A business plan produced for Just Change India, to operationalize the concept of Participative Capital

1. Just Change
Business Plan To Operationalise Participative Capital
Changing The Role Of Capital
For Sustained Growth In Rural India
Produced by the participants of the Global Young Leaders Programme, November 2011

2. Table Of Contents
Executive Summary 3
Introduction 5
Background 6
Business Model 14
Business Development 27
Supply Chain Management 37
Community Benefits 44
Financial Analysis 50
Recommendations & Conclusion 65
Appendix 69

3. Executive Summary 1 of 2
• Just Change is a community led initiative that
grew out of the struggle of the Adivasis of
Gudalur, Tamil Nadu to improve and sustain
their livelihoods in the face of adverse market
forces
• An examination was conducted in the way the
currently economy is structured
• Just Change India has developed a concept to
address this issue – an international
cooperative of producers, consumers and
investors, enabled through a Participative
Capital business model
• The business model outlines the establishment
of a new “Operational Company”, that links
producers, consumers and investors to provide
mutual economic and social benefits
3

4. Executive Summary 2 of 2
• To operationalise Participative Capital an
estimated capital investment of INR 100
million (10 crore) is required in which a
return will be expected by the fourth year
• By sharing returns between investors and
community groups, rural community
livelihoods will be improved – returns are to
be managed through a robust governance
structure within a sustainable business model
• Community groups will re-invest the returns
into community programs such as education,
skills training and healthcare services as well
as channel a portion into stability funds
• The recommendation outlines a pilot project
with Tea and Paddy in Tamil Nadu , with the
intention for expansion into neighbouring
states and other commodity products
4

5. Just Change
Background and Objectives
I. Just Change India
II. Adivasis Journey
III. Global Tea Market
IV. Global Paddy Market
V. The Challenge
VI. Investment Plan Objectives

6. Just Change India
“a grassroots response to the global economy that has left the
vast majority of people powerless with little or no control over
factors that influence their lives...”
- Stan Thekaekara, Founder of Just Change
• Just Change is a concept that grew out of the struggle of the Adivasi farmers of
Gudalur, Tamil Nadu to secure their livelihoods and live in dignity
• Around 2003, “Market forces” saw prices of tea leaves plummet to a level that is
threatening the farmers’ livelihoods, yet consumers worldwide continued to pay
high prices
• “Just Change” pioneered an alternative way of doing business which links poor
producers, consumers and investors to work together for mutual benefit
To foster a more just, equitable and sustainable economy for farmers
7 3

7. Global Tea Market - Overview
GLOBAL TEA PRODUCTION
• Tea is the highest consumed drink
in the world - production
dominated by China, India, Kenya
and Sri Lanka
• Export Market is dominated by Sri
Lanka, China and India with the
major players in the Import Market
being Pakistan, Japan and China
• No global institution exists in the
tea industry, only individual nations Source: Tea Board of India, www.teaboard.gov.in
have national Tea Boards or Tea
Associations
• Tea production is labour intensive
where the livelihoods of millions in
the rural areas are largely
dependent on tea picking and
processing
9 3

8. Tea Market – Sustainability Issues
• Global prices have been declining
since 2000 due to the price
collusion by the oligopolistic tea
manufacturing industry
• A combination of price volatility
and the domination of the tea
supply chain by a few
international companies is
adversely affecting the
sustainability of the tea sector
• Working conditions and
livelihoods of plantation workers
and small scale farmers in tea
producing countries are under
growing pressure - most earn less
than Rs.100 a day.
10 3

9. Global Paddy Market – Overview
• Rice cultivation is the principal activity and source of income for
millions of households around the world
• At the beginning of the 1990s, annual production of rice was around
350 million tons and by the end of the century it had reached 410
million tons
• Globally, India has the largest rice area and is second in rice
production, after China
• Among the exporting countries, Thailand, Vietnam, India and
Pakistan are the major countries exporting rice in sizeable quantity
11 3

10. The Challenge
Two thirds of India’s population are rural
farming communities with 30% living below the poverty line.
POVERTY
While the economy has been growing at 8% , agricultural output has
risen at only 3.3% per year*
Commodity retail prices largely benefit the intermediary branding and MARKET
packaging companies, wholesalers and retailers INEQUITY
COMMODITY Access to basic commodities like tea, rice and spices have become
ACCESS disproportionately expensive for consumers and less profitable for
RESTRICTIONS producers
“The YLP participants work closely with Just Change to address the challenge of
operationalising, on a larger scale, the concept of Participative Capital which is
envisioned to generate a more equitable economic and social benefit for the network
of producers and consumers as well as provide a return of investment to the
investors.”
*Sources: International Fund for Agricultural Development www.ruralpoverty.org & China vs. India: A Tale
of Two Plans, The Economist Network
12

11. Investment Plan Objectives
• To create an investment framework for the operationalising of
Participative Capital
• To allow investors with aligned interests to become active
participants of social change while realising a financial return
• To ensure fair prices for producers so they have more control
• To deliver good quality products at fair prices to consumers
• To enhance and improve the overall societal development
• To create an investor framework that can be applied across
different commodity products and states in India
Creating a more just, equitable and sustainable economy
13

12. Just Change
Business Model
i. Purpose
ii. Participative Capital
iii. Benefits of Co-Destiny
iv. The Key Players
v. Business Model
vi. Organisational Structure
vii. Governance Overview
viii. Governance Approach

