Kaveri Seed Company Limited (KSCL) Earnings Call Transcript
November 7, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Kaveri Seed Company's Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference call will be recorded. Joining us today on this call is Mr. Mithun Chand, Executive Director. Before we begin, I would like to mention that some of the statements made in today's 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 would now like to hand the call over to Mr. Mithun Chand. Over to you, sir.
Good evening, and welcome, everyone, to our quarter 2 H1 financial year '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 will touch upon the operational and financial performance of the company and then open the floor for question-answer session. Revenue from operations registered a growth of 17.09%, INR 1,041.91 crores as compared to INR 889.85 crores in first half '25. EBITDA INR 333 crores, grown by 11.12% as compared to INR 299.68 crores in first half '25. Net profit was INR 301.45 crores as compared to INR 279.41 crores in first half '25 grown by 7.9%. Cash on books stands at INR 363 crores against INR 559 crores. Quarter 2 financial year '26 revenue from operations was INR 96.61 crores, EBITDA was 0.16 crores, net profit was loss of INR 15.05 crores. Board has recommended 250% dividend that is INR 5 per equity share on a face value of Rs. 2 per equity share. The double-digit growth in revenues and EBIDA are very Impressive. Substantial increase in maize volumes resulted in much higher growth in terms of its revenues, which shows its potential in overall non cotton portfolio and also shows the strength of the company in the segment. Inspite of moderate volume growth in selection & hybrid rice, the realizations were higher. Maize volumes increased by 29.7% so as revenues increased by 56.76%. The contribution of new products to volumes of Cotton is up from 11% to 36%. Cotton sales impacted by increased illegal cotton seed usage. The increase in cost of production of cotton seed impacted the profitability. Hybrid rice volumes increased by 0.9% and revenues increased by 21.48%. Selection rice volumes increased by 2.60% and revenues increased by 11.07 %. Vegetable seed revenues increased by 31.06%. I will now open the floor for question and answer session.
[Operator Instructions] The first question is from the line of Yogesh Mittal who is an individual investor.
Question about the vegetable seeds. Since last few years, we have increased the focus on the R&D and we also have a dedicated sales team for -- but the sales and this have not gained much traction in last few quarters. Can you please explain what the company is taking initiatives for growth of the vegetable seeds? And how is the competitive landscape happening in this area?
Vegetable market is a very competitive market and it's a year-long business. And vegetables in the sense like there are many segments in vegetables, but majority of the segment is dominated by chilli, okra and tomato. These 3 contribute to majority of the revenues. As a company, we are very much focused on vegetables. As you rightly said, we have intensified our R&D team. We are much focused on few vegetables and we have a separate dedicated team. Yes, in the last couple of years, we were not able to grow much as anticipated, but definitely, we have grown in terms of vegetable feed business. Even this year, we have grown in terms of revenues. Going forward, we are very bullish on vegetables and definitely we will be achieving good growth in vegetables. And this year also in the second half, we see a good growth in vegetables. First half, we have seen heavy rains, even that has impacted a few amount of sales that we are pretty optimistic in the second half.
The next question is from the line of Dhruv Saraf from Bowhead India Fund.
Just wanted two questions. What is the R&D spend for the quarter sir?
For last year, the R&D spend was INR 60-odd crores. This year, the R&D spend if you take in the quarter-wise, it was slightly here and there, but every quarter, we'll be spending between INR 15 crores to INR 20 crores. I'm talking about the recurring expenses. Again, CapEx is different. If you observe the balance sheet, there is an increase in the amount of depreciation also. So that is because we have set up a new office and we have already -- this quarter, we started R&D facility also. So both are impacting the depreciation.
Okay, secondly sir, employee and the other expenses have grown at 13% in H1. So does it going to continue for the rest of the year? Or we expect an increase or decrease?
it will be between the 12% to 15%. One is that increments and the other is new headcount, because as we are adding new crops and new people, new R&D facilities for the [indiscernible] that should be in between 12% to 15%, combination of both increments and headcount.
Understood. Understood. Inventory has gone up [indiscernible] balance sheet. order build up in inventory going ahead, or 0 debits remain at the current level?
