Wednesday, December 26, 2012

IFC plans equity investment in Probiotech


Under its strategic agenda to support agribusiness, the International Finance Corporation (IFC) — a lending window of the World Bank Group — is close to making a deal for equity investment in a domestic company, Probiotech Industries.
IFC has principally agreed to buy a stake in Probiotech — a sister company of Nimbus Group — and in a couple of weeks will sign a mandate agreement, according to sources at IFC that has already bought shares worth Rs 30 million of Rural Microfinance Development Corporation (RMDC) at a premium rate of Rs 180 per share making it a total investment of Rs 54 million.
After RMDC, IFC has been interested in buying equity of Probiotech as it is keen to increase its investment in Nepal.
Though both Nimbus and Green Invest — financial consultant of Nimbus — could not be contacted, IFC sources said that Probiotech has a high growth prospect and the agreement with IFC will provide the company financial access to expand its operations.
Earlier, IFC had helped small poultry farmers to increase their productivity through better farm management practices. It had supported Avinash Hatchery and Probiotech Industries to strengthen the technical skills of 3,000 poultry farmers, directly impacting 40 per cent of the industry under its SouthAsia Enterprise Development Facility.
"The poultry industry contributes around three per cent to the gross domestic product with a total investment of $334.26 million," the Sustainable Energy Financing report of IFC on Nepal’s industry stated, adding that the industry’s performance suffers from low productivity despite its contribution to the national economy.
"Probiotech Industries is the leading feed industry and seeing its high growth prospects, IFC has been interested in supporting it," according to IFC that is finalising its stake, amount of capital it will pump in, and time bound exit policy in the agreement.
There are various modalities of exit policies, which the IFC is considering, and will be finalised in the agreement that will also have broad terms and conditions.
After the agreement, the due diligence of Probiotech will finalise the equity per cent and capital the IFC will pump in, the sources claimed, adding that IFC might pump in around $200,000 but it will be finalised only after due diligence that will start from mid-January, if everything goes as planned.
According to IFC norms, it cannot invest more than 25 per cent equity in a company.
IFC has been engaged with private sector players, multilaterals, government, and other stakeholders to implement an integrated development agenda in Nepal. Besides working on a payment reform project, an advisory team is making important progress by building partnerships between the government and private sector through the Nepal Business Forum.
IFC is already investing in Nepal with a committed portfolio of $25 million that includes projects across various sectors like power, air transport, banking, microfinance, and trade finance lines.

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