FSG report reveals emerging opportunities for India’s agri-tech sector

Underscores need for traditional agricultural companies to embrace deep tech in order to de-risk position in an evolving global landscape

New Delhi: FSG, a global consulting firm, has launched the Agritech Report 2022, “What’s next for Indian agri-tech? Emerging opportunities and the way forward for India’s agricultural technology sector”.
The report captures the current state of Indian agri-tech in India, the landscape of emerging opportunities, and a recommended way forward – for traditional agriculture companies to succeed across the agriculture value chain, and for agri-tech start-ups to address the stiff competition ahead.
The report highlights that while traditional agriculture companies lag behind in most categories, large agrochemical players benefit from in-house R&D and a greater investment capacity. They are therefore ahead in developing, producing, and marketing sustainable and specialized inputs such as bio-fertilizers and organic fertilizers. However, traditional agriculture companies focused on the upstream and midstream value chain, including in-farm mechanization solution providers, lag behind start-ups in most other agri-tech innovation categories. The time is right for traditional agriculture enterprises to embrace technology – whether they choose to deepen their expertise as specialized solution providers, or to expand into adjacencies.
The report points to how agri-tech start-ups will need an acute focus on profitability and sustainable growth to survive an emerging `battle of platforms’. This situation will be exacerbated by a funding slump in the medium term amidst an overall slowdown in global investment activity.
The report also indicates that the next phase of India’s agri-tech growth story will be driven by categories such as bio-stimulants, farm management software, remote sensing and advisory, farm automation, novel farming systems, seed-to-fork traceability, and agri-carbon.
Speaking on the occasion, Rishi Agarwal, Managing Director, Head – Asia, FSG, said, “New developments in engineering and technology are changing traditional farming practices. Innovations in agricultural technology have the scope for improving not just agricultural yields, help adoption of sustainable farming practises, but also help farmers improve their lives. Legacy agricultural businesses need to make calculated and fast decisions to keep up with this rapidly evolving environment. Irrespective of whether they want to become a professional solutions provider or expand geographically, they will need to leverage technologies such as data analytics and digital networks.”
“While these recent positive developments are encouraging, agri-tech companies should also pay attention to medium- to long-term trends in order to make informed business decisions. India’s agri-tech advances, if properly harnessed, present a golden opportunity for sustainable and equitable growth that will not only ensure agribusiness profitability but also improve farmers’ livelihoods,” he adds.
The report also suggests that the influx of capital over the years has created 5-7 late-stage start-ups (i.e., Series C+), such as Ninjacart, Dehaat, WayCool, Jumbotail, and Arya.ag, each valued between US$ 300M and US$ 800M. These start-ups leveraged early opportunities to transform the traditional supply chain through technology and business model innovations that addressed inefficiencies and gaps such as input shortages, wastages, and a low share of the final sale price for farmers.

Key Recommendations Excerpts

Attention to emerging opportunities:
  • Sustainable inputs, in-farm solutions including farm management software, remote sensing and advisory, and farm automation, novel farming systems, novel farming systems, traceability, and agri-carbon to improve farmer livelihood and accelerate the pace of growth and innovation.
  • Climate change has intensified the focus on agri-carbon innovations.
  • Innovative global start-ups need to be responsible for addressing systemic barriers and building the critical ecosystem required to scale the agri-carbon market.
Enhanced focus on Technology adoption:
  • Technology has irreversibly disrupted the traditional agricultural value chain – from how farmers access information and inputs to how they grow and sell their produce.
  • Stronger need to adapt to this digital transformation of agriculture.
  • Investments in in-farm innovations, including artificial intelligence (AI) and Internet of Things (IoT) solutions, robotics/drones, and farm management software, have been growing exponentially.
  • Between 2018-19 and 2020-21, funding to this category grew almost four times, from US$ 10 million to US$ 39 million.
Renewed focus on profitability:
  • Faced with a ‘battle of platforms,’ start-ups need a renewed focus on profitability.
  • The first wave of India’s agri-tech start-ups focused on market linkages, raised funds based on ‘gross merchandise value,’ or ‘gross value of goods sold,’ although they typically earn razor-thin margins per trade.
  • These relatively ‘mature’ start-ups now compete for farmer attention in a ‘battle of platforms,’ not only among themselves but also with a host of new entrants.
Enabling end to end solutions:
  • Players with solid on-ground networks may choose to expand into adjacencies, gradually moving toward ‘end-to-end solution providers.’
  • Focus on value-added products and services adjacent to core business across the agriculture supply chain, from market linkages to digital finance.
  • Start-ups in this sector will need to continue to be innovative in staying in touch with and expanding their farmer network through a mix of digital and in-person