Introduction to top 30 Agricultural stocks to buy in India: India’s economy is largely dependent on agriculture, which means that almost 58% of its workers depend on it to make a living. According to the Indian government, this sector accounts for 17.8% of the GVA of the country. India’s agricultural sector is largely a pillar of the Indian economy and plays a significant role within the country’s socio-economic system. It is no surprise that agriculture and other allied activities are important to domestic consumption.
India has greatly increased its production in agriculture in both volume and variety to ensure food security and a fair share of exports. Due to this significant change in the agricultural industry, the agrochemical industry has experienced significant growth, making India one of the world’s largest consumers of agrochemical products. Among the factors driving the growth of this industry are a rapidly increasing population and the necessity for economic growth. Furthermore, various bottlenecks such as soil degradation, lack of water supply, shortage of land due to urbanization, and so forth are also contributing to farmers’ dependence on agrochemicals.
India’s Union Budget 2021-22 made clear that farmers sit at the top of the government’s agenda and referred to ‘Aspirational India’ in general terms. FM Sitharaman has pledged to double farmers’ incomes by 2023 in accordance with that commitment. Providing the necessary push to the agricultural sector, this has very positive implications for the industry.
As a farmer’s income increases, his buying power increases, as does his ability to invest in better harvest production such as Improvements in seeds, crop protection products, tractors, irrigation systems, etc. can increase output as well as a farmer’s disposable income. With an emphasis on building an export-oriented economy, the government has pumped approximately Rs. 131,000 crores into agriculture and related sectors over the past few years.
The agriculture sector is one of the most important sectors in the country, with considerable scope for expansion; the sector has a great demand for time-tested and proven products such as pesticides, tractors, and existing irrigation systems. Moreover, there is scope for innovation with the advent of new and more efficient agricultural techniques and products, such as biologicals, hybrid seeds, organic fertilizers, and pesticides, as well as new irrigation techniques and other upcoming products.
As a result, agriculture offers plenty of investment opportunities. Investments can be made in agricultural companies that provide products and services. In addition to fertilizers (nitrogen, phosphate, and potash), pesticides (which protect plants against insects, fungi, weeds, and other nuisances), seeds, crushing and processing, and livestock are also included.
Guide on top 30 Agricultural stocks to buy in India, factors need to be considered, investment risks associated with Agriculture stocks
|Company Name||Last Price||% Chg||52 wk||52 wk||Market Cap|
|High||Low||Rs. in Crores|
|JK Agri Genetic||613.95||1.2||1,031.80||480||284.69|
|Shree Ganesh Bio||139.35||-4.06||227.8||114||277.74|
|Indo US Bio-Tec||72||-3.87||104.8||25.71||52.43|
|Company Name||BSE Scrip Code||NSE Symbol||CMP||Rating||Industry|
|PI Industries Ltd.||523642||PIIND||2915||3||Agrochemicals|
|Bharat Rasayan Ltd.||590021||BHARATRAS||10352||0.5||Agrochemicals|
|DCM Shriram Ltd.||523367||DCMSHRIRAM||987||0.5||Chemical Manufacturing|
|Coromandel International Ltd.||506395||COROMANDEL||760||3||Fertilizers|
|Bayer CropScience Ltd.||506285||BAYERCROP||4740||1||Agrochemicals|
|Godrej Agrovet Ltd.||540743||GODREJAGRO||541||0.5||Agriculture|
|Avanti Feeds Ltd.||512573||AVANTIFEED||542||3||Aquaculture|
|Kaveri Seed Company Ltd.||532899||KSCL||510||0.5||Agriculture|
|Balrampur Chini Mills Ltd.||500038||BALRAMCHIN||335||0.5||Sugar|
|Dalmia Bharat Sugar and Industries Ltd.||500097||DALMIASUG||399||0.5||Sugar|
|Tata Consumer Products Ltd.||500800||TATACONSUM||770||1||Coffee and Tea|
Factors need to be considered before investing in stocks
The following factors should be considered by investors when assessing the best agricultural stocks to buy: Assess the range of products that the company offers; Since the agriculture sector uses a wide variety of products such as fertilizers for different types of soil and pesticides for different types of insects affecting specific types of crops. The wider range of products offered by a company can be beneficial for it since many of these products are complementary and can offer a better product mix to customers, as well as maintain healthy profit margins for the company.
Understanding the location in which the businesses operate can offer a good insight into how the business will be conducted. This is extremely important, as seasonality impacts different states and locations in different ways every year, and companies that have the right offerings across states not only maintain their revenues but also their margins.
