Industry updates for March 2013: CARE Research

CARE Research has come out with industry updates for March 2013.

Agri. Products - Seeds - EBIDTA margins contracted yoy amid rising operational cost.

Indian seed industry is the fifth largest seed market in the world, accounting for 4.4 percent of global seed market after the U.S. (27 percent), China (20 percent), France (8 percent) and Brazil (6 percent). The market size of Indian seed is expected to grow at a rate of 11 percentp.a. to USD 3.2bn till FY16e. CARE Research estimates seed industry top-line to continue to witness positive demand trend in FY13, but margin may remain under pressure on account of increasing competition and wages cost

Key takeaways:

• CARE Research observes improvement in seed consumption during the kharif season of 2012-13.
• Revenues of 5 companies analyzed by CARE Research grew by 21.9 percent yoy during 3QFY13. Despite operating expenses growing by 22.7 percent in 3QFY13 (yoy), the EBDITA of these companies grew by 16.5 percent in 3QFY13 (yoy) on account of better business performance and improved operational efficiency
• The Interest outflow has been higher for these companies during the quarter, increasing by 34.8 percent yoy.
• Indian seeds export is expected to touch Rs. 1,000 crore in next 2-3 years, as 38 varieties from India have been registered in the Organisation for Economic Co-operation and Development (OECD) list, taking the total number of Indian seeds in the OECD list to 95.

2. Agri. Products - Sugar – Average sugar price continued downward trend in January 2013.

Production of sugar during the current season (2012-13) is expected to witness a decline over the previous year due the deficiency in rainfall, lower sugarcane acreage, drop in yield and recovery rate in the key sugar-producing states like Maharashtra and Karnataka. Although, other major sugar-producing states like Uttar Pradesh and Tamil Nadu are likely to witness higher sugarcane acreage and sugar production in sugar season of 2012-13, output from these states will not be sufficient to offset the likely shortfall in sugar production in Maharashtra and Karnataka. During the current sugar season, government has released higher quantity of non-levy sugar in the market without any inter-month restriction which led to drop in prices in the first few months of SS 2012-13. However, with steady demand for sugar in the country by households and manufacturers of confectionaries, biscuits, chocolates etc., sugar prices in the current sugar season are expected to remain elevated compared to last year.

Key takeaways:

• In the month of December 2012, sugar output registered an increase by 4.1 percent on a y-o-y basis and reached a level of 55.9 lakh tonnes compared to 53.7 lakh tonnes in the same month previous year. During the period October to December 2012, total sugar production in India stood at 80.3 lakh tonnes compared to 77.6 lakh tonnes in the corresponding period last year.
• For the period December 2012-March 2013, government has released 68.5 lakh tonnes of sugar under non-levy quota without any inter-month restriction on sales. Government has decided to make available 6.51 lakh tonnes of levy sugar in the market for the period January-March 2013.
• Sugar prices declined for the third consecutive month in January 2013. Average sugar price in Mumbai market was marginally lower by 0.8 percent on a m-o-m basis whereas in Delhi market price declined by Rs. 50 per quintal

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