KAVERI SEED CO LTD (KSCL) Q2 FY23 Earnings Concall Transcript

KAVERI SEED CO LTD (NSE:KSCL) Q2 FY23 Earnings Concall dated Nov. 15, 2022

Corporate Participants:

Mithun Chand — Whole Time Director

Analysts:

Guneet Singh — CCIPL — Analyst

Anurag Jain — — Analyst

Agam Shah — Rspn Ventures — Analyst

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Yogesh Tiwari — Arihant Capital — Analyst

Gagan Thareja — ASK Investment Managers — Analyst

Udhayaprakash — Value Research India — Analyst

Vidit Shah — IIFL Securities — Analyst

Nitin Awasthi — InCred Equities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Kaveri Seed Company’s Q2 and H1 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

Joining us today on this call, we have Mr. Mithun Chand, Executive Director.

Before we begin, I would like to mention that some of the statements made in today’s call may be forward-looking in nature and may involve risks and uncertainties. For a list of such considerations, please refer to the earnings presentation.

I would now like to hand the conference over to Mr. Mithun Chand. Thank you, and over to you, sir.

Mithun Chand — Whole Time Director

Thank you. Good evening, and welcome, everyone, for our Q2 H1 financial year ’23 earnings conference call. We hope you had a chance to review the presentation of our results, which is also available on our website. I would touch upon the operational, financial performance of the company and then open the floor for the question-and-answer session.

Non-cotton segment had grown by 12.36% during the first half of the year due to higher revenue growth from rice, maize and vegetables. EBITDA and PAT margins during the half year grew by 159 and 174 basis points. Growth in non-cotton segments were achieved in spite of more than 20 lakh hectares less rice acreage. Bajra and maize sowing has picked up by registering growth of 10.4% and 2.5%, respectively.

In this quarter, we have announced a buyback of up to INR125.6 cores at a maximum purchase price of INR700 per share. This is the fifth consecutive buy back by the company in the last five years.

Some developments from the industry aspects. The government panel has approved an application seeking environmental clearance of indigenously developed GM mustard seeds, experts said, paving the way for commercial use of the country’s first GM food crop. This the first GM crop to get an approval in the last two decades, this is a very positive move by the government of India.

Coming back to the financial highlights of the first half financial year ’23. Revenue from operations were at INR816.44 crores as compared to INR758.36 crores in first half financial year ’22, registered a growth of 7.66%. EBITDA was at INR259.2 crores as compared to INR229.19 crores first half ’22, increased by 13.3%. Net profits were at INR243.39 crores as compared to INR212 crores in first half, registered a growth of 13.3%. Our cash on book stands at INR497 crores.

Segment wise highlights. Cotton volumes increased by 6.1% and revenue by 1.5%. Hybrid rice volume grew by 5.25%. Hybrid rice industry is growing at close to 3% to 4% over the last few years. We are the second largest player in the rice market. The company has a market share of more than 12.5% as of now. Selection rice volume grew by 17% and revenue by 6.84%, close to 7%. The contribution of new products was up from 19.75% to 25.16% of volumes. Maize volumes increased by 8.68% and revenue by 12.46%. Contribution of new products was up from 23.65% to 35.5% of volumes. Vegetable sales volumes increased by 20.54%, while revenue increased by 18.07%.

Major segments are hot pepper, tomato, gourds and okra. We had good growth in Op’s like coriander and cowpea. We, as a company, have been really investing in R&D and have been agile in bringing multiple user and supply seeds arrangements and going to be the biggest initiatives.

I will now open the floor for question-and-answer session.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Guneet Singh from CCIPL. Please go ahead.

Guneet Singh — CCIPL — Analyst

Hi. Thank you for giving me this opportunity. My question is regarding the tax that has been imposed on our company. I’m of the understanding that if the company owns land or it is leased out by the company and [indecipherable] formed by the company, then no tax will be availed, but government has imposed a tax on us. So what — I mean, how are we proceeding with that? Are we contesting that? And do we have any update on the sales?

Mithun Chand — Whole Time Director

Yes. As we have mentioned to the exchanges earlier, for the financial year ’19-’20, we were claiming an agriculture income that was denied by the tax authority. We have gone for the appeal and filed an appeal against that.

Guneet Singh — CCIPL — Analyst

So that is for the financial year ’19-’20 or –?

