India's agri-business companies are likely to attract more funds in the coming years with more potential seen in the farm sector by venture capital and private equity funds, a latest KPMG-Ficci report said today.
The opportunities in the food processing industry are significant, which is expected to reach a size of Rs 4 lakh crore by 2014-15 fiscal, contributing around 6.5 per cent to the gross domestic produce, it said.
"Venture capital and private equity funds have shown high level of interest towards various food and agri ventures in India. ...while all segments of agribusiness are expected to attract funding in the future," according to the KPMG-Ficci report released in Hyderabad today.
Agri-technology-based segments are expected to receive higher relative share of funding over others, it said, adding the double-digit growth of vast Indian agri-business has triggered a surge in private equity (PE) placements and merger and acquisitions (M&A) over the past few years.
Noting that Indian food value chain is on the verge of a great transformation, consulting firm KPMG India Retail Head Rajat Wahi said: "Continuous financial and regulatory support from government, increasing participation of private and public corporates, and increasing exposure of foreign players is likely to spur investments in developing the infrastructure across value chain right from farm inputs to the consumers."
According to the report, agri-product companies with presence in edible oils and spices have attracted high investor interest with more than 40 transactions in this space over the last five years.
Agri-logistics is the other area that has been attracting a lot of attention from investors with over USD 60 million invested just in 2012, it said.
The report highlighted that PE investments in agri- business as a percentage of total investments have grown to 3.8 per cent in 2012 from 0.2 per cent in 2008.
During the same period, venture capital (VC) investments in agribusinesses grew from 0.2 per cent to 1.6 per cent of total investments.
The report recommended that the public-private partnerships (PPPs) could be a useful tool to accelerate development in various areas of agri-business.
Currently there are PPPs in the areas of contract farming, drip irrigation projects and terminal markets among others. "However, the scope of these projects is still limited and they serve as examples or models rather than be the norm."
Agri-business incubators modelled along PPP lines could also prove to be immensely helpful to foster support for agri ventures, it added.
Inspite of the huge supply advantages, the