Potatoes are grown across 130 countries and form the largest non-cereal food crop consumed in large per-capita measures in some of the Eastern European and South American countries. India is the world’s third-largest producer of the crop and is estimated to consume about 25 million tonnes each year. Calcutta-based Sumangal Industries Limited launched a high yield investment program under the banner of the Flexi-Potato Purchase Scheme. Market regulator, Securities and Exchange Board of India (SEBI), took exception to the company’s collecting uncollateralized deposits from the members of the public without due registration, and issued prohibitive orders.

This case puts the facts underlying the offering in perspective and conducts a micro-economic analysis to assess the strengths of the business proposition. The statistical analyses reveal that the volatility and predictability of seasonal pricing patterns that the company seeks to exploit may not continue beyond the short-term. Further, the early success of the scheme is likely to attract entry into the segment, thereby squeezing arbitrage margins and enhancing business process costs. This case also lays out facts relating to exogenous influences on the local potato market and encourages policy makers to adequately inform potential investors as a means to empower them to make sound resource allocation decisions. The conclusions of the case could be applied beyond West Bengal, and beyond India, to other agricultural produce and pyramidal investment schemes, qualified by local conditions.

Learning Objective:

• Urge students to remove ambitious marketing terminology and to uncover the underlying theoretical and fundamental premise of a business proposition.
• Provide students with the experience of undertaking a micro-economic analysis of a real-world situation, and to validate assumptions relating to potential investment opportunities.
• Enable students to explore the limitations of free-markets and to decipher the influence of state and non-state actors on micro-economic outcomes such as the determination of price-quantity equilibriums of apparently humble, everyday products.
• Redefine the role of regulation and coordination among regulators to empower the potential investors with adequate information to make their own investment decisions.