Kaveri Seed Company Limited — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

Kaveri Seed Co. delivered a strong Q1 FY26 with robust revenue and profit growth driven by increasing acreages and higher realizations in non-cotton segments. While the cotton segment faced challenges from illegal seeds and rising production costs, new cotton products showed significant contribution. The company anticipates sustained 15-20% growth for the next 3-5 years, particularly in non-cotton segments and exports.

Highlights

  • Revenue from operations was ₹945.31 crores, registering a growth of 16.98% YoY.

  • EBITDA stood at ₹332.85 crores, an increase of 13.68% YoY.

  • Net profit was ₹316.50 crores, growing 11.88% YoY.

  • Non-cotton segments like rice, maize, and vegetables continue to grow in acreages, revenues, and realizations, with non-cotton hybrids revenue up 31% and volumes up 8%.

  • New products in cotton contributed 34% of volumes, up from 12% previously, indicating successful product launches.

Concerns

  • Cotton sales were impacted by an increase in illegal cotton and restrictions on hybrid rice sowing in Punjab.

  • Increased cost of production for cotton seed impacted profitability, and government price restrictions prevented passing on costs.

  • EBITDA margins declined by 1% compared to the previous year, primarily due to cotton segment margins.

Key financials

  1. Revenue from Operations ₹945.31 Cr +17%YoY
  2. EBITDA ₹332.85 Cr +13.7%YoY
  3. Net Profit ₹316.5 Cr +11.9%YoY
  4. EBITDA Margin 35.2%

What they filed

Q1 FY27: revenue down 13.8%, net profit down 14.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue82 155 77 945 97 +18%180 +16%82 +6%815 −14%
EBITDA-6 13 -15 322 -6 +0%18 +38%-14 +7%281 −13%
Net profit-3 15 -29 316 -15 −400%7 −53%-26 +10%271 −14%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentVolumes GrowthRevenues Growth
Hybrid Rice6.5%32%
Selection Rice1.5%11.6%
Maize21%54%
Vegetable Seed28%41%
Non-Cotton Hybrids (Overall)8%31%
Cotton Hybrid-15%—
New Cotton Products——

Capital allocation

high confidence
  • Capex Capex disclosed
    • New R&D plant ₹45 Cr
    So last year, the entire revenue expenditure of R&D was close to RS. 60-odd crores. This quarter, it should be in the same line, RS. 15 crores to RS. 17 crores and capital expenditure extra will be over and above because we have again invested like RS. 45 crores to RS. 50 crores in a new R&D plant. Today, it was the opening of that R&D centre.
  • Liquidity Liquidity disclosed Company has 'all-time high cash' but majority is tied up in inventories.
    Perfect. Last question before I join is, what is our dividend cash payout policy? Because I think we're sitting on all-time high cash and we had a buyback policy before. Now what is it going forward? Not at a high because as we have produced more inventory this year, majority of the cash is there in the inventories, which will be realized in the next coming quarteRs.

Guidance & targets

Overall Company Growth

  • Revenue Growth Overall Company Growth · next 3 to 5 years · High confidence 15% to 20%
    And overall, we see the company to grow 15% to 20% going forward for the next 3 to 5 years which looks pretty much possible.

    — Mithun Chand

  • Revenue Growth Overall Company Growth · year-end overall · Medium confidence close to 20%
    Overall, what we think is that right now, the 17% growth, which is looking for quarter-on-quarter, but year-end, it should be like close to 20% growth overall.

    — Mithun Chand

Non-Cotton Segment Growth

  • Revenue Growth Non-Cotton Segment Growth · going forward · High confidence around 20%
    Definitely, what we think is that non-cotton segment should be in and around the 20% growth levels going forward as we see acreage increase in maize.

