1 BUSINESS PLAN Samridhi Agri Products Pvt Ltd 5/82 , Vipul Khand, Gomtinagar, Lucknow 226010, Uttar Pradesh, India http://samridhiindia.com/ Confidentiality This business plan is confidential and is the property of Samridhi Agri-Products Pvt. Ltd. Any reproduction or divulgence of its contents without prior written consent of the organization is strictly prohibited.
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BUSINESS PLAN
Samridhi Agri Products Pvt Ltd
5/82 , Vipul Khand, Gomtinagar,
Lucknow 226010, Uttar Pradesh, India
http://samridhiindia.com/
Confidentiality
This business plan is confidential and is the property of Samridhi Agri-Products Pvt. Ltd. Any reproduction or divulgence of its contents without prior written consent of the organization is strictly prohibited.
Genesis of Samridhi .............................................................................................................................................. 7
About Uttar Pradesh ......................................................................................................................................... 10
Current Operations............................................................................................................................................ 10
The Model ............................................................................................................................................................. 11
Samridhi Value Chain……………………………………………………………………………………………………18
Support Services ................................................................................................................................................. 18
Capital Requirement ......................................................................................................................................... 23
Board Members .................................................................................................................................................. 33
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Executive Summary
With huge production potential and an insatiable demand for milk unmatched anywhere in the world, India’s dairy industry holds the potential to create large-scale employment, provide stable and sustainable incomes, and build a bridge out of poverty for millions of households in rural communities across the country. Recognizing this, Samridhi Agri-Products Pvt. Ltd. was established in 2009 to create many of those dependable and dignified jobs by filling the gaps in Uttar Pradesh’s rural dairy supply chain.
Through its distributed model, Samridhi procures milk from two distinct producer segments – “ultra poor” households rearing Samridhi-owned livestock, and households who already own dairy animals. By serving both groups, Samridhi can create the largest possible social benefit for asset-less households while ensuring that its facilities are operating at their full capacity.
Women who qualify as “ultra poor” (commonly understood as households earning less than $1.25 a day) are given the option of rearing Samridhi-owned cattle or goats, and personally select the animal(s) that will be kept at the family home. Each woman receives a steady salary of Rs. 600 per month that will cover the cost of rearing the animal in exchange for producing a pre-determined quantity of milk (approximately 50% of potential production for cows and goats). She is also able to either sell the remaining milk to Samridhi at market rates, or keep the milk for her own family’s consumption. For the average ultra poor household, these milk sales can increase their household income by as much as 400%. Furthermore, as the dairy animals reproduce, Samridhi only claims one female calf or twelve calves, leaving the remaining offspring – up to two cows or 12 goats - as the property of the employee. This allows the woman to build a foundation of productive assets over the course of her employment, and positions Samridhi as a trusted buyer of milk as animals produce milk over their lifetimes.
Samridhi also purchases milk from middle or upper poor households, (commonly understood as those earning more than $2 a day) who already own productive dairy animals, at the rates used to purchase surplus milk from ultra poor women. Not only does this ensure that Samridhi facilities are maximizing their capacity, but it also reinforces Samridhi’s position as a trustworthy, beneficial partner in the development of the whole community.
In addition to income security and access to productive assets, Samridhi also makes a series of high quality and affordable services available to both employees and non-employees including skill-building trainings, linkages to high-yielding varieties of livestock, nutritional feed, veterinary services, artificial insemination support, and access to livestock insurance.
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For pricing milk, Samridhi uses industry standard calculations for measuring the quantity milk fat content (FAT) and nonfat milk solids (SNF) to determine its value. Testing is done twice in the collection process, first in the presence of the woman at her village collection center to establish her variable income, and again at a central Bulk Milk Chiller (BMC) facility to verify measures, control quality, and identifies any possible fraud. This ensures transparent pricing at the village level and builds Samridhi’s reputation as a dependable supplier for wholesale buyers.
