2. Disclaimer
This presentation contains certain “forward looking statements.” These forward looking statements that include words or phrases such
as Bajaj Hindusthan Limited (the "Company") or its management “believes”, “expects”, “anticipates”, “intends”, “plans”, “foresees”, or
other words or phrases of similar import. Similarly, statements that describe the Company’s objectives, plans or goals also are forward-
looking statements. All such forward looking statements are subject to certain risks and uncertainties that could cause actual results to
differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based
on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management.
Neither the Company nor any of its advisors nor any of their respective affiliates, shareholders, directors, employees, agents or advisers
makes expressed or implied representations or warranties as to the accuracy and completeness of the information contained herein and
neither of them shall accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising
from any error or omission in compiling such information or as a result of any party’s reliance or use of such information. The information
and opinions in this presentation are subject to change without notice.
This presentation does not constitute a placement document, prospectus or other placement document in whole or in part. This
presentation shall not constitute an offer to sell or the solicitation of an offer to buy any security. There shall be no sale of these
securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification under securities laws
of such state or jurisdiction. This presentation must not be distributed to the press or any media organization.
This presentation is not an offer for sale of securities in the United States. The securities of the Company have not been and will not
be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The securities of the Company may not be
offered or sold in the United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the
Securities Act) absent registration under the Securities Act or pursuant to an exemption from registration. There will be no public
offering of the Company's securities in the United States.
3. India- Brief demographic profile
CAGR CAGR
since since
1950 1960 1970 1980 1990 2000 2009 1950 2000
At current prices
Gross Domestic Product Rs Crore 9719 15083 40405 110887 442134 1786526 4933183 11.14% 11.95%
Agriculture Rs Crore 4801 6404 16747 34384 117796 409660 861753 9.20% 8.61%
Manufacturing Rs Crore 1056 2009 5578 19840 74995 264114 780405 11.85% 12.79%
Services Rs Crore 1162 2190 4744 12579 51238 233549 691221 11.44% 12.81%
Others Rs Crore 2700 4480 13336 44084 198105 879203 2599804 12.35% 12.80%
Population Census Lakhs 3611 4392 5482 6833 8463 10286 11660 2.01% 1.40%
Rural Lakhs 2987 3603 4391 5239 6291 7425 NA 1.84%
Urban Lakhs 624 789 1091 1594 2172 2861 NA 3.09%
Population Census
Rural % 83% 82% 80% 77% 74% 72% NA NA
Urban % 17% 18% 20% 23% 26% 28% NA NA
Per Capita Income Rs 267 326 675 1,630 4,983 17,980 37,490 8.75% 8.51%
Net Sown Area Million Hectares 119 133 140 140 143 141 #142 0.35% 0.08%
Net Sown Area % 41.80% 44.60% 46.20% 46.00% 46.90% 46.30% NA
Agriculture as % to GDP % 49% 42% 41% 31% 27% 23% 17%
Source: GOI-Ministry of statistics and programme implementation, Census of India, Ministry of Agriculture- Directorate of Economics and Statistics, bugdet.ap.gov.in
# Based on 2005-06 data
Growth rate of land under sowing is abysmal which may cause lower
production of agriculture items. The only option is yield improvement to
feed the growing population
4. India World ranking in production and consumption
Production Consumption
Ranking Ranking
Rice 2 After China 2 After China
Wheat 3 After EU, China 3 After EU, China
Sorghum (Jowar) 3 After Nigeria,USA 3 After Nigeria,Mexico
Millet (Bajra) 1 1
Sugar 2 After Brazil 1
Cotton 2 After China 2 After China
Source: Based on crop year 2009 United States Department of Agriculture
India is the swing factor for rice, wheat, sugar and cotton on a
global basis
5. Growth rate of yields
Yield Kg per Hectare
CAGR
since
1950-51 2002-03 2007-2008 1951
Rice 668 1744 2203 2.12%
Wheat 663 2610 2785 2.55%
Sorghum (Jowar) 353 754 981 1.81%
Millet (Bajra) 288 610 1030 2.26%
Sugar Cane 33422 63576 67531 1.24%
Cotton 88 191 466 2.97%
Source: Ministry of Agriculture- Directorate of Economics and Statistics
Yield improvements are insignificant over the past six decades
7. Performance of companies having rural presence
Company Category Unit 2004 2005 2006 2007 2008 2009 CAGR
Hero Honda Two Wheeler Lakh Unit 20.70 26.21 30.01 33.37 33.37 37.22 12.45%
Maruti Suzuki Cars Lakh Unit 4.21 4.87 5.27 6.35 7.11 7.22 11.39%
Customers in
Bharti Mobiles crores 0.71 1.18 2.1 3.9 6.42 9.67 68.59%
Turnover Rs Crores
Hindustan Uniliver * FMCG Rs Crores 10,888 11,975 13,035 14,715 NA 17,319 9.73%
Tata Tea (standalone
result) Tea Rs Crores 783 900 982 1071 1153 1379 11.99%
* Proportionate for 12 Months for 2009. Data for year 2008 is not availble since company changed it year end closing during that period
** For Maruti suziki domestic sales have been considered
Source: website of respective companies
Rural wealth creation has become the mainstay of the economy in
general
8. Why are yields not improving?
Loan waivers for farmers
Loan waiver schemes by the Central and State Governments
NREG scheme
The recently launched NREG Scheme provides guaranteed
employment for 100 days and a minimum wage of Rs. 100 per day
MSP which covers 70% population
Government ensures Minimum Support Price (MSP) for almost all
major crops. MSP increases every year thereby disjointed of market
realities.
