Mumbai: In the first-ever venture capital (VC) investment in the north-east, Omnivore Partners has bought a significant minority stake in Guwahati-based Arohan Foods Pvt. Ltd, the country’s first pork integrator, for an undisclosed amount.

Omnivore is an early stage VC fund backed by Godrej Agrovet Ltd.

Arohan Foods, which was started in 2011, offers packaged pork products including sausages, cocktail sausages and sliced salami in a variety of flavours developed in-house under its flagship brand Choice Pork Natural across the seven states of the north-east. It works with smallholder pig farmers across north-east India and plans to enter breeding and contract farming over the next two years.

“North-east is a huge pork market and the social stigma typically associated with pork eating (elsewhere in the country) is nil. We have seen success of firms like Venky’s (Venkateshwara Hatcheries Pvt. Ltd) and Suguna (Suguna Poultry Products Ltd) and we are positive that Arohan Foods will grow into a multi-crore business," said Mark Kahn, venture partner with Omnivore Partners, which was formerly called Omnivore Capital.

According to Arohan Foods estimates, the annual pork production in India is 240,000 metric tonnes. “For 4 crore people in the country, pork is the main source of protein in their diet. People are increasingly seeking convenience in their cooking," said Kahn.

The founders of Arohan Foods are Anabil Goswami, formerly with Tata Chemicals, Ranapratap Brahma, who used to be at Bank of Baroda and Arindom Hazarika, who was with Kotak Mahindra Bank.

The promoters plan to use the money raised to launch their products in other parts of the country including Mumbai, New Delhi and south India. By mid FY 2015, Arohan plans exports to Nepal, Myanmar and Bhutan. It also plans to set up a contract farming system to source pigs locally at sustainable prices and in quantities that meet Arohan’s demands.

“With the capital that we have raised now, we want to expand our current capacity and are building a new unit to cater to our pan India supply. The new factory will include a state-of-the-art slaughterhouse and pork-processing facility," Brahma said. Other plans include reaching out to more farmers, introducing new breeds and cost-effective feed.

The company will also expand its product offering to bacon, ham, multiple variants of pork, dry products and semi fermented pork. “We are exploring all kind of cuisine that use pork in various forms," said Brahma.

On the issue of exiting from an early stage firm such as this, Kahn said investors are aware that three-fourth of the portfolio will go towards strategic sales. “VCs have been IPO (initial public offering) dependent in India. If you notice, except for IT, most exits are through strategic deals," Kahn said, adding that they may look at reinvesting in a firm in its second round, if required.

Venture capital and private equity (PE) investments in India have been concentrated in the southern, western and northern parts of country, with investors shying away from risk-prone regions such as Jammu and Kashmir and the north-east, where insurgency often impacts growth opportunities for businesses.

The north-east region is gaining economically as insurgency is on the decline in some areas, Kahn said.

“We are trying to find more entrepreneurs in the region. It is possible to find globally exposed, professionally trained and highly educated entrepreneurs here," he said.

Mahesh Murthy, founding partner at Seedfund, said he would shy away from investments in farflung areas because he feels companies need handholding and supervision in the early stages. That’s why Seedfund prefers investments in New Delhi, Mumbai and Bangalore.

“We are active investors, not passive. Can you imagine the hectic schedules, if one was to travel to meet the companies?" he said. He, however, added that investing in farflung areas is viable in companies at a more mature stage of development.