Mahindra Group Shopping Out Minority Stake in Agri Unit to PEs

January 13, 2017

Indian Conglomerate, Mahindra Group, is courting private equity players as it plans to sell a 33 percent stake in its agri unit, Mahindra Agri Solutions Ltd (MASL).

The sale of the stake is being pursued with the target of raising Rs 300 cr (US$44 million) to accelerate the growth of the group’s argri unit through acquisitions with the goal of reaching revenues of Rs 3,000 cr (about US$451 million) in three years.

This latest announcement is another step by the group to strengthen its agriculture business in the hunt for growth and revenue. In February of last year the group announced that it was restructuring and consolidating its agribusiness units into wholly-owned single entity. The move brings together crop care, seeds, seed potato, fruits, and edible oils, but also is designed to facilitate the group increasing its attention on pulse production, and to support its expansion into new segments including dairy products, processed foods, and juices.

Indeed, India is the world’s biggest producer and consumer of milk. And with over 80 percent of the country’s $58 billion dairy sector being unorganized and fragmented, Mahindra Agribusiness has earmarked the industry as being a major growth sector for the company, leading to the announcement in 2014 of its acquisition of a dairy for Rs500 crore (US$80 million). More recently, this past September, MASL opened its first Saboro Lounge in Mumbai, which will offer a range of cold-pressed juices, smoothies, salads, and desserts made from the freshest fruit, vegetables, and dairy products.

A Full Schedule

For any private equity firms considering bidding for a stake in MASL, the company is making its future plans for growth known.

Starting this year, Mahindra has granted ‘sector’ status to its agri unit, which now has a separate board and conducts independent financial reporting and human resource policies.

“With sector standing, we’re empowered to develop in a much bigger method,” Ashok Sharma, president of Mahindra Group’s Agri Enterprise told the Economic Times. “Within the subsequent three to five years, we might be making large bets to scale up and get in expertise and types.”

Mahindra’s push for growth through the expansion of its agricultural business will play out over the next two years through planned investments and acquisitions in crop care, micro irrigation, seeds, fruit and the agri-chemical sector. However, during that time the group also will be conducting testing and pilot programs in its newer segments including dairy, pulses, and better-for-you quick service restaurants.

When looking on a slightly longer timeline, MASL may be looking at going public.

“The formation of Mahindra Agri Solutions last year and getting sector status this year is to make this whole agriculture business stand on its own feet and create a future of its own so there is value creation for our shareholders,” Sharma said. “Maybe in the future, in four to seven years, we will make it a listed company.”

“The sector status gives a clear message to the outside world that this is a focus industry. In the new role now, the agriculture sector will be more independent in terms of growth plan and finances,” said Sharma.

Beyond food, the group also issued a “promise statement” in 2016 declaring that it will launch three digital platforms by 2020, and is already conducting a pilot program for its “My Agri Guru” mobile app which gives farmers access to real time weather forecasts, market prices, crop protection measures, and an agronomic crop calendar in both Hindi and English.

 

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.

 

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