Ladies and gentlemen, good day and welcome to Kaveri Seed Company's Q3 and nine months FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Joining us today on this call, I am 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 now hand the conference over to Mr. Mithun Chand. Thank you, and over to you, sir.
Thank you. Good evening, and welcome everyone to our quarter three, nine months financial year 2024 earnings conference call. We hope you have had a chance to review the presentation of our results, which is also available on our website. I will touch upon the operational and financial performance of the company, and then open the floor for question and answer session. Revenue from operations was at INR 981.89 crores as compared to INR 939.93 crores, registered a growth of 4.46%. EBITDA was at INR 321.13 crores as compared to INR 303.67 crores, increased by 5.75%.
Net profit was at INR 290.22 crores as compared to INR 280.93 crores, registered a growth of 3.3%. Cash on book stands at INR 587 crores, as against INR 403 crores. Quarter three's financial highlights. Revenue from operations was at INR 118.47 crores as compared to INR 123.49 crores, down by 4%. EBITDA was at INR 222.25 crores, and net profit at INR 11.66 crores. Oilseed results, maize and vegetables are growing in both volumes and revenues, and the same trajectory will continue in the coming quarters, too. Company continues to deliver good realizations in both cotton and rice, in spite of volumes remaining stable. Increasing trend of new products contribution in bajra and maize.
Efforts in export yielding results and put the company on the fast track in international markets. On a quarterly trend, other income was down by INR 19.14 crores, and depreciation increased by INR 1.5 crores. The rest all remained flat. The higher other income in quarter three, financial year 2023, was on account of redemption done from investments made by the company for the implementation of early buyback done during the last financial year. As part of our continuous endeavors to reward our investors, the company had announced a buyback of shares at INR 275 up to INR 325 crores. Operational highlights. Cotton volumes are stable, but revenue increased by 6.03%. The contribution of new products was up from 45% to 59.67% of volumes in bajra.
Hybrid rice volumes are stable, but revenue increased by 9.26%. Selection rice volumes are stable, but revenues increased by 8.16%. Maize, increase in maize revenue by 5.36%. Contribution of new products were up from 38.67% to 49.45% of volumes in maize. Vegetable seeds sales volume increased by 22.13%, and revenue increased by 24.4%. Revenue, vegetable products like bitter gourd, tomato, okra, and watermelon have showed good performance. Contribution from exports to revenue has increased by 139%. I will now open the floor for question and answer.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Siddharth Dunn from Goodwill. Please go ahead.
Yeah. Hi. Can you hear me?
Yes.
Yes.
Yeah. Hi. My first question was, employee benefit expenses have really shot up this quarter, and it is our highest ever for any quarter. So any reason? Is it any one-off, or is it a higher expense in general?
No, that is a continuous trend, what we are seeing in last five, six quarters, as we are increasing the headcount and that's the reason the employee cost is going up.
Okay. So we can expect-
Sorry?
We can expect it to be around INR 3,500 crores as a base now. INR 3,500, sorry, INR 3,500 lakhs. Yeah.
INR 3,500 lakhs. Yeah.
Yeah. Okay. My second question is.
Last week quarter it was around INR 29 crores.
This quarter is around INR 349.7 lakhs, right? Employee benefit expense.
Yeah. I am seeing the standalone. You are talking about the consolidated.
Consolidated.
Yes.
Okay. My second expense is on a longer term, three, five-year basis. How much can we expect our R&D expense as a percentage of sales to be? Because it has gone up over the years.
If you see in the last five years, we have spent close to INR 200 crores. Year-on-year, it's coming up to 5%- 6% of our total revenue. I think this will continue, and going forward, the trend will continue. Further, it may go up.
Okay. Any views on new genetically modified seeds that can be allowed in the market by the government? When can we expect that to happen?
As of now, we are not working on any genetically modified crops. Working in the sense, we are not developing any technology for that. We are dealing cotton crop, which is only one crop which is genetically modified crop. Recently they had an argument in the Supreme Court regarding the genetically modified mustard, but the judgment is reserved. Based on the judgment, new technologies may come for it, and the government is favoring for new technologies. I think if that is cleared, most of the technologies will come to India.
How quickly can we ramp up in case of mustard or maize or any crop that is allowed GM? Can we ramp it up the way we ramped up cotton?
The technology is already available outside of the country, and most of the trials are also done in India. Once it's approved, it may take three to four years to get introduced.
Okay. Three to four years. Okay. That's a good timing. My other question was, can we expect the promoter to participate in this buyback?
Our offer says that even the promoter will participate in the buyback.
Okay.
To what extent, that we'll decide later on.
That we'll decide later on. Okay. I just wanted to understand this accounting query. What is the difference between your CWIP and your biological assets? Because you have classified them as both in the current.
Biological assets are the standing crops which are there in the field.
Okay.
When we give it for the production, some stock will be there on the field. So that, we call them biological assets.
Okay. The RM, CWIP, and finished goods will be what assets?
That are which are already received in the plant, which we can physically see that.
Okay. Understood. Perfect. Thank you.
Okay.
Thank you. Next question is from line of Yash from Daulat Equities. Please go ahead.
Hello. Good morning.
Yes, go ahead.
I just wanted to know the contingent liabilities for the tax issue that is-
You are not audible. Your voice-
I just wanted to know if there is a retrospective tax on tax contingent liability. To what extent are we covered?
