Detailed Narrative
Financial Performance Overview for Q3 and Nine Months FY26
Kaveri Seed Co. reported a robust top-line performance for the nine months ending FY26, with revenue from operations growing 16.94% to ₹1,221.56 crores compared to ₹1,044.61 crores in the prior year. EBITDA for the same period increased by 10.35% to ₹358.39 crores, and net profit grew 4.9% to ₹308.91 crores. For Q3 FY26, revenue from operations was ₹173.65 crores, a 16.08% increase year-on-year, though EBITDA growth was a more modest 1.14% at ₹25.38 crores, with net profit at ₹7.46 crores.
Segmental Growth Drivers
The company witnessed strong growth across several non-cotton segments. Research paddy volumes surged by 51%, sunflower volumes by 94%, and mustard volumes by 64%. Non-cotton hybrids overall saw a 6.1% increase in volumes and 13% in revenues. Maize volumes grew 21% with revenues up 42.6%, and hybrid rice revenues increased by 17.9%. Exports also contributed significantly, showing a steep 86% revenue growth in the current quarter, indicating successful international market penetration.
Profitability Challenges and Outlook
Despite strong revenue growth, Q3 profitability was impacted by higher production costs, particularly in cotton, maize, and rice, which the company was unable to fully pass on to farmers. This resulted in a nearly 500 basis point decline in gross margins year-on-year. Management expects gross margins to normalize to the 45-48% range as production costs stabilize. The company is also investing in R&D and plant capacities, with R&D/capex spend expected to stabilize at lower levels going forward⏳ as most major capex is completed.
Working Capital and Liquidity
The company's cash and books stood at ₹309 crores, a decrease from ₹409 crores in the previous quarter. This reduction is largely attributed to a significant investment of over ₹200 crores into inventory. Management noted an industry-wide trend of increased inventory production, which contributed to higher production costs. Receivables increased to ₹250 crores from ₹175 crores last year, but are expected to normalize📎 to ₹80-90 crores by year-end, improving cash flow.
Strategic Focus on New Products and Market Dynamics
Kaveri Seed Co. is focusing on new product development, with at least 8-10 well-performing hybrids in major crops like rice, maize, and cotton. These new products are expected to drive good revenue growth starting from June 2026. The company anticipates maize volumes to remain healthy due to increasing acreages and usage, despite recent price dips. Management also addressed the ongoing issue of illegal cotton, noting it remains at similar levels to the previous year and is increasing.
Regulatory Environment and Capital Allocation
The Draft Seeds Bill 2025 is viewed positively by management, as it aims to create a more organized market, although some aspects are still under debate. Regarding capital allocation, with over ₹300 crores in cash, the company is open to inorganic growth opportunities. While dividends are consistently paid, a decision on buybacks will be made in the first or second quarter, as liquidity was previously tied up in inventory. The company is also managing ongoing income tax demands totaling ₹126 crores, with appeals pending.