The biggest challenge of farming in India for centuries has been low productivity. Non-effective use of water, lack of modern machines and to a large extent excessive dependence on monsoon have always been increasing the difficulties of the agricultural sector. But, now this picture of fields is changing rapidly. Advanced technologies like ‘Artificial Intelligence’ (AI), drones and precision farming are now reaching the fields directly.
The government is also giving full support to this technological change through initiatives like ‘Rashtriya Krishi Vikas Yojana’ (RKVY). Its simple goal is to make farming more efficient and profitable rather than limiting it to large areas only. The direct benefit of this big change coming in the agri-tech ecosystem is being given to those companies which are finding solutions to the old problems of the agricultural sector through technology. Let us know in detail about those companies which are leading this agri-tech revolution.
1-UPL
UPL, one of the world’s leading agro-chemical and seed producing companies, is now strongly moving towards an agri-tech based business model. The company’s performance in the December quarter was quite encouraging and its income increased by 12 percent to Rs 12,269 crore. This impressive growth in volumes is mainly due to the huge demand for its products in Europe and Latin American countries. However, its net profit declined to Rs 490 crore in the quarter from Rs 853 crore last year, but this is a clear improvement compared to the previous few weak quarters. The company’s operating margin has also improved to around 18 percent. The most important thing is that UPL’s seed business ‘Advanta’ is growing at the rate of more than 20 percent and the company is preparing to unlock a huge value for investors by bringing its IPO soon.
2- PI Industries
PI Industries has a strong hold in both domestic and international markets. It has modern manufacturing and excellent research facility in Gujarat. However, the recent December quarter proved to be a bit challenging for the company. Its income fell from Rs 1,901 crore to Rs 1,376 crore due to weak global demand and sluggish purchasing by customers. There was also a decline in profit and it came down from Rs 373 crore to Rs 311 crore. Despite this, the company largely preserved profits on the back of excellent cost management and a 50 per cent growth in its pharma business. The company’s strategy regarding the future is very clear. The company has already launched five new molecules in the market and is going to invest Rs 500 to 600 crore on the expansion of new technologies by FY 2027, while remaining completely debt free.
3- Kaveri Seed
Kaveri Seed Company, which has been working in the hybrid seeds market since 1976, is continuously focusing on Research and Development (R&D). In the agricultural sector, weather and crop cycle have a direct impact on the seed business, yet the company registered a spectacular jump of about 21 percent in its income, taking it to Rs 210 crore. There is huge demand for seeds of maize, paddy and vegetables in the market. However, due to the inability to completely pass the burden of rising production costs on to farmers, its net profit fell marginally from Rs 15 crore to Rs 13 crore. The company spends 5 to 10 percent of its income on new research, due to which it has a strong pipeline of new hybrid seeds for the future. The company’s earnings are increasing rapidly in foreign markets also.
4- Jain Irrigation Systems
Jain Irrigation Systems’ micro-irrigation and solar pump tools are becoming very popular for accurate and correct use of water in the fields. The company’s income has jumped 17 percent on an annual basis and touched the level of Rs 1,600 crore. The most important change is that the retail business of the company has increased by about 24 percent. Due to this, the company’s dependence on government projects is reducing and there is a huge improvement in its working capital. Even though the company may have suffered a loss of Rs 47 crore this quarter due to one-time expenses, the management is continuously investing in new high-tech segments. The company’s beverage manufacturing plant has become operational and the joint venture in tomato processing is expected to start earning good profits by the next financial year (FY27).
Should you bet on these stocks?
From an investment perspective, the Agri-Tech theme appears very strong and safe in the long term. There will always be a need to increase productivity in farming and technology is the perfect solution for this. But as any investor you need to be cautious. The financial situation of every company is different. The fundamentals of some companies are very strong, while some are still going through a phase of reform. Before investing money in the stock market, carefully analyze the balance sheet, margins and sources of income of these companies.