Samridhi draws its revenues from the margin between the procurement price of milk in rural areas and the selling price to wholesale buyers. Through a single BMC, Samridhi can provide employment to 288 ultra poor households and procures milk from an additional 432 farmers by selling 2400 LPD to urban wholesale buyers. A single BMC can service approximately 24 villages, employing 12 ultra poor women per village and purchasing from an additional 18 farmers per village. This translates to 72,000 litres of milk procured each month, generating revenues over Rs. 17 Lakhs. Against those revenues, Samridhi bears the costs of the BMC’s capital investment, salaries for Samridhi management BMC staff, and salaries to ultra poor employees, payments to non-employee producers, and the cost of maintaining its herd.
Samridhi has also committed itself to rigorously benchmarking and evaluating the progress made out of poverty by its ultra poor employees. Collecting information quarterly, Samridhi evaluates the social impact that increased income is having on employees in areas such as quality of housing, value of household assets, nutritional quality of the family diet, and the children’s access to education. This information will be used by Samridhi to optimize for both social and financial performance, and will ensure that the company’s profitability is in lockstep with social gains made by its employees.
Leading this effort is a core management team that brings together valuable insights and experience from both India’s dairy industry and social sector. Pairing veterans of Amul, the world’s largest milk cooperative, with experienced leaders from India’s microfinance industry, the Samridhi team collectively brings a diverse set of skills and specialized knowledge to the design and management of the organization. Furthermore, each member of the team holds graduate degrees from India’s premier institutes for economic development.
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Background
As urbanization continues to dominate India’s current development agenda, stagnation in
the agricultural sector has left many rural poor households struggling to earn enough to
meet their most basic needs. Between 1991 and 2001, over 7 million1 farmers quit farming,
meaning over 2,000 farmers every day were left suddenly looking for alternative ways to
earn a living. Some of the reasons for the slowdown in agriculture include under-developed
irrigation, severe weather (floods in some years and drought in others), increased
incidence of crop disease, land disputes that have left farmers with small parcels of land on
which it is difficult to cultivate crops, and volatility in market pricing. Another growing
challenge is the problem of agents or middlemen that are extracting a greater proportion of
the profit margins in the rural-to-urban supply chain. Most farmers sell their produce to a
middleman in the village or have to deal with brokers in government-authorized markets
in cities and towns. Because of their dependence on these delivery channels, they are often
exploited and are given low prices for their produce. For the rural poor to avoid being left
further behind, new, localized, and sustainable employment opportunities must be made
available for those who are otherwise unemployed or underemployed.
For India’s rural economy, dairy is a critically important industry. In the wake of uncertain
income from agriculture, small scale farmers and agricultural laborers can earn more
reliable income from dairy farming. Dairy is the largest agricultural contributor to India’s
economy and adds Rs 1.179 billon2 to its GDP. From acute shortage of milk until the 1960s,
India has become the largest producer of milk in the world. In 2006, India reported over
100 million tonnes of milk produced. India’s dairy industry relies heavily on a “crop-
livestock production system,” in which the feed provided to dairy cows is a mixture
comprised of residual output from the crops grown by small-holder farms. These farm
labourers also split their time between tending to crops in the field and managing the care
and feeding of the dairy livestock. The large and growing rural labour force, combined with
the large number of livestock, has helped India’s dairy industry grow to its current size.
2 Meeta Punjabi, “India: Increasing demand challenges the dairy sector”, part of Smallholder dairy
development - Lessons learned in Asia, Food and Agriculture Organization (FAO) of the United Nations.
Accessed online: January 2012: page 44 ftp://ftp.fao.org/docrep/fao/011/i0588e/i0588e00.pdf
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Despite current production levels, however, India’s dairy industry can and should be far more productive. One of the industry’s biggest challenges is the weak productivity of its livestock. India’s cattle produce 987 kg per lactation, compared to the global average of 2084 kgs per lactation2. Some of the prevailing factors that lead to low productivity are poor quality of domestic cattle breeds, lack of accessible veterinary services, inadequately trained caretakers, and poor quality feed. Any intervention that addresses one or more of these challenges can positively impact rural households by increasing milk yields and therefore, increasing the incomes of dairy farmers.