13. Purpose
• To outline the enterprise operating on the principles of
sustainability to also be run as a profitable business
• The bases of the enterprise is on the principle of Participative
Capital, to include the participation of producers, consumers
and investors
• The governance structure of the enterprise is to ensure
equitable returns are delivered to all stakeholders
15

14. Participative Capital
Participative Capital is a concept that generates a more equitable economic and
social benefit for the network of producers and consumers as well as provide a
return of investment to the investors.
• Relationship reinforced among participants via co-existence and co-operation
Co-destiny towards a common destination and mutual economic and social benefits
• The transactional value derived from the commodity, consumption and capital
Value and from the network of producer groups, consumer groups and investors results in
Surplus surplus which in turn is redistributed equitably into the business or contributes
to improving the standard of living of the people in rural India
Central • A structured Operating company linking consumer groups and producer groups,
Governance focusing on supply chain efficiency and surplus distribution
Sustainable business Equitable distribution Extend social benefits to
income and growth of economic benefits the greater community
16

15. Participative Capital - Visual Model
17

16. Benefits Co-Destiny
• Financial return on • Fair price for their
investment products
• Contribute to • More consistent
betterment of society demand via a more
e.g. minimise poverty structured supply chain
and improve standard of and loyalty incentives
living, healthcare and • Enjoy economic and
education social benefits from
• Small investment – Big Capital Producer surplus
impact Investors Groups
Co-destiny
• Receive goods at a fair • Improve standard of
price living in rural India
• Improved quality of Consumer Community
Groups & India • Strenghting community
products via improved relationships
supply chain model and
governed process and
federation aggregator
• Better price stability via
Federation’s risk fund
• Enjoy economic & social
benefits from surplus
18

17. The Key Players
Producer Groups Consumer Groups
Farmers represented through • Cooperatives
Local Societies at Village/Taluka • Mid-size wholesalers
levels • Local consumers in villages
Operating Company
(JCI Producer Company)
• Deploy ‘Capital’ provided by investors
• Process commodities provided by the
Producing Groups
• Distribute commodities to Consumer Groups
• Distribute financial returns to all stakeholders
Investors
Provide capital with the intent to generate financial return
19

18. Organisation Structure
Just Change Trust (JCT) Advisory/Think tank
Board of Directors
Auditors
External
Executive Director
Oversight /
Approval
JCT PG Shareholders GM Investor
General Manager (GM)
Finance & Admin Operations Community Relations
Marketing & Bus Dev Operation
Supply Chain
Purchases
IT
JCIPC ( Just Change India Producer Company )
21

19. Just Change India Producer Company
JCIPC - an Independent Operating Company
• JCIPC is to facilitate return on investment and build capacity to expand
product(s) and services
• JCT will continue to operate as a think tank, independent of JCIPC but
will also take an advisory role on Board of Directors
• Board of Directors consists of representatives from all the major
stakeholders to oversee and approve the major decisions made within
JCIPC, ensuring the direction and purpose of the entity remains
community driven
• The day to day operation of the entity is split into several business units
including: Finance & Administration, Operations and Community
Relations
22

20. Business Units 1 of 2
Role of Finance & Administration
• Investment management
• Governance of capital and
surplus
• Provide funding management
to Operations
• Distribute funding to producer
members
• Identify and manage financial
privileges for members (i.e.,
rebates)
• Human resource
administration and
management
• Internal audit
23 23

21. Business Units 2 of 2
Role of Operations Role of Community Relations
• Business Development & Marketing • Communication with
• Marketing & communications community
• Promotional materials • Community development
• Public relations initiative
• Brand awareness • Community fund
• Pricing Management
• Supply Chain
• Manage the market place
• Manage logistics
• Manage warehouse
• Purchasing
• Inventory management
• Supplier management
• IT
• Manage technology vendor
• Provide day to day technology
support
24

22. Key Aspects of Governance
Business model and organisation structure will ensure:
• Compliance with all applicable laws and regulations
• Transparency and segregation of duties in the overall
administration of the Operating company (see business
model)
• Accountability of key stakeholders
• Effective management of the capital and financial surplus
distribution amongst investors, consumers and producers
• Profitable management of a multiple commodity products
enterprise (Rice, tea)
• Execution of strategy
Governance and management organisation structure is scalable for
multiple product(s).
25

23. Governance Approach
Sustainable business income Equitable distribution of
and growth economic benefits
• Exclusive participation via shareholding in • Central governance on surplus management
Operating company, assurance of fair via Board of Directors of Operating company
price and quality goods and incentives to benefitting consumer groups, producer
promote continuous supply and demand groups and investors
of commodity • Operating company to focus on business
• Selection criteria of participants in supply development; match demand and supply as
chain for worthiness well as ensure fair price, price stability and
quality goods
Extend social benefits to the Improved and efficient
greater community marketing and supply chain
• Central governance on surplus • A structured Operating company linking
management via Board of Directors of consumer groups and producer groups,
Operating company focusing on marketing and supply chain
• Dedicated community relations personnel efficiency
to focus on community development • Selection criteria of vendors/suppliers for
initiatives worthiness
26

24. Just Change
Business Development
i. Purpose
ii. Market Strategy Overview
iii. Marketing Plan
iv. Branding Strategy

25. Purpose
• Participative capital is a new concept being introduced
amongst producers, consumers and investors and therefore a
strong marketing plan is required for successful business
development
• As a ‘start-up’ the main goal is to increase awareness and gain
the confidence of producer and consumer groups
• A secondary goal is to develop a strong brand which will build
trust and loyalty to JCPC
28

