ROLE OF DUE DILLLIGENCE IN AGRIBUSINESS by IRJET Journal

ROLE OF DUE DILLLIGENCE IN AGRIBUSINESS

Dr. Shazia Shaheen1 , Dr. Prerna Bhagalpurkr2

1Visiting Faculty, Post Graduate Department of Commerce & Business Administration, T.M University, Bhagalpur, Bihar, India.

2 Assistant Professor, Indraprastha Engineering College, Ghaziabad, UP, India ***

Abstract - Due Diligence is a key concept in corporate governance, especially in the private firms.

This review paper explores the importance of due diligence in agribusiness, basically in a diversified and rapidly growing market of India This review highlighting its significance in risk management, investment decisions, and regulatory compliance issued be SEBI. By scrutinizing the various aspects of due diligence, including external and internal factors of the company, stakeholders and shareholders. It entails a careful examination of the fiscal, social, legal, and environmental elements, enabling risk audits and preemptive steps to reduce possible hazards. By taking this preventive measure, companies and investors can lessen their exposure to potential losses and liabilities and cut down on needless expenses. Due diligence is a core concept of corporate governance and it must have some ethical considerations while implementing any rule in agribusiness.

In order to enable informed decision-making and ensure environmental and moral soundness, it assists in identifying risks and information gaps. They are used to growing and processing crops, adjusting farming operations, and comprehending commodity prices. Investors may find it simple to become enthralled with an acquisition and move on without fully comprehending the nature of their investment. Agribusiness is evolving in India and all legal and technical issues are need to address with demand and supply of the existing market. The market and customers are two parts of same coin where due diligence and transparency is essential for growth. In order to improve the sustainability and profitability of agriculture ventures in India, due diligence is essential

Key words: Due Diligence, Agribusiness, stakeholders, diversified, sustainability

1.INTRODUCTION

AgribusinessinIndiaisavitalcomponentoftheeconomy,contributingsignificantlytoGDPandemployment.However,itis alsofraughtwithchallengessuchasmarketvolatility,regulatoryhurdles,andenvironmentalissues.Duediligenceservesasa crucialmechanismforstakeholdersrangingfrominvestorstofarmerstomitigaterisksandensureinformeddecision.Inthe financialindustry,duediligenceisanessentialprocedurethatincludereviewingatarget'staxandfinancialdocumentation. Assuringtheviabilityoftheinvestment,itassistsinidentifyingpotentialhazardsandthreatstotheinvestment.Throughthe identificationofpossiblehazardsandprofitableinvestmentopportunities,thisapproachassistsinvestorsinevaluatingthe competitive landscape of the market. A third-party, independent assessment of a new technology and the company that identifiespotentialandchartsacourseforgrowthisknownastechnicalduediligenceintheagriculturalindustry.

Alotoftheopportunitiesandhazardswon'tpreventadealfrombeingmade;rather,theywillenableeveryoneproceedin agreement[1].

Agribusinesscomplexdealsfrequentlynecessitateahighlevelofduediligencefromboththebuyerandtheseller.Thebuyer mayneedtoverifyannualwaterrightsexpensesaspartoftheirpost-closeoperatingcostprojections,whilethesellermay needtoscheduleduediligenceandclosingaroundthecrop'sgrowthandharvestcycle.Whilefarmlandleasesmayinvolveflex orhybridrentpayments,farmlandpurchasesmayalsoincluderepaymentforculturalexpenditurespaidbytheseller.These financialconsiderationsshouldbepartofthebuyer'sduediligenceevaluationsincetheyareessentialtotheirassessmentof theasset[2].

Agribusiness companies are struggling to expand due to heightened rivalry, shifting circumstances, flexible national and internationalregulatoryframeworks.Firmsmustaccomplishsignificantgrowthiftheywanttostayinthegameorleadtheir industry.ThenormalM&Adealgoesthroughseveralstages.Whendecidingwhethertomoveforwardwithacontract,thedue diligence phase of the process is crucial. Evaluating environmental and regulatory compliance is an essential part of agriculturalduediligence.Thisencompassesexaminingthebusiness'sadherencetoapplicableenvironmentalandregulatory

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 08 | Aug 2025 www.irjet.net p-ISSN: 2395-0072

standards,whichincludeaspectsoflabour,healthandsafety,andenvironmentalconservation[3].Forthedevelopmentof agriculture,weneedtoutilizeexpertsandspecialistsforenhancedperformanceofagriculture.