Last year, we's built's up inventory in anticipation of a good sale this year. Unfortunately, even though we have achieved the sale, but we could not per our anticipation, especially in [indiscernible] cotton. In cotton, we've built up inventory but because of illegal usage and the acreages were coming down. So that has impacted that we have seen some sort of inventory -- higher inventory. And we have produced some buffer stock because last year, the entire inventory was cleaned up. So in rice and maize also, we have some buffer stocks and inventory. This year, it will be high. But going forward, it should be in line with this year. It will not increase.
[Operator Instructions] The next question is from the line of Amit Doshi from Care PMS.
Cotton has again, you know, Q1 also did not do well, Q2 also did not do well. So I wanted to understand in the inventory, which the earlier participant asked. What portion of it would be cotton? And have we taken -- I mean, is it because illegal cotton seeds are cheaper, so have we taken -- and you also mentioned that there is a higher cost of production of cotton seed. So have you taken hit in the P&L towards that and the inventory is valued at the market price. How would [indiscernible] trying to understand the impact on the margin despite such a huge rise in the maize price revenue as well as volume growth?
Basically, we take the inventory cost at cost, we will not take at a selling price and take it cost, cost incurred by the company. And as a policy, whenever we write it off the inventory, we take it in the balance sheet. So all the inventory which is there in the books are salable inventory, and we are not worried about the inventory as it's all fresh protection. In terms of cotton, the inventory stays for 3 to 4 years. So we are not worried about that. Whereas in other crops also the inventory -- the cost of production has gone up, both in maize and rice, but we were able to pass it on to the farmers in those segments. Whereas in cotton, it was a restricted one, so we were not able to pass it on. So that's the reason you see a huge rise in revenues and the volumes. And maize as a crop is growing crop, and we see a huge potential in maize going forward. And as a company, we are very much focused on maize, and that's how the volumes are reflecting that growth. And even in the second half, you see a good growth in maize, and that will continue for at least 3 to 5 years.
Yes. Okay. So that was -- my point was about the cotton seed since you cannot sell it beyond the point. So if we already have a higher cost inventory, which we are not going to be selling at the same cost, then why don't we kind of take it a hit?
No, we can sell it in the next year also, right? We can sell in next year.
Price is already high, right? So we are basically just to understand, so we are sitting on high cost inventory, correct? Out of that INR 920 crores, there will be some portion which is cotton and which is a high cost inventory. At which price it is difficult to liquidate, if just correct me.
Inventory, what I meant to say is that the cost of production was higher than last year, but definitely lower than selling price.
Okay. Okay. That's what I wanted to confirm. Okay. Understood. Understood. Understood.
The margins have taken it. We are not -- I mean to say you're not getting any negative returns on that.
Okay. Okay. Okay. Now coming to the -- sorry, before that, exports, sir, can you share what has been exported? We were quite positive on exports. So what portion is exports? And if you can just give any color on that.
Compared to last year, we will do well in the exports. Exports will come in the third and fourth quarter majorly. We'll do better than last year. Last year, the base was also very, very much lower, but we'll be growing at least 25% to 30% more than last year figures. In fact, we should be in that INR 35 range -- INR 35 crores range this year in terms of exports. That will come in the third and fourth quarter. Going forward, year-on-year it will grow in terms of exports because we have tested in many countries, the results are very positive. And now we are getting new orders from different countries. But you know as a season business, it will be very minimal in the first few years, then it will increase. So we are in the trial and initial stages. But year-on-year, we'll definitely see growth in exports, both in terms of field crop and vegetables.
Okay. Okay. Sir, so far, the rabi season has already begun. If you can just give to how the season is looking, especially because of extended monsoon. So how the next 2 quarters are looking like for rabi season?
Majority of the season will -- majority of the sales will come from maize. Maize sowing is not started because of the, you had rightly said, the extended monsoon. Now it will start. Some areas it has already started, but now majority of the area will start in this month. So we are very much bullish on maize and we have good inventories also. We have planned inventory for this rabi, anticipating good rabi. So we'll see a good volume growth in maize even in the second half.
