Dive into the agro sector as we present ten thoughtfully selected agriculture stocks. These carefully researched choices offer consistent growth and reliable returns, making them suitable for both newcomers and seasoned investors. Don’t overlook this smart, long-term investment prospect within the agriculture sector.
The Context
The master’s eye is the best fertilizer — Pliny
About 58% of India’s population relies primarily on agriculture as a source of income, making India one of the key players in the global agricultural industry.
India is the world’s largest producer of milk, pulses, and spices. We also have the largest herd of cattle (buffaloes), and the largest area planted for wheat, rice, and cotton. According to EMR figures, the value of the Indian agriculture market was approximately Rs. 55,994 billion in FY 2020.
In addition, the market is anticipated to expand at a CAGR of almost 12% between 2021 and 2026, reaching a valuation of roughly Rs. 111,916 billion by that year. This is further supported by the increasing income levels in rural and urban areas, which have boosted the demand for agricultural products across the country. Consequently, the agriculture sector is being encouraged by the increasing use of innovative technologies such as blockchain, artificial intelligence (AI), geographic information systems (GIS), drones, and remote sensing technologies, as well as the introduction of numerous e-farming applications.
It is a rich, expanding industry for all investors, and one of the major benefits of investing in agriculture generally is that demand in this area is typically stable because people constantly need to eat – wouldn’t they? Following a thorough examination of the corporations that operate in this industry, we have compiled a list of the top 10 agriculture stocks that possess the prospect of steady growth from an investing standpoint.
Four-Point Selection Criteria
We examined 28 well-known, publicly traded agro-based companies, and the top 10 equities were chosen using the following criteria:
≡ The low or negligible ratio of Debt To Equity (D/E).
≡ A double-digit Return On Equity (ROE) growth over the past 5 years.
≡ A double-digit Return on Capital Employed (ROCE) growth over the past 5 years.
≡ A double-digit Compounded Sales Growth over the past 5 years.
1. Coromandel International Ltd
Coromandel International Ltd. is ranked first among the top 10 agriculture stocks on our list. Coromandel International Ltd. is one of India’s leading agri-solution providers. Along the entire farming value chain, it provides a broad range of goods and services. The company specializes in organic fertilizers, specialty nutrients, bio-pesticides, crop protein, and fertilizers. Nutrients and other allied goods account for around 85% of the company’s revenues, and crop protection accounts for about 15%.
The business uses a network of 20,000 dealers and a market development staff of over 2,000 people to distribute its goods. The company has a presence in 81 different nations around the world. It is a part of numerous marketing and technical joint ventures (JVs) that span the US, Canada, Europe, Japan, China, and other countries. Additionally, it has joint ventures for phosphoric acid in Tunisia and South Africa. The corporation currently owns and runs 16 manufacturing sites in India that feature 7 cutting-edge R&D labs.
The company’s main priorities right now are to better understand its customers, develop strong sub-brands, invest in R&D and data analytics, grow to be a major player, open up new markets, and improve efficiency & quality throughout the entire value chain.
Coromandal International Ltd., a debt-free company has generated an ROE of about 26% and ROCE of about 31% over the past five years.
2. Dhanuka Agritech Ltd
On our list of the top 10 agriculture stocks, Dhanuka Agritech comes in at number two. Dhanuka Agritech manufactures a wide range of agrochemicals like herbicides, insecticides, fungicides, and plant growth regulators in various forms like liquid, dust, powder, and granules. The company has more than 300 registered products, including plant growth regulators (PGRs), insecticides, fungicides, and herbicides.
There are currently three manufacturing facilities for the company, located in Sanand (Gujarat), Keshwana (Rajasthan), and Udhampur (J&K). A plant for the technical manufacturing of pesticides is now being established in Dahej, Gujarat. Dhanuka Agritech has a presence at 10 million farmer touchpoints thanks to its pan-India distribution network, which includes 40 warehouses, 7,000+ distributors, and 80,000+ retailers.
The business collaborates internationally with 10 top agrochemical firms from the US, Japan, and Europe, which enables it to introduce cutting-edge technology in India. For the online selling of Dhanuka products through its platforms, the company has also partnered with up-and-coming online platforms including AgroStar, Gramophone, and Plant It.
