Tag: agrochemical

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Advent Buys Significant Stake in Suven Pharma – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Advent International acquires significant stake in Suven Pharma

Global private equity investor Advent International has entered into a definitive agreement to acquire a 50.1% stake in Suven Pharmaceuticals Ltd from the Jasti family (promoters) for ₹6,313 crore. Advent will also launch an open offer to acquire an additional 26% of the pharma company. The total deal size would add up to ₹9,589 crore. After the acquisition, Advent intends to explore the merger of its portfolio company Cohance Lifesciences with Suven Pharma.

Read more here.

Central Bank of India to raise up to ₹1,500 crore in FY23

Central Bank of India’s board has approved a proposal to raise up to ₹1,500 crore this financial year (FY23) by issuing Basel III compliant bonds. The base issue size is ₹500 crore with a greenshoe option of up to ₹1,000 crore. Under the Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

Read more here.

Electronics industry push for tax rationalisation in Union Budget 2023

The Indian electronics industry wants the government to rationalise tariffs and remove small tariffs of 2.75% on parts and components of mobile phones, sub-assemblies, and mechanics. They want the Centre to reduce Goods & Services Tax (GST) from 18% to 12%. India Cellular and Electronics Association (ICEA) also wants the 20% basic customs duty on high-end phones to be pegged at ₹4,000 per device. This measure could limit the smuggling of high-end phones, which ICEA said will add ₹1,000 crore to the GST collection.

Read more here.

Agrochemical players likely to see 15-17% growth this fiscal: CRISIL

According to a report from CRISIL Ratings, agrochemical players will grow at 15-17% in FY23, primarily driven by continued strong exports and stable domestic demand. Major agrochemical firms registered a stellar 23% growth in FY22. Their revenue could further grow by 10-12% next financial year as India continues to benefit from the China+1 strategy of global players.

Read more here.

Alembic Pharma gets USFDA approval for Fulvestrant injection

Alembic Pharmaceuticals Ltd has received final approval from the US Food & Drug Administration (USFDA) for its generic Fulvestrant injection. The drug is used in the treatment of breast cancer. As per IQVIA data, Fulvestrant injection had an estimated market size of $71 million for the 12 months ended September 2022.

Read more here.

Godrej Properties acquires 62-acre land in Kurukshetra

Godrej Properties Ltd (GPL) has acquired nearly 62 acres of land in Kurukshetra, Haryana, to develop 1.4 million sq. ft. of plotted residential development. Kurukshetra is a self-sufficient city with good infrastructure consisting of schools, colleges, and hospitals. It also has significant historical and religious importance. GPL has been acquiring land in the National Capital Region (NCR) and peripheral areas to expand its presence.

Read more here.

Noida authority directs DLF to pay ₹235 crore for Mall of India land

Noida authority has issued a notice to realty developer DLF, asking it to pay ₹235 crore within 15 days for the dispute related to the land of Mall of India (the biggest mall in the country). The move has come after the Supreme Court ordered the Noida authority to pay ₹295 crore to Veerana Reddy. The authority acquired the land from Veerana Reddy in 2005 and later auctioned it to DLF, who developed the mall there.

Read more here.

Jet Airways pilots, cabin crew exit amid relaunch uncertainty

According to a CNBV-TV18 report, many standby pilots and cabin crew of Jet Airways have exited amid relaunch uncertainty. The report further states that the vice president of in-flight service has been sent on leave, while the salaries of CEO Sanjiv Kapoor and CFO Vipula Gunatilleka have been reduced. Earlier, Bloomberg reported that lenders to Jet Airways are resisting a court-approved resolution plan, further delaying the private airline’s relaunch.

Read more here.

Welspun Enterprises to receive ₹2,339 crore in first close of road asset sale

Welspun Enterprises Ltd. will receive about ₹2,339 crore from the first closing of the sale of six road assets to Actis Highway Infra Ltd., said Managing Director Sandeep Garg. “The enterprise value for the transaction is somewhere in the range of ₹9,049 crore, out of which approx. Rs 3,000 crore were received by us during the construction phase from the client,” he added. The five projects are the Welspun Delhi-Meerut Expressway, Welspun Road Infra, MBL (CGRG) Road, MBL Road Ltd., and Chikhali Tarsod Highways.

