How Indian Agrochemical CDMO Companies Maintain A Steady Growth Trajectory Amid Global Economic Slowdown And Market Volatility

Date:10-25-2024

As the demand for sustainable and eco-friendly pesticide products continues to rise, Indian agrochemical CDMO companies are prioritizing diversification, innovation, and capacity expansion to reduce reliance on imports. In the past two years, India has emerged as a global manufacturing hub, thanks to its advanced manufacturing capabilities, strong process engineering expertise, abundant skilled labor, and adherence to global quality standards and environmental regulations. 

It has been noted that the CDMO businesses of these companies go beyond simply selling products; they are dedicated to building long-term partnerships with their clients. This approach not only enhances their value proposition but also raises the barriers to entry for competitors, significantly increasing the demand for custom agrochemicals. In the coming years, these companies are expected to further solidify their market positions while continuing to advocate for green development of the industry in India.

Seeking long-term growth opportunities based on resilience amid stable performance

The past year has been another challenging one for the Indian chemical industry, particularly due to weak demand in key end-use sectors such as agrochemicals and ongoing pricing pressures across various fields. Despite these industry-wide challenges, Indian agrochemical CDMO companies have successfully maintained stable financial performance by enhancing customer interactions, implementing cost-saving measures, launching new products, and adapting their market strategies.

While some companies faced declines in revenue and profits, putting pressure on their profitability, others thrived through innovation and market adjustments, showcasing the industry’s potential and resilience. 

For example, PI Industries achieved remarkable growth by commercializing new products and boosting export volumes, with year-on-year revenue and profit increases of 18.1% and 37%, respectively, in fiscal year 2024. Both Dhanuka Agritech and Deepak Nitrite reported growth in operating revenue and EBITDA. Although Rallis India saw a drop in operating revenue, it experienced a substantial rise in net profit. Overall, the chemical industry is actively pursuing growth opportunities while navigating challenges.

Solid orders in the CMCD business provide significant revenue visibility

In fiscal year 2023-24, several Indian agrochemical companies reported solid orders in their CMCD business, establishing long-term partnerships with global innovative companies in the agrochemical and pharmaceutical sectors.

Chemplast Sanmar, an Indian specialty chemicals company, has signed four letters of intent over the past 18 months with global agrochemical innovators for the production of advanced agrochemical intermediates and active ingredients. In May 2023, the company entered into a five-year letter of intent with a global agrochemical firm to produce an advanced intermediate. In July, Chemplast partnered with another international agrochemical company to produce a new active ingredient. In November, the company signed another five-year letter of intent with a global agrochemical firm for the production of another new active ingredient, further broadening its business scope. In May 2024, Chemplast finalized its fourth five-year contract for the production of agrochemical intermediates, with commercial supply expected to start in 2025. The company anticipates that as the capacity utilization of its new multi-purpose production block stabilizes, revenues from its custom chemicals business will reach INR 10 billion within the next three years, significantly enhancing its economic benefits and market influence.

Anupam Rasayan, an Indian company specializing in the custom synthesis and manufacturing of specialty chemicals, announced in April 2024 that it had signed a letter of intent valued at approximately $90 million (around INR 7.43 billion) with a prominent Japanese fluorochemical company for the supply of two key intermediates using fluorination chemistry over a period of seven years. Earlier, in April 2023, Anupam Rasayan secured a five-year contract worth $46 million (INR 3.8 billion) with a leading American multinational for the exclusive supply of high-end intermediates using fluorination chemistry. In fiscal year 2024, Anupam Rasayan entered into five contracts or letters of intent with several multinationals from Japan and the U.S., generating total contract revenues of approximately INR 89 billion and providing strong revenue visibility for the next five to seven years.

Aarti Industries secured two long-term supply contracts totaling INR 90 billion in fiscal year 2024, paving the way for continued growth in the CDMO market and the high-value agrochemical sector. In December 2023, Aarti signed a nine-year supply contract worth INR 30 billion for an agrochemical intermediate with a global agrochemical products and solutions company. This intermediate serves as a key raw material for widely used herbicides, which have a large and steadily growing global market. In January 2024, Aarti secured a four-year contract worth over INR 60 billion with a multinational conglomerate company for a specialty chemical from its existing product portfolio. In addition to these contracts, Aarti has also established several other long-term agreements/contracts in recent years.

Collaborative mergers, investment empowerment, and backward integration optimize the supply chain

In fiscal year 2023-24, Indian CDMO companies have been optimizing their supply chains through collaborative mergers, investment empowerment, and backward integration to enhance their R&D capabilities, production efficiency, and market competitiveness.

In 2023, PI Industries acquired Archimica S.p.A., Therachem Research Medilab, and Solis Pharmachem through its subsidiary, PI Health Sciences Ltd. (PIHS). The company plans to combine the acquired businesses' R&D capabilities with its brand-new integrated pharma research center in IKP Hyderabad, aiming to bolster its contract research organization (CRO) and contract development and manufacturing organization (CDMO) services. For fiscal year 2024, PI Industries allocated INR 132.2 billion in capital expenditure for the pharma sector, actively working to establish an integrated CRDMO market supply system by upgrading research and manufacturing infrastructure, enhancing business development, and optimizing key business processes. The CRO facility in Hyderabad is nearing completion and will provide a range of services, including pharmaceutical chemistry, lead compound optimization, analytical services, process development and safety studies, toxicology testing, preclinical and clinical supply, and technology transfer services.

