Agriculture and allied industries have been one of the vital sectors of the Indian economy. The crop protection industry refers to companies that…

Agriculture and allied industries have been one of the vital sectors of the Indian economy. The crop protection industry refers to companies that manufacture fertilizers, pesticides, fungicides etc. This has a direct connection with agriculture. Allied industries of the agricultural sector include the animal husbandry industry, which is a branch of agriculture. It includes dairy farming, poultry farming, apiculture, aquaculture among others. Mr. Karnal Singh, the founder of VEN Private Limited, founded the company in Hoshiarpur, Punjab in the year 1965. During the 1960s, the “Green Revolution” development program in India enhanced the productivity of crops. VEN Private Limited became one of the many companies manufacturing crop protection solutions. It focused on the manufacture of pesticides and insecticides. During 1970s, “White Revolution”, another landmark development program, transformed India from a milk deficient nation into the world's largest producer of milk. This popular movement prompted Mr. Karnal Singh to branch out into dairy farming, focusing on milk production and other dairy products. The crop protection business and dairy farm business turned out to be profitable ventures. Over the years, the need for animal feed products especially for livestock increased multifold. Animal feed refers to fodder like compressed and pelleted feed, grains and legumes made specifically to feed livestock cattle. Seeking this opportunity, Mr. Karnal Singh established the animal feed business in the 1990s. Thus, VEN Private Limited became a diversified agri-business company having three different business verticals - Dairy, Animal Feed and Crop Protection. Their vision statement reads: “Providing sustained value that nourish people and the planet" Over the years, each of these divisions has operated with the above vision in mind, aligned with what the company aspires to achieve. Although operations have been wholly contained within Punjab, the business has thrived and become profitable over the years. Management of the company in recent years has been handled by the family members, headed by Mr. Karnal Singh's son Mr. Kunal Singh. The current management is exploring various opportunities to expand its business across different verticals. As a first step, it intends to assess the performance of each of its divisions as they currently stand in FY 2024–25 within Hoshiarpur, Punjab. Divisional performance evaluation (Hoshiarpur, Punjab): At VEN, the performance of each division is assessed independently, and staff members are rewarded based on the division's outcomes. For the financial year ending 31st March 2025, the financial performance of each division is as follows: The Dairy Division (DD) reported revenue of 6,80,00,000 and a profit before interest and tax (PBIT) of 60,10,000. The netbook value of plant and equipment stood at 5,65,25,000, and net current assets amounted to 1,04,75,000.The Animal Feed Division (AFD) achieved the highest revenue of 10,62,50,000 and the highest PBIT of 63,77,500. The netbook value of its plant and equipment was - 7,43,75,000, and net current assets totaled - 1,51,25,000.The Crop Protection Division (CPD) generated revenue of 6,00,00,000, with a PBIT of 57,66,000. The netbook value of plant and equipment stood at 2,62,50,000, while the net current assets were - 60,00,000. It is noted that the PBIT for each division includes a deduction for head office expenses, which have been allocated 2% of the respective division's revenue. The company's cost of capital is 9% per annum, and depreciation on plant and equipment is charged at 15% per annum on cost. VEN evaluates divisional performance using both Return on Investment (ROI) and Residual Income (RI), calculated based on the controllable profits and using the net book value of plant and equipment at the reporting date as the investment base. These metrics also serve as the basis for the company's performance-linked reward system. In this context, the manager of the Animal Feed Division has claimed that his division is the best-performing unit in the company. It is proposed to expand the operations of the Dairy Division by venturing into the manufacturing of frozen desserts, as part of the strategic growth initiatives led by the management. For further details, refer to Annexure 1. Operational efficiency and integration of supply chain management In its effort to enhance operational efficiency and integrate supply chain management across its verticals, VEN has obtained consultancy services from an entity based in the USA. These consultancy services are aimed at developing a customised enterprise resource planning (ERP) software solution to optimise procurement, production, logistics, and distribution processes. The service is expected to be completed within three months from now. The consideration of USD 1,000,000 for such consultancy services is required to be paid in foreign currency. It is anticipated that the exchange rate will decline by 4% over the three months period and in order to protect the dollar payments after three months, finance manager has decided to hedge the risk involved in foreign currency transaction. He is looking forward to two options to hedge the transaction risk i.e. either Forward cover or Money market cover. The relevant spot and forward rates are: ₹/ $ Spot 3 Month's Forward 85.60/85.90 87.60/87.90 The borrowing rates in India and USA are 8% and 5.5% respectively and deposit rates are 6.5% and 4% respectively. This ERP implementation has also supported the Crop Protection Division in resolving its warehousing and shipping constraints and enabled