Top 20 Indian Agrochemical Companies in FY 2018-19: Backwards Integration, Forwards “OpenAg”

Highlights of the list in FY 2018-19

FY 2018-19 was a challenging year to Indian agrochemical enterprises. Though the Indian economy continues to be one of the world’s fastest growing economies, the domestic routine activities in the country remained sluggish during the second half of the fiscal year. The economy was still recovering from the impact of demonetization and the implementation of the Goods and Service Tax (GST). In addition, liquidity crisis negatively impacted the consumption demand and market sentiments. As a result, the economic growth rate took a hit.

Externally, the major raw material prices firmed up during the year due to demand-supply situation and global supply-side constraints. Environmental crackdowns in China continued and disrupted operations of several upstream suppliers, some of whom even shut down. This triggered a raw material scarcity and led to price hikes. Besides, the rupee was volatile, mainly impacted by uncertainties around US-China trade negotiations and surge in oil prices.

Closer home, erratic monsoon, uneven rainfall distribution and its prolonged withdrawal in certain locations led to a drastic shifting in crop and pest load, along with rural distress. As per the India Meteorological Department (IMD), 2018 was the sixth warmest year on record in India with patchy monsoon and average temperature being significantly above normal. The rainfall during the annual monsoon season was less than the original forecast at 91% of the long-term average. India received below normal and erratic South West monsoon (-9%) and deficit North East monsoon (-44%), which resulted in lower crop sowings.

In FY 2018-19, the list of top 20 Indian agrochemical enterprises almost  remains the same with the previous year. Compared to FY 2017-18, there  are still half of the companies obtained double-digit growth in 2018-19,  while the growth of some enterprises was a little frustrated.

Following the acquisition of Arysta LifeScience, UPL is now one of the top 5 agricultural solutions companies worldwide. With approximately US$5 billion in combined sales and EBITDA of around US$1 billion, UPL has a commercial presence in over 130 countries. The company offers an integrated portfolio of both patented and post-patent agricultural solutions for various row and specialty crops, including crop protection, biological, seed treatment and post-harvest solutions covering the entire crop value chain. This new UPL aims to be “among the three largest companies in the agro market in the next three years”.

Heranba reported the fastest growth, having reached a 35.14% growth rate. The company’s export business, which grew by almost 80% last year by enhancing its production capacity, as well its customer base within India and through exports. Its top 3 technical products (Deltamethrin, Cypermethrin and Alphacypermethrin) and other TC, formulation and intermediates products are exported to more than 60 countries.

The agrochemicals division of Sharda grew by 13.42% from INR 14,861 million in FY17-18 to INR 16,855.6 million in FY18-19. Sharda has followed a unique asset light business model whereby it keeps its competitiveness in identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations through third party distributors or using its own sales force. The total number of registrations increased by 140 from 2,157 as of March 31, 2018 to 2,297 as of March 31, 2019. The company has another 1,028 registrations in pipeline across geographies.

The total sales of the top 20 companies reveals an overall increase of Rupee 70 billion (a 18.2% Y-o-Y growth) over the previous year, approximate equal to the total of the last seven enterprises on the top 20 list.

Overview of Global Agro Chemical Market

Global chemical-based crop protection sales increased by 4.2%, from $54.2 billion in 2017 to $56.5 billion 2018. Rising demand for pesticides and increasing consumption of agrochemicals in liquid form are some of the key factors expected to boost the demand for agrochemicals in the global market.

Recovery in the Brazilian market (one of the largest agrochemical consumers in the world), is the major driver of growth in 2018. The excessive crop protection inventories, which resulted in the 2017 decline have been addressed and are no longer such an issue.

High crop protection prices are mainly on the account of supply shortages, particularly higher prices of products originating from China as a result of the environmental pressures from government, consolidation in the national industry and shifting of all chemical production in chemical zone/parks. Higher prices have also driven higher tariffs imposed by the US on some Chinese chemical products. As a result, industry has passed on the higher price to consumers.

REGION WISE GLOBAL CROP PROTECTION MARKET MIX

Huge opportunity for Generic Pesticides players

Agrochemical worth $6.3 billion are going off patent between 2014-2020 and more agrochemical active ingredients (AIs) will lose patent protection between 2019- 2026. With so many products coming off patent, industry players have the opportunity to choose the right off-patent/generic AIs for their product development strategies.

Over last 20 years, there has been a decline in the discovery of new active ingredients. At the same time, there has been a substantial increase in the number of mixture products entering the market. It is projected that, from 2019 to 2026, approximately 70 mixture products will lose the patent protection.

Forwards “OpenAg”

Being one of the world's five largest in the industry, UPL now works with more than 13,000 products registered worldwide (the portfolio of Arysta, which has 6,850 products, will be unified with that UPL, which has 6,150 records). With market access to 90 percent of world's food basket and a focus on high-growth regions, new UPL represents a compelling value proposition for growers, distributors, suppliers and innovation partners in a consolidating market.

To achieve its goal of ranking among the top 3 agricultural solutions companies worldwide, UPL announced a new purpose: "OpenAg" - that of an open agriculture, of sustainable growth for all, based on a systemic program of plant protection. This is the new objective of the company, which will work for a more modern, collaborative and open innovation. In 2019, the new UPL brought very important news to its biggest market-Brazil. In the next five years, UPL will invest US$ 200 million in Brazil’s agriculture, initially directed to research. All registration processes already initiated in Brazil will be continued, and priority will be given to sustainable products.

