New-age agritechs will potentially drive $34 bn of GMV by 2027: report

The pandemic was a tailwind to bolster the importance of technology-led processes in the sector. Factors impacting India’s fragmented agricultural markets – low production outputs due to small size of farms, high presence of intermediaries, informal data and credit flow, and high government intervention – make the agri-value chain ripe for disruption, suggests the ‘Avendus Agritech Report’.

Active participation of private growth investors in the sector, as seen in consumer tech-focused companies over the last five years, will prove to be a precursor for IPO timelines – three to five years – for most of the agritech startups, Avendus’ heads of digital and technology investment banking Pankaj Naik and Karan Sharma said.

As of September 2022, the sector has seen funding worth $3 billion. Further, of the 1,500 players operating in the space, only 17 have a gross merchandise value (GMV) of over $100 million.
“Players need to keep scaling… we’ve already seen players who have a positive contribution margin and in fact, contribution margins for some players are even in the 3-5% range,” Varun Gupta, director, digital and technology investment banking at Avendus Capital told ET.

Contribution margin in the market-linkage agritechs, which represents net revenue of all variable costs essentials to operations, is staggering in ranges of 2-3% in the B2B perishables, 7-10% in B2C perishables, 2-3% in non-perishables among few key players. A steady state range would be 7-12%, 12-16% and 7-12% respectively, the report added.

The agritech landscape in India can be broadly divided into three categories – pre-production, production and post-production.

Within these three areas agritech companies innovate and solve for farm mechanisation, farm inputs platform, controlled environment agriculture, farm analytics and agronomy advisory, contract farming, precision agriculture, market linkage and supply chain solutions, fintech facilities for credit and insurance, and quality management and traceability.

Players in the pre-production phase include the likes of Prosus backed DeHaat, Info Edge backed Gramophone, JM Financial PE backed BigHaat, while players in the production include the likes of Omnivore backed Krishify, India Quotient backed BharatAgri, Northern Arc backed Jai Kisan, Orios backed Unnati and Accel backed Samunnati.

The post-production phase is slightly more crowded with funding with players such as Lightrock backed WayCool, Quona Capital backed Arya, Omidyar backed Bijak, Prosus backed Vegrow, and Walmart backed Ninjacart.

The over $1 billion of capital raised in 2021 is 3 times that of previous year, and 40% of the total capital raised in the past six years. Globally, a total of $45 billion of funding has happened in agritech with 16 of the total 18 unicorns having been created in the past two years in the space.

“From an IPO perspective, we think it’s a five year story. We think, at a $1-1.5 billion sort of a scale, there could be interesting IPO outcomes, which would emerge, but that given that there are already companies in the $100-$500 million range, we think it’s quite possible for at least 2-3 IPOs in the next 4-5 years, maybe more, but at least 2-3 IPOs in next four to five years,” Bandish Shah, vice-president, investment banking, digital & tech, Avendus Capital told ET.