Deal making in food and agri-businesses hits 5-yr low in 2016

The year 2016 has so far registered 62 PE deals worth $ 250 million in the food and agri space, the lowest in terms of deal value over the last five years, according to the VCCEdge Funding Insights presented by News Corp VCCircle. In comparison to the previous year of 2015, which saw a massive 153 deals worth $ 1154 million, 2016 YTD (year to date) has seen a fall of 78 percent in deal value and 59 percent in number of deals.

While 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 deal value is lower than half of 2014 -which had $ 523 million worth of deals.

Since 2012, the sector has garnered investments to the tune of $ 2767 million from 406 deals. While agro businesses attracted $ 722 million from 40 deals, those in the food industry saw 366 deals amounting to $ 2045 million.

The agri-farming and processing businesses attracted maximum investments in 2016. This segment saw 6 deals amounting to $ 79 million, greater than 2013 and 2014 ($ 30 million and $ 28 million) but down 58 percent compared to $ 191 million last year. Its share in overall deal value has spiked up from 17 percent in 2015 to 32 percent in 2016.

Food tech and online groceries, which saw a 358 percent increase in deal value to $ 504 million in 2015 with 85 deals, registered only 33 deals worth $ 67 million in 2016. While its share in total number of deals has remained above 50 percent, there has been a fall from 44 percent to 27 percent in terms of deal value.

Mirroring the trend in the food tech space is the restaurants segment. Against a four year trailing average of $ 148 million since 2012, this segment has recorded 9 deals to the tune of only $ 27 million so far in 2016.

The packaged foods segment has been lackluster in 2016 with 9 deals worth $ 42 million. As against 2015, it is a fall of 55 percent in number of deals and down 68 percent in value terms. Dairy and poultry sector has been the only segment to witness a growth of 120 percent with investments amounting to $ 33 million in 2016 spread across 2 deals.

“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 & 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, head - India New Ventures, News Corp and CEO, News Corp VCCircle.

She added, “After the irrational exuberance which we witnessed in 2015, the self-correction mode we are 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.”