JK Agri Genetics Ltd - Repeat

CMP = 318

JK Agri Genetics Ltd was part of JK Tyre and Industries and later  demerged into a separate public limited company in 2003. It is leading agri-biotech hybrid seed company with pan Indian presence. Its activities include plant breeding, biotechnology R&D, seed production, processing and marketing of hybrid seeds of various field crops and vegetables. The Company has a wide product range covering all the major commercial segments of the seed business and catering to the requirements of farmers in most of the agro-climatic segments.

JK Seeds Documentary

https://www.youtube.com/watch?v=VYvx225JJyg

 “JK Seeds” the flagship brand, is one of the most trusted seed brands in the country. The Company’s product range can be classified under two major categories, viz., field crops and vegetable crops:

Field crops

It includes hybrids of bajra, jowar, maize, rice, cotton, sunflower, mustard, wheat, pigeon pea, castor etc.

Vegetable crops

It includes hybrids of tomato, bhindi, chilli, watermelon, muskmelon, gourds, brinjal, radish, cabbage, sweet corn, cucumber etc.

Fodder Crops and Plant Growth Solutions 

The company has added new products to expand the portfolio.  

Production and R&D facilities

Company has a team of over 80 scientists working across 7 breeding research centres and 23 multi-location trial centers covering all agro-climatic zones of India. The research centres are located in Sriganganagar, Sonepat, Lucknow, Hyderabad, Bangalore, Dharwad and Jaipur. The facility is well equipped with Dehumidified Cold Storage, Germplasm Bank for keeping the valuable germplasm lines of the mandate crops.

Company has established its state of art biotech laboratory, with facilities for tissue culture, transgenic crop development, molecular biology, molecular breeding, radio isotope laboratory, molecular QC laboratory, insectary and large containment green houses


The company has earned name for itself amongst the farming community through its quality products.  Company has several collaborations with national and international institutes like Dr. Balasaheb Sawant Konkan Krishi Vidyapeeth, Dr. Panjabrao Deshmukh Krishi Vidyapeeth, Directorate of Rapeseed-Mustard Research, Indian Agricultural Research Institute, International Crops Research Institute for the Semi-Arid Tropics, International Rice Research Institute, Seed Vision, etc, for research and development. 

JK PASS PASS COTTON

JK Pass Pass has been very well accepted in the markets. Since it takes 3 years for a good seed variant to be commercially successful

https://youtu.be/84O8kliCXBM

JK SEEDS PADDY HYBRID JK2082

https://youtu.be/aCqHQQkvZn4

Investment Rationale

Now Indian Farmers are adopting and using more hybrid seeds due to disease and pest resistant properties. It also helps in reducing the losses and cost of production. Hybrid seeds has resulted in many advantages such as yield improvement, better quality agri output and ultimately higher profitability for farmers.

Any Genetically Modified (GM) technology in the market has to first go through rigorous research, development and testing and then seek GEAC approvals, which is a long process and takes around 5-7 years (It is the normal cycle for a seed to be commercialized). Further, developing such technology involves huge cost implications. As such, the entry of a new technology is subject to regulatory approvals and huge investments which create significant high entry barriers. 

JK Agri Genetics has achieved unique distinction of being the first Indian company for commercializing Bt Cotton with indigenous GM Technology 

JK Agri R&D team has delivered good hybrids in Cotton, Corn, Paddy, Bajra, Mustard, Wheat and vegetables. Company has spent around 7.15% of its total income on research & development during FY19.

Ethiopia has approved the commercialization of JK Bt Cotton after five years of field trails  by the Ethiopian Institute of Agricultural Research and JK Agri Genetics.  Ethiopian government has launched the New Cotton Development Strategy (NCDS) which laid out its plans for the coming 15 years (2017-2032) to make Ethiopia one of the world’s top cotton producers with annual cotton lint production of 1.1 million metric tons. Ethiopia has declared strategy to increase the  cultivation area of cotton from 80,000 hectares to 250,000 hectares in next five years and one million hectares till 2032. JK Agri  will be the only approved Bt cotton seed supplier in the Ethiopian market. It gives huge growth potential for JK Agri.

