Top 20 Indian Agrochemical Companies in FY 2020-21: Adapting To the ‘New Normal’ with Consistent Focus on Product Supply, Cash Position, Optimal Capex

Financial Year 2020 began with a significant slowdown in demand in most of the economies of the World. The previous two financial years were affected and influenced by several events ranging from the after-effects of deteriorating United States-China trade relationships, uncertainties around the United States (US) Presidential elections, volatile crude prices, the closure of the Brexit deal and so on. But far above these disruptions, the outbreak of the global COVID-19 pandemic was more catastrophic, leading to severe contractions across economies. The world GDP fell by an estimated 3.3% in 2020 – the sharpest contraction of global output since the Great Depression. (Source: World Economic Outlook, April 2021).

The Indian economy was no different. However, it is now undergoing a V-shaped recovery, showing strong signs of revival. The positive economic symptoms are underpinned by the rollout of vaccines, increase in mobility, privatization and the government's strong financial impetus. There is, however, uncertainty about the nature of the ongoing recovery, but with strong prospects of growth in consumption and investments, the GDP is estimated to grow at 11% in FY 2021-22. Further, waves of the virus could, however, affect the economy and make the overall outlook uncertain.

Highlights of the List in FY 2020-21

(Click to enlarge the image)

Adapting to ‘New Normal’, Focus on Core Strengths

No discussion is complete these days without touching upon the ‘new normal’. Last year was enormously challenging – for the world and the agrochemical companies in India. Yet many teams operated safely and reliably by constantly focusing on their core strengths, innovating and transforming, and adapting to the constantly changing situation as best they could.

• UPL Limited: UPL’s achievement last year is a credit to everyone in the company. Most Latin American countries delivered close to double digit growth compared to last year. South-East Asia market also saw double-digit growth, supported by the continued expansion of Glufosinate solutions. There was also an accelerated growth in China, driven by volume gains in UPL’s branded sales and Yoloo acquisition. Besides, UPL’s collaboration with FMC provided the company access to commercialized Chlorantraniliprole insecticide in key markets before the patent’s expiration. UPL’s deal with Meiji will give the company access to Fluprazine which was discovered by Meiji and is a patented insecticide. With these agreements, UPL will now have a complete portfolio for rice in Asia and India.

• Meghmani Organics Limited (MOL): MOL continued to deliver modest results despite lockdowns and curfew scenarios during the pandemic. The company’s capacity utilization during the challenging times stood at ~76% for the agrochemical division. Export business continued to contribute 79% of its total sales turnover. During the year MOL was accorded with “Four Star Export House” status along with excelling its ranking in Fortune 500 Companies. MOL has recently started a subsidiary in Brazil and has already received several registrations. It is currently in the process of filing more registrations and increasing its product portfolio. 

• Rallis India Limited: Rallis deployed several market-conducive strategies to expand the domestic and exports businesses. The company recorded 10% growth in the domestic business; 3% growth in exports including contract manufacturing, with significant growth recorded in North America, Europe and Latin America, particularly the US and Brazil. The company received nine new registrations in strategic overseas markets. To expand the product and customer portfolio in off-patent and contract manufacturing, Rallis is adding two new manufacturing plants at Dahej in Gujarat State – for formulations and a multi-purpose plant for AIs and intermediates, to strengthen its capabilities across multiple business segments. Incrementally, Rallis plans to launch two new products each year to support domestic business growth. 

• Sharda Cropchem Limited: Sharda, an intellectual property-driven company engaged in marketing and distribution of wide range of formulations and generic active ingredients, has procured 2,570 registrations - 2,292 registrations are formulations and 278 registrations are AIs. Additionally, the company has filed 1,026 applications for registrations globally pending at different stages. Sharda efficiently channelizes its time and resources for strengthening its core competency of identifying generic molecules and registration opportunities which offers scalable growth with limited capital requirements. The highly flexible operating model results in overall cost competitiveness; efficient management of fluctuating market demand across various geographies, and offering a wide range of formulations and AIs.

Recorded 20%+ Growth against Adversity, Seizing Now-or-Never Opportunities

Despite the challenges posed by the pandemic, many agrochemical companies in India ran the business at optimal levels and delivered more than 20% growth during this fiscal year. They have envisaged favorable business conditions and market dynamics for agrochemicals and have been working on various projects to seize the golden now-or-never opportunities. 

