Deal focus: IVFA pushes Seedworks' hybrid agenda

Asia would seem to be a hot market for hybrid rice; with the grain forming a staple of most diets in the region, new strains that offer faster maturity or higher yields should draw interest from farmers.

That logic holds up in China, where a 2013 report by the International Food Policy Research Institute found that more than half of all land under rice cultivation was devoted to hybrid varieties as of 2010. However, in other countries, including India, hybrids penetration remains low; only in Vietnam did it reach 10%.

"Rice is a leading crop in terms of acreage in India, but the hybridization percentage is very small," says Srikrishna Dwaram, a partner at India Value Fund Advisors (IVFA). "Over the last 10-15 years it's gone from zero to 7-8%, so there is a trend of increasing hybridization. We hope to bank on that."

IVFA believes it can tap into this expected takeoff with the acquisition of Seedworks International, an India-based hybrid seed developer. Up to $40 million, including the recent investment, will go towards helping Seedworks seize new opportunities in the market. There is also a desire to build its presence in other field crops, particularly cotton. Seedworks has already developed a number of hybrid cotton varieties, and while it is not yet a major player, the fragmented and dynamic cotton market is likely to provide openings for talented players.

"With cotton seeds the product life cycles tend to be shorter; there is a fair amount of movement in the pecking order of companies, depending on the kind of goods they produce based on their R&D," says Dwaram. "You may see a number 10 company become a number five company, or a number four company become number one. There isn't a permanent number one."

The deal represents a hand-off to IVFA from Wand Capital, the US-based private equity firm that had provided start-up capital to Seedworks and its vegetable-seeds focused sister company, Seedworks India, in their early stages in 1998, and bought a majority stake in 2007. With its investments reaching maturity, Wand was looking for an exit. It sold Seedworks India to Bayer last year.

IVFA's priorities for the business include improving the sales and marketing teams, as well as its distribution network. The GP believes these to be Seedworks' greatest stumbling block, holding back its impressive R&D capabilities, and it hopes to bring the company's operations into balance.

Beyond that, the plan is for Seedworks to broaden its portfolio; the company already has corn and millet strains on the market. However, this remains a long-term goal. "The R&D life cycle is very long for entry into any new crops, but maybe over a period of time we will work toward entering other things. But it's a long gestation project, not an immediate project," says Dwaram.

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• Topics
• South Asia
• Industrials
• Buyouts
• India
• India Value Fund Advisors
• Agriculture