9 Best Agricultural Sector Stocks In India

Know About Agriculture Sector In India

 

Agriculture in India dates back to the Neolithic period. India ranks second globally in agricultural output. In 2018, agriculture employed more than half of India’s labour force and contributed 17–18% to the country’s gross domestic product.

 

In 2016, agriculture and related industries such as animal husbandry, forestry, and fisheries accounted for 17.5% of the nation’s gross domestic product (GDP) and employed approximately 41.49 per cent of the labour force. India has the highest net cropped area in the world, followed by the United States and China. Agriculture’s contribution to India’s GDP is continuously falling in tandem with the country’s broad-based economic growth. Nonetheless, agriculture is demographically the most extensive economic sector and plays an important role in India’s entire socioeconomic fabric.

 

 

In the period between March and June of 2020, the total value of agricultural exports was $3.50 billion. In 2013, India exported agricultural products worth $38 billion, making it the seventh largest agricultural exporter globally and the sixth largest net exporter. The majority of its agricultural exports are destined for developing and underdeveloped nations. India exports agricultural/horticultural and processed goods to about 120 countries, particularly Japan, Southeast Asia, SAARC nations, the European Union, and the United States.

 

India is the world’s largest producer of many fresh fruits such as banana, mango, guava, papaya, lemon, and vegetables such as chickpea, okra and milk, as well as major spices such as chilli pepper and ginger, fibrous crops such as jute, and staples such as millets and castor oil seed, according to 2014 FAO world agriculture statistics. India is the second-largest producer of wheat and rice, two of the world’s most important staple foods.

 

India is currently the second largest producer of dry fruits, textile raw materials derived from agriculture, roots and tuber crops, pulses, farmed fish, eggs, coconut, sugarcane, and a variety of vegetables. In 2010, India ranked among the world’s top five producers of more than 80% of agricultural products, including numerous cash crops such as coffee and cotton. As of 2011, India is one of the five largest producers of animal and poultry meat in the world, with one of the quickest growth rates. 

 

According to 2008 research, India’s population growth exceeds its ability to produce rice and wheat.

 

Other recent studies assert that India can easily feed its rising population and produce wheat and rice for worldwide exports provided it reduces food staple spoilage/waste, improves its infrastructure, and boosts farm production in a manner comparable to Brazil and China.

 

India’s rice production reached approx 95.3 million tonnes in 2011.  In addition to a boost in the production of lentils and other food necessities, the production of lentils has also increased annually. In 2011, Indian farmers produced approximately 71 kilos of wheat and 80 kilograms of rice per Indian citizen. The annual rice supply per capita in India is currently greater than the annual rice consumption per capita in Japan.

 

In 2021, India exported agricultural products worth $ 50.3 billion, making it one of the top 10 largest agricultural exporters globally. This indicates exponential growth, as net exports in 2004 amounted to approximately $5 billion. India is the fastest-growing exporter of agricultural products over the past decade, and it’s $50.3 billion in net exports are more than double the European Union’s total exports (EU-28). It is now one of the largest suppliers of rice, cotton, sugar, and wheat in the world. In 2011, India exported over 2 million metric tonnes of wheat and 2.1 million metric tonnes of rice to Africa, Nepal, Bangladesh, and other places.

 

Aquaculture and capture fishing are among India’s fastest-growing sectors. Between 1990 and 2010, the Indian fish yield through capture doubled, while the harvest from aquaculture tripled. India was the sixth greatest producer of marine and freshwater capture fisheries in 2008 and the second largest producer of aquaculture-farmed fish. India shipped 600,000 metric tonnes of fish products to around fifty per cent of the world’s nations. India lags significantly behind in terms of quality protein intake, which must be addressed by making protein-rich foods such as eggs, meat, fish, poultry, etc., available at cheap costs.

 

Over the past six decades, India’s agricultural output per hectare has increased on a yearly basis, on average, throughout the country. These advantages are mostly the result of India’s green revolution, the improvement of its road and electricity generation infrastructure, as well as reforms and awareness of gains. Despite these recent achievements, agriculture sector has the potential for significant productivity and production gains, as crop yields in India are still between 30 and 60 per cent of the best sustainable crop yields feasible in industrialized and other developing countries. India also experienced some of the highest food losses in the world as a result of post-harvest losses caused by poor infrastructure and unorganized retail.

 

Reasons For Investing In Agriculture Stocks

 

Agriculture is one of the most important sectors of the Indian economy, as it supports about 58 per cent of the country’s labour force. The sector represents around 17.8 per cent of India’s gross value added (GVA). The Indian agriculture stocks primarily serves as one of the cornerstones of the Indian economy and is interwoven into India’s socioeconomic structure.

