Top 20 Indian Agrochem Firms: Performing Well Despite Poor Monsoon

Despite the unfavorable weather condition, Indian agrochemical industry maintained growth in the 2014/15 fiscal year, best proved by the sales performance of the top 20 Indian agrochemical firms, most of which achieved growth to certain extent. It is reported that Indian agrochemical market achieved a low double-digit growth but lower than last year. However taking into account the weather impact, the industry is regarded to have performed quite well than expected. 
 

Unfavourable monsoon is the biggest problem 
 

Due to the special geographic condition, Indian agriculture relies very much on the monsoon rain which provides direct irrigation for more than 55% of the crops in India. Therefore the farm product sales are also affected by the rainfall and reservoir level. These factors will influence farmer’s decision on selection of crops to be planted in a year. The monsoon rain in the 2014/15 year came rather late, resulting in 40% reduction of rainfall in the first quarter of 2014 (April to June) compared with the previous year. What is worse is the drastic increase of rainfall in the second quarter, which led to a flood disaster, particularly some northern and northeastern regions of India suffered severe flood. The late arrival of monsoon and reduced rainfall affected planting of rice, cotton and rapeseed. According to an official estimate, reduced rainfall will reduce food crop yield by 3.2% while the unfavorable rainfall in the second half of the year caused losses of wheat, mustard and rice. All top 20 companies, without exception, mentioned the adverse impact to the sales to different degrees. They anticipated that the continued El Nino phenomenon will further affect the monsoon climate in 2015, thus to impact the performance of Indian agrochemical market. 
 

Almost all companies gained growth 
 

According to the top 20 Indian agrochemical firms issued by AgroPages, majority of them overcame the adverse impact and achieved growth at different levels with the only exception of Indofil Industries and BASF who experienced dropped sales. The entry level of top 20 Indian agrochemical firms was INR 5.4 billion, INR 1.5 billion higher than last year. A total of 13 companies achieved double-digit growth while 5 companies achieved single-digit growth. UPL ranked No.1 on the list, followed by Bayer CropScience. Gharda Group achieved a quick rise to rank No.3 with sales of INR 17.97 billion at a high growth rate of 28.4%. The sales of the first 9 places all achieved sales of above INR 10 billion. 
 

UPL said that compared with the increased sales but decreased profit of other companies, UPL not only achieved sales growth but also achieved a 10% increase of profit. The business performance in India is not so desirable due to the impact of Indian market condition, but that does not cause strong impact to the company as they are running its business worldwide. In actual fact, UPL achieved growth in all regions particularly with a significant growth of 20% in Latin America and Indian local market. UPL disclosed that its 80% sales come from their proprietary brand products. A total of 55 products were launched over 2 recent years, contributing 5% sales. UPL stated that the increased contribution to sales from newly released products reduces company’s operation risk and enhances the sustainability of the future development of the company. 
 

The No.2 ranked Bayer CropScience achieved 15.4% growth in the 2014- 15 fiscal year, having reached INR 32.7 billion. The company said that the brands such as Confidor®, Regent®, Nativo® and Fame™ show a good market performance. Furthermore the release of the new Raxil Easy has enhanced the position of Bayer CropScience in Indian seed treatment market. 
 

The performance of Indofil Industries decreased slightly by 4% with sales being INR 14 billion. BASF is another company suffering declined sales at 14.7%, saying that the main reason for the decrease lies the late monsoon rain which affected crop planting and the demand for herbicide in central India. Moreover the competition from generic fungicide caused an impact to the price of its product. In 2015 BASF’s new Agricultural Research Station in Pune was put into operation, which is expected to bring benefit to the company’s growth in the future. 
 