1.1ResearchObjective:Duediligenceisthemajorfactorindecisionmakingprocess,investigationandauditing processof agriculturallaw.Ifanycompanywantstoattainmergerandacquisition,itshouldbeanalysesitspaperofaudit.Agribusinessis trulyinspiring,withoneofitskeygoalsbeingtomeettheneedsofpeopleintheformoffoodandresourcesinthebestpossible way.Duediligenceistheessentialforauditandinvestigationprocessofacompany.Itisnotonlyimportantinagricultural sectorbutineverysectoritneeds.TheagriculturallawofIndiaincludesmanykeyaspectsforthedevelopmentofagribusiness andfarmers.Thefollowingarethekeyresearchaimsofthisarticle:

 Toinvestigatetheimpactofduediligenceintheagribusiness

 Toidentifythedemandforduediligenceintheagriculturesector

 Identifyandinvestigatethesupplychainduediligenceinagri-business

1.2 To investigate the impact of due diligence in the agribusiness

Due diligence is crucial for agricultural regulations compliance and operational efficiency. It helps businesses assess environmentalimpacts,improvelong-termviability,andfosterpositivecommunityrelations.Duediligenceisahardtopicin thefieldofagribusinessoragricultureAcomprehensiveduediligenceprocessattractsinvestors,improvesmarketpositioning, and attracts better reputations. It identifies opportunities for technological advancements, enhances productivity, and considerssocial,economic,andenvironmentaldimensions.Thisprocesshelpspotentialdonorsfocusonoverlookedaspects and ensures a balanced approach. Inadditiontoenhancinglongtermviabilityandcultivatinggoodcommunityties,duediligenceassistsfirmsinevaluatingenvironmentalconcerns. Itdrawsininvestors,enhancespositioninginthemarket,anddrawsinbetternames[4]

1.3 To identify the demand for due diligence in the agriculture sector

Duediligenceplaysacrucialroleincompanyoperations,assistinginvestorsandfirmsinidentifyingandcontrollingecological andsocialhazards.Byaddressingissueslikehazardoussubstances,ecologicaldamage,andworkerrightsbreaches,ithelps businessespreventbrandingcatastrophes.Becauseofconcernsaboutlabour,ecology,andrightsforindividuals,agricultural suppliersarequiterisky.Whenidentifyingrisksandtakingpropermeasurestomitigatethem,duediligenceassistsinvestors anddecision-makers.Itlowersneedlessexpensesbyactingasapreventivesteptostoplossesandliabilitiesinthefuture. Businesses,enterprises,andinvestorsmustuseduediligenceasacriticalproceduretoevaluateandcontrolriskstosocietyand theenvironmentrelatedtotheiractivities.

Companiesmustuseindustryframeworksandcertificationprogramstomakesuretheirstandardsandframeworksareinline withindustrynorms.Theseframeworkscanhelpachieveduediligencegoalsandmaximizeefficiencies.Companiesshould, however,thinkaboutgoingbeyondcertificationinordertokeeptheirduediligenceproceduresdynamicandever-evolvingand tomakesurethatacontinuousimprovementprocessisatthecenterofthem[5].

1.4 Identify and investigate the supply chain due diligence in agri-business

Theagriculturalproductvaluechain,popularsince2000,encompassestheentireproductionprocessfromrawmaterials acquisitiontofinalsale.Theeffectivecommunicationandcollaborationwithstakeholdersandownersmakepolicyframework intheimplementationduediligence.Thisframeworkhelpsincreaseefficiencyintheagriculturalindustry,encompassingevery stagefromfarmtocustomer,ensuringa comprehensiveand efficientvalue chain[6].Supplychaindue diligenceisa key processinwhichcompaniesthoroughlyresearchandevaluatepotentialsupplierstoidentifyandmitigaterisksassociatedwith theiroperations.

Theseriskscanencompassa widerangeofissues,includingcompliancewithlaws andregulations,ethical practices,and environmentalimpacts.

