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
(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.
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
