Agrochemicals - May16

SECTOR REPORT
13 MAY 2016
Agrochemicals
Good monsoon + rich strategy
Absolute Stock Returns (%)
3M
6M
1Y
DAL
20.5
45.9
6.1
IIL
47.9
24.4
(9.9)
Rallis India
40.4
6.2
(1.0)
BSE 500
13.8
1.2
(1.0)
Valuation (on FY18E)

P/E (x)
P/BV EV/EBITDA
(x)
(x)
4.4
12.1
DAL
18.0
IIL
13.2
2.0
8.8
Rallis India
16.7
3.5
10.9
Satish Mishra
satish.mishra@hdfcsec.com
+91-22-6171-7334
Deepak Kolhe
deepak.kolhe@hdfcsec.com
+91-22-6171-7316
Indias total food demand continues to rise in

tandem with its population, disposable income and a
shift in preferences. With more pressure on limited
land (17% of global population on 2% of land),
improving crop yields and minimising farm losses are
key to raising food supply.
Agrochemicals play a vital role in raising crop yields,
but are under-penetrated in India. According to
studies, there is 15-25% crop loss owing to non-usage
of pesticides in the country. The structural drivers for
the domestic agrochemical market are (1) Lower
penetration, (2) Efficient products, (3) Shift towards
cash crops, and (4) Increasing farmer awareness. The
governments initiatives to double farm incomes by
2022 will further support demand. A few players are
also focusing on the export market owing to Indias
competitiveness in manufacturing at a lower cost.
A normal monsoon will be crucial for Indian agriinputs, as only ~46% of the net cultivated area is
irrigated. There are challenges galore for the sector,
which is at the end of the value chain (after seeds
and fertilisers). However, things seem to be looking
up with the IMD and Skymet forecasting rainfall to
be 106% and 105% of long period average in 2016.
Sector Perspective
DAL
IIL
Rallis
MCap
CMP
TP
Rating
(Rs bn) (Rs/sh)
(Rs/sh)
31.5
630
BUY
700
9.1
441
BUY
535
40.6
209
BUY
250
Source: Company, HDFC sec Inst Research
We have focused on domestic players like Dhanuka

Agritech, Insecticides India and Rallis India. These are
a proxy play for an uptick in the domestic market.
Investment arguments
Dhanuka Agritech Ltd (DAL): (1) Present only in
asset-light formulation business, (2) Focus on inlicensing specialty molecules (~75% of portfolio)
via tie-ups with MNCs, (3) Regular product
launches, (4) Revenues and PAT to grow at a CAGR
of 23% and 34% over FY16-18E, and (5) Zero net
debt and end of capex phase. Initiate coverage
with a BUY. Our TP is Rs 700 (20x FY18E EPS).
Insecticides India (IIL): (1) Present across branded
and technical business, (2) Strong product
portfolio led by R&D, brand acquisitions and tieups with MNCs, (3) Top-20 products (~50% of rev)
are growing at ~30%, (4) Focus on R&D for
molecules going off-patent, (5) Capex is over, net
D/E of 0.9x FY16E, and (5) Sales and PAT to grow
at a CAGR of 16% and 31% over FY16-18E. Initiate
coverage with a BUY. Our TP is Rs 535 (16x FY18E)
Rallis India: (1) New product launches, (2) CSM
revenues are likely to begin, (3) Robust uptick in
seed business, (4) Strong distribution network, and
(5) Sales and PAT growth at 16% and 31% CAGR
over FY16-18E. Maintain BUY with a TP of Rs 250
(20x FY18E EPS).
Revenues (Rs mn)

FY16E FY17E FY18E
8,308 10,219 12,524
9,785 11,315 13,139
16,279 18,680 21,927
PAT (Rs mn)

FY16E FY17E
FY18E
978
1,318
1,750
402
535
691
1,430
1,904
2,435
ROE (%)
FY16E FY17E FY18E
21.8
24.6 26.9
12.9
15.0 16.7
16.7
19.9 22.3
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
AGROCHEMICALS : SECTOR REPORT
Contents
Indian agriculture under a cloud ...................................................................................................................... 3
Reasons for poor condition of India farmers .................................................................................................... 4
Lower crop yields ................................................................................................................................................. 4
Impact of irrigation .............................................................................................................................................. 4
Non-remunerative price for crops ....................................................................................................................... 8
Lack of marketing infrastructure ......................................................................................................................... 9
Focus on the quality of agri-inputs ................................................................................................................ 10
Agrochemicals .............................................................................................................................................. 11
India players strategies ................................................................................................................................ 13
Companies
Dhanuka Agritech..................................................................................................................................................... 14
Insecticides India ...................................................................................................................................................... 25
Rallis India ................................................................................................................................................................ 35
Page | 2
India has the second-largest

arable land and is among the
top producers of key crops
Around half of Indias

population is dependent on
agriculture, which contributes
~14% to GDP
Indian agriculture under a cloud

The agriculture sectors contribution to the Indian
GDP has fallen from ~28% in FY94 to ~14% in FY14.

The employment share has declined from ~65% to
~49%. A higher share of employment vs. lower
contribution has resulted in lower per capita
income for the sector (source: Government of
India reports).
India has the second-largest arable land in the
world after the US. However, the share of arable

to the total land is highest in India at ~49%. This
gives limited/no room for further increase.
Arable Land Vs. Total Lands (As per FY12)

Country
~85% of farmers own marginal

(<1Ha) or small (<2 Ha) lands
40% of agriculture households

are below poverty line
China
India
USA
Brazil
Japan
Germany
France
Italy
Spain
Argentina
Canada
Australia
Population
(mn)
1,361
1,243
316
198
127
81
64
60
46
42
35
23
Arable land Arable % of total

(mn ha)
land
139
15
145
49
165
18
59
7
4
12
12
33
21
39
8
26
14
27
27
10
42
5
47
6
Source: World Bank, HDFC sec Inst Research
Owing to the high arable land, India in one of the

top producers of many crops.
India In Food Production (FY15)

Crop
Rice
Wheat
Sugarcane
Fruit + Veg
Cotton
Maize
Output (mT)
103
96
355
205
35
23
Rank
2
2
2
2
2
6
Source: Ministry of agriculture, Company, HDFC sec Inst Research
India is the largest producer of spices, pulses, milk,
tea, cashew and jute; second-largest of wheat,

rice, fruits and vegetables, sugarcane, cotton and
oilseeds
The story of the Indian farmer, however, is not as
glorious. About 36% of the agricultural households

have been issued BPL (below poverty line) cards.
About ~5% are Antyodaya cardholders, which are
for ultra-poor households (source: MOSPI, GOI).
At an all-India level, the average monthly income
of agricultural households between Jul-12 and

Jun-13 was estimated at Rs 6,426. This included
net receipts from cultivation, farming of animals,
non-farm
business
and
income
from
wages/salaries. (source: MOSPI, GOI)
Page | 3
Reasons for poor condition of India farmers

Crop yields in India are lower
compared to other key
producers
1.
2.
3.
4.
There are multiple reasons for lower crop yields:
Lower crop yields

Non-remunerative price for crops
Reducing farm size per farmer
High risk associated with natural calamities
Lower crop yields
In the charts below, we have compared yields of
Yield (000 kg/ha)

8
6
4
2
-
USA
Russia
Ukraine
India
China
Crop yields vary significantly within states. These
can be attributed to an array of reasons such as

technology adoption, quality of agri-inputs and
infrastructure availability. However, it has been
observed that there is a direct relation between %
irrigated area with crop yield.
Russian Fed.
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
% Irrigated
Yield '000 kg/ha
Yield - LHS
% Irrigated
120%
100%
80%
60%
40%
20%
0%
Maharashtra
Rajasthan
Chhattisgarh
Odisha
Karnataka
MP
Jharkhand
Gujarat
Assam
Bihar
Uttarakhand
All India
Tamil Nadu
UP
AP
West Bengal
Haryana
Punjab
10
10
Banana
Source: MOPSI, GOI reports, HDFC sec Inst Research
Brazil
20
20
Ecuador
30
Philippines
30
China
40
40
India
50
Potato
France
Viet Nam
Indonesia
India
Bangladesh
Wheat
Rice
World
Crop yields in different states are

directly proportional to the
irrigation facility
China
World
USA
India
Impact of irrigation
Crop Yields For Food Grains Vs. Irrigated Area
China
World
World
Key reasons for lower yields:

(1) Poor quality of agri-inputs
(2) Inadequate irrigation facility
(3) Less usage of technology
the top-5 crop producing countries. In most cases

(except banana), our yield is below or equal to the
global average.
The sequence of the countries is based on their
global ranking in production.
(1) Poor irrigation facility, (2) Poor quality and

quantity of agri-inputs (seeds, agrochemicals and
fertilisers), (3) Conventional style of farming, i.e,
less technological advancement, and (4) Wastage
during farming.
Source: MOPSI, GOI reports, HDFC sec Inst Research
There are exceptions to the rule. For instance, in
Bihar and Assam the relation between irrigation

and yields are not direct. This may be owing to
frequent floods in Bihar and good rains in Assam.
Page | 4
Only ~46% of Indias cultivated

area is irrigated and the rest is
dependent on the rains
India accounts for about ~17% of the worlds
Over the years, there has also been a significant
And since only ~46% of the net cultivated area is
Consequently, the share of groundwater sources
population, but only ~4% of the worlds fresh

water resources. The distribution of these
resources is uneven across states.
irrigated, there is high dependency on monsoon.
Low Irrigation Penetration

Area (mn H) (LHS)
The situation is worrisome as

India has 4% of global fresh
water resources
Area under irrigation (%) (RHS)
140
60
120
50
100
has increased from 29% to a whopping 62% during

the same period (source: GOI reports).
Source Of Irrigation In India
40
80
30
60
20
40
10
20
-
FY51
A higher usage of underground

water (62% vs. 29% over the
past 65 years) has made India a
water-stressed nation
shift in the sources of irrigation in the country. The

share of canal in net irrigated area has declined
from ~40% in 1950-51 to ~24% in 2012-13.
FY61
FY71
FY81
FY91
FY01
FY11
Source: Ministry of Agriculture, HDFC sec Inst Research
Uncontrolled and non-scientific water usage has
However, the scarcity is not yet reflected in the
led to water scarcity in the country. As per

international norms, a water-stressed and waterscarce country is one where the per capita water
availability goes below 1,700 m3 and 1,000 m3,
respectively. India is already a water-stressed
nation with 1,544 m3 per capita availability, and is
sprinting towards water scarcity.
Of the total available water, irrigation consumes

