Global investors, agrochemical giants eye Indian business

Several global investors and agrochemical giants, including certain domestic groups, are actively scouting for highly attractive Indian agrochemicals firms, enthused by the bright prospects for the sector on the back of high consumption of agrochemicals in the Indian subcontinent. 

 

Industry representatives and analysts said the global investors, especially the Japanese, of late, favour India and Latin America as the two bright spots on the global agrochemicals map. Some domestic players with deep pockets were also increasingly looking at opportunities to grow through acquisitions and mergers, they point out. 

 

Close on the heels of Tokyo-based Sumitomo Chemicals acquiring the Mumbai-based Excel Crop Care last month, enquiries for prospective sellers have increased in the recent past. Last year, Bayer Crop Science had acquired Hyderabad-based Seed Works India. Indian companies like Insecticides India are looking at acquisitions. 

 

"Several global players are exploring opportunities in the Indian market and some of them include Monsanto Growth Ventures, Syngenta Ventures, BASF Venture Capital and DuPont Ventures, among others," a senior executive of a global consultancy firm told ET, seeking anonymity since some of them were among his clients. "Adama Global and Bayer Crop Science are also looking at investments." 

 

The same executive said most of the top agrochemical companies already have presence in India in the form of joint ventures but a majority of them are now exploring options for an independent foray through acquisitions. 

 

"A higher number of agrochemical products will get off-patented this fiscal and come into the market than five years ago, opening up a big market. Also, low production cost, high consumption, clarity over IPR (Intellectual Property Rights) protection and higher profitability in the Indian agrochemical industry makes it a good bet for foreign companies," said Aditya Jhawar, agri analyst with Investec Capital Services India.

 

"The agrochemical industry is expected to witness a lot of mergers and acquisitions in the coming months, especially by Japanese companies with improving market sentiments," said Nagarjuna Agrichem's Managing Director Vijay Shankar. 

 

MNCs are looking at acquiring mid-sized companies in the range of `4001,000 crore said a Mumbai-based analyst, requesting not to be named as he was not authorised to speak to the media. "These agrochemical giants generally have a 10-15 year period view and with the expectations of the industry clocking 10-15 per cent CAGR (compounded annual growth rate) in the coming months, the foreign giants are upbeat on the Indian market," he said. The Industry currently is growing at 8-10 per cent annually. 

 

Shashank Kanodia, analyst with ICICI Securities, saw the prospects of higher profit margins attracting global firms to actively look at opportunities. "Earlier, agrochemical giants used to tie up with local firms for distribution of their products, which led to lesser margins. However, with these MNCs planning to hit the market directly, their margins may rise up to 25 per cent."