PI Industries a safe bet among agri-based stocks: Madhusudan Sarda

In a chat with ET Now, Madhusudan Sarda, Managing Partner, Vallum Capital Advisors Private Ltd, talks about how monsoon may influence agri-based stocks.

ET Now: It seems that the monsoon would be on time this year. What would it mean for the agri industry and are there any themes in particular that you would be tracking?

Madhusudan Sarda: At present, there are expectations that the monsoon would be slightly lower than what it was last year.

That said, with time as the El Niño effect subsides, we should see some improvement on the monsoon front. It should get stretched to October. Since, agri-based stocks have seen a substantial run up in last two years, even as there have been a lot of negative performances within this space in the last two quarters because of the vagaries of rain fall.

So in this space, we like PI Industries for a long time and I feel that could be watch out for even if it reacts negatively to monsoon woes.

ET Now: What is so special about PI Industries? Why do you like only that one from the agri space?

Madhusudan Sarda: We think it is a safe bet due to its de-risked business model. It is dependent on domestic market and has a substantial presence in contract research and manufacturing services (CRAMS). The company makes special molecules for innovators; they do CRAMS for them. That is a stable business, which takes care of the earnings when the monsoon season is not that good.

So, the company is substantially safe in terms of performance and the CRAMS space in India has been fairly successful.

Therefore, if you look at CRAMS in the pharma space, it seems to be an area where a lot of growth has happened over years. We feel agri is a segment where a lot of growth will happen as far as the CRAMS is concerned.