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8/3/2019 Niraj_Shah IFC Presentation Mentions Jain Irrigation
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IFC Global Agribusiness
ASSOCHAM 2nd International Summit cum ExhibitionProcessed Food, Agribusiness & Beverages
Investments and Business Opportunities
September 15, 2010
Niraj H ShahSenior Investment Officer
IFC South Asia Department
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IFC’s Products and Services
SeniorDebt
Global TradeFinance Program
StructuredFinance
MezzanineFinance
PrivateEquity
• On-lending
• Liquidity management
• Acquisition financing
• Warehousing facilities
• Syndicated loans
• Partial creditguarantees
• Securitization
• Bond underwriting
• CreditEnhancement
• Convertible debt
• Subordinated debt
• Other Tier IIinstruments
• Common shares
• Preferred shares
• $1 billion program
• Guarantees to issuing banks
• 46 issuing banks in 24
countries
• 92 confirming banks in 62countries
• $579 million of issuedguarantees in first 12 months
AdvisoryServices
• Corporate governance
• Risk management
• Small and medium
business banking
• Housing finance
• Energy efficiency finance
SustainableFinance
• Carbon finance
• Renewable energy
• Supply chain financing
• Cleaner production
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IFC’s Goal: Deliver development impact along the global agri-supply chain, through
investments and advisory services with the private sector, to createopportunities and improve peoples’ lives
FinancialInstitutions
MarketInfrastructure
FarmProduction
Inputs Collection Processing Marketing Distribution
Risk Sharing Facilities
Pre-Harvest Finance Trade Finance
Fertilizersand otherChemicals
Land
Project/Corporate Finance
Retail
Infrastructure/Logistics
CIT–
Access to Markets
IFC’s investments in the Agribusiness valuechain exceeded US$2.0 billion in FY2010
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IFC Agribusiness Portfolio OverviewAgri-related Investments
(including Syndications)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
$
M i l l i o n s
IFC'S COMMITMENTS IN AGRIBUSINESS BY FISCAL YEAR
Agri-Wholesaling
Rural and Trade Finance
Fertilizers
Food Retail
Agri Infrastructure
Equity FundsAgribusiness Production & Processing
2.0 bn
1.4 bn1.3 bn
848 m
483 m
546 m
347 m
304 m
120 m
406 m
2.0 bn
The active portfolio of agri-related investments was
$3.9 billion at FYE10 (excludes Trade Finance)IFC has significantly increased its agri-financing in recent years
6
Africa6% Middle
East/NorthAfrica
2%South Asia
11%
East Asia11%
LatinAmerica
45%
Europe andCentral
Asia25%
IFC'S AGRIBUSINESS PORTFOLIO BY REGION
Food Retail12%
Fertilizers
6%Agri
Infrastructure4%
AgribusinessProduction
andProcessing
75%
EquityFunds
3%
IFC'S AGRIBUSINESS PORTFOLIO BY SECTOR
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Technical Assistance is a significant part of IFC’s
contribution
Bertin, BrazilPilot project with Bertin to create a
Sustainable Cattle Ranching Model in the Amazon.
Mars, IndonesiaPartnership w/Mars Symbio Sciences
focusing on sustainable cocoa and more recently sustainable mariculture
North Andre, ChinaDevelopment of a traceability
system to enable small farmers to meet GLOBALGAP standard in the apple sector
ECOM, Africa/AsiaEstablishing Farmer Training Centers to support small farmers to increase
productivity, improve quality and meet international standards
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Global Agri-Snapshot
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Dynamics of global food prices have becomemuch more complicated
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• Increasing speculation by financialplayers
• Increasing trade protectionism
•Rising correlation with oil prices
Feedback Loops
•Further productivity improvements
•Availability of additional land
•Availability of water
•Diverting land for biofuels
Key Supply Drivers
•A severe El Niño (or similar) event
•Climate change
•A renewed surge in oil prices
•A sharp depreciation of US dollar
Uncertainties
•Population and income growth,especially in Asia
•Shifting diets; more protein, edibleoils, and processed foods
•Diverting food commodities for biofuelproduction
Key Demand Drivers
Source:Modified from Nomura Global Economics
Priceof
Food
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Global Snapshot – 2010
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• Global alert for grain price spikes, althoughnot expected to 2008-09 levels
• 40% drop in production in major grain areasof Russia and Kazakhstan due to droughtand excessive heat; announced export bans
of wheat for rest of 2010.
