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M.R. Subramani

Floriculture exports likely to rise 15%

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Chennai Feb. 25 Valentine's Day has got over two weeks ago and its time to weigh the results. We are talking business, not love. Cut flowers, particularly roses, can spell fortune for investors sniffing for opportunities. Let's look at the sector first.

The global floriculture business is worth $80 billion (approx Rs 3.6 crore) with the developed countries mainly Europe, the US and Japan accounting for the most of the business volume. Since the 1990s, when the potential for cut flower exports was realised, India has gone through a learning curve.

India exports

Last couple of years, the sector has begun to make rapid progress what with the Centre realising its potential for the sector and agencies such as the Agricultural and Processed Food Products' Export Development Authority (Apeda) going out of their way to promote exports. Floriculture exports during 2005-06 fiscal increased 37 per cent to Rs 305 crore.

During the current fiscal, exports are projected to grow at least 15 per cent. The domestic market, on the other hand, is nearly double with expendable income rising and flowers turning out to be an important part of lifestyle.

This year, demand for roses on Valentine's day at Apeda's market facilitation centre is estimated to have increased to five million stems from less than 2.5 million last year. On a day-to-day basis, negotiations are on to source Indian roses in various markets abroad.

Japan eyes India

Opportunities further beckon flower exporters as Japan, which consumes nearly 80 million rose stems annually, is looking towards India. Already, India has replaced the Netherlands as the second-largest exporter of cut flowers to the Far-East nation. With Apeda setting a target of Rs 450 crore for floriculture exports by 2010, the sector looks to possess immense potential.

Opportunities

What then are opportunities? There are very few companies that are in the business of floriculture and listed. There were at least four floriculture firms that had been listed in the stock exchanges. Currently, stocks of only two firms are traded in the bourses.

Listed companies

And among the two, Elegant Floriculture and Agritech India Ltd is trading well below its issue price of Rs 10 a share. It is currently quoted at Rs 2.71, caught between the 52-week low of Re 1 and high of Rs 3.80. During the third quarter, the company's net was Rs 14.2 lakh against Rs 17.3 lakh in the second quarter and Rs 9.6 in the third quarter of the previous fiscal. The other one, Karuturi Networks Ltd, has been witnessing a sharp rally upwards during the last fortnight or so. Its shares have jumped 31 per cent to Rs 235.20 during the period. The stock is in the news as a 1:1 bonus is on the anvil. Also, it is on the verge of buying Sher, world's largest producer and supplier of roses, for about $50 million.

After acquisition of the Netherlands-based company, Karuturi Networks will emerge as the global leader in roses. Towards this, the company has mopped up $25 million through foreign currency convertible bonds, while the rest could be through internal accruals.

The company is also looking to acquire rose farms in Ethiopia, where it has plans for further expansion to tap the European market. Having a farm in one of the African markets makes sense logistically and it is one of the reasons why Kenya has emerged among the leading floriculture exporting nations.

The company has also a Rs 300-crore deal running with a large supermarket to supply one million stems a week. The company's net in the third quarter was Rs 3.54 crore against Rs 2.84 during the same quarter a year ago. Looks like floriculture and firms in the sector have come a long way off.

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