Coromandel International achieved 6% growth, mainly attributable to the globally growing demand for mancozeb and Brazil’s demand for chlorpyrifos. However the unfavorable exchange rate of some Latin American countries and African countries had an impact on its CIF price. Coromandel’s recent business activities include establishment of representation office in China to strengthen procurement efficiency, setup of research centre in Hyderabad India to attach importance to product development. Rallis mentioned in its performance report that during the report period the company achieved good growth both home and abroad where China business contributed 28% sales. In the domestic market, its sales network has covered 80% of India due to the effort to promote new product and to grow market. In 2014, Rallis released 4 new products in India, which are rice herbicide DUTON, insecticide HUNK, grape fungicide BLEND and rice insecticide mixture ORIGIN. The other company with sales above INR 10 billion is Bharat Rasayan, who ranked No.8. The company achieved nearly 30% growth in 2014-15, saying that the newly operational production facility in Gujarat State completed an upgrade and launched some new products, which played a key role in the increase of sales of the company. Additionally the improvement to production efficiency, control of production cost, expansion of international market and expansion of domestic sales network are conductive to the growth of the company. 
 

For Insecticides India, expansion of sales channel and release of new product were main reasons for the company’s growth, where its technical product and formulation product both increased by 56% and 4% respectively. The No.12 ranked PI Industries said that its growth was attributable to release of new product, expansion of sales channel, increase of leading product and launch of new brand for key crops, emphasizing the popularity of its new rice herbicide Nominee Gold and insecticide OSHEEN, which further strengthened the company’s position in rice market. PI believes that continued growth was a result of rich product line, it is for this reason that the company would cooperate with more innovative companies in reviewing products which fit Indian market. It is said that PI recently has signed agreements with some companies, where 10 new products are under review. Sharda Cropchem achieved 33% growth, thanks to its diversified product range and penetration into the high-end European and North American market. GSP’s growth was mainly attributable to the 43% export growth while its brand image greatly attracted domestic market. 
 

The other double-digit growth companies were the No.18 ranked Nagarjuna Agrichem and the No.19 ranked Willowood Chemicals. The extended market catchment area and the increased product range enabled Nagarjuna Agrichem to achieve a 9% growth in domestic market. The shutdown plant earlier due to fire accident was resumed bringing 60% growth of export. The sales of Willowood Chemicals reached over INR 7 billion in the 2014-15 fiscal year at a growth rate of 25.5%. Its new releases each year played a good foundation for continued growth and its market is growing rapidly in India. Up until March 2015, Willowood established more than 5,000 direct distributors in India, its product and brand image are well recognized by Indian farmers.

Future prospects in 2015-16

The consumption mode of Indian market is different from global market. From global perspective, herbicide is a main product for crop protection, followed by fungicide and insecticide. The favored weather in North America and Europe promotes the consumption of herbicide while the increased GM crop planting area restrains the use of insecticide in developed market. For India, tropic weather, high-yielding rice, cotton, sugarcane and other cereal characteristics render insecticide to be the largest consumed product for crop protection. Lower labor cost on manual weed control restrains herbicide sales as well. However due to the increase of labor cost, the use of herbicide has been increasing over recent years. The increase of rice planting area increases the use of herbicide. The rising fruit and vegetable prices are driving the sales of high-value added pesticide.  

India’s arable area is only 190 million hectares, developable land for cultivation is rather limited, and existing cultivated land is decreasing constantly. Compared with other countries, India’s land yielding efficiency is low, so is the use of pesticide. Therefore to enhance the use of pesticide can help farmers to raise the yield of crops. Government’s provision of financing to farmers will promote the development of agriculture, farmers will have more funds to purchase and use more pesticide and seed. Moreover, farmer’s knowledge of pesticide application, increase of income, development of hybridization technique, growing demand for food crops, promotion of contract farming and improvement to research capacity are all factors to drive the future agrochemical development of India.

The scarcity of monsoon rainfall, depressed crop pricing and farmer’s decreased income have affected the sales of prime Indian agrochemical companies in the first and second quarters of 2015- 16 fiscal year, therefore industry is not too optimistic about the performance of agrochemical companies and the Indian market in the 2015-16 fiscal year.