Ladies and gentlemen, good day, and welcome to Kaveri Seed Company's Q4 and FY24 Earnings Conference Call. As a reminder, all participants' lines will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. Please note that this conference call will be recorded. Joining us today on this call is Mr. Mithun Chand, Executive Director. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For a list of such considerations, please refer to the earnings presentation. I would now like to hand the conference over to Mr. Mithun Chand. Over to you, sir.
Thank you. Good evening, and welcome, everyone, to our quarter four for FY 2024 earnings conference call. We hope you had a chance to review the presentation of our results, which is also available on the website. I will touch upon the operational and financial performance of the company, and then open the floor for the question and answer session. Financial highlights for FY 2024. Revenues from operations were at INR 80.54 crore as compared to INR 60.64 crore in quarter four, FY 2023, grown by 32.8%. EBITDA was at INR 15.5 crore as compared to negative INR 6.73 crore last quarter. Registered a growth of 3.32 x. Net profit was at INR 2.79 crore as compared to a loss of INR 13.89 crore in quarter four 2023, grown by 1.2 x. Cash on the books stands at INR 443 crore in FY 2024, as against INR 538 crore in FY 2023.
Revenues on operations were at INR 1,060.43 crore as compared to INR 1,000.56 crore in FY 2023, grown by 6.18%. EBITDA was at INR 336.63 crore as compared to INR 296.94 crore in FY 2023, grown by 13.37%. Net profit was at INR 293 crore as compared to INR 267.04 crore, registered a growth of 9.72%. I will just highlight some of the major highlights. Witnessed an increased trend of vegetable segments, doing well on both volume and revenue front on account of increasing share of new variants launched during the year. The volume increase in vegetable crops has resulted in good realizations. Other segments like cotton, hybrid rice, and selection rice realizations were higher due to demand for these seed segments and price increases. Our efforts in the last three years in capturing the market shares in above outlined segments is really paying off.
To foster company's growth in international markets, recently incorporated a subsidiary in Bangladesh. Exports are showing good traction and expected to be sizable business. In an endeavor to reward our shareholders, the company are doing a buyback of 44.83 lakh shares at INR 725 per share, amounting to INR 325 crore. Some of the operational highlights. Cotton volumes were stable, but revenue increased by 3.37%.
Mr. Mithun, sir, you are not audible. The management line got disconnected. The management line got connected.
Selection rice volumes were stable, but revenue increased by 10.43%. Maize revenue increased by 2.79%. The contribution of new products was up from 33.87% to 47.96% of the total volumes in maize crop. Vegetable seed sales volume increased by 19.79%, and revenue increased by 23.68% as compared to last year. Vegetable crops like bitter gourd, tomato, okra, and watermelon have shown good performance this year. Exports increased by 250% compared to last year. Now I would like to open the floor for question and answer session.
Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge who wish to ask a question may press Star and One on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin Awasthi from InCred Equities. Please go ahead.
Hello, sir.
Hi.
Yes, sir. I had a few questions, one regarding the Bangladesh market and remaining related to co-products in India. I will start with the Bangladesh market questions. I just want to understand that cotton in Bangladesh, the BT, if I am correct, has been approved. Is that correct, or is it still in approval stage?
I think they have approved, but as per the license agreement, we cannot export to any other country apart from India. We need to sell only in India. We are not doing any cotton sales in Bangladesh as such.
Okay. Because there are universities which have tied up with companies, and they have developed traits of BT. Can you do something like that and export to Bangladesh? Or you have to do that with the university or an organization in Bangladesh?
Basically, as of now, we are not looking for cotton as such in the current couple of years. But the Bangladesh market is growing big, and we were doing our business from India. We are willing to distribute what they were selling. We wanted to pick up our own brand, develop our own brand and research there. That is the reason we have set up a subsidiary company. It may take two to three years to get the entire base, and first we will do marketing, then we will start with sales there.
Okay, understood. Basically, the business as of now is just export, and people can brand in their own brand and sell it in Bangladesh. The move is within two, three years to convert that into your own brand, own products.
