India's Aavishkaar Capital makes first investment from ESG fund in INI Farms
Aavishkaar Capital, one of India’s largest impact investors, has made its first investment from its maiden ESG fund in Agrostar-led INI Farms, top company executives told DealStreetAsia in an exclusive interview.
Founded in 2009, Mumbai-based INI Farms is one of the largest agri-based players in India. It procures fruit and vegetables from farmers across the country and exports them to more than 30 countries, including the US, UK, Germany, and Middle East. The company, which was acquired by Agrostar last year, is expected to record revenues of around $45 million by the end of this year.
Meanwhile, Aavishkaar Capital’s Asia- and Africa-focused ESG First Fund is set to raise up to $150 million by the end of this year. The fund has a target size of $250 million and is expected to be closed by 2024. It made the first close at $55 million in 2022.
“It was our first private credit offering, so we wanted to make sure we got the strategy right. With tightening interest rates and a lot of wait-and-watch happening for investors, we were very apprehensive about getting the strategy right. Last 12 months were focused on putting the first few deals on tables. Now we have three years to scale the fund,” said Abhishek Mittal, partner at ESG First Fund at Aavishkaar Capital.
The new LPs the company plans to rope in over the next 12 months are mainly development financial institutions and family offices and foundations. Germany-headquartered KFW Group has been its sole LP until now, committing $55 million to the ESG fund.
The fund plans to make 4-6 investments at around $20 million in Asia and Africa in the next one year with a 50:50 split.
“We are doing up to $2 million investments from the fund and will scale up when needed. Our sweet spot is $3-5 million. We believe that demand for sustainability products and food is on the rise and supply-chain problems are largely cited in markets like Asia and Africa. Hence, we prefer investing in businesses which will invest in sustainability outcomes and where investment will go into capacity addition and working capital requirements.”
According to Aavishkar Capital, its biggest competitive advantage is that it is looking at more smaller bets, SMEs and companies where no capital is available, and those that have outgrown financing needs from banks.
The firm has eight funds in total, overseeing $530 million worth of assets across Asia and Africa. It has clocked more than 74 investments and over 42 full and partial exits. It is also looking at launching a carbon fund for Asia whose first close is set to be made by the end of this year. Aavishkar is also looking at closing its sixth India fund and eighth overall fund soon.
ESG is increasingly emerging as a dominant investment theme both for LPs and fund managers as corporates across sectors are now prioritising the concept in their overall strategies.
While the ESG First Fund is sector agnostic, it plans to tap companies enabling the supply-chain process of sustainable food and agriculture products, consumer non-durables such as apparel, accessories and personal care products across Asia and Africa, and services looking at helping companies monitor and reduce carbon footprint.