During the year, Indofil commenced the commercial production of the first ever in-house manufacturing facility for production of 35,000 MT of emulsions and powder and operations of the GIDC plant for producing Mancozeb with an annual capacity of 35,000 MT in October 2018. Indofil also launched eight new products in the agrochemicals domestic market and applied for about 100 registrations overseas and got approvals for 84 registrations of those applied in earlier years. Forwarding to the open-agro market, Indofil completed the acquisition of 80% stake in an Italian distribution company, namely Agrowin Biosciences S.R.C. and entered into a joint venture with Reagens, Italy – IndoReagens. Indofil received INR 8,828.4 million in the international agro-business which is very close to its INR 9,815.8 million in domestic.

Coromandel’s crop protection business had a resilient performance during the year, growing in domestic formulations and international markets and achieved its highest ever turnover (INR 18,020 million, a 19.65% Y-o-Y growth) and EBITDA (a 11% Y-o-Y growth). Coromandel has taken progressive steps towards upgrading its portfolio from old generics to patented combinations or recently off patented molecules. The business is actively pursuing new product development and has successfully launched five products during the year, including two in-house patented combinations which have received encouraging response from the market. Besides, the bio pesticide business, acquired from E.I.D Parry (India) Limited, was successfully integrated with Coromandel’s Crop Protection, which has enabled business’s access in developed markets and provided a presence in complementary product segments.

Rallis increased by 18.63% from INR 12,117 million recorded in FY 2017-18 owing to the strong performance of the international business and increase in product realization. At Rallis India, international business shot up more than 34% last year. It is investing heavily in new facilities over the next three years and will address its growth through reverse engineering. This will be done in two phases, with some supported by backward integration and OpenAg strategies.

Crystal has produced about 41 technical grade pesticides that will now be made indigenously for the Indian formulators & farmers rather than importing. This will enable farmers in the country to get the same at low cost while saving the foreign exchange & support Prime Minister Narendra Modi’s ‘Make in India’ initiative. Crystal has already finished several acquirements in 2018, including: Solvay's Cytec, some Syngenta’s seeds business, cooperation with KeyGene, acquiring some key brands of FMC India, three insecticide & fungicide brands from the Indian unit of Syngenta AG.

Meghmani increased by 16.6% YoY to INR 11,297 million in FY 2018-19 on the back of strong growth in agrochemicals segment. This was driven by robust growth of 36% in exports, favorable market conditions and better price realization. Volumes for the year stood at 16,430 MT. On the back of the vertically integrated business model, Meghmani is expecting more share in the domestic market in FY2020 as its backward integration can prove to be a major competitive edge for pricing and margins. This will help in avoiding the drastic price increments of raw materials coming from China. Going forward, the company plans to double the capacity of 2, 4D by adding 10,800 MTPA with capex of ~ INR 1.27 billion and it is expected to be operational by Q1 FY 2021.

Meanwhile, other Indian agrochemical companies conducted OpenAg strategy via direct / indirect cooperation, expansion, merger and acquisition thus being less dependent on outsourced supplies.

Agro Life Sciences Corporation (Krishi Rasayan Export Pvt Ltd’s sister concern) and AlgaEnergy(a Spanish biotechnology company)’s wholly-owned subsidiary in India, MicroAlgae Solutions India Pvt Ltd have formed a 50-50 joint venture ‘AgMA Energy Pvt Ltd’.

SML, the world’s largest water dispersible granule manufacturer, has recently partnered with the world’s largest sulphur bentonite manufacturer, Tiger-Sul Products LLC(USA), to become U.S. and Canada’s exclusive sales agent of the global company’s patented sulphur- and zinc-based water dispersible granular nutrition products.

Excel Crop Care, a leading player in Indian agrochemical, household insecticides and animal nutrition sectors, announced the completion of the merger of Sumitomo Chemical India Ltd., a subsidiary of one of the leading global chemical companies Sumitomo Chemical Co., Ltd., Japan.

Indogulf recently established a subsidiary in Australia for agrochemical business and launched 5 new agrochemicals in Ethiopia in 2019. The company has a global footprint in over 17 countries. Indogulf also has a registered office in the USA, and is in the process of establishing three JVs in Africa and the Middle East with local partners.

PI Industries is going to acquire Asia biz of Italian agrochemical firm Isagro. The acquisition is likely to be completed by the end of December, 2019, subject to closing formalities and regulatory approvals. This acquisition will help meet growing demand from international customers by getting access to additional manufacturing capacities of Isagro Asia.

Prospect

India is a large exporter of pesticides, mostly manufacturing generic products. The most upcoming dependable face as Global Crop Protection Chemical sourcing centre is of course India. Since many years, India is supplying very good quality formulations of generic pesticides to different markets, but now time has come to become strong in backward integration and forward OpenAg to participate more significantly in global market. Maybe it’s about learning from the turmoil of the last 18 months and evolving as an industry into one that can truly work together.

Maybe the goal should be, if it isn’t already, for the entire Indian agro-industry to strengthen itself by building trust, communicating better from top to bottom, and becoming more collaborative and less transactional oriented. Indian agrochemical companies are having a great time in the last three years because of the China factor. And the time has come for India to think beyond.

The article is from 2019 INDIA PESTICIDE SUPPLIERS GUIDE magazine.