Okay. Okay. Last time, you had given guidance that Q2, Q3, Q4 will be better than last Q2, Q3, Q4. So it's not the case in Q2, I mean at least on the profitability front. How do you see Q3, Q4?
Even in the profitability front, if you take EBITDA minus other income portion, we are positive here. In terms of the percentage, even though Q3 is usually a loss quarter because it's just [ as below ] a sale. Even in that occasion if you take -- even in that incident if you the EBITDA minus other income, even the other income is lower this year in this quarter when compared to previous quarter and the depreciation was high. So if you take out these components in terms of the margins, even though it's negative margins, we have done better than the last quarter. And Q3, Q4 also we'll do better than the last 2 quarters both in terms of the revenues and in terms of the profitability.
Okay. Okay. Sir, dividend, we announced INR 5. That has been the case historically. But at that time, you used to do even buybacks. Now with the buyback probably not happening going forward owing to that law amendment. So how are we trying to kind of rewarding the shareholders?
We'll have a separate discussion in the Board after that because this time, we have the entire money even if you [indiscernible] balance sheet, the results and the money went into inventory. So that will be realizing in the next 6 to 8 months, majority of the inventory, then we'll take a call on that.
The next question is from the line of Sonaal Kohli from Bowhead.
Congratulations on your sales growth. After a long period, it was very healthy in the first half. So my question is in the coming crop season because of the rain, do you expect the outcome can be different than what you may be thinking now. Can it postpone the consumption of seeds in any way or lead to a permanent dent in seed demand, not only for you, but generally for the industry?
We don't see that as of now because usually this year, we have seen an excess rainfall and most of the crops were impacted in the first quarter itself. First quarter, which was a major seeds and the sowing pattern also has taken hit. For example, in rice, majority of the rice moved to the varietal rice this time. That's the reason we have not grown much in hybrid rice. So the impact is already done. But whereas in second half, the one positive point is that all the tanks are full, the moisture levels are pretty good. So we see good rabi coming up. The season got extended by -- delayed by a week or two, but we don't see any threat as of now.
Sir, some parts of India still going through rain. I mean if it continues like for how long a period then that would make you change your view?
We don't see that because now you don't get any monsoon now. If you get anything, you get any cyclone, earlier it was monsoon rains. Monsoon is a continuous thing, cyclones are once in a while. So we don't see that now.
So you don't see that any dent in demand?
No.
Secondly sir, in terms of your margins, your gross margins have been falling, why your product mix has improved because cotton hasn't done that well? And I'm talking not only this quarter but from a half yearly perspective because I understand your business looking on quarter to quarter does not make sense. [indiscernible] in terms of profitability. While you're expecting a margin increase, so what happened to lower gross margin and hints a lower EBITDA margin for you? And how would you expect it to go forward?
Basically, if you take the margins, we are down by 1.5% to 2% in terms of the EBITDA level. But if you take the entire cost, I have gone to the cost of goods. The major portion, the 2%, 2.5% was rise in the cost of goods. So as I said, the production cost is up both in cotton and non-cotton segments also. And there was a huge price hikes and everything we were not able to pass it on to the farmer. Majority of that we have passed on in the crops. Cotton, we were not able to pass it on. But this year was one of the year where we have taken a hit, but we will definitely go back to our own previous profit margins.
Cost increase is permanent in nature or you expect the cost is falling or already started falling because it has not improved and has been going up for the last few years.
No, usually, every year -- not every year, but when you see it 3 to 5 years, year-on-year, the cost of production definitely goes up as the grain price goes up and we will pass it on to the farmer. This year, the price was -- the cost of production was up by more than 15% to 20% that's the reason the entire cost was not passed to the farmer in one go because previous year, most of the companies were not having inventories and their production was very aggressive. This year, the cost will remain same or will come down compared to last year.
Sir, [ related to ] cotton and non-cotton, were you able to pass on anything at all in cotton side?
Cotton, we were not able to pass it on because the price remained there, even though there was few like 3% increase in price, but that tally we were not able to pass it on to the farmer because the inventory was very high, there was full of inventory in the market. The sentiment was not good for farmer. The prices were not good so that we were not able to pass it on in cotton. But in noncotton segments, majority like few percentage here and there, but majority we were able to pass it on to the farmers.