Mithun Chand — Whole Time Director

The demand what we got is for ’19-’20 financial year. That’s the only demand what we got, and that’s what we went for the appeal.

Guneet Singh — CCIPL — Analyst

So going forward, do you have any clarity on whether this cash will be levied on us or –?

Mithun Chand — Whole Time Director

Not really. That’s again subject to the interpretation of the authorities. As of now, we are claiming the same benefit. If anything is there, we’ll definitely inform.

Guneet Singh — CCIPL — Analyst

Right. But I believe that can you just elaborate the reason why governments would have imposed the tax on us? Do we not own the land or —

Mithun Chand — Whole Time Director

No. I may not go back to the government side. But our side, what we feel is an agriculture activity, and we are claiming this income for the last many years, and it was allowed. And this is the only financial year where we were not allowed by that, for that we went for the appeal. Once we get the decision, we’ll update it.

Guneet Singh — CCIPL — Analyst

All right. And any potential reason we think why just for that financial year it was levied and not for any other?

Mithun Chand — Whole Time Director

No, we don’t have much of Idea. It’s a routine process what they say, and we’ll update as I said earlier. Any news on this, we’ll update.

Guneet Singh — CCIPL — Analyst

All right. My last question regarding the same, is that the only financial year when it was levied, or previously have we had any other occurrence as well?

Mithun Chand — Whole Time Director

We had only one demand for the financial year ’19-’20. When we got the order, that was yearly mention to [Indecipherable] and it was there in the website. And for that financial year we have appealed for the — we have gone for the appeal.

Guneet Singh — CCIPL — Analyst

All right. Thank you for taking the questions.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Anurag Jain [Phonetic], an individual investor. Please go ahead.

Anurag Jain — — Analyst

My first question is the performance has been good in a seasonally weak quarter. However, the performance — overall performance is clouded by a 50% decline in other income. Other income has dropped from INR15 crores to INR7.5 crores. So what is the reason for this drop in other income?

Mithun Chand — Whole Time Director

Basically, for us, other income is the income generated by investing activities, basically in financial instruments, which I mentioned in the annual report. Basically, it’s real estate fund, long-term, short-term. Based on the maturity of the fund, whenever we get income, we book in it.

Anurag Jain — — Analyst

Okay. Thank you. And I have two more questions related to the balance sheet. The trade payables, the trade payables other than MSEs have declined from INR372 crores. INR372 crores was the number in September 2020. Then it came from — September 2020, I’m comparing September balance sheet only. So September — two years ago, September 2020, the trade payables were INR372 crores. They came down to INR245 crores in September ’21. And now currently, they are at INR180 crores in September ’22. So there appears to be a secular decline in trade payables. So my question was, is there a change in policy or terms with the producer farmers that because of which the trade payables are declining?

Mithun Chand — Whole Time Director

That all depends on what sort of production we are doing, which crop we are doing. In the previous years, we were producing a lot of cotton, and we were having a lot of inventory of cotton. The area got declined in cotton. The other thing is that, as rightly said, even now we are paying advances. I mean, there is a lease agreement and everything, we are paying advances. The production costs we incur much earlier now.

Anurag Jain — — Analyst

Okay. So that is why the payables are decreasing because the farmer is kind of paid —

Mithun Chand — Whole Time Director

But that all depends on the dynamics of the crop and which crop and where we are operating in that. End of the day, the COGS matters.

Anurag Jain — — Analyst

Okay. And another question on the balance sheet was that — from last year, September ’21, the receivables were INR281 crores. They have increased currently to INR366 crores. So my question was that, overall, what are the — how are the industry conditions on recoverability of receivables from the trade and how comfortable is Kaveri on recovering these receivables because these have increased significantly in the last one or two years? And any update on the outstanding receivables from state government, which were earlier provisioned for and we were expecting recovery?

Mithun Chand — Whole Time Director

If you see the receivables and if you see the bad debt percentage of the company which we disclose every time, less than 0.5%. And till date, we had only INR40-odd crores of bad debt for the last eight, 10 years, including the government bodies. A majority of the bad debts are in the government bodies. Otherwise, the trade receivables, we are not much worried about it. But this time, some area decisions got delayed, the receivables took some time, but we are not bothered about the receivables. Most of the receivables will be closed before the year end. Once we see the balance sheet of the year, most of that will be received. And regarding the government bodies, some we have received, some majority is pending, but it’s only started now.

