Hi OmPrakash & Hitesh,
This is what the company says about the way they grow/source the seeds.
AR pg 13 - “Much of our seed production is carried our on leased land and through production growers. To avoid competition between the 2, the company enlists loyal production growers-we have close to 1,00,000 such growers and offer them attractive remuneration”
Now, am not sure this is same as growing it in it’s own farm. Do you still think the tax angle is ok given the above.
omprakash,
Hi Raj,
Nice to know about your interest in gardening/farming. Perhaps you can provide us the best ground feedback on the quality of the seeds of kaveri as compared to competition and the reputation of the co.
Thanks & Regards,
Ayush
Guys,
Kaveri Seed Company Stock Story updated.
Have a look. This is a quick & dirty job - to try and bring everyone on the same page, asap.
Look forward to refining this further with inputs form those invested & tracking.
-Donald
Stock story looks very precise and still has all the info one needs.
great job.
Thanks for the stock story, looks good.
That apart, i think, one of the numbers put by you earlier - “The hybvrid seeds market for Paddy is 20 times bigger than cotton” doesn’t match up with overall information available:
)- The overall hybrid seeds market is somewhere between 10-12,000 cr.
)- Hybrid cotton seed market is roughly, 2000 cr. (as Kaveri has 11% market share with 200 cr. sales)
)- So, for paddy hybrid seed market to be 20 times of cotton market size , the overall hybrid seed market size has to be bigger than 40,000 cr.
AR page 12 on opportunity -currently only 2 million out of 40 million hectares paddy field is cultivated using hybrid seeds.
The rest use non-hybrid variety seeds, probably saved from their own yield.
In case of hybrid seeds, a farmer can’t do seed saving from his own yield (as he can do from non-hybrid seeds), as the seeds saved from the hybrid variety yield does not guarantee to exhibit the same quality as the original hybrid seed. So, farmer has to buy hybrid seeds every year, hence the dislike of hybrid seeds by small farmers.
Also, unlike cotton/maize, Paddy is not a cash crop in India, it is still asustenancecrop grown by many small farmers and will take a long time to convert them to hybrid varieties.
But one positive is, a hybrid seeds business normally can expect repeat customers(they go by brand) if the product is good.
Thanks. wish i could provide input from on the ground adoption of Kaveri seeds. But right now am out of country. I havebenefitedimmensely from your blog, and please accept my thanks for that.
Also immensely thankful to the wonderful members of this forum from whom i am learning a lot. Although i have been member here for over a year, it’s only in the last 2-3 month’s that am getting really hooked to valuepickr and now i realize what a big miss it has been from my side. Hope to be more regular in future.
Thanks & Regards
Raj
Hi Raj,
Wonderful to have someone like you join our collaborative efforts.
Comments in bold below.
-Donald
That apart, i think, one of the numbers put by you earlier - “The hybvrid seeds market for Paddy is 20 times bigger than cotton” doesn’t match up with overall information available:
TRUE. We need to establish all claims/reported figures
Also, unlike cotton/maize, Paddy is not a cash crop in India, it is still asustenancecrop grown by many small farmers and will take a long time to convert them to hybrid varieties.
Seems logical. But Need to get in more expert views on the subject, folks dealing with farmers,etc.
Hope to be more regular in future.
Yup. I hope more & more folks like you join in on our as someone calls it “collaborative research experiment”
Hi Guys,
Management Q&A with Kaveri Seed Company scheduled for 26th Sep.
Appreciate if all interested/tracking can pitch in with your questions. I will be consolidating right till 25th - AGM day.
-Donald
hi donald,
i really want to thank you for the wonderful effort you put in here for the smaller investors like me. i know you have been extremely busy and have a lot of backlog of QA’s to upload. can i help you here in anyway in compiling the QAs or otherwise. i am based in london and can spend sometime over the weekends(have long workdays so can’t do much over the weekdays). if I can be of any help, please let me know.
regards,
hemant
Thats very true.
I have started learning & enjoying investing since I came across this forum. Many-many thanks for this idea. Would like to extend my helping hand as well.
Hi Hemant & Atul,
Thanks a lot, very generous of you both to offer extra b/w for the communication/conviction transfer effort at ValuePickr.
I have extensive notes on the Q&As. I can scan and sens across. And We need extra hands, yes! But unless you have accompanied me for the Management Q&A, you cant do justice - the context will be missing. And there is much in my head - the notes are mostly cryptic - to help me recollect the big-picture context.
If you have noticed our transcripts try to recreate the interview experience as completely as possible - the flow, the tone, the follow-up questions to make the Management answer things at a deeper level.
Somebody who hasn’t been there, cant do justice. And somebody who has been there but has not been completely deeply into the stock , again cant do justice.
I need a hands-up from folks who can accompany us on Management Q&As to be able to do justice
. Dont worry, I will allocate exclusive time to Q&As for a day or two, and try to finish off all in the next week possibly, Inshallah!
