MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Indian Economy
Indias GDP is anticipated to expand by 6% to 6.8% in FY24. The bullish growth
estimates are based on a variety of positive factors, including a rebound in private
consumption due to increased industrial activity, greater Capital Expenditure (Capex),
near-universal vaccine coverage, and the return of migratory workers to cities. Despite
facing the challenges of COVID-19, the conflict between Russia and Ukraine, and the
coordinated policy rate hikes by central banks - led by the Federal Reserve - aimed at
curbing inflation, which caused the US dollar to appreciate and widened the current
account deficits in net importing economies, agencies globally maintain their projection
that India will remain the fastest-growing major economy in FY23, with a growth rate of
6.5-7.0%.
Following the effect of the first two waves of the pandemic, which resulted in a major
GDP contraction in FY21, the rapid recovery from the virus in the third wave contributed
to a recovery of economic production in the January-March quarter of 2022. Due to the
Indian economys full recovery ahead of many other countries, production in FY22 exceeded
its pre-pandemic level in FY20. However, the turmoil in Europe forced a revaluation of
forecasts for inflation and economic growth in FY23. In January 2022, retail inflation in
the country rose over the RBIs tolerance range. It remained above the goal range for 10
months before falling below the upper end of the target range of 6% in November 2022.
In FY23, Indias economic development was mostly driven by private consumption and
capital formation, which helped generate employment as seen by the dropping urban
unemployment rate and quicker net enrolment in Employee Provident Fund. According to the
Periodic Labour Force Survey (PLFS), the rate of urban unemployment for those aged 15 and
over decreased from 9.8% in the quarter ending September 2021 to 7.2% in the following
quarter (quarter ending September 2022).
From April to November 2022, there was an impressive YoY increase of 15.5% in Gross Tax
Revenue, fuelled by robust growth in direct taxes and the Goods and Services Tax. The
introduction of innovative policies like PM Gati Shakti, National Logistics Policy, and
PLI schemes is expected to bolster the countrys manufacturing and infrastructural
sectors, reduce value chain costs, and provide a firm foundation for sustainable economic
growth and improving resilience.
(Source - Economic survey 2022-23)
Agricultural Sector
The agriculture sector in India is expected to increase by 3.5 percent in FY23. Apart
from serving local needs, India has recently emerged as a net exporter of agricultural
products. Agricultural exports reached $50.2 billion in FY23. According to estimates, the
country produced 149.9 million tonnes more food grain during the month of Kharif than it
did on average over the preceding five years. However, the area seeded with paddy was
around twenty lakh hectares less than in 2021.
Indias agricultural exports reached $50.21 billion in 2021-2022, an increase of
19.92%. India exported fresh produce worth $1.5 billion in 2021-2022; these included
fruits worth $0.74 billion and vegetables at $0.76 billion.
The food processing industry in India is a burgeoning industry that has gained
significance in recent years. According to the Agricultural and Processed Food Products
Export Development Authority (APEDA), the industry is likely to grow at a CAGR of 3%
between 2022 and 2030. Processed fruits and juices, pulses, guar gum, groundnuts, milled
goods, cereal preparations, oil meals, and alcoholic drinks are some of the major
processed food exports from India. In FY22, India exported goods worth US$25.6 billion,
making history in the fields of agricultural and processed food exports.
(Source-
https://pib.aov.in/PressReleasePaae.aspx?PRID=1895288#:~:text=Fiscal%20policv%20statements%2
0hiahlighted%20that,Bn%20in%20FY%202022%2D23.,
https://www.studyig.com/articles/union-budget-2023-for-agricuiture-sector/#:~:text=%E2%80%9CThe%20aariculture%20credit%20taraet%20will.over%20the%20past%20few%20vears.)
