Congrats TAP GAP 2016 Winner Pushkar for Kaveri Seed @ Rs 325 !

It’s already up 20% inside two months and we have 10 months to go in 2016 & I’m quite sure that many from the remaining  100 entries too will outperform & as always I promise to also reward the gauravblog hamper to  the one whose entry gains the highest % in 2016 as at closing December 31, 2016….unless it’s Pushkar again scoring on one of  his other two entries,Larsen & Toubro or Firstsource Solutions !  🙂

Kaveri Seed is a Debt Free  & Cash Rich ( Rs 345 crs at December 31,2015) dividend paying company  which has had a tough drop last year .In fact a year ago in March 2015 it was a strong Rs 1077 (52 Week High) and since then dropped to Rs 300 in January this year on the back of two consecutive poor Monsoon that lowered farm income & the Company had to write off more no cotton seed inventory ,largely maize.Q 2 FY 15 saw a bottomline loss of Rs 48 crs on account of this.Also Royalty Dispute with Monsanto remains an unresolved issue for the Industry

A good Monsoon in 2016 will quickly push this Company back into Orbit….it already has got a push with Government Panel proposing a national uniform price for Bt Cotton for 2016 believed to be Rs 800 per 450 gms Bt Cotton packet,incl of trait or license fees of Rs 49.These fees are 74% less than prevailing.It is awaiting acceptance by  the Ministry of Agriculture.This should also help remove Royalty overhang.FY 15 Royalty was Rs 159 crs on Sales of Rs 1161 crs.In FY 16 for the nine months the Company has provided just Rs 37.53 crs as directed by State Governments while the actual liability as per agreement with Service Provide Monsanto is Rs 102.51 crs creating a shortfall of Rs 64.55 crs.The matter is pending in Court between National Seed Association of India & Monsanto which will first decide if Government of India indeed has a right to intervene in fixing MSP & Trait Value…If Government wins then Kaveri Seed is also entitled to get a refund of Rs 200 crs from Monsanto for excess Royalty paid till 2015.If  Monsanto triumps then Kaveri needs to pay out as of date just Rs 65 crs underprovided.It is Debt Free & has Cash Reserves of @ Rs 345 crs as on December 31,2015 ….but whoever wins it will yet be a win win for the Industry & Kaveri as there will be clarity on Pricing & Royalty….Problem is that Monsanto through it’s Indian JV with  Maharashtra based Mahyco,Mahyco Monsanto Biotech has threatened to hold back newer technologies & also re-evaluate it’s presence in India if the Government does not roll back the Plan to cut Bt Cotton Trait Value by 70%….In my view India is too big a Market for Monsanto to ignore & there will be a resolution to this issue   

Another Development is a Forensic Audit ordered by SEBI in December 2015 to be conducted by CA Firm  Sarath & Associates based in Hyderabad

Company has got a National Footprint with  Brand Loyalty in a high barrier industry   where it takes strong investment in R & D for seeds and a lead time of 7 to 8 years to commercial production .Q 1 April to June Quarter  in any FY is always the crucial quarter as Farmers buy seeds to sow just before Monsoon sets in.Q 1 FY 15 saw Sales of Rs 664 crs down from Rs 827 crs in Q 1 FY 14 & even lower than the Rs 736 crs in Q 1 in FY 13.FY 15 saw 8.4 m packets sold while FY 16 is expected to close under 6 m.FY 17 should see a 20% to 25% climb back.

Market Cap is Rs 1158 crs at Rs 390 =>  @ One Year Sales…..Book at 31/12/2015 was @ Rs 133 on a Networth of @ Rs 920 crs

Of course there is always the global resentment for increasing use of hybrid seed technology,especially Bt Cotton  & for the Monopoly of Monsanto in this and their dictating terms ….that is for another debate though

Here is the List of all 101 Entries and how they have performed till date from your recommended price or  January 15,2016 closing taken if lower