Strictly Private & Confidential

DEE Mandala Properties Pvt. Ltd. - Information Memorandum

June 2014

Motilal Oswal Investment Advisors Pvt. Ltd. (MOIAPL)

Exclusive Strategic & Financial Advisor

Disclaimer

This Confidential Information Memorandum (the IM) has been prepared by Motilal Oswal Investment Advisors Private Limited (MOIAPL), based
on information provided by the management of DEE Mandala Properties Private Limited (hereinafter referred to as DMP or the Company) and other
information by sources identified herein solely for the purpose of allowing interested investors an opportunity to evaluate a transaction involving the
Company.

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In no circumstances must recipients or their officers, employees, agents and professional advisors make contact with the management, employees,
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Strictly Private & Confidential

Contents

Transaction Overview & Investment Highlights

Promoter Background & Current Business
Horticulture Agreement with Government of Karnataka
Project Plan & Details
Business Plan & Projection
Industry Overview & Outlook
Comparative Analysis of Types of farming

Strictly Private & Confidential

Transaction Overview

Unique opportunity to invest in core agriculture business in the state of Karnataka which offers highly conducive climatic
conditions for agriculture

DEE Mandala Properties Private Limited (DMP) intends to do protected farming using hi-technology methods for high
value products. The products which have year round stable consumption level and stable price level like English Cucumber,
European Salad Tomatoes , Bell Pepper and Bottle Brinjal

Sponsor of DMP has been involved in hi-technology agriculture since last 7 years in the state of Karnataka. Already doing
over 10 hectares of greenhouse farming and intends to extend it to additional 200 hectares

Corporate Farming is not permitted in India through automatic route. However, DMP is the only large scale player in India
to have achieved all the requisite approvals for bringing large land parcel (200 hectares including 20 hectares for processing
facilities) under Corporate Farming for vegetables

Total outlay for developing 180 hectares of greenhouse cultivation is estimated a t around Rs 2600 mn, of which DMP
intends to raise Rs 800 million through equity and balance as debt from banks on the back of equity investment. The capital
to be invested in phases over next 15 months for following
o Developing land into table-top form, building at least 150 greenhouses, developing crop support systems, manufacturing
media for soil-less farming, developing irrigation system, water harvesting, drip irrigation, store house and power backup

Land parcel is strategically located within one hour drive from Bangalore city (capital city of Karnataka) and on National
highway 4 connecting Andhra Pradesh and Maharashtra. It is well connected by road to major metros and regional major
cities. There is a large natural lake in close vicinity which ensures favorable water table and water supply round the year

Strictly Private & Confidential

Investment Highlights Business

State of Karnataka offers very conducive climatic condition for hi-technology agriculture at low cost level

The current business (under the Sponsor and family name) is already the largest greenhouse hydroponics production
setup in India with over 10 hectares of greenhouse already under cultivation producing high value products like
European cucumber, European salad tomato, bell pepper, basil
Reported sales of Rs 140 million (US$ 2.5mn) during year ending March 31, 2014

Sponsor has made significant capital and R&D investments over last 7 years and has demonstrated successful
implementation of hi-tech agriculture
Sells vegetables under own brand DEE Mandala to both organized retail as well as unorganized vendors
The Sponsor is a noted environmentalist honored by the President of India as well as on several occasions by the
Government of Karnataka

Corporate Farming is not permitted in India through automatic route. However, DMP is the only player in India to have
achieved such large scale cabinet approval to bring 200 hectares of land under hi-technology agriculture through
Corporate Farming. Has potential to receive over Rs 500mn of capital subsidy

Entire land parcel is already in possession of the Sponsor

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Investment Highlights - Horticulture Sector

Capital subsidy from National Horticulture Board
o For production related component of horticulture project, a subsidy of 20% of the total project cost is applicable
o For primary processing related component, a subsidy of 40% of the total project cost is applicable subject to certain
conditions & ceiling

Support from Central and State Government

o The Food Security objectives have led government to setup several agencies like National Horticultre Board, National
Horticultre Mission, Rashtriya Krishi Vikas Yojna etc to support & promote horticulture. Protected farming specifically
grew 93.2% between FY2007 & FY2012

100% income tax exemption under Section 2 (1A) of Income Tax Act
FDI allowed upto 100% through Automatic Route as per clause 6.2.1 of Consolidated FDI Policy 2014
Easier access to bank loans with cheaper cost - the sector enjoys Priority Sector Lending category
Large consumption based demand supply gap in India, which is further widening
Huge export potential as India offers better quality at competitive price

