Origo eyes Rs 650-crore farm produce procurement to be given out as trade loans

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August 25, 2021 3:45 AM

The trade financing company, operating across 12 states, has made `181 crore worth of procurement last financial year and and provided it as structured trade loans. This would witness a three times growth this fiscal year, Sunoor Kaul, co- founder and director of Origo Commodities, said.

Farm produce procurementOrigo’s agri-trade financing has been worth `120 crore in the first quarter of this fiscal year.

Origo Commodities has set a target of procuring `650 crore worth of farm produce this fiscal year, to give out as structured trade loans to small and medium agro-processing and exporting units, which don’t qualify for availing bank credits because of their low net-worth and lack of collateral.

The trade financing company, operating across 12 states, has made `181 crore worth of procurement last financial year and and provided it as structured trade loans. This would witness a three times growth this fiscal year, Sunoor Kaul, co- founder and director of Origo Commodities, said.

Origo’s agri-trade financing has been worth `120 crore in the first quarter of this fiscal year. “Though the company targets procuring `1000 crore worth of farm produces, 65% of it would go towards structured trade loans. The rest would go to those units which don’t need any trade finance this fiscal but want aggregated single-window procurement instead of fragmented purchases,” Kaul told FE, adding even companies requiring trade finance get aggregated procurement with their inventory held as security.

Origo has clients like Patanjali, Dawat, Impex India, Shri Balaji Agro Tech and others to whom it provides services.

The structured loan, besides farm procurement, is appended to warehousing and logistics support, which helps agri-processors and exporters in the small and medium category build up capacity. Origo mainly procures in the segments of grain, pulses, oil seeds and poultry.

Though the company follows the incremental risk charge (IRC) formula, a Basel Commitee regulatory requirement, it goes beyond the banking channel’s risk appetite to provide trade finance products to agro SMEs with a turnover ranging between Rs 15 crore and Rs 250 crore.

“Banks generally provide trade finance products to large companies at a maximum 3 times debt to net worth ratio. We provide it at 8 times debt to net worth ratio,” Kaul said. Origo doesn’t take any collateral but looks that a company is not a bank defaulter and it has been servicing its liabilities regularly before availing a trade finance.

The company’s e mandi functions as a digital platform for purchases and sales, facilitating farmers to get a purchaser for its produce. This also enables efficient procurement for processors and exporters.

Besides holding inventory as security, the trade financer also takes a percentage of its client’s turnover in case of regular deliveries for units like rice mills. It also takes a margin call in cases where there is price drop of the commodity it holds as security. “We take a margin call for every 5% price drop in the commodity we keep as security,” Kaul said.

Origo takes conventional trade financial products from banks and distribute it to the small agro-processing and exporting SMEs, on the strength of its distribution, underwriting and digital capabilities. The company offers credit for 60 days.

However, returns on trade finances has been restricted to 1.5% to 2% but this can go up to 3.5% and above with increasing procurement that would give the advantage of economies of scale through reduced cost in system and the price benefit got for bulk purchases. The benefit would also be passed on to the consumers, Kaul said.

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