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BW Businessworld

The Agri Millionaires

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India produces nearly 11 per cent of the world’s vegetables and 15 per cent of all fruits. The country is the largest producer of mangoes, bananas and pomegranates, globally, though its share in the international trade of fruits and vegetables remains a meagre 1 per cent. A plethora of government schemes such as the National Horticulture Mission and the Rashtriya Krishi Vikas Yojana, the efforts of the agriculture export promotion body APEDA and the National Horticulture Board, and agriculture extension programmes of various state governments, have not been able to arrest the declining growth in agriculture exports.

The problem with our farming, experts say, is elementary. Indian farmers are mostly small and marginal with fragmented landholdings. And the small size is making adoption of farm mechanisation and modern techniques difficult. Until pooling of landholdings becomes easy, achieving economies of scale will remain difficult, points out the Economic Survey 2011-12.
It is in this context that the growth of a new generation of agri-entrepreneurs, which believes in global best practices, turns interesting.  These entrepreneurs offer farm-to-fork services which global retail giants like Carrefour vouch for, and are fast becoming the preferred picks of venture capital funds interested in agri-businesses. The fact that they all find a common clientele in retail chains is an indication of the early bird advantage that awaits them as and when India allows foreign direct investment (FDI) in multi-brand retail.

A look at some individual initiatives in Bihar, Gujarat, Maharashtra, Andhra Pradesh and Karnataka reveals that even though they are minnows when compared to the agri-initiatives of corporate giants such as ITC, Mahindra or Avantha, agri-entrepreneurs are on the rise, and they mean business.
PROMOTER: Prakash  Khakhar
TURNOVER: Rs 75 crore
Pomegranates Are His Pride
Six years ago, Prakash Khakhar, a long- time trader-exporter of fruits and vegetables in Mumbai, decided to learn a lesson or two in agriculture. He bought 70 acre in Ahmednagar, a water-deficient region lying 350 km away, and with the help of his management graduate son Kaushal, developed a pomegranate farm there. The move surprised many of his peers; it was easier and often economical to pick up the best produce from the mandi, pack and export to Indian expatriates craving home-grown fruits.
As he strolls among his pomegranate trees today, 62-year-old Khakhar, chairman of Kay Bee Exports, recalls the momentous decision of his life. Today, his firm exports more than 700 tonne of pomegranates a year, and is the single biggest Indian pomegranate exporter to Europe. And its business does not end with pomegranates.
Kay Bee is a model for hundreds of farmers. In over 1,000 acre in Maharashtra and Gujarat, it has built farmer linkages through contract farming. Vegetables and pomegranates are grown on a 100 per cent buyback agreement and at a pre-determined price. Free supply of seeds, agricultural inputs and a farm gate pick-up are the icing on the cake. “My peers tell me that I am mad to pay farmers an average of Rs 23 for a kilo of vegetables, which can be easily picked up from the market for Rs 12 or 15,” says Khakhar.
Before Kay Bee began its engagement with farmers (most of them owners of small holdings of an acre each, on average), it had to preserve and secure seeds, risk nature’s vagaries and, post-harvest, carry produce to the local mandi at a price tag of Rs 10-Rs 30 a kilo. “Our farmers, being small, never got the highest price. They are now assured of a decent sum throughout the season,” Khakhar adds.
Kay Bee more than doubled its turnover to Rs 75 crore this year from Rs 30 crore the previous year on the back of vegetable exports. Kaushal Khakhar, CEO of Kay Bee Exports, is the driving force behind his father’s decision to take up the farm-to-fork model. The 32-year-old says the change was intentional. “We were supplying to traditional export markets for many years. The change was meant to cater to the high value, quality conscious retail chains in Europe.”
Quality practices followed. Kaybee has an office — Kaybee Veg — in London. The liaison officials there take orders, receive payments and cater to the likes of retail giants such as Marks & Spencer and Sainsbury in the UK.
Mango Mood
Forty-three-year-old Hota Veerabhadra Rao is no newcomer to farming. His extended family has owned a sprawling 1,500-acre farm in Andhra Pradesh for more than 200 years now. Staying alone in his 24- room ancestral mansion (his wife and two daughters stay in Rajamundry, an hour’s drive from his farm) five days a week, Rao presides over his agri-business (he owns 400 acre) and is busy finding a solution to one of the biggest problems faced by mango growers and horticulture farmers globally — the extremely short shelf life of mangoes.
