Thanks are again due to our super champ stock picker Hitesh Bhai. So much wealth already created and continue to be created thanks to his foresight and thorough home work.
Kaveri is a very promising story for next 3-5 years at lest. the dealer as given very good response about Kaveri seeds. even though he is not a dealer of Kaveri but knows what is happening or what is selling at ground, he sells Nuziveedu,Myco,Tulsi,Vibha and others, he says last year was very good for Kaveri and we must see for at least one more year for BT cotton of Kaveri. he commented about management as simple people who clearly knows what there are doing and god fearing,simple,24 carat. he had a negative view about Vibha seeds. this dealer is in the market from 1974. is a very big dealer in 3-4 districts. Nuziveedu. Director Research also gave good briefing about the industry he said Nuziveedu have a market share about 28-30% in BT and he had a positive view about Kaveri Seeds. about taxes i think every one in the industry are assuming it as agri income but Nuziveedu is paying 32% tax and i think there are paying it to show it for listing. there will do same as Kaveri and stop paying taxes after listing which will happen in next 2-3 months.(we have another big seed company to track).Nuziveedu want be a 70% BT and 30% from others like rice, maze by 2015. at present it will be 85-90% BT.finally we are very positive about Kaveri but atleast it requires another year to be monitored for big betting on this stock.
we had more than 1 hour meeting with the dealer and one and half hour meeting with Nuziveedu. there arefiling for very big IPO in next few days with sebi.
thanks for the rundown tirumal. did kaveri mgmt give any kind of revenue or growth targets for the next few years - overall and for different segments?
also, i think this possible IPO may have been one of the drivers for the recent run-up in kaveriās stock price.
arefiling
So this IPO from NSL will have some ruboff effect on Kaveri as well.
IPO means Its Probably Overpriced hence the issuance PE would be around 20 with fantastic forward PE being projected for March 14 n 15.As such Kaveri PE shud also touch 15-20 times implying a price target of 1200-1600.
Big Bull RJ is also very bullish in Agricultural stocks.Opening of FDI in retail wud also mean or money in hands of farmers another positive for Kaveri.
Kavari management had guided 20% but we think there will do 25-30% . and top management member gave a 1000 cr sales target in next 3 years to one of our media friend. i feel some vested interesed parties are buying Kaveri seeds for high ipo price for NSL(fee good factor for IPO).
i think this is similar to what happened at the time of muthoot finance IPO. manappuram financeās shares were jacked up to insane valuations until muthootās IPO as it was the only listed gold loan company then and then crashed right after. we could see something similar with kaveri with stock running upto the IPO and a sharp correction thereafter
Hi allā¦
Really had a nice experience with the entire team. A good practical exposure for me. Tirumal Raoā¦let me tell you at the beginning I had a very negative impression of the Kaveri Seeds management when they were answering the questions reluctantly. But when we had the team meet, things were crystal clear.
Though I left early, but could get a good feel of what actually the seed industry is, Mr.Mithun explained the entire process in a very explanatory manner.
Hmm! Tremendous learning in 2-3 days. Team Hyderabad was clearly inspired! No smarts for guessing why - the quality of discussions, momentum & level of participation,backed up by solid collaborative homework.
Happy to share that this time I was glad to play a different role (perhaps really for the first time) - 80% of the solid homework was truly collaborative )- we could inspirelarger participation for thinking n asking questions; individual participants themselves raised the bar replacing the initial lazy/cliched kind of questioning with thoughtful deeper probing. This had a sort of viral effect on thinkers & thinking (certainly not over-analysis) - led to questions coming in till the last moment - I was happy compiling/incrementally improving the question set till as late as 2 am! This was my dream when I started envisioning a collaborative platform like ValuePickr in 2008 - if 5 of us can do it over email, no reason why we cant multiply manifold over a web-platform. I live and breathe this dream, dailyā¦thanking you ValuePickrs for showing all a first glimpse of the tremedous potential that we can unleash!! This is just the beginning, I am sure of it:)
This also set me free to think/prepare/wish on how best to utilise our time at Hyderabad. Could we meet a truly representative set - representatives with and without a stake in the company we were interested in,MD/Director/CXO level folks at different companies, and then from a totally grounds-up perspective - players with direct contact/influence with the end consumers - the farmers.
