Have Breeders Bet on the Wrong Horse - By Shailesh Menon I Economic Times
Posted on - 05 Apr 2016
Have Breeders Bet on the Wrong Horse?
By Shailesh Menon
Economic Times
It was a nippy evening at the Pune race course, a day before the annual sale of two-year-old colts and fillies through auctions. Around 300 thoroughbreds -bearing shining coats of all hues and neatly combed bushy tails -were paraded in small circles for inspection by visitors.
The handlers of these horses -who accompanied breeders from stud farms across the country -were visibly bored and tired. They had been lining up horses before groups of horse-lovers, nosey bloodstock agents and the public for three days, but there were hardly any enquiries from prospective buyers. The breeders, sitting under large garden umbrellas on the sidelines, were understandably fidgety.
Towards noon on the auction day, several breeders decided to withdraw their entries from the sale. Their best horses would not even have covered the `production cost'. Raising a horse up to two years of age (the age at which thoroughbreds start training to run races) costs breeders 7-8 lakh. At this auction, held in mid-February this year, the asking rate (informal negotiations prior to bidding) for the best horses was 5-6 lakh.
Inevitably, the auction turned out to be a damp squib. “The auction did not help us much this time,” says Nirmal Singh, owner of Hazara Stud Farm.“But one cannot blame the auction alone as there is a general lull in the breeding industry. There are no big buyers these days and prices have fallen significantly over the past two years.” Prices of horses have declined 40-60% since 2012 as the industry grapples with a deadly cocktail of oversupply of foal stock, and lower demand due to economic slowdown. In their heydays, breeders sold their best horses for 10-20 lakh. Several breeders have been forced to shut down farms due to the overall funk. The insensitive ones have left their horses to die. Smaller breeders are selling their thoroughbred stocks at throwaway prices to schools, marriage parlours, film studios, resorts, polo clubs, riding schools, army and state police departments.
“Number of serious breeders is coming down at an alarming pace. Many of us are carrying on the trade because we just can't shut the farm and go. We deal with live animals here,” says Tegbir Brar of Dashmesh Stud Farm. “There's a lot of cost involved in breeding; salary, for one, is a big drainer. Fodder cost is also very high these days,” Brar adds.
TROUBLING TIMES
The current troubles of the breeding industry can be traced to the period between 2010 and 2013. Indian breeders imported over 700 mares during those years. They aimed to produce “best quality foals“ by buying top-notch mares from overseas markets such as the US, the UK and Ireland, impregnating a few with champion stallions and bringing them home before foal-birth. Indian laws allow breeders to import horses for breeding purposes only, and not for racing.
Towards 2011-12, the foal stock in India shot up to 1,900 a year. The breeding industry was suddenly faced with a glut of colts and fillies in the successive years. Indian race courses are equipped to house not more than 1,250 babies every year; anything above that means a good number of the new-born foals would remain unsold with breeders. Today, around 40-50% of the (new) stock is lying unsold with breeders, as per broad estimates.
“At some level, the fault lies with the industry itself. We imported a lot of mares between 2010 and 2012 causing a glut,” admits Zavaray Poonawalla of the Poonawalla Stud Farms. “We've very limited outlets to sell new brood every year. That apart, when the industry is importing new mares every year, the existing newborn mare stock goes unsold.”
Problem for Indian breeders is the absence of an alternative market to sell their stock. Tight quarantine restrictions and livestock export rules make it difficult for Indian breeders to ship their horses overseas.
“We'll be able to increase production only if we have international clients buying our horses. And that's a bit distant due to stringent quarantine restrictions and tough government controls,” he adds.
This was not the case until mid-2000, when Indian breeders actually exported their horses to “smaller countries” (in terms of racing popularity) such as Sri Lanka, Mauritius, Singapore, Malaysia, South Korea and a few Arab countries.
Stud farm owners also had managed to send out a few horses to the US, which is relatively liberal, provided the exporting country meets strict quarantine requirements. Indian horses have never managed to make inroads into Europe because horses from “third world countries” are not allowed -even for transit purposes.
Sadly for Indian stud farm owners, the global equine influenza outbreak post 2007 shut almost all available export corridors'. These days India breeders do not export horses to even smaller countries. One of the reasons for this being tighter export controls imposed by Animal Husbandry Department (AHB) in the aftermath of horse-related diseases like equine influenza and contagious equine metritis (a treatable venereal disease).
“Breeding is not profitable at all; I am a breeder because I am passionate about horses and racing,” says Jaydev Modi, chairman of Delta Corp and owner of Quasar, a champion horse which has won over 6 crore in prize money and is now used for breeding purposes. “Consider yourself lucky if you get a horse like Quasar out of 50 horses you own. Breeding a champion horse is much like winning a jackpot in the races,” he says resignedly.
