This story first appeared in DNA Money edition on Monday, Jul 22, 2013.
A substantially large Indian agricultural market, coupled with increasing activity in the sector, has led to a significant increase in private equity (PE) and venture capital (VC) placements.
Going by data compiled by research service Venture Intelligence, the sector witnessed a 75% year-on-year increase in PE/VC investments during the first six months of this calendar year.
A total of nine agri-business companies raised around $126 million in the first half compared with $72 million raised by six companies in the same period last year.
Agriculture and related businesses comprise the entire value chain, encompassing foods, agriculture produce, seeds, fertilisers, agri-technology and agri-infrastructure.
Industry experts feel businesses addressing the bottom of the pyramid offer a great opportunity for focused investment firms.
“Investing in agriculture and related businesses fit perfectly into their investment theme,” said a top official with an international transaction advisory.
The largest PE investment in the industry during 2013 was Multiples Private Equity’s Rs 250 crore ($43.24 million) investment in Bangalore-based Milltec Group, which develops technology and machinery for rice milling, roller flour milling, maize (corn) milling and agro-processing plants.
Another buyout focused PE firm, India Value Fund, has committed $40 million to pick up a majority stake in Kochi-based spices firm VKL Seasoning. VKL, a spin-off from the Vallabhdas Kanji Group, provides seasonings and flavours to customers, typically quick service restaurants, in India, the Middle East and Africa.
Interestingly, this time around, the agri-business sector also witnessed participation from investment firms based out of the Middle East region.
For instance, in February, Qatar-based Hassad Food acquired 69% stake in PE-backed rice exporter Bush Foods Overseas for around Rs 800 crore ($135 million), giving existing investor StanChart PE a 2.5 times return on its investment.
Similarly, last week, publicly listed rice exporter Kohinoor Foods agreed to sell a 20% stake for almost Rs 113 crore ($18.8 million) to Al Dahra Holdings, an Abu Dhabi-based agriculture focused investment firm.
Arun Natarajan, CEO, Venture Intelligence, said the rising appetite for such companies among overseas investors and also the higher prices being enjoyed by agri commodities in recent years could continue to sustain PE interest in the industry.
Apart from PE buyouts, the latest quarter (ending June) also witnessed VC funds and specialist agri-business focused funds stepping up their investment activity.
Omnivore Partners, an agri-business focused investment fund, announced two new investments in the latest quarter – in pork products firm Arohan Foods and fly trap maker Barrix Agro Sciences.
Additionally, Khyati Foods and Lawrencedale Agroprocessing attracted VC funding during the quarter from SEAF and Sarona Asset Management and Aspada Investments, respectively.
A substantially large Indian agricultural market, coupled with increasing activity in the sector, has led to a significant increase in private equity (PE) and venture capital (VC) placements.
Going by data compiled by research service Venture Intelligence, the sector witnessed a 75% year-on-year increase in PE/VC investments during the first six months of this calendar year.
A total of nine agri-business companies raised around $126 million in the first half compared with $72 million raised by six companies in the same period last year.
Agriculture and related businesses comprise the entire value chain, encompassing foods, agriculture produce, seeds, fertilisers, agri-technology and agri-infrastructure.
Industry experts feel businesses addressing the bottom of the pyramid offer a great opportunity for focused investment firms.
“Investing in agriculture and related businesses fit perfectly into their investment theme,” said a top official with an international transaction advisory.
The largest PE investment in the industry during 2013 was Multiples Private Equity’s Rs 250 crore ($43.24 million) investment in Bangalore-based Milltec Group, which develops technology and machinery for rice milling, roller flour milling, maize (corn) milling and agro-processing plants.
Another buyout focused PE firm, India Value Fund, has committed $40 million to pick up a majority stake in Kochi-based spices firm VKL Seasoning. VKL, a spin-off from the Vallabhdas Kanji Group, provides seasonings and flavours to customers, typically quick service restaurants, in India, the Middle East and Africa.
Interestingly, this time around, the agri-business sector also witnessed participation from investment firms based out of the Middle East region.
For instance, in February, Qatar-based Hassad Food acquired 69% stake in PE-backed rice exporter Bush Foods Overseas for around Rs 800 crore ($135 million), giving existing investor StanChart PE a 2.5 times return on its investment.
Similarly, last week, publicly listed rice exporter Kohinoor Foods agreed to sell a 20% stake for almost Rs 113 crore ($18.8 million) to Al Dahra Holdings, an Abu Dhabi-based agriculture focused investment firm.
Arun Natarajan, CEO, Venture Intelligence, said the rising appetite for such companies among overseas investors and also the higher prices being enjoyed by agri commodities in recent years could continue to sustain PE interest in the industry.
Apart from PE buyouts, the latest quarter (ending June) also witnessed VC funds and specialist agri-business focused funds stepping up their investment activity.
Omnivore Partners, an agri-business focused investment fund, announced two new investments in the latest quarter – in pork products firm Arohan Foods and fly trap maker Barrix Agro Sciences.
Additionally, Khyati Foods and Lawrencedale Agroprocessing attracted VC funding during the quarter from SEAF and Sarona Asset Management and Aspada Investments, respectively.
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