Coimbatore-based Sara Cotton Fibers Pvt Ltd has raised $6.4 Mn through a mix of equity and debt to fund its overseas expansion plans in Ethiopia.

It has raised $4.5m debt from Development Bank of Ethiopia, while institutional investors and overseas and Indian HNIs have invested $1.9m for a 14% stake in the company. Chennai-based Kalpathi Group will have 58% stake in the company as a strategic investor.

Company will initially bring 2,500 acres of farm land in Ethiopia under cultivation of certified organic cotton and this will be increased later to cover as much as 5 lakh acres in 5-7 years.

In the long term, company also plans to enter into oil seeds and growing other agro commodities.

Sara Cotton is cultivating long staple certified organic cotton with modern irrigation facilities and ginning plant to process the cotton. After ginning, the cotton will be brought to India.

On the reasons for expansion into Ethiopia, Mohammed Saleem, Founder CEO, Sara Cotton said, "Ethiopia offers a very investor friendly climate for corporate. Incentives for our expansion include a three year tax holiday, duty-free machinery imports and duty-free import of spares up to 15% of the machinery value. The Ethiopian government has also recently announced cotton as a priority sector for the country."

Transaction Reference: Indiainfoline

Sara Cotton with a strong team for farm management that includes soil analysts, cotton experts and agronomists has undertaken almost two years of research in Ethiopia to ensure the suitability of soil, water and climate.

Sara Cotton is promoted by Mohammed Saleem, who is a leading cotton trader based in Coimbatore. Over the last decade, he had been into contract cotton farming in Maharashtra and Madhya Pradesh and has also provided consulting in cotton farming to farmers in Tamil Nadu, Maharashtra and Gujarat.

Karuturi Global, a Bangalore-based horticulture firm, has leased around 311,700 hectares of land in Ethiopia, for agriculture and plans to grow crops like cereals, sugar and palm for future exports.

Last November, Hyderabad-based Neha International acquired remaining 49.99% stake in Oromia Wonder PLC, a floriculture unit located in Ethiopia. It has acquired 10,000 acres in Ethiopia through its wholly owned subsidiary as part of diversification into agriculture.

Edible Oil manufacturer Ruchi Soya Industries Ltd, has also signed up with the Ethiopian government to grow soya beans, maize and pulses in that country. Early this year, it acquired 25,000 hectares on a 25-year lease with an option to double the area.

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