CapAleph Indian Millennium SME Fund and Zephyr Peacock India Fund have invested Rs 30 cr (US$4.6 million) in Indian potato seed startup, Utkal Tubers.
Launched in March 2016, Utkal Tubers produced 1,000 tons of potato seeds in its first year, however, plans to expand production to 5,000 tons of local varieties this year from its facilities in Karnataka. The company is also currently establishing additional facilities in Odisha, Gujarat, and Punjab.
Maiden Ag Investment
This investment marks the first in the ag sector for the CapAleph Indian Millennium SME Fund. Following in the path of Omnivore Partners, SEAF’s India Agribusiness Fund, and Rabobank Equity Advisors, India’s CapAleph, which was founded by former partner at Indian Value Fund, George Thomas, and The Meeran Family Trust announced the launch of the fund in March 2015.
An anchor commitment of approximately Rs 25 – 30 Cr (US$4 – $4.8 million) was committed by the Meeran family, founders of Eastern Condiments which boasts turnover of Rs 800 Cr (US$128.25 million). The fund is targeting further commitments from domestic institutions and HNIs.
“We have raised a corpus of Rs 70 crore (US$10.8 million) and will raise the balance Rs 30 crore (US$4.6 million) by the end of June,” George Thomas, founder of CapAleph Indian Millennium SME Fund, told the Economic Times.
CapAleph plans to invest between Rs 5 Cr and Rs 25 cr (US$800,000 and US$4 million) in each of its portfolio companies to be sourced from professors at agricultural universities, food labs of global players such as Pepsi and Unilever, and government labs, in exchange stakes generally in excess of 40 percent.
“We are looking to deploy this fund over a two-year period in five to six startups that address issues related food productivity, wastage, water scarcity, and so on,” Thomas added.
A Return for Zephyr
This deal marks a return for Zephyr Peacock to Utkal Tubers, after a previous investment by the firm in the startup in October of last year.
“Food and beverages dominates consumer spending in India,” Raina told Live Mint last October. “With rising income levels, there is evidence of slow transition towards a non-cereal based diet, leading to an increase in consumption of vegetables for carbohydrate nutrition.”
However, more than 60 percent of India’s farmland is being used to cultivate cereals, pointing to a future where there will be higher demand for vegetables, and particularly potatoes as demand for carbohydrates climbs over the coming decade.
“Zephyr Peacock has incubated this business, we have taken controlling interest with this investment. Our hope is to create a good franchise for potato seed, improve seed quality, and variety in seed deficient states,” Thomas said.
One Potato, Two Potato
The simple potato has been drawing greater attention in both the agricultural production and investment spaces in recent years, particularly in regard to emerging markets due to a variety of factors.
The World Potato Congress believes potatoes are key to global food security and seeks to raise awareness about the features of the crop. Potatoes, for instance, pack more protein and energy per acre versus competing crops, according to David A. Thompson, president of the World Potato Congress, cited in AgWeek.
In addition, overexploitation of underground water by the farming community, including wheat farmers, has caused damage in some regions. In Hebei, China farmers are now prohibited from planting wheat in an attempt to preserve water and land after irrigation practices, such as digging, have triggered hazardous sinking and landslides.
In response, Chinese officials are looking to the potato to fill a void in the country’s diet caused by these interruptions to its grain production. The nation is looking to increase potato production from 95 million tons in 2015 to 130 tons by 2020.
“In China, the potato industry is no longer an industry for underdeveloped areas or the poor but highlights the country’s modern agricultural drive and enriches people’s dining tables,” Agriculture Minister Han Changfu said at the World Potato Congress held in Yanqing, Beijing last year.
Noting this trend, The Netherlands-based APH Group has partnered with China’s Inner Mongolia Linkage Potato Co. Ltd. for the construction of a potato handling and transport system, and a climate control system for a potato storage complex with the capacity of 140,000 tons of potatoes.
In other emerging economies, social impact agricultural investment firm, AgDevCo, has invested $4.5 million in partnership with Saise Farming Enterprises into a seed potato production project in the Northern Province of Zambia. As part of an economic diversification drive, France’s Vicampro Farm is partnering with the Nigerian state government of Kaduna in a joint venture to construct a $120 million potato and rice processing plant, which will be the largest of its kind in West Africa.
-Lynda Kiernan
Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com
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