Usher Agro Is Expanding Its Capacity

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Usher Agro Limited is an India-based company is engaged in the processing of agro based products, such as rice and wheat allied products. Usher is operating in food processing industry, considered to be one of the fast growing industrial segments having huge potential for growth.

Usher put its first project of rice milling at Mathura (U.P.) started in 1996 with an installed capacity of 10800 MTPA and which is now stood at over 543600 MTPA. Besides, rice milling Usher is also having Wheat flour milling facility of 75000 MTPA and captive co-generation power plant based on rice husk a by-product of rice milling activity. The company exports its products primarily to the Middle East and Gulf countries. It is also developing a 16 MW power plant for the generation of bio-mass power.

The company is rising capacities on many locations and entering into pulses. Company is expanding its existing wheat milling capacity at Mathura by 50,000 MTPA to make wheat milling capacity of 125,000 MTPA. The company is modernizing the existing rice milling facility at Buxar and also adding additional capacity of 46,800 MTPA rice milling facility at the same complex thereby making the total rice milling capacity at Buxar to 93,600 MTPA. To be self-reliant on the power front the company has setup a co-generation power plant of 1 MW at Buxar, Bihar for captive use. This power plant will help to reduce the cost of operation with better efficiencies and better efficient value added utilization of Bye product.

Agriculture provides the principal means of livelihood for over 58.4% of India’s population. It contributes approximately one-fifth of total gross domestic product (GDP). Agriculture accounts for about 10 percent of the total export earnings and provides raw material to a large number of industries.

The food processing Industry in India is of fundamental importance, as it does the vital link between agriculture and industry. This industry provides nearly 60 percent of all job opportunities by directly employing around 1.6 million workers. It is the fifth largest industry in the country in terms of production, consumption, export and growth. The worth of the Indian processed foods sector stood at USD 157 billion in FY2012; it is expected to touch USD 255 billion by FY2016 with a compound annual growth rate (CAGR) of 20%.

The availability of raw materials, changing lifestyles and relaxation in regulatory policies is fuelling the growth of this industry. India is the second largest producer of fruits & vegetables and the third largest producer of food grains. In addition to its large and wide-ranging raw material base, India has a huge consumer base of over one billion people. All these are positive factors that add vigor to the processed foods industry, which holds tremendous opportunities for large investments.

Indian Wheat Industry

Most Indian wheat is soft or medium hard, best suited for making flatbreads called “chapattis” or “rotis”, the most popular wheat-based product. Consumers usually take their wheat to small flour mills where it is milled into wholemeal flour called “atta” for making rotis. The flour mills mostly produce all-purpose flour or “maida” and suji or “semolina.” There are around 1000 flourmills in India, with a milling capacity of more than 24 million tonnes. The balance of the wheat in the country is processed in the stone mills sector in the unorganized sector.

Minimum support prices (MSP) or procurement prices are announced by the government every year at the beginning of every wheat season. The distribution is mainly by state governments through thousands of fair price shops spread throughout the country in the urban and rural areas. The Government system handles only a small proportion (10-11%) of wheat production and private merchants handle the large proportion of the total wheat production.

Indian Rice Industry

Rice is the predominant staple food for 17 countries in Asia and the Pacific, nine countries in North and South America and eight countries in Africa. Rice is the staple food of more than 60% of the world population and is expected to remain as a lifeline for the people in Asia and Pacific regions where 90% of it is produced and consumed.

Rice is grown in many regions across India. India has the largest area under rice cultivation in the world and ranks second in the production after China. India has also emerged as a major rice consumer and exporter. Rice cultivation is found in all the states of India but West Bengal, Andhra Pradesh, Uttar Pradesh, Punjab, Orissa and Tamil Nadu are the major rice producing states accounting nearly 2/3rd of the national output.

India’s total rice output was over 95 million tonnes in 2010-11 and is expected to be about 102 million tonnes in 2011-12. Since the last ten years the area under rice cultivation has been nearly the same at approx 43.50 million hectares, while the production has increased from 82.53 million tonnes in 1997-98 to 95.33 million tonnes in 2010-11 mainly due to increase in yield from 1900 kg/ hectare to 2240 kg/ hectare.

Usher Agro currently trading at Rs 42 having market cap of Rs 1600 million. With the trailing twelve month earnings per share of Rs 11.90 its price to earning ration is 3.54 which is very low compare to industry average of 36.5. It pays Rs 1.5 dividend a share yielding 3.5% at current market price. The low valuation couple with further increase in the production capacity makes this stock an attractive buy for long-term.