With food prices widely expected to remain high across the world, food and farm produce companies have become the darlings of investors, with money pouring in from all quarters, be it public markets, private equity/venture capital players, foreign direct investment and even global depository receipts.

So it may be a first, but comes as no surprise, if Hyderabad-based floriculture firm Neha Inter-national is all set to raise R92 crore through global depository receipts (GDRs), to be listed on the Luxembourg Stock Exchange.

Also, as data by PE/VC research firm VCCedge points out, PE/VC investment in agriculture more than tripled from $76.07 million in 2009 to $252.5 million in 2010.

Several food and agri companies have outperformed the Sensex, with Gokul Refoil up 83% and Jain Irrigation up 19% from March 1, 2010, to February 28, 2011, during which the Sensex climbed a more moderate 10%.

Parul Soni, executive director and practice leader, development advisory services, Ernst & Young, feels that owing to the growing demand in processed food, at least R1 lakh crore of investment would be required from both government and private players, adding that the entry of specific agri-related funds such as VenturEast, SEAF (Small Enterprise Assistance Funds) and India Agribusiness International Fund is only making the space more exciting.

Take IL&FS, which through its Tara India Fund III, invested $16.2 million in August 2010 in Karuturi Global, a floriculture player. And though Archana Hingorani, CEO & executive director, IL&FS Investment Managers predicts ?there will be greater investments in the mid-market space, instead of large deals?, even this seems encouraging, given the unorganised and hard-to-access agricultural sector.

V Srinivasan, CEO of Siva Group which invested $7.63 million in Karuturi Global, $55.72 million in KS Oils and $48.69 million in Ruchi Soya Industries in 2010-11 is more optimistic: ?The agri space would grow independently, unaffected by global factors such as economic meltdowns. Segments of essential food grains, pulses, oil seeds, will continue to have uninterrupted growth, drawing maximum interest from investors,? he says.

This process seems to be happening already, with Indian corporate giants like Reliance and Birla and international players like Wal-Mart and Carrefour interested in contract farming for sourcing farm produce. As Shakun Kohli, associate director, KPMG, points out, clearly the horizon has expanded beyond sugar, fertilisers and tractors. Even floriculture companies are on acquisition sprees. Neha International recently acquired a 49.99% stake in Oromia Wonders Plc, a floriculture company in Ethiopia. It also acquired Mauritius-based Globeagro Holdings in 2007 for Rs 41 crore, just as Karuturi Global acquired Kenya-based Sher Agencies for Rs 21 crore and Monsoon Capital picked 3.8% in Karuturi Global in 2010 for Rs 2.8 billion.

This fundamental shift can also be gauged by the kind of FDI investment that the sector is attracting year-on-year. 100% FDI is allowed under automatic route in floriculture, horticulture, development of seeds, animal husbandry, pisciculture, aquaculture, cultivation of vegetables and services related to agro and allied sectors. Soni from E&Y adds that FDI in food processing industries has grown from Rs 636 crore in 2008 to Rs 975 crore in 2010. Similarly, FDI in vegetable oil and vanaspati has grown from Rs 201 crore in 2008 to Rs 290 crore in 2010.

Sageraj Bariya, analyst (agriculture), Angel Broking says companies with robust product portfolios and strong farmer relationships would benefit the most. ?Key agri-input sectors like fertilisers and agrichemicals would perform in line with the market, while in terms of agri-output based companies which have strong brand and robust sourcing network would continue to benefit from higher consumer spend.?