In conversation with Rajesh Aggarwal, Managing Director, Insecticides (India) Ltd

By removing bottlenecks and introducing progressive regulatory measures to safeguard the environment, the future of the agrochemical sector looks bright, asserts Rajesh Aggarwal, Managing Director, Insecticides (India) Ltd (IIL).

What is your outlook on the domestic and global agrochemical sector? Any emerging trends and opportunities you are witnessing post-pandemic? 

Based on different market research and our outreach, the domestic market of the agrochemical sector will grow at a CAGR of 8 per cent in FY22 to reach USD 3.7 billion by FY22 and USD 4.7 billion by FY25. Globally, the agrochemicals market was valued at USD 231.00 billion in the year 2020 and is projected to reach USD 315.3 billion by the year 2030, growing at a CAGR of 2.9 per cent in these 10 years. 

We anticipate an increase in demand for our key products as the third wave of COVID 19 (Omicron) wears off and global economies open up. We also expect a faster registration of our products in domestic and international markets, a pick-up in pace at our research and development (R&D) centres, an increase in our efficiency to push our new products launched in the previous two financial years to the grassroots level, and a gradual streamlining of container availability for exports. 

The agrochemical industry contributes heavily towards food security, provides employment to a large workforce and has been a champion sector for decades. By removing bottlenecks and introducing progressive regulatory measures to safeguard the environment, the future of the agrochemicals sector looks bright. 

While collaboration was important in the beginning, with the pandemic, Indian businesses are increasingly interested in expanding their R&D capabilities and facilities so that they can harness the power on their own. They're not only boosting Indian manufacturing, but also repositioning themselves as solution providers in the process. While partnerships have been critical in bringing world-class agrochemicals to India, next-generation formulations developed in India have also proven to be efficient and cost-effective. Spraying them is simple, and they have a low dosage and higher efficacy. As a result, it is clear that to gain a competitive advantage, agrochemical companies will increasingly focus on incorporating next-generation formulations into their R&D capabilities and product mix. 

For Q2FY22, Insecticides India reported a 15.11 per cent decline in consolidated net profit at Rs 41.50 crore from Rs 49.01 crore in Q2FY21. What factors led to this underperformance? 

Covid alienated farmers as the country entered another state of emergency as a result of the second wave. The second quarter of FY22 saw several challenges and flood-like conditions in several states as a result of heavy rainfall. The pandemic had resulted in prolonged lockdowns, a slowing of economic activity, and many logistical issues. All of these factors cast a pall over agriculture and the use of agri inputs like agrochemicals. Nonetheless, we were able to turn a profit. While the country is still fighting the pandemic, we are optimistic that the situation for agriculture and its related industries will improve. 

What measures are you implementing to safeguard profit margins from cost-push inflation and supply chain challenges? 

Insecticides (India) Limited (IIL) conducts a farmer survey regularly to identify specific information gaps. The company sends out a crop advisor team to meet with farmers and assist them with their various crop protection needs, as well as to inform them about the most recent technology and other important points that reduce their input costs. The company, which has a network of about 60,000 retailers, provides cutting-edge technology to even small and marginal farmers. We expect to maintain and improve our profit margins as a result of changes in product mix, such as the addition of new generation patented products and a cutting down on generic low-profit products. The new generation products will help not only with the top but also with margin accretion. On a long-term basis, we also anticipate that exports will contribute at least 20 per cent of the overall top line. 

Can you shed some light on the new products you have launched and the patents you’ve been granted during 9MFY22? 

In the last nine months, we have primarily launched the patented herbicide ‘Hachiman’ in technical collaboration with Nissan Chemical Corporation, Japan, and we plan to launch two additional products in FY22. We intend to launch five new products next year. We keep adding new products to the kitty so that both the top and bottom lines grow. We received one patent for "An Herbicidal Formula Containing Pendimethalin And Oxyfluorfen" recently, which we intend to launch next year in FY23.  

What is your earnings outlook for the upcoming quarter? 

 We anticipate that market will open because the third wave has already peaked. For FY22, we anticipated a 10-15 per cent increase in revenue. We also expected our EBITDA and PAT margins to improve by 100 basis points in FY22, owing to improved product mix, cost-cutting measures, and backward integration for certain raw materials. However, with the third wave and an increase in raw material costs, it appears difficult to achieve the same; in this scenario, we expect to grow the top line by at least 5 per cent. 

We are hopeful that with our efforts like the 'Farmers Contact Programme', which assists farmers with their various crop protection concerns, and CSR initiatives like 'Insecticides Jaroori Hai' and 'Kisaan Jagrukta Abhiyan,' which help them understand the importance of adopting new farming techniques to reap numerous benefits, there will be greater adoption of agrochemicals, which will also boost our sales.