26. Marketing Strategy Overview
Marketing Strategy
STEP 1 STEP 2
Attracting
Consumer & Producer Branding
Groups
Top priority is
“Attracting Consumers & Producer Groups”
29

27. Marketing Plan – Year 1 and 2
Main focus:
To attract Consumer and Producer Groups
Method
• Year 1 and 2 – focus on maintaining and extending consumer demands and
ensure production levels increase accordingly as well
• JCIPC will be using their in-house resources to achieve their first two years’
marketing goals
• The approach in the first two years do not require substantial investment
• After the first 2 years, once the base of producer/consumer have been founded
with investment flowing in, more substantial marketing activities are planned in
accordance with an increased budget for marketing expense
• Plans to attract producer and new consumer groups are outlined in the next two
slides
No substantial marketing expenses expected in years 1 and 2
30

28. Attracting Producer Groups
For existing producer groups/circle: For new producer groups/circle:
Suggested methods: Suggested methods:
• Supply contract: premium at • Multi level marketing:
signing of contract: e.g: INR20/kg producers earn eventual share
green leaves of surplus increases
• Guaranteed fixed buying price: • At signing supply contract:
e.g: INR45/kg green leaves entitled to the benefit package
• Share of surplus/volume unit offered to existing members
• First right to invest
• Group representative have
aggregated vote in decision
making process
• Access to education and health
care as members
• All groups benefiting from
participative capital
31

29. Attracting New Consumer Groups
Suggested methods
• Initially use word of mouth, going
through trusted organisations and
then using the success stories to
attract others, highlighting all the
benefits of participating
• Benchmarking against market price
and offering discounts
• Partnership with cooperatives in Tamil
Nadu, Kerala, and other states: % per
total volume to the cooperatives ;
mutual technical support;
• Referral scheme
• Membership discount for loyal
consumers
32

30. Marketing Plan – Years 3-5
Starting in year 4 the budgeted marketing expenses will increase allowing for
additional efforts in scaling up JCIPC’s operations.
Year 3 Year 4 Year 5
Producers Educate and visit new villages Media campaign Trade show
on concept to get buy in and
develop relationships Policy advocacy Best producer of the year award
Roll out rewards scheme for
new producers (commission)
Tea Newspaper ads TV ad Trade show
Consumers Flyers Tea tasting Study tour
Website Product Promotion
Paddy Newspaper ads TV ads Trade show
Consumers Flyers Website Study tour
Rice tasting Roadshow
Roadshow
*Eakgon Cellphone is a cellphone service for illiterate farmers to provide them with information on cultivation
33

31. Market Expansion Plan
Tea to be No. of Rice to be No. of
Period Households Period Households
sold [MT] Society sold [MT] Society
Year 1 100 5 20,000 Year 1 2000 8 20,000
Year 2 125 6 25,000 Year 2 4000 12 40,000
Year 3 188 8 47,000 Year 3 8000 18 160,000
Year 4 281 10 132,070 Year 4 14000 25 1,120,000
Year 5 422 15 557,335 Year 5 21000 35 11,760,000
Year 6 633 25 3,527,933 Year 6 30000 40 176,400,000
In order to achieve the above mentioned figures, we will do the following
steps:
Step 1: Promote brand and bring societies on board
Step 2: Branding
*Projections are conservative and expected to be exceeded based on selling goods in open market
34

32. Branding Strategy – Just Change Tea & Rice
• The brand will be • Leverage on existing
associated with retail chain outlets in
certain YR1 to mid YR2
communities i.e. • Set up new exclusive
Raitasanga retail outlets
• Create sense of • Location based
ownership / brand will serve as
relationship with Product Place potential tourist
the brand destination site
• Offer free samples to
potential consumers Promotion Price • Price penetration
• Multilevel marketing
• Use referrals and
Promotion within the different
groups of society
word of mouth to • Premium pricing for
increase awareness different quality of
• Business tie-up with tea / rice
entrepreneur groups
in the society
35

33. Branding
“Just Change your rice”
“Supporting the Just
communiTEA”
Change
Enabling a sense of ownership within the community
36

34. Just Change
Supply Chain Management
I. Traditional Supply Chain Model & Issues
II. Solution to the Traditional Model
III. Benefits of 3 Tier Supply Chain
IV. Why a Marketplace is Needed
V. Marketplace Framework
VI. Warehousing

35. Traditional Supply Chain Model & Issues
Farmers
Issues
• Exploitation by dealers and
Mandis Registered aggregators
(Market) Dealer
• No common marketplace to:
Aggregator • Buy and sell product
• Identify producers and
Processing State
Packaging Procurement
consumers beyond local
System boundaries
Intermediary • Share information
Distribution Hubs
• No warehouse for temporary storage
Consumer • Lack of logistics network
Lack of marketplace between Producers and Consumers limits
fair trade and equitable growth
38

36. Solution to the Traditional Model
Village 3 Tiers Supply Chain Model
Farmers
Tier 1 : Producer Group
Producer
• Process goods, packaging
Group
• Sell goods to Operating Company
Operating Tier 2 : Operating Company
Warehouse • Marketplace to link up producers and
Company
consumers
• Warehousing/stock management
Consumer Open
Groups Market
Consumer Tier 3 : Consumer Groups
• Sales & distribution to end consumer
3 Tier model links up producers and consumers directly
39

