Motilal Oswal Financial Services

Initiating Coverage | 22 Arpil 2014

Sector: Agriculture

Monsanto India

BSE SENSEX

S&P CNX

22,758

6,815

CMP: INR1,600

TP: INR2,150

Buy

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

MCHM IN

17.3

1,770/528

3/123/156

26.5

0.4

Monsanto India limited

(MIL), the flagship company of Monsanto company, is a subsidiary

and the only listed Monsanto entity outside the United States. MIL has partnered with

farmers for over four decades. In India, the Monsanto group operates through 3 entities

i.e. (1) the listed entity Monsanto India Ltd (MIL) which is primarily involved in Maize

seeds and Herbicides; (2) 50:50 JV between Mahyco and Monsanto Holdings Pvt. Ltd

known as Mahyco Monsanto Biotech (MMB) which is sub-licensed to distribute BT cotton

technology in India; and (3) Monsanto Holding.

Taking a big leap

Market share gain to drive earnings growth and re-rating



Financials & Valuation (INR b)

Y/E March

Sales

EBITDA

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Valuation

P/E (x)

P/BV (x)

EV/EBITDA (x)

EV/Sales (x)

20.0

5.5

17.9

4.6

15.3

4.3

13.2

3.4

11.9

3.3

9.7

2.6

2014E 2015E 2016E

5.8

1.5

1.4

104.7

30.4

33.8

7.4

1.9

1.8

31.0

31.7

35.3

9.1

2.5

2.3

28.4

31.7

35.3

79.9 104.6 134.4

290.2 369.2 477.9



Monsanto operates through 100 year old brand called Dekalb and it is India's largest

selling hybrid maize seed brand with 25% market share.

It currently derives 40% of its revenues from products launched in last 2 years.

Monsanto has been able to reduce the age profile of its portfolio from 10 years in 2009

to 8 years in 2013 and further plan to reduce to 6 years going forward.

Operational efficiencies and consolidation measures have helped reduce seed write

offs to less than 7% of revenues from an average of 20% for last 3 years. Additionally

sales return has come down by 15% there by driving growth.

Monsanto has a ~60% market share in the global USD5.4b glyphosate industry and

~25% market share in the Indian INR8b glyphosate industry, under the 'Roundup' brand.

Monsanto enjoys a premium positioning in the market place with its glyphosate selling

price at INR 340 per litre and competitors around INR 310-320 per litre.

GM food crops and RR Flex can be game changer events for Monsanto India.

Focus on market share gain and reduction in write offs to drive growth

Monsanto operates through 100 year old brand called Dekalb acquired from Cargill

in 1998 and it is India's largest selling hybrid maize seed brand with 25% market

share. Over last 2 years it has aggressively launched 7-8 hybrids leading to regain

of market share from players like pioneer and DuPont which are around 20-23%

market each. It currently derives 40% of its revenues from products launched in

last 2 years. This has also helped Monsanto gained market share in FY14 but also

helped to reduce the age profile of its portfolio from 10 years in 2009 to 8 years in

2013. Monsanto has a very strong Rabi portfolio as compared to Kharif. The

management plans to aggressively roll out newer hybrids for Kharif going forward

which has been under development since last 3-4 years there by driving margins.

Over last few years operational efficiencies and consolidation measures has

helped reduce seed write off to less than 7% of revenues from average of 20%

for last 3 years and reduction of sales return by 15% there by driving growth.

Shareholding pattern (%)

As on

Dec-13 Sep-13 Dec-12

Promoter

72.1

Dom. Inst

2.1

Foreign

1.4

Others

24.4

Stock performance (1 year)

MFAS and DDFS differentiated services to connect with farmers

Launched in 2010, MFAS is a service which offers timely and customized crop

management advisory to enable maize, cotton and vegetable farmers to enhance

farm yields and profitability. It currently has 1mn farmers connected with

presence in 16 states across 7 languages. Other companies like Pioneer etc and

government agencies tried to replicate this model through outsourcing model

22 April 2014

Monsanto India

but have unable to get breakthrough. MIL provides a toll free number 1800 3000 0303

after purchase of any Dekalb® maize hybrid seeds packet and is operational 365 days

from 7am to 9pm. MIL has opened the free advisory centre in Malad, Mumbai, for

farmers where 40 agro experts are employed to assist the farmers. We believe this

is one of key differentiators that Monsanto has build over last 5-7 years with huge

investments in backend which adds value to farmers and is not easly replicable.

Herbicide penetration provides huge scalability opportunities

Weeds are plants which can cause yield losses up to almost 60% of the crop potential.

Labor shortage, rising wages due to NREGA implementation (15% CAGR in wages

post FY08) and rising urbanization trends have accelerating demand for

herbicides.Herbicides market in India is highly underpenetrated with its share in

agro-chemicals standing at 20% as against global standards of 48%.Glyphosate is a

leading safest herbicide and accounts for 30% of global herbicide sales and 70% of

Indian herbicide sales. Monsanto has a ~60% market share in the global USD5.4b

glyphosate industry and ~25% market share in the Indian INR8b glyphosate industry

selling products under the 'Roundup' brand. Monsanto enjoys a premium positioning

in the market place with its glyphosate selling price at INR 340 per litre and

competitors around INR 310-320 per litre. In FY14 cost for glyphosate has gone by 30-

35% leading to price increases of around 15-20% to protect margins and drive growth.

GM food crops and RR flex (BG2RR) approval - Game changer events

Once approved by all bodies all companies can start the field trials for GM food

crops, thereby providing significant opportunities of newer growth avenues.

Monsanto, Syngenta, Pioneer, Dow has been working on field trials across various

crops prior to monotorium imposed by government and hence are much ahead of

other competitors. MIL has been working on Roundup Ready® and Yieldgard® in-

the-seed technologies to offer maize farmer's choice of superior insect protection,

with convenient, flexible and effective weed management, to optimize maize yields.

Currently Monsanto GM corn is currently at BRL2 stage and management has guided

that it will take atleast 3 -4 years for commercial launch to happen. The initial research

and trials suggest that Monsanto GM corn can increase yields by 20-40%. Our

interaction with management highlight that not only the GM corn but the technology

for GM corn as well will remain in Monsanto India. This in our view will lead to

substantial re rating for the stock post commercial launch. Monsanto's current

technology of BT is likely to be replaced by RR Flex (BG 2 RR). RR flex has gone

through RCGM and is awaiting final approval from GEAC. RR-Flex has trait of herbicide

tolerancy thereby negating chances of damage to crop due to usage of herbicide and

also reducing labour cost.

Valuation and view

We expect topline to grow at 25% CAGR and PAT at 30% CAGR over FY14-16E. We

believe the investments done in FY09-FY12 will start paying off for Monsanto India

in terms of new product launches and market share gain. We also remain excited

about the huge potential and scalability opportunity it has to offer over the long

term from GM food and RR Flex. The stock is currently trading at 15.3x FY15E and

11.9x FY16E EPS. We value the stock at 16x FY16E EPS and arrive at a target price of

INR 2150 on the stock. We initiate coverage with a

Buy.

22 April 2014

Monsanto India

Company Description

Monsanto Company

Monsanto Company is a leading global provider of technology-based solutions and

agricultural products that improve farm productivity and food quality. Monsanto

remains focused on enabling both smallholder and large-scale farmers to produce

more from their land while conserving more of our world’s natural resources such as

water and energy. The group company generated total revenue of USD 13.5b with

~75% of that from seeds and genomics for crops (corn, soybean, cotton and

vegetables) and the remainder from herbicides for agricultural productivity.

Headquarters: St. Louis, Missouri, United States; Facilities: 404 facilities in 66

countries.

Globally, its business is structured in two segments:

a. Seeds and Traits: The Seeds and Traits segment consists of the Company’s global

seeds and traits business, and genetic technology platforms - including breeding,

biotechnology and genomics.

b. Crop Protection: The Crop Protection segment consists primarily of agricultural

and industrial, turf and ornamental herbicide (weed management) products

The group company

generated total revenue of

USD 13.5b with ~75% of

that from seeds and

genomics for crops

Monsanto India limited (MIL)

Monsanto India limited (MIL), the flagship company of Monsanto company, is a

subsidiary and the only listed Monsanto entity outside the United States. MIL has

partnered with farmers for over four decades. In India, the Monsanto group

operates through 3 entities i.e. (1) the listed entity Monsanto India Ltd (MIL) which

is primarily involved in Maize seeds and Herbicides; (2) 50:50 JV between Mahyco

and Monsanto Holdings Pvt. Ltd known as Mahyco Monsanto Biotech (MMB) which

is sub-licensed to distribute BT cotton technology in India; and (3) Monsanto

Holding.

MIL is a R&D-focused agriculture company, which aims to improve farmers’ lives by

offering farmers wide access to cutting-edge, high-yielding maize hybrid seeds

researched and developed through advanced seed breeding techniques; and

herbicides for weed management. Our team comprises of over 375 employees, a

majority of whom are from rural backgrounds

Footprints in India: 1. Mumbai, 2. Chandigarh, 3. Eluru, 4. Hubli, 5. Kolkata, 6.

Coimbatore, 7. Siliguri, 8. Silvassa

R&D, Quality and Manufacturing Sites:



Three Corn Seed Research Breeding stations at Udaipur, Bangalore and

Jalandhar.