~84%, industrial ~12% and domestic usage ~4%.
usage of water. As per GOI reports, India uses 2-4

times more water for crop production compared
to other major agricultural countries like China,
Brazil, and the US.
Hence, India can save ~50% water by adopting

scientific and efficient irrigation methods. This will
expand the area under irrigation and also result in
water conservation.
Page | 5
Poor irrigation infrastructure has led to a strong
-20
Source: IMD, Economy survey, HDFC sec Inst Research
-25
A study over FY81-16 has shown that agriculture
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
-10
FY16
-15
-5
Agriculture growth has been

robust in La Nina years, which is
expected in 2016
FY15
-10
FY14
20
FY13
-5
40
FY12
FY11
5
5
60
FY10
10
FY09
FY08
80
FY07
10
Monsoon Surplus/(Deficit)
FY06
Agriculture GDP Growth (RS)
La Nina
100
FY04
Relation Between Agriculture Growth And Monsoon
EL Nino
120
FY03
relation between Indian agriculture and monsoon.
FY02
Lack of irrigation facility has

resulted in direct relation
between monsoon and
agriculture growth
Cumulative Rainfall (Jun-Sep) (LPA) (%)
FY05
Monsoon is make or break for Indian agriculture
growth during La Nina is as high as 8.4% vs. an

average of 3%. El Nino results in negative growth.
10
Strongest El Nino in 2015 since 1997
The rainfall recorded in India was 88% and 86% of

LPA (long period average) in 2014 and 2015.
Since 1950, there have been 22 El Nino (bad
monsoon scenario) events of varying durations

and intensities. Of the 21 El Nino before 2015,
nine have been followed by La Nina (good
monsoon scenario).
The 2015 El Nino has been the strongest since
1997. However, forecasts of a La Nina in 2016

have revived hopes of a normal monsoon (source:
Economic survey 2015-16).
8.4
8
6
3.7
2
0
-2
-2.1
-4
La Nina years
Years other Period average El nino years

than EL Nino
and LA Nina
Source: Economic survey 2015-16, HDFC sec Inst Research
A normal monsoon in 2016 is essential for the
agricultural sector, which has been in distress for

the past two years.
Page | 6
The outlook for 2016 is robust

with both IMD and Skymet
predicting above-normal
monsoon
Robust outlook for monsoon in 2016
Probability For Monsoon-2016 By Skymet
Things seem to be looking up after two
Probability
Drought
Below normal
Normal
Above Normal
Excess
consecutive years of monsoon deficit. Two key

metrological agencies, IMD and Skymet, have
predicted rainfall to be 106% and 105% of LPA
(long period average) in 2016.
These forecasts have improved the sentiments of

all stakeholders in the sector.
Key points from the IMD forecast
The El Nino conditions have started weakening.

This years rainfall is likely to be 106% of the LPA,
with a model error of +5%.
Probability For Monsoon-2016 By IMD

Category
The Indian government is

implementing several projects to
improve irrigation infrastructure
Deficient
Below Normal
Normal
Above Normal
Excess
Rainfall Range Forecast Probability

(% of LPA)
(%)
< 90
1
90 - 96
5
96 -104
30
104 -110
34
> 110
30
Source: IMD, HDFC sec Inst Research
Key points from the Skymet forecast
The monsoon in 2016 is likely to be 105% of LPA.

Central India and west coast are likely to receive
%
5
10
30
35
20
Source: Skymet, HDFC sec Inst Research
Initiatives taken by Government of India
Irrigation projects worth Rs 58.4bn (vs. Rs 53bn
FY16BE) haves been budgeted under the Pradhan

Mantri Krishi Sinchai Yojana (PMKSY). Under this
scheme, 28.5 lakh hectares of land will be
irrigated.
The implementation of 89 stalled irrigation
projects under AIBP (Accelerated Irrigation

Benefits Programme) will be fast tracked.
This will help irrigate 80.6 lakh hectares. These

projects require an expenditure of Rs 170bn next
year and Rs 865bn in the next five years.
The government is focusing on water conservation
and judicious usage of water. Currently, flood

irrigation method is followed in India, which leads
to huge water loss. Focus on sprinkler and drip
irrigation systems will lead to lower consumption.
good rainfall.
Tamil Nadu, North East India and some regions in

Karnataka may receive less rainfall.
Page | 7
The easiest way to increase farm

income is by increasing MSP and
switching to cash crops
Non-remunerative price for crops
Change in crop pattern
Aim to double farmers income: Lower farm
Low-value cereals dominate Indian farming. There
income is a key reason for the poor state a

majority of the small farmers are in. The
government has targeted to double farmers
income by 2022. It is planning different initiatives
at farm and non-farm levels to achieve its goal.
Factors such as (1) MSP for crops, (2) Type of

crops, and (3) Marketing infrastructure impact
remuneration for farmers.
Is the increase in MSP sufficient?
There has been a significant increase in MSP of key

crops over the past few years.
Bringing more crops under MSP

and improving cold
storages/supply chain are key
factors
MSP (Prices in Rs/quintal)

Commodity
FY10
FY15
FY16
Paddy
Red Gram
Green Gram
Black Gram
Groundnut
Soyabean
Cotton
Wheat
950
2,300
2,760
2,520
2,100
1,390
2,500
1,080
1,360
4,350
4,600
4,350
4,000
2,560
3,750
1,450
1,410
4,625
4,850
4,625
4,030
2,600
3,800
1,450
% Change
FY10 to FY16
48%
101%
76%
84%
92%
87%
52%
34%
Source: Ministry of agriculture, HDFC sec Inst Research
However, MSP is not applicable for all crops and

not implemented fully across all states. Sometime
owing to excess production and absence of MSP,
farmers end up with huge losses.
The sale of food grains under the public
has been some shift towards high-value crops over

the past decade, but they still remain significantly
small.
The value of output per hectare from fruits and
vegetable was ~Rs 3.3 lakh vs. ~Rs 0.4 lakh for
cereals, Rs 0.3 lakh for pulses and Rs 0.5 lakh for
oil seeds (source: GOI reports for FY14).
Distribution Of Cropped Area Across Major Crops

Year
Rice
Wheat
Coarse Cereals
Total Cereals
Pulses
Total Food Grains
Sugarcane
Condiment and Spices
Fruits
Vegetables
Oilseeds
Fibres
Tobacco
Other Crops
Total
2001-02
24%
14%
16%
54%
11%
65%
2%
1%
2%
3%
12%
5%
0%
8%
100%
2013-14
22%
16%
13%
51%
13%
64%
3%
2%
4%
5%
14%
7%
0%
4%
100%
The share of fruits and vegetables has doubled

over the past two decades. However, it is still
below 10%.
distribution system (PDS) further reduces the

demand and, hence, the price of grains.
Page | 8
Inadequate marketing
infrastructure and gaps in APMC
Act are key reasons for farmers
poor condition
Lack of marketing infrastructure
Reducing farm size per farmer
Lack of supporting infrastructure is one of the key
Indias rising population and stagnant farm area
reasons for the lower share of high-value crops.
These crops require more capital and technology,
quality inputs, support services and timely

information.
have resulted in a highly fragmented land holding.

The average land holding has reduced from 1.84
hectares in 1980-81 to 1.15 hectares in 2010-11.
Land Holding in India
Fruits and vegetables are not part of the MSP

scheme and, hence, are completely exposed to
market dynamics.
Small land holdings make

adoption of mechanisation
unviable in India
A shortage of cold storage facilities and perishable
nature of the fruits and vegetables have resulted

in a majority being sold in local markets.
Inadequate supply chain infrastructure, too many
intermediaries, and gaps in the APMC Act have

resulted in low realisation for even high-value
crops.
In many states, farmers are forced to sell their

A transparent land lease law
may be a game changer and
lead to consolidation of lands at
the operational level
produce through APMC. Unless farmers are given

full freedom, there will always be middlemen in
the system and the farmers will receive only a
small pie of the final realisation.
There should be impetus on agro-processing
Marginal (< 1 ha)

Small (1 to 2 ha)
Semi-Medium
(2 - 4 ha)
Medium (4 - 10 ha)
Large (> 10 ha)
1980-81
Holding
(%)
56%
18%
Area
(%)
12%
14%
2010-11
Holding
Area
(%)
(%)
67%
22%
18%
22%
14%
21%
10%
24%
9%
2%
30%
23%
4%
1%
21%
11%
A fragmented land area makes usage of

technology unviable. Only ~15% of farmers (~55%
of area) have land parcels more than two hectares
that can benefit from mechanisation.
The absence of a transparent land leasing law is a
major problem. In many cases, landowners are not

farming and lands are given to sharecroppers.
industries,
cold
storages,
refrigerated
transportation facilities, and retail chains. The
development of contract farming, cooperatives,
and government support will provide market
access to farmers and will reduce price risk.
Tenants are not able to benefit from different
Unless these gaps are addressed, farmers will stick
The usage of mechanisation and implementation
to low, but assured, value crops like food grains.
government schemes without documents.

Landowners are also apprehensive about
providing tenant details, as they fear losing their
land.
of government schemes are viable only post the
consolidation of land holdings. With rising
population and further fragmentation of lands, the
only solution is a transparent land leasing law that
protects the interest of all stakeholders.
Page | 9
Risks associated with natural calamities

Transparent and quick relief
against natural disasters will
prevent distress among farmers
Indian farmers are exposed to natural disasters
such as droughts, floods, cyclones, storms,

landslides, earthquakes, etc. These can lead to
extreme distress in the absence of government
support.
So far, most relief measures were available to

Jan Dhan Yojana and the crop
insurance scheme can be game
changers for Indian agriculture
farmers with outstanding loans from banks.

