Support for agri producers in the recent 2016-2017 Indian budget bodes well for investors, an executive for Indian agri fund Mandala Capital has told Agri Investor.
The Indian government has pledged 359.8 billion rupees ($5.3 billion; €4.9 billion) in direct funding for the agriculture sector, which has been struggling with persistent drought and low commodity prices. The budget includes provisions to improve irrigation, provide financial assistance to farmers and for the removal of barriers to business throughout the Indian economy.
However, Mandala Capital general partner Uday Garg warned that while the government’s focus on agriculture is a positive sign, it will have to maintain that focus over a number of years if it is to achieve the improvements targeted in the budget.
“Overall, the budget does make me more confident but this is a multi-year process that needs sustained policy support,” he told Agri Investor.
He also said drought conditions and low commodity prices have had mixed results in Mandala’s portfolio; while valuations at some companies have been affected by working value or inventory issues, investments in water management, solar water pumping or heartier seed varieties have benefited from the adverse conditions.
The firm reached a first close on Mandala Food Fund II on $140 million in December 2015, with a target of $250 million. Food Fund II made its first investment in November 2015, leading a $120 million raise for micro-irrigation company Jain Irrigation Systems. The majority of Mandala’s investors are US pension funds and endowments, with additional investments from US and European family offices.
Mandala investments that Garg sees as primed for growth include agtech suppliers looking at farming efficiencies and yield improvements, scalable back-end companies dealing in fast moving consumer goods or food services and processing, logistics and cold chain operations.
India’s new budget is part of government efforts to double incomes for Indian farmers in the next five years, and includes extending irrigation systems to 2.8 million hectares of agricultural land, for which it has allocated 200 billion rupees too the National Bank for Agriculture and Rural Development as an initial investment for a long-term irrigation fund. Another 150 billion rupees has been allotted to easing interest burdens for indebted farmers.
Mandala Agribusiness Fund closed on $115 million in 2012, according to PEI Research and Analytics, while Mandala Capital Fund I closed on $120 million in 2014.