A Biotechnology Research Centre at Bangalore



A Seed Processing Facility at Hyderabad



A Quality Assurance Laboratory at Hyderabad



A Chemistry Plant in Silvassa

MIL has partnered with

farmers for over four

decades

22 April 2014

Monsanto India

Key Milestones

Year

1949

1975

1978

1979

1989

1998

1996

2000

Milestone

Monsanto Chemicals of India Limited incorporated

Launched Machete – India’s first rice weed herbicide, helped farmers reduce rice yield loss by ~40 per cent

Launched Lasso – soybean weed herbicide, helped farmers reduce soybean yield loss by ~40 per cent

Launched Roundup – world’s number one weed control herbicide, helped farmers reduce labour cost and crop loss caused by

general weeds

Listed on the Bombay Stock Exchange (BSE)

Invested in Agrochemicals plant at Silvassa

Launched Leader – wheat weed herbicide, helped farmers reduce wheat grain loss by ~70 per cent, helping secure India’s

wheat production

Acquired corn hybrid and sunflower businesses, post Monsanto's global acquisition of Cargill Inc.'s International Seed

Operations in 1998

Monsanto Chemicals of India Limited renamed as Monsanto India Limited

Listed on the National Stock Exchange (NSE)

Launched Fastmix – India’s first rice weed control herbicide for water-scarce areas

Invested in Corn Processing Plant at Elluru, Andhra Pradesh

2001

2002

2003

2004

Leader becomes India’s number one wheat weed herbicide

Integrated all corn hybrid seed varieties under ‘Dekalb’ brand

Voted among ‘India’s Best Places to Work’ by Great Places to Work Institute

Dekalb becomes India’s number one corn hybrid seed brand

Voted among ‘India’s Top 25 Best Employers’ by Hewitt Associates

Invested in Corn Research Breeding facility at Ghaziabad, Uttar Pradesh

2006

2007

Divested Leader – wheat weed herbicide to Sumitomo Chemicals

India identified as an independent region within Monsanto Company

Quality Assurance (QA) Lab at Hyderabad commissioned to meet current & future testing needs of India & Asia-Pacific

Voted among ‘India’s Top 25 Best Employers’ by Hewitt Associates

Divested hybrid sunflower business to Devgen Seeds and Crop Technology Pvt. Ltd. to increase focus on core businesses

Invested in Corn Drier facility at Shamirpeth, Andhra Pradesh

2008

Voted as ‘India’s Best Places to Work’ by Great Places To Work Institute

Divested Machete, Fastmix & Lasso to Sinochem India Company Private Limited to increase strategic focus on core

businesses. Today, MIL is sharply focused on its world-class products - Dekalb corn hybrid seeds and Roundup herbicide

businesses, that continue to be the number one choice of Indian farmers

Source: Company, MOSL

Revenue breakup for FY13 (%)

FY13

Others, 1

Agro

Chemicals,

Seeds

Business,

Revenue breakup for FY14E (%)

FY14E

Agro

Chemicals,

Seeds

Business,

Source: Company, MOSL

22 April 2014

Monsanto India

Dekalb: Strong Brand focus on market share gain



Monsanto operates through 100 year old brand called Dekalb acquired from Cargill in

1998 and it is India’s largest selling hybrid maize seed brand with 25% market share.

Monsanto has launched 7-8 hybrids in last 2 years leading of regain of market share

from players like pioneer and DuPont which are around 20-23% market each.

Monsanto India currently derives 40% of its revenues from products launched in last 2

years.

Aggressive launch of newer products has not only helped Monsanto gained market

share in FY14 but also helped to reduce the age profile of its portfolio from 10 years in

2009 to 8 years in 2013.



Operational efficiencies and consolidation measures have helped reduce seed write

offs to less than 7% of revenues from an average of 20% for last 3 years. Additionally

sales return has come down by 15% there by driving growth.



Monsanto has a very strong Rabi portfolio as compared to Kharif. The management

plans to aggressively roll out newer hybrids for Kharif going forward which has been

under development since last 3-4 years there by driving margins.

Entered hybrid corn with acquisition of Cargill

Monsanto started as Herbicide Company in India prior to 2000s. In 1998, Monsanto

global acquired Cargill’s international seed operations in central and South America,

Asia, Africa and Europe (excluding the UK) for USD1.4b as part of its strategy to

quickly spread the use of its GM seed worldwide. Monsanto Chemicals was a pure

manufacturer of agrochemicals. Monsanto Enterprises looked after the marketing

and distribution functions and was the marketing arm of the US parent with a

marketing and distribution infrastructure and rights for the entire range of parent's

products; while Monsanto India was the holding company of the group's operations

in India. Seeds and other biotechnology products were introduced through the

parent's 100% subsidiary, Monsanto Technologies. All this subsidiaries have now

been integrated with Monsanto Chemicals, which subsequently became Monsanto

India Ltd in 1999-2000. This restructuring was aimed at making Monsanto India an

“integrated agri-business company” and was formally put through in June 2000.

Restructuring done to focus on seeds business in 2008

Post consolidation, the company had branded seed products like DeKalb maize

hybrids (HiShell, AllRounder, Prabal, Sheetal, Double etc.), Asgrow sunflower hybrids

(SH3322, SH41, SH177, SH416, SH88 etc.), Frontline paddy hybrids (RH 257, RH664

etc.) in addition to Herbicides like Roundup (Glyphosate), Machete (Butachlor),

Leader (Sulfasulfuron) and FastMix (Butachlor). This consolidation also resulted in

promoters share increasing in listed Monsanto India from 40% to 72%. However,

during the fiscal year 2007-08, Monsanto India divested its Butachlor and Alachlor

businesses to Sinochem India Company Private Limited and Sunflower seeds

business to Devgen Seeds and Crop Technology Pvt. Ltd. Profits of INR458m from

some of these divestitures in 2007-08 significantly bolstered Monsanto’s net profit;

this was distributed to shareholders through a special dividend of INR180 per share

in 2008. Today, Monsanto had made Dekalb corn seeds and Roundup herbicide as

its core business in India, in addition to the biotech traits business

Consolidation also resulted

in promoters share

increasing in listed

Monsanto India from 40%

to 72%

22 April 2014

Monsanto India

Decalb 100 year old brand, leader with 25% market share

Monsanto operates in hybrid corn segment through 100 year old brand called

Decalb acquired from Cargill in 1998. Dekalb® is India’s largest selling hybrid maize

seed brand renowned for its rich and diverse maize germplasm pool and enjoys 25%

market share with other players like Pioneer, DuPont having 22-23% each, Kaveri at

14% and Nuziveedu at 10% respectively. Monsanto currently has 17-18 hybrids and

sells across in 18 major states of India. Around 90% of the Corn is produced in 6-7

States namely TN, AP, Maharashtra, Gujarat, MP, UP, Rajasthan, Bihar for Rabi.

Monsanto India started launching its own product from FY08 onwards under the

DeKalb brand. In early 2000s Monsanto derived 80% of its revenues from herbicide

business, however post success of Decalb brand, seeds revenues now stand at 65%

of FY14 revenues for Monsanto with herbicide at 35%.

Monsanto continues to gain market share

Others , 5%

Nuziveedu , 10%

Monsanto, 25%

Dekalb® is India’s largest

selling hybrid maize seed

brand

Kaveri, 14%

Pioneer , 23%

Du Pont, 23%

Source: Company, MOSL

Hybrid maize introduction led to increase in Yield

Area (ha)

Production (MT)

Hybrid Maize

Introduced

Yield (kg/ha)

2,335 2,414

2,540

2,024

1,792

1,822

2,000

2,041

1,681

FY03

FY04

1,907

1,938 1,912

FY06

FY07

FY08

FY09

FY00

FY02

FY05

FY10

FY11

FY01

Source: Company, MOSL

Monsanto India has 7 R&D Seed Breeding Stations, Corn Seed Drying & Processing

Plant in Hyderabad, State-of-the-art QA Seed Testing Laboratory and AgroChem

facility, Silvassa. It also has more than 300 acreages of farmer land available for

breeding and around 40, 000 acres for seed production. It engages 21,000+ growers

for seeds production.

Monsanto acquired

leadership position with

more than 40% market

share in hybrid corn market

in early 2000s

22 April 2014

1999- 2007 – scaled up but 2007-2012 saw loss of market share

Post acquisition of Dekalb brand in 1998, Monsanto acquired leadership position

with more than 40% market share in hybrid corn market in early 2000s. Dekalb was

very strong brand with products like Dekalb 900M, Dekalb Super 900M, Dekalb

SUPERME, Dekalb lishell, Dekalb double, Dekalb prabhal and Dekalb Allrounder.

Monsanto India

Amongst the entire portfolio Dekalb 900M, Dekalb Super 900M were the best

products in the portfolio with more than 70% market share in 2002-03, a testimony

of strong positioning of Monsanto in early 2000s.

However 2007-2012 saw a period of consolidation in market share for Monsanto

due to numerous factors like:-

1) Lack of investments in breeding in 2002-2007 hence lack of newer product

launches in 2008-2013, as it takes 5 years to launch a product. Eg: - Product

launched in 2008 is actually effort of last 5 years of R&D which includes crossing,

testing, etc.

2) Lack of MNC interest in bringing Germplasm into India.

3) Increased in competition intensity with companies like Syngenta, Pioneer,

Kaveri, Nuziveedu etc launching newer hybrid corn given success of BT Hybrid

cotton in India.

4) Non participation in lower end of hybrid corn market in the range of INR 60-80

per kg which has grown significantly in last 5 years especially in AP during the

Kharif season.

5) Focus on Rabi market which was more premium in nature as compared to kharif

which was more of lower price market.

6) Non participation in subsidy business which is currently around 25-30% of

overall corn industry. States like UP, Rajasthan, Gujarat and Karnataka (100%

subsidy) provides subsidy.

Non availability of right hybrids in South India affected market share

In 2007-08 maize gained popularity with farmers as a higher remunerative crop due

to its less water consumption, high yield, and good market price. Almost 83% of

Tamilnadu acreages were dedicated to corn production. Farmers affected by price

volatility in sugar cane, turmeric, and vegetables, switched to maize cultivation.

Also, Immediate liquidity in the market, store-and-sell facility, and high demand,

prompted TN farmers to increase maize cultivation in 2007-08. Continuous cropping

and congenial environment led to development of pests and diseases, especially like

Downy Mildew and Stalk Rot. Our channel checks with distributors and farmers

suggests, Monsanto lost market share in south India due to non availability of right

hybrids during increase in pests and diseases to the corn crop thereby losing market

share to competitors.

Downy mildew on plants

Almost 83% of Tamilnadu

acreages were dedicated to

corn production

Source: Company, MOSL

22 April 2014

Monsanto India

Our checks suggest that in Andhra Pradesh during Rabi season some of Monsanto

hybrids didn’t perform well during cyclone in AP. While we understand some of new

launches in FY10 like DKC 9081 and DKC 9142 have done well but some others

weren’t able to withstand the cyclone as compared to competition whose hybrids

didn’t fall during cyclone. Also in central Karnataka due to increase in foliar diseases

like Rust, TLB etc performance of Monsanto hybrids was affected thereby leading to

market share loss.

New product launches to improve market share

Monsanto has launched 7-8

hybrids in last 2 years

leading of regain of market

share from players like

pioneer and DuPont which

are around 20-23% market

each.

While Monsanto India lost some market share from 39% in 2007 to 25% in 2013, the

company 2008 onwards started increasing its investments in breeding and exchange

of Germplasm from the parent. Our interaction with management suggests that the

increased investments since 2007 onwards has started seeing tangible benefits in

terms of newer launches since 2012. Monsanto has launched 7-8 hybrids in last 2

years leading of regain of market share from players like pioneer and DuPont which

are around 20-23% market each. Recently launched hybrids include DKC 9108, KC

9106, DKC 8101, DKC 9081, DKC 9120, DKC 9125 and DKC 9126.

