India’s agriculture underpins both national sustenance and global food supply. From northern wheat fields to eastern tea estates, it shapes rural communities and fuels economic activity. Engaging about half the population, it extends beyond traditional practices, encompassing modern technology and extensive food processing.
Amid this ever-changing landscape, certain companies have positioned themselves for success. This blog highlights the top stocks to consider in 2024, offering insights into opportunities within this vital industry.
About the agriculture sector
Agriculture in India is a bedrock of the economy. It involves about 42% of the population and accounts for 18.2% of GDP,ie., Gross domestic product. The country stands as a global powerhouse in key commodities like rice, wheat, milk, and pulses.
The industry has shown consistent expansion, averaging a 4.18% increase annually over the past five years. In 2023, it reached a valuation of ₹90215.8 billion. Despite facing hurdles such as irregular monsoons, strategic investments in technology and infrastructure ensure that agriculture remains robust and central to India’s economic framework.
Also read: The past, present, and future of the Indian agriculture industry
Top agricultural stocks
Investing in agriculture offers varied avenues, from crop cultivation to innovative irrigation technologies. Companies in this space are key to global food supply, with roles in agrochemicals, seed development, and machinery. By investing in these stocks, you contribute to sustaining populations globally.
Below are five firms poised to benefit from trends in agriculture, ranked by their capitalisation as of August 27-2024. Although a larger capitalisation often reflects financial strength, it’s not a predictor of outcomes. While it can help refine your choices, deeper insights come from evaluating financial health, current market conditions, and broader economic indicators—factors crucial for anticipating a company’s prospects.
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#1 Mahindra & Mahindra (M&M)
The company is a key player in India’s agricultural avenue, with its Farm Equipment Sector (FES) playing a main role in the company’s overall operations. It holds 44.7% of the farm equipment space.
In the first quarter of FY25 the FES generated ₹265 crore in revenue and profit after tax (PAT) of ₹1,238 crore during the same time frame.
The stock has shown significant volatility, with a 52-week peak of ₹3,013.50 in June-2024 and a low of ₹1,450 in November-2023. Despite this, the stock has delivered an 82.94% return over the past year. Over five years, the share price has climbed @401.9%.
#2 Coromandel International
The brand is known for its fertilisers, crop protection, bio-pesticides, specialty nutrients, and organic innovations, making it a vital contributor to the agricultural sector. Reaching approximately 20 million farmers, the company’s influence extends over 80 countries.
The company posted a PAT of ₹309 crore in Q1 FY25, down from ₹494 crore in the same period the previous year. However, its book value per share showed an increase of 14%, rising from ₹287 to ₹328.
The stock’s performance has been strong, with a 63.65% gain over the past year and a 352.56% rise over five years.
#3 Bombay Bumrah Trading Corporation Ltd (BBTCL)
Founded in 1863, BBTCL is one of the oldest and most diversified companies in India, originally starting with the teak trade and later expanding into a variety of sectors under the Wadia Group’s leadership.
It has tea and coffee plantations spanning South India and Tanzania. In Q1 of FY25, reported a net total income of ₹4,40,330.10 lakh and a PAT of ₹47,162.25 lakhs.
The corporation’s share price surged to a 52-week peak of ₹2,604.95 in August-2024, following a low of ₹970.05 the previous year. With a one-year appreciation of 155.26% and a five-year increase of 173.21%, the company has shown a strong performance trajectory.
#4 Godrej Agrovet
The company’s activities span animal feed, palm oil, crop protection, dairy, poultry, and processed foods, supported by more than 50 production facilities and an expansive distribution reach throughout India.
The logo’s international footprint includes a joint venture in Bangladesh, while within India, it offers diverse agricultural solutions, such as insecticides and plant growth regulators, backed by a network of about 6,600 partners. The company is also a major player in the palm oil industry, overseeing plantations in nine states, and its subsidiary, Astec LifeSciences, bolsters its offerings with specialised active ingredients and intermediates.
Godrej Agrovet’s stock has seen substantial growth, hitting a 52-week peak of ₹876.70 in July 2024, up significantly from a low of ₹446.35 in October 2023. This translates to a 62.86% increase over the past year. Over the longer term, the stock has risen by 70.94% over five years.
#5 Dhanuka Agritech
Established in 1985, Dhanuka Agritech Ltd has become a key player in India’s agrochemical landscape. Under the leadership of Ram Gopal Agarwal and Mahendra Kumar Dhanuka, the firm has developed a broad portfolio of formulations, including essential products like insecticides, pesticides, and herbicides.
Dhanuka operates several strategically located facilities across India, including plants in Gujarat, Jammu and Kashmir, and Rajasthan. In Q1 FY25, revenues surged to ₹493.58 crore, a significant rise from ₹369.07 crore the previous year. While PAT reached ₹48.90 crore.
Dhanuka’s stock has a 52-week peak of ₹1,925.80 in August 2024, far above its low of ₹764.60 in November 2023. This marks a 132.9% increase over the past year. Over a five-year span, the stock has climbed 481.78%.
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Factors to consider before investing in agriculture sector
Entering the agricultural market presents unique opportunities but also significant risks.
Government intervention
Policy changes can reshape the entire field. Adjustments to subsidies, tariffs, or environmental regulations can instantly affect profitability. Keeping an eye on legal developments is crucial, as state interventions often dictate the overall landscape and the financial health of organisations tied to it.
Chain of production
From farm to table, the path is complex and full of potential pitfalls. Any disruption—whether it be a shortage of labour, delays in transport, or other logistical issues—can significantly impact operations. It’s important to evaluate how well the business can manage or mitigate such disruptions.
Innovation and growth
Farming has evolved. Today, new technologies like AI, data-driven crop management, and drone surveillance have revolutionised traditional practices. Firms that adopt these methods can enhance their productivity and stand out in a competitive market.
Global trade and currency shifts
Organisations involved in exporting products are at the mercy of international trade dynamics. Whether it’s new tariffs, trade barriers, or fluctuations in the rupee, these factors directly impact profits. Always assess how well-prepared they are for such challenges.
Financial stability
Thoroughly examine the financial indicators, including revenue growth, debt management, and overall cash flow. Sound financials are often a sign that the entity can weather the industry’s inherent volatility.
Diversified operations
Look for organisations that operate across multiple segments—be it food processing, distribution, or agricultural technology. A diverse portfolio within the farming ecosystem can offer greater stability.
Emerging market trends
Pay attention to evolving trends. Organic produce, sustainable practices, and plant-based alternatives are increasingly gaining traction. Identifying entities that align with these emerging shifts may offer growth opportunities in the long run.
Bottomline
When evaluating agriculture sector stocks, it’s crucial to dig deeper than just past metrics. Historical data offers context, but a thorough assessment of financial health, market forces, and economic trends is vital. A comprehensive approach can help uncover companies that are not only positioned for expansion but also demonstrate long-term stability in 2024.