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Promoter Experience
Sponsor of Project Green has been involved in horticulture since 1991 and greenhouse agriculture since last 7 years
Sponsor has fine-tuned the greenhouse cultivation over last 7 years at his own cost

Key Achievements
Developed hydroponic techniques
Hydroponic is a method of growing plants without soil, using mineral nutrients in an inert
medium like perlite, gravel, biochar, mineral wool, expanded clay pebbles or coconut husk. Mr.
Gowda has developed unique hydroponic techniques which helped improve the yield
significantly while controlling the infection and other problems associated with soil. This further
enhanced the yields of the high yield imported seeds, has been able to beat the maximum yield
guidance of supplier
Developed unique rainwater harvesting systems
Developed a network of canals leading to several water bodies. This ensures large quantity of
water availability throughout the year while continuously charging the water table. Greenhouses
are designed to capture rainwater which is then collected in tanks
Developed efficient & economical processes
Has been able to significantly reduce capital expenditure for greenhouse setup by training own
group of contractors. In-house development and enhancement of drip-irrigation technique
resulting in significant water saving. Has facilities for reuse of Hydroponic media after
sterilization and mineral treatment
Developed in-house brand
Under which he has been selling vegetables to organized retail as well as unorganized vendors
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Current Business Profile

Land Location

Located within 1 hr drive from Bangalore city center

Located in amidst vast land of approx 6,000 hectares. The neighborhood is home to vast variety of fauna &
flora where a variety of eco-friendly agri projects are already executed

Area Cultivated

Cultivated 10 hectares of land under greenhouse

Crops Cultivated

European cucumber, cherry tomato, salad tomato, bell pepper, bottle brinjal, broccoli, sweet basil, rosemary etc

Historical Financials

Generated Rs 140 million of sales during FY14

Employs post graduates and diploma holders from reputed agricultural universities advising on cropping,
nutrition, pest control, production and yield improvement etc

Current Employees /
Employee Welfare
Plans

One of the largest employer of women workers (over 300 women currently employed) in agriculture sector
with facilities of
a) Whole day meal arrangement for workers and their children
b) Primary education facility for their children
c) Accommodation facility for several workers

Strictly Private & Confidential

Snapshots of Existing Facilities & Resources

Cucumber plants in Greenhouse

Greenhouse Cluster

Cucumber

Vast natural lake

Tomato plants in Greenhouse

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DMP Committed to Large Horticulture Project with GoK Huge Future

Business Potential

10

DMP entered into MoU with Government of Karnataka to setup

horticulture projects valuing over Rs 63 bn
Current approval of 200 hectares of hi-tech agri is a subset of the
larger project MoU
Offers unique project expansion potential for DMP with high level
of support and assistance from the state Government

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Phase I of Expansion Plan

11

Plans to expand the greenhouse cultivation

to additional 180 hectares and 20 hectares
for food processing facilities
o 86 hectares would be brought under
direct ownership
o Balance 114 hectares would be
included through long term lease
contract
Land already under possession
All necessary government approvals have
been attained including State High Level
Clearance Committee (SHLCC) approval
which allows the Company to consolidate
the land parcel under corporate entity, thus
making
Corporate
Farming
approval
available to the Company
Corporate Farming is not permitted by
any state government in India
However, Karnataka state provides an
exemption under its Land Reform Act
as mentioned below
Application for the approval was
moved in 2011

Strictly Private & Confidential

Project Plan

12

 DMP intends to bring 200 hectares of land under Corporate Farming structure 86 hectares through purchase of land and 114
hectares through 30 years long term lease
o Entire parcel of 200 hectares is under direct / indirect control of the sponsor
 Poly Greenhouses will be built over 180 hectares while balance 20 hectares would be used for primary processing,
warehousing, sorting / grading and packing purposes
o SHLCC has approved the same project plan
 Project would be executed over 18-20 months under the direct supervision of the Company engaging 4-5 contractors
o Including leveling of land (table top land needed for greenhouse), erecting steel structures, polycarbonate plastic
covering, ventilating, irrigation system, power system, worker quarters etc
 Products would include European Cucumber, European Tomato, Bell Pepper and Bottle Brinjal
o All creeper plant which would grow vertically along the strong tied to the roof-top, thus very high yield per unit land
o Seed varieties available especially for Greenhouse which can generate yields in the range of 8-12x in comparison to the
open-field cultivation
o The varieties grown under Greenhouse are highly differentiated in look, feel, shelf-life and nutritional content
o These vegetables have quite have demand levels throughout the year in urban areas
 Nearly 30% to be sold within Bangalore , balance across Rest of Karnataka, Hyderabad, Chennai, Mumbai, Pune, Delhi