Progressive land fragmentation
Every successive generation drastically increases fragmentation
and mitigates use of modern farming techniques to improve
productivity and yields. If land parcel boundaries were to be
removed, India will have 7% more cultivable area.
Improper fertiliser usage
The imbalanced subsidy on urea has resulted in excessive usage
and has depleted the land of phosphates and other micro-nutrients
9. Why is supply not catching up?
Land for agriculture declining
Limited cultivable land which is further lessened by more lucrative alternate
usage like SEZs etc.
Continuance of agriculture a major problem
The new generation is far better educated and is richer. Agriculture does not
interest them and is a national issue.
No efforts by Government to improve water table or irrigation
Across India, the water table is declining at an alarming rate and land is
becoming less and less fertile as evidenced by increased fertiliser usage for
same output. No concerted efforts are in place either by the Government or at
the grass root level.
Resistance to change
The typical farmer is completely averse to any change in farming techniques
or use of newer seeds etc.
Crop Switching
Farmers habitually switch crop based on the revenue that he gets from
revision in support prices
10. Domestic demand & supply - foodgrains
Million Tonnes
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Opening Stock 16 12 16 18 23 31 1 1
Production 185 195 203 216 219 184 219 220 222 224 225
Imports 0 7 2 1 0 0 - - - - -
Availability 201 213 221 235 241 214 219 222 222 224 225
Consumption 184 192 196 202 208 213 218 223 229 235 241
Exports 6 5 7 10 3 1 - - - - -
Closing Stock 12 16 18 23 31 1 1 (2) (7) (11) (15)
Stock to Use% 6% 8% 9% 11% 15% 0% 1% -1% -3% -5% -6%
Increase % incr Y Source: USDA upto 2007
Foodgrains include Wheat, Rice,Barley,corn,millets and sorghum
Yon Y on Y
MMT
1968 15 22%
1976 19 21%
1978 14 14%
1981 17 16%
1984 22 18%
1989 29 23%
1993 11 7%
1997 17 10%
2002 14 7%
2004 36 22%
2008 13 6%
Max increase 36 23%
Foodgrain availability is assumed at 0.75% increase since there will not be any drastic increase in land availability or the yields
Consumption increase is taken at 2.5% year on year which is its historical rate of increase
Considering the above factors it seems that we are heading towards a deficit in overall foodgrain availability in next 3 to 4 years.
11. Domestic demand,supply & stocks since 1960 -
foodgrains
250 35%
230 Green 30%
210 Revolution
25%
190 20%
170
15%
150 ^
10%
130
110 5%
P ro duc t io n
90 C o ns um pt io n 0%
70 S t o c k t o us e -5%
50 -10%
Source: USDA upto 2007, company estimate thereafter
Foodgrains include wheat, rice,barley,corn,millets and sorghum
India’s consumption in most of the years has been equal to or more than the
production. If the yield does not improve, India will head for deficit in 3 to 4
years
12. Domestic demand,supply & stocks since 1960
– Milled Rice
Rice, Milled 2005 2006 2007 2008 2009 2010E Million Tonnes
Opening Stock 11 9 11 11 14 18
Production 83 92 93 97 99 78
Imports - 0 - 1 - -
Availability 94 100 104 109 113 96
Consumption 81 85 87 90 94 97
Exports 5 5 6 5 2
Closing Stock 9 11 11 14 18 (1) ^
10 0 3 5%
Gre e n
90 3 0 %
R e v o lu t io n
2 5%
80
2 0 %
70
15 %
60
10 %
50 P r o d u c t io n
5%
C o n s u m p t io n
40 0 %
S to c k to u s e
30 -5%
Source: USDA upto 2007, company estimate thereafter
Source: USDA upto 2007. Production for 2010 assumed 20% lower and consumption at historic growth rate of 3%
Government will increase MSP to augment production causing even more distortions
13. Domestic demand,supply & stocks since 1960
– Wheat
Wheat 2005 2006 2007 2008 2009 E 2010 E Million Tonnes
Opening Stock 4 2 5 6 8 11
Production 69 69 76 79 81 64
Imports 0 7 2 0 -
Availability 73 78 82 84 88 76
