Team Hosachiguru: Ashok (left), Sriram Chitlur (centre) and Srinath Setty Image: Nishant Ratnakar for Forbes India
Long before he became a champion of sustainable farming, Srinath Setty was dabbling in the lucrative commercial real estate business in Bengaluru. Along with his cousins, the 37-year-old had developed a 160-apartment complex on Bannerghatta Road while also being engaged as a consultant.
“But what I do now is more satisfying,” says the engineer. “It has allowed me to do something that I always wanted to do, but couldn’t since scaling up was going to be difficult.” Srinath comes from a family of farmers in Karnataka and had cultivated papaya and pomegranate on his farmland before realising that the business couldn’t be scaled up due to shortage of land.
Today, Srinath, his uncle Ashok and Sriram Chitlur, a former colleague of Ashok, are part of the core team that runs Bengaluru-based Hosachiguru, an agricultural asset management startup that runs 19 sustainable projects on 900 acres, nearly twice the size of Monaco. By 2020, the company intends to increase the land bank to over 1,400 acres.
Hosachiguru, which means new sprout in Kannada, is a five-year-old company that acquires farmland and manages existing ones. “We don’t promise any particular returns on investment. But you are investing in land, in trees that yield a good return in future and that’s something our customers have faith in,” says Srinath. Of the 19 projects that the company runs, three are in horticulture, while the remaining are for timber.
Hosachiguru was started by Ashok and Sriram in 2008. While they were disillusioned with the monotony of their IT jobs, the two had one more reason to foray into farming. “Ashok is fond of Mysore Sandal soap,” says Srinath. “At that time there was a shortage of sandalwood and the soap was not available anywhere. That’s when he realised they must try and farm sandalwood themselves.”
In 2009, the duo began by sowing sandalwood saplings on eight acres that Ashok’s cousin had in Rayadurgam, around 250 km from Bengaluru. The cousins also agreed to share the revenue equally.
For the next five years, Ashok and Sriram dabbled with various methods and technology to figure out a farming model and understand crop-specific challenges and, by 2014, they had developed a sandalwood farm. In the meantime, Srinath also joined them and the trio set up Hosachiguru. They then acquired a few more acres to take the total farm size to 40 acres. The entire operation was bootstrapped.
Around the same time, word of mouth ensured that more landowners were ready to join them. They were assured maintenance for 15 years, which included holistic management services like drip irrigation, soil management, fertilisers, etc; in return, Hosachiguru would charge an annual maintenance fee. “The customer always has the choice of what they want to farm,” says Srinath, who went to Israel to undertake a course in plantation management.
The company’s business model is simple. On one hand, it manages farmland for owners, charging around ₹
1,500 per acre per month depending on the type of crop. On the other hand, it acquires land for its investors based on water availability and soil conditions and then redesigns them for the crops selected for cultivation. It also ensures that the soil is levelled and loosened, in addition to ensuring a drip irrigation system or borewell, and hires labourers to work on the farm.
In the horticulture business, Srinath says, the company began to earn profits from the third year by selling fruits to online retailers and exporters. “In the timber business, the gestation period is longer,” he says. A nine-year-old teak plantation spread across 35 acres, for instance, gives them a valuation of ₹
35 crore for the trees.
“We have managed to reduce costs by at least 30 percent by bringing down water usage and improving organic matter in the soil. There are weather stations set up at every project and we also have soil moisture sensors to ensure that we do the right thing,” says Srinath.
At present, 11 of the 19 projects they manage are owned by individuals or institutions. The other eight are businesses that Hosachiguru develops where it invests in land and sells them to buyers for an amount in addition to taking care of it. Along the way, the company also raised an undisclosed amount of capital from Venkat Narayan, CEO of Prestige group, one of southern India’s biggest real estate companies. The company has begun making profits and Srinath reckons it will earn an annual revenue of ₹
40 crore at the end of the current financial year.
“Hosachiguru is a distinct market innovator. Its managed farmland concept is a sustainable way of creating long-term wealth, rural jobs and making the farmlands productive. The founding team is passionate and energetic, and breathing fresh life into the sector,” says Narayan.
Hosachiguru has planted over a million trees and has nearly $7 million of assets under management.
The model isn’t entirely new or free of blemishes. In the early 1990s, India was hit by scams involving teak plantations where companies such as Anubhav Plantations sold shares in teak plantations to investors, only for them to find out that the trees were never planted. Some 50 such companies operated in southern India before shutting down. “There isn’t a novelty factor here,” says Arvind Singhal, chairman of management consulting firm Technopak Advisors. “In the 1990s there were far too many scams that involved companies offering teak certificates or land in teak plantations that were to provide yields later. But those failed and investors lost money. Today too, it’s not that different.”
But Srinath has a different take. “It was never a teak scam. It was a financial scam. These companies never planted the trees and due to the lack of information then, and means to check them, people lost money.”
Hosachiguru claims that the company has an online tool through which owners and investors can monitor information about the farms. There are CCTVs set up across the farms, and every detail, including the location of the trees, the fertilisers used, the number of men and women on the field, etc, can be monitored. Then there are farmhouses, and cycling tracks across the farmland for the investors to turn up and use for weekends for their families.
With over 70 employees now, Hosachiguru has also put together a team that will focus on land acquisition. “Over the next year, we want to add 500 more acres under cultivation,” says Srinath. “Right now, people coming to us want to farm, but do not have the land. That’s why we are buying the land and selling them to investors. But once people see the results, we are sure many more people who have land will turn to us to manage it.”
(This story appears in the 27 September, 2019 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)