Read more here.

Infibeam Avenues receives RBI approval for Bharat Bill Payment licence

Infibeam Avenues Ltd has received a Perpetual Licence from the Reserve Bank of India (RBI) for its bill payments business, BillAvenue. The licence will allow BillAvenue to function as a Bharat Bill Payment Operating Unit (BBPOU) under Bharat Bill Payment System (BBPS). The licence will help the company offer secure and uninterrupted services to 18,000+ billers, agent institutions and a network of ten lakh agents spread across 2,000 cities and towns in India.

Read more here.

Air India Express, AirAsia India exploring synergies ahead of merger

Air India Express and AirAsia India (which has changed its name to AIX Connect) are exploring synergies in terms of having unified customer touchpoints ahead of their proposed merger. An operational review process is underway to integrate budget carrier AirAsia India with Air India Express, and the merger is likely to be completed by the end of 2023. Post-merger, the entity will be branded as Air India Express.

Read more here.

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Editorial

India Pesticides Limited IPO – All You Need to Know

India Pesticides Ltd launched its three-day initial public offering (IPO) on June 23. It is the fifth major public issue to hit the Indian markets this month. In this article, we take a closer look into the company and its IPO. 

Company Profile – India Pesticides Limited

India Pesticides Limited (IPL) is engaged in the manufacturing and sales of agrochemicals in India. It was incorporated in 1984. The company offers herbicide and fungicide technicals. They are the sole Indian manufacturer of five technicals and among the leading manufacturers globally for Captan, Folpet, and Thiocarbamate herbicide (in terms of production capacity). The company also manufactures over 30 formulations of herbicides, insecticides, and fungicides. These are all essential inputs that protect crops from pests and fungus. IPL also offers Active Pharmaceutical Ingredients (APIs)— the raw materials used for making drugs.

Their technicals are exported to more than 25 countries across Asia, Africa, Europe, and the Americas. The exports contributed ~62% to the total technical segment revenues in the financial year 2019-20 (FY20). IPL’s agrochemical formulations are primarily sold to prominent crop protection manufacturers such as Syngenta Asia Pacific, UPL Limited, Ascenza Agro S.A., Conquest Crop Protection Pty., Sharda Cropchem Ltd, and Stotras Pty.

India Pesticides has two manufacturing plants in Uttar Pradesh. The aggregate installed capacity of the plants is 19,500 million tonnes (MT) for agrochemical technicals and 6,500 MT for formulations. The company is reportedly constructing two new manufacturing units, which will be used for producing herbicide technicals.

IPL is well-known for its Research & Development (R&D) capabilities. They have focused extensively on expanding their product portfolio and growing their customer base. The company is run by experienced promoters and a strong management team, led by Anand Swarup Agarwal. He has over 35 years of experience in agrochemical manufacturing.

About the IPO

In May 2021, India Pesticides received approval from market regulator SEBI to raise funds via an initial public offering (IPO). The public issue opens on June 23 and closes on June 25. The total issue size of the IPO is Rs 800 crore. This comprises a fresh issue of ~33.78 lakh shares, aggregating up to Rs 100 crore. It also includes an offer for sale (OFS) of up to Rs 700 crore by existing shareholders. The price band for the IPO has been fixed at Rs 290-296 per share.  

Individual investors can bid for a minimum of 50 equity shares (1 lot) and in multiples of 50 shares thereafter. You will need a minimum of Rs 14,800 to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 650 equity shares (13 lots). However, if you are planning to apply for more than 1 lot, keep in mind that your capital may get blocked for no reason if the IPO is oversubscribed.

India Pesticides plans to utilise the net proceeds from the IPO for two main purposes:

  1. To finance the working capital requirements of the company
  2. To meet general corporate purposes

The total promoter holding in the firm will reduce from 82.68% to 72% post the successful completion of the IPO.