Because of this [indiscernible] there are a lot rumors because of the U.S. India deal if it happens, then maize crop may get impacted.
As of now, we don't see much. But when you see the Agriculture Ministry, if you can go back to the statement which was given couple of months back, they wanted to double the maize production in the next 5 years. By 2035, we want to double maize production because most of the [indiscernible] crops have gone up, now most of the maize is going for the industrial usage. Earlier in India, more than 70% to 80% was poultry. So we don't see that kind of hit rate and if you see as an overall acreage of also this year, even in this market, the heavy rainfall, the maize market overall acreages were up by 10% to 12% at Indian level.
[indiscernible] growth of 15% is possible according to you?
We've already grown at 17% in terms of revenue in the first half. Second half, definitely [indiscernible].
[Operator Instructions] The next question is from the line of Siddhant from Goodwill.
I just wanted the usual update on new GM crop. If there is any update from the government?
As of now, nothing has moved in terms of the government. It stands still there. There's sort of confusion even in the U.S. India trade deal also, nothing is moving forward. So we need to wait for some more time to get a clarity on that.
The next question is from the line of [ Anurag Jain ] who is an individual investor.
Congratulations on the good results. [indiscernible] what is happening at the industry level and what is the outlook for the seed industry for the next 1-2 years?
Basically seed industry when it -- to a mid to long-term range, it will definitely grow in terms of the seed segment. Yes, but which crop will grow, that is more important. What we see as of now is that the maize crop and rice. These are the 2 segments, which will grow much faster. Maize will grow much faster and rice will also grow. Whereas cotton, we don't see that showing us growth in terms of segment. Companies who are dependent on 1 or 2 crops may suffer. That's the reason if you see our portfolio, we have a very diversified portfolio. We are not dependent on one crop. If you see -- if you take our company in the last 7, 8 years, we are constantly saying that we want to decrease dependency on one crop. That's what we are seeing now. The cotton is less than 20%, whereas earlier it was more than 70%. So in that way, we have balanced our portfolio well. Now we are also trying to increase revenues from vegetables and exports. So we are derisking ourselves from the entire seed industry. But overall, if you see -- derisking ourselves by not depending on one crop. But overall, if you see the industry is in very good shape and it will grow well going forward. And this year, there were many constraints in that one in terms of cotton crop [indiscernible] because there no new technology was there. That's one part. There were heavy rains. Most of the time the crop is damaged. The farmer was not able to sow the seeds, they were not having good choice because already the season got delayed because of excess rain. So there are many constraints in that. Even the chilli prices were not good earlier, now the chilli prices are also good. So this all impacted the seed business, but these are very short-term things. But when you see in mid- to long term, seed industry will be very bullish. And they say that by 2030, hybrid seed market itself will be like $6 billion from like $3 billion.
So the current industry size is $3 billion and it is expected to grow to $6 billion for the [indiscernible]
Yes.
Sir, if you allow, what is the outlook for Jowar seeds, Bajra seeds and vegetable seeds and the mix [indiscernible]
Vegetables are doing well. Vegetables will definitely grow going forward. Vegetables have a very big market. And year-year, vegetables are growing at more than 18% to 20%, hybrid vegetable market. So that's a very good market to be in. And whereas in Bajra and Jowar, these are very limited markets and like targeted markets. Bajra is a bigger market than Jowar. So we are also releasing hybrids in Bajra, even that revenue will also come in the next 2 to 3 years.
And sir, there are some smaller like oil [indiscernible] sunflower and mustard, how are they growing?
These are very small markets when [indiscernible] mustard, sunflower and mustard, there in both the crops, in sunflower we are in the top 3 segments, but the market is very strong and mustard, we have started doing well in mustard. In terms of [indiscernible] mustard segment, we have grown by more than 40% year-on-year with a small base. But going forward, mustard will also do well, but they are very limited and small markets. It can't -- the biggest markets in India are maize, rice and cotton, these vegetables. These 4 contribute more than 85% of our total seed market.