 BUSINESS: Mangoes
 TURNOVER: Rs 10 crore
“I have joined hands with Acharya Ranga University, Hyderabad, and Indian Institute of Horticulture, Bangalore, to run a research facility on our premises to see if we can increase the shelf life of mangoes from the current 15-20 days to 75 days,” says Rao, a mechanical engineer from REC, Surathkal (Karnataka). The Rs 5-crore project is funded by the National Horticulture Board. “We will have walking coolers where we will be stuffing mangoes in different conditions. This will be a 3-4 year project.”
When Rao’s grandfather turned large swathes of virgin forest into mango orchards and cashew farms decades ago, on an average, there were 20 mango trees per acre. Today, Rao’s farm has at least 120 mango trees on an acre. “Even while reducing the acreage, I have increased the productivity four times. Otherwise, there is no sustainability in farming as all input costs are increasing day by day.”
Rao’s farming technique has been study material for a few universities and caught the fancy of several mango farmers. Hota Agrotech, his company, exports about 300 tonne of fresh Banganpalli mangoes a year. In terms of fresh vegetables and mangoes (perishables), Rao has a Rs 10-crore turnover. He also cultivates and exports cocoa, coconut, palm oil, rice and vegetables.
Early this August, Rao wanted to test the acceptance of his high value, export-quality mangoes in Rajamundry. “We released about 10 tonne export quality products to test market – we thought it will last for 10 days, but all 2,000 packs were lifted within a week. If it can happen in a small town like Rajamundry, just imagine its scope in bigger cities,” says Rao. Going ahead, he says, domestic retail chains will offer him an equivalent, if not more, market potential.
 KEY EXECUTIVE: M.R.  Chandra Mouli
 BUSINESS: Gherkins
 TURNOVER: Rs 600 crore
(BW Pic By Jagadeesh  N.V.)
Ga-ga Over Gherkins 
Not many of the 25,000 farmers cultivating gherkins — a cucumber variant — in more than 1,000 villages in Andhra Pradesh, Karnataka and Tamil Nadu are aware that nearly 700,000 tonne of gherkins are pickled every year to meet European and US demands. But Global Green, part of the $4-billion Avantha Group, is. The seeds-to-shelf company provides farmers with gherkin seeds, fertiliser, accessories and technical expertise. It also procures gherkins right from the farmland and gets them packed and pickled within 24 hours — all to be shipped to the US and Europe. It also insures the product against crop failures. 
What distinguishes Global Green from several other Indian corporates in the agri business is its focus on growing, manufacturing, distribution and selling non-native food varieties. Mexican chilli or Jalapeno, silver skin onions, capers, cherries… thus goes its product list, though gherkins account for 65 per cent of Global Green’s $110 million (over Rs 600 crore) revenues. “We procure over 50,000 tonne of gherkins. For best quality gherkins, we pay Rs 23 per kilo (for the current season),” says M.R. Chandra Mouli, vice-president, agri (operations, development and innovation), Global Green.
The result: from one acre, a farmer harvests 5,000 kg of gherkin, which means Rs 75,000 in gross income and Rs 25,000-40,000 in gross net profit in three months. “Our plan is to double the production, from 50,000 tonne to 100,000 tonne in four years,” says Ashutosh Joshi, vice president, sales and marketing.
The supply chain is complex. Global Green has about 800 stock-keeping units in India, against over 2,500 globally. It handles about 90 million jars a year. It also has an exclusive packing agreement with Bay Valley Foods, the largest gherkin pickle company in the world.
Litchi Model
In the middle of April this year, there were two hailstorms, damaging crops. Besides, it did not rain even once this season; we have had a massive crop failure this year,” says Ranjan Kedia, CEO of Radha Krishna Impex, which exported the largest volume of litchis a few years ago. During the last litchi season, Kedia exported nothing. That’s how unpredictable the agri-business can be.
The Delhi-based Kedias moved to litchi export in 1994. Ranjan, his brother and father were among the pioneers of scientific litchi cultivation, harvest and export in Bihar in the early 1990s. “It was very challenging; infrastructure in Bihar was absolutely poor. Farmers had lost confidence in the marketability of litchis. The biggest challenge was to ensure the farmer linkage and win his confidence,” Ranjan recalls.

