Government’s decision to allow FDI in agriculture to boost growth

India’s biggest seed company Advanta was trading over 30% below its peak valuation in early March 2013. Yet the stock has generated over 50% returns for its shareholders in the past one year. The company will certainly be a favourite as the industry’s prospects appear bright, especially with the government set to open up the sector to atttact foreign investment.

For the quarter to June ’13, Advanta reported a spurt of over 120% in net profit to Rs 31.7 crore at the consolidated level. For the first half, profits were up 35% year-on-year. This strong performance comes on the back of a very good year in 2012, when it posted a near five-fold spurt in net profit.

India’s seed industry is expected to grow at a CAGR of 17% over the next four years. The government’s decision to allow FDI in the sector makes the industry more attractive even for private equity funds. “In the long run, the prospects of the (seed) sector would be good. In fact, this sector would be one of the best sectors to play in the entire value chain,” says Sandeep Raina, AVP, Retail Capital Markets, Edelweiss Financial Services. Advanta could well be a beneficiary then.