Founded in 2009, SLCM is trying to streamline supply chain, warehousing in addition to finance for farmers
SLCM has created a technology-enabled network of extra than 4213 warehouses, 19 bloodless storages in India and Myanmar
Can its version of vegetation as collateral show to be the benefit within the agritech finance sector?
Being an agrarian economic system, agriculture has usually been on the heart of all improvement and financial pastime in India. With time, the stakeholders of the agri-surroundings have became to agritech to resolve the intrinsic challenges the usage of era in any respect tiers. Whether it is deliver chain for farm-to-desk or crop and weather intelligence. But others are tackling a greater fundamental problem — losses and credit score availability.
With greater than a decade of enjoy in agri finance, Sandeep Sabharwal, the CEO and founding father of Sohan Lal Commodity Management (SLCM), is addressing these essential worldwide problems. SLCM affords warehouse management, agriculture financing, collateral management and procurement offerings to farmers, processors, millers, buyers, importers, exporters, commodity exchanges and the government. Its tech-enabled warehouses not most effective provide secure garage and protection offerings, however additionally help in streamlining deliver of agri-commodities.
“The concept of SLCM struck me once I was handling a own family-owned enterprise of food processing unit, wherein I faced troubles which include bizarre losses, terrible crop protection and unavailability of finance,” Sabharwal advised Inc42.
Being an infrastructure-pushed quarter, these issues grow to be increasing submit-harvest meals loss and stressing the agriculture zone.
Founded in 2009 with a meagre investment of approximately INR 16 Lakh and a team of 4, SLCM has created a era-enabled community of more than 4213 warehouses, 19 bloodless storages spread over sixty eight.15 Mn sq.Toes throughout India and with a throughput of 831.43 Mn metric tonnes. In FY 19-20, SLCM clocked the revenue of INR 722.22 Cr and generates employment for nearly 59K people directly and circuitously.
While SLCM is called after Sabharwal’s grandfather (Sohan Lal) to hold the enterprise legacy, the brand new inner call for the employer is “So Lets Change Minds”, the founder instructed us. This offers the agritech startup a global enchantment.
Here are a few key records around the employer.
Total investment raised up to now: INR 370.16 Cr
Key traders: Incofin Investment, ResponsAbility, Nexus Venture Partners, Mayfield, Everstone, ICICI’s Emerging India Fund
Presence: Pan-India and operations in Myanmar
Number of clients: 5016
Average ability of a warehouse: 1500 metric tonnes
Number of commodities dealt with: 930+
NPA % on loans: 1.04% (as on March 2019)
Amount of loans disbursed: INR 2042.Forty two Cr (until Nov 2019)
Loan ebook length: INR 192.72 Cr (as on March 2019)
The Beginning Of SLCM’s Agritech Journey
“One can face the entire global if your family is by way of your side but that point changed into difficult. As I took a decision to close down the properly-set up family enterprise (a meals processing unit) and set up SLCM, my father didn’t communicate to me for 2 years,” recalled Sabharwal.
But he became determined. His preliminary studies made him realize the want for a carrier-pushed method to minimise put up-harvest losses (round 10%-15%) that farmers incur for staple agricultural produce like wheat, paddy, pulses, spices, culmination and veggies. “We as a result released SLCM as an asset-light model. We began running regardless of the circumstance of the warehouse with efficiency in decreasing publish-harvest losses to merely 0.Five% using scientific techniques,” he brought.
While SLCM started out incomes sales from the first year itself, it changed into very little as compared to the business that Sabharwal had shut. “My father subsequently were given the self belief after I obtained the first PE funding from Nexus Venture Partners in May 2010 and after that, there was no searching lower back,” chuckled Sabharwal.
Today, the group has seven marquee institutional investors on-board through 4 primary a success rounds of investment and one secondary round. These buyers have invested up to the Series D degree and maintain 82.12% stake within the corporation.
With time, the employer has also extended its presence into different verticals in addition to crossed worldwide borders. In 2014, it started operations in Myanmar providing warehouse control answers. Also in March 2014, SLCM commercialised its NBFC division in the name of “Kissandhan” for the financing operations.
The SLCM Backbone: Patent-Pending AGRI REACH Process
Sabharwal claims SLCM is the simplest corporation in agritech which has a centralised real-time technique management device. “We have implemented for the patent of our “System and Methods for Real-Time Data Management” and feature named the method as ‘AGRI REACH’.”
“AGRI REACH”, is the end result of all the tactics, techniques and structures that the startup follows to keep the fitness of the crop and start operations of a warehouse in only 24 hours at any area no matter infrastructure and provide a widespread operational revel in in all facilities.
It is basically an set of rules which combines a series of approaches, audits and actual-time tracking of the centers to give blunders-unfastened outcomes and use up the chance of crop harm. It makes use of techniques like geo-fencing to bar-coded storage receipts to keep away from theft, pilferage, and conducts internal audits in conjunction with a “Maker and Checker” policy at every degree.
Agri-Warehousing: Maintaining Day To Day Challenges
Agri warehousing debts for approximately 15% of the warehousing marketplace in India amounting to nearly INR 8000 Cr- INR 8500 Cr. It has been developing at a fee of over 10-12% the previous couple of years. At gift, the agri warehousing capability in India is extra than a hundred and twenty million metric ton (MMT), and it has been developing at 4 % CAGR over the last three years.