Forinstance,retailersmustensurethattheirsuppliersarenotengagedinharmfulactivitiessuchaschildlabor,forcedlabor and any illegal activities. Also, Agri firms should assess the environmental practices of their suppliers to prevent any involvementinactivitiesthatleadtoecologicaldamage,pollution,orunethicalapproach.Byimplementingrobustduediligence practices,organizationscanfosteraresponsiblesupplychainthatalignswiththeirvaluesandregulatoryrequirements.

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 08 | Aug 2025 www.irjet.net p-ISSN: 2395-0072

2. Relationship between Due Diligence and Agribusiness in context of production

Fig-1:(PricewaterhouseCoopers,n.d.)

Production: Productionstartswithsoilmanagementformaintaincropandfertility,asitinvolvespracticeslikeplanting, growingandharvestingcropsforfinalusage.

Itisatediousprocesswhichneedsproperirrigationsystem.Agriculturalselection,preparationoffield,planting,cultivating, wateringandcontrollingpestsisessentialfortheproductionprocess.

Growthandproductionworkparallellyinagribusinessvaluechainanalysis.

Processing: Everypointoftheproductionprocesswherevalueisaddedisidentifiedbythechain,whichincludesthesourcing, manufacturing, and marketing phases. Process includes creating or producing items or crops and preparing them for distributiontoretailersandwholesalers.Thedistributionof productsinvolvesaseriesofprocedurescalledsupplychain management,orSCM[7].

WholesaleandRetail:Instateswhereagribusinessmarketingregulationshaveundergonereform,theModernWholesale Marketseekstoenabledirectmarketingbetweenwholesalersandretailers,enablingsupplybetweencustomersandfood manufacturers,basedontheirsizeandscale.

3. Importance of Due Diligence in Agribusiness:

Demandisexpectedtoincreaseduetoeffortstoexportnon-chemicalresidueagriculturalproducts.Foranalysts,business executives,investors,entrepreneurs,andlegislators,pastmergerandacquisitiontransactionsdataintheAgriculturalProducts andServicesIndustryisaninvaluabletool.Itfacilitatesproactivechoicesonmarkettimingbyofferingin-depthinsightsinto marketpatterns.Informedoperationsthereforeinvestmentstrategiesarecriticalformanagingmarketdynamics,andthisdata aidsintheircreation[8].Duediligenceprovidestransparentresultinanorganisationwhichistheneedofanybusiness.

4. Risk Management

Duediligenceaidsinidentifyinganyriskrelatedtoinvestmentsinagriculturewhileimplementingaudit.Thisentailsevaluating operational,credit,andmarketrisksthatmayhaveanimpactonyieldandprofitability.Shareholdersaswellasstakeholders areverymuchconcernaboutriskrelatedissuesinlegalprocess,thisdecisionmakesahugedifferencebetweentobeornotto be.

InvestmentDecisions

Investorsinagribusinessneedtoanalysetheviabilityoftheirinvestmentcarefully.Assessingfinancialdocuments,operational capabilities,marketconditionincludingcostandpricingstrategyarecomponentofduediligence.HowmuchFDIandMSPboth referstoinvestmentdecisionoftheInvestors.

RegulatoryCompliance

India's agribusiness sector is subject to various regulations, including environmental laws, labor laws, and food safety standards. Due diligence ensures that businesses comply with these regulations, minimizing the risk of legal issues and penalties.Understandingregulatoryrequirementsisessentialforbothlocalandforeigninvestors.

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 08 | Aug 2025 www.irjet.net p-ISSN: 2395-0072

EnvironmentalConsiderations

Environmental due diligence has gained prominence because of increasing focus on sustainability and assess the environmentalimpactofagriculturalpoliciesandpractices,ensuringcompliancewithsustainabilitystandards. Investorsandcompaniesmustconsidertheecologicalfootprintoftheiroperationstoalignwithglobalsustainabilitygoals.

5. Role of SEBI:

SecurityExchangeBoardofIndiaprovidesvariouslawsandensurecompliancewithregulatoryframeworks,incompanies investment process to protect the rights of stakeholders and shareholders, also exercises specific due diligence on their investorsandinvestments.