Goat milk production, too, represents a reservoir of untapped potential. Goat milk is extremely nutritious and has anti-fungal and anti-bacterial properties, and is commonly administered in hospitals across India for recuperating patients as goat milk is easier than cow’s milk to digest. As the marketing of goat milk slowly overcomes common prejudices, the nascent market for this high value commodity is growing. For herders, goats are low cost, are easier to care for, do not require expensive fodder, are more compact and easier to house – all benefits that make goat rearing a more viable and attractive livelihood activity for poorer households. Finally, goat meat is in high demand in the country and there are no social taboos associated with goat slaughtering, as there are with the slaughtering of cows in India. As goats are valued for both their milk and meat, they can potentially contribute a great deal towards the creation of new livelihoods for rural households. As per the 2007 livestock census, India has over 140 million goats. Over the past 10 years, the goat population has increased by 15%. This growth rate is in spite of an annual slaughter rate of 38%. In terms of total volume of goat milk production, India is the world leader producing 4 million metric tonnes in 20083. Even though India is the largest producer of milk, it could soon face a shortage of milk to feed its burgeoning population. According to the National Dairy Development Board (NDDB), India has to grow its milk production by five million tonnes each year (current rate is 2.5 million tonnes/annum) to meet the demand of 180 million tonnes by 20214. The only way India can accomplish this is if more of its farmers are able to own cattle, and increase the productivity of that cattle through effective training of farmers, access to quality feed and availability of veterinary services when critically necessary.
3 Dr. D. Swarup, Annual report 2010-2011, Central institute for research on goats (CIRG). Accessed online:
February 2012: Page 1 http://www.cirg.res.in/downloads/ar1011.pdf
6 Website of the Govt. of UP - http://upgov.nic.in/upinfo/up_eco.html accessed online - December 2011 7 The Multidimensional Poverty Index (MPI), an Oxford poverty and human development initiative,
complements income poverty measures by reflecting the deprivations that a poor person faces all at once
with respect to education, health and living standard
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village-level milk collection. Currently, Samridhi procures milk from 150 women across 12
villages and pays top of the market rates.
For the individual producers, regular milk sales allow their households to move from
subsistence activities to earning a stable income. Typically, the household already owns 1-3
cows and sells milk daily to a middleman despite habitually delayed and below-market
payments. By selling instead to Samridhi, they receive fair and timely payments that not
only surpass those of the middlemen, but also those provided by Parag, the state dairy
cooperative.
The Model
Samridhi purchases milk from two distinct client segments: Qualifying Ultra Poor
Employees and Private Livestock Producers.
1. Qualifying Ultra Poor Employees (under $1.25 / day)
In these villages, the ultra poor are those who have little to no productive assets and are
among the poorest groups in the country. These are households that are too poor even to
own cows or goats of their own. At present, they cobble together odd jobs such as manual
labour or field work to earn an income. Without a steady income, they live in a state of
constant volatility and are unable to consistently address their most basic food, housing,
health, and education needs. Samridhi has developed a robust selection process to ensure
that it can identify the poorest households in these villages and help them earn a stable
income in an area where they have no other options.
Qualifying Ultra Poor Employees
> Owns dairy animal (cow or goat)
> Not a salaried employee
> Sells milk to Samridhi at will
> Livestock owned by Samridhi (cow or goat)
> Salaried employee
> Produces a set quantity for Samridhi
> Sells excess to Samridhi or another buyer
Private Livestock Producers
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Under this model, each qualifying household rears one-to-two Samridhi-owned cows with
total productivity expectation of eight litres of milk per day, or three-to-five Samridhi-
owned goats with total productive expectation of three-to-five litres of milk per day. As
employees of Samridhi, they receive a guaranteed salary of Rs. 600 per month and are
eligible for bonuses based on the quantity and quality of milk produced.
In addition to this salary, the model also gives families an opportunity to build a stable base
of productive assets: after the contract period initial dairy animal is owned by employee,
the majority of offspring become the property of the individual employee. Not only does
this create social benefits through steady income and a chance to own productive assets for
the individual employees, but it also expands the pool of Private Livestock Producers from
whom Samridhi can purchase milk.
Cow Milk
Women from qualifying households employed by Samridhi rear the Samridhi-owned
cow(s) on their own and pay all related expenses. As long as she provides milk worth Rs.
18,840 each year, she gets a fixed wage of Rs. 7,200 per year. On an average, it costs about
Rs 10,000 per year to maintain a cow. Any milk above this minimum requirement belongs
to the employee and she can decide whom to sell this milk to, though she is strongly
encouraged to sell the milk to Samridhi.
