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Surender Singh Khalsa
Analyst +91 22 6626 6726

BUY Kaveri Seeds Company Ltd
We initiate coverage on Kaveri Seeds, with a BUY rating and a price target of Rs 236.

Investment Positives
Indian seeds market set for linear growth: Rising governmental thrust to enhance sagging farm yields, mounting private sector involvement in developing better hybrids, and thrust on corporate farming would enable the Indian seeds industry to grow faster than it has in the past. Market share shifting to organised players: Perceptible shift in market share from unorganised players (with no access to research skills or requisite distribution networks) to organised players such as Kaveri Seeds. Research-driven model on company-owned lands: In the last two decades Kaveri has been developing a proprietary germplasm on its own lands, with land ownership of about 200 acres. Geographical expansion, wider product range open furthur growth avenues: The company has been expanding beyond the southern states (AP and Karnataka) into the lucrative northern markets. Also, it has been widening its product range beyond corn and sunflower, by launching products in cotton, paddy, edibles and vegetables, thereby providing furthur growth opportunities. Recent business restructuring leading to a more integerated company: On the merger of Growmore Farms and Kaveri Agritech with Kaveri Seeds, the latter is well poised to capture the entire value-additions in the seed production valuechain and complement its offerings with bio-fertilisers and other inputs.

Bloomberg Code: ................. KSCL IN Reuters Code: ..................... KSCL.BO NSE Symbol: ............................ KSCL BSE Code: ............................. 532899 Expected Share Price: ..................... 66 return (%) Expected Dividend yield (%) .......... 1.7 Market Data Sensex: .................................... 17,847 CMP: ........................................... 170 Target Price .................................. 236 52-Week Range(H/L): ..................... NA Market Cap (Rs mn): ................ 2,329 Shares O/S (mn): ........................ 13.7 Free Float (mn): ........................... 5.39 3 m Avg. Volume : ......................... NA

Geographical and crop concentration: About 65% of revenue from Karnataka and AP (down from 80% two years ago), making it susceptible to adverse agroclimatic events in that region. Also, 68% of revenue from corn and sunflower (down from 74%), making it vulnerable to major pest attacks or acreage shifts in these crops. Furthur aggression from MNC's: Global seed MNC's have multi-billion dollar research budgets and a strong product range, which could give the incumbants Stiff competition.

Relative price performance of the stock is not avaliable as we are expecting the stock to list on 4th Oct. 2007
Relative Price Movement
150 140 130 120 110 100 90 80 Nov-06 Jan-07 Dec-06 Oct-06 Feb-07 Mar-07 Jun-07 Apr-07 Jul-07 Aug-07 May-07 Sep-07

At Rs 170, the stock is available at 11.9x FY08E and 7.9x FY09E earnings, which leaves enough scope for price appreciation, in the light of exponential growth.
Y/E Mar (Rs m) Net Sales Growth (%) Ebitda Ebitda (%) Net Profit NPM (%) FDEPS P/E (x) EV/Ebitda P/B (x) RoCE (%) RoE (%) FY06 481.7 1.3 55.4 11.5 29.3 6.1 16.5 10.3 42.0 3.9 26.9 53.9 FY07 657.7 36.5 186.4 28.3 105.9 16.1 10.9 15.6 12.5 6.2 57.5 61.9 FY08E 990.6 50.6 353.9 35.7 195.4 19.7 14.3 11.9 6.6 2.1 42.9 28.4 FY09E 1500.3 51.5 525.7 35.0 294.1 19.6 21.5 7.9 4.4 1.8 38.9 24.2 FY10E 1800.0 20.0 621.9 34.5 366.9 20.4 26.8 6.3 3.7 1.5 40.3 25.7