Yes.
Okay. Understood. Cotton market, as of now, we are not entering in Bangladesh.
Yes.
Okay. That is the question from the Bangladesh market. Secondly, on the Indian products. Cotton market, with this year, I think government has not given a very big hike and approved the increase in sale price. It is about INR 10 per packet. However, what I have observed is last year's massive hike of around INR 40 a packet was not completely gained by the company. What are we thinking right now? That will we be able to gain that both of these combined from INR 810 to INR 864, if I am not wrong, where the rates have been changed to. Can we still try and get around INR 30 or INR 25 of this increase? Or will we have to
We can definitely realize more than last year based on each individual company regarding the realization. But one thing we need to observe this year, this year the cotton production cost has also gone up.
A significant hike is there in the production cost compared to previous years of INR 60, INR 70 more than a packet. We incur more than INR 60, INR 70 per packet. But whatever we try to realize from the market, definitely we realize more from what we realized last year, but that will be compensated, or in fact, will be some sort of a minus in terms when we compare with the production cost.
Okay. Basically, yes, there is an opportunity to gain more from the customer. However, production cost is astronomically high if you're giving that rate.
Yeah.
I don't think that increase has ever happened before in production cost.
Yes.
Okay. Understood, sir. Secondly, about the second product, which I wanted to discuss about a little was about maize. There has been massive campaigns from the government side and other agencies to start maize farming in a very big way. For the first time, we are seeing prices stabilize much above MSP and stay there for some time, which is giving comfort to farmers to shift all across India to maize. Are we seeing growth in our segment? Are we seeing growth in our demand for our maize seed products?
Definitely. Going forward, maize is a very good crop. Even government has initiated ethanol plants, so as of now, the estimate is more than 33% of the total production will be utilized by ethanol when it is fully commissioned. So definitely there will be more pressure to produce maize. And as a crop now with the stable prices and above the MSP, it is much lucrative for the farmer. So definitely as a long-term crop, not only for this year, this year definitely the maize acreage will slightly go up, and the longer term view also, maize is a crop which will definitely gain market.
As of today, in the market, what is our market share in the maize seed market, and what would be our ranking?
As of now in the markets, we are close to 7% to 8% market share as of now.
Okay. And that would conclude us at which rank?
We are in the top five players.
Top five.
Okay. Understood. Thank you, sir. That's all the questions from my side.
Thank you. The next question is from the line of Sanjeev Zarbade from DreamLadder Investment Advisors. Please go ahead.
Yes, sir. Congratulations on good set of numbers. Sir, I just wanted to understand your vision regarding the vegetable business and what kind of market size the business can command in the medium term.
Vegetables market is a very interesting market in India. It is growing at much faster than any other crop. Major component in vegetables are chili, okra, tomato, and gourds. So these are the crops where we are concentrating much, and in the recent, we have developed good hybrids, and even that has given a good performance in markets. Now production is also stabilizing now in doing that. So we see a very good growth in vegetables in coming forward. As of now, we are a very small base, but a decent base in compared to vegetable crops. We are close to that INR 55 crore to INR 60 crore mark. Definitely, we see a good growth in vegetable, at least 20% growth going forward year on year.
Okay, sir.
Thank you. The next question is from the line of Guneet Singh from Counter Cyclical Investments . Please go ahead.
Hi, sir. In the balance sheet, we see that other current liabilities have gone up from around INR 400 crore to INR 510 crore year-on-year. I would like to understand how much of this is the advances from customers.
I just need to check the exact number. It should be close to INR 160 crore to INR 180 crore.
All right. INR 160 crore to INR 180 crore. Sir, we are two months in Q1 currently, and this is a heavy quarter for us, so what kind of demand uptake are we looking at currently based on the current scenario?
We see good demand for across all the crops, but the main constraint is in cotton. We don't have enough production for cotton for this year. That's the only crop where we are seeing a bit of difficulty. Whereas other crops, the demand is also good, and we have enough production for that. We see a good growth coming in other crops in terms of cotton.