Mustard seed market is also a small market like sunflower or they should be much bigger than John sunflower seed?
Mustard is slightly better than sunflower. Mustard is all varieties but we are concentrating on hybrids that is a very small market that is [ picking ] up now. And government is also focusing on mustard contribution. So that's another advantage for that.
Sir, just one follow-up. For the cotton season, were there some expectations that government will allow the new technology? So is there any development on that on the cotton [ acreage ]?
As of now, nothing in the last 5, 6 months, all the negotiations and talks are [indiscernible] but once U.S. and India trade deal is done, then they may talk on it, but no one is taking a call on that. But as Kaveri, even though we have very low in cotton going forward, with the new technologies also we have very good hybrids, which were already tested last year and now the hybrids are already on ground now, which are giving very good results. Kaveri will grow in terms of cotton acreage going forward.
We have the next question from the line of Dhruv Saraf.
[indiscernible]
Majority of the revenues -- we say anything in the first 5 year are new products. Majority of the sales in the cotton, most of the crops are in the second and third year and some are in the first year also. So going forward majority of the contribution will be from the new products.
[indiscernible]
Cotton as of now it's like 100 to 120 days. Crop is really doing well.
[Operator Instructions] The next question is from the line of Amit Doshi from Care PMS.
So you mentioned that vegetable is a very strong or whatever, it's growing very fast, 18%, 20%. We are also doing well. But the size of the contribution that we have is extremely low. So why is that our numbers are so low considering that the market is so huge and we have good R&D spend in the vegetable seed space as well?
So vegetable market is a big market. It's a growing market year-on-year. But to be more successful, we need to have a better product which can meet the competition. So in that way, we are putting our effort there. Now the pipeline hybrids are good and they are scaling up the revenues in vegetables. You know that the industry, the research itself takes 8-10 years to get a good product. So it is taking time and most of the crops are -- most of the varieties are hybrids and they are in [ piling ] segment. Some are doing well. Definitely, we'll increase our revenues in vegetables.
Okay. So how many new probably kind of new products are in pipeline as far as vegetable is concerned? Because you mentioned in cotton, you are significant and by FY '28, we'll have all the new products kind of in the cotton segment. But about the vegetables, if you can share?
Vegetable, also most of the products are new products because we have launched all the products in the last couple of years. And every year, we are launching and trying new hybrids. So most of the sales are from new hybrids and vegetables, there are many vegetables one, but there are tens of vegetables in that. So we've many varieties of vegetables in the pipeline and mainly like Okra, chilli, [indiscernible] and tomato, we are breeding more in these crops and most of the hybrids will be in these crops.
Okay. Okay. Sir, you mentioned that this is in maize, et cetera, there is a huge price jump that we have seen because of inventory probably at the industry level was low. So do we see the seeding in the next year, coming year for maize?
Yes. I've already commented on that. This year, the prices will be lower than -- for sure, it will not go up than last year. In some crops, it's lower than last year.
It will be lower than last year. Okay. Okay. Sir, any update on the tax matter?
So we are seeing the appeal. Once it gets any -- once we get any sort of communication that will be disclosed.
Okay. And any discussion on that we were trying to -- with this new tax bill, et cetera, anything that...
That has become a continuous effort from our side as the seed industry. But the decision -- we have not seen any decision coming in our favor, but it's still pending there.
[Operator Instructions] We have the next question from Jasmeet, an individual investor.
Sir, in [indiscernible] terms, what is the decline in the sale of cotton volumes? And sir, according to you, when do you think the market will normalize? Or is there any other hybrid that can compete with the illegal variety that is being sold in the market currently?
In terms of cotton, we are down by more than 20% in terms of volumes. In terms of the illegal market, as of now, we don't see that it will go up next year. But governments are -- all the state governments and central government is taking a view on how to cut down illegal BT. But we are not afraid of that because that's not legal and we can't fight with those things in the market.
Right. And in terms of hybrid [indiscernible] any other reason apart from restrictions in Punjab that has impacted the volumes.
