Funding Options for Agri-business

To make the agriculture sector productive it is necessary to ensure food security, controlled inflation and social inclusiveness. To explore the real worth of the agro-based industry, it is imperative to invest in new technology, modernization, and food processing, to promote value-added products and widen exports and business.

Due to intricate structure of food sector and prolonged gestation process, raising funds is somewhat a challenge. Given this, the government had included food processing within the parameters of ‘priority sector lending for banks’.

Role of Nabard

For International Finance Corporation, agri-business has become a priority due to its contribution to food security. Nabard, created in 2006-07, worked as a window to offer refinance for loans paid out to food processing industry particularly agro-processing segment, development of market, and follow-up initiatives, leading to enhanced refinance for the sector. The stats suggest that the refinance support offered by Nabard reached 1,310 crores in the year 2006-10.

Valuable Stats

The credit-linked subsidiary schemes floated by the Government of India for the cold storage sector, agri-sector infrastructure and rural godown got these subsidiary schemes that consolidated post-harvest linkage and raw material repository for processing units and invited fresh credit flow to the sector. In this effort the total bank loan granted under Ciss reached 5,422 crore.

The overall growth in ground-level credit for agribusiness raised from 1,80,486 crore, which was in 2005-06, to 3,66,919 crore in the year 2009-10 and it has strengthened the raw repository for food processing, as per the government records.

Addressing the Requirements

The financial needs of agribusiness companies differ from business to business. As per the MD of Nabard, Gopalan usually the financing needs are working capital, equity capital or long and term debt financing. Working capital, which is very crucial for the growth of many agribusiness firms, can be met through several instruments like bank loans or commodity-driven financing.

The major financial requirements of any agribusiness include:

• Procurement of agrochemicals, seeds and farm machinery etc

• Allied Agriculture project finance for dairy, poultry, warehouse, greenhouse, godown, and farm building construction.

• Production of crop loan, irrigation, land development, plantation crops, etc. 

• Processing of post-harvest mechanisms like sorting, grading, storing, packing and value-addition.

• Marketing, branding, promoting, sampling, selling and other promotional expenses. 

• Consultancy for agri-clinics, agribusiness centers, etc.

Synopsis

Given the above agribusiness requirements, one of the most popular instruments that can provide a long term financial support is venture capital firms in India. Venture capital funds in India are growing and venture capital firms are finding agriculture sector to be more profitable in the present scenario and are ready to invest in this sector.

What Venture Capital Funds in India Offers

Raising funds for your company could be a herculean task, specifically if you’re startup firm as it is understood that you may not have sufficient funds to address all financial expenses to push your firm further. Moreover, banks are reluctant to offer loans being this business risky for them.

The alternative is to get capital either from borrowing money or from equity financing. Through equity financing you can sell out the equity of your firm, in the form of stock shares, in exchange for money that you can utilize to meet your business expenses.

Venture capital fund in India is a way of seeking money from investors. Surprisingly this funding source is gaining more and more popularity due to various related benefits:

You get Capital without Selling Any Equity

Venture capital companies in India funding are similar to a debt that your company seeks. You are liable to pay for this debt in whole including the interest. This funding option is beneficial for startup companies who are in need of addition capital without selling off their stock equities and also can enjoy the total control over the firm.

It Offers an Alternative Funding Option

Albeit, venture capital funding helps keep your equity from selling, it can also fuse the two given your priorities and requirements. For instance, you can also sell out your equity to reduce your risk of loss, and can also opt for VC funding to get new equipment like computers or any other equipment for your office.

It Offers More Funds to Expand Business

It is the major and most obvious advantage of acquiring funds from venture capital funding. This fund can be used for expanding your business, buying new tools and equipment, enhance R & D, or any other aspect of your business.

Synopsis

The above said advantages associated with VC funding have made it popular option, especially for startups enterprises to opt for. Remember, venture capital funding is just like the financing institution, so make sure to work with those that have a proven track record and are associated with the industry you’re in.

Significance and Benefits of Venture capital Firms in India

Venture capital firms in India provide funds/capital that is committed for longer term to assist unquoted agri-tech companies flourish. Venture capital helps if you are a start up, wish to expand your business, buy a part of your parent company, turn around or revive a firm, buy a company.

PE firms that are focused on agri-tech domain are mostly interested in companies that are capable of displaying high potential for growth in five to seven years. In addition, such companies should also ensure that they have a great and experienced team with an ability to transform the business goals into a reality.

Inclination towards Agribusiness Companies
Of late venture capital funds in India, raised by PE firms had exhibited great interest on the Agribusiness companies, and have invested $126 million in nine Indian companies in this sector in the initial six months of year 2013. It is nearly 75% more compare to $72 million invested in six companies in the same time last year, as per the stats from Venture Intelligence (research service firm).

Benefits to Small Company
The major advantage that a small company raising venture capital is that in case you obtain funds from a lender, irrespective of your business’s success or failure, the lender owns a legal right to all of the interest on the loan along with the repayment interest of the capital. But in venture capital, the shareholders earning is driven by companies’ profit and growth.

Role in Indian Economy
Companies under venture capital firms are developed to be more profitable and efficient that directly contributes to the mainstream economy of India too. It also motivates the managers and staffs as the management receives carried interest, including part of profits. Overall it is the combine benefit of employees, business and also the country. In brief, the small companies that are about to collapse due to insufficient funding, can become a promising and growing company, contributing to the economy of India, after the intervention of PE firms.

Synopsis
Venture capital is a respite to small companies that could not fetch bank loans and are in dire need of funds for growth! Ultimately it is the win-win situation for all – the small company, the venture capital firm in India!

Venture Capital Firms in India – An Overview

If you are planning to establish, expand or grow your brand new business you must be looking for the company or individual who can take the risk of investing money on your business. Any bank will probably deny providing loan for your ventures, you being a new and inexperienced player.

This is where venture capital firms in India come into picture. They are often willing to accept a risky investment, on the basis of the business plan you have presented before the firm and have proven how the business will succeed.

What is Venture Capital Firm

It’s a group of investors who receive income from wealthy individuals who are keen on growing their wealth. They take the money and invest it in more risky businesses. As the investments are risky, these venture capital firms take a small share in the invested company. This small sharing is worth it to the enterprises, as they are not able to receive the funds needed from any other source.

How Venture Capital Companies in India Works

These firms work under a particular investment model. This investment profile is in the form of a document that defines the types of businesses the firm is ready to invest in. Thus by targeting their investments to specific types of businesses; like Omnivore Partners that invests in startup agricultural technology companies in India to improve farm productivity, enhance agro sustainability and seek transformation of Indian agriculture; the companies can learn the ropes of a specific industry, and thus in future can decide better investment plans based on their experience. These venture capital funds in India not only support startup businesses but also offer address expansion financing needs of promising businesses. Albeit, it is rare, as the growing and successful businesses can get the bank loans.

When a venture capital firm gets the money from the investors, it puts the money in a fund, which is then invested in various companies, expecting that the companies will repay the money in nearly three to seven years. When the invested company takes their business to the public and begins to selling bonds and stocks, the money is paid back to the venture capital firm, along with interest.

Synopsis

Venture capital firms are great source of funds for those promising startup businesses that cannot get any funds from otherwise. There are several venture capital companies in India, like omnivore partners that can help you establish or expand your business. If you approach them, they like your business plan, you may find the financer for your business. So, if you have any business plan ready, it’s time to take action, but ensure that you approach the right VC firm for venture capital funds to take your business to the next level!