Financial Performance

India Pesticides has consistently posted strong growth in revenues and profits over the last three financial years. It seems that the Covid-19 pandemic has not affected the company’s financial performance at all, despite having to temporarily shut down manufacturing units amidst strict lockdowns. Its revenues have jumped by 90.5% during FY19-FY21. Its net profit increased by 90% YoY to Rs 134.5 crore, and total income by 33.8% YoY in FY21. EBITDA margin has increased from 20.7% in FY19 to 29.2% in FY21. The rising demand for the various agrochemical products they offer will continue to drive overall financial growth.

The company’s Return on Capital Employed (ROCE) stands at 45.18%, which is very high when compared to its peers in the Indian agrochemical industry. It means that for every Rs 100 worth of capital employed, IPL earns Rs 45.18 on it. The Return on Equity (RoE) of 34.5% is also quite high when compared to competitors. Over the last three years, the company has posted an average Earnings Per Share (EPS) of Rs 8.8. 

Risk Factors

  • The company requires certain approvals and licenses to manufacture and sell its products in India and across the globe. This includes registrations from the Central Insecticides Board and Registration Committee (CIBRC). If they fail to obtain such registrations or get their licenses renewed, it could adversely impact the firm’s operations and financial performance. 
  • The operations conducted by India Pesticides are subject to regular inspections or audits by its customers. The failure to meet quality standards and technical specifications prescribed by customers may lead to loss of business. This would negatively impact the company’s reputation and financial results.
  • IPL has to comply with strict regulations of various international markets where they sell their products. Thus, its global operations are subject to regulatory risks that could negatively affect its overall performance.
  • The failure to identify or understand evolving industry trends or the inability to develop new products to meet customer demands may adversely affect its business/financial growth.
  • Seasonal variations or unfavorable weather patterns may have a negative impact on IPL’s sales growth.
  • The revenue derived from India Pesticides’ top 10 customers represents around 69.3% of its overall sales income (as of Sept 30, 2020). The loss of any one of these customers or even a reduction in purchases by them will negatively affect financial results.

IPO Details in a Nutshell

Axis Capital, JM Financial, and KFin Technologies Pvt Ltd. have been selected as the book-running lead managers to the public issue. India Pesticides had filed draft papers for its IPO in February 2021. You can read it here.

Ahead of the public issue, IPL was able to raise Rs 240 crore from 12 anchor investors. This includes foreign portfolio investors (FPIs) such as Abu Dhabi Investment Authority (ADIA), Integrated Core Strategies, Wells Fargo, Tara Emerging Asia Liquid Fund, Plutus Wealth Management, and BNP Paribas.

Conclusion

Based on the current demand trends in the market, India Pesticides expects to stabilise growth rates and improve EBITDA margins to over 31% in the upcoming quarters. They will continue to focus on R&D activities to launch new products and gain a better market share. Agrochemical manufacturers like IPL will continue to ensure enhanced food security in India and many countries across the globe. The company’s IPO is likely to attract significant investor participation due to its impressive financial track record and diversified portfolio. 

Once it gets listed, India Pesticides Ltd will be directly competing with major players such as UPL, PI Industries, Rallis India, Sumitomo Chemical, Dhanuka Argitech, Bharat Rasayan, and many more. You can also check out our recent analysis of certain fertilizers and agrochemical companies here.

Before applying for the IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. The issue was subscribed 1.29 times on the first day of bidding (June 23). The portion reserved for retail investors was subscribed 2.51 times, and that of Non-Institutional Investors (NIIs) was subscribed 19%. 

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

Categories
Editorial

Fertilizer and Agrochemicals Companies: An Analysis

When India went into strict lockdowns during the first wave of the Covid-19 pandemic, almost all sectors of our economy suffered. It was only the agricultural sector that continued to show strong positive growth (~3.4%) during the financial year 2020-21 (FY21). Despite supply chain disruptions, our country’s farming sector has worked extensively to cater to the rising consumption demands of citizens. We also saw fertilizer companies ramping up production and supplying farmers with essential agricultural inputs during this period. As a result, certain fertilizer manufacturers have thrived over the past year.

Let us take a closer look at some of the prominent companies that fall under the fertilizer and agrochemicals industry in India. 

