Investment gurus such as Jim Rogers saw it coming as early as 1999. Prices of agri-commodities are soaring in the face of sustained uptick in global demand and stagnating production. Notwithstanding the scorching economic growth in India, Indian agriculture is painfully ambling along at around 2 per cent due to decades of under-investment. That, however, is changing. With the policy-makers renewing efforts to boost agriculture-the last two budgets were agri-focussed-now, a clutch of companies is poised to capitalise on the coming boom. Right from companies that provide farming inputs such as seeds to farming techniques and machinery to those involved in distribution of farming products-companies in the agri-sector are slowly coming into the limelight. As the farm income increases, another class of companies that has traditionally focussed on urban centres has rapidly increased its penetration in rural India. These are banks and consumer durable companies. There are many themes playing out in the agri-sector. (see The Seeds of Growth). The Base Producers The first to benefit are direct agri-products companies. Commodity prices affect the earnings of rice millers, sugar producers and tea manufacturers. Investment opportunities abound in this category as the global and domestic demand is expected to remain strong over the coming years, and prices are expected to remain reasonably firm. "Strong demand will require a substantial increase in acreage, which has been virtually unchanged for decades. Until that happens, agricultural prices are likely to stay elevated," says Si Kannan, Associate Vice President of Kotak Commodity Services. Hence, companies producing agri-based products are well poised for the future. A case in point is rice and wheat miller Usher Agro, which listed last year at Rs 9, but zoomed to Rs 30 levels soon thereafter. The stock thrived on the back of steady demand for its products by acquirers such as Food Corporation of India, among others. Besides companies such as REI Agro, krbl, exporters of the long-grained and aromatic basmati rice, are also riding the crest of the same wave. "The seeds business is cyclical but fetches high return on investment" Harendra Kumar Head (Research)/ ICICI Direct Sugar is yet another agri-commodity which is on an upswing. ADBI Capital's agri-analyst Maitali Shah picks up India's top two sugar producing companies, Bajaj Hindusthan and Balrampur Chini, along with Dwarikesh Sugar for a long-term play of four years and more. She cautions though, "sugar stocks are not in favour just now as off late, sugar industry is facing a glut." Arun Kejriwal, Director, Kejriwal Research and Investment Services, however, points out that the long-term story in sugar will play out more aggressively once India starts looking seriously at ethanol as an alternate fuel. Ethanol is a by-product of sugar processing. Brazil has made a significant move towards using ethanol and that move alone has affected global sugar prices tremendously. Besides, companies in the business of food and solvent extractions are seeing a revival in their fortunes. Among the many companies, Ruchi Soya and KS Oils-companies into solvent extraction-also feature high among investors' favourite stocks. Indirect Beneficiaries However, soft commodities apart, there are many more investment opportunities within the broad agro-theme. One company that has been in focus is Jain Irrigation. It is the largest supplier of micro-irrigation equipment in the country. As the government stresses on increasing the arable land under irrigation, the company is well poised to take advantage of the investments coming in new irrigation techniques. Finolex Industries, KSB Pumps and Kirloskar Brothers, too, fall in the category of agri-infrastructure companies. As production techniques are spruced up, the agri-input sector which provides the much-needed stimulant to crops is the seeds and the fertiliser sectors. There are a number of players in this segment-among them Advanta India, which debuted recently on the stock market, and Monsanto India. "The seeds business while being cyclical shows high return on investment once the seeds are launched in the market," says Harendra Kumar, Head (Research) at ICICI Direct. Kumar points out that increased corporatisation of agriculture will provide a tremendous fillip to the seeds business as companies try and improve the low yields from most crops. Other companies worth considering are agro-chemical companies such as Rallis India, United Phosphorus which deal with crop protection chemicals. Fertiliser companies such as EID Parry, Coromandel and Godavari Fertilisers or gnfc are good bets as we look into the future even though they operate in a highly regulated environment as yet. Among other equipment producers, tractor companies also provide a good opportunity as increased mechanisation of farming results in an increased demand for tractors. M&M has significant share of this market. The Fringe Gainers There are many companies not directly related to agriculture but thriving nevertheless on the agri-sector. Mahindra & Mahindra Finance is essentially a play on India's rural economy with more than 70 per cent of its business coming from rural and semi-urban areas. Brokerage house SSKI believes that the "increasing focus on agriculture by the government, corporates and organised financiers would propel India's rural economy on to a higher growth trajectory. M&M Finance is ideally placed to capture this opportunity." ICICI Bank is also aggressively zooming in on rural markets. Agriculture contributes about 20 per cent to the gross domestic product. As of now its capital market exposure is fairly insignificant. But market observers reckon that the shift is imminent as agri-sector gains dominance in the coming years. Says Jaideep Goswami, Head (Research), UTI Mutual Fund: "As investment picks up in agriculture, the sector will improve its share of market capitalisation to reflect its importance in the overall economy."