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Startup Mantra: Pick the best farm mechanization products
Pune-based agritech startup MeraTractor is creating a transparent ecosystem for small and marginal farmers to assist them in purchasing the best farm mechanization products
India witnessed the highest tractor sales in the domestic market in 2022 on the backdrop of good monsoon for consecutive four years and increased farm incomes. Another indication of a robust rural economy is the increasing market for pre-owned tractors. Small and medium farmers are driving this domestic market. Riding on this wave, Pune-based agritech startup MeraTractor is creating a transparent ecosystem for small and marginal farmers to assist them in purchasing the best farm mechanization products. Founded by Sajith Abraham and Monak Gohel, the startup is building a ‘phygital network’ to help partner dealers from the supply of tractors, demand generation to sale of tractors, name transfer documentation, bringing in banking partners for tractor loans, and much more. The startup also intends to become a new-age manufacturer that will help dealers (rural entrepreneurs in Tier 3 to Tier 6 Locations) sell farm mechanization products to small and marginal farmers.
The bank connection…
Abraham has done BTech in Agriculture from Junagadh Agricultural University in Gujarat while Gohel has done MBA in Finance and CFA. Abraham has rich experience in the rural segment for tractor sales and has worked with several companies including banks involved in rural lending. He moved to Pune in 2008 and worked in tractor lending space while handling the entire Maharashtra, Andhra Pradesh, and Telangana regions for a prominent bank.
Says Abraham, “While working in the tractor financing segment, I had a lot of learnings and understood this market in depth. The new tractors were sold through dealerships but the used tractor segment was largely unorganised. Most of the transactions in used tractors were happening without any technical support and peer-to-peer. I was thinking of starting a new venture in 2015 but could not gather the courage to leave the comfort of a corporate job. Finally, in June 2017, I decided to quit my job and start MeraTractor.”
Gohel knew Abraham as they were working in the same company. The duo had travelled across Maharashtra to open new rural branches and link the agriculture business portfolio to those branches. Gohel left his job in 2014 to pursue a career in investment banking. Gohel received a call from Abraham in 2017 and he expressed his desire to join Abraham.
Gohel says, “Abraham shared the idea of starting a business for used tractors and in January 2018 we started working on this idea. We raised a small round of ₹1.25 crore from our friends and family so that we could have the working capital for the business. I quit my job around the same time and that is when our journey started.”
Learnings
The initial business idea was very simple. Although Abraham and Gohel did not have any tech background, they got a listing website developed, similar to a marketplace platform. The concept was that any farmer would visit the site, list their tractor and bidding will happen. If a bid is placed, the farmer would get an SMS notification to accept and close the auction or let it run further. Abraham and Gohel expected the buyer and seller to pay a fee on each fulfilled transaction. The duo got their first deal on the very first day, but the money eluded them.
Abraham says, “I always wanted to forget the first deal. Even though the amount was small, the buyer and seller refused to pay us and avoided our calls. UPI transactions were not popular those days and we had a tough time following up. That is when we realised that our business model is flawed. We could not control the transaction and the buyer-seller would not visit our site again for a long period. So, we decided to pivot.”
Pivot
Banking and corporate sector experience had taught us one thing that in any business revenue should be there and it can be scaled later, says Abraham. He said, “We ruled out developing a mobile app but we wanted the buyer-seller to visit our portal again and be a repeat customer. We narrowed down on the repossessed vehicle market, especially the financiers and brokers. Such vehicles (tractors) would often be without proper documents, broken or damaged parts, etc. Financiers are selling these vehicles every month and buyers (brokers) would refurbish them and then sell them to farmers. However, there was no organised or trusted branded network for this segment.”
Explaining the agri-scenario, Abraham said, “There has been significant work in crop cultivation, in ensuring better yield, farm-gate solutions and a push from the government to improve farmer income. However, farm mechanization for Indian farmers, of which over 85 per cent are smallholders, has been vastly missed out because of purchase capabilities. This creates challenges starting from discovery, financing facilities, and other key milestones in the process, making it difficult for an unassuming farmer. As a solution, we thought of bridging the gap between a smallholder farmer and access to farm mechanization, and financial products.”
