Agriculture and staples may not be the most glamorous business around, but a nation of billion-plus people will automatically throw up numerous business opportunities. With private equity investors witnessing a few early success stories in upstream and downstream businesses and entrepreneurs discovering opportunities in catering consumers with organised sector products, the sector has just begun to see traction.
That is the consensus of the panellists in the third edition of VCCircle ICICI Bank Agri & Food Investment Summit, which drew around 250 participants across the agriculture value chain.
“Private equity investors have to realise that the investment duration in the agri space is much longer than the typical 2-3 years of gestation period and that timeframe has to be factored in as a risk,” Deepak Shahdadpuri, MD of BCP Advisors, has said.
But this has not subdued the deal activity in the agri business space. During the past three years, food and agri-related businesses have accounted for 125 M&A transactions valued at $1.4 billion and 60 private equity deals valued at $650 million, according to VCCedge, the final research platform of VCCircle. While investors face the challenge of spotting the next set of big stories early, entrepreneurs, who have achieved considerable success, are bullish over the medium term.
Ajaay Gupta, managing director of Capital Foods, backed by Future Ventures, sounds extremely optimistic. “In the next 5-7 years, we are going to see a number of billion-dollar firms in the agri and food business in India,” he affirms.
According to Sameer Mehra, founder & CEO of Suminter India Organics, the industry of organic farming is relatively new in India. Therefore, companies have to borrow from other industry models. Also, people in western countries understand the importance of organic food. As of now, Indian consumers are not that familiar with food adulteration and contamination. So, it may be wise to export end products, unless there is a substantial local market for the companies.
Rajesh Srivastava, MD of Rabo Private Equity comments, “We are living in a time where food shortage is a reality and it will remain so for at least the next 15 years. Therefore, raising the productivity should be the top priority for all companies.”
Adit Gupta, director of AMD Industries, believes that beverage companies in India are still struggling with sustainable product packaging. “China, the USA and countries in Western Europe are rapidly changing from glass to plastic for packaging. We need innovation in the form of light-weighting, down-gauging of thickness, alternative packaging materials and recycling,” he details.
Prabir Banerjee, CEO of the agri business division, Amalgamated Plantations Pvt Ltd, has pointed out that in spite of various challenges in the North-Eastern region, it’s not without its share of its opportunities. “The good thing about the North-East is that farmers there do not use fertilisers, pesticides and other chemicals (not because they don’t know how to use it, but because they can’t afford it). So, we have a readymade organic farming base there. When the Green Revolution hit India, NE missed the bus and thank god for that,” he clarifies.
According to Hemant Vora, general manager of ICICI Bank Ltd, it may be a good idea to push for acquisitions abroad, but it is imperative for companies to have a stronghold in the Indian market first before going global.