Report: PE investment into Indian food and agri plummets

Private equity investment into food and agri businesses in India hit a five-year low this year, with just 62 private equity deals worth $250 million, a staggering 78 percent year-to-date (YTD) drop in value from last year, a report from VCCEdge shows.

The investment thus far in 2016 pales in comparison to the 153 deals worth $1.15bn completed in all of 2015; YTD there’s been a 78 percent fall in deal value and 59 percent decline in the number of deals.

The declines are due in large part to huge drop in food tech and online grocery deals, the report shows; that segment has registered just 33 deals worth $67 million, compared to $504 million across 85 deals in 2015.

Nita Kapoor, head of News Corp VCCircle, parent company to VCCEdge, attributed the declines to a “self-correction” following an “irrational exuberance which we witnessed in 2015”.

“It gives entrepreneurs running businesses in the food, agri and consumer [sectors the] space to re-calibrate their business models and desist from ‘me too’ ideas to realign themselves with the evaluation criteria of the investor community,” she said.

Among other segments, agri farming and processing attracted the most investment in 2016, with six deals worth $79 million, but still down 58 percent compared to $191 million last year; and restaurants saw nine deals valued at just $27 million.

Though packaged foods saw just nine deals worth $42 million, a 55 percent fall in the number of deals and a 68 percent decline by value, Kapoor expressed promise for that segment.

“Packaged foods is a segment which will see investor interest in the future due to growth drivers like rising penetration of organized retail, changing urban lifestyle and increasing preference for convenient and hygienic food options,” she said.

The dairy and poultry sector was the only segment to witness growth so far in 2016, with two deals worth $33 million representing a 120 percent year-on-year increase.

The top deal of the year in agri farming and processing was India Value Fund Advisors’ $40 million investment into Hyderabad-based Seedworks International, followed by International Finance Corp’s $20 million into Kishore Biyani’s Future Consumer Enterprises. The top food deal was Peepul Capital Fund III and Ascent India Fund III’s $30 million investment into Maiyas Beverages and Foods.