Auction platform
Gohel said, “Farmers do not know how to get RTO work done or find a banker for getting a loan, create complete documentation, etc. We understood that we can create an auction platform. We began operations using Whatsapp and Microsoft Excel. We used to send a list to brokers and call everyone to get their highest bid. But there was competition from big players and other auction houses were also entering the tractor segment apart from cars, etc. They were targeting big ‘feeder’ brokers and hence we decided to tap and handhold the small brokers who usually are not aware of the auction or banker.”
“Later, we built an auction platform, easy to use and available in regional languages like Hindi, Tamil, Telugu, etc. We needed to add value to make the small brokers stick to the platform and hence we built a personal relationship with them. We offered them a good proposition wherein we would assist the small broker and farmers to avail of vehicle financing from banks. Our customer acquisition cost was practically zero for this new revenue stream,” he added.
Covid impact
Covid lockdowns took a toll on the team. Abraham said, “By February 2020 we were disbursing loan amounts of ₹5 crore every month with over 100 vehicles being liquidated monthly through our platform. Unfortunately, Covid-19 hit at that time and we were not prepared for it. We asked the core team to take salary cuts and they all agreed and stayed with us. We put in some more savings and raised debt to survive the lockdown period. During the second wave, we were on the verge of falling apart.”
“Around June 2021, Amrendra Singh from Dehaat called up and that was a ray of light for us. We had to find a way out and raise working capital. Our revenues were locked. Then we realised that we have to go digital and change our business model. We decided to distribute the risks and create various revenue streams,” Abraham added.
Franchise model
Abraham and Gohel were already selling tractors and helping brokers and farmers with vehicle financing. The only missing part was the vehicle documentation and that triggered a thought of starting MeraTractor franchise or exclusive dealership at tier 3 and tier 4 locations.
Gohel said, “It was low-cost dealerships and customer walk-ins were easy. We did not have to worry about enquiry generation. We were also promoting our brand through social media and Whatsapp groups of farmers which gave us brand recognition. We were creating a phygital marketplace catering to farm mechanization products and bringing farmers, dealers, agents and financial institutions on a common platform to transact in a transparent, trustworthy and hassle freeway.”
“Despite being asset-light, the company, which is a dealer-owned and company-operated model, controls the entire transaction and creates a sustainable business proposition for farmers, dealers, financiers and new tractor OEMs,” he added.
Go-to-market
Gohel said, “Our strategy is clear. We roll out the platform services in any geography first. Understanding franchise viability in rural regions is very important. After understanding the supply networks and other farm mechanisation ecosystem opportunities, we launch the dealerships in that region. Last year we capitalised on our existing network and sold 170 rotavators, a farm implement, through our dealers.”
“Around a year ago, we also realised that due to some inefficiencies we are losing out on revenue. This revenue loss was due to a delay in the tractor sale transaction due to a manual process. So, we decided to build our own ERP software and simultaneously also starting for senior positions and expand the team. Now all procurement channels and integration processes are technology driven. This also helped us overcome the talent pool problem. Since we work with the rural segment, the freshers or graduates we hire are from tier 3 and 4 regions and they are very impulsive in nature. They tend to take radical decisions suddenly. Being tech-driven has helped us do away with the dependency and streamline processes,” the entrepreneur duo added.
Cross-selling
Abraham and Gohel have worked out several revenue streams along with the tractor liquidation and resale. Gohel said, “We are introducing financial products like motor insurance by tying up with prominent players. We will soon introduce tractor warranties as part of our value chain. Cross-selling more farm mechanisation products and seasonal products will widen our scope for revenue.”
“The farm mechanisation products concept came as a demand from our dealers when we visited them during the last 3 years. We are also introducing a service-at-doorstep initiative in which farmers will be able to request emergency or breakdown situation service. With the financial assistance provision, we are also stopping farmers from getting into other unfair practices driven debt cycles,” stated Gohel.
