Dalwai: agri-tech is in an inflection point
In a disruptive year on the economic front, agri-tech has been one of those rare verticals, which has shown definitive uptick signs, emerging as a formidable entity with increasing investments. And the first movers in the game, assisted by a supportive environment, are now getting ready to skip to the new level. Today, their presence can be marked across the value chain – in advisory services to input supply, in scientific storage to market linkage at the post-harvest stage (some of them have also developed integrated play capability) and also in the form of the marketplace, where farmers can be readily linked with their prospective buyers. The icing on the cake is: the trend is not restricted to pure agriculture and food play. Technology-based firms in the agri-allied sectors, like fisheries and dairies, have also sprung up and some of them have already become bright spots.
“We all know that 2020 has been an exceptionally bad year because of Covid-19,” observes Ashok Dalwai, CEO, National Rainfed Area Authority. “But, as far as the agri-tech sector is concerned, the crisis year has certainly pushed it to an inflection point.” The authority functions under the aegis of the ministry for agriculture and the chairman of the empowered body, Doubling Farmers Income Committee (DFI). And the feeling is no different in the mainstream agri-business sphere. “We can confidently say in unison that technology is proving to be a game changer for the agriculture sector in India,” adds Raju Kapoor, director, public & industry affairs, FMC India. “Affordable high-speed internet and availability of digital content has paved the way for the growth of the agri-tech sector in India.”
Dalwai’s assertion that the crisis period has rather acted as the springboard for the agri-tech sector finds resonance in a recently released report by Accel and Omnivore Funds. The report, titled ‘Post Covid: the Agri-tech Landscape’, presents a comprehensive picture of how agri-tech firms suddenly found themselves in a situation which needed an agile response from them.
“The restrictions imposed on logistics, the shutting down of traditional retail channels and the sharp drop in demand led to an unprecedented slowdown for many companies,” the report points out. “The agri-tech sector, though, has proved to be surprisingly resilient. Strong tailwinds, formed by restricted movements, migration of labour and increased consumer awareness of health, have helped escalate the adoption of technology throughout the farming ecosystem.”
The basic submission in the report that the sector, which was growing at a gradual pace before Covid-19, found a new spring in its step, has also been proved statistically. The report affirms that, in the past five years, there has been a tremendous surge in institutional funding to the business (on a low base, of course) – rising from $45.8 million to $430 million now. And, in the past one year, it has nearly doubled, rising from $219 million. But, according to Jinesh Shah, managing partner, Omnivore, this $400 million-plus investment quantum could be a conservative estimate. “We have taken into account the pure agri-tech play,” says Shah. “If we start looking at allied sector firms, this figure will easily touch $700 million. The point is: 2020 has consolidated agri-tech’s positioning as a hot and happening sector in the minds of investors.”
Kadavil: giving better value to consumers, fishermen and farmers
The report also offers other pointers to indicate the growing confidence in the sector even amidst an adverse spell. On the basis of a survey of the top-notch 67 agri-tech firms, the report maintains that 85 per cent of the companies covered by the survey witnessed a spike during the lockdown period and a majority of them are expected to witness more than 50 per cent growth during the current financial year. Players aligned with dairy, aquaculture and horticulture are hopeful of a positive revenue growth, while those attached to input, machinery and advisory services are expecting a moderate drop in revenue, which will not be more than 20 per cent vis-à-vis the figures of the past year.
On a broader basis, the report underlines the emergence or consolidation of the recently emerged trends – the rise of B2B platforms and the marketplace, emergence of farm to consumer brands, precision agriculture and creation of e-markets. And there are clear reasons for these factors to find a firm footing now in the larger agri business. For instance, the growing popularity of B2B platforms and farmer marketplaces are a direct consequence of the fact that, during the Covid-19-led lockdown period, when the traditional agri-supply chain was also affected in varying degrees, digital platforms ensured seamless connectivity between various stakeholders in the chain.
Similarly, rising health consciousness has led to an increase in demand for safe, healthy and traceable food items, resulting in the emergence of Farm to Consumer Brands or F2C. “The new government reforms, coupled with the disruption of market linkages due to the pandemic, have accelerated the creation of inter-state e-markets, involving farmers, traders and buyers,” affirms the report. “We could see the emergence of several start-ups providing services for enabling this transition.”
Making a difference
There seems to be a common string shared by the existing bunch of leading agri-tech firms in the country – they have been there for the last five-eight years, having started almost on an experimental basis. However, they gradually scaled their businesses and today have a report card that shows they have managed to make a difference on the ground to a considerable extent.
The icing on the cake is: they are promising a more vibrant future in terms of further unlocking the potential of different verticals of Indian agriculture, which has decisively moved beyond the mere consideration of food security. And, therefore, there is more focus on horticulture and other cash crop streams, with volume of fruits and vegetable production now exceeding food grain production.
