Startup Circle: How is Origo Commodities creating a positive impact on the agritech ecosystem?

In 2010, two IIT Delhi Alumni - Sunoor Kaul and Mayank Dhanuka co-founded Origo Commodities. Origo Commodities aims to redefine traditional modes of procurement, handling, preserving, storing, and financing farm produce; which had been largely ignored by the agri markets. Origo has become one of the largest service providers to the government through its warehousing capability and network. It also spearheads a technological transformation in agri supply chain financing through its flagship agri-trade finance platform - TradeFi.

Read more about the startup and its plans from the Co-Founder, Sunoor Kaul. Kaul outlines what the company does and the future the market holds.

Tell us more about Origo and its offerings.

Origo is today helping unlock liquidity access for the Indian agricultural sector with its concerted efforts. We’ve emerged as one of the leading Agri FinTech companies in India focused on commodity trade and finance. Origo has kept technology at the heart of its operations to eliminate wide-ranging need gaps that prevail within the system. We deal with several agri commodities like maize, paddy, wheat, soybean, cotton, and Mustard to name a few.  Our services are differentiated into the following – Trade & Finance and Warehousing.

Our vision is to create an agricultural economy that is less fragmented; with equitable access for everyone in the system, in line with the country’s financial inclusion agenda. With the penetration of formal capital in agriculture being as low as 5%, the company is focusing on the untapped market, which has an estimated $100 billion market potential.

In terms of warehousing, we focus on quality warehousing processes and scientific warehousing techniques help in an average wastage reduction of 10%. These state-of-the-art warehouses come equipped with IoT-enabled infrastructure along with CCTV monitoring. Also, we conduct timely audits and have added insurance protection for several events including natural disasters, burglary, and accidents.

Today, Origo Commodities has a robust presence across 12 states. We have a strong team of more than 1,100 professionals. We are also an accredited warehouse service provider by MCX with strict adherence to exchange guidelines. Moreover, we even manage about 5% of India’s total PDS stock via our robust infrastructure.

What are the drivers/market trends that are shaping the AgriTech landscape in 2021?

At present, the storage and delivery of essential commodities are of prime importance.  India is going through a rough phase of the second surge as the entire nation is going into lockdown gradually. At times like this, the storage and delivery of essential commodities become key. So, everything from procurement to storage and distribution of it will shape the AgriTech landscape in 2021.

The way to look at it is to separate the pre-harvest and post-harvest agri fintech innovations. While one addresses harvest quality, climate predictability, soil quality, etc., we also need to address other aspects such as bringing liquidity into the system, efficiency to agri supply chains, profitability for farmers, and distribution channels, etc., as well. We are likely to see the democratization of pre-harvest technologies, as people will begin to operate, scale, and reduce the overall cost of introducing tech-enabled products and services in the market. Be it the use of drones to sprinkle affected crop areas, GIS and GPS mapping, or soil monitoring, more people will sign up due to the obvious advantages brought in by such tech-driven approaches.

On the other hand, post-harvest innovations such as securitized debt instruments, forward contracts, blockchain-enabled trade financing for agri stakeholders, IoT integrations, etc. will lead the sector towards faster and transparent systems devoid of pilferages and food wastage. Another key trend is that companies will continue to disrupt the agri sector with the latest in-warehouse management practices. They will improve the quality of products while also adding to the efficacy of the supply chain and logistics.

How is Origo tapping these market trends for growth?

Origo is working closely with the government bodies to serve this need. Around 80% to 90% of our warehousing demand comes from the government itself. On our Structured Trade Finance, we ensure to innovate and scale the financing for agro commodities, thereby driving more liquidity towards the segment at large.

Origo has quite a few offerings and among them, our focus is on providing securitized debt instruments, building commodities financing platforms, warehouse management systems, and an auction-driven trading marketplace. With blockchain integrated technology the platform could play a path-breaking role for agri stakeholders, as they can witness developments in real-time, and undertake transparent transactions. We intend to provide the tools to make the process more efficient for everyone.

What are your market growth pre- and post-covid?

We at Origo deal with two different aspects of agribusiness, i.e. structured financing and warehousing. When it came to warehousing, pandemic did not impact us adversely because 90% of our business is with the government. Considering that the government played an active role in providing essential supplies as a relief measure during the pandemic, we were at the forefront. We provide our services to different government agencies to stock products that farmers brought under MSP procurement and serviced timely supply to PDS stores. Government support in allowing our team to operate all warehouses ensured smooth operations and for us to operate effectively utilization our manpower.

Structured Trade Finance was impacted for the initial 6 weeks during which period the country had gone through a complete lock-down including the agriculture mandis which limited the transactions. By June 2020, we were ramped up slowly to normal trade and finance operations.

As we are back to our normal operations since then, we are keen on doubling the purchases and the overall quantity in FY2022. Also in 2021, we aim to close almost 100% more contracts as compared to FY 20. In revenue terms, we will end up higher, and profitability should be similar, or better than last year.

What tech transformation have you brought to the market?

We are driving the technological influx across every level of the agri commodity supply chain in India. This includes everything from trade facilitation to procurement and from warehousing to finance. We are ensuring that we maximize the usage of state-of-the-art technologies including blockchain. At the same time, we envision making the agribusiness more lucrative for investors; including MF houses and retail investors in the long haul. It will considerably ease the liquidity challenge that the segment faces at present.

As an emerging technology, blockchain is playing a pivotal role across sectors in delivering secured, efficient, and transparent processes. In the agri-tech sector, blockchain is crucial for high security for all users, especially with decentralise procedures. There has been a trust deficit when it comes to monetary flows in the agri sector. Many believed pre-existing systems to be unreliable. Because blockchain works on a consensus-based system where changes to data points cannot be made by any unitary party, it acts as a robust alternative.

Furthermore, blockchain facilitates tokenization of assets, wherein contracts and commodities on the platform are converted to digital form. Therefore, our blockchain-backed application smoothens the transaction flows for anybody who signs onto the platform.

What are your growth priorities for 2021?

Origo’s focus is to simplify the agri supply chain through end-to-end supply chain solutions and financing. We already have solutions for warehousing & commodity financing (structured trade finance, procurement finance, input purchase financing). In the coming year, we plan to launch our blockchain platform for trade finance. We aim to enrol our existing and new customers, suppliers, lenders, and warehouse owners to further augment our ecosystem.

With our digital auction platform launch in May, the idea is to promote a more efficient commodity purchase mechanism and a better price discovery platform. New laws support disintermediation. Hence, we believe that digital auctions will allow more direct engagement of farmers and processors; thereby bringing efficiency to the commodity supply chain.

Funding

We have received $20 mn equity funding so far, our investors include Triodos Caspian & Oikrcedit alongside others. In 2020, we closed our debt financing round worth Rs. 220crores with Yes Bank, HDFC, CSB Bank, Utkarsh Small Finance Banks, Northern Arc& Vivriti Capital in FY 2021.