PI Industries - Superior Business Model

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382

PI has initiated an aggressive marketing campaign on ground ahead of kharif season with the tag-line :

“Nominee, Osheen Ki Jodi, Kisannon Ne Chinta Chodi”

and is pushing hard for combine sales of Nominee and Osheen to farmers. In case kharif is good, this strategy could pay off well. Let’s keep our fingers crossed and keep monitoring each development closely. The benefits of this strategy might trickle down in Q1FY14 results in case kharif forecast is good.

On similar lines, Rallis has initiated aggressive marketing campaign for its products GeoGreen and Glucobita ahead of kharif season.

Rgds.

383

Hi,

Here’s the link to a very informative interaction with Mr. Salil Singhal, Chairman & MD, PI Industries Ltd, available on VCCTV

http://www.youtube.com/watch?v=u70Km0sAOQs

384

Link to Latest Issue of Inhouse Magazine of PI Industries for members’ ref. :

http://www.piindustries.com/sites/default/files/Inhouse%20Magazine%20Volume4.pdf

Company seems flushed with confidence auguring well for bright future visibility of PI amidst current uncertain macros.

Worth one time read.

Rgds.

385

April 15, 2013 is fixed as the Record Date for the purpose of sub-division of existing equity shares of Rs. 5/- each in to 5 equity shares of Re. 1/- each of PI Industries Ltd.

11th April, i.e., tomorrow will be the last day of trading for FV5 share as from 12th April i.e. Friday, the company will trade ex-split with FV1.

Rgds.

386

Hi everyone, I am new to this website, and have been following the outstanding work on two stocks in particular- PI and Kaveri. If I have to choose between the two, then here are the considerations:

Kaveri is dependent on Monsoons? But PI is only partially dependent upon monsoons.

Kaveri has entrenched competitors, PI has relatively differentiated CSM model. PI also is becoming inreasingly differentiated in Agchem.

Kaveri will benefit from operating leverage? Don’t know. But PI will definitely benefit from operating leverage in CSM business.

Valuation wise, both seem evenly matched.

Kaveri has a more durable franchise.

What do you guys think- am I on the right track to choose PI over Kaveri?

387

Hi Anil,

This is a good question:).

To my mind PI Industries is no doubt a story for the long term. I have high hopes of the CSM business compounding nicely for years to come. I have only average hopes of the Agri-business compounding over the years. It will remain a mixed bag, till CSM outstrips Agri segment and starts running even faster…I can sort of see that happening in next 3-4 years.

Kaveri Industries - is a different game. Its a play on Intellectual Property as much as the potential from the Agri-space in India. Unlike PI, a majority of its business is not really affected by Monsoons (there is hardly a 5-10% difference annually). So far it has done very well…still early days …but if it can keep coming out with super-products, its track record of on the ground execution -scaling up production & creating the marketing buzz…is unmatched. Its a recent story, but with a very long term potential. As it grows its intellectual property (especially Rice) it will be valued much higher than PI.

Cotton market is penetrated fully. Mkt size will probably remain where it is. Company can grow for next 2-3 years; its No#2. Maize - Company can keep growing 15-20% every year. Its no #3. Hybrid Rice - now this is the product of the future- with enormous potential. Reportedly Kaveri is ahead in ICAR trials; but commercially available product in significant size may be 3-4-5 years away.

-Donald

388

question:)).

Hi everyone, I am new to this website, and have been following the outstanding work on two stocks in particular- PI and Kaveri. If I have to choose between the two, then here are the considerations:

What do you guys think- am I on the right track to choose PI over Kaveri?

Hi Donald,

Excellent reply, as befits someone who knows both stocks really well.

It seems Kaveri will benefit from PE re-rating as its longer-term competitive advantage become apparent to general investing public. PI on the other hand, would benefit as the faster-growing and higher-margin CSM business becomes preponderant. It should be 45% of FY13 revenue, and unless agchem has a good FY14, CSM should become dominant in FY14. That should pull up overall EBITDAM, leading to bottom line growing faster than top line.

Kaveri, as I sense from the discussion thread, would probably have a 20% growth FY14. As such, its a toss-up between re-rating of Kaveri and faster bottomline growth of PI.

Also, PI will benefit from the split. For some strange reason, investors like lower-priced stocks.

Your thoughts?

Anil

389

Private weather services firm forecasts normal monsoon

By PTI | 17 Apr, 2013, 07.35PM IST

NEW DELHI: India’s southwest monsoon is expected to be normal at 103 per cent of the 50 year average, a private weather forecaster said today.

The monsoon prediction by Skymet comes a week ahead of the long-range forecast of the India Meteorological Department (IMD).

The private forecaster has suggested that central India will have the least fluctuation with normal rainfall through the four-month season from June to September.