• Drops in output throughout Europe, but notto these levels, leads to precarious globalgrains situation which will depend onSouthern Hemisphere supplies (Australia &
Argentina)
Current Prices are rapidlyapproaching pre-2008 highs
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Main Issues in Global Agri-IndustryIncreasing role for BRICs
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• Volatility in the commodity markets to continue
• Increased focus on land and agri-commodities as an investment class
• Sovereign Wealth Funds interested in large scale land investments in regionswhere land is available to address food security
• Emergence of regional Latin America and Asian players (e.g., JBS, Marfrig,Olam, Wilmar, Mengniu, Yili) as global leaders
• Brazil: Agri-players in particular consolidating and globalizing, becomingmajor international players; but infrastructure still needs to improve
• Russia: Structurally changed to become a large exporter of grains, incontrast to high dependence on imports in 1970s
• China: Growing industrialization and demand continues to influence globalprices
• India: In contrast, agri-markets more focused internally and sensitive tolocal climatic and economic conditions
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• World food production needs to double within 30 years
• Yet, pressure on natural resources is increasing:• 40% of the world’s crop and pasture land is degraded, 8 million ha of cropland lost to
urbanization, roads, etc every year
• Agriculture accounts for nearly 70% of global water use
• By 2025, some 48 countries and 1.4 billion people will experience water stress or scarcity,the majority of those will be in emerging markets
• 25% of world’s marine fish stocks are overexploited; an additional 50% are fully exploited• Biodiversity/deforestation issues in major emerging markets (Brazil, Indonesia)
• Climate change is a looming threat to agriculture and food supply
• Biofuels are becoming increasingly contentious in the environment of rising food prices
• Global trade liberalization and subsidy elimination are important issues in dealing withthe global food crisis.
Intensification, resource efficiency andsustainability are core issues for
agribusiness and rural development
The Sustainability Challenge
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Food insecurity particularly impacts developing countries
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Strategic Context for IFC
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• Agricultural Development Aid plunged from around 17% of total development
aid in 1980 to 3.8% in 2006.
• A renewed international commitment to Food and Agriculture is at the centreof the global development agenda.
• FAO estimates that the world will need to boost agricultural investment to
$83 billion a year by 2050, a 50% increase over the last decade’s averageinvestments to feed a growing population.
• Most of the additional investment is expected to come from the privatesector - from small farmers to large agribusiness companies.
• IFC’s role is to work with the private sector in promoting sustainableagribusiness in emerging markets.
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Examples of existing Agribusiness projects
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Poultry sectorSuguna (India) – 2007
IFC Role
• Long-term partner for mid-tier
growth company preparing for IPO
• Sharing of poultry sector expertise
• Corporate governance bestpractices in preparation for IPO
500DirectJobs
Created
3,600Total
Employees
Employment Creation
24,000FarmersReached
$300 avgmonthlyincome /farmer
Farmers Reached
600Wholesale
Distributors
12,000Suguna-brandedlive birdkiosks
SMEs Reached
AvianInfluenza
Management
Biosecurity- SupplyChainMgmt
Technical Assistance
The Project$154 million project to more than double sales for India’s
pioneer and market leader in integrated poultry production.The company’s direct purchasing provides farmer incomes andits backbone kiosk structure provides employment for retailers.
• $35m Preferred Shares
• $18.4m A Loan
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IrrigationJain (India) – 2008-10
IFC Role
• Global agribusiness partner as thecompany expands internationally
• Implement environmental andsocial best practices & guidelines
5,600TotalDirectJobs
Improvedlivelihoods
Employment
2,300contractfarmersreached
Improvedincomes
Farmers Reached
Cleanerproduction
technologies
Technical Assistance
The ProjectJain Irrigation Systems (JIS) is India’s largest provider of micro
irrigation systems (MIS). JIS is growing rapidly and expandingits manufacturing capacities for MIS as well as its processed
fruits and vegetable production. Agriculture uses 80% of waterin India; meanwhile less than 5% of India’s irrigated land is
MIS, which increases water use efficiency 80-95%.
• $60m A loan (4 loans)
•$14.5 m Equity
Reducedemand for
waterthroughefficientdelivery
Environmental
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IFC Role
• Corporate Governance advisoryservices for company and sector
• Support a leading regional player
• Long-term financing in a difficultlocal market
4,100 Full-Time Jobs+5,000
Seasonal
Jobs andtraining
Employment Creation
The ProjectExpansion of one of the leading branded food and beverage producers
in Bangladesh. The US$52 million project increases productioncapacity in rice processing, snacks and confectionary, beverages, and
dairy, while addressing permanent working capital needs.
2009
• Loan of $15 million
Suppliesfrom9,750
farmers
Pran buyshalf the
processedhorticulturein country
Farmer Benefits
Packaged and Processed FoodPran Foods (Bangladesh) - 2009
1,900exclusive
distributors
Distributionnetwork provides
backbone fordomestic value
chain
SME Benefits
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Fruit Juices sectorNorth Andre (China) - 2005
The ProjectNorth Andre is a leader in China’s concentrated apple juice
industry.$96.7 million project to expand operations (expand 1 existingplant and 3 greenfield plants) and support capital structure,
including working capital - replacing short term debt.
• $15m A loan (2005)
IFC Role
• Provide long-term financing not
available in local market
• Sustainable development of commercial apple sector
• Demonstration effect of social andenvironmental policies/guidelines
400 JobsCreated,850 Total
SeasonalEmployees
Employment Creation
25,000FarmersReached
Farmerfinancing;foster newvarieties
Farmers Reached
ISO 9000:2000 andHACCPcertified
Supplierrelationsw/globalplayers
Quality Management
SMELinkages
IFC TechnicalAssistance-Traceability
Sustainable Development
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Niraj H Shah
Senior Investment Officer
South Asia Department
Thank You