Use of Soil Moisture Sensors gains momentum
Take the case of DeHaat, a technology-based, full-stack platform that offers complete end-to-end services to farmers in four eastern states in India – Bihar, UP, Jharkhand and Odisha. The company provides the entire range of services from pre- to post-harvest stage, covering seed to market value chain, says Shashank Kumar, founder & CEO, DeHaat. “Farmers registered with DeHaat get direct access to quality agri inputs (from UPL, Tata, Rallis, IIL, Iffco, Corteva, Bayer, et al), customised crop advisory, credit and market linkage of farm produce like corn, wheat, banana, litchi and seasonal vegetables (to ITC, Godrej, Cargill, Reliance, Metro, Spencers),” he adds.
The platform (with dedicated app and call centres) has close to 400,000 registered members from the farmers’ community, and is served by over 1,200 local and last mile DeHaat centres in its pockets of influence. “DeHaat brings up to 50 per cent increment in the agricultural income of Indian farmers through its digital as well as physical network,” claims Kumar, while admitting that the Covid-19 year has seen a massive escalation in the volume of farmers registered with the platform, due to the reverse migration trend after the national lockdown was announced.
Bengaluru-based Stellapps, recognised as one of the two World Economic Forum Technology Pioneers from India, is another example of unique digital initiatives, set afoot in the sphere of the agriculture allied businesses. Formed in 2011, its core management comprises former Wipro employees, who are trying to digitise the Indian dairy supply chain from farm to consumer, improving farm productivity, as also milk quality, while bringing in supply chain traceability for one of the largest crops in the world.
The company is leveraging on advanced analytics and artificial intelligence through its full-stack IoT platform to enable dairy ecosystem partnerships (financial and insurance institutions, cattle nutrition, veterinary services, etc), to drive significant value for each stakeholder, especially small-holder farmers. “We have successfully deployed the SmartMoo platform (full-stack IoT solution) – spanning milk production, procurement and cold chain logistics – to touch over 11 million litres of milk each day across 33,000 villages and impacting two million farmers,” says Ranjith Mukandan, CEO, Stellapps. “Many large, medium and small milk co-operatives, as well as private dairy companies are leveraging Stellapps’ digital network, to power their dairy supply chain operations.” The company has now reached out to 18 states, he adds.
FreshToHome, also based in Bengaluru, is emerging as a formidable name, particularly in fresh fish home delivery (currently present in about 20 cities). It shows how an efficient front-end delivery system can be managed, by having a sound back-end technology empowered system. “At FreshToHome, we use cutting-edge research in AI and precision aquaculture for furthering food security in a sustainable manner, while also giving better value to consumers, fishermen and farmers,” says Shan Kadavil, CEO & co-founder, FreshToHome.
Kumar: improving farmers’ income
There is an interesting story behind the formation of FreshToHome. Kadavil, a former CEO of a Silicon Valley-based gaming firm, used to buy fish from a grocery platform run by his present co-founder Mathew Joseph, a fishing industry veteran. The latter, however, was forced to shut it down due to viability issues. Missing his daily dose of fish, fresh from Kerala, Kadavil approached him and offered to revive the business with some friends, who also had similar Silicon Valley connects like him. “I realised the potential is epic-scale in the segment,” he adds.
Orinko (managing a network of peri-urban hydroponic cloud farms), Clover (fresh producer supplier), Country Delight (a direct-to-consumer milk company, serving over 200,000 households in Mumbai, Delhi, Bengaluru and Pune), Acquaconnect (a full-stack aquaculture technology venture, working with shrimp and fish aquaculture farmers to improve their farm productivity) and Ninjakart (one of the largest agri-tech start-ups, having helped thousands of farmers in establishing direct contact with HORECA customers), etc, are some of the leading signposts of the fast emerging domestic agri-tech universe. On the online marketplace side, there are platforms like agri-bazaar, which reports a monthly gross merchandise value (GMV) of over Rs1,000 crore, with nearly 200,000 farmers in its loop. And more such platforms are coming to the market now.
More action expected
Covid-19-led economic devastation notwithstanding, 2020 is probably signing off with promising projections for a few sectors that include online education, healthcare and also agri-tech. The spate of fresh funding from the institutional side, particularly private equity players, has made stakeholders more bullish and confident than ever before. Around mid-December, Arya, a major name in post-harvest agri-tech and agri-fintech, announced it had raised $21 million in a mix of equity and debt at the closure of the Series B round. Arya offers storage, warehouse management, embedded finance and market linkages to agricultural producers and buyers across India, through a digital collaboration platform.
“Of the foodgrains worth $130 billion produced by India annually, there are huge losses in primary and secondary markets, due to lack of storage, forcing farmers to sell off-cycle for lower returns,” observes Prasanna Rao, co-founder & CEO, Arya. “These farmers are dependent on financing for their cash flow needs but are vastly underserved, hurting their ability to store and sell their produce optimally. Arya’s digital solution pairs warehousing with financing and critical market linkage services to help smallholder farmers thrive.” In October, FreshToHome had turned heads, when it raised a staggering $121 million in funding for its expansion plans pan-India and in the UAE, which it is eyeing as a major international market for its future growth.
With institutional investors raising interest and an ecosystem becoming more supportive, scalability is the main consideration for those who are well-positioned for the next leap. “We are in discussions with several FMCG companies that are launching their private label milk and value-added products (like cheese and paneer) to enable export calibre, quality and traceability via its dairy digitisation network,” says Ranjith of Stellapps. “Furthermore, the $225 billion Indian industry registers production of 540 million litres per day, out of which only 10-11 million litres are being handled on our platform. There is a long way to go.”
