Here's why this investment bank wants to support agri, dairy business startups

Auram Equity Partners is a two-year old investment banking firm that is set to launch the first of a series of B-Plan competitions called the ‘Aurum Venture Challenge’. Sanjay Bansal, Founder and Managing Partner tells Firstbiz about the company’s investment philosophy, the upcoming competition for agri and dairy businesses in a freewheeling interview.

Can you tell us a bit about Aurum Equity and your investment philosophy?

Sanjay Bansal: We are an investment banking firm with the desire to do early stage investing with proprietary money.Currently we are investing in smaller ventures. The whole objective is to come to a model where we do investment in lead structuring, M&A, private equity kind of work at the same stage to early stage investing. When we started off, we decided to create a sunrise sector focus firm.

There are large number of sectors in the country, which have fast growing and burgeoning industries. For instance, Agri Food and Beverages - the sector is valued at about Rs 9,000-1,000 crore. It incorporates various sub-sectors such as staples, food, FMCG products, dairy, agro-chemicals, poultry, meat, beverages and alcohol. Now if you add up all these, it becomes a very large sector.

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[caption id=“attachment_95137” align=“alignleft” width=“380”]  Image: Aurum Venture Capital.[/caption]

Our whole endeavour is to look at those big sectors where there is a systematic shift taking place from unorganized to organized on a very rapid pace and cover those niches which are new and fast growing within them like agri-technology or organic food. We also look at Agro Food Beverages, consumer retail, healthcare and pharmaceuticals, and technology media.

Why did you choose to invest in mid-market segment?

SB: I think any upcoming firm needs to graduate to the mid-level. The activity in that pocket is extremely competitive and crowded. We look at large deals with big volumes. The real activity will happen in the Rs. 50- Rs. 200 crore range. This is our target market.

Can you tell us the genesis of this new property, Aurum Venture Challenge? How did it come about?

**SB:**We wanted to know what’s happening in the sector. So if we are looking at any particular sector and I need to identify new opportunities and categories coming up within it, theonly way to do this is to have a competition where you invite these firms. This is akin to anangel fund, where one would typicallyidentify three-five solid business ideas and see if you can get them funded instantaneously. The whole idea is similar to a business school B-Plan competition. If we find some amount oftraction, then in certain companieswe will hand hold themand take them to the next level.The basic tenet is to nurture entrepreneurship in the sector.

What is Aurum’s interest in this sector?

SB: We understand what is going on in the sector. Like I mentioned, there will be lot of business which will come up and we want to resonate with everything new happening in these sectors. So if you have to do that, then these kinds of competitions are relevant for us. We will have a series of competitions and different funds, propositions and sectors.

When are you launching?

SB: We are launching sometime next week and expect to increase by sometime early September and close by end of September. We expect to launch by September 25, 2014 either in Delhi or Mumbai.

What’s the structure of the challenge, application criteria, etc?

SB: Anybody with an idea to someone who is doing a very early stage revenues in the under Rs. 5-crore level. We want to know about the team, problem it’s solving, the industry category, why they need money, the purpose of raising money. We will shortlist approximately 10 - 15 applications. We will announce not more than five winners. We will have a jury of five members who will fund in combination with Auram and the amount will vary from Rs. 50 Lakh to Rs. 1 crore at the most.

Will you have a long-term engagement with winners post the competition?

SB: Yes. We will provide mentoring, advice, hand holding, strategy, till they become stable to become winners in multiple ways.

Is there a lot of VC and PE money going into the dairy and agri sector in India or are investors still shying away from it?

**SB:**I think this is the sector that has a growing interest. There is decent amount of activity in the agri-food and diary sector. The latter has been particularly active in the last 15 - 24 months in terms of private equity. Different parts of the agri-food sector attract different qualities of money - some are venture capital ready some are private equity ready. Dairy is more PE ready same holds for food, FMCG or staple side companies. However things like organic or poultry are not PE ready.

What are the current opportunities for entrepreneurs in this sector?

**SB:**There are many new categories in food sector. There are many technology incumbents which will either make agri-processes or creating instruments which will make growing of crops faster or easier. So there’s a technological advancement taking place in the sector which therefore has a bearing on the product. Non-technology companies are also there because they are also growing such asthe organic sector. So technology intervention to create agri-relevance to develop the sector and this whole shift from unorganized to organized is where the sector is headed.?