Former F1 racer Narain Karthikeyan’s agrilogistics venture, Leap India food and logistics, has raised $10 million in equity funding from Neev Fund, a co-investment platform promoted by UK’s Department for International Development (DFID) and State Bank of India.
The funds will be used to finance the expansion of mechanised warehouses used for storage of grains. This is the first of three rounds of funding planned for the expansion of the Karthikeyan family’s agriculture related businesses, in which it plans to pump up to $250 million to set up grain storage facilities across states in India such as Punjab, Assam and Delhi.
Leap India has already obtained long-term contracts from certain state governments for setting up such facilities on a public-private partnership model.
The government has opened up the agriculture storage sector to private participation and has auctioned close to 100 steel silos or mechanized steel warehouses for grain storage on 30-year contracts to private players.
The onus of building the facilities is on the private player which wins the auction for each such silo and receives a fixed fee for operations and maintenance of these silos. The government plans to set up 1,000 such storage facilities with average capacity to store up to 50,000 tonne of grain.
“Automated storage can save up to 20% of food grains. The business model is also sound for private players because their counterparties are Food Corporation of India and a state government which ensures payments will happen,” said Sudhir Dash, former managing director at investment bank Investec.
The construction of the planned silos could cost an estimated Rs 50,000 crore, according to industry analysts.