Bridging the technology gap to improve transparency in milk co-operatives.

Background

Shri Kamdhenu Electronics Private Limited (SKEPL) has been promoted by a group of young promoters. The company was set up in 1996 to bridge technology gaps existing in the Milk co-operatives in rural India. The company is based in Vallabh Vidyanagar, a small town near Milk City of the country, Anand (Gujarat).

Milk Co-operatives are spread widely in villages all over the country. They act as facilitators between milk producers (mostly farmers) and dairies. The sector, like many other rural sectors, is plagued with inefficiency and lack of transparency, creating numerous problems like sub-standard quality of milk, under payment to members etc.

SKEPL identified these problems and developed a PC and/or Micro-Processor based Auto Milk Collection System (AMCS) to create a technology intervention that not only solved many of these problems faced by co-operatives but made business sense. The AMCS acted as an interface to integrate all the operations of the co-operative reducing inefficiencies and improving transparency. SKEPL made a modest but the promoter's vision was to improve the Milk Co-operative system through technology intervention. Five years after the humble beginning, SKEPL has planned to expand and introduce new interventions to simplify co-operative operations and has found Aavishkaar as a partner to help them realise the dream.

SKEPL Products:

The major products in the SKEPL current portfolio are
a) Automatic Milk Collection System (AMCS) and
b) Milk Analyser.

AMCS integrates milk parameters measuring instruments with PC through an interface. The system immediately provides data on parameters like Fat, weight and also final payments to be made to the farmers. This electronic system has brought total transparency in the system as farmers immediately come to know about quality and value of their milk with printed slip in their hand.

Milk Analyser provides data on six different parameters of milk simultaneously and helps in reducing any adulteration of milk by the farmers or any cheating done by the co-operative authorities.

Aavishkaar: Removing the barriers

The journey, though challenging, was a successful one for the company in initial years. However, as the South Gujarat market approached saturation, the company found it difficult to sustain its growth and faced stagnation. SKEPL devised an expansion plan to reach out to all the co-operatives in the country and coupled its AMCS offering with the new MILK ANALYZER. The company found it impossible to raise resources to fund its expansion plan. Lack of fixed assets ruled out loans from banks and it was not possible for the company to fund its expansion from internal accrual and take the benefits of its products to masses.

AIMVCF and SKEPL

AIMVCF identified SKEPL as a true opportunity on parameters such as rurally oriented, socially relevant commercial viable investment. Based on the due diligence performed by Aavishkaar, the growth potential of the company established and a clear growth strategy was devised.

AIMVCF investment is expected to strengthen the assembly line, quality control department and marketing & distribution network of SKEPL.

Investment

AIMVCF has invested Rs. 18 Lacs only into SKEPL as its first tranche for 26.47% stake in the company. The promoters and their family members hold remaining stake in the company.

AIMVCF has also kept an option to invest further Rs. 9 Lacs in Optionally Convertible Debenture (OCD), if need arises.

AIMVCF Role after Investment

Aavishkaar is working actively with SKEPL, and has identified roles and responsibilities for itself with in the growth strategy. Aavishkaar has retained rights to nominate on seat in the board. The reporting structure for SKEPL has been designed in such a manner that the executive team of AIMVCF continues to enjoy insights into operational issues. The reports will be sent to Management Board members on quarterly basis for their feed back and suggestions. Regular meetings with the team of SKEPL, joint reviews of performances with all stakeholders, visits to production site and markets, fine-tuning of strategies will be regularly done.

Exit

AIMVCF intends to exit from SKEPL at the end of 5 years with either buy back arrangement with the promoters or strategic sale of its stake.