In October, agri warehouse operator Origo Commodities Pvt Ltd raised ₹7 crore through an issue of pass-through certificates backed by its receivables. It was the country’s first PTC issue where the underlying asset related to agricultural commodities.

Now, the company is gearing up for more such issues. Another ₹50 crore issue is just round the bend. In the next financial year, the company expects to raise around ₹250 crore through these instruments, says Sunoor Kaul, co-founder and Director of Origo.

On the face of it, ₹250 crore may not appear to be much, but then the uniqueness lies in the underlying asset as well as the way the instrument is structured. This could pave the way for more funds flowing into agriculture, giving investors a higher rate of interest.

The first issue carried a coupon rate of 12 per cent, but only because it was a pilot. Going forward, investors could expect to get 8-10 per cent, Kaul said.

How it works

Origo Commodities, set up in 2010, operates some 500 warehouses across 12 states. These warehouses store foodgrains, oilseeds and cotton (no perishables). The Government of India is a major customer of Origo — it keeps foodgrains procured for the public distribution system. Origo roughly holds about ₹9,000 crore worth of commodities.

Four years back, Origo decided to procure directly from farmers with its own money, if a food processor (such as ITC or Brittania) entered into an agreement with it to lift the commodity. Origo would keep the goods in its warehouse and the processor would buy the stuff from the company as and when it needs it.

This way, Origo created a stream of receivables. Now, it is securitising these receivables, through PTCs. For additional comfort to the investor, these PTCs are also backed by the commodities themselves, in the form of warehouse receipts.

In 2020-21, Origo would procure commodities worth ₹350 crore on its balance sheet, with the funds raised as debt from banks — more than twice the ₹160 crore it did in 2019-20. In the next financial year, this number would go up to ₹800 crore, Kaul said.

To buy these commodities, Origo takes loans from banks, but now another option is to raise funds through PTCs. “In not-too-distant future, even retail investors could buy these PTCs, earning a higher rate of interest than the banks offer,” Kaul said.

Further, this ‘one-contract, multiple transactions’ model gives the food processor an assured supply at a fixed price. It gives Origo an opportunity to earn fees for providing the service.

But more significantly, by eliminating the middleman and improved efficiencies in handling and storing the commodities, the entire value chain saves about 10-12 per cent, Kaul said. Until the recent agri reforms, Origo had to pay the ‘mandi fees’ even if it bought from farmers directly, but not anymore.