New Delhi: There’s something food companies should be worried about: investors are no longer pumping money into the sector. Investments in food and agriculture businesses have hit a five-year low this year, a study released on Monday shows.
So far in 2016, total investment in the food and agriculture sectors has been $250 million, a 78% decline from 2015 (full year), according to VCEdge Funding Insights, a study by News Corp. VCCircle.
There have so far been only 62 deals in the sector this year, as compared with 153 in 2015. Total fund inflow touched a five-year low after the sector received $523 million of investments in 2014, $406 million in 2013 and $435 million in 2012, according to the study.
Agri farming and processing companies attracted the maximum investments in 2016 with six deals amounting to $79 million. However, this is a decline of about 58% from $191 million in 2015.
Food technology and online groceries received only $67 million of investment in 2016, a sharp decline from $504 million in 2015. Between 2014 and 2015, investments in food technology and online groceries jumped 358%. There were nine deals totalling $42 million in the packaged food segment in 2016 so far, a 68% fall from the previous year. “Dairy and poultry has been the only segment to witness a growth of 120%, with investments amounting to $33 million in 2016 spread across two deals,” the study added.
Hyderabad-based Seedworks International Pvt. Ltd, which raised $40 million from India Value Fund Advisors in September, topped the deal chart, followed by Bengaluru-based Maiyas Beverages and Foods Pvt. Ltd’s $30-million funding from Peepul Capital Fund III LLC and Ascent India Fund III in April, and International Finance Corp.’s $20-million investment in Kishore Biyani’s Future Consumer Enterprises in May.
“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. In the agro space, the ability to scale up along with infrastructural development of cold chains, warehousing, farm equipment etc. are factors that would determine investor attraction for the future,” said Nita Kapoor, chief executive of VCCircle.
After its irrational exuberance in 2015, Kapoor said, the self-correction mode that the industry is witnessing this year has come in as a boon. “It gives entrepreneurs running businesses in the food, agri and consumer space to recalibrate their business models and desist from ‘me too’ ideas to realign themselves with the evaluation criteria of the investor community,” she said.