Kaveri Seed Company Limited (KSCL) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Kavi Research Company's Q3 and 9-month F26 earning conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Listener, joining us today on this call, Mr. Mithun Chan, Executive Director. Before we begin, I would like to mention that the sum of the statement made in today's call may be forward-looking in nature and may involve risk and uncertainty. For a list of such considerations, please refer to the earning presentation. I would like to hand the conference over to Mr. Mithun Chan. Thank you and over to you, sir.

Thank you. Good evening, and welcome, everyone, to our quarter, three, nine-month financial aid 26. I think this is a conference call. We hope you have had a chance to review the presentation of our results, which is also available on our website. I would touch upon the operational and financial performance of the company, and then open the floor for the question application. Hi, Liz. Revenue from operations has registered a growth of 16.94% to 1221.56 crore as compared to 1044.61 crore in nine months financially identified. EBITDA was at 358.39 crore as compared to 354.78 crore, registered a growth of 10.35%. Debt profit was at 308.91 crore as compared to 294.46 crores, grown by 4.9%. For the quarterly financial 26 revenue from operation was at 173.65 crore, a steady growth of 16.08% from Rs. 154.77 crore. EBITDA was at 25.35 crore, 38 crore as compared to 25.09 crore. Registered growth of 1.14%, net profit was at 7.46 crore. Cash and books were at 309 crore, and against 409 crore. We are happy to declare a good set of quarterly numbers, made and selection wise volumes both had resulted in good revenue growth. Had there been a good rate of support in maize during the quarterly financial year 26, we would have better profitability growth during the nine months of our operations. Having said that, this is a good indication for next year performance as we are able to block better growth rates across our best-performing segments like rice, maize, and vegetables. Our investments in expanding land capacities and increased spending in R&D is going to contribute for increasing share of new products in both cotton and non-potting segments. The demand spike and including acreages of mails, hybrid rice and selection rice, and vegetables are going to be major drivers in the years to come. This year, commercially, main producers were lowering around 1,600% against We are able to convert volumes of non-potten seeds into revenues. Growth due to good realizations and increasing market share and leadership in some of the leading segments, whereas in the company has good dominance in the market. During the quarter, volumes of non-cotton hybrids increased by 6.1% and revenues increased by 13% and volumes as well as revenues of cotton see it as a steady growth. Research parry has grown by 51% in volume, but our vegetable seeds has grown by 5% in volume. Sunflower has grown by 94% in volume and mustard has grown by 64% in volume. Our efforts in entering It's a new international market in the last five years and increasing registration of fees. These countries are expanding at ground level and delivering good results on our export front. Exporter business chief growth of 86% in the first year during the current quarter and continue to grow and every year would be better than the previous year unless there is going to be any major unfounded disruption in these markets. As for our nine month results, we are witnessing continual growth in increasing contribution of new products. Cotton sales continue to impact by increased illegal cotton and high cost of production. All rice segments are doing well, both on volumes and revenue front. We are able to maintain hybrid rice volumes in spite of restrictions in the state of Punjab, which has been the largest market for us. It has been one of the largest markets for us. Thank you very much, everyone, and welcome to the call, and welcome to the call, and welcome During the next quarter, we are expecting major growth in Swing Maze, in Bihar, U.P. and Punjab. Similarly, expecting growth in summer, major in Gujar, Pakistan, West and U.P. I would now open this word for question and answer session. Thank you.

Thank you so much, sir. Ladies and gentlemen, we will begin with the question and answer session. Anyone who wishes to ask a question may press star N1 on their touch on telephone. If you wish to remove your text from the question queue. You may press star and took. Participants will request to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question to assembles.

Our first question comes from the line of Amit Agisar from H.J. Hawaiian Company. Please go ahead.

Yeah, thank you for the opportunity. So, what percent of the annual revenue is currently reinvested into R&D and breathing, and how should this trend evolve?

As of now, the spend is in between 8 to 10 percent of our total revenue, both including revenue and capex. Going forward, they should stabilize their details. Actually lower than what we have spent in the last year because most of the capex is already done there.

And how many new hybrids are expected to be commercialized annually across cotton, maize and rice?

That's a continuous activity. We don't find by number, but each and every segment, we have very good pipeline hybrids. Like we have more than 200 hybrids in our portfolio. Each segment has got a different pipeline. So it's very difficult to find the number. But yes, in terms of major crops like rice, maize, and cotton, we have at least 8 to 10 hybrids which are really doing well.

Sir, can you put some color on what is the typical justification period, like from lab research to commercial launch?