October 4, 2007

therefore. ARG Research Quality seed key to perk up sagging form yeilds Two primary reasons for such low farm yields are low-quality seeds and lack of grassroots knowledge about optimum farm practices. Also. Market share shifting to organised players The Indian seeds market is about Rs 40. Today it can boast of access to a wide range in various crops. where India has emerged as a cotton exporter -. Comparative Global Yields Country (Qn/hectare) Sunflower Corn Cotton Rice Sorghum Vegetables USA 17 93 13 74 42 571 Brazil 16 30 21 33 20 118 China 17 112 23 63 38 171 India 6 19 5 30 8 102 • • Low quality seeds Sub-optimum Farm practices Source: FAO(2006). The potency of hybrid and GM seeds to enhance yields has been globally proven and the case of BT cotton is a testimony to this in the domestic context. ARG Research Page 2 October . Germplasm and land ownership are key differentiators for Kaveri Germplasm (a seed database. We will. Many such schemes exist at individual state levels. which are key ingriedents for a successful seeds company. continue to see a shift from such unorganised players to established players like Kaveri. such as the Rs 250. The Indian government has formulated a number of policies to correct such imbalances. most of them do not have research capabilities and a distribution network.from relying on imports just a few years ago. enabling it to roll out hybrids far more quickly to respond to a specific trait required in a crop for a particular region.000m and is characterised by more than 400 players. most of whom operate locally and focus only on one or two crops. not just in comparison with the developed world but also with some of our Asian neighbours.key to enhance depressed farm yields One of the key reasons for India's sluggish farm growth has been dramatically lower yields. Kaveri has consciously been enhancing its germplasm (either sourced from various universities and global bodies. with various combinations of traits possible in a specific crop) is the key differentiating factor for a seeds company.2007 .000mn agriculture policy at the Central level.AGRO Investment Summary Better seeds . thereby providing it with a competitive edge. or developed in-house) in multiple crops. Kaveri’s Business Model Germplasm Collection Product Design by Selection of in-bred lines Initial Hybrid Trials (2000 -3000 crosses) Advanced Hybrid Trial (200-300 crosses) Trials on Farmers Fields Test Marketing Commercial Launch Ramp up volumes through Geographical expansion Ongoing 1-2 years 1-2 years 3-6 years 1-2 years Ongoing Ongoing Source: Company. Over time.

paddy. since inception. certain royalties are payable. Another 200 acres is likely to be added in the current fiscal.P.. thereby ensuring that costly germplasm is protected.value-accretive In FY07. has been growing its foundation seeds in-house on company-owned land. etc. given India's unique agro-climatic variations and crop diversity. This backward integeration enabled Kaveri Seeds to consolidate within itself the value-addition in both the entities and protect its germplasm. as these are the largest crops in those states. the company has licensed the Bt gene from Monsanto and JK Agri Genetics to be loaded onto its hybrids. Business consolidation . For cotton. Gujarat and Rajasthan has been successful and would contribute to revenues this year. test marketing in Bihar. Significantly. which was floated to enter the fast-growing organic farming through bio-fertilisers. together with Growmore’s real estate.AGRO Land ownership key for GM trials In recent years too. and expanding its distribution network to nothern and western India. sorghum. Concerns Crop and geographical concentrations: Though Kaveri has concentrated on sunflower and corn.2007 . well established in the organic space as well. Having a wider product range keeps it hedged against any crop-specific event and a wide distribution network hedges it against adverse agro-climatic risks in some regions. FY 05 Others 8% Paddy 7% Cotton 10% Maize 43% Paddy 11% FY 07 Others 15% Maize 42% Paddy 7% Others 23% FY 10E Maize 25% Cotton 6% Sunflow er 32% Cotton 24% Sunf low er 21% Sunf low er 26% Source: Company. Kaveri Seeds amalgamated Growmore Farms (meant for cultivating Foundation Seeds) with itself. It now owns nearly 190 acres directly (mostly in A.P. For this. was also merged with Kaveri Seeds to synergistically tap the distribution network and leverage of the parent brand. India has seen a number of instances of bio-piracy. Credible business strategy: broadening product range and widening geographical reach Historically.) and controls over 100 acres through long-term lease arrangements. After this restructuring. and Karnataka belt. But it has been successfully developing newer hybrids in cotton. Another group entity (Microtek). the company had first expanded into the A. Kaveri has emerged as a fully integerated seeds company. bio-pesticides and micro-nutrients. it has been successfully launching seeds in other segments as well. Kaveri. which would make the company one of the largest land-holders in the industry. vegetables. though in this decade it has entered other markets. and Karnataka. rendering protection of germplasm difficult due to lax implementation of plant-variety protection legislation. AR Research Given its genesis.P. Page 3 October . Kaveri has been focussed on the corn and sunflower markets of A. This is a major advantage for Kaveri.