22 April 2014

Monsanto India

Monsanto product profolio

Sr No Brand Name

Dekalb® 900M Gold

Trait

For irrigated and assured rainfall conditions with good grain color

and good storing quality

For fertile soils with assured irrigation availability and good

management. Responds to good growing conditions and good

management.

For high fertile soils with irrigation facilities and good agronomic

practices. Pinnacle maize produce is known for high starch

content and very suitable for starch industrial use.

For consistent high yields, excellent grain color and good keeping

quality.

For irrigated and assured rainfall conditions with wide

adaptability. Its grain is rich in protein and oil and suitable for the

feed industry.

With high shelling percentage, this advanced hybrid maize has

attractive grain color and more protein percentage suitable for

poultry feed

Offers big cobs with good tip filling, is suitable for both grain crop

and green cob purposes and matures in 95-100 day

Utilizes soil moisture effectively as it has a deep root system, has

attractive grain colorand the ability to give good yields under

tough conditions

This is a stay green plant type with wider adaptability, consistent

high yields and cylindrical cobs with good tip filling

Desi type of grains with attractive grain color which matures in 90

days with good standability

For better yields even under less rainfall situations, has attractive

grain colorand can be stored for a longer time

This is a full maturity hybrid with high yielding potential,

attractive grain color and good keeping quality

For irrigated and assured rainfall conditions, excellent grain color,

robust cob size and good for storability

Good yields under less rainfall conditions and consistent

performance across soil types and varying agronomic conditions

New hybrid maize seeds for progressive maize farmers in Punjab

and Uttar Pradesh. While DKC 9108 is meant for the

spring

planting season

and DKC 9106 has been developed to suit the

May planting Kharif season

in the region for better productivity

With enhanced productivity, this new hybrid maize seed caters to

the Kharif season in Karnataka, Andhra Pradesh and Maharashtra,

suited for soil types with limited availability of utilizable water

Specially developed maize hybrid seeds for farmers who plant

maize in the rabi or dry season and need improved standability of

their maize crop

Specially developed maize hybrid seeds for farmers in Northern

States with irrigation on their lands

Before 2006

Year of Launch

FY07

Targeted States

DKC 9081

FY10

Bihar

Dekalb® Pinnacle

Before 2006

Dekalb® Super 900M

Before 2006

Dekalb® Supreme

Before 2006

Dekalb® I-lishell

Before 2006

Dekalb® Double

Before 2006

Dekalb® Prabal

DKC 9072

DKC 7074

DKC 972 plus

DKC 984

DKC 9099

Dekalb® Allrounder

Before 2006

FY07

DKC 9108 and DKC

9106

2011

Punjab and Uttar Pradesh

DKC 8101

New Launches

2011

Karnataka, AP, Maharashtra

DKC 9120

2013

DKC 9125

2013

Northern States

Source: Company, MOSL

22 April 2014

Monsanto India

Some of the recent launches performance has been very strong

Brand

DKC 9081

Commentary

Developed specially to optimize yields in the rabi season in Bihar. In

its second year of cultivation in Bihar, this hybrid maize seed recorded

large growth and enhanced volumes as an ever increasing number of

progressive Bihar farmers took to its cultivation.

Developed to cater to the Kharif season in Karnataka, Andhra Pradesh

and Maharashtra. Farmers rewarded Dekalb® with a 5x volume

growth for the hybrid in FY13 over FY12.

Developed for farmers in Punjab and Uttar Pradesh.

States

Bihar

DKC 8101

DKC 9108

Karnataka, AP,

Maharashtra

Punjab and UP

Source: Company, MOSL

Strong marketing initiative assist in brand recall

Brand

DKC 8101

Dekalb Hishell

Dekalb 9120

Campaign name

Hero

Guru

Pehelwaan

Region

Maharashtra

North

Bihar

Source: Company, MOSL

Improving age profile of portfolio to help accelerate growth

Monsanto India currently

derives 40% of its revenues

from products launched in

last 2 years.

Monsanto India currently derives 40% of its revenues from products launched in last

2 years. Also the aggressive launch of newer products has not only helped Monsanto

gained market share in FY14 but also helped to reduce the age profile of its portfolio

from 10 years in 2009 to 8 years in 2013. Management has guided that it plans to

further reduce this to 6 years over next 2-3 years indicating aggressive product

launches and phasing out of older products going forward.

Rollout of kharif hybrids to philip market share gains further

Our checks suggest that Monsanto has a very strong Rabi portfolio as compared to

Kharif. This is also endorsed from the fact that Monsanto has a strong footing in

states like Bihar, UP and Maharashtra which have higher proportion of corn grown

during rabi and is weaker in South India which is a large Kharif market specially AP,

TN and Central Karnataka. The management plans to aggressively roll out newer

hybrids for Kharif going forward which has been under development since last 3-4

years thereby helping to improve their market share positioning.

Inventory forecasting helped reduce sales returns and write offs

All the corn companies

need to have around 6-9

months of inventory before

the start of the season

Inventory forecasting is the most important element for improving margins in corn

segment. Corn has a shelf life of 1 year as compared to cotton of 3 years. Also all the

corn companies need to have around 6-9 months of inventory before the start of

the season. Hence if the inventory comes back from the trade channels and

distributors then almost 50-70% of the inventory doesn’t germinate leading to

companies taking a write off the same.

However over last few years Monsanto with a view to gain greater operational

efficiencies decided to consolidate seed processing operations at Hyderabad from

Bellary and Eluru. This has resulted in better operation controls, inventory

management and reduction in operational cost. It offered a location advantage for

transport availability and economical dispatches of finished goods, resulting in

substantial cost savings. Also by closing down the Eluru drier facility and the Bellary

22 April 2014

Monsanto India

Seed Conditioning unit we were able to make significant workforce related savings.

Also in case of overproduction the company now takes a prudent step to sell off the

grain directly instead of converting it into a seed and then taking a hit. All these

measures has helped reduce seed write off to less than 7% of revenues from

average of 20% for last 3 years and reduction of sales return by 15%.

FY14 witnessed a stellar performance

Corn is a 120 day crop but

over last few years many

farmers use hybrids to

cultivate 90 day crop

thereby leading to increase

in acreages

FY13 saw pressure on maize acreages on account of delayed rainfall and drought in

key maize growing markets of Maharashtra and North Karnataka thereby impacted

Kharif sales. However FY14 saw robust growth of 36% topline growth 9MFY14 over

9MFY13 primarily due to strong kharif and Rabi season due to increase in acreages

for corn due to higher global corn prices, strong rainfall and lower base effect of last

kharif season. Also corn is a 120 day crop but over last few years many farmers use

hybrids to cultivate 90 day crop thereby leading to increase in acreages. Eg: - In

north India, farmer produces cotton in kharif and potatoes in Rabi and in between

kharif and Rabi produces corn in 90 days.

Hence due to lower sales return and write offs in FY14 due to strong kharif and rabi

season, improvement in product mix in favour of single cross has helped Monsanto

improved margins significantly from 18.2% in 9MFY13 to 28.1% in 9MFY14 marking

an improvement of 10%.

Share of Rabi on increasing

trend…

Currently Rabi contributes

around 35% of volumes and

50% of value and Kharif

contributes 65% of volumes

and 50% of value.

Over last few years with improvement in irrigation facilities, better corn realization

acreages for corn production in rabi has been on an increasing trend. In 2008

around 85% of the corn sales were in kharif season while now it contributes around

65%. However currently Rabi contributes around 35% of volumes and 50% of value

and Kharif contributes 65% of volumes and 50% of value.

Most of Rabi corn is single cross thereby improving margins

Rabi corn seeds are largely single crossed and are sold low in volumes and high in

value and are more profitable. While Kharif corn seeds are 2 way and 3 way crossed

seeds and are more in volume and lower in value, hence lesser profitable. Over last

2 years most of the newer hybrids launched by Monsanto has been single cross in

nature. Also over last 2 years the share of single cross in Monsanto portfolio has

increase to around 40%. We believe that with increase in Rabi hybrid corn share the

share of single cross is likely to increase thereby leading to significant increase in

margins for Monsanto in the corn segment.

22 April 2014

Monsanto India

Public-Private Partnership (PPP)

MIL participates across 6 states for PPP viz. Uttar Pradesh, Jammu & Kashmir,

Maharashtra, Odisha, Jharkhand & Uttranchal

Key Highlights of PPPs across states:

Hybrid Maize Yield Enhancement Program, Uttar Pradesh



Aims to improve crop yields, income, and thus, transform the lives of thousands

of maize farmers in Uttar Pradesh.



Knowledge on agri inputs and practices are shared at farmer education

programs, live crop demonstrations conducted, and information disseminated at

state-exhibitions and village-level exhibitions/fairs to progressive farmers and

farming groups.



Farmers gained access to quality inputs including Dekalb® maize hybrid seeds, as

well as the latest agronomic practices.



The project benefited 40,000 farmers from 23,000 households in 1,500 plus

villages



The average yield increased by 6-7 quintals per acre and farmers now earn

approx. INR6,000 – INR7,000 incremental income.

Improving Maize Productivity through Hybridization, Jammu & Kashmir



This project aims to transform over 25,000 maize farmers’ lives across 1,214

villages in eight districts in Jammu & Kashmir by improving crop productivity.



In coordination with Department of Agriculture, our Field Team conducted crop

demonstrations enabling farmers to increase yields by approx. 40-65% per acre.



Farmers now earn approx. INR5,000 – 6,000 incremental income per acre.



Maize hybrid seed usage is up 25 per cent from 15 per cent in the past with

better agronomic practices. Improved farmer income has set positive trend for

maize in the State.

Integrated Agriculture Development, Maharashtra



In 2012, MIL participated in Buldhana and Nandurbar districts of Maharashtra to

improve productivity of 5,000 farmers on approx.



4,000 acres through better seeds and agronomic practices



Farmers benefitted from sharing of knowledge related to right plant spacing,

better inputs and crop management, and despite deficient rainfall, yields

increased by 6-10 quintals per acre over earlier years



The project has been extended to five-fold cover 25,000 acres in 2013

PPP to Increase Maize Productivity through Hybridization, Odisha



Under the Rashtriya Krishi Vikas Yojana (RKVY), MIL partnered the Department

of Agriculture in a project to offer maize growing as a choice to 5,746 farmers in

459 villages in 4 districts (Balangir, Nuapada, Sonepur and Gajapati) in 2012-13.