Strictly Private & Confidential

Project Location Sponsor has access to nearly 1,000 hectares of contigeous land
 Current business plan involves 200 hectares of land
 The entire land parcel is located within one hour drive
from Bangalore centre
o About 35 km from international airport
o On NH 207 / NH 4 Express Way
o Well connected by road to major metros and
regional cities
 Average annual rainfall of 859mm and ambient
temperature of 26-32 degrees, suitable for agriculture
 Large natural lake within the premises

Strictly Private & Confidential

13

Products Targeted under the Project Creeper plants, highest yield per unit land
European Cucumber

European Tomato

Its the primary type of cucumber grown under greenhouse

Differentiating characteristics

Differentiating characteristics
o Thick wall

o Seedless, Mild in flavor

o Minimal seed

o Thin edible skin that requires

o Large in size

no peeling

o 2-3 times longer shelf life

o Larger shelf life

It excels in flavor and crispiness
compared to other cucumber varieties
Has an impressive 96% water content
and the skin is high in Vitamin A
Cannot grow in open field

It excels in taste over other tomato

varieties
Yields under greenhouse is 12-15 times compared to
traditional plants under open-field cultivation

Bottle Brinjal
Year round consumption pattern
Much lesser seed content
Much better look & feel as compared to
normal brinjal
Larger shelf life

Bell Pepper
High premium product with stable consumption level
round the year
Demand has been growing with
changing lifestyle & food consumption
pattern

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14

Current & Targeted Yield

Open Field Yield

15

DMPs Yield

Guidance / Attestation of Greenhouse Yields

Jain Irrigation

Vine-Ripened
Tomato & Bottle
Brinjal

100-120 ton / ha

600 ton / ha

Greenhouse Vegetable Production Statistics - A review of Current

Data on the International Production of Vegetables in
Greenhouses, 2013 Edition, Gary W. Hickman

Department of Horticulture, Government of Karnataka

European
Cucumber

Cannot be grown

150 ton / ha

Indian Council of Agricultural Research, Goa

Bell Pepper

20-40 ton / ha

150 ton / ha

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Potential Customers Organized retail, food businesses, unorganized retail

Current Organized Retail Institutional Clients, Bangalore

16

Potential Markets
Delhi

Pune

Mumbai
Rest of
Karnataka

Unorganized Retail Vendors, Bangalore

Bangalore city has atleast 10,000 unorganized vendors with
large clientele base who can potentially buy over 20kg per
day from DMP

Hyderabad

Chennai
Sample delivery started to Mumbai clients like Hypercity
Sample delivery started to Pune clients

Already supplying to over 700 unorganized retail vendors

Strategic tie-up done with logistic partner

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Business Plan Implementation over next 6 quarters

Total Area of 180 ha, effectively 80% utilized
for Greenhouses

17

Product-wise Assumption
Product

Yield / Ha
per cycle (tn)

Cycles per yr

Selling Price in yr0

European
Cucumber

150 tn

3.0 cycles

Rs 30 per kg

European
Tomato

500 tn

1.0 cycle

Rs 20 per kg

Bell Pepper

150 tn

1.0 cycle

Rs 50 per kg

Bottle Brinjal

500 tn

1.0 cycle

Rs 20 per kg

Planned product composition

Project Buildup Plan

Capex Breakup per Hectare (Rs Mn)

Crop Support System

0.7

Irrigation & Water harvesting

Micro Irrigation, Use of Plastic Mulching etc

0.5
3.5

Land Development

2.6

Greenhouse Structure

7.3

Hydroponic Soil-less Media

2.5

Other Infra

0.8

Total

17.8

Q1

Q2

Q3

Q4

Q5

Q6

Q7

Effective
Average
Cultivated
Area (Ha)

12.0

36.0

60.0

84.0

108.0

132.0

144.0

Produce
(Tn)

1,350

4,050

6,750

9,450

12,150

14,850

16,200

Revenue
(Rs Mn)

27

82

136

191

249

308

342

Strictly Private & Confidential

Financial Projection of the Project

Rs Million

18

FY15

FY16

FY17

FY18

FY19

48

132

144

144

144

21,600

59,400

64,800

64,800

64,800

Total Revenue

390

1,115

1,289

1,368

1,452

39%

EBITDA

133

377

451

486

523

41%

34.2%

33.8%

35.0%

35.6%

36.0%

29

176

293

374

458

7.4%

20.6%

25.8%

29.6%

33.0%

925

1,549

1,842

2,216

2,675

1,037

1,245

934

622

311

Effective Greenhouse Area (Ha)

