Rainbow Agro to spend RMB2.68 billion on clethodim, 2,4-D and flumioxazin productions

On January 31, 2023, Rainbow published a feasibility study for a fundraising program in 2023.

To meet its business development needs and further enhance its capital strength and profitability, Rainbow is planning to raise funds through the targeted issue of shares for a total amount of more than RMB 2.547 billion, inclusive of principal amount. After deducting related expenses, the raised funds will be spent on a new pesticide technical project, which will include an annual 8,000-ton clethodim plant, upgrading the company’s digital management and replenishing working capital.

Table 1:   Rainbow’s Proposed Spending after Fundraising 

Rainbow plans to focus using the funds raised on producing pesticide technicals, which are selected and allocated according to industry development trends, market demand, the company’s own technical reserves and future development planning requirements. After the implementation of the fundraising program, the company will possess a more diverse pesticide technical portfolio, a more stable supply capacity, an optimized product structure and an enhanced capacity to take on more purchase orders, enabling it fulfill the diverse needs of customers, promote market development, fully utilize its global marketing network through a ″fast market entry″ feature and the advantages of independent overseas product registration. Therefore, the fundraising program is expected to expand the company’s market share and increase its profitability. 

Through the implementation of the fundraising program, Rainbow will achieve the production of an additional 70,000 tons of pesticide technical, with the production capacity of 2,4-D and clethodim increasing substantially. 

The two new products covered by the fundraising program, 1,000 tons of flumioxazin and 1,000 tons of clopyralid annually, will be produced based on a modified but well-proven technical process, while for its 8,000-ton clethodim and 60,000-ton 2,4-D and 2,4-D isooctyl ester productions, the company will adopt an advanced process based on the technical achievements and practical experiences it has gained from the operations in recent years using green continuous techniques. 

Through the implementation of the fundraising program, the company’s technical achievements in the green production processes for clethodim and the 2,4-D can be applied to achieve the dual advantages of high technical standards and production volume, with the aim of supplanting outdated capacity through the adoption of advanced processes to achieve the cost and quality objectives, therefore, strengthening the company’s stature in the relevant industry sector.

(1) Annual 8,000-ton clethodim production 

The company plans to spend a total of RMB798.0479 million on the product, which includes RMB733.6948 million from the fundraising, covering production equipment and related supporting facilities, to create an annual production capacity of 8,000 tons of clethodim technical.

The project will be implemented by Ningxia Hanrun, a wholly-owned subsidiary of the fundraiser located in the existing plant area of Ningxia Hanrun. The construction is scheduled to last for two years, with 50% being spent in the first year and other 50% on the second year of the construction period.

The project filing procedure has already been completed (project code: 2208-640912-07-01-186293), and its EIA is in progress.

The project’s static payback period, including construction period after tax, is 7.14 years, at internal rate of return after tax of 16.16%, reflecting its economic advantages.

(2) Annual 60,000-ton 2,4-D technical and 2,4-D isooctyl ester production via green process 

The company plans to spend RMB762.3671 million on the product, which includes RMB721.8062 million from the fundraising, covering production equipment and related supporting facilities, to create an annual production capacity of 40,000 tons of 2,4-D technical and 20,000 tons of 2,4-D isooctyl ester.

The project will be implemented by Ningxia Hanrun, a wholly-owned subsidiary of the fundraiser located in the existing plant area of Ningxia Hanrun. The construction is scheduled to be completed in one year, and 100% of the allocated amount will be spent during that construction period.

The project filing procedure is completed already (project code: 2212-640912-89-05-515303); EIA is in progress.

The static payback period, including construction period after tax, of the project is 6.28 years, at internal rate of return after tax of 17.56%, highlighting its economic benefits.

(3) Annual 1,000-ton clopyralid production 

The company plans to spend a total of RMB182.8156 million on the product, including RMB172.3516 million from the fundraiser, covering production equipment and related supporting facilities, to create an annual production capacity of 1,000 tons of clopyralid technical. 

The project will be implemented by Ningxia Hanrun, a wholly-owned subsidiary of the fundraiser and located in the existing plant area of Ningxia Hanrun. The construction is scheduled to be completed in one year, and 100% of the allocated amount will be spent during the construction period.

The project filing procedure has been completed (project code: 2212-640912-89-05-623246), while the EIA is in progress.

The project’s static payback period, including construction period after tax, is 5.98 years at internal rate of return after tax of 17.50%, revealing its economic advantages.

(4) Annual 1,000-ton flumioxazin production 

The company plans to spend RMB260.1091 million on the product, including RMB245.4705 million from the fundraiser, covering production equipment and related supporting facilities, to create an annual production capacity of 1,000 tons of flumioxazin technical. 

The project will be implemented by Ningxia Gerui, a 92.06% share-controlled subsidiary of the fundraiser, and will be located in the existing plant area of Ningxia Gerui. Construction is scheduled for one and a half years, with amount of 50% being spent in the first year and 50% in the second year of the construction period. 

The project filing procedure has been completed (project code: 2211-640912-07-01-718863), and the EIA is in progress.

The project’s static payback period, including construction period after tax, is 6.34 years at internal rate of return after tax of 18.42%, affirming its economic benefits.

The pesticide technicals covered by Rainbow’s fundraising program are all important and come in many varieties at scale, being key to the expansion of various markets around the world, as determined by the company based on its medium-term strategic plan. These products have good future prospects with sufficient market demand, enabling the company to fully make utilize its production capacity and facilitate the implementation of the fundraising program. 

In 2020, the global clethodim market was valued at some $380 million, with a compound growth rate of 9.95% from 2016 to 2020. Global clethodim market sales have been growing constantly, gradually becoming one of the major dry land herbicides, due to its low toxicity, high efficiency, low residue and good safety.

Used in wheat, corn, rice and other cereal crops for control of farmland weeds, 2,4-D is the earliest phenoxy carboxylic acid herbicide and the largest variety of the kind. According to data from AgroPages, the value of the global 2,4-D market in 2020 was about $910 million, with a compound growth rate of 11.68% from 2016 to 2020.

Clopyralid is widely used in mixing with other herbicides, especially phenoxy, acetanilide, imidazolinone and pyridines. Due to the successful development of its mixture products used in corn and other crops, sales of clopyralid have shown steady growth. Its market value has exceeded $200 million in recent years.

Flumioxazin is the number one product in the category of ″other PPO inhibiting herbicides,″ and its market value in 2019 was $402 million, being one of the top 20 global herbicides.