So if you see hybrid volumes are up by 2% to 3%, even though we lost like 500 tonnes in Punjab that is like we have gained in other markets. If you see overall hybrid market, the markets are down compared to the previous year. The acreage has cut down because of the heavy rains. But this is a very short-term thing. Going down the line, hybrids will definitely come in and will take major share in life.
So the main reason is lower acreages only?
Sorry?
The main reason is lower acreages.
Lower acreages in a sense like hybrid market. Most of the hybrid varieties because of acreage.
And sir, one more thing I ask, do we have any hybrid that can counter the illegal -- that can have the similar characteristics to the illegal seed of cotton that is being sold?
No, that's what I answered. But illegal, we can't compete with it because these are illegal technologies which are there in the market. As a company, we don't enter into illegal things. The technology is illegal.
The next question is from the line of Yogesh Mittal, an individual investor.
I have heard in the call a few times that it takes about 7 to 8 years to launch a new seed of any variety. So just wanted to clarify that you -- do we mean to say that suppose any new seeds have been launched in this year, for example, so the research and development and the development process started about 7 to 8 years ago on those? Is that right thing to understand?
Yes, yes. Because it's a continuous activity, we get many hybrids, we test on many things. It will take so much time. Based on the need for that, we sometimes fast track it. The basic time is like 6 to 7 years. And higher the research spend, higher the amount of time you spend on it, the more the chance of getting hybrids.
Yes. So on the costly part of it, do we understand that any cost being incurred to develop any new seed for last 7, 8 years or continuing even now, those are being captured in the P&L. The actual cost of that seed, which will be for the actual production when it is sold, it is put in the cost of goods sold.
We don't capitalize anything. We just -- yes, we don't capitalize anything. We just expense it out every year as and when needed.
Yes. I mean, yes. I was saying the same thing like R&D expense is basically expense and the actual cost of the seed is captured in the cost of goods sold when it is actually ready to sell.
When it is produced, it is there in the cost of goods. When it is in research phase, it is expense of the R&D.
[Operator's Instructions] The next question is from the line of [ Balaji ] who is an individual investor.
I have one question regarding tax. Is there any update regarding the tax [indiscernible] commissioner of tax?
No. We are there in the appeals stage and [indiscernible] is already there [indiscernible] exchanges. As of now, we have not received any fresh demand or fresh any objections on there or any adverse or favorable announcement.
Okay. Sir, I have another question regarding recent floods in Andhra and Telangana, so is there any impact on our receivable sir. Are we directly impacted? Is there any impact on our receivable? Recently, there were floods in Telangana, Andhra Pradesh, does it have any impact on our receivable, sir?
Not much. Not much. We don't have any. Regarding these floods, we don't see any impact on receivables.
[indiscernible] has my understanding, lead some agriculture land that produce hybrid seeds that were serving market, so with this type of flood situation, do they have any impact on our inventory, sir?
In terms of the production, yes, we do take production in areas. When these type of rains are there, we are also part of it, even that is impacted. Then the reason we derisk production model because we do it in many states and many seasons. So that's a continuous activity somewhere here or there. But as of now, we don't see much of impact because of the crops have not sown yet.
Sir, we are diversifying the other noncotton products, but as seen in presentation sir, maize production is almost -- it has increased drastically. Is sustainable in the future, sir? Is that area wise -- sustain area wise or [indiscernible] wise?
We see a good potential in maize crop, and we don't see any threat in maize crop at all. And we are very much bullish on maize and most of the hybrids in maize are coming, so we are not worried about that. And in fact, we are very bullish and optimistic about that.
Is there any impact on inventory return, sir? It has -- as seen in our cash flow statement, almost in inventory they are positive with regard to your cash flow, but in [indiscernible] they are in negative. [indiscernible] cash flow from operations, they are in negative side. So is there any impact on our inventory, sir?
No. Because as I told earlier, [indiscernible] inventory levels were low and we were not able to sell in the Kharif especially cotton. Other, we have produced as a buffer crop and everything will get normalized in the next 6-9 months.
Thank you very much. Ladies and gentlemen, that was the last question. Thank you all for joining this conference call. For any further information, please be in touch with Mr. Rama Naidu from Intellect PR on 99202-09623. On behalf of Kaveri Seed Company Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.
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