Top 20 Indian Agrochemical Companies in FY2022-23: Braving Global Headwinds with Resilience and Growth

The Indian economy showed resilience in 2022-23 amidst global headwinds. GDP growth is estimated at 7.2% in FY 2022-23, driven by strong domestic consumption and investment. The services sector witnessed robust growth, especially in trade, transportation, communication and broadcasting. However, inflation remained a concern and the Reserve Bank of India (RBI) revised the key policy rates northwards in a bid to contain it. 

In 2022-23, India's agriculture sector demonstrated resilience and growth for the fourth consecutive year. Total foodgrain production reached 330.53 million tonnes, a 4.7% increase over 2021-22, largely driven by a 9.5% expansion in rabi crop output. The sector's gross value added grew 3.3%. 

Key factors driving growth were favorable rainfall, government support through initiatives like the ″Digital Agriculture Mission″, and strong global demand which boosted agricultural exports past US$50 billion. However, long-standing challenges remain including low yields, inadequate irrigation and farm mechanization infrastructure, and limited adoption of modern agronomy. Sustainability efforts are increasing but agriculture remains a major GHG emitter.

For 2023-24, India is projected to be the fastest growing major economy. Growth is estimated at 6.6-6.9% by the World Bank and RBI. This outlook is supported by high services exports, lower oil prices, and moderation in import-intensive consumption. Easing global inflation and government measures will aid growth. Upside risks include extreme weather events and global commodity price volatility. The focus on digital infrastructure and reforms in banking, agriculture, and manufacturing will attract investment. Initiatives like production-linked incentives and increased infra spending will boost manufacturing and sustain long-term growth. Emphasis on foodgrain production, agri-exports and rural economy will support the agricultural sector.

Global Crop Protection Market

In 2022, the global crop protection market experienced robust growth of around 10%, reaching US$79 billion in value. Key drivers included increased product prices, favorable weather conditions in some regions, and growing demand from expanding crop acreages.

Although growth was solid, the industry faced challenges like currency weakness against the US dollar, high input costs for farmers, and foreign exchange shortages limiting agricultural chemical imports in some Asian and African countries. Overall, agrochemical companies benefited from high commodity prices and strong demand, but higher costs and unstable macroeconomic conditions posed risks. The market is projected to see more muted growth in 2023 as prices normalize.

India's Scenario

India ranks fourth in the world in the crop protection market after United States, Japan, and China. India’s agrochemicals market reached an estimated value of US$7.2 billion in FY2022-23. The crop protection market is expected to grow over a CAGR of 3.0% during the forecast period of FY2023-28. 

Key growth drivers are increasing food demand from a rising population, improving crop yields and quality, adopting modern agriculture practices, pest attacks causing 15-20% yield losses, and low per capita consumption versus other countries. Insecticides dominate with a 50% market share, followed by herbicides and fungicides. Paddy, cotton, maize and fruits/vegetables are major agrochemical consuming crops. Maharashtra and Southern states represent 70% of the market. 

Exports grew rapidly in 2022, benefitting from supply chain disruptions in China. India gained global market share as patents expired and global players adopted a "China plus one" strategy. The domestic crop protection industry experienced a year-on-year growth of approximately 9-10%. This growth was supported by an expected rise in per hectare expenditure, driven by an increase in crop protection prices and the expansion of acreages under key crops. Farmers' preference for high-end chemistries also contributed to this growth. The price rise of formulations, averaging around 7-8%, and the introduction of new products in the last two years played a significant role in driving the industry forward. However, volume growth was limited due to factors such as skipped sprays in cotton caused by erratic monsoons and lower infestation of pests like brown planthoppers in crops such as paddy. Profitability challenges emerged from high-cost inventory liquidation and pricing pressure from Chinese generics influx.  

Long term, the industry is projected to grow steadily due to government support for agriculture, increasing crop prices and farm incomes, new product development, and climate change driving pest threats. However, growth faces headwinds like poor weather, lower priced imports, stringent regulations and growing popularity of organic products. Sustainability efforts are increasing such as promoting biopesticides, while tackling counterfeit products and knowledge gaps. Overall, India holds significant potential, but needs strategic efforts by industry and government to tap it fully.

Performance of Indian Agrochemical Companies in FY2022-23

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The Indian agrochemical industry witnessed a reasonably good performance in financial year 2022-23, with most companies reporting revenue growth compared to previous year. Key factors driving growth include normal monsoon, increased acreage, high commodity prices, new product launches, and growth in exports. However, high input costs, forex fluctuations, impairment charges and inventory provisions impacted profitability for some players.

After years of precipitation, the top 20 agrochemical companies in India have been able to maintain stable development, so the ranking on the list will only change slightly according to the performance of the year. From the 2022-23 list, there are a total of fourteen companies with sales above ₹ 2,000 crore, and a total of six companies with sales between ₹ 1,000 and 2,000 crore.