Anurag Jain — — Analyst

Thank you, sir. This is all from my side.

Operator

Thank you. We have the next question on the line of Agam Shah [Phonetic] from Rspn Ventures. Please go ahead.

Agam Shah — Rspn Ventures — Analyst

Congratulations for a good set of numbers. I just have two questions on buyback. Do we have any sense about promoters participation in the buyback, do you have any idea?

Mithun Chand — Whole Time Director

We have clearly mentioned in the screen itself when we gave the public — when we had a meeting, we have clearly indicated to the investors and agents. It’s a clear market mechanism by that, where promoters are not eligible to participate. We are not participating in it.

Agam Shah — Rspn Ventures — Analyst

Okay. That’s it. And in terms of time line, when should this be updated?

Mithun Chand — Whole Time Director

So basically, it’s all very much prescribed in the act itself. We need to go as per the act. But for your information, we’ve already started buying, and we are intimating it to the exchanges every day. I don’t know the current status, but it’s all there in the website and the exchanges, what is the quantity we bought, and as mandatory we need to disclose it every day and that we are doing it.

Agam Shah — Rspn Ventures — Analyst

Okay. All right. Thanks a lot. All the best.

Mithun Chand — Whole Time Director

Thank you.

Operator

We have the next question from the line of Sanjeev Zarbade from DreamLadder Investment Advisors. Please go ahead.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Yes, sir. Couple of questions from my side. I wanted to understand when will the volume growth start contributing to the revenue growth, if you could give some idea on that?

Mithun Chand — Whole Time Director

If you compare this year to the previous year, there was much of a volume growth higher than the revenue growth in most of the COGS. But clearly, in this year, there we have much higher volume growth than the revenue growth. The reason for that this time is that we have given because of the competition in cotton and other crops, we have realized less. That’s one of the reason the revenues are lower. Otherwise, if you see the volumes have grown more than 12% to 15% most of the crops.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Okay. And the second question would be on — are you looking for any acquisitions in field and other related activities?

Mithun Chand — Whole Time Director

As of now, no. We are looking for a vegetable company, but right now, we have a good R&D and we — I don’t think we are looking for any vegetable company. At the same time, we are not saying that we are not inclined to that. If we see any right opportunities, we might go for it. But proactively, we are not working for it. But if you get any opportunity, we will not leave it.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

And last question from my side. When will we see again good numbers like the Bt cotton times in cotton crop? Are you expecting any singular disruptive technology entering the country both in cotton and non-cotton business?

Mithun Chand — Whole Time Director

See, when you talk about the revenues, we are going on a year-on-year basis. And if you see the composition right now when earlier it was like 75% — 70%, 75% to 80% of contributor is cotton. Right now it came down to close to 35%, 37%, which you were saying for the last three years that the contribution of cotton will come down by less than 40%. That is already happening. In all other segments we are growing. But if you see the retail developments what we had like government allowing GM mustard trials so they have parents and then there’s another meeting which is coming up for the BG-2 RRF for the new technology, which is moving [indecipherable] close to a decade. So that’s a very positive thing. If the new technologies come in, definitely we may see good volumes from picking up in cotton as well.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

All right, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.

Yogesh Tiwari — Arihant Capital — Analyst

Yes. Good evening, sir, and thanks for the opportunity. My first question is how is the competition from illegal Bt cotton in the current quarter compared to previous other quarters?

Mithun Chand — Whole Time Director

See, anyhow cotton comes in the first quarter, we don’t see any such sale in the second quarter. It’s only the left-out sale what we get in the second quarter, apart from states like Tamil Nadu, which is a very small state. But if you see illegal cotton, are playing a big role as of now, but most of the governments are against for the illegal cotton, so it has remained stagnant or slightly lower than the as a percentage compared to the previous year. But in the second quarter, we don’t see any change in that. As I said, it’s a very lean quarter. Going forward, now the government is approving for the new technology, so the illegal cotton should come down as a percentage, going forward as the government approves new technology.

Yogesh Tiwari — Arihant Capital — Analyst

So we can expect in the coming quarters the market share which we were losing or the organized sector was losing that will not happen basically because of technology?

