Agreement for Wholesaler of Medicine India

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Agreement for Wholesaler of Medicine India Powered By Docstoc
					End to End Financing in the
Agriculture and Livestock Sector


March 17, 2007
    The Unfolding India Story


                                         Rural banking
                                        Financing value
                                             chain
                          Rural India


           India –
        The Economy




     …a global giant in making

2
    The Unfolding India Story


                                         Rural banking
                                         Rural banking
                                        Financing value
                                             chain
                          Rural India


           India –
        The Economy




     …a global giant in making

3
    India
           Largest democracy in the world
                1 billion strong consumers
           Fourth largest economy & tenth most industrialized
                projected to grow larger than Italy, France, Germany and
                 Japan in 30 years
           One of the fastest growing economies
                at 8.5% in FY 04, 7% in FY05 and 7.25% (E) in FY 06
           Abundant skilled manpower
           One of the most liberal FDI regime
           AT Kearney:
                third most attractive investment destination
                best BPO destination
           Sixth largest forex reserves in the world at USD 140 bn



4
    Fastest growth among major economies
    11%       10.3%
                                            Annual GDP growth rate
    10%
     9%
     8%
     7%               6.0%
     6%
     5%
     4%                         3.5%
                                           3.1%       2.9%      2.8%
     3%                                                                    2.5%
                                                                                  1.7%     1.6%     1.5%
     2%                                                                                                      1.3%
     1%
     0%
              China               US                  Brazil                 UK            Italy             Japan
                       India              Mexico                 Finland          France           Germany

         Fastest growth among all democracies having GDP > $100 bn
         Over 7% growth in 4 years in the 1990s

    Source:      2002 World Development Indicators Report (data for 1990-2000,
                 average annual percentage growth)

5
    India - Sectoral share of growth
                                    Sectoral                Growth
                                               Growth
          Sector                    share of
                                               2005 (%)   Q1 FY06 (%)
                                    GDP(%)

       Services                        57.9      8.6         9.6

        Industry                       22.5      8.3         10.1

     Agriculture                       19.6      1.1         2.0

            GDP                                  6.9         8.1




    Source: Central Statistical Organization
6
    Agriculture growth has lagged...
           3rd largest producer of food in the world but the
            growth of the sector has been limited
           While the Tenth Plan assumed that agricultural
            production would grow at the rate of 4.0%, the
            growth has been less than 1.5% in the first three
            years
           India’s entrepreneurial initiative has been behind
            growth in other sectors but it is still in a nascent
            stage with myriad laws coming in the way
           Inadequate credit delivery mechanism to the rural
            sector has been the main cause

            Agriculture remains mainstay of livelihood of over
            60% of Indian population



7
    The Unfolding India Story


                                         Rural banking
                                         Rural banking
                                        Financing value
                                             chain
                          Rural India


           India –
        The Economy




     …a global giant in making

8
    The Rural Economy
                            GDP
                        (Rs. 28.3 Tn)


         Urban                                Rural
      (Rs. 13.9 Tn)                        (Rs. 14.4 Tn)



                          Non-Agri                              Agri
                         (Rs. 8.4 Tn)                        (Rs. 6.0 Tn)



                  Share of non-agricultural output has exceeded
                     agricultural output in the rural economy


    Source: CERG (Consumer & Economic Research Group
    – Based on research by Omkar Goswami & Rama
    Bijapurkar)
9
         Increasing Rural & Agri Credit
     Rural
     Credit                                  Agri Credit
                                                 (O/s)
     (O/s)                    1580 Bn
                                                                         1115 Bn


                656 Bn
                                                           494 Bn




              1999-00        2004-05                   1999-00         2004-05


                  Institutional Credit extended in rural India has grown by
                                    19% p.a. (compounded)


         Source: RBI
10
     The Unfolding India Story


                                          Rural banking
                                          Rural banking
                                         Financing value
                                              chain
                           Rural India


            India –
         The Economy




      …a global giant in making

11
     Rural customer is characterized by …
      Socio-economic profile          Occupational profile


                                               Farm based
                                                  Agriculture
                 Rich                             Commodity trade
                                                  Dairy / poultry

             Middle Income                     Non-Farm based
                                                  Services
             Low income                           Enterprises
                                                  Handicrafts




     and large variations in financial requirements across the
     year

12
      Rural lending entails varied risks

               Price Risk          Yield Risk
                                                      Risk
                                                    Elements
                      Crop Risk


                                     Payment Risk     Liquidity
                                                     Constraints
        Other Risks



Diversion of        Non Delivery
   Funds            of Products



13
         While identifying the risks we realised that
         integrating the value chain...

               Commission                               Sub
     Farmer               Processors   Wholesaler             Retailer   Consumer
                 Agent                                 Wholesaler




