Ladies and gentlemen, good day and welcome to Kaveri Seed Company's Q2 and H1 FY2024 earnings conference call. As a reminder, all participant lines will be in the 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 over the call to Mr. Mithun Chand. Over to you, sir.
Thank you. Good afternoon. Welcome, everyone, to our Quarter two and H1 FY2024 earnings conference call. We hope you 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 has registered a growth of 5.75% to INR 863.42 crores as compared to INR 816.44 crores in first half FY2023. EBITDA was at INR 298.88 crores as compared to INR 259.72 crores in FY2023, increased by 15.08%. EBITDA margin improved to 34.60% from 31.81% in first half FY2023, improved by 301 basis points. Net profit grew by 14.45% to INR 278.56 crores as compared to INR 248.39 crores. PAT margin was at 32.26% as compared to 29.81%, grown by 245 basis points.
Cash and books stood at INR 732 crores as compared to INR 497 crores. Major highlights. Board has recommended 250% dividends, that is INR 5 per equity share on a face value of INR 2 per equity share. Despite stable volumes in rice and cotton, better realization translated into substantial revenue growth, which has fueled significant improvement in margins. The surge in global rice prices has propelled a remarkable 10.8% increase in rice cultivation area. Company is not only witnessing unprecedented success in the vegetable business but also aggressively expanding its footprints in international markets. In vegetables, major focus is on cold crops like cauliflower, cabbage, and carrot. Cotton volumes are stable, and revenues increased by 6.77%. Hybrid rice volumes are stable, revenues increased at 9.97%. Selection rice volumes grew by 4.87% and revenues by 14.8%. Maize revenues were grown by 13.96%.
The contribution of new products was up from 44.46% to 58.71% in bajra. Vegetable seeds volume increased by 25%, and revenues grew by 20.6%. Vegetable crops like bitter gourd, tomato, okra, and watermelon have done well. Export business has increased by 146.49% on account of expanding newer geographies. Maize sales export volumes increased by 129.91% and revenues by 140.52%. I would now open the floor for question and answer session. Thank you.
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 touchtone 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 Madhur Rathi from Counter Cyclical Investments . Go ahead.
Thank you for the opportunity, sir. Sir, I wanted to know, our cotton revenues from Q2 on Q2 basically have fallen. What is the reason for that?
Second quarter is a very lean quarter for us. Whatever sale we get is a lower sale. Compared to last year, if you see because of the thin volumes, the cotton sale is lower. That is not significant. It is only 2,000 packets lower than last year.
Okay. Sir, there was a report that this year cotton production was lower. Do we think that next year cotton seed sales will be better than expected, or what kind of growth are you expecting in the cotton segment for the next year?
The cotton production has been tough this year, which we are going to sell for the next year. It is too early to predict the output on that. We can only say by the month of January or February what the production that we are going to get.
Sir, in your experience and being in industry for so long, sir, how has the year post El Niño been in terms of the business?
Sorry?
Sir, in your experience, how has your post-El Niño year been in the business, our business segment of cotton and other seeds?
Basically, we are done in spite of the tough conditions this year. Most of these crops were stable or lower. Even in these tough conditions, we were able to increase the revenues and some crop, the volume as well. Being a multi-crop portfolio, we do not see that sort of a risk when compared to the other companies, which are concentrating one or two products. In that way, we are very much placed, and El Niño year and the other normal years are well in the cycle, so we do not see much of a difference. We are quite bullish in the second half and even for the next year.
Okay. Sure. Thank you, sir. We had launched hybrid tobacco seeds. How are they doing?
Sorry?
Hybrid tobacco seeds that we had guided in our AGM that we had launched. How are they doing?
Hybrid tobacco seeds.
Yes, sir.
Which would be a tobacco?
Sir, we had launched hybrid tobacco seeds. We had guided in our AGM. That's what I was asking. How has that responded?
Are these tomatoes?
Tobacco, sir.
Sorry to interrupt you, Ms. Madhuraji. Could you speak a little louder because your sound is not clear.
Hybrid tobacco seeds, sir.
Hybrid tobacco. We are not into tobacco at all.
Okay. Sir, with INR 732 crores in our cash, please do a buyback, sir. It will be very helpful for our shareholders.
