>Advanta India Limited (LKP SHARES)

…best bet to play the agricultural productivity theme

INVESTMENT ARGUEMENT

• We believe that Advanta India Ltd - AIL is the most aggressive and geographically diversified hybrid seed play available to investors to play the agricultural productivity improvement theme in key markets across the globe.

• Fox Paine LLC a private equity firm based in the US sold Advanta in bits and pieces and the United Phosphorus Group acquired the Asia Pacific and Latin America business in March 2006 and Advanta India Ltd - AIL came out with its IPO in March 2007 by raising Rs2.2bn by issuing shares of Rs10 each at a price of Rs640 per share. AIL part of the UPL group is the holding company for the global business of Advanta spanning five major geographies - Australia, USA, Thailand, Argentina and India. AIL has a leadership position in Sorghum Sunflower and Corn and is a leading agronomic global seed company competing with Syngenta, Limagrain, Monsanto,
Pioneer (Dupont group) and Pro Agro (Bayer group) in most of the markets.

• Australia is a $35mn business and Sorghum is the focus crop accounting for close to 40% of the business. The other key crops are corn, canola, sunflower, oats and pearl millet among others. Acquisition of Longreach Plant Breeders, a wheat research company in Australia has reinforced its presence in the wheat market in Australia. Exports of AIL are channeled out of Australia and the key countries where hybrids of sunflower and canola are sold include Pakistan, Bangladesh, Sudan, Iran and Indonesia. However the profitability is not high as the operating costs in Australia is high.

• US business was reinforced in sweet sorghum with the acquisition of Garrison and Townsend-GT, which essentially is a private label business with no branding. AIL acquired the $10.5mn business at one time revenues and the acquired companies have proprietary traits and a good germplasm in grain and forage sorghum and we expect this crop to fill the gap arising due to corn in the bio-fuel market. AIL remains the third largest player in Sorghum after Monsanto and Pioneer. It is among the few players in the world to have a quality sweet sorghum germplasm and while GT is the vehicle in the US, AIL has tied up with the TATAS in India. Sweet sorghum although a relatively small component in its portfolio would be a fast growing segment as the cost of production is low and can develop into a preferred crop in the bio-fuel market. AIL also acquired the sunflower seed business of Limagrain in the US last year which consolidated its position in the sunflower seed market. The US business is expected to grow at the rate of 15% annually.

• Thailand is a $15mn business where Corn is the key crop and it has a 60% market share in corn. Thailand is also a good market for vegetable seeds. AIL is a strong player in the Thai corn market in baby corn and sweet corn and is now building a strong presence in the field corn market.

• India is a $30mn business and the focus crops include paddy, vegetables, corn and sunflower and we expect the business to grow at 20% annually led by vegetables, paddy and mustard. With the acquisition of Golden Seeds and Unicorn Seeds AIL now has a 10% market share in the Rs6bn vegetables seeds market in India. As India is the second largest producer of vegetables in the world, AIL is looking to tap the opportunities in vegetable seeds like cabbage, cauliflower, chillies and okra. Hybrid rice is a huge opportunity with 42 million hectares of acreage under rice of which only 2 million is under hybrid and Bayer, Pioneer and Advanta are the key players in this segment.

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