AGRO- BASED INDUSTRY

PI Industries Ltd Rallis India Ltd Bayer CropSciences Ltd

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Recommendation
These inference help us to pick the best recommended company amongst the three. Bayer CropScience
Ltd is clearly the best recommended company with highest Enterprise value and book value per share.
It has highest assets base and huge reserves which highlight huge growth potential from the investors
viewpoint. PI Industries is the second most recommended company. Rallis India Ltd is much smaller
compared to these two and ranks last in our analysis.
Bayers Crop Science FY2012 FY2013 FY2014 FY2015 FY2016 CAGR The EPS of Bayer is
EPS 35.19 294.11 75.14 104.59 83.41 24.1% increasing at a CAGR
Earnings Retention Ratio 88.06 98.31 93.06 79.93 80.03 -2.4%of 24.1% which shows
Reserves 753.20 1,891.80 1,705.70 1,996.30 1,720.50 22.9% good returns from
Enterprise value 2,739.78 3,785.45 5,029.97 11,042.94 12,578.00 46.4% investors point of
Book Value/ Share 200.68 488.94 476.04 555.44 496.02 25.4%
view. Further it is
Net Sales 2,204.40 2,626.00 3,146.20 3,615.30 3,644.10 13.4%
maximum among the
ROE 17.53 60.15 16.61 18.84 17.13 -0.6%
three companies. Bayer
CropScience is also
commanding a very high enterprise value which shows it has high future prospects but at the same
time for an investor it also means that the company is overvalued. But if that value of the company is
justified by other financial parameters then the investor can consider investing in the company. Book
value per share of Bayer CropScience is also increasing at a CAGR of 25.4% over the years which is
maximum among the three companies.
PI Industries FY12 FY13 FY14 FY15 FY16 Net Sales increase
CAGR
EPS 40.27 7.57 13.52 17.84 over the years also
22.9 -13.16%
Earnings Retention Ratio 87.55 85.95 85.19 85.97 86.44 -0.32%
give positive growth
Reserves 306.68 511.05 669.47 868.87 1142.09 38.92%
indication to the
Enterprise Value 1557.63 1925.73 3835.46 8370.91 7861.67 49.89%
investors and all the
BVPS 126.72 192.97 50.05 64.62 84.29 -9.69%
three companies are
Sales 874.97 1147.56 1586.29 1936.37 2075.94 24.11%
performing good in
ROE 31.67 18.42 26.96 27.56 27.11 -3.81%
this regard. Return on
Equity gives the
equity owners an indication on how much returns the company is earning on their equity investment. All
the three companies are performing well in this regard and are earning god returns for their equity
shareholders.
Rallis India FY12 FY13 FY14 FY15 FY16 One thing common in
CAGR
EPS 5.21 6.14 7.53 7.48 all the companies is
6.48 5.60%
Earnings Retention Ratio 57.81 62.54 68.12 66.57 61.43 1.53%
that all the companies
Reserves 534.2 602.04 693.8 778.51 846.01 12.18%
are not giving much
Enterprise Value 2464.65 2227.21 3392.76 4458 3321.25 7.74%
dividend and are
BVPS 28.47 31.96 36.68 41.03 44.5 11.81%
retaining most of the
Sales 874.97 1147.56 1586.29 1936.37 2075.94 24.11%
profits. Thus they are
ROE 18.31 19.2 20.52 18.22 14.56 -5.57%
ploughing back their
profits and have
accumulated huge reserves and surplus. This shows huge growth potential from the investors point of
view as the companies have huge reserves which they can invest in profitable ventures. Bayer
CropScience is leading in this regard with maximum reserves followed by PI Industries and then by
rallis India Ltd.
Bayer CropScience has acquired Seedworks (Hyderabad) in 2015-16 which is expected to strengthen
its vegetable seed business in India and will also provide good opportunity to gain market share. It has
also bought AgraQuest, supplier of biological pest management solutions for 425$ million. PI
Industries is also investing a lot in R&D and is launching a new product Legacee in Kharif 2016.

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These factors further enhance investors sentiments as they see it as future growth prospects for the
company.
Price Earnings (P/E) ratio shows how much price the company is commanding in the market per rupee
of earnings. If it is higher it shows that markets have high regards for the company and it has potential to
command such higher price, On the other hand lower P/E ratio means the company can’t command
higher price due to gloomy future prospects. However, from investors perspective they might see a
company with higher P/E ratio as an overvalued company.
Bayer CropScience is having P/E of 44.61, PI Industries is having P/E of 32 and Rallis India Ltd is
having

What specific actions will enable you to keep ahead of or catch up with competition?
 Capturing Market Share; Targeting a New Market : Follow the government policies, especially
regarding the subsidies the government offers for various kinds of fertilisers, organic fertilisers,
urea, hybrid seeds, etc. and innovate in the same direction. Also, launching new products where
your competitors are not present, you will gain the market share. Customers like to buy similar
products from the same supplier which increases trust, thus, building a bond between the customer
and the company.

 Expand Your Product/Service Offerings: Investing in Research & Development helps in quality
improvement for your products. Also, offering better credit terms for payables to your suppliers
and buyers helps companies sell more than they would in an ideal market case than its competitors.
Improving automation and technology for production will help lower costs and hence invest those
savings in R&D.

 Foreign Collaboration: Tie-ups with Israel for better increasing productivity and automation helps
lower costs of production and pass on the benefits to the customers. Israel is mentioned here
specifically because it leads the world in agriculture technology, automation and agricultural yield.

 Being Ready for Genetically Modified Seeds Market : This market has a huge potential in near
future. Companies don’t have approval to produce such seeds currently. But, once the approval is
given, company with already setup infrastructure to produce such seeds will be at an advantage over
others, e.g, PI Industries has not yet ventured into the seeds market, while the other two have. It
can invest those reserves in building capacity for the production of genetically modified seeds.

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