Couldāve very well been wishful thinking:) right - I have always believed solid sincere preparation meets luck - very rarely things fall into your lap on their own; but nature does conspire to make things happen for the(really?)deserving . And there steps in, Team Hyderabad. Truly impressed by the talent here - young Richa - her excitement & potential was infectious, Om is another Ayush & Hitesh in the making - watch out guys, and the savvy Tirumal.
Think about it. The foundation of our ability to extract so much in so short a time - lies our sincere homework - the quest to understand - the truly inspired collaborative efforts we are increasingly/unhesitatingly pouring in!:). But that can go only so farā¦Read on to appreciate more what it takesā¦so we can emulate the processā¦each timeā¦as far as possible.
Certainly not a cake-walk. We were constantly on the job. Many twists in the tale:) how things fell in place for us - and in a sequence that was just tailored for us to extract the maximum. You might have experienced this - that in a new field, you are able to use incremental knowledge to good effect - learning from one and using that base/level of info/understanding with the next - probe deeper and refine current understanding! with the next in lineā¦and again with the 3rd, 4th entityā¦and only then do you start to get to a state (of some understanding)ā¦where you can qualify the commentsā¦question & probe slightly deeperā¦not lap up what the experts dish outā¦sometimes it can annoy the expert ā¦as I realised it was doing to our last entity in the chainā¦I realised thatā¦and held myself back a bitā¦before Om finally coaxed him into opening up completely ā¦just like everyone else.
I can tell you without hesitation - the sequence of people we met - a) Dir level at Kaveri b) MD level at Vibha c) Dealer who has practically grown with the industry -from 1974 d) finally R&D Head at Nuziveedu. Highest calibre folks - who have been there, done that - but more importantly those who freely shared what they know and gave us their highly valuable, Quality time!! That sequence was importantā¦Had we met the R&D head first for example, wellā¦draw your conclusions!
Getting access is not enough (that itself takes lot of talent, planning, luck)ā¦even your solid homework may come to nothingā¦if you fail to be aware of the presence/absence of natural flowā¦the cross-currentsā¦all the 4 experts are now friends (well, sort of;)), we can get back to them for more refinements in understandingā¦cross-checking impact of developments, new facts that emerge, etcā¦thatās a critical pieceā¦the Market Edge!!..by the way you may not/need not agree with the viewpoints or positions taken by one or the otherā¦and still be very good friendsā¦appreciate what each guy brings to the tableā¦a few years back, I was totally blind to this aspectā¦I could be great friends with someā¦but only those who I thought were rockstars:) ā¦you know what I mean. ValuePickr must bring more & more Experts/Industry professionals into its increasingly valuable Investment Network. Each one of us can strive for this!
Getting us access to the right folks - was the untiring efforts of Tirumal Rao - Cool & collected and very resourceful. He made life very very easy for us (esp me), personally willingly taking care of every small logistics/need. I got to meet his lovely family too briefly - and understand firsthand, how & what allows him to be what he is! He ensured after a hard day I could meet my school friends (post 10 pm,party & unwind till 3 am) and then pick me up next morning from a bāfast meet with a college senior at 9 am, ensuring/reminding me to get back to work:) early, so we can do justice to the full work day again.
For me the process /means, is as important as the** End**:). Getting impatient to know the End, the Verdict?? Hey, we gotta make sure we get the process right most times, the Ends will follow, right. We hope to inspire more & more ValuePickrs to imbibe and get the process right, results will inevitably follow, Inshallah!
