Maintaining 9% economic growth is a task in front of policymakers. An important factor to watch here is the growth in the agriculture sector. Investments are taking place from both private and public parties. However, Indian agriculture has yet a long way to go compared to agriculture in developed nations. It throws open an opportunity for those who are suppliers to the agriculture sector.

Business

Aries Agro (Aries) is a Mumbai based player having nationwide presence in the business of manufacturing of micronutrients and other nutritional products for plants and animals. As of now, the company has four manufacturing facilities at Mumbai, Kolkata, Hyderabad, and Bangalore, with an installed capacity of 21,600 TPA. It manufacturers plant nutrients, insecticides, and veterinary products.

Aries Agro Care is a subsidiary of Aries, proposes to trade in seeds for vegetables and field crops. Another subsidiary of Aries – Aries Agro Equipment, is keen to initiate trading of mini tractors. The same is expected to start in the last quarter of FY2007-2008.

Financials<./B>

Aries has posted a topline growth at 41% CAGR, from Rs 19.51 crore in FY2002-2003 to Rs 77.40 crore in FY2006-2007. Though one must note that FY2006-2007 consists of trading revenue of Rs 30.75 crore, which is 175% more than the trading revenue earned of Rs 8.20 crore in FY2006-2007. The company incurred losses in FY2002-2003 and FY2003-2004. However, it has posted a profit of Rs 1.06 crore in FY2004-2005 and subsequently raised the profit to Rs 8.44 crore, denoting a CAGR of 181%.

The company has already made the payment for one time settlement of its dues to IFCI, arising out of a lease finance transaction, where Aries defaulted in 2002.

Objectives

The company intends to tap the capital market to fund its expansion plans. It intends to increase its manufacturing capacity by 79,200 TPA and wants to install a packaging capacity of 9,000 TPA. It proposes to buy new plant and machinery for the Mumbai plant. Capital expenditure for mobile marketing along with expenditure on renovation of the office building is also on the cards.

It will invest Rs 7.36 crore in Golden Harvest, which is setting up a project to manufacture chelated micronutrients and invest in another company Mapco. The company has plans to use Rs 17.76 crore to meet its working capital requirements.

Outlook

Aries has big plans on the cards. The company may see a high growth in the domestic market and in international markets, due to five-fold growth in the foreseeable future. However, the first unit will come on stream in February ’08 and the remaining three will come on stream in September ’08. Golden Harvest and Mapco will commence commercial production in March ’08.

The stock on offer is 18 and 20 times its trailing twelve months earnings, as on March 31, 2007 on the lower and upper end of the price band, taking into account the fully diluted equity capital. The market capitalisation to sales ratio stands at 2.18. This appears stretched for Aries. Investors should note these factors while applying for shares in the company.