Government Measures and Policies
In order to lower the cost of agricultural inputs, increase productivity, and increase
farmer incomes, the government has enacted a number of developmental programs, plans,
reforms, and policies. These consist of:
• Agriculture Accelerator Fund - The Fund will seek to provide farmers with
creative and cost- effective solutions to their challenges. Additionally, it will use
contemporary technology to change agricultural practices and boost production and
profitability.
• Increase in Agriculture Credit-The Government increased the credit to Rs.20 lakh
crore with a focus on animal husbandry, dairy, and fisheries.
• Promotion of natural farming - The government declared that it would establish
10,000 Bhartiya Prakritik Kheti Bio-Input Resource Centres for organic farming. The
government would assist one crore farmers in switching to natural farming over the next
three years. 10,000 Bio-Input Resource Centres will be established for this, resulting in
the development of a dispersed national micro-fertilizer and pesticide production network.
• Promotion of alternative fertilizers-The government also launched new schemes
promoting the adoption of alternative and natural fertilizers.
(Source -
https://www.outlookindia.com/national/budaet-2023-from-start-up-fund-to-natural-
farmina-what-is-new-for-farmers-and-aariculture-sector-news-258645)
Seed Sector Overview
In India, the seed market was worth US$6.3 billion in 2022. With a compound annual
growth rate (CAGR) of 6.8%, the size of the global seeds market increased from $58.74
billion in 2022 to $62.72 billion in 2023. The Russia-Ukraine war hampered global economic
recovery from the COVID-19 epidemic. Due to supply chain interruptions, a rise in
commodity prices, and economic sanctions against other nations as a result of the conflict
between these two nations, there has been inflation in many different markets throughout
the world. At a CAGR of 6.6%, the seeds market is projected to reach $81.1 billion in
2027.
The global market for hybrid seeds was worth $59,555.2 million in 2020, and it is
anticipated to grow to $166,189.8 million by 2031, at a CAGR of 9.6% from 2022 to 2031.
Indias hybrid seed market produced $17,729.4 million in sales in 2020, and it is
anticipated to increase to $51,780.8 million by 2031, at a CAGR of 10.0%. This significant
market share is mostly attributable to the expansion of indoor farming operations and the
rise in demand for organic products as well as for expensive fruits, vegetables, and
flowers that can be grown with ease and efficiency inside.
The agro-ecological diversity of India comprises a number of significant crops, but
cotton is one of the most significant for the nations agricultural exports. Cotton is one
of Indias most important cash crops and fibres because it employs between 40 and 50
million people in trading and processing. Additionally, it directly contributes to the
survival of six million farmers. The government through its Public-Private Partnerships
plans to conduct a cluster-based and value-chain strategy to boost the production of
extra-long staple cotton. The supply of inputs, extension services, and market links will
necessitate collaboration between farmers, the government, and corporations.
Due to increased investment in agricultural infrastructure, including irrigation
systems, warehousing, and cold storage, the agriculture industry in India is anticipated
to gain further pace in the coming years. Additionally, it is likely that the increased
usage of genetically modified crops would increase Indian farmers yields.
(Source:
https://www.alliedmarketresearch.com/hvbrid-seeds-market#:~:text=lndia%20hvbrid%20seeds%20market%20aenerated.l0.0%25%20durina%20the%20f
orecast%20period., https://www.investindia.aov.in/sector/aariculture-forestrv.
https://www.researchandmarkets.com/reports/5769073/seed-industrv-in-india-market-trends)
Company Overview
Nath Bio-Genes (India) Limited is an experienced seed Company in India that has been
producing and distributing seeds to Indian farmers for about two decades. With its strong
research and development background, the Company has developed several highly rated cotton
seeds that have demonstrated resilience to various viruses and weather changes and have
performed well in ICAR trials. The Companys new launches, Sanket and Jumbo cotton seeds
are ranked amongst the top three in most geographies and under different planting
conditions. Such consistently high ranking of the Companys seeds provides reasonable
confidence that its cotton seed portfolio will grow faster than the industry.
