How to profit from seeds:: Business Line

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Of the various farm inputs, seeds obviously have the most direct impact on farm yields.

Yet, the seeds market in India is predominantly supplied by locally produced seeds, mostly saved by the farmers from the previous crop.

The yield improvements managed through hybridization in the Green Revolution and the recent rapid growth in cotton yields with the advent of the genetically modified Bt Cotton have both resulted in a growing pace of adoption of new seed varieties by farmers.

Private players producing hybrid seeds have thrived in this environment, focussing on lucrative cash crops such as sunflower, paddy and maize, as well as earning license fees from distribution of the established Bt Cotton. The long-winded process involved in obtaining the feedstock required to develop new traits, subjecting new varieties to field trials and obtaining certification of new hybrids erect fairly high entry barriers to protect the entrenched players in the seeds business, allowing for high margins.

Though the market potential in India has attracted a large number of global names (Monsanto, Dow Agro, Syngenta, Bayer), this business has only a token representation in the listed space. Monsanto India, which derives over half of its sales from hybrid seeds, Advanta India with a global portfolio of seed brands and the small-cap Kaveri Seeds are the only listed options.

Of these, only Advanta and Kaveri Seeds offer a pure play exposure to the seeds business.