Case Study

Overview

AgTech Pvt Ltd is an AgriTech company specializing in technology centered around the
farmer, so the farmers can grow the best products and get the best prices.
● CORE OFFERINGS​-
a. High quality seeds
b. Farm insights (soil mapping, water stress, insect detection etc), as a service,
given by use of precision agriculture tools and other data
c. An app giving information and insights about crop prices around relevant
markets and mandis, using both secondary and primary data.
● CONCEPT AND FLOW​: Farm insights gather data on the farm and provide farmers
with information about the best crop(s) to grow. A farmer decides on the crop, then
h/she is encouraged to buy seeds. The harvest coming out of the seeds, via the
pricing app, will be sold at the best prices.

Contrib
Sl. Manufacturi Revenue
OFFERING ution to Technology Distribution
No. ng Stream
Sales

Manufactured Normal
in-house with - Modern Trade Sale, Credit
High Quality
1 85% strong - Direct Sales Days
Seeds
(patented) - E-Commerce allowed upto
R&D 7 Days

Precision Hardware​: Given as a Service

Farm Insights Agriculture Outsourced presentation to fees, after
2 5%
(as a service) Hardware and Software​: farmers, before delivery of
Software Built In-House sowing service

Data​: Primary
(via sales
agents),
Crop Pricing Secondary
3 10% App Online Yearly fees
App (Government
data)
Software​:
Built In-House

● Hardware for farm insights include remote sensors, yield monitors, etc; the same
tools are used on multiple farms. These tools are some of the fixed assets of AgTech.
● Pricing data is taken from secondary government data and primary data gathered by
sales agents. Collecting prices of different commodities in different areas is one of
their KRAs. They also sell seeds and do the necessary testing on the farm whenever
a farmer opts for farm insights using tech. They are trained for this.
 ● Recently, bulk data on farmers is acquired through the government by paying a
one-time fee. The information given is authentic. The data is regarding ~100,000
farmers: basic profile like including name, address, land size, etc. AgTech wants to
utilize this data for lead generation, through direct calls/visits, advertisements, etc.
● The firm is currently unprofitable due to high R&D costs and low presence among
farmers.

FarmToFork Pvt Ltd, a B2C e-commerce online supermarket company, is planning to invest
a large amount in AgTech Pvt Ltd, to significantly grow AgTech around its core and newer
business models. FarmToFork specializes in providing groceries and household essentials to
end customers, using technology. They have a presence in 14 states in India, including all
major Tier 1 and Tier 2 cities.

You are asked by AgTech’s Board to formulate a plan which will help them use the
investment money in the most effective way. Their target is to reach 10x revenue from Year
1 to Year 5. (Meaning, if revenues for Year 1 is INR 1 Million, by Year 5, it should reach INR
10 Million)

QUESTIONS:
1. Explain your understanding of the present business model of AgTech. As the
business scales, what can be done to improve the model? (​Scalability​ is an attribute
that describes the ability of a process, network, software or organization to grow and
manage increased demand).
Think along revenue drivers, cost drivers, asset utilization, etc. The basic question to
guide is: “If this works when we are doing 1 unit, will it work when we are doing
100, 1000, 10000 units?”

2. Given AgTech’s business model, what are the key things that drive its present
revenues? In other words, what are revenues dependent on?
Think along major factors that drive revenues (not basic stuff like price and quantity,
but rather, what impacts the price and quantity, and at what intensity.) Delve into as
much detail as possible, stating clearly what are your dependent and independent
variables.

3. Do you think that AgTech should add more products/services to its portfolio, or
modify existing ones, or both? Elaborate clearly on the additions / non-additions,
explaining your reasons in detail.
Think along keeping fixed costs at around the same levels.

4. With the new investment money, AgTech can apply one or more of the following
approaches:
a. Scale up the existing business, utilising the same products and the same
distribution channels
b. Add new products/services to its portfolio
c. Add new distribution channels
What, according to you, should be AgTech’s strategy? Explain in detail, giving
 out clearly the factors affecting each part of the strategy, the associated costs
involved, and your reasoning for why the strategy is viable.

5. Synergy ​is the concept that the value and performance of two companies combined
will be greater than the sum of the separate individual parts. Do you see any synergy
between the investor and the investee? If yes, how can it be utilized in the strategy?
Don’t just mention your idea; delve into detail, about how it will derive a ​tangible
benefit to AgTech.

For all 5 questions, ​DON’T BEAT AROUND THE BUSH. Keep answers short while still
delving into detail. Use pointers. Focus is on quality, not quantity.

6. Using all of the answers above (and other ideas that are left unexpressed), prepare a
Income Statement Model​ in Microsoft Excel. This will be the ultimate document
that you will present to the board of AgTech. By answering the above questions, and
perhaps adding more ideas, you will have created a strategy that AgTech can use to
scale and grow. Now you need to showcase that strategy by projecting your numbers
for the next 5 years.
Assume your own numbers for price; don’t make it unreasonable.
Take this data into consideration:

Gross
Channel-Wise Sales for Seeds Margin of
(Year 1) % of Sales Channel
Modern Trade 45% 25%
Direct Sales 40% 35%
E-Commerce 15% 15%

The model’s format can be something like this:

Year 1 Year 2 Year 3 Year 4 Year 5

Revenues
Seeds
Direct Sales
Modern Trade
E-Commerce
Farm Insights
Pricing App
Other Products (if Any)
Other Products (if Any)
Direct Costs
 Seeds
Direct Sales
Modern Trade
E-Commerce
Farm Insights
Pricing App
Other Products (if Any)
Other Products (if Any)
Gross Profit
Indirect Costs
Salaries
Research and Development
Other Indirect Costs
EBITDA

Take care of profit margins and include them in the model. The format given is the
basic you should follow: add to it, whatever you think is necessary.
There will be a lot of work required to arrive at the numbers in the model. Show all
your workings clearly.

The core testing ground for the model is:

- How you are arriving at the revenues. The more detail, the better relationships
drawn among variables, the better it is.
- How costs are projected, how they move in line with revenues.
- How all numerical elements tell the same story as your strategy.
- Your assumptions about the present and the future: how reasonable they are; how
consistent they are, and how they tie up with the model. Make sure to include your
assumptions in a separate sheet. Outline them CLEARLY.
- How the variables flow. If I change a variable, I should be able to see its impact
everywhere where it is supposed to place an impact. (Hint: use formulas and
functions as much as possible, wherever a relation exists).
- The target is:
1. Revenues at Year 5 should be >=10x of Revenues of Year 1
2. EBITDA margin at Year 5 should be >=15%

7. Now that most work is done, you will need to communicate clearly to the board. Prepare
a simple, ​3-4 slider Microsoft Powerpoint Presentation​ explaining your strategy and
why you think it will work, supported with numbers from the model.
Testing grounds:
- Brevity (should not be long)
- Neatness
 - Visuals (graphics, colors, aesthetics)
- Clarity of communication

You have three deliverables:

1. A Word/PDF file outlining your answers to the first 5 questions.
2. An Excel file showcasing the Income Statement model.
3. A PowerPoint Presentation showcasing your communication of strategy.

In case you need any further clarification, you can reach out at
adarsh.gautam@claroagro.com​.
ALL THE BEST!