According to the Ministry of Agriculture and Farmers Welfare, Rabi sowing is expected to increase by 1.7% from last year to a three-year high of 196.5 million hectares.
Moreover, according to the Indian Meteorological Department, the monsoon season is also expected to be strong in 2025. This bodes well for fertiliser companies.
As a result, stocks of fertiliser companies have rallied strongly, gaining more than 10% in a month. This optimism is also based on the expectation that fertiliser companies will perform strongly in the March quarter.
Strong volume growth, price hikes, and subsidy benefits will drive growth. The fertiliser sector is insulated from US tariffs, and China’s presence is limited due to high entry barriers.
Thus, we have picked five undervalued agriculture stocks you can watch for the long term.
Let’s take a look…
#1 Chambal Fertiliser
First on the list is Chambal Fertiliser.
Chambal Fertilisers, incorporated in 1985, is a K.K. Birla Group company.
The company has three urea manufacturing units at Gadepan (Kota, Rajasthan), with a total installed capacity of around 3.4 million (m) metric tonnes per annum (MMTPA). It’s the country’s largest private-sector urea manufacturer, with 13% market share and the third-largest urea company.
It also trades agri-inputs such as complex fertilisers, pesticides and seeds. It also holds a 33.33% stake in Indo Maroc Phosphor SA (IMACID), Morocco’s leading phosphoric acid producer.
Chambal Fertilisers derives most of its revenue (97%) from the manufacturing and selling of fertilisers, with the remaining 3% coming from the crop protection and speciality nutrients business.
It has maintained a stable financial performance. Revenue has grown at a compounded annual growth rate (CAGR) of 12.2% over the last 5 years to Rs 179.7 billion (bn). Volume growth expanded capacity and favourable policy support drove revenue growth.
Chambal Fertiliser Financial Snapshot (FY20-24)
| Particulars | FY20 | FY21 | FY22 | FY23 | FY24 |
| Sales Growth (%) | 20.9 | 4.2 | 26.3 | 72.8 | -35.3 |
| Net Profit Growth (%) | 109.6 | 42.6 | -10.4 | -34.0 | 23.4 |
| Return on Equity (%) | 34.7 | 33.3 | 24.5 | 14.6 | 17.5 |
| Return on Capital Employed (%) | 23.1 | 31.7 | 26.6 | 19.5 | 24.6 |
The company’s net profit grew at a faster 16.3% CAGR during the period to Rs 12.7 bn due to the superior operating efficiency of its fertiliser plants.
Steady profit growth also contributed to strong return ratios. Its return on capital employed (RoCE) and return on equity (RoE) averaged 25%.
Though its revenue declined 7% in 9MFY25, its profit grew 29% to Rs 15.2 bn, thanks to higher margins. The company has formulated various growth strategies for the coming years.
The company plans to deepen its reach in existing regions, while tapping into fresh ones. To this end, it plans to collaborate with innovative companies from Japan, the US, Europe, and the Middle East to access new-age crop protection and speciality nutrient products.
The company is also expanding its capacity, spending Rs 16.4 bn to set up 2.4 lakh MTPA technical ammonium nitrate capacity and 2.1 lakh MTPA weak nitric acid capacity at its Kota facility. The capital expenditure is likely to be funded from internal accruals.
Chambal Fertiliser trades at a price to earnings (PE) ratio of 16, about 42% lower than the fertiliser sector’s PE of 28, making it highly undervalued.
#2 Dhanuka Agritech
Next on the list is Dhanuka Agritech.
Dhanuka Agritech manufactures various agrochemicals such as herbicides, insecticides, fungicides, and plant growth regulators, available in multiple forms such as liquid, dust, powder, and granules.
DAL has a geographical presence in India, the US, Japan and China, among other countries. Its diverse product portfolio comprises over 90 products. It has over 300 registrations in insecticides, herbicides and fungicides, reaching nearly 10 m Indian farmers.
This reduces dependence on a particular crop and mitigates the adverse impact of adverse monsoon weather or crop infestation in a specific state or region.
Its revenue is highly diversified, with 35% coming from herbicides, 30% from insecticides, 20% from fungicides and 15% from other sources. Geographically, 22% comes from North India, 39% from the South, 11% from the East, and 28% from the West.
