Kaveri seeds company limited -- kscl

Just comparing the consolidated vs standalone- segment wise.

They have reported 91 Cr (consolidate) vs 84.39 Cr (standalone) in seeds division. Any idea which subsidiary is generating the seeds sales? The difference has been zero till last quarter for seeds division.

On inventory front, as compared to last year’s Q2, most inventory rise is cotton seeds, so cant be taken as positive indicator for next 2 quarters. In fact the line 2© in p&l denotes that the inventory has reduced. So we should not have an expectation of more then 130 eps for the year.

Another point worth noting is dramatic increase in payables and recievables. Any views on that front from experts?

Here are my brief notes. I couldn’t note the breakdown in rupees (and packets) for cotton, corn and rice although Mithun gave out those numbers for Q2 and H1. If anybody has written down those numbers, please post them here -

a) 65-68L cotton packets in FY14. They can atleast do a 20% growth in volume next year. And then 20% from there (Mithun was fairly confident he could do 1 cr packets). Q2 growth came in due to more cotton being sold in AP and Karnataka (not much in Maharashtra - as the season is almost done there).

b) Cotton production has been reduced this year (due to 55L inventory already existing). All other seeds production (corn, bajra, rice etc.) has been ramped up.

c) They had a 45% growth in rice and are seeing a lot of traction in the rice segment (he was sounding unusually bullish on rice througout the call). He is expecting easily 30-40% growth next year.

d) Their next growth drivers are corn and rice and he was confident that they could do very well in the next 2-8 yrs in these two segments.

e) Q3-Q4 Fy14 sales will be about 80-120 cr (last year, they did 180 cr sales in q3-q4). But their profitability will be similar to last year (last year, q3-q4 eps was Rs.16). It seems they may see higher realizations on corn.

e) They don’t see cotton acreage decreasing next year even if cotton prices go down (as they are going down right now). His response was ‘if the market doesn’t buy it, govt will. The farmer is not subject to a lot of downsides in cotton’

f) He doesn’t think cotton acreage is going to get affected next year due to the cyclone recently (and damage of crops on the AP/Odisha coast).

g) Most of the receivables have been received (and a few more will be received by December). Nothing to worry on that front.

135-140 EPS for FY14. My bet is on Rs.140. But these minor things shouldn’t matter.

I joined the concall a bit late but here is some info 10,000cr seed market may go to 15,000cr in next few years. Market can even go to 30-40000 cr in next 10 years. H2FY13 was 180-190cr but H2FY14 is going to be less, around 80-100Cr (n then management said maybe 120cr) but chances are that they will maintain profitability Next year cotton could be close to 80 lakh packets. No formal dividend policy but should be 20% payout. (Question was from Kiran Kumar… I think VP member) Not banking on price increase next year Good plans for corn. Plans to increase market share in MP and Gujarat next year. Maharashtra market share increase will take a couple of years

Hi Kiran, Here is the break up. Unfortunately I missed cotton 40cr bajra vs 40cr 62cr rice vs 50cr 80cr corn vs 65 cr 14cr microtek vs ??

And I have no idea why my posts are coming all in same line. Something wrong. So I have to post again… 40cr bajra vs 40cr… 62cr rice vs 50cr …80cr corn vs 65 cr… 14cr microtek vs ??

Here is the revenue breakup for Q2

38 cr Cotton (3.5-4 lac packets),20 cr bajra,12 - microtek,Rest - corn and other crops.

Found one point quite funny, to one question , company answered they have around 700-800 acres of company owned land where they R&D , germ plasm etc etc… Is done and around 8500 acre of land is used for contract mfg. of seeds.

To another question towards the end, company answered, they have only 400 odd acres of company owned land and he double confirmed this information!!!

I think last AR mentioned company owning 600 acres of land? This could be genuine mistake though, am not reading much into it.

Kiran, you didn’t mention a significant q&a from youself :wink:

Mgmgt. Said, they have the thought process to share about 20% of earnings as dividend, unless some capex (unplanned) comes up. So, I think we can expect 26-28 rs dividend in current year :slight_smile:

http://www.researchbytes.com/Conference-Calls-transcript-Kaveri-Seeds-14-Nov-2013-K0468.htm

Wow. The corporate profile on that link is very detailed. I think the pdf file was updated today, but only with Q1FY14 results.

Nevertheless, a very comprehensive corporate overview.