The Company incorporated a variety of growth drivers in its portfolio, including hybrid
paddy, bajra, maize, vegetable seeds, and plant nutrients supplement resulting in
de-risking of its business. The management has projected a 15% plus guidance for the
upcoming year. Despite a difficult climate, the Company has been able to improve its
working capital cycle from the previous year, with the progress being driven by
receivables management. The Company has increased its non-cotton non-paddy portfolio sales
to 44.69% of total revenue.
The Company works hard to sustain positive relationships with the agricultural industry
and forge strong connections to collaborate closely with forward-thinking farmers. Over
15,000 farmers have joined the Companys network to cultivate seeds for it. Among other
honours & accolades, the Company had received the coveted "Vasantrao Naik
Prathisthan Award" for its contribution to raising agricultural productivity.
Product Portfolio
Segment |
Key Products |
Product Pipeline |
Key Geographies |
Cotton |
Sanket, Jambo, Profit +, Panchrantna, Himalaya |
NBC 2020, NBC 211, NBC 30, NBC 85 |
PAN India |
Paddy |
Dhadak, Dhadak Gold, Loknath, Gorakhnath, Tehelka, Gazab, Khushi-27,
Puravakamini, Menka, Kasturi, Nath 2020, Nath Poha, Golden-72. |
NBRH 19195, NBRH 34 |
North, Central and North-East India |
Pearl Millet |
Super-27, NBBH-20, NBH-07, NBH-05, NBH- 1717 |
NBBH-2122, NBBH- 2212 |
North, West & Central India |
Mustard |
Rajshree, Rajshree Gold, Himalaya, Goldie, Goldie Super, Golden-100
& Pari-313 |
In process |
North & Central India |
Corn |
Dominator, NWMH- 2002 Gold, Don-1588, NMH-1008, Koshi-55 |
NMH-5620, NMH- 6560, NMH-6926 |
PAN India |
Wheat |
Mohan Wonder, Manik-07 |
NW-10, NW-16, NW- 20 |
North, Central, West & East India. |
Forage |
NutriMax, NutriMax Gold |
In process |
North, Central, West & East India |
Grain Sorghum |
Amranath, Amarnath- 251 |
In process |
North, Central, West & South India |
Vegetable |
Chilli - Legend, NCH- 495 Okra - NOH05, Sara Cucumber - NCH02. NCH
1061 Bitter Gourd - Chintu Tomato - Akhand, Joy |
Chilli - NCH 2561, NCH 200, NCH 2564 Okra - NOH3341 Cucumber -
NCUH2061 Bitter Gourd - NBH6054 Tomato -NTH1965 |
PAN India |
PNS |
Win-chi-Win, WinGoli, WinPro Granules |
In Process |
PAN India |
Cotton - The performance of Cotton has been better despite the industry facing the
issue of sale of illegal BT cotton seeds. The Company has been actively collaborating with
the industry body and the Government as well as imparting education to farmers on the
issue. About 13.80 lakh cotton packets were sold by the Company in FY23. The Company
believes that the efforts it is making with farmers will payoff, that they will produce
results, and that it will enable the Company to achieve a 15% volume gain in FY24.
BT Cotton - The only transgenic crop that has been given the government permission for
commercial production in India is BT cotton. It has undergone genetic modification to
create an insecticide to combat the common pest known as the cotton bollworm.
HTBT Cotton - Although it has not received regulatory approval, the HTBT cotton version
adds a further layer of modification, making the plant resistant to the herbicide
glyphosate.
Challenges faced by Cotton Industry - HTBT cotton requires only one application of
glyphosate. There is no additional requirement for weeding. This leads to a saving of cost
of about Rs. 7,000-8,000 per acre of land. Since the Genetic Engineering Appraisal
Committee has not authorized it, it is being sold illegally in Indian marketplaces. With
such unlawful cotton seed sales, farmers are in danger since there is no guarantee of the
quality of the seed, it pollutes the environment, the industry loses genuine seed sales,
and the Government also loses revenue. It would not only destroy tiny cotton seed
businesses, but it will also endanger the countrys whole legal cotton seed industry.
