Irrico close to doubling Russia farmland portfolio

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Agrimoney | 13 Sep 2013

Irrico close to doubling Russia farmland portfolio

Irrico, the Russia-based agricultural investment company, revealed it is on the verge of doubling its land portfolio as it unveiled it had attracted a third investor, emerging markets private equity group ADM Capital.

Jason Silm, Head of Agriculture Investments at VTB Capital and Executive Chairman at Irrico, which since being set up last year has acquired two farm operations totalling 22,000 hectares, said that it was "highly probable" that it would shortly close a third deal, taking its portfolio to about 30,000 hectares.

"In line with the business plan we should have 40,000 hectares by mid-2014," Mr Silm told Agrimoney.com, adding that the investment company had sufficient funding to purchase 60,000 hectares.

Irrico, which is buying and developing farms in southern Russia, is aiming to invest some $250m over three years into land, modern machinery, irrigation systems, and storage facilities.

Emerging markets investor

The comments came as Irrico, which was set up by VTB Capital and earlier this year received investment from the North Caucusus Development Fund, revealed that it had attracted a third investor, Hong Kong-based ADM Capital.

ADM, founded in 1998 during the Asian financial crisis as Asia Debt Management, is best known for providing capital to medium-sized companies, such as Isiklar in Turkey, where the fund earlier this year sold its stake in fruit juice concentrates group Penkon.

Anthony Stalker, the fund's European head, said that its "significant investment" into Irrico would "deliver social and development benefits", through the establishment of "modern farming practices".

He added that ADM, with the other investors, was "very confident in our ability to continue to grow Irrico into a significant player in this sector".

Investment strategy

Irrico aims to profit by executing modern farming practices and installing irrigation, and should this year see its operations produce four times the tonnage of crops that were harvested two years ago, before it owned them.

The installation of  centre pivot irrigators, purchased from US-based Lindsay Corp, is also allowing the company to expand into higher margin crops, such as soybeans and corn with less climate risk.

Its farms are based within 400km of Black Sea ports, the main route out
for Russian grain exports, which are indeed largely grown in the south of the country.

'Liquidity event'

The aim is to "build the company and gain significant scale to allow a liquidity event in 2018," which might take the form of a stock market flotation or a trade sale, Mr Silm, the former Head of Global Operations at Macquarie Agricultural Funds Management, the Australian bank.

Given the relatively low price of land in Russia, investment in the country's farming offers strong prospects for returns.

"The entry price is very low, but operating profits are comparable to leading producers in the America's and Australia," he said.
Original source: Agrimoney
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