Just came across this piece of news,

cotton farmers cry foul as kaveri seeds dupes them,

If one googles on this one can even find this being reported on local news channels…

On a slightly different note, I have been a silent admirer of VP for more than a yr now, unfortunately my 1st post had to be of a seemingly negative news on one of my biggest holdings:) But seriously,thanks to one and all on this wonderful forum. It truly has been a grt learning experience, learnt much more here than I did in 2 yrs of my business school.hope to contribute to the best of my abilities…nd sorry for digressing from the topic guys.

Hi Mayank,

The link which you have forwarded is not opening.

Also, while searching I cam across a seperate news around July 2013, mentioning about farmers getting duped but the company in question was Ganga Kaveri Seeds.

Are you sure that its the company is **Kaveri Seeds **or Ganga Kaveri seeds.

Its Kaveri Seeds that I’m referring to…the following link might help,

https://www.google.com/url?q=http://www.thehansindia.com/posts/index/2013-11-29/Cotton-farmers-cry-foul-as-Kaveri-Seeds-dupes-them-78188&ct=ga&cd=NjQ0MTg1MTYyNzk3NTIzMDY5Mg&cad=CAEYAA&usg=AFQjCNEIGBWe-cP3mNzgD-RwOPa5ChKoHA

There is a google cache version of the news item here:

http://webcache.googleusercontent.com/search?q=cache:SDLYMcuaJyIJ:www.thehansindia.com/posts/index/2013-11-29/Cotton-farmers-cry-foul-as-Kaveri-Seeds-dupes-them-78188&hl=en&gl=in&strip=1

Looks like it is Kaveri Seeds since Jadoo is their brand.

Link to TV9 coverage of the same incident is given below for ref. :

_http://www.snehatv.com/Ondemand.aspx?purl=k3FOEWQrPro&Related=False_

Rgds.

Thanks Mayank for alert.

Here is the news item from the google cache copy pasted here for ease of others.

Vijayawada: Cotton farmers in Krishna district have allegedly been duped by a private seed company, by supplying low quality cotton seeds. They have taken up cultivation in the upland villages of Jaggaiahpet, Nandigama, Mylavaram and Tiruvur Assembly segments.

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Farmers are worst hit, with the crop failing on two counts—series of cyclones and rain and spurious seeds.

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They opted for the âJadooâ variety seeds of Kaveri Seed Company this year, following its wide publicity, claiming high yield.

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The company had hired several film actors to promote âJadooâ with promises of high yield. While it doubled the market share from five per cent in 2011-12 to ten per cent in 2012-13, along with its other popular brand âJackpotâ, farmers in the district allege that their loss was twice the annual return. According to unofficial sources, farmers used the âJadooâ variety in more than 300 acres, 150 acres in Mylavaram and Tiruvur and the same area in Jaggaiahpet and Nandigama segments.

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They say the crop developed moisture and lost colour in hundreds of acres, resulting heavy loss to them. They had invested around Rs 25,000-30,000 per acre and lost almost everything.

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Farmers in Kanchikacharla mandal of Nandigama, A Kondur mandal of Tiruvur and G Kondur mandals of Mylavaram are worst hit, by crop failure.

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They accuse the company of supplying spurious seeds, resulting in heavy loss. Farmers are getting ready for a show-down with the company, whose representatives did not even care to visit them despite repeated requests.

The TV link seems to be in Telugu, so couldn’t make out anything from it. Could you or someone who understands Telugu produce a summary of the issue. Is it reporting same things as the above print article ?

@Mahesh, You are one of vp’s respected expert on agro sector (partly my impression from pi & Dhanuka thread) but strangely i haven’t found you very active on Kaveri thread. Not sure what could be the reason? :slight_smile:

What’s your takeaway from the above incident? i can understand crop failure due to factors like cyclone, excess rains etc…but how far can it be linked to spurious seeds ?

I think we are entering cotton harvest season now, so can we expect similar claims from other areas too which had excess rains ?

Actually in summary I am asking views from knowledgeable people in this area about: does this issue has potential to spread like wildfire and cause damage to Kaveri’s business in the following year, or is it a routine matter even with other seeds and not to be taken very seriously ?

