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Embedded markets - the Indian M&A playbook

Agri Fintech
Embedded markets - the Indian M&A playbook
By Niall Haughey • Issue #20 • View online
Welcome back to the Agri Fintech Newsletter and a warm welcome to the 21 new subscribers since my last issue.

In this Issue
🧐 Thoughts [Embedded markets and Indian M&A]
🗞 Relevant News [Hello Tractor, iProcure, Decision Next, Agro Club].
Reach out and say hi 👋 and please do share the content with people in your network by sharing on Twitter or interacting with this post on LinkedIn.
👀 Coming Soon - In late July, I recorded a webinar introducing Agri Fintech in Latin America.
It went way better than even I expected thanks to the amazing insights provided by the panel on topics ranging from Sustainability, Peer to Peer finance, expanding in the wider region, establishing partnerships and innovation in credit risk.
I cannot wait to release this content on Monday 5th September, alongside my Newsletter which will discuss my thoughts post interview, as I obviously learned a lot and revised some of my thinking.
Coming soon my friends
Coming soon my friends
Embedded Markets - the Indian M&A playbook
Agri Fintech is quite a nascent sector and the opportunities for (M&A) mergers and acquisitions have so far been quite limited.
I have noted some transactions in the newsletter but they tend to be in isolation and scattered by categories and region. For example, Oxbury Bank acquired its’ financial services technology partner, but there have not been many other examples like this…. at least yet.
However, there was one trend I noticed for downstream acquisitions in the Indian Agri Fintech sector and I thought it would be a good time to revisit this in a short August edition.
In this Issue, I wanted to delve a little deeper and
✳️ Revisit the “India fullstack” idea;
✳️ AgroStar’s and INI Farms;
✳️ DeHaat’s and Y-Cook; and
✳️ Final Thoughts
India 🇮🇳
As I noted previously, India is the home of the integrated and ‘full stack’ platform and the platforms tend to span a broad range of services within any given value chain.
Businesses such as AgroStar, DeHaat, or Reshamandi will offer products and services around inputs, often including tailored agronomy advice, wrap financial products around this and then facilitate market linkages for the output later in the season.
This strategy makes sense and captures the value in value chain i.e. as production progresses the value increases and having a platform to capture both the inputs and the outputs also captures the value.
Not only does the value increase but payment often settles via the platforms, which allow them to gather unique insight and act in a debt collection capacity if there is any credit. This ‘value capture’ is key to Agri Fintech, as my friend Antony Yousefian depicts in this LinkedIn Post.
AgroStar and INI Farms
When I caught up with Hitesh Joshi, the Director for Fintech Initiatives at the company, earlier this year to discuss Agro Star’s move into farmer credit, it was on the day their acquisition of INI Farms was announced, so we had a great opportunity to discuss this in more detail.
Firstly, if you don’t know AgroStar they are one of the veterans of the Indian Agritech scene and have been in existence since 2013.
They have served over 5 million farmers on their platform and have 1m transacting farmers at any one time according to Joshi. This network is supported by over 2,000 retail touchpoints across 5 provinces and they recently raised a $70m Series D to expand this physical presence to 5,000 stores.
Their purchase of INI Farms in March this year enables them to facilitate market linkage for their growers on a grand scale. INI are a large Indian exporter of fruit and vegetables, who are Global GAP certified and exporting to 35 countries.
Joshi advised
We were constantly getting a lot of feedback from farmers that we were helping them to a large extent with inputs and advisory, but it would be great if you could help us sell our products too.
The acquisition allows AgroStar to leverage its strength’s on the production side of the value chain and utilise a slick and experienced marketer - see here - to handle output and distribution.
The fact that INI Farms handle over 40,000 MT of fresh produce nationally (via a Direct to Consumer model) and internationally to lucrative markets in the Middle East, South East Asia and beyond will certainly mean AgroStar can scale market linkages via these channels.
Similarly, for INI, the supply base provided by AgroStar producers is a huge asset and they can now grow beyond their own production capacity and the 5,000 farmers they previously sourced from, something acknowledged by AgroStar’s official comment.
This acquisition provides a scaled presence to AgroStar in the $300 billion+ agri output market. 
This acquisition will enable us to rapidly scale our business into the domestic and international food supply chains
This acquisition was a clear combination of two machines - one input driven and one output driven.
DeHaat and YCook
DeHaat are another giant in the Indian Agritech scene, operating in India since 2012. Like AgroStar they have a full value chain offering with AI Based crop advisory offered to farmers in Haryana and Bihar, in Northwest and Northeastern India respectively.
