Kaveri Seed Company shares on Monday fell 19.2 per cent to hit 52-week low of Rs 486, marking its sixth straight fall. With today's fall, the share prices of the seed company have halved from their year high of Rs 1,077 hit earlier in March this year.
Kaveri Seed Company on Thursday reported that its net profit for the first quarter of FY16 fell 5.19 per cent to Rs 218.43 crore and its total income declined 20 per cent to Rs 666.11 crore.
Vivek Kumar, agro chemical analyst with SBICap Securities, says that the dip in revenue by 20 per cent is a major disappointment despite the profits meeting estimates.
"The share is in weakness because revenues have fallen 20 per cent and the miss is very significant. The company has also not done provisioning of Rs 64 crore royalty payment to Monsanto," he added.
For every bag of cotton seeds that Kaveri Seeds sells for Rs 900-930, the company has to pay Rs 120 to Monsanto as royalty, Mr Kumar said.
But Kaveri Seeds has been paying Rs 20 instead as Telangana has issued a directive to cotton seed companies not to increase prices owing to weak monsoon, he added.
The Telangana government has called for paying Rs 20 as royalty to Monsanto and a case in this regard is pending in the Telangana High Court, Mr Kumar added.
If court ruling goes adverse, then Kaveri Seeds will have to shell Rs 64 crore for which the company has not done any provisioning.
Meanwhile, a deficit monsoon has hit cotton acreage which could hit Kaveri Seeds' business.
The shares of Kaveri Seeds ended 17 per cent lower at Rs 499.70. The stock was underperformed the benchmark index which closed 0.67 per cent lower.
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