Rajeev Mantri presented his in-depth investment thesis on Kaveri Seed Company (NSE: KSCL) at Asian Investing Summit 2017.
Kaveri Seed is an industry-leading developer and marketer of seeds in India.
The Indian agriculture industry is seeing a drive to raise farm productivity, and the Indian government has set a target to double farmer’s income in the next five years. The productivity drive requires using seeds that deliver higher yields, requiring hybridization and increasing seed replacement rates. Farmers have shown a willingness to pay for commercial seeds that deliver higher yields, as it directly increases their income. The seed business has three significant barriers to entry: technical, regulatory and brand.
Since inception in 1986, Kaveri has maintained a sharp focus on the customer, the Indian farmer, demonstrated a strong commitment to research and development, and achieved success in developing new products and entering new markets. Over the last ten years, Kaveri has grown revenue at a compounded growth rate of 30% and EPS at 32%. Through this growth burst, it has maintained profitability and enviable operating metrics, with gross margins consistently in the mid-50% range. The business has substantial headroom for growth, with the Indian seed market projected to grow to over Rs 270 billion ($4 billion), from the current size of Rs 210 billion ($3.2 billion) in the next three to four years.
Kaveri has negligible debt and is cash-rich (with a current market capitalization of Rs 38.7 billion, it reported cash of Rs 5.2 billion as of December 31 2016), and is proposing to initiate a stock buyback.
About the instructor:
Rajeev Mantri is director of private investment firm GPSK Investment Group, and executive director of Navam Capital, an India-based venture capital firm. Prior to founding Navam Capital, Rajeev worked as a venture capitalist at New York-based Lux Capital, focusing on investments in energy, water and nanomaterials. Rajeev is has contributed columns and articles on technology, investing, venture capital and political economy to The Wall Street Journal, Mint, Financial Times, The New York Times, MIT Technology Review, BioSpectrum, Roubini Global Economics and others. In August 2010, Rajeev co-founded Vyome Biosciences, a biopharmaceuticals company, and served as Vyome’s president through the company’s formative years. Rajeev graduated with a BS in materials science and engineering from Northwestern University, and an MBA from Columbia Business School, specializing in private equity and value investing.
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