Dhanuka Agritech Ltd., a debt-free business has generated an ROE of about 22% and ROCE of about 27% over the past five years.
3. Sumitomo Chemical India Ltd
Sumitomo Chemical India Ltd holds the third position on this list of top 10 agriculture stocks. One of the top companies in the sector, Sumitomo Chemical India Ltd. (SCIL), has a balanced portfolio of technical and formulation products as well as backward integration for some of its products.
The company is renowned for domestically marketing the exclusive goods of its Japanese parent, Sumitomo Chemical Company Limited, in the business categories of agrochemicals, animal nutrition, and environmental health. Having incorporated a subsidiary called Excel Crop Care Limited, the company now has a robust portfolio of specialist and generic interests as well as a powerful joint marketing network. With this combination, the Company has advanced considerably in the Indian crop protection industry.
In addition, SCIL has established a presence in several other regions of the world, including Africa. Insecticides, weedicides, fungicides, fumigants, rodenticides, plant growth nutrition products, bio-rationals, and plant growth regulators are just a few of the product categories in which the company is active.
The firm is renowned for domestically marketing the unique products of its Japanese parent, Sumitomo Chemical Company in the agrochemicals, animal nutrition, and environmental health business divisions. To meet the high domestic and international demand, Sumitomo Chemical India Ltd plans to invest around 15% of consolidated EBITDA annually in production facility upgrades and capacity development.
Over the last five years, this debt-free company has generated an ROE of about 23% and ROCE of about 26%.
4. Bayer CropScience Ltd
Bayer CropScience Ltd is ranked fourth among the top 10 agriculture stocks on our list. In its Agri Care business, Bayer CropScience principally produces, sells, and distributes insecticides, fungicides, and herbicides, as well as a variety of other agrochemical products and corn seeds.
Bayer CropScience is one of the biggest players in the field of Crop Protection, Seeds and traits, Environmental Science, and digital Farming (data science and predictive analytics). The 82% domestic agrochemicals, 11% domestic corn seeds, 4% exports, and 3% exchanged seeds make up the company’s revenue mix.
Its parent corporation, Bayer AG, provides the company with direct operational and product assistance, enabling it to launch and improve new products. Through both direct ownership and indirect ownership through its companies, Bayer AG has a 71% share in the business.
Bayer CropScience is a debt-free business and has generated an ROE of about 20% and ROCE of about 25% over the previous five years.
5. Godrej Agrovet Ltd
Godrej Agrovet Ltd holds the fifth position on this list of top 10 agriculture stocks. Godrej Agrovet Limited is a diversified, R&D-focused agribusiness firm committed to enhancing Indian farmers’ productivity via the development of new goods and services that sustainably raise crop and livestock yields.
It commands a significant market share in each of the turfs in which it competes, including processed foods, animal feed, crop protection, oil palm, dairy, and poultry. The company’s primary line of business, the Animal Feed Business, which accounts for 46% of total revenues, holds a strong position in the domestically organized animal feed market.
It can be found in several subcategories, including cow, broiler (chicken), layer (eggs), and aqua feed. Its 32 cutting-edge production facilities, which include quality assurance labs, assist farmers in increasing the productivity and profitability of their farms.
Additionally, it dominantly operates in Bangladesh’s animal feed market through its joint venture ACI Godrej Agrovet Pvt Ltd. The company also conducts business in the areas of crop protection (17% of revenues), oil palm (13% of revenues), dairy (15% of revenues), poultry & processed foods (9% of sales), and others.
The company has a joint venture with Tyson Foods, U.S.A. to produce and market processed poultry and vegetarian products to compete in the farm-to-plate landscape. Through its trademarks, Real Good Chicken and Yummiez, Godrej Tyson Foods offers protein products that are delicious, safe, and reasonably priced. Over the preceding five years, Godrej Agrovet Pvt Ltd has generated an ROE of roughly 18% and an ROCE of about 22%.
The corporation is not debt-free, though, and its debt-to-equity ratio is around 0.5.