37. Benefits of 3 Tier Supply Chain Model
Producers enjoy:
• Increased margins due to direct sale to consumer
groups
• Easy access to information
• Ability to retain personal relationships
Consumers enjoy:
• Ability to search and price compare
• Lower prices due to direct purchase
• Decreased costs through the use of online auction
• Easy access to information to facilitate daily
operations
These benefits are obtained by using the marketplace
platform within the Operating Company.
Marketplace is the essence of 3 Tier Supply Chain Model
40

38. Why a Marketplace is Needed
A marketplace enables Producers and Consumers to:
• Communicate effectively
– Linking rural communities to
consumer groups
– Visibility of supply and demand
beyond local networks
• Trade, Buy and Sell
– Price creation and determination
– Match up willing buyer and seller
Marketplace brings producer and consumer groups together
41

39. Marketplace Framework
• Concept
• Create a marketplace platform online and through a mobile phone network for
Sellers and Buyers to go beyond the current limits of a traditional market
• Role
• Enable Producers and Consumers to buy and sell products beyond current
boundaries, by leveraging on the information and logistics network provided
and recommended by the Operating Company
• Establish the connection between Producers and Consumers, allowing them to
interact and communicate
Successful marketplace implementation needs warehousing
42

40. Warehousing
• Concept
• Serves as storage of products when there
is no immediate match in the Marketplace
between producers and consumers
• Operating company manages
logistics to Consumer for warehouse
products
• Role
• Provides Producers with stable income with stable sales of products
• Provides Consumers with reliable supply of products
• Operating company’s purchase of product during oversupply eliminates
price volatility for Producers
Ｗarehousing enables sales at the right time and price
43

41. Just Change
Community Benefits
I. Community Services Overview
II. Impact Opportunities
III. Financial Benefits
IV. Women Empowerment
V. Community Benefit Indicators

42. Community Services Overview
Primary issues faced by the community:
• Availability and usage of public health services and facilities is still
minimal at best - critical care services are often 100KM or more
away.
• Significant school dropout rates among children
• Market fluctuations often lead to significant income loss for rural
farmers who lack access to emergency funds, which results in the
loss of land – this has also led to a disturbing increasing trend of
alcoholism and suicide rates
45

43. Impact Opportunities
A Board of Directors of the Operating Company is to allocate certain
funds to address the community needs. This pilot program is to
focus on:
• Education and Skills Training
• Healthcare services
• Improved communication
• As returns increase as the operations scales up, additional
services may be introduced to address needs of other target
communities, including:
• Women’s empowerment
• Financial assistance through community funds for
contingencies
• Community services will roll out all activities & services via
existing community structures
46

44. Financial Benefits
Current scenario, as is: New initiatives:
• Currently the producers are Community loan fund
organised only to a limited extent • To address financial constraints caused by
while the power of collective unforeseen events
financial capability is not realised • It is paid out as a low interest loan i.e.
so far interest sufficient to cover administration,
• The community borrow money supervision & loan loss cost with no element
of profit taking
from local money lenders at a very
high interest rate when in need - • Initial funding from Investors portion
interest rates are often 3% /month • Kept sustainable by a) repayment by
borrowers b) surpluses generated by business
Implementation Needs:
• Group lending by way of cross guarantee
• Cap on borrowing size per borrower, loans are short term in nature 1-2 years
• Cap of number of loans to be lent in each financial year.
• Governance at project level to ensure compliance of operational/administrative
procedures & policies.
• Set up a team to operate the fund
47

45. Women Empowerment
Current scenario, as is: New initiatives:
• Women’s power is not fully • Build a stronger, happier and value
utilised for the community’s driven community through the groups,
benefit focusing on:
• Each woman is an individual – Managing household financials and
worker, therefore no leveraging savings
on the power of women as a – Collective bargaining of goods for
group the community
Implementation Needs: • Visit other communities and villages to
• X* salaried women to visit learn and share best practices
communities • Reskill in areas to support execution of
• Driver(s) the model (i.e., SNEHA group)
• Car(s)
• Increase awareness of government
• Administrative support
schemes and ways to take better
*Number is scalable, depending on
advantage of them
membership
48

46. Community Benefit Indicators
Community Intangible benefits Tangible indicators
Producers Steady income Net increase in average income
Primary Education Number of children enrolled in primary
school
Literacy rate: percentage of people
Healthcare Number of injury deaths
Number of deaths in children age 1-59
months
Skills training Percentage of revenue growth in
community
Communications Number of people who has access to the
broadband internet including common
facilities
Consumers Lower retail price Discount rate: the percentage of deduction
of price compared to the market price
*Additional details on community opportunities in appendix
49

47. Just Change
Financial Analysis
I. Key Targets
II. Shareholding Principles
III. Capital Raising
IV. Surplus Distribution
V. Key Assumptions
VI. Financial Overview
VII. Sensitivity Analysis
VIII. Future Growth Driver

48. Key Targets
• Sustainable
• Multiple revenue streams creates surplus stability
• There will be two rounds of capital raising to maintain stable
cashflow for working capital and business expansion
• Scalable
• Profitability of business is highly dependent on scale and volume
• Model is dependent on Just Change’s ability to attract producers and
consumers
• Lowering marginal costs and capital expenditures create attractive
margins for business expansion
• Large potential for growth
• Flexibility of business model promotes expansion into more
commodities (such as spices, vegetable oil, cotton, cocoa etc.)
• Case study of tea and paddy is highly promising
The economics of participative capital delivers financial gains
51

