Netafim Agricultural Financing Agency (NAFA), an agri-focused NBFC and a subsidiary of Netafim Singapore, has raised $40 million via external commercial borrowing (ECB) from Israeli-based investors- the Phoenix Group and Cogito Capital.
The raised funds will be utilised effectively for business expansion, enhanced offerings, and to expand horizons in the agri-rural domain. The company would successfully improve its margins as it intends to service the high-cost old debt and bring down the overall cost of funds, the company said.
The deal also marks fresh equity infusion into NAFA, which recently raised $9.4 million of Tier I Capital from Netafim Singapore and offered exit to the initial equity partners Atmaram Properties & Granite Hill Fund as they had reached their investment horizon.
This is the maiden investment for both Phoenix Group and Cogito Capital in India and NAFA, through acquiring stake in Netafim Singapore.
Since acquiring NBFC license from RBI in 2013, NAFA has established its presence in eight states and disbursed total loans worth Rs 1,000 crore to over 10,000 customers. Among these, more than 60% of farmers are small farmers and marginal farmers.
The company now aspires to expand this network and diversify to allied activities for customers’ long-term credit needs.
Netafim CFO Lauri A. Hanover said, “In the aftermath of Covid, India is gearing up for self-reliance with emphasis on the agri-rural economy and its rapid modernisation. While the sector is still highly fragmented, the demand for credit in agriculture is largely unmet through formal financial institutions.”
“Being the innovator of drip irrigation and serving customers for more than 57 years across the globe, the equity infusion in NAFA is aligned with our core of supporting customers in adopting precision irrigation and automation solutions in agriculture. This equity infusion will help NAFA strengthen its capital adequacy and further expand its market presence,” Hanover added.
Netafim Agricultural Financing Agency CEO Prabhat Chaturvedi said, “Indian agriculture, in general, is characterized by low and uncertain returns as they are more prone to natural calamities and varied risks, resulting in constant demand for agri-financing support.”
“The advent of intensive and climate-resilient agricultural technologies has further amplified the need for good financing schemes. Despite the presence of multiple financial mediums, there aren’t enough credit products catering to the niche demands of the farmers, leading to a huge credit gap. In India, there is a need for diversified credit schemes, along with adequate handholding, to provide financial guidance to farmers on investing in agriculture and allied activities,” he added.
With this investment, NAFA will further enhance its credit lending portfolio and expand horizons within the agri-rural domain beyond micro-irrigation.
Cogito Capital Managing Partner Guy Zukin said, “Cogito is excited to be teaming up with Netafim and Phoenix Insurance, in providing growth capital to NAFA. This investment matches Cogito’s strategy of making investments alongside strong partners, focusing on high growth and adjusted risk opportunities.”