    — Mithun Chand

R&D Expenditure

  • Quarterly R&D Spend R&D Expenditure · per quarter · High confidence ₹15 crores to ₹17 crores
    So last year, the entire revenue expenditure of R&D was close to RS. 60-odd crores. This quarter, it should be in the same line, RS. 15 crores to RS. 17 crores

    — Mithun Chand

Depreciation

  • Quarterly Depreciation Depreciation · per quarter for next 12 to 18 months · High confidence ₹12 crores to ₹15 crores
    So the depreciation, that's including both last year and this year, the depreciation altogether should be like RS. 12 crores to RS. 15 crores should be per quarter, and it will not go beyond this.

    — Mithun Chand

Export Business

  • Growth in Exports (Bangladesh sales) Export Business · compared to previous year · High confidence 30% to 40%
    Compared to previous year, the export will definitely have a growth of 30% to 40%.

    — Mithun Chand

New Cotton Products

  • Revenue Contribution from New Products New Cotton Products · FY28 · High confidence 80% to 90%
    If you talk about FY28, 80% to 90% of the revenue from new products.

    — Mithun Chand

Crop Nutrients Business

  • Growth Crop Nutrients Business · next 3 to 5 years · Medium confidence good growth
    The crop nutrients is only RS. 45-50 crores business as of now. But even we see good growth going forward in the next 3 to 5 years, it will contribute to the top line.

    — Mithun Chand

What to watch in Q2 FY26

Consolidated vs. Standalone Accounting Clarification

next quarter
Current Discrepancy noted, management promised clarification
Target Detailed explanation of accounting treatment for consolidated sales

Why it matters

Crucial for investors to accurately assess the company's overall financial performance and growth.

I will also try to clarify that. I will also try to clarify that regarding the consolidated one, in what way the accounts are treating it, I will just -- do that.

Risks & concerns

  • Increase in illegal cotton

    high

    Illegal cotton sales impacted the company's cotton sales and profitability, and poses a risk to farmers.

    Management acknowledged

  • Restrictions on hybrid rice sowing in Punjab

    medium

    Restrictions affected sales in a key state for hybrid rice.

    Management acknowledged

  • Increased cost of production for cotton seed

    medium

    Higher production costs impacted profitability, exacerbated by government price restrictions.

    Management acknowledged

  • Government price restrictions on cotton

    medium

    Inability to pass on increased production costs due to price restrictions affected profitability.

    Management acknowledged

  • Pending tax matters

    low

    No resolution at commissioner level, and policy discussions are ongoing.

    Management not addressed

Q&A highlights

5 direct
Illegal cotton seeds (BG-III) Direct
Yes, basically illegal BG-II RRF seeds. That's what we call as illegal seeds.

Confirms the nature of illegal seeds impacting the market and company's cotton sales.

Asked by Siddhant

Sustainability of non-cotton growth rate Direct
Definitely, what we think is that non-cotton segment should be in and around the 20% growth levels going forward as we see acreage increase in maize. And even we see the rice market to go up.

Provides confidence in the sustained growth trajectory of the non-cotton segments, a key driver for the company.

Asked by Siddhant

Productivity of illegal seeds vs. legal BG-II Partial
No, we still need to watch it now, we have seen a mixed result on that. The crop is still growing and we are yet to see the results.

Indicates uncertainty regarding the performance of illegal seeds, which could influence future market dynamics and regulatory actions.

Asked by Siddhant

Dividend cash payout policy and high cash position Partial
Not at a high because as we have produced more inventory this year, majority of the cash is there in the inventories, which will be realized in the next coming quarteRs. But as of now, we have not taken any decision on the buyback policy. Dividend will definitely be there. We'll come back with the policy once we have the discussion on it.

Clarifies the company's cash position is tied to inventory and defers a specific dividend policy announcement, which is important for shareholder returns.

Asked by Siddhant

Risk of inventory write-off Direct
Whatever inventory we have is all new inventory. Our written off is always a part of the system. So we don't see any sort of high risk in writing it off as of now.

Reassures investors that the increased inventory is new and not at high risk of write-off, addressing a potential concern.

