Kaveri Seed Co. Ltd. does not see much of an impact on its profitability due to the government slashing prices of genetically modified Bt cotton seeds by Rs 60 per packet, but expects lesser innovation in the field going forward.
Yesterday, the agriculture ministry reduced prices to Rs 740 per packet of 450 grams from Rs 800 earlier, financial daily Mint reported.
The move may lead to lesser innovations, and research and development by companies in the field as hybrid seeds become less profitable, G Vijay Kumar, chief financial officer at Kaveri Seeds, told BloombergQuint. The company commands 20 percent share in the Indian cotton seed market, with nearly 67 percent of its revenue coming from cotton sales.
The government has to think in a holistic manner. If companies are not able to bring hybrids to the market, how will the farmers increase their output?G Vijay Kumar, CFO, Kaveri Seeds
He sees the price cut to have a meager impact of Rs 10-12 crore on the company’s net profit on a base of around Rs 800 crore. The company had reported net sales of Rs 70.64 crore and net profit of Rs 5.43 crore in the quarter ended December 2017.
“We are looking at a 15-20 percent growth in business and we are more concentrated on non-cotton business than cotton because those products makes 5-7 percent more margins for us,” Kumar added.