23 May SEAF Fund invests in organic food processor, Khyati Foods
Small Enterprise Assistance Funds (SEAF) announces that its India Agribusiness Fund has invested in Khyati Foods Private Limited.
Khyati Foods engages in the production and processing of organic cotton and soybeans, primarily for export to Europe and North America. Khyati is unique in that it purchases its products from 4,400 certified-organic smallholder farmers in India. The Company has successfully established a farmer training and certification system to ensure that farmers can easily move through the three-year certification process and deliver consistently high quality products to Khyati. The farmers benefit from both increased output volumes and higher pricing for their products.
Madhya Pradesh is one of India’s poorest states and is largely dependent on agriculture. As opposed to many farms in India’s richer states, where the conversion of agricultural land previously using chemical fertilizers and pesticides has meant a loss of profits and delay in profitability, Khyati’s farmers generally had not been able to afford such chemicals; hence, Khyati has been able to save substantially on converting farmlands, and its farmers have only experienced gains in income.
SEAF has invested USD $1.8 million into the business, with the money to be used to expand its warehousing and as working capital. Khyati’s 4,400 certified organic farmers in Madhya Pradesh farm 26,000 hectares. An additional 10,000 farmers are going through the certification process, and should provide for continued growth for the Company. The Company should have more than 50,000 organic farmers in the coming years, which would put Khyati among the top five organic produce companies in India.
In addition to SEAF, Sarona has made an equity investment of $750,000 into Khyati. Per Sarona: “Sarona is pleased with its investment in Khyati Foods because it helps build up a strong and growing company, while generating solid financial returns for its investors.”
Future plans for Khyati include adding to its variety of crops—currently consisting largely of organic soy and cotton. The proceeds of the investment will also enable the Company to establish distribution and processing centers in locations closer to its farmer bases, which will improve the Company’s efficiency and decrease wastage and logistic costs. These changes should benefit both the Company as well as its farmers, who as organic farmers earn more than 20-30% than traditional farmers.
While the Company is exporting the bulk of its products, the market for organic foods is growing in India. The Government of India is also taking various initiatives to promote the industry, including encouraging farmers to develop agriculture lands as organic and to cultivate premium-priced and health-oriented crops in the country. Various programs have been introduced to aid the progress of organic cultivation, including the National Project on Organic Farming, National Horticulture Mission and Technology Mission for North East, and Rashtriya Krishi Vikas Yojana. The government has also eased restrictions on exports produced without using chemical fertilizer and pesticides to promote organic farming.
- SEAF is an SEC registered investment adviser to international private equity funds through which it has invested growth capital and provided business support to growth-oriented SMEs in frontier and emerging markets for over two decades. With assets under management of USD 400 million, SEAF’s funds identify and support promising entrepreneurs while seeking to provide attractive returns to its investors. SEAF manages its funds through a network of 26 offices around the world, with its headquarters in Washington, D.C.
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