Mithun Chand — Whole Time Director

So the coming quarters like three and four quarters, we don’t do any sale in cotton assets. But in the coming year, definitely, the organized sector cotton percentage — organized sector will have a larger percentage in the market. And we are one of the biggest player in cotton. And definitely, we think that we will go back to a market share once the technology comes back.

Yogesh Tiwari — Arihant Capital — Analyst

Sure. And on this GM mustard, if you can quantify what would be like the industry size and what will be the revenue potential or the industry potential for this GM mustard?

Mithun Chand — Whole Time Director

As of now, we don’t have any GM mustard, but mustard has grown close to 7 million hectares across India. And now it’s only moving on to hybridization in mustards. It’s very marginal right now, but it’s moving in that direction. And even the government, as they are importing oil, even government decision for the mustard seeds. Going forward, you see a very good scope for the mustard seeds. The other point what we need to see here is that like mustard is a crop or not or — it’s an important crop. But it’s the first food crop which the GM licensed, which has GM trailing. Going forward, it’s like all food class will come into it. That will open up a new market and a new variant and new crops will definitely add to it, but that is huge potential for companies like us, which have good market in most of the crop where we operate. And we are — continuously, we are venturing into other crops, which will further help us to gain market share in most of the crops.

Yogesh Tiwari — Arihant Capital — Analyst

Thank you, sir. And last one question. So if I look across all the crops like cotton, hybrid rice, maize, vegetable, our revenue — our volume has increased more than the revenue. So is there any pricing pressure or because of competition or something like that where the volume growth — yes?

Mithun Chand — Whole Time Director

Just now I explained that volumes are up this year when compared to previous year. But this time because of competition and because of some other issues, we were not able to realize more, for example, cotton, the realization is much lower than the last year. So that had impacted to some extent.

Yogesh Tiwari — Arihant Capital — Analyst

Okay. And what would be the completion of rabi portfolio?

Mithun Chand — Whole Time Director

And that is a very temporary process. We don’t see that will continue for long. There’s one of the year where there are some cases where we need to reduce the realization based on the competition.

Yogesh Tiwari — Arihant Capital — Analyst

Sure. And what portion of your product portfolio would be contributed — attributed to rabi crops?

Mithun Chand — Whole Time Director

Usually it’s like — rabi, it’s like — we take third and fourth, we call it as rabi, like that should be around 20%, 25% of the sales.

Yogesh Tiwari — Arihant Capital — Analyst

20%, 25%. And how has the season started like in Q3?

Mithun Chand — Whole Time Director

It’s too early, but we see a very good rabi coming up because we see good prices for the maize, and we are actively confident that we can do good sale in maize and even sunflower in second half compared to the previous year. Anyway, even though it’s a very lean quarter, but compared to the quarter-on-quarter basis, I think that we’ll be doing well in the crops where we operate. And if you see this year was a very tough year in terms of the overall cropping conditions, most of the crops were down — the crops came up. Even in tough conditions, we were able to increase our sales and our market share as well. If you see, we have gone to 12.5% market share in rice, which itself shows the strength of our hybrids. And even in maize we have grown by more than 18% in terms of the volumes, whereas industry is less than 5%. Even in sunflower remain the same, we have grown by double more than 200% in sunflower. And even in bajra we grew. So if you see on a crop-by-crop basis, in most of the crops, we have gained market share. And that will — that itself shows the strength of products in the tough condition. And going forward, it will really help us to gain further market share and gain a little more value for us.

Yogesh Tiwari — Arihant Capital — Analyst

Yes. But overall, you are seeing a strong — like for the industry, Q3 has been good, as you told till now, maize prices have increased. And so these factors — because of these factors, it has supported industry in Q3, right? We’re seeing a strong Q3 —

Mithun Chand — Whole Time Director

Yes. The Q3 is only one month now. We are into Q3 only one month now. The season is as of now looks good, the products are just moving out. We see when that portfolio what we have — compared to our portfolio to the previous year, we see a good rabi coming up. Rabi is basically maize product and some rice. We see both crops doing well, and sunflower is also there. So these three crops we are doing well. The other interesting thing is even vegetables, we have seen a good year this year, I mean to say good crop in the third and fourth quarter. Chilly is also moving now. So even that it will contribute. So all contribution — as a contribution of all crops, we see growth for our company in the Q3 and the initial growth.

Yogesh Tiwari — Arihant Capital — Analyst

Sure. Thank you, sir. That’s helpful. Thank you.