However, there is nothing for marginal farmers,
landless workers and sharecroppers.
There is a need for a policy that provides a
minimal amount of relief to the farmers

immediately after the calamity. Damages should
be compensated in a given timeframe.
Direct transfer of money to the farmers bank

Seeds are the best and easiest
way to incorporate technology
in agriculture
Awareness, financial support

and strict regulation against
spurious seeds are key factors
accounts can improve transparency and efficiency

of relief measures.
Government initiatives
Crop insurance scheme: The government has

provided Rs 55bn (vs. Rs 26bn in FY16BE) for this
scheme, which aims to insulate farmers from
natural calamities and reduce their losses.
Agri credit: The government allocated an all-time
high of Rs 9.0tn for agricultural credit in FY17

compared to Rs 8.5tn YoY. Provision of Rs 150bn
has been made in FY17BE towards interest
subvention. These steps will reduce the burden of
loan repayment on farmers, which has increased
significantly post the two years of rain deficit.
Focus on the quality of agri-inputs

Apart from the supporting infrastructure discussed
earlier, seeds, fertilisers and agrochemicals are key
inputs in agriculture. Their quality and quantity
directly impact crop yields.
During the previous green revolution, the focus

was on usage of high-yielding seeds and effective
usage of fertilisers.
Seeds
Seeds are a key product in agri-inputs. Due to lack
of awareness and financial support, the share of

quality seeds is still low vs. the farm saved seeds.
Quality seeds usage is <20% in pulses and <30% in
paddy and wheat.
Currently, there are institutions (public, private

and universities) that are involved in the
development of high-yielding crops.
So far, technology has been successful adopted in

cotton (BT). Hybrids in maize, vegetables, fruits,
and rice are also gaining traction.
The government is implementing initiatives to
increase the usage of quality seeds. Policy is made

for 100% FDI under the automatic route. There is a
thrust on creating a seed bank.
There is need for a mechanism that offers financial
support to marginal farmers. Since hybrid seeds

are costlier, they arent very frequently.
A strict regulatory framework should be in place to
restrict the sale of spurious seeds. Companies

should be held accountable for poor performance
of seeds.
Page | 10
Soil health card will lead to a

judicious use of fertilisers in
India
Fertilisers
Agrochemicals
The usage of fertilisers was given significant
Agrochemicals have received the least attention
importance during the Green Revolution. The

average consumption of fertilisers in India rose
from ~106 kg/ha in 2005-06 to ~128 kg/ha in
2012-13.
However, the usage in India is still below its
neighbouring countries. Pakistan consumes 205

kg/ha whereas China uses 396 kg/ha.
A balanced usage of nutrients is important, along
Lower pesticide usage is one of

the key reasons for lower yields
in India
with higher usage of fertilisers. The optimal level

of fertiliser use depends on the soil, crop and
water availability.
Lower price of urea vs. complex fertilisers resulted
in higher usage of nitrogen nutrient compared to

phosphorous and potash. An unbalanced usage of
fertilisers is leading to lower yields.
Government initiative: A soil health card scheme
has been initiated to give farmers information

about the nutrient level of the soil. This will help
them make judicious use of fertilisers. The target
is to cover all 14cr farm holdings by March 2017.
The government has budgeted Rs 3.7bn for this
project.
from the government.
It is estimated that crop losses in India owing to
pests are as high as 15% to 25%. If these losses are

avoided, India will be able to meet its needs for
2020 domestically (source: GOI reports).
The usage of agrochemicals is quite low in India
compared to other countries. This is also

considered as one of the key reasons for lower
crop yields.
Agrochemical Usage Vs. Yields

Country
UK
France
USA
China
India
World
Pesticide uses (kg/ha)

5.0
5.0
7.0
13.0
0.6
3.0
Yield (Tons/ha)
7.0
7.5
7.0
6.5
3.0
3.0
Source: FICCI Agricultural Census, Analysis by Tata Strategic
While consumption is low in India, pesticide

residues have been found to be too high.
This is mainly because of a huge spurious market
and the use of more dangerous chemicals.

Developed countries have shifted to safer
chemicals such as organophosphates and
pyrethroids, whereas India still uses hazardous
organochloride formulations.
Page | 11
Inadequate access to latest technologies such as

Lack of awareness and lower
share of cash crops have
resulted in minimal usage of
agrochemicals in India
low drift nozzle and spray shields is also leading to

lower efficiency. It is estimated that currently only
0.1% of the applied pesticide in Indian farms hits
the target with the remainder contaminating the
soil and water (source: GOI reports).
Indian farmers also lack information related to
agrochemicals. The Central Insecticide Board and

Registration Committee (CIBRC) regulate pesticide
use in India. However, farmers are often unaware
of the pesticides recommendations.
Use of bio-pesticides has not been popularised

and constitute only ~4% of the total pesticide
market in India.
Despite having the second-largest arable land,

India and Latin America are two
growing markets. Global
innovators are keen to
participate in India
agrochemicals consumption is very less in the

country.
Agro-chemical Market Size In Major Countries

Country
Brazil
USA
China
Japan
France
Germany
Canada
Argentina
India
Italy
Australia
2008 (US$ bn)

5.9
6.6
3.2
3.2
3.2
2.0
1.3
1.0
1.4
1.2
1.1
2013 (US$ bn)

10.0
7.4
4.8
3.4
2.9
2.1
2.0
1.7
1.7
1.3
1.1
CAGR (%)
11.0
2.3
8.6
1.3
(2.5)
1.0
8.2
11.2
3.8
2.1
(0.6)
Source: Sumitomo annual report
Awareness among farmers, better availability of
The Indian crop protection industry is estimated at
~US$ 4.25bn, which is divided between domestic

and exports. It is expected to grow at 12% CAGR to
reach ~US$ 7.5bn by FY19 (source: Tata Strategic
Group, FICCI).
Indian Crop Protection Market (US$ bn)

Export
Domestic
Total
FY14
2.0
2.3
4.3
FY19E
4.2
3.3
7.5
CAGR (%)
16.0
8.0
12.0
Source: Tata strategic group, FICCI
Exports will grow at 16% CAGR. Indian players are

well placed, with the right skill set available at a
lower cost and growing outsourcing by MNCs.
Global innovators serious about India
Global majors want to expand their products in

India owing to an immense scope for increase in
penetration.
What they have to say
Chemtura: In India, we intend to continue to

invest in order to expand our portfolio of
businesses in the region.
Dupont: Over the next 5 years, we anticipate that
over half our sales growth in the agriculture

segment will occur outside North America and
focused in key markets of Brazil, Russia, Ukraine,
India and China.
FMC: With the acquisition of Cheminova, we are
expanding our international sales, particularly in

Europe and key Asian countries such as India.
products and rising farm incomes will lead to a

higher usage of agrochemicals.
Page | 12
India players strategies

Indian players have a huge
opportunity both in domestic as
well as export markets
The Indian domestic agrochemical market is
growing fast, led by lower penetration, new

efficient products and farmers shifting towards
cash crops.
Generic products earlier dominated the market.

However,
seeing
the
vast
opportunity, global innovators are entering India
through marketing tie-ups with local players.
Key Indian players have adopted different

strategies.
All key players are focusing on

launching specialty products
with tie-ups with global
innovators
Differentiated Approach By India Players

Company
Bayer Crop science
Rallis India
UPL
PI Industries
Dhanuka Agritech
Insecticide India
Key Strategies
Best product portfolio owing to strong parent. Pioneer in launching new products
One-stop solution for farmers. Products across both generic and licensed category
Diversification across multiple countries. Shift from pure generic to branded company
Focus on high-end CSM business. Specialty product approach in domestic market
Only into formulation. Specialty product portfolio with tie-ups with global innovators
Portfolio of fast-growing generic products. Focus on bio-pesticide and R&D
Being at the end of value chain (after seeds and
Impact of monsoon on Indian players
Like
other
agri-inputs,
consumption
agrochemicals is also dependent on monsoon.
of
fertilisers), farmers prefer to cut cost in usage of

agrochemicals during tough years.
Outlook for agrochemicals is robust if monsoon

remains normal.
Agrochemicals market growth is

directly linked to monsoon
Revenues Growth (%) Of Indian Agrochemical Players

Company
Dhanuka Agritech
Insecticides India
PI Industries 1
Rallis India 2
UPL 3
Cumulative Rainfall*
FY07
259.9
37.4
17.6
14.0
15.8
106
FY08
23.8
17.4
22.0
13.4
21.8
98
FY09
35.6
33.4
9.6
(9.4)
28.9
78
FY10
21.1
43.3
2.1
26.5
16.0
102
FY11
20.5
19.3
42.5
15.6
24.7
102
FY12
7.8
15.9
3.6
5.1
15.1
93
FY13
10.0
18.2
12.3
19.0
5.0
106
FY14
26.8
40.1
20.0
20.9
24.4
106
FY15
6.3
11.6
19.5
5.3
16.8
88
9MFY16
3.1
0.8
3.3
(14.6)
2.8
86
Source: IMD, Company, HDFC sec Inst Research *Cumulative Rainfall (Jun - Sep) (LPA) (%)
1 - PI Industries: Only domestic agri-inputs division revenues are considered. CSM revenues are not included.
2 - Rallis India: Only domestic revenues are considered. These are ~70% of total revenue.
3 - UPL: Only Indian revenues are considered
Page | 13
INITIATING COVERAGE
13 MAY 2016
Dhanuka Agritech
BUY
INDUSTRY
AGROCHEMICAL
CMP (as on 13 May 2016)
Rs 630
Target Price
Rs 700
Nifty
7,815
Sensex
25,490
KEY STOCK DATA

Bloomberg
DAGRI IN
No. of Shares (mn)
50
MCap (Rs bn) / ($ mn)
32/472
6m avg traded value (Rs mn)
STOCK PERFORMANCE (%)

52 Week high / low
Rs 718/408
3M
6M
12M
Absolute (%)
20.5
45.9
6.1
Relative (%)
9.6
46.4
12.5
SHAREHOLDING PATTERN (%)

Promoters
FIs & Local MFs
FIIs
Public & Others
Source : BSE
Satish Mishra
+91-22-6171-7334
Deepak Kolhe
+91-22-6171-7316
74.99
6.52
0
18.49
On the road less travelled

Dhanuka Agritech Ltd (DAL) has a unique business
model with (1) Focus on in-licensing speciality
molecules, (2) Tie-ups with global innovators, (3)
Regular launches of new products, preferably in the
fast-growing herbicide/fungicide segments, (4)
Presence only in asset-light formulation business,
and (5) Pan-India distribution network with added
initiatives such as Dhanuka Doctors to spread
awareness among farmers.
DAL has developed a strategic partnership with eight
global innovators across Japan and the US. The
sourcing of new exclusive products has resulted in
the share of high-margin high-growth specialty
molecules rising to ~75% by FY15. The company
aspires to launch 2-3 new products (in 9(3) category)
every year to maintain its growth momentum.
DAL adopted the asset-light only formulation
approach, as it requires less incremental capex to
launch new products. It has spent Rs 1.2bn in adding
capacities over the past five years. We see no major
capex over the next 2-3 years even for revenue CAGR
of ~20%.
DAL has strengthened its marketing network to
achieve full benefits of tie-ups with MNCs and new
launches. The number of distributors (~9k) and
Dhanuka Doctors (~1.5k) has doubled over the past
seven years.
A differentiated approach has worked in the
companys favour. It has achieved revenues CAGR of
31% and EBITDA CAGR of ~38% over FY05-15. The
balance sheet is debt-fee despite a distressed agri

situation (owing to two bad monsoons) and recent
capex of Rs 600mn (to be commissioned in FY17).
A strong product portfolio and new launches will
lead to robust growth. A healthy balance sheet and
improving return ratios will command premium. At
CMP, the stock is trading at 18.0x FY18E EPS and 4.4x
BV. We initiate coverage on Dhanuka Agritech with a
BUY rating and a TP of Rs 700/sh (20x FY18E EPS).
Robust financials: We expect revenues and PAT to
grow at a CAGR of 23% and 34% over FY16-18E.
RoE and RoCE will grow to 26.9/26.1% in FY18E vs.
21.6/20.3% in FY16E.
Near-term outlook: FY16 was challenging for

agrochemical players owing to the second
consecutive year of bad monsoon. DALs share
price moved up ~20% in the past three months in
anticipation of good rains. Any disappointment
related to monsoon is a big risk for all agri-input
companies.
Financial Summary (Standalone)