Yash, sorry, we lost your audio in between.
Hello.
Yeah, go ahead.
Yeah. If we have a retrospective tax on our contingent liabilities for the case that's going on, till what extent are we covered?
What do you mean by retrospective? We have one case which is going on, which is already disclosed to the exchanges and is already mentioned in the annual report. That is the only thing which we are having as of now. Any other thing comes in, definitely it will be disclosed.
Yes. What is the extent of liability if we lose the case?
That we have given. Like for one financial year, the demand was like for INR 65 crores or INR 70 crores. I do not remember exactly, but that we have already mentioned in the annual report. You can, for that reference, you can get it.
Yeah. Also, are you sticking with the growth guidance of 12%-15% consolidated profit? The 12%-15% consolidated profit growth, does that include the buyback EPS growth or not?
Sorry?
Does the 12%-15%-- You've given a guidance, right? 12%-15% of consolidated profit growth.
Yes.
Yeah. Are you still sticking by that guidance?
Yeah. That's a long-term guidance what we have given for that. We need to see. We still go with the same thing.
Okay. Thank you. I'll just come back to you.
Thank you. Next question is from the line of Sanjeev from DreamLadder. Please go ahead.
Yeah, sir. Thanks for taking my question. It was regarding the, this is INR 1 lakh crore allocation that the government has done regarding the agricultural sector and R&D. Do we stand to benefit from this initiative, sir?
Sorry. I'm not able to understand.
No, I was asking about the government allocation of INR 1 lakh crore in the budget regarding agriculture. Do we expect to benefit from this initiative? And how-
Definitely. Anything in agriculture will definitely get benefited. May not be directly, but a lot of indirect benefits will be there. If you can give farmers subsidy, or if you can provide some sort of an irrigation facilities or some sort of a logistics or to maintain post-harvest, anything in respect to agriculture, definitely that will help us indirectly. As the farm income grows, definitely they will afford for good seed.
Right. That's it, sir, from my side and all the best.
Thank you. Next question is from the line of Dhruv from Flute Aura. Please go ahead.
Hello. Thank you for taking my question. I just wanted to understand by what time are we expecting the buyback to complete?
Because we have already given the postal ballot, the results are on February 8. Once we get the scheduling approval, after that it may take another one month's time. So most probably it will complete by March 10, in and around that March 10.
Okay. Thank you so much.
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical. Please go ahead.
Firstly, thanks a lot for the sixth consecutive buyback and the highest-ever buyback in our history. So thank you very much.
Sir, sorry to interrupt you. Can you please speak through the handset?
Sir, thank you very much for the sixth consecutive buyback, which is the largest in our history. I want to thank you on behalf of all the shareholders for the buyback. Now, sir, the concern is that, sir, you are constantly mentioning that we hope to grow by 10-15%, but in the nine months also, we grew by less than 4.5%, which is less than the rate of inflation. Sir, so till when do you think we can again come back to our growth path? I have given a growth of 10-12% as a long-term growth. Still, I am very much confident that if you take the long-term growth, that will match. But based on the seasonality, a year or two, we may lose it, but on a long-term basis, we will grow in that fashion.
Sir, also wanted to understand that, sir, what is our market share in cotton seed in this financial year?
We have close to 16% market share. 14%- 15% market share for cotton.
Sir, also, sir, in FY 2015, we used to have 12% market share in pearl millet. Sir, what is the status of this now?
Yeah, we are working on pearl millet. There are very good pipeline hybrids in pearl millet. We think that we can get back our market shares and much higher market shares what we used to have earlier. We are pretty bullish on pearl millet, and we are already testing several hybrids which are doing well. We can expect pearl millet sales coming in the next years.
Sir, what is our market share in the current financial year?
As of now it is very low. It is like 2%-3%, not more than that. We have huge scope to grow in that area.
Sir, now the thing is that our revenues are flat since FY 2015. Sir, if we see our R&D expense has increased from INR 12 crore to INR 63 crore. Sir, similarly, if we see our employees have increased from 814 to 1,275. Sir, similarly, our sales promotion, farmer meeting expenses, staff and dealer meeting expenses, everything has gone up. Sir, so now the thing is that we are spending more on everything. Then sir, why are we unable to get the business?
Sir, if you see the 2014-2015, the mix was more than 75% was from cotton. The other crops contributed only 25%, 30%. The scenario was different. The margins were very high in cotton earlier, 35%, but right now if you see the cotton margins are only 15% odd. If you see the present composition, cotton hardly constitutes 35%. We are growing in all other crops except for cotton, where we are declined. So that is the reason for the flattish revenues and being normal for the last 10 years. If you see other crops, if you take minus cotton, we are growing in each and every crop. The other thing regarding the costs, it is quite visible that how much we are spending in R&D. We have increased our headcount, we have increased our network. We have more dealers now than what we had in 2014, 2015.
As we said, we are working for the future. We are very confident about our product pipeline and what we are spending now, that will be reflected in the future growth.
Thank you. The line for the participant dropped. We move on to the next participant. Next question is from the line of Rohan from Turtle Capital. Please go ahead.
Good afternoon, sir.
Welcome.
Sir, lately our market share in cotton in Andhra Pradesh and Telangana has decreased. Whom have we lost our market share to, and what can we do to recover that market share? Do we have any plans to recover our market share?
