With weather—unseasonal rains and heatwave—affecting production besides rising demand and fears of El Nino affecting the monsoon, the spices complex has virtually been on fire over the past two months.

Shares of major players such as Dabur, Patanjali Foods, ITC (Aashirvad brand), Tata Consumer Products (Sampann), Emami (Mantra) have surged, barring occasional corrections.

ITC shares, which were at ₹472.50 a piece on BSE in mid-July, touched a high of ₹492 on July 20 and has zig-zagged over the past month.

According to analysts, Agri business is contributing about 10-30 per cent to their top lines, of which, share of spices is rising steadily.

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Abhishek Jain, Head of Research, Arihant Capital, said, “Within the spices sector, dedicated pure-play companies are rare, and those of listed players contribute only a tiny fraction (0-2 per cent) at present to their revenues from spices. The most significant players in the industry are unlisted.” Nevertheless, the contribution is gaining significantly, over last few years.

The scarcity of pure listed players is driving investors to SME stocks. In fact, Telangana-based Srivari Spices and Foods received an overwhelming response from investors for its IPO on the NSE-SME platform, a whopping 418.5 times. Investors had poured in nearly ₹2,700 crore worth of bids against the issue size of ₹9 crore by bidding 64.27 crore shares against the offer size of 15.36 lakh equity shares. The price band of the issue was ₹40-42. The stock is likely to be listed at the bourses on Friday.

Growing population, the popularity of Indian cuisine on the global platter, and the rise of e-commerce are boosting the demand for Indian spices. A smaller cumin (jeera) crop globally, a drop in area under turmeric besides rain damaging the previous crop, weather damaging the chilli crop and supply constraints in pepper have all boosted prices of these spices, both in the spot market and in the futures exchange.

On July 18, turmeric was traded at ₹12,681 on NCDEX and topped ₹16,000 during the first week of this month before settling down at ₹14,570 today. Jeera futures opened at ₹58,600 on July 17 hit a record ₹62,495 on Aug 8 and is trading now at ₹60,450.

Positive outlook

The entire spices market in India is poised to boom in the coming years. With the rising demand for authentic Indian cuisine, the increase in online sales of whole spices, government support for spice export, the organic and natural food trend, and the increased use in pharmaceuticals and cosmetics, the future looks bright for the whole spices market.

The $3-billion Indian flavours market holds a great deal of possibility for growth in the coming years, driven by increasing demand from residential and also worldwide markets, coupled with increased use in pharmaceuticals. However, the market is highly fragmented with lack of standardisation and quality control.

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While shares of ITC is now quoting around ₹450 on BSE, up 0.46 per cent. Its 52-week high is at ₹499.60. Prices of Emami were in the green for most part of July and are currently ruling around at ₹504 on the BSE—not far from its 52-week high of ₹524.95. Patanjali Foods, which was at ₹1,273.65 a piece on July 18, had a volatile run (due to its Offer-for-sale) is hovering around at ₹1300.

Gaurang Shah, Senior Vice-President at Geojit Financial Services, said, “We have a buy advisory on ITC, as well as Tata Consumer products. We remain positive as these are growing brands, and a lot of people have now started to opt for these branded products rather than buying from local kirana (grocery) store, which is not a guarantee in terms of purity as well as quality.”

Prabhudas Lilladhar has recommended “accumulate” on ITC stock, while KR Choksey, Axis Securities have come up with “Buy” rating, targeting a price of ₹540. Most of the brokers have suggested “accumulate” on Dabur stocks; while for Emami, HDFC Securities has recommended a sell.