the services and manufacturing sectors, which promised
good returns even back.
But some
investors seem to have found an answer closer to the ground- in agricultural
fields.Last year, Indian agro-based companies attracted a host of private equity players,
players, who see potential in this space on the back of strong demand and the
sector's insulation from the credit-induced economic crisis in the West.
The prominent deals in 2008 include the $50 million investment by Blackstone in Hyderabad-based Nuziveedu seeds,
which is one of the largest hybrid seeds companies in India. Another prominent
example was Morgan Stanley's investment in castor oil maker Biotor Industries,
through its Asia fund. More recently, Chennai-based Sree Ramcides, a 36-year
old, family-run agro solutions company attracted $5 million from ePlanet
Ventures last month.
Veda Corporate Advisors executive director C Venkat
Subramanyam said the investments signalled a broader trend of private equity
players looking at sectors that are more insulated from the global slow down.
Veda was the exclusive advisor for the Ramcides transaction.
At the time of investment, ePlanet Ventures managing director Chandrasekhar
Kandasamy said, “We see a huge opportunity in agro and agro-related businesses
for the next 3-5 years.”
“Compared to the manufacturing and services
space in India, agriculture has been a laggard. But, unlike the manufacturing or
services space, agriculture is insulated from incidents in US or Europe. So,
it's a very good diversification opportunity in the current environment,” added
Mr Arun Natarajan, founder and CEO, Venture Intelligence, a research service
focussed on venture capital
and private equity.
According to a recent report by research firm Four-S
Services, the lack of big integrated players in the agri-business, has opened up
a wealth of opportunity for PE players to invest in this fragmented space that
promises growth potential. Within the agri-business, private equity firms are
exploring various areas including agri-biotech and seeds, food processing,
organic farming, crop protection, integrated cold chain management and logistics
& distribution.
Industry observers also attribute the increasing PE
interest in agro-based companies to Limited Partners (institutions that back
private equity or venture funds), who want to see more investments happening
outside of the metros.
“Till now, PE has been a largely metro, urban
story. Increasingly, LPs want to see funding happening in areas where there is
not so much of a competition for deals and businesses and also want funds to
move beyond the metros to the hinterland. So, agro-based industries are an
obvious option. The consumer spend in Tier-II and Tier-III cities has also gone
up,” Mr Natarajan added.
Source: Economic Times