All right, sir. In terms of cotton, do we expect to maintain the volumes of last year, or do we see a degrowth this year?
As of now, we see a slight degrowth in that because we don't have exact inventory. We have done 52 lakh, 53 lakh packets in cotton last year. We have inventory close to 47 lakh or 49 lakh. I don't know the exact number. Something close to that. We'll be down by 4% to 5% compared to previous year.
Okay. All right, sir. And sir, what would be the main reason for this? We also had some news of a shortage of supply in cotton seeds, so has that impacted the company?
Yeah, it's across the industry. We see a shortage across the industry. It's not only for Kaveri. We had a very bad year in terms of the production. The entire production got affected across India, and there was different types of difficulties in producing it. That's the reason the production is down and the production cost has also gone up. These are the two impacts of that. Not only in cotton, in other crops also there's immense pressure on the production. In most of the industry says that there's shortage of most popular hybrids. But in other crops, we try to manage it, but in cotton, we are not able to do that.
All right, sir. Would we be able to maintain the EBITDA margins of last year in cotton?
Slightly down compared to previous year because I said that we might realize more in the market compared to previous year. A couple of rupe will be increase in the price, but the production cost has also gone up. There's a slight impact on the EBITDA margin. But what we see is that might be compensated with the other crops, where we see good growth in other crops. Cotton is only 30% of our total sale now. The other 70% will see a growth, so we are pretty confident that we'll do growth across and overall consolidated basis .
Right. So, sir, how do we look at the demand for non-cotton segments, specifically the rice segment, hybrid and selection rice?
The other main crops like maize, rice, and what we call as selection rice, even that is also rice. We see good demand in these crops, and we see double-digit growth in these crops.
All right, sir. In terms of realizations for non-cotton segments, how are they currently, and what cut margin should we expect from the non-cotton segment? We see any improvement or
It should be in line with this year. Even with the production costs are up in those crops, we will be able to pass it on to the farmer. We do not see any pressure on the non-cotton segment.
All right. On a consolidated basis, what kind of volume growth or degrowth are we looking at in FY 2025?
If you see non-cotton segment, volume growth will be more than 10% across.
All right, sir. Thank you very much for answering my questions. Wish you all the best.
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead. Mr. Madhur?
Sir, I am trying to understand that according to news reports, the cotton seed production is down something like 25%. So firstly, I wanted to get your view on that, whether the shortage is actually 25% or thereabout. Sir, if so, then since we are expecting something like 5% volume degrowth in cotton, do you think it can be set off by higher realization?
In cotton seeds. Sir, also, what was our realization for cotton seeds last year, and what is it now?
I think you missed the first question. I have already answered this. The realization will be slightly higher than last year, but the production costs have gone up. That will compensate what we realize from the market. In fact, there will be some sort of a negative, how to say. If you see the net profit EBITDA margins, we may not be able to maintain last year's EBITDA margins because the production costs have significantly gone up. Even though we realize more from the market, we will have some dent on that.
On an overall basis, in your best judgment for FY 2025, sir, you think we can reach around INR 300 crore EBITDA that we are doing since last many years, or you expect a fall?
Absolutely. If you see the overall percentage of cotton is only 30% of our total sales as of now, close to 30%. We see a good growth in the other 70%. Definitely we see a good year coming, and in terms of what you said, EBITDA, definitely this will be higher than what it is now.
Great, sir. Thank you very much, and that is okay.
Thank you. The next question is from the line of Rohan Patel from Turtle Capital. Please go ahead.
Hello, am I audible, sir?
Yeah.
What is our cotton market share?
We have 12% to 13% of the total market. We have a market share of 12% to 13%, 12% to 13%, it is.
Okay. If you see, over the period of time, we have lost our market share considerably. It is half of what we used to be having before, some years ago. So who have we lost our market share to? Is it unorganized players or organized players? What has happened over there? Can you just elaborate on it?