Products in the pipeline - The new products being developed by the company are NBC
1821, NBC 1851, NBC 1811, and NBHV 2205. To market distinctive cotton products like
NBC-10, Sanket, Maharana, and Jambo, extraordinary efforts have been made. The Government
raised cotton seed rates by Rs 853 for each packet, which helps to provide a better value.
However, the trade of unlawful HTBT Cotton continues to have an impact on the sector.
The following are the products, the Company is developing:
• Medium and Large Boll
• High tolerance to sucking pest.
• High toleranceto pinkbollworm
• Wider adaptability
• Yield Superiority
With a focus on yield superiority, the strategy is to offer farmers a wide selection of
cotton seed types that are suited for various climatic situations. Sanket and Jambo, the
Companys two newest hybrids, are aiding in the segments rise.
Paddy - The sales of paddy comprise both open pollination and hybrid seeds, with the
latter commanding higher margins. As a result, hybrid paddy has the most significant share
in the Companys product portfolio. To improve margins, the Company has adjusted its paddy
product mix to increase hybrid paddy sales, leading to a 7.43% decline in volume but a
lower 1.24% decline in value in FY23. Hybrid paddy is currently a high-value, low-volume
product that the Company is focusing on. Despite a potential decline in paddy volume, the
revenue and margins from this segment are expected to remain high, with paddy volume
growth projected at 15% in FY24. The Company has invested heavily in its hybrid research
program and launched new products such as Dhoom, Dhadak, and Dhadak Gold. The Companys
key products in this segment are Loknath, Gorkhanath, Super Duper, and Tehelka.
With respect to research and development, the Company is currently working on products
that possess the following characteristics:
• Early maturity, fine grain and increased resistance to diseases and pests
• Increased moisture stress tolerance
• Medium-Bold and Long-Bold grain products with medium maturity (125-135 days)
that are equipped with resistance to BLB and BPH.
Vegetables - The vegetable segment is a significant market with a wide range of product
offerings, and its cultivation varies across different regions in India. The Company has a
robust presence in this segment, with more than ten products available throughout the
country, contributing over 11% of the Companys gross margins. The Company is currently
working on launching new products with high disease resistance and excellent virus
resistance, particularly in tomato and okra, as well as high-yield and no bitterness
features in chilly, bitter gourd, and cucumber. Furthermore, the Company is conducting
extensive research and development to expand its product portfolio, including foraying
into fruits in addition to vegetables. Vegetable growth is expected to increase by 20%.
The R&D team of the Company has been working on the following:
• Developing newer products
• Diversifying the existing portfolio of products
• Expandinto thefruits segment.
Plant Nutrient Supplement-Win-Chi-Win isa Plant Nutrient Supplement with a track record
of raising crop yields when applied to the crops. The Company noticed a significant
increase in the demand for this product for horticultural, agricultural, and vegetable
crops. For the exclusive purpose of sourcing and marketing Win-Chi-Win in India, the
Company has a partnership with a Chinese Company. The product is distributed throughout
the country. In the PNS vertical, the Company introduced two new products. Both are soil
conditioners that assist grow healthy crops by enhancing the quality of the soil. For
FY24, PNS Growth is anticipated to be above 20%.
Others - This category mostly covers wheat, jowar, mustard, bajra, and maize with a
larger proportion of maize, mustard, and bajra. 45% of the Companys top line comes from
this segment of the business.
Financial Overview
The Company has been able to deliver persistently with respect to cotton sales and has
maintained its long-term debt-free status. The Company continued to maintain a net profit
margin of around 12% (at adjusted PAT) and a gross contribution margin of about 55%. Field
crops, vegetables, and supplements all reported high margins, which contributed to the
Companys success in transitioning to a de-risk business model. An impressive 45% of the
portfolio was made up of non-cotton and non-paddy. The Companys receivable days have also
improved due to better control. The Company declared a dividend of 20% and has given a
topline guidance of [15-20%] for FY24.
