Distribution Advantage

Rallis India is the second-largest pesticide and agri-chemical company and part of the Tata Group. It has a market share of 13 per cent in India and its network covers 80 per cent of the country. For the nine months ended December 2012, the company posted revenue growth of 10.5 per cent (y-o-y).

Outlook and valuations.
Uneven rains during the kharif season and lower rains during rabi season saw the industry reeling from a generally weak FY13. Tough agri-conditions with the Neelam cyclone in October 2012 affecting crops was visible last quarter while at the same time some states faced drought. But the company expects margins to move up the next quarter with rupee stabilising at current levels. An international contract manufacturing order expected to close in the current quarter is expected to positively impact topline ahead. An improved monsoon in 2013 is the most important hinge for it. The stock trades at 20.1 times its TTM earnings.

How they did it
* The most recent quarter saw a ramp up in the seeds business positively impacting topline growth by 7 per cent
* In December 2010, the Rallis acquired seed company Metahelix and the most recent quarter saw it acquire 22.1 per cent stake in Zero Waste Agro, a company that manufactures organic soil nutrients. It expects to acquire majority stake in FY14

This article was originally published on April 12, 2013.