The Verdict!! Well, a sense of that may start emerging from the next few post(s)
Coming soon, after a short break, if I do not lose the network connection.
| Indian Hybrid Seeds Industry - A Primer | Observations |
|---|---|
| 1. The Hybrid Seed Industry in India has matured over the last 30-40 years or so. Players like Nuziveedu, Rasi, Mahyco, Kaveri, have been around for a long time and evolved over the years. Vibha Seeds is a relatively new player from 1995 or so. | |
| 2. Currently a 8000-10000 Cr Hybrid Seeds market. Cotton has been the growth driver for the Industry and comprises 50% of the market (4000-5000 Cr) led explosively by the BT cotton explosion from 2002 onwards. Hybrid Cotton has been available from the start by the way. Corn is next at 25% (2000-2500 cr(?)). Other field crops like Paddy, Jawar, Bajra bring up the 3rd segment. Vegetable seeds (primarily Tomato, Chilli, Bhindi 80%, Watermelon & others - rest 20%)is a 800-1000 Cr segment. Overall Hybrid Seeds market has been growing at 12-15% rates annually. | |
| 3. This is a very dynamic industry, things can & do change dramatically sometimes . Pedigree (deep understanding of Indian climatic/soil conditions, different weather zones, crop patterns & its complexities, the customer (farmer) and his needs, R&D quality, Products - depth & breadth, years & years of channel & farmer relationships) make a big difference. So alertness & nimbleness in reacting to market dynamics, ability and resourcefulness to exploit/extract market dynamics to your advantage is critical too. | |
| 4. Key Success Factors - 50-60% weightage to having the Right Product. But getting the balance 40% right - Supply Chain (Production scale, Reach), Marketing (handling Distributors/Dealers relationships & Incentives), is equally important. Some like Mahyco have missed the boat despite having good to great products, for not getting the balance right, esp Supply chain. For getting the Right Products - Apart from pedigree, a diverse germaplasm bank is obviously necessary (Factor1), which maintains the purity of the hybrid lines, right to the original foundation source. Investments in R&D and continuous systematic experimentation (Factor2) - crossing male & femal hybrids with particular desirable traits (drought resistant with sucking pest resistant, etc) is another. Almost everyone mentions "Luck" as a persistent 3rd factor. Kaveri proved suddenly "lucky" in the last 3-4 years, and changed its fortunes dramatically from an "also' player. Nuziveedu says its "lucky" to have seen one blockbuster product being replaced by another - 2 blockbusters in same crop is a rarity in the Seeds industry. Vibha despite consistently higher (?) investments & focus on R&D has not been able to really deliver. |
Need to refine this more - get more facts in. |
| 5. Price controls exist only in BT Cotton, which has meant it is a high-volume low margin business. Blockbuster products have meant high volumes but obviously could not see high margins. Corn segment has been highly lucrative for all players; Blockbuster Corn products have meant very high margins, but not much volumes`. Decently good Corn products have enjoyed high margins. | |
| 6. Paddy Hybrid seeds have not seen any significantly better products, leave alone blockbusters. Paddy Hybrids have been in existence for last 19 years!! Chances of a blockbuster product there are relatively slim (its the nature of the crop seed). Breakthroughs can't be ruled out however. | |
| 7. Wheat has never seen any hybrid seeds. So certain crops/cereals lend themselves to hybridability so to speak, some greatly so, whereas some have proved sterile to such efforts. Pulses for example has not seen any real success except for Red Gram. | |
| 8. The hybrid seeds pecking order - 1. Cotton 2. Corn 3. Paddy/Bajra/Jawar 4. Vegetables has remained liked this for last many years. In between something like a sunflower crops out, but was short-lived. This picture Is unlikely to change in a hurry!! | |
| 9. Cotton acreage/ market size has been stable - in the range of 9000-12000 million hectares (90% penetrated). Corn acreage/ market size (50% penetrated) Hybrid Seeds Market for Crops like Sunflower saw dramatic rise, and is now almost finished. Paddy penetration has been where it is 2% levels for donkeys years. Jawar/Bajra/Sorghum have been (?) steady. Vegetables Hybrid Seeds market has been increasing. Some figures released at a recent Seeds Association association meeting (same day as Kaveri AGM) show Cotton Market has not de-grown this year...its almost at the same level. Actually AP has grown by as much as 30%!! while Gujarat has degrown, Maharashtra too. |