Sir, I will just try to correct that. We were never at 25% market share. We were at a market share of 17%- to 8% at peak. Then the cotton market share were also up to significant, like INR 5.5 crore. Now the market size itself is INR 4.5 crore. The cotton market has declined, and we have lost market share, especially in Andhra, where we had more than 40% market share. That has come down. Then cotton is taken by all other players, and basically there are one or two companies which are taking the majority of market share.
Okay. Are we trying any initiatives to recoup that, going back to 17% on pan-India basis?
Definitely, because we have introduced many hybrids, and still there are some more pipeline hybrids. So we are fairly confident going into that market share in the coming years. We have very promising hybrids. Some are already tested and launched in the market. That we are going to see the sale in the next coming two to three years for that.
It will take us two to three years. Sir, as of now, what is-
No. I mean to say, this is a real good towards that path, you will see in the next two to three years.
Okay. As of now, what is the share of new products in cotton?
This year it is less because we were not able to produce the cotton. As I said that there was a tough condition in terms of production. If you see the major markets again with Money Maker, Jadoo, and ATM, there are three main products which are contributing more. But going forward, there will be other products which would be having a size in total contribution.
Okay. What was the packets sold in 2024 for cotton?
That is already given in the presentation. It is around 51 lakh, 52 lakh packets. The exact number is there in the presentation.
Okay. Sorry. That was from my side. Thank you.
Thank you. The next question is from the line of Sandeep Abhange from LKP Securities Limited. Please go ahead.
Yes. Can you hear me?
Yeah.
Yes.
Yeah.
Sorry, your voice is cracking.
Your line is not clear.
Hello. Yes. Can you hear me now?
Yes, sir.
Yeah. I was asking the production cut what we have gone through. Are we expecting this production cut to-
I am not able to hear you, sorry.
Hello.
Yeah. In between I am missing you.
Hello. Yeah. Can you hear me now?
Slightly better, but yeah.
I was say-
Sandeep, sir, your line is not clear. I request you to rejoin the queue.
Okay.
Thank you. The next question is from the line of Krushi Parekh from Pentacle. Please go ahead.
Yeah. Hi. I just want clarity. You mentioned that the advance from customers in the other current liabilities is, what is the number this year?
It is between INR 160 to INR 180 crores.
INR 160 to INR 180 crores.
I just find out the exact number, but it should be INR 160 to INR 180 crores. Because as of March 31st, we need to see the exact number.
Okay. Because I think last year it was somewhere around INR 270 odd crores, if I am not wrong.
Last time also it is the same number. Usually it is not around the INR 200 crore mark.
Okay. So around INR 160 to INR 180 crores is what you are suggesting.
Yes.
Okay. Second thing, we again got this income tax notice a month back or so. How different is the demand this time versus what we have received in some of the prior years? I am sure we are confident on the agricultural income portion of it, but how different it is versus the earlier claims that the department has made.
In the same line what they have done, the assessments were done in the same line. If you see in the previous year, a couple of years back, we had another demand. In the same line, the demand was raised this year, but nothing is admitted. One of the cases is in the Commissioner of Income Tax (Appeals). Nothing has gone through. It is still in initial stages.
Okay. So nothing different, and we are-
Nothing different. It was all done on the same lines.
On the same lines. Okay. Got it. Thank you.
Thank you. The next question is from the line of Yogesh Mittal , an Individual Investor. Please go ahead.
Sir, thanks for giving me the opportunity. Sir, I have a question about the vegetable seeds. I know that the company has multiple vegetable seeds as the offering. Out of these, which seeds are company's own development by the R&D, and which are from outside, like the license or something like that?
The majority of the revenues, like more than 90% of the revenues are for our own seeds. There are some seeds where, like cabbage or cauliflower, that we import. But otherwise, it's all our own seeds.
Okay, sir. Sir, one thing more. Last year, what have been the R&D expenses, both CapEx and OpEx, FY 2023 to FY 2024?
For FY 2023, the R&D expenditure was around INR 45 to INR 47 crores. For FY 2024, it was around INR 57 odd crores. The majority of that is in the recurring expenses.
Majority in recurring. Okay.
Yes.
