Happy Independence Day from Mandala Capital

Happy Independence Day from Mandala Capital

Dear Partners,

Mandala Capital wishes you a Happy Independence Day. Thank you for your support all these years and for many years to come.

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Building a Global AgTech Platform – Part II: Challenges and Strategies for Implementation

Building a Global AgTech Platform – Part II: Challenges and Strategies for Implementation

This article is part of a series by Aric Olson, President of Jain Irrigation, Inc., on how Jain Irrigation built its global AgTech platform in  a short period of 5 years. Read Part I: Acquisitions are Integral to Strategy here. Look out for the finale Part III releasing in coming weeks. 

“What we found with our investments in Ag Tech is that it is far easier for a large multi-national company to make “bolt-on” acquisitions to an existing footprint.  In many cases there is no need for duplicate G&A staff, buildings and locations. These savings alone along with some minor market-place pricing adjustments and focus on selling the value are enough to take cash-burning startups into a breakeven situation.  The “bolt-on” acquisitions also obtain benefits of a more secure future with a stabilized and larger entity. The agriculture and irrigation technology customers also get a sense of security in their large investments knowing that the company has a better chance of existing for support in years to come.”

Jain Irrigation Systems Limited (“JISL”) has a globally integrated work force across India, Israel, Australia, and the United States, to name a few countries. 

R&D is focused on the development of agronomic applications with product management out of India, United States, Australia, and Israel and software development out of India, Ukraine, United States, and Australia. This unique talent pool helped in dealing with the initial challenges of integrating all of the technologies, different programming languages, different interfaces and so on that we had acquired from around the world into a common platform.    

Once the integration was complete and we proceeded to commercialize our technology offering, we learned of new challenges in selling and servicing growers. Growers in the United States and other countries have struggled to extract the full benefits of technologies offered by most market participants. Small startups entering the market promising major technological breakthroughs or massive yield gains for farmers have largely under-delivered and/or have run out of cash before reaching scalability. 

With regards to sales and pricing, we found that even when a technology/idea is relatively proven in the sector, there can be large pricing swings and demand elasticity for the technology/idea. We learned the importance of the sales teams to market and develop a value proposition for more accepted technologies/ideas and for management teams to ensure margins can be sustained in the product / service being sold. The difficulties experienced in the industry have made growers skeptical and hesitant towards readily adopting new technology.  

We found that it takes local and committed field support and distribution to be able to grow sales and the incentives offered to the sales and distribution network have to be greater than usual to ensure the product is pushed. Through our experiences we have explored direct models, dealer models and hybrids to arrive at the right combination.  

It is clear that in order for larger scale and rapid growth, one needs a strong and committed dealer network. As a result, we recently invested in the two largest micro-irrigation dealers in California to get closer to the grower, to be able to sell and deploy technologies through their sales and marketing teams and to build an entry point as all of their new construction projects could put in monitoring and automation starter kits and be designed in such a way that technology upgrades sales would be much easier to make and provide value at a much lower cost of ownership for the grower. For JISL, there were other added benefits with the investment in distribution.  

Now with an amazing technology platform that includes the the ability to provide all irrigation components after the pump (and solar pumps for some projects), our own distribution in California and one of the industry’s best global supply chains (where the best and highest quality irrigation products that come from India at a low cost/high value), our competitive future looks bright.

We can confidently say that we have an unrivalled irrigation and technology platform and are best placed to expand on the opportunities we have created. 

In Part III of this series, we explore the opportunities that lie ahead for the AgTech industry. 

Mandala Capital is a private equity firm focused on long term and sustainable investments across the food value chain in India and South East Asia. We partner with visionary promoters and management by providing complete financial and operational support to increase the companies’ value and help companies achieve sustained leadership in their sectors.

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Building a Global AgTech Platform – Part I: Acquisitions are Integral to Strategy

Building a Global AgTech Platform – Part I: Acquisitions are Integral to Strategy

This article is part of a series by Aric Olson, President of Jain Irrigation, Inc., on how Jain Irrigation built its global AgTech platform in  a short period of 5 years. Look out for Part II and Part III releasing in coming weeks.

Jain Irrigation, Inc (“JII”) is a wholly owned subsidiary of Jain Irrigation Systems Limited (“JISL”) based in Jalgaon, India.  In 2015 JII developed a strategic plan to create a leading AgTech irrigation company with a billion dollar target valuation. At around the same time, Mandala Capital invested a total of USD 120 million across the Jain group.

From 2015 to 2019 the company acquired Puresense Environmental, Observant, Pty. Ltd., and ETwater Inc..  Also, JISL’s sister company, NaanDanJain, acquired Gavish Control System (a leading nursery and greenhouse controls company) in 2014.  JISL also formed a partnership with Agralogics.