(Rs bn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY14
7,369
1,206
920
18.4
34.2
26.4
30.9
FY15
7,838
1,317
1,059
21.2
29.8
23.7
28.4
FY16E FY17E
8,308 10,219
1,406 1,911
978 1,318
19.5
26.4
32.2
23.9
22.2
16.2
21.8
24.6
FY18E
12,524
2,524
1,750
35.0
18.0
12.1
26.9
DHANUKA AGRITECH : INITIATING COVERAGE
DAL enjoys pan-India presence through its
DALs performance over the past 15 years

DALs revenues have grown ~30x
over the past 15 years
Dhanuka Agritech Ltd (DAL) is engaged in the
marketing and has a network of more than 8,600

distributors and over 80,000 retailers.
DALs revenues have grown ~30x over the past 15
The strong performance was led by multiple
formulation of a wide range of agrochemicals.
factors such as increasing focus on distribution

network, tie-ups with global innovators and focus
on in-licensing product where margins are higher.
years. In the chart below, we have summarised its

journey over three phases and the key triggers.
Stellar Performance Led By Multiple Factors

Revenues (Rs mn) (LHS)
EBITDA (Rs mn) (LHS)
EBITDA margins (%) (RHS)
14,000
The company has built a

network of more than 8.5k
distributors and over 75k
retailers across India
25%
2 years deficit
12,000
20%
1 years rain deficit
10,000
8,000
15%
6,000
10%
4,000
5%
2,000
FY18E
FY17E
FY16E
FY15
FY14
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
0%
FY02
Source: Capitaline, Company, HDFC sec Inst Research (*Deficit more than 10%)
Tie-up with global innovators

and launches of specialty
products were key strategies
FY02 to FY06
Focus on in-licensing products and
increase in tie-ups with global
innovators.
Blockbuster product Targa Super
was sourced from Nissan Chemical,
Japan.
Hit by two years of rain deficit in
2002 and 2004.
FY07 to FY13
Products launched during FY01-FY06
started contributing to topline.
Escalation in raw material prices pushed
up realisation of many products.
Focus on fast-growing herbicides. Built
strong product portfolio.
Govt support with reduction in excise
duty from 14% to 8%
EBITDA margins improved owing to
higher contribution from in-licensing
products.
FY14 to FY18E
Two consecutive rain deficits (2014
and 2015) impacted the sector.
Introduction of new 9(3) products.
Rising share of revenues from newly
launched products and hence,
gradual increase in margins.
DAL enjoyed 6% of the domestic
agrochemicals market share.
New plant at Rajasthan to support
future growth.
Page | 15
DHANUKA AGRITECH: INITIATING COVERAGE
Asset-light business model

Unlike the technical business,
only the formulation model
requires less incremental capex
for launching new product
Dhanuka Agritechs asset-light business model
differentiates it from peers. The company focuses

only on formulation and sources technical directly
from innovators or other manufacturers. Three
factors support this model: (1) A better product
mix, (2) Strong marketing network, and (3) Good
relationship with innovators.
Fast-growing product mix
DALs product portfolio is concentrated towards

fast-growing herbicides, while that of the domestic
industry is towards insecticides. Herbicide is
growing at a rapid pace owing to the rising manual
labour cost in India. Globally, it is the biggest
category.
Crop Protection Industry As Per Category (%)

Insecticide
100%
80%
DAL is focusing on fast-growing

herbicides, whereas the industry
is concentrated towards
insecticides
Fungicide
Herbicide
Other
4%
16%
7%
11%
15%
44%
30%
60%
16%
40%
65%
27%
43%
20%
22%
0%
India
Global
Dhanuka
Source: UPL AR, Company, HDFC sec Inst Research
DALs revenue contribution from herbicide and

fungicide category has gone up from 23% and 13% in
FY08 to 30% and 16% in FY15.
DALs revenue mix
Revenue (%)
FY08
FY15
Insecticide Herbicide Fungicide Others

57
23
13
8
43
30
16
11
DALs Targa Super is the market leader in

herbicide for soybean. It was launched in 2001 in
collaboration with Nissan (Japan). The recent
launches have been mostly in the herbicide and
fungicide categories.
New Product Launched In Herbicide And Fungicide

Product
Conika
Dozo
Sempra
Sakura
Oxykill
Protocol
Category
Fungicides
Herbicides
Herbicides
Herbicides
Herbicide
Fungicides
Crop
Paddy
Cottons
Sugarcane, maize
Soyabean
Rice, Onion,
Chilli, rice, grapes, tomato
Year
FY16
FY16
FY15
FY15
FY15
FY15
Strong marketing network
DAL has a pan-India marketing network with more

than 8,600 direct distributors and over 80,000
retailers. A strong marketing network will lead to
(1) Increased brand awareness, (2) Strong product
reach, (3) Interest from global innovators, and (4)
Competitive advantage. The company doubled its
distributors between FY08 and FY14.
Page | 16
Strong Marketing Network In India

DAL has a pan-India marketing
network with over 8,600 direct
distributors and over 80,000
retailers
Marketing Network
Revenues (Rs mn)
Total Distributors
Districts covered
Dhanuka Doctors
Retail counters
FY08
2,482
4,000
450
750
FY14
7,384
8,000
600
1,500
75,000
FY15
7,851
8,600
600
1,500
80,000
Technical collaboration with global leaders
DAL has strong technical tie-ups with global
innovators. Currently, the company is sourcing

specialty molecules from four American and
Japanese companies each. As part of these
collaborations, DAL gets access to better products
and saves on R&D costs, while the innovators gain
entry to Indias fast-growing agrochemical market
and access to DALs marketing network.
Currently, the company is

sourcing specialty molecules
from four American and four
Japanese companies
DAL has introduced 16 new

products in the past three years
Strong Relationship With Global Innovators

Tie up
with
Nissan
Country
Japan
Dupont
US
Chemtura
Sumitomo
FMC
Dow
Mitsui
Hokko
US
Japan
US
US
Japan
Japan
Products
Targa Super, Sempra, Sakura,
Qurin, HOOK, Cursor, Hi-Dice, DUNET,
Cover, Lustre, Dhawa gold
Omite, Dimline, Vitavaxulta,
CALDAN 4 G, Sheathmar
MARKAR, AAATANK, Brigade, Nabood
ONEUP, TARGA SUPER + ZARGON,
Bombard, Nukil,
Kasu-B, Conika
Regular introduction of new molecules
DAL has introduced 16 new products in the past
three years. Of this, six are registered under 9(3)

and 10 under 9(4). The revenue share of the new
products improved to 20% in 9mFY16 compared to
15% in 9mFY15.
Two consecutive years of rain deficit impacted the
growth of these products. We believe Sempra,

Conika, Mortar and Sakura have huge growth
potential in the near future and a normal
monsoon will lead to better demand.
Products Launched In Past 2-3 Years

Product
Thiram
Goldy
Conika
Type
9(4)
9(4)
9(3)
Cover
9(3)
Dozo
Dhanvarsha
Sempra
9(3)
Mortar
9(3)
Sakura
Pager
Oxykill
Jackal
9(3)
9(4)
9(4)
9(4)
Defend,
9(4)
Danfuron
9(4)
9(3)
Categ. Crop
Fung
Fung Potato, grapes
Fung Paddy
Soyabean, Black
Insec gram, sugarcane,
Paddy
Herb Cottons
PGR
Herb Sugarcane, maize
Paddy and
Insec
vegetable
Herb Soyabean
Insec
Herb Rice, onion
Insec
Paddy, grapes,
Insec
chilly, horticulture
Brinjal, chilli, okra,
Insec
tomato
Launch
FY16
FY16
FY16
FY16
FY16
FY16
FY15
FY15
FY15
FY15
FY15
FY14
FY14
FY14
Page | 17
Rising share of specialty molecules
Robust growth potential for new products
The introduction of new products has led to a
The penetration of crop protection chemicals in
Specialty And Generic Revenues Contribution
60.0%
Addressable area for new products

A bigger opportunity in crops such as cotton,
maize, sugarcane and paddy, where sowing area is
huge.
Mortar, Sakura and Sempra will be major
contributors to revenues.
40.0%
Product
Type
Crop
20.0%
Conika
Conika
Fung
Fung
Pomegranate
Tomato
Conika
Mortar
Fung
Insec
Cole Crops
Paddy
1,199
108,600
97
1,700
Mortar
Mortar
Insec
Insec
Tomato
Cole Crops
2,100
2,000
400
140
Sempra
Sempra
Sakura
Herbi
Herbi
Herbi
Sugarcane
Maize
Cotton
12,025
17,675
28,882
317
106
693
Sakura
Herbi
Onion
2,970
583
Sakura
Herbi
Jute
2,540
83
gradual increase in the share of the high-margin

specialty segment.
Speciality (%)
100.0%
Generic (%)
80.0%
Contributions from products

launched in the past three years
increased to 20% in 9mFY16 vs.
15% in 9mFY15
0.0%
FY11
FY12
FY13
FY14
FY15
FY16
Decreasing Product concentration
As of FY12, the top-5 products contributed ~41%
to revenues (Targa super 20%, Caldan 10%,

Markar 4%, Omite 4% and Dhanzyme 3%). Rising
contribution from new products has, however, led
to a decline in the top-5s share to 25-28%. The
contribution from products launched in the past
three years increased to 20% in 9mFY16 as
compared to 15% in 9mFY15.
Top-5 Products Contribution

Products
Targa super
Caldan
Markar
Dhanzyme Granules
Omite
Category
Herbicide
Insecticide
Insecticide
Organic manure
Insecticide
India is below 30%. Therefore, new products have

a huge potential.
Addressable
Area
area (k acre) tapped*
244
73
1,072
73
Source: Company, HDFC sec Inst Research,*000 acres
We have analysed the huge revenue potential for a

few new products.
Revenues share
25-28%

Page | 18
No major capex going forward
Sempra was launched in FY15 for sugarcane and
The company has spent more than ~Rs 1.2bn on
Assuming Addressable Area For Sempra (%)
30.0
Usage Area In Sugarcane For Sempra (mn ha)
0.39
Assum: Area Tapped Of The Addressable Area (%)
25.0
Usage amount (Rs/ ha)
5,000
Total Sales (Rs mn)
1,961
The area under maize is ~9.4mn hectares
compared to ~5.2mn hectares in sugarcane. Even

at a lower penetration, it offers a huge
opportunity.
The company has already incurred a major capex
for its growth. We believe it will require only Rs

