Correction: Mandala plans final close, offers hybrid investments

*corrects management fee to 2.5 percent.

Mandala Capital is planning the final close of the Mandala Agribusiness Fund, a 10-year private equity fund, in November this year. It has been fundraising for over two years.

It is targeting $250 million and is currently on $115 million after getting commitments from TIAA-CREF, the largest US institutional investor, and Utimco, the endowment fund of the university of Texas, in November 2013.

Mandala is also nearing completion on another two to three deals after making the fund’s first investment last week into Arcadia Biosciences, a seed technology company.

The Arcadia deal was a preferred equity transaction but Mandala is also working on different types of structure for other deals, including debt and equity hybrids, according to Uday Garg, managing director of Mandala Capital.

“We have started to get creative on deal structuring where several of our deals have a yield component, thus allowing us to return cash to investors right away,” Garg told Agri Investor. “The structure also enables us to secure strong downside protection through debt-like features where relevant but still achieve upside through our equity exposure and convert features. The yield component and debt feature also allows us to be realistic about exits – something that has eluded Indian private equity over the last few years.”

The structure will be different for every deal and it is about working out what works with the owners of the company and Mandala, said Garg.

The Fund will invest over a three-year period and will consider exiting investments through IPOs, trade sales or buybacks from the company itself. “If just one product of Arcadia’s launches successfully, it could produce a enough ongoing cash flow to return everyone’s investment many times over,” said Garg.

Mandala isn’t the first investment firm to think about using different structures within a fund that looks like a private equity fund in the agri investment market; SLM Partners is negotiating terms for an investor to commit to a fund with a hybrid-style agreement offering the arrangement on the other side of the deal to Mandala.

Mandala Agribusiness Fund charges a 2.5 percent management fee and 20 percent performance fee.

Kronstein Alternative Investment Advisors is the fund’s placement agent in Europe and AccessAlpha Worldwide is the US placement agent.