The team conducted 238 Farmer Awareness and Education Programs along with

NGO partners and District Agricultural authorities, and maintained continued

farmer connect, enabling improved farm performance



Average farmers’ yields doubled with Dekalb® maize hybrid seeds, i.e. 1.5 – 2

tons per acre from 0.8-0.9 quintals per acre with open pollinated varietal (OPV)

seeds, enabling farmers to earn additional income of INR6,000-7,000 per acre.

22 April 2014

Monsanto India

PPP to Increase Maize Productivity through Hybridization, Jharkhand



Under Rashtriya Krishi Vikas Yojana (RKVY), we were chosen by the Department

of Agriculture, Jharkhand to participate in a project to increase productivity by

popularization of maize hybrid seeds in 5 districts - Gadhwa, Palamau, Latehar,

Lohardagga and Ranchi



We outreached to 6,671 farmers in 159 villages through 230+ farmer awareness

and training programs, and 145 harvest day events



Our dedicated



Field team show cased Dekalb® maize hybrid seeds’ yield superiority and

enabled farmers to yield 1.8-2.0 tons per acre.



Additionally, favourable market prices enabled farmers to earn incremental

income of INR5,000 – 7,000 per acre.

Project Drishti, Uttaranchal



Project Drishti encouraged farmers in Uttaranchal to upgrade from open

pollinated varietal (OPV) seeds to maize hybrid seeds, and educated them on

improved agronomic practices towards increasing income and quality of life of

300 farmers in 91 villages.



The team outreached to 575+ farmers across four districts through crop

demonstration activities.



Crop yields increased by 50 to 100 per cent with maize hybrid seeds compared

with OPV cultivation, and farmers earned incremental income of INR5,000 –

7,000 per acre.



By way of the above Public- Private Partnerships (PPPs), we have contributed in

making a positive difference to approx. 1 lakh farmers.



Additionally, we engaged with the State governments in Rajasthan and Madhya

Pradesh under various initiatives to extend better quality products and create

shared value for over two lakh farmers in these States.

22 April 2014

Monsanto India

Testimony by the farmers

Name

Sunil Bhaskar

Kankde,

Region

Aurangabad, Maharashtra

Testimony

My farm yielded 35 quintals per acre (7-8 quintals per acre higher than last year) with

Dekalb® 900M Gold

hybrid maize seed in the Rabi season. Although I was using

hybrid seeds, I knew that the right information on how to plant these, as well how to

manage the crop life through DDFC which helped immensely, as assistance was just a

call away. Since they had exact information on my region and its agricultural facets,

the advice they gave was topical, relevant and highly specialized. I feel this is yet

another blessing for us farmers.

I cultivate Maize on my 5 bigha rain-fed land. Earlier, I used to produce 1.5 quintals

per bigha of Maize from OPV (Open Pollinated Varieties) seeds. This harvest was

sufficient only for personal consumption. Ever since I started using Dekalb®’s

DKC-

7074

seeds, I have been able to produce 40 quintals in 5 bigha land which is about 8

quintals per bigha and a gain of 6.5 quintals per bigha. My economic conditions have

improved significantly and my family is enjoying the fruit of this progress. From the

additional income I have earned over the last 2-3 years, I have dug a well, purchased

agricultural equipment and a buffalo and sent my children to a good private school.

Further, Maize plants have provided enough green fodder for cattle which has led to

increased savings. My future is secure and my family and I are elated

“I participated in one of Monsanto’s farmer meetings conducted in my village. The

demonstrated success of Dekalb® hybrid maize seeds led me to choose

Dekalb®

900M Gold

on two of my 5-acre farm. By employing the right agronomic practices as

guided by the Monsanto team, I got superior yields of 40 quintals per acre as

compared to 28 quintals from other seeds used earlier. The excellent grain colour of

the produce fetched an additional premium of INR50 per quintal, translating to a

total incremental benefit of over INR12,000 per acre.

“I have been using Dekalb® hybrid maize seeds for almost ten years now, which

stabilized my financial position. This year, on the advice of the MIL team, I sowed

DKC 9081 and Dekalb® 900M Gold in 10 acres of my 12 acre farm. The results were

outstanding. I got 34 quintals per acre from

Dekalb® 900M Gold

and 39 quintals per

acre from DKC 9081. Despite the irregularities in weather this season, the yield from

my farm was significantly higher than other farmers in my village who did not use

Dekalb® seeds. My additional income has helped me send my brother to an

engineering college, arrange the marriage of two of my sisters and buy a four-

wheeler.”

Dekalb™ 900m gold has helped me get 3 times higher yield of 49.7 quintals per acre

versus only 16.6 quintals per acre from other hybrid seeds that I planted on three

acres of my farm.

Dekalb™ 900m GOLD

is better than other seeds as it gave me

higher yields, and higher income due to superior quality of corn which fetched me a

good market price. I earned an income of inr 32,814, which is 5 times higher than

what i earned in the other three acres combined.

Sudhanshu Singh, a 48 year old Engineer, is a farmer with 150 acres of farmland and

believes in progressive farming techniques. He grows maize on 80 acres of his farm

and has always used Dekalb® hybrid maize seeds, because of the quality of crop and

the increasing yields he gets. From the resultant cash flows, he has invested in a

combined tractor and maize harvester to further enhance the level of mechanization

on his farm

I have been the Sarpanch of this village for over 45 years and I have witnessed

unparalleled prosperity for the entire village with Project Sunshine. Earlier many of

our villagers used to migrate to cities to look for work, but now, they are investing

their time and effort in agriculture in their own village and reaping spectacular

returns. Our quality of life has improved. I am glad that this dream of mine has come

true in my lifetime.

3 years ago, our farming was unsystematic and yields were inefficient and

insufficient. Then, two things happened. First, I was introduced to Project Sunshine

and decided to start cultivating maize on a large part of my 3 acre farm. Not only did

we get seeds, fertilizer and other inputs to start with, but also proper training in

farming techniques, such as guidelines on row-spacing and proper and timely

nutrition for plants. The result is taller plants, bigger cobs, good color, excellent grain

quality and a much higher yield. We now get 30% higher prices than conventional

maize.

Source: Company, MOSL

Punam Chand

Kasotia

Adol Village, Jhadol Tehsil,

Rajasthan

Bapurao

Shevantrao

Shinde

Silod, Aurangabad, Maharashtra

Mohammad

Nanhe

Balthirasulpur village,

Muzzafarpur, Bihar

Not Given

Sudhanshu

Singh

Nayanagar, Samastipur, Bihar

Surpalbhai

Bihar

Pratapbhai

Maharashtra

22 April 2014

Monsanto India

Hybrid Corn at an inflection point



India’s maize yields are half of the world average, with India’s yield at 2.47 tons/ha in

comparison with the world average yield of 5.14 tons/ha.

Farmers choosing maize hybrid seeds have contributed to increasing maize production

by approximately 93 per cent in the last 11 years.

In India 6-7 states contribute 90% of the corn production. Major crop producing States

are TN, AP, Maharashtra, Gujarat, UP, Rajasthan and Bihar.

Around 52% of the corn production is used for poultry feed, 24% in Food, Cattle food

and Starch 11% each. 60% of the raw material of poultry feeds consists of maize.

In 2013 production of corn in India was 23MT while consumption was 18.9MT and

management believes that in next 3 years demand for corn will outstrip its supply.

Hybrid maize a boon to farmers

Hybrid penetration is still at

the nascent stage with only

60% of the production is

under hybrids

Hybrid penetration is still at the nascent stage with only 60% of the production is

under hybrids. Overall Hybrid Market in India is estimated to be around INR9,000cr.

Out of which Cotton is 3600Cr, Corn 1200-1400Cr, Rice 500-600Cr, Vegetable

2000Cr. Even though farmers choosing maize hybrid seeds have seen increase in

maize production by approximately 93 per cent in the last 11 years (22.50 million

tons in 2012-13 from 11.15 million tons in 2002- 03) India’s maize yields is just half

of the world average, with India’s yield at 2.47 tons/ha in comparison with the world

average yield of 5.14 tons/ha. In the next 5 and 10 years India’s domestic demand

for maize is forecasted to outstrip supply. It is expected that maize production will

rise to 30MT in 2017 showing a robust growth of 36% while with the period of next

9 years it is expected that the production will double to 44MT by 2022.

Hybrid corn penetration relatively high in developed countries

94%

% of Crop in Hybrid

88%

86%

85%

75%

60%

35%

Canada

USA

Argentina

Brazil

India

Global

Source: James 2012, MOSL

22 April 2014

Monsanto India

Yield per hectare is low in India compared to Global average of 5.14 (tons/ha)

Area (thousand hectares)

2.30

1.94

2.41

Yields (tons/hectare)

2.53

2.01

2.47

2.55

2.47

1.89

1.94

7,500

2004

7,600

2005

7,800

2006

8,260

2007

8,170

2008

8,330

2009

8,600

2010

8,800

2011

8,710

2012

9,500

2013

Source: Ministry of Agriculture, MOSL

Hybrid Market in India at around ~9000Cr

INR Cr

1,400

2,000

1,400

3,600

600

9,000

Cotton

Corn

Rice

Vegetable

Others

Total Hybrid

Market

Source: Company, MOSL

Area under cultivation for Other Crops (‘000 hectares)