Company Outlook
The Companys future strategies are aimed at increasing its revenue multiple times
through new geographies and newer products. The Company is introducing new items generated
by the research channel and expanding into new regions with its acquisition of additional
territories. The Company has already started testing its products and receiving licensing
approvals in Southeast Asia and Africa, where there is also a sizable market. These would
protect the Company from single-country regulatory and environmental risks.
Infrastructure
The Company has been following the policy of least blockage of funds in Infrastructure.
Since renting godowns and processing facilities is far more effective, efficient, and
economical, the Company has entered into a long-term contractual agreement with one such
provider in Southern India, as a result of which, all of the Companys field crop
processing requirements are met under one roof.
Research and Development
The Company has redefined its research and development using the best R&D experts
in the country. Using the latest technologies, the Company has created high-yielding
hybrids with greater endurance to biotic & abiotic stress. The Companys niche
collection of superior & world-class Trait Specific Elite Germplasm is what gives it a
competitive edge over its peers.
The Company has the following R&D investments:
• 32 breeding and evaluation R&D dedicated stations in different Agro-Climatic
conditions
• About 300 acres of land for the purpose of research and development
• Partnerships and collaborations with globally recognized research institutes
such as NRCPB, CIMMYT, IRRI, ICRISAT
• Dedicated team of hand-picked plant breeders and biotechnologists based at key
R&D centres under the guidance of R&D veterans.
Seed Production
The Companys operations are spread far and wide within the country. The Company is
involved in the production of seeds in the states of Andhra Pradesh, Gujarat, Karnataka,
Maharashtra, Rajasthan, Odisha, Uttar Pradesh, Madhya Pradesh, and Tamil Nadu having
varied agro-climatic regions. The seed production is carried out on 30,000 acres of land
by a team of 25,000 dedicated growers and 72 technically qualified organizers. By
establishing strict field standards and quality control inspections throughout the seed
production process, the Company ensures that only seeds of the highest quality reach its
processing facilities. To ensure strict controls, a team of competent production employees
and quality personnel monitor farms. The Company looks after its team of produce growers
and organizers to establish better ties with them. Acknowledging their hardships, and
presenting them with the required guidance, direction, and financial assistance, have
produced positive results and helped the Company gain their trust, loyalty, and
commitment.
Elaborate Seed Processing Facilities
With three processing plants in Maharashtra, Telangana, and Andhra Pradesh, the Company
provides sophisticated seed processing capabilities. The Company also has custom
processing arrangements in Gujarat, Karnataka, Tamil Nadu, Madhya Pradesh, and Rajasthan.
Each and every plant has been equipped with a pre-cleaner, fine cleaner, grader, gravity
separator, de-stoner, indented cylinder, treater, needle separator, and packaging
machinery. For the ginning, de-linting, drying, processing, treating, packaging, and
storing of seeds, the Company has independent facilities. The farmers seeds are treated
to meet quality criteria that go above and beyond those imposed by the regulatory bodies.
By assuring increases in seed viability and extending the shelf life of seeds, the quality
of seed processing is raised to a new level. To provide ideal storage conditions for the
seed, all of the packaging material has the best environmental barrier qualities.
Stringent Quality Assurance
The Company has testing laboratories located in Maharashtra and Andhra Pradesh which
are highly precision-oriented and organized. The crew conducts frequent field inspections
throughout the whole manufacturing area. In accordance with the Companys quality policy,
top-notch quality requirements are met to give farmers the best yields possible and
increase their profitability. Total quality management is also taken into consideration.
For frequent monitoring of lot germination, genetic purity tests are carried out. Another
test called as ELISA test is conducted on genetically modified crops to determine their
gene purity. The Company undertakes rigorous efforts to ensure seeds are generated under
optimal conditions and genetic purity is maintained across all the batches. Another round
of quality assurance takes place during the processing and packaging of foundation seeds.
