Another round of consolidation likely in India agricultural inputs sector

The Indian agricultural inputs sector, which includes agrochemicals and fertilisers, is heading for a fresh round of consolidation over the next five years where more than a dozen deals could be sealed, say experts and industry players.

The key factors fuelling consolidation in the domestic market include large mergers and acquisitions in the global market, incentives by the government for larger players and prolonged unfavourable monsoon spells affecting many firms.

Companies that could see acquisitions include India's biggest private-sector phosphatic fertiliser producer Coromandel International, Nagarjuna Agrichem, Bharat Rasayan, Gujarat State Fertilizers and Chemicals, Rashtriya Chemicals and Fertilizers, Deepak Fertilizers and Petrochemicals.

However, most of these companies refused to comment officially on their acquisition plans, citing regulatory norms on such price sensitive disclosures.

Ravi Kataria, managing director of investment bank Investment Imperative Group, said India is set to see around 15 deals in the agrochemicals and fertilisers sectors over the next five years with at least two-three deals a year. “While mergers and acquisitions have been a constant in this industry, it has gained traction in the past three-four years,“ said K Ravichandran, senior vice-president, ratings agency ICRA.

India is the fourth-largest global producer of agrochemicals after the US, Japan and China.

Consolidation at the global level of Monsanto-Bayer, Dow Chemical-Du Pont and ChemChina-Syngenta, among others, is triggering a corresponding consolidation of their arms in the Indian agrochemical space.

With global acquisitions, the global agrochemical and seed industry is now being controlled by four big players, as against six earlier, commanding a market share of 55-60%, according to a Deloitte report.

“Consolidation in the fertiliser space is being caused to tap the benefits of low gas prices and other inputs provided by the Union government if a unit manufactures beyond its threshold,“ said Kataria.

This, Kataria said, would improve the growth rate of the top-10 players to 14-15% as against the normal performance of around 6% seen from 2012 to 2015, considered an industry normal period. Similarly, the growth for top five agrochemicals players will improve to 12-13% over the next five years from 8.5% seen from the 2012-2015, he said.