Operator

Thank you. We have the next question from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.

Gagan Thareja — ASK Investment Managers — Analyst

Good afternoon. Am I audible?

Mithun Chand — Whole Time Director

Yes.

Operator

Mr. Gagan, I request you to kindly come on the handset, because the audio is pretty low, however.

Gagan Thareja — ASK Investment Managers — Analyst

I am on the handset.

Operator

Yes. This is much more clearer.

Gagan Thareja — ASK Investment Managers — Analyst

Okay. So the first question is on the impending GEAC approval of HTBt cotton. If this goes through, which is very likely to happen, will the price be controlled price that we already see in BG1 or this will be — this will not figure under price control? And secondly, there will be a royalty payment involved for this one [indecipherable] which is there now. Any thoughts on this?

And third [Speech overlap] Please go ahead.

Mithun Chand — Whole Time Director

What you see is then coming to the GMC, it’s the technology is provided by them now. So definitely, there will be a royalty on that. As an industry with the government as an association with the technology provider, we are working out a structure where all the parties should be benefited. In terms of the price control, it’s too early to say whether it’ll be controlled or not, but we are in discussion with the — all the parties involved, and we’ll have an amicable solution for it where we do not have any interest, and it will help the Indian farmers. So the direction will be a win-win situation of all the players.

Gagan Thareja — ASK Investment Managers — Analyst

Right. So I think the acreage under cotton may or may not increase, but there will be a shift away from BG1 to BG2, which might give some scope for market share gains.

Mithun Chand — Whole Time Director

If you see — just sorry to interrupt your question, but it’s not only about the acreage shift. If you see traditionally, Indian acreages or Indian have 12 million hectares plus or minus 2 million hectares for the last 20 years. But there are very new technologies which are coming in right now. One, the technology comes in most of the hybrids might be mechanically harvested or high density plantation. Even though the acreages might be same, but the volume may double or triple.

Gagan Thareja — ASK Investment Managers — Analyst

Right. So you’re saying that with the same acreages, the seed package that you can sell can also double our triple?

Mithun Chand — Whole Time Director

Yes, because the seed rate per acreage is going up. If you see in the traditional way, when you do one packet 15 years back, now that’s come up to two, 2.2. So with the new technologies, it may go up to six, eight packets. There are some countries where they go for 13 packets per acre as of volume as of quantity. That all depends on the technology and what sort of a hybrid you are sowing, whether it is mechanically harvested. So that all comes later on. But it’s a good sign for the industry. If a new technology comes in, the illegal Bt will come down, and we will have a scope to innovate good products and help Indian farmers and improve the productivity. There are various techniques in that. So definitely, the market and there is a scope to increase market share. More things will follow.

Gagan Thareja — ASK Investment Managers — Analyst

And from the perspective of profitability, do you see this as being at the same levels that you currently have on your cotton portfolio? Or do you see that you foresee some material change to your profitability?

Mithun Chand — Whole Time Director

Right now cotton is the least in our portfolio, but definitely going down the line, cotton will definitely improve. Cotton as a crop is a very lucrative crop. Because of some various issues, we couldn’t do much work in the last seven, eight years. But going before that, cotton was a very lucrative crop, and we are pretty hopeful that it will come back to its own levels. And seed is a very important part in the entire agriculture field, one which determines the entire productivity. So seed is a premium product and always there’s a premium on the seed which we sell. So we are not worried about that, and it can easily realized in the market.

Gagan Thareja — ASK Investment Managers — Analyst

Okay. And also, the government has put some restrictions on the usage of glyphosate in that only a certified or registered pesticide trained person can —

Mithun Chand — Whole Time Director

That’s again coming back to the legal Bt, to control illegal Bt. Because illegal Bt, is nothing but resistant to glyphosate. To control illegal Bt, they have done some alternative ways. But once the technology is approved, I’m pretty sure that illegal Bt will not be —

Gagan Thareja — ASK Investment Managers — Analyst

But do you see this sort of delaying the approval or launch process for HTBt or BG2 because the government would want some time before they can control — one season before they can control the illegal HTBt cotton and then bring the legal versions?

