Kaveri Seed Co., which competes with Monsanto Co. to sell hybrid seeds in India, is seeking a bigger share of the food crop market to reduce dependence on cotton seed, its breadwinner.
The company gets about 60 percent of revenue from cotton seed sales and the remainder from vegetable seeds and grains including paddy and corn. It aims to reverse the proportion in three years, enticed by profit margins that are almost double that of the cotton segment, Executive Director C. Mithun Chand said.
“Rice looks very lucrative and a big product for us in the coming years”
as hybrid seeds currently cover just 6 percent of the rice paddy area,
he said. “We are working hard on vegetables and want to triple our revenues in vegetables over the next 3 to 4 years.”
Prospects for cotton in India have slowed as repeated pest attacks despite planting hybrid varieties have discouraged growers, while food crops have been gaining prominence due to the government’s drive to boost production. India is the world’s second-biggest producer of rice and wheat, and top grower of cotton.
Kaveri expects to profits to climb 15 percent to 20 percent this year as higher revenues from the food crop segment offset the impact of a government-mandated cut in cotton seed prices, Chand said.
The company’s total revenue and net income have risen at a compounded annual growth rate of 1.6 percent and 10.4 percent respectively in the five years through March
2018, according to a report by Chola Securities. Kaveri is also looking to foray into Indonesia, Thailand, Vietnam and the Philippines where the cropping pattern is similar to India. It has set aside $45 million to 4 billion rupees for possible acquisitions in germ plasm and other technology areas, he said.
Kaveri announced a 2-billion rupee stock buyback last month. A cash hoard of about 6 billion rupees and minimal expenditure needed to fund growth will enable the company to announce more repurchases in the future, Chand said. The company’s shares have returned an average 30 percent annually since their trading debut in October 2007, more than three times the yearly gain in the S&P BSE 500 Index during the period, data compiled by Bloomberg show.