SLCM is trying to tap this opportunity with new-age technology. In order to envision a clean everyday functioning, SLCM has integrated many key technical and regulatory approaches. This consists of:
SAP backend to automate the whole procedure of warehouse control
“Maker & Checker” policy at each process and stage to iron out all the possibilities of mismanagement of the shares
A backend team to screen warehouse managers,
An internal Auditors and the Audit team of 26 contributors to affirm facts accumulated
Geo-fencing era to oversee the audit group
As discovered by Sabharwal, 86 audits are conducted at a frequency of each day, weekly, fortnightly, monthly, quarterly and yearly basis on diverse processes to test satisfactory requirements. With real-time resource tracking, the crew guarantees to bring even the slightest deviation within the shares to the awareness of the control.
Increasing frauds in the sector are another task to hand. As Sabharwal advised Inc42, the industry has been hit by means of a series of massive scams in Gujarat, Tamil Nadu and now the trendy is in Andhra Pradesh. Some agencies have even exited this enterprise. As according to an estimate, fraud to the track of INR 6300 Mn has been said to this point in the ultimate 3 years.
To beat this, SLCM has added bar-coded receipts as true as criminal tenders to eliminate the hazard of fraud in phrases of faux storage receipts, boasted Sabharwal. “We paintings at the precept that if the receipt mentions a particular grain of a specific range in a particular warehouse, it needed to be there and this is the basis on which our commercial enterprise is built & followed the practice to the core at the level religiously,” he brought.
The Second Pillar Of Success: Agri-Financing
Ideally, in agri-financing; land, other valuables and balance sheets are taken into consideration as collateral to increase finance to farmers and other stakeholders. However, SLCM offers finance to farmers purely in opposition to crop as collateral no matter balance sheet or net well worth. Since such agri-commodities have an established value and market, short liquidation mechanisms offer enough budget to cowl a loan prolonged towards them in case of a default.
Other parameters consisting of kind of asset being financed, borrower profile and reimbursement capacity, mortgage to fee ratio, geography (vicinity) of the borrower, give up utilisation of the asset among others are also taken into consideration.
“This reduces the chance of distress selling. Additionally, the farmer saves 9.5% of its produce in the course of the garage duration which could were degraded in any other case,” delivered Sabharwal.
Collections also are simplified at SLCM. While liberating the commodity a consumer is meant to pay principal and a easy rate of hobby and other relevant expenses to release the lot clever stock. To get their collateral released, borrowers are required to transfer the relevant amount (dues) from the reputable account to the Kissandhan account. “Once we get hold of the confirmation from our money owed crew approximately the obtained payment, we launch the collateral.”
Is Collection A Pain Point In Agri-Finance?
Despite loan waivers and government intervention, farmers are considered the riskiest asset class to lend to, Sabharwal has a unique opinion here. “Warehousing (Development & Regulation) Act, 2007 introduced a negotiable warehouse receipt device which allows the farmers seek loans from banks against NWR to keep away from misery sale of their agricultural produce,” he explained.
In this system, goods are first brought to the collateral supervisor who issues a warehouse receipt to the borrower that certifies the amount and quality of the saved goods or commodities. The garage receipt of the products or commodities issued via the collateral manager act as collateral for the loan.
A nicely-advanced warehouse receipt finance machine blessings farmers, banks, economic establishments, insurance companies and commodity exchanges. In the agri-credit area, the borrower’s commodity collateral towards which the credit is disbursed is an increasing number of being assigned to expert collateral management organizations.
Banks are the ultimate beneficiary in a warehouse receipt finance gadget because the common tenure of mortgage in opposition to warehouse receipt is round six months which facilitates banks with their asset-legal responsibility mismatch issues as they could churn portfolios fast.
Further, lending towards warehouse receipt is safer and extra liquid for banks. Collateral managers genuinely make the job easier for banks as a long way as underlying collateral is concerned. Warehouse receipt financing also help banks gain precedence zone lending targets in an green way.
The Three-Step Strategy For Differentiation
In the previous couple of years, a number of gamers have made their mark in the agri-tech phase throughout all niches. Names consisting of Freshokartz, Ninjacart, Farmtaaza, Waycool and Crofarm among others have disrupted agriculture in a wonderful manner. When asked about the strategy to cope with competition from new-age gamers, Sabharwal said that any entity dealing in commodities be it farmer, dealer, processor, importer, exporter, SME and so on. Might require warehousing. All one wishes to understand is the production and consumption cycle of food production.
Overall, the agency is creating differentiation for itself across three areas:
Process: Using clinical warehousing technology coupled with the agriculture domain know-how to keep any kind of agricultural crop, agnostic to infrastructure, area and weather styles.
Impact: In a country like India, where post-harvest losses are pegged at 10% of the complete product which amounts to INR 1 Lakh Cr of loss, SLCM has been instrumental in devising era to reduce these losses to 0.5%. This has the ability to keep INR 99.5K Cr, regardless of the situation of the warehouse.
Service: SLCM has evolved ahead integration into warehouse receipt financing, whilst different agri-focussed NBFCs aren't based totally merely on the crop as collateral.
Going forward and for 2020, SLCM has plans to discover Southeast Asian nations like Cambodia, Laos, and mapping their tech to changing DNA of Indian agriculture in the near future. They are actively scanning the environment for inorganic growth through acquisitions inside the allied region of deliver chain management as properly.
“The quarter we're addressing is extremely large and underserved, so to mention quantify my competitors would be myopic in imaginative and prescient. Though I would really like to mention that there are various businesses which can be performing some components of the services that we do,” he added.