Okay, sir. Thanks for this. All the best, sir. Thank you.
Yeah.
Thank you. The next question is from the line of Anurag Jain, an Individual Investor. Please go ahead.
Good afternoon, sir.
Yeah.
I just wanted to clarify on the advance from customers. Sorry for repeating this question. Earlier last year, the balance sheets shows that the advance from customers was INR 276 crores. If this year it is between INR 160 to INR 180 crores, is there a change in strategy by the company?
Nothing. I just need to check the exact number because this will rise on March 31. But what we have seen compared to the last year, the advances are in line or slightly better than last year because we don't have cotton seed. We have got huge advances for cotton.
Okay.
Any other clarify about this exact number.
Okay, sir. My second question is, this is coming from the consolidated cash flow statement. The consolidated cash flow statement shows that for FY 2024 and FY 2023 combined, the company has paid for property, plant and equipment almost INR 208 crores. INR 99 crores in one year and another INR 108 crores in the FY 2023. I wanted to understand what is this capital expenditure of INR 208 crores on, and by when the benefit for these would be available?
Sir, there are a couple of things. One is the new offices we are constructing, that we will move into next one or two months. The other thing is all about the plant. We have set up plants and cold storage in the last couple of years. That's the main CapEx what we have done. Most of the plants are already commissioned. This year we are already using it.
Okay. And sir, the cold storage would be operational by when?
Even the cold storage is also operational.
Okay, sir. Thank you. Sir, one more question on the, in the fourth quarter, the other segment has witnessed sales of INR 31.5 crores. This was a significant contribution in the fourth quarter.
Sorry, can you please repeat? I missed it.
I will repeat, sir. In the fourth quarter of the previous year, FY 2024, the other segment, basically if I take the total sales of the company and remove the sales for cotton, selection rice, hybrid rice and maize, then what is left is basically the others. If I take the others, the sales contribution for others has been INR 31.5 crores in Q4, which last year Q4 was around INR 5.5 crores. So, what-
Basically, that is export business which has come in from sunflower.
Okay. Sunflower and export business.
For export, we have done for sunflower. The other, that was done in the fourth quarter.
Okay. Okay, sir. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask questions. The next question is from the line of Siddhant Dand from Goodwill. Please go ahead.
Yeah. My question was, on a broad basis, what does the industry need to do or the government need to do to encourage cotton sales production or harvest to go back to the previous highs that we saw a decade ago?
One thing, you are talking about the price or in terms of the area?
Area.
Area, that government, I don't think will act on the area because that all depends on the demand and supply.
Okay. Demand is low.
Yeah, demand is low. But the price is good, so I don't see areas going down from here. If there's a real demand, the area will go up. But the one thing we need to observe in cotton is that there are new technologies which are waiting for the approval. That's one thing which will increase the value. The other thing is that, in terms of the close plantation, high-density plantation, that is also coming in, wherein the volume will go up. The area might remain same, but the volume will go up by 2x to 3 x.
Okay, got it.
These are two things which are awaiting. Yeah.
Okay.
These are the two things which are waiting.
Is there something-
Nothing more. I think the new technology will come any time. Most of the approvals are already done.
Okay.
That most probably in the next six months, hopefully that should be done. If nothing goes wrong.
Okay. Within a year or not, three to five years.
Yeah. The other thing, even for the close plantation, it's in the very advanced stages. If you get the right product, definitely it will also move in. So in the next three to five years, these are the two things which are coming up that will definitely increase the volumes of the cotton market, irrespective of the area.
Okay, understood. Secondly, is there any update around new genetically modified seeds possible or it's still a long time to go?
That's what I said. Most of the approvals are already done for the-
No, non-cotton.
Non-cotton, most of the crops are under trial. I think even compared to a couple of years back, now we are in a very positive side, even that might be approved. That's my personal feeling. Nothing.
Okay. That's all I wanted. Thank you.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Thank you. Thank you for joining the call. For any other information, please be in touch with Mr. Rama Naidu from Intellect PR on +91 9920209623. On behalf of Kaveri Seed Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.