CDC Group hunts further investments in South Asian ag

Head of South Asia Srini Nagarajan says food and agri investments in the region have been ‘ignored substantially’ by private equity.

UK development finance institution CDC Group is looking to increase its food and agriculture investments in South Asia, head of South Asia Srini Nagarajan told Agri Investor.

The fund has 5 percent of its $5.6 billion global investment portfolio invested in the food and agriculture sector, behind financial services, infrastructure and manufacturing, according to the CDC website.

“We’re trying to do more on the food and agri side,” Nagarajan said.

“If you asked me one sector which private equity has ignored substantially, it’s food and agri across the region. In Asia, private equity funds have played around the edges but have not been able to create more commercially sustainable businesses over a period of time.”

In May, CDC committed $15 million to Omnivore Capital 2 India, a 2016-vintage targeting SMEs with an emphasis on agribusiness.

It has directly backed 39 South Asian food and agriculture businesses to date, of which only one was outside India. It has also committed to 24 food and agriculture-focused funds in the region, according to the CDC website.

The development finance institution invests from its balance sheet, which it calls the ‘Growth Portfolio’, and a separate bucket known as the ‘Catalyst Portfolio’, which targets higher risk deals with greater potential for development impact.

The latter was created in 2017 and is not expected to exceed more than 20 percent of the portfolio, according to the Independent Commission for Aid Impact.

Food and agriculture fits into both buckets, Nagarahan said. “For example, if you want to have local agri-storage solutions so that farmers can sell through the crop cycle and realize more, then we need to do much more pioneering in terms of our catalytic work,” he added.

“The distribution chain, farm to fork and the logistics part of it is something our growth capital can easily do, so we’re attempting to do that on both sides. Quite often it’s not simple to find a platform of that scale in these countries, particularly on food and agri, and which fits into your business integrity norms.”

South Asia accounts for 35 percent of CDC’s portfolio, behind Africa at 52 percent. The institution is most active in India, representing 29.7 percent of its portfolio; Bangladesh is its next largest South Asian market, followed by Pakistan.

The fund has also invested $53 million in Myanmar and backed the launch of the Myanmar Private Equity and Venture Capital Association in September.

“Water is available in abundance in Myanmar and it’s the one country which doesn’t share a river with neighbors. It’s an extremely potent country in terms of water, which is becoming a big, big virtue today,” Nagarahan said. “We’re doing a lot more work on the food and agri there as well.”