Ethiopia Govt Approval for JK Bt cotton for commercialization

https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Agricultural%20Biotechnology%20Annual_Addis%20Ababa_Ethiopia_2-11-2019.pdf

https://www.eiseverywhere.com/file_uploads/ab61a379f9e9c38b551c623a2dfa0faa_e_Recorder-Vol2_18.pdf

(refer page # 29 -30 -31)

Swiss Govt Approval for JK BT Cotton

https://bch.cbd.int/database/record.shtml?documentid=114535

It is expected that exports will pick up in coming quarters for Ethiopia.  The margins there will be much higher due to absence of price caps. Ethiopia approved commercialization of Bt cotton in order to boost yields and production. Last year, the GOE approved two different varieties of Bt cotton seeds (JKCH 1050 and JKC 1947) for commercial cultivation. There is an ongoing preparation to import the Bt cotton seeds from India for upcoming planting season.

https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Ethiopia%20Cotton%20Production%20Annual_Addis%20Ababa_Ethiopia_5-29-2019.pdf

(refer page # 2 - 4 )

Recently company has raised 50 crores fund to meet the additional working capital requirement for African business by allotment of Equity Shares and fully Convertible Warrants on Preferential basis to the promoters at Rs 484 per share. Shareholding of the Promoter Group has gone up from 23,22,207 Equity Shares (64.44%) to 33,55,264 Equity Shares (72.36%) assuming full conversion of Warrants. 

https://www.bseindia.com/xml-data/corpfiling/AttachLive/68695a5d-8920-4590-91e7-1ad1e952e82f.pdf

https://www.bseindia.com/xml-data/corpfiling/AttachLive/FD034A65_1AB6_48B5_854C_EF625137EF25_190714.pdf

JK Agri is focusing to increase the share of the vegetable segment due better margins compared to other field crops and cotton.

Domestic business of GM Cotton seed is facing headwinds due to price capping on it. Company is succeeded in commercialising the Bt. Cotton technology in 2 countries where there is no price cap on cotton seeds.  JK Agri Genetics finds fast growing Ethiopian market for its Bt cotton seed which is very lucrative proposition for the company.  

Growth possibilities in seed industry are very huge in India because very few companies are with good R&D capabilities and just 6 - 7  companies like Monsanto, JK Agri,  Kaveri, Rasi seeds, Nuziveedu, Nath-bio are having infrastructure for business scalability. Government is betting big to boost agriculture output. Indian seed industry is expected to grow  at a CAGR of 13.6% during 2019-2024, reaching a value of US$ 9.1 Billion by 2024. Advanced research and technology will change the seed industry to increase the per acre productivity. Seeds will change the way agriculture in the coming years. 

https://www.seedworld.in/pdf/SeedWorld2019-Report.pdf

Feeding a huge population in the next decade has become mammoth task for most of  the asian and african countries. Reduction in cultivation area is adding further pressure. It is not possible without increasing  agriculture output with high yield and disease resistant hybrid seeds.

JK Agri is marketing its products across 25 states through a wide network of 18 carrying and forwarding agencies, 1500 wholesalers / distributors and more than 20,000 retailers.

JK Agri Genetics has very experienced promoters and management team. It is part of the JK Group (East), which is more than 100 years old diversified business group with interests in company like JK Lakshmi Cement, JK Tyre & Industries, JK Paper, Bengal & Assam Limited and JK Fenner Limited. Company has appointed Dr. Gyanendra Shukla as President and Director (CEO) w.e.f May 23, 2019. He is having three decades working with leading multinational agri  companies like Monsanto, Bayer Corporation and Syngenta. 

Conclusion

‘JK seeds’ is well established brand name among the farming community.

Agriculture is the dominant occupation in India, which create abundant opportunities for research based companies like JK Agri which is continuously delivering high yielding, disease & pest resistant hybrid seeds through its dedicated R&D team.

Indian seed market is at point of inflection with future growth above 13% for next decade. Ethiopia is having potential of Rs 150 - 500 crore cotton seed market and it will be  gamechanger for JK Agri due to market monopoly.


Earlier we have bought JK Agri stock on 15 March, 2015 at Rs 450. It has made its life time high of Rs 1925 on 1 August, 2018. Recent market correction has given again great investment opportunity at right time to buy it at multi-year low level of Rs 318.  It can be bought with 10-20 % of allocation.