We expect this trend to continue in India. while indian companies are focussing on building hybrids Competition intensifying from MNC's: Given the unique business model of the seeds business. as. 51 bn 25% 75% Commercial Rs 12.7 bn Source: Industry .2007 . It also has the Microteck division (merged last year). AR Research MNC’s focussing on gene . in the last three years it has been growing at 12-15%.39 bn 77% 23% Unorganised Rs 5. Company Background Kaveri Seeds was incorporated in 1986 by eminent agriculturist Mr Bhaskar Rao. which is being enhanced to 30. keeping in mind the diverse agro-climatic zones in India.000 tpa this year. The company currently has 18. valued at Rs 51bn.25 bn Organised Rs 7.69 bn Public Rs 1.level research. bio-pesticides and micro-nutrients. Indian Seeds Market Rs. The Indian Seed Industry The Indian seed industry is the eight largest in the world. which manufactures bio-fertilisers. After stagnating for most of this decade. AR Research Page 4 October .000 tpa processing capacity.35 bn Private Rs 5. developing hybrids is a tough task. has a pan-India footprint. who had been in the seeds business for a decade prior and is widely credited with popularising the hybrid seed concept in southern India. primarily driven by newer hybrid launches and renewed government emphasis.AGRO Revenues from AP & Karnataka 90 80 70 60 50 40 30 20 FY05 FY 06 FY07 FY08E FY09E FY10E AP & Karnataka Source: Company. It has been expanding its distribution network and currently. MNC's have been focussing on gene-level research and leveraging that by licensing the technology to domestic companies.75 bn 58% 42% Varietal seeds used by farmers Rs 38. with 750 distributors.

dominated by unregulated players.. As unorganised players do not have research credentials and the requisite distribution network. though lately they have started to supply even hybrid seeds. At present. which was a major menace for cotton farmers in India. etc. as farmers realise the benefits of using fresh seed to enhance yields at only minimal incremental costs. tend to operate in the public-bred or HYV (high-yield varieties) segments. Most of the private sector's thrust is on hybrids and GM seeds.2007 . In time. The gene supplied by Monsanto has the ability to produce a protein capable of killing the Bacillus thuringiensis (Bt) virus. the National Seeds Corporation. Indian farmers have been using seeds saved from the previous year’s harvest. the level of hybridisation in Indian crops is highly irregular. low-value seeds in the pulses. Cotton is often touted as the major success story. various state seeds corporations. Industry remains fragmentaed & consolidation is imminent Government bodies like Nafed. Historically. with the top ten accounting for a quarter of volumes in the segment. though that is fast changing. the industry has been fragmented. with very little success in rice due to non-availability of hybrids suitable for the Indian palate. market share is rapidly shifting towards organised players. They generally supply high-volume. such seeds lose their yield and vigour.AGRO Historically. AR Research BT cotten has been a block buster success Significantly. oilseeds and cereals segments. Major crops by Volume Jowar 2% Bajra 2% Sunflower 1% Cotton 1% M aize 5% Vegetables 3% Others 3% Rice 48% W heat 35% Major crops by Value Others 32% Rice 15% Wheat 8% Vegetables 12% Maize 3% Jowar 2% Cotton 22% Sunflower Bajra 3% 3% Source: Company. only 25% of the market has been commercialised. led by the Bt technology of Monsanto. There are more than 350 players in this segment. Page 5 October .

