India holds enormous potential to become the ‘next destination’ for AgriTech platforms propelled by the unorganized and fragmented nature of Indian agriculture, coupled with challenges such as lack of infrastructure and supply chain inefficiencies. With growing demand patterns, the industry is expected to see a huge demand for AgriTech platforms.
In conversation with Mr. Amith Agarwal, CEO & Co-Founder– Agribazaar (Agriwise and Staragri), we attempted to seek his opinion and understand his side of story to the changing fortunes of the Agritech Industry and how are companies gearing up for it.
Advanced and Effective Technology will be the future of Agriculture Market in India”
Q1. How is your platform positioned in the market? How was your journey as an Agritech player in India?
With the understanding that there is a huge opportunity in tapping into the post-harvest management operations, we founded India’s first ever Agri start-up- ‘Staragri’ in 2006. To further support the services provided by the company, we also founded ‘Agribazaar’ to deal with the online sales of the products, and finally ‘Agriwise’ which is our own NBFC for providing financial solutions to the agripreneurs.
We first started our operations in Jaipur, when we realised that the traditional ‘mandi’ system does not provide for any storage or financing facilities. We identified this as a huge opportunity to tap into. With this realisation, we started the warehousing receipt based financing system, in partnership with ICICI Bank. We became their channel partner. Some of our other banking partners also include AXIS Bank, SBI Bank, etc. The overall process has been extremely successful for us, making ‘staragri’ the largest post-harvest management company in India. Today, we have more than 1000 professional warehouses and more than 10,000 field warehouses. These are spread across 15 states and have a cumulative capacity of 1.9 Million Tons capacity. We also own 1 silo with a capacity of 16,000 Tons.
Q2. Following up upon the type of warehouses you mentioned, could you tell us what is the difference between Professional warehouses and Field warehouses?
Professional warehouses are the warehouses which we take on lease ourselves. After we have our warehouse in place, our customers can store their produce in these professional warehouses on a rental basis. Before we give out storage space, a thorough quality check is carried out for all the produce. Our average rental rate for storage is about Rs. 7 to Rs. 8 per sq. ft. Other than this, there is also a charge levied for every bag of produce stored, which is the same at about Rs. 7 to Rs. 8 per bag.
We also manage third party warehouses called field warehouses. Here, in most cases, the customers has his own warehouse but needs help in managing the operations and/or financials. In this we generate a WHR for them so avail finances. For this process, the commodities are pre stacked, and we only have to deal in the quality assurance operations of the commodities. In terms of earnings from these warehouses, we only receive the collateral management fees and not any rent as the ownership of the warehouses lie elsewhere.
Q3. Could you help us understand the financial side of the entire process? Also, is there a difference in the rate of interest for the loans from Banks and NBFCs?
When it comes to Professional warehouses, we provide financing solutions to our consumers who have stored their products with us. This is done via our own NBFC, Agriwise or any one of our banking partners, at an interest rate of not more than 9%. If the consumer deals directly with our NBFC, we manage the entire process and get an earning. However, if a banking partner is involved, our earnings come from the collateral management fees.
Currently, our NBFC has pan-India presence through 26 branches and has 30+ empanelled financial institutions. For comparing the rate of interests, we can say the rate of interest the bank charges is lower than NBFCs. A bank typically charges 8% to 8.5%, whereas NBFCs charge not more than 9% to 12%. In FY21, the current portfolio outstanding of our NBFC stood at INR 2.28 Billion while we registered cumulative disbursed cases worth INR 14.53 Billion.
Q4. How do you identify your target market? Do you have any particular criteria to identify this target audience? And, how do you get this target market on-board?
We have an online platform, Agribazaar to sell the produce digitally which helps identifying the farmers who want to sell their commodities online. A farmer can register themselves as a user and then sell their commodity via our platform. For the registration purposes we require their KYC. So this becomes the parameter that filters out the target market. A farmer can fill in their pricing expectation for the processors on the platform and the processor can access their available options. This whole process and transaction is managed by ‘Agribazaar’ which includes loading, transfer duration, delivery date and time, and more. We monitor each and every step through our systems. In the grain segment, most framers have a land area of above 5 acres (which can be classified as small and mid-scale farmers). We charge the transaction fees, which we normally charge from the buyers and not from the farmers.
The on-boarding process is determined by the type of commodity a player is working upon. We currently operate only on cash crops such as grains, oilseeds and more. In these segments we have a lot of processors who purchase these products and sell it further. We target the processors who utilise these commodities and request them to try out our platform. Similarly, we approach the farmers operating in the same commodity and request them to try our platform.
With over 100,000 registered users, 33,000 listed auctions, 6.72 Million Tons worth of agri commodities transacted online and over INR 306.01 Billion GMV in FY21, Agribazaar is disrupting conventional agri-trading. Our active users are from 6-7 states such as Andhra Pradesh, Maharashtra, Rajasthan and more. At Agribazaar, we target end users via social media, and we also have offline branches (70 branches) for ground work.
Q5. In your opinion, who are currently the market leaders, well-positioned in each segment?
In the Warehousing and Post-harvest management segment we have Agrostar, NCML, NBHC, LTC, GO Green (Ahemdabad), Origo, Sohan Lal (Delhi) and Arya Collateral as well. In the financing segment, we operate as a specialised NBFC and it is a unique business model. Other than our platform, we have Samunnati, Arya Dhan and Fullarton. Competition in this segment is dependent on the regional presence. Agriwise is present in Haryana, Punjab, Rajasthan and Gujarat while Samunnati is mostly based in the Southern part of India.
Q6. Currently, what are the ongoing opportunities in the market? Any specific areas which are untapped, especially in the financing business?
No, there is no untapped area in the financing segment since banks and NBFCs are proactively providing services by bringing valuable products and solutions. However, the end market is huge and only a small portion of it has been captured. Warehousing facility segment has an opportunity. Building a warehouse gets companies only a 7 year tenure. However, if they can get a 10-20 year tenure then we might see more warehouses being built. Secondly, schemes are being made in the favour of the farmers by the banks and NBFCs to support them for building their warehouses. Usually farmers do not have the equity for which a long term loan can be provided on the basis of respective collateral, therefore short term financing is a trend.
Q7. Which type of loan is more prevalent in the agri finance segment (Secured loans or Unsecured Loans)? Also, which harvest period witnesses a higher demand for financial backup?
In my opinion, 30% of the loans are unsecured loans while 70% are the secured loans in the agritech financing sector. Farmers require financing for the entire value chain process, and not just during a specific time period. They require it for inputs, loans against warehouse receipt and more. However, it is safe to say that the demand for financial solutions are higher during the pre-harvest period.
Q8. In your opinion, what is the future of the market? Are there any foreseeable developments which might boost the industry?
Personally, for us, all three companies are growing fairly and positively. The next 5 years are very bright for agri finance too. With the advent of technology, we can assume that the market will hold a lot of potential and space to grow for new players.
Companies like ours are implementing technology such as remote sensing, satellite imagery, and AI based solutions. India still has a long way to go when it comes to the implementation of these technologies. For instance, through our MoU with the Department of Agriculture, Government of India, we will build and promote Digital Agricultural Platform (DAP), will
enable and empower Indian farmers to approach farming in an integrated manner, with a single source enabling agritech platform. As a part of this collaboration, agribazaar will leverage its world-class technological capabilities to create standardized and verified data for Agristack, profile agricultural land, develop a generalized advisory platform, and enable access to an integrated farmer marketplace for the broader stakeholder ecosystem. It will also facilitate better access to financial services for farmers.
For any queries or feedback, reach out to the author at Namit@kenresearch.com