Kaveri Seed Company Limited — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

Kaveri Seed Co. reported a mixed Q4 and FY25, with full-year revenue and EBITDA showing modest growth of 5.57% and 1.43% respectively, driven by strong performance in non-cotton segments. However, Q4 saw a revenue decline and a significant net loss. Full-year net profit also decreased by 9.48%. The company increased its cash position and completed a strategic acquisition, but faced challenges in export markets and its cotton hybrid segment, leading to potential gross margin stress in the near term.

Highlights

  • FY25 Revenue from operations grew by 5.57% to ₹1121.57 crores, compared to ₹1062.43 crores in FY24.

  • FY25 EBITDA grew by 1.43% to ₹274.29 crores, compared to ₹270.43 crores in FY24.

  • Cash on book increased to ₹556 crores in FY25 from ₹443 crores in FY24, a 25.5% increase.

  • Non-cotton segments like hybrid rice, selection rice, maize, and vegetables witnessed good growth rates, with hybrid rice volumes up 13% and revenues up 26%.

  • Acquired remaining 30% stake in distribution company, Aditya Agritech Private Limited for ₹23.60 crores, increasing company's stake to 100%.

Concerns

  • Q4 FY25 Revenue from operations declined by 4.46% to ₹76.95 crores from ₹80.54 crores in Q4 FY24.

  • Q4 FY25 Net profit was a negative ₹30 crores, a significant decline from positive ₹2.79 crores in Q4 FY24.

  • FY25 Net profit decreased by 9.48% to ₹265.21 crores from ₹293 crores in FY24.

  • Export sales declined to ₹22 crores in FY25 from ₹66 crores in FY24, primarily due to political unrest in Bangladesh and absence of a one-time order from Tanzania.

  • Volumes of cotton hybrid decreased by 35% and revenues decreased by 27% in FY25.

Key financials

2 periods

Headline

  • Revenue (FY)
    ₹1,121.57 Cr
    YoY +5.6%
  • EBITDA (FY)
    ₹274.29 Cr
    YoY +1.4%
  • Net Profit (FY)
    ₹265.21 Cr
    YoY -9.5%
  • Cash on Book (FY)
    ₹556 Cr
    YoY +25.5%

Q4

  • Revenue
    ₹76.95 Cr
    YoY -4.5%
  • EBITDA
    ₹-15.31 Cr
  • Net Profit
    ₹-30 Cr

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.

Capital allocation

high confidence
  • Capex ₹20 Cr
    • Maintenance and addition of new plants ₹20 Cr
    • New office space and R&D centers (including biotech center) ₹90 Cr
    RS. 20 crores to RS. 30 crores per annum will be the capex for maintenance and addition of new plants. This is, CWIP of RS. 90 crores on March in the balance sheet... One is we have set up new office space now that is already commissioned. Some part is left out and some goes down for some R&D centres that we are building up. That is in the capital work in progress... Biotech, we have not commissioned yet. It's in the process.
  • M&A Aditya Agritech Private Limited Acquisition · Closed · Consideration ₹[object Object] (cash)

    To increase company's stake to 100%

    Acquired remaining 30% stake in distribution company, Aditya Agritech Private Limited for RS. 23.60 crores to increase company's stake to 100%.
  • Liquidity Cash ₹556 Cr
    Cash on book stands at RS. 556 crores in FY25 as against RS. 443 crores in FY24.

Guidance & targets

Revenue

  • Consolidated Revenue Growth Revenue · next 3 to 5 years · Medium confidence 10% to 12%
    when I gave guidance of like 10% to 12% it is for the next 3 to 5 years, not for the year. That's the minimum what we see. It should be better than that.

    — Mithun Chand

  • Non-Cotton Segment Revenue Growth Revenue · ongoing · High confidence 12% to 15%
    non-cotton segment, we have already witnessed a good growth this year. Going forward, even with this high base, we can easily improve with the 12% to 15% growth in this non-cotton segment also.

    — Mithun Chand

  • Cotton Segment Revenue Growth Revenue · this year · Medium confidence Growth
    cotton with a small base will grow this year.

    — Mithun Chand

  • Export Market Revenue Revenue · next 5 years · Medium confidence ₹150 crores
    in the next 5 years, the export market can be RS. 150 crores. And even the same time, I've given the guidance of vegetables to be close to RS. 150 crores.