According to the International Seed Testing Association (ISTA), more than two lakh quality
tests are performed annually along the whole supply chain before seeds are packed and sent
to marketing centres. Every seed lot that enters the processing plants is sampled and
checked for physical appearance, moisture, other distinguishable varieties present,
physical purity, treatment, genetic purity, germination, vigor, and soil emergence. These
are then classified and reported accordingly.
Diversified Distribution Network
The Company has 16 business centres in 131 regions in India, collaborating with more
than 2,000 distributors across. Over the last 4-5 years, the Company under the guidance of
Seed Marketing Veterans has expanded into new locations both within and outside the
country. The Company plans on further expanding its Direct Retailer reach in the upcoming
years. With a positive foothold in India, the Company has been expanding to newer foreign
regions with agronomic circumstances comparable to those in India. The Company is fully
prepared to expand its wings in further regions of Asia, Africa, and the Middle East.
Risk Mitigation Strategies
Risk |
Impact |
Mitigation |
Regulatory Risk |
Increased domestic as well as foreign competition in the seeds space
can result in the tightening of regulatory norms posing a risk to the operations of the
Company. |
The Company has a dedicated Compliance and R&D team to stay
updated on international standards on GM and/or Hybrid seeds. These dedicated teams in
collaboration with middle management and technology teams help the Company mitigate any
risk arising from policy changes. |
Technology Risk |
Increased usage of the same technology on the soil can render soil,
pathogens, and pests resistant to its beneficial effects. |
The Companys R&D infrastructure is focused on innovating and
inventing newer technologies to avoid reliance on only one type of technology. The Company
aims to produce seeds with high yields and endurance to several pests and viruses. |
Unpredictable Weather |
Weather plays a key role in the production of food grains, pulses,
vegetables, etc. Any adverse climatic conditions can negatively impact the production and
maintenance of crops and fields |
The Company attempts to minimize the effects of these natural
variables by taking proactive and quick action by creating seeds that can be cultivated in
particular situations, such as drought, heat waves, etc. |
Cotton Business |
There are multiple risks associated with the cotton business such as
the increased proliferation of illegal seeds which are herbicide tolerant in cottongrowing
states to meet the customized product-based demands |
The Company has a diversified product portfolio and focuses on All
season products. The Company seeks to increase segment growth in the vegetable and plant
nutrient markets. |
Human Resources
The Company considers human resources as its biggest asset. As the Company is
transitioning from its growth phase, it considers human resources to be critical for its
operations as well as plays a key role in running the business. The Company has a
dedicated team of scientists and researchers who have laid a strong foundation for the
Company. The Company undertakes constant training and development of its employees and
continues to nurture them via workshops with renowned research institutes globally. In
order to create brand awareness for its products, the Company has taken steps to expand
its sales and marketing team. The Company has laid down extensive HR policies to recruit
personnel with potential and retain its best talents. The Company wants its employees to
reach their full potential by striving to create a conducive work for them. As of 31st
March 2023, the total employee strength of the Company stood at 433.
Internal Control Systems
The Company follows all the local regulatory standards for effective and efficient
management of its business. The Company believes that a robust internal control system
forms the basis of effective corporate governance. The internal controls of the Company
are sufficient according to the size and nature of its operations. These internal and
accounting controls are continuously monitored and updated as and when needed to ensure
that the assets are protected from loss or unauthorized use. An audit committee is
appointed by the Company which considers all internal factors and recommends remedial
action as and when necessary.
Cautionary Statement
Statement in the Management Discussion and Analysis describing the Companys
objectives, projections, expectations and estimates regarding future performance may be
"forward-looking statements" and are based on the currently available
information. The management believes these to be true to the best of its knowledge at the
time of preparation of this report. However, these statements are subject to certain
future events and uncertainties, which could cause actual results to differ materially
from those, which may be indicated in such statements.
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