000 48. Millet G.000 8000 3200 32. industrial growth and usurping of farm land for SEZs are leading to less acreage available for farming. most domestic companies start by focussing on one crop.000 Syngenta. while farm yields have not been able to cope with the burden of feeding more mouths. Key Players Given the huge R&D costs and possibility of failure. one could custom-design a plant with all desirable traits: colour.000 21. Hence.Advanta. Raasi Advanta.8 Area under Market Hybrid (%) Size (tons) 2 90 50 80 40 50 80 20 30 480.3 2 6. which hitherto were unthinkable. mustard and soyabean segments are likely to see furthur movement towards hybrids. With the right gene-collection. maize.000 8000 22. we will have to use higher yielding varieties of seeds as an effective way of enhancing yields. AR Research The vegetable. Proagro Nuziveedu.000 350. pest tolerance. yield.7 7. For India to sustain a 9% GDP growth rate. then start diversifying as their key product is accepted in the market. Pioneer. further putting pressure on farm yields.Kaveri Monsanto. Page 6 October . Bio-technology and genetic engineering: Biotechnology has enabled development of newer crop varieties.AGRO Crop Paddy Wheat Maize Cotton Sorghum Pearl Millet Sunflower Mustard Vegetables Area (m hectares) 42 26 7. providing seed companies with opportunities to develop products meant for such applications.2007 .4 8. Alternate crop use: We will also see a global trend of diversion of agri-crops to biofuels. Shrinking farmlands: Rapid urbanization. oilcontent. Sorghum Rice Mustard / Rapeseed Vegetables Syngenta Monsanto ProAgro Advanta Nuziveedu Raasi - Source: AR Research Industry Drivers Some of major drivers for Indian seeds are Many macro drivers positive for Indian seeds industry Demographic burden: India's population has been steadily increasing. agriculture has to grow at least at 4%.2 3. etc. Kaveri Corn Sunflower Cotton P. Kaveri Proagro Key Players Source: Industry.5 10.

It is for this very reason that MNC's have underperformed the local companies. Products developed for one region cannot be planted elsewhere with equal potency. Kaveris competitive advantage Crop Kaveri's Price Rs/kg Corn Sunflower Sorghum Cotton P Millet Rice (Var) Rice (HY) 60-170 200-280 60-70 350-750 125-135 15-20 225-250 Kaveri Yeild (Per Acre) Q/Acre 25-50 7-12 25-35 5-20 15-20 25-30 35-40 Competition Price Rs/kg 20-200 100-280 50-80 250-750 60-135 15-20 150-275 Competition Yeild Q/Acre 20-50 3-12 15-30 3-20 5-18 25-30 35-40 Source: Company Page 7 October . which are both threats and opportunities. in India. like Kaveri. Hybrids cannot be re-used. thereby opening up export opportunities. But for companies which have an understanding of the unique agro-climatic conditions. Unique agro-climatic condition: India has the unique distinction of three climatic zones and 15 agro-climatic more farmers adopt hybrid technology. AR Research India could emerge as export Hub for seeds in future In fact. India has the potential to emerge as the seed producing hub of South Asia. Source: Ministry of Agriculture. it provides multiple opportunities for customised products.AGRO Enhancing the SRR (seed replacement ratio): Since. this is expanding the markets -. given these agro-diversities and capable research facilities. Many of our neighbouring countries have similar agro-climatic zones.2007 . thereby limiting the rampups.

These useful organisms are destroyed by constant application of chemicals. Organic farming management relies on developing biological diversity in the field to disrupt habitat for pest organisms. destroying the equilibrium in nature and the result is pests and diseases have become more virulent. Microteck division was merged last year in September & hence. but organically / biologically produced.000 farms (Source: The Hindu Survey of Indian Agriculture. Organic Farming offers an natural alternative to nutrietional needs of farmland by providing the same nutrients. If the same farmer switches over to organic farming. They are fast developing resistance to such chemical control. 2007) under organic farming in India.7 mn MT of NPK is applied to Indian soils annually. Going forward. M ic ro te c k R e v e n u e s Organic farming likely to grow expanentially in India 17 0 12 0 70 20 F Y 07 FY 08E FY 09E FY 10E M ic ro te c k R e v (R s . As per some estimates. increasing application of chemical fertilisers & pesticides has led to deterioration of soil quality & decline in fertility levels.AGRO Microteck Division Over the years. we expect exponential growth from this business.000 per acre. organic farming is aviable activity Cost of cultivation in case of rice is Rs 9.000 per acre (Rs 4. Application of chemical fertilisers only has a short term effect on productivity. Currently there are 30.500 to 3. Thus the cost of production can be gradually brought down to Rs 2. and the purposeful maintenance and replenishment of soil fertility. only half years revenues were booked.000 on fertilizers. Yield is about 35-40 quintals per acre and at present price of Rs 600 per quintals. 000 per acre.000). the cost of fertilizers and pesticides can be reduced to half or less by using organic products. Soil contains useful micro-organisms which keep the diseases and pests under control. pesticides Rs 3. the net income is Rs15. around 16. Products offered Crop management Organic farming Export consultancy Bio-Fungicides Bio-pesticides Bio-Yield Maximisers Source: Company. m n ) Source: Company. which makes this a high margin business for companies who can successfully develop such products.000 farmers and 8. AR Research Economics of Organic Farming Over the long term. Organic farmers are not allowed to use synthetic pesticides or fertilizers. The yield levels can be reached to 40 quintals over a period of time and once reached. it is sustainable.2007 Page 8 . AR Research October . Organic farming is a multi-billion dollar industry in USA & is growing rapidly in India as well most comparabale organic products easily command a premuim of 2x-4x chemically produced ones.

