The bulk of the newly acquired seed production area is dedicated to the non-cotton sector and mostly towards high-margin hybrid rice, maize and vegetable seeds, and nearly half of the land is located in and around the Telugu states of Andhra Pradesh and Telangana, India’s largest listed producer of hybrid seeds said.
With rising seed replacement ratios where farmers are picking up more hybrid varieties of rice and maize, the company with Rs 930 crore of annual revenue is also eying margins of around 50% over the next 3-4 years against the current blended margin of 20%.
The product mix will also undergo a significant change where non-cotton seeds will be dominating with around 60% of revenue contribution over this period. Currently, 47% of revenue comes from selling cotton seeds.
“The shift towards high-margin non-cotton segment is primarily to de-risk the dominant business model centred on cotton in India and create new growth avenues,” executive director Mithun Chand told ET.
Hybrid rice, which currently contributes around a quarter of Kaveri Seeds’ revenue, has emerged as the second-largest revenue contributor after cotton.
“The Indian hybrid rice seed market is currently estimated at around Rs 10,000 crore in value and around 2 lakh tonnes in volume, where Kaveri has seen its hybrid rice business growing at 45% in the last five years as against the industry average of around 8%,” he said.
Thanks to a healthy mix of high-volume cotton and high-value rice, maize and vegetable seeds, Kaveri Seeds is estimating its revenue to grow 15% a year, double the industry average of around 7%. It is also projecting industry high profitability of 15-20%.
“With an over 10% share of the Indian hybrid seeds market, as the second-largest producer of hybrid cotton seeds, third-largest producer of hybrid maize seeds and fifth largest producer of non-cotton hybrid seeds like rice, Kaveri Seeds with zero debt will focus on high-margin niche segments and geographies – not just in India but worldwide for exports,” Chand said.
The Hyderabad-headquartered company embarked upon a de-risking model by pruning down the contribution from cotton seeds, which, though commands the highest acreage in India in terms of sowing, turned highly regulated by the government’s increased interference on pricing the seeds that affected realisations of seed producers. Kaveri Seeds finds the non-cotton seed market with high-margins as attractive also because it is largely an unregulated segment with a high potential for penetration.