Coimbatore-based Sara Cotton, a cotton farm, has raised $6.4 million through a mix of equity and debt to fund its overseas (farm) expansion plans in Ethiopia.
The company has raised a debt of $4.5 million from Development Bank of Ethiopia and mopped up the remaining $1.9 million from institutional investors and overseas high net-worth individuals, with the latter picking up a 14 per cent stake in the Indian firm.
Chennai-based Kalpathi Group is a strategic investor with a 58 per cent stake in Sara Cotton. Mr Mohammed Saleem, a cotton trader in this textile hub, is the promoter of the company. He has been providing consulting services to cotton farmers in Tamil Nadu, Maharashtra and Gujarat, and has a strong farm management team, which include soil analysts, cotton experts and agronomists.
According to a release from the company, these experts had undertaken research for almost two years in Ethiopia to ensure suitability of soil, water and climate before embarking on this expansion plan.
The company has decided to cultivate long staple certified organic cotton and establish a modern ginning plant to process the cotton in Ethiopia. The estimated demand for the fibre has been put at 20 million bales. It plans to bring the fibre to India after ginning, as the demand for the long staple cotton is high in the domestic market.
It is targeting a revenue of $50 million in the next 18-24 months.
Why Ethiopia?
On the company's expansion plans, its Chief Finance Officer, Mr Sundhar Rajan, said that the project would encompass establishment of a cotton farm in Ethiopia in 25,000 acres at commencement. “We plan to bring around 5 lakh acres under cotton cultivation over the next 5-7 years, enter into oilseeds and grow other agri commodities in the long term.
Asked why Ethiopia, Sara Cotton's founder-CEO Mr Saleem said the country offered an investor-friendly climate for corporates, including a three-year tax holiday, duty-free import of machinery and duty-free import of machinery spares up to 15 per cent of machinery value.