“We have forecast a normal monsoon with seasonal rainfall being 103 per cent of the long period average,” Jatin Singh, Chief Executive Officer, Skymet, told PTI.

According to it, rainfall could be weak in eastern UP, Bihar and northern Madhya Pradesh in June and July and in peninsular India in August.

According to the private forecaster’s projections, the chance for normal monsoon is 44 per cent, above normal (29 per cent), excess (15 per cent).

It has forecast nine per cent chance of below normal monsoon and three per cent probability of drought.

“We have devised a statistical model using National Centers for Environmental Prediction (NCEP) model. We think it has the best signal with 0.6 co-relation,” Singh said.

However, a section of weather scientists do not consider the NCEP model good enough for operational forecasts.

IMD is expected to come out with its long-range monsoon forecast next week.

Currently, meteorologists from SAARC nations are holding a workshop in Kathmandu to discuss their forecast for the south west monsoon this year.

A consensus statement of the South Asian Climate Outlook Forum is expected to be adopted tomorrow in Kathmandu.

390

Q4FY13 Estimates of major research houses for PI Industries is provided below..


( fig. in ` cr. )

Elara Capital

Edelweiss

IDFC

Q4FY12






Q4FY13e Revenue

305.3

304.4

299.1

241






Q4FY13e EBITDA

49.1

50.6

56.3

37.3






Q4FY13e PAT

26.7

29.3

29.9

21.78



391

Rallis Q4FY13 results out…

Exceptional 35 % YoY growth in revenues registered…may be an indication of robust growth registered by agchem cos. in q4…augurs well for PI…

Tomorrow’s analyst meet commentry will be interesting to note and will give an indication of likely industry scenario going forward…

Rgds.

392

hi mahesh,

do you have any clue on why PI crashed 10% today? there was also a news item about resignation of the company CFO. could there be some skeletons in the cupboard here?

393

The CFO joined in Sep 03, 2012. So, it means he left within 6 months. Don’t want to hazard a guess, but looks more like a case of misaligned individual career aspirations to me.

394

Hi Hemant,

The decline has been without any known news…as far as my knowledge goes, there is nothing to worry as such fluctuations can be expected because of thinly traded nature of the counter because of which even one large sell order or buy order on a single day makes it fluctuate wildly on both sides…last week a buy order made it run up 10 % and today one sell order has made it run down 10 % …as said before, one needs to keep his price points ready for such counters…Disclosure-- have not sold a single share out of my holding till now and will look to add in case it falls to 120 odd levels…

As far as CFO’s resignation goes…he was with the company only since last 6 months…he was at Plethico Pharma for 19 long years and made first switch to PI after so many years…there may be some issues like not adjusting with the PI’s culture or not able to get some things done in desired timeframe…anyway…Mr. Rajnish Sarna was already the CFO of the company since last many years and after a brief break of six months again becomes the CFO which is good as he has handled the company affairs extremely well…

Ground feedback have been positive for the agchem industry in general and very positive for PI in particular so this fall should in no way be looked at as a point of any concern…

Feedback from Rallis analyst meet will be posted in my next post…

Rgds.

395

Feedback from Rallis Analyst Meet :

Management’s body language was very positive…sounded very bullish on the prospects…

Expects industry to grow atleast 8-10 % in FY14…

Inventory situation at industry level is far better than previous fiscal…

In FY13, Fungicides have shown sluggish growth while herbicides and insecticides have continued their growth albeit at a slow pace…

Company to spend heavily on branding to improve product turns which will eventually enable the company to lower the wcapital…

Sees tremendous growth in contract manufacturing…Trend is catching up on outsourcing the manufacturing work by World’s Top Agchem cos…As of now, China enjoys 80 % marketshare of generic outsourcing while Japan enjoys 90 % marketshare of Innovative (patented) outsourcing…Agchem cos. are actively looking at derisking where India is getting the huge benefit…

Overall it was a good meet in contrast to last year and confidence seems to be back at industry level…This is particularly noteworthy as Rallis management has been always conservative one …

Rgds.

396

Hi Mahesh, Hemant et al,

I am from the investments industry and have been posting since last few weeks on this topic. I understand from my contacts that there have been a few visits to the plants and offices of PI in the last few weeks. Body language was strong, and commentary was positive. I hear there were adjustment issues, leading to departure. Given the performance of Rallis (and Uniphos), coupled with the initial monsoon forecasts, I feel confident here.

Anil

Disc- I’ve owned this stock since many years.

397

Crop protection products to be dearer this kharif

Hyderabad, April 28:

Farmers have to brace themselves for a steep hike of prices of pesticides and other crop protection products this kharif.

The Association of Pesticides Manufacturers expects the hike to be between five and 30 per cent across all products, including fungicides and weedicides.

The industry feels that it has to pass on to the farmers the increase in prices of certain raw chemicals, mostly imported from China.

