Coming to the concerns raised by you,
1). About the management overpaying itself, the AR lists five directors who are paid a total of 1.34 crores as remuneration. Selling expenses might be higher because the company has its own brands of seeds and sales of these might need the initial push.
2). Coming to debtor days, according to an anagram report, debtor days have come down from 116 in fy 09 to 92 in fy 10 whereas inventory days have gone up from 147 to 227 days. This could be thought of as a key monitorable.
Company has recently completed a capex of 60 crores which will help it ramp up its revenues to more than 400 crores from current level of 200-220 crores expected in fy 11 without too much further capex.
Coming to free cash flow, company generated free cash (although low amount) during four of the last five years. March 06 and March 07 it was positive around 1 crores whereas for March 08 it was 14 crores. For March 09 it was negative to the tune of 5.52 crores and again back in March 10, around plus 6 crores. ( I dont know where you got FCF negative figures for last four years)
3). Inventory days as you mentioned have gone up to 227 days but I guess seeds if stored properly would not perish. Plus the company has a seed bank at its new facilities where it stores seeds and germplasm from which it generates hybrid seeds. I dont know if that too is included in inventory.
Coming to pluses and minuses in this company:
1). Company has currently only 2% market share in cotton seeds and it contributes around 25% to topline. So if it can increase its market share, the revenue potential looks huge.
2). If you look closely at the sep qtr results, the micronutrient division has started contributing to the top and bottom line and this could be another trigger going forward. Plus it would help the company in pushing revenues in lean quarters -- June is traditionally the best quarter for the company and other quarters mostly are lacklustre.
3). Management seems to be good looking at the way they have steered the company and handled their expansion. With most of the capex done, if things go according to plan, the company can ramp up their revenues without too much capex. Always an ideal situation to be in.
4). Regarding valuations, you can compare its valuation with other seeds companies like monsanto, Advanta, camson bio etc which are in peer group. Most of these quote at much higher valuations.
Weather plays an important role in the demand for seeds and hence to that extent the company is dependent to some extent on weather.
Any kind of govt intervention in seeds policy can create problems.
June qtr is usually best quarter and to that extent there can be some price fluctuations. March is usually the worst quarter.
Inventory days are high and need to be monitored.
Valuation is different from person to person so it is difficult to decide ideal valuation to enter a scrip. But according to my perception, for fy 11, since the best quarter is behind, there are less chances of negative surprises in next two quarters. So at around 11 PE for a low debt company with lots of scope to grow having completed its capex, this looks attractive.
Technically, the scrip broke out of multiple tops in the region of around 310-330 during Sep 10 and since then has hit a high of around 450 and now come down to test the earlier resistance zone of 310-330 (which according to change of polarity principle is likely to be a support zone now-- Any stiff resistance zone if crossed by a scrip tends to be a support zone on subsequent declines-- We are observing similar pattern in Mayur uni where earlier resistance of 270-280 now is acting as support zone.) Now it would be intersting to see if scrip can take suppport of this 310-330 zone and can move up from hereon.