Russian fund plans $4bn in agri co-investments – exclusive

The state-backed fund will work with Thai agribusiness Charoen Pokphand as a primary partner and focus on vertically integrated projects, often with Asian markets in mind.

The $10 billion Russian Direct Investment Fund has made $2 billion in co-investments to agriculture and plans to a commit further $2 billion in the next two years, its chief executive officer has told Agri Investor.

Its “primary partner” will be Thai agribusiness Charoen Pokphand, an investor in the $1 billion dairy the fund said in May it would build. The pair is targeting a vertically integrated poultry business in St Petersburg with an estimated value of $680 million. A major investment in one of Russia’s biggest rice companies is also in the pipeline, with Charoen Pokphand also a seemingly likely investment partner.

CEO Kirill Dmitriev said agriculture is now one of the fund’s top priorities, after Western sanctions and the devaluation of the Russian rouble created strong opportunities to invest in domestic production. He said portfolio businesses would have to be internationally competitive, and in particular be prepared for European competition if and when sanctions are lifted.

The fund will not be limited to a particular agricultural sector. Dmitriev said that the most important factor was good management, which he said “is not very solid” at the moment in Russia.

The RDIF can invest up to 20 percent of its funds abroad, and is exploring options to invest in a strategic agricultural hub in Egypt, according to Dmitriev. It also plans to explore opportunities in Europe, particularly Italy and France, by the end of the year, in the expectation that sanctions will be lifted.

“We have no immediate plans to invest in European agriculture, but I do believe in major synergies between European and Russian agriculture,” said Dmitriev.

Dmitriev also said the fund was actively looking to provide domestic agribusinesses with growth equity in partnership with banks, as most of them are highly leveraged.

He added that vertical integration and use of technology were key to building commercially successful agribusinesses and better-managed companies with ties to export markets in Asia. The proposed rice investment will, like the dairy, be linked to Asian markets and mostly rely on robotics.

Since RDIF was established in 2011, it has invested or committed more than 760 billion roubles ($11.46 billion; €10.25 billion), of which 70 billion roubles were the fund’s own resources, and 690 billion roubles were provided by its international co-investors, partners and banks.

Co-investors with RDIF are required to at least match investments by RDIF.