Crop

Corn

Sorghum

Barley

All Wheat

Rice

Soybean

Groundnuts

Rapeseed

Sunseed

Cotton

2004

2005 2006 2007 2008 2009

2010 2011 2012 2013

7,500 7,600 7,800 8,260 8,170 8,330

8,600 8,800 8,710 9,500

9,100 9,000 8,510 7,930 7,530 7,500

7,060 6,330 6,300 6,300

750

755

700

770

750

780

620

780

770

780

26,620 26,500 26,400 28,000 28,150 27,750 28,460 29,070 29,860 29,400

42,300 43,400 44,000 43,770 45,400 41,850 42,860 44,100 42,410 44,000

7,990 7,800 8,120 8,800 9,600 9,600

9,300 10,270 10,800 12,220

6,800 6,860 5,910 6,500 6,400 5,300

6,000 5,300 5,000 5,500

7,150 7,380 6,640 5,700 6,600 6,450

7,250 6,600 6,750 6,800

2,300 2,410 2,145 1,630 1,530 1,400

760

735

800

830

8,786 8,873 9,166 9,439 9,406 10,310 11,140 12,200 11,800 11,800

Source: Ministry of Agriculture, MOSL

Yields (tons/hectare; except cotton kilos lint/hectare) for Other Crops

Crop

Corn

Sorghum

Barley

All Wheat

Rice

Soybean

Groundnuts

Rapeseed

Sunseed

Cotton

2004

1.89

0.8

1.73

2.71

1.97

0.73

1.03

0.91

0.53

471

2005 2006 2007 2008 2009 2010 2011 2012 2013

1.94 1.94

2.3 2.41 2.01 2.53 2.47 2.55 2.47

0.85 0.84

1.0 0.96 0.89 0.99 0.95 0.84 0.92

1.59 1.74 1.73

1.6 2.17 2.18 2.13

2.1 2.23

2.59 2.63 2.71 2.79 2.91 2.84 2.99 3.18 3.14

2.11 2.12 2.21 2.18 2.13 2.24 2.39 2.46 2.41

0.9 0.95 1.08 0.95 1.01 1.05 1.07 1.06 0.94

0.92 0.91 1.05 0.98 0.92 0.98 1.04

1 1.09

0.95 0.87 0.96 1.02 0.99 0.98 0.94 1.01 1.03

0.64

0.6 0.69 0.65 0.59 0.92 0.84 0.88 0.88

467 518 554 523 503 516 491 489 572

Source: Ministry of Agriculture, MOSL

22 April 2014

Monsanto India

Production (‘000 MT; except cotton in 480 pound bales)

Crop

Corn

Sorghum

Barley

Wheat

Rice (Milled)

Soybean

Groundnuts

Rapeseed

Sunseed

Cotton

2004

14,180

7,240

1,300

72,150

83,130

5,850

7,000

6,500

1,224

19,000

2005

14,710

7,630

1,200

68,640

91,790

7,000

6,300

7,000

1,550

19,050

2006

15,100

7,150

1,220

69,350

93,350

7,690

5,385

5,800

1,280

21,800

2007 2008

18,960 19,730

7,930 7,250

1,330 1,200

75,810 78,570

96,690 99,180

9,470 9,100

6,800 6,250

5,450 6,700

1,120 1,000

24,000 22,600

2009

2010

2011 2012

2013

16,720 21,730 21,760 22,230 23,500

6,700

7,000 6,030 5,300

5,800

1,690

1,350 1,660 1,620

1,740

80,680 80,800 86,870 94,880 92,460

89,090 95,980 105,310 104,400 106,000

9,700

9,800 11,000 11,500 11,500

4,900

5,850 5,500 5,000

6,000

6,400

7,100 6,200 6,800

7,000

820

700

620

700

730

23,800 26,400 27,500 26,500 31,000

Source: Ministry of Agriculture, MOSL

Globally Corn is the most widely grown crop

Maize is the most grown crops globally. It ranks 1

in terms of total global

production. Maize is majorly used as animal feed and industrial usage of starch. In

terms of international trade America has surplus corn and hence it is a net exporter

of maize. Europe, Ukraine, Russia and Australia have net deficit. In Asia China, Japan,

Korea and most of the other ASEAN countries are net importers. Management

believes that India will have surplus corn will be able to export for another 3-4 years.

Post which due to increase in consumption, demand will outcast the supply and it

will become net importer of corn.

Worldwide Corn Production (mt)

Canada South

2% Africa

Mexico

India Argentina

Ukraine

Brazil

Worldwide Corn Consumption (mt)

Others

14%

37%

Indonesia

1% Egypt

Canada

1% Japan 1%

India

Others

21%

32%

China

22%

Mexico

China

23%

Brazil EU

6% 8%

Source: USDA, MOSL

India on of the largest consumer of corn

As per the KPMG estimates,

India will require 40-45MT

of corn in next 15-20 years.

6-7 states contribute 90% of

the Corn production in India

Every year population is increased by 2crore. It’s like adding Australia every year.

Also as the disposable income rises there will substantial change in consumption

pattern. People will more of Dairy products, Meat/Fish/Eggs, Fruits, Edible oil etc

and less of Rice and Wheat. Also for every Kg of meat you need 6Kgs of grain. Hence

requirement for corn will increase substantially. India is the world’s 6

largest

consumer of maize. As per the KPMG estimates, India will require 40-45MT of corn

in next 15-20 years. We currently have farmer base of ~8m who produce corn of

22MT in the field spread of 8.5m hectares. Farmers are choosing maize hybrid seeds

on 60% of India’s maize areas. Also 6-7 states contribute 90% of the Corn production

in India. Major crop producing States are TN, AP, Maharashtra, Gujarat, UP,

Rajasthan and Bihar. Also; Maharashtra, Gujarat, Punjab, Haryana and UP support

field trials for GM corn while Bihar and Tamil Nadu government are currently

opposing field trials. However after elections things are expected to improve. No

moratorium is received for field trail.

22 April 2014

Monsanto India

5 States contributing 65% of the total corn production in India

22%

Others

35%

Karnataka

16%

Maharashtra

Rajasthan

Bihar

11%

Source: Ministry of Agriculture, MOSL

Major Corn producing states

Source: Government of India, MOSL

Most of the Corn is consumed in Poultry

Around 60% of the raw

material of poultry feeds

consists of maize

Indian Poultry has recorded a growth rate of 12% per annum for the past 20 years.

Poultry feed cannot be thought of without Maize, be it by quantity or quality.

Around 60% of the raw material of poultry feeds consists of maize. Due to

hybridization in maize, there is significant enhancement in quality and quantity,

which is also reflected in chicken production.

22 April 2014

Monsanto India

Poultry biggest consumer of corn

Cattle Food, 11%

Starch, 11%

Seed, 1%

Food, 24%

Brewery, 1%

Poultry, Pig, Fish,

52%

Source: Directorate of Maize Research, MOSL

India’s 5 yearly Corn Production & Consumption pattern has moved in

tandem

India’s 5 yearly production and consumption pattern has shown a similar trend from

1960 to 2010; except the period from 1975 to 1985 where consumption grew at a

higher rate than production. India is been able to produce as much as it is

consuming however since past decade India is outgrowing its consumption

requirement mainly due to higher penetration of hybrid corn resulting in higher

yields. In 2010 production of corn was 21.7mt while consumption was 18.1mt.

Similarly in 2013 production was 23mt while consumption was 18.9mt.

India’s 5 yearly Production pattern

Production (in MT)

9.2%

6.2%

4.8%

3.3%

7.3

0.0%

4.1

4.8

7.5

-0.6%

7.0

-0.8%

6.6

9.0

9.5

1.2%

-0.9%

12.0

4.1%

14.7

21.7

-4%

7.5 6.2

5 year CAGR

8.1%

India’s 5 yearly Consumption pattern

Domestic Consumption (MT)

4.9

6.8

7.0

9.3

9.5 12.0 14.2 18.1

5 year CAGR

4.3

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: Ministry of Agriculture, MOSL

Depletion in water levels is a key concern

Water availability is a major limiting factor in productivity. There has been a major

depletion in the water levels since 2002. Hence micro irrigation will play a major role

in overall development of agriculture. Even building a dam is a challenging task due

to NGO protest and other political issues. The following chart clearly exhibits that

since 2002 there has been a substantial depletion of water levels especially in key

agricultural states in North India.

22 April 2014

Monsanto India

Change in water levels in India from 2002-08

Source: Company, MOSL

% of land irrigated in various crops

Crop (in order of area)

Rice

Wheat

Oilseeds

Of which Soyabean

Pulses

Fruits and Vegetables

Jowar and Bajra

Cotton

Corn

Sugarcane

Production

(MT)

104

12.3

17.2

232

21.5

358

Yield

(kg/ha)

2,372

3,140

1,135

1,207

694

908

491

2,476

70,317

Yield of Key Country

Irrigation

(kg/ha)

China : 6,590

58%

China : 4,748

92%

26%

US: 2,957

16%

US: 920

36%

US: 920

21%

Brazil: 80,234

94%

Source: Company, MOSL

Land required for same output has reduced multi folds

. In 1950s 353.7sq.mts were

required to produce 100kgs

of corn which has reduced

to mere 96.4sq.mts in 2009

The land required to produce same amount of corn has reduced significantly due to

modern farming techniques and especially sowing of hybrid variety of corn in past

few years. In 1950s 353.7sq.mts were required to produce 100kgs of corn which has

reduced to mere 96.4sq.mts in 2009. It is estimated that this will further reduce the

just 53sq.mts by 2030. This improvisation is possible due to hybridization of corn.

22 April 2014

Monsanto India

Reduction in amount of land required for same output

Source: Company, MOSL

22 April 2014

Monsanto India

Monsanto Farm Agvisory Services (MFAS) & Dr. Dekalb

Farm Care Service (DDFC) – Differentiated model



Launched in 2010, MFAS is a service which offers timely and customized crop

management advisory to enable maize, cotton and vegetable farmers to enhance farm

yields and profitability.



It currently has 1mn farmers connected with presence in 16 states across 7 languages.

Other companies like Pioneer etc and government agencies tried to replicate this

model through outsourcing model but have unable to get breakthrough.

MIL provides a toll free number 1800 3000 0303 after purchase of any Dekalb® maize

hybrid seeds packet and is operational 365 days from 7am to 9pm.

MIL has opened the free advisory centre in Malad, Mumbai, for farmers where 40 agro

experts are employed to assist the farmers.

DDFC farmer enrolment rose 32% YoY, at 3.5+ lakh farmers in 2012-13 up from 2.65

lakh farmers in 2011-12

MFAS – Key Differentiator

1mn+ farmers connected

Present in 16 states

across India

MIL launched Monsanto Farm AgVisory® Services (MFAS) in 2010 leveraging on high

penetration of mobile phones in the villages. This is an innovative service which MIL

is offering to lure the farmers and educate them on crop management. Already 1mn

farmers are connected and using the services fruitfully. It has been launched in 16

states and across 7 different languages targeting most geography in India. The

program has resulted in higher yield for farmers and in turn this has increased the

brand loyalty. Our interaction with management suggests that this has been created

with significant amount of investments over 5 - 6 year period. We also learn that

some of the other companies like Pioneer etc tried to replicate this model through

outsourcing model but have unable to get breakthrough.

Key Features of MFAS



Assisted by 7 different

languages



MFAS is built on a highly sophisticated IT software system, which assists

qualified and trained MFAS Advisors to identify the farmer’s query, consult the

comprehensive technical advisory system, and present the solution to him

instantly, mostly, on a single call.

The toll-free number works for 365 days from 7 am to 9 pm, giving live solutions

to any crop related query of the farmer.

MFAS offers two distinctive services which provide timely and customized

advisory to the farmer round-the-season helping him get immediate solutions to

his farming queries.

