IFC disburses $3.8 million to Probiotech to accelerate post-earthquake recovery, boost farmer incomes

IFC – a member of the World Bank Group – and Private Sector Window of the Global Agriculture and Food Security Programme have disbursed $3.8 million to Probiotech Industries, a commitment announced last year, reaffirming IFC’s and Nepali private sector’s commitment to support the country as it rebuilds itself after the devastating earthquake.
This is IFC’s first investment in Nepal’s agribusiness sector. Probiotech is one of the early organised poultry feed manufacturers that set up the first pellet feed mill in the country.  The company will use the funding to finance manufacturing capacity for high-margin value-added products such as soya flour nuggets, and refined oil, and streamline the food supply chain.
“In the backdrop of the earthquake that devastated the Himalayan country weeks ago, this financing package reaffirms that investors are not shying away from Nepal,” said managing director of Probiotech Anand Bagaria. "Through IFC’s investment and advice, we seek to rebuild this important sector and adopt best practices for production efficiency, environmental and social standards, and to upgrade technology," he added.
The financing will also enable Probiotech to expand its procurement and distribution networks. Currently, the company distributes its products through 100 registered dealers and 500 sub-dealers across 70 districts of Nepal. As a result the company will increase sourcing from over 8,000 farmers and food suppliers, improving food safety standards, and boosting their incomes.
"The project will increase the supply of quality soy-based protein, especially for the low-income people of Nepal where malnutrition is prevalent, and promote food security," said head of Industry, Manufacturing, Agribusiness and Services, IFC Asia Pacific Patrick Leahy.
"IFC remains committed to supporting Nepal as it rebuilds its agribusiness sector that employs 70 per cent of the workforce,” said IFC’s director for Asia-Pacific Vivek Pathak. "This investment will help create jobs, both at the plant and farm level, and have a direct positive impact on farmers’ incomes."
As of March 2015, IFC has a committed portfolio of $3.3 billion across the agricultural value chain globally. IFC‘s agribusiness strategy aims to promote inclusive growth and environmental and social sustainability in agricultural supply chains. A past advisory project of IFC helped small poultry farmers in Nepal make their businesses more productive through better farm management practices that reduce costs, and improve poultry quality.
Likewise, the Global Agriculture and Food Security Programme is a worldwide effort that pools donor resources to fund programs focused on increasing agricultural productivity as a way to reduce poverty and increase food and nutrition security. The programme targets countries with the highest rates of poverty and hunger. The public sector window helps governments with national agriculture and food security plans. The private sector window, managed by IFC, provides long- and short-term loans, credit guarantees, and equity to private sector companies to improve productivity, deepen farmers' links to markets, and increase capacity and technical skills.
Likewise, IFC – a member of the World Bank Group – is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In the fiscal year 2014, IFC provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development.

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.

Nimbus sets up Bird Flu Relief Fund

Nimbus Holdings has formed a Bird Flu Relief Fund to mitigate not only the risk of poultry farmers by compensating them but also to mitigate the risk on public health, apart from helping government policy to triple per-capita consumption and availability of chicken and eggs in the next 15 years by encouraging commercialisation of poultry sector.

"We have established a Bird Flu Relief Fund of Rs 7.5 million," informed chairman of Nimbus Holdings Jagadish Agrawal, here today.

Though the government also compensates poultry farmers for losses incurred due to bird flu, the government relief comes late and is too little.

"Our initiative will also support the government as farmers will get double benefit," he said, adding that the Bird Flu Relief Fund will compensate poultry farmers within seven days. "Commercial poultry firms have to be, but, registered with Nimbus, as only those farmers using Shakti feed will be compensated, at present, upon the declaration of bird flu outbreak by the government."

Named Shakti Sahayogi Haatharu — the campaign — will help protect farmers and encourage them to report bird flu — Avian influenza — also known informally as avian flu — as soon as possible which will help reduce the risk on public health, said managing director of Nimbus Anand Bagaria.

Repeated instances of bird flu have forced poultry farmers to shift business as they have to bear losses every time it strikes. “Nimbus is planning to collaborate with insurance companies and other domestic and international agencies to safeguard the poultry business in the future,” he said, adding that it will help stop farmers abandoning the business.

