Dhanuka Agritech Ltd: Agri R&D

Again, our stock pick is a company that does R&D. Dhanuka Agritech is into the crop care business. It is a part of the agro-based Dhanuka Group. Dhanuka Agritech has a pan-India presence, with 27 branches injected into rural areas and employs more than a 1000 people. It has 4 manufacturing facilities at Gurgaon, Sohna, Sanand and J&K for making various grades of pesticides, plant growth stimulants, fertilizers and other such products. It also has 2 seed processing units in MP and Andhra.

Dhanuka Agritech Ltd is a company engaged in R&D of seeds and products that aid in agriculture. It also has various business alliances with major companies in US, Japan and Norway. The company's website says:

"India has established its superiority in the field of IT and it is time that it establishes its superiority on its own turf – agriculture. Dhanuka is committed to shoulder its responsibility towards this dream."

Incidentally, this is what I had discussed two weeks ago, that R&D in biotech related fields will be the next driver of the Indian economy. Dhanuka Agritech is one of the many companies engaged in such work at the moment. It is well placed to achieve the desired objectives - although they may not take a 51% market share vis a vis Monsanto, but surely, there is potential for serious growth whenever there is R&D.

Dhanuka Agritech released its quarterly and yearly results two days ago. Total sales for the year ended 31-mar-09 were up around 40% to Rs 336 crores. EPS also increased by around 40% (from 18.43 to 25.28). The share currently trades at Rs 198 (as on 19-jun-09). That gives it a P/E of 8. It recommended a dividend of Rs. 6 per share. The fact that the company is regularly paying its shareholders increased dividends and also is being able to grow with existing funds at a nice pace - confirms the skills of the management of the company. Dividends over the last few years:

(Announcement) 19-06-08	(Record Date) 25-08-08	(Type) Final				(% on FV of 10) 50.00	AGM
22-06-07	17-09-07	Final				20.00	-
26-03-07	05-04-07	Interim				20.00	-
14-07-06	21-09-06	Final				20.00	AGM
24-04-06	04-05-06	Interim				20.00	-
27-06-05	19-09-05	Final				20.00	AGM
29-06-04	09-09-04	Final				15.00	AGM
24-03-05	-	Interim				20.00	-
16-06-09	-	Final				60.00	-

Many would find the share price expensive. But the share price of this stock has risen steadily over the years (another example of shareholder value creation):



Although one may wait a bit to invest in this stock (to get it at aroundd 150-160) the current valuations are not unjustifiable. Agriculture in India is a huge industry, and research in agriculture is an almost oligopoly. Dhanuka Agritech, with its position and strong R&D emphasis has a huge growth potential over the coming years- again, the growth of Monsanto in US and worldwide corroborate my emphasis.

Bottom Line: If it's R&D based agri companies that you want to bet on, Dhanuka is one you wouldn't want to miss.