The team behind the Indian agriculture investments of Lightrock, an impact investment firm backed by the royal family of Liechtenstein, have been working the country for longer than you might think.
“Our first agri investment in India was in 2010 – our partnership with the Lightrock platform began in 2019 but our same team has been investing in early-stage [companies] in the Indian ecosystem since 2010,” partner Vaidhehi Ravindran tells Agri Investor.
“We initially started with a focus on supply chains, especially the fresh produce supply chains. In 2010-11, the government deregulated the Agricultural Produce Marketing Committee Act, which made it possible for non-licensed buyers to buy directly from farmers in the field of farmers,” she says.
The change undid a system of licenses set up in the 1960s to protect prices for growers and provided a window for private firms like Lightrock to get more involved in the market.
As we reported this week, Ravindran says Lightrock aims to tackle three “systemic problems” in Indian agriculture through its investment: a need to transform the process of growing food; a need to create a better marketplace for selling that food; and a need to improve supply chains, to get that food to a broader range of places and buyers in a faster and more efficient way.
For the team’s first five or six years, it invested in a series of product-specific fresh supply chains for commodities such as potatoes, apples, oranges, bananas, pomegranates and other temperate vegetables, aiming to create technology-enabled supply chains.
“What we realized was that there are different parts to these supply chains – it can’t be product-specific,” Ravindran says, and it was by identifying the three distinct parts that led to the three “problems” that underpin its investment aims.
In food production itself, Ravindran says India has relatively low levels of mechanization and thus low yields, but is still in the top two or three in production volume for a lot of commodities such as wheat, rice and diary, purely because of the vast amounts of arable land.
So investing in that, as well as the end market to provide more places for farmers to sell produce, makes obvious sense.
“India has become as close as mature as any developed country [in terms of physical infrastructure] in the last five or six years, which now makes it ready to build new-age solutions that require less handling, for example. But because there are a lot of intermediaries making short margins, nobody had enough money to invest and build this infrastructure out,” Ravindran says, with investors like Lightrock able to step in and provide that capital.
On the future of ag investing in India, Ravindran says: “The last decade in Indian agriculture was about going from the physical to the digital.
“I think we will see more technology-first agribusinesses [catering to] digitally-native farmers. The three problems I’ve mentioned are more systemic in nature – we are starting to see more niche problems that can plug into these transformational platforms, too.”
It is certainly a huge market and one ripe with opportunities, although just perhaps not in the more traditional institutional investor target areas of farmland and timberland.