Basically, across India, the majority of the market share was taken by Rasi, from one of the companies. Here also, Rasi is the main player. As I said earlier, we are pretty confident about our new pipeline hybrids, where we can think that we can get back our market sharing going forward in cotton as well.
You are saying Rasi is a market leader?
Yes.
Okay. Lately we are also having issues with illegal cotton seed. How big is illegal cotton seed as a market?
As a percentage, it remains same over the years, like 8%-10%, that remains same for over the years. Going forward, once the new technology comes in, we might not see this illegal cotton.
Okay.
I think that will remain sideways for next year or two as a percentage.
Okay. Then it can reduce.
Sorry.
After three, four times-
Can you please speak through the handset?
Okay, yeah. Wait a minute. Am I audible now?
Yeah, go ahead.
Yeah.
Yeah. For a year or two, the market share of illegal will be sideways, but afterwards it can reduce. What I mean to say is that as the technologies are pretty old.
Okay.
They sound like BG II RRF illegally is already available. What they say is already available in the market. That's the reason we are seeing illegal cotton. Once a new technology gets into place, then we don't see this type of illegal product coming in.
Okay. Another question is that what are the challenges you are having in scaling vegetable business? Because in last few years it has not grown very highly, but you are lately saying that you want to double it up or grow 25%-30% in three years. What are the actions you are going to take? What are the new hybrids you are going to bring in vegetable?
If you recollect, what we were saying is that in vegetables we will grow year-on-year at 20%, 25% for the next five years. Last year we were a bit flattish. I mean, we just grew by 7%, 8%. This year we are growing by almost 10%, 12% compared to previous year. But as a span, as I said earlier, because we are more dependent on season and climatic conditions, some years might be good and some years might not be. But as a long term, you see that we will attain that 20%, 25% growth over a five-year period of time. That we are pretty confident and we are already seeing the results for that.
Okay. On export side, what are the geographies that you are targeting for export, and have you created any crop or vegetable portfolio that you want to focus on in export side?
Yeah, basically in vegetables we are concentrating on gourds, tomato, hot pepper, and okra. So these are the crops we are already exporting. Also, we have done one or two crores of exports of vegetable this year as well. If you see our export sales have increased compared to the previous year. We are concentrating countries like neighboring countries, especially Bangladesh, Nepal, the other countries like African countries and countries like Indonesia, Thailand.
Okay. Are you also focusing on field crop side for exports? America is a bigger market.
Basically, we are mainly focused on crops like rice, maize. These are the two crops which are there in the countries where we are operating, and we are targeting those markets.
How big?
Including vegetables as such. This year we have done sunflower also. Yes, we have sent sunflower to Tanzania. I don't think that might come next year because it's a one-time sale what we have done, and that's a government order. If further going down the line, if we get a government order of that size, we can do. Otherwise, if you take that out of the entire export sale, from 20 we'll be having that 45-50 crores of export this year, minus government sale.
Okay. In next three to five years, how big can export be for us in revenue size? How big it will contribute?
What we are seeing is that export from last year it was around INR 20, INR 25 crores, INR 20, INR 21 crores of exports. We see like in the next five years it should cross more than INR 100 crores.
Okay.
In the next three to four years.
Okay.
From our side.
Thank you. Next question is from the line of Ankit Gupta from Bamboo Capital Partners. Please go ahead.
Yeah, thanks for the opportunity. Mithun, we are likely to end this year.
I think the audio is not clear.
Mithun, is it better now?
Yeah.
Yeah. We are likely to end this year with sales of around INR 1,150 crores, and almost attain the sales which we had done in 2015. Mithun, from here on, will it be possible to reach INR 2,000 crore kind of revenue over the next three to five years? If yes, which all segments are expected to contribute towards the data of INR 850, 100 crore mark?
From taking the base year of 2024, up to 2030 we can easily by INR 2,000 crores. We have very good pipeline. As I said, these are the three main field crops like cotton, maize, and rice, and other crop, vegetable. These four will contribute to the majority of the growth. In all the crops what I mentioned above, we have very good pipelines coming up. We have very good hybrids which we are already trialing. We are pretty confident that we can go back to our main market shares, and we can further increase our market shares also. From here on INR 2,000 crores, it looks quite possible and not far away.
But if you look at it-
Hello.
Yeah.
Can you be a bit louder?
Yeah, sure. If you look at it, cotton sales, cotton of course because of the price control, the revenues have fallen. But even our volumes have not grown over the past seven, eight years. Even if I look at maize, there's hardly any growth in volumes at ACMA and maize. Revenue also in 2015 were around INR 160 crores, which last year was around INR 230 crores. What efforts are we taking to grow these two segments for cotton and maize specifically, so that our revenue can touch the guidance that you have given?
If you see maize, it was like INR 130 crores, INR 140 crores at that particular time. I just need to check it out, INR 140.
Yeah.
Right now it is like INR 240 crores, INR 250 crores. It is INR 250 crores. If you take rice was only INR 20 crores, INR 30 crores at that particular time. Now it is more than INR 225 crores. Vegetables were zero. Now we will be closing around INR 50 crores, INR 55 crores of vegetables.
Except for cotton, all other crops we have grown.