The fund, under Nimbus Sahayogi Haatharu — a corporate social responsibility campaign of Nimbus Holdings — will help promote poultry business in the country, said Dr Dinesh Gautam who is the deputy chief executive of Probiotech Industries, an agribusiness wing of Nimbus Holdings.

Probiotech Industries is the first feed industry to receive ISO 9001: 2008 and NS certifications and has the latest pelleting plant with autobatching facility producing 300 metric tonnes of feed every day. 'Shakti' is the largest selling animal feed brand in the country with 25 per cent market share.

It deals with approximately 20 products in animal feed, another 20 in feed supplements, and around 20 more in fine chemicals, vaccines and medicines.

The government has introduced a poultry policy with an aim to triple the per-capita consumption and availability of chicken and eggs in the next 15 years by encouraging the commercialisation of the poultry sector.

The current average per-capita consumption of poultry meat and eggs stands at nine kg chicken and 120 eggs. The poultry policy has also envisaged strategies including prioritising the poultry sector for government supported programmes so as to encourage massive commercialisation of the sector that already has an investment of over Rs 30 billion.

Research on increasing milk production succeeds

Khilanath Neupane of Chitwan, Phulbari has been able to earn more by selling more milk these days without increasing the number of his cattles.
"I have five cattles and two buffaloes," the ex-Nepal Aman said, adding that he used to sell around 30 litres of milk earlier but since he has started feeding the cattles the new balanced dry heated feed developed for the cattles, they are producing around five to eight litres more increasing his income.
It is the first time in the domestic diary sector that such a dairy feed product is designed to meet the nutrition need of the high yielding cattle and buffaloes with more protein, fat, TDN, minerals and vitamins."We have done a long reaserch and developed the dry, heated balanced pellet feed that can help boost quality milk production," said Dr Dinesh Gautam, Chief Technical Officer of the Probiotech Industries Pvt Ltd, a company under the Nimbus Group.
"The company with supported from Practical Action has done extensive research in Chitwan and Gurkha to develop the feed that can not only help produce more milk but also quality milk with necessary fat and Solid Not Fat apart from fat all other solids, like vitamins, minerals, protein (SNF)," he said, adding that the cost of milk depends upon the ratio of fat and SNF in the milk.
"More the fat and SNF, more the price the milk get," he added.The reaserch was also felt necessary due to decreasing milk production in the country recently. "Until some years ago, farmers used to have milk holiay due to excessive milk production," said Deepak Dhoj Khadka of Practical Action. "But the situation has reversed, Nepal imports milk from India," he said, adding that Practical Action is helping Probiotech to research on cattle feed under its Access to Market programme.
There are 7.1 million cattle and 4.6 million buffaloes in Nepal, according to the Ministry of Agriculture (2008-09). "Of the total, 0.9 million cattle and 1.1 million buffaloes are in milking stage," it said, adding that Nepal produces 413,919 metric tonne (MT) of milk from cattle and 103,1500 MT of milk from buffaloes. The cattles produce 1.5-2 litres per day and buffaloes three litres per day But after the cattles feed the new pelle feed, they started producing more milk upto 3.5 litres.
Domestic cattles have not been producing more milk due to the lack of breeding programme, quality fodder, fodder cultivation awareness, feed-concentrate that is not balanced and low management knowledge of farmers, according to Gautam.Due to lack of knowledge of dairy farmers on nutrient requirement of animals, they are underfeed resulting in to lower production, he added.
The programme also aims at delivering knowledge and skills to smallholder dairy farmers through 'Dairy Chautaris' -- an initiative of the Market Access to Smallholder farmers (MASF) Dairy Project which bring together technical experts and farmers for transfer of knowledge and access to services that is aimed at over 3,000 smallholder dairy farmers in Chitwan, Dhading, Gorkha and Tanahu.
Practical Action and Nimbus (Pro Bio Tech) have entered into a partnership to research, test and deliver appropriate low costs, high nutrition feed through the existing supply distribution channel of Pro Biotech Industries Pvt Ltd under the brand name Shakti feed.