Concall Summary: Kaveri Seeds Q4FY20

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:
  1. 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

1. Expecting cotton acreage and other crops like maize and rice should remain the same in FY21 like it was in FY20
2. There is support from the government for cotton farmers and hence not seeing any negative sentiment from farmers in sowing of cotton crops
3. Sticking to the earlier guidance of revenue growth of 15% and EBITDA growth slightly higher than revenue growth 
4. 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
5. The management doesn’t see any significant downfall in the acreage of maize because Northern states are encouraging farmers to sow maize
6. Last year monsoon was good and groundwater reservoirs are full and similar situation is expected for the current year as well
7. The price fall in maize should not affect farmer sentiment in not sowing maize for the current year
8. Have not had any disruption in operations and since the company is in essential commodity business have not faced any trouble
9. Holding inventory of around 1 crore packets of cotton currently which is similar as last year
10. Have been growing market share in hybrid rice segment
11. 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
12. 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
13. Not seeing any difficulty from farmer end in terms of purchases for crop sowing for seeds segment
14. Corn prices have increased quite significantly over the last few years and even after falling slightly last year it is still remunerative for farmers
15. Also looking at climatic conditions there aren’t many crops that can replace corn in terms of having similar remunerative attractiveness
16. 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 
17. The seeds segment is already dominated by the large organized players and 80-85% segment is currently served by Top 10 players
18. The revenue growth guidance that the management has is also dependent on high growth coming from non-cotton crops
19. Currently, cotton and non-cotton crops constitute equally to the total volumes of the company
20. The CAPEX for the current year will be similar as last year and don’t see any major CAPEX requirement in the near future
21. 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
22. In cotton seeds margins are around 15-20% and in non-cotton crops margins are as high as 30-35%
23. The advances from customers have been higher this year than last year around Rs 220 crores compared to Rs 200 crores last year
24. 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