Investment Opportunities in Agri-inputs
Agricultural innovation is critical for private sector players in agri-inputs to remain competitive in a continuously evolving market. The change is an expectation of farmers as well as consumers is driving these innovations in agri-input sectors. Some of these innovation examples such as the launch of genetically modified crops, new models of molecular assisted selection or molecular assisted breeding (MAB), novel ways of delivering agri-inputs like pesticides as well as fertilizers, and different types of micronutrients, as well as delivery mechanisms, have become the norm than the exception. However, most companies don’t have the monetary resources to keep innovating regularly. The more prominent companies, like Bayer, Monsanto, Dow-DuPont, Syngenta, have the luxury of a global presence and the robust revenue streams that they can utilize to innovate. This is a challenge for local homegrown companies to invest more in research and development programs to develop new agri-input services or products that can benefit the farmers and consumers. Homegrown companies may need investments from banks or venture capitalists to venture into novel products and services.
From investors’ point of view, there are many opportunities to invest in the agri-input products and services sector. Some of the selected elements where ROI is very high for investors, either banks or VCs, are:
- Some companies are looking to expand their business portfolios by integrating molecular breeding (MAS or MAB) into their R&D programs to develop and introduce new products and regularly launch them in the market. These products need to be competitive and market-oriented to benefit all the stakeholders. Introducing molecular tools into the R&D programs will help the companies shorten their breeding cycle and introduce them to the market much quicker than conventional methods.
- When the agri-input companies are trying to expand their market to other geographies, whether within or outside the country, they need funds to expand. Since this kind of expansion requires many trials, regulatory approvals, etc., more funds are required in different geographies. This approach helps the companies grow their business geographically, thereby growing their revenues multifold and providing higher ROIs to investors.
- The companies also need funds to expand or prioritize their product portfolio via mergers and acquisitions or strategic collaborations with other companies. The prioritization of product portfolio by adding competitive products and removing certain products that are not doing well revenue-wise makes the portfolio very lean and highly competitive in the market. This approach helps the companies optimize their product portfolio growing their revenues multifold. This is a good investment opportunity that strategic investors and VCs can take up.
- Other excellent investment opportunities. These opportunities are based on evolving regulations – ban or phasing out of certain pesticides/ technical, cap on GHG emissions and technology up-gradation etc. Some of these are—
- Nanotechnologies for seed coating that increase the efficiency and germination of coated seeds and increase the profitability of companies that invest in this technology,
- Novel delivery mechanisms like sustained-release capsules or tablets for increasing the efficacy of input delivery like fertilizers and pesticides for control of soil-borne pathogens are also an excellent investment opportunity,
- Several active ingredients for the manufacture of pesticides are coming off-patent in the next decade, and several companies are vying for procuring the rights of manufacture within their manufacturing facilities. It requires either modulating their existing manufacturing facilities or establishing new ones for which the funds will be required. Also, companies that are trying to expand into biologicals through research and development or mergers and acquisitions from another company seek funding,
- Another growing investment area is the information and communication technologies that companies are trying to integrate within their supply chain – starting from R&D, field trials, processing, packaging and marketing. It is an essential investment for companies to ensure traceability and also dispute resolutions if any.
Though the investment opportunities are immense across the agri-input sector, there has to be critical technical and financial due diligence of the agri-input companies before investors can take a go-no-go call for an investment decision. The diligence will also decide the kind and quantum of investments required and duration. The companies will utilize this to provide expected returns and sufficient ROI for investors to plan an exit.
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