AgroStar: Agri inputs directly to farmers

Mobile commerce venture AgroStar supplies seeds and fertiliser to farmers. As the company expands, delivery will be a challenge

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Navinbhai Karsanbhai Patel, a farmer from Navanagar in Gujarat, used to have a hard time securing quality inputs for his four-acre farm. That was before he got to know about AgroStar's offerings. His association with the company, now 18 months old, has resulted in 300 missed calls to the helpline number and 25 orders worth Rs 24,000.

AgroStar has become so central to his life, that he recently invited the entire team for his daughter's wedding.

"Our head office in Pune frequently receives appreciation gifts from farmers," says co-founder and chief executive officer Shardul Sheth, an MBA from Rochester Institute of Technology, New York.

After working for nearly 13 years in companies such as Best Buy and PricewaterhouseCoopers in the US, he came back to India to start something with his younger brother Sitanshu Sheth, an MBA from Mumbai-based SP Jain Institute of Management and Research.

After a not-so-successful attempt at manufacturing and distributing organic fertiliser, the brothers launched AgroStar, a mobile commerce firm that sells agricultural inputs directly to farmers, in 2013.

Operational in Gujarat and Maharashtra, it is in the process of expanding to Rajasthan and Madhya Pradesh. It aims to have a pan-India presence in the next three years. The two-year company recently raised $4 million (Rs 26 crore) from IDG Ventures India and existing investors.

AgroStar has so far raised Rs 35 crore in two rounds of funding. Aavishkaar happened to be one of the early investors. The company counts Snapdeal founders Kunal Bahl and Rohit Bansal among its mentors.

Business model

AgroStar sells nearly 1,000 products. These include seeds, fertiliser, pesticides and agri-implements, through its mobile-commerce platform. Farmers are required to give a missed call and the company executives do the follow-up. The company claims to receive 1,500 to 2,000 calls every day. Since its launch two years ago, the start-up claims to have received 900,000 missed calls. "The average size of a transaction is Rs 1,500. What is encouraging is the fact that farmers keep ordering products from us," says Shardul Sheth.

With a staff strength of 100, AgroStar has two warehouses, in Ahmedabad and Pune, and most of the products are delivered using multiple channels including India Post's parcel service. Cash on delivery is the preferred mode of payment.

"Mobile is a non-threatening technology and adoption among farmers is therefore going to be faster," says T C Meenakshisundaram, founder and managing director of IDG Ventures India.

"I will be happy if the company is able to touch the lives of 50 per cent of the total farmers in the next five years," says Vineet Rai, founder and chief executive officer of Aavishkaar.

Challenges

Farming is a region-specific activity and it is going to be a big challenge for the company to cater to region-specific needs as it expands to new markets. Sourcing of quality products and keeping those in warehouses to be delivered in time is another challenge. Moreover, most of these products are procured by farmers on credit from local vendors. AgroStar will have a tough time making them switch over to cash payment.

However, the biggest challenge from similar ventures, as the model is replicable.

"Yes, the model can be replicated. But, you need to have insights into the issues faced by farmers. For that, you need to travel to rural areas frequently. It is not going to be easy for today's entrepreneurs to venture into rural areas and spend time with farmers," says Shardul.

According to Meenakshisundaram, AgroStar will continue to have the first-mover advantage. "Others will always be copy cats," he adds.

The way ahead

The company plans tie-ups with financial institutions, so that farmers are able to get high priced products such as agri-implements without going through the hassles of securing loans. Delivery is another area that is going to get the attention of top executives. The company currently ships products in three to six days. However, with expansion in areas far away from warehouses, it will have to look for new channel partners to deliver on time.

"The agri input sector, though highly fragmented, is a huge market. If AgroStar manages to capture a fraction of the business, it is going to be huge," says Rai.
EXPERT TAKE

AgroStar is addressing the challenges of demand and supply mismatch in a hugely fragmented agricultural supply chain market, which has not been disrupted for generations. Extensive utilisation of data analytics in this space for predicting demand and agri-input stock aggregation will help lower the procurement cost and increasing margins through economies of scale.

With the success of the company's transformational model, many competitors will evolve. So, rapid expansion into major agrarian states will be key to garner a large market share and create strong entry barriers for late entrants. The technology platform offered by such players will be the major differentiator, as technological disconnect has been the main reason for the alarmingly declining share of agriculture in the country's gross domestic product.

Growing smartphone penetration in virtually untapped rural regions is boosting the growth of m-commerce platforms, which might be the beginning in bringing in a prompt evolution in agricultural practices.

Nishant Navin is founder and managing partner of DIA Capital Advisors