50-100mn per year towards maintenance capex.
Net debt/equity remains zero even at the peak of

its capex despite poor rains. We expect net debt
to remain zero over FY15-FY18E.
We expect the company to generate CFO of ~Rs
700mn/year and free cash flow of ~Rs 500mn/year

over FY17E-18E.
Healthy Cash Generation And No Capex To Boost FCF

Capex (LHS)
1,500
Sempra potential in Maize

Total Area Under Maize (mn ha)
Addressable Area For Sempra (mn ha)
Assuming Addressable Area For Sempra (%)
Usage Area In Maize For Sempra (mn ha)
Assum: Area Tapped Of The Addressable Area (%)
Usage Amount (Rs/ha)
Total Sales (Rs mn)
9.4
2.8
30
0.28
10
5,000
1,410
FCF (RHS)
1,000
Rs mn
800
1,000
600
400
500
200
-
(200)
(500)
(400)
FY11
DAL has spent more than ~Rs

1.2bn on capacity expansion in
the past five years. No major
capex likely in 2-3 years
FCO (LHS)
FY18E
1.6
FY17E
Addressable Area For Sempra (mn ha)
Strong free cash flow generation
FY16E
5.2
FY15
Total Area Under Sugarcane (mn ha)
FY14
Sempra Potential In Sugarcane
capacity expansion in the past five years. Earlier, it

had formulation units at Gurgaon, Udhampur and
Sanand. DAL will almost double its capacity with
the new manufacturing facility in Rajasthan, which
will commence from FY17.
FY13
maize to control cyprus weed. It is the only

product in the world with the ability to do so. This
product has the potential to achieve revenue of
more than Rs 3bn.
FY12
The penetration of crop

protection chemicals in India is
below 30%. Therefore, new
products have a huge potential
Revenue potential from Sempra
Page | 19
Strong return ratios: Healthy asset turnover and
How a differentiated model helped DAL
Higher assets turnover ratio: Dhanuka has asset

turnover ratio ~2x as of FY15.
DAL has the highest fixed asset

turnover ratio owing to its
formulation model
Dhanuka
PI Industry
Rallis India
UPL
Insecticide India
2.5
higher margins has resulted in strong return

rations for Dhanuka Agritech.
ROE Comparison
Dhanuka
40.0
2.0
PI Industry
Rallis India
UPL
Insecticide India
30.0
1.5
20.0
1.0
10.0
0.5
FY11
FY12
FY13
FY14
FY15
FY11
FY12
FY13
FY14
FY15
PBT margins: Lower depreciation and interest cost

as compared to peer leads to better PBT margins
Lower depreciation and interest

cost resulted in better PBT
margins for DAL
Dhanuka
20.0
PI Industry
Rallis India
UPL
Insecticide India
ROCE Comparison
Dhanuka
35.0
PI Industry
Rallis India
UPL
Insecticide India
30.0
15.0
25.0
20.0
10.0
15.0
10.0
5.0
5.0
-
FY11
FY12
FY13
FY14
FY15
FY11
FY12
FY13
FY14
FY15
Page | 20
Dhanukas cash conversion cycle

is the highest among peers.
However, it is mainly on account
of lower payables. Being debtfree, DAL prefers discount to
extended payable period
Concerns on high WC cycle is over stretched
Expansion in CRAM business on the cards
Dhanukas cash conversion cycle is around 150-
In 3QFY16, the management indicated some
170 days. This is the highest among agrochemical

players. However, looking deeper, the difference is
mainly on account of lower payable days.
Debtor and inventory days for DAL are comparable
to the industry. Since the company enjoys debtfree status, it buys most of the raw materials in
discount while paying in cash.
Risks
Monsoon: Indian agriculture is dependent on
Working capital cycle as on FY15

Particulars (Days)
interest in the CRAMs business. DALs relationship

with global innovator companies could help
expand the business. Although this may not
happen in the near future, we believe this
initiative will strengthen the companys position
from formulation to CRAMs manufacturer.
UPL
PI Ind.
Rallis
Dhanuka
Inventory
89
71
79
89
Debtor
Payables
111
97
72
67
50
58
90
29
Cash conversion cycle
103
77
71
150
monsoon, with only ~46% of arable land irrigated.
Dependency on global suppliers: DAL is engaged

in the business of formulation rather than
technical. Therefore, the company is dependent
on global innovators.
Changes in regulation: Product registration is a

time-consuming process. Any changes
regulation could impact product launches.
in
The management has indicated

interest in the CRAMs business
Page | 21
Assumptions
Assumption
Specialty
% Change
% Of Revenues
Generic
% Change
% Of Revenues
Gross Margins Total (%)
Specialty Margins (%)
Generic Margins (%)
FY12
4,136
9.4
72.0
1,609
(0.7)
28.0
FY13
4,643
12.2
72.0
1,805
12.2
28.0
FY14
6,041
30.1
73.0
2,234
23.8
27.0
FY15
6,495
7.5
75.0
2,165
(3.1)
25.0
FY16E
7,340
13.0
80.0
1,840
(15.0)
20.0
FY17E
9,175
25.0
81.3
2,116
15.0
18.7
FY18E
11,469
25.0
82.9
2,370
12.0
17.1
35.3
34.6
37.7
37.3
37.8
40.0
29.0
38.1
40.0
30.0
38.3
40.0
30.0
Peer Valuations
Chambal Fert
Coromandel Int
Dhanuka Agritech
Insecticides India
PI Industries
Rallis India
UPL Ltd
Navin Fluorine
SRF Ltd
Mcap
(Rs bn)
CMP
(Rs/sh)
Rating
TP
(Rs/sh)
27.6
63.7
31.5
9.1
85.5
40.5
250.2
20.6
72.4
66
225
630
441
626
209
584
2,105
1,261
BUY
BUY
BUY
BUY
BUY
BUY
BUY
BUY
NEU
76
260
700
535
680
250
625
2,150
1,330
EPS (Rs/sh)
FY16E FY17E
FY18E
9.9
8.9
9.5
11.8
15.9
21.7
19.5
26.4
35.0
19.5
25.9
33.4
20.1
25.0
31.1
7.4
9.8
12.5
31.8
35.3
43.5
85.5
99.7
134.4
73.7
86.5
95.0
FY16E
6.7
19.0
32.2
22.7
31.1
28.3
18.4
24.6
17.1
P/E (x)
FY17E
7.5
14.2
23.9
17.0
25.1
21.3
16.5
21.1
14.6
FY18E
7.0
10.4
18.0
13.2
20.1
16.6
13.4
15.7
13.3
FY16E
1.2
2.7
6.5
2.7
7.6
4.5
3.7
3.2
2.7
P/BV (x)
FY17E
1.0
2.4
5.4
2.4
6.1
4.0
3.1
2.9
2.3
FY18E
0.9
2.1
4.4
2.0
4.9
3.5
2.6
2.5
2.0
FY16E
17.8
14.9
21.8
12.9
27.3
16.7
21.6
13.5
17.0
ROE (%)
FY17E
14.7
18.0
24.6
15.0
27.1
19.9
20.5
14.3
17.3
FY18E
14.1
21.7
26.9
16.7
27.0
22.3
21.3
17.2
16.5
Source : Company, HDFC sec Inst Research
Page | 22
Income Statement (Standalone)

(Rs mn)
Net Revenues
Growth (%)
Material Expenses
Traded Goods
Employee Expenses
Other Operating Expenses
Operating Profits
Operating Profit Margin (%)
Other Operating Income
EBITDA
EBITDA Margin (%)
EBIDTA Growth (%)
Depreciation
EBIT
Other Income (Including EO Items)
Interest & Financial charges
PBT
Tax
RPAT
EO (Loss) / Profit (Net Of Tax)
APAT
APAT Growth (%)
AEPS
EPS Growth (%)
Balance Sheet (Standalone)

FY14
7,369
26.9
4,270
327
580
1,001
1,191
16.2
15
1,206
16.3
47.2
48
1,157
48
42
1,163
232
931
11.2
920
44.7
18.4
44.7
FY15
7,838
6.4
4,485
436
648
965
1,304
16.6
13
1,317
16.8
9.3
59
1,259
61
26
1,294
233
1,061
2.0
1,059
15.1
21.2
15.1
FY16E FY17E FY18E

8,308 10,219 12,524
6.0
23.0
22.6
4,344 5,308 6,483
832 1,023 1,254
725
834
959
1,014 1,155 1,317
1,393 1,898 2,511
16.8
18.6
20.0
13
13
13
1,406 1,911 2,524
16.9
18.7
20.1
6.8
35.9
32.0
62
90
94
1,344 1,822 2,429
47
48
52
14
1,377 1,870 2,482
399
552
732
978 1,318 1,750
0.0
0.0
0.0
978 1,318 1,750
(7.7)
34.8
32.7
19.5
26.4
35.0
(7.7)
34.8
32.7
(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders Funds
Minority Interest
Long-term Debt
Short-term Debt
Total Debt
Long-term Provisions & Others
Net Deferred Taxes
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Investments
LT Loans & Advances
Other Non-current Assets
Total Non-current Assets
Inventories
Debtors
Other Current Assets
Cash & Equivalents
Total Current Assets
Creditors
Other Current Liabilities & Provns
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF FUNDS
FY14
FY15
FY16E
FY17E
FY18E
100
3,225
3,325
394
394
153
36
3,909
100
4,023
4,123
161
161
174
34
4,492
100
4,755
4,855
175
175
174
34
5,238
100
5,741
5,841
174
34
6,049
100
7,051
7,151
174
34
7,359
671
223
10
201
3
1,106
2,113
1,703
227
23
4,067
482
783
1,264
2,802
3,909
702
385
51
303
3
1,444
1,917
1,939
184
457
4,496
622
825
1,448
3,048
4,492
1,389
35
151
303
9
1,887
2,052
2,166
184
435
4,837
661
825
1,486
3,351
5,238
1,400
35
151
303
9
1,897
2,523
2,523
184
560
5,790
813
825
1,638
4,152
6,049
1,405
35
151
303
9
1,903
3,091
3,091
184
910
7,277
996
825
1,821
5,456
7,359
Page | 23
Cash Flow (Standalone)