Dhanuka’s financial performance has been stable. Revenue has grown at 11.8% CAGR over the last five years to Rs 17.6 bn. Dhanuka has technical tie-ups with multinational companies like Nissan Chemicals, contributing around 40% to its revenues.
The company’s net profit rose strongly by 16% to Rs 13.9 bn, despite a fall in sales price due to destocking by global manufacturers (mainly China). The company’s ROE and ROCE have averaged 22% and 29%, respectively, during the period.
Dhanuka Agritech Financial Snapshot (FY20-24)
| Particulars | FY20 | FY21 | FY22 | FY23 | FY24 |
| Sales Growth (%) | 11.4 | 23.9 | 6.5 | 15.1 | 3.4 |
| Net Profit Growth (%) | 24.8 | 49.6 | -0.9 | 12.0 | 2.1 |
| Return on Equity (%) | 20.0 | 26.4 | 21.8 | 22.0 | 19.0 |
| Return on Capital Employed (%) | 25.8 | 36.1 | 29.3 | 28.8 | 25.6 |
In 9MFY25, the momentum remained strong, with 15% revenue growth to Rs 15.9 bn and 22% profit rise to Rs 2.2 bn, driven by improved margins.
Looking ahead, the company has embarked on new product launches to maintain its growth. Its latest products, LaNevo and MYCORe Super, have seen excellent sales.
It has also introduced Roxa for wheat weed control. In addition, Dhanuka has acquired international rights for iprovalicarb and triadimenol from Bayer AG, enhancing global market expansion.
To this end, it plans to expand its international presence into over twenty countries, including Latin America, Europe, the Middle East, Africa, and Asia. The management aims to maintain a double-digit revenue growth and around 21% profit growth.
Dhanuka trades at a PE ratio of 21, about 25% lower than the fertiliser sector’s PE of 28, making it undervalued.
#3 Kaveri Seeds
Next on the list is Kaveri Seeds.
Kaveri Seeds is one of India’s largest and fastest-growing seed companies. It is the second largest producer of hybrid cotton seeds.
It has over 125 high-quality hybrids and varieties developed across field and vegetable crops. Geographically, 94% of its revenue comes from the domestic market and 6% from exports.
33.6% of Kaveri Seeds‘ sales come from cotton seeds, while the remaining 66.4% comes from non-cotton such as maize, paddy, millet and vegetable seeds. Unlike cotton seeds, the non-cotton category offers higher margins to the business.
Over the past five years, Kaveri Seeds’ revenue has grown at a CAGR of 7% to Rs 11.5 bn, while net profit has grown 6.6% to Rs 2.9 bn. Its return ratios, RoE and RoCE, averaged 23% and 24% during this period.
Kaveri Seeds’ business was previously heavily dependent on cotton seeds. However, the government’s strict price regulation on cotton seeds, its primary revenue contributor, hampered its growth momentum.
Kaveri Seeds Financial Snapshot (FY20-24)
| Particulars | FY20 | FY21 | FY22 | FY23 | FY24 |
| Sales Growth (%) | 14.9 | 11.4 | -6.4 | 10.3 | 7.3 |
| Net Profit Growth (%) | 19.8 | 19.6 | -31.5 | 28.2 | 9.9 |
| Return on Equity (%) | 27.1 | 25.0 | 16.6 | 20.0 | 24.3 |
| Return on Capital Employed (%) | 28.3 | 25.8 | 17.4 | 21.0 | 26.0 |
Thus, it is shifting its focus from cotton seeds to non-cotton segments. This shift slowed growth, but the business now shows early signs of recovery.
In 9MFY25, cotton seed sales as a percentage of sales declined further to 24.7%, while non-cotton seed sales increased to 75.3%. Its net sales grew 31% to Rs 1.5 bn, while net profit rose 29% to Rs 0.15 bn, driven by 31% growth in non-cotton.
Looking ahead, Kaveri Seeds’ growth is expected to come from the non-seed category. The management targets revenue growth of around 12%, while net profit is expected to grow by 15-20%. Margins will also likely improve due to increased revenue from the high-margin non-cotton seed category.
Kaveri Seeds’ share price has recently surged, leading to a narrowing valuation. Nonetheless, it still trades at a PE of 25, 11% lower than the fertiliser sector’s PE of 28.
#4 India Pesticides
Next on the list is India Pesticides.
India Pesticides is one of the global agrochemical manufacturers that has been operating in India since 1984. The company is the only Indian manufacturer and among the top five globally for several technical products, such as folpet and thiocarbamate herbicides.