DeHaat have had a busy 2022. In January 2022, they acquired Helicrofter, an inputs distribution business, which gave them immediate access to 250,000 farmers in the central province of Maharashtra (and as it turned out, close access to major output markets in Mumbai, Pune and Hyderabad, home to up to 50m people).
However, it was their next acquisition in April this year that really caught my eye, especially as the timing was close to AgroStar’s. They made an injection of $3.1m into YCook for 75.5% of the business, according to Crunchbase.
Similar to the INI Farms acquisition above, YCook allowed DeHaat producers closer market links to both downstream platforms, consumers and some export markets.
Was there more to the YCook acquisition? When I asked Amrendra Singh, Co Founder, he put it in plain and simple terms for me:
This was completely about access to the consumer. For us, it is always about having links from the farmer all the way to the markets and YCook gave us direct access to consumers in a big way.
This sentiment was echoed in the official statement with DeHaat aiming to “expand their customer footprint across 15+ countries with a wide range of fresh as well as processed products.. with 100% traceability”.
It seems the rationale in India really is to expand market access for growers and the gross margins that come with it.
Final Thoughts
🧐 When I originally noted these acquisitions I was curious to see if the Agri Fintech sector mirrored any of the activity in mainstream Fintech market i.e. acquiring licences, technology or possibly distribution.
This hasn’t really materialised yet, with the exception of the Oxbury acquisition noted above and possibly the Growers Edge acquisition of technology assets from Farmland Finder.
I think we have a lot of building to do before we see more like these.
🧐 In India, acquisitions reflect the ‘full stack’ nature of the market with the rationale to increase geographic footprint or expand closer to consumers.
This makes perfect sense but makes me wonder how the fintech elements in the stack play out.
For example, one key trend to note globally, which India excels in, is ‘open banking’. This refers to sharing standardised bank account data using open API and is now extending to a broader range of financial data beyond accounts.
This trend has driven a proliferation of specialists in fintech by allowing easy partnerships with SaaS companies and platforms. In a ‘full stack’ environment how easy will those partnerships be? Would the players rather develop that in house?
DGV, the dairy neobank, are attempting the partnership approach in that particular value chain in India so perhaps we will see more activity like this.
📰 News
It has been a little slower in the past few weeks, which is unsurprising given the holiday season in the US and Europe. Nevertheless, we had some noteworthy activity:
⦿ John Deere invest in Hello Tractor.
This is an excellent news item and one I am glad to see as on one side you have a giant equipment manufacturer and the other an African tech start up that has been developing its offering for 7 + years.
This makes total sense for Deere as it will give them an insight into some of the economics of ‘pay as you go’ and ‘as-a-service’ models. Obviously, this is mostly applicable to their African and Asian businesses, as they allude to, but I’m sure HQ will be interested in how this could be applied in other jurisdictions such as the US.
⦿ Staying in sub-Saharan Africa, iProcure, the inputs platform has raised a $9m Series B to expand its footprint in Kenya, Uganda and Tanzania and offer Buy Now Pay Later credit facilities. Alongside the $9m, it has raised $1.2m in debt, which I assume is to fund those BNPL activities.
The input retail segment is a unique and interesting one, with similar companies tackling this challenge in India (Agrim) and Indonesia (Agriaku) for example.
⦿ Decision Next, the San Francisco based commodity analytics software, launch a finished goods price forecasting tool.
This is awesome and I really admire these risk management tools. If you are a business, why would you not use them? Lock in your margin and move on, don’t speculate.
It seems this latest offering from Decision Next moves this forecasting ability even further downstream from their typical commodities inputs.
⦿ Agro Club expand their grain marketplace offering into Brazil.
Agro Club are an active and energetic player in the agritech scene and it is always interesting to follow their progress.
For example they recently expanded into Europe to offer Buy Now Pay Later offerings which I think was well timed, especially for the Spanish market, which they entered.
I know little about the dynamics of Brazilian grain trade but my understanding tells me it is somewhat similar to North America and involves a lot of the same players i.e. the ABCD’s. I’d love to hear more about this particular play, given the difficulty of grain marketplaces to add value in mature or developed grain markets.
*** If you operate in the sector and want to share updates, please do as I am more than happy to receive these.
That’s all folks!
Reach out and say hi 👋 and please do share the content with people in your network by sharing on Twitter or giving the post a Like on LinkedIn here
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Niall Haughey

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