Mithun Chand — Whole Time Director

No, that has not begun, because illegal Bt, anyhow illegal Bt, because protein expression in most of the illegal Bt is not there. When you have process, the expression of the protein is different and the quality of the seed and the performance of the seed entirely differs. And I don’t think there might be much delay, again, that’s subject to the government policy. But if you see in the last one, two years, the things how it’s moving and the proactiveness of the government and the technology provider, we are pretty confident that the technology will come very fast. And I think the way how they have given GM mustard on the next meeting, they call for Bt cotton.

So definitely there will be some sort of a breakthrough. And as an industry, we are pretty hopeful and working towards the getting the new technologies, which will indirectly control the illegal Bt also, which is the need of the hour and even government wants that.

Gagan Thareja — ASK Investment Managers — Analyst

Yes. But there are two aspects. One is that you will need glyphosate for HTBt cotton also. So I mean, if the current policy of usage around glyphosate continues, there might be some hesitation in taking up HTBt cotton. And second —

Mithun Chand — Whole Time Director

That’s a different thing. That’s again a government policy. If they approve the Bt cotton legally, then they will give for the glyphosate also.

Gagan Thareja — ASK Investment Managers — Analyst

Okay. And secondly, you will also have to procure the trait and develop your hybrids? Or have you already been in the process of doing that?

Mithun Chand — Whole Time Director

We’ve already given that. We have given many years back for the convention of the parental lines. The lines are already with them. Once the government approves, it will not take more than a season to get the converted lines.

Gagan Thareja — ASK Investment Managers — Analyst

Okay. Right. And secondly, on the tax aspect, I think even the start of this calendar year, around February, the Telangana authority of advanced ruling came out with two ruling stating that seeds cannot be considered as agricultural produce, I mean, hybrid seeds and, therefore, they should attract GST at the 18% rate. Has that had any bearing on the current tax demand raised on you? And do you see — because these rulings might form a precursor or reference, this issue recurring in the future also?

Mithun Chand — Whole Time Director

There are two different aspects. So one, what we are talking about, what we have for the demand for the income tax, not the GST rate. The advanced ruling act is related to GST. Even that clearly mentioned that only not the seed process, but anything which is processed and sold in the secondary market should be taxed, not the primary product. We have got the GST exempted, which is there in the ruling itself, that is secondary source.

Gagan Thareja — ASK Investment Managers — Analyst

Okay. So you don’t see any risks from that?

Mithun Chand — Whole Time Director

Any risk for that because I’ve — from the GST console itself, the seed is exempted.

Gagan Thareja — ASK Investment Managers — Analyst

Right. And just your thoughts on — because you have your ears close to the ground, if you could give us some idea of how the market is currently sort of formed between you and your competition in your various significant crops? And how do you — because hybrid rice you’re saying market is growing at 3%, 4%. If you could give some idea of each of these crops, the outlook for the coming rabi and followed up by the next Kharif, it could help us understand —

Mithun Chand — Whole Time Director

Sure. If you see this year, as I explained in all the questions, even though this year was a very tough year in terms of the hybrid market, there are many alternate crops, the crop got shifted. Even in that scenario, we were unable to grow the crop where we operate, for example, in Maize, we have grown by more than 18% in volumes. In terms of the revenue, it might be 13%, 14%. But in terms of the volume, we have grown by more than 18%. In hybrid rice we have grown in, varietal rice we’ve grown more than 17%. In cotton also, we have grown. So that itself shows a sense of our hybrid when compared to the competition. And we are pretty confident going forward that we have very good present hybrids and a good set of pipeline hybrids, which will help us to increase market shares. And as an advantage for Kaveri that we are bearing most of the cost where we — across all the portfolio, and we are the only company in India to have such a large portfolio and presence across all states. Any cropping pattern shift or change based on the seasonality may not impact much because we have the other alternate crops to cater to the market. And we have again added to — we have added mustard to our portfolio. We are working on pulses and soybean, even though that is not a big market as of now. We are working on those all segments. We have intensified our bidding program in R&D in vegetables. So that is also helping us to grow.

So in all our aspects, in all directions, we are not leaving any area, including exports we are targeting. So that gives us confidence that we’ll grow much better than the market and will increase our market share going forward based on our portfolio. We are pretty confident about that.

Gagan Thareja — ASK Investment Managers — Analyst

Thanks, sir. I’ll get back in the queue. Thank you.

Operator

Thank you. We have the next question from the line of Udhayaprakash from Value Research India. Please go ahead.

