Kaveri Seeds is buzzing this morning and share is trading higher by 8.88% at Rs. 1,574 on strong volumes – 12,000 shares exchanged hands on BSE in the first hour against 2week average quantity of 11,700 shares. With a current market cap of Rs. 2,150 crore, its 52 week high/ low stands at 1,720 and 1,005 respectively.

Bayer AG’s Indian arm Bayer Cropscience is learnt to be interested in acquiring a strategic stake of less than 26% equity stake (to avoid open offer) in this Hyderabad based hybrid seeds maker, India’s second largest BT cotton player. While the business of both the companies is complimentary to each other, the foreign partner can add value by bringing on board its superior technology while Bayer gets a philip in product development.

As of 30^th June 2013, Kaveri Seed had equity of Rs. 13.75 crore (face value Rs. 10 each), of which 64.73% was held by promoters, while institutions held 17.95%, noteworthy among them being IDFC (8.47%), Oppenheimer (2.16%) and Bodhivriksha (1.16%). Balance 17.32% is held by 5,000 retail shareholders. It is not know whether the purchase will be a fresh issue or secondary sale by promoters.  

Kaveri Seed reported consolidated revenue of Rs. 712 crore for FY13 and earned PAT of Rs. 128 crore, translating in to EPS of Rs. 93.47. Of this, it paid a healthy dividend of Rs. 16 per share. Q1, which is seasonally the best quarter accounting for close to two-thirds of the annual revenue, saw consolidated revenue rise to Rs. 736 crore (up 53% YoY) and PAT jumping to Rs. 162 crore (up 60% YoY). Thus, Kaveri is a very attractive target in the hybrid seed business, along with its micro-nutrients portfolio, which accounts for only a tiny portion of the revenue.  

Meanwhile, Bayer Cropscience is up close to 2.7% at Rs. 1,579, commanding a market cap of about Rs. 6,240 crore.