Green is the new gold. Equity funds look to reap rich harvest

By Abhishek Anand

Windfall Indian agri firms have profited from infusion of equity funds
Photo: AP

IT IS financial inclusion of a different kind. Sensing a huge opportunity, private equity funds are increasingly investing in the rural economy, primarily consisting of agribusiness, microfinance and livestock. The latest in the series is Lighthouse Funds, which has recently invested nearly Rs. 34 crore in Dhanuka Agritech Ltd.
Dhanuka Agritech is present in businesses such as agrochemicals, fertilisers and seeds. The company’s agri-division has a pan-India presence and a dealer network of 15,000 outlets across the country.
Summit Partners, a US private equity fund with $11 billion in assets under management, too has made its debut in India with a $30 million investment in Krishidhan Seeds Ltd (KSL), a commercial seeds company based in Maharashtra.
KSL develops, produces and distributes proprietary hybrid seeds of cotton and rice. It claims a countrywide presence and offers a diversified portfolio of more than 120 products including crops, vegetable seeds and crop nutrition. It has more than 30,000 seed growers under its fold and has a strong network, with about 1,600 distributors and 25,000 retailers across the country.
And that is not all. Vistaar Livelihood Finance, a microfinance company, recently raised nearly Rs.15 crore from SVB India Capital Partners, a mainstream investor, and Elevar Equity, a social venture fund. Vistaar Finance has several schemes under which it lends anywhere between Rs. 15,000 and Rs. 40,000 to rural people.
“With the National Rural Employment Guarantee Act and rapid growth of the Indian economy, income level is on the rise in rural areas. It provides immense opportunity and that is luring private equity funds,” says Brahmanand Hegde, managing director and chief executive officer, Vistaar Finance.
MOREOVER, SOME companies are also trying to rope in strategic investors. For instance, Delhi-based agribusiness firm Dev Bhumi Cold Chain Private Ltd is looking to raise funds through private equity.

‘Agribusiness has the potential of yielding 25 percent returns,’ says BMR Advisors director Sujata Mody

“The potential in the rural sector is immense and major private equity and venture capital firms, including the likes of Nexus, New Silk Route Advisors and Sequoia Capital, are looking to invest in the sector. We have roped in the services of PricewaterhouseCoopers to help us raise funds,” says a senior official of Dev Bhumi Cold Chain Private Ltd.
“Agribusiness has the potential of providing returns close to 20-25 percent and that is why both private equity as well as venture capital companies are exploring opportunities in the area,” says Sujata Mody, director, BMR Advisors. “The average deal size is anywhere between $10 million and $25 million.”
However, IFCI Venture Capital Funds Ltd chairman Atul Kumar Rai is not so gung-ho on rural investments. “No one has any doubt about the potential of our rural sector. But there are several roadblocks ahead,” he says. “There is a huge shortage of power and even roads are not in a good condition. On top of it, there is no pricing freedom on many agricultural produce. As a result, risk involved in the business is high and, hence, only big private equity funds are in a position to take such risk.”
But as they say, the higher the risk, the higher the possible gains.