(Rs mn)
Reported PBT
Non-operating & EO items
Interest expenses
Depreciation
Working Capital Change
Tax Paid
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Investments
Non-operating Income
INVESTING CASH FLOW ( b )
Debt Issuance/(Repaid)
Interest Expenses
FCFE
Share Capital Issuance
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
EO Items, Others
Closing Cash & Equivalents
Key Ratios
FY14
1,163
(48)
42
48
(659)
(224)
322
(288)
34
(10)
59
(239)
64
(42)
57
(193)
(170)
(87)
11
23
FY15
1,294
(61)
26
59
(38)
(234)
1,045
(253)
792
(41)
63
(231)
(237)
(26)
529
(117)
(380)
434
2
457
FY16E
1,377
(47)
14
62
(330)
(399)
677
(400)
277
(100)
47
(453)
14
(14)
277
(246)
(246)
(21)
435
FY17E
1,870
(48)
90
(676)
(552)
683
(100)
583
48
(52)
(175)
408
(332)
(507)
125
560
FY18E
2,482
(52)
94
(954)
(732)
838
(100)
738
52
(48)
738
(440)
(440)
350
910
PROFITABILITY (%)
GPM
EBITDA Margin
EBIT Margin
APAT Margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax Rate (%)
Asset Turnover (x)
Inventory (days)
Debtors (days)
Other Current Assets (days)
Payables (days)
Other Current Liab & Provns (days)
Cash Conversion Cycle (days)
Debt/EBITDA (x)
Net D/E (x)
Interest Coverage (x)
PER SHARE DATA (Rs)
EPS
CEPS
DPS
BV
VALUATION
P/E (x)
P/BV (x)
EV/EBITDA (x)
OCF/EV (%)
FCF/EV (%)
FCFE/MCAP (%)
Dividend Yield (%)
FY14
FY15
FY16E
FY17E
FY18E
37.7
16.3
15.7
12.5
30.9
26.6
27.1
37.3
16.8
16.0
13.5
28.4
26.0
25.7
37.8
16.9
16.2
11.7
21.8
21.6
20.3
38.1
18.7
17.8
12.9
24.6
25.0
23.4
38.3
20.1
19.4
14.0
26.9
28.7
26.1
19.9
2.1
104
84
2
24
39
128
0.3
0.1
27.8
18.0
1.9
89
90
1
29
38
113
0.1
(0.1)
48.4
29.0
1.7
90
95
1
29
36
121
0.1
(0.1)
96
29.5
1.8
90
90
1
29
29
122
0.0
(0.1)
NA
29.5
1.9
90
90
1
29
24
128
0.0
(0.1)
NA
18.4
19.4
4.0
66.5
21.2
22.3
4.5
82.4
19.5
20.8
4.2
97.1
26.4
28.1
5.7
116.8
35.0
36.9
7.5
143.0
34.2
9.5
26.4
1.0
0.1
0.2
0.6
29.8
7.6
23.7
3.3
2.5
1.7
0.7
32.2
6.5
22.2
2.2
0.9
0.9
0.7
23.9
5.4
16.2
2.2
1.9
1.3
0.9
18.0
4.4
12.1
2.7
2.4
2.3
1.2
Page | 24
INITIATING COVERAGE
13 MAY 2016
Insecticides India
BUY
INDUSTRY
AGROCHEMICAL
Rs 441
Target Price
Rs 535
Nifty
7,815
Sensex
25,490
KEY STOCK DATA

Bloomberg
INST IN
No. of Shares (mn)
21
9/137
14

52 Week high / low
Rs 605/295
3M
6M
12M
Absolute (%)
47.9
24.4
(9.9)
Relative (%)
37.0
24.9
(3.4)

Promoters
68.75
FIs & Local MFs
7.76
FIIs
5.09
Public & Others

Source : BSE
Satish Mishra
+91-22-6171-7334
Deepak Kolhe
+91-22-6171-7316
18.40
Ready to grow
Insecticides India Ltd (IIL) is a fast-growing Indian
agrochemical player present across branded
formulation and the technical business. It has built a
strong
product
portfolio
through
reverse
engineering, inorganic acquisitions and tie-ups with
global innovators.
IILs product portfolio comprises ~100 branded
products and ~20 technicals. To increase its focus on
high-growth and high-margin products, IIL has
categorised the top-20 branded products as
Navratna and Super-11. The top-20 products
contribute ~70% to formulation revenues (~50% to
total revenues) and have grown at ~30% CAGR over
FY12-15.
The company has product tie-ups with global players
such as AMVAC (US) and Nissan (Japan). Two
products from each partner are part of the top-20. IIL
has formed a 50-50 JV with OAT Agrio (Japan) to
capitalise on molecules going off-patent (worth US$
6.3bn) during 2014-2020. The total investment by the
JV, which aims to discover new molecules, will be
~Rs 400mn.
IIL has invested ~Rs 2.5bn over the past five years to
enhance its capacities as the current ones operates
at sub-50% utilisation level. We see no major capex
over the next 2-3 years even for revenue CAGR of
~20%. The company has a pan-India distribution
network and has increased it distributors to 5,000 in
FY15 vs. 3,200 in FY12.
IILs capex phase is over and it has partly reduced its

debt by raising Rs 838mn through QIP (Aug-15 Rs
510/sh). Cash generation and no further capex will
improve the balance sheet. At CMP, the stock trades
at 13.2x FY18E EPS and 2.0x BV. We initiate coverage
on Insecticides India with a BUY rating and a TP of Rs
535/sh (16x FY18E EPS).
Highlights of the quarter
grow at 16% and 31% CAGR over FY16-18E. RoE

and RoCE will grow to 16.7/13.2% in FY18E vs.
12.9/10.4% in FY16E.
Near-term outlook: FY16 was challenging for agri-
input players owing to a bad monsoon. IILs share

prices have moved up ~34% in the past three
months in anticipation of good rains. Any
disappointment is a big risk for all agri-input
companies.
Financial Summary (Standalone)

(Rs bn)
Net Sales
EBITDA
FY16E FY17E FY18E

9,785 11,315 13,139
962 1,127 1,286
FY14
8,641
818
FY15
9,642
1,111
APAT
400
548
402
535
691
Diluted EPS (Rs)

P/E (x)
EV / EBITDA (x)
RoE (%)
19.3
22.8
9.9
17.4
26.5
16.6
7.9
20.4
19.5
22.7
12.5
12.9
25.9
17.0
10.5
15.0
33.4
13.2
8.8
16.7
INSECTICIDES INDIA: INITIATING COVERAGE
IILs performance over the past 15 years
Insecticide India Ltd (IIL) is one of the fastestProducts expansion through

acquisition, tie-ups and reverse
engineering
growing agrochemical companies in India. Its

current product portfolio comprises branded
products, technical and bulk formulations.
Over the years, revenues have grown multi-fold,

led by inorganic acquisition of brands, expansion
of distribution network and tie-up with innovators.
The margins are strengthening with focus on high-
margin products. The revenue share from top-20

products (Navratna and Super-11) has increased to
48% in FY15 from 40% in FY12.
It has a portfolio of 99 formulations and 18 active

ingredients. IIL enjoys a pan-India presence
through a network of 5,000 distributors.
Outstanding performance over the years

EBITDA (Rs mn) (LHS)
Revenues (Rs mn) (LHS)
2 years deficit
14,000
14
1 year rain deficit
12,000
FY16 was difficult owing to

second year of poor monsoon
EBITDA Margins (%) (RHS)
12
10,000
10
8,000
6,000
4,000
2,000
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15 FY16E FY17E FY18E
Source: Capitaline, Company, HDFC sec Inst Research (Deficit more than 10%)
FY02-FY06
Contributions from new products

launched in the past two years
are yet to pick up
Started
FY07-FY13
Chopanki
Technical plant commenced operations in
21 brands from Montari

Industries Ltd in 2003
Acquired Monocil brand from NOCIL Ltd

Two new formulation plants at Dahej and
operations
(Rajasthan)
in
Acquired
Commissioned
second formulation
plant in Samba (Jammu)
Chopanki and Dahej
Udhampur commenced operations
Launched Nuvan, Hakama and Pulsor in
collaboration with AMVAC and Nissan

Set up R&D Laboratory in Chopanki
Acquired the exclusive rights to sell Entered into a JV with OAT Agrio, Japan,
the Thimet brand in India from
AMVAC
for research and invention of new

agricultural chemicals
FY14-FY18E
Poor monsoon resulted in
slower growth in FY15 and FY16
Market share reached 7%
Contribution started from
newly launched products like
Hakama, Pulsor
Launched R&D centre with OAT
Agrio, Japan
Normal monsoon expectation in
2016 is key
Page | 26
~70% of revenues come from

branded sales
Business segments
Expansion via R&D, acquisitions and tie-ups
IIL has three major segments (1) Branded
IIL manufactures off-patent technicals that provide
formulation, (2) Technical, and (3) Bulk

formulation. Branded business is B2C whereas the
others are B2B.
Of the 99 products in its portfolio, IIL has

categorised the top-20 high-growth high-margin
ones as Navratna and Super-11.
The top-20 products contribute ~70% to the

branded segments revenues and ~48% to total
revenues.
IIL has product tie-ups with

AMVAC (US) and Nissan (Japan)
Revenue share (FY15)
backward integration to its formulation portfolio.
It has expanded its product portfolio through

inorganic routes such as 21 products from Montari
Industries and one from NOCIL.
IIL is sourcing specialty molecules for four
products through international collaborations with

AMVAC (US) and Nissan Chemical (Japan). All the
products are successful and contributed ~19% to
total revenues in FY15.
Acquisition and tie-ups

Year
BulkFormulation
Super 11
11%
11%
Navratna
37%
Branded
16%
Technical
2003
Acquisition of 21 brands of Montari industries
2006
Acquired the exclusive rights to sell Thimet and

Nuvan in India from AMVAC, Netherlands
2011
Acquired Monocil from NOCIL Ltd.
2012
70%
Other
22%
Events
2012
Launched Hakama and Pulsor in collaboration with

Nissan, Japan
Entered in to a JV with OAT Agrio, Japan for research
and invention of new agricultural chemicals
JV with OAT Agrio: IIL and OAT Agrio, Japan, have

Exports: The contribution from exports was only

JV with OAT Agrio (Japan) will
work towards the discovery of
new molecules
3% of revenues in FY15. However, the

management expects it to cross the Rs 1-bn mark
within five years.
formed a 50-50 JV and have set up an R&D centre

in Rajasthan. The total investment will be ~Rs
400mn. The JV will work towards the innovation of
new molecules.
IIL is pursuing registration of its products in the
Middle East and South-East Asia. A JV with OAT

Agrio, Japan, will be instrumental in discovering
new molecules.
Page | 27
Focus on fast-growing segments

Rising share from Navratna/Super-11 in formulation
The company has categorised the top-20 highTop-20 products recorded ~31%
CAGR over FY12-15
margin high-growth products into Navratna and

Super-11 groups. The marketing focus is diverted
towards increasing their revenue share.
As a result, revenues from the top-20 products

have been ~31% CAGR over FY12-15 and their
share increased from 40% to 48%.
Newly launched products like Nuvan, Hakama,

Pulsor and Logo are doing well.
Navratnas Gross Revenues Break-up

Products (Rs mn)
FY12
FY13
FY14
FY15
416
501
716
774
Nuvan
268
512
602
Lethal
374
350
432
511
Monocil
Victor
333
316
370
392
517
292
481
376
Hijack
Hakama
Pulsor
171
-
227
78
50
344
221
136
321
281
276
31
34
90
152
27
1,669
33
2,304
42
3,302
80
3,855
30
35
36
37
Thimet
IIL is pursuing registration of its

products in the Middle East and
South-East Asia
Pluto/ Xpload
Flite
Total
% Of Total Revenue
IIL plans to launch new products and strengthen

its marketing network to maintain robust growth
momentum.
Super-11 Gross Revenues Break-up

Products (Rs mn)
Logo/Gama
Indan
Sharp
Arrow
Super star
Selector
Sargent
Avon Plus
Phentom
Metro
Streptomil
Total
% Of Total Revenue
FY12
154
89
51
19
84
47
70
31
11
555
10
FY13
40
114
64
50
107
59
48
77
26
15
600
9
FY14
121
42
129
84
86
81
58
61
104
35
26
828
9
FY15
233
205
131
98
94
91
85
57
55
33
28
1,110
11
We expect revenues from the top-20 products to
grow at a CAGR of 22% over FY16-18E.

