Despite having been in existence for six years, the firm started collecting money from the public only in the last two years. It has raised approximately ₹70 crore, which has been deployed over an area of more than 3,000 acre of land. Currently, over 2,000 investors have subscribed to this platform, according to the firm.
Since the returns are in the form of agricultural income, they are exempt under the Income Tax Act, 1961, in India. As a result, the income in the hands of investors is also tax-exempt. However, there are certain risks that investors need to take note of due to its operating structure.
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(Graphics: Mint)
Here, we outline how Growpital works, based on information from its website and an interaction with its founder, Rituraj Sharma, and highlight the potential risks associated with such investments.
1. What is Growpital?
Growpital is an agricultural investment platform that claims to offer tax-free fixed-profit sharing to investors ranging from 10% to 15% on investments.
The funds are invested in agricultural project portfolios, where investor capital serves as working capital for farming.
The platform manages farm projects either through an in-house team or by partnering established market players. The firm ties up with farmers and provides standard operating procedures to them on farming.
Growpital compares itself to a mutual fund, with diversified crops being grown across farm projects.
2. How will Growpital utilize the funds?
It utilizes funds to take lands on lease in different parts of the country and develop the basic minimal infrastructure, which can be used for irrigation. By selling the crop produce, the firm earns revenue.
The firm’s costs include lease rental to landlords, other working capital costs of farming, fixed payment to farmers and fixed profit sharing to investors.
3. Why are the returns called profit sharing?
Growpital designed LLPs (Limited Liability Partnership) to collect funds. Your investment is considered a capital contribution and you become a partner in LLP. The asset (farm projects) is owned by the LLP and all the partners in the LLP are considered legal co-owners, as per the firm.
You get fractional ownership of the farm projects under your name as per the amount invested by you.
Note that since your income will be in the form of business income, the investor needs to file a specific ITR return showing income under business or profession.
4. Who bears the price risk and weather risk associated with farming?
The risk will be borne by Growpital. But the company claims to reduce these risks by investing in varied crops across 11 states including Rajasthan, Madhya Pradesh, Maharashtra, Karnataka, Odisha, Bihar, Uttar Pradesh, Kerala, Chhattisgarh, Haryana, Chandigarh.
5. Why is it not under a collective investment scheme?
According to the founder of the firm, under a collective investment scheme (CIS), there is a lack of control by an investor over the funds allocated to any activity. However, in Growpital’s case, there are certain powers vested in the partners. For instance, important decisions such as obtaining a loan or debt from a bank require approval from more than 60% of the partners in the LLP, added Sharma.
6. Is there any lock-in period for investments?
For most plans listed on Growpital’s platform, there is a lock-in period of 12 months.
If you withdraw before the committed period ends, the project entity would deduct all payouts given to you from the original investment amount and pay the remaining amount to you.
However, if you make any withdrawal request after the committed period and before the maturity period, the original investment amount shall be repaid.
7. How liquid are the investments?
The firm claims to offer quick liquidity if the investor wants to exit. In an interview with Mint, the founder of Growpital, Rituraj Sharma, said that they keep enough buffer that even if all the investments are withdrawn on the same day, the firm will be able to pay 65% of capital back, while the rest will be paid in 3-4 months of time as the revenue from existing standing crop or inventory realizes.
8. What are the risks with its structure?
It is important to understand the terms and conditions of the partnership agreement that an investor enters with the firm.
Generally, a partner in a firm has a share in both profits and losses of the firm.
If Growpital offers assured returns of 10%-15%, it is important to make sure if the partnership is exempt from taking losses. Otherwise, there is a risk of investors incurring losses on capital invested if the fund does not generate the desired results.
When investing in any financial product, it is important to understand how the fund will be utilized. While the generic information is presented by the company on its website, it is important to verify the books to ascertain the authenticity of promises made. Being an LLP, its information will not be directly available in the public domain. So, one needs to ask if there is a right to access books/accounts of the firm as a partner.
Further, where retail investors’ money is involved, crowdfunding would be scrutinized strictly by the government or regulators in the interest of investors.
If principles of partnership are not followed by providing assured returns (which takes the form of a loan), there could be a possibility of Growpital’s investment process being categorized as an unregulated deposits scheme. Note that as an LLP, the firm is covered under the Ministry of Corporate Affairs and not regulated by Securities and Exchange Board of India, which governs and regulates most of the financial products in India.
(With inputs from Vinod Kothari & Company on the general structure of LLP and unregulated deposits)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
