Kaveri Seed Company Limited (KSCL) Earnings Call Transcript
August 14, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Kaveri Seed Company Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. Joining us today on this call, we have with us Mr. Mithun Chand, Executive Director. Before we begin, I would like to mention that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. For a list of such considerations, please refer to the earnings presentation. I now hand the conference over to Mr. Mithun Chand. Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome, everyone, to our quarter 1 financial '26 earnings conference call. We hope you had a chance to review the presentation of our results, which is also available on our website. I would touch upon the operational financial performance of the company and then open the floor for Q&A. We are delighted to declare a good set of numbers on account of increasing acreages and higher realizations of non-cotton segments like rice and maize. Increased volumes of non-cotton hybrids have resulted in good realizations, which has been well reflected in the overall revenue growth. The increase in contribution of new products of volumes of cotton will have major impact in the quarters to come in our overall cotton revenues growth. Rice, maize and vegetable segments continue to grow both in terms of acreages, revenues, so as realizations. In spite of restrictions in hybrid rice sowing in Punjab, we had delivered good set of growth in hybrid rice revenues. We have witnessed a trend of substantial increase in revenue growth as compared to volume growth across all non-cotton segments like rice, maize and vegetables, which would continue in the next years to come. Revenue from operations was at INR 945.31 crores as compared to INR 808.09 crores in quarter 1 '25, registered a growth of 16.98%. EBITDA was at INR 332.8 crores as compared to INR 292.79 crores in quarter 1 financial year '25, increased by 13.68%. Net profit was at INR 316.50 crores as compared to INR 282.91 crores and registered a growth of 11.88%. Key highlights. The contribution of new products of volumes of cotton, up from 12% to 34%. Cotton sales impacted by increase in illegal cotton, increase in cost of production of cotton seed impacted the profitability. Hybrid rice volumes increased by 6.48% and revenues increased by 32%. Hybrid rice restricted in Punjab affected the sales in that state. Selection rice volumes increased by 1.5% (sic) [ 1.30% ] and revenues increased by 11.58%. Maize volumes increased by 21% and revenues increased by 54%. Vegetable seed volumes increased by 28%, whereas revenues increased by 41%. Volumes of non-cotton hybrids increased by 8% and revenues increased by 31%. Volumes of cotton hybrid decreased by 15%, and there is a corresponding decrease in revenue. I would now open the floor for Q&A session.
[Operator Instructions] The first question comes from the line of Siddhant from Goodwill.
My first question was when you refer to the cotton illegal seeds, are these largely BG-III seeds?
Yes, basically illegal BG-II RRF seeds. That's what we call as illegal seeds.
Okay. Any update on the BG-III.
Not yet, but it's been positive, any time it should come by seeing the growth in this type of illegal cotton, even the government authorities are a bit worried about it and even farmers for new technologies. We have a continuous dialogue with the approving authorities. So any time we may expect it.
Okay. Any update on non-cotton GMCs or testing?
As of now, now, the testing is going on, but not much. What we think is that initially, first thing will be the cotton segment because which is already approved in the market and non-cotton segment may take some more time to get the formal approvals.
Okay. The non-cotton growth that we achieved this quarter, firstly, congratulations on that. Secondly, do you think this will sustain at this rate for the next few years or maybe a lower rate?
Definitely, what we think is that non-cotton segment should be in and around the 20% growth levels going forward as we see acreage increase in maize. And even we see a rice market to go up. This time, even the rice market grew when compared to previous year, majority of the market was in this varietal speed. not in the hybrid segment. But definitely, what we anticipate is that definitely the move to hybrids. We'll definitely see as an industry as a growth. We see both acreages coming up in both maize and hybrid rice, whereas Kaveri, we are well placed in maize. We have very good pipeline hybrids which are coming in, which are for the -- not only for the southern segment, which we are already working on the segments which we are not there. Even in rice, we are working on the segments where we are not there. So we have very good pipeline hybrids in those segments. What we think we believe is that going forward, 20% here and -- 20% growth in non-cotton segment is very much possible. And coming back to cotton by seeing the base what we have. Even last year, we said that we have a low base, we will not go back but the illegal cotton has gone up this time and the acreages are also slightly down. That has impacted the sale. But the plus point in our sale this year is that even though we have decreased in our sale, but the new cotton contributions have gone up when compared to the previous year. So those are the segments which are doing well. So definitely, we think that even in cotton, we see a good growth coming. We just got delayed by a year or so, but we are pretty confident about the cotton growth. And overall, when we see the company like 15% to 20% growth going forward for the next 3 to 5 years looks pretty much possible.
