Overview
VCCircle ICICI Bank Investment Summit 2010 : Agri , Food & Emerging Sectors
After the huge success of our Agri, Food & Emerging Sectors summit in June last year, which had participation of Ms Chanda Kochhar and the czars of Indian private equity & venture capital in addition to the leading corporates and emerging business in the space scouting for funds, VCCircle launches the 2nd edition of the initiative, which promises to be the largest platform for the food & agri vertical, congregating representatives from private equity, investment banking, agri and food businesses, legal experts and bankers who will give answers to the opportunities and challenges in India’s most attractive sector.
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), offers enough reasons for an active play by private capital. One, the market is both domestic and export-led. Two, the demand for farm and food products is ever-increasing as there is less and less land under cultivation globally. Three, there are many fundable and viable niches within the ecosystem of agriculture. Four, the loop of agribusiness and food business that starts from agri inputs such as seeds and fertilizers to the meal on your plate (farm-to-fork) offers a value chain that promises opportunities along the way such as logistics, cold storage, packaging, commodity markets and last-mile retail. Not only this, agricultural allied activities such as dairy, poultry and fisheries join the long list of unexplored niches in the ecosystem.
But, along with the upsides, 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. These challenges not only prove to be stumbling blocks for Indian agriculture, as a whole, but also limit the way capital flows into a few sub-segments of this sector. 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 is a distinct skew towards deals in established niches within agriculture and food businesses such as fertilizers, chemicals, seeds and edible oils. Some of the other areas which are blinking on the PE radar are agri-biotech, food processing, cold chain and logistics, commodity exchanges, food and retail services, and organic farming.
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? Would the agri business prefer access to good debt structures and finance to private equity capital?
VCCircle Investment Summit 2010 has put together over two dozen representatives from private equity, investment banking, agri and food businesses, legal experts and bankers who will throw up answers to the opportunities and challenges in what could undoubtedly be India’s most compelling sectors to invest in.
So, grab a bite of this appetizing opportunity.