Need to understand/ document this better from Experts |
| 10. BT gene technology was not the game changer, or even the differentiator in any way - it is now the least common denominator. If that was, Monsanto would have run away with the Market - it could not. Monsanto was forced to change its business model for the first time - for addressing the opportunities in the Indian market!! For the Indian market, it realised, the only way to stay in the game was to devise a Royalty model - licensing the tech to all. And reportedly, this is the model that it is adopting now in rest of the world markets!! The Germaplasm for Indian conditions is the key (which MNCs didn't possess then in any significant numbers, they may get to that stage/develop in next 10-15 years).Good quality cotton hybrids existed much before BT Cotton - with higher Yield and Quality, and other drought/flood resistant aspects. Combined with the Ballworm resistent BT gene, Nuziveedu used its Balli & Mallika hybrids to blockbuster effect! |
Again need to refine this better with Experts |
2 Likes
| Hybrid Seeds Industry - The Main players | Observations |
|---|---|
| 1. Nuziveedu The Leader in this industry by a distance. ~30% market share in BT Cotton Market. 2 Blockbuster products - Balli & Mallika. Promoters are from a farming background, and are reputed to have a solid understanding of the pulse of the market. The group is big with deep pockets. Diversified interests in Sugar, Textiles, Power. Balli & Mallika were quality hybrids and existed from before BT gene tech was introduced in India. It probably has the largest germaplasm bank in India. Employs about 115 people in R&D. Has a much bigger Marketing set-up - thru many different small sister entities, all of which are crucial for the edge in the numbers game. Not only do they have the most proven R&D, they are known for their street-smartness too; getting scale in supply chain quickly, dealer relationships have never been a problem as they have been in existence for over 40 years. But they have always had the knack in introducing products similar/close to something that competition gets a good name for. Distributors/Dealers know they can bank on a Nuziveedu - it knows how to succeed. Nuziveedu has a presence in other crops like Corn, Varietal rice, Hybrid Rice, and others but no significant products. 90% of Revenues are from Cotton. They are trying to change this by acquiring other smaller companies in the space. Funds have never been the problem. Blackstone has invested in the group in 2010. Why do they need to go for an IPO now? |
Totally selling over 1 Crore packets in a 3.8 Cr Cotton Hybrid Seeds annual market in India. Leased contract farming space of over 150,000 acres(?) |
| 2. Mahyco Maharashtra Hybrid Seeds company. These are reputed to be solid guys and command respect in the Industry. They are the only players to refund CASH for unsold inventory to the dealers. Known to be conservative, they have never pushed aggressively. They are known for solid good products in every crop -Cotton, Corn, Paddy & others. Some of their quality cotton Hybrids - have had inherent "Multiplying" problems. They also do not possess/control as large leased farming space as say Nuziveedu or Kaveri, so scaling up supply chain quickly in order to accommodate a pull for their products has been a weakness. Some of their products have such loyalty that farmers from Warangal will do whatever they can to buy their products - despite weaker supply - buy from other regions like Gujarat - pushing up black market prices to 2400/- per packet! This year they have introduced new varieties of hybrid which are reputedly very good. They have also taken up more leased space (vacated by the smaller cotton players who could not last due to sharp correction in cotton prices from 6000 to 3000 per quintal) and are reportedly keen on solving their vexed supply chain issues. |
In AP they did only 6 lakh packets last year. If they get their act right, dealers say they can easily do 15 lakh packets more. From whose share will this come form? |
