Indian agri-tech saw 6,600 crore PE funding in 4 years
India has seen ₹6,600 crore in private equity investment in the agri-tech space over the past four years, growing at 50% annually, according to a report by Bain & Company and Confederation of Indian Industry (CII). The report also estimates that around 30% of India’s rural ecosystem is now adopting digital payment and commerce solutions to benefit from easier access to agri-finance services.
“Investors have focused on opportunities that address systemic issues, build sustainable systems and deliver inclusive growth. Several global tech giants see this space as a new growth opportunity and are investing in innovative solutions for monitoring crop health and yield estimation,” the report, titled “Innovation in India’s Rural Economy: Disruptive Business Models Driving Inclusive Growth in Agriculture and Rural Finance,” states.
According to the report, over the past decade, India’s rural ecosystem has evolved significantly with multiple catalysts preparing this space for future growth. These trends have created an environment conducive to innovation, enabling start-ups and traditional players to introduce disruptive business models that address inefficiencies, especially in India’s agriculture and finance sectors. Significant national and international investments are being injected into the sector to improve efficiency and access to credit, the report says.
“The disruption of food and agriculture in India will evolve from traditional agriculture to new agricultural models, advanced agri-tech services and new food products. Over the past six years, several start-ups have emerged to reduce systemic inefficiencies between inputs and markets, precision farming, processing and storage,” said Parijat Jain, Partner and Head of Bain India Agribusiness Practice.
The report also highlights that the country’s rural microfinance sector has grown significantly over the past 18 months, growing from a gross loan portfolio of around ₹1,22,500 crore in December 2019 to ₹1,46,700 crore in March. 2021. There has been a significant increase in access to credit in the rural ecosystem as well. Agricultural credit grew by 10% CAGR over the past five years, reaching almost ₹14 lakh crore in 2019-2020. About 35% of agricultural credit business comes from Tamil Nadu, Andhra Pradesh and Uttar Pradesh, the report said. He also notes that as the lending experience and risk base of borrowers matures, there has been an increasing trend of borrowers switching to traditional lenders and leaving higher cost microfinance lenders. “Access to data has also spurred credit growth as it enables better decision-making among fintech players. With digitization, transaction history is captured, even for low-budget borrowers, and used to create more robust loan profiles,” the report said.
Qualifying the next generation of farmers and FPOs to become digitally savvy, the report identifies new business models that are emerging across the agricultural value chain, from inputs and harvesting to processing and distribution. Information and transparency initiatives tackle existing inefficiencies and formalize a traditionally informal sector, he said.
“India’s rural economy is poised for future growth enabled by rural digitization, affordable technology access, financial inclusion initiatives, empowerment of FPO and FPC communities, improved infrastructure and access, increased concentration of investors and a surge of tech startups in the space,” Tarun Sawhney, Chairman, CII Rural & District Economy Council, said.
The report highlights that Unified Payment Interface (UPI) transactions have doubled in the past year, now processing eight times more transaction value than credit cards. In addition to the pandemic, access to smartphones, reduction in data cost and Aadhaar building a digital identity enabling services such as Know Your Customer (KYC) and electronic signature were identified as the factors that fueled the rapid rise.
While cash is still the dominant payment method for rural finance, accounting for around 90% of all payments, the penetration of digital payments is increasing, thanks to government interventions such as the Payments Infrastructure Development Fund. Digital-centric banking models and reduced operational costs (which have enabled lenders to manage lower-value loans) have also helped lenders grow in the sector, according to the report.
It indicates that expanding the participation and role of FPOs in the rural value chain, expanding post-harvest infrastructure, access to robust data sources for real-time data and taking decision-making and building trust with farmers can help transform Indian rural agri-tech. large space. “The ecosystem is now at an inflection point, and companies that address inefficiencies across the value chain will have explosive growth potential,” the report said.