 

Agriculture and other linked activities are, of course, essential to domestic consumption. To secure food security and a fair share of exports, India has dramatically increased the variety and quantity of its agricultural products. And this translates to the agricultural industry transformation having a substantial impact on the expansion of the agrochemical industry, making India one of the world’s largest consumers of agrochemical products.

 

In addition to food production, factors contributing to the expansion of this industry include a fast-growing population and an ever-increasing need for economic growth. In order to survive, farmers are also compelled to employ agrochemicals due to the occurrence of different obstacles, such as soil deterioration, a lack of water supply, and land scarcity caused by urbanization, among others.

 

The deployment of “Kisan Drones” to facilitate crop evaluation, the digitalization of land data and the application of insecticides and nutrients will be of immense use to farmers. This has extremely favourable repercussions for the industry, as it gives the agriculture sector the required boost. An increase in a farmer’s revenue will result in an increase in the farmer’s purchasing power and investment in better harvest production, such as improved seeds, pesticides, tractors, irrigation systems, etc.

 

These are just a few examples of ways to increase not only a farmer’s output but also his or her own income. In reality, the central government has invested over Rs. 131,000 crores in agricultural and related industries, with an emphasis on export-oriented growth.

 

Agriculture is one of the most important industries in the country, with significant opportunities for consumer growth; the sector needs tried and tested products such as pesticides, tractors, and established irrigation systems, among others. With the introduction of new and more effective farming processes and products, such as biologicals, hybrid seeds, organic fertilizers and pesticides, new irrigation systems, and other forthcoming items, there is also potential for innovation.

 

Consequently, the agriculture industry is rich with investment potential. Investors can opt to invest in companies that provide agricultural products and services, such as fertilizers (nitrogen, phosphate, and potash, as well as special categories), pesticides (which protect plants from insects, fungi, and other pests), seeds, crushing and processing, and cattle.

 

Factors To Consider While Compiling The List Of Best Agricultural Stocks

 

Agriculture continues to expand as a vital industry because of the large room for steady consumption.

 

• Assess the diversity of products offered by the company, as the agriculture industry utilizes a vast array of items, such as fertilizers for various types of soil and insecticides for various insect species that influence specific sorts of crops. Many of these items are complementary and can add value to the business, allowing the company to provide a better product mix to clients and maintain healthy profit margins.

 

• It is essential to identify the places a business serves, as this provides insight into its operations. It is particularly crucial since seasonality affects different states and regions in different ways each year, and a company with the correct offers in each area not only maintains steady sales but also maintains healthy margins. For instance, even if one state receives less rainfall in a particular year, resulting in less farming activity and thus fewer sales of agri-products, the corporation can make up for lost sales in other states that had adequate rainfall. Having exports can also assist a company to mitigate the effects of adverse weather or economic conditions in India, thereby protecting its sales.

 

• Evaluate the R&D a company invests in the development of new agricultural products. This is vital for a firm because the agriculture market is always evolving, with the introduction of new and more efficient farming practices and better products, which can not only provide a competitive advantage over rivals but also contribute to revenue and profit expansion. The R&D as a percentage of sales is a metric that investors can use to determine how much R&D a company invests in innovation. While a larger R&D as a percentage of sales is not a perfect indicator of finding better products, it gives investors a solid notion of a company’s capacity to find new items and maintain revenue and margin expansion.

 

• Investors must evaluate a company’s production capacity and scale, as well as its production efficiency and distribution route, before investing. With a higher capacity and a robust distribution channel, a business is able to increase its sales and encourage client retention. This is a significant component because many small businesses encounter distribution challenges that prevent their products from reaching the correct customers, consequently hindering their growth. 

 

• Investors must also evaluate a company’s financial strength to determine its long-term viability and potential for growth. This can be accomplished by analyzing the company’s return ratios, such as Return on Equity (ROE) and Return on Capital Employed (ROCE). These ratios are essential for determining the company’s return on the money it has invested in the business. A larger ratio shows that the company generates a greater return for its stakeholders, which is favourable for investors.

 

• Additionally, investors should consider the company’s cash flows, which represent the tangible returns made by the organization. The Operating Cash Flow/EBITDA ratio enables investors to determine a company’s capacity to turn operating earnings into operating cash flows. A larger ratio of operating cash flows implies that the organization creates tangible returns, whereas a low ratio may imply aggressive revenue recognition procedures. Also, evaluate the company’s capital structure to establish its financial responsibilities and the proportion of profits attributable to shareholders. To evaluate this, investors can examine the company’s Debt to Equity ratio. A lower D/E ratio suggests reduced interest commitments and greater freedom for the corporation to reinvest profits to seek long-term growth or distribute them as dividends, both of which benefit shareholders.