Various advisory service offered through MFAS

Inbound advisory

Suitable seed selection

Timely agronomic practices for fertilizers,

Pest-disease and weed management

Outbound advisory

Regular voice based crop advisories and alerts

throughout the season

Timely alerts on crop management

Hybrid recommendation

Weather forecasts

Local mandi prices

Source: Company, MOSL

22 April 2014

Monsanto India

Dr. Dekalb Farm Care Service

DDFC is dedicated Maize Crop Advisory Service under the MFAS umbrella. The Dr.

Dekalb Farm Care (DDFC) service, a customer-connect innovation introduced in

2010-11 to forge stronger farmer alliances, is a revolutionary new step in

Monsanto's engagement with farmers. The objective of DDFC project was to collate

and provide information to uneducated and less aware farmers. It was initiated in

May 2010. Success of DDFC lies in the agronomic knowledge of scientists which they

are able to share it with the farmers through this platform. Mobile will play a very

important role in communicating to farmer about Dekalb. In India Agronomics plays

a big role. In West due technological advancement farmer are more knowledgeable.

Indian farmers will be educated through mobile. MIL has opened the free advisory

centre in Malad, Mumbai, for farmers where 40 agro experts are employed to assist

the farmers. Currently MIL is servicing ~1mn farmers across the country through

their toll free number free of cost. However management believes that MIL might

be able to charge nominal amount but with that even the cost won’t be recovered,

on the other hand this type of services brand loyalty is improved resulting in higher

sale.

How does DDFC work?

It seeks to reach farmers in need of sustainable, timely agronomic knowledge. The

helpline answers a wide range of farm and crop management related questions.

With offerings ranging from one-on-one advice, information about MIL's hybrid

maize seeds and other crop management updates, this service helps farmers to

improve farm yields, while conserving resources. DDFC service improved yields,

reduced risks and boosted farmer confidence.

A toll-free number and contact centre has been set up, where farmers call to seek

advice on farm issues. Since a detailed database is maintained, the advice given to

farmers is not generic, but specific to their needs and farm conditions. Proactive

messages are delivered to the farmer's mobile phone, in their language, on best

practices on crop management. Additional information like weather forecasts, local

market prices for commodities, information on new hybrids and customer schemes

are also shared.

How data collection happens?

The DDFC team collects comprehensive information on farms and crop

management. With its advanced and innovative D-Tool (Diagnostic Tool) and Farmer

Expert Panel, it provides solutions on nutrient deficiency of soils timely control of

pests and diseases, recommendation on weedicide thus aiding in conservation of

resources and enhancing yield. DDFC drives on holistic crop management advisory

from its extensive research.

Ease of access to farmers



any Dekalb® maize hybrid seeds packet

Maintains a detailed database of each farmer.

Provides a toll free number with a simple assist directly to the DDFC advisor in

the preferred language of the farmer.

22 April 2014

Monsanto India

DDCF provide opportunity to understand the ground reality

Having a wide reach to farmers, through DDFC MIL has been able to acquire some

significant ground realities. Owing to this platform MIL is able to reach to farmers

directly and get first hand information on their experience and problems. Direct

reach enables them to find a suitable solution for every farmer which differentiates

them from the competitors. MIL has already derived some interesting findings

through recent surveys which have led to effective decision making by the

organization. The platform is well integrated with field efforts and even though it is

centrally controlled, the effectiveness, to a large extent, is driven from the field,

enabling MIL to leverage and synergize efforts.

How do farmers take decisions?

An internal research by Monsanto indicates that farmers base their farming

decisions on information received from peers or input dealers. MIL provides farmers

with after-sales services where experts educate farmers about agronomic practices

to help them realize better yields. Information provided by DDFC’s helpline assists

farmers in access to comprehensive and specialized information on farm and crop

management. The handholding of farmers through the critical stages of the product

usage has helped improve farm yields, conserve resources and boost confidence.

Farmer households obtaining information from various sources (%)

Others, 22.8

Government

demonstrations, 2

Credit agency, 1.9

Village fairs, 2

Output buyers/

food

processors, 2.3Primary

Extension

Cooperative

workers, 5.8

Society, 3.6

Other progressive

farmer, 16.8

Input dealers, 13.2

Radio, 13.1

Television, 9.4

Newspapers, 7

Source: MOSL, Company

Rural mobile penetration assisted the popularity

By 2014, the wireless

subscriber base is expected

to reach ~1 billion of which

468 million will be rural

subscribers

Mobile penetration in rural India is vital tool for the success of DDFC. By 2014, the

wireless subscriber base is expected to reach ~1 billion of which 468 million will be

rural subscribers. With such a wide reach MIL is able to provide unique services. It

establishes user identity and hence enables personalized content delivery. Using the

mobile as a medium, MIL connects and provides various services to farmers.

The Success Story

DDFC farmer enrolment

rose 32% YoY, at 3.5+ lakhs

farmers in 2012-13



DDFC was awarded a Silver Prize at Monsanto Sustainable Yield Global Pledge

Awards in 2010

DDFC farmer enrolment rose 32% YoY, at 3.5+ lakh farmers in 2012-13 up from

2.65 lakh farmers in 2011-12

22 April 2014

Monsanto India

Roundup sales to grow on increasing use of

herbicides



Weeds are plants which can cause yield losses up to almost 60% of the crop potential.

Farmers in India have been using manual labor to pull out weeds which is labor

intensive.

Labor shortage, rising wages due to NREGA implementation (15% CAGR in wages post

FY08) and rising urbanization trends have accelerating demand for herbicides.

Herbicides market in India is highly underpenetrated with its share in agro-chemicals

standing at 20% as against global standards of 48%.

Glyphosate is a leading safest herbicide and accounts for 30% of global herbicide sales

and 70% of Indian herbicide sales.

Monsanto has a ~60% market share in the global USD5.4b glyphosate industry and

~25% market share in the Indian INR8b glyphosate industry selling products under the

‘Roundup’ brand.



Post expiration of Monsanto’s Roundup patent in 2,000, many firms, especially

Chinese firms have entered the market and form 40% of global supply.

Monsanto enjoys a premium positioning in the market place with its glyphosate selling

price at INR340 per litre and competitors around INR310-320 per litre.

In FY14 cost for glyphosate has gone by 30-35% leading to price increases of around

15-20% to protect margins and drive growth.

Weeds can cause substantial (20-60%) damage to crop; thus requiring use

of herbicides

A weed is a plant considered undesirable. Weeds take up the nutrition in the soil

and hence impact yields. In some cases yield losses can add up to almost 50% of the

crop potential. Apart from depriving the crop of nutrition, weeds also act as a host

to many pests which are harmful to crops. Weeds are a major problem for farmers

across crops and across the country – especially in the wet/Kharif season. Other

problems associated with weeds in agriculture include: a) reduced crop quality by

contaminating the commodity; b) interference with harvest; c) serve as hosts for

crop diseases or provide shelter for insects to overwinter; d) limit the choice of crop

rotation sequences and cultural practices; and e) production of chemical substances

which are toxic to crop plants. Ineffective weed control measures could result in 20-

60% loss in yield. Thus weeds need to be removed from the farm which can be done

via manual plucking or by use of chemicals like herbicides. So far, farmers in India

have been using manual labour to pull out weeds. When weed picking is done

manually, there are chances of damage to crop which further impacts yields.

Herbicides are pesticides used to kill weeds. Selective herbicides kill specific targets,

while leaving the desired crop relatively unharmed. Some of these act by interfering

with the growth of the weed and are often synthetic mimics of natural plant

hormones.

22 April 2014

Monsanto India

What is Glyphosate?

Roundup® (a glyphosate-

based product) is a broad

spectrum, post emergent

systemic herbicide, the

flagship brand of MIL Crop

Protection Chemicals

business. It is world class,

innovative solution to

weeds, a critical farmer

concern.

First registered for use in 1974, Glyphosate is used to kill a variety of broadleaf

weeds and grasses. Labeled uses of Glyphosate include over 100 terrestrial food

crops as well as other non-food sites including forestry, greenhouse etc. The

greatest Glyphosate use according to US Geological Survey (USGS) is in the

Mississippi River basin where most application is for weed control on GM Corn,

Soybeans and Cotton. Glyphosate at rates of 0.35-0.54kg /ha provides at least 90%

control of a wide range of annual grass and broad level weed species in subtle /pre-

plant even with cultivation just 6 hours after treatment. This ensures a weed free

start for next crop. Glyphosate use has skyrocketed to more than double the

amount used five years ago, with 57 million pounds of Glyphosate applied to corn

fields in 2010 compared to 23 million pounds in 2005 and 4.4 million in 2000

Glyphosate is a leading herbicide globally, Monsanto is the largest player

Glyphosate is a leading herbicide and accounts for 30% of global herbicide sales.

Glyphosate is used to kill weeds, especially annual broadleaf weeds and grasses

known to compete with commercial crops grown around the globe. Monsanto

developed and patented the glyphosate molecule in the 1970s, and has marketed it

as Roundup since 1973. It retained exclusive rights in the United States until its

United States patent expired in September, 2000.

The global glyphosate

market was valued at

USD5.4b in 2012 and is

expected to reach USD8.7b

by 2019

The global glyphosate market was valued at USD5.4b in 2012 and is expected to

reach USD8.7b by 2019, growing at a CAGR of 7.2% over the forecast period from

2013 to 2019. In terms of volume, the global glyphosate market demand was

718,000 tons in 2012 (Source: Transparency Market Research).

Monsanto has a ~60% market share in the global glyphosate industry with products

sold under the ‘Roundup’ brand. Monsanto primarily distributes glyphosate

products in the B2B market through distributors, independent retailers and dealers,

and agricultural cooperatives. Monsanto’s production process experiences lower

lead times and cost savings due to vertically integrated supply chains for raw

materials including: disodium iminodiacetic acid and phosphorus. In addition to lean

value chains, Monsanto leases phosphate mines in several locations from

government entities, providing ample supply for production needs. Since the

expiration of Monsanto’s primary glyphosate product, Roundup, in 2000, many firms

have entered the market to serve farmer’s requests for cheaper weed control

alternatives. Primary amongst these are Chinese firms who form 40% of the global

supply.