In May 2024, Aarti Industries announced a significant strategic partnership with UPL, forming a 50%-50% joint venture (JV) dedicated to the production and promotion of specialty chemicals, particularly downstream derivatives of amines, which have diverse applications in agrochemicals and paint industries. This joint venture is expected to begin commercial supply in the first quarter of fiscal year 2026-27, with annual revenues anticipated to reach INR 40-50 billion within two to three years after commercialization, roughly around fiscal year 2030. This arrangement is a first of its kind partnership between two large Indian companies to develop, manufacture and market the downstream and value-added chemical intermediates for global markets.

Coromandel International officially expanded its business into the CDMO sector in the fiscal year 2023-24, establishing partnerships with leading global innovators to support the manufacturing of new molecules and intermediates. The company plans to invest INR 10 billion (approximately ¥830 million) in the new business over the next two years. This investment will include acquiring additional land for future expansion and setting up new multiproduct plants at two production sites to enhance its operations.

Deepak Nitrite has officially entered the fluorochemical sector with the launch of its first fluorochemical plant. Deepak Chem Tech Limited (DCTL), a wholly-owned subsidiary of Deepak Nitrite Limited, has commenced the operation of its state-of-the-art fluorination facility located in the Dahej district of Bharuch, Gujarat. The commercial operation of this plant not only highlights the company’s technical expertise but also plays a vital role in Deepak Group’s strategic initiative to establish itself as a key center for chemical R&D in India.

In September 2023, Chemplast Sanmar successfully completed and commissioned the first phase of its multi-functional production facility in Berigai, with an investment of approximately INR 2.7 billion. The second phase is expected to be completed by fiscal year 2024-25. As the company’s custom chemicals business continues to flourish, it is projected to achieve peak capacity utilization within the next two to three years.

In 2024, Jubilant Ingrevia commissioned its state-of-the-art, multipurpose, agro active ingredients & intermediate plant at Bharuch, Gujarat. The plant, established by the Company’s wholly-owned subsidiary, Jubilant Agro Sciences, is geared towards serving both the company’s contract manufacturing organization (CMO) customers and its own production of active ingredients. The plant is designed to produce high-value products to meet the rising global demand for agro active ingredients and intermediates. The company has developed cost-competitive value-added products by using captive raw materials based on its completely backward integrated Pyridine capability, where it holds global leadership position.

In fiscal year 2024, SRF put into operation nine dedicated facilities at its Dahej site, with all active ingredients currently under development moving into production. Over the past year, particularly in the last six months, SRF has invested around INR 18 billion to expand several plants. These strategic investments allow SRF to tap into unexplored market segments, pursue new expansion opportunities, and drive value growth.

Dhanuka Agritech continues to prioritize R&D and breakthroughs in innovation in chemical synthesis. This fiscal year, the company commenced operation of its chemical synthesis plant at Dahej and has been dedicated to achieving breakthroughs in this field. Additionally, it has established a new R&D laboratory in Sanand, Gujarat, employing 30 chemists focused on accelerating product research and process development, which will enhance the creation of new products while capitalizing on contract manufacturing opportunities.

Breakthroughs in product innovation and recognition of R&D and manufacturing capabilities

PI Industries has received the ISO common name approval for its novel pyridinecarboxamide insecticide, Pioxaniliprole, innovated in fiscal year 2023-24. This makes PI Industries the first company in India to obtain such approval, highlighting both its R&D capabilities and the growing competitiveness of Indian agrochemical companies in the global market.

Rallis India has expanded its Custom Synthesis and Manufacturing (CSM) product portfolio in fiscal year 2024 by commercializing three new products. These products span the entire agrochemical value chain, including one intermediate, one active ingredient, and one formulation. Two of these products are being produced at Rallis India’s state-of-the-art manufacturing facility at Dahej. The introduction of these new offerings strengthens Rallis’s competitiveness in the market and broadens its customer base within the CSM sector, positioning the company favorably for partnerships with innovative agrochemical companies in Japan.

Additionally, Rallis has recently announced the successful completion of pilot-scale production for a new insecticide, Flavocide, developed by Bio-Gene Technology, an Australian company developing novel insecticides derived from nature. Flavocide is an insecticide based on the natural compound Flavesone, which is derived from eucalyptus. Rallis has produced several hundred kilograms of Flavocide from the pilot-scale batches, demonstrating high yield and consistent quality. This sets a solid foundation for the future global commercialization of Flavocide-based solutions. According to Bio-Gene, Rallis was appointed based on its proven record of successful production of a wide range of agrochemical products meeting stringent standards and its capacity to produce Flavocide in sufficient quantities for potential future supply to Bio-Gene’s distribution partners.

Furthermore, several other companies have also made significant strides in product innovation and commercialization, demonstrating their R&D capabilities and providing substantial support for their competitiveness in the global market.

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This story was initially published in the 2024 India Focus. Download the magazine to read more stories.

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