• Coromandel International Limited: The Crop Protection business of Coromandel witnessed a strong turnaround this year, growing by 24% over last year. As far as the domestic formulation sales are concerned, 25% of the sale is from the collaboration with global agrochemical companies for the new products and co-marketing products. The business has received registration of 10 plus molecules during the year for the domestic market and has got more than 50 registrations for the international markets. On the manufacturing front, the business improved the overall capacity utilization. Coromandel has also obtained approval for selling Mancozeb WDG for the markets. Overall, the profitability of the business has improved due to a better product mix, coupled with efficiencies in sourcing and manufacturing. 

• Best Agro Group: With 22% growth in revenue, FY 2020-21 was a significant year for the company. The company took progressive steps towards upgrading the portfolio from old generics to patented combinations and recently off-patented molecules. In 2020, the company became the first Indian organization to manufacture Dinotefuran 20% SG, a super systematic insecticide that controls a broad spectrum of previous and invasive pests. Besides, Best Agro is preparing to increase its formulation plant capacity to 50,000 MTPA. Considering its international footprints, Best Agro is actively exploring various markets such as Africa, Asia, South East Asia and the Asia Pacific, European Union (EU) and the US and plans to own subsidiary companies in the Africa, EU, and the US markets. 

• Dhanuka Agritech Limited: Dhanuka's strength lies in manufacturing formulations. Insecticides contribute a significant portion of the overall revenues and the company aims to ramp up its presence in the fast-growing herbicides segment. The company's pan India distribution network consists of nearly 6,000 distributors and 80,000 retailers, enabling it to have a presence across 10 million farmers’ touchpoints. Over the years, the company has built strong strategic partnerships with leading global innovators. The company's collaboration with MNCs such as Corteva, FMC, Oro Agri of USA; Arysta, Hokko Chemical, Mitsui Chemicals, Nissan Chemical, Nippon Soda and OAT Agrio of Japan has provided it access to the latest technologies which the company has effectively implemented in the domestic market. 

• Heranba Industries Limited: With listing on the stock exchanges this year, a wide range of opportunities have opened up for Heranba to explore. The priority will be to focus on product registrations in foreign markets to enhance the export of the TCs and formulations. Heranba is looking to register the products in the regulated markets of Europe, the US and Latin America. Heranba also sees good potential in the existing markets. As of FY2021, the company has a presence and is focused on growing its footprint in the Middle East, Commonwealth of Independent States, Asia, Southeast Asia and Africa. With these focus areas, the company is confident of entering the regulated markets and other untapped geographies in export markets.

Backwards Integration, Draw Strengths Upstream

To significantly reduce the dependence on China for raw materials, more and more Indian companies have decided to focus on integrating the industries’ chain backwards and draw the strengths upstream. Indian chemical firms, which were eyeing the key TCs and intermediates business upstream for the past few years, received a boost from the pandemic and the focus on localizing supply chains. 

• Meghmani Organics Limited to venture into contract manufacturing: In 2020, MOL had successfully commissioned a 2,4-D plant at Gujarat Industrial Development Corporation in Dahej doubling the capacity to 21,600 MTPA and its formulation unit expanded to add more capacities to manufacture EC, SC, WDG, SL etc both based out of Gujarat, India’s prime chemical belt with proximity to key ports. MOL is also in the process of setting up a new multipurpose agrochemical manufacturing plant which is at an advanced stage of construction currently at Dahej. This plant will be used exclusively to manufacture new chemistries with full backward integration and is expected to go into manufacturing by end of 2021. MOL is further planning to venture into contract manufacturing in 2022 with an initial investment of US$20 to 25 million for various products in Dahej. It is already under discussion with several companies to chalk out its plans to begin on a new note soon.

