June 24 (Bloomberg) -- Sakata Seed Corp., a Japanese seed wholesaler, is betting that rising demand for its disease-resistant hybrid ‘F1’ seeds will help the company triple its market share in India.
The company accounts for about 1 to 3 percent of the ‘F1’ and ‘open pollinated’ vegetable seed market in the world’s second-fastest growing major economy, and plans to increase it to 10 percent by 2018, Chief Executive Officer Hiroshi Sakata. That would place the company in the top five vegetable seed wholesalers in India, Sakata said. F1 seeds are first generation offspring from cross-breeding of two different parents.
“About a quarter of the seeds used in India are F1 seeds. I see that ratio increasing to more than half as India’s economy grows, and shifts from cheaper seeds that are produced through open pollination,” Sakata said in an interview in Tokyo. “It won’t take long for that to happen. It’s our business opportunity.”
His company, Japan’s largest listed seed wholesaler, is betting on demand for higher-yielding F1 seeds rising in India as rising wages in an expanding economy makes the seeds more affordable. India’s economy is expected to grow 8.8 percent this year, compared with 1.9 percent for Japan and 1 percent in the Euro area, according to the International Monetary Fund.
Sakata Seed, based in Kanagawa Prefecture, west of Tokyo, is aiming for 300 million yen ($3.3 million) in sales in India by next fiscal year, and 500 million yen by 2013. The company declined to comment on last year’s sales in India.
About 90 percent of the seeds the company produces are of the F1 variety. Disease-resistant hybrid seeds are more expensive but provide at least two to three times higher economic returns from their yield and quality than open pollinated cultivars, according to the United Nations’ Food and Agriculture Organization.
“I don’t think Sakata’s F1 seed marketing in India will be up on its feet running as fast as they expect,” said Masanobu Mizuta, an analyst at Toward the Infinite World Inc., who has a “neutral plus” rating on the stock. “It’s still planting seeds for growth in the region, and it will take some time for farmers to truly see the benefits of expensive F1 seeds. But the fact that they have already set their eyes on India is a positive.”
Sakata Seed, founded in 1913 and listed on the Tokyo Stock Exchange since 1987, established a subsidiary office near New Delhi in May 2008. It currently operates farmland, research centers and sales divisions across India, and has 55 employees.
The company is scheduled to report full-year earnings on July 15. Its shares have tumbled 11 percent this year through yesterday compared with a 3 percent decline for the Topix index. The stock is valued at 142 times reported profit, while companies in the Topix index trade at an average 32 times.
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