Basically, it's a very time-taking process. As we are there in the industry for the last many years, we are able to give hybrids in a very continuous manner. But to start, to begin with now, is something, if some person starts now, it's a very cool side that is also exactly safe to get a hybrid. So we have a very long vacation time.

Thank you for answering the question, sir. I'll join back because I have more questions. Thank you. Thank you.

Thank you. Our next question comes from the line of Dhruv Sara from Bohat India Fund. Please go ahead.

Hi, Mr. Sir. Congratulations on the good set of numbers. Sir, just wanted to understand, you know, why are Q3 gross margins like down almost 500 basis points here on here? And, you know, we're nearly at multi-year lows if I look at Q3 in the past as well. So, sir, do you see a key reason for this?

Good morning, everyone.

Hello, sorry. Hello, sir, can you hear me? I'm sorry, sir, but...

I'm sorry, sir, but your line is breaking.

Am I working? Sorry. Am I audible now?

Yes, you are. Are you talking about the gross margins for the consolidated? Yeah. This time we have explained that the cost of production was a bit high compared to the previous years and especially like cross-fed cotton. That has impacted to some extent as we were not able to pass on everything to the farmer. That we already mentioned in the first quarter result where we have seen impact. When you talk about this quarter, the gross margins fell by 4%. Mm-hmm, compared to previous years, which is in line with the consolidated one.

Yes, sir, the key reasons in this quarter was given that, you know, cotton has a very low failure in this quarter. Why would the gross margins are falling this quarter specifically?

Even in maids and dyes, the cost of production is a bit higher than compared to the previous years. And, usually, we used to sell higher in terms of higher rates in Rabid, but we We were not able to pass it on to the server this time. So, that's 2-3% impacted this quarter, but it will not continue going forward because the production prices have already stabilized now. We don't see that going forward.

All right. All right. And, sir, secondly, you know, you spoke about cash at 10 or 10 crores versus 1 and 10 in the previous quarter. So, sir, has there been further investment in working capital, you know, either due to inventory or debtors, and do you see this normalizing going ahead in Q4?

Yes, if you see the overall inventory levels, if you take the overall cash flow, like the majority of that close to 200 crores less has been into the inventory. And even the trade, even the inventories are higher trade, payables are also lower compared to the previous year. So, I think once the season goes on, it will normalize it. As we have built the inventory, that's the reason we have seen some sort of, say, fresh output towards building up the inventory. And some to bring it towards the capital, but not much.

Sir, last week, sir, you know, I wanted to get your sense on the cost of production, sir, you know, for the coming season, across cotton and non-cotton crops. So now that you would have received a lot of the cotton stock for the next season, how is the next season looking like specially for all of these cotton mage and rice on both cost of production and the general outlook on the season?

Basically, when you compare to year-on-year basis, compared to last year to this year, the cost of production has not gone up. In some cases, it has gone down compared to previous years. But as even though if the costs are stable, then any of you will increase the prices to some extent that can be absorbed. So it will normalize to what it used to be earlier than between that 45 to 48 percent.

All right.

I'll get back in a minute. Thank you.

Okay.

Thank you. Our next question comes from the line of Sanya Jain from Care PMS. Please go ahead.

Thank you for the opportunity. The first question was for the non-corporance segment. The other crops category has shown a strong growth of 59%. Could you please elaborate? What are the key drivers behind this growth? Is this export, Slip?

It's a combination of all the crops. Other crops include like wheat, mustard, bhajra, sunflower, everything comes in the other crops. So, the mustard and wheat moves in this segment, that's the reason we have seen a good growth in the other crop segment.

Okay. Could you provide a revenue break-off for this segment?

We don't have the revenue break-off, no, but overall, it's a very small portion when compared to the overall revenue, because more than 80% of the revenues are contributed by three crops, maize, cotton, and rice. So, the very small segment, which comes in a very few quarters, especially like the third and fourth quarter. But I try to provide the number when I are restricted next time.

Okay, thank you. And wanted to understand, we mentioned in the investor presentation that research study is worth in 2 by 51%. What constitutes of research study?

Research study is nothing but a study with our varieties which are developed by our own company.

And this is not included in paddy phase?

Sorry? So there are two types of paddy. One is hybrid paddy. Okay. There are two types of paddy. One is hybrid paddy. There are two types of paddy. One is hybrid paddy. Okay. There are two types of paddy. One is hybrid paddy. What would you put in the research paddy? Both are in the paddy segment. Researcher is our research paddy are varieties, whereas hybrid paddy are hybrids. That's the only difference. Okay. I know.

Okay, okay. And just a last question. What are the views on the draft sheet view for 2025? And has there been any recent developments or updates? And what could be the potential impact of it on the industry or on the company?

