PUBLICATION NAME BUSINESS TODJ\ Y
CITY WHERE IT APPEARED MUMBAI
DATE JUNE 3,2007
bt money
has been virtually unchanged for. decades. Until that happens, agricultural prices are likely to stayelevated," saysSi Kannan, AssociateVice President of KotakCommodity Services.
Hence, companies producingagri-based products are well poisedfor th~ future. A case in point isrice and wheat miller Usher Agro,which listed last year at Rs 9, butzoomed to Rs 30 levelssoon thereafter. The stock thrived on the backof steadydemand for its products byacquirers such as Food Corporationof India, among others. Besidescompanies such as REI Agro, KRBL,
exporters of the long-grained andaromatic basmati rice, are also riding the crest of the same wave.
Sugar is yet another agricommoditywhich is on an upswing.IDBI Capital's agri-analyst MaitaliShah picks up India's top two sugarproducing companies, B.ajajHindusthan and Balrampur Chini,along with Dwarikesh Sugar for along-term play of four years andmore. She cautions though, "sugarstocks are not in favour just now asoff late, sugar industry is facing a
nies that provide farminginputs such as seedsto farming techniques and machinery to those involved indistribution of farmingproducts-companies in theagri-sectorare slowlycoming
into the limelight.As the farmincome increases,another class
of companies that has traditionally focussed on urban centres hasrapidly increased its penetration inrural India. These are banks andconsumer durable companies.There are many themes playingout in the agri-sector.(seeThe Seedsof Growth).
The Base ProducersThe first to benefit are direct agriproducts companies. Commodityprices affect the earnings of ricemillers, sugar producers and teamanufacturers. Investment opportunities abound in this category asthe global and domestic demandis expected to remain strong overthe coming years, and prices areexpected to remain reasonablyfirm."Strong demand will require a substantial increase in acreage, which
INVESTMENTGURUS SUCH AS JIMRogers saw it coming as early as1999. Prices of agri
commodities are soaring in theface of sustained uptick in globaldemand and stagnating production. Notwithstanding the scorching economic growth in India,Indian agriculture is painfullyambling along at around 2 per centdue to decades of under-investment. That, however, is changing.
With the policy-makers renewing efforts to boost agriculturethe last two budgets were agrifocussed-now, a clutch of companies is poised to capitalise on thecoming boom. Right from compa-
Reap a Bumper HarvestAs agri-sector booms, related companies
offer good opportu nities for investors.SHALINI s. DAGAR
PLOUGHED FOR RETURNSHere's the cream of the crop that is poised to deliver a rich harvest.
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PUBLICATION NAME BUSINESS TODAY
CITY WHERE IT APPEARED MUMBAI
DATE JUNE 3, 2007
bt money
IFood processing Dabur, Jain Irrigation, KS Oils, Ruchi Soya,
(fruit pulp, soya oil processing) Agro Dutch, Heritage Foods
I Infrastructure Jain Irrigation, KSBPumps, Kirloskar Bros, Finolex Industries,
(irrigationsystems,pipes,pumps) Patel Engineering,Adani Enterprises
THE SEEDS OF GROWTHA host of agricultural sectors and companies will benefit from the growing opportunities,
SECTORS COMPANIES
IAgri-commodities REIAgro, Bajaj Hindusthan, Balrampur Chini, Satnam
(sugar, tea, rice) Overseas, KRBL,Riddhi Siddhi Gluco Biols, Usher Agro
The Fringe GainersThere are many companies not directly related to agriculture but thriving nevertheless on the agri-sector.Mahindra & Mahindra Finance is
essentially a play on India's ruraleconomy with more than 70 percent of its business coming fromrural and semi-urban areas.
Brokerage house SSKI believes thatthe "increasing focus on agriculture by the government, corp oratesand organised financiers wouldpropel India's rural economy onto a higher growth trajectory. M&MFinance is ideally placed to capture this opportunity." ICICI Bank isalso aggressively zooming in onrural markets.
Agriculture contributes about20 per cent to the gross domesticproduct. As of now its capital market exposure is fairly insignificant.Rnt m"rkf't ohsf'rvf'rs reckon that
*This list is only indicative
share of this market.
lTC, HLL, M&M, Punjab Tractors, Escorts,
M&M Financial, ICICIBank, YESBank
Monsanto, Rallis India, United Phosphorus, EID Parry,
GNFC,Coromandel Fertilisers, Tata Chemicals,
Bhagiradha Chemicals
"The seeds business is cyclical
but fetches high return oninvestment"
Harendra Kumar/ Head (Research)/ IGIGIDirect
seeds business as companies tryand improve the low yields frommost crops. Other companies worthconsidering are agro-chemical companies such as Rallis India, UnitedPhosphorus which deal with cropprotection chemicals.
Fertiliser companies such as EID
Parry, Coromandel and GodavariFertilisers or Gl\TfC are good betsas we look into the future even
though they operate in a highlyregulated environment as yet.
Among other equipment producers, tractor companies also provide a good opportunity asincreased mechanisation of farm
ing results in an increased demandfor tractors. M&M has significant
IRural consumption
(generic products, services)
IAgri-inputs
(seeds, fertilisers
agro-chemicals)
glut." Arun Kejriwal, Director,Kejriwal Research and InvestmentServices, however, points out thatthe long-term story in sugar willplay out more aggressively onceIndia starts looking seriously atethanol as an alternate fuel. Ethanol
is a by-product of sugar pro~essing. Brazil has made a significantmove towards using ethanol andthat move alone has affected globalsugar prices tremendously.
Besides, companies in the business of food and solvent extrac
tions are seeing a revival in theirfortunes. Among the many companies, Ruchi Soya and KS Oils--<:ompanies into solvent extraction-alsofeature high among investors'favourite stocks.
Indirect BeneficiariesHowever, soft commodities apart,there are many more investmentopportunities within the broad agrotheme. One company that has beenin focus is Jain Irrigation. It is thelargest supplier of micro-irrigationequipment in the country. As thegovernment stresses on increasingthe arable land under rrrigation, thecompany is well poised to take
. advantage of the investments comingin new irrigation techniques. FinolexIndustries, KSB Pumps and KirloskarBrothers, too, fall in the category ofagri-infrastructure companies.
As production techniques arespruced up, the agri-input sectorwhich provides the much-neededstimulant to crops is the seeds and
'the fertiliser sectors. There are a
number of players in this segmentamong them Advanta India, whichc1phntPc1rprpntlv ()n thp~t()rk- m"r-
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