Produce (Tonnes)

EBITDA Margin (%)

PAT
PAT Margin (%)
Networth
Total Debt

CAGR (%)

Note:
Income from agriculture is tax exempted as per Indian Income Tax Act
Capital subsidy to the tune of Rs 500 million from various schemes like from National Horticulture Board is not accounted in the projection
Projections include addition of 200 hectares of land for hi-technology agriculture to be added over 6 quarters starting April 2014 i.e. Q1 FY15

Strictly Private & Confidential

100%

Organizational Structure Modular structure based on greenhouse units

19

Chairman & CEO

General Manager
Marketing
Head

Post Harvest
Department

Chief Technology
Officer /
Production Head

HR Head

Finance
Head

Project Head

6 PMs, MSc Agri

1 Production Manager per 3AMs

Assistant
Manager

Supervisor

15 workers
per hectare

15 workers
per hectare

Supervisor

15 workers
per hectare

18 AMs, Dipl. Agri

Supervisor

15 workers
per hectare

Legal Head

15 workers
per hectare

15 workers
per hectare

Supervisor

15 workers
per hectare

15 workers
per hectare

72 Supervisors,
Dipl. Agri
2,160 Workers

Each greenhouse operates as a separate reporting segment and each supervisor is responsible for end-to-end operations,
maintenance & yield
Strictly Private & Confidential

Management Team

20

Mahadev Gowda

Aged 51 years, Mr. Gowda is a mechanical engineer by qualification

CMD & CEO

He is one of the pioneers in Bangalores organized real estate business and thus has great
insights into the real estate dynamics and regulations

Noted environmentalist. Received National Award for Environment Preservation &

Conservation from the President of India. Received several awards from Government of
Karnataka

Heads all marketing & sales strategies and initiatives. Manages retail & institutional clients in
Bangalore and setting up client base outside Bangalore

Shashikanth Goni

M.Sc. (Agri) in Horticulture, specializes in Hydroponic technique

Chief Technology Officer,

Production Head

Has around 10 years of horticulture experience in Greenhouse as well as Open Field

Oversees processes right from land development, media preparation, sowing to post harvest
handling

Rajesh RK

B. Sc. (Elec), PG (Systems)

Project Head

Heads the entire Greenhouse project execution including land development, operations, coordination with contractors for erecting the structures, layout designing, electrical & power
systems

Anitha Subbaiah

A Commerce Graduate with around 13 years of industry experience.

General Manager, HR Head

Handles overall co-ordination for the Chairman and also heads the Human Resource division

Strictly Private & Confidential

Major Greenhouse Production Areas in the World

3
37%

Israel
13,000 ha

North America

Europe
Top 5 countries by area (ha)

21

Country

% Arable Land
Under
Greenhouse

Israel
S Korea
China
Japan
Holland
Spain
Italy
Greece
Turkey
Poland
France
Mexico
Canada
US
India

4.235%
3.866%
1.963%
1.134%
0.987%
0.411%
0.370%
0.183%
0.153%
0.060%
0.052%
0.048%
0.007%
0.005%
0.001%

As of
2012
2010
2010
2010
2007
2007
2007
2007
2007
2007
2007
2009
2012
2009
2012

India ranks amongst lowest

India
1,098 ha

Source: Worldstat, Eurostat, Yang, Lee, MAFF,

Turkstat, SANGARPA, US census

Asia
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Tremendous Growth in Vegetable Cultivation, Rising Per Capita Consumption

22

Vegetable Production
Drivers:
Tremendous growth in area under
vegetable
cultivation
and
productivity due to:
Development of improved
vegetable varieties/hybrids/
technologies through
systematic research
Adoption of improved varieties
by the farmers
Developmental policies and
support of the government
culminated in
(grams)
Source: Indian Institute of Vegetable Research.

Vegetable Demand Drivers: Rising per capita income, urbanization, health consciousness,
increasing working women, rising per capita income of farmers, favorable income elasticity of
demand and annual growth rate for domestic demand for fruits & vegetables

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Indian Protected Farming Trends

23

Protected Farming is refers to farming done in a closed environment and includes greenhouse, shade nets, mulching, plastic tunnels
and anti-bird nets. This results in increased yield
The area under protected cultivation accounts for 0.23% of the total area under horticulture FY12
The Food Security objectives have led to National Horticultre Board (NHB), National Horticultre Mission, Rashtriya Krishi Vikas
Yojna promoting increase in area. Giving a sharp rise of 93.2% CAGR protected farming growth between FY2007 & FY2012
The protected cultivation gained momentum after the 11th five year plan FY2007-12 where government agencies and initiatives
supported the growth

