India's hybrid seed sector heading for next wave of consolidation

The Indian Rs 12,500-crore hybrid seed sector is heading for its next round of consolidation as rising costs and increased price regulation squeezes margins of the companies.

Several large seed producers with deep pockets, both domestic and multinational, are hoping to buy financially strained or "technologically rich" smaller firms with a sizeable geographical reach and distinct product portfolio.

The Indian hybrid seed market, with over 300 companies, has been growing at 15-20 per cent annually over the past several years and is projected to reach around Rs 18,000 crore by 2018. About 10 domestic and multinational companies control over 80 per cent of the market.

SVR Rao, a seed industry veteran, said several seed companies were actively scouting for small- and medium-sized seed producers. For instance, the Blackstone-backed Nuziveedu Seeds, which bought two seed companies over the past three years, is once again actively looking at acquisitions.

"The company is looking at target entities that have strengths in brand, market reach, supply chain and research areas," said Rao.

Nuziveedu Seeds chairman Mandava Prabhakar Rao, who is also the president of the National Seed Association of India (NSAI), conceded that the company is looking at acquisitions, but said nothing has been finalised.

"The target company should bring on to the table more value, market share and help us expand our presence either in the existing or newer hybrid product segments."

The major deals in the past couple of years, include Rasi Seeds acquiring Bayer's corn seed business last May, Delhi-based Crystal Crop Protection buying Rohini seeds and French company Limagrain taking over vegetable seed firm Century seeds, both in 2012.

SVR Rao said some multinationals were hoping to acquire Nagpur-based Ankur Seeds, which is strong in cotton and vegetable seeds.

Confirming the interest from global players, Ankur Seeds managing director MG Shembekar told ET, "Some MNCs did approach us but we turned them down since we were not in need of funds but were looking at partners who could provide us with innovative technologies to help us strengthen research capabilities."

Nuziveedu's Rao said only hybrid seed companies that have sound R&D capabilities and maintain high product quality will survive. "Access to technology makes the difference in the long term."

Kailash Gandhi, analyst with the Mumbai-based Wallfort Financial Services, said, "Apart from the MNCs, such as Bayer and Monsanto, that are looking at acquisitions and strategic partnerships in the domestic market, a few major Indian companies are also exploring opportunities to expand their presence in some of the untapped geographies and newer seed segments."

Buying out of smaller companies with strengths in market reach and product portfolio helps the MNCs and large domestic seed producers save precious time of at least six-seven years, said Gandhi.

Hyderabad-based Kaveri Seed Company is also looking at consolidating size through alliances, said its executive director Mithun Chand. "We are now looking at alliances that offer us access to superior technologies."

Expressing concern over the financial pressure on small and medium seed producers, K Niranjan Kumar, member of the NSAI, said one of the key problems the SME segment facing was absence of adequate financial support from the institutional lenders.

Kumar, who is also managing director of Garc Seeds, said, "The financial support from lenders is inadequate to expand research work to come up with better seeds and compete with large domestic and multinational players."

For more information regarding India seed market visit India Seed Industry Outlook to FY’2018