10% Higher margins sustainable with upward bias FY06 Margins High Value Products Inhouse Foundation Seeds manufacturing FY07 Margins We see these margins as sustainable. which places it in a comfortable situation for furthur capex or any inorganic opportunity. 160 140 120 100 80 60 40 20 0 FY 05 FY 06 FY 07 FY 08E FY 09E Interest Cover FY 10E 60 50 40 30 20 10 0 Balance sheet will stay unleveraged Long term debt(Rs mn) Page 9 October . 30% Ebitda M argins 25% 20% 6. 700 600 500 400 300 200 100 0 FY 05 FY 06 FY 07 Operating prof it FY 08E FY 09E FY 10E 40 35 30 25 20 15 10 5 0 Operating Margins The margin rise in FY07 over the previous year is due more to the Growmore Farms merger and the launching of higher-realisation hybrids in various crops.AGRO Financial Analysis The cumulative effect of the higher-margin hybrids. Also.2007 .99% 26. the company has historically been debt-averse.26% 10. integrated business model and pipeline of high-value hybrids to be launched in the next two years.85% 15% 10% 5% 0% FY06 Inhouse Foundation High Value Products Seeds manufacturing FY07 Margins 8. given the favourable macro-economic conditions. geographical expansion and business restructuring has enabled Kaveri to embark on the path to higher operating profits.

2007 . 150 100 WC mgmt will become crucial 50 0 -50 -100 FY 05 FY 06 FY 07 Inv entory Day s FY 08E FY 09E FY 10E WC Day s Page 10 October . given the larger distribution network now and the reversal of earlier practices of receiving advances from the channel network. 400 350 300 250 200 150 100 50 0 FY 05 FY 06 FY 07 PA T(Rs mn) FY 08E FY 09E FY 10E 22 17 12 7 2 PA T Margins(% ) However. the working capital has to be more efficiently managed.AGRO Which leads to most of the operating leverage gains to be transmitted to the bottom line.

6 4. At our target price.88 18. Also.9 16. it will trade at 16.6x FY08 & 11x FY09 earnings.1x FY08 & 1.78 19.2 34.236/-.6 3.05% CAGR for FY08-FY10 period.AGRO Valuations We expect the company to deliver sales growth of 34.21 13.05 14.4 17 2. it quotes at mere 11.72 22 28.9x FY09E earnings.7 EV/EBITDA FY08 FY09 6.6 3. Even on an EV/Sales & EV/Ebitda basis.8x FY09 expected book-value is lower than industry standards M o n s a n t o P /E 30 25 20 15 10 5 0 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Jul-07 P /E Source: Bloomberg. Page 11 October . Also P/B of 2.74 16. AR Research. We initiate coverage on the company with a BUY rating & a price target of Rs.9 FY09 7.6 18.42 42.68 12 18. implying an appreciation of 66% from IPO price.9 14 28.71 11. whereas most industry players quote at 15x-20x one year forward earnings. it is available at significant discount compared to its peers Peer Comparision EBITA Margin Net margin RoCE RoE EV/Sales FY08 FY09 Kaveri Seeds Company Advanta India Monsanto 35.33 Given the strong visibility of earnings.4 Per(x) FY08 11.8% CAGR & PAT growth of 37.9x FY08E & 7.3 4 3.170/-. R e tu rn R a tio s Kaveri is better at capital efficiency leading to value accretion 70 60 50 40 30 20 F Y 06 F Y 07 F Y 08E R o C E (% ) F Y 09E R O E (% ) F Y 10E Peer comparison Kaveri earns higher margins (operating & net margins) than its peers. At Rs.9 1.2007 .05 16. Kaveri has better return ratios than peers.83 24. wide product portfolio provide necessary comfort for attainment of our estimates.

