Ujjay

Owned by Ashu Sikri (Unlicensed)
Aug 05, 2022
2 min read

  • Spoke with Mithil Gandhi, co-founder of Ujjay on Aug 5

  • They were into leasing farmers equipment (1-3 lakh ticket size) and post COVID have pivoted to F&V + spices export

    • Current focus: grapes (MH), cumin and coriander in Gujarat, Chili from AP, Pineapples from Assam. Export markets = Bangladesh, Malaysia, Middle east, Russia (on-pause)

  • His view is that farmers don’t really want to take ownership of an asset bc then they are on the hook for maintenance which is a pain, they are happy with a pay to use model

  • They tried to do a leasing program for FPOs with Samunnati. Idea was that Ujjay would get financing (at 11-12% annual interest) to purchase on-field and processing equipment, handle the maintenance and then FPO would be able to pay for use. They were looking at a tomato focused FPO in MH. Eventually decided to not go ahead for a few reasons:

    • Elite capture drove down utilization: All decisions were made by ~10 BOD members who were also local sarpanch. These BOD members blocked access to the equipment to other farmers to ensure they had access to it when needed and didn’t care that it reduced utilization (as they didn’t own the machine)

    • Equipment viewed as community assets not so treated well. These assets need lots of maintenance and tough to get visibility to whether maintenance was being done

    • Collections and recovery were a challenge. Leasee knows that its expensive to move equipment (have to send someone, load it to a truck) and so keep asking for extensions or make it hard to remove the asset

  • Found similar challenges in Telangana and Maharashtra

  • Evaluated various types of equipment in the 1-3 lakh range, other than tractors (which are already widely available). Mostly did leases to individual farmers and some equipment sales to larger farmers

    • Transplanters, weeders (2 wheel 35hp tillers)

    • Harvesters (16 to 20 lakh): Harvest season in TN is early so farmers there purchase equipment using govt subsidies and then move it around from TN to AP to Telangana to Karnataka and drive up utilization

    • primary packaging

    • Dryers

    • Grading/sorting machines

  • Other companies to look at:

    • Sarvagram: Doing equipment leasing to farmers, its apparently a high-touch model and not clear if it makes money to Sarvagram is apparently cross-selling other products. Scheduled to speak on Aug11

    • OurFood: Leases Primary Processing equipment to franchisees

    • S4s: Solar dryers in a franchisee model

  • Overall guidance

    • Converting capex to opex makes a lot of sense and there is real farmer demand

    • Lots of challenges with collective asset ownership / FPOs (see above)

    • Didn’t have a perspective on types of assets where this might work better (larger ticket size, something that makes sense to own, etc.). Cautioned against stuff with “lots of moving pieces” given the maintenance challenges

    • Offered to review our thinking and offer perspective as we evolve