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Edelweiss Commodities, the fully owned subsidiary of financial services group Edelweiss, is planning to expand its operations across both its main verticals - bullion and agri.
While most erstwhile big broking houses or investment banks have commodity verticals, Edelweiss group has expanded into the value chain by adding spot businesses that also include private mandis and imports.
"We are expanding the agri value chain which begins with procurement from farmers to providing funding, warehousing, finance against warehoused stocks and selling it to traders in India and abroad," said D P Jhawar, President and Head of Commodities Business at Edelweiss.
"Success of the commodity business will depend on procuring material ourselves to be cost efficient," Jhawar said. The Edelweiss agri value chain business is under Edelweiss Integrated Commodity Management Ltd (EICML).
Approaching the entire value chain differently, EICML has started procuring commodities directly from farmers and pays farmers directly by crediting money into their bank accounts or by crediting Kisan Cards.
"Increased bank account coverage due to Jan Dhan Yojna has helped us as, we don't make cash payment," Jhawar said.
Edelweiss became the single largest importer of pulses, of which it imported 3.6 lakh tonne in FY15, which is roughly 9% of India's imports. On the domestic front, it has an annual turnover of nearly six lakh tonne.
In FY15, the company on the agri side, achieved a turnover of Rs 3,000 crore and about one million tonne of commodities. It plans to replicate this in other commodities like dry-fruits and spices too.
Apart from imports, the company is expanding in a big way in building warehousing capacities. At present, the company has 160 warehouses at 100 locations with six lakh tonne capacity.
"In the next 3-5 years, our target is to build three million tonne of warehousing capacity, which is expected to be the largest in the country," Jhawar said.
"To bring transparency, we are investing in technology which will modernise warehouses with customer interface and online operations," he added.
The customer will be able to view his stock statement online as well as actually view physical stock through web based applications. The company has invested Rs 15 crore in technology for this and a further Rs 15 crore investment is planned over the next two years.
Edelweiss has also set up a 12-people agri research desk to support all its agri sub verticals. It is hopeful that it will be able to play a greater advisory role for higher efficiencies within the agrarian sector.
Under the bullion vertical, the refinery set up at Ahmedabad started operations from February 2015 with a capacity to refine 72 tonne gold and 200 tonne silver. The company intends to increase the capacity to 200 tonne gold and 1,000 tonne silver over the next 2-3 yrs.
In addition to the Rs 85 crore that has been invested so far, it plans to invest a further Rs 40 crore. Edelweiss is also investing in scrap collection from various towns/cities through large franchise collection centres and existing jewellers.
"This will greatly help in recycling the vast gold reserves in our country, thereby reducing imports and positively impacting India's current account," Jhawar said. India currently imports 800-900 tonne gold and 7,000 tonne silver per annum, as per the World Gold Council.
"In two years we expect to get London Bullion Market Association (LBMA) approved refinery status," he said, adding that it plans to tie up with banks for gold monetisation plan.
