October 24, 2016

Investment activity in India’s food and agri sectors has shown a significant slow-down this year, according to a report issued by News CorpVCCEdge, the financial research arm of News Corp VCCircle.

To date in 2016, India’s food and agribusiness sectors have seen 62 private equity deals with a total value of $250 million – a significant decrease compared to 153 deals with a total value of $1.15 billion for this time period the year before. Broken down, India’s farming and processing businesses saw six deals totaling $79 million. Of this total value, $40 million was accounted for from the single investment by India Value Fund Advisors in Seedworks International. The packaged food segment saw nine deals worth $42 million, and food tech and e-commerce grocery services saw 33 deals worth $67 million.

Despite that this seems to be a significant drop in investment activity, industry watchers are not seeing it in a completely negative light.

“After the irrational exuberance in 2015, self-correction this year has come in as boon,” Nita Kapoor, Head -India New Ventures, News Corp and CEO, News Corp VCCircle told the Economic Times. “It gives entrepreneurs in food, agri and consumer business space to recalibrate their models and desist from ‘me too’ ideas to realign themselves with the evaluation criteria of investors.”

PE in India Marches On

There remain signs that investor interest in India’s food and agri spaces continues as new capital commitments occur.

Box8, one of the fastest growing food tech startups in India announced that it has raised R 50 cr (US$7.5 million) in a Series B led by IIFL Seed Ventures Fund and including existing investor, Mayfield Fund. Founded in 2012 by Amit Raj and Anshul Gupta – two alums of the Indian Institute of Technology – the company has grown to be a fully integrated operation, overseeing the sourcing of raw materials, the food preparation, and its delivery. The company serves 12,000 meals per day through 60 stores across Mumbai, Pune, and Bangalore.

“With this round, we intend to go deeper into the cities where we are present and start operations in Delhi, Chennai and Hyderabad in the next 12 months,” Gupta told Live Mint.  “Apart from geographical expansion, we want to invest in technology. We want to drive more automation and personalization.”

The company raised a previous round of US$3.5 million led by Mayfield Fund and including Dhiraj Rajaram, founder and CEO of Mu Sigma Inc. and Kaushal Aggarwal, co-founder and managing director of Avendus Capital and Indian Angel Network.

Additionally, private equity firm, Motilal Oswal has agreed to invest up to Rs 110 cr (US$16.5 million) into Benlauru-based Dairy Classics Ice Cream in exchange for a significant minority stake in the company.

Of all of India’s food and agri sectors, dairy and poultry was the only segment to see a growth in investment value last year, seeing two deals valued at $33 million, representing growth of 120 percent according to Nita Kapoor.

Founded in 2003, Dairy Classics sells under the Dairy Day brand, one of southern India’s top five ice cream brands, seeing a topline of Rs 150 cr (US$22.5 million) for fiscal year 2016. The company plans to use the fresh capital to fund the expansion of its brand recognition, capacity expansion, and for enhancing its network distribution.

This investment marks the second capital commitment by Motilal Oswal to food related businesses, following the firm’s investment in Paraq Milk Products.

“The consumption theme is playing well for private equity funds,” Vishal Tulsyan, CEO of Motilal Oswal told the Economic Times. “Companies with strong brand identity and significant growth potential can provide great returns to financial investors.”

After raising its first $125 million fund in 2007/08 and its second $155 million fund in 2013, Mumbai-based Motilal Oswal is currently working to raise $300 million from offshore investors for its third alternative asset private equity fund. To date, the firm’s first fund has been completely deployed, and its second fund is nearly fully deployed according to the Economic Times.

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Lynda Kiernan