| 3. Kaveri Kaveri was always known to be a good player. They have always been strong in Corn.Promoters are humble, down to earth, no flashyness. He will give the same respect to someone that he had known 20 or 30 years back. He has farmers interests at heart. A 24-carat man, is how the Dealer (not a Kaveri dealer by the way) described Bhaskar Rao. But it was one of the smaller players. Continued success in last 2 seasons with Jadoo Hybrid have catapulted them suddenly in the top 5 league. They are in a good position, but can they sustain here? Across the Industry there is respect for Kaveri as solid, down-to-earth, and street-smart guys. If someone can do it - establish themselves firmly as the number 2 or 3, they can. That they can marshal the suply side challenges of scaling up to match demand/take adequate inventory risks is now proven. What remains to be proven is the QUALITY of their top Hybrids like Jadoo, or new hybrids like ATM that they have introduced. ATM is claimed to be better than even Jadoo, bu these are obviously nowhere near a blockbuster product as Mallika. What makes a blockbuster product is universal application - similar good results in most markets, in most conditions, in new conditions that nature always throws up - no monsoon, over-deluge, new pests like sucking pest (in addition to ballworm) which has recently come up! The farmer needs to give a unequivocal thumbs-up. Everyone agrees (competition, and dealers) if for the 3rd season in a row, farmers give their approval and Kaveri manages to grow its position from where it is, it will have firmly established its dominance. Is that performance in next season a no-brainer? Clearly no. There have been mixed results from different regions as per one dealer. As per the same dealer in his opinion Mahyco may turn the tables on Kaveri atleast in AP. Time for more scuttlebutt, across regions, to get a better feel? |
No player other than Nuziveedu has crossed the 5 million packets barrier successfully. Anyone that does can only do that on the back of a blockbuster product. Supply chain or marketing strengths cant take you there!! Players like Rasi have touched the 4.5 million mark a couple of times but have not been able to sustain or scale up from there. It may be a tough act for Kaveri to maintain current status, leave alone scaling up. Supply chain they will handle, everyone agrees. Will their product stand up. That can only be known post next season - June 2013!! |
| 4. Rasi These guys have been there for a long time. And have good products across crops. No blockbuster product till now. They have the distribution network strength. |
Have touched 4.5 million packets mark a couple of times. Couldn't go beyond, or sustain there. |
| 5. MNC Players Monsanto, Syngenta, Pioneer are mostly strong in Corn. They do have blockbuster products there. So they do enjoy high margins & profitability. They are also strong in Vegetable Hybris Seeds. 80% of the Vegetable Seeds market is Tomato, Chilli, and Bhindi. Mostly dominated by the MNCs. Namdhari is strong in Watermelon. Watermelon and the other vegetable seeds make up for 20% of the rest of the 800-1000 cr vegetable market. |
MNC players are not the main competition for a diversified seeds player. |
Disclaimer: This is a first-level understanding, work-in progress document, which aims to get the big-picture, right. Represents best effort basis reproduction. Needs to be progressively refined for inaccuracies, facts & figures to be cross-checked, and Inferences validated again with subject-matter experts. Please keep coming back to this space for checking on refinements.
2 Likes
Now for the really really impatient, canāt wait folks, the quick impressions. Please take these with a healthy pinch of salt. Many things to sink in, get more qualifications on.
1). Kaveriās success has been exemplary in last 2 seasons - Cotton. They have been successful in Corn but that hasnt changed the pecking order of companies. its recent success in Cotton has meant the Pecking order has changed. Kaveri is no 2, after Nuziveedu.
2). remains to be seen, if it can sustain and improve on this performance. They have the pedigree and the resourcefulness. They have demonstrated both. a 3rd blockbuster performance in a row -will catapult it there - on a sustainable basis. FY14 will be the real test. For Kaveri to sustain here itself is a challenge, to surprise everyone with another great performance will be tough, but not unimaginable. If someone can do it,. they CAN. BUT it will depend entirely on the strength of their good Products - can they become Blockbuster Products from Good - remains to be seen - and a Tough call to make.