âThe hike will be most in the weedicides segment, which has shown the maximum growth in the crop protection market. Today weedicides have a share of almost 30 per cent in the market,â V.K. Garg, the associationâs Vice-President and General Manager (Marketing-South India), Insecticides India Ltd, said.

For instance, glyfocate, a popular weedicide, which cost about Rs 230-235 a litre, could go up to over Rs 300, he points out.

The Rs 10,000-crore crop protection market may mirror an over 20 per cent growth this fiscal, as monsoon expectations are so far positive.

On Insecticides India Ltd, Garg said the company would be focussing on new technologies that would produce cheaper new generation products. âToday, only 20 per cent of the farmers were using technology products due to their costs. Our target is to provide cheaper products through indigenous technology,â he said.

The company, through a tie-up with Japanese major Otsuka Agri Techno, is setting up the first of its kind R&D facility at Chopanki, Rajasthan, which will be fully operational by December this year.

âBy the end of the current fiscal, we hope to bring out at least three new products, which would have a total new chemical composition,â he said.

While the existing technology-based products are priced three to four times more than the conventional products, IIL expects its new generation products to be double than the conventional products.

IIL, which notched up a Rs 650 crore turnover last year, will also launch another two or three products through marketing tie-ups with MNCs this year. It recently launched a curative fungicide for paddy crop called Pulsor through a marketing tie-up with Nissan Chemicals.

398

Agri-input makers see revival in demand on normal rain forecast

New Delhi, April 28:

The prediction of a normal monsoon has raised the hopes for agri-input companies, especially fertiliser and pesticide makers, who are expecting a rebound in demand.

âThe monsoon forecast has been good and we believe there will be a pick-up in demand,â said Kapil Mehan, Managing Director of Coromandel International Ltd, which reported an 8 per cent drop in sales for fiscal 2013 over last year.

Stockpile

Fertiliser makers such as IFFCO and Coromandel had faced a double-whammy last year as prices of the non-urea, potassic and phosphatic nutrients had shot up on spiralling global prices and poor offtake by farmers due to erratic monsoon.

This had resulted in a build-up of stocks of these nutrients, currently estimated at about eight million tonnes, of which the di-ammonium phosphate (DAP) stocks alone are pegged at 5.5 million tonnes.

Higher prices

âA normal monsoon should increase the demand for fertilisers,â said P.S Gahlaut, Managing Director of Indian Potash Ltd (IPL).

Gahlaut believes that with the normal rains, the farmers could be convinced to accept the prices of decontrolled complexes. The rise in prices of the potassic and phosphatic complexes last year had prompted the farmers to switch over and use more of cheaper urea. Itâs not only the fertiliser companies, even the pesticide makers are bullish on better monsoon prospects and expect sales to rebound.

Pesticide cos

âThe forecast of a normal monsoon is important considering that there have been deficient rains in the past 18 months. There is a reasonable demand for crop care products from the distributorâs perspective. The movement of products such as herbicide has already started ahead of the kharif sowings,â said Rajesh Aggarwal, Managing Director of Insecticides (India) Ltd.

399

Hi Maheshji,

As you have in depth knowledge of agrochemical market, i want to know your view on Insecticide Ltd.

Thanks & Regards,

Apurva

400

Hi Apurva,

Agrochemical market in India is a very concentrated one because of the complexities involved in setting up a strong marketing and distribution network across rural India…In addition, low penetration i.e. low per hec. consumption provides ample opportunity for each of the Indian established player to grow but the difference lies in approach strategy…In the long run this will be the differentiating factor…

In Indian agrochemical market, if I want to have exposure to pure Indian companies, then, my preference will be Rallis, PI Ind., Dhanuka and then Insecticide…

Rallis is an undisputed leader and will be huge benefeciary because of its reach, branding power as well presence across almost all high prospect agri inputs…

PI Ind. is the second most preferred company because of its strategy of concentrating on innovative products, unique marketing strategies as well as its clean distributor policies which enables it to manage inventory quite well and turn out high revenue per product…

Dhanuka will be the third preferred company because of its strong marketing network and an asset light model…however, its lack of technical manufacturing expertise will always make it command relatively lower valuations…however, management wise they have improved alot since last many years…

Insecticide will be the last choice I will make if I want an exposure to agrochemical sector…Only if Rallis, PI and Dhanuka have run-up alot and are beyond comfortable level will I touch Insecticide…This is because of the management bandwidth and approach to be a follower rather than a trend setter…Although because of the recent expansions undertaken, it might grow well in the short term, but, in the long run its strategy is not what attracts me to invest in it…

Rgds.

401

PI Industries Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on May 18, 2013, inter alia, to consider the following :

1). To consider and approve the Audited Financial Results of the Company for the year ended March 31, 2013 and;

2). To recommend dividend, if any, for the year ended March 31, 2013.