Overall, the growth momentum of these companies in FY2022-23 was not as strong as the previous year. Their performance has inevitably been affected by various challenges from around the world, including broad-based inflation, supply chain disruptions, rising energy prices, and the war between Russia and Ukraine, which slowed down the pace of global recovery. 

In terms of individual companies, UPL still leads the list by an order of magnitude. UPL reported 15.3% increase in consolidated revenue to ₹ 47,228 crore. They closed the year with double-digit growth in EBITDA. Domestic revenue grew 15% while exports grew across regions like Latin America, Europe and North America. UPL mentioned that they generated significantly higher cash flows during the year, enabling them to reduce gross debt by over US$ 600 million.

In addition to UPL, 15 companies registered sales growth in rupee terms, of which 12 achieved double-digit growth. PI Industries, NACL Industries, Best Agrolife and Atul Ltd have seen annual growth rates of more than 20%. The reasons for the decline in the growth rate and even the negative growth rate are no different from those mentioned above. It is worth exploring how these companies that achieved more than 20% growth held up in this year's headwinds.

PI Industries' crop protection business achieved 23.2% growth in FY 2022-23, with revenue reaching ₹ 5,254.2 cores. The company (including all business sectors) registered a 46% year-on-year growth in profit after tax. 

The annual financial performance has exceeded the company’s updated projections. PI Industries registered 26% growth from exports due to an increased uptake on existing products and the introduction of 4 new products. It also saw 12% growth in the domestic segment. The newly launched brands have gained good traction and acceptance.

The company said its strong performance has been the result of its focus on a growth strategy that is based on building a strong customer value chain driven by digitization and strategic tie-ups, focus on intellectual property to drive differentiation in the marketplace along with organic expansion and inorganic growth opportunities.

The company specifically mentioned in its annual report that they achieved a significant milestone by becoming a debt-free Company, with zero debt capital compared to ₹ 2,678 million in the previous year, resulting in a Debt-to-Equity ratio of Nil, down from 0.04 in FY2021-22. 

NACL Industries registered the highest-ever turnover of ₹ 2,116 crore in FY2022-23, with a 29% growth year-on-year. The Company earned a profit after tax of ₹ 94.87 crore, an increase of 29%. The growth in revenue can largely be attributed to Exports and Domestic Retail sales, which grew by 41% and 27% respectively over the preceding financial year. Retail business of the company has been growing at a CAGR of 61% for last 3 years while industry is growing at 5 to 7% by leveraging its brand equity supported by large field force and distribution network spread across India.

For the international business, it has taken steps to diversify its presence across channels as well as strengthen its formulation product portfolio. The business initiated more than 60 registrations in almost 15 countries in the financial year for its existing product range as well as new formulations.

The company mentioned in its annual report that its Srikakulam technical plant has witnessed a record annual production of 10,290 MT, and the company commenced in the second half of FY2023 its new manufacturing site in Dahej to make active ingredients as well as Intermediates for domestic and overseas markets.

The fiscal year 2023 marked a remarkable growth and achievement for Best Agrolife. Owing to forward-thinking inventory management prior to kharif season, Best Agrolife delivered robust early quarter performance despite unpredictable monsoons and market surplus testing industry resilience and competitiveness. With a striking 44% uptick in turnover, reaching ₹ 1,746 crore, Best Agrolife exceeded internal forecasts in FY23. An 89% EBITDA boost and 83% PAT increase to ₹ 192 crore distinguished company financials. 

The strategic shift from generics to branded solutions facilitated innovative product introductions like the new fungicide, Tricolor. Looking ahead, Best Agrolife aims for specialty molecule leadership via exclusive patented compounds by FY25. Commitments to backward integration, expanded manufacturing capacity to further boost proprietary molecules and eco-conscious solutions remain steadfast.

The company disclosed that it has allocated ₹ 200 crore for capacity enhancement and backward integration, with a targeted completion timeline of FY24 and FY25. This investment underscores the company's commitment to expanding its capabilities and ensuring sustained success.

Outlook

According to the analysis of the companies in their financial reports, the outlook for the industry in FY2023-24 remains positive driven by prediction of normal monsoon, increased pest incidence, government support for agriculture, and strong export demand. Companies aim to drive growth through new product launches, increased registrations, geographic expansion, digitization, and sustainability initiatives. Erratic weather patterns, inflationary pressures, and currency fluctuations in export markets will still be the key challenges for them to achieve their goals. However, Indian agrochemical companies are focused on innovation, cost optimization and strategic investments to deliver profitable growth.

This article was initially published in AgroPages' '2023 India Focus' magazine.

If you would like to share your company's story. Please contact Christina Xie at christina@agropages.com