We are very confident that we will grow going forward. Cotton, one thing, the acreages were down, as rightly said, because of the price control order and all other things. The margins were down in cotton. The overall acreages were down, and over and above that, we lost some market share in cotton. Three contributed for a decline in cotton. Going forward, what we see, we have very good hybrids in our pipeline. We are already testing a couple of hybrids in northern India also, which is doing well, and the central base also. In the next three to five years, we think that we can get back our market share to what we used to have earlier, like the 20-odd percent market shares. We are very confident about that.
Okay. Cotton we can understand, but even in maize we have not done well over the past seven, eight years.
Maize, I just need to check it out. Maize, like for INR 140, INR 150 crores.
INR 160 to around INR 160 crore in FY 2025, and now we will lose somewhere around INR 240 for this year. It was around INR 160 crore in FY 2025.
I think that was one year where we had done huge sales. That was in 2013, 2014. After that it came down, but the portfolio has also changed now. Earlier, the entire market share was in Karnataka and Andhra. Tamil Nadu and Andhra. Now we are expanding across India, and our market shares are up. We are all moving to single cross hybrids.
Okay. What is the market size of rice seeds and vegetable seeds in India?
Market size, 8% is hybridization. You can see 55,000 tons of rice, 55,000- 60,000 tons of rice.
Okay.
Of hybrid rice.
Okay.
Vegetable, so your market size is close to INR 2,500 crores-INR 3,000 crores, slightly above than that.
Because, even in vegetables, although we were hardly present in vegetables in FY 2015, but over the last seven, eight years, our sales have hardly grown to let's say we will end up this year with somewhere around INR 60 crores. So, although this has grown from nil to INR 60 crore, but its impact on our overall revenue hasn't been that significant.
One thing, see, as I said earlier, cotton has contributed to 75% of the total sale in 2015. 70%- 75% of the sale. That has come down to 35% now, as a percentage. You can see the growth in other crops.
Yeah.
That is the main difference as of now. But if you see any crop portfolio minus cotton, we have grown in a good pace. Going forward, you can see what is the amount what we have spent in the last five, six years in terms of the R&D or in terms of the headcount we have, in terms of the increase the market presence, increasing the network, setting up these facilities, processing facilities, and if you see the grower base of more than INR1 lakh farmer, 1 lakh acres. That shows how fast we are growing on the crops except cotton. But as cotton is a major portion for the company and for the industry as well, from the cotton also will grow in the next years to come. The entire growth will come going forward.
Okay. Thank you.
Thank you. Next question is from the line of Uday Prakash from Value Research. Please go ahead.
Yeah. Hi, sir. My first question is regarding the export market. You already answered it.
Uday Prakash, can you please speak through the handset?
Yeah. Am I audible right now?
Can you come a little closer to the phone?
Yeah. I am audible now?
Yeah. Thank you.
Yeah. Sir, I know that you already answered the question on exports, but if you could give us a number on what is the contribution of exports to total revenue on nine months basis, and what is the growth year-on-year?
For the nine months, we have done around INR 40 odd crores, I think, exports right now. I just need to check the figure. But for the entire year, it was INR 20-22 crores last time. It is almost like it doubled this year, INR 40 crores. And we will end up in between, like overall for the year, it will be around INR 60, INR 55-60 crores of exports because some orders are pending. So we will do that. Out of which, INR 15-20 crores of exports are a one-time sale, as I said earlier. For what we have done in sunflower, we have shipped one to Tanzania. That may not come next year. But on overall basis, we are up by 75%-80% more than last year.
Thank you. The line for the participant dropped. A request to all the participants, please use handsets while asking a question. The next question is from the line of Sandeep Abange from LKB Securities. Please go ahead.
Yes. Hi, sir. Thanks for the question. I had a question regarding your growth from the non-cotton space. As you can see, the overall non-cotton-
Sorry.
-volumes.
Can you hear me?
Hello? Hello? Hello. Yes, can you hear me?
Yes.
Yeah. I had a question regarding non-cotton volumes. Your non-cotton volumes have grown significantly in the past five years, mainly in the hybrid rice and in vegetables as well as selection rice. Just wanted to have an outlook going forward, like how big are we seeing in terms of the non-cotton space? Currently, it is contributing around 65%. Are we expecting similar kind of contribution going ahead, like in next two, three years, or it will go past 65%? How we look at it.
What we see is that, as we were telling earlier, cotton should contribute in between 30%-35%, because cotton is a very big market.
Okay.
From the base where we are right now, I may not comment upon a year or two, but down the line, we have a huge scope of growing cotton also. I don't think the composition will change much. It will be in that bracket, 70%, 30%. 30% will be around cotton and 70% will be non-cotton.
Okay. Secondly, I have a question.
As we see growth in cotton also, that's the reason we say that cotton will also contribute to that 30% going forward.
Okay. We can expect a 70-30 kind of ratio going forward.
Yes.
I have questions regarding your margins in terms of your vertical wise. Can you give some clarity on your margins in hybrid rice, maize, vegetables? Like you say, in cotton, you have 15% approximately margins in cotton. Can you give some ballpark number in terms of margins in your verticals, if you can give us an idea.
Our EBITDA margins are in between the 27%, 28%.
Right.
This is the last four, five years in between 27% to 30%. In cotton we are in between the 15% up to 18% margins.
Okay.
Non-cotton segment will have that 35%-40% segment.
Okay, so like-
Even in each crop, each hybrid has got a different margins.
