Complex Made Simple

Abu Dhabi fund Mubadala may invest in Russian vegoil, rice firms

* Several funds may invest $158m in EFKO Group

* May also invest $142m in AFG National

* Analyst says domestic vegoils, rice markets packed

* Potential for growth seen outside Russia


Abu Dhabi state investment vehicle Mubadala Development Co may invest in a vegetable oil producer and a rice producer in Russia, a Russian state-backed fund said, in a rare Gulf investment into the country’s commodities sector.

Russia’s agriculture and food production sector has been growing due to Moscow’s decision to ban most Western food imports in 2014 in retaliation for sanctions over Ukraine, which are keeping many Western investors away from Russian assets.

“Russian agriculture … is attractive to foreign investors due to the high growth rate in the domestic market and exports,” Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund (RDIF), said in a statement on Thursday.

Veggies and rice

The RDIF, Mubadala and other investors will consider a co-investment of roughly RUB10 billion ($158 million) into EFKO Group, a major vegetable oil and fat products maker in Russia.

The consortium may also invest up to RUB9bn in AFG National, a Russian rice producer that is also developing fruit and vegetables projects.

“Asia and the Gulf region are the only potential investors, we still have, while Western investors hold back from investments for obvious reasons,” Andrey Sizov, the head of SovEcon agriculture consultancy, said.

“All of them usually work with the RDIF because it is a local partner approved by the government,” he added.

RDIF and Mubadala have been investing in Russian infrastructure, mining and other sectors since 2013.


Looking out

By investing in agriculture and food projects in Russia, companies from the Gulf region are following Asian investors that have already announced plans to invest in milk and dairy production in Russia.

However, both AFG National and EFKO may need to look outside Russia for significant growth. “Russia’s domestic market (for vegoils and rice) is packed in terms of consumption per capita and is unlikely to show any significant growth,” Sizov said.

AFG National plans to use the investment to increase agricultural production and expand its land bank, while EFKO, which owns the Black Sea terminal for vegetable oil supplies, will finance its expansion into some former Soviet countries, as well as the Middle East and Asia, the RDIF said in a statement.

Co-investors will receive significant but not controlling stakes in both firms.