IFC to support Netafim India's capex & working capital requirements

 International Finance Corporation (IFC) says it will support irrigation major Netafim India's capex and working capital requirements. The company would require around $75 million for its proposed projects. Netafim India’s parent company, Netafim Ltd, is 80 per cent owned by Orbia (formerly Mexichem)

IFC said that the company is facing delays in receivables caused by the Covid-19 pandemic, which has led to higher working capital requirements. Netafim India requires $75 million of financing for the coming years to support its working capital needs, cover the financing needs of new community irrigation projects, and execute capital expenditure investments to maintain its production facilities. The proposed $75 million long-term financing will be in the form of Non-Convertible Debentures.

Funds will be disbursed to Netafim India to cover its financing needs throughout the country, with the largest use of proceeds being in the states of Andhra Pradesh, Gujarat, Tamil Nadu, Telangana, and Chhattisgarh.

The expected project-level outcome is its contribution to generating better yields for the local farmers and strengthening their resilience to climate stocks. The project in India may have larger benefits given the potential for creating impact at scale using the community irrigation model. It will also contribute to sustainability by promoting water used efficiency in agriculture in several water-stressed regions, said IFC.

Founded in 1965 in the Negev desert in Israel, Netafim Ltd (Netafim) is a global player in the micro irrigation systems (MIS) sector. Clients value Netafim’s team of 200 agronomists deployed globally that provide expertise in all crop types and growing conditions.

The proposed investment consists of a loan up to $20 million (Rs 152 crore) to Netafim Irrigation India Private Ltd (Netafim India), guaranteed by Netafim, to support the working capital needs of Netafim India arising from the Covid-19 crisis, and capex needs to maintain local production capacity. IFC is also considering mobilising a financing package of up to $55 million (around Rs 417.8 crore) with commercial banks and /or development finance institutions (parallel loans) for the same purpose.

It may be noted, Netafim is a key technical partner with IFC in the Better Farming Alliance, a commercial partnership that was launched to bring effective solutions to chili and tomato smallholder farmers in India to help them increase yields, income, and access to markets. Netafim and IFC have also worked on a project combining solar powered pumps and drip irrigation in India, targeting larger crop production systems such as sugar cane, where water use efficiency is critical for sustainability.

Netafim India’s parent company, Netafim Ltd, is 80 per cent owned by Orbia (formerly Mexichem) and 20 per cent owned by Kibbutzim Hatzerim (also the founder of Netafim). One of Netafim’s key factories is also located within Kibbutz Hatzerim.

Orbia, founded in 1953, is a Mexican company involved in several industries, including building and infrastructure, data communications, irrigation, chemicals, and more. Orbia focuses on insuring food security, reducing water scarcity, reinventing the future of cities and homes, connecting communities to data infrastructure, and expanding access to health and wellness with advanced materials.

IFC to invest $75 mn in Indospace Logistics to develop industrial parks

 International Finance Corporation (IFC), the investment arm of the World Bank, is planning to invest around $75 million (Rs 550 crore) in Indospace Logistics Parks III LP, a $580-million vintage fund for developing logistics and industrial parks across India.

The fund is managed by Indospace Capital Asia Pte Limited and its Indian affiliate Indospace Capital Advisors Private Ltd, together referred to as Indospace. It develops and operates warehousing and industrial property assets in India through various special purpose vehicles (SPVs). These SPVs are indirectly owned by Indospace Logistics Parks III LP, a Singapore-based limited partnership managed by Indospace Capital Asia Pte Limited (Indospace or the Fund Manager).

IFC’s investment woud be in the form of straight loans of up to $75 million (around Rs 550 crore) to various SPVs that owned and operated the industrial and warehousing properties, said IFC.

The funding will provide Indospace with long-term finance in these times of the Covid-19 pandemic to continue investing and developing select projects envisaged under the fund over the next two years. IFC anticipates that its commitment will provide a significant positive step forward to the Indian warehousing and industrial property market, which is in its evolutionary phase and now going through a severe slowdown due to Covid-19.

If the fund is successful in developing and offering its properties in time for companies to set up operations, it will help demonstrate a path of recovery for the sector while relying on private investment. The project will contribute to the resilience of real sector markets by enabling business infrastructure that will ensure a continued supply of goods and services at affordable prices and limit disruptions along supply chains, thereby mitigating the effects of an economic downturn.

The fund is an existing portfolio client of IFC. In 2018, IFC had committed an equity of up to $25 million, not to exceed 20 per cent of total commitments, in IndoSpace Logistics Parks III, LP. The company's sponsors include PE funds Everstone, Realterm and GLP, an investment manager and business builder in logistics, real estate, infrastructure, finance and related technologies.

According to the company's website, Indospace has a portfolio of around 36 million square feet across 35 logistics and industrial parks, including developed parks and those under various stages of development across the country. The company claims to be the largest network of industrial and warehousing parks in India.

