The private equity story in India has largely been an urban one with capital finding an easy way into predictable and established growth areas such as technology and consumer spend industries. The global financial meltdown, which did not spare many of these sectors that were very coupled with the world, shifted the focus of the investment community on recession-proof and non-cyclical sectors that were under-served and untapped.
Agriculture and food, the primary segment of the Indian economy both in terms of GDP contribution and labour force (accounts for one-fifth of our GDP and 56% of workforce), undeniably offers enough reasons for an active play by private capital. But, there are manifold challenges that Indian agriculture faces such as fragmented land holdings, inefficient production techniques, gaps in storage and cold chain facilities, lack of market information to farmers, high fuel costs and monsoon dependency and so on. This, in some ways, limits capital flows to a few sectors.
Consider some of the large deal activity in the agriculture and food space: Summit Partners made its debut in India with a $30-million investment in Krishidhan Seeds. Siva Ventures invests about $48 million in Ruchi Soya Industries. Morgan Stanley Private Equity Asia announced its first deal in India by picking up a minority stake in castor oil maker Biotor Industries Ltd for Rs 182 crore. Private equity major, Blackstone Group picked up a stake in Hyderabad-based seed maker Nuziveedu Seeds Ltd. Chennai-based agro solutions firm Sree Ramcides raised Rs 25 crore from ePlanet Ventures. Clearly, there seems to be a distinct skew towards deals in established niches within agriculture and food businesses such as fertilizers, chemicals, seeds and edible oils.
At the Investment Appetite In Agri and Farm Sector panel of the VCCircle ICICI Bank Investment Summit 2010: Agri, Food & Emerging Sectors, some of the burning questions that will be tackled include: What kind of deals are PEs scouring the market for? What are the challenges that deal-makers face in terms of sourcing, deal closures and exits? Are there concerns on corporate governance in this sector? How do agri businesses view private equity? Is PE looking at only the tip of the iceberg? Which are the hot and which are the untouchable areas within agri and food business? Are deals largely limited to agri input industries such as seeds, fertilizers, fine chemicals and farm tools? What role do entrepreneurs expect PEs to play?
In an entrepreneur-investor engagement session–to be chaired by TVS Capital Funds chairman Gopal Srinivasan—Kotak Private Equity CEO Nitin Deshmukh, JM Financial executive director Bhavesh Shah and Argonaut Private Equity director Rahul Mehta will exchange notes with Krishidhan Seeds managing director Sushil Karwa and Parag Milk Foods managing director Pritam Shah on finding the right balance in these alliances. They will also touch upon the overall investment climate and appetite that exists in the dynamic space.
To get a knowhow on the chemistry of deal-making, click here to