AGRICULTURE / FARMING - THE NEXT BIG ' THEME ' IN INDIA ?

Different ‘themes’ catching up in any stock market time to time,

and company’s from such sectors giving many fold returns in

short period. In India ,earlier it was IT, then Real Estate

(based on land bank stories), again Power, Education,

Bio technology …etc. A common feature in all these times are

,lot of companies changing their name to add such hot ‘tags ‘ along

with their name to lure retail investors in order to rig the  price

easily  and then offload their own shares to public at higher rate

and make money. Most of these chameleon companies may not

have any relation with such new ‘themes’ other than its names .

So even if that theme really works ,price of  such name changed

companies will not  sustain at higher level when people realize

the facts. What I mean is  , don’t buy a stock  only because

of its name but do  some basic  home work to ensure that the

particular company have at least some operations in such high

potential ‘theme’ sectors.                

          Considering the thrust of government ,changing lifestyle

and disposable income level - ‘Agriculture’,  to more specific

‘Farming’ is considered as the next big theme in India.

All allied businesses of farming are expected to get re-rated

in future which include Micro Irrigation , Seeds,

Agrochemicals, Bio fertilizer, Pesticides, Micro nutrients etc.

(Since the prices of most of the fertilizers other than Bio

fertilizers are  under govt control in India  , this sector may

not out perform) .In the first leg , till farming developed in   a

corporate level and production of such agri products improve

substantially  ,companies processing these agri products

without proper backward integration may face stiff margin

pressure. In order to avoid such a contraction  in

margins , food processing companies should go for

farming and produce - what they need.

              Unfortunately most of our listed players with ‘AGRO’
tag are merely processors of agri products after procuring the
same from farmers. So when we look into investment
opportunities in agri related company’s  ,we should clearly
distinguish  whether the company is in farming and  related
sector or only in agri processing sector. If it is in agri
processing sector only , it may enjoy a valuation which is
available for food processing sector now and not get a
premium as in the case of  farming may get in future. Needless to
say ,JAIN IRRIGATION is the undisputed beneficiary 
( by all means ) of improved activity in farming related sectors
 and it is difficult to imagine another company in near future in
its place due to its top class management , aggressive and
 inorganic growth plans , and integrated status. We have
already discussed some other companies like Aries agro ,
Rungta Irrigation ..etc in past  and expected to bring few
more companies to your attention in coming weeks.
So before catching anything with ‘AGRO’ tag –Think twice