Kaveri Seed: Owner-Operated Company With Growth Opportunities

Rajeev Agrawal of DoorDarshi India Fund presented his investment thesis on Kaveri Seed Company (India: KSCL) at Asian Investing Summit 2021.

Thesis summary:

Kaveri Seed is a top-three seed company in India, with ~10% market share of the hybrid seed market. Kaveri is among the top three producers of cotton seeds, with ~15% market share. It is a top-three procurer of maize hybrid seeds and ranks among the top five players in the rice market.

Seed is less than 5% of the cost to a farmer. As a result, a good seed producer commands high margins. Kaveri has consistently earned 20+% margins at the EBITDA and PAT levels. The business has low capital intensity, thus allowing Kaveri to earn 20+% ROE and ROCE as well.

The shares recently traded at a P/E of ~10x and EV/EBIT of ~9x. The company’s diversified seed portfolio and growth opportunities in rice, maize, and vegetable seeds provide an additional margin of safety. Lastly, the business is run by an owner-operator with 55% ownership. Minority shareholder interests are well-aligned with those of management.

For additional investment insights, please see a recent article by Rajeev.

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About the instructor:

Rajeev Agrawal is the Fund Manager and Managing Partner at DoorDarshi India Fund. DoorDarshi India Fund is based out of the US and enables investors to benefit from opportunities in Indian equities. Rajeev is also the founder of DoorDarshi Advisors where he has been working with investors who have a long time horizon.

Rajeev has been investing in the US and Indian equity markets for 15+ years. Rajeev follows Value Investing principles and finds that the Indian equity market provides wonderful opportunities for his style of investing. Prior to starting DoorDarshi, Rajeev was a Technology executive focusing on the Financial Industry and has worked with IHS Markit, Goldman Sachs, Bank of America, JP Morgan and Dresdner Bank. Rajeev did his B.Tech from IIT Bombay and MBA from IIM Calcutta.