131.085.000 980.385.2007 .842 61.470 74.646 69.000 FY02 FY03 FY04 FY05 FY06 FY07 Source: Annual Report(2006) Dept of Agriculture & cooperation Page 12 October . farmers cannot use the harvest of previous crop to sow in the current season.400 4. Annexure 2 : Indian & Global Seeds Data Type of Seed(MT) Production Breeder Seed Foundation Seed Distribution Certified Seed 918.554 54.AGRO Annexures Annexure 1 : Seed Basics Seeds are of 3 types: 1.460.000 5.048 65. Hybrids: They are the first generation offspring's of two genetically distant and distinct parental lines of the same species.900 1. 2. Though they deliver higher yields.000 1.300 1. GM Seeds : They mutate a new plant variety by introducing a foreign gene onto an existing plant to realise a specific trait therein. 3.000 6. Open Pollinated: Here.000 80.000 4. breeding happens naturally by free cross pollination or self pollination.400 6.000 1.000 6.

AGRO Global Seeds Market(USD Mn) Country USA China Japan France Brazil Germany India Argentina Italy Canada Russia Korea Australia Mexico Taiwan Others Size of Domestic Market 5700 4500 2500 1930 1500 1000 1000 930 780 550 500 400 400 350 300 4436 26776 Source: ISF Annexure 3 : Key Success factors for a Seeds company Germplasm: Quality of germplasm. right quantity.reduces market risk Across regions & across crops is ideal Page 13 October .R&D: Newer Agricultural technologies constantly being introduced Disease & pest tolerance have become key areas Advance breeding techniques Consistent product performance –Brand reliability Production: Relationship-based contracts Technological assistance Inventory: Prudent working capital management Plan production 2-3 years in advance Plan for foundation-breeder seed 3 years in advance Usually 6-10 months inventory Product portfolio: Product mix. right place and at right time is crucial Needs substantial investment Determines product pipeline Technological edge. Marketing: Placement of right product.2007 .

Today. overall better ROI Benefits to Consumers Increased Dietary components Longer Shelf Life Can be used to administer additional Nutrients/Medicines Far greater Choice Some key GM facts Since 1996. Annexure 5 : Plant biotechnology basics Biotechnology is an Extension of Plant Breeding CONVENTIONAL PLANT BREEDING Genes are made of DNA. we can claim to be self-sufficient in cotton (and exporting too!) mainly to a large extent of GM technology. From 6.It is like a string of pearls. addition of certain minerals Better pest control Reduced Insecticides/Pesticides consumption Thus. it has risen to 39% in the current year & the yields have gone up from 11.2% of the total cotton area under cultivation of BT-Cotton. Desired Gene Many genes are transferred X Donor Plant Commercial Plant Variety New Plant Variety PLANT BIOTECHNOLOGY Using plant biotechnology.75 Mn Hectares) In the Indian context. you can add a single gene to the string.2 Tons/Hectare to 22 Tons/Hectare.2007 . world has seen consistently rising (in double-digits) growth rates for Biotech Crops.7 Mn Hectares in 1996 to 102 Mn hectares in 2005 Significantly. far higher proportion of this growth came from developing countries (7 Mn Hectares) as compared to developed countries (2.e. BT Cotton is a glaring example of benefits of GM.: More vitamins.AGRO Annexure 4 : GM benefits & current status Benefits to Growers • • • • • • • • • • • • • Far Higher Yields than conventional Seeds Introduction of desirable traits in the end product i. Desired Gene Desired Gene A single gene is transferred + Donor Commercial Plant Variety Improved Commercial Plant Variety Page 14 October . The global acreage for Bio-tech crops has grown from 1.