Major issues of Due Diligence in Agribusiness

1. Financial Due Diligence

Financial due diligence involves a comprehensive review of financial statements, cash flow projections, and funding requirements.Thisaspectiscrucialforattractinginvestmentsandensuringfinancialstability.

Operational Due Diligence

Thisincludesevaluatingtheoperationalprocesses,supplychainmanagement,andproductionefficiencyofanagribusiness. Operationalduediligenceisperfectcombinationofoptimalityindex.Duediligenceisapplicableeverystepofauditingprocess.

Legal Due Diligence:

Legalduediligenceassessesthelegalstandingofagribusiness,includingownershipofland, Contracts,andcompliancewithapplicablelaws.Legalprocedureisacomplexprocessanditidentifyanylegalliabilitiesthat couldimpactthebusiness,Acompany'sfinancialstatementsmightonlybeauditedifthebankorcurrentownershipgroup requeststhattheybeauditedannually.Anindependentcertifiedpublicaccountantmayexaminethefinancialstatementsof ownersorlenderswhodonotneedauditedfinancialstatements[9].

Market Due Diligence

Analyzingmarkettrends,consumerpreferences,andcompetitivelandscapesisvitalforunderstandingthemarketpotentialof agribusinessventures.Marketduediligenceprovidesinsightsintodemandforecastsandpricingstrategies.Inagribusiness, marketingduediligenceprovidesconditionofmarketingstrategy.

Challenges in Conducting Due Diligence

Despiteitsimportance,conductingduediligenceinagribusinessinIndiaposesseveralchallenges:

DataAvailability:Accesstoreliabledatacanbeasignificanthurdle,especiallyinruralareaswhereinformalmarketsprevail. Datamanipulationmightgiveaconfusingandbadresults.

ComplexRegulations:Theregulatorlandscapecanbecomplexandfrequentlychanging,makingitchallenginganddaunting tasktoensurecompliance.Thelegalaspectofagriculturalbusinessisabitmorecomplexthangeneralbecauseitsdomainis notmuchprevalent.

Cultural Factors: Understanding local practices and cultural factors is crucial, as they can significantly impact business operations.Externalenvironmentimpactstheduediligencebyadoptingthedifferenttypesofhabit.

DISCUSSION

Theduediligenceisalegalideathatcanbeusedinmanydifferentfieldsincludingagribusiness.Anystockcanbethesubjectof duediligencebyanindividualinvestorutilizingeasilyaccessiblepublicdata.Equityanalystsandprivateinvestorscarryout due diligence to find the best possible answer for the business, which promotes growth. Legaldefenseistypicallyusedbybusinessestoshapethefutureandsatisfytheirobjectives.Usually,theprofitmarginisthe reasonfortheduediligence.Themaingoalofduediligenceistolowerriskexposure.Theproceduremakessurethatbefore consentingtoanytransaction,apartyisfullyinformedofallitsterms. Inordertoprotectoneselffrombeingheldlegally responsiblewithanylossordamage,duediligenceistheprocessoreffortofcollectingandanalysinginformationbeforeto makingadecisionorcarryingoutatransaction.Thewordreferstoavarietyofcircumstances,butparticularlycommercial dealings[10].

Lastbutnotleast,Duediligenceisnecessarytoolsfortheauditandtransparencyoforganisation.

CONCLUSION

Agrowingemphasisondiligenceintherightofthird-partyagreementsinvolvingpatentedcropsisoneofthemajorshiftsthat theIndianagriculturalsectorisexperiencing.Broadaccessrights,suchastheabilitytoremovecurrentcropsandretrieve

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 08 | Aug 2025 www.irjet.net p-ISSN: 2395-0072

privateinformation,arefrequentlyincludedintheseagreements.Furthermore,limitsonassignmentcanapplytothebuyer's acquisition of the seller's interest in a license. Adopting strict due diligence procedures is essential for negotiating the complexityofthisdynamicindustryastheagriculturalsectordevelops. It'scrucialtodoyourresearch,askquestions,and identifytheproblem'scorecause.Itisprimarilyemployedinfinancialrecordaudits,investigations,andexaminations.Itisan extremelymethodicalapproachtoriskmitigationanalysis.

Conflicts of Interest

Notapplicable.

Statement of ethical approval: Notapplicable.

Statement of informed consent: Notapplicable.

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