Our Foods

Owned by Ashu Sikri (Unlicensed)
Aug 16, 2022
3 min read

  • Spoke with Harish Reddy (VP Growth and Partnerships) on Aug 16

  • Left next steps a bit open ended as this was a research call for us; agreed to checkin in a couple weeks. Harish liked the idea of helping agri-entreprenuers tap into govt subsidies and training farmers on improving quality (OF has some similar content on their youtube page)

  • OF doesn’t work w FPOs, they feel there is no accountability and they won’t get recurring high quality processed stuff back through FPOs

  • Model is decentralized food processing

    • Farmer Franchisee (FF) builds a shed (using their own money as this is something that OF and its lending partners will not lend against as it cannot be repossessed)

    • OF manufactures and sells processing equipment to FF. Daal processing has 3 machines (sorter, processor, polisher) which together cost 4 lakh.

      • Previously OF partnered with NBFCs to provide equipment loans for 15% and 15k monthly EMI; recently OF partnered with SBI to give FFs loans at 8% interest with 35% capital subsidy through PMFME (OF fills out the application for its FF to ensure they get the subsidy) and EMI has dropped to 8k

    • OF guarantees buyback from the FF; OF will take whatever volume FF processes (assuming it meets quality standards) and price will change weekly and depend on grade

      • OF sets the prices it will pay to FF based on whatever spread it wants to earn post its secondary processing

      • Working on arrangement where farmers can store daal in CWC warehouses and get 70% warehouse receipt financing

      • OF has a network of local field agents (1 agent to 10 FFs) who do weekly visits to monitor operations, services machinery, ensures quality control, esp SOP for procurement

      • Training for FFs on quality SOPs incl moisture, grain size, etc

    • OF does secondary processing (grading, sorting, drying, packaging) and sells the finished product (B2B and B2C)

      • Right now OF leases warehousing + secondary processing capacity, apparently have approval from AIF for 3% interest subvention to build 25 dispatch centers, 4cr each, currently speaking with banks

  • A single FF can process ~100 tons annually and buys from ~40 local farmers who provide 2-3 tons each to the FF. Pitch to the FF is to make 15 to 20k per month (net of equipment loan payments) while staying in the village and not needing to migrate to the city.

  • 1200 active FFs today, mostly male

  • Exploring some incremental earning opportunities for FFs:

    • FF can process loans for farmers. SBI gives a 1 to 1.5% BC fee which is split w 50/50 with FF

    • Sales of fertilizers and pesticides

  • Commodities: non perishables, daals, rice, chil, turmeric, groundnut, turmeric

  • Geographies: 6 core states incl AP, Telangana, Karnataka, MH, MP, Rajasthan; launching in 6 new states incl Odisha and Jharkhand (loans sanctioned, machinery to be delivered)

  • While FF can get an equipment loan through SBI (bc there is collateral), working capital is hard to come by. OF picksup from the FF once they have 3 tons of processed material which takes an average of 15 days; FF pays the FF within 7 days of pickup. This means there is a working capital need of 1.5 to 2 lakh

  • Raised a $6mn Series A earlier this year (ref) and apparently in discussion with DFC for Series B