Based on the eight liter productivity expectation, the woman can end up making Rs. 600 /
month as fixed wage and an additional Rs. 1250 / month by selling the milk to the Samridhi
collection center. Furthermore, Samridhi will only take back one female cow calf born to a
Samridhi cow. The original livestock and other offspring will be entirely owned by the ultra
poor employee. Even when a Samridhi livestock is between lactation cycles, and not giving
milk, the company still pays employees Rs. 600 each month, provided the employee is
taking good care of the cow.
The table below shows a year-over-year timeline for expected milk generation from a two-
year-old cow (all amounts in Rs.):
Month Value of Total Production
Samridhi’s Share
Employee’s Share
Samridhi's Margin
Total revenue/cow for Samridhi
Fixed Employee Wages
Total revenue that employee receives
Year 1 33,180 18,840 14,340 4,977 16,617 7,200 21,540
Year 2 33,180 18,840 14,340 4,977 16,617 7,200 21,540
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Assumptions
1. Total Samridhi benefit includes revenue (Rs 23/litre) that Samridhi receives by
selling the mandatory milk (2.75 litres/day) that employees have to give and the
margin (Rs 3/litre) that Samridhi receives from the additional milk (2.09 litres/day)
that Samridhi receives from employees.
2. Total production starts from eight litres per day, and goes on decreasing gradually
with time. A cow typically gives eight litres milk for three months of the year and
gradually reduces over the next six months. During lactation (which lasts three
months), the cow is unproductive. Samridhi continues to pay the fixed salary of Rs
600/month to the employee throughout the year.
3. The figures taken here are an average over a year. However, as cow productivity
declines, Samridhi’s share also declines with it.
4. The table given here assumes a very conservative, worst-case scenario with respect
to reproduction. In the first year, we assume a male calf, and in the second year a
female calf that will hold a value only in the third year. Each employee receives a
cow and a female calf at the beginning. At the end of two years, the calf belongs to
Samridhi while the original cow and remaining calves are owned by the employee.
Goat Milk
As a livelihood option, goat rearing holds tremendous potential to provide a quality income
for the ultra poor. The reproductive cycle of goats is shorter (five months), and goats
generally give birth to multiple kids (two-to-three per gestation). And from a nutritional
perspective, goat milk is the only dairy product that contains beneficial anti-bacterial and
anti-fungal minerals. However, due to social stigma, many have been reluctant to rear goats
as livelihoods and the market for dairy goats is less developed than the market for cattle.
Seeing both the economic and nutritional benefits of goat milk, several organizations are
working to market the virtues of goat milk and increase demand. It is in this work that
Samridhi sees a tremendous opportunity, leading Samridhi to enter into an agreement with
Lucknow-based The Goat Trust to source the necessary livestock and provide critical
support services to its employees.
Under this programme, Samridhi provides three goats to each employee with a total
productivity expectation of 3-5 litres per day. In the first batch, Samridhi is procuring goats
of the Sirohi breed (a large breed that hails from the state of Rajasthan) and the local
breeds from within Uttar Pradesh through The Goat Trust. Given that a goat reproduces
twice in a year, Samridhi leaves the original goat with the employee and takes one offspring
per goat per lactation over a span of two years.
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For goats, the annual expected productivity is shown below:
In addition to the seed funding of roughly Rs. 32 lakhs provided by Upaya Social Ventures,
Samridhi is looking to raise roughly Rs. 2,40,00,000 in coming two years in order to reach
further 260 odd villages. We shall be able to reach scale with access to additional capital.
Risk Mitigation
Currently, insurance companies do not have an extensive network in rural areas of North
India. Organizations in this area commonly rely on NGOs or insurance agents to meet their
regulatory requirement of rural portfolios. Furthermore, lack of awareness among the rural
people makes it difficult for them to access insurance products. As it is our goal to enable
producers to maximise profits from dairy activities, they could just as easily be pushed
back to below-poverty levels if their cattle are not properly insured. Thus, like any other
business, risk mitigation has to be provided. Currently, Samridhi is purchasing cattle
insurance for its own herd through TATA-AIG, a general insurance company.
Private Livestock Producers of Samridhi are also offered this service, albeit at a slightly
higher price. Veterinary services at affordable prices and other business-support services
are also valued by Samridhi as they will reduce business risk for the producers and ensure
a steady milk supply.
