Seed industry will continue to grow at double-digit rate: ICRA

NEW DELHI: The domestic seed industry will continue to grow at double-digit rate over the medium term on improvement in seed replacement ratio (SRR) and farmers opting for improved varieties of hybrid seeds, a ratings agency has said.

The favourable policy environment aimed at supporting the usage of seeds through National Seeds Plan (NSP) and boosting agricultural productivity through National Food Security Mission (NFSM) augurs well for the industry, ICRA said in a statement.

The domestic seeds industry, currently valued at $3.2 billion, has grown at a Compounded Annual Growth Rate (CAGR) of 8.4 per cent in volume terms during 2008-09 to 2014-15 to reach 3.5 million tonnes in consumption.

"ICRA expects the domestic seed sector to continue its current pace of growth at early double-digit rate over the medium term. This is largely driven by improving seed replacement ratio (SRR) and increasing adoption of improved varieties of hybrid seeds," it added.

"As improving the level of mechanisation and ensuring adequate irrigation infrastructure is a long drawn process and challenging due to fragmented land holdings, ICRA believes that ensuring better quality seeds to farmers is a relatively low-hanging fruit to boost the agricultural yields," ICRA Ltd Senior Vice-President Sabyasachi Majumdar said.

Based on the agency's sample, the private sector companies witnessed operating profit margin of about 15.5 per cent average over FY11-FY14 as compared to 9.3 per cent for public sector entities during the same period.

The ratings agency also noted that the profitability of private seed companies will remain healthy.

The significant investments in research and development (R&D) and working capital to maintain strong product pipeline will keep the indebtedness for the private sector at moderately high levels, it added.