Godrej to parlay clients into irrigation gains

Godrej Agrovet, a subsidiary of Godrej Industries, has ambitious plans for its newest venture. It’s hopeful of becoming one of the three biggest players in the drip irrigation segment in five years, according to its managing director Balram Singh Yadav.
Central to that plan are the farmers Agrovet serves in its four business segments.

“We sell animal feed to 1 lakh farmers and agri inputs to 5 lakh. We also work with 10,000 farmers in our oil palm business and 3,000 in poultry,” Yadav told DNA.

Agrovet is giving finishing touches to a joint venture with an Israeli micro irrigation systems (MIS) company.

“They will provide the technology and we will hold the majority stake,” Yadav said. He said that the JV will be inked in two months. While he did not disclose the company’s name, he said it is not Netafim, which also from Israel and is the world’s biggest MIS company.

“Netafim has big business here so why would they want to partner us?” Yadav said. Agrovet last year did a drip irrigation pilot with Silicon Valley-based Driptech, which is now on its own. It’s to be noted Israel is considered as having the best MIS technologies in the world.

MIS includes both drip and sprinkler irrigation.

Drip irrigation, also known as trickle irrigation, helps save water and fertiliser by directing them in a trickle to the roots of plants. Sprinkler irrigation is used in spraying water to irrigate the soil surface over a particular area. The size of the MIS market in India is pegged at `2,700-3,000 crore, nearly three-fourth of which is for drip irrigation.

Jalgaon, Maharashtra-based Jain Irrigation Systems (JISL), with a 50-55% market share, is the market leader. Netafim comes second with 15-20%. While US-based John Deere is considered the third biggest, others in the fray include Finolex Plasson, Premier Irrigation Adritec and Nagarjuna Fertilizers & Chemicals.

Mahindra & Mahindra recently announced plans for foray into MIS through its acquisition of EPC Industries.

Till 1985, India used flood irrigation which had low efficiency and led to the destruction of crops. Of India’s total arable land of 140 million hectare (1 hectare, or Ha, equals 2.47 acre), about half is rain-fed. Of the rest, about 4-5 million Ha have been covered by micro irrigation, with the other 65 million hectare flood-irrigated. In the past few years, over half-a-million Ha has been irrigated per annum.

“The government puts a lot of emphasis on micro irrigation. We are not taking on anybody. There is scope for everyone. The Godrej brand name and reliability will definitely help us,” Yadav said about the competition. 

The central government has allocated Rs1,150 crore this fiscal to subsidise MIS. Even state governments have their own subsidies, with the result that the farmer pays only 10-20% of the cost of MIS in some states. The cost of micro irrigating a hectare of land costs Rs40,000 and the systems have to be replaced every 5-7 years.

Anil Jain, MD, JISL, said the entry of new players in the recent past, has not dented its market share. “It’s a complex business and as new companies come in, we are looking at covering more regions. We are setting up a manufacturing facility in Rajasthan and we set up in Gujarat in February.”

He said that JISL’s real competition is flood irrigation and not other companies.

Sageraj Bariya, an independent research analyst, concurred with him and said Godrej need not go after farmers who are clients of JISL or Netafim. “There is no threat to JISL in the immediate future. But the network that M&M and Agrovet have is a huge advantage for them.” Last week Godrej Agrovet ventured into seeds business.

Lalit Mishra, strategic business unit head, business development, Netafim India, was not available for comment. But he had earlier said that an established rural network does not necessarily mean a positive. “It (selling MIS) requires work in terms of collection of subsidies from the government,” he said.

An analyst with a domestic brokerage said MIS is a regional and long-term play.

“Most companies tend to focus on a particular region like Jain Irrigation in western India, especially Maharashtra. Agrovet should do the same thing,” he said, adding that some the farmers that Agrovet works with might already be buying MIS from other companies.

“It could be a clash of loyalties for the farmer and it’ll be interesting to see how companies work past this.”