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Risk/ Challenge Factor
Source Impact Way to Mitigate
Procurement
Risk
It is difficult to procure
livestock in large numbers,
especially higher yield breeds.
This could be slow the
scalability of the project.
• Samridhi
will partner with the necessary service
providers to provide Artificial
Insemination for the livestock
Quality Risk –
Goats
Since we are procuring the
goats from Rajasthan, it is
possible that the supplier does
not provide genuine breed.
The result could be low
productivity of goats.
• Goats are purchased on agreement
with the supplier, which will clearly
state that the payment to the supplier
will be made only after the goat
delivers the pre-stated amount of milk.
• Identify high yielding local breeds and
their suppliers
Upkeep of the
livestock
Since the cost of the original
animal is not borne by the
employee, they might not take
proper care of the animal.
The result could be
deteriorating health of the
animal, as well as low
productivity.
• The formation of Village Committees to
ensure continuous monitoring.
• Village supervisor to make daily visits
to each household and record the
health status of the animal with a
camera. The body weight of the animal
will be measured at regular intervals
and if it falls below a particular level,
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the cattle to be taken back by the
company. All of this will be
communicated to the employee
beforehand in the agreement. Also,
since a major part of the milk will be
owned by the employee, s/he has a
positive incentive to maintain the
cattle.
Competition
from other
milk buyers
The employee might report
lesser milk, and sell it
elsewhere to other parties in
milk business.
The result could be a
substantial decrease in
Samridhi’s revenues.
• The initial agreement will stipulate the
amount of milk expected by Samridhi.
In case the shortfall reaches a
particular amount, Samridhi will take
the livestock back from the employee.
• Day-to-day monitoring done by the
Village Supervisor.
Reproductive
Risk - Goats
Time distortions in the
delivery of goat kids resulting
from external factors beyond
the control of the goat rearer.
Slower scalability. • Samridhi will arrange for Artificial
Insemination for the goats, improving
the likelihood of consistent
reproduction. Also the Pashu Sakhi will
record regularly track the time of
goat’s heat period to time the artificial
insemination appropriately.
Copycat Another organization could
imitate the model in the same
The potential employee may
shift to the competitor, thus
• As the incumbent purchaser in the
target area, it is difficult to another
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Competitors geography, and become a
direct competitor.
causing a decline in our
revenues.
party to enter the same geographical
area. Furthermore, Samridhi has
established an expertise in its
management personnel and
partnerships.
Livestock Mortality
Cows and goats are both being
procured from another state.
Adaptability to the extreme
winter climate in UP
• Each village will have a Pashu Sakhi
(para-vet) trained in basic veterinary
services, and livestock management.
• Village supervisor will make weekly
visits to the livestock rearers’ houses
to ensure that livestock is being fed
properly
Milk Supply Women diverting their milk to
other channels specially
during festivals or local events
Decline in Samridhi’s
revenues
• Samridhi will form a village committee
consisting of one Samridhi field staff,
two ultra poor members and one
opinion leader in each village. The
committee meets regularly and
ensures that there is peer pressure
maintained to discourage women from
diverting the milk
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Samridhi’s Key Values
• Transparency:
Quality standards and pricing information are shared with producers without
restriction. Additionally, producers witness quality tests being done on the milk
right in their villages, and are given clear tools on how price is determined along
with test results. This guarantees fair treatment for all individuals who Samridhi
purchases milk from.
• Direct & Regular Touch with Producers:
Due to their inability to procure sufficient quantities of milk, many dairy facilities
have no option but to run below capacity. This inability to maintain regular milk
supplies can be attributed in part to their negligible presence in producing villages.
Most private companies normally tend to ignore this crucial part of dairy business
and have to depend on middlemen for procurement. Samridhi’s promoters hold
degrees in rural management from premier institutes, but also have worked in the
rural areas alongside milk producers. Under their leadership, Samridhi’s systems
have been developed to ensure regular contact with the milk producers.