No, no, in the new seed build, a lot of these things are trying to be addressed. One nation, one license, most of the licenses are decentralized now. Proper registration of the hybrids, proper research, proper documentation, everything is coming in a juicy life. So it will be a very organized market and I need to admit it will be very helpful for the farmers. In most of the things, some are still debating on some facts, but overall it looks good when competing with previous ones.

Any recent updates that have happened?

No, the draft is circulated within the industry and we all have submitted the comments and more or less it should be passed any time.

There might be one round of discussion or so.

Okay, thank you.

Thank you.

Our next question comes from the line of Amidh Aghita from HGY & Company as a follow-up question. Please proceed.

Thank you for the follow-up, sir. Sir, with over 3-in-it crude cash, what is the capital allocation priority like any inorganic opportunities or dividend buybacks or what is the company's plan?

In the previous year, we have done all the dividend we are giving it. We used to do all the buybacks in the last year. This year, because we were building up the inventory. As we have seen some sort of a liquidity, I'm going to say the cash bought in these activities, so we have not taken any decision on it, but in terms of the organic growth, we are open for it, because it is a very temporary situation what we are facing as of now, but maybe a next three to six month cash will be the free cash that we generate. So that, we are open for inorganic growth, even as of now, but in terms of the buybacks, that have a meeting in the first quarter, the follow-up quarter, then we will decide about the buyback thing. We will take a decision on the buyback.

And the last question, sir, how is the company strengthening farmer loyalty and repeat usage in a highly competitive feed market? Are there any plans to digitize the farmer engagement, demand forecasting, or dealer analytics?

That's already, we have done it. Most of that is digitalized now. We have the huge database of the only farmers. Follow-ups are already there. We have digital marketing network. We have huge social media networks for that. We track everything from demand generation to the crop, harvest.

Thank you, sir. I appreciate you answering my questions and all the best for the future. Thank you. That's it for my city.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1.

The next question comes from the line of Sahil Malhotra, an individual administrator.

Please go ahead.

Good afternoon, sir. My question is with respect to the demand received from income tax authorities. In two converted years, we received the demand. In one year, we received the demand for 56 crores, and in the second year, we received the demand for 70 crores. So, I would like to get an update, what is the, how the management is pursuing these cases, and whether in future we are getting this exemption from the tax authorities for the agriculture income or not, whether any provisions have been made in this regard or not.

The commission of appeals, once we get the outcome of the appeal, we will update the status.

Sir, were there any provisions he has made for this demand for 56 crores and 70 crores?

Provisions in other, we have made the appeal payment for that. Other one is like we are saying it's in contingent liability. As such, no provisions have been made in love.

No, because we have cash, we have not made any provisions for that. Okay, and when we are likely to get the update, because like one case was in 2024 and this case also around nine months back, so when we are likely to get an update on these two cases?

Basically, there are three cases pending at the appeal stage. It's been almost like 20 and a half years there. Most probably should come back in the next six months or so because the hearings are going on, the proceedings are going on, so that should come back.

Okay, sir. Okay. Thank you.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, members star and one. Our next question comes from the line of Anurag Jan, an individual investor. Please go ahead.

Good afternoon, sir. Am I on the phone? Yeah, yeah, please. Sir, one question is a follow-up on the previous one regarding the cash. There is a dip in cash. So, how has the receivables moved during the last one here? And because May's seed is the one which has grown significantly compared to other seed varieties, so is there some significant, you know, sales to government agencies, government corporations for May's seed? Is that leading to a build-up in Elisabeth?

Not much. If you see actual Elisabeth as of now, at the end of 31st December, last year it was close to 175 odd crores. This year is close to 215 euros. Just 75 euros has gone up because the sale is also higher in these quarters. So we are just waiting for that. But we don't see any government portion in it. We have insignificant portion of government in it. We are not worried about that. As a company policy, we provide anything more than two years as bandits. We don't carry it. Okay.

And for exports, how do the receivables work? Are the receivables out there?

Usually we work on LPs. We don't give any credit there. But if you care about it. Okay.

So the receivables would be pertaining to our domestic is only not for exports?

The majority of the group are domestics, and we don't see any... Difficulty in getting it, and the year-end it will get outside. Usually, at the year-end, the outstanding are in between 80 to 90 crores or something like that, it should come back to both levels.

And sir, like two years ago, you know, there was some outstanding receivable with government corporation, which was unpaid, and so the company had made a provision for it, but the company was still pursuing it with a government corporation for payment. So what was the outcome of that?

Still we have pending payments there. We received some three or four bills. We are trying to get it. We are doing that, but it is all provided in the provisions.