UPL

UPL Limited (formerly known as United Phosphorus Ltd) manufactures and markets crop solutions in India and across the globe. It operates through two segments: Agro Activity and Non-agro Activity. The company primarily offers herbicides, fungicides, insecticides, and pesticides. It also provides seed treatment products, adjuvants, and solutions for crop protection. UPL distributes certified seeds for corn, millet, oats, rice, wheat, soya, and much more. In addition, the company offers a wide range of plant stimulation solutions, post-harvest products, aquatic treatment solutions, and farmer advisory and education services. UPL is also known for manufacturing and marketing essential industrial chemicals. 

Financial Performance & Expansion Plans

The Covid-19 pandemic and the lockdowns imposed across India do not seem to have caused any major effect on UPL’s financial performance. The company’s net profit was up 34% quarter-on-quarter (QoQ) or 72% YoY to Rs 1063 crore for the quarter ended March (Q4 FY21). Its revenues had increased by an impressive 40% QoQ to Rs 12,706 crore during the same period. UPL reported a 61% YoY increase in net profit to Rs 2,871 crore for the financial year ended March 31, 2021 (FY21). It has focused extensively on innovation and transformation and has adapted well to the challenging times. 

UPL has posted consistent increases in revenues and profits over the last five years. From FY17 to FY21, revenue has grown at a yearly rate of 24.18%, whereas the industry average stood at 7.45%. As of May 2021, UPL has secured a market share of 26.64% in the fertilizers and agrochemicals industry.

In a recent statement, UPL said it will continue to focus on driving sustainable agriculture and transformational growth using new technologies. The company has laid out strategies to tap new growth markets and opportunities in the agricultural solutions space.

The shares of UPL have surged by ~110% within a year (since May 2020). 

Chambal Fertilisers and Chemicals

Chambal Fertilisers and Chemicals Ltd (CFCL) manufactures and sells fertilizers in India and internationally. The company offers agricultural inputs such as urea, di-ammonium phosphate, and muriate of potash. It manufactures pesticides, insecticides, fungicides, herbicides, NPK (nitrogen, phosphorus, and potassium) fertilizers, agrochemicals, and micro-nutrients, primarily under the ‘Uttam’ brand. Interestingly, CFCL is also involved in designing, developing, marketing, and distribution of software products for the mortgage lending industry. 

Financial Performance & Expansion Plans

CFCL posted a consolidated net profit of Rs 541.75 crore for the quarter ended March (Q4 FY21). It had posted a net profit of Rs 201.06 crore in the corresponding quarter last year. However, total revenue from operations declined by 16.67% YoY to Rs 1,640.76 crore. Net profit was up 42.6% YoY to Rs 1,747.59 crore for the financial year ended March 31, 2021 (FY21).

Since FY17, the company’s revenue has grown at a CAGR of 4.92%, whereas the industry average stood at 7.45%. It has secured a market share of 9.29%.

Despite strict lockdowns amidst the second wave of the Covid-19 pandemic, Chambal Fertilizers has been able to operate plants at normal levels. Its production, distribution, and market collections have remained unaffected. In fact, CFCL is in a position to repay its debts and other financial obligations for the next year. The company aims to become a pan-India player by expanding to high potential states. For this, CFCL has identified a strong marketing network comprising around 1,000 dealers and 7,000 dealers.

CFCL’s share price has risen by ~106% since May 2020

National Fertilizers Ltd

National Fertilizers Limited manufactures and sells urea products and industrial chemical products in India. It also offers bio-fertilizers, including rhizobium, phosphate, and zinc that are used to supplement chemical fertilizers and maintain soil fertility. The company distributes certified seeds under the ‘Kisan Beej’ brand name. National Fertilizers also trades in compost products, agrochemicals/pesticides (comprising insecticides, herbicides, and fungicides), as well as potassium chloride, di-ammonium phosphate, and nitro phosphate. This has enabled the company to emerge as a one-stop fertilizer supplier for its customers.