One of the many strategic acquisitions undertaken by Jain Irrigation. Agralogics is the leading provider of data infrastructure for the AgTech space.

Post the Mandala investment, JII had managed to bring together leading start-ups in remote sensing and irrigation automation and integrated the different technologies and supported their developmental roadmaps.  At the same time, JISL, through the funds from Mandala Capital, made significant internal investments for the development of irrigation controllers, solar power controls and pumps, and fertigation pumps and controls. 

By incorporating acquisitions as an integral part of the strategy, JISL could provide all of the leading agronomic monitoring tools and capabilities to its customers, as well as develop the ability to control irrigation systems, all in a short period of time.

In Part II of this series, we discuss the challenges faced and strategies for implementation.

Aric Olson 

CAIS, CID, MBA, CSSBB, CPIM, CSCP

President | Jain Irrigation, Inc.      

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EFRAC launches Asia’s first NABL accredited CO2 Laboratory

EFRAC launches Asia’s first NABL accredited CO2 Laboratory

Mandala Capital's portfolio company EFRAC recently launched Asia’s first NABL accredited CO2 Laboratory. Increased testing, inspection and certification ensures higher quality and safety of products for consumers.

Learn more about the Gas Division and the NABL accredited gas testing lab (ISO 17025:2017). 

Mandala Capital is a private equity firm focused on long term and sustainable investments across the food value chain in India and South East Asia. We partner with visionary promoters and management by providing complete financial and operational support to increase the companies’ value and help companies achieve sustained leadership in their sectors.

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Inaugural Impact Report 2019: Creating Impact Along the Entire Food Chain

Inaugural Impact Report 2019: Creating Impact Along the Entire Food Chain

A message from Mandala Capital's Managing Partner, Mr Uday Garg


Our mission is to create impact along the entire food chain that is sustainable and scalable. What does that really mean and how is Mandala’s approach to impact as an asset manager differentiated?

Sustainable impact requires durability that ensures impact on all stakeholders beyond an investment cycle or fund life.The inherent challenge in our work is the potential for a promoter or owner of a business to have a time horizon and return expectations that are not fully aligned with the investment style and structure of a fund. As a firm, we recognize this dynamic and approach investments with the aim of balancing our objectives of optimal investor return while ensuring that investments are meaningful to the company. Often, it is only through active dialogue that these issues can be resolved to achieve an ideal outcome for all stakeholders.

Fundamentally, our relationship with the companies is built on a basis of trust that transcends the transactional and provides a foundation to influence operations post-investment. It is through our close operational involvement that we are able to closely monitor and prioritize value creating events that align EBITDA progression with sustainable social impact progression. Each of our companies are their respective category leaders in the food supply chain and, as such, innately capable of delivering positive social impact. Our investment structures are designed to ensure our companies are well poised to deploy Mandala’s investment to integrate operational adjustments as well as innovation to demonstrate return that has a correlating effect in contributing to long-term positive social impact. The developments that we guide within our portfolio are designed to be fixtures of an investee company and will amplify over time rather than truncate.

Scalable impact is impact that has a meaningful effect and that can be replicated at a larger scale without diluting impact.

Small scale start-ups established solely with the purpose of achieving impact either through innovation or geography are often dislocated from viable sources of capital and, more importantly, the supply chains that their products and services must be integrated with in order to have measurable and sustainable impact. Certainly these companies can develop and often grow into meaningful market leaders, but, as an asset management strategy, it is not a reliable assumption to expect high quality returns — financial and social — within 10 years. Instead, we have discovered that larger companies in the sector are naturally best positioned to make large scale, socially impactful, changes and bring in the private sector, government and DFI funding to grow.

In preparing to draft this impact report, we spent a long time reviewing the existing literature and practices in the space. In most instances we found at least one of two trends on display: either social impact is very loosely attributed to a fund manager’s investment or targeted impact investments show very little capability to achieve demonstrable returns. We then decided to take a slightly unconventional approach to evaluating our investments – intended to employ many of the same elements of our investment strategy – that would be focused on what our role was going to be, where we could add value and how we could showcase the sustainable and scalable impact we seek to create.

This report demonstrates our initial best effort in defining, measuring and monitoring the impact our investments havecreated and in laying the foundation for continuing to track their impact trajectory. We have defined our goals and the corresponding data points and worked with all our partners to gather the data. We have also formulated calculations that allow us to translate those data points into the monetary impact created towards each of our goals, per dollar invested into the Fund and deployed into each company.

We have taken this approach because we believe that numbers tell a complete story, removing from the results the emotion and bias that often favor less compelling and impactful investments from those which create true value. Numbers also serve as an effective bridge between our investors and portfolio companies. The trendiness of impact investing leads me to believe that the impact investing industry is moving towards a more quantitative approach in measuring and communicating impact.