 

• Investors should also be on the lookout for changes in the industry’s governing legislation, which could have a substantial impact on companies. Changes to allowed components or chemicals may be included in regulations. A company that can dynamically adapt to such changes will be better equipped to adopt them and remain sustainable over the long term, all the while earning favourable returns for the benefit of its investors.

 

• Overall, investors should focus their selection choices on strong domestic distribution & farmer ties, balance sheet soundness in terms of cash flows & capital structure, and superior raw material security. In addition, big global agrochemical firms’ intermediate suppliers are better positioned as a result of the rise or transfer in outsourcing from China to India, as these companies have a high opportunity of increasing their market share in such circumstances.

 

• Investors should invest in companies that have growth predictability and the resilience to withstand economic downturns. Other criteria, such as profit margins, R&D spending, revenue growth rate, etc., must be evaluated prior to investing in an agricultural company. 

 

Best Agricultural Stocks In India – NSE, and BSE (basis their market capitalization in descending order – data collected as on 29 August 2022. Please note this is not an investment advise, please ). 

 

• Bombay Bumrah (Market Cap – 6,239.70 Crore)

 

150 years have passed since the founding of the Bombay Burmah Trading Corporation, Limited (BBTCL). As a publicly traded firm, the company built its reputation on teak in 1863, and the rest is history. A reputable Indian commercial organisation with holdings in plantations, foods, textiles, chemicals, electronics and light engineering, healthcare, and real estate, the Wadia Group owns the company as one of its primary concerns. The mastheads of the Wadia Group are Bombay Burmah, Bombay Dyeing, and Britannia.

 

BBTCL is currently one of the few pre-independence era businesses still thriving thanks to its basic principles, ethical standards, and above all, trading acumen. The second-oldest publicly traded corporation is this one. The annual combined turnover of the BBTCL Group is 1.2 billion dollars. In addition to tea, coffee, other plantation products, biscuits, dairy products, auto electric and white goods parts, weighing items, horticulture and landscaping services, and healthcare products including dentistry, orthopaedic, and eyeglasses, the company has broadened its areas of interest.

 

• Kaveri Seeds (Market Cap – 2,665.30 Crore)

 

One of the biggest agricultural enterprise in India today is Kaveri Seeds, which specialises in hybrid seeds for important Indian crops.

 

High-yield seeds produced as a consequence of its quest of excellence and outstanding research and development (accredited by DSIR since 2001) have made the company the go-to partner for farmers for the past three decades. In order to deliver the best research, improve farm productivity, and ensure the food and nutritional security of millions of people, it has gradually modernised our goods and processes.

 

Its varied portfolio of seeds caters to key crop categories to enable crops for diverse agro-climate and soil conditions. There are more than 1,00,000 producing growers on 65,000 acres of land spread over 12 different agro-climatic zones. Through its ideas, innovations, and efforts, we are releasing the latent power of seeds, enabling Kaveri to flourish unrestrictedly while generating value for our stakeholders and the country.

 

• Raghuvansh Agro (Market Cap – 501.25 Crore)

 

A pioneer in the agri-dairy product sector is Raghuvansh Agrofarms. It works to put the backbone of the Indian economy—agriculture and related sectors—into the hands that will nurture it by encouraging people to get involved and participate.

 

Its  foundation was laid in the year 1995.  It has cattle stock and arable land under its ownership, consulting relationships with researchers, and a wealth of business environment knowledge in India. In the agriculture and dairy industry sectors, it provides financial, technical, and strategic assistance to develop successful businesses.

 

With creative programmes like Microfinance and Kisan Helpline, it is assisting many others in realising their full potential and contributing to the strength of our country.

 

• Goodricke Group ((Market Cap – 475.52 Crore)

 

India-based Goodricke Group Limited is a tea-producing business with its main office in West Bengal. It is a part of Camellia PLC UK, the biggest tea producer in the world’s private sector. Goodricke Group Limited, Stewart Holl (India) Limited, Amgoorie India Limited, and Koomber Tea Co. Pvt. Limited are the four tea-producing businesses under its umbrella. The Group has 27 tea factories and 30 gardens located in Darjeeling, the Dooars, Assam, and Cachar. The Goodricke Group recently purchased two estates from the McLeod firm in Assam while they were having financial issues. Major Darjeeling brands include Goodricke Castleton, Roasted, and Margaret’s Hope, while Goodricke Khaass, Goodricke Zabardast, and Goodricke Chai are among the top Black (CTC) tea brands.

 

• Nath Bio-Genes (Market Cap – 369.34)

 

Nath Bio- Genes (I) Ltd, amongst the top players in the Indian seed industry, has served Indian farmers for more than four decades. The company has played a pivotal role in shaping Indian agriculture by developing and supplying quality hybrids seeds to farmers. The company has a presence in 17 over states and markets approximately 150 varieties of seed products to more than 5 million farmers across the country.

 

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