Definitely we definitely consider, but again, it's subject to the board discussion. We will definitely consider it.
Sure. Thank you. Thank you on all the questions.
Thank you.
Thank you. The next question is from the line of Anand, who's an individual investor. Please go ahead.
Thanks for the opportunity, sir, and congratulations on a good set of numbers. My first question is on cotton seeds. What I realize is that, sir, previous seeds like Jadoo, ATM, although they had a very high yield, but the feedback that I have received is these old hybrids take around 160 to 180 days for maturity. Currently, these seeds have become susceptible to bollworm in the later stages of crop. Is that a fair understanding?
Yes. As we move forward, these are old hybrids, and if you see, after Jadoo became ATM, although ATM is still doing well in some parts. After that, we have introduced Money Maker, which is also doing well now. After that, now we have introduced a couple of hybrids for the north and the central regions also, which are doing well. It's a combination of all, and definitely in the industry, and as we go over the years, previous hybrids get faded out and new hybrids come in based on the challenges. Now, most of the hybrids, you have rightly said that we are trying to for resistant for the virus, some certain resistant that we are looking at.
The two hybrids that I hear from Kaveri stable are 144 and 36. These are the hybrids which matures much early in the cycle, like 100 and 120 days. Where are we in—if I were to look at last season, if you can give us a breakup of how our sales were between the older hybrids, which would take higher maturity, and the newer hybrids, which would mature much early in the season?
Basically, if you take our portfolio, Jadoo, ATM, and Money Maker contributes to more than 85% of the revenue. There are other hybrids which are sold in very small quantity. These are all the new hybrids which are introduced. This will be like half a lakh, 1 lakh packets. Based on next year, and we are waiting for this year result, as of now, it looks good. But for the next meeting, I can be telling you the exact position, which are the promising hybrids based on the performance this year. But what we see as of now, they are performing well, and going forward, we will pick up the volumes.
So if I were to look at this season, I think on a combined we did around 57 lakh packets as a company, a consolidated company. Is that the number?
Roughly. I do not exactly remember, but it is close to last year's.
55 to 60 lakh, somewhere in between.
It is close to last year. We have 1 lakh less or minus. So 2% lower. That is it.
So going ahead, do you see that the. So some of these hybrids, let's say 36 or 144, depending on how these hybrids perform, do you think that the share of these would continuously keep going up?
Definitely. These are very promising hybrids. As I said earlier, we will wait for our other season; by this season's end we'll know in the advanced system about the performance of that, and we'll be giving a revenue, which are the hybrids which are looking better. Not only these two, we have tested many other hybrids in different codes, which I can't reveal right now. We are all in the testing stage. Once they are there, we'll disclose. But definitely, we see a very promising hybrids in our portfolio. Going forward, we see momentum in cotton seeds as well.
The next question that I have is again on the same thing. What has happened in the last. I've been tracking Kaveri Seed Company since maybe 2015 onwards, or maybe even before that. The price per packet of seeds has not moved much, like from INR 800 to INR 860, would be right now, roughly INR 845. I think that's the price. Do you see significant margin pressure, and do you also see production volumes going down because the farmers are not getting compensated enough for that?
Yeah. As you see, cotton seeds in the last eight, nine years, it has not moved up when compared to 2015. But in the last two years, the last selling price only the two or three. Like we said, the margin production is very difficult, and the cotton seeds production cost is also going up. That is putting a pressure on the margin. But definitely, we are trying to increase the selling price so that is compensating on it.
Okay. One more question in terms of the production side. If we have to plan for next season, then by when can we have seeds which can be used for production?
Already we have planned for next year's production.
Okay.
We usually sow in the month of May 2023 for selling something in the month of Kharif of 2024.
Okay. Going by our current production plans, what could be the maximum number of packets we can do in the next season?
So we are in target. I may not be disclosing the exact figure that we will not reveal as of now, but we have enough production for next year. As I said in the earlier question, what is the productivity of that only we will get to know by year-end because the season was also not good. There were delayed dry spells in between. Pest attack was also more. So that we will get to know by once December to January.
Okay. I understand your difficulty in giving that kind of a prediction, but can we assume that it could be 20%-40% more or any range that you can give compared to last year?
Usually we are saying that cotton will grow in between 5% to 10%. As a guidance, we are saying cotton will grow in between 5% to 10%. Based on for our requirement, we have the production.
