Private investments in the Indian food and agricultural space have hit a five-year low so far this year in terms of value, dragged down mainly by a plunge in deals in the food tech and online groceries space. The segment has been roiled by shutdowns as too many me-toos mushroomed over the months and startups grappled to establish a feasible business model.
The year 2016 has so far registered 62 private investments worth $250 million in the food and agri space, revealed a News Corp VCCEdge Funding Insights report focused on India’s food and agriculture sector. This compares with the whopping 153 deals worth $1.15 billion struck in 2015.
However, the number of deals in the sector at the going run rate is better than 2012 and 2013, which witnessed 45 and 64 deals, respectively, the report said.
Food tech and online groceries space, which saw a 358% increase in deal value to $504 million in 2015 with 85 deals, clocked only 33 deals worth $67 million in 2016. The share of the food tech and online groceries space, however, remained above 50% in the overall food and agricultural space..
"As far as the fall in investment in the food tech space is concerned, it is in line with the overall slowdown in the technology space in the country," said Nitish Agrawal, managing director of investment bank Indium Capital, which also focuses on consumer brands.
Besides, these technology businesses are mainly aggregators rather than creators and investors have become more judicious in investing in such companies now than they were a year ago, he added.
However, there is no demand slowdown per se in the consumption of the end consumer and investments will continue to flow in innovative companies, Agarwal said.
The restaurant space has also seen some pressure as the industry recorded just nine deals worth only $27 million in the year so far, against a four-year trailing average of $148 million since 2012.
Deepak Shahdadpuri, managing director, DSG Partners Asia, recently told VCCircle that the restaurant space has come under some pressure because only a few PE investors have had exits and realised cash distribution from the sector over the last few years.
However, he said that with growing GDP and higher discretionary spend in the pockets of Indians, eating out will continue to be a growth sector.
The packaged foods segment has also been lacklustre in 2016 with nine deals worth $42 million, marking a fall of 55% in number of deals and down 68% in value terms.
Packaged foods segment also came under pressure in 2016 with nine deals worth $42 million against 2015, the report showed.
The dairy and poultry segment witnessed a growth of 120% growth in terms of deal value to $33 million across two deals.
The biggest deal in the agri farming and processing space was a $40 million investment in Hyderabad-based Seedworks International Pvt. Ltd by private equity firm India Value Fund Advisors (IVFA). This was followed by International Finance Corp’s (IFC) investment of $20 million in Kishore Biyani’s Future Consumer Enterprises Ltd.
In the food space, the $30 million investment made by Peepul Capital Fund III LLC and Ascent India Fund III in Maiyas Beverages and Foods Pvt. Ltd topped the chart, according to the report.
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