6. Kaveri Seed Company Ltd
The Kaveri Seed Company conducts research, produces high-quality hybrid seeds, processes them, and markets them. The business which was founded in 1976 to support India’s green revolution is currently the country’s top producer of agricultural seeds, specializing in hybrid seeds for important field and vegetable crops.
For field crops, the company offers hybrid or variety seeds for wheat, rice, cotton, sunflower, mustard, sorghum, legumes, bajra, and cotton. One of the famous vegetables provided by the Company is brinjal, along with tomatoes, okra, chilies, watermelon, gourds, and chilies.
The seed business (96%) and micronutrients (4%), combined, account for the majority of its revenue. The business operates 17 seed processing facilities. It contains a corn cob drying facility and more than 170 outreach trial centers.
It has 15,000 MT of total cold storage capacity and 10 lakh square feet of warehouse space spread across several important sites in India. In addition to having a sizable local presence, Kaveri Seed Company has experienced rising growth in the export market, which includes Pakistan, Sri Lanka, Bangladesh, and Vietnam. For prospects, the company wants to increase its market share by introducing new product variants across non-cotton categories like rice, maize, pearl millet, and vegetables.
Over the preceding five years, Kaveri Seed Company has generated an ROE of about 20% and ROCE of about 22%. It is a debt-free business.
7. Sharda Cropchem Ltd
On this ranking of the top 10 agriculture stocks, Sharda Cropchem Ltd secures seventh place. Sharda Cropchem Ltd. exports agrochemicals (technical grade & formulations), as well as non-agro goods such conveyor belts, rubber belts and sheets, dyes, and dye, intermediates to several international destinations.
The business operates under an asset-light strategy, concentrating on the identification of generic molecules, and the preparation of dossiers in the pursuit of registrations followed by the marketing and distribution of formulation. The company outsources the production of AIs and other formulations, which has made it more cost-competitive globally. The agrochemical segment provides about 80.6% of the overall revenue, with the chemical segment providing the balance.
Its herbicide division accounts for 50% of the segment’s revenue, followed by fungicide with 27% and the insecticide division with 23%. The company’s main priorities include finding novel compounds and securing the required licenses in other nations. The group had 1,128 global registration applications as of March 31, 2021, and 2,543 agrochemical registrations as of that date.
It obtains 100 to 150 registrations annually, and the business is present in 80 different countries thanks to its strong marketing network.
Sharda Cropchem Ltd is a debt-free business and has produced an ROE of around 17% and ROCE of about 20% over the previous five years.
8. Chambal Fertilizers & Chemicals Ltd
Chambal Fertilizers & Chemicals Ltd is ranked eighth among the top 10 agriculture stocks on our list. Chambal Fertilizers & Chemicals Ltd is engaged in the production of Urea from its manufacturing plants. It also sells and trades in other agricultural products and fertilizers. Additionally, it has a joint venture in Morocco that produces phosphoric acid. The company did operate a software division earlier; however, in FY-21 it stopped running that unit by selling its assets and transferring some of its liabilities.
Urea, Di-ammonium Phosphate (DAP), Muriate of Potash (MOP), Ammonium Phosphate Sulphate (APS), various grades of NPK fertilizers, Sulphur, Micronutrients, and Agrochemicals are among the fertilizers and agri-inputs offered by the company. It exclusively produces urea at its production facilities, and through its distribution network, it sells and trades additional fertilizers and agro-inputs. The business sells goods under the Uttam Vir brand, which is well-known in its target areas.
Sales of manufactured goods, the majority of which were made of urea, accounted for 58% of total revenue as of last year, with the remaining 42% coming from trade in other fertilizers and agricultural supplies.
The corporation already has a sizable distribution network across the nation that includes 3,700 dealers and 50,000 retailers. States like J&K, Haryana, Uttarakhand, Punjab, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, and Rajasthan are among those where it is present. Surprisingly, Chambal Fertilizers have access to about 90% of the Indian fertilizer market.
The company’s main line of business is the sale of fertilizers to farmers at a discount thanks to the government’s numerous programs and laws. The government frequently regulates the prices of various goods; therefore the company is quite sensitive to bureaucratic policy changes.
