FDI in retail likely to spur deal

activity in agriculture, logistics

The food value chain has to improve to cater to retailers. PEs can help
firms access capital, capabilities and customers
KEY DEALS IN THE AGRI SPACE
Buyer

Deal value
($mn)

Target

Blackstone Advisors India

Nuziveedu Seeds

50.0

New Silk Route, Citi Venture*

KS Oils

49.0

Siva Ventures

KS Oils

35.5

Summit India

Krishidhan Seeds

30.0

Nalanda India Fund

Triveni Engineering & Industries

25.0

India Agri Business Fund

Super Agri Seeds

9.56

Unilazer Ventures

InI Farms

3.61

Acumen Fund

BASIX Krishi Samruddhi

*includes Capital, The Baring Asia PE Fund

REGHU BALAKRISHNAN
Mumbai, 19 September

The governments decision to allow

foreign retailers to set up supermarkets in the country is likely to
spur private equity (PE) investment
in agriculture and warehouses, the
backbone of the retail sector.
The need for efficiency and quality would drive investment in
warehouses and supply chains,
experts say.
In last five years, the countrys
agriculture sector saw 35 PE/VC
(venture capital) deals, worth a mere
$356 million.
In 2010, seven such deals, worth
$122 million, were recorded; the volume was the most since 2007. So far
this year, only three deals, worth $15
million, have been recorded in the
sector, compared with six, worth
$24 million, last year.
Though India-focused PE
investors run sector-specific funds
in areas such as healthcare and
infrastructure, only a few funds like
Rabo Equity Advisors, the PE arm of
Rabo Bank, operate in the agriculture sector.
Rabo Equity Advisors, Indias
first food and agriculture-focused
PE fund, had launched the $120million India Agribusiness Fund
and invested in companies such as
LT Foods, Sri Biotech Labs, GeePee
Agri, Daawat Foods, Global Green
and Vacmet India. Rabo now plans

1.67
Source: VCCEdge

This would directly benefit consumers.The stakeholders in the

food value chain, who deal with
Deal
Deal value
modern retailers would have to perk
Year
volume
($mn)
up their productivity, quality, logis2007
9 43.0
tics and general governance.
2008
5 89.0
According to an Ernst & Young
2009
5 63.0
note, Indias productivity in food
2010
7 122.7
and agriculture is one of the lowest
2011
6 24.3
in the world, and investment in bet2012
3 14.8
ter farming practices would lead to
Total
35 356.2
an increase in output.
Figures rounded off to 1 decimal
Source: VCCEdge
Pinaki Ranjan Mishra, partner
and national leader (retail and conto raise a second fund, one with a sumer products), Ernst and Young,
said, FDI (foreign direct investcorpus of $250 million.
With a population of about 1.2 ment) in retail would help modbillion, growing 1.6 per cent a year, ernise the supply chain. This presIndia is a large and growing market ents a big opportunity for companies
who manage warehouses and logisfor food products.
Though food products are the tics. PE funds would have an opporsingle largest comtunity to work with
ponent of private The stakeholders in the
them for their future
growth plans. This
consumption expen- food value chain, who
will include not just
diture,
PE/VC deal with modern
investors feel the retailers, would have
capital, but also prosector is not yet ripe to perk up their
viding capability and
for
investment. productivity, quality,
client contacts.
However, this is like- logistics and governance
Possible consolily to change soon.
dation in the fragRajesh Srivastava, chairman and mented food and agriculture space,
managing director, Rabo Equity against the backdrop of increasing
Advisors, says, As food and bever- interest from multinational compaages form a large part of most retail- nies, could lure PE/VC investors.
ers, the sectors would obviously be
Yes, there could be some stake
targeted heavily, once foreign retail- sales by financial investors to forers come in. The best part is quality eign strategic investors. Consolidwould be fully secured by these ation is very much possible, Srivasretailers, to protect their reputation. tava said.

SNAPSHOT OF DEALS