9 42.0 1.8 33.9 14.2 FY08 11.3 24.6 1.5 26.6 4.5 42.0 1.7 EV/EBITDA FY08 FY09 6.83 16.4 24.340 697 20 578 45 1.6 3.1) 3.7 3.5 6.7 74.8 10.0 1.78 19.0 0.500 1.3 3.7 Peer Comparision Mkt. in minority interests .0 53.8 Dividend yield (%) 1.7 Debt/Equity (x) 1.0 26.9 0.800 442 486 653 993 1.33 13.0 Bottomline growth (%) 124.3 1.5 DPS (Rs/share) 3.1 33.5 32.9 EV/Sales FY09 1.Inc.3 16.5 5.320 20 1.9 38.6 1.4 17 16.5 24.9 1.3 36.5 50.5 261.2 1.AGRO Income Statement (Rs m) Y/E Mar Net sales .2007 .2 26.7 0.4 0.7 2.8 3.2 1.42 42.9 BV (Rs/share) 43.4 3.5 10.110 20 1.21 2.0 Working capital turn (days) (54.9 0.3 81.8 32.05 Per(x) FY09 7.Capital expenditure 47 128 562 0 Free cash flow (72) (104) (634) 110 312 .199 40 172 338 507 601 16 15 16 19 21 7 12 29 45 38 7 14 20 21 12 12 54 110 167 205 29 106 195 294 367 29 106 195 294 367 Mar-06 Mar-07 Mar-08 Mar-09 Key Ratios ARG Estimates Cash Flow Statement (Rs mn) ARG Estimates Y/E Mar Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Topline growth (%) 1.3 26.9 34.5 EV/Sales (x) 4.8 P/B (x) 3.9 6.5 50.537 20 1.6 3.05 Page 15 October .6 4.74 28.3 1.88 14.Depreciation .4 2.3 4 3.Tax PAT + (Associates-Minorities) Consolidated PAT ARG Estimates Balance Sheet Statement (Rs m) Y/E Mar Networth Debt Minority interests Capital employed Fixed Assets Investments Working capital Cash Capital deployed 77 144 221 93 135 (41) 34 221 265 119 384 208 73 54 48 383 ARG Estimates Mar-10 1.8 Operating margins (%) 8.4 12.9 7.6 0.1 34.Dividends 47 94 157 + Equity raised 16 85 734 + Debt raised 41 (25) (99) (0) + Inc.Miscellaneous items 4 36 (10) (8) Net cash flow 1 14 (29) 26 13 + Opening cash 33 34 48 19 45 Closing cash balance 34 48 19 45 58 Dupont Analysis Y/E Mar EBIT margins (%) Capital turn (x) RoCE (%) Leveraging factor (x) Interest impact (x) Tax break (x) Consolidation factor (x) RoE (%) ARG Estimates Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 10.1 1.72 22 28.4 16.Operating expenses Operating profit + Other income .1 32.9 0.0 1.8 1.2 25.3 EV/ EBITDA (x) 42.0 0.4 Dividend payout (%) 24.6 11.3 15.130 1.9 9.0 1.0 1.Investments (16) (63) (53) 150 .71 11.340 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 482 658 991 1.5 20.0 96.3 21.8 1.68 12 18.130 742 20 349 19 1.7 0.3 P/C (x) 8.1 1.9 5.6 0.8 CEPS (Rs/share) 20.3 13.4 FDEPS (Rs/share) 16.4 6.9 40.2 PER (x) 10.557 1.0 12.8 126.9 61.6 51.5 2.557 659 170 669 58 1.0 0.4 112.9 14 18.3 112.0 0.6 18.2 2.Interest .9 24.3 27.3 1. in working capital 61 95 295 228 92 Operating cash flow (25) 24 (71) 110 312 .0 31.0 5.9 57.9 28.3 84.7 Y/E Mar Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Consolidated PAT 29 106 195 294 367 + Non-cash items 7 13 28 45 37 Cash profit 36 119 224 339 404 .7 29.9 6. Cap EBITA Margin Net margin RoCE RoE FY08 Kaveri Seeds Company Advanta India Monsanto 2329 17666 12185 35.

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