Investing for the Future - India's Agrochemical Companies Scale Up

Date:11-16-2023

Over the past decade, India's chemical industry has consistently outperformed global chemical companies in terms of returns to shareholders. The industry has grown at a robust 15% CAGR between 2006-2019, primarily driven by rising revenues. In recent years, margin expansion and valuation multiples have further boosted growth. India's chemical industry is well positioned to capitalize on the country's long-term economic growth story, supported by rising domestic demand and India's attractiveness as a low-cost manufacturing hub. The industry is expected to grow at 11-12% CAGR during 2021-2027. Exports of chemicals from India are also rising rapidly, having grown at 11% CAGR between 2014-2018 compared to just 0.4% growth in total exports. However, challenges remain around feedstock availability, infrastructure constraints, high energy costs and availability of skilled talent ^[1].

India is the fourth largest producer of agrochemicals globally, accounting for around 13-15% of the global market. The agrochemical market in India is estimated at INR 765 billion (USD 10.3 billion) in FY2023 ^[2]. Agrochemical exports exceeded USD 5.5 billion in FY2022. The Indian agrochemical industry fetches valuable trade surplus every year. The trade surplus sharply increased from Rs. 8,030 crores in 2017-18 to Rs. 28,908 crores in the last fiscal ^[3].

The agrochemical sector has witnessed significant investments and expansion activity by Indian companies over the past 2 years. Most leading agrochemical players have announced new projects and capacity expansions.

Frequent Investments by Leading Players

The frequent investments by leading Indian agrochemical companies showcase certain common themes - setting up new formulation and technical manufacturing plants, acquisitions to enter new chemistries and geographies, and investments in R&D infrastructure. 

Many companies are adding formulation and technical manufacturing capacities across existing and new sites to meet growing domestic and export demand.

Dhanuka Agritech Ltd. Announced in August 2023 the commencement of trial production at its new plant in Dahej, Gujarat. Dhanuka Agritech’s Dahej plant is a technical manufacturing plant that will provide raw material security and the benefit of backward integration in the form of lower raw material costs. The company has spent more than Rs 300 crore over a period of two years to set up the unit.

With a total investment commitment of INR 600 crores, Gharda Chemicals Limited is set to establish a cutting edge manufacturing facility at Industrial Park project PIP (Payal Industrial Park) in Dahej, Gujarat. The upcoming chemical manufacturing facility at PIP will specialise in the production of API and agrochemicals-based formulations, further reinforcing Gharda Chemicals Limited’s commitment to delivering high quality chemical products.

Insecticides (India) Limited has acquired the industrial site spanning approximately 58,000 square meters, located within the Industrial Area of Sotanala, Alwar, Rajasthan, aiming at establishing a state-of-the-art manufacturing facility for the Company.

India Pesticides Ltd. is setting up an agrochemicals, active pharmaceutical ingredients and intermediates, and fine chemicals manufacturing unit at Sumerpur in Uttar Pradesh's Hamirpur district. With the new plant, total capacity of India Pesticides will increase to57,500 tonnes per annum from 23,500 tonnes per annum over the next3–4 years.

Willowood Industries, a subsidiary of Willowood Group, had inaugurated in 2022 a brand new production plant for Producing Technical. This facility is a state-of-the-art DCS controlled zero liquid discharge manufacturing facility designed to produce 18000 mts of technical products. With this investment, Willowood completes its plan of becoming a fully backward & forward integrated company from producing intermediates to technical & offering final products to farmers through its distribution channels.

In March 2023, NACL Industries' subsidiary received environment clearance for establishing manufacturing facility in Andhra Pradesh. The facility would be involved in the manufacturing of various agrochemicals, synthetic organic chemicals and fluorine based chemicals with a production capacity of 264.615 TPD and co-generation power plant (6 MW).

Tagros Chemicals announced in May 2023 that it intends to expand its pesticide technical and pesticide specific intermediates at SIPCOT Industrial Complex, Panchayankuppam in Cuddalore district of Tamil Nadu. Tagros Chemicals has scheduled the completion of project work for December 2024.

AIMCO Pesticides is expanding its technical manufacturing plant at Khed in Ratnagiri district Maharashtra with an investment of Rs 24.66 crore. The brownfield expansion will increase its capacity from 14,400 TPA to 21,500 TPA.

Building robust R&D infrastructure is also a priority, as evidenced by investments by companies like Dhanuka Agritech, Crystal Crop Protection and Astec LifeSciences. This focuses on developing innovative products and more eco-friendly solutions.

Dhanuka Agritech has set up a new research and development centre at Palwalin Haryana with an investment of Rs 10 crore. The facility will be open for farmers, researchers and other stakeholders of the agriculture sector. The new R&D facility will also enable researchers of the agriculture sector to undertake scientific studies. The facility will also be open to farmers for soil testing, water analysis, and testing of Bio-pesticides among others.

Crystal Crop Protection Limited, has launched a new business in agrochemical retail- Saffire CropScience that will leverage technology to offer global-standard products and services. Saffire will usher in a technological revolution in the crops solutions and services, allowing farmers to access them more efficiently. The new company will provide a wide range of agrochemical products and services, all of which will be made feasible by innovative techniques and technology, resulting in increased profitability for all stakeholders in farming value chain.

Astec LifeSciences Limited, a subsidiary of Godrej Agrovet Limited (GAVL), launched its new advanced research and development (R&D) Center in Rabale, Maharashtra. The state-of-the-art R&D Center is equipped with a synthesis lab for product synthesis and a formulation lab to develop new formulations in the crop protection space. 

The frequent investments showcase the robust growth opportunities that leading Indian agrochemical companies foresee in this sector, driven by growing domestic and export demand. The focus areas are augmenting formulations and technical capacities, strengthening R&D infrastructure and acquiring niche technology capabilities.

Positive Effects on Future Growth 

The continued investments by India's leading agrochemical companies are expected to significantly augment capacities, capabilities and growth in the coming years.  

Expanded capacities will enable companies to meet growing export demand and tap into the opportunities arising from global supply chain shifts as the world looks to reduce dependence on China. Companies will also be able to introduce more products in the high-growth domestic market.

Acquisitions provide access to new chemistries, strengthen technological capabilities and open up fresh geographies to accelerate growth.

Investing in R&D builds a pipeline of innovative and effective crop solutions to address farmer needs, paving the way for sustainable long-term growth. It also enables companies to adopt greener chemistries in line with global sustainability trends.

Reduced Dependence on China

A crucial aspect of the recent capacity expansions is the setting up of technical plants to manufacture key intermediates, which reduces dependence on raw material imports from China.

Companies like Gharda Chemicals, Dhanuka Agritech, UPL and PI Industries are implementing plans to backward integrate into technical manufacturing. While certain complex intermediates may continue to be sourced from China, local technical manufacturing will improve security of raw material supply. It will also provide benefits in the form of lower costs for Indian companies.

Future Outlook

The investments by Indian agrochemical majors, supported by conducive government policies and rising agricultural output, have brightened the prospects of this industry. With capacities rising, capabilities being developed and end-market demand increasing, the Indian agrochemical sector is poised for rapid growth in the coming decade. Companies will need to focus on sustainable solutions, continue to invest in innovation and build global scale to realize this potential.

Investment and expansion events of India agrochemical companies in the past two years

References: 

[1] The Indian chemical industry: Unleashing the next wave of growth. February 2020. McKinsey & Company.

[2] CRISIL

[3] India becomes 2nd largest exporter of agrochemicals. By Harish Mehta. July 27, 2023.

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