Equity and capital firms making a bee-line for India’s agri-businesses

By RJ Whitehead

- Last updated on GMT

Related tags: Private equity, Venture capital

Equity and capital firms making a bee-line for India’s agri-businesses
India is providing fertile ground for private equity and venture capital firms, judging by the high level of interest they have shown towards agri-business companies, which currently amounts to spending of US$126m over the first six months of 2013.

The total, across nine Indian companies, is a 75% increase on the US$72m invested across six business during the same period last year, according to Venture Intelligence, the research service firm.

Equity flooding in

In one of the largest PE investments, Multiples Private Equity’s invested over US$43m in Bangalore-based Milltec Group, which develops technology and machinery for rice, roller-flour and maize milling, as well as agri-processing plants.

India Value Fund committed US$40m for a majority stake in Kochi spice firm VKL Seasoning. VKL, a spin out from the Vallabhdas Kanji Group, provides seasonings and flavours mostly to quick service restaurants in India, the Middle East and Africa.

Interestingly, the sector also attracted investment firms based out of the Middle East.

"In February, Qatar-based Hassad Food had acquired a 69% stake in PE-backed rice exporter Bush Foods Overseas for US$135m, fetching StanChart PE a two-and-a-half times return on its investment. And just last week, the publicly listed rice exporter Kohinoor Foods agreed to sell a 20% stake for almost US$18.8m to Al Dahra Holdings, an Abu Dhabi agriculture focused investment firm," said Arun Natarajan, CEO of Venture Intelligence.

Venture capital interest

Aside from private equity, venture capitalists have increased their stake in Indian agri-business to the point that it now competes with healthcare for second place in their list of favourite sectors, behind IT. This is in terms of number of investments completed during the second quarter of this calendar year, according to Venture Intelligence.  

Omnivore Partners, which focuses on Agri-business, had announced two new investments in pork products firm Arohan Foods and fly trap maker Barrix Agro Sciences. Similarly, Khyati Foods, which focuses on soybeans, oilseeds and spices, has attracted investment from agri-business fund SEAF and Sarona Asset Management.

Much of this activity has come as equity firms increasingly come to consider that businesses which address the bottom of the agri pyramid can offer opportunities for focused investment firms.

"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 private equity interest in the industry​," added Natarajan.

Related topics: Business, South Asia, Industry growth

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