integration with Reachme, the e-commerce platform, as further explained in the Annexure 2. Annexure 1 Diversification Strategy: The Dairy Farm operations for FY 2025-26 at Dhagwar, Kangra district, Himachal Pradesh VEN perceives that there is an opportunity to grow in the premium milk and dairy product segment. For this it wants to follow a different business operating model than the current one at Hoshiarpur. At Hoshiarpur, raw milk is procured from farmers, which is then used to produce different dairy products. The quality of milk that is used cannot be directly controlled by VEN. The dairy products at the Hoshiarpur unit caters to the wide strata of customers ranging from those preferring economy range products to those wanting premium range products. For premium range products, VEN wants to have complete control over the quality of milk that is the main ingredient of its diary operations. For this reason, it wants to own the breed of cows from which the milk will be procured that will be used to make premium range products. They will be bred, raised, fed and managed in order to produce milk and other dairy products. Cows will be milked every day. Milk thus obtained will be stored in cold storage and sold to retail distributors on a weekly basis. The milk will be fresh milk and concentrated or sweetened or otherwise altered in any way. Milk production will be the primary focus of this newly developed milk farm. Work for this new dairy farm began in FY 2025-26. On April 1st, 2025, VEN purchased land for 3 crores at Dhagwar town for this new dairy farm. On this day, it also purchased 100 cows which had an average age of 3 years. VEN received a non-refundable grant of 10,00,000 for the acquisition of the cows. During the financial year 2025-26, VEN incurred the following costs: (i) ₹ 12,00,000 to raise and feed the animals in terms of taking care of their foods requirements and managing their upkeep to maintain them in healthy condition. (ii) ₹ 5,00,000 as breeding fee to a local farmer. On 1st October 2025, 20 calves were born. There were no other changes in the number of animals during the year ended 31st March 2026. On March 31st, 2026, VEN had 10,000 litres of milk in cold storage, which had not been sold to retail distributors. The milk was sold shortly after the year end at the same market price, which had not changed since the year end. Information relating to fair value As of April 1st, 2025, the fair value less cost to sell of the land was 3 crores. Over the next two valuation dates, the value appreciated to 3.10 crores on October 1st, 2025, and further to 3.15 crores by March 31st, 2026. For milk, the fair value per litre stood at 40 on April 1st, 2025, increasing to 42 by October 1st, 2025, and further to 45 as of March 31st, 2026. Regarding livestock, the fair value of a newborn calf rose from 30,000 per calf on April 1st, 2025, to 35,000 on October 1st, 2025, and reached - 40,000 by March 31st, 2026. A 6-month-old calf was valued at 32,000 on April 1st, 2025,38,000 on October 1st, 2025, and - 44,000 by March 31st, 2026. The fair value of a 3-year-old cow increased from 42,000 per cow on April 1st, 2025, to 47,000 on October 1st, 2025, and reached - 50,000 by the end of the financial year. Similarly, a 4-year-old cow was valued at 42,000 per cow on April 1st, 2025,48,000 on October 1st, 2025, and - 52,000 on March 31st, 2026. Product Development Strategy: Introduction of frozen dessert products at Hoshiarpur, Punjab within the Dairy Division It has been proposed to expand the business of Dairy Division at Hoshiarpur, Punjab by venturing into manufacture of frozen desserts. This would require additional investment in plant and equipment of 1,75,00,000 which will generate a contribution of 95,00,000 per annum. The annual fixed cost of the division will increase by - 8,50,000 (excluding depreciation). Net current assets of this division will increase by - 25,00,000 due to the acceptance of this proposal. Annexure 2: Expansion plans for Crop Protection Division for FY 2025-26 Crop Protection Division primarily sells pesticides and insecticides. The main market for the company has been Punjab. Recently, Mrs. Gunjan Wadhwa, the head of the CPD informed the management at VEN that there is a growing demand for these products from the nearby states of Haryana and Uttar Pradesh. These are from small pockets of rural towns, comprising farmers who have small landholdings and do not have direct access to VEN's distributors in Punjab. Therefore, they buy these products from agents, who charge a hefty commission, which reduces their profit margins. The CPD in the meantime is looking to expand its market presence outside Punjab. Mrs. Wadhwa sees an opportunity to expand in rural towns rather than in larger semi-urban cities where competition is stiff. An additional hurdle that the company faces is the lack of warehousing and shipping facilities, since VEN has had its operations only within Punjab. While VEN's newly implemented ERP system has significantly improved internal efficiencies across procurement, production, logistics, and distribution, it does not substitute for the physical infrastructure and external network required to penetrate new rural markets. Since the project is still at a nascent stage, Mrs. Wadhwa does not recommend investing in warehousing and shipping facilities in these newer markets yet. Hence, she approaches Reachme, an e-commerce company who are willing to connect sellers like VEN with buyers like small farmers in rural areas. The company earns a seller fee for the sales made through the website. Buyers pay a yearly subscription fee in order to access the website services. Further the company is willing to provide VEN warehousing and shipping services for an additional fee.