-Donald
justice.
Donald,
I understand and appreciate your views. However let us know in any way if we can help. Of course, will be regular and keep adding value to the forum as much as, I can.
Firstly, thanks to Donald for pushing me to look at this company. Whatever, I see looks quite interesting till now.
Here is what I have learnt (some of which may be very rudimentary):-
A few questions to the knowledgeable:-
My question that can be added to the list is if they are planning to raise the dividend payout ratio, it isabysmallylow right now
Thanks
isabysmallylow
I agree vidur, just like the maruti ad.
“In a market obsessed with dividends, the question is Kitna Deti hai?”
donald needs to ask in the q&a with management “aage jakar kitna denge?”
Hitesh,
Given the first quarter is the largest quarter and other quarters being negligible as far as profits are concerned , can we expect an opportunity to add Kaveri Seeds during the year after Q2/Q3 results ?
Regards
I guess it will depend on the broader markets. If there is overall correction, then kaveri too might come down. Currenlty it seems the move has just begun by taking out the earlier top of 855 convincingly. Lets see how far it takes the stock price.
Hitesh/Vidur
Aage jagar kitna denge - aapki soch kya hai? is a default question:)
I want some sharp questioning to come in boss. Please help.
From a risks perspective/business scaling up perspective/ or generally probing/validating the claims we have heard …as in the RIce hybrid story going forward.
We can do some lazy questioning & come back, or we can really extract a lot. Depends on us. let’s all chip in.
-Donald
Hi Donald,
Here are the questions i have, please see if you can include any of them in your Q &A. My first time into Q&A, so please use your and other seniors discretion while picking the questions 
Q. Seek clarity on the whole subject of licensing from Mayhco for Bt cotton seeds(terms & durability of licensing), govt.administeredpricing , who is the pruchaser from them , what is the competition doing to bridge the demand supply gap in bt. cotton seeds etc…
Q. Confirm the theory about the brand being a moat in seed business. What are the chances that the farmers who have used their seeds this year and had good result from it, will come back to them the next year ? Can this be predicted by doing some field work on this years yield from their seeds and hence production managed accordingly?
Q. With a market growing at 12-15% , and they growing at 40%+ whom are they taking market share from and on what strength ?What are the competitors doing/not doing to catch up ?
Q.The 60 crore capex in FY 10-11 was good enough to take the revenue to 400 + cr, what is the next growth plan ? The capex in FY12 was just 11 cr.
Q. How does the company plans to use it’s 100 crore cash.
Q. Is there a scope for cross selling in case of Micro-nutrients to buyer of kaveri seeds. Can we expect higher growth for micro-nutrients(in other quarters?) in the lines of seeds?
Q. Kexveg subsidiary - Market opportunity/size of exotic vegetable seeds?
Q. A broad idea about the approval cycle(if any) for the newly developed hybridvarietiesand the risks associated with that.
Q. What is the risk associated with having 1 lac “loyal” production growers with 75000 acres under seed production ? How easy/difficult it is to manage such scale and hence growth ? What’s the working model.
Q. Their vision on growth in the paddy/maize/bajra hybrid seed market ?
Some queries from my side:
1). How does the status of monsoon affect the fortunes of kaveri seeds? Normally farmers need to buy seeds before onset of monsoon when no one has any idea about how monsoon will fare. So does monsoon actually affect the fortunes of the company?
2). How does the company view the tax rate it is being accorded? Any chances of tax rate increasing going forward? Is there any litigation with tax authorities on the tax rate the company pays?
3). Company’s dividend payment policy going forward.
4). Does the company need any regulatory approval before launching seeds in a new state once it has been successfully launched in another state?
5). How does the company envisage the Kexveg venture going forward? What is the likely contribution to the revenues in next 2-3 years in an optimistic projection?
6). What kind of margins does company expect in the Kexveg venture?
7). Same question as Raj Panda on micronutrient business. Where does the company stand currently in terms of competition. If and when company expects it to scale up and start contributing meaningfully to sales and profits?
8). How are the prospects for exports of seeds? Regulations, margins, prospects??
9). Any effort by management to make the 2nd, 3rd and 4th quarter of financial year more productive in terms of sales and profits?
10). Royalty payment terms.
11). Where does the company stand overall against competition? What are the competitor’s growth rates in comparition with Kaveri’s?
12). Was q1 fy 13 an extraordinary quarter in terms of demand supply mismatch for BT Cotton seeds? How does the company expect future growth?
Hi Raj & Hitesh,
Thanks - a good set of questions - starting to look wholesome. I am happy:)
Others, please chip in. No question is basic or unnecessary. Basic common sense questions that can help us understand Kaveri and/or the business better. Keep the focus that we always try to establish - if performance has been good so far - will it be sustainable for next 2-3 years & why?
Feel free to post anything that’s top of your mind as you think about Kaveri and its business. You can refer to the stock story - for pointers.
Let’s collaborate effectively.
Cheers
Donald