Consequently, their share in total revenues will
increase to ~55%.
Technical revenues to pick up
Technical sales are the second-largest business for
IIL and have contributed ~16% to revenues in

FY15. The company has two technical synthesis
plants with multi-product facilities. The current
capacity stands at 13,800 tpa; utilisation rate was
56% in FY15.
IIL is pursuing registration of its products in the

Middle East and South-East Asia.
A JV with OAT Agrio, Japan, will be instrumental in

discovering new technicals.
Page | 28
The current capacities operate at sub-50%
Robust Growth To Continue In Technicals

Technicals (Rs mn) (LHS)
Technical sales are the second

largest business and contributed
~16% to revenues in FY15
18%
3,000
18%
18%
20%
16%
2,500
2,000
% of Revenues (RHS)
11%
1,500
10%
15%
Plants
10%
Chopanki
Unit 1 Formulation
Unit 2 Technicals
Unit 3 Formulation
Samba
Formulation
Udhampur
Formulation
Dahej
Unit 1 Formulation
Unit 2 Technicals
10%
1,000
5%
500
-
FY18E
FY17E
FY16E
FY15
FY14
FY13
FY12
0%
The company has spent ~Rs

2.5bn in the past five years
towards capacity expansion
The technical segment has reported revenue

growth of ~38% CAGR over FY12-15.
As of FY15, IIL had a portfolio of 19 technicals.
Technicals launched in FY15 like diafenthiuron,

imazethapyr and myclobutanil are yet to
contribute to revenues. We believe revenues from
technical will grow at 15% CAGR over FY16-18E.
Ready infrastructure to support robust growth
Insecticide India has a strong portfolio of products.
To maintain its growth momentum, the company

has added production capacity and strengthened
its distribution network.
Building up capacity
We dont see any major capex
over the next 2-3 years
utilisation level. We dont see any major capex

requirement over the next 2-3 years.
Capacity And Utilisation For FY15
The company has spent ~Rs 2.5bn in the past five
years towards capacity expansion. IIL has

formulation and technical manufacturing facilities
across Chopanki (Rajasthan), Udhampur (J&K),
Samba (J&K) and Dahej (Gujarat).
Started
Capacity (tpa) Utilisation (%)
in
FY02
FY08
FY15
18,000
3,800
20,000
62
32
11
FY05
13,430
46
FY12
5,600
52
FY12
FY13
53,000
10,000
28
66
Strong distribution network
A strong marketing network is the key factor for

brand awareness and product reach. This helps in
partnering with global innovators.
The company has pan-India distribution network.
It increased its number of distributors ~55% over

the past three years to 5,000 in FY15.
Strengthening distribution network

Particulars
Distributor
Dealers/Retailers
Revenues (Rs mn)
FY12
3,200
50,000
4,501
FY15
5,000
60,000
9,642
CAGR (%)
16
6
29
Page | 29
Well spread across geography
Improving return ratios
IILs footprint is well spread across India.

It has a presence across major crop-producing
Even in the capex phase (FY11-15), return ratios
states like Punjab, Haryana, AP, Maharashtra,

Tamil Nadu, UP, MP and Gujarat.
North
South
Central / West
100%
80%
60%
and ROCE to pick up to 17% and 13% by FY18.

ROE (%)
18
18
16
15
25
16
18
19
21
20
26
25
26
24
ROCE (%)
15
10
41
20%
41
39
39
FY18E
FY17E
FY16E
FY15
FY14
FY13
FY15
FY14
FY13
FY12
FY12
0%
Lower capex leads to positive FCF
Debt to equity to be comfortable

The money raised from QIP (Rs 838mn) was used
for debt repayment. Further cash generation will
lead to reduction in D/E to 0.5x by FY18E.
A capex of Rs 2.5bn in the past five years has been

completed. We expect positive FCF and an
improvement in return ratios.
Capex (LHS)
1,000
FCF (RHS)
Debt/Equity (x)
1.2
Rs mn
1.0
500
1.0
1.0
Interest Cover (x) - RHS

1.1
6
0.9
0.9
0.8
0.7
4
0.5
0.6
-500
FY18E
FY17E
FY16E
FY15
FY14
FY13
FY12
FY18E
-1,500
FY17E
FY16E
0.2
FY15
-1,000
FY14
FY13
0.4
FY12
The money from QIP was used

for loan repayment
Although ratios have fallen in FY16, we expect ROE
East
40%
Lower capex will lead to positive

FCF and return ratios will
improve from FY17E
were healthy.

Page | 30
Risks and concerns
High WC cycle: IILs cash conversion cycle is

A normal monsoon is key for
Indian agrochemical players
around 120-130 days - higher than PI, Rallis and

UPL. Although, Dhanuka Agritech has a higher cash
conversion cycle, it is mainly on account of lower
payables.
Working Capital Cycle As On FY15

Particulars (Days)
Inventory
Debtor
Payables
Cash conversion cycle
UPL PI Ind. Rallis Dhanuka

89
71
79
89
111
72
50
90
97
67
58
29
103
77
71
150
IIL
148
63
79
132
Monsoon: Indian agriculture is dependent on

monsoon as only ~46% of the arable land is
irrigated.
Changes in regulation: Product registration is a

time-consuming process. Any changes
regulation could impact product launches.
in
Fluctuation in raw material: Most of the raw
materials are derived from crude oil. Any

fluctuation in crude prices could impact margins.
Page | 31
Assumptions
Revenue Growth (%)
Navratna
Super 11
Other Branded Sale
Technical
FY13
38.0
8.1
4.5
1.5
FY14
43.3
37.9
22.3
54.0
FY15
16.7
34.0
-17.5
68.4
FY16E
5.0
2.0
-5.0
17.0
FY17E
22.0
22.0
10.0
15.0
FY18E
22.0
22.0
10.0
15.0
Gross Profit Margins (%)

Branded Formulation (GPM %)
Institutional Sales (GPM %)
32.8
30.4
32.8
30.8
37.5
15.0
31.5
38.0
15.0
31.9
38.0
15.0
Peer Valuations
Chambal Fert
Coromandel Int
Dhanuka Agritech
Insecticides India
PI Industries
Rallis India
UPL Ltd
Navin Fluorine
SRF Ltd
Mcap
(Rs bn)
CMP
(Rs/sh)
Rating
TP
(Rs/sh)
27.6
63.7
31.5
9.1
85.5
40.5
250.2
20.6
72.4
66
225
630
441
626
209
584
2,105
1,261
BUY
BUY
BUY
BUY
BUY
BUY
BUY
BUY
NEU
76
260
700
535
680
250
625
2,150
1,330
EPS (Rs/sh)
FY16E FY17E
FY18E
9.9
8.9
9.5
11.8
15.9
21.7
19.5
26.4
35.0
19.5
25.9
33.4
20.1
25.0
31.1
7.4
9.8
12.5
31.8
35.3
43.5
85.5
99.7
134.4
73.7
86.5
95.0
FY16E
6.7
19.0
32.2
22.7
31.1
28.3
18.4
24.6
17.1
P/E (x)
FY17E
7.5
14.2
23.9
17.0
25.1
21.3
16.5
21.1
14.6
FY18E
7.0
10.4
18.0
13.2
20.1
16.6
13.4
15.7
13.3
FY16E
1.2
2.7
6.5
2.7
7.6
4.5
3.7
3.2
2.7
P/BV (x)
FY17E
1.0
2.4
5.4
2.4
6.1
4.0
3.1
2.9
2.3
FY18E
0.9
2.1
4.4
2.0
4.9
3.5
2.6
2.5
2.0
FY16E
17.8
14.9
21.8
12.9
27.3
16.7
21.6
13.5
17.0
ROE (%)
FY17E
14.7
18.0
24.6
15.0
27.1
19.9
20.5
14.3
17.3
FY18E
14.1
21.7
26.9
16.7
27.0
22.3
21.3
17.2
16.5
Page | 32
Income Statement (Standalone)

(Rs mn)
Net Revenues
Growth (%)
Material Expenses
Traded Goods
Employee Expenses
EBITDA
EBITDA Margin (%)
EBIDTA Growth (%)
Depreciation
EBIT
Other Income (Including EO
Items)
Interest
PBT
Tax
RPAT
Mionority Interest
EO (Loss) / Profit (Net Of Tax)
APAT
APAT Growth (%)
AEPS
EPS Growth (%)
Balance Sheet (Standalone)

FY14
8,641
40.1
4,997
1,018
293
1,515
818
9.5
18.0
67
751
FY15
9,642
11.6
5,987
496
344
1,704
1,111
11.5
35.8
142
969
FY16E
9,785
1.5
6,203
571
396
1,653
962
9.8
(13.4)
167
795
FY17E
11,315
15.6
7,093
656
456
1,983
1,127
10.0
17.2
189
938
FY18E
13,139
16.1
8,195
755
524
2,380
1,286
9.8
14.1
205
1,081
269
487
87
400
400
13.3
19.3
13.3
332
642
93
548
548
37.2
26.5
37.2
297
503
101
402
402
(26.7)
19.5
(26.7)
274
669
134
535
535
33.0
25.9
33.0
222
864
173
691
691
29.2
33.4
29.2
(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Long-term Debt
Short-term Debt
Total Debt
Net Deferred Tax Liability
Net Block
CWIP
Investments
LT Loans & Advances
Total Non-current Assets
Inventories
Debtors
Cash & Equivalents
Total Current Assets
Creditors
Other Current Liabilities & Provns
Total Current Liabilities
Net Current Assets
FY14
FY15
FY16E
FY17E
FY18E
127
2,339
2,466
302
2,278
2,580
46
133
5,225
127
2,787
2,914
537
2,680
3,216
45
156
6,331
207
3,132
3,339
498
2,470
2,968
45
156
6,508
207
3,610
3,817
464
2,300
2,764
45
156
6,782
207
4,244
4,451
432
1,852
2,284
45
156
6,937
1,701
542
111
48
63
2,464
3,117
1,279
964
90
5,450
2,036
653
2,689
2,761
5,225
2,047
377
111
59
22
2,616
3,914
1,668
944
66
6,592
2,098
779
2,877
3,715
6,331
2,257
200
111
59
22
2,649
4,021
1,743
944
75
6,783
2,145
779
2,924
3,859
6,508
2,368
100
111
59
22
2,660
4,495
1,860
944
82
7,381
2,480
779
3,259
4,122
6,782
2,362
100
111
59
22
2,654
5,040
1,980
944
85
8,049
2,988
779
3,767
4,282
6,937
Page | 33
Cash Flow (Standalone)

