Housed on the second floor of Forbes Building in the southern end of the commercial capital of the country, Mumbai, Rabo India Finance Pvt Ltd is a non-banking finance company (NBFC) with a difference.
Even as all NBFC's and nationalised banks plunging full fledged into retail lending, Rabo India, a 75 per cent subsidiary the Denmark-based $280 billion asset co-operative banking major, Rabobank International, focuses on corporates operating mainly in agriculture, food, fertiliser and health care sectors.
"More than 50 per cent of our Rs. 800 crore loan portfolio consists of lending to companies in food and agriculture," says Mr. Hans Hannart, managing director. Adding further he says that, Rabo India also looks at technology, media and telecom (TMT)industries. The focus on TMT segment is mainly due to Rabobank International acquiring DG Bank, Germany sometime back.
Meanwhile, Rabo India is seeking a banking licence from Reserve Bank of India to increase its role in the food and agriculture sectors- starting from farm inputs to processed food industry.
"A banking licence would enable us to access funds at a far cheaper rate so that our operations would be economical," explains Mr. Hannart. Contrary to the wholesale lending focus of Rabo India, the proposed bank will be a major player in the retail segment with a nationwide presence.
According to him, Rabo India, will take 15 per cent stake in the equity of the proposed bank and Rabobank International will contribute another 20 per cent. The other three Indian promoters of Rabo India will bring in the remaining equity.
While awaiting the banking licence, Rabo India has decided to launch an India specific fund to invest in agriculture, healthcare, biotech and TMT sectors. However the size of the fund is yet to be decided. Apart from financing activity, the Rs 32.39 crore income Rabo India is very active in corporate advisory services. Around 55 per cent of its revenues are from financing activity and the balance is from rendering corporate advisory services.
"We have thirty live mandates in the area of mergers and acquisitions," he smiles. Interestingly, many of proposals for advisory services are from the domestic tea industry. After assisting Tata Tea in acquiring Tetley's, UK, Rabo India, according to Mr. Hannart is advising tea companies in unlocking the value in their operations. "And for those companies having good gardens, we will advise in proper brand building exercise," he remarks.
Rabo India doesn't stop with just advising and where ever needed the company provides financial assistance. According to Mr. Hannart, the company has financed around five tea companies.
That aside, the NBFC is actively involved in evolving a better supply chain for farm products working in tandem with couple of fertiliser units in the country. "Fertiliser companies are very close to the farmers and interact with them actively. Some even sell seeds to the farmers. Our reasoning is, when the fertiliser industry can organise the farmers to produce well, they can also organise them to add value to the supply chain," explains Mr. Hannart. For the purpose of developing necessary infrastructure in the food and agriculture industry, Rabo India recently signed an agreement with Infrastructure Development Finance Company Ltd (IDFC).
The joint initiative will include advisory and financial assistance to establish cold chains, high technology warehouse, auction centres, value added centres and creation or development of selected terminals of existing ports as agri-ports with dedicated facilities to handle fresh agri produce, processed foods and shrimp/sea food.
According to him, unlike the developed world where organised retail chains are driving the changes in the food chain, in India, food service (hotels, restaurants, eat outs etc) will take the lead for driving change in the short to medium term, resulting in creation of capacities for warehousing and logistics of chilled and frozen products. "This will result in the emergence of food distribution as a distinct function. This momentum will help the development of other key segments of food retailing viz fresh produce and staples," he opines.
The company predicts emergence of business opportunity for entities having existing relationships with farmers, such as input companies and cooperatives in the form of food distribution.
The food distributors can offer the logistic services to the food retailers as well, to improve their capacity utilisation. The subsequent growth in food retail would further enhance the restructuring of the supply chain.