Avesthagen to buy Delhi seed firm for $5 mn

Avesthagen to buy Delhi seed firm for $5 mn
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First Published: Tue, Nov 06 2007. 01 02 AM IST
Updated: Tue, Nov 06 2007. 01 02 AM IST
Bangalore: In an attempt to increase its reach within India and develop and sell products based on its technologies, Bangalore-based Avesthagen Gengraine Technologies Pvt. Ltd (Avesthagen) is acquiring a New Delhi-based seed company, believed to be among the largest sellers of seeds in the private sector, for $4-5 million (Rs16-20 crore).
This will be the third strategic acquisition for Avesthagen in seeds this year, taking its total bill to $10 million, almost one-third of the $32.5 million it raised in equity financing in January. Earlier this year, along with its French partner Groupe Limagrain, Avesthagen acquired Swagath Seeds Pvt. Ltd and Cee Kay Seeds & Seedlings Pvt. Ltd.
“Our earlier two acquisitions were in South India, in cereal and vegetable crops. But this buyout will give us a presence not only in North India, but also access to the staple crops like wheat and rice,” said Deepak Mullick, executive director of the agri-bio division at Avesthagen. Mullick declined to disclose the name of the company, but was optimistic that the deal will give Atash Seeds Pvt. Ltd, an equal joint venture between Avesthagen and Vilmorin & Cie (a holding company of Limagrain) opportunities to translate its proprietary technologies into seeds.
Avesthagen has developed technologies that make crops resistant to drought and saline conditions. “I’d not call these genetically engineered crops; they are ‘environmentally adjusted’ crops,” said Villoo Morawala Patell, founder and managing director of Avesthagen, sidestepping controversies related to genetically modified seeds. Atash will start rolling out drought and salinity-tolerant cereal (maize, millet and sorghum) and vegetable seeds from 2008-09.
Agri-biotech is the second fastest growing sector in Indian biotech after biopharmaceuticals, and crossed $250 million in revenue in the year ended March, according to a joint Biospectrum-ABLE (Association for Biotech Led Enterprises) survey.
Biospectrum is a magazine brought out by the Cyber Media group and ABLE is an industry body of biotech companies in India.
Seeds account for a large part of this.
“Hybrid, or novel, seeds provide the largest business opportunities in agri-biotech,” said Nitin Deshmukh, head (private equity) at Kotak Mahindra Bank Ltd in Mumbai.
However, the sector has hardly attracted any investment. “That’s primarily because so much is happening in other sectors that the comparative rate of return becomes low,” said Deshmukh.
Moreover, the sector still lacks scale. “Most of the companies have Rs40-50 crore turnover and until they cross Rs100 crore, they won’t become attractive for investors,” he added.
Analysts are, however, confident that the explosive growth in the retail sector will cause a ripple effect in agriculture—several large retail companies have set up supply chains linking fields to store shelves—and that demand for quality seeds will go up very soon.
Ripple effect or not, Mullick, who is former president of the National Association of Planting Seed Industry in India and represents the Indian seed industry at the International Seed Federation, said the Indian seed market needs home-grown technologies.
He added that the Indian seed market, around $1 billion in size, is dominated by multinationals that together have a 80% share. Smaller companies such as Avesthagen have to differentiate themselves in terms of technology to make a dent in the market.
“We are already negotiating with large seed companies, both local and global, to license our technology,” said Mullick.
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First Published: Tue, Nov 06 2007. 01 02 AM IST