Okay.
Overall, I am just giving a benchmark of the 35%-40% that it has.
Okay. In that, do we have high margin in hybrids, hybrid rice and vegetables, or is it kind of in a similar space?
Usually the margins are a bit high in vegetables, but the volume is very low. As of now we are operating at a separate division. The expenses are also pretty high. Once the volume goes up, once the price goes up, once the sales goes up, then the chance of margins going up are pretty high.
Okay. Just adding in the same note, like in the same verticals, how is the overall market share, like in hybrid rice, in selection rice, maize, if you can give some clarity on that.
Maize, roughly we have 8%-9% market share. Hybrid rice, we have more than 10% market share as of now, 10%-11% market share. In selection rice, we have other 10% market shares, 10%-12% market shares.
Okay. That's very helpful. And overall, how is the realization in terms of value growth as well? Are you seeing good value growth across the non-cotton portfolio? Just wanted to take a view on the value growth. How is the value growth doing?
Volume growth?
Value growth. I'm not talking about volume growth, I'm talking about the value growth, the realization growth in your realizations across your non-cotton portfolio.
I said that we work on margin in between 35%-40%, in between 30%-40% other crops. That will remain same going forward also. But as most of the costs, if you see the headcount, and if you see the R&D expense are pretty high, even the depreciation pretty high. Once the sales volume goes up, definitely the margins will be slightly 2%, 3% better than what it is right now.
Okay. Just one question on the follow-up and on the other part is then assume that you have given a guidance of INR 2,000 crore next five years, like almost double.
Can you be a bit loud?
Yeah. You have given a guidance of INR 2,000 crore by FY 2030. So in that, what we have seen in FY 2015, you had a major contributor, cotton, but right now you have quite diversified. Are we expecting the non-cotton portfolio to majorly contribute to that INR 2,000 crore revenue? As well as exports, like you said exports will be around 100% and around. How much would be the split of domestic and export, and how much would be the cotton and non-cotton, on that INR 2,000 crore revenue?
Majority of that will be domestic one. We see at least 7%-8% from the export market, like around INR 150 crore from the export market. But as I said, the composition will be 30%, 70%. Even in that scenario, 30% will be from cotton and 70% will be non-cotton.
Okay, great. Thanks for answering the question. Thank you so much.
Thank you. Next question is from the line of Amit Doshi from Care Portfolio. Please go ahead.
Thank you. Sir, recently there has been news about this maize in focus going to for this ethanol production, and news that sugarcane farmers are also shifting to maize crops. Do you see anything on the ground? We just want to have your comments overall on that and impact on Kaveri.
Maize is a very good crop for both in terms of our climatic conditions and in terms for the farmers. With the ethanol coming up, as of now, they estimated one-third of the total production is required if all the plants are commissioned. Going forward, we see that maize acreages may go up, and that will help definitely Kaveri, because we are one of the major players in maize. That will definitely help Kaveri also. The maize crop will definitely go up, and that will help Kaveri.
Okay. Do you see that thing changing on the ground in terms of farmers shifting their sugarcane crop to the maize?
Sir, it's too early because the plants need to be commissioned. But down the line, we'll definitely go.
Okay. Thank you so much, and wish you all the very best.
Thank you. Next follow-up question is from the line of Madhur Rathi from Counter Cyclical. Please go ahead.
Hello?
Yeah.
Sir, I wanted to understand saying that they will also double.
Sorry, I am not able to hear you. Your voice is breaking.
Hello.
Madhur, may I request you to come in a better reception area? I believe network is not clear at your end.
Sorry?
The network is not good, sir. Your voice is breaking.
My network?
Yes, sir.
Oh, sorry. Is it okay now?
Yes.
Yes. Sir, so I was saying, I hope my voice is audible now.
Yes.
Yes. Sir, I was talking about a news article which appeared recently, which said that Nuziveedu Seeds will double their revenue in five years, and they hope to recoup their lost market share in cotton from 15% now to 30%. Sir, and we are also more or less talking about the same thing. Sir, I mean, everybody cannot take market share because the market is constant. Sir, basically what edge do we have vis-a-vis the competition? And sir, what has changed that in the past few years that market share that we have lost in cotton, what gives you confidence now that this will get reversed?
Sir, in terms I may not comment about the other companies, about the projections and what they do. But coming back to Kaveri, we are pretty confident about our hybrids. The entire projection base or entire comment, what we are doing as of now is only on the base of the hybrids which are there in the pipeline. So by seeing the performance of the pipeline hybrids, we are pretty confident that we can go to those levels.
Okay. And sir, there was a news article regarding the Cotton Association telling that the seed production would be 30%- 40% less in this current season. So do we see an impact of that on our seeds?
I may not say 30%- 40% down, but this are slightly compared to last year production, overall cotton is down.
Okay.
And down for this year. But going forward, even I see the same issue for the next year as well, because we see a shortage in the seeds.
And sir, what about our production?
As of now, we have not received the entire production. Even we will also shortage of that seed. But as of now, we are still receiving the seed and we are testing the quality of it. Once we get that report, definitely we will let you know. By next quarter to the end, we will give a clear picture for that.
So do we have some kind of-
But as of now, initially what we say is that even our production got impacted, that we were saying for the last two quarters. To what extent, that we need to see.
