venkatesh,
The list u put up extends to some more pharma companies like etc., Housing finance companies etc, manufacturing/consulting companies like newspaper companies etc. Kitex is under my watchlist. I would want to watch it for any improvement in business fundamentals.
An interesting read this ;
India “not scared” if Monsanto leaves, as GM cotton row escalates -
U.S. seed company Monsanto is welcome to leave India if it does not want to lower prices of genetically modified cotton seeds as directed by the government, a minister said on Wednesday, in a sign the rift between New Delhi and the firm is widening.
In case if monsanto leaves india…what could be the potential effect on Kaveri seeds…Does that mean they will loose all the cotton seed business…which makes around 70% of the total revenues…Please some one answer this if I am interpreting this wrong
Worth reading…
How Monsanto found an able adversary in the Sangh parivaar
KSCL management had said in the concall that the forensic audit initiated by SEBI was a routine matter. SEBI response to RTI request - Has initiated only 2 forensic audits over the last 3 years (including KSCL). Seems like SEBI rarely takes such a step.
SEBI response attached.
Wow amazing diligence amit - keep up the good work.
Thanks Amit for filing the RTI and getting the response.
Good to see the initiative taken by you., Amit
A good initiative, Kudos to Amit,
But the reply from SEBI and KSCL is contradicting.
KSCL is saying it is a “routine matter” but SEBI’s reply implies it is a “rare event”. Now I understand it is upto us to seperate the “Chaff”, but I am concluding that the doubt on KSCL is still unresolved.
Correct me if I am wrong.
Think again. The 50% loss is not notional, but real.
Rough notes on Kaveri Q4FY16 concall
Q4FY16 concall Rs. Cr
Revenue FY16 FY15 FY16 FY15
Cotton pkts - lacs 55.86 86 540 790
Maize - tons 9150 10067 157 162
Paddy - tons 2000 1510 80
Lint 48 39
Others ??
825 991
Royalty paid cr 38 155
(11 lac pkts in maharashtra. Total mkt in maharashtra = 1.3 cr)
Total market size = 75000 mt. Mkt leader - Dupont, Monsanto
Jadoo volume FY16 = lac pkts 35
Jadoo volume FY17E= lac pkts 44
AP and telangana state govt discouraging farmers to go for cotton. Hence acreage may drop in FY17
FY17 guidance - cotton 6.5 to 7 million packets
FY17 guidance - non cotton 23-25% growth over FY16
Maize acreage may go up…… Due to good expected monsoon
EBIDTA - non cotton = 28-30%
Cotton seeds market size 5.3 cr 14-15
4.3 cr 15-16
4.2 cr 16-17 E
EBIDTA per packet - cotton seeds - Rs 200
KSCL expects 20% volume growth in FY17 over FY16 resulting in market share gains
Strategy for market share gains
employee costs….9 cr per quarter - standalone. 11cr per quarter - consolidated
Decision for utilisation of around 500 cr towards dividend or buy back in Q1FY17 con call
Forensic audit is under process. May take about 1 year to complete
New plant in karim nagar…… near main paddy growing area
Capacity = 10mt per hour
Production cost - cotton seeds FY16 340 per pkt
Production cost - cotton seeds FY17E 380 per pkt
The incremental cost would be passed to dealers (reduction in discount) and farmers
Mithun Chand interview - 11/May…CNBC
Impact of changes in MRP and Royalty
Particulars Earlier Current
MRP of cotton seeds 930 800
Royalty (incl of service tax) 185 49
Net 745 751
So there is no impact on margins due to reduction in MRP as royalties have been reduced correspondingly
However, the production cost is likely to increase in FY17 (refer concall notes above)
Disc: Tracking. Not invested
Area under sowing for kharif cotton crop is down by 20% while it is up for almost everything else as of July 15 2016 (Source ministry of agriculture). However, total sowing area is up by 4% this year compared to same period last year. Looks like farmers have switched from cotton to pulses and other cash crops. Monsoon is also delayed this year. that will push some seed sales to July from June. This will impact June qtr sales which is a major qtr for Kaveri.
If June qtr results are bad stock will take a beating. No news on SEBI audit yet. So that’s another overhang.
Thought of sharing this article in todays ET (20/Aug/16). The landscape for GM seeds appears to be very large…it covers maize, soyabean, cotton, potato, canola, papaya, alfalfa and squash. And there would be many more to come.
From the article one can deduce that Nuziveedu seeds equation with Monsanto has soured significantly. Wondering whether - Once the Monsanto - government issue is resolved…would it be a significant advantage for Kaveri Seeds?
Monsanto pulls new GM cotton seed from India in protest
This is not a good news for Kaveri. 70% of their sales come from BT cotton and they and other seed companies depend on Monsanto for developing new varieties of seeds to protect against pests that develop resistance to existing seeds.
Earlier this year, govt put price controls on private royalty price arrangement between Monsanto and seed companies. Monsanto had threatened to pull out of India. Govt has since withdrawn the order but Monsanto is still pulling out.
If not from Kaveri and other Indian seed companies in similar position, then from where will the farmers buy cotton seeds? So this should be bad for all Indian seed companies. The farmers might shift to other crops and that should be a big push for cotton prices.
Going by the tough stance taken by the government, hoping that they have the indigeneous solution for this around the corner.
Kaveri Seed made a 3 cr donation to TRS in FY15
Their annual report was released on 1 Sep 2016. Following observations
http://www.kaveriseeds.in/images/annual-reports/annual_report_2015_2016.pdf
They have not even mentioned the SEBI ordered forensic report anywhere in the report despite the audit being ordered in Dec-15 which is during the financial year. Even the secretarial auditor has not mentioned it, which draws a question on the company’s willingness to disclose
The COO appointed in May-15 is a veteran of 2 decades in the agro chem industry, last working with BASF. The remuneration is decent ~1.1crores. However, not on the board of directors.
3)The MD&A does not even talk about market share (or movement therein), competition activity (other than being dismissive that farmer will go for quality) or industry specific concerns such as Bollgard-2. I did not learn anything from this.
4)they pay negligible VAT or service tax being an agriculture industry. The possible GST impact is not even alluded to in the report http://finmin.nic.in/reports/modelgstlaw_draft.pdf the draft GST law specially excludes seeds from the definition of agriculture via Section 2(7) which states that
2(7) “agriculture" with all its grammatical variations and cognate expressions,
includes floriculture, horticulture, sericulture, the raising of crops, grass or garden
produce and also grazing, but does not include dairy farming, poultry farming, stock
breeding, the mere cutting of wood or grass, gathering of fruit, raising of man-made
forest or rearing of seedlings or plants;(emphasis added)
5)the industry appears pivoting towards an integrated approach involving seeds, pesticides and biologics. There seems a real risk of disruption due to this and competition from integrated players like Bayer Crop sciences.
While one must appreciate their double digit CAGR across revenue, profit, assets, the disclosures are far from adequate in my view,. This is a case where an investor will not get a balanced view from the annual report.
Kaveri Q1FY16 Results out :
1) Revenue : at Rs. 493.97cr v/s 539.36cr for Q1FY15 (down 8.41% on Q-on-Q basis )
2) Net profit after tax : Rs. 160cr v/s 222.28cr for Q1FY 15 (down 27.89% on Q-on-Q basis )
( Yet Employee benefit expense see a 72% increase from 6.22cr to 10.74cr ).
Discl : Not invested.