49. Shareholding Principles
The Shareholding structure is not only determined by capital contribution but also by
participative contribution to the business
Investors will provide the capital for the business,
and producers will be providing their labour and
sweat capital
Example of Participative Shareholding
Participative
Shareholding 90 (Capital to be repaid) 10
Model Surplus 20
90%
18 2
10%
90-18 = 72 28
Surplus 20
72%
14 6
28%
72-14 = 58 42
The shareholding of producers increases as the initial capital investment is repaid
52

50. Capital Raising - Shareholding
Shareholding The operating company will
Interest on day 1 make an upfront commitment
PRODUCER INVESTOR
of 10% of capital raised to
10% 90% invest in a community fund on
day 1
Sweat Capital Capital
100%
SHAREHOLDING The shareholding structure is
COMPANY linked directly to the amount
of invested capital left to be
repaid
Capital Capital
10% 90%
The long term stable
COMMUNITY FUND TO shareholding relationship will
FUND BUSINESS primarily benefit the
producers
Producers become shareholders by investing labour capital
53

51. Capital Raising - Overview
• Capital raising will occur in two rounds, both
raising INR 50M
• Second round will take place in year three of
10% operations
• Producer communities will have an 30%
opportunity to invest in the second round of
capital raising
20%
90%
Bridging the gap
50%
Total Participative Capital Business Capital Breakdown
Investor Capital Breakdown Investment
Business Capital INR 100M Working Capital Marketing
Commitment to Community Stability Fund
Upfront commitment to communities
54

52. Capital Requirements - Overview
To mitigate financial risks arising from
INR 90M supply and demand mismatches and
production shortfalls due to natural
forces, a stability fund will be
established
30%
Marketing and brand building will be
50% essential in establishing our business
operations and is a key consideration
during the capital raising process
20%
The business will require a large
provision of capital for working capital
needs especially in the beginning stages
Working Capital Marketing Stability Fund
of operations
The capital raised will be primarily used for working capital
55

53. Overview – Surplus Distribution
First 3 Stable Beginning Stable
Years Distribution Distribution Distribution
Multi-level surplus
distribution
structure
The distribution of surplus will filter through 3 levels
56

54. Overview – Surplus Distribution
• The operating company will retain 100% of the surplus in the first three
years to build the business
• Thereafter, the operating company will retain a constant 25% of surplus
to maintain operations
• Of the remaining 75%, surplus will be distributed to both the producers
and investors with the division skewed towards the investors until the
original capital invested has been repaid
• The producers’ share of the surplus will be returned in the form of cash
and community investments via the community fund
Investors benefit more at the start of the venture. Upon
capital repayment, majority of surplus goes to producer
57

55. Key Assumptions
Rice Tea
Y1 Y3 Y5
Paddy Cost Y1 Y2 Y3 Y1 Y2 Y3
Commodity Sell INR/kg
Composition INR/kg Commodity Cost INR/kg Sell INR/kg
Unbroken Rice 68% 18.5 22 24 26.25 Tea (Mass) 70 75 80 100 112 125
Broken Rice 7% 9 11
Husk 20% 4 5
Rice Bran 3% 27 37
Y1 Y3
Y1 Y2 Y3 Y4 Y5
Commodity Annual Growth Rate
Commodity Annual Growth Rate
Tea 25% 50%
All Rice Products 100% 100% 75% 50% 43%
• Rice production anticipated for high growth in the first three years that
will then taper off
• Conversely, tea’s growth rate is expected to accelerate after the second
year of production
• No expected growth in broken rice, husk and rice bran in 5 years as their
contribution in terms of value is small
Assumptions provided from sources within the producer communities
58

56. Financials – Income Statement
Financial Overview (INR M) Y1 Y2 Y3 Y4 Y5 Y6
Total Sales 45.7 85.4 177.2 304.3 488.6 702.0
Total Cost of Goods Sold 43.6 79.6 157.9 269.9 404.6 578.8
Net Profit -1.4 -0.5 9.3 17.5 49.8 72.9
Gross Margins 19.9% 20.4% 20.1% 19.8% 25.1% 25.1%
Net Profit Margin (%) -3.1% -0.6% 5.2% 5.8% 10.2% 10.4%
Margins increase with scaling efficiency
59

57. Financials – Gross Income
Participation Fee (INR M) Y1 Y2 Y3 Y4 Y5 Y6
Paddy Volumes handled (MT) 1360 2720 5440 9520 14280 20400
Paddy Value 29.92 59.84 119.68 209.44 314.16 448.8
Tea Volumes handled (MT) 50 250 500 700 1200 1800
Tea Value 5 25 50 70 120 180
Participation Fees 0.35 0.85 1.70 2.79 4.34 6.29
Participation & Vendor Fees 0.35 0.89 1.85 3.09 4.84 7.29
Warehousing (INR M) Y1 Y2 Y3 Y4 Y5 Y6
Total Paddy (MT) 2000 4000 8000 14000 21000 30000
COGS 29.6 59.3 126.7 221.8 332.6 475.2
Sales 35.7 71.4 153.6 268.8 435.3 621.9
Total Tea (MT) 100.0 125.0 187.5 281.3 421.9 632.8
COGS (INR M) 7.0 9.4 15.0 22.5 33.8 50.6
Sales (INR M) 10.0 14.0 23.4 35.2 52.7 79.1
Cash Surplus (INR M) 9.0 16.7 35.3 59.7 121.7 175.2
Gross Margins 19.8% 19.6% 19.9% 19.6% 24.9% 25.0%
Higher margins obtained with economies of scale
60