And sir, do we see some kind of price spike in this year kharif season as well as the next year when the production will be down?
I do not know. Again, it is all again, the government need to decide, the central government need to decide on the pricing. We need to see that. But definitely production costs and everything have gone up. So in that view, the price also need to go up.
Okay, thank you.
Thank you. Next question is from the line of Mohammed Patel from Care Portfolio. Please go ahead.
Hi. Can you give some more qualitative details on the products in the pipeline, both cotton and non-cotton?
This year, the entire production, both cotton and non-cotton, got affected this year. But in non-cotton, we have enough inventory, enough production. We have planned it different locations, so we were quite safe when compared to industry. But in cotton, the areas are very limited. We got affected in cotton production. To what extent, that only then after the next one to two months we can get to know. Because as we are yet to receive the stock, and yet we need to test for the quality. Then only we can get to know. But for sure we have been impacted. To what extent, that I can give in the next four or five weeks later.
You are saying that FY 2025 the cotton sales could get impacted because of this?
Yeah, definitely. To what extent, I do not know. But whether we will have the same level of production, or it will slightly above or lower 5%-10%, that we need to see.
Okay. Can you give some more details on the pipeline, both cotton and non-cotton, based on which we are confident of growing?
We have very good pipeline hybrids, both cotton and non-cotton segment, in all the crops. In fact, we are in different zones. As I said earlier, we are tested one in Northern India, one in Central India. We see a good performance as of now, and we are pretty confident about that.
Can you share the number of products in pipeline for cotton and non-cotton?
That's a different thing, because there are N number of products. Only one or two will be there. Once we launch officially, we can share the number of it.
Okay. My next question is, how many products have we launched in FY 2024?
I just need to take the figures, but across the crops, we have done 12 to 14 products across.
Okay. How much do we expect on a-
That we need to check on that number. Usually, we don't track that number, how many products, because we have got 8 to 10 crop portfolio. For example, only in vegetables, we have 10 crops. So each crop will have different hybrids in different segments. So usually, we don't track that numbers.
But do we expect to launch more than 12, 15 products on an annual basis?
No, that's a minimum number what we test every year. That's just a minimum number what we do every year. So tracking that number, that will not give any figures as such.
Okay. I just wanted to understand, so out of this 4% growth that we have done in the nine months, how much of that would have come from the new products?
No, that we have already given in the presentation. Each crop has got a different contribution. What we see is a new introduction, new products. Everything has contributed more. Each crop details, we have already shared in the presentation.
Okay. Thank you.
Thank you. Next follow-up question is from the line of Sandeep Abange from LKB Securities. Please go ahead.
Yeah. Just I had a follow-up question on the size of the market. Can you give a number in terms of how big is the unorganized market versus the organized one in the hybrid seed market?
Overall, Indian seed market, they are estimating around INR 55,000 crores-INR 60,000 crores. Out of which, hybrid seed market, most of that is organized market. It is around INR 22,000 crores-INR 25,000 crores.
Okay. So almost half of it is organized and half is unorganized is trying to say.
Basically, the unorganized market is there in varietal crops.
Okay.
Very unorganized in the sense that the farmer reuses his own seed. But I should say, in the last 15 years, the seed replacement ratio has also gone up to 60%, 65% level from 20%, 25% levels. So they are all moving to the organized market.
Okay. What is the seed replacement rate in the non-cotton portfolio, across your non-cotton portfolio?
No, only in varieties we talk about seed replacement ratio, whereas in hybrids, they are 100% seed replacement.
Okay. 100%. Okay, fine. Just to understand the hybrid penetration of, like you mentioned, in hybrids rice, the hybrid penetration is still between 6%-8%. What is the status for non-cotton portfolio? How is the hybrid penetration in that area?
Rice is also year-on-year increasing, but not to the pace as we thought. But right now, it has reached 8%, 10% of the overall portfolio, 7%, 8%. Whereas in maize, it's almost like 75%-80% is hybridized.
Okay.
Majority of that is already hybridized. Only area which is not hybridized is rice. That is slowly going up, and there are different reasons for that because there are different segments in rice, and we are trying to get a good hybrid which can replace varieties which are high yield level there. But Year-on-year it's changing, and we see a huge potential in rice, and going forward, it will definitely increase.
Okay. Thank you.
Thank you. Next follow-up question is from the line of Siddharth Dunn from Goodwill . Please go ahead.
Yeah. Hi. I just wanted to understand what the worst case scenario that cotton will be affected this year.
As I said earlier, it is too early for us to say, but maybe a 5%-10% ± than the previous years.
Okay. I just had a question that in case there is a proper disaster or something, do we have insurance over our crop or something like that?
We have some, but not successfully done here. We do not have insurance for that.
Okay. Apart from that, there are some restrictions on rice exports. Will they affect the production or sale in the year?
I don't think so, because what we are doing is very, I wouldn't say we are doing in the hybrid market. The exports import as the government policies, usually that will not impact the acreages as such. When we are seeing the acreages in the rise in the last 15, 20 years, it remains stable at that 40, 44 million acres.
Okay. Are we present in Basmati over there?
Right now, no. Right now, no, but we are working on Basmati also.
Okay. Any potential market size for us in Basmati?
The potential is already there, but usually we are working on the hybrids which have got major market shares, like medium slender or something like those type of grains maturity. We are working on those ones. These are very niche markets, very specialized markets for that. We are doing one, but our main focus is on the mainstream.
