India agrochem companies hope for higher growth in Q3

Agrochemical firms hope for a better performance in the third quarter of this financial year than in the previous two quarters due to good rainfall ahead of the rabi season and a significant improvement in overall crop acreage across the country.

Introduction of new products by agrochemical companies is expected to further boost sales, said industry executives and sectoral experts. The previous two quarters were marred by destocking due to the goods and services tax (GST) and uneven rainfall in many parts of the country.

Ratings agency Icra has said that major agrochemical companies are expected to report 11-12% year-on year revenue growth for the October-December period, after a growth of 1.1% and 7.4% in the first and second quarters, respectively. 

"Weak growth in the first quarter of 2017-18 was on account of channel destocking undertaken due to impending implementation of GST," said K Ravichandran, senior VP, Icra. "While growth was seen in Q2 due to a healthy offtake by farmers during the kharif season, it also witnessed an uneven distribution of rainfall and a marginal decline in sowing."



The domestic market, which witnesses 40-45% of its sales in the rabi season, accounts for half of India's $4.2-billion agrochemical industry. 

Q2 of the current fiscal was hit for about 15 days by GST and absence of rains in October, and hence, growth was nominal, said Rajesh Aggarwal, MD, Insecticides India. 

However, Aggarwal said that late rains in September helped both kharif and rabi crops as reservoirs received waters and the southern markets saw a revival in sowing and subsequently sales. Hence, a better performance is expected in the third quarter, he said, adding that rampant pest attacks in a few regions too helped push sales of pesticides. 

According to HDFC Securities, rabi sowing reached 94% of the total arable land of approximately 63 million hectares as on January 5, led by rice and pulses, which saw an increase of 46.1% and 7.6%, respectively. Besides, states like Tamil Nadu and Karnataka, which have been under drought-like conditions for the past few years, are expected to have performed better this time.

India's crop protection industry is expected to grow at a CAGR of 12% to reach $7.5 billion by 2018-19 from $4.25 billion in 2013-14 said a report by industry body Ficci and Tata Strategic Management Group.