For a developing country like India with close to 1.3 billion people and shrinkingarable land the priority is to focus on sustainable agricultural practices; withdeployment of advanced technology and consistent research and development efforts. Seed isthe basic and most critical input for sustainable agriculture across the world. It isestimated that the direct contribution of quality seeds alone to the total production isaround 15-20% depending upon the crop. It can be further enhanced up to 45% withefficient management of other inputs.
The countrys seed industry is evolving at a rapid pace. It grew at a compoundgrowth rate (CAGR) of 8.4% in volume terms from FY 2009 to FY 2015 to reach 3.5 milliontonnes in consumption (Source: ICRA). Going forward the industry is expected to growsignificantly owing to improved seed replacement rate (SRR) and increasing adoption ofhigh-yielding hybrid seeds. The Government of Indias favourable policy environmentaimed at supporting the usage of seeds through the National Seeds Plan and bolsteringagricultural productivity through the National Food Security Mission (NFSM) also augurwell for the industry.
As a responsible industry player we at Kaveri Seeds are working hard with afarmer-centric approach. So that the Indian farmer can have a wide product choice; and theagricultural sector can grow sustainably and contribute to nation wellbeing.
Revisiting FY 2015-16
FY 2015-16 was one of the most challenging years in our corporate journey. Thishappened as Indias agricultural sector witnessed two consecutive years of inadequaterainfall and drought across large parts of the country. Coupled with low commodity pricesthe rural sector was under tremendous stress. Given the large carryover stocks by theindustry there was significant competitive pressure by competitors to liquidateinventory. At Kaveri we had anticipated the prevailing risks and responded withresilience and delivered a satisfactory performance taking into account the conditions inwhich we had to operate.
In the current financial year we achieved consolidated revenue of Rs 910.17 crores (Rs1176.66 crores in FY 2014-15). Our EBIDTA stood at Rs 206.00 crores vis--vis Rs 325.08crores in FY 2014-15; and a net profit at Rs 172.69 crores vis--vis Rs 300.96 crores inFY 2014-15. We maintained a persistent focus on product quality innovation and farmerengagement to strengthen our business model.
Moreover we strengthened our credit management better inventory management andproduction planning enabling us to bring down our inventory significantly and ensuredsteady cash flows and reduce our risk of bad debts.
During FY 2015-16 we worked proactively towards consolidating our fundamentals.
We reinforced our R&D through breeding high-performance hybrids increasing ourtesting locations and forging relationship with more institutions to develop superiorproducts. We focused commercialisation of new products to meet the requirements of farmersin different regions.
Our marketing and distribution network our key strength enabled us not only toservice our existing markets but also expand our reach further in most markets. Our corenetwork of loyal and committed channel partners has been built over long period of timeon the strength of proven product performance and meeting customer expectations.
We are expanding our marketing and distribution network deeper into agricultural belts.We believe that such expansion will significantly enhance business opportunities for us infuture in untapped and growing markets.
We continued our engagement with the farming fraternity through multiple engagementprograms. We not only made them aware of our brands and new range of products; but alsorendered relevant agronomic information to increase their farm productivity.
We anticipated the climate challenges and were successful to produce seeds for nextyear in spite of tough growing conditions.
For all that we have achieved over the years the credit goes to our team. We haveadded many senior professionals this year to strengthen the management and bring Worldclass best practices in our organisation. We have been able to attract the best industrytalent nurture their skills and recognise their hard work through various rewards. Werely on the expertise of our people for success across our business functions; and ourhuman resource practices actively support our growth strategy.
Cotton Maize Rice and Bajra along with other field crops are key crops and we stillbelieve that we can grow market share in most of the crops and create market in Rice.
We are confident to bounce back in Cotton in the coming year given very goodperformance of our leading hybrids as compared to competition. We expect the Maize marketto increase in the coming year given the attractive commodity prices.
Rice with a huge market potential is the next major opportunity for the Companysbusiness. Rice farmers are upgrading from farm saved seeds to packed seeds and we alreadyhave a good presence in the growing market. We would like to ramp up our volumes inselection rice and are investing in a state of art processing and conditioning plant inMulagnoor which is an ideal location close to seed production area.
The demand for Vegetables has been increasing with economic growth and higherdisposable income. The demand for high quality vegetables seeds has been growing in thelast few years and we have identified Vegetables seeds are the next growth opportunity.Currently Vegetable seed contributes to less than 2% of our revenue but we are confidentthat we will be able to rapidly ramp up the business. We have expanded our investment inVegetable R&D and strengthened our expertise in seed production & sales andmarketing by adding human capital.
At Kaveri our social commitment is a part of our all-embracing sustainabilitystrategy. We conduct various community outreach and socio-economic development programmesin three villages of Telangana namely Gatla Narsingapur Ramnagar and Bollone Pally. Ourintervention areas comprise education farmer welfare and community empowerment from thegrassroots.
India is now witnessing a huge socioeconomic and demographic transition as povertylevels are declining and large sections of society are aspiring for a better quality oflife. The countrys food consumption patterns are also changing with focus on healthand nutrition. We at Kaveri have the capability and the commitment to help make adifference in the food and nutritional landscape of India.
On behalf of my colleagues on the Board I would like to express my sincere gratitudeto our employees bankers partners customers and shareholders for their continuedsupport and encouragement as we pursue our growth strategy.
G. V. Bhaskar Rao
Chairman & Managing Director