Singapore’s sovereign wealth fund Temasek is to invest Rs 572 crore ($105 million) for a 19.9 per cent stake in Godrej Agrovet Limited (GAVL), a subsidiary of public listed Godrej Industries Limited (GIL), GAVL said on Monday. The investment will be a combination of primary and secondary investment components and will be the single largest alternative investment in the agri-business space in India.
The firm, which has interests in animal feed, oil palm, agri-inputs and poultry, is valued at Rs 2,860 crore in this transaction.
Nadir Godrej, chairman of GAVL, said, “Godrej Agrovet has been a tremendous source of creation for GIL and continues to be on a strong revenue and profit trajectory, while delivering excellent returns on capital employed. Indian agriculture is at an inflection point and with GAVL’s focus on R&D and operational excellence, we believe that the future looks very bright for the business.”
Rohit Sipahimalani, head of India, Temasek said, “We are pleased to have another opportunity to partner with the Godrej Group in what is an attractive sector in India.”
HSBC acted as the advisor to the transaction.
This is Temasek’s second investment in Godrej Group this year. It bought 4.9 per cent stake in consumer products firm Godrej Consumer for $135 million in January this year. This was the single largest alternative investment deal in the Indian FMCG industry.
The Godrej Consumer deal was the first transaction after the leadership change at Temasek in India. Manish Kejriwal, who was heading India office since 2004, left the sovereign wealth fund in late 2011 to start his own PE firm. Rohit Sipahimalani, who joined as managing director (investment) in 2008 from Morgan Stanley, took over after Kejriwal departed.
In June Temasek hired Promeet Ghosh, the former M&A head of Bank of America Merrill Lynch (BoAML), as managing director in India.
Temasek’s other portfolio companies in India include ICICI Bank, Tata Sky, Bharti Airtel and its tower arm Bharti Infratel.
The company’s animal feed division is the largest manufacturer of compound feed in India, producing more than 1.1 million tonnes of feed and nutrition products for dairy cattle, poultry and aquaculture annually.
The oil palm business manages over 45,000 hectares of smallholder cultivation across Andhra Pradesh, Tamil Nadu, Karnataka, Mizoram, Goa, Gujarat, Orissa, Maharashtra, and Chhattisgarh.
The poultry business, best known for operating under the Real Good Chicken and Yummiez brands, is a joint venture with Tyson Foods (US).
Godrej Agrovet has 45 manufacturing facilities, a network of over 10,000 rural distributors/dealers, and over 2,000 employees.
For FY12, Godrej Agrovet saw sales increase 28 per cent to Rs 2,460 crore with PBIT (profit before interest and taxes) rising 73 per cent to Rs 140 crore as compared to previous fiscal. For the first two quarters of FY13, the company had revenues of Rs 1,643 crore with PBIT of Rs 105 crore.
The transaction has been done 20.4x Godrej Agrovet’s FY12 PBIT, according to back of the envelope calculations done by VCCircle.
Deals in agri-business
Other PE investments in food and agri space this year include IDFC PE’s investment of Rs 150 crore in StarAgri. Founded in 2006, and headquartered in Jaipur, StarAgri provides integrated post-harvest management solutions including warehousing, procurement and collateral management of agricultural commodities besides value-added services such as risk management.
IDFC PE also invested Rs 155 crore ($29 million) in Parag Milk Foods this year.
Also, this year Mount Kellett Capital invested $64 million in Jain Irrigation Systems and Rabo’s India Agri Business Fund invested in Prabhat Dairy.
In the past, Actis had invested $65 million in Nilgiri’s Dairy Farm and Blackstone had struck a $50 million deal with Nuziveedu Seeds.
(Edited by Prem Udayabhanu)