Good rains set to increase earnings of farm related firms

An ASSOCHAM study has said that due to good monsoon this year, a large part of corporate India with direct connect with the agriculture and the rural economy is set to post handsome growth.
Good rains set to increase earnings of farm related firms

Thanks to bountiful rains this year, a large part of corporate India with direct connect with the agro and the entire rural economy is set to post handsome growth in the coming two quarters in sales and profitability ranging between 15 and 45 percent with benefits of monsoon accruing to several mid and large cap firms Mahindra and Mahindra, Rallis India and Jain Irrigation, according to an ASSOCHAM paper.

“The firms benefiting directly from abundant rainfall relate to those in the irrigation infrastructure, farm equipment like tractors, seed development and the food processing”, the ASSOCHAM Paper ‘Monsoon Showers Fortune on Farm Related Firms’ noted. 

It said a host of other firms engaged in fertilizers, seeds, farm equipment, food processing and consumer consumption would immensely benefit from a sizeable improvement in the demand for farm inputs as also higher farmers’ income leading to a significant rise in rural demand. 

The paper projected that with a good monsoon, sale of tractors for Mahindra and Mahindra is expected to rise. The sale during the Sep-Mar 2017 window is expected by at least over 15 per cent, also resulting in commensurate uptick in bottom line. Other leading tractor and farm equipment firms including Escorts and VST Tillers Tractors are also expected to do well both in income and net earnings, according to the paper.

“With monsoon being the lifeline of the Indian economy, it is no surprise that good rains would bring good fortune not only to the companies engaged in the farm related sectors but also the entire macro picture,” ASSOCHAM president Sunil Kanoria said.

Likewise, for Rallis India is a subsidiary of the Tata Group which is a key player in the agriculture business, bountiful rains are expected to generate 33.58 per cent higher sales during the monsoon months. Positive monsoon sentiment has already started showing its results. The company has reported a profit of Rs 174.20 crores for its first quarter of 2016, implying a 55 per cent increase in sales.

Similarly, Coromandel International, a mid cap company operating in fertilizers sector is likely to see a trend of  surge in sale during the months Sep-March, post the active period of monsoon and sowing of seeds. The company is expected to see a rise in sales by 5.13 per cent for the period March -September 16, and a 19.82 per cent for the period September 16-March 17.

Jain Irrigation Systems is a leading manufacturer of micro irrigation systems, piping, tissue cultured plants, solar photovoltaic and solar water heating systems. Micro irrigation systems and related products make up about 40 per cent of the total sales of the company. Piping is also partly dependent on water and monsoon rains. A positive monsoon is projected to put the irrigation business in good shape. A growth of 17-18 per cent is expected in the sales during the monsoon season as well as the lean season.

Likewise, the leading sugar firms like Balram Chini and Mawana Sugar are projected to improve their performance significantly in the coming months, thanks to rain and firming of prices.     

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