• Professional Management
As a highly perishable commodity, milk handling, processing & marketing requires a
great deal of domain knowledge. Samridhi places a lot of emphasis on
professionalism in its operations, regularly collecting and analyzing data on both the
milk it is purchasing and the individuals who are collecting it. Information on
production levels and quality is reviewed daily by management to identify any
potential issues in the process. And a series of social metrics are systemically
gathered and evaluated to ensure all Samridhi employees are meeting their most
basic needs and making continued progress out of poverty.
• Expected Outcomes
Each Samridhi BMC is expected to create 1500 jobs at full capacity. Many of these
jobs are filled by women without any other predictable income stream. These
employees are expected, after receiving steady and increasing incomes, to meet
their critical needs and benefit from a better quality of life. Samridhi is diligent
about collecting and reporting on social metrics to ensure the salaried positions are
generating a tangible improvement in the lives of employees.
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Based on initial lessons from pilot activity, below are the key metrics and expected
outcomes over a period of one to two years:
Metric Pre-intervention Post-intervention Measured via
Residence Live in a “kaccha”9 house Live in a “pucca”10 house
Household Index
Household Assets
Household asset value less than $100
Household asset value of over $300 including cots and other furniture, refrigerator, electric fans, etc…
Household Asset Index
Grameen PPI ™ Score
Average score less than 25 Average score 35 or above Grameen PPI™11
Children’s
Education
Children not enrolled in school because parents cannot afford school fees
75% of school-age children are enrolled in either government or private schools
Household Cash Flow
Financial
Inclusion
Don’t have bank accounts and don’t save
Active bank accounts with regular savings
Samridhi metrics
Number of Meals
Average 1.5 meals/day Eat 2.5 meals/day on average
Customers note increase in variety of food
Samridhi metrics
Current Partnerships
Partner Services Offered Arrangement
Sanchetna Financial Services Private Limited
1. Providing customized loan products to meet the requirements of the clientele in the area of operation
2. Information sharing about the possible areas of intervention
Identical set of promoters
9 Temporary made of natural materials such as mud, grass, bamboo, thatch or sticks 10 A more stable house that has fixed walls constructed of stones, cement/ concrete, timber, etc. but roof is made up of the material like
un-burnt bricks, bamboo, grass, thatch, etc. 11 The Grameen Foundation Progress out of Poverty Index™ (PPI) is designed to measure the poverty levels of households and to track
changes in poverty levels over time.
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Upaya Social Ventures
1. Bridge capital investment 2. Technical support on the business
planning and inclusion of ultra poor households
Capital Investment
The Goat Trust
1. Sourcing of milk cattle 2. Training of Pashu Sakhi 3. Breed enhancement of goat population
in the area of intervention
Memorandum of Understanding
Devashish Milk Foods Pvt. Ltd.
1. Purchasing milk from Samridhi 2. Providing support in chilling milk
Memorandum of Understanding
Management Profiles:
Lokesh Kumar Singh
Lokesh is a Chemical Engineer from HBTI, Kanpur and holds a diploma in rural
management from IRMA. He has over seven years of experience in different fields. He
worked in SKS Microfinance Pvt. Ltd. (India’s largest NBFC-MFI) for over 3 years where he
headed the expansion between 2004 and 2007 in 12 states including UP, MP, Rajasthan &
Bihar. During this time, he built and managed a loan portfolio of over Rs. 200 Crores with
100% repayment rate. During this period he recruited and managed over 1200 employees.
Having been associated with Samridhi since inception gives him insights into managing the
overall operations of Samridhi. He looks after the functions of procurement as well as new
initiatives which has mandate to enhance the procurement as well as other interventions to
meet the requirements of customers of Samridhi.
Niraj Pareek
Niraj is an alumnus of the Accenture-XLRI HR Academy (first batch) and has over five years
of experience. He worked in the Accenture India Delivery Centre at Bangalore for over two
years in the HR Team. As part of their recruitment team, he was involved in recruiting over
24,000 employees in two years. Prior to Sanchetna, he had a stint with a UP based MFI,
where he managed their Varanasi and Dehradun regions.
Niraj was instrumental in spreading the operations of Samridhi to different geographies.
Currently he looks after the function of procurement which includes starting new centers,
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maintaining chilling facilities, looking for prospective buyers of the chilled milk as well as
co-ordination with Business Development team so as to enhance the procurement.
Board Members
Member Qualification Current Occupation Prior Experience