3). Others like MAhyco and Rasi have threatened to break into the Blockbuster category Products a couple of times in the past but could not sustain for one reason or another.
4). Nuziveedu has been Lucky to have replaced one blockbuster product with another. @ Blockbuster products in a row is sort of unheard of in this industry. That is why there are there - at that unassailable 28-30% market share.
4). Can Kaveri eat away market share from Nuziveedu - remains to be seen. At teh moment the odds are seemingly stacked against - in my opinion. Because it has already gone ahead of the others - so it cant really eat away market share anymore from others. it is no2. Challenging the No1 blockbuster products - initial market feedback suggests - Kaveriās products are far from it.
5). Mahyco is in a good position to turn the tables on Kaveri - They have very good products - great pull form the farmers - but they have to get the supply chain logisrtics right - production scale, they certainly have the distribution reach and the very favourable relationships with the trade!
If they can get the Supply chain right. Certain developments seem to suggest they may. For Kaveri the products have to prove universally good - different regioons have sent in different results - some places very good, some average,
-Cheers. more later
-Donald
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Bravo !! Terrific work.
Thanks a lot Donald and Team Hyderabad for the hard workā¦ truly inspiring!
Hi Donald and team hyderabad,
Wonderful work indeed. Again, this forum is taking research to next level by doing scutllebutts and getting informed perspectives from various stakeholders. A unique way of analyzing the company, grounded in the reality. Kudos to you guys for putting up so much of work and sharing it with community.
In support of what donald said that companyās products needs to be universally good, however in some regions for some products, the performance is average. Here is a link in Andhra daily with respect to Kaveri 225 (maize) failing across the region
http://www.thehansindia.info/News/Article.asp?category=1&subCategory=2&ContentId=86685
It seems to be 15-20 day old news.
Best Regards
Dhwanil Desai
Thanks a lot for all the laborious work done & share the same on open platform.
Congratulations to Donald and Team Hyderabad, wonderful work on all aspects. Really appreciate the hard work and precious time you guys have put in for making this work.
Thanks again to Hiteshji for another superb stock selection.
Thanks to Hiteshji, Ayush, Anil Kumar and all others for the rigorous round of questioning and Donald again for the comprehensive compilation and ground work.
The kind of collaborative effort being put here and the end result of dissecting stories deep down to the market reality is simply Phenomenal and unheard of in the Indian equity space.
Kudos to ValuePickr ! Way to go
I think this news article is a small issue, as we met the dealer in hyd. who as operations from Medak district from where this this happened. he didnāt mentioned any thing about this, he is also one off the big dealer for maize in that district.
hi donald,
i do belong to this really really impatient category 
once again, many heartfelt thanks for the amazing effort from you and team hyd and the amazing work you are doing for the investor community in general.
you may cover these in you later posts, but a few questions that come to my mind after reading these initial posts:
1.how has nuziveedu been able to come up with one bluckbuster product after the other while the other players in the industry from the same region with access to the same technology couldnāt? is their their R&D after? gremplasm bank? something else we donāt know?. how can this be replicated by kaveri? if it canāt be replicated, would you not say that nuziveeduās stock whenever it lists would be a better long-term investment.
2). what has stopped these players to expand into other major regions in india out of AP? is the success replicable across other regions? if yes, we are looking at a potentially huge market without even taking exports into account.
3). Does hybridisation of seeds for different crops depend a lot on the crop itself? why cotton hybrids are so successful and paddy and wheat are not? if hybrids for these two could be created successfully we could be looking at a far bigger market.
4). you mentioned that you spoke to the R&D head at nuziveedu. what kind of efforts have they put in to break through in other hybrids apart from cotton? did you get any kind of revenue or growth projections from other players like nuziveedu, rasi and mahyco?
regards,
hemant
Congratulations to donald and team Hyderabad. Valuepickr had this phenomenal reputation for content and quality of discussions, now we have moved to a different level with respect to dissecting theopportunitiesand market realities to a new level.
Carry on the good work!!!