Omnivore Capital, an early stage venture capital fund backed by Godrej Agrovet Ltd, has made its first investment by buying a 33% stake in weather forecaster Skymet for an undisclosed amount.
“We believe that improved meteorology is one of the best tools to reduce risk in agriculture,” said Mark Kahn, executive vice-president for strategy and business development at Godrej Agrovet and venture partner, Omnivore. “In India, the difference in productivity between the best and the worst farms is very high. Superior forecasts can reduce the level of crop failure and help close that productivity gap.”
Omnivore, in which Godrej Agrovet—the diversified agribusiness arm of the Godrej group—is the anchor investor, focuses only on investments in the agriculture technology area.
Kahn declined to disclose the deal amount as it would reveal the valuation of the privately-held company.
Most of the money Omnivore has invested in Skymet will be used for research and development to improve the accuracy of their short- and medium-term forecasts, and to begin long-term forecasts.
Skymet provides customized weather data, depending on the need of the industry. For instance, farmers would need weather forecast such as how much it will rain while the port or shipping industry would need to know wave height or tide.
As much as 45% of the company’s revenue comes from agriculture and the rest from other sectors such as power and telecom according to Jatin Singh, founder of Skymet. Some of the company’s clients include Reliance Infrastructure Ltd, Gazprom, Thomson Reuters and North Delhi Power Ltd.
Skymet is also a vendor to the Hindustan Times and Mint published by HT Media Ltd.
Omnivore, which is raising a Rs.250 crore fund, is expecting to achieve a first close at Rs.60 crore. The investors in the first close will mainly be domestic rich individuals and some from the US and Israel. For the second close, the fund intends to target development finance institutions and institutional investors.
Omnivore aims to have a portfolio of 10-12 investments of deal size in the range of Rs.20-25 crore.
Most venture capitalists backed by corporations look to invest in companies that will have strategic value to the parent in the future. Godrej Agrovet has a different view.
“The idea behind Omnivore is not to create acquisition targets for Godrej. Entrepreneurs will never be ready to partner with us if that was the aim,” Kahn said. “The idea is to scale up the agriculture-tech start-up we invest in, deliver superior financial returns to our investors, and build an ecosystem of agricultural innovation in India.”
Opportunities in the agriculture-technology sector are limited as scaling up companies is a challenge, experts say.
“Money will always follow scale and the sector has yet not found scale in India, hence it is still niche,” said Anand Vermani, director, corporate finance, KPMG Advisory Services Pvt Ltd.
The biggest problem with India is that “we don’t invest in technology apart from IT services and BPO”, Vermani said. “Unless Reliance or some big company enters the sector or a small company gains scale, the sector will remain niche.”
Although agri-tech is a niche play with opportunities to write only smaller cheques, the broader agriculture sector has thrown up many opportunities for venture capitalists, said Sandeep Singhal, co-founder, Nexus Venture Partners.
“We have looked at companies in this area,” he said. “Agriculture is a large sector with many inefficiencies.”
Source: Livemint