Business valuation strategy for new hydroponic farm development – a proposal towards sustainable agriculture development in United Arab Emirates
ISSN: 0007-070X
Article publication date: 25 December 2020
Issue publication date: 22 February 2021
Abstract
Purpose
This study aims to evaluate a hydroponic farm (through nutrient film technique) while considering uncertainty, sustainability and the system's utility in the dominant desert geography. The idea of the hydroponic farm is to allow individuals/businesses to grow plants. Given the geographical condition, the hydroponic system may be useful in the Gulf context and may lead to food security and sustainability. Additionally, the UAE government has initiated several support schemes that can be availed for investing in such businesses that can contribute to the nation's food security.
Design/methodology/approach
The hydroponic farm is evaluated using the net present value and real options approach. The authors studied five scenarios: 1. business as usual, 2. 50% subsidy on initial investment through Khalifa funding, 3. 4% premium, 4. Subsidy plus premium and 5. solar panel installation with bore well.
Findings
As per the assumptions and data usage, all the scenarios shows a positive net present value (NPV); Nevertheless, scenarios 4 and 5 report the significant highest net present and delay value.
Research limitations/implications
This study has environmental, economic and social implications. Lower imports indirectly lead to lower carbon footprints. The local production of food ensures higher employability in the sector and increase in local consumption. Additionally, fresh food consumption is directly associated to good health.
Practical implications
Supportive policies such as subsidies through Khalifa funding may accelerate the expansion of such projects through domestic and foreign investments. One of the important takeaway from the study is to invest in the training of the workforce.
Social implications
Given the geographical condition, the UAE usually depends on food imports. If the hydroponic farms become popular, the residents will have access to fresh vegetables and fruits. Higher engagement in agriculture activities also ensures a significant increase in agriculture-related businesses and higher employability.
Originality/value
The study adds novelty to the literature because the effect of Khalifa funding and investment analysis on solar (wells) has not been evaluated in any hydroponic studies. We presented the results with tornado graphs using NPV risk and real options approach in the Gulf context. The study represents functional scenarios that were previously not found in the literature.
Keywords
Acknowledgements
Authors are very thankful to Ajman University for providing the scientific resources to conduct the study. Authors have taken a due care to stick to the highest level of academic integrity to collect the data and references. Nevertheless, if a discrepancy related to usage of data and references is reported, authors will respond to it in the best possible way. The authors have not received any funding to execute the project.
Citation
Sisodia, G.S., Alshamsi, R. and Sergi, B.S. (2021), "Business valuation strategy for new hydroponic farm development – a proposal towards sustainable agriculture development in United Arab Emirates", British Food Journal, Vol. 123 No. 4, pp. 1560-1577. https://doi.org/10.1108/BFJ-06-2020-0557
Publisher
:Emerald Publishing Limited
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