Warehouse Receipts Financing (B)

Code :FCF0030

Year :

Industry : -

Region : Asia

Teaching Note:Available

Structured Assignment :Not Available

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Abstract: This case discusses the journey of a Trader from a Middleman to a Service Provider and how he did this by tapping the Commodity Derivative Market in India. Through protagonist Kundan Shah (Kundan), a trader from Punjab, India, the case draws attention to the importance of Warehouse Receipts under the inventory financing system. It also brings to light the different players of the collateral management system, their roles and responsibilities, and their importance in the entire inventory financing scheme.

The case begins by highlighting the reducing profit margin for Kundan, a trader/middleman who is a part of the Agriculture Produce Marketing Committee (APMC) community, and purchases agri-produce from the farmers in mandis for reselling in the retail market at a better price and with a good profit margin. However, margins have decreased because fewer farmers are willing to sell their produce to these traders in light of various government initiatives and the improved financing options available to them. An example of such a government initiative is the National Agriculture Market (eNAM), which is a pan-India electronic trading portal that networks the existing APMC mandis to create a unified national market for agricultural commodities in India. So, small and fragmented farmers can get their agricultural produce price information and decide to store their produce in warehouses or to sell in mandis (market). Further, the case showcases how the margins have been going down year by year with lower procurements from the farmers. Faced with uncertainty over the sustainability of his business, Kundan is thinking of changing his trade from being an intermediary to becoming a warehouse service provider. The case also emphasizes the importance of warehouses and the role of the warehouseman in preparing Warehouse Receipts for agri-credit.

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Pedagogical Objectives:

  • To analyze the commodity/inventory financing scenario in India.
  • To study the roles and responsibilities of all the participants in the collateral management system.
  • To assess the issues and challenges with respect to commodity/inventory financing.
  • To understand the risk management practices in agriculture.
  • To critically look at the changing business model of the commodity value chain in India.

    Keywords :Middlemen’s margin; Warehouse receipts; Warehouse receipt financing; Collateral management; Service Provider; APMC; CMA; WDRA; Registration and accreditation of Warehous; Agro-commodity financing; Priority sector lending; Accreditation agency; e-NWR

    Contents :

    Case Introduction >>

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