ICRA expects the domestic seed sector to continue its current pace of growth at early double-digit rate over the medium term largely driven by improving seed replacement ratio (SRR) and increasing adoption of improved varieties of hybrid seeds. The favorable 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. ICRA notes that while the profitability of private seed companies will remain healthy, the significant investments in research and development (R&D) and working capital to maintain strong product pipeline will keep the indebtedness for the private sector at moderately high levels. ICRA believes that the Indian seed industry, which has evolved from public-sector dominated one till 1970’s into a multi-faceted industry with significant involvement of private firms, would benefit from joint development efforts of the players.
The domestic seeds industry, currently valued at USD 3.2 billion, has grown at a CAGR of 8.4% in volumes terms over FY09 to FY15(P) to reach 3.5 million tonnes (consumption). While the Indian Seeds industry has its genesis in the establishment of National Seeds Corporation Limited in 1963 with the sector opening to private investments in 1988, the growth has only picked up in the last decade with the formalization of National Seed Plan in 2005. Further, NFSM which aims to ensure right to food to significant proportion of below the poverty line population in India is likely to provide fillip to the seed industry for boosting productivity yields.
Mr. Sabyasachi Majumdar, Senior Vice-President, ICRA Limited, says “The key challenge in Indian agriculture is poor productivity yields across all major crops. 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. As improving the level of mechanisation and ensuring adequate irrigation infrastructure is a long drawn process and challenging due to fragmented land holdings, ICRA believes that ensuring better quality seeds to farmers is a relatively low-hanging fruit to boost the agricultural yields.”
ICRA study on select seed companies shows that the private sector companies focus on hybrid seeds which are widely used in vegetables and field crops such as maize, millets, cotton (primarily biotech). This has resulted in higher profitability margins of the private sector players over public seed corporations. Based on ICRA’s sample, the private sector companies’ witnessed operating profit margin of about 15.5% (average over FY11-FY14) compared to 9.3% for public sector entities during the same period. Moreover, the concentrated product portfolio focusing primarily on Kharif crops (whose sowing season begins in May) along with presence across the value chain (from product development to distribution) has resulted in higher working capital intensity for most of the private players at the end-of financial years. Based on ICRA’s analysis, the private sector companies have a longer cash conversion cycle of about 160 days (as seen over FY11-FY14) resulting in NWC/OI ratio of about 40% as against 75 days of cash conversion cycle for public sector players (NWC/OI: 20%) over the same period. As the industry requires significant investments in research and development (R&D) and working capital, ICRA notes that the Indian seed industry would benefit from joint development efforts covering a wider crop variety apart from millet and sorghum.
Your email address will not be published. Required fields are marked *
True Premier League Opening Ceremony
GNH Imports Life-Saving Medicine to India
SHELL LUBRICANTS OPENS LEARNING CENTRE in partership with bml university
Tanishq launches Rivaah – a new sub-brand for wedding jewellery for all Indian brides
Hollywood Calling @ The Westin Pune, Koregoan Park
Select a category
Play slots online with critic.net
2014 The Global Indian New Network (TGINN)