24 Good Businesses 2012

Medicine Man

Kautilya Phytoextracts is helping small farmers supplement their     income by growing medicinal plants and breeding rabbits

Upendra Das, a farmer of Bihar’s Fatehpur village, walks with a swagger. And why wouldn’t he? Das broke the record for the highest income from Artemisia annua, a medicinal plant that’s an active ingredient in anti-malarial drugs — its March-June crop fetched him₹40,000 this year. “It is a 5-feet tall plant that looks similar to arhar dal,” describes Das. It also keeps insects and animals away, which makes inter-cropping possible. In Fatehpur, farmers grew potato along with Artemisia precisely for this reason.

Das thanks Kautilya Phytoextracts for his fortune — the Patna-based company told Das and others like him that they could improve their income by cultivating medicinal plants along with their usual crops. Now, even without Das’ exceptional results, the farmers of Fatehpur routinely earn ₹20,000-30,000 instead of ₹5,000 with every harvest. Das, who owns a half-acre patch where he grew rice before he switched to Artemisia, produced 25% more on his land by cultivating medicinal plants along with the usual crops. 

Kautilya generates additional income for farmers by contract farming medicinal plants for pharmaceutical companies. It approaches them through seminars, trade fairs and advertisements, and signs buyback agreements for agreed-upon quantities that meet the quality standards and delivery schedules set by the buyer. The buyer supplies seeds and teaches farmers to cultivate the crop, besides arranging to transport the produce. The companies buy the harvested crop from Kautilya at a pre-determined price, which is fixed with reference to the National Medicinal Plants Board and mandis. Kautilya gets a trading profit of 1-3% of the value for acting as an interface.

Currently, Kautilya has seven buyback agreements worth ₹38 crore with companies such as Ipca Labs, Dabur’s Ayurvet and Anubhav Biotech. It grows eight medicinal plants, including Artemisia annua; Mucuna puriens, used to treat Parkinson’s disease; and vedarikand and kaunch, both aphrodisiacs. Kautilya also has an incense sticks division, and will soon start a rabbit-breeding programme.

 Work where you live

Kautilya was started in July 2008 by Sanjeev Srivastwa and PK Pahari. The 39-year-old Srivastwa, who hails from Bihar, says he was moved by protests in Mumbai against migrants: “People migrate because they don’t earn enough back home, so I wanted to increase farmers’ income.” The duo ran an industrial consultancy business earlier and in the course of preparing a project report, Srivastwa realised there is a gap between the demand and supply of quality raw materials for medicines. Soon, a business idea was born. 

Kautilya’s growth has been remarkable. There are no outside investors in the company: Srivastwa and Pahari invested equity from their consultancy into Kautilya, which ended FY12 with a turnover of ₹26 crore and a net profit of ₹15 lakh. The company works with 9,823 farmers in 300 villages across 15 districts of Bihar and plans to reach out to 100,000 farmers in three years through partnerships with local NGOs and politicians. Srivastwa claims the company has made profits right from day one. All quantities are pre-sold and if the crop fails, as has happened twice because of drought, Kautilya and the company that supplies the seeds, take the hit. 

A plan to put up a solvent and extraction plant in Jamui, Bihar, is now in place. “The idea is to reduce the amount of leaves that are transported,” elaborates Srivastwa. “Ipca Labs takes the Artemesia plant by truck to Ratlam, Madhya Pradesh, for processing. We plan to process the leaves at our plant so that the quantity is reduced to 2%; that is, 100 kg of leaves will be converted into 2 kg of Artemisia.” Dena Bank has given an in-principle okay for a ₹5 crore loan for the 3,000 kg per day plant.

Multiplying success

Kautilya has another business in the Dooars region of North-West West Bengal and Jamui where it employs 5,000 women divided into groups of 15-20, and supplies them with training and basic machinery to make bamboo sticks used in the manufacture of agarbattis. The sticks are supplied to companies such as ITC and brands such as Badshah and Motorcycle. “In Dooars, due to the shut down of tea gardens, there is mass unemployment,” notes Srivastwa. He adds that his social, political and administrative clout helps him avoid conflicts with the local mafia.“We have made women [we employ] micro entrepreneurs. My income is reduced but recognition is high.” It works like this: Kautilya gives bamboo on credit. It then buys finished sticks from women after deducting the cost of raw material and the cost of machinery deployed. The finished stick is sold to companies at a margin of 2% and the rest is ploughed back into the company.

Finally, in June last year, the company trained and equipped 50 adivasis in the Muzaffarpur and Chakai areas of Bihar in rabbit farming. Rabbit meat can be exported profitably and Kautilya has already tied up with the Tamil Nadu-based Delta Farms to supply rabbits. “One kg of rabbit can be grown every 45 days,” says Srivastwa. “It will become an additional income for farmers.” Kautilya plans to train about 1,500 below poverty line families in rabbit farming. It has sought the help of Jeevika, a Bihar Rural Livelihoods project, to recruit, train and finance farmers where the proposal is still under consideration. 

Here again, as in medicinal plants, Kautilya will get a trading profit from Delta for acting as the interface between the farmers and the company — the farmers breed the rabbits, sell the meat to Kautilya, which, in turn, sells it to Delta for an as-yet undecided margin. “We have hooked up farmers with companies that don’t have the resources or time to mobilise them,” Srivastwa says.