Study On Agro Industry And Agro Based Products Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2163 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Cause and effect essay Did you like this example? We would like to put forward to you all an Investment Idea, which would be real one worth investing in present market conditions. We considered our target investors to be Moderate Risk appetite and looking for stable returns in the long term. Sectors such as Infrastructure, Construction, Auto, and Consumer Durables, Banking are more interest rate driven industries. Don’t waste time! Our writers will create an original "Study On Agro Industry And Agro Based Products Finance Essay" essay for you Create order In the current scenario interest rates are just 15 20% (approx) behind the highest levels we have seen in recent years or just before recession of 2008. Above that Interest rates are expected to move up in this year further with increasing inflation. So these Industries may not perform as good as in the past in short to medium term period. In this trying period it makes sense to go overweight on conservative but stable return generating industries such as FMCG, Agro Products which have continuous demand for products even in lower liquidity conditions in terms of money. The Indian Agricultural Scenario Total geographical area of India is 328.7 mn hectares of which 140.3 mn hectares is net sown area, while 193.7 mn hectares is the gross cropped area, according to the Annual Report 2009-10 of the Ministry of Agriculture. Agriculture is one of the strongholds of the Indian economy and accounts for 14.6% of the countrys GDP in 2009-10, and 10.23% of the total exports. The sector provides employment to 55% of the work force as per recent numbers. Indias agriculture and allied sector grew by 3.8% in the first 6 months of the current fiscal (2010-11), against 1% in the year-ago period. According to the GDP data released by the Central Statistical Organisation (CSO) on November 30, 2010, the countrys farm sector grew by 2.5% and 4.4% each in the 1st 2 quarters of the current fiscal, against 1.9% and 0.9%, respectively, in the same period last year. The Government is giving highest priority to agriculture and allied sector. The 11th Plan allocation has been considerably higher over the 10th Plan allocation. An amount of US$ 19 bn has been allocated for the Ministry of Agriculture during the 11th 5 Year Plan. Capital investment in agriculture has increased from US$ 1.2 bn in 2007-08 to US$ 3.26 bn in 2010-11 (inclusive of State Plan Scheme Rashtriya Krishi Vikas Yojana), as per a Ministry of Agriculture press release dated August 3, 2010. Production India has become the worlds largest producer across a range of commodities due to its favourable agro-climatic conditions and rich natural resource base. India is the largest producer of coconuts, mangoes, bananas, milk and dairy products, cashew nuts, pulses, ginger, turmeric and black pepper. It is also the second largest producer of rice, wheat, sugar, cotton, fruits and vegetables. As per the Centre for Monitoring Indian Economy (CMIE) farm output will grow by 10% to 114 mn tonne (MT) in the 2010 Kharif season, while Rabi season is expected to report a 2% increase at 116.6 MT. Oilseeds production is expected to rise by 11.1% during the season to 18.1%, sugarcane to notch up by 15.6% to 321 MT and cotton to grow by 12.4% to 26.9 mn bales compared to 23.9 mn bales in the last season. The agency pegs the overall food grain output growth up by 5.3% to 229.7 MT. Major agricultural crops, including food grain, oilseeds, cotton, sugarcane, and fruits and vegetables, are pro jected to grow by 7.2% in 2010-11, while production of non-food crops as a whole is projected to grow by 9.7% in the year. Exports According to the governments Agri-trade promotion body, Agricultural and Processed Food Products Export Development Authority (APEDA), Indias exports of agricultural and floricultural products, fruits and vegetables, animal products, cereals and processed food products was worth US$ 1.14 bn during April-May 2010-11. Indias Agri-export turnover is expected to rise to nearly US$ 18 bn by 2014, according to APEDA. At present, around 70% of the countrys agricultural and processed food exports are to developing countries in the Middle East, Asia, Africa and South America. Indian seed companies are eyeing the export markets in SAARC (South Asian Association for Regional Cooperation) and African countries with a host of hybrid seeds and best farm practices. While some of the companies like J K Seeds, Namdhari Seeds, Nuziveedu Seeds, Nath Seeds, R asi and Vibha Seeds have