Its product portfolio includes 27 technicals, 207 formulations, and two active pharmaceutical ingredients (APIS). Technicals include fungicides and insecticides, formulations include crop protection, and APIS focus on dermatological treatments.
72% of revenue comes from technical and APIS, while the rest comes from formulations. Geographically, 60% of revenue comes from the domestic market, while 40% comes from exports.
The company’s sales and profits have grown at a CAGR of 14.8% and 6.5% respectively over the last five years, reaching Rs 6.8 bn and Rs 0.6 bn in FY24. Its RoE and RoCE have averaged 23% and 31%, respectively.
India Pesticides Financial Snapshot (FY20-24)
| Particulars | FY20 | FY21 | FY22 | FY23 | FY24 |
| Sales Growth (%) | 40.8 | 35.3 | 10.4 | 23.6 | -23.1 |
| Net Profit Growth (%) | 61.4 | 90.1 | 17.0 | -8.9 | -57.6 |
| Return on Equity (%) | 19.6 | 24.6 | 19.5 | 15.6 | 6.3 |
| Return on Capital Employed (%) | 26.9 | 46.2 | 34.0 | 25.7 | 10.5 |
Its revenue in 9MFY25 grew 12% from a year ago to Rs 6.2 bn, while profit grew a marginal 5% to Rs 0.63 bn. High inventory amid weak demand continues to weigh on the company.
Looking ahead, India Pesticides is allocating Rs 1.1 bn for capital expenditure in FY25 to increase production capacity.
IPL plans to use two additional blocks at Sandila for herbicide technicals and intermediates to improve efficiency while developing a new manufacturing facility in Hamirpur, Uttar Pradesh.
Its operating cycle extended from 152 days in FY23 to 211 days in FY24 due to high inventory levels and demand pressure.
This has impacted its performance in FY24. However, the company expects its cash conversion cycle to reduce by 20-25 days from the March quarter onwards.
India Pesticides trades at a PE of 25, 11% lower than the fertiliser sector’s PE of 28.
#5 Bombay Burmah
Next on the list is Bombay Burmah.
Established in 1863, Bombay Burmah is part of the Wadia Group and is engaged in the business of tea and coffee plantations, including dental products.
Bombay Burmah is a diversified holding company with interests in multiple segments. Its core business is plantations, primarily tea and coffee, with estates in South India and Tanzania.
Apart from plantations, it holds a stake in Britannia Industries, contributing to its consolidated revenues and profits. Other segments include healthcare through its dental products subsidiary (Leigh Healthcare) and auto electrical components.
The company’s sales and profits have grown at a CAGR of 8.4% and 8% to Rs 171 bn and Rs 17.4 bn, respectively, over the last five years. Its RoE and RoCE have averaged 20% and 29%, respectively.
Bombay Burmah Financial Snapshot (FY20-24)
| Particulars | FY20 | FY21 | FY22 | FY23 | FY24 |
| Sales Growth (%) | 4.1 | 12.7 | 8.3 | 14.6 | 2.9 |
| Net Profit Growth (%) | 53.8 | 7.5 | -36.7 | -166.0 | 425.3 |
| Return on Equity (%) | 25.2 | 23.4 | 14.6 | -19.1 | 37.2 |
| Return on Capital Employed (%) | 34.1 | 34.5 | 19.4 | 5.6 | 51.8 |
Looking ahead, the company plans to integrate bio fertilisers into its fertiliser program in 3-5 years, aiming to cut urea costs by 20%. It also wants to expand retail tea sales to boost profitability and increase the average selling price.
The company aims to grow its business in solenoids and switches in the medium term and explore high-value opportunities such as solenoid and brush holder assemblies.
India Pesticides trades at a PE of 12, 57% lower than the fertiliser sector’s PE of 28.
Conclusion
The agri-sector often stays out of the limelight but select companies with strong balance sheets and steady cash flows can offer decent long-term opportunities.
That said, businesses in this space are vulnerable to factors beyond their control—monsoons, government policies, and global commodity cycles, to name a few.
Fertiliser and seed businesses, in particular, can be quite cyclical, which explains why shares in this sector trade at lower valuations.
As always, don’t chase momentum. Instead, focus on underlying fundamentals and valuations. Remember, do your research before acting on any stock idea.
Happy investing.
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