English 
搜索
Hebei Lansheng Biotech Co., Ltd. ShangHai Yuelian Biotech Co., Ltd.

Novel Coronavirus | Survey on Indian agrochemical enterprises -- Crisis & Opportunity coexistqrcode

Feb. 17, 2020

Favorites Print
Forward
Feb. 17, 2020
By Zorro
As the coronavirus concerns rise across the globe, India Inc is starting to feel the heat. China is the focal point, and the role of the Chinese economy in providing incremental growth to the world economy cannot be ruled out. Hence, any slowdown in China is likely to impact companies across the globe and India is no exception.
 
This month’s reduction in the U.S.-China trade tensions has improved the outlook for profit margins and exports at Indian manufacturers after a tepid 2019, the analysts said. India’s chemicals shipments increased at about 21% annually between 2014 and 2018 before moderating last year due to the trade war and slower economic growth, they wrote. The trade between India & China has grown to USD 87 billion in FY19, imports being the major component. It will have some positives and negatives for India in the short to medium-term.
 
Indian agrochemical companies hit by Coronavirus concerns as imports suffer
 
Coronavirus outbreak in China has hit supply chains across the world. Indian importers of raw materials too are facing problems as China factories remain shut for some time now. The Indian agrochemical sector is closely monitoring the outbreak as it imports a significant portion of its raw material from China. A prolonged trade halt will impact margins and Indian firms are hoping that the situation in the neighbouring nation improves soon.
 
We caught up with RV Bubna, CMD of Sharda Cropchem and Rajesh Aggarwal, MD of Insecticides India Ltd. to understand the impact on their business.
 
While talking about his exposure to China, Bubna said the sourcing of raw materials could be impacted if the disruption prolongs, “Our sourcing is about 97 percent from China and if the things go on like this, we will have some adverse impact. We are also very confident about the flexibility and resilience of the Chinese people and factories and the next 10 days will be crucial because some of the factories have started production today, some will start after three days, some will start after a week.”
 
Talking about coronavirus impact Rajesh Aggarwal, MD of Insecticides India Ltd. said, “The imports from China are about 25-30 percent of our total purchases so it is a big number that way. We are covered for 2-3 months, but there are a lot of things which are important. Prices which were going down for the last 3-4 months continuously have suddenly seen a surge.”
 
Some Indian agrochemical makers may gain from China virus lockdown
 
The worsening coronavirus crisis has emerged as a threat to global economic growth. But the development has also brought some relief for domestic companies who competes with finished Chinese goods. 
 
“Currently none of the Hubei industries seem to have been impacted and the intermediate prices have also not rallied,” analysts led by Mehul Thanawala wrote. Prices could start to climb if the epidemic continues to spread and restrict movement, they said.
 
Some Indian chemical stocks such as PI Industries Ltd. and UPL Ltd., have beaten the market in recent years, helped by robust growth in end-user industries and exports to China, which has closed many chemical facilities on environmental concerns.
 
PI Industries is a leading player in the agrochemicals space which is getting major benefits from falling imports from China of fertilizer and chemical products. PI Industries is ready for multi-year growth in the CSM segment because of its enhanced R&D and supply scarcity related issues in China. Recently, it has witnessed big product wins and a significant surge in the deal pipeline. The company is in the mode of capacity expansion as management sees decent growth opportunities in the future.
 
Fertilizer is the fourth largest commodity that is imported from China to India and a recent fall in import due to Coronavirus is going to help domestic fertilizer players in a big way where UPL is the leader of this segment. The fallout from China disruption due to coronavirus on the CPC industry is uncertain and is still being weighed, according to UPL. Management sees this as an opportunity to seize market share and grab the space being vacated by Chinese chemical companies. Management believes that the opportunity for UPL to emerge as an alternative supply source offsets the potential negative impact on the overall demand for CPC as a result of the problems in China.
 
More Indian agrochemical companies will be affected if the situation continues
 
According to the survey, many respondents said that the epidemic has a big impact on the business. They expressed that they would prefer to and trust the face-to-face communication with suppliers. 
 
“One of the most important exhibition CAC 2020 where we meet global customers is indefinitely postponed. All meetings were of immense importance. Global business developments are also affected. Global movements are restricted by company due to possible infections at airport/transit airports due to which sales activities affected. Visitors from any country to company/ies are restricted. Inbound visitors are requested to postpone their visits. Besides, Shipments from and to China are affected,” T P Sethu, GM of Gharda said.
 
Atul, the Managing Director of Krishi, feels there is a disruption in the market due to CoV, “If the Chinese factory do not start shipment by early March then globally there could be closures in Plant as they will be no raw materials left. As of now there will be no impact on our business but if the situation prevails for another month, then we will struggle to keep the supply chain functioning smoothly. Currently we have stopped trading and only offering products to our retail customers. Luckily it is off season in India and the demand will only come from April by which time we hope things will normalize.”
 
Dhanuka Agritech, one of India's leading agrochemical company, said they expect deadly coronavirus to impact the Kharif season if it extends beyond March. MK Dhanuka, managing director, said, “September sales were delayed because of the continuation of monsoon in October. But rabi season is good so sowing has increased by 10 percent. Therefore, we were able to get good growth in rabi season and we hope that this momentum will continue in Q4 also. So, we expect around 20 percent growth in Q4 as well.”
 
On price increase front, he said, “In this quarter, the price was reduced on a monthly basis. However, because of coronavirus in China, issues being noticed and some price increase started happening in India for the products which are coming from China.”
 
Talking about business exposure to China, Dhanuka said, “We are importing three pesticides directly from China as we need registration from the ministry of agriculture to import any chemical. But indirectly we are buying from traders and Indian manufacturers. So that exposure is quite big as China is the cheapest globally and companies who are manufacturing in India are also dependent on China for intermediates and chemical.”
 
 
As required, we will keep a close update on the Chinese situation and inform about the situation of the factories opening and the situation of supply and the price trend for all the products.
 
Source: AgroNews

0/1200

More from AgroNewsChange

Hot Topic More

Subscribe Comment

Subscribe 

Subscribe Email: *
Name:
Mobile Number:  

Comment  

0/1200

 

NEWSLETTER

Subscribe India Special Biweekly to send news related to your mailbox