‘Adopting genetically-modified crop applications would also lead to increase in size of the seed market’
Kaveri Seed Company, the only seed firm listed on Indian stock exchanges, is the market leader in the southern part of the country, besides Maharashtra. The seed producer’s chairman and managing director G.V. Bhaskar Rao says product performance is the only means to earn farmer loyalty, which also enables the company to win market share from competitors. Edited excerpts:
What has been the impact of the monsoons over the last two cycles. What do you think will be the impact this year?
After two years of drought, India witnessed normal monsoon in kharif 2017, returning optimism to the rural sector and improving farmer sentiment. It was one of the best years for cotton. Though the average rainfall pattern during this year was normal, rainfall distribution was uneven. A dry spell prevailed during the month of August, which is a crucial crop growth period, affecting the rain-fed crops like cotton, pulses, bajra, etc. Central and North part of India received excess rainfall in September, which impacted yield and quality of cotton crop. Monsoon has arrived in time for kharif 2018 and rainfalls are expected to be normal, according to IMD forecasts.
What do you think about cotton acreages in India and the way forward for cotton farmers?
FY 2017-18 was one of the best years for cotton in terms of acreages. We expect overall industry acreages to be 10% sideways for the next five years. Also, cotton price continues be very lucrative and cotton remains the highest ROI crop in India. Kaveri Seeds will maintain leadership in southern India, has plenty of room to make strong market share gains in Central and Western India, and will make meaningful entry in northern India as well.
What are the various crops farmers are concentrating on and how does Kaveri Seeds help them achieve a good yield?
Cotton, maize, rice, sunflower, pearl millet and vegetables account for a majority of the revenues of the Indian hybrid seed industry. We are among the top three seeds companies in cotton, maize, sunflower, and pearl millet/bajra segments, and top five in the rice segment. We will gain market share in vegetables driven by new hybrids across hot pepper, okra, tomato, sweet corn and gourds. We have actively undertaken focussed training of field assistants for educating farmers across geographies on integrated crop management, advanced agronomic practices, pest resistance techniques, and product knowledge, to increase yields and income.
How do you see Kaveri Seeds contributing to the betterment of farmers?
Though seed is the most low-cost input for farmer, it is the most critical input. We have been, over the past several years, providing farmers with high quality high yield seeds which has helped reduce their wastages, improve crop yields and income. We participate in and sponsor agricultural fairs at state and district levels aimed at disseminating knowledge on integrated crop management, new technologies, better farming techniques, advanced agronomic practices, pest resistance techniques and product knowledge to increase yield and income among farmers. These public gatherings are organised in collaboration with the State Department of Agriculture, SAUs and ICAR institutions.
After the cotton revolution, what do you think would be the next big game-changer for farmers?
Rice is the largest crop under cultivation in India and is the staple food for a large population. Rice hybrid seed is the most under-penetrated category in India with only 6% penetration. Other countries have 50% plus of the rice area under hybridisation and in China, 65% of the rice area is under hybridisation, providing for significant scope in India. Hybrid rice is gaining increased acceptance and market for both selection variety rice, and hybrid rice is growing rapidly. We are addressing both segments of paddy market and have an extensive portfolio of products in hybrid rice and selection rice to take advantage of this opportunity. Maize is the most widely grown crop worldwide. India is the world’s sixth largest producer and fifth largest consumer of maize. Maize acreage has grown in India over the years as it is highly adaptable to different seasons, requires less water, and is easy to grow with a good commodity price. Demand for maize in India is expected to continue to grow due to demand from the feed industry and export opportunity. Hybrid vegetable seed is one of the fastest growing segments in India estimated to be about ₹2,000 crore. India is the second largest producer of vegetables in the world after China. Vegetables are round-the-year crop and enable safeguarding from crop shift patterns.
How do you see the future of hybridisation of seeds in India?
Rice, maize and vegetable crops are highly under-penetrated in terms of hybridisation. India’s increasing population, arable land and willingness of the farmer to adopt newer technologies provides multifold opportunities in rice, maize and vegetables.
What are the steps you have taken to address the Pink Bollworm challenge affecting crops?
The issue is not restricted to hybrids, but farming practices the farmer adopts. So, we have increased farmer awareness programmes to prevent the impact of Pink Bollworm. We are educating farmers to be proactive and take preventive measures rather than reactive measures.
What is your vision for growth?
Over the years, Kaveri Seeds has undergone a concerted growth transformation and diversification, starting from a corn only player to one of the largest cotton seed developers and a multi-crop player. Today, Kaveri is among the top three seeds companies in the cotton, corn, sunflower, and pearl millet/ bajra segments, and top five in the paddy segment. We have strengthened the non-cotton segment in the last few years with higher product launches and notifications. Our focus remains on strengthening our non-cotton business further and maintaining our cotton leadership. We are expecting that non-cotton contribution in revenues may go up to 60% from the current 42% in the next few years. We also plan to increase market share across crops in central and northern India.
We have made intensive efforts over the last few of years to truly de-risk the company and build a future ready organisation. Our growth pillars include crop diversification, organisational capability, increased visibility and mind share among farmers and channel partners, strengthened supply chain, and reinforcement of cotton leadership. As always, our eyes are set on delivering profitable growth, healthy return ratios and maximising shareholder value.
How do you see the use of technology impacting farm output?
Technology plays a key role in increasing farm output by protecting against pest attacks, eliminating wastages and increasing yield. Over the years, we have been increasing spends on R&D to produce better quality seeds year after year. We have over 600 acres of dedicated research farms with varying agro-climatic conditions. We have a strong and highly motivated R&D team of about 100 personnel, including more than 20 scientists. We have increased the number of farm demonstrations for many of our pipeline products, and also increased Multi Location Trials.We have also been working on increased adoption of mechanical harvesting and HDP in India. Farmers remain under stress as harvesting costs keep escalating, Mechanical harvesting and HDP remain viable solutions. There are also many other genetically modified crop technologies awaiting government approvals, which will increase the size of the seed market and significantly increase farmer income.
What do you think are the best practices that can be adopted from developed nations on agri technology?
Better infrastructure in terms of irrigation, storage facilities, cluster farming, power costs, and mechanisation technologies are needed to improve the health of the agri sector. Southern States and Punjab are the most progressive agri States and follow the best agri practices in India.
How do you compete with other MNCs in your sector?
MNCs have been part of the agri market in India since five decades and Kaveri Seeds has been successfully competing with both MNCs and local players since the last three decades. We are the only company have leading market share in cotton and non-cotton crops. We have invested meaningfully in R&D, developing proprietary germplasm and hybrids, which are suitable to local soil and weather conditions. Developing a superior germplasm bank across multiple crops is a multi-year effort, which has not been easy to replicate for most MNCs.
Product performance is the only means to earn farmer loyalty, and the superior performance of Kaveri products over the years across crops have enabled the company to take market share away from competitors.
We see a lot of cash on your books, how to intend to use that?
We are company with a track record of rewarding shareholders on a consistent basis. The company’s strong balance sheet and cash flows enable us to reward the shareholders, and that is also part of our corporate philosophy. We are one of the very few companies doing a sizeable buyback in consecutive years. FY19 will be the second year of us doing a ₹200 crore buyback. We effected a ₹200 crore buyback in August 2017. At the Q4 FY18 board meeting, the board has approved a ₹200 crore buyback program (at ₹675 per equity share) for FY19. The buyback will commence from after obtaining shareholder approval through postal ballot, and other approvals like SEBI and other legal approvals.
Source: The Hindu