By Aman Shah
Cannabis? In India? First LGBT rights, now cannabis? Have we suddenly become too progressive? These questions revolve around every youngster’s minds who has been brought up watching American TV shows and movies. India is on her way to becoming one of the few countries to have done so when only half of the American states and very few of the European countries have done the same.
It is true that two of India’s own “business celebrities” have not only supported but invested in a start-up named Bombay Hemp Company (BoHeCo). This start-up is one of the first few in India to study the medical use of cannabis. This Mumbai based start-up has been funded by Ratan Tata, the Chairman Emeritus of Tata Sons and the MD of Google India, Rajan Anandan. The seed-investment of $1 million was received by the start-up.
What is BoHeCo?
As mentioned, this start-up was founded when seven Mumbai University students discussed some innovative solutions to the problems that still scourge Indian agriculture. Bombay Hemp Company (BoHeCo) started with the best of motives and the idea grew ripe when one of the friends came across the Australian hemp ecosystem. Australian Hemp Ecosystem is based on ecological sustainability, modelled to boost-up the sustainable development ideology in Australia that benefitted localites. That is when they were convinced of hemp–a super crop (as they call it) having immense potential in India.
BoHeCo currently markets few products in two categories– Handloom and Seed Oils. It proudly markets its business model that revolves around the industrial use of Hemp: A variety of the Cannabis sativa plant species that is grown specifically for the industrial uses of its derived products.
BoHeCo claims to have a formula to take the nine-thousand-year-old wonder crop of the Himalayas, cannabis, and transform it into a channel that powers the future. The company currently sells handloom shirts and dresses made by women of Uttarakhand who lost their livelihood during the floods of 2013. Along with it also sells wallets and scarves made of hemp-yarn. Also, it has already commercialized a hemp seed oil claimed to be the world of nutrition to the human body.
What are BoHeCo’s long-term plans?
BoHeCo in its 2013 interview had already stated itself an inexpert of carrying out research on hemp seeds by itself. It had collaborated with Council for Scientific and Industrial Research (CSIR) to do so. BoHeCo cofounder, Avnish Pandya says the company had its first batch of cannabis plants cultivated in Jammu & Kashmir within the CSIR framework. The company had its initial funding used in the research. The seed funding by Tata and Anandam will primarily be used in hiring scientists from countries such as Netherlands for R&D as well as hiring business development executives.
The state governments of Himalayan states Uttarakhand, Uttar Pradesh and Himachal Pradesh have shown an active interest in cannabis cultivation permits. The governor of Himachal Pradesh has invited BoHeCo to collaborate with the state government to foster the commercial use of hemp. It also plans to develop a better supply-chain to commercialize the handloom products from Uttarakhand. For that, it plans to expand its current centres of fashion boutiques all over India apart from its well-established ones in Jaipur, Rishikesh and Goa.
Is there any history of Cannabis in India?
Bhaanga—a traditional Indian drink—is mentioned in several Indian texts dated before 1000 CE. Though it is debated as to whether this bhaanga can be identified with modern bhang or cannabis. In some parts of India, medicinal properties are attributed to the cannabis plant.
As bhang has served such an important role in India’s culture and religious practices, it hasn’t been possible to criminalise cannabis completely in the country. Cultivation of cannabis is government-regulated. The cultivation of industrial hemp in India is legal.
Indian laws related to Cannabis
India is currently following its Narcotic Drugs and Psychotropic Substances (NDPS) Act of 1985. There have been certain amendments to the act but it still clearly mentions the illegality of the drug. NDPS says cannabis is illegal but it has dropped bhaanga from its definition. According to the Act, Cannabis means charas, ganja or any other mixture containing any of them.
NDPS banned the production and sale of cannabis resin and flowers, but permitted the use of the leaves and seeds, allowing the states to regulate the latter.
In July 2017, Union Minister of Women and Child Development Maneka Gandhi suggested that marijuana be legalized on the medical grounds as it would reduce drug abuse and aid cancer patients. But this all came under effect when the cabinet examined note on National Drug Demand Reduction Policy. After around a week from the minister’s statement, the Union Government issued the first-ever license to grow cannabis for research purposes to the Council of Scientific and Industrial Research (CSIR), in collaboration with the Bombay Hemp Company (BOHECO)–the start-up here focused upon.
When reports by a research firm say that marijuana-based start-ups are expected to reap more than $10 billion in sales in 2018, you know that Indian start-up has to have a place in the market-share of international cannabis start-ups. The weed related deals from private equity and venture capital are as shown in the figure below. (Source: pitchbook.com)
American cannabis start-ups raised a record amount of venture capital last year, with 69 companies snaring nearly $274 million, according to PitchBook.com
There are special websites to get funding for cannabis start-ups in the United States. These sites serve as a platform for an idea for a new marijuana business or a cannabis product. They work for the companies from putting up a strategy to holding up parties for fundraising.
The news of BoHeCo put a curtain on the news of Attorney General of US Jeff Sessions’ decision to overturn an Obama-era policy that allowed legal marijuana to flourish. 94% of Americans have supported medical marijuana. While 64% have asked it to be legal nationwide. There are currently thousands of people employed by the legal marijuana industry. Sessions have taken back the Obama-era memo, which instructed federal prosecutors to deprioritize marijuana crimes in states where marijuana’s legal. This may slow down the industry a little bit as it may insert fear into customers’ minds.
Eaze Solutions Inc. – A Case Study
Eaze launched in July of 2014 to help medical marijuana patients order cannabis on demand. It soon expanded to allow people to get a medical weed card in the state of California over the phone in under 10 minutes. The company has been provided with fundings of more than $50 million till today. The company attracted investors like rapper infamous for his history of drug abuse – Snoop Dogg’s company Casa Verde Capital LLC.
|Nov 5, 2014||1.5 million dollars|
|April 14, 2015||10 million dollars|
|Oct 24, 2016||13 million dollars|
|Sep 14, 2017||27 million dollars|
|Total||51.5 million dollars|
Despite federal prohibitions by US government, Eaze now operates in more than 100 cities. The company excels as executives leverage generous promotions, fierce expansion and, per several sources, hard-hearted negotiation tactics.
The company records a 30% gross margin on the sales of marijuana and cannabis-related products for medical use. Though its 10 minutes guaranteed delivery business demands a lot more money into operating costs. Such higher operating costs and expansion costs have led this start-up to note a $12 million net loss in the fiscal year of 2017. Though the company sees a steep growth in revenue each year. The revenue growth has been as high as 118% between 2015 & 2016.
What can be predicted for BoHeCo from Eaze Solutions?
BoHeCo has already set its foot into the retail business and is expected to see much higher operating and expansion costs. This may not be contradicted by the forecasted sharp revenue growth of the company. BoHeCo though may report high gross margin in the upcoming years but the real expenses of the company lie in the investment in Research and Development. This may increase Operating Costs by a huge margin and BoHeCo may report losses for some upcoming years.
But the real catch for BoHeCo is acquiring intangible assets like patents or certain rights for marketizing hemp in the Indian market. The whole of the discussion of BoHeCo’s growth boils down to one question of the legality of cannabis for medicinal use in the Indian market. Certain steps have been taken by the Union government to do so after the statement by Cabinet Minister Maneka Gandhi.
Also, the last question to be asked is whether Ratan Tata (also a well-known philanthropist) had invested his money in BoHeCo for the encouragement of R&D in the sector or for the sole purpose of earning profits. Ratan Tata’s office hasn’t commented yet on so. These questions may be answered after looking at company’s performance over the years.
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