already ventured into the export markets in the region. Investments The public and private sector investment in agriculture have been steadily increasing since 2004-05. While public sector investments in agriculture have increased from US$ 3.61 bn in 2004-05 to US$ 5.5 bn in 2008-09, private sector investment has increased from US$ 14 bn in 2004-05 to US$ 25.5 bn in 2008-09, according to the Annual Report 2009-10 of the Ministry of Agriculture. Government Initiatives In the Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee has made the following announcements for the agriculture sector: Provision of US$ 86.9 mn to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern Uttar Pradesh, West Bengal and Orissa Provision of US$ 65.2 mn to organise 60,000 pulses and oil-seed villages in rain-fed areas in 2010-11 and to provide an integrated intervention for water harvesting, watershed management and soil health to improve productivity of the dry land farming areas Provision of US$ 43.4 mn for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity Banks have been consistently meeting the targets set for agricultural credit flow in the past few years. For the year 2010-11, the agricultural credit flow target has been set at US$ 81.5 bn Under the Agricultural Debt Waiver and Debt Relief Scheme (2008), time frame for the repayment of the loan has been extended till June 30, 2010 from six months up to December 31, 2009 In addition to the 10 mega food park projects already being set up, the government has decided to set up five more such parks External commercial borrowings are to be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied products, marine products and meat A number of other initiatives are already in place for the agriculture sector, which include The National Food Security Mission was launched in 2007-08, with an outlay of US$ 1.24 bn during the 11th Five Year Plan (2007-2012). It aims at enhancing the production of rice, wheat and pulses by 10 MT, 8 MT and 2 MT respectively, by the year 2011-12 The Rashtriya Krishi Vikas Yojna (RKVY) was operationalised with effect from August 2007 with a n outlay of US$ 5.3 bn during the 11th Five-Year Plan (2007-12). The RKVY scheme aims at incentivising states to increase outlays for agriculture and allied sectors in order to achieve 4% growth in the sector in the current five-year plan. RKVY has encouraged states to step up allocations to this sector. Allocation to agriculture and allied sectors was 5.11% of total State Plan Expenditure in 2006-07 and this has gone up to 5.84% in 2008-09, according to the Annual Report 2009-10 of the Ministry of Agriculture The government has allocated US$ 1.43 bn this fiscal to the states under RKVY, 87% more than in 2009-10 at US$ 763.3 mn According to the Annual Report 2009-10 of the Ministry of Agriculture, the National Horticulture Mission (NHM) was launched in 2005-06. During 2009-10, 201 new nurseries were set up under NHM 100% foreign direct investment (FDI) is allowed under automatic route in Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquac ulture and Cultivation of Vegetables and Mushrooms under controlled conditions and services related to agro and allied sector. Besides the above, FDI is not allowed in any other agricultural sector/activity, according to the Department of Industrial Policy and Promotions (DIPP), consolidated FDI Policy The Planning Commission is working on an ambitious action plan to boost secondary agriculture, which includes value-addition to farm products, in the 12th Five Year Plan (2012-17). According to K Kasturirangan, Planning Commission Member, the sector was estimated worth over US$ 12.8 bn three years back and now it could be more than US$ 21.3 bn The government will provide US$ 6.43 bn in 2010-11 as subsidy to decontrolled fertilisers under the nutrient-based subsidy policy that came into effect from April 1, 2010, according to Mr Srikant Kumar Jena, Minister of State for Chemicals and Fertilisers. Under the new nutrient-based subsidy policy (NBS), the government provides subsidy o n decontrolled (whose MRP is not decided by the government) nutrients such as Phosphorus (K) and Potash (S). A budget estimate of US$ 11.9 bn has been set for fertiliser subsidy during the 2010-11 In April 2010, the Cabinet Committee on Economic Affairs (CCEA) approved US$ 142.5 mn for the National Horticulture Board to implement its existing schemes and promote 25,000 integrated commercial horticulture projects in the 11th Plan period ending 2012. Road Ahead The countrys demand for horticulture products is expected to grow by over 20% to touch 360 MT in 2020-21, according to a study conducted