Several cotton growing Indian states has dented sowing due to inadequate rains and hit hybrid seeds sales hard and producers have seen nearly a fifth of seed returns from their distributors, double that of last year.
Normal returns from seed dealers hover at around 10% a year, adding to the woes of Indian hybrid seed firms that are currently in a prolonged wrangle with the global seed giant Monsanto BSE 1.76 % on royalties. Hybrid seed manufacturers could see 300-400 basis points fall in profitability this time, say analysts. Cotton growers have shifted to other crops like pulses and corn.
The manufacturers are claiming that through the distributors seeds are getting returned. “”Stocking of seeds also entails additional expenditure”.
The y-o-y fall in cotton acreage was about 50% as of June 2016 as per the figures published by the ministry of agriculture. In Punjab and Haryana, cotton acreage fell by 27% to 7.56 lakh hectares as against 10.3 lakh hectares last season due to the fear of whitefly pest attack. Indian hybrid seed firms are already burdened with unsold inventories over the past two years and writing off the stock would impact their profitability, say analysts. “As against 18-20% EBIDTA.
The Indian seeds industry, which is currently valued at $3.2 billion (approximately Rs 19,200 crore), has grown at a compounded annual growth rate of 8.4% in volume terms over FY09 to FY15 to reach 3.5 million tonnes (consumption), said a 2015 report by ICRA India.