Global Players in Glyphosate manufacturing

Sr no

Leading Chinese Glyphosate manufacturers

Zherjiang Wynca Chemical Group Co Ltd

Nantong Jiangshan Agrochemicals Co Ltd

Jiangsu Yangnong Chemical Co Ltd

Sichaum Agro Chemicals Co Ltd

Zhejiang Jinfanda Biochemical Co Ltd

Sales (USD m)

296

236

230

215

201

Source: Wiglab Journal, MOSL

22 April 2014

Monsanto India

Herbicides market in India highly underpenetrated

Herbicides market in India is

highly underpenetrated

with herbicides share in

agro-chemicals standing at

20% as against global

standards of 48%

Herbicides market in India is highly underpenetrated with herbicides share in agro-

chemicals standing at 20% as against global standards of 48%. Agro-chemicals in

themselves are under-penetrated in India with consumption in India standing at a

mere 0.6kgs/Hectare as against global average of 4.5kgs/Hectare. In India,

glyphosate is the most significant herbicide product and is preferred by farmers

because it is relatively safe and very effective. Glyphosate forms 70% of herbicides

sales in India and is an INR8b (25m liters) market.

Roundup enjoys leadership position with pricing power

Monsanto enjoys leadership position with 25% market share with other players

being excel industries and Sabero organics to name a few. The market in India is

extremely competitive with 150+ manufacturers and many more brands being

available. Most of the players import their requirement of the intermediate product

from countries such as China since India is deficient in phosphorous mines which are

a key raw material for manufacturing glyphosate. However Monsanto enjoy a

premium positioning in the market place with its glyphosate selling price at INR 340

per litre and competitors around INR 310-320 per litre. In FY14 the global glyposate

prices have increased by 15-20% and with rupee depreciation the cost of production

for Monsanto has gone by 30-35%. Monsanto and other industry players hence took

price increase of around 15-20% thereby leading to higher growth and stable

margins.

Herbicides penetration %

India

62%

48%

26%

16%

Global

9.4

6.6

4.6

23%

20%

Insecticides

Fungicides

Herbicides

Others

4.2

2.5

2.4

2.3

1.3

Consumption of agrochemicals

Consumption of Agrochemicals (Kg / Hectare)

0.6

Source: Company, MOSL

Rising labor costs to drive herbicides demand, driving sales for Roundup

higher

Labor forms 60% of cotton cultivation costs in India. Out of the total cost of

cultivation of INR20,000/acre, ~60% i.e. INR12,000 is labor cost as compared to 10%

in developed countries. Traditional methods of weed control -- hand weeding or

mechanical weeding, provide limited duration weed control, are labour intensive,

and hence, costly. Labour shortage, timely unavailability, rising wages and

insufficient farm mechanization options, has farmers choosing to spray herbicides

for weed management. Further, when weed picking is done manually, there are

chances of damage to crop which further impacts yields. Herbicides marketed under

brand ‘Roundup’ for Monsanto offer a unique solution wherein weeds are killed at

their initial stage of growth, leaving the crop un-damaged and thus enhancing yields.

22 April 2014

Monsanto India

Benefits of Roundup Brand

Roundup® is a glyphosate based broad spectrum, post emergent systemic herbicide

for weed management, and the flagship of our agricultural productivity business. It

provides efficient weed control and helps cover wide areas effectively. It offers cost

savings in weed management on labour and time, helps prevent soil erosion,

conserve water and carbon dioxide, and is safer to soil microbes (as compared to

other herbicides) in conservation (reduced or zero) tillage practices. Roundup® is

also used to control weeds along roadsides, railway tracks, airports and gardens and

doesn’t pose threat to life.

Following are the benefits of Roundup:



Potential to save crop-yield loss by approximately 30-35%



Manages weeds by eliminating them from their roots



Protects weed reemergence for 50-55 days



Reduces manual dependence for weeds removal



Saves farmers money and time



Can be used easily with minimal impact on soil fertility

NREGA driving wages higher…

Wage rates in India have been on a continuous spiral especially post implementation

of NREGA making manual weed picking an expensive affair. The Ministry of Rural

Development, Mahatma Gandhi National Rural Employment Guarantee Act

(Mahatma Gandhi NREGA) was introduced in 2006 with providing at least one

hundred days of guaranteed wage employment in a financial year to every

household whose adult members volunteer to do unskilled manual work. Spending

under NREGA has aggregated to over INR2005b since its implementation in 2006,

having provided employment to over 313m households during FY06-13.

Rising Labor cost a major concern

Labor cost (INR/Day)

137

157

81 93

67 70 72 75 78

48 54 60

31 35 39 43

20 22 25 28

106

121

Source: Company, MOSL

22 April 2014

Monsanto India

NREGA Budget

NREGA Budget Outlay (INR b)

391

300

113

120

401

400

330

33.9

Employment has improved consistently

Employment provided to households (m)

45.1

52.6

54.9

50.4

55.47

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Source: Company, MOSL

…

coupled with urbanization trend

Impact of Further, urbanization has reduced the availability of labor for agricultural

activities. In 1951 83% of population lived in rural India, this number has reduced

significantly in 2011 where only 69% of the total population is rural. However of the

total rural population percentage of people employed in agriculture related

activities have remained ~33% throughout 1951-2011.

Urbanization has led to shortage in labour supply

% of Rural

Average

population

Annual

Total Exponential Rural

Agricultural

Population Growth Population % of Rural

workers (9)

Rate (%)

Population

(m)

Agricultural Workers (m)

= (8)/(4)

361

1.25

299

83%

33%

439

1.96

360

82%

100

131

36%

548

2.2

439

80%

126

29%

683

2.22

526

77%

148

28%

846

2.16

631

75%

111

185

29%

1,029

1.97

743

72%

127

107

234

32%

1,211

1.64

834

69%

119

144

263

32%

Source: Agricultural Statistics Handbook 2013, MOSL

Year

1951

1961

1971

1981

1991

2001

2011

Tea Industry: An Example of Benefit of Roundup

India is one of the largest producer and consumer of tea in the world. The

production of tea has been steadily growing in the country due to efficient and

integrated agricultural practices which include efficient weed management. Tea is a

perennial plant which lives beyond 80 years. Weed infestation is the key concern

which significantly hampers productivity of tea. Besides reducing yield, weeds also

restrict branching and frame development in young tea plants, which impacts

productivity in later years. Tea plants are susceptible to weeds like Borreria hispida,

Clerodendrum viscosum, Cynodon dactylon, Polygonum sinensis, Cyperus rotundus,

Ageratum conyzoides etc. Roundup®, that can be used to manage weeds in young

and mature plantations, has been the herbicide of choice for tea planters for nearly

two decades. The herbicide saves man-days and provides broad-spectrum control of

weeds for up to 50-60 days.

22 April 2014

Monsanto India

Sundar Azaria, General Manager, Parrison’s Estate, Wayanad, Kerala

Weed infestation is one of the most serious problems in tea plantation, reducing the

leaf yield significantly. In addition to the problem of reducing the nutrient

availability for the tea bushes, weeds in our area grow very fast, aided by heavy

monsoon, thus outgrowing the tea plants. Creepers are also a major issue in the tea

estates of South India. Hence, it is essential to control weeds at an early stage.

Weed management is a major expense for tea estates. Manual methods are

insufficient, inefficient and extremely costly. We had been using Roundup® initially,

but due to tight cash flows, we had to use cheaper products. Having tried many

products, I can say that Roundup® provides the best control for weeds.

22 April 2014

Monsanto India

GM Food crops and RR Flex – Game changer

events



Once approved by all bodies all companies can start the field trials for GM food crops,

thereby providing significant opportunities of newer growth avenues.

Monsanto, Syngenta, Pioneer, Dow has been working on field trials across various

crops prior to monotorium imposed by government and hence are much ahead of

other competitors.



MIL has been working on Roundup Ready® and Yieldgard® in-the-seed technologies to

offer maize farmer’s choice of superior insect protection, with convenient, flexible and

effective weed management, to optimize maize yields.



Currently Monsanto GM corn is currently at BRL2 stage and management has guided

that it will take atleast 3 -4 years for commercial launch to happen.

The initial research and trials suggest that Monsanto GM corn can increase yields by

20-40%.

Our interaction with management highlight that not only the GM corn but the

technology for GM corn as well will remain in Monsanto India. This in our view will

lead to substantial re rating for the stock post commercial launch.



Monsanto’s current technology of BT is likely to be replaced by RR Flex (BG 2 RR). RR

flex has gone through RCGM and is awaiting final approval from GEAC.

RR-Flex has trait of herbicide tolerancy thereby negating chances of damage to crop

due to usage of herbicide and also reducing labour cost.

Monsanto to have huge advantage over competition in GM Food crops

Monsanto has been pioneer in innovation in technologies for increasing productivity

for farmers globally. In 2002 it launched BT technology through Monsanto – Mahyco

JV and has achieved 95% penetration in India since then. BT has been a success

inspite of some of other companies like Nath seeds, etc launching at the same time.

Globally USA, Brazil, Australia etc allow production of GM food crops apart from

Europe. However in India field trials for GM food crops are on hold post objection

from environmental minister. However the recent environmental minister has

approved the field trials of GM Food crops after a monotorium of 3 years. Also in

recent meeting on 21

March the GEAC has given an inpriciple to restart the field

trials; however the company is yet to receive official notification on the same. With

government and GEAC now approving the ball lies in the Supreme Court which is

likely to take this matter in April, post which companies have to take NOC from

individual states for re starting field trials. Once approved by all bodies all

companies can start the field trials for GM food crops, thereby providing significant

opportunities of newer growth avenues.

Launch of GM corn – next big trigger

There are 4 stages to field trials namely greenhouse, BRL1, BRL2 and biosafety.

Monsanto, Syngenta, Pioneer, Dow has been working on field trials across various

crops prior to monotorium imposed by government and hence are much ahead of

other competitors. To help farmers overcome the challenges of rising cost of

cultivation primarily driven by labour costs MIL has been working on Roundup

Ready® and Yieldgard® in-the-seed technologies to offer maize farmers the choice of

22 April 2014

Monsanto India

dual benefit of superior insect protection, with convenient, flexible and effective

weed management, to optimize maize yields.

Monsanto’s technology – YieldGard VT Double Pro, is a combined trait maize

product developed by combining insect protection and herbicide tolerance traits,

stacked together using traditional breeding methods. The inserted genes and their

gene products have a history of safe use, and have undergone review and approval

by several regulatory agencies around the world.

Currently Monsanto GM

corn is currently at BRL2

stage and management has

guided that it will take

atleast 3 -4 years for

commercial launch to

happen.

We learn that currently Monsanto GM corn is currently at BRL2 stage and

management has guided that it will take atleast 3 -4 years for commercial launch to

happen. The initial research and trials suggest that Monsanto GM corn can increase

yields by 20-40%. Our interaction with management highlight that not only the GM

corn but the technology for GM corn as well will remain in Monsanto India.