Mainstream. Okay. Thank you.
Thank you. Next question is from the line of Anurag Jain, individual investor. Please go ahead.
Good afternoon. Am I audible?
Yeah.
Good afternoon, sir. My question is, in the quarter gone by, how has been the performance of mustard seeds?
Mustard is good. We have tested one hybrid last year. That is still in the trialing stage. It is still in the fields. Last week we visited, but it is good. It is doing well. Mustard is a crop which will have a good scope in India, and we are working on hybrid mustard. That will also contribute going forward.
Okay, sir. One earlier answer I wanted to clarify. On the R&D expenses, the R&D expenses are around 5% of sales, and you mentioned you expect this to increase. At what level do you think this will stabilize? R&D expenses as a percentage of sales, at what level they will stabilize from the current 5%?
It might go up to 8% to 9% going forward. That includes your capital expenditure.
Okay, sir. Thank you.
Thank you. Next follow-up question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good afternoon, Mithun. Am I audible?
Yeah.
Mithun, my question is looking at your commentary in the current column in the past, essentially two things are clear that you will gain market share in the cotton side, and then I think your non-cotton portfolio will grow at 15%-20% all put together. Non-cotton has a higher margin. I am slightly not sure how to read into that 12%-15% growth guidance. Because if you put this all together, I think it should be higher. What am I missing here?
That is the guidance what we have given right now. 12%-15% is what we see. The next six years, it will be almost like 70%, 80% growth.
Okay. But is it fair to assume that your non-cotton portfolio will grow at 15%, 20% because your export and vegetables will grow at much faster pace?
Yeah. That all comes in the non-cotton segment.
Okay. I am saying that non-cotton as a segment can grow at 15%, 20%. Is that a fair assumption?
What we say is that overall, as a company, we will grow in between the 12%-15% growth for the next five to seven years.
Okay.
The percentage will be like 30% cotton and 70% will be non-cotton.
Okay.
The mix might remain same.
Okay, got it. I think you guys are at 8%-9% in the maize and in the hybrid rice, I think you said around 10% market share. We have been in both these segments for a long time. How do we see room to increase our market share from 10% to let's say 15%-17%? What are the levers to do that?
One thing, the cotton market itself is, sorry, the rice market itself is expanding. It may not be necessary that from the modern market share we'll take it. If you see in the last seven, eight years, it has gone up by 20%, 30%. As a trend, as an industry trend, what we are seeing, they give a growth rate of 8% to 10% for the, as a flat is 7% to 10% for the next 20 years as a seed industry.
We'll grow in that respect as a company, as we are there in many crops. We are adding new portfolios, which are in between the 12% to 15% will be our growth. By seeing the pipeline hybrids and by work what we have done in the last five, seven years, we are pretty confident that we will reach the projection what we have guided this.
Okay. Got it. Thanks.
Thank you. Next question is from the line of Manisha, individual investor. Please go ahead.
Sir, our seed business, cotton seed business, might be affected due to lack of production. You told that it should be -5%-10%, but it should be maximum -5%-10%, or it can go more, sir?
As of now, it looks like that. As I said earlier, it might take like other three to four weeks, but as of now, initial, like 5%-10%, not more than that.
Sir, 5%-10%, I think it's normal. I think every year 5%, 10%, even the acreage is also dropping by 2%, 3%. I think 5%, 10% should not-
No. Usually we maintain inventory. This time, based on that inventory and everything, I think that we are getting short of
Yeah.
I said it's too early for me to say. As a guidance, I'm just saying. I will get to know only after three to four weeks later.
Sir, if the production itself is affected in the whole industry, then the acreage should also get affected and farmers will go for other crops. So what do you think the other crops should be, sir?
Usually, in the inventory, usually as an industry, they have 15%-25% more inventory than required. So the acreage is what it was there. It may remain same or slightly come down by later. This time, for a good quality seed, there will be shortage. The inventory, I mean to say that my hybrid is in demand. I may not be having those hybrid seed, but a different hybrid seed will go.
Sir, you think the prices should go up then? If there is a-
Again, I said it's a government-controlled thing, and being an election year, I'm not particularly sure how much will it go up.
Sir, what are the other products which we are going for this kharif season, other big launches?
Basically we are there in rice, maize and other crops. All other crops will do well. We don't have any issue with the inventory.
And sir, one thing I wanted to ask is that the cash on books has been dropped from quarter-on-quarter. What is the reason, sir?
What was that in September?
Yeah, it was from INR 787 crores, INR 780 crores. Now it has come to INR 587 crores.
We might have done some investments. I mean, we might have made some farmer payments. Production cost inventory. We will be receiving it. Payments, we have made it.
You are building up inventories.
Yes, sir. These are time where we pay for inventories.
Sir, what are the other new products which you will be targeting in this kharif season? Like new hybrids or other new products, special products or something like that?
No. Whatever products we launch will be in those hybrids, in those crops where we are dealing with. As I said, like rice, maize, cotton, and vegetables are the major crops where we focus on, and the launches will also be there in these crops.
Sir, one more question about the consolidated employee cost, which has gone up by 30%. It should be because of some temporary hiring or something like that or what?
No. One, we have hired many people in R&D. We have increased our strength to close to 200 now. We have appointed many people across non-locations. That's the main cost for us.
