September 13, 2016

Private equity fund, India Value Fund Advisors (IVFA) has agreed to invest Rs 270 cr ($40 million) through a secondary share purchase in Seedworks International Pvt Ltd., a Hyderabad-based hybrid seed manufacturer.

SeedWorks develops, produces, and markets hybrid rice, cotton, pearl millet, and corn seed with rice and cotton responsible for the majority of the company’s business, and rice alone accounting for almost 70 percent of the company’s total annual revenue of Rs 150 cr  (US$22.55 million) last fiscal year according to VC Circle.

IVFA’s Entry Into Agribusiness and Food

“We have been evaluating the food and agri-business space for a while now,” Srikrishna Dwaram, partner, IVFA told Live Mint.

Indeed, IVFA announced in October of last year that it intends to invest $150 million in India’s food and agribusiness sector over the next two years.

“Food business will be one of the highest growth sectors for the country over the next 20 years. The demand is driven by need for convenience, rising disposable incomes and aspirational lifestyles,” said Haresh Chawla, partner, India Value Fund Advisors.

IVFA recently made its first investment in the food services sector through the acquisition of deGustibus Hospitality for $30 million, however, the firm has also made a $40 million investment in the ingredients business, VKL Seasoning, and another in packaged food business, Keya. Moving forward, IVFA is looking to reinforce the management of deGusitbus, which owns the brands Indigo, Indigo Deli, Neel, and Tote on the Turf, and expand its presence in the country.

India’s total food service market, both organized and unorganized, is projected to grow from a value of US$48 billion in 2013 to a value of US$78 billion by 2018, according to a report by the National Restaurant Association of India, however it is this rapid growth that could bring challenges to investment firms such as IVFA as they struggle to grow found-led businesses into professionally managed and directed ventures.

Potential in SeedWorks

Dwaram told Live Mint that SeedWorks’ R&D initiatives based in Hyderabad and field trial sites located throughout India’s key climate zone was a main draw to IVFA.

SeedWorks’ cotton seed business also has promising cotton products in its pipeline – something that could prove to be a strategic advantage given Monsanto’s recent decision to withdraw its application requesting approval for its newest generation of genetically modified cotton seed in India only last month.

Additionally, SeedWorks has great potential to expand its business into major agricultural regions of India. Currently, the company is active in the eastern and central Indian market however, there is the ability to expand into North East India – one of the county’s key rice producing regions.

“The company has got a really good product portfolio but needs to beef up its sales and marketing efforts and so the immediate item for us will be to bring in new energy into the management team for the same,” Dwaram told Live Mint.

“…going ahead, as we implement the growth strategy for the company, we will look at investing more funds in the company,” said Dwaram reports Deal Curry, which goes on to state that IVFA is currently pursuing the acquisition of SeedWorks’ Philippine subsidiary by the end of the month.

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Lynda Kiernan