                     Intermediaries take 75% of MRP

     25%       15%                     10%       10%          25%          100%
                            15%
                              Opportunistic
     Non-transparent                                         High prices
                               profiteering
      pricing                                                Limited choices
                              Wastage rampant
     Limited financial
                              Quality & hygiene
      capability
                               problems
     Primitive grading &
      pricing facilities
14
     … greatly benefited the farmers…



                  Farmer   Trader      Ginner     Textile Mill



         Farmer

        Brought together seed cos., farmers, insurance
         cos., ginners and textile cos. on common platform
        Improves cotton quality, reduces cost and ensures
         economies of scale at the village level



15
        …and mitigated our risks, hence…
                              Sells Fully Grown Birds
     Day 45 - 60                                                       Poultry Feed
                                                                           Co.
                                 Pays the Balance amount



                                                   Repays the loan with interest


     Day 2 - 45    Poultry Feed Provides veterinary support
                       Co.      Constant monitoring

                   Poultry Feed Sells Day Old Chick, Feed, Medicine
                       Co.
                          Corporate
                          Risk Sharing
                                                        Credit Assistance
          Day 1


16
      …we took an integrated approach…
     ICICI Bank acts as a catalyst for the integration of players
                         in the value chain

              Finance facility
                                                    Banana (Middle East)
                         Integrated Value
                         Addition Centre
                                          Exports      Mangoes (U.K)

     Farmer                 Infrastructure
                         - Grading/Packing           Vegetables (U.K. /
                                                         Mumbai)
                         - Ripening
                         - Cold Storage

       These initiatives have increased
       realisations by 30%

17
     Covering Sectors in Agri Space through Corporate
     Loans...

      Poultry          Seeds            Horticulture             Rural Infra


                                  Understanding evolution of
                                 global and domestic industry


                               Getting insight into sector specific
                In depth                 characteristics
                 Sector
                Analysis             Developing thorough
                                 understanding of supply chain




                               Identifying key risks and mitigants




18
     ...Individual Loans - both Farm and Non-Farm
                                       Farmer Finance

               Agriculture            Agri Credit Line
              (pre-harvest)
                                      Farm Equipment



               Agriculture           Commodity Finance
             (post-harvest)

                                      Irrigation facilities
                Agriculture
             (infrastructure)         Micro Warehouses


                                        Jewel Loans
               Non - Farm
                                        Microfinance




19
     ...And Facilitating Farmer- Corporate Tie Ups
     Creating a closed loop of credit, extension services & output off-take



                                  Hariyali Kissan   Extension
         Loan for pass                Kendra           service/advice
            through to
            farmer
                         Inputs




                                                           Produce
          Repayment of                                     Procurement
             loan with                 DSCL
             interest



20
     ...Funding along the dairy value chain...
         Cattle financing through village level co-operative societies
            To enhance the milk production in the State
            To provide opportunity for farmers to diversify in to
             dairy sector

         SMP and butter purchase/production finance for dairies for
          stocking and/or conversion of excess milk to SMP/butter
          during flush season
            Regular and timely milk payment to dairy farmers is thus
             ensured




21
 ...Financing the entire Gherkin value
 chain...


                        •Crop loan to farmers with buy back arrangement from the
 Gherkin farmers        company
                        •Farmer should be registered with the company


                        •Financing the glass jar manufacturers & traders supplying other
      Intermediaries    ingredients
                        •Financing of the transporters (collection agents as well as the
                        logistic supplier for finished goods)



     Processing units   •Term loan for expansion (new bottling lines, cold store units etc)
                        •Working capital assistance (export credit)




22
 ...Structured financing of rural warehouses...

                      Private             Rent payment
                   Entrepreneurs           guarantee
                                                           Warehousing
                                                           Corporations


                                    Tripartite agreement
                                        on Escrow of
                                    receivables through
           Funds -
                                         ICICI Bank
     Construction of rural
        warehouses




                                   ICICI Bank




23
     Complemented by “Risk mitigants”
                Life Insurance                      Non - Life Insurance

        Micro insurance – MFIs             Weather risk
                                            Cash in transit
        Retail products – Individuals
        High net worth clients             Accident
                                            Theft
                                            Fire
                                            Critical illness
                                            Motor vehicles




     Protecting the loan portfolio

24
     And redefined rural banking…


Conventiona   Branch     Manpower     Product     Single
 l banking    based      intensive     driven    product




               Hybrid    Technology   Customer   Multiple
 ICICI Bank                                      products
              channels    intensive    driven




25
     Resulting in a holistic approach…

                            Multiple channels targeting specific
                             segments of the rural population
                            Branches
     Comprehensive             Branches at major agricultural markets
     channel strategy          Rural branches
                            Franchisees, internet kiosks, MFI &
                             corporate partners


                            Credit: focus on farmer financing, agri-
                             businesses, commodity-based
      Comprehensive
                             financing and micro-credit
      product strategy      Savings and investment products
                            Insurance




26
     Thank You




27

				
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