According to Poonawalla, the industry has no buyers now. “From the looks of it, even 2016 is going to be a bad year in terms of prices.”
BUSINESS OF BREEDING
Indian breeders (many of whom are owners too) make money by selling horses or by winning stakes in top races. The third revenue stream of offering “stallion services” -under which stud farm owners with accomplished stallions provide mating covering services for a fee -is not popular in India as breeders prefer to import impregnated mares (covered by top global stallions) from the west.
When horse prices plummet, breeders try to race as many horses as they could to win big races. Horses like `In the Spotlight' (which has won 8 Indian classics and stakes worth 5.2 crore), Southern Empire (prize money of 2.6 crore) and Bourbon King (2.3 crore) have done exceptionally well bringing home the bucks.
Horses (both colts and fillies) start participating in trophy races six-eight months into their training. By the time they turn four, they are ready to participate in ‘Classics’ -races with higher stakes. Sometimes, breeders neuter colts (male horses) to improve on-track performance. Such colts are called geldings. Both colts and fillies (female horses) run the same races. An accomplished filly is retired after two years of top-level racing and is kept in the farm as a broodmare. The sole purpose of a broodmare is to breed good horses.
“Out of the 10 mares in your farm, 6-7 manage to produce foals. Not all foals are fit to race. Only 4-5 can be trained to race. The onus to do well and earn some money for farm falls on these race-worthy horses,” explains equine expert Anil Mukhi, who runs the Galaxy Bloodstock.
Mukhi says the breeding model in India is poor. “Breeders here keep both mares and stallions. In overseas markets, breeders keep only mares; when they want to breed, they send them to stallion stations which offer mating services. This results in a better foal crop.”
Inferior quality, perhaps, is the reason why Indian thoroughbreds are not invited to participate in international races. But big breeders like Poonawalla and Farrokh Wadia of Yerawada Stud Farm disagree. They cite the successes of horses like Mystical (winner of 4 Indian classics and two international races), Astonish (which won two races in Hong Kong), Adler (won a race in USA) and Saddle Up (won races in Malaysia) to drive home their point.
According to Poonawalla, Indian horses are just 5 seconds slower than the best of global thoroughbreds. “Our horses can go abroad and be bought by international buyers,” he says.
Wadia says Indian breeders have shown they can export good quality horses. “Efforts are on to make horse exports a possibility. We're talking to concerned authorities in Europe about our horses. An international expert committee is helping us to establish export channel with Europe,” he clarifies.
The Stud Book Authority of India (SBAI), which keeps a record of all matters concerning registration of breeding establishment and thoroughbreds, is helping breeders put forth their case. “We ensure integrity of Indian thoroughbreds,” says Satish Iyer, registrar at SBAI.
Apart from untying knotty export-related issues, breeders and horse-owners are also liaising with government and the bureaucracy to gain some respite on the taxes front. Even though horse breeding comes under the livestock and animal husbandry ministry, it does not get the sops and tax-breaks enjoyed by cattle growers. Apart from income tax, breeders, horse-owners are required to pay service tax, sales tax (in some states) and even octroi charges while transporting horses from one race circuit to another.
Besides this, prize money for winning horses pales in comparison with other countries. As per International Federation of Horseracing Authorities data, average prize money per race in India is about Eu 5.15 lakhs) compared with euros 6,284 (1.1 crore) in Hong Kong and ros 1,34,201 (euros 1,07,915), (88.4 lakhs) in UAE. Indian turf clubs are not able to raise prize money as betting turnover (a significant portion of which goes to the turf club) has slid significantly over the past two years.
Vivek Jain of the Royal Western India Turf Club says clubs are not in a position to increase money significantly.“Even clubs have their constraints. Also, an increase in prize money will not alone solve the problem of breeders. Their problem has more to do with the general lull in the economy. They're not finding enough buyers for their stock,” says Jain.
Efforts to revive the Madras Turf Club and Royal Calcutta Turf Club and grand plans to open a new club in Punjab offer a glimmer of hope for the depressed industry. “We need to have the right infrastructure to grow our breeding industry. Newer avenues have to be built locally to support it,” says Ravi Reddy, president at Nanoli Stud Farm. Reddy says a small country like England has nearly 50 race courses while India has just about 10, counting even the smaller ones. “Also if you want to breed quality horses, you need to have large tracts of fertile farmland. Restriction on land use, etc has to be reduced.”
Wadia says the government should be sympathetic towards breeding. “This is not only rich man's activity; there are several small farmers who raise horses on their farms and this industry gives direct employment to lakhs of people.”