Oh, okay. And these—
In the sense that the leftover stock and the fresh production. We are on target on that as of now. But again, subject to the weather conditions.
Okay. So basically for next year, as of now, things might change. You see a 5%-10% growth in the cotton seed as of now.
We have already given this guidance long back. In the past one, two years, we are saying 5%-10% in cotton for next two to three years. We still give the same guidance.
Okay. I will move on to other crops now, sir. We are seeing significant growth in Q2 in maize, and you have also highlighted that there is a very strong demand for maize going ahead. If you can tell us what areas this demand is coming from, and also on the export side. Our exports have grown significantly this quarter. You have also alluded to export growing significantly going ahead. So what kind of registrations we have in different countries? That is one thing I want to know, sir: what are the crops in that sense, and how do you see export growth going ahead in the next two quarters and the next year? And also finally, on maize, what kind of growth are we looking at in the coming years?
Maize as a crop looks good both in terms of domestic and internationally. We gave a guidance of 20% to 15% in maize, a longer term of three to five years, that we are pretty confident that we are really be able to achieve it. This quarter especially, when talking about coming back to this quarter, maize definitely has contributed to the major growth. One is both in domestic, we had a good sale and across India, because anyway, it's a very lean quarter for us, second quarter, most of that is a spillover sale. Might be in Karnataka, might be in some parts of Andhra, and some parts of Maharashtra. But major contribution was from exports, where we had done INR 15 crores more than last year. So against INR 10 crores of export, we had a INR 25 crores of export. That was a major revenue.
Out of that export, 90% of that was maize. More than 90% was maize.
Can you see this trend continue?
Maize as a crop looks good. Going forward, we see maize growing better in exports also.
Okay.
We are exploring other countries. Majority of the exports earlier were only to Bangladesh and some of Nepal. Now we are even looking at African countries. We are concentrating crops like maize, sunflower, vegetables, and rice. Rice, especially for the Southeast Asian countries like Indonesia, Philippines, Thailand. These are the countries which we are concentrating more, including Vietnam. We see a good growth coming in there. Wherever we have tested our rice hybrid, that is very positive. Definitely, as you know, it will take some time for us to make growth, but it is very positive. We are moving in a very positive direction. As a company, we are very much bullish on this export segment.
You also mentioned in the presentation this time that vegetable seed growth has gone up by 25% and 26% roughly, and the revenue is due by around 20%. You also mentioned that there is unprecedented growth in the vegetable segment for our success. How do you see, because this portfolio has not changed in last five years , from, like, roughly, say, INR 730 crores. How do you see this vegetable going ahead, like for this year and for the coming years? How do you see this changing?
Vegetable is a very big segment in India, and this is a faster-growing segment. We are very small in the vegetable segment by saying the overall market. The way what we have worked in the last 10 years, we have very good hybrids which are there in the pipeline, and some hybrids are already placed in the market. Last year we had done close to INR 45 crores as overall sales for vegetables. Again, first half it was INR 22 crores compared to INR 26 crores this year. In the second half also we see a similar growth, and we think that vegetable year-on-year will grow at more than 20%-25%.
Okay. That is it. The last question from my side, it is more of in case of vegetable companies; to some extent the demand outlook that we have can also be visualized from the balance sheet in terms of the kind of advances that we get from the customer. If I were to look at our H2 other current liabilities, which I think are mostly coming from advances from customers, they have gone up. They used to be like INR 80 crores to INR 90 crores five years before, and now they are almost at INR 270 crores. If you can give some kind of a breakup of those in terms of what crops are these.
You are talking of current liabilities?
Other current liabilities, which are INR 270 crores and-
That other current liability is not only advances; that also is payments which need to give for the production.
Oh, okay. Which we also need to give for the—
Usually, this is a very lean season. We do not have much of an advances for this second half. Usually we get advances for the first half, but the industry is changing. Nowadays, we are not taking much of an advance because we need to give more discounts. We have slightly slowed down on that.
Okay. One last question, sir. On the company stock, one of the major hangovers has been the income tax issue. Two things, sir. What could be our maximum liability here in this case, in case we lose the case, and do you think there could be some kind of a settlement with the department so that the hangover is taken care of?
