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Impact investment into Indian agriculture gathers pace

The unique investment approach is establishing itself as a key driver of agriculture investment in the Indian economy.

Impact investing is becoming an increasingly popular way to invest in India’s agriculture. In 2013 some $40 million was raised through 17 impact investments into the country’s agribusiness sector, according to Unitus Capital, a Bangalore-based financial advisory firm.

And there is plenty of supply. Around half of India’s 1.3 billion population is involved in the agriculture industry in some way, according to Mark Kahn, a founding partner at Omnivore Partners, the Mumbai-based venture capital firm. Omnivore invests into early stage agriculture and food technology companies in the South Asian country.

“The nice thing is in India is that we don’t really lack for deal flow,” he told Agri Investor. “Agriculture affects such a meaningful chunk of the population so we see quite a bit. There is a real entrepreneurial wave going on.”

Included in the Unitus research were investments made by funds focused on agriculture, impact-focused funds and development-focused institutions. “Participation from mainstream funds is seeing an uptick and we are seeing interest in agriculture from mainstream private equity investors,” said Ishita Verma, an analyst at Unitus.

Agriculture technology was a particular target among impact investors, according to Verman, as investors hope to capitalize on the developments of new technologies to improve productivity in the food chain. “India is still plagued with considerable inefficiencies so there is an opportunity for entrepreneurs to develop solutions for improving farm and agribusiness productivity and making agriculture more sustainable,” said Verma.

Omnivore invests into agriculture and food technology companies that aim to improve productivity along the value chain. Omnivore’s Fund I, an eight-year fund with a two year extension – closed at Rs 2.6 billion ($43.1 million; €31.2 million) in 2009. It is currently 40 percent deployed across eight investments.  Its investor base includes strategic investors, financial institutions and a variety of very large to smallish high net worth individuals that are “big believers” in the cause, according to Kahn.

“We look for opportunities to modernise and transform Indian farming,” said Kahn. “This includes ensuring the supply chain is in place so that farmers can really benefit from innovative products. It is not enough just to have farm productivity.”

Unitus identified other investment firms in its research including those with a dedicated focus on agriculture such as SEAF India and Aspada Investments; impact investment funds such as Aavishkaar, SIDBI VC, Google Impact and Acumen Fund; and development-focused institutions such as International Finance Corporation and Proparco.

Additional reporting by Louisa Burwood-Taylor.