The tractors-to-technology Mahindra Group is planning to sell a minority stake in its subsidiary Mahindra Agri Solutions to raise up to Rs 300 crore as it looks to triple revenues to Rs 3,000 crore in three years to help scale up the business and build muscle through acquisitions, a senior executive said.
The fundraising exercise is part of a pump-priming plan for the agriculture business for faster growth. The agribusiness was part of the conglomerate’s farm equipment business but was made into a subsidiary last year. From fiscal 2017, agriculture business will be given a ‘sector’ status within the group. The company’s revenue grew to about Rs 900 crore in the financial year 2016 from Rs 70 crore in 2011.
“With sector status, we are empowered to grow in a bigger way. In the next 3-5 years we will be making big bets to scale up and get in technology and brands,” Mahindra Group’s Agri-Business President Ashok Sharma told ET. “One of the options we are evaluating in next year is raising money through private equity funds by divesting a small stake.”
The agriculture business, which spans selling seeds to micro-irrigation, acquired a new sector status after group reorganized its businesses in December.
Sharma said Mahindra Agri Solutions will be on an “overdrive” in acquisitions and investments for its stable businesses like crop care, micro irrigation, seeds, fruits and agriculture chemicals while testing and piloting newer businesses like dairy, pulses, and health food-focussed quick service restaurants in the next two years.
“The formation of Mahindra Agri Solutions last year and getting sector status this year is to make this whole agriculture business stand on its own feet and create a future of its own so there is value creation for our shareholders,” Sharma said. “Maybe in the future, in 4-7 years, we will make it a listed company.” Mahindra Agri Solutions now has a separate board with independent reporting of finances and human resources policies.
The group, under a “promise statement’’ plan released in 2016, aims to create three successful digital businesses before 2020. It is already piloting an in-house created mobile application called My Agri Guru, which forecasts weather and price for farmers to help them manage crops.
It is also in advanced talks with two agriculture startups for investments. In September, it invested about $1 million in a startup MeraKisan, which sources fresh vegetables and fruits directly from farmers and sells it to the customers.
“The sector status gives a clear message to the outside world that this is a focus industry. In the new role now, agriculture sector will be more independent in terms of a growth plan and finances,” said Sharma.
“From a 20-year perspective, agriculture sector should be one of the profitable sectors for the group. These are important times and we are creating a strong foundation.”
Mahindra group, which describes itself as a federation of companies as against a diversified conglomerate, incubates different business “There is a strong interest by private equity firms in the agriculture sector, both on the input and output side of the business. Mahindra has a solid network in rural areas, and sweating the same network is logical. They are moving from capital cycle to consumption cycle,” said Mayank Rastogi, Partner – Private Equity and Transaction Advisory Services at consultancy EY.
Source: Economic Times