Basically, we do not have any litigation as of now. I mean, we do not have any pending demand other than what we have disclosed in the balance sheet or to the exchanges. Other than that, we do not have any pending demands. We are claiming an agriculture income. They might deny it. For that, the liability is all calculated what, which is they do it. But as of now, we have only one year litigation that we are seeing. The other litigation is a different litigation. We never got any big demand for that.
What is the amount? I mean, if you can—
They never derived any amount for that because, as they have not given any demand, there's no derivation for the liability.
This is a major hangover because rest of the crop companies that I see, even some of our competitors, they actually don't consider it as an agriculture income, like DCM Shriram.
I don't know if you are seeing it, many companies doing that way. Anyway, the subject is pending, and everything is disclosed in the reports, and everything is transparent on the company side. Based on the other unexpected liabilities, we don't know. If something is there, definitely we'll try to intimate.
Okay. Thank you, sir.
Thanks.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Manish Shah, who is an individual investor. Please go ahead.
Thanks for the opportunity, sir. Sir, in the presentation you told that the second half also is looking very good. What crops are looking good, and what kind of revenue growth you can do compared to last year, sir?
Basically, second half is all contributed by maize. The other thing, the other crop, other segment, what we are looking at export. These two contributes to the major second half. Both the segments should do well.
Sir, comparison to last year, second half should be what, 15%, 10% more?
We have given a guidance in between 10% to 15%. That's what we stick for.
Sir, in the guidance you have told that the profit can grow by 15%, the CAGR for the next two to three years. You stick by that guidance, sir?
If you see the first half, here the profit has grown by close to 14%-18%.
We can do for the next two to three years; that is possible.
Sorry?
For the next two, three years, is it possible, sir, to do this kind of number?
Yeah. On a consolidated basis for the first half grew by like 13.5%.
Yeah, sir.
We said 12%-15% on the bottom line. We are still stick to that.
Sir, and another question is about, sir, the exports and the vegetables. Sir, in the next three to five years, what kind of a figure can you, like, can it be a INR 100 crore business or more than that, exports and vegetables, or any other?
Next three to five years, what we see both exports and vegetables should be close to INR 100 crores, yes.
A single segment or both?
As a single segment.
Any other promising crop?
No, we are again entered. We started selling mustard also. That is also a good crop. We also see growth in that mustard.
About the cash on the books of INR 732 crores, what are the future plans? Any acquisition or any other thing?
We are open for acquisition. In the previous, as we were not able to find any growth, we have given a dividend or buyback. Again, based on the current scenario, we will see whether we need to go for the buyback or based on the opportunity to acquire a company that will disclose. That again, that depends on the board. Once any outcome from the board, definitely we will let you know.
Sir, what kind of area in acquisition are you looking, sir? Because in the presentation you have given that the cotton seeds, we are the second number two player. In other segments, where are you looking for acquisition, sir?
Basically, for some vegetable component or some technology.
Sir, any specific, sir?
As of nothing. I said that we have not identified any company, and we are open for it. If any company comes in, definitely we will acquire. As of now, we have not identified anything.
If there is no acquisition, then there is a buyback.
That I will not comment as of now. That again, subject to the board decision. Any decision taken, we will definitely inform.
Sir, thanks a lot for answering all the questions, sir.
Thank you. A reminder to all the participants: you may press star and one to ask a question. The next question is from the line of Anurag Jain, who is an individual investor. Please go ahead. Mr. Jain, are you there? Hello, Mr. Jain. You are not audible to us. I think Mr. Anurag Jain's line has dropped. A reminder to all the participants: you may press star and one to ask a question. We will give it a moment for the question queue to assemble. The next question is from the line of Anurag Jain, who is an individual investor. Please go ahead. Mr. Anurag Jain, are you there?
Because you are not audible to us. Mr. Anurag Jain, we are unable to hear you. I would request you to disconnect and join back. A reminder to all the participants: you may press star and one to ask a question.
We will take that as the last question. On behalf of Kaveri Seed Company Limited, I would like to thank all the participants for joining the call. For any further information, please be in touch with Raman Naidu from Intellect IR. You can reach him on 9920209623. On behalf of Kaveri Seed Company, that concludes this conference. Thank you for joining us, and you may now disconnect your line.