Double-digit growth for Indian seed industry: ICRA

The domestic seed industry will continue to grow at a double-digit growth rate in the medium-term driven by improved seed replacement ration (SRR) and rising adoption of improved hybrid seeds, ratings agency ICRA announced on Monday.

The profitability of private seed companies will remain healthy while investments in R&D and working capital to maintain a strong product pipeline will keep private sector's indebtedness at moderately high levels, the ICRA said in a statement.

The favourable policy environment aimed at supporting the usage of seeds through National Seeds Plan and boosting agricultural productivity through National Food Security Mission (NFSM) augur well for the industry, it said.

According to the report, the Indian seeds industry grew at a Compound Growth Rate (CAGR) of 8.4 percent in volume terms from FY 2009 to FY 2015 to reach 3.5 million tonnes in consumption.

On an average, private sector companies saw operating margin of about 15.5 percent between Finacial Year 2011 - FY 14 vis-A-vis 9.3 percent for state run companies, the statement added.

Private sector companies have a longer cash conversion cycle of about 160 days versus 75 days for state run players as observed by ICRA during the period FY 11 - FY 14.

The ratings agency highlighted that the Indian seed industry would benefit from joint development efforts encompassing a wider variety of crops apart from millets and sorghum.

"The key challenge in Indian agriculture is poor productivity yields across all major crops," said Sabyasachi Majumdar, senior vice-president, the ICRA, said in the statement.

"The productivity yields in India suffer on account of varied factors such as fragmented land holdings which impact the level of mechanization, lack of all weather irrigation facilities, depleting soil quality due to aggressive use of fertilizers and usage of poor quality of seeds as reflected in low seed replacement ratio," he added.

The roots of the Indian seed industry lie in the commencement of the National Seeds Corporation in 1963 while the sector was opened for private investments in 1988.