At what seemed like the height of the pandemic on 24 March 2020, and with the market reeling from a sharp pullback we sent a Covid-19 update to our investors.
Our broad message then was that it would be at least 2 years before growth returned for our sector. Specifically, we felt that companies in our sector could see anywhere from a 20-40% decline in operations this year and would spend the next year simply recovering from that decline. This is particularly unfortunate for the sector which was only just returning to growth after repetitive shocks for the last 5-6 years, including record back-to-back droughts, GST, demonetisation and a banking crisis amongst others.
More recently, I came across an article describing the expected growth in the market to be Square Root shaped (√). I think it captures what we have been saying since March quite well.
The initial spike in sales (post reopening) that some of the data is showing is the small spike at the start of the square root – this is likely to prove short-lived and I think there is already some evidence of that turning down as the virus response remains muddled globally. To be clear, the square root shape is meant to be indicative of what global growth will do – different countries and different sectors will have differing outcomes. Policies, societal behaviour and management skills will possibly separate the winners from the losers.
It’s a good time to highlight that our team has continued to work well from home and stay safe in all their various locations. All of our portfolio companies are fully operational and are practicing the necessary safety protocols to ensure a safe and healthy work environment for their workers.
Our companies have also been active in contributing towards CSR activities related to Covid-19 to support their broader communities. For example, we have helped with funding testing kits, ventilators and midday meal programs. Our sugar business has used its ethanol capacity to produce sanitizers. And some of the Hospitals we support have been in the frontline dealing with Covid patients.
On this World Food Safety Day, we show you behind the scenes how Valley Spice by Jain Farm Fresh Foods Ltd. works to bring safe, pure and authentic spices from Farmers all the way to your home. Shuddta aur Swaad, Ab Sehat Ke Saath. #MadeInIndia
— Valley Spice (@JFFvalleyspice) June 7, 2020
We continue to be busier than ever with regular monitoring and new initiatives at portfolio companies.
We thank you for reading our letters and hope that everyone is staying safe during this period.
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).