58. Financials – Operating Margins
Operating Cost (INR M) Y1 Y2 Y3 Y4 Y5 Y6
Headcount 5 6 7 8 8 9
Salary and Wages 1.7 2.3 2.9 3.6 3.9 4.1
Office exp. Including rental(SGA) 1.2 1.2 1.8 1.8 2.2 2.2
Marketing(SGA) 0.9 1.8 1.4 2.3 2.5 3.6
Promotion(SGA) 0.9 1.8 1.4 2.3 2.5 3.6
Warehouse costs 0.3 0.6 1.2 2.1 3.2 4.5
Transport Costs 4.2 7.0 10.9 18.6 29.9 42.9
Training Camp costs(SGA) 0.9 1.8 1.4 1.6 2.5 3.6
Interest (10% rate) 0.0 0.0 0.0 1.2 3.0 6.0
Total Operating Cost 10.1 16.4 20.9 33.6 49.5 70.5
Operating Margin -4.3% 0.0% 7.7% 8.8% 15.3% 15.8%
Supply chain costs make up the majority of OPEX
61

59. Financials – Returns to Investors
Investor Interests Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Investor Shareholding (%) 90.0% 90.0% 90.0% 88.7% 85.5% 69.5% 35.0% 35.0% 35.0% 35.0%
Surplus to Investors (INR M) - - - 6.3 11.6 32.0 38.0 21.1 23.2 25.5
Investor IRR (%) - - - -86.3% -48.8% -15.6% -0.6% 4.3% 8.1% 11.0%
Participative capital investing is a fairly new
investment concept
The expected return is relatively lower in
comparison with conventional investments
This model offers an investor the
opportunity to enhance the community’s
well being in India
Investors can fulfill an engaging relationship
with a community for better living.
The investment gives the community a sense of purpose
62

60. Sensitivity Analysis
Net Profit (INR M) Y1 Y2 Y3 Y4 Y5 Y6
Best Case (+20% Production) 5.0 11.4 34.1 60.1 118.2 171.2
Base Case -1.4 -0.5 9.3 17.5 49.8 72.9
Worst Case (-20% Production) -7.8 -12.5 -15.5 -25.1 -18.6 -25.4
Investor IRR Y4 Y5 Y6 Y7 Y8 Y9 Y10
Best Case -79.5% -39.0% -7.8% 3.8% 9.2% 13.1% 16.1%
Base Case -86.3% -48.8% -15.6% -0.6% 4.3% 8.1% 11.0%
Worst Case -93.5% -59.0% -26.4% -9.1% -1.6% 1.8% 4.7%
Because weather conditions will change year to year, the
worst case scenario where production is consistently
below estimates is highly unlikely
Water and weather conditions have a strong impact on crop
production and financial performance
63

61. Future Financial Growth Driver
Scale up requires additional margins to be obtained through
the optimisation of the supply chain
64

62. Recommendations & Conclusion
I. Implementation Milestones
II. Risk Assessment Matrix
III. Recommendations & Conclusion

63. Implementation Milestones
5 year implementation plan
Year 1 Year 2 Year 3 Year 4 Year 5
Secure
Capital Source & Create Community
Create
Implement brand Investor Investments
Operating
Supply Chain Surplus
Company
Distribution
Sign up
Attract and enlist
producer, consum Producer and Consumer Groups
er groups
Community Community
benefits benefits
*Additional details on Implementation Plan in Appendix defined defined
66

64. Risk Assessment Matrix
1 Lack of alignment of goals of members of Operating
11 Company and Board of Directors
9 7 8
High
5 2 Lack of transparency in the administration of the
1
Operating Company and Board of Directors
3 Thin spread of surplus due to overwhelming
community requests
Impact
10 4 Ineffectiveness of and lack of outreach of community
3 4 6 programmes
Medium
2
12 Limited market penetration
5
Lack of confidence of investors in profitability of
business venture
7 Commodity price volatility
Low
8 Inability to secure funding to commence
implementation of business model
9 Production downtime due to poor
maintenance and power outages
Low 10 Poor quality commodity
Medium High
11 Supply chain failure impacting commodity distribution
Likelihood
12 Commodity supply outweighs demand
67

65. Recommendations & Conclusion
• In keeping with the vision of Just Change, a methodology in
‘operationalising ‘ a Participative Capital business model has been
created
• Recommendations include the establishment of a new ‘Operational
Company’ that not only links the producers and consumers but also
investors
• The recommendation outlines a pilot project with Tea and Paddy in
Tamil Nadu and Kerala regions respectively, with the intention for
progressive expansion
• With a capital investment of INR 100M, estimated initial
investments will enable scaling resulting in operating profits from
year 3 onwards
• The venture is expected to improve the livelihoods of rural
communities, producers and consumers alike, whilst providing a
sustainable business model for the success of stakeholders
68

66. Just Change
Appendix
I. Assumptions
II. Financial Details
III. Governance
IV. Community Opportunities
V. Detailed Implementation Plan
VI. Risks and Mitigation

67. Assumptions
• Governance and structure created with a focus on the tea and
rice business
• Marketplace system can be set up to be used via mobile phone
network and online – platform software to be developed
• All producer and consumer groups have access to mobile
phones (SMS)
• Logistics infrastructure exists for the delivery of goods
• Surplus distribution and implement plan assumes profit
70

