V R Kaundinya, MD of Advanta India said that the company will need $ 45 to $ 50 million for regulatory work in GM clearances. The company will have to ensure better debt to equity ratio.
He further said that Advanta is the largest Sorghum Seeds company in the world. This year has been a bit of a difficult year due to drought. The company could see 10 to 20% organic growth this year, he added.
In recent developments, Advanta India is going to initiate steps for raising funds upto Rs 750 crore. The company is going to raise funds via various instruments and will consult with merchant bankers & advisors. The company is going to explore most expeditious way of raising funds. It will seek shareholder approval by enabling resolution.
Advanta India promoters hold 65.95% currently and maximum promoter dilution could be to 37.16%. The company could be raising funds to expand inorganically.
Advanta India’s debt is at Rs 426 crore in CY08 (taken primarily to fund the acquisitions). Analysts expect this year’s debt to be stable with no acquisitions. Strong cash flow with no acquisitions will reduce debt to equity from 0.9 in CY09 to 0.7 by CY10. Net debt is expected to improve to 0.5 in CY10 vs 0.8 in CY08 without acquisitions.
The company has acquired vegetable seed company, Golden Seeds for Rs 60 crore. It also bought Unicorn Seeds in India for Rs 65 crore and US based Garrison and Townsend in 2008 for $ 10.5 million. Advanta acquired the sunflower seed business of Limagrain and Australia’s Longreach for $ 12 million. The company has delayed the decision of merging Unicorn Seeds with itself due to ‘lack of time’ in last meeting in July.
Sunsat produces sunflower oil, a healthier alternative with less trans fat. The project has been commercially launched in the current year and revenues are expected to accrue only from CY11. The company expects to foray into value added projects such as bioenergy. Sweet sorghum is a feedstock for bioethanol. Advanta has already launched in India and plans to launch in US, Brazil, etc. The company plans to invest $ 15 million in R&D in 2009 as against $ 10 million in 2008. R&D is expected to impact margins -accounted for 7% of revenues in CY08 to go upto 10 to 12%.
The company has leadership focus in Sorghum seeds -that is to be world’s largest contributing 30% of revenue. The growth driver is opening up of GM Canola Seeds in Western Australia. Growing of GM crops was recently allowed in Australia. The company has an early mover advantage in the domestic mustard seed market (it is the first and only one to launch). It is expanding into new geographies-Brazil, China, Europe, Indonesia and is also looking into Philippines. Monsoon might not affect revenues of the company as much as Advanta domestic revenues are 20%.
In the past guidance given by the company, 2009 was suppose to be the challenging year for Argentina due to drought and farmer unrest. Inorganic growth was expected going forward in strategic crop segments and markets such as Brazil. Integrated marketing tie up with United Phosphorus was suppose to impact revenues positively.
Advanta India’s Q2CY09 revenues stood at Rs 201 crore vs Rs 179 crore, OPM stood at 22% vs 25% and PAT stood at Rs 22.2 crore vs Rs 22.6 crore.
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