Summary
Kaveri Seed Company Limited - Q3 FY26 Earnings Call Summary Tuesday, February 10, 2026 4:00 PM
Event Participants
Executives 1 Mithun Chand (Executive Director)
Analysts 6 Amit Agicha (HG Hawa & Company), Anurag Jain (Individual Investor), Dhruv Saraf (Bowhead India Fund), Jasmine Sodhi (Wealth Advisors), Sahil Malhotra (Individual Investor), Saania Jain (Care PMS)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations (9M) | ₹1,221.56 crores | +16.94% YoY; Driven by strong volumes in Maize and Selection Rice. |
| Revenue from Operations (Q3) | ₹173.65 crores | +16.08% YoY; Bolstered by non-cotton hybrid growth and export surge. |
| EBITDA (9M) | ₹358.39 crores | +10.35% YoY; Growth tempered by higher production costs in cotton and maize. |
| Net Profit (9M) | ₹308.91 crores | +4.9% YoY; Lower growth relative to EBITDA due to higher cost of sales and tax contingencies. |
| Cash and Bank Balances | ₹309 crores | -₹100 crores YoY (from ₹409 crores); Inflow utilized for inventory building (₹200cr+) and capex. |
| Gross Margin (Q3) | ~500 bps decline | Impacted by high cost of production and inability to pass costs to farmers in Rabi maize. |
| Exports Revenue (Q3) | +86% (Growth) | Significant expansion via new international market registrations over the last 5 years. |
| Inventory | Higher YoY | Reflects aggressive production in Maize and Cotton to meet anticipated demand. |
Geographic & Segment Commentary
- Maize: Volumes increased by 21% and revenues by 42.6% in 9M FY26. While commercial prices fluctuated between ₹1,200 and ₹1,900 per quintal, the company expects major growth in Spring Maize across Bihar, UP, and Punjab.
- Rice (Hybrid & Selection): Selection rice volumes grew 7% with revenue up 14.2%. Hybrid rice revenue increased 17.9% despite volume restrictions in Punjab, the company’s largest market for this segment.
- Cotton: Sales remain impacted by the prevalence of illegal HT (Herbicide Tolerant) cotton seeds and high production costs. Management anticipates a recovery in June 2026 (Kharif season) based on positive feedback for new hybrids.
- Other Crops (Mustard/Sunflower/Vegetables): Mustard volumes surged 64% and Sunflower by 94%. Vegetables saw a marginal volume growth of 1.5% but an 11.4% revenue increase due to better price realizations.
Company-Specific & Strategic Commentary
- R&D Investment: Reinvesting 5% to 10% of total revenue into R&D and breeding. Management expects this to stabilize at lower levels as major infrastructure capex is completed (Mithun Chand).
- Inventory Strategy: Aggressive production has led to a flood of inventory in the market for Maize, causing short-term margin pressure. The company holds 8-9 million packets of cotton seeds, focusing on newer hybrids with 3-5 year lifespans (Mithun Chand).
- Digitization: Implemented digital marketing networks and dealer analytics to track the lifecycle from demand generation to harvest for improved farmer loyalty (Mithun Chand).
- Regulatory Compliance: Management is optimistic regarding the Draft Seeds Bill 2025, noting it will centralize licensing (“one nation, one license”) and better organize the market (Mithun Chand).
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (Cotton) | Recovery starting June 2026 | Based on pipeline of new hybrids performing well in trials; expected to overcome illegal seed pressure. |
| Profitability/Margins | Normalization to 45-48% range | Projected as production costs stabilize and the surplus inventory environment eases. |
| Cash Usage | Decision in Q1/Q2 FY27 | Evaluation of buybacks or inorganic growth opportunities once free cash flow normalizes. |
| Market Expansion | High growth in Spring/Summer | Growth expected in Bihar/UP (Maize) and Gujarat/Rajasthan (Millet) in upcoming quarters. |
Risks & Constraints
| Risk | Context |
|---|---|
| Tax Demands | Income tax authorities have raised demands of ₹56 crores and ₹70 crores. Management is appealing these but has not made formal provisions beyond showing them as contingent liabilities (Mithun Chand). |
| Illegal Seeds | Illegal HT cotton seeds continue to eat into the organized market share. Management expects illegal volumes to remain high in the coming season (Mithun Chand). |
| Commodity Price Volatility | Low commercial maize prices (dipped to ₹1,200) impacted Rabi sowing in MP and Maharashtra. If prices stay below ₹2,000, farmer returns may be squeezed (Mithun Chand). |
| Inventory Glut | Excessive industry-wide production in Maize has led to pricing pressure and high carrying costs for the company (Dhruv Saraf/Mithun Chand). |
Q&A Highlights
Margins and Production Costs
- Question: Why did gross margins drop 500 bps this quarter? (Dhruv Saraf)
- Answer: High cost of production in cotton and maize, combined with an inability to pass these costs to farmers during the Rabi season, impacted margins by 2-3%. Production prices are now stabilizing (Mithun Chand).
Capital Allocation
- Question: What is the plan for the ₹300+ crore cash balance? (Amit Agicha)
- Answer: Cash is currently tied up in inventory building. Buyback decisions will be revisited in Q1/Q2 FY27. The company remains open to inorganic growth opportunities (Mithun Chand).
Receivables and Bad Debts
- Question: Are receivables increasing due to government sales? (Anurag Jain)
- Answer: Receivables rose by ₹75 crores YoY to ₹250 crores, primarily due to higher sales volume. Government business is insignificant; anything older than two years is provided for as bad debt (Mithun Chand).
Inventory Risk
- Question: Is there a risk of cotton inventory obsolescence? (Jasmine Sodhi)
- Answer: Most current stock consists of new hybrids with a 3-5 year shelf life. Management plans to liquidate these over the next few seasons and will resume new production in May/June 2026 (Mithun Chand).
Key Takeaway
Kaveri Seeds delivered a steady performance in 9M FY26 with a 16.94% revenue increase to ₹1,221.56 crores, though Q3 margins faced a 500 bps contraction due to elevated production costs and an industry-wide inventory glut in Maize. Strategically, the company is pivoting toward non-cotton segments, evidenced by a 42.6% revenue jump in Maize and an 86% surge in exports, while maintaining a high R&D spend of 5-10% of revenue to refresh its hybrid pipeline. Despite significant legal challenges regarding ₹126 crores in tax demands and the persistent threat of illegal HT cotton seeds, management remains optimistic about a recovery in the cotton segment by Kharif 2026. Looking ahead, the focus shifts to normalizing inventory levels and stabilizing margins to the historical 45-48% range as market supply balances.
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