The debt-to-equity ratio of Chambal Fertilizers & Chemicals Ltd. is a little high (at 0.7), but over the last five years, the company has been able to yield an ROE of around 27% and ROCE of about 16%.
9. P I Industries Ltd
With a significant presence in both domestic and international markets, PI Industries Ltd. is a major participant in the agrochemicals industry. The Gujarat division of P I Industries Ltd. has state-of-the-art facilities, integrated process development teams, and in-house engineering know-how. Its revenues are split into two primary groups. It generates 23% of its revenue from the sale of formulations and 76% of its revenue from active ingredients and intermediaries.
Its goods, which are widely used in farms all over the world, include insecticides, fungicides, herbicides, and specialty items. The company has 4 international offices and a presence in more than 30 countries. As for its export markets, these include the USA, Brazil, Saudi Arabia, Myanmar, Indonesia, the UK, France, and Italy. It has a physical presence in India, Japan, China, and Germany. Being an export-heavy firm, currently, it derives 77% of its income from exports and the remaining 23% from local sales. With 9 zonal offices, 28 depots, 1500 skilled field personnel, 10,000 active dealers/distributors, and more than 100,000 retailers dispersed across the nation, the organization manages a sizable distribution network. In India, it has a reach of more than a million farmers.
The corporation operates in a field that requires a lot of research hence 3-4% of its annual revenues have been allocated to R&D projects. Do note that for the next three to four years, the company has a healthy order book for exports worth $1.5 billion (about Rs. 10,000 crores).
Over the last five years, the debt-free company PI Industries Ltd. has generated an ROE of roughly 18% and ROCE of about 19%.
10. Rallis India Ltd
Last but not least, Rallis India Ltd is ranked tenth among the top agriculture stocks on our list. Rallis India Ltd, now a Tata Group firm, has more than 150 years of history. The business manufactures agrochemicals and supplies agricultural inputs along the entire value chain, from seeds to organic plant development nutrients. Rallis also engages in contract manufacturing for large multinational companies.
The domestic market Rallis India has about 6% market share for crop protection and plant growth nutrients and a 3% market share for seeds. The business is divided into two segments: Crop Care (84% of revenue) and Seed (16% of revenue). The companies’ crop care segment has around 3,812 Dealers and the Seeds segment has around 2,600 Dealers. It exports to 70 Locations & reaches 80% of districts in India to provide agricultural solutions to more than 5 Million farmers.
The companies’ seed and crop care segments each have about 3,812 Dealers and 2,600 Dealers, respectively. It exports to 70 locations and serves 80% of India’s districts, providing agricultural solutions to more than 5 million farmers. For the next five years, the company has budgeted a total of Rs. 800 crores for capital expenditures to increase its capacity for formulations, introduce new active ingredients, and achieve backward integration.
In the past five years, Rallis India Ltd., a debt-free company has generated an ROE of roughly 13% and ROCE of roughly 15%.
Conclusion
Stocks tied to agriculture have no direct bearing on the market at large. Weather, crop diseases, and pests are just a few of the radically distinct threats that they face. It won’t necessarily have an impact on your agricultural stocks even if the world economy slows down.
Even in the perils, there is always a market for food and other agricultural products.
In a larger sense, the agricultural powerhouses of the world include Russia and Ukraine. While the latter was the fifth-largest grain exporter, the former used to be the top grain exporter and top fertilizer supplier in the world. Currently, though, both nations are at war, so they are effectively off the global market for a while.
While not instantly favorable for the home market because we continue to purchase oil and other goods from Russia, this appears to be a fantastic chance for Indian agro-businesses that rely heavily on international exports.
Nevertheless, keep in mind that agriculture is a cyclical industry with boom-and-bust or high- and low-priced price patterns. Aside from the typical economic cycles, other elements including extended droughts, floods, and pests can cause the agriculture sector to trend downward. “Dive into the world of agricultural investment as we present our thoughtfully selected top 10 stock picks. These carefully researched choices offer consistent growth and reliable returns, making them suitable for both newcomers and seasoned investors. Don’t overlook this smart, long-term investment prospect within the agriculture sector.”This concludes our top-10 list of the best agriculture stocks currently traded on the stock market.
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