Okay. Within the cotton, is the illegal seeds productivity higher than the BG-II seeds that we are selling right now or the industry is selling right now?
Right now, what we anticipate is that is our company's internal thing, may differ from other companies. But what we see the 20% of the market is in the illegal BG now.
Okay. No, I'm talking about the productivity of those seeds. Is it better than...
No, still we need to watch it now. We have seen a mixed result on that. But it's still -- the crop is on the ground. We need to get -- see the result. But anyway, the government is also acting very harsh now. They have witnessed this type of growth. We all as an association, we all represented saying that it will harm the farmer going forward because they don't know what sort of seed they are putting in. So that also will impact yield going forward. So I think that will be corrected.
Perfect. Last question before I join is, what is our dividend cash payout policy? Because I think we're sitting on all-time high cash and we had a buyback policy before. Now what is it going forward?
Not at a high because as we have produced more inventory this year, majority of the cash is there in the inventories, which will be realized in the next few more quarters -- coming quarters. But as of now, we have not taken any decision on the buyback policy. Dividend will be definitely there. We'll come back with the policy once we have the discussion on it.
Okay. And because you are sitting on all-time high inventory, do you expect some inventory to get written off or not really?
Whatever inventory we have produced is all new inventory. Our written off is always a part of the system. So we don't see any sort of high risk in writing it off as of now. But the stock is not yet returned yet. We have just made a provision. It is reaching the stock. We'll meet it through the quality test and do that. But with our experience, what we see is that most of the stock is this year produced stock. So usually, these stocks lie for 2 to 3 years. So we don't see that sort of risk.
The next question comes from the line of Amit Doshi from Care Portfolio Managers Private Limited.
Sir, while we say that we have a 17% growth, that's on the stand-alone. When I look at the consolidated numbers, we are in a single-digit growth. So is it fair to say that the sales that we have done is lying in as inventory in subsidiary? I mean any clarification that you would like to give.
So we don't have any inventories in subsidiaries because whatever we sell is through subsidiaries only. Majority of the subsidiaries when we see, it's only cotton, not the other crop. That's the reason you see a single-digit growth there.
No, still not very clear. So when you say consol has INR 945 crores of sales, whereas -- sorry, stand-alone has INR 945 crores of sales and consol has around INR 90 crores less sales. So I didn't get the cotton part.
No, what -- as per the accounting, we need to deduct that, but that's the only thing. That's the reason you see a single-digit growth there. We need to knock out that sale.
So -- but ultimately, as a company, including subsidiary, we would have done sales of only INR 50 crores, right, and not INR 945 crores.
Subsidiaries -- we have done more sale in subsidiaries. But when we see the entire -- the source of the seed is from the main company seed. For example, if I sell INR 700 -- if I sell at INR 800 in cotton there, the INR 600 is registered in the books of Kaveri, only INR 200 is registered in the books of subsidiary. That's the reason, you see a very small growth there, only INR 50 crores sale there. Anyway I will come back with those -- anyhow I will come back with...
Not very clear on...
I will also try to clarify that. I will also try to clarify that regarding the consolidated one, in what way the accounts are treating it, I will just [indiscernible] do that.
Sure, sure. Sir, in terms of volume growth and price growth, we have seen significant price hikes in all of the [indiscernible] seeds except the cotton one. So any particular reason that this time there is no significant demand or some price hikes that we have taken? Anything particular because all volumes have grown, but the price has grown far higher. So anything on that?
If you see the last 2 quarter con calls, we were saying that the cost of production is going up in most of the crops. That's what we have seen here. And we were able to pass on the cost of goods to the farmers in non-cotton segment. Whereas in cotton segment, because the prices are restricted by the government and there was a lot of inventory, the demand was not that good. So these all have affected in not passing on to the farmer. That's the reason even though we have realized a few rupees -- few tens of rupees more than last year, but the cost of production is really high when compared to the last year. That has impacted our profitability.
Okay. So that is something which...