Publishing and sharing Mandala’s inaugural impact report is a major milestone, both for the company and for me personally. The Mandala team – including all our partners – care about a lot of social causes and actively support and lead various philanthropic endeavors. This is in large part due to the influence of my grandfather, Mr. B.R. Barwale, who built a very large and successful business in agriculture and always emphasized the importance of giving back a significant amount to the farmers and the rural community, without seeking recognition or advertising his philanthropic efforts. Thus, from the outset, we have naturally sought partners aligned in this basic philosophy.

Mandala Capital was established in 2008 and we launched Fund I in 2014. This report is certainly long overdue, but we deliberately wanted to watch the impact investing industry mature and contemplate our role in the community of impact investors. We believe that this report reflects who we truly are while demonstrating adequate respect to the impact investing world. It is my sincere hope that you will enjoy reading it and that it will provoke new thoughts and ideas that broaden and elevate our ongoing dialogue.

Uday Garg is the founder of Mandala Capital and has since 2008 been exclusively focused on investments in the food value chain. Prior to Mandala Capital, he worked at Altima Partners focusing on private investments in global Emerging Markets across sectors (including agribusiness). He began his career in the Investment Banking division of Deutsche Bank (New York), followed by Portfolio Manager roles at Amaranth Advisors (Connecticut) and Duet Group (London).

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An Overview of Mandala Capital’s Structured Approach to Investments

An Overview of Mandala Capital’s Structured Approach to Investments

 

The Private Equity designation characterizes a wide range of investment firms. Although it is tempting to evaluate the asset class through a singular lens, there are genuine differences between firms and the underlying investment themes, financial product offerings, portfolio volatility, risk-reward, and the methodology of decision making.

 

The Mandala Method

At Mandala Capital, we pride ourselves in our structured and comprehensive approach to investments in the food and agri industry. This process has been developed over a decade by our Team and built upon our past experiences and lessons learnt— particularly during the early years of Fund I.

The process is continuously refined through strategy sessions, conversations with our LPs and market participants, and constant self-introspection. Doing so allows us to better foresee trends and disruptions in the marketplace, as well as develop financial products that are best suited to withstand downward market movements and capture long term high growth opportunities.

Mandala Capital's investment strategy is focused on four steps which we define as follows:

  1. Thesis Driven
  2. Deal Creation
  3. Deal Structuring
  4. Value through Operations

Mandala Capital thoroughly evaluates each investment through this rigorous step-by-step approach— before and during an investment’s lifetime- to ensure that the deal is beneficial to all stakeholders.

 

Thesis Driven

Developing a thesis is a complex exercise and a key differentiator for Mandala Capital.

This is an ongoing and continuous process where we leverage our Team and our broader network’s combined market experience, market relationships, and access independent research where necessary. We consider three broad areas to help us develop a thesis and identify target companies. These comprise Industry, Mandala Edge, and Exit.

Using Industry research is not a novel approach. However, combined with Mandala Edge and Exit analysis, it helps create strong conviction on pursuing certain transactions and maximises return opportunities.

 

Deal Creation

We spend a long time on the ground truly understanding the needs of the companies, and more importantly, the people behind the companies we invest in.

Many firms in the Indian food-agri industry are family-run businesses that come with a unique set of challenges and concerns. Through the personal relationships we form, we are able to understand the nuances behind operational decisions that cannot be captured on spreadsheets or metrics.

 

Deal Structuring

Thanks to the unprecedented amount of time spent nurturing relationships with our partners and deeply understanding their unique needs, we are able to structure deals nontypical of a private equity firm. These include a combination of various debt-like and equity-like instruments along with FX hedges and incentive structures to align interests. In the food and agribusiness sector, where it is conceivable to see annual operating plans change several times a year due to external forces, our deal structures help secure returns and provide downside protection, while delivering a product that works for our partners and stakeholders.

While we spend increasing time on each component of our strategy and work tirelessly to develop and maintain our proprietary edge, in the area of Deal Structuring, we believe that we have been ahead of the curve from the early days with a healthy respect for risk-reward balance and reduced volatility in our investments.

 

Value through Operations

Finally, we commit to leaving every investment with greater operational capabilities post-investment, as part of our mission to grow industry-leading agriculture, food and food related companies.

We share knowledge with other thought-leaders in the industry and are heavily invested in agtech and new frontiers. With 360 degree sector understanding, we are able to advise and help increase the value of all our investments. More recently, we have also added Impact management as part of our Value through Operations step, and introduced a proprietary quantitative methodology to track and monitor the dollar impact created by each of our companies following our investment.

If you are interested in engaging with Mandala Capital, please contact us to find out more.

Mandala Capital is a private equity firm focused on long term and sustainable investments across the food value chain in India and South East Asia. We partner with visionary promoters and management by providing complete financial and operational support to increase the companies’ value and help companies achieve sustained leadership in their sectors.

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