Omnivore Partners to raise its second fund of almost $50 million

The venture capital firm will raise the funds from domestic institutional investors and high net worth individuals

Mumbai: Agriculture and food-tech focused venture capital firm Omnivore Partners plans to raise its second fund of almost $50 million (about 325 crore) to invest in agriculture and food businesses, according to senior company executives.

“We have exhausted more than 50% of the fund in the 11 investments that we have made so far. By end of this year, we are looking at making a few series B investments in our portfolio companies and then we will start raising a new fund early next year," said co-founder and partner Jinesh Shah. The firm will raise the funds from domestic institutional investors and high net worth individuals.

Omnivore, started by Shah and Mark Kahn in 2011, has invested in firms such as Skymet Weather Services, a weather forecaster; Barrix Agro Sciences, a pest management solutions provider; and Eruvaka Technologies, a provider of monitoring and automation technologies for aquaculture farms.

The firm looks to make investments in tech-focused firms working in agriculture sub-sectors such as farm automation, information services, precision agriculture using Internet-connected devices, sustainable agriculture and agri-supply chain. Omnivore targets the acquisition of a significant minority stake in the companies it invests in, typically 30-35%.

Omnivore started raising its first fund in August 2011. It took it two years to raise 260 crore. The fund was anchored by the Godrej group.

While Kahn has a background in agri-business, having worked in senior management positions for Godrej Agrovet, the agri-business arm of Godrej group, Shah has a background in finance and investing and has worked with IT companies and venture capital fund Nexus Venture Partners.

“Due to my vantage point of being in the agri industry, I saw that there was a lot of early-stage activity and a lot of interesting start-ups," Kahn said, adding that access to capital was a huge challenge for these firms and was an unfulfilled need which he and Shah thought of tapping.

According to Shah, several problems plague the agriculture sector and these present opportunities that can create large firms. “There have been very few innovations in the agri space targeting small-scale farmers, who form the biggest chunk of the market. Companies that are creating solutions for these farmers are a huge opportunity for investors to tap into," said Shah.

However, he added that investing in agriculture requires one to have a longer-term investment horizon, as scaling up is slower than in consumer tech, in which most venture capital firms invest. This year Omnivore has made investments in Y-Cook India, Retigence Technologies and Ecozen Solutions.

Y-Cook is in the business of producing pre-cooked vegetables, fruits and legumes that have a shelf life of almost 12 months without the need for preservatives and refrigeration. Ecozen provides micro-cold storage facilities at the farm level and Retigence is a big-data solutions firm that helps retailers with inventory mangement.

According to Harish H.V., partner at Grant Thornton India Llp, there is a good amount of investment interest among domestic venture capital/private equity funds. “In the last few years, several promoters have sold their businesses and are sitting on large pools of cash. Also, several promoters are organizing their wealth into family offices. These two sources are the biggest targets for people looking to raise funds," he said, adding that investments in start-ups by marquee investors such as Ratan Tata have also given a push to other high net worth individuals to look at these avenues.

Omnivore’s fund-raising plan comes at a time when investor interest in agriculture and allied businesses is on the rise in India.

According to VCCEdge, an online investment tracker, four firms in the food and agriculture sector have raised $71 million since January. This compares with $68 million raised by 10 firms in all of 2014.

Over the last five years, more than $1 billion in funds have been allocated to food and agri businesses in the country.

This year, agri-allied sectors such as warehousing have witnessed strong investor interest. On 21 July, Fairfax India Holdings Corp. acquired a 74% stake in National Collateral Management Services for about 800 crore. In April, Singapore’s Temasek Holdings invested 250 crore in StarAgri Warehousing and Collateral Management. “The agri sector has over the last few years seen an influx of good quality entrepreneurs and that has resulted in an increase in the number of good quality companies for institutional investors to put money into," said Shah.

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