Management has guided that the technology is ready and MIL will not pay any

royalty to Monsanto USA for the same. This in our view will lead to substantial re

rating for the stock post commercial launch of the same. We believe that Monsanto

India will have a significant first mover advantage; however pricing of the same will

continue to be a key monitorable.

RR Flex technology can drive herbicides sales growth

Monsanto’s current technology of BT is likely to be replaced by RR Flex (BG 2 RR). RR

flex has gone through RCGM and is awaiting final approval from GEAC (Genetic

Engineering Appraisal Committee). Some industry experts believe that the industry

can multiply by 3-5x due to higher yield RR Flex offers as compared to BT. Currently,

herbicides need to be carefully used in case of BT cotton as the crop may get

damaged if herbicides are sprayed on the top of the plant. RR-Flex will be herbicide

tolerant thus negating chances of damage to crop due to herbicide use. This in our

view will give a huge phillip to herbicide sales going forward.

22 April 2014

Monsanto India

Financial outlook

Revenues to post a 25% CAGR over FY14-16

We expect revenues to grow at a 25% CAGR from INR6,053m to INR9,474m over

FY14-16. Growth will be driven by seeds business which is expected to grow at 23%

CAGR (contributes 65% to total revenues) led by aggressive launch of new maize

hybrids. Agro-chemical business as well is expected to post a strong 29% CAGR led

by increased penetration of herbicides, which will drive Roundup (glyphosate) sales.

Segment wise revenue of MIL (m)

Agricultural Chemicals

Seeds

5,870

4,852

3,879

2,674

1,127

2,975

1,560

2,174

2,858

3,605

3,860

3.0%

FY13

FY14E

FY15E

FY16E

FY12

4,602

FY13

FY14E

FY15E

FY16E

19.2%

6,053

7,709

Total Revenue (m) and YoY growth(%)

Total Revenue

31.5%

YoY Growth

9,474

27.4%

22.9%

FY12

Source: Company, MOSL

Margins to expand 200bp

EBITDA is expected to grow at a 29% CAGR from INR1,483m to INR2,461m over

FY14-16. Margins are expected to expand 200bp from 25% to 27% led by

improvement in mix in favor of single cross maize, lower sales returns and inventory

write-offs due to better sales forecasting abilities going forward

EBITDA margin trend

EBITDA

112.9%

1,925

26.6%

550

-15.6%

FY12

FY13

FY14E

FY15E

FY16E

697

1,483

29.9%

27.8%

YoY Growth

2,461

Source: Company, MOSL

PAT to grow at 30% CAGR

Led by strong operating performance we expect PAT to grow at 30% CAGR from

INR1,379m to INR2,319m over FY14-16. Tax rate is expected to remain stable at

10%.

22 April 2014

Monsanto India

PAT growth trend

PAT

104.7%

1,806

1,379

673

34.2%

FY13

FY14E

31.0%

FY15E

28.4%

FY16E

YoY Growth

2,319

502

17.2%

FY12

Source: Company, MOSL

ROCE and ROE to improve going forward

We expect ROCE and ROE to improve from 34% and 30% in FY14 respectively to 35%

and 32% in FY16E respectively primarily on account of improvement in margins.

ROCE trend (%)

ROCE

ROE trend (%)

ROE (%)

FY11

FY12

FY13

FY14E

FY15E

FY16E

FY11

FY12

FY13

FY14E

FY15E

FY16E

Source: Company, MOSL

22 April 2014

Monsanto India

Valuation and view – initiate coverage with a Buy

Market share gain to drive earnings growth

We expect topline to grow at 25% CAGR and PAT at 30% CAGR over FY14-16E. We believe

the investments done in FY09-FY12 will start paying off for Monsanto India in terms of new

product launches and market share gain. We also remain excited about the huge potential

and scalability opportunity it has to offer over the long term from GM food and RR Flex.

The stock is currently trading at 15.3x FY15E and 11.9xFY16E EPS. We value the stock at

16x FY16E EPS and arrive at a target price of INR 2,150 on the stock. We initiate coverage

with a Buy.

Monsato India PE

2.9

10.4

14.3

P/E (x)

Avg (x)

Peak (x)

Min (x)

33.3

Monsato India PB

5.0

4.0

3.0

2.0

1.0

0.0

1.9

0.5

P/B (x)

Avg (x)

4.3

Peak (x)

Min (x)

4.1

Source: Company, MOSL

22 April 2014

Monsanto India

Annexures

Improvement in Bio Tech Agriculture

Source: Company, MOSL

Biotech agriculture can increase the productivity going forward

Source: Company, MOSL

22 April 2014

Monsanto India

Significant R&D is required for a long term

Source: Company, MOSL

Global Seed and Agro Chemical Market

Market Performance 2012 (Distributor level – Average Exchange Rates – Nominal USD)

Year

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YOY growth

2011/12

Crop Protection (USD m)

25150

26710

30725

31190

30425

33390

40475

37860

38315

44528

47360

6.4%

Non-Crop Agro

Chemicals (USD m)

4270

4445

4675

4905

5150

5365

5655

5860

5880

6290

6375

1.4%

Conventional Seed

Seed

(USD m)

3140

13060

3709

4476

5095

5855

7062

9150

10570

12870

15685

18495

17.9%

13521

14524

14657

14485

14648

16870

17185

17950

18810

19065

1.4%

Agrochemical = $53732,

Seed = $37560, +8.9%

Source: Company, MOSL

22 April 2014

Monsanto India

Financials and valuation

Income statement

Y/E March

Net Sales

Change (%)

EBITDA

EBITDA Margin (%)

Depreciation

EBIT

Interest

Other Income

Extraordinary items

PBT

Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Min. Int. & Assoc. Share

Adj Cons PAT

2011

3,634

-11.4

652

17.9

108

544

122

503

14.8

428

532

-1.2

532

2012

3,738

2.9

550

14.7

460

152

-3

601

100

16.5

502

500

-6.1

500

2013

4,424

18.4

697

15.7

109

588

169

750

10.2

673

34.8

673

2014E

5,819

31.5

1,483

25.5

122

1,360

175

1,535

156

10.2

1,379

104.7

1,379

(INR Million)

2015E

7,411

27.4

1,925

26.0

137

1,788

222

2,010

205

10.2

1,806

31.0

1,806

2016E

9,108

22.9

2,461

27.0

152

2,309

273

2,582

263

10.2

2,319

28.4

2,319

Balance sheet

Y/E March

Share Capital

Reserves

Net Worth

Debt

Deferred Tax

Total Capital Employed

Gross Fixed Assets

Less: Acc Depreciation

Net Fixed Assets

Capital WIP

Investments

Current Assets

Inventory

Debtors

Cash & Bank

Loans & Adv, Others

Curr Liabs & Provns

Curr. Liabilities

Provisions

Net Current Assets

Total Assets

2011

3,657

3,743

-30

3,714

1,395

518

876

1,514

2,367

1,303

409

172

484

1,095

831

264

1,273

3,714

2012

173

3,671

3,844

-27

3,817

1,380

571

809

111

1,958

2,476

1,297

504

190

485

1,537

1,203

334

939

3,817

2013

173

3,902

4,074

-36

4,038

1,541

674

868

2,509

2,503

1,394

412

203

494

1,866

1,440

427

637

4,038

2014E

173

4,837

5,010

-36

4,974

1,741

796

945

2,509

3,918

1,660

542

1,066

650

2,430

1,764

666

1,487

4,974

(INR Million)

2015E

2016E

173

6,200

8,076

6,372

8,248

-36

6,336

8,212

1,941

2,141

933

1,086

1,008

1,056

2,509

5,718

8,055

2,089

2,506

691

849

2,111

3,684

828

1,017

2,939

3,457

2,229

2,693

711

764

2,779

4,598

6,336

8,212

E: MOSL Estimates

22 April 2014

Monsanto India

Financials and valuation

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation(x)

P/E

Cash P/E

Price / Book Value

EV/Sales

EV/EBITDA

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

Turnover Ratios (%)

Asset Turnover (x)

Debtors (No. of Days)

Inventory (No. of Days)

Creditors (No. of Days)

Leverage Ratios (%)

Net Debt/Equity (x)

2011

61.6

74.2

433.7

10.0

46.9

25.9

21.6

3.7

7.1

39.6

0.6

14.7

17.3

1.0

39.8

130.9

65.5

0.0

2012

29.0

34.2

222.7

20.0

79.9

55.2

46.8

7.2

6.9

46.9

1.3

13.2

16.1

1.0

47.7

126.6

82.6

0.0

2013

39.0

45.3

236.0

22.0

65.8

41.0

35.3

6.8

5.8

37.1

1.4

17.0

19.1

1.1

32.7

115.0

101.5

0.0

2014E

79.9

87.0

290.2

22.0

32.1

20.0

18.4

5.5

4.3

16.8

1.4

30.4

33.8

1.2

32.7

104.1

103.9

0.0

2015E

104.6

112.6

369.2

22.0

24.5

15.3

14.2

4.3

3.2

12.4

1.4

31.7

35.3

1.2

32.7

102.9

103.4

0.0

2016E

134.4

143.2

477.9

22.0

19.1

11.9

11.2

3.3

2.5

9.1

1.4

31.7

35.3

1.1

32.7

100.4

102.3

0.0

Cash flow statement

Y/E March

OP/(Loss) before Tax

Depreciation

Others

Interest

Direct Taxes Paid

(Inc)/Dec in Wkg Cap

CF from Op. Activity

(Inc)/Dec in FA & CWIP

(Pur)/Sale of Invt

Others

CF from Inv. Activity

Inc/(Dec) in Net Worth

Inc / (Dec) in Debt

Interest Paid

Divd Paid (incl Tax)

CF from Fin. Activity

Inc/(Dec) in Cash

Add: Opening Balance

Closing Balance

2011

503

108

-3

100

316

896

-111

-1,909

1,269

-750

-16

-6

-151

-173

-27

198

172

2012

601

125

258

721

-96

-6,085

5,782

-399

-33

-3

-258

-294

163

190

2013

750

109

-3

253

894

-86

-3,840

3,450

-476

-47

-3

-345

-395

180

203

2014E

1,535

122

-175

156

1,339

-208

175

-33

-443

863

203

1,066

(INR Million)

2015E

2016E

2,010

2,582

137

152

-222

-273

205

263

-246

1,474

1,952

-209

222

273

-443

1,045

1,573

1,066

2,111

3,684

E: MOSL Estimates

22 April 2014

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