PE/VC investment in Indian agri-business increases

Investments in the sector rose 75% in the first six months of 2013

Private equity and venture capital are increasingly eyeing the Indian agri-business. Investments in the sector rose 75% in first six months of 2013.

PE and VC firms invested $126 million across nine Indian Agri-Business companies during the first six months of 2013, up from the $72 million (invested across six companies) during the same period last year, said data from Venture Intelligence, a research service focused on private company financials, transactions and valuations in India.

In one of the largest PE investment in this segment during 2013, Multiples Private Equity’s invested Rs 250 crore ($43.24 million) in Bangalore-based Milltec Group which develops technology and machinery for rice milling, roller flour milling, maize (corn) milling and agro processing plants.

India Value Fund, has committed $40 million to pick up a majority stake in Kochi-based spices firm VKL Seasoning. VKL, a spin out from the Vallabhdas Kanji Group, provides seasonings and flavors to customers - typically Quick Service Restaurants (QSR) - in India, the Middle East and Africa.

"In February, Qatar-based Hassad Food had acquired a 69% stake in PE-backed rice exporter Bush Foods Overseas for $135 million, fetching StanChart PE a 2.5 times return on its investment. And just last week, the 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," said Arun Natarajan, CEO of Venture Intelligence.

Apart from Private Equity buyouts, the latest quarter (ending June 2013) also witnessed Venture Capital funds and specialist agri-business focused funds stepping up their investment activity in Agri-Businesses. So much so that Agri-Business was tied with Healthcare as the second favorite industry among VCs (after Information Technology) based on the number of investments during Q2’13, the Venture Intelligence data shows. The Agri-Business focused Omnivore Partners announced two new investments in the latest quarter: in pork products firm Arohan Foods and fly trap maker Barrix Agro Sciences. Two other companies in the industry that attracted VC investors during Q2’13 included Khyati Foods (focused on Soybeans, Oilseeds, Spices) from SEAF and Sarona Asset Management and Lawrencedale Agroprocessing (focused on Agri Logistics) from Aspada Investments.

"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.