We present key takeaways of Edelweiss Rural and Agri Day 2015 held in Mumbai on June 26, 2015. The event, that brought together 13 corporates/industry bodies and 131 investors, was a resounding success.

Post 2 consecutive bad crop seasons in FY15, sentiments at ground level have improved markedly over the past 20 days following good onset of monsoon. Contrary to IMD prediction, rainfall in June, so far, has been 24% above normal and well distributed across most states. Consequently, sowing activity across crops has picked up on pan-India basis. Nonetheless, progress of rainfall remains crucial as more than 30% of South West monsoon occurs in July.

Our interactions with major agro players indicate pick up in demand at the ground level and most companies are cautiously optimistic about the ongoing season.

Off-take of agrochemical products, especially herbicides, has improved significantly over the past fortnight, led by the timely and widely distributed rainfall. There is substantial generic products channel inventory, but branded products are seeing good off-take. Agrochemical players estimate the domestic industry to record 10% volume growth in the ongoing season. Players with established brands and wide distribution reach are likely to capture significant part of this growth. We believe the space offers interesting investing opportunities over the medium term.

Post excessive non-urea fertiliser channel inventory during FY13-15, the fertiliser sector has commenced the ongoing season with normal inventory across markets. Though collection of subsidy continues to be a challenge, players have now started receiving money from the government’s kitty.

The micro irrigation industry is also expected to fare well, considering players’ focus on cash flows. For agri financing players, H1 is generally consolidation time and growth gathers pace only in H2 with respect to financing. Sugar industry woes persist on account of adverse market dynamics.

We believe that declining arable land and rising population need to be addressed by improving yields, which will bolster the agri input sector’s long-term story.

We maintain our bullish stance on the sector and believe agri stocks are good long-term investment opportunities. We believe Bayer Cropscience, Dhanuka Agritech, Rallis India and Coromandel International will be key beneficiaries of improving rural demand.