MUMBAI: India's largest tractor maker Mahindra & Mahindra has begun discussions for investing in and collaborating with startups in the agricultural sector to eliminate traders and have direct access to customers and farmers as the company looks to multiply its revenue ten times to Rs 10,000 crore in five to seven years, a senior official said.
The company believes that with the help of technology and Internet, India's oldest and most politically sensitive sector is poised for disruption and the unorganised sector will slowly but surely get more organised in the coming years, in turn increasing the group's sales and reach to farmers. "We are in touch with startups in the agri space. If we like some ideas we can partner them or buy equity or buyout a company," said Ashok Sharma, president and chief executive of Agri, Africa and South Asia operations, Mahindra group.
"This (disruption) is going to create new opportunities, business models; new players will come in the market." The company, which sells seeds, irrigation products, fertilisers and fruits, is keen to develop technology which will help farmers buy and sell directly online, seek online advisory services and cut harvest losses aggravated due to multiple middlemen.
"These are important interventions that will transform the supply chain," Sharma said. "The margins that companies are paying to distributors and retailers can be passed on to farmers. We are looking at solutions where we are able to offer farmers value of input and output." Experts say execution is a challenge, but the group can leverage its tractor dealer network across India.
"Creating a digital platform is easy but creating a supply chain is difficult," said Hemendra Mathur, managing director, SEAF India Agribusiness International Fund. "It is a challenge unless you have on-ground presence. Not many companies in India know rural India as much as Mahindra does due to its tractor business. The company will have to leverage its dealer network, infrastructure and brand."
Mahindra Agri has recently added new business verticals such as dairy, pulses and edible oil as it repositions itself as an input and food company primarily from an input and crop care company. The group has earmarked Rs 1,000-1,500 crore to build infrastructure and acquire technology to scale up new businesses. It expects most growth in the next five years to come from new businesses. It is expanding its products and reach in both local and overseas markets. In the local market, it is conducting a pilot in Madhya Pradesh to sell milk in and around Indore and Bhopal and is planning to expand outside the state after 2017.
In the overseas market, it is also setting up a team in Kenya for trading agriculture products such as rice, pulses, seeds and micro irrigation equipment between the region and India. The company expects revenue of Rs 1,000 crore in the current fiscal, up from Rs 600 crore in the previous year.
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