If you see the decline, we are down by like 1% in EBITDA margins compared to the previous year. Usually, when we do sale in non-cotton segment, the margin should go up. But the -- in fact, the margins have gone up in non-cotton segment, but the margins in cotton have dragged a bit. That's the reason we have seen a dip of 1% in the overall EBITDA margins.
Understood. Understood.
And that's a very temporary thing. This year, all the companies have produced more. Now it should moderate.
Okay. Okay. And sir just earlier participant spoke about inventory of course we had a very high inventory of -- compared to last year, INR 750 crores, more than INR 1,000 crores. So last time you mentioned we produce buffer stock. So you did mention, but do you see anything significantly liquidating in the second half in the rabi season? And how do you see rabi season...
Definitely, the second half will be much better than last year because we see a huge, I mean, very good positivity for maize. And if you see this year also, our major crop is maize, which has grown by more than 21% in terms of volumes as well. And going forward also maize is a crop which will grow. Vegetables are also gone up. And when you see the next 3 quarters of the second half, basically, it should be much better than what we had earlier.
Understood. Understood. Sir, any clarity on the tax matter that which is still pending or hanging for...
As of now, no case is disposed at commissioner level, I mean, the CAT appeals level. If anything is there, definitely, we'll inform to the investors and the exchange.
No anything at the policy level. So the current...
Policy level, not yet. But as an industry, as an association, I'm also part of it. We are continuously representing it, and they also want to make a policy, but they're unable to -- I mean to say they are still working on it. There are many reports which suggest that it should be treated as agriculture income internally, but we are waiting for the policy. We are trying for it. I'm not sure when we'll get, but we are continuously trying for that.
Okay. Okay. And sir, we also have crop nutrients as a part of our sales. So what percentage of that would be -- I mean, sales breakup you have given, but this crop nutrient segment?
Sorry?
We also have crop nutrients segment, right? Or everything is...
Yes. No, we have -- that's all comes in the subsidiaries, but that's a very small part of the business.
Okay. It would be less than the...
The crop nutrients is only INR 45 crores, INR 50 crores business as of now. But even we see a good -- even going forward in the next 3 to 5 years, even that will also contribute -- I mean it will contribute to the top line. We're working on the products earlier, maybe in a year or 2, most of the products and the network will be across India. So we see good activity in those segments. And the other part, what we have done in this year in the last 1, 2 years, even in subsidiaries, we were only doing cotton earlier. But we have many products in R&D because we have already -- we have expanded our network -- subsidiary network to other states where we are giving other products which are not there in Kaveri. For example, if you have 2 or 3 hybrids in Kaveri, one of the hybrids are given to the subsidiary so that we can market all the hybrids because in a company, we can't market all the hybrids at a go. So we are already expanding those networks. So even in subsidiaries, we'll also do very good business going forward, both in cotton and non-cotton segment. Earlier in the last 10 years, it was only pure cotton, very negligible non-cotton segment...
Okay. Okay. And sir, when I look at other peer segment results, peer companies in the listed space, so they have also done significantly well, like [indiscernible] if I take more than 35% growth. So this time, is it across industry, would you want to say that Kaveri has also done in line with industry or slightly...
That we need to see because this time, the industry was tough, except for maize in some crops, most of the crops, they were not able to do, for example, cotton, no. But whereas Rallis, their hybrid has done well in Northern India, cotton. But as the industry because every company has their own policies initially because some do that in first quarter, some do in second quarter. But as a policy as a company, we take only the liquidated stock as the sale and provide everything as returns, whereas other companies take the policy of 1 -- 10%, 15% or so. Usually, this time, what we see in the industry is the returns are more than the usual terms. So we need to check for the second quarter results, and we can only say what they have done well because we don't have an exact idea what the liquidation amount is. Once you see the second quarter, we can compare first half to first half and then we can draw a conclusion.
Okay. Okay. I will reach out to you separately on the revenue standalone consolidated.
Sorry.
Thank you so much for the stand-alone consolidated clarification. I will reach out to you separately...
Yes. I'll definitely try to work on it. I'll just try to understand...
The next question comes from the line of Dhruv Saraf from Bowhead India Fund.
Congratulations on the good numbers. Sir, just wanted to understand what is the R&D, as a percent of sales for the quarter?