Area Under Protected Farming

Cumulative Area (Hectares)
50,968

27,598
20,412
13,778

Method

Market size by value

(Rs mn)

Market Share

Shade Nets

21,140

81%

Mulching

4,010

15.4%

Plastic Tunnels

370

1.4%

Anti-bird Nets

340

1.3%

Greenhouse

230

0.9%

Total

6,689

26,090

1,892
FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

Shade Nets & Mulching were most widely used methods because of low
capital expenditure involved
Greenhouse being the most expensive accounts for smallest share

Source: Indian Horticulture Board

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Indian Greenhouse Market

24

Greenhouse technique is cultivation of crops under a closed environment where the components of the climate are controlled like
temperature, humidity, air flow and even the root media
Accordingly, the yields of crops under Greenhouse can be 10-12 times higher than the open field cultivation
There has been considerable growth in the Greenhouse installation due to growing popularity, established yield levels and supports
by government agencies
National Horticulture Board provides capital subsidy to the extent of 40% of capital invested per unit of project subject certain preconditions

Area Under Greenhouse

Cumulative Area (Hectares)

Advantages of Greenhouse
1,098

762

440

Creates favorable micro-climatic conditions. The temperature and moisture is

controlled through artificial ventilation. Root medium (replacement for soil) is
developed using non-soil materials and added with micro-nutrients most
suitable for specific crop

Much higher yield per unit area compared to conventional farming 10-12x

496

Superior protection from pests, birds, soil infections, crop infections, weather
conditions

337
149

Very favorable for high value off-season crops

Propagation of planting crops is possible throughout the year
FY2007

FY2008

FY2009

FY2010

Source: National Horticulture Mission

FY2011

FY2012

Requires significantly less water resources compared to conventional farming

Export quality yields can be produced from the greenhouses

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Key Trends Driving Greenhouse Development

Forecasted Water Scarcity

As per OECD, people living under

severe water stress is projected to
double between 2000-2050, reaching
3.9 bn people - India to be one of the
most affected geographies
Greenhouse will emerge as the most
effective technique for food security
in the backdrop of worsening water
scarcity
Irrigation is very precise and
techniques like hydroponics use
significantly lower water than open
field

Population Density, 2100

25

CO2 Emission, Today

As per United Nations estimates, the

world population will reach 8bn by
2025 and 9 bn by 2043 from current
level of 7bn - India will be home to
the largest population in the world,
with one of the highest density

Globally the CO2 emission has been

on high to meet energy requirements
& construction - India has been one of
the highest CO2 emitting countries

Greenhouse is most effective in

meeting food requirement for densely
populated
areas
with
lesser
availability of arable land

Combined heat and power systems on

greenhouses are over 40% more
efficient

Greenhouses have significantly higher

yield per unit of land
Yield visibility is very strong due to
highly controlled environment
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Greenhouse contributes substantially

in reducing Greenhouse gases

47% reduction in CO2 converting

CO2 to Oxygen

Comparative Analysis of Types of Farming

26

Parameters

Private Farming

Co-operative Farming

Contract Farming

Corporate Farming

Ownership

Individual farmer

Group of farmers

Individual farmer

Company

Risk Sharing

Entirely by the farmer

Collectively by the group

Mostly by farmers as most Entirely by the Company

contracts are Company
biased

Capital

Completely by the farmer

Infused by the group

Majority by the farmer

Entirely by the Company

Farm-firm flow

Many intermediaries

Many intermediaries by
better bargaining power

Very less / no middle men

No intermediaries

Market Access

Uncertain & difficult

Better than private

Reliable access assuming

company doesnt default

Fool proof access

Technology

Unsophisticated

Slightly better than Private Certain sophistication as

Farming
may be contributed by the
Company

Latest technologies used

Sustainability

Tough for farmer to

remain profitable

Relatively better than

Private Farming

Short term in nature

Long term in nature

Social Impact

Status quo of society

Unity, self-sufficiency

Often leads to arm

twisting of small famers
Corporate might end up
dictating

High prosperity for

farmers by selling land,
earning rentals,
guaranteed employment

Environmental
Impact

Status quo

Status quo

Squeezing of resources
due to myopic view of the
contracting company

Strong positive impact due

to long term view &
commitment

Strictly Private & Confidential

THANK YOU

For any further information please contact:

Ujjwal Singh
Ph: +91 22 3980 4347
Mobile: +91 9820082261
Ujjwal.singh@motilaloswal.com