The investment, a secondary purchase of shares from existing investors, saw existing investors Everstone Capital, Mayfield Advisors, Nexus Venture Partners and Emerging India Fund sell a small part of their stakes in the company.
Aditya Bhandari, co-head for Asia at Incofin, said the asset management firm was keen on investing in Sohan Lal because of its fully integrated and process-driven business model.
“They are a fully integrated post-harvest management company. Once the farmer is in the harvest phase, there are a lot of obstacles that follow. Sohan Lal is able to provide various solutions for these problems as it is present across the entire value chain in post-harvest. It is the only company that has a fully integrated approach to this segment," Bhandari said over the phone.
Sarah Djari, investment director at ResponsAbility, said, “We are delighted to accompany SLCM’s development in India and abroad. We are convinced the talented team and supportive shareholders will foster further innovations towards deeper financial inclusion in the agri space."
SLCM currently has 1,549 warehouses under management and has disbursed loans worth Rs820 crore in the last three years through its Kissandhan unit.
Founded in 2008 by Sandeep Sabharwal, Sohan Lal offers various warehousing services such as scientific storage for agriculture commodities, fumigation, testing and certification and funding against storage receipts. The firm offers its services to farmers, processors, traders and commodity exchanges.
Incofin, which has almost $750 million of assets under management, has invested in SLCM through its latest fund AGRIF, which focuses on agricultural and financial services business. AGRIF is a $175 million fund that invests across the globe. ResponsAbility Investments manages over $3 billion in development investments.
“Sohan Lal is a very process-driven company. Agri is a very volatile market, a lot depends on the monsoon, and there is also price volatility. One of the biggest weakness of this segment is that companies and teams don’t have a very strong hold on processes. A scalable business can only be built when the company and the team is very process-driven," said Incofin’s Bhandari.
Sabharwal, group chief executive at SLCM, said, the impact funds’ investment “is aligned to our strategy of ushering SLCM as leader in post harvest agri-logistics and financing not only in India but across Asia."
Bhandari added that based on Incofin’s global experience, Sohan Lal is one of the few firms globally in the integrated agribusiness space that is extremely process-driven.
Incofin’s previous investments in India include microfinance companies such as Fusion Microfinance Pvt. Ltd, Grameen Financial Services Pvt. Ltd, Annapurna Microfinance Pvt. Ltd and Arman Financial Services Ltd.
The money—the fifth round of investment in Sohan Lal—will help the company scale up its business in India and overseas.
In September 2015, the company had raised Rs100 crore in a round led by Chicago-based Creation Investments Capital Management Llc and existing investor Everstone Capital.
Several other agri-warehousing firms have also seen strong investor interest in the past.
In April 2015, Singapore’s state-run investment firm Temasek Holdings Pte. Ltd invested Rs250 crore in IDFC-backed Staragri Warehousing and Collateral Management Ltd. In July the same year, Canadian investor Prem Watsa’s Fairfax India invested Rs800 crore in National Collateral Management Services Ltd to acquire a 74% stake.
A severe shortage of agri-warehousing capacity makes private companies in the sector an attractive opportunity for investors.
According to a 2015 report by a panel on strengthening negotiable warehouse receipts, set up by the Warehousing Development and Regulatory Authority (WDRA), under the department of food and public distribution, India’s total warehousing gap is estimated at 35 million tonnes.
The report said that the total warehousing capacity, as of October 2014, was 117.52 million tonnes, of which the private sector contributed 18.97 million tonnes, while the rest came from the Food Corporation of India, central and state warehousing corporations and cooperatives.