    — Mithun Chand

  • Vegetable Segment Revenue Revenue · next 5 years · Medium confidence ₹150 crores

    — Mithun Chand

  • New Products Contribution to Revenue Revenue · next 3 to 5 years · Medium confidence More than 50%
    more than 50% of the revenue will be contributed by the new products, new products in the sense, which are already placed in the market, which are already launched in the market for the last 1 or 2 years and also the newly to be launched products.

    — Mithun Chand

Profitability

  • Gross Margin Profitability · this year · Medium confidence 46% to 47% (plus/minus 1-2%)
    The margins this year was close to 46% to 47%. That should remain same in like 1% to 2% plus or minus because of this year, we have high inventory cost. And in cotton, we may not pass on. This year might be slightly stressed.

    — Mithun Chand

  • Gross Margin Improvement Profitability · going forward · Low confidence Further up
    But going forward, there are pretty high chances that the gross margin should go further up as we wisll be increasing in vegetables and other crops. Bajra, which we already have high gross margins. Again, it should go up.

    — Mithun Chand

What to watch in Q1 FY26

Cotton Segment Volume Growth

next quarter
Current Down by 30% in FY25
Target Growth in FY26

Why it matters

Recovery in the cotton segment from a low base is crucial for overall revenue growth and market share, especially with new hybrids.

Regarding cotton, last year we were down by close to 30% in terms of the volumes. And with the low base, we are pretty confident that we will grow in cotton this year, even though the acreages may not grow, but as a company as a level, we'll grow with this base.

Risks & concerns

  • Decline in Export Sales due to Political Unrest

    medium

    Export sales declined to ₹22 crores in FY25 from ₹66 crores in FY24 due to political unrest in Bangladesh and absence of a one-time order from Tanzania. Management expects recovery.

    Management acknowledged

  • Cotton Acreage Decline and Segment Profitability Pressure

    medium

    Cotton acreage is expected to fall as it is less lucrative than maize. Despite a 4% price hike, passing on increased production costs is difficult due to high inventory, potentially stressing margins this year.

    Management acknowledged

  • Gross Margin Stress from High Inventory Costs

    medium

    Gross margins for the current year (FY26) might be slightly stressed due to high inventory costs and challenges in passing on price increases in cotton.

    Management acknowledged

  • Crop Shifting due to Monsoon Timing

    low

    Untimely or uneven monsoon could lead to crop shifting, impacting sales. However, the company's diversified portfolio across most crops minimizes this risk.

    Management downplayed

Q&A highlights

7 direct
Upcoming Season Outlook & Inventory Strategy Direct
The season looks good for the coming year, even the prediction for the monsoon is good... we have built up inventory for couple of reasons. One, we anticipate a good season. Second thing, as we were almost empty with the entire inventory... So where the strategy wanted to maintain a buffer inventory, that's one of the reason why we built up the inventory.

Provides management's positive outlook on the upcoming season and explains the rationale behind the significant inventory buildup as a strategic buffer.

Asked by Agastya Dave

Cotton Portfolio & Non-Cotton Growth Expectations Direct
Regarding cotton, last year we were down by close to 30% in terms of the volumes. And with the low base, we are pretty confident that we will grow in cotton this year... non-cotton segment, we have already witnessed a good growth this year. Going forward, even with this high base, we can easily improve with the 12% to 15% growth in this non-cotton segment also.

Clarifies expectations for both cotton (recovery from a low base) and non-cotton (continued strong growth) segments, which are key revenue drivers.

Asked by Saania Jain

Impact of Cotton Price Hike and Cost of Production Partial
This time, we have seen a huge increase in the cost of production. The government has increased only by 4%, but there's a lot of pressure... But in cotton, even though the prices have increased by 4%, it will be really difficult for us to pass it on because there's a lot of inventory in the system.

Highlights potential margin pressure in the cotton segment due to rising production costs and challenges in passing on price increases, despite a government-announced hike.

Asked by Dhruv Saraf

Structural Shift to Higher Inventory Levels Direct
In terms of the inventory, we have the intention to strategically build up the inventory... And going forward, there may not be a sudden increase than what we have seen this year may not be there going forward, but the inventory levels will be slightly usually higher than the previous years.

Indicates a strategic and potentially structural change towards maintaining higher inventory levels, which could impact working capital management and cash flow.

Asked by Dhruv Saraf

New Product Contribution and Market Strategy Direct
more than 50% of the revenue will be contributed by the new products... in the next 3 to 5 years... when we launch a hybrid, it should be tested in the farmers' field only. That's how we also create a programme for building awareness among farmers and show the difference between our hybrid and the competitor hybrid.