• Best Crop Science LLP becomes first agrochemical company in India to manufacture Trifloxystrobin TC: Best Crop Science LLP will be soon acquired by Best Agrolife Ltd. Best Agro is heavily investing in backward integration of leading ingredients such as Pymetrozine, Pyraclostrobin, Dinotefuran. Besides, Best Agro has recently announced that the Central Insecticide Board and Registration Committee has granted it registration for the indigenous manufacturing of Trifloxystrobin TC u/s 9(3) which earlier was being imported from China. With this new addition, Best Agro will become the first agrochemical industry to manufacture and market Trifloxystrobin in India. Trifloxystrobin is India’s No. 1 fungicide in demand. Trifloxystrobin, being a top molecule has enormous demand in the domestic and global markets of North America, Europe, the Asia-Pacific, South America, the Middle East, and Africa. The estimated Trifloxystrobin market size of India is close to INR 400 crores. With a positive outlook, Trifloxystrobin as part of the new product portfolio will open a new window of opportunity to explore larger markets to Best Agro Group. 

• Insecticides India Ltd. to manufacture two important insecticides intermediates in India: IIL is endeavoring to reduce its dependence on China. In this regard, it has decided to create chief intermediates of Lambda-cyhalothrin and Thiamethoxam in India. As per a statement by the Managing Director of IIL, Rajesh Aggarwal, “At present, we are importing about 30 to 35% of the raw material from China. We are planning to produce it locally. When we set up our plant for the intermediates by the end of this calendar year, we would be able to reduce their imports by 7 to 8%.”

• Indofil Industries Ltd. has successfully undertaken backward integration of key AIs and intermediates: Indofil continued to strengthen its manufacturing capacities through a stronger backward integration model. The company has successfully undertaken backward integration of key products like Metalaxyl (MPX and MAC intermediates) and Cymoxanil (2-CEU intermediate). This has reduced the dependence on the raw material requirements from the overseas markets, while also improving the quality control processes, margins and ensuring faster time-to-market.

Overview of Indian Agrochemical Industry

India is the world's fourth largest producer of agrochemicals after United States, Japan and China and has emerged as the 13th largest exporter of pesticides globally.

The Indian agrochemicals industry was valued at around INR 44,000 crore in FY21 out of which domestic consumption was worth around INR 21,000 crore, while exports during the same period were worth around INR 23,000 crore. The industry is expected to grow at a CAGR of 8 to 10% by 2025 and will be driven by several growth levers such as increasing population, decreasing arable land, increasing demand for high-value agricultural products and increasing efforts from the industry and the Government to promote awareness and technology penetration. (Source: Ministry of Agriculture & Farmers Welfare, GOI and FICCI)

Industry Turnaround: 

• Industry is increasingly focusing on digitization to drive better analytics, decision-making and traceability across the value chain. Digital tools such as farmer apps and dealer management systems are helping companies in undertaking tailor-made approaches for different market segments. The COVID-19 outbreak has further pushed an already growing trend of technology and internet usage in rural areas, thus creating a favorable digital environment.

• On the regulatory front, the industry has witnessed some emerging trends such as aerial spraying of agrochemicals being allowed on an interim basis for locust control and a proposed ban on 27 agrochemical molecules, amongst several others. 

• Some of the evolving go-to-market models are being considered and adopted by the industry. These include direct selling to Farmer Producer Organizations as alternatives to traditional.

Industry Dependency on Imports：

The Indian agrochemical industry is highly reliant on the import of raw materials and technical intermediates. In FY20, China alone contributed to around 50% of India’s total pesticide imports (valued at INR 9,096 crore).

From the perspective of the industrial chain, although the Indian chemical industry has bright prospects for growth, India relied heavily on China for pesticide supplies in the past seven years. India's overall chemical infrastructure is still relatively underdeveloped, and its access to key intermediates and raw materials is limited. It is high time the entire Indian agro-industry strengthens itself by building trust, communicating better from top to bottom, and becoming more collaborative and less transactional oriented. The Indian chemical industry needs to be upgraded to create opportunities for cooperation between China and India. And the time has come for India to think beyond. 

Prospect

In the face of the COVID-19 outbreak, many agrochemical companies in India showed tremendous agility and nimbleness and managed to contain opportunity losses on account of lockdown and global impairment in supply chains to a very minimal level. But that alone is far from enough. The companies with internal operations(scale) would need to redraw their global manufacturing and sourcing map to split the risk across more countries/regions. Accelerating as the supply challenges, global and domestic demand day by day, only those enterprises that adapt to the ‘new normal’ with a consistent focus on product supply, cash position, optimal Capex could survive and thrive in the long run. 

Any comment to this article, please contact Christina Xie at christina@agropages.com

This article was initially published in AgroPages' '2021 India Pesticide Suppliers Guide' magazine.