Udhayaprakash — Value Research India — Analyst

Hi, sir. Thanks for the opportunity. I have two questions, both related to the rice segment. The growth in hybrid rice has been low compared to selection rice. And when we go to revenue on a half year basis, revenue and hybrid rice has actually fallen by 1.3%. Can you please tell me what is the reason between this? And my second question is, can you please elaborate the difference between the hybrid rice and selection rice because selection rice has seen a much better growth in the first half of this year. So what influences someone to buy it?

Mithun Chand — Whole Time Director

So basically, the difference between hybrid and selection rice is that hybrid has a different parent, different breeding activity, where the seeds of that may not be used again. The cultivation and the process is different. I mean these are not much different, it’s same. But the technology and the adaption and the process to arrive to that is different. Basically like the hybrid and selection is nothing but the varieties in hybrids. Whereas selection rice or research varieties which are developed by our company, our own company, not by any other government body, which is developed by our own and we sell it to the market. If you see in terms of [Speech Overlap] sorry?

Udhayaprakash — Value Research India — Analyst

Yes, sir. The reason for the flat growth in hybrid rice compared to selection rice?

Mithun Chand — Whole Time Director

As I said, this year, it was a very tough market in hybrid as compared to the previous year. The acreages were under pressure. As I said in the call itself that 20 lakh acres were down when compared to the previous year. Even in that scenario, we are able to grow more in rice. Research rise because there were heavy rains and the process got delayed, that’s the reason they have moved to research rice. That’s where we have seen a growth of more than 17%. So both are rice segments based on the seasonality and the adoption they move in those directions.

Udhayaprakash — Value Research India — Analyst

So is there margin difference between hybrid rice and selection rice, or the margins are all same?

Mithun Chand — Whole Time Director

Basically, the margins more or less in all the crops remain same, apart in one or two segments. But most of the crops we operate are same margin more or less let’s say between that 25% to 35% margin, all non-cotton crops. It will be in the same line.

Udhayaprakash — Value Research India — Analyst

Okay, sir. Thank you. That’s it from my side.

Operator

Thank you. We have the next question from the line of Vidit from IIFL Securities. Please go ahead.

Vidit Shah — IIFL Securities — Analyst

Hello, sir. Thanks for taking my question. My first one was on the GM mustard trial approval that we’ve got from the government. Are there — what are the crops that are also being considered if you could shed some light on the crop that the government is currently considering for approval would be very useful? And post approval, how long will it take to roll out these variety seed — hybrid seeds in the market?

Mithun Chand — Whole Time Director

I’ll come back to the question, the first trial what they’ve approved in the last 20 years. There are many crops which are lined up, maize is there, rice is there, brinjal is there. There are many other crops, soya is also there. But right now, government has given approval for trading of mustard. Is that is up, it may take a couple of years to get because you need to get the technology, and then you need to transfer the technology to the other hybrids. So it may take two or three years. But even though it is taking time, it may take two, three, four years down the line, but it is a very good sign to get new technologies and the process will be very much simplified and very much under the side banks. So that is a very positive sign.

Vidit Shah — IIFL Securities — Analyst

Okay. Understood. And sir, noticed that in the tax expenses, there’s about INR1 crore of tax pertaining to earlier years. And as an effective tax rate also the quarter reported a 60-odd percent effective — 50-odd percent effective tax rate. So I mean, what’s the reason for such a high tax expense in this quarter?

Mithun Chand — Whole Time Director

See, that INR1 crore is a very small quantum. And again, whatever tax we paid is on the other income what we generated. It’s not on the business. So based on the fund redemption, based on the income what we got, the tax there is.

Vidit Shah — IIFL Securities — Analyst

Okay. Got it. And just one clarification was on the EPS. I think the statements say an EPS of INR0.28. Is this correct because the share count seems unusually high using this EPS.

Mithun Chand — Whole Time Director

Sorry?

Vidit Shah — IIFL Securities — Analyst

The EPS that you reported on a consol basis is INR0.28 per share.

Mithun Chand — Whole Time Director

I just need to check it because we have got close to INR12 crore of equity with the INR2 face value close to 5.8 crores share then divided by profit. I just need to check it. I don’t have the figure right now that maybe anything is there. Usually that should be right. But I’ll again reverify, and if there’s a fault, I’ll correct it.