For example, a company can compensate for lost sales from one state if it experiences less rain in a given year, which results in lower agricultural activity and consequently lower sales of agri-products, by utilizing rain from other states. Further, having exports can remove any risk that may arise from weather or economic circumstances in India, thereby protecting the company’s sales.
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Research and development are used by a company to develop new agricultural products. A company needs this because farming sees a level of dynamism constantly with the introduction of new and more efficient farming techniques, as well as the development of better products which in addition to providing the company with a competitive advantage over competitors, it can also contribute to revenue and margin growth.
Investors can evaluate the level of innovation a company undertakes by measuring their R&D expenditure as a percentage of sales. It may not be true that a company’s R&D spending percentage is a good indicator for finding better products. However, it shows investors how capable a company is of developing new products and growing revenue and margins.
In terms of production capacity, production efficiency, and distribution channels, investors must evaluate a company’s size and capacity. As a result of a large capacity and strong distribution channel, a company can scale its sales as well as witness repeat business with its customers. It is a crucial factor because there are many smaller companies that face distribution issues, which may prevent their products from reaching the right customer, thereby hindering their growth. The model portfolio consists of a range of companies that have demonstrated a strong distribution channel and have a strong customer communication system, thereby enabling them to effectively serve their customers and increase revenue.
In order to determine a company’s sustainability and growth prospects, investors must also assess its financial strength. By analyzing return ratios of the company like Return on Equity (ROE%) and Return on Capital Employed (ROCE%), this can be done. The ratios have a crucial role in determining the returns a company generates on the capital invested in it. The higher the ratio, the higher the return generated by the company for stakeholders, which is positive for investors.
It is also important for investors to examine the company’s cash flows to determine the tangible returns it generates. By evaluating Operating Cash Flow/EBITDA, investors can find out how well a company converts operating profits into operating cash flows. If the operating cash flow ratio is high, this indicates tangible returns that the company generates, and if it is low, this may indicate that aggressive revenue recognition practices are in place.
Evaluate the company’s capital structure to understand its financial obligations and whether any profits belong to the shareholders. Investors can assess this by looking at the company’s Debt to Equity ratio. By lowering the D/E ratio, the company will have fewer interest obligations and be able to reinvest returns for long-term growth or distribute dividends, both of which benefit the shareholders.
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To determine if any significant changes have been made to the regulations surrounding the industry, investors should watch for changes in the regulatory environment. Chemicals or ingredients that can be used might change due to changes in regulations. When companies are able to adapt dynamically to these changes, they can thrive long-term and remain sustainable, generating positive returns for investors.
In summary, investors should consider a company’s distribution network within the domestic market, farmer connections, balance sheet strength in terms of cash flows and capital structure, and raw material security. Further, intermediate suppliers to major global agrochemical manufacturers are better positioned as a result of the shift in outsourcing to India, as these firms stand a great chance of increasing market share.
Investing in companies with growth potential and the ability to recover from downturns is the best approach. In addition to profit margins, revenue growth rate, R&D expenditure, etc., investors should consider other factors when investing in agricultural companies. This model portfolio includes a few good stocks in the agricultural industry for any investor to include in their portfolio, as they check all the boxes in terms of strengths, consistency in performance, and risk factors.
Investment risks associated with Agriculture Stocks
Government regulations may change regarding the use of certain chemicals and ingredients that are a critical part of the product offering of these companies. A change in regulation can have a severe impact on the company’s revenue, since the company will have to stop making products immediately, and new products may have to be created to replace the old ones. As the company would not be able to sell existing products, it would have high research and development costs and manufacturing costs. When this occurs, the company’s dominance in that product category may be impacted by a competitor’s product capturing the company’s market share.
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Historically, the Indian weather has been very fluctuating with inconsistent rainfall across different states of the country. For example, if the rainfall is lower during a particular year, the agricultural activity has a tendency to reduce for a certain type of crop or state, resulting in lower demand for fertilizers and pesticides. As a result, revenue could significantly decline and the growth rate could be slowed.
Although innovation has always been beneficial to the economy and agriculture industry, it might not always be beneficial to every business. In the case of one company producing a particular variant of fertilizer, new and improved versions of the product could threaten sales of the original product. It is also possible that a competitor will take the company’s share of the market if the company fails to come up with its own version of the new fertilizer.
A company’s finances may be at risk if it does not have enough cash to meet its obligations, generates lower profits than forecast, or loses market share. In addition to higher input costs, higher interest rates, excessive borrowing, extra cash obligations, a lack of cash or credit reserves, and unfavorable changes in exchange rates in cases where companies import goods to develop products, financial risks can also arise.
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