MUMBAIl The agriculture sector is inviting attention from a host of private equity players.
Just a week after Morgan Stanley Private Equity Asiatook a significant minority stake in castorseeds firm Biotor Industries, the Blackstone Group has invested in another Indian agri company.
Blackstone grabbed a minority share in NSL Seeds, India’s largest hybrid seeds company, for an undisclosed sum.
In fact, 2008 saw seven deals in the Indian agro-based companies’ space, much more than in previous years. The tally is impressive considering there are not too many players with the size and scale to attract PE.
One attraction for PE players is the good business prospects agri-based industries offer.
Akhil Gupta, chairman and managing director of Blackstone Advisors India, said India is focusing on improving its agriculture sector and is witnessing a significant increase in investments in it. “We believe NSL is an ideal partner to explore the significant potential of this highly attractive sector,” he added.
“Within the agri-business, there are various areas for private equity firms to explore. And the seeds business definitely is an interesting arena,” said K K Rathi, director (private equity) at Motilal Oswal Venture Capital Advisors.
But the attraction is not across the board, industry watchers said. “Take for instance the seeds and the fertilisers business. The former is an attractive proposition but the latter is not,” said an official from a leading advisory firm.
Arun Natarajan, managing director & CEO of Venture Intelligence, said PE investors are keen to diversify beyond the main metro cities, and agri-business companies provide a good way to do this.
“The development of cold chain and other logistics infrastructure that enable efficient transport of farm goods to the metros and export markets also boosts investor confidence in this sector,” said Natarajan.
“Given that there is a history of companies from this sector that are already listed — like Jain Irrigation, KS Oils, Lakshmi Overseas and Karuturi Networks — also provides confidence regarding exit opportunities.” Meanwhile, Blackstone said it will have a representation on the board of NSL Seeds. JM Financial was the advisor for this transaction.
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