Vidit Shah — IIFL Securities — Analyst

Okay. Thank you so much.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello, sir. So I would like to ask once the HTBt cotton comes in and like you said, you’re working on parental lines, but you also have a stock of older fees if you carry the stock for a very long time. What happens to that stock? Do you write off the entire stock of seeds? Or what happens to that stock that’s what I want to know.

Mithun Chand — Whole Time Director

Basically when you get HTBt, it’s not possible to convert the entire volume into HTBt in the next one or two years. It will take some time to convert because we need to have the parental seeds to multiply and then sell it. So in the due course, we’ll not produce the old seeds, we will produce the converted seed and will balance in that. Usually, the running hybrid seed doesn’t have the risk of fading it, putting it out.

Nitin Awasthi — InCred Equities — Analyst

Okay. Understood, sir. So there will be balancing basically till the time that seed is actually coming into commercial production, you’ll end these seeds and you won’t produce any of the prior seeds?

Mithun Chand — Whole Time Director

And it is a combination of all, first year it might be 2%, 98% then straight will increase the percentage in that way. That’s how it happens.

Nitin Awasthi — InCred Equities — Analyst

Okay. Understood. So secondly, companies much smaller than your goods sales in the seed segment are moving into different countries in the Southeast Asian markets. And obviously, there is government letting given because of which those things wouldn’t have happened. So diplomacy is very highly required for seed companies to go into different countries. But we don’t see that happening with your company. Is there a reason specific for that? Or are you also looking to move into Southeast countries, south eastern countries, but just had not been able to break ground as of now? Could you just highlight that or give your thoughts on this?

Mithun Chand — Whole Time Director

We are mentioning in most of the calls saying that we are working in seven different countries, even though a few are exports. We are doing an export business of more than INR20 crores for the last five, six years. But that is majority from the Bangladesh, Pakistan, Nepal and these are the countries. We have given our seed in the south eastern countries and some African countries, especially in Indonesia, Thailand, Philippines and in African countries. We have been in the trialing stage. Once we get the approval, we’ll market it.

Right now, we don’t have the research center there. We don’t want to set up a research center strategically as of now because some of the hybrids are suitable for their conditions. So we are trailing and the initial trials gave a very positive things, and we are trailing for the last two to three years, and we have exported some this year also.

Nitin Awasthi — InCred Equities — Analyst

[Speech Overlap] Why the question of not setting up R&D centers in countries in Africa because Africa as a continent, is emerging as the fastest basket list of countries which is approving GMC. So why the apprehension of not setting up an R&D center in one of those countries and exploiting the opportunities there?

Mithun Chand — Whole Time Director

So one thing, we have a good market in India, first thing. We are focusing more on Indian market. The other thing we are — at the same time, we are not neglecting the other countries, but we need to have a proper strategy to grow there because you know much about the African countries, no Indian company is successful there in Africa. There are many countries who has been doing research in the last 15 years. But no one has done enough — leaving apart a company or two, no one has been successful in doing business in Africa. And for example, cotton, we are not allowed to sell cotton there because the technology is a BG technology here.

In terms of the maize, they go with the white maize. We have the yellow maize here. So there are some constraints, but at the same time there are some countries where some products which are similar to us can be marketed there. So far, we are exploring that country. And there is a strategy when we are going to southeast Asian countries, maize and rice are the big crops. So in these two crops, we have very good portfolio and very good R&D. And we have some products which are suitable for those areas, climatic conditions. So we want to explore that, we want to have some market, some distribution network and then set up an office. For example, in Bangladesh, we are doing for the last three, four years, we were doing some distribution channel. Right now, we want to set up a company in Bangladesh. Once we have some decent size, and — we don’t want to bleed and we don’t want to expand unnecessary where we can’t manage. And you know Africa very well, the conditions are different, the policies are different and as they write, every morning is a different morning there.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. That explains it. Thank you so much.

Operator

Thank you. That was the last question. I would now like to hand the conference over to Mr. Mithun Chand for his closing comments.

Mithun Chand — Whole Time Director

Thanks all for participating in the con call. For any further clarification, you can reach our Investor Desk for any time to the number mentioned in the presentation. Thanks all.

Operator

Thank you. Thank you for the joint call. For any further into, please be in touch with Rama Naidu from Intellect PR. On behalf of Kaveri Seed Company Limited, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.