(iStock)
(iStock)

Buy mango bonds for the love of Alphonsos and not returns

  • This scheme is more of a subscription than an investment as the payback is in the form of mangoes
  • Invest only if you are keen to support a social venture and are willing to lock your money for five years

What do you make of an investment product that promises returns in kind instead of cash? The logical reaction would be to move away from such a proposition. But if the proposition entails a steady supply of Alphonso mangoes, looking the other way may be a tad hard. Cashing in on your love for mangoes is the Mango Scheme 2.0 that was launched by Devgad Taluka Amba Utpadak Sahakari Sanstha Maryadit, a cooperative society consisting over 700 farmers in Devgad taluka, Maharashtra. Akin to a collective investment scheme (CIS), the return from this scheme comes in the form of yearly supply of Alphonso mangoes.

But should you really view this as an investment or a subscription scheme?

How does it work?

The scheme prospectus likens the scheme to a five-year fixed deposit, where you park your money for five years, and every year the scheme offers a 10% return in the form of mangoes. At the end of the tenor, you get the principal back.

The minimum amount that needs to be invested is 50,000; thereafter, you can invest in multiples of 5,000. So if you invest 50,000 this year, you will start getting mangoes worth 5,000 (10% of the deposit) every year for five years. But remember, it’s not a fixed deposit because you can’t liquidate your money. The scheme comes with a lock-in of five years.

You can choose the type of mangoes you want to receive. There are eight different grades of Alphonso mangoes, and as you lock in your money for five years, the scheme rewards you by locking in the prices. You don’t need to take the mangoes all at once and can choose different delivery dates in advance to spread the supply across the season, which usually lasts 8-12 weeks. The minimum gap between two deliveries needs to be at least a week.

“In this scheme, we offer rate protection, wherein the prevailing rates for the year you invest in will get locked in for the next five years. After five years, there will be a price revision. You can either accept the new price and lock-in your deposit for another five years or move out and get the principal back," said Omkar Sapre, one of the board members of the cooperative society. “We have had over 200 people invest in the scheme since its inception and have raised over 1 crore," added Sapre.

Just to see how this subscription model stacks up against buying on your own, we compared the prices of A1+ grade mangoes—the superior Alphonso variety—under this scheme against the prices available online. We found that the prices published for the first week of May were lower or at par with other online retail portals.

To invest, go to Devgadmango.com/mango-bonds and fill out the Google form. You’d be prompted to provide your name, email address, mobile number, who you are purchasing the bonds for, the amount you wish to invest, the preferred grade of mangoes and the dates of delivery. There are multiple ways of making the payment. However, only buyers in Pune can make cash payment.

Should you invest?

According to Shyam Sekhar, chief ideator and founder, iThought, a financial planning firm, it is a high-risk investment in an untested domain. “The scheme looks like a collective investment scheme with the built-in benefit of paying returns in kind. Unless the fiduciary angle is validated, investing is fraught with risks. The continued land ownership of participating farmers needs to be ensured for the supply promise to be fulfilled."

We couldn’t find any offer document for the investors to go through and understand all the risks involved in detail or any grievance redressal mechanism. “We need to ensure there is a fall back for investors if supplies are not ensured. The investor must know how to redress a future grievance," said Sekhar.

Co-operative societies are governed by their respective state laws and, typically, don’t come under any regulator like the Securities and Exchange Board of India (Sebi) or the Reserve Bank of India. “Even if such a scheme doesn’t need Sebi approval and is not required to register with Sebi, in the interest of investor protection, they should at least comply with the CIS guidelines as it will bring in more trust, which the scheme doesn’t do at present," said Prithvi Haldea, chairman of Prime Database Group, a primary market tracker.

As an investment, this scheme doesn’t inspire confidence. According to Shyam Sunder, managing director and co-founder at PeakAlpha Investment Services Pvt. Ltd, a financial planning firm, a scheme like this should be seen as more of an expense. “I think people invest for many reasons. The primary reason is to make money. But other reasons could be to support an industry they love, or a product they love. In such cases, they can consider buying these bonds but this is not an investment," said Sunder.

You should also keep in mind that the scheme is ultimately linked to Alphonso mango production every year. The crop production is always affected by things that are not under farmers’ control. However, the cooperative society claims that the supplies are ensured even in years of low production as the investors are first catered to before they reach out to the open market.

According to Sekhar, this should be seen as more of a social venture investment since farmers are taking the initiative to access social capital and their initiative can be supported by those for whom 50,000 would not move the needle much. Others could also consider opting for a seasonal subscription from the same society for a home delivery or turn to the regular local supplier.

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