Food, water cos emerging as investment options

More fund houses plan schemes targeting the sectors

 

Mumbai, May 16

Both retail and institutional investors' interest in companies associated with essential commodities such as food and water is on the rise.

Many agriculture commodities are becoming scarce resources worldwide and they are preferred by new fund themes and managers.

Canara Robeco Mutual Fund is planning to launch its water fund in India.

The European asset management firm Robeco, which has picked up 49 per cent stake in Canara Bank's asset management arm, is gearing up to launch new products in the second half of 2008, after a revamp of the old asset management company.

Growth stage

The Sustainable Asset Management (SAM), the Swiss subsidiary of Robeco, has expertise in managing water funds and is expected to provide the guidance for water fund offerings, which are already being sold in other parts of the world such as Australia, China and Japan.

"We are very optimistic on our sustainability fund. The Indian market is in the beginning of the growth stage and there is tremendous potential," said a Robeco official, while on an India visit recently. DSP Merrill Lynch's Natural Resources and New Energy fund, which closed in March, would also invest in water and agriculture sector companies.

Meanwhile, some stocks of companies dealing in water and listed on bourses have outperformed the market recently.

The story is the same for the pure-play food companies. Ion Exchange India Ltd has moved up by 36.81 per cent in the past one month, whereas Mount Everest Mineral Water has gained 34.58 per cent. The Tatas picked up a stake in the latter.

Dream run

Another new entrant South Korea based Mirae Asset Mutual Fund has plans to launch an Asia Pacific fund for investors that will invest in companies purely dealing in the food business.

Mr Gopal Agrawal, Head- Equity, Mirae Asset, said the Asia-Pacific Resources Fund was in the planning stage right now and would invest in pure-play food based companies, especially when food prices going up.

"We don't have many companies dealing exclusively in the food business in India; but, there are such companies listed in Australia, Hong Kong as well as two-three other markets in the Asia-Pacific," Mr Agrawal said.

Sita Shree Food Products, which recently got listed on the bourses, had a dream run and moved up more than 120 per cent within a short span of time.

Another company, Jhunjhunwala Vanaspati has moved up 25 per cent in the past one month. REI Agro Ltd has gained 18.31 per cent.

Baring Private Equity Asia invested $51 million in KS Oil last year in August and is now advising the company on its global expansion strategy. KS Oil is now planning to set up facilities in Indonesia for production of palm oil.

No replacement

"We are actively watching this sector in India, we have made some investments in China in the same sector," Mr Jean Eric Salata, Founder and CEO, Baring Private Equity Asia, told Business Line recently, when asked whether they were considering food sector companies for investment, given the global food prices going up.

More and more water and food business companies are likely to come up in the near future, say analysts. "Water-related technology companies are setting up shop in Chennai, where there is water scarcity and money is flowing in from abroad," said a report.

Unlike with petroleum, no technological innovation can ever replace water. India and China are likely to be most severely affected by water scarcity as they undergo a vast rural-to-urban population migration.