Consumption 70 73 76 76 77 77
Exports 1 0 0 0 0
^
Closing Stock 2 5 6 8 11 (1)
100 45%
P r o d u c t io n 40%
90 Green
C o n s u m p tio n Revolution 35%
80
S to c k to u s e 30%
70
25%
60
20%
50
15%
40
10%
30 5%
20 0%
10 -5%
Source: USDA upto 2007. Production for 2010 assumed 20% lower and consumption at same levels
India will have lowest inventory of wheat
14. Low cane supply caused by massive crop switching…
(million tonnes) SY 02 SY 03 SY 04 SY 05 SY 06 SY 07 SY 08 SY 09 SY 10E SY 11E
Opening Stock (A) 10.7 11.3 11.6 8.5 4.0 * 3.6 9.2 8.1 2.3 0.0
Production (B) 18.5 20.1 14.0 12.7 19.3 28.3 26.3 14.7 14.0 21.0
Total Availability (A+B) 29.2 31.5 25.6 21.2 23.3 32.0 35.6 22.8 16.3 21.0
Demand – Total 17.9 19.9 17.5 18.5 19.6 22.7 27.5 22.5 23.4 24.6
- Domestic 16.8 18.4 17.3 18.5 18.5 21.0 22.5 22.5 23.4 24.6
- Export 1.1 1.5 0.2 0.0 1.1 1.7 5.0 0.0 0.0 0.0
Imports 0.0 0.0 0.4 2.1 0.0 0.0 0.0 2.0 0.0 0.0
Closing stock 11.3 11.6 8.5 4.8 3.6 9.2 8.1 2.3 (7.1) (3.6)
Closing stock-Month 7.6 7.0 5.8 3.1 2.2 4.9 3.5 1.2 (3.6) (1.7)
Stock -to- use Ratio (%) 63.3 58.4 48.5 26.1 18.5 40.6 29.5 10.2 (30.3) (14.5)
Source: Indian Sugar Mills Association (ISMA) – October 2008, Company estimates
* Adjustment made as per Central Excise Certificate
Massive crop switching caused by inordinately high induced MSP for
Wheat
15. Volatility in Sugar Cycle increasing…
10.00
8.00
6.00
Absolute Difference in Sugar Production Year on Year
Million Tones
4.00
2.00
Difference in production
-
62
64
66
68
70
72
76
78
82
84
88
90
94
96
00
02
06
08
74
80
86
92
98
04
10
19
19
20
20
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
(2.00) Year
(4.00)
(6.00)
(8.00)
(10.00)
(12.00)
High induced MSP for alternate crops induces more volatility in sugar
cycles
16. … leading to sugar crisis and recovery will take much
longer as demand grows even more
Typical Sugar Cycle (5-7 Years)
Lower Higher &
Lower Increase in Increase in Higher Decline in Delayed
sugar prompt Lower
sugarcane sugar area under sugar sugar payments
production payment to profitability
production prices cultivation production prices to farmers
farmers
2-3 years up cycle
BHL Prices*
^
(Rs./Qtl)
40.0 1,196 1,163 1,195 1,311 1,363 1,388 1,385 1,338 1,178 1,420 1,692 1,795 1,425 1,485 2,068
30.0 64% 63%
60% 58% 58%
20.0 46% 48% 49%
45%
Million tonnes
41%
10.0 38%
26% 30%
19%
0.0
SY95 SY96 SY97 SY98 SY99 SY00 SY01 SY02 SY03 SY04 SY05 SY06 SY07 SY08 SY09 SY10 SY11
(10.0) 10%
Unprecedented
(20.0) inventory levels -15%
-30%
(30.0)
Inventory (as a % of Consumption) Production Consumption
* BHL free sugar prices
^ 9MSY09 actual realization for BHL
Source: Indian Sugar Mills Association (ISMA) – October 2008, Company estimates
This can and will happen to other
crops then what?.........
17. Wheat & rice or sugarcane ??
ECONOMICS OF SUGARCANE VERSUS RICE-WHEAT
Year 2009
MSP Revenue/
Yield/Acre Cost of culva- Rates/Qtl. Acre Profit/Acre Av.Profit /
Crop (Qtls.) tion/Acre (Rs) (Rs.) (Rs.) (Rs.) Annum/Acre
Sugarcane (Plant) 225 20405 140 31500 11095
Sugarcane (Ratoon) 200 13190 140 28000 14810 12953
Wheat 20 11010 1080 21600 10590
Paddy 24 11280 900 21600 10320 20910
Year 2010
MSP Revenue/
Yield/Acre Cost of culva- Rates/Qtl. Acre Profit/Acre Av.Profit /
Crop (Qtls.) tion/Acre (Rs) (Rs.) (Rs.) (Rs.) Annum/Acre
Sugarcane (Plant) 225 20405 180 40500 20095
Sugarcane (Ratoon) 200 13190 180 36000 22810 21453
Wheat 20 11010 1080 21600 10590
Paddy 24 11280 980 23520 12240 22830
-One Wheat and one paddy crop can be done during the year
-Wheat- Nov to April and Paddy – July to September
-For Sugarcane, state advised price (SAP) as per Uttar Pradesh state government is considered. SAP 2010 is assumed
Source: Company
Irrational MSP without economic fundamentals will cause severe
distortions
18. Future ???
India sorely needs
The 2nd Green Revolution