Yes, sir. That part I understand. That is what I am talking about. And sir, another question is, you know, there has been a sharp dip in May's prices. So, for the farmers, not for the wheat, but for the May's prices. So, in light of that, do you expect there would be some correction in the volume for May's next year because of the sharp dip in prices? Or do you expect the May's volumes to remain stable next year?

We think maize volume should remain good and healthy and because the economies are going up and the usage is also going up. I do agree that the maize prices are down. In fact, it went down to as low as 1,800 to 1,250, 1,300 close. But right now it's close to 1,800 to 1,900 rupees. Anything about 2,000, 2,000, near to 2,000 is a good price for maize.

Okay. And what would be the price at which the farmer would break even like? At what price a farmer would break even?

No, farmer will definitely be break even, but in terms of what returns he makes it, if anything close to 2,000 is a good return for him.

Okay. All right, sir. Thank you.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Reminder to all the participants, if anyone would like to ask a question may press star and 1. Our next question comes from the line of Dhruv Sara from Mohit India Fund as a follower. Please proceed.

You know, the last two years have been good for May's occasion. And, you know, a lot of companies have spoken in the past about there being a shortage of inventory. Do you see that, you know, going next season, now that everyone knows that May is the hot crop and it's going up, is there a chance that the market could see, you know, increased supply and hence there could be pricing pressure for the industry and for yourself as well for next season and beyond?

If you see, if you take, that's what happened this quarter itself. Because last year, by seeing the demand for the made, everyone has produced more inventory, including us. All the industry players have produced more inventory. That's the reason the prices are also up in terms of the production costs. And there was a huge availability of inventory in the second half now. That's one of the reasons why we couldn't pass it on to the farmer and that also made some dent in our revenues. But it will normalize now. It will normalize now because everyone has the inventor and everyone knows that.

Okay, so do you not see the risk of experimental flooding for Hari 26 as well?

I don't see that because already it's there, in the inventory, everyone, as an industry, we want more than the inventory will be available. Okay, okay. And everyone is working on the action of parameters.

Not a lot of companies have taken aggressive production for next season, you are saying?

No. In fact, for this year itself, the current running year 2526 financial year, most of the companies have taken aggressive production. And that has resulted in extra cost of production for all the companies. When you see the Rabi, for the second, third quarter, this is what we are talking about, when we see the main market, most of the companies have got huge inventory and it was heavily flooded in the market.

Okay, okay, awesome.

Already the prices that we, what we used to sell, it's red with red, and even we were not able to pass it out as a farmer, and that's what one of the factors why the cost of production is called off for us, when compared to the anomaly is.

Wonderful, sir. And, sir, you know, the cotton crop for the last year must have been harvested, sir. So, have you received any feedback in terms of, you know, your performance of new products? You've seen products like the new 2P products have launched. How has the market feedback been for them?

Our products have really done well, performed well, and we will see that a good set of growth numbers come in in the next couple of years.

I'm interested in June 26.

We will get to see good revenue increase in that.

And finally on cotton itself, do you see any increase in in-linear feed ratio? Or do you see the volume going up again for in-linear competition?

I see that it will be in the same level as what the increase in that. It should be very side-wave-ish. Okay, thank you, sir.

Thank you.

Ladies and gentlemen, anyone who wishes to ask a question will press start in one. Reminder, ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Next question comes from the line of Jasmin Sodhi from Welt Advice.

Yeah, so congratulations on these numbers, first of all. Since we were just on the subject of inventory, I would like to specifically ask about the cotton inventory. Although I feel this must be an industry-wide problem, because everyone is seeing a decline in cotton fields because of the illegal STC. So, what is our position of cotton inventory? Do we see any risk?

No, as of now, we have, I mean, we will be, to the end of the season, I mean to say, available for the next season will be in between 8 to 9 million packets for us, which is in line with our anticipation, and as a total seed, most of the hybrids are, in our case, most of the hybrids, what we have produced, are new hybrids, so they will have lights, at least for the next 3 to 5 years. So, definitely, we will be liquidating them, so we don't see any trading there. In fact, we will be taking a new production for this year also. We start in the month of May, June, of course, next.

Okay, thank you very much.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, press star and 1. Reminder, anyone who wishes to ask a question, press star and 1. Ladies and gentlemen, as there are no further questions, we will conclude the call. Thank you so much for joining the call. For any other information, please be in touch with Mr. Ramanidu from Internet PR on 9920209623. I repeat, 9920209623. On behalf of Kaviri Seeds Company Limited, that concludes this conference. Thank you for joining us and you may now disconnect your links. Thank you.