Hi Raj,

Yes I have been absent on kaveri thread although I have gone through the excellent extensive work done by Donald and other valuepickr members…seed business is a completely different business than crop protection and my concetrated portfolio approach has somewhat turned me away everytime I have looked at seed business…i prefer comprehensive agri-input players than pure seed players…this is not to say that seed is not a good business to be in ; seed business has excellent growth prospects from India point-of-view but entire thing is not linear but is exponential…in this business if your product gets good responeword of mouth will spread fast and you will get exponential growth, but in case of one bad year for your blockbuster product, farmers will not come to you for many years…this is what i have grasped from the ground sources i have and i can be wrong…

with rgds. to kaveri, i think donald and his team will be able to better judge the implications of this incident as I don’t track the company closely…

Rgds.

I think in each company’s performance there will come some or other blip where its mettle will be tested…

e.g Some months back Page Inds had a whole batch of underclothes which were supposedly defective … I know this bcos I was a victim of the batch… and the shopkeeper told me that he had similar complaints from lots of other customers… But the next batch onwards problem had been resolved… This did not make major news in stock markets bcos nobody makes a hue and cry about a faulty underwear…:slight_smile:

Coming to Ajanta pharma, it had issues related to tax raids?? I think when stock price was around 375-400 some time back and there was lot of hue and cry and nervousness… Donald had talked to management and management had categorically answered about that… One can ascertain that on ajanta thread.

Similar blips might come up with Kaveri… One has to take into account that kaveri has been stealing market share since past many years and you dont do that if your product is of poor quality… The seeds business is mainly about farmer’s confidence in seeds… and trust in the brand… One possibility could be that the harvest may have been affected due to climatic factors if it is limited to one particular region of the state…

Personally I think this is a minor hiccough and might be forgotten in next quarter or two…

Feedback from management would be most welcome.

hitesh.

1 Like

I agree you with you Hitesh and i sincerely wish this is one off incident and mostly related to weather.

Another thing, the folks from AP have done such great field work in the pre-sowing period. How would it be, if we can do some field work in this harvest season too? Things like farmer feedback from diff. regions on the crop, feedback from dealer etc etc…

After all the effectiveness of a product such as seed is not completely known until the crop is harvested.

Coming to your interesting feedback on Page. I am giving my view, please correct me if am wrong.

I think even if the issue was highlighted in media and later clarified by Page as a mfg. related defect contained to only one batch , the overall effect on business would be still less, majority of customers will still be willing to get back to the brand for next time. A no question asked return policy from Page (for the batch) could have solved the immediate problem and also built a good long term reputation for the brand.

Whereas if something similar were to happen for Kaveri, i think the potential damage could be more severe. There could be farmer suicides, govt. intervention, bank loan defaults, negative publicity from competitors trying to garner market share, compensation issues etc etc etc…

The risk associated with each business can be so different even if the nature of the problem is similar :slight_smile:

Summary of TV9 Reportage:

It summarizes the plight of the farmers in the Krishna District of AP using “Jadoo” in hope of higher yield. Especially, it emphasizes the plight of those small farmers who have investment of more than 35,000 Rs. including the charges of lease, where they mention if not compensated they don’t have many options than to commit suicide

My Take:

I tend to agree to with Raj Panda, that even though there could be secluded mistakes and lapses in product quality in other cases, the effects on farmers life and its repercussions would be much more serious than someone simply getting delivered a faulty underwear! And more importantly this could have major implications to brand loyalty if the managements fails to handle such issues with required amount of compassion.

As per recent media reports, India poised for a bumper Cotton harvest this year.

The association has pegged the output this season at 380.5 lakh bales (of 170 kg). The estimate is against last yearâs production of 334 lakh bales.

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There are some concerns in certain pockets in AP where there were excess rains. The above case concerning Kaveri may too be in these regions. Apart from lower yield the quality of produce is also expected to be inferior in these zones.

âProduction will be a record this year, so there will be pressure on prices. The Corporation may have to buy cotton in Andhra Pradesh on behalf of the Centre,â said Poppat.

This will be required mainly as the crop quality in that State has been affected by rains over the last few weeks.

However given global oversupply this year, the cottonacreagenext year might see further contraction.

There may be pressure on prices, given the forecast of a record global crop following higher production in the US and India. âGlobal prices are unlikely to be bullish,â said Ramani. On Wednesday, cotton contract maturing for delivery on ICE US ruled lower at 78.76 cents a pound.

Link:http://www.thehindubusinessline.com/industry-and-economy/agri-biz/cotton-prices-unlikely-to-fall-below-support-levels-despite-pressure/article5398058.ece

Dated 27th Nov 2013.

Karnataka to blacklist cos selling inferior BT cotton seeds