The stock of seed-maker Kaveri Seed gained over 20 per cent last week, following a good performance in the December quarter. Even as peers such as Monsanto India saw their operating profit margin shrink, Kaveri managed to improve its profit margin by over 11 percentage points to 39.8 per cent. This was helped by stable revenue from the maize seed segment despite the 15-20 per cent fall in the crop’s acreage across key States such as Bihar and Andhra Pradesh. Kaveri did not report cotton lint sales during the quarter. This, in addition to netting off dealer discounts from revenue, which were earlier shown as expenses, led to a 30 per cent decline in reported revenue. However, improved profitability restricted profit decline to just 2 per cent.

The company expects many farmers to switch from soya to cotton this year, given the weakness in soya prices. Kaveri, with its flagship cotton seed brands Jackpot and Jaadoo, is well placed. These two brands account for almost a third of the company’s sales. In addition to cotton, higher penetration of rice hybrids augur well for the company. Hybrid seeds account for barely 5 per cent of the total area under rice cultivation currently, implying lot of room for growth.

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