responsAbility backs developing world organics

Development-focused asset manager responsAbility has acquired a significant minority stake in Suminter India Organics, a company that supplies developed markets with organic food and fiber products sourced from the developing world.

Founded in 2004, Suminter provides more than 20,000 smallholder farmers with inputs and training to produce organic and non-GMO commodities including soy, cocoa, cotton, sugar and pulses, among others. Suminter then purchases the output and processes and exports it in the form of certified organic and GMO-free animal feed, food and clothing products.

Suminter carries out sourcing and processing operations in 20 countries throughout Asia and Africa and the majority of its products are sold to customers in the US and Europe that include Whole Foods, spice provider McCormick and clothing retailer H&M.

The investment is the second from responsAbility’s agriculture-focused equity fund, responsAbility Agriculture I, for which the firm held a first close on $50 million in June 2017 and expects to reach a final close on $125 million by the end of 2018. Fundraising for the vehicle has focused on family offices, foundations and private pensions, the firm’s head of agricultural investment told Agri Investor in January.

According to a summary posted on the firm’s website, the vehicle has an 8 percent hurdle rate, a management fee of 2 percent on committed capital and will target a gross IRR of more than 20 percent over its five-year investment period.

In January, the firm made its first investment from the fund when it secured a significant minority stake in Samunnati, a Chennai, India-headquartered company that offers cash-flow loans to small- and medium-sized businesses across that country’s agricultural supply chain.

In June, the Switzerland-headquartered firm secured an “anchor investment” of an undisclosed size for its agriculture-focused debt fund, which is targeting $300 million.

Rik Vyverman, the firm’s head of agriculture equity investments, told Agri Investor the investment in Suminter came after his team had screened more than 400 potential investment opportunities and reflected the firm’s dual focus on development outcomes and financial return.

“The attractiveness for us to invest in it [Suminter] is, on one hand, the impact story, but, on the other hand, is also its financial metrics,” Vyverman said. “The fact that this company has predominately – almost 99.99 percent – US dollar- or Euro-based income, means there is no FX risk, which I think is very actual at the moment, given what’s happening in markets.”

Capital from the investment, according to Vyverman, will be devoted largely to expanding capacity at existing processing facilities in India, Uganda and the Philippines, with the remainder devoted to working-capital finance.

“It [the focus of how capital will be used] is predominately expansion of the processing facilities they already have, which were in-house or which were being done on agreements and are now being taken in-house,” said Vyverman. “It is either expanding or setting up the new processing facilities for the specific country or region, given the growth of the company and activities in that specific region or country.”

Social impact of responsAbility’s investment into Suminter will be measured by the number of smallholders brought in to Suminter’s supplier network, metric tons purchased and acreage under organic cultivation. For each of these metrics, Vyverman explained, the firm has projected specific targets for each it hopes to reach over the course of its investment in the company.

“It are impact KPIs which are available to the company without having to dig further, because the impact is inherent to the companies we invest in,” Vyverman said.