Outlines the company's long-term growth strategy through new product innovation and direct farmer engagement for market penetration.

Asked by Krushi Parekh

Gross Margin Sustainability and Future Outlook Direct
The margins this year was close to 46% to 47%. That should remain same in like 1% to 2% plus or minus because of this year, we have high inventory cost. And in cotton, we may not pass on. This year might be slightly stressed. But going forward, there are pretty high chances that the gross margin should go further up as we wisll be increasing in vegetables and other crops.

Provides specific guidance on gross margins, acknowledging near-term stress from inventory and cotton, but projecting long-term improvement driven by higher-margin segments like vegetables and Bajra.

Asked by Yashovardhan

Recovery of Bangladesh Export Business Direct
It will come back... Yes, yes. We can see that Bangladesh is coming back. No, last time, there were a couple of reasons. One was political issue. Second, there was lot of inventory in the market in last year... Now most of the inventories are down, the issue is also sorted out. And I think we can get back to the earlier sales we had in Bangladesh.

Addresses a key reason for the significant decline in export sales and provides confidence in the recovery of the Bangladesh market, which is crucial for export revenue growth.

Asked by Dhruv Saraf

CWIP and Biotech Center Commissioning Status Direct
CWIP of RS. 90 crores on March in the balance sheet... One is we have set up new office space now that is already commissioned. Some part is left out and some goes down for some R&D centres that we are building up. That is in the capital work in progress... Biotech, we have not commissioned yet. It's in the process.

Clarifies the components of the substantial Capital Work in Progress (CWIP) and confirms that the biotech center, a key R&D investment, is still under development and not yet operational.

Asked by Dhruv Saraf

2 min read 6 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

Kaveri Seed Company reported a challenging Q4 FY25 with revenue from operations declining by 4.46% to ₹76.95 crores and a net loss of ₹30 crores, compared to a profit of ₹2.79 crores in Q4 FY24. For the full fiscal year FY25, revenue grew modestly by 5.57% to ₹1121.57 crores, and EBITDA increased by 1.43% to ₹274.29 crores. However, net profit for FY25 saw a 9.48% decline to ₹265.21 crores from ₹293 crores in FY24, partly due to one-time interest entries, increased employee costs, and higher depreciation.

Strategic Inventory Buildup for Anticipated Growth

The company strategically built up inventory, citing anticipation of a good season and the need to maintain a buffer after being almost empty previously. Management indicated that inventory levels, particularly for moving hybrids, would be 'slightly usually higher than the previous years' going forward. Approximately 20% to 25% of the inventory across all crops is intended as buffer stock, with over 95% of current inventory comprising moving hybrids already approved in the market.

Product Portfolio Performance and Future Drivers

Non-cotton segments demonstrated strong performance, with hybrid rice volumes increasing by 13% and revenues by 26%, selection rice volumes up 22% with 39% revenue growth, and maize volumes up 7% with 22% revenue growth. Vegetable seed volumes grew by 3% and revenues by 8%. Conversely, cotton hybrid volumes decreased by 35% and revenues by 27%. The company expects new products, including those launched in the last 1-2 years, to contribute over 50% of revenue in the next 3 to 5 years.

Export Market Challenges and Recovery Outlook

Export sales experienced a significant decline, falling to ₹22 crores in FY25 from ₹66 crores in FY24. This was attributed to political unrest in Bangladesh and the absence of a one-time government order from Tanzania. Management expressed confidence in the recovery of the Bangladesh market, noting that inventories are down and issues are sorted. The company aims for consolidated export revenue to reach ₹150 crores in the next 5 years, expanding into new geographies like Africa and Southeast Asia.

Capital Expenditure and Infrastructure Development

The company plans an annual capex of ₹20-30 crores for maintenance and new plant additions. Capital Work in Progress (CWIP) stood at approximately ₹90 crores as of March, encompassing new office space (partially commissioned) and ongoing R&D centers. The biotech center, a key R&D investment, is currently in process and not yet commissioned. Kaveri Seed highlights its extensive processing facilities, warehouses, and cold storages, stating it has one of the largest capacities in India.

Gross Margin Outlook and Pricing Strategy

Gross margins for FY25 were around 46% to 47%. Management expects margins to remain within a 1-2% range of this level for the current year (FY26), acknowledging potential stress due to high inventory costs and the difficulty in fully passing on a 4% cotton price hike to farmers. However, they anticipate gross margins to improve 'going forward' driven by increasing contributions from higher-margin segments like vegetables and Bajra.

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