That would be a permanent cost now?
Yes. That will go up.
Sir, what is the reason for hiring? Are you very hopeful of the present next year? What is the reason for hiring?
It's a continuous activity. We have developed many hybrids. We are marketing in those areas as of now. That's the reason the headcount and the salaries year-on-year, both are going up.
We are pretty confident that next two, three years will be very good?
We are pretty confident about our business, not for just 2, 3 years. On a long-term basis also, we are very confident and bullish on the business.
Sir, thanks for asking all the questions, sir. Thank you, sir.
Thank you. Next question is from the line of Uday Prakash from Value Research. Please go ahead.
Yeah. Hi, sir. I just want to ask, if you could elaborate between what is the difference between selection rice and hybrid rice, and what is the margin profile? Is it same or are they different?
Hybrids are nothing but where two different parents are involved. Selection rice is like the varieties. That is it. But these are the varieties which are developed by our own company. That is the reason we call it selection rice.
And margin profile for both, is it same or is it different, sir?
Hybrid rice has got a slightly higher margin.
Okay. And sir, in the last con call you stated vegetable. We are focusing more on vegetable because it is not as seasonal as other crops and also have the use cases in more states compared to other crops which are limited to few states. Do we have-
Sorry. Can you be a bit louder? Sorry. I do not know, my network or something, but I am not able to hear.
Yes, sir. Am I audible now?
Yeah.
Yeah. Sir, the last con call you had stated that we focus more on vegetables, not just because of the margin, but also because it is not as seasonal as other crops, and also the use cases in more states as compared to other crops. Do we have to focus, do we have to do something special for the supply chain in order for the growth to really see or what are we trying to do there, supply chain front for vegetables?
We have a separate division for vegetables, even though that is a part of Kaveri. It's a 100% part of Kaveri, but we run it as a separate division because as I said, it's a year-long crop. The payment, the collection, the crop cycles are entirely different. The follow-up is also different. That's the reason we have set up a new team for that from the last six, seven years. That's how they are running the business. That operates independently.
Okay. Sir, my next question is on, in the last few years, hybrid rice and selection rice have been the growth drivers for us and since after those things when the focus on cotton started shrinking. Do you believe that rice will be the growth driver going forward too, or have you identified any specific growth driver? Or all the crops that you're focusing on, we are betting on them for future growth?
We as a company, we are there in many crops and all crops are important for us. But based on the conditions, like acreages and conditions, these are the three main crops: cotton, maize, rice, and all other vegetables included. These are the four main crops which we need to focus on, and majority of the growth will also come from this. The other crops are also there, like mustard, pearl millet, sorghums, and so on. But the overall size of the market, the entire seed market is very low. Even though we are big in that, we cannot make big impact in terms of the revenues. But these are the four crops which have the growth and which will contribute to the major revenues. Saying that, we should not neglect those crops also. We are working on those crops also.
Sir, is it safe to assume that whatever R&D that you are going to do going forward in three to four years, it is both on these three to four crops? Is it safe to assume that?
We are doing R&D in many crops. But as I said, as these four crops are contributing to 80%-85% of our sales, even the R&D spend will be 80%-85% on these crops only.
Okay. Finally, my question is on exports. Can you give the revenue contribution to export on a nine months basis and what has been the
year-on-year growth?
Sorry?
Contribution of exports to total revenue on a nine-month basis, and what has been the growth on a year-on-year basis?
Overall, the growth is 140% or so. The production, the overall, the exports for the nine months is between INR 40 crores to INR 45 crores. That I think we have given in the slide in the presentation also. But for the entire year, it should be around that INR 60 odd crores, INR 55 crores to INR 60 crores. By the percentage, it will be 4% to 5%.
Okay. Finally, you've answered this enough, but just hope that I'm interpreting the idea. Since 2015, let's say till nine months basis, our revenue has been around the same level, and that is mostly because the contribution of cotton has fallen over the years. But on the other crops also, we had to start almost from scratch, and only now, let's say, we have a very established front on all the crops. Can we say that this stagnation won't persist going forward now, given that we have good presence in all the segments?
As I said that more than 70% was contributed by cotton in 2014, 2015. From there now, 65% to 70% of the total volumes for the total revenue is contributed by non-cotton crops. Even in non-cotton crops, we added portfolios like rice which were very low earlier, then vegetable which were low we have added. So in that way, we are focusing on more crops and we are increasing revenue in most of the crops where we are operating. Cotton is the only crop where we have lost our sales and revenue and margins. Even in these tough conditions, we were able to maintain the entire margins. If you go back to those levels, the EBITDA margin was around 30 odd percent. Now also with very low margins in cotton, we are able to maintain the 28%, 30% EBITDAs.
And if you see the R&D spend or if you see the infrastructure or if you see the headcount what we have now when compared to 2014, 2015, it is very high now. As rightly said that the employee costs itself have doubled or tripled compared to those levels. So what we see as we are adding more crops, we see good years coming forward and whatever we have spent in the last five, seven years, that will convert to revenue in the next five to 10 years. Hello?
Yes, sir. Thank you. That is it from my side.
Okay.
Thank you very much. As there are no further questions, I thank all the participants for joining the call. For further information, please be in touch with Rama Naidu from Mittal IR on 992-020-9623. On behalf of Kaveri Seed Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.