Asked by Siddhant

Discrepancy between consolidated and standalone sales growth Partial
No, as per the accounting, we need to deduct that, but that's the only thing. That's the reason you see a single-digit growth there. We need to knock out that sale. ... I will also try to clarify that regarding the consolidated one, in what way the accounts are treating it, I will just -- do that.

Highlights an accounting complexity affecting reported consolidated numbers, which management promises to clarify, crucial for accurate financial assessment.

Asked by Amit Doshi

Reasons for inventory jump in March quarter Direct
So we have produced all seeds. If you recollect last year con call when we had a March quarter results, we said that we have intentionally increased the inventory. One is we are anticipating good season. And second thing is we want to maintain some buffer stock because this time, we faced inventory crunch and we lost some sales that is last year.

Explains the strategic rationale behind the increased inventory, linking it to anticipated demand and buffer stock management.

Asked by Krushi Parekh

Rice volume growth vs. sowing area increase Direct
I've already commented on this, but again, I'll clarify on it. Regarding rice, we have grown at 6% in terms of the volumes in hybrid rice. Whereas in other areas, the rice acreage has gone up, but it all moved to the varieties, not to the hybrids. That's the reason we have seen a decline. We have remained same.

Clarifies that while overall rice acreage increased, the shift towards varieties over hybrids explains the lower volume growth for the company's hybrid rice.

Asked by Anurag Jain

2 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Kaveri Seed Company Limited reported a strong Q1 FY26, with revenue from operations growing 16.98% year-over-year to ₹945.31 crores, up from ₹808.09 crores in Q1 FY25. EBITDA increased by 13.68% to ₹332.85 crores, and net profit rose 11.88% to ₹316.50 crores. The company attributed this performance to increasing acreages and higher realizations in non-cotton segments.

Segmental Performance and Growth Drivers

Non-cotton segments were key growth drivers. Hybrid rice revenues increased by 32% (volumes up 6.48%), selection rice revenues by 11.58% (volumes up 1.5%), maize revenues by 54% (volumes up 21%), and vegetable seed revenues by 41% (volumes up 28%). Overall, non-cotton hybrids saw an 31% increase in revenues and 8% in volumes. Management expects non-cotton segments to sustain around 20% growth going forward.

Cotton Segment Challenges and New Product Contribution

The cotton segment faced headwinds, with hybrid cotton volumes decreasing by 15% and a corresponding revenue decline. This was primarily due to the proliferation of illegal cotton and increased production costs, which could not be fully passed on due to government price restrictions. However, new cotton products showed promise, with their contribution to cotton volumes increasing significantly from 12% to 34%.

Inventory Management and Outlook

The company intentionally increased inventory in the March quarter to build buffer stock, anticipating a good season and to avoid sales losses experienced in the prior year due to inventory crunch. Management stated that the current inventory is new and does not pose a high risk of write-off. They expect the second half of the year to be much better, driven by positivity in maize and other non-cotton segments.

Capital Expenditure and Depreciation

Kaveri Seed invested ₹45-50 crores in a new R&D plant during the quarter. Quarterly R&D expenditure is expected to be in the range of ₹15-17 crores. Depreciation is projected to be ₹12-15 crores per quarter and is expected to continue at this rate for the next 12 to 18 months due to new asset capitalization.

Growth Outlook and Strategic Focus

The company projects an overall growth rate of 15-20% for the next 3-5 years, with year-end growth expected to be close to 20%. Export business, particularly to Bangladesh and other new countries like Tanzania, Vietnam, and Philippines, is anticipated to grow by 30-40% compared to the previous year. By FY28, new cotton products are expected to contribute 80-90% of cotton revenue.

Regulatory and Industry Challenges

The spread of illegal BG-II RRF cotton seeds remains a concern, impacting the market and potentially harming farmers. The company is in continuous dialogue with authorities regarding the approval of BG-III seeds. Additionally, restrictions on hybrid rice sowing in Punjab affected sales in that state. The company is also actively pursuing a policy resolution for pending tax matters, which are currently at the commissioner level.

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