by the Horticulture Society of India. The report said that rising income will create more demand for horticultural products, which will further push the production of such crops in India. The horticulture sector encompasses a wide range of commodities, including fruits, vegetables, potatoes, tuber crops, ornamental, medicinal and aromatic crops. The Indian organic product market, currently pegged at US$ 322.41 mn, is expected to reach US$ 2.15 bn in the next five years, as per, International Competence Centre for Organic Agriculture. Source : IBEF India Brand Equity Foundation About New Age Agro Industry Companies we have considered and selected? There is a new approach towards Agro industry with technological advancement all over the world and India is not exception for that. There are new age companies evolving such as Karuturi Global, REI Agro, Ruchi Soya which have integrated new technologies to be successful in this industry and taking Indian agro industry products to the world. Karuturi Global is focused on Flower plantation and export of flowers world over. It is leading Rose providers to the world. This company came up in just last 5 years with small entrepreneurial efforts of an Individual out of his own need for the product. These days the world and even in India people are becoming more n more health concisions and Soya is one of the leading agricultural healthy food product used to make number of products right from fried snacks to vegetables to frozen foods to Oils and many more. Ruchi Soya used these products to its advantage to emerge as the leader in this category. Our another major company which is mainly into Rice production and selling Agri products activities has established itself as a leading Rice distributor over the last 5 years in India. 1st Company: REI Agro REI Agro Limited engages in processing and marketing basmati rice. The companys activities include procurement, storage, drying, dehusking, polishing, color sorting, grading, inspecting, maturing packaging, branding, and distribution. It sells basmati rice primarily under the brand names of Kasturi, Real Magic, Mr. Miller, Hungama, Hansraj, AI-Tahaan, Ikon, Rain Drop, Mehrab, and Nausheen. The company distributes its products through a network of distributors and retail stores. As of March 31, 2009, it operated 380 retail stores under the brand name 6Ten. The company markets its products in India and internationally. In addition, it engages in wind power generation in Rajasthan, Maharashtra, Tamil Nadu, and Gujarat with installed capacity of 46.1 megawatts. REI Agro Limited was founded in 1994 and is based in New Delhi, India. Company Background: REI Agro Limited was established in the year 1994. REI Agro is the largest basmati rice processing and marketing company in the World. The company carries on an integrated process from paddy procurement to drying, de-husking, milling, polishing, colour sorting, grading, inspecting, packing, branding, distribution and retailing facilities. It has a diversified income stream with strategic forays into the wind energy business with a 35.9 MW installed capacity in Rajasthan, Maharashtra and Tamil Nadu. In 2007, the company forayed into the retail sector of Punjab, Haryana, Chandigarh with the opening of 5 retail stores. It has planned to open 50 more stores with an investment of Rs 50Cr in a year. The Company exports products to Saudi Arabia, Dubai, USA UK. It has a strong pan-India network of 460 dealers, and the products are available across 100,000 retail outlets. Investment Rationale: Companys Half-yearly Profits for the current year of Rs. 90.50Cr are substantially more than last years full year profits of Rs. 60.93Cr. Companys Net Sales have been rising steadily since last 9 years (CAGR of 38.59%) and in FY 2009-10 the company is expected to post yet another year of highest sales in its history. Companys Operating Income has registered a growth of 41.11% in current fiscal amounting to Rs. 2448.23Cr vs. 1735.01Cr in the last year. Companys book value has increased with a CAGR of 38.23% p.a. during the period 2006 to 2009. The Net Worth has risen with a CAGR of 25.28% p.a. in last 3 years from the year 2006 to 2009. Companys Foreign Earnings have been continuously rising since last 7 years with a CAGR of 143.22% p.a. Financial Highlights of the company: Companys Operating Profits have swelled from Rs. 320.58Cr in 2007-08 to Rs. 449.44Cr in 2008-09. Companys reserves have grown at an average of over 29.23% p.a. during the period 2005-06 to 2008-09. Operating income for the period ending March 2009 has increased by 41.11% compared to last years full year income of Rs. 1735.01Cr.