IFC-backed Nepalese PE Business Oxygen to deploy 80% of its $14m fund this year

26 Apr 2019

Chalida Ekvitthayavechnukul

Business Oxygen (BO2), the first private equity firm in Nepal, plans to make up to 14 investments in total and deploy about 80 per cent of its $14-million fund by the year end, chairman and CEO Siddhant Raj Pandey told DEALSTREETASIA.

IFC, a member of the World Bank Group, appointed White Lotus Centre Pvt. Ltd. as fund manager for Business Oxygen, its SME ventures fund in Nepal, in 2015.

BO2 is an 80:20 joint venture between International Finance Corporation (IFC) and local business consultancy firm White Lotus Centre.

BO2 fund focuses on investing in Nepal’s high-growth, small-and medium-sized enterprises across all sectors.

Pandey, a banking industry veteran and former CEO of Ace Development Bank, said that only 39 per cent of Nepal’s SMEs have access to 􀁿nance, leaving a gap for funds like BO2 to bridge.

“The deal sourcing in Nepal has been incredible. A lot of companies are out there. There is a lot of demand especially now when the banks have liquidity crisis and companies are unable to grow because of lack of capital,” he said.

BO2 usually invests between $100,000 and $500,000 per company and takes up to 49 per cent equity with an expected IRR of a minimum 20 per cent.

It has already made seven investments over the past two and a half years and plans to seal six to seven more deals within this year, he cited.

BO2 has invested in local restaurant chain Dalle Restaurant, farmer market Le Sherpa, natural pet food producer Godawari International, solar energy solution provider Saral Urja Nepal, and eco-tourism resort chain Himalayan Chain Resort.

“Apart from the capital infusion, we also give importance to impact investment from the gender equality side. Employment has gone up four times in the companies that we have invested in, they [investees] pay 100 per cent more tax since our entry, or even the climate smart adaptation. All these are what the companies have to adhere to,” he said.

The CEO said, the fund will probably see two to three exits next year. “By then, we will be in position to pitch for a new fundraising,” he added.

BO2 secured $7 million from IFC in 2015 and an additional $7.3 million from IFC through the United Kingdom’s Department for International Development Fund and the Climate Investment Fund’s Pilot Program for Climate Resilience in 2017.

Source : https://www.dealstreetasia.com/stories/nepals-business-oxygen-131987/