68. Income Statement
Brokerage Y1 Y2 Y3 Y4 Y5 Y6
Volumes handled (MT)* 3660 7283 14331 24806 37359 53518
Brokerage & Vendor Fees** 0.05 0.29 0.65 1 1.7 2.8
Warehousing Y1 Y2 Y3 Y4 Y5 Y6
Total Tea (MT) 250 313 391 586 879 1318
COGS (INR M) 18.8 23.4 29.3 43.9 65.9 98.9
Sales (INR M) 31.3 39.1 48.8 73.2 109.9 164.8
Gross Margin 12.5 15.6 19.5 29.3 43.9 65.9
*Volume reflects the total volumes handled for brokerage as well as warehousing for tea and
paddy
** Brokerage & Vendor Fees are one of the income streams along with Warehousing, income
from brokerage reflects only the brokerage volumes
With economies of scale, better margins can be generated
71

69. Financial Overview
(INR M) Y1 Y2 Y3 Y4 Y5 Y6
lNCOME 67 110 192 323 485 701
COGS 60 101 177 299 445 639
PBIT 2.2 1.1 1.5 3.7 7.4 13.6
800
700
600
500
400
300
200
100
PAT
0
COGS
Y1
Y2
Y3 Sales
Y4
Y5
Y6
72

70. Operating Costs
(INR M) Y1 Y2 Y3 Y4 Y5 Y6
Salary and Wages 1.16 1.36 1.51 1.61 1.61 1.71
Offic exp. Inclu rental 1.2 1.2 1.8 1.8 2.16 2.16
Marketing 0.06 0.08 0.10 0.15 0.22 0.33
Promotion 0.06 0.08 0.10 0.15 0.22 0.33
Warehouse costs 1 1 0.8 0.8 1 1
Transport Costs 3.8 4.7 5.9 8.8 13.2 19.8
Training Camp costs 0.25 0.31 0.39 0.59 0.88 1.32
Total Operating Costs 7.49 8.72 10.51 13.83 19.27 26.62
Transport costs is the majority of operating costs – accounts
for more than 50%
73

71. Capital Required
10%
20%
10%
Total required
Business Capital 20%
participative
Investment : 1.8M USD
90M INR
capital investment
2M USD
100 M INR 90% • 2M USD (100M
INR, 10 crores)
50%
Investor Capital Breakdown Business Capital Breakdown
Warehousing Working Capital
Business Capital
Marketing Stability Fund
Commitment to Community
74

72. Detail of JCIPC General Mgmt Group
Member Role Hiring profile
General Manager [1] -Decision maker in General -A dynamic individual who is experienced in agriculture
Management Group (GMG) business (Min. 5 years experience)
Finance Manager[1] -Manage daily operation related to -A dynamic individual who is experienced in agricultures
finance such as surplus management or business as well as with the financial industry (Min. 3 years
capital management experience)
Supply Chain Manager -Manage daily operation related to -A dynamic individual who is experienced in agricultures
[1] supply chain business as well as with Supply Chain management and
inventory control (Min. 3 years experience)
Purchasing Manager [1 ] -Manage daily operation related to -A dynamic individual who is experienced in agricultures
procurement business as well as with previous procurement experience
(Min. 3 years experience)
Marketing & Bus Dev -Manage daily operation related to -A dynamic individual who is experienced in agricultures
Manager [1+1member] marketing & Business Development business as well as experienced with marketing and
business development in the rural sector (Min. 3 years
experience)
IT Manager [1] - Manage daily operation related to -A dynamic individual who is experienced in agricultures
Business Development such as business as well as IT experience in the rural sector (Min. 3
distribution strategy years experience)
Community Relation -Manage daily operation related to -A dynamic individual who is experienced in agricultures
Manager [1+1member] community relations business (Min. 3 years experience)
77

73. Community Opportunities: Education
Current State New Initiatives
• High rate for school dropouts • Increased access to education
• Dominant child labor facilities by actively engaging
government in partnership with
NGOs
• Extend financial assistance to
impoverished households
• Obtain computers for schools
through donations from
corporations
Education for the Future
79

74. Community Opportunities: Skills Training
Current State New Initiatives
• Rural farming communities have • Impart training to generate
limited skill sets that prevent secondary source of income
them to pursue secondary • Partner with agricultural
sources of income agencies to provide trainings
• Growers among the on latest
communities are not exposed to cultivation/production
effective crop methods
cultivation/production methods • Extend training in basic
and have less than optimal business for enterprising
output members so that they can
successfully start and run
small businesses
Training for Alternate Livelihoods
80

75. Community Opportunities: Healthcare Services
Current State New Initiatives
• Rural communities often under • Increase awareness on the
utilise the public health services need for healthcare with the
mainly due to lack of awareness help of local community
organisations and public
• Insufficient specialists available: health officials
Critical cases referred to places of
distances of 100KM or more • Encourage expectant mothers
to go for continued follow up
checks
• Bring public health officials to
villages for basic medical
checks ups and immunisation
for children and women
Healthcare is key for good well being
81

76. Community Opportunity: Access to Information
Current State New Initiatives
• Lack of awareness of • Build community groups to
government schemes influence government
• Very limited interaction policies/decisions to protect
between producers and community interests.
consumers resulting in lost • Increase awareness on government
opportunities schemes and programs related to
development of rural communities
• Build communication channels
(phone & internet access) to
facilitate interaction & information
sharing between producers,
consumers, investors, government
etc.
Keeping Communities and Stakeholders Connected
82

