Temasek-backed Indian agri warehousing firm raising capital – exclusive

StarAgri Warehousing and Collateral Management, an Indian post-harvest management company, is launching StarAgri Finance to complement its existing services for farmers and agribusinesses.

StarAgri Warehousing and Collateral Management, one of India’s first post-harvest management companies, is in talks with various international private equity firms about a capital raising round for its new non-banking financial company (NBFC) StarAgri Finance.

StarAgri Finance is the latest NBFC, a financial institution that provides banking services without holding a bank license, to raise money for an agriculture-specific business; private equity firm Mandala Capital invested Rs1.1 billion ($17.9 million; €16.3 million) in Sustainable Agro-commercial Finance, last month.

The round comes a year after Singapore sovereign wealth fund Temasek invested $40 million into the company for a minority stake.

StarAgri offers farmers and agribusiness a range of post-harvest services. These include produce warehousing, collateral management to help farmers get financing from local partnered banks, procurement, StarLabs for testing agri produce, logistics and transportation, value-added services like insurance and private mandi or marketplaces offering all of the above under one roof.

StarAgri Finance won’t replace the collateral management services that StarAgri already offers in partnership with local banks, but it will be another source of credit for farmers from StarAgri’s own balance sheet, according to Amith Agarwal, co-founder and chief executive of StarAgri.

The new NBFC will offer finance against agri assets, finance for agri-equipment, machinery and tools, working capital and semi-urban and rural loans against properties.

As well as talking to private equity firms about the new business, Agarwal is open to more strategic investors.

Providing finance to farmers is essential to make sure they are able to get the best price for their produce, Agarwal told Agri Investor. 

“Even now during harvest time, farmers can reach financial distress and have to sell their commodities at whatever price,” he said, adding that finance can help farmers expand and make improvements to their businesses without having to wait for produce to sell. In turn, farmers can then wait for commodity prices to rise before selling.

“Farmers will only trust us if they get better price realisation for their produce, and all our efforts are aligned in this direction to ensure that happens,” Agarwal wrote in a statement. “A large number of farmers and agri-players currently borrow at usurious rates of interest from unorganised moneylenders. We understand that access to affordable finance to enhance farm productivity can change the financial future of a farmer household.”

StarAgri has big expansion plans for its business overall and after building one big mandi in Kota, Rajasthan, it is planning to build another 16 in the state before expanding elsewhere in India. The company is now running an extensive marketing campaign in Kota to attract farmers to come and deposit their produce and use their warehousing and other facilities.

“We ensure that farmers get best price for their crop; our vision is to get directly connected to 25 lakh (2.5 million) farmers in next three to four years,” Agarwal write in a statement. “There are six crore (60 million) farmers in India and we are connected to only 2.5 lakh farmers, there is lot to be done and many to get connected with.”

StarAgri argues that it is the only end-to-end post-harvest solutions company in India.

“There are some that provide parts across the supply chain such as warehousing, and others that just provide collateral finance services, but there are no real competitors in the end-to-end market,” Agarwal told Agri Investor. Although he admits that there will be a lot of consolidation in the sector in the near term creating more competition.

IDFC Private Equity, the investment management firm, is another minority shareholder in StarAgri after investing $30 million in 2012.