So last year, the entire revenue expenditure of R&D was close to INR 60-odd crores. This quarter, it should be in the same line, INR 15 crores to INR 17 crores and CapEx of like -- capital expenditure extra over and above that because we have constructed almost like it's already done. We again invested like INR 45 crores to INR 50 crores in new R&D plant. Today, it was the opening of that plant -- that center, R&D center.
So you said around INR 14 crores of depreciation in the first quarter. What is...
Sorry.
We've seen around INR 14 crores of depreciation in the first quarter. So sir, what should we assume this run rate as well going ahead? Or will depreciation increase...
Yes. Maybe for a year or so, this run rate year or like for the next 12 to 18 months, this should go on because we have set up a new office. So that also was capitalized in the last quarter. If you see last quarter, the depreciation was INR 14 crores. This quarter, it is INR 12 crores. So it will continue for the next 5, 6 quarters, then it should be done.
So you don't expect, sir, your depreciation to increase from these levels in the next few quarters?
Because we are setting up -- because the R&D plant has come into -- so we will be starting this R&D plant here. So the depreciation, that's what both last year and this year, the depreciation altogether should be like INR 14-odd crores per annum -- per quarter. INR 12 crores to INR 15 crores should be the per quarter -- it should not go than this -- INR 12 crores to INR 15 crores should be per quarter, and it will not go beyond this.
Understood. Right, Mithun sir, what is the visibility you have on the export business on the Bangladesh sales? Do you expect...
Compared to last year, we see a lot of positivity in Bangladesh, not only in Bangladesh, in other countries like Tanzania, Vietnam, Philippines, we have already imported -- exported to some extent. Compared to previous year, the export will definitely have 30% to 40%. But last year, the base was very small again. But whatever this -- whatever we are growing this year, that will be the base. And year-on-year, we see a good growth in exports also because most of the products are accepted in new countries also, which we were testing for the last 3 to 5 years. So some quantities are already exported this year. And sorry, this quarter also, the running quarter also, we have done some sales.
I had a question on cotton, sir. So you've seen the new products perform well in the market, and you scaled up to almost 10 lakh packets of new products. So going ahead in FY '27, '28, how do you see the mix changing of cotton? Do you assume that -- should we assume that new products in cotton would be most of the sales going ahead? Are you confident of that?
If you talk about FY '28, 80% to 90% of the products will be from the new -- 80% to 90% of the revenue from new products.
The next question comes from the line of Krushi Parekh from BugleRock PMS.
Sorry, first of all, for the background noise, but we had substantial jump in the inventory about 40% as compared to previous year in the March quarter. I mean the sales revenue jumped about 17-odd percent largely because of this cotton or...
Sorry, in between I was missing you. What's your question...
My question is that we saw a jump in the inventory during the March quarter. And the revenue for this quarter jumped by about 17-odd percentage. So is the mismatch because of cotton seeds only or because of some other seeds as well?
So we have produced all seeds. If you recollect last year call also con call when we had a March quarter results, we said that we have intentionally increased the inventory. One is we are anticipating good season. And second thing is we want to maintain some buffer stock because this time, we faced inventory crunch and we lost some sales that is last year. So we have produced more and strategically, we are keeping some as buffer stock. Yes, cotton, as per our anticipation, we thought of doing better, but we have not done well. The cotton inventory is slightly higher than compared to what you say, like our anticipation. But if you see the overall level, if you see cotton as a percentage is only 20% of our revenue. So that will be in line with our inventories.
Okay. And typically, who would be producing these illegal cotton seeds and how can...
There are many -- tens of companies who do it. There are tens of companies who do -- usually not the big companies will do, smaller companies.
Okay. And considering where we are today in terms of our inventory level, so how will -- our procurement will be in the next season?
Cotton, we have already given it. We are trying to reduce the inventory because we have not done well to what extent we'll be successful in that. Any other -- whatever inventory we have given is a new hybrid. So we don't have any worry about that. But whereas in other crops, we are yet to give the production because that all happens in the second half. By seeing the inventory level, by saying which variety we need to give based on that we will give. So we don't see any threat in those non-cotton inventories. Even in cotton, it's a new hybrid, so even though we don't see any issue in that.
The next question comes from the line of Anurag Jain, an individual investor.