77. Community Opportunities: Additional Initiatives
• Take initiatives that will
empower the community
through creation of Stree-
shakti groups
• Develop a community loan fund
to address emergency financial
needs by extending a low
interest loan
Improving Standards for Community Stability
83

78. Implementation Plan – Year 1
Identify Project Manager/Lead for Participative Capital Initiative JCT
Attract investors JCT
Secure 1M Capital JCT
Hire Operating Company resources (Finance, Operations, Business JCT
Development)
Establish fund to manage 1M capital Finance
Define and implement producer group membership requirements, Bus Dev
needs & structures (i.e., tracking)
Define and implement consumer group membership requirements, Bus Dev
needs & structures
Create outreach materials to attract producer/consumer groups Bus Dev
Identify and attract producer and consumer groups (i.e., Tea/Rice Bus Dev
tasting road shows, community visits)
84

79. Implementation Plan – Year 1
Hire additional Operating Company resources (Community JCT
relations, additional Operations)
Sign up producer and consumer groups Bus Dev
Source supply chain resources (warehouse, logistics, Market Place Operations
software)
Secure financing for supply chain resources Finance
Implement supply chain solutions Operations
Create Board of Directors & elect Chairperson JCT
Define methods to communicate with producers/consumers Bus Dev
85

80. Implementation Plan – Years 2-5
Year 3
Research Community Service needs of producer communities
Design Community benefit indicators
Define and create branding and packaging
Year 4
Prioritise community services based on needs
Design operation plan and budget for community services
Distribute surplus to investors
Year 5
Launch community services to producer communities
86

81. Risk Assessment & Mitigation
No. Risk Functional Likelihood Impact Risk Mitigation
Area
1. Lack of Alignment of Goals of Governance LOW HIGH 1. Define clear roles and
members of the Operating responsibilities of each role in
Company and Board of the Governance Structure
Directors 2. Rotation through election of key
roles in Operating Company and
Board of Directors
3. Just Change to play an
intermediary role in any disputes
or alignment issues
2. Lack of transparency of the Governance LOW MEDIUM 1. Establishment of a strong
administration of the corporate governance model,
Operating Company and transparency in systems,
Board of Directors processes, decision making with
clear roles and responsibilities
and segregation of duties
embedded in the organisation
3. Overwhelming requests for Community MEDIUM MEDIUM 1. Community and social benefit
community and social benefit programmes to be agreed upon
programmes resulting in thin and prioritised (eg. top 5) by the
spread of surplus and established Governance
minimising social impact of structures
initiatives
87

82. Risk Assessment & Mitigation
No. Risk Functional Likelihood Impact Potential Risk Mitigation
Area
4. Community programmes are Community MEDIUM MEDIUM 1. Establishment of Key
not effective and reach only a Performance Indicators
certain portion of the (KPIs) for measuring benefits
community resulting in of community programmes
minimal social impact, 2. Implementation of robust
potential escalation of social communication channels to
issues, disparity, jealousy and the various stakeholders of
conflict the business model
5. Limited market penetration Business LOW HIGH 1. Implementation of effective
resulting in low revenue Development marketing strategy striking a
growth balance of economic and social
benefits
6. Lack of confidence of Finance MEDIUM MEDIUM 1. Establishment of a strong
investors in profitability of financial and risk management
venture and supporting risk policies and procedures with
management and control clear segregation of duties and
processes delegation of authorities
framework embedded in the
Finance Function of the
Operating Company
2. Provision of a robust financial
model outlining profitability and
cash flow projections
88

83. Risk Assessment & Mitigation
No. Risk Functional Likelihood Impact Potential Risk Mitigation
Area
7. Commodity Price volatility Finance MEDIUM HIGH 1. Monitoring undertaken by
resulting in uncertainty in Operating Company on
revenue streams commodity markets and
pricing trends
2. Utilise Delayed Marketing
mechanism to manage price
volatility
8. Inability to secure funding to Finance MEDIUM HIGH 1. Secure strong investors with
commence implementation of like-mindedness on both the
business model economic benefits and long term
social view
9. Production downtime due to Supply Chain LOW HIGH 1. Implement robust preventive
poor maintainence and power maintenance plans
outage resulting in supply not 2. Implement backup generators to
being able to meet demand supplement primary source of
and a loss of revenue electricity
89

84. Risk Assessment & Mitigation
No. Risk Functional Likelihood Impact Potential Risk Mitigation
Area
10. Poor Quality Commodity Supply Chain LOW MEDIUM 1. Stringent Quality Criteria
impacting business venture established by Operating
economic and social interests Company
2. Quality Control checks
undertaken by Operating
Company
11. Failure in supply chain to Supply Chain LOW HIGH 1. Establishment of Key
distribute commodities to Performance Indicators
consumer groups on a timely (KPIs) for measuring and
basis monitoring supplier
performance
2. Multi supplier strategy to
ensure contingency suppliers
in the event of supplier failure
3. Stringent Supplier
Assessment as part of
selection criteria
12. Supply outweighs Demand Supply Chain MEDIUM HIGH 1. Channel excess supply to
resulting in excess auction houses and other
commodity and wastage trading houses
2. Stringent Demand and
Production Planning
undertaken by Operating
Company
3. Maintain contingency funds to
90 sustain farmers livelihood

85. Thank you
If you are interested in more details about the business plan please contact the Global Institute For Tomorrow
Suite 1111, CityPlaza One, 1111 King’s Road, Taikoo Shing, Hong Kong
Tel: (852) 3571 8103 www.global-inst.com