World Bank investment arm to channel $200 mn into Shriram Transport Finance

Shriram Transport Finance Company Ltd is raising $200 million (around Rs 1,420 crore) from International Finance Corporation and other investors through a securitisation structure

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IFC, the World Bank's private-sector investment arm, said the structure would help mitigate foreign exchange risks and attract patient capital from pension funds, insurance firms, and foreign institutional investors. Half of the total amount will come from IFC’s own account and the rest will be mobilised from like-minded partners. The first tranche of $82 million was disbursed on Thursday. Half of which is from IFC’s own account.

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The proceeds will help Shriram Transport meet its funding requirements and allow it to continue expanding its reach to micro, small and medium enterprises, IFC said.

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Hemalata Mahalingam, Manager, Financial Institutions Group, IFC South Asia said that the unique securitisation structure would channel patient capital from diverse financial sources into the NBFC segment and support the development of India’s debt capital markets.

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Umesh Revankar, MD and CEO, Shriram Transport Finance added that the funds raised would be used to help the small commercial vehicle operators and MSMEs in rural and semi urban markets.

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There is a huge growth opportunity in smaller towns and the company will unleash the potential of these geographies.

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The transaction comes at a time when NBFCs in India have been feeling a liquidity crunch since September last year due to the Infrastructure Leasing & Financial Services Ltd (IL&FS) crisis.

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IFC believes that NBFCs are an important source of credit for road transport operators and MSMEs, for whom the credit gap is pegged at $397 billion. IFC has been supporting asset-financing NBFCs and was an early investor in this segment.

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IFC backed Shriram Transport earlier as well. The World Bank arm had invested $150 million in Shriram Transport in the form of senior debt in 2016. In 2017, IFC invested in the company’s first offshore, rupee-denominated bond issuance, also known as masala bonds, to enable diversification of its funding sources.

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The development comes at a time when Shriram Group's flagship company Shriram Transport is facing pressure in the public market where the company's stock price dropped by 8.8 per cent after Piramal's exit. After the exit, on June 14, company's stock price dropped by 8.8 per cent to Rs 986.1 (on July 25, 2019) from Rs 1,081.6. Company's market capitalisation dropped by Rs 2,165.6 crore to Rs 22,372.6 crore from Rs 24,538.2 crore.

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Revankar expects the upcoming festival season, pre-buy demand for BS-IV vehicles and other factors will boost the demand for new and used commercial vehicles and help the company.

IFC sees green bond scope in India, says project identification only issue

The International Finance Corporation (IFC) sees immense opportunities to finance projects through green bonds in India especially in areas like urban transportation, waste-to-energy and water treatment, its senior official said here Tuesday.

"Opportunities in India are huge. Look at infrastructure and amount of urbanisation and the level of agriculture (projects)," said Vivek Pathak, Director for East Asia & Pacific Department at the IFC.

The projects he identified include development of urban transportation, waste-to-energy, water treatment and green building.

Noting that more and more financial institutions have been issuing green bonds in India, he said: "There is increasing awareness. The solar and wind sector have done very well in India and I think the opportunities are going to be huge in India."

However, identifying such projects for green bonds is a challenge everywhere and India is no different, he told reporters.

Deepak Fertilisers & Petrochemicals lines up $160 mn capex with IFC backing

Deepak Fertilisers and Petrochemicals Corporation is planning to invest up to $160 million in capital expenditure. The investment will be backed by a $60 million investment package from the International Finance Corporation (IFC).

The project will help the company ramp up the production and distribution of specialty fertilisers in India. The project will also allow Deepak to increase its IPA production capacity in India by 100,000 million tonnes per annum (MTPA).

Through a mix of quasi-equity instruments, IFC will assist Deepak Fertilisers on a greenhouse gas (GHG) reduction plan and the establishment of N2O catalyst conversion devices and the formulation and implementaton of an environmental and social action plan (ESAP).

The project is expected to help climate change mitigation efforts by a net reduction of GHG emissions. This will be achieved by installing N2O catalyst conversion devices at all Nitric Acid manufacturing processes at Taloja. IFC's engagement will likely contribute to increase competitiveness in the fertiliser sector as the company works on innovation.

Deepak Fertilisers and Petrochemicals Corporation Limited and its subsidiaries (DFPCL) is an industrial chemicals and fertilizers company engaged in manufacturing and trading of iso-propyl alcohol (IPA), nitric acid, methanol, technical ammonium nitrate (TAN), compound fertilizers and other chemicals. Smartchem Technologies Limited (STL) is a 100 per cent subsidiary of DFPCL. Deepak also plans to expand its ammonia production capacity through Performance Chemiserve Private Limited (PCPL), a subsidiary of STL.