In an interaction with Rajesh Aggarwal, Managing Director, Insecticides (India) Limited

The company has been working on brownfield expansion for the capabilities of both technical & formulation units in Chopanki (Rajasthan) and Dahej (Gujarat) in FY22, elucidates Rajesh Aggarwal, Managing Director, Insecticides (India) Limited

What is your outlook on the Indian agrochemicals sector over the medium to long term? What demand trends do you expect to witness in H2FY23?

The agrochemicals industry in India is undergoing transformational growth at the moment. For so long, the country has played catchup to nations like the United States, Japan, and China, in terms of production. Today, that is changing because there's increasing awareness among farmers that agrochemicals are vital if we want to attain good productivity & food security now and in the future. In terms of manufacturing as well, Indian manufacturers have augmented their research & production facilities in line with the international market. As one of the premier manufacturers of crop protection and nutrition products in India, we're also playing our role to ensure that we continue to provide the right & safe solution to the farmers.  

In the medium term, Indian manufacturers are working for ‘Make in India’ and research in India, which is helping the nation with indigenous manufacturing of the products that were being imported earlier. Today, we are the fourth-largest producer of agrochemicals globally after the US, Japan & China, and increasing demand will drive further growth. Insecticides India Ltd (IIL) has partnered with different international companies like Nissan Chemical Corporation and OAT Agrio (both in Japan) to bring the latest technology to Indian farmers.  

The Indian agrochemicals market was valued at US$ 846.90 million between April 2020 and January 2021, which is expected to reach $7.4 billion by 2026, growing at a CAGR of 8.6 per cent, according to Expert Market Research (EMR). The outlook is very positive and I'm optimistic about a bullish future for the sector in the medium and long term.

In Q1FY23, Insecticides India reported healthy YoY growth in revenue from operations and profit after tax of 19.74 per cent & 9.58 per cent respectively. What are the key factors responsible for your outperformance?  

First of all, I must give kudos to the team for their untiring dedication to serve the farmers and I believe that if we are able to make a difference to the farmers, our numbers will also follow. Specifically, this fiscal growth is mostly credited to significant growth in the B2B segment (institutional sales). This is as a result of adding co-partners for our new products in the B2B channel. Institutional sales have grown over 30 per cent for Q1FY23 compared to Q1 FY22. I must also add that traction in the demand for 'Focus Maharatna Range' consisting of 11 premium range and superior-margin products is another factor.

We've also seen tremendous acceptance of new products, such as Hachiman and Shinwa, launched in the prior fiscal year FY22 along with growth in sales has given us the first-mover advantage. These new products contributed approximately 12.21 per cent of all revenues recorded in the first quarter of FY23. We've also seen significant performance in the herbicides segment for Q1FY23, recording a growth of 44 per cent over Q1FY22. Our new product Torry has also received an overwhelming response from the market.  

Can you throw some colour on the new generation products that you recently launched as well as the patents you’ve been granted in H1FY22?

We launched three new generation products in Q1FY23 namely, Torry, a herbicide for weed control in maize crops; Sargent Xpress for control of stem borer and leaf folder in crops like paddy, and Himax, which is a non-selective weedicide. These are some of the ways through which, we're trying to bring the latest technology solutions to the farmers. We received a few patents as well in the first quarter of 2023.

Can you shed some light on your ongoing as well as future Capex plans? Also, has backward integration started to reap benefits?

We're embarking on a number of expansion projects in the areas of the capital and human resource expenditure. Our focus is to build capacity. The company has been working on brownfield expansion for the capabilities of both technical & formulation units in Chopanki (Rajasthan) and Dahej (Gujarat) in FY22. There is a marginal increase in Capex budget on account of inflationary costs and non-budgeted incidental expenditures. We have already incurred a total expenditure of Rs 1,132 million at the end of FY22. 

The new technical synthesis facility under expansion at Dahej in Gujarat is expected to commence operations by Q2 of 2023. The plan is to manufacture new technical and intermediates with this capacity expansion that will be used for captive consumption, going forward. Our backward integration plan is also streamlined.  

What is your earnings outlook for the upcoming few quarters?

We expect double-digit revenue growth in FY23. This is going to be driven mainly by expansion activities that we have carried out in our facilities, the addition of new generation products along with registering a significant number of products in the current fiscal year. These new generation products will not only help in top-line growth for IIL but also, in margin accretion, which is expected to increase by 100 basis points from 11.28 per cent in FY22.