Business Update
- Revenues growth of 15% and EBITDA growth of 20% for the quarter and this should increase going forward
- Acreage of cotton has increased
- Cropwise volume growth:
- Cotton: 17%
- Two cotton hybrids are under demonstration currently with the farmers
- Introduction of new paddy hybrids have helped in volume growth during the year
- Total cash on books as on March 2019 is around Rs 350 crores
- In January the company successfully completed the buyback and deployed Rs 196 crores for the same
- Have received strong support from government in moving ahead with operations
Participants
- IIFL
- Motilal Oswal
- Fidelity
- HDFC Mutual Fund
- Edelweiss
- Wealth Managers
- IDFC Securities
- Oldbridge Capital
- Sunidhi Securities
- B&K Securities
- SMIFS
QnA
- Expecting cotton acreage and other crops like maize and rice should remain the same in FY21 like it was in FY20
- There is support from the government for cotton farmers and hence not seeing any negative sentiment from farmers in sowing of cotton crops
- Sticking to the earlier guidance of revenue growth of 15% and EBITDA growth slightly higher than revenue growth
- The acreage growth in cotton in Telangana should go up as state government is supporting farmers and have said to buyback entire quantity from farmers
- The management doesn’t see any significant downfall in the acreage of maize because Northern states are encouraging farmers to sow maize
- Last year monsoon was good and groundwater reservoirs are full and similar situation is expected for the current year as well
- The price fall in maize should not affect farmer sentiment in not sowing maize for the current year
- Have not had any disruption in operations and since the company is in essential commodity business have not faced any trouble
- Holding inventory of around 1 crore packets of cotton currently which is similar as last year
- Have been growing market share in hybrid rice segment
- In terms of revenue rabi crops are contributing 50% of the volumes in the maize segment and in the next two years this should get bigger as management is targeting newer markets
- As of now have not provided any assistance to the dealers yet and the season will start from June till August end and haven’t seen any pressure from dealers on cash flows
- Not seeing any difficulty from farmer end in terms of purchases for crop sowing for seeds segment
- Corn prices have increased quite significantly over the last few years and even after falling slightly last year it is still remunerative for farmers
- Also looking at climatic conditions there aren’t many crops that can replace corn in terms of having similar remunerative attractiveness
- Not seeing pressure on cash flows from dealers because cash collected from dealers have been higher and in agriculture sector haven’t seen any threat from COVID
- The seeds segment is already dominated by the large organized players and 80-85% segment is currently served by Top 10 players
- The revenue growth guidance that the management has is also dependent on high growth coming from non-cotton crops
- Currently, cotton and non-cotton crops constitute equally to the total volumes of the company
- The CAPEX for the current year will be similar as last year and don’t see any major CAPEX requirement in the near future
- As of now, there is no plan for buyback, there is no policy for buyback as such but if there won’t be any requirement for cash could go ahead with the same
- In cotton seeds margins are around 15-20% and in non-cotton crops margins are as high as 30-35%
- The advances from customers have been higher this year than last year around Rs 220 crores compared to Rs 200 crores last year
- Have gained market share in Northern India in non-cotton crops, In cotton have gained market share in Gujarat & Maharashtra
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Image Source: Kaveri Seeds Official Website