Just to continue on the point of consolidated sales and stand-alone sales. Last year, the consolidated sales were around 8% higher than stand-alone sales. So for the full year, would you expect the same trend to continue that consolidated sales would be like 8% higher than, say, stand-alone sales?
So majority of the quarter is first quarter, but that's what I said that I just need to find out the accounting policy of stand-alone and consolidated. But if you see the subsidiary business when compared to last year, that will definitely be better than the next second half. Last year, second half to this year, second half or last year, 3 quarters to this year, 3 quarters, it will be much better than the last year because as I said that earlier, we were only concentrating on cotton crops, now we are down to the non-cotton segment. Non-cotton segment usually comes in the second half. So that will be much better than last year.
The reason I'm asking this question is because if we look at consolidated sales, the growth is only 7%, which is good. But stand-alone sales growth is 17%, which is excellent. So for the full year, what kind of trend would you look at like a 7% growth or a 17% growth, which is the more meaningful number?
So consolidated, I'll just come back with the accounting policy, how they do that. But if you take the stand-alone process, it will be much better than the 17% growth.
Okay. Okay, sir.
The next 3 quarters will be much better than the first. For example, if we have done 17% growth when compared to quarter 2 to quarter 1. If you compare the next 3 quarters to next -- this coming consequent 3 quarters, the 17% growth will be much higher than the 17% growth.
Okay. And...
Overall, what we think is that right now, the 17% growth, which is looking for quarter-on-quarter, but year-end, it should be like close to 20% growth overall.
Okay, sir. Okay. And then the same trend should be reflected in the consolidated sales too...
Yes, yes.
Because the consolidated should be higher than the stand-alone for the full year?
That's -- let's just come back on how the accounting of the consolidated numbers. But definitely, the sale will be -- in terms of absolute figure, the sales will be higher, both in terms of the consolidated and in terms of the stand-alone.
Okay. And sir, there is a follow-up. One of the previous participants had asked that where are the illegal seeds coming from. So you said that it's coming from the smaller companies, but the smaller companies in India or is it coming from overseas?
Most of the cotton companies are Indian companies. I mentioned that this way or no [indiscernible] the smaller companies, there are very small pockets, they produce and they cater to their own segments.
Okay, sir. And sir, just to understand the growth -- rice volumes, growth in rice seed volumes, the sowing area has increased by around 17% across different states as per the commentary in the presentation. But for selection rice, the volumes are up by 1.3% and hybrid rice volumes are up by 6.5%. So our volumes have grown lesser than what is the increase in the sowing area. So what would be the reason for this lower volume growth versus the growth in the sowing area for rice?
I've already commented on this, but again, I'll clarify on it. Regarding rice, hybrid rice remains same, but we have grown at 6% in terms of the volumes in hybrid rice. Whereas in other areas, the rice acreage has gone up, but it all moved to the varieties, not to the hybrids. That's the reason we have seen a decline. We have remained same.
Okay, sir. Okay. So basically, we have maintained our share...
Yes. In fact, we have increased our share in hybrid rice.
Okay. Okay. All right, sir. And sir, for -- when the company says new products, for like cotton, we are saying that new products have gone up from 12% to 34%. So what is the definition of new products? These new products are like the products which are launched in last 1 year or last 2 years? What is the definition of...
Last 2 years, last 2 years.
Last 2 years.
In fact -- yes, you can say.
The next question comes from the line of Dhruv Saraf from Bowhead India Fund.
Sir, what is the outlook on the cost of production going ahead? You had a tough season there. So do you believe you've seen the peak in terms of cost increases? Or are you seeing further increases in terms of next season?
I don't think so because last year, the competition was pretty high among all the companies because most of the companies were down with the inventories and everyone was very aggressive in producing it and the cost of production has gone up. This time, the inventories are there. Everyone is slowing down on the level of inventories. So I don't see any like further rise in -- some sort of inflation here, but not a significant rise as like what we have witnessed this year that we may not witness in the coming next 2 to 3 years.
And is it safe to assume that the margins can expand from here going ahead given the mix has changed to...
Even I said in the earlier thing that going forward, the margin should improve.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you, and over to you, sir.
Thank you. For any further queries, you can call our investor desk and anything. I'll come back with the consolidated one again. Thank you.
Thank you for joining the call. For any other information, please be in touch with Rama Naidu from Intellect PR. On behalf of Kaveri Seeds Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
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