Agri stocks to scale up further despite the recent run: Dhiraj Sachdev

In a chat with ET Now, Dhiraj Sachdev, Senior VP & Fund Manager, Equities, HSBC Asset Management(India) Pvt Ltd, shares his views on Agri sector, Excerpts:

ET Now: You have a very large exposure to agri, a trade which I am sure has worked very well for you but is there still some more steam left in the top agri names you own?

Dhiraj Sachdev: We do own fairly decent exposure to the agrochemicals business. It has the characteristic of just like a pharmaceutical business where the business is less capital intensive in nature and it is scalable. You still has huge acreage of farm cultivation which is under penetrated and in terms of usage of agrochemicals.

So we like the business model with high ROEs and scalability and the valuations are probably at a discount to the likes of pharmaceutical businesses. So we do believe that they can scale up further despite the recent run-up and earnings momentum should continue.

ET Now: So you are happy to own UPL, Kaveri, I mean the agri stocks which are up for more than what…?

Dhiraj Sachdev: Yes, so the business models of each of these companies may be very different. So seed company may extremely do well if they are able to scale up, there are insecticide companies, there are other segments of agrochemicals. So the business model of each of these companies may be very different. Some of them are export-oriented in nature, the likes of UPL that you mentioned.