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Kaveri Seed Company: Reaping Fruits Of Labour

The agripreneur has worked constantly towards broadening KSCL’s portfolio with better research, discipline and governance

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Successive bad monsoon may have taken its toll on millions of farmers forcing the government to rejig its budget allocation, but for the shareholders and investors of Hyderabad-headquartered Kaveri Seed Company (KSCL), 2014-15 results bettered all its prior years’ performance across most operational and financial parameters. The company not only achieved higher revenue, profit and volumes but also successfully launched newer products. “Superior quality seeds supported by an advanced R&D program have been the cornerstone of our success,” says the agripreneur Gundavaram Venkata Bhaskar Rao, the chairman and managing director of KSCL which was incorporated in 1986 and went public 20 years later. Since then Rao and his team are driving revenue and profitability of KSCL at a brisk pace.

At a consolidated level, KSCL’s revenue in FY2015 stood at Rs 1,161.23 crore compared to Rs 1,011.10 crore in the previous year. This translated into an impressive 15 per cent growth rate. Rao says this has been possible because the company continues to maintain strong discipline and governance around capital allocation and expenditure. “Our consolidated profit after tax for FY15 was at Rs 300.95 crore compared to Rs 208.95 crore in FY14,” he says.

Genetically enhanced premium quality seed has been the hallmark of Kaveri for more than three decades, thanks to the company’s vast experience in producing seeds for major agricultural crops as well as a very strong in-house R&D programme for maize, cotton, sun flower, bajra, sorghum, rice and several vegetable crops.

A quick glance at KSCL’s revenue over the years explains how the company has become the darling of investors and shareholders. In March 2008, the company’s revenues stood at about Rs 100 crore only to jump and cross the Rs 1,000 crore mark at the end of March 2014 and Rs 1,161 crore the next year. The reasons for this growth are fairly straightforward — its emphasis on broadening its portfolio of hybrid seeds to not just field crops but also vegetables, and its ability to read market requirements quickly and deliver.

Explains Rao: “The company has undergone a concerted growth transformation from a corn only player to one of the largest cotton-seed developers and a multi-crop player.” He says, “We continue to maintain our dominant position and grow our market share. The foundation of our model rests on highly advanced R&D programme based on gene rich elite germplasm, a diversified portfolio, growing brand equity, best-in-class operating model, strong financial profile and human capital.”

Like an astute leader, Rao is aware of the company’s over dependence on hybrid cotton and is therefore trying to increase revenue share from other segments of the market such as hybrid paddy, pearl millet, maize, vegetables and culinary herbs. Also, the company intends to go beyond seeds and plans to push other agri-products like micro-nutrients, plant growth regulators, bio-fertilisers and bio-pesticides.

Kaveri, which enjoys a healthy 20 per cent net profit margin, is emphasising on creating a strong research pipeline and a better revenue mix from different market segment’s to power future growth. This, Rao believes, will help the company reap a richer harvest in the future.

Having cornered a dominant share of cotton market in Andhra Pradesh and consolidating its share in Telangana, KSCL plans to increase its market share in Gujarat. The company’s new hybrid ‘Three-by-One’ bred for high density planting will commence commercial sale soon. In the maize business, Kaveri plans to consolidate the number by phasing out extant hybrids and introducing new hybrids to its existing portfolio of 34 corn hybrids. The company is also looking to leverage the government’s programme in hybrid paddy as hybrid rice is under penetrated in India (-5 per cent of total area planted).

Currently the company has six hybrids in its supply chain, three of which are notified (KPH 199, KPH 371 and KPH 460). Kaveri says vegetable seed is one of the fastest growing markets in India — estimated at around Rs 1,500-2,000 crore. Going forward, Rao says his company plans to focus on the vegetable seed business by expanding the existing outfit.

ashish.sinha@businessworld.in; @ashish_BW