Financial Performance

The company is yet to post its Q4 results. Looking at past performance, National Fertilizers has posted a consistent increase in revenues. It has secured a healthy market share in the urea segment across northern India. Over the last 5 years, the revenue of National Fertilizers has grown at a yearly rate of 9.04%, whereas the industry average stood at 7.45%. It has secured a market share of 9.8% (as of May 2021).

NFL’s share price has surged by ~185% within a year (since May 2020).

Coromandel International

Coromandel International Ltd manufactures and sells farm inputs in India. The company operates through two segments: Nutrient and Other Allied Business and Crop Protection. It offers fertilizers, bio pesticide solutions, crop protection products, and plant bio-stimulants. It supplies specialty nutrients, including bentonite sulphur, water-soluble and organic fertilizers, and micro-nutrients. The company also provides farming services, such as crop advisory, soil testing, and farm mechanization. In addition, it operates 750 rural retail outlets across Andhra Pradesh, Telangana, Karnataka, and Maharashtra. Coromandel International is a subsidiary of E.I.D. Parry (India) Limited.

Financial Performance

The company posted a 33.5% YoY (or 53% QoQ) decline in consolidated net profit to Rs 155.85 crore for the quarter ended March (Q4 FY21). Its net sales declined by 05% YoY to Rs 2,855.97 crore during the January-March period. Coromandel International posted a 25% YoY increase in net profit to Rs 1,329.15 crore for FY21. 

Over the last five years, revenue has grown at a CAGR of 3.01%, whereas the industry average stood at 7.45%. Coromandel International has obtained a market share of 9.79% so far.

Coromandel International said it has delivered an all-round performance in Q4 by adopting digital marketing to reach out to the farming community. In the upcoming quarters, the company will focus on improving operational efficiency and introduce new products to support farmers in improving crop productivity.

Rallis India

Rallis India Limited manufactures and markets agricultural inputs in India. The company offers crop protection products, including insecticides, fungicides, and herbicides. It also offers seed treatment chemicals and soil conditioners. Rallis distributes seeds, including those for hybrid rice, maize, sunflower, cotton, paddy, mustard, wheat, etc. The company offers contract manufacturing services for crop protection, specialty chemicals, and polymers.  It also manufactures household products such as ‘Termex’ and ‘Hippo’, which are used for termite control. The company exports most of its products to approximately 70 countries across Europe, Asia, the Middle East, the Americas, and Africa. Rallis India is a subsidiary of Tata Chemicals Limited.

Financial Performance

Rallis India posted a consolidated net profit of Rs 8.12 crore for the quarter ended March (Q4 FY21). This is compared to a net profit of Rs 68 lakh in the corresponding quarter last year. Its revenue from operations rose 32% YoY to Rs 471.26 crore. Net profit for the financial year 2020-21 grew 24% YoY to Rs 228.58 crore. The company said it is positioning itself to meet the growing requirements of the agricultural sector.

Over the last five years, revenue has grown at a CAGR of 4.79%, where the industry average stood at 7.45%. As of May 2021, Rallis India has only been able to secure a market share of 1.71%.

Rallis India’s shares have risen by ~50% since May 2020.

Conclusion

The fertilizer and agrochemicals industry in India is highly competitive and consists of a large number of players. We have only mentioned a few of them in this article. Other important companies in this industry include Rashtriya Chemicals & Fertilizers, Deepak Fertilisers & Petrochemicals Corp, Fertilisers and Chemicals Travancore (FACT), Bayer CropScience, Gujarat State Fertilizers & Chemicals (GSFC), etc. 

Last week, the stocks of major fertilizer companies saw a rally after the Centre increased the subsidy of di-ammonium phosphate (a fertilizer) by 140% from Rs 500 to Rs 1,200 per bag. This is mainly due to a surge in prices of phosphoric acid, ammonia (used to make fertilizers) in the international markets. This move would definitely benefit our farmers. However, it may cause a subsidy burden on the companies mentioned above. 

According to a recent report from Mordor Intelligence (a consulting firm), the Indian fertilizer market is expected to register a CAGR of 11.9% over the next five years. Through technological innovations, the industry will continue to provide enhanced food security to our country. And through this, the stocks will continue to grow as well.