A FARMER IN INDIA has a tough time. Not only does he have to contend with poor seed quality and erratic weather conditions, he has to face a host of problems even after harvest. Getting crops to buyers, finding storage space in the market, dealing with middlemen, and figuring out how to get the best price without being cheated.
Enter StarAgri, a Jaipur-based company, which plans to provide the entire range of post-harvest services— warehousing, procurement, collateral management, risk management, retailing, and logistics—under one roof. Its integrated model caught Infrastructure and Development Finance Corporation’s (IDFC) attention, and the private equity fund took a minority stake for Rs 150 crore in February—its first investment in the agriculture sector.
“We looked at the value chain and found few companies in the post-harvest stage,” says Girish Nadkarni, partner, IDFC. StarAgri stood out because it combined warehousing (which calls for long-term investments) with collateral management and procurement services, which are shorter term.With this fresh capital, StarAgri plans to increase its warehouses from 750 to 2,500 in three years, adding 30 lakh tonnes to its current capacity of 10 lakh tonnes.
It is also building frugally engineered warehouses and plans to branch out into rural retail, labs, and insurance.
Founded in 2006 by Suresh Goyal, Amith Agarwal, Amit Mundawala, and Amit Khandelwal with just Rs 5 lakh, StarAgri has been working closely with 50,000 farmers across 10 states. The company offers crop-grading facilities through 12 laboratories, has a tie-up with the National Commodity & Derivatives Exchange, a leading commodity bourse, and educates farmers about commodity exchanges. It also provides storage and finance on storage receipts, maintains a robust database on bulk buyers, and facilitates better deals with farmers. This improvement in collaboration between buyers, sellers, and financiers leads to savings.
“There are warehousing companies, collateral management companies, and a big unorganised market for procurement facilities [at one place]. Ours is an innovative model and we don’t have direct competition, though we have rivals in each segment,” says company director Mundawala.
Judging by the company’s financial performance, the model is a success. Its profit after tax (PAT) rose from Rs 1 lakh in FY07 to Rs 9 crore in FY09. The company is looking at a PAT of around Rs 16 crore in FY12. StarAgri employs over 400 people and is now focussing on strengthening its middle management. It recently recruited from the Indian Institute of Management Ahmedabad and the Indian Institute of Technology Roorkee.