 PROMOTER: Ranjan Kedia
 BUSINESS: Litchis
 TURNOVER: Rs 100 crore
 (BW Pic By Bivash  Banerjee)
“Our first task was to create a model farm. Awareness programmes followed, and with the help of farmers, we succeeded in doubling our litchi exports year after year, for the first six-seven years.” Kedia today deals with 1,500 farmers, mostly in Bihar. “In 1994, we were handling 20 tonne; in 2011, it was 10,000 tonne of fresh litchis. Today, we are also procuring and processing litchis in countries such as China, Madagascar and South Africa.” 
The Kedias have realised that the domestic market is equally lucrative. They have eased up  on exports, increasingly supplying their products to FMCG companies such as Dabur, HLL and Pepsi. The India story is driving Kedia’s business today. “In the organised retail sector, between the farm gate price for fresh produce and the organised retail price, the value addition is almost 300 per cent. In mandis, it is not more than two times,” concludes Ranjan. 
About his model, Ranjan says,  “The farmer needs to just own the land and trees. He does not need to invest in agricultural inputs. We provide him the inputs and we lift the produce from the farm gate. So his entire focus is on production and quality.”
Banana Republic
When it comes to bananas, the Working Group of the Planning Commission has only one success model to highlight — the contract farming model of Desai Fruits and Vegetables (DFV), Gujarat. Founded by a farmer, Ajit Desai, in 1999 and taken over later by corporate and foreign investors, DFV is not only a case study for aspiring banana exporters, it is an early sign of corporate interest in such entrepreneurial initiatives.
 PROMOTER:Deepak  Fertilisers,Contract  Farming India
 TURNOVER:Rs 124    crore
Desai continues to be the managing director of DFV despite his meagre 5 per cent stake. Though he has not shared details about DFV’s financials, the firm’s history talks about Desai and his brother’s successful efforts that brought in global practices in banana farming, packaging and transportation to a remote Gujarat village a decade ago. Over the years, Desai’s contract farming initiatives have grown in size and involve over 2,500 small- and medium-sized farmers. It procures bananas that are hand-picked, processed, stored and packed using world-class methods and transported in a temperature-controlled environment. 
In April 2006, Switzerland-based Contract Farming India AG picked up a strategic stake in DFV. Supported by the funds, DFV created multiple integrated packing houses. With a production volume of over 50,000 tonne last year, the firm hopes to double its procurement this year.
Recently, Pune-based Deepak Fertilisers and Petrochemicals Corporation bought 49 per cent stake in DFV for Rs 61 crore, and the entire money has been invested in bolstering the company’s infrastructure network. DFV has been valued at Rs 124 crore.

Enter The Experts
The credit for building the DFV brand, perhaps, needs to be shared with its CEO, a computer science graduate from IIT Kanpur, Pankaj Khandelwal, under whose guidance DFV grew 80-fold in valuation in two years. He moved out of DFV after the two-year contract his company — Insight and Intellect (InI) Consulting — had with DFV ended, but that was only the beginning of the agri ambitions of this 38-year-old technocrat, who also possess a management diploma from IIM, Calcutta. “I was fascinated by the opportunity in farming. We (Khandelwal and his angel investor friends) bought 40 acre in Ahmednagar (near Mumbai) in September 2009,” says Khandelwal sitting in his corporate office in Mumbai. InI wants to specialise in pomegranate farming.
 PROMOTER:Pankaj  Khandelwal
 BUSINESS:  Pomegranates
 TURNOVER: Rs 5 crore
“It is a combination of three systems — contract farming, management of land assets of people whom we consider investors and trading,” he says. What InI does in the second instance is to have management agreements with landowners. The entire farming will be InI’s responsibility, expenses and profits (or losses) will be shared. Khandelwal says there is lot of interest among the “asset class” to go for such management contracts. In the past three years, the company has got 500 acre under its management control. It exported 300 tonne last year, and expects to touch 1,000 tonne this year.
InI has farm managers, supervisors and technical experts to manage farms. It has also introduced automated (drip irrigation) systems. “We spend Rs 3.5 lakh per acre in automation. Such practices are beyond the means of a common farmer,” Khandelwal claims. 
In December 2010, his project got financial support from equity investment firm Aavishkaar. In July 2012, Unilazer Ventures picked up close to 45 per cent stake in InI. “We will manage 2,000 acre of pomegranate farms in the next 18 months. We aim to raise the average productivity of pomegranates from 4.5 tonne per acre in India today to the global level of 15 tonne per acre,” he says.
joe (dot)mathew(at)abp (dot)in
(This story was published in Businessworld Issue Dated 27-08-2012)