Kaul: linking agencies, traders and farmers
DeHaat is eyeing 10 million registered farmers as part of its ecosystem by 2025. And successful FPOs like Sahyadri Farms (India’s largest grape exporting agency) and another major post-harvest specialist, Origo Commodities (managing 400 warehouses across 12 states, handling food grains worth about Rs9,000 crore) are all set to add major digital components in their operations – integration of block chain functionality. “Next February, we are also launching an e-auction platform, which will link government agencies and private traders with farmers,” says Sunoor Kaul, co-founder & director, Origo Commodities.
Farmer-centric majors like Iffco-Kisan – which is now aiming to go beyond the advisory service and have its own retail brand in place – are also in the agri-tech fray. “We are working on 10 high-tech farm projects across the country,” says Morup Namgail, head, agri-tech, Iffco Kisan. “We will be working on more of these projects and, in the near run, it will be centred around spice-related products, which are going to be the main offerings of our retail basket.” One of the major projects which it has undertaken is in association with NABARD in Banaskantha district in Gujarat. Covering 30 villages with over 1,000 farmers producing potatoes, papaya, castor, tomatoes, and sugarcane, the project aims to significantly reduce cultivation and post-harvesting losses and increase the yield by 30 per cent.
The scene is likely to get more interesting, with the active participation of some global technology giants too. For instance, The Weather Co of IBM is helping a clutch of agri-start-ups with weather-specific advisory inputs and other information-centric services. “We have designed a comprehensive AI and cloud-enabled solution to provide accurate and timely weather advisory available at a sub-acre level – accessible anywhere, anytime,” says Himanshu Goyal, India business leader, The Weather Co. “The solution is based on an electronic data record (ECR), which is free of human bias and is cost-effective”.
According to him, Weather Operations Centre (WOC) for agriculture (a centralised dashboard and a major offering of the company, enabling decision-making on the basis of live data of all known variables needed by farmers, including weather forecast, soil moisture, soil temperature, crop health monitoring, yield prediction and market level price forecast) is becoming quite popular. The solution was deployed for the government of Karnataka in five districts last year for tomato and maize crops and the high level of accuracy extended by the solution helped the Karnataka Agri-Price Commission with further crop planning. The Weather Co has also collaborated with other government entities, including the ministry for agriculture and NITI Aayog, on a range of solutions and trials. It has been deploying its technology to facilitate precision agriculture, by providing insights around weather forecasts and crop health.
For this purpose, it uses large-scale geo-spatial data analytics, remote sensing, and AI capabilities delivered on the cloud. “We have been seeing a great momentum in this space, with farmer-producer organisations (FPOs) being formed at block levels, helping build the ecosystem for greater penetration of technology in the agriculture sector,” Goyal adds. “Clearly, we see immense potential for agri-tech start-ups, which will present a market potential of $24 billion by 2025 according to a recent EY report.”
Goyal: anytime, anywhere weather advisory
Bringing farmers closer to technology
A senior government functionary like Dalwai also endorses the outlook that the farm-related technological intervention drive will mature in the coming years, with the adoption of new technological tools by farmers not being a serious issue. “The present government has pursued the digitisation drive with a missionary zeal and some of its popular offshoots like eNAM platform, agmark, or even the direct benefit transfer (DBT) scheme have brought farmers closer to the technology,” he reasons.
And according to Shah of Onmivore, the big picture of the Indian agri-tech business may also have some global components. “The way new innovations are happening in the agri-business, India may soon become a knowledge hub providing solutions to small farmers globally,” he predicts. “For the big farmers and big farms, the solutions would mostly be provided by Israel and some European countries, which have taken the lead. Moreover, in two-three years’ time, we expect a couple of these agri-tech firms to turn unicorns.”
It is still early days for the agri-tech sector and, therefore, nobody is seriously asking questions on their financial management and viability (primarily judged by valuation model rather than the brick-and-mortar parameters) or the larger B2B orientation or even the fact that it is stakeholders in the horticulture business who are more enthusiastic in adopting them. For the latter, the usual response is: horticulture farmers are more progressive and adapt new solutions more readily than their staples counterparts. “Horticulture demonstrates maximum spread in the use of high-technologies,” observes Pawanesh Kohli, former CEO, National Centre for Cold Chain Development (NCCD).
“Look at the equipment used in poly-houses, poly-tunnels, green houses; sensors, actuators, logic programmes are used to automatically control light, humidity and temperature to very fine precision levels.” But in more generic terms, can these agri-tech firms add a new dimension to the Indian agri business, asks Chaudhary Pushpendra Singh, president, Kisan Shakti Sangh (a moderate voice in the farmers’ protest in Delhi). He also defines the parameters on which they are going to be judged. “We are not opposed to technological intervention, but the critical point is: will the emergence of these stakeholders in the value chain help in augmenting the income of the farmers, who are at the fulcrum of all their offerings and initiatives?” A valid point indeed, which would definitely be probed more minutely, going ahead.