Indian agritech firm plows into profits with retail investor backing

Update (February 1, 2024, 11:10am SGT): Indian markets regulator SEBI has passed an interim order banning Zetta Farm’s platform Growpital from collecting money from investors and has frozen its accounts.

Shailendra Kumar Dhani, a farm owner who also works as a school teacher, has leased out 16 acres of his land to India-based agritech firm Zetta Farms. In exchange, he gets a fixed quarterly income of US$1,650.

It was costing him to maintain the land, and he wasn’t even using it completely because of his teaching job, he says. Renting it out to Zetta Farms was beneficial, as he didn’t need to worry about the farm’s produce and the market prices for these goods – these are risks that are borne by the firm.

A farm run by Zetta Farms / Photo credit: Zetta Farms

Zetta Farms was launched in 2019 by Rituraj Sharma, an entrepreneur from Rajasthan in Northern India, and his friend Krishnna Joshi. After unsuccessful attempts at managing a solar business and a hyperlocal startup, Sharma’s passion for sustainable agriculture led him into the agri segment.

Before starting the firm, Sharma and Joshi tried their hand at agriculture by growing crops like Strawberry, Kale, and Bok Choy. They used hydroponics, a soilless technique, to cultivate vegetables and herbs. Their success came in the form of an award by the Rajasthan government for cultivating strawberries in the arid region.

However, after investing about US$48,000 into their initiative, the duo realized that hydroponics was a capital-heavy business and that their investment would be locked in on building the infrastructure. This became a stumbling block for expansion.

So three years later, they registered Zetta Farms as a limited liability partnership (LLP) and shifted to conventional open-field farming, which had faster cash flows and short project break-even cycles. An LLP can have unlimited members or partners, unlike in a private limited company, which is limited to 200 members. This is important because income generated for partners is tax-free in India. Besides, the compliance and regulatory requirement for an LLP is less restrictive.

Bringing retail investors to farming

In the financial year ending (FYE) March 2023, just four years after it began operations, the company recorded a revenue of 550 million rupees (US$6.6 million) and a net profit of 30 million rupees (US$360,000). For FYE 2024, it’s targeting a revenue of US$50 million, which would be an over 7x increase.

See also: Profitable Indian agri-finance firm says its model can’t be replicated in SEA yet

Zetta Farms leases land from large-scale farmers (typically high-net-worth individuals) and Farmer Producer Organizations (FPOs) – which are farmers collectives owning more than 25 acres of land – to conduct its operations. In return, the company provides them an annual return that ranges from 5,000 rupees (US$60) to 60,000 rupees (US$720) per acre of land.

Zetta Farms founder and CEO Rituraj Sharma (fourth from the right) and co-founder Krishnna Joshi (fourth from the left) / Photo credit: Zetta Farms

The agritech firm also employs residents in the area to cultivate the land and earns revenue by selling produce in local markets or trading to companies by bulk. Additionally, it contributes to local employment by ensuring farm laborers receive a monthly income without the dependency on farm yields.

Minimizing risks for rewards

A larger problem to address

Scope for expansion