Mandala invests $18m in agri finance company

The $120m Indian private equity fund has invested in Sustainable Agro-commercial Finance, a rare agriculture-focused Non-Banking Financial Company, in its fourth investment so far.

Mandala Capital, the Indian agribusiness private equity fund, has invested Rs1.1 billion ($17.9 million; €16.3 million) in Sustainable Agro-commercial Finance (SAFL), an agriculture-focused Non-Banking Financial Company (NBFC).

An NBFC is a financial institution that provides banking services without holding a bank license. SAFL will use the capital to expand its agri-loans business into new rural and semi-urban areas and into different financing options.

Mandala Capital closed on $120 million last year below an initial $250 million target. The fund manager focuses on investing “for the long term in India’s fast evolving food and agribusiness sector”, according to the press release. This is the fund’s third investment with a fourth expected soon, according to Uday Garg, managing director.

SAFL finances a range of different agriculture businesses including micro irrigation systems, small farm equipment, horticulture plantations, solar pumps and general productivity improvement projects. It is backed by Jain Irrigation and International Finance Corp. It is one of the only finance firms offering these services to agribusinesses.

SAFL is unique because it is 100 percent agri-focused and provides 100 percent asset-backed loans, according to Garg.

Mandala funded the company through purchasing non-convertible, subordinate bonds – negotiable certificates of deposit – from SAFL that are structured as Tier II capital, and equity capital.

The company is targeting a pan-India presence with a network of over 250 branches or satellite offices across rural and semi-urban areas over the next five years.

“SAFL is steadily expanding presence in other states and is delighted to have Mandala join SAFL as a financial partner in a transaction which we believe will make our company one of the most bankable in the sector,’ said Arvind Sonmale, chief executive of SAFL. “We are now looking forward to a period of accelerated lending activity and we think the prospects for our key lending products are extremely positive.”

Mandala’s previous investments include US-based Arcadia Biosciences, in a round which Mandala led and Gati Kausar, a cold chain solutions company, which sold a minority stake to Mandala in October. Arcadia is now preparing for an $86 million Nasdaq IPO.

The fund stopped marketing quite early in the process as it focused on executing its pipeline, according to Garg.

AccessAlpha Worldwide and Kronstein Alternative Investment Advisors were Mandala’s placement agents in the US and Europe respectively.