(Rs mn)
Reported PBT
Non-operating & EO Items
Interest Expenses
Depreciation
Tax Paid
Capex
Free Cash Flow (FCF)
Investments
Non-operating Income
Debt Issuance/(Repaid)
Interest Expenses
FCFE
Dividend
EO Items, Others
Key Ratios
FY14
487
(3)
159
67
(251)
(84)
374
(462)
(88)
(111)
3
(570)
437
(159)
191
(45)
234
38
90
FY15
642
(3)
240
142
(999)
(80)
(59)
(335)
(394)
0
3
(332)
645
(240)
11
(45)
360
(30)
66
FY16E
503
(3)
297
167
(135)
(101)
728
(200)
528
0
3
(197)
(248)
(297)
(17)
80
(57)
(522)
9
75
FY17E
669
(3)
274
189
(256)
(134)
739
(200)
539
0
3
(197)
(204)
(274)
61
(57)
(536)
7
82
FY18E
864
(3)
222
205
(157)
(173)
958
(200)
758
0
3
(197)
(480)
(222)
57
(57)
(758)
3
85
PROFITABILITY (%)
GPM
EBITDA Margin
EBIT Margin
APAT Margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax Rate (%)
Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Other Current Liab & Provns (days)
Debt/EBITDA (x)
Net D/E (x)
Interest Coverage
PER SHARE DATA (Rs/sh)
EPS
CEPS
DPS
BV
VALUATION
P/E (x)
P/BV (x)
EV/EBITDA (x)
OCF/EV (%)
FCF/EV (%)
FCFE/MCAP (%)
Dividend Yield (%)
FY14
FY15
FY16E
FY17E
FY18E
30.4
9.5
8.7
4.6
17.4
13.4
13.3
32.8
11.5
10.0
5.7
20.4
15.1
14.9
30.8
9.8
8.1
4.1
12.9
10.5
10.4
31.5
10.0
8.3
4.7
15.0
11.9
11.8
31.9
9.8
8.2
5.3
16.7
13.3
13.2
17.9
1.8
132
54
13
86
21
92
3.2
1.0
2.8
14.5
1.7
148
63
14
79
19
126
2.9
1.1
2.9
20.0
1.6
150
65
14
80
19
130
3.1
0.9
2.7
20.0
1.8
145
60
12
80
17
120
2.5
0.7
3.4
20.0
2.0
140
55
10
83
14
108
1.8
0.5
4.9
19.3
36.8
3.0
194.4
26.5
54.4
2.5
229.8
19.5
27.5
2.5
161.5
25.9
35.0
2.5
184.7
33.4
43.4
2.5
215.3
22.8
2.3
9.9
4.6
(1.1)
3.4
0.7
16.6
1.9
7.9
(0.7)
(4.5)
0.2
0.6
22.7
2.7
12.5
6.1
4.4
(0.2)
0.6
17.0
2.4
10.5
6.3
4.6
0.7
0.6
13.2
2.0
8.8
8.5
6.7
0.6
0.6

Page | 34
COMPANY UPDATE
13 MAY 2016
Rallis India
BUY
INDUSTRY
AGROCHEMICAL
Rs 209
Target Price
Rs 250
Nifty
7,815
Sensex
25,490
KEY STOCK DATA

Bloomberg
RALI IN
No. of Shares (mn)
194
41/607
65

52 Week high / low
Rs 274/142
3M
6M
12M
Absolute (%)
40.4
6.2
(1.0)
Relative (%)
29.5
6.7
5.4

Promoters
50.09
FIs & Local MFs
10.67
FIIs
Public & Others
Source : BSE
Satish Mishra
+91-22-6171-7334
Deepak Kolhe
+91-22-6171-7316
7.56
31.68
Scripting a turnaround
FY16 has been challenging for Rallis India considering
(1) Two years of rain deficit in India, (2) Weaker Latin
America and European currencies, (3) Muted
international prices of agri-commodities, and (4)
Unfavourable weather in Latin America. Hence,
EBITDA declined 17% YoY to Rs 7.1bn and PAT fell
15% to Rs 3.4bn.
beneficiary of the Indian agriculture growth story.

Lower penetration of agrochemicals in the country
and its cost advantage underpin its long-term
growth. A strong brand, complete portfolio,
extensive distribution network and a strong balance
sheet will help gain market share. Maintain BUY with
a TP of Rs 250/sh (20x FY18EEPS).
However, things seem to be looking up in FY17 with

the forecast of a normal monsoon, improvement in
agri-commodity prices and strengthening of LatAm
currencies. Additionally, Rallis has specific triggers
such as (1) New product launches, (2) Custom
synthesis (CSM) revenues likely to begin, and (3)
Growth in the seed business.
Investment arguments
The CSM business progress is encouraging. Two

products for global innovators have reached the pilot
stage and are headed for commercial production.
The revenue from seeds grew only 6% YoY to Rs
3.2bn in FY16. EBITDA margins were muted as well at
7.2%. Strong growth levers such as (1) Diversified
portfolio, (2) Strong brand, and (3) Pan-India
distribution network are in place for the seed
business. A normal monsoon may lead to revenue
growth of 25-30% CAGR over the next 2-3 years. We
expect a significant boost in profitability led by
operating leverage.
The stock has rallied ~13% in the past month, but we
believe there is more to come. Rallis is a direct
grow at a CAGR of 16% and 30% over FY16-18E.

RoE and RoCE will grow to 22.3/20.7% in FY18E vs.
16.7/15.1% in FY16P.
Near-term outlook: Any disappointment related
to monsoon is a big risk for all agri-input

companies. Around 30% of Rallis revenues come
from exports. Sharp volatility in global agri
commodity prices and emerging market currencies
will have a direct impact on Rallis India.
Financial Summary (Consolidated)

(Rs mn)
Net Sales
EBITDA
APAT
Diluted
P/E (x)
EV /
RoE (%)
FY14
17,466
2,613
1,519
7.8
26.8
15.8
22.7
FY15
18,218
2,771
1,572
8.1
25.9
15.1
20.5
FY16P
16,279
2,302
1,430
7.4
28.4
18.0
16.7
FY17E
18,680
2,997
1,904
9.8
21.3
13.7
19.9
FY18E
21,927
3,693
2,435
12.5
16.7
10.9
22.3
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
RALLIS INDIA : COMPANY UPDATE
Assumptions
Change In Estimates
Sales Growth (%)

Domestic
Exports
Metahelix
Total
Gross Margin (%)
Tax Rate (%)
Working capital (days)
Inventory
Debtors
Creditors
Capex (Rs mn)
FY13
FY14
FY15
FY16P
FY17E
FY18E
19.0
8.3
42.2
14.4
39.8
31.0
4
67
41
63
349
20.9
17.3
46.3
19.8
42.3
28.8
18
69
35
64
587
5.3
2.0
40.0
4.3
45.4
27.9
49
79
50
58
431
(7.0)
(20.0)
6.4
(10.6)
48.5
21.0
43
91
44
61
800
15.0
15.0
25.0
14.8
49.0
24.2
43
85
45
60
800
15.0
25.0
25.0
17.4
48.5
24.0
42
80
45
60
800
Net Sales
EBITDA
APAT
AEPS
FY17 Old
18,680
2,997
1,904
9.8
FY17 New
18,680
2,997
1,904
9.8
% Change
-
Net Sales
EBITDA
APAT
AEPS
FY18 Old
21,927
3,693
2,435
12.5
FY18 New
21,927
3,693
2,435
12.5
% Change
-
No change in estimates
Peer Valuation
Mcap
(Rs bn)
Chambal Fert
Coromandel Int
Dhanuka Agritech
Insecticides India
PI Industries
Rallis India
UPL Ltd
Navin Fluorine
SRF Ltd
TP
(Rs/sh)
EPS (Rs/sh)
FY16E FY17E
FY18E
P/E (x)
FY16E FY17E
P/BV (x)
FY16E FY17E
ROE (%)
FY16E FY17E
CMP
(Rs/sh)
Rating
27.6
66
BUY
76
9.9
8.9
9.5
6.7
7.5
7.0
1.2
1.0
0.9
17.8
14.7
14.1
63.7
225
BUY
260
11.8
15.9
21.7
19.0
14.2
10.4
2.7
2.4
2.1
14.9
18.0
21.7
31.5
630
BUY
700
19.5
26.4
35.0
32.2
23.9
18.0
6.5
5.4
4.4
21.8
24.6
26.9
FY18E
FY18E
FY18E
9.1
441
BUY
535
19.5
25.9
33.4
22.7
17.0
13.2
2.7
2.4
2.0
12.9
15.0
16.7
85.5
626
BUY
680
20.1
25.0
31.1
31.1
25.1
20.1
7.6
6.1
4.9
27.3
27.1
27.0
40.5
209
BUY
250
7.4
9.8
12.5
28.3
21.3
16.6
4.5
4.0
3.5
16.7
19.9
22.3
250.2
584
BUY
625
31.8
35.3
43.5
18.4
16.5
13.4
3.7
3.1
2.6
21.6
20.5
21.3
20.6
2,105
BUY
2,150
85.5
99.7
134.4
24.6
21.1
15.7
3.2
2.9
2.5
13.5
14.3
17.2
72.4
1,261
NEU
1,330
73.7
86.5
95.0
17.1
14.6
13.3
2.7
2.3
2.0
17.0
17.3
16.5
Page | 36
Income Statement (Consolidated)

(Rs mn)
Net Sales
Growth (%)
Material Expenses
Traded Goods
Employee Expenses
EBITDA
EBITDA Margin (%)
EBIDTA Growth (%)
Depreciation
EBIT
Other Income
Interest & Financial Charges
EO Profit/(Loss)
PBT
Tax
RPAT
Minority Interest
APAT
APAT Growth (%)
AEPS
EPS Growth (%)
FY14
17,466
19.8
8,376
1,709
1,105
3,663
2,613
15.0
24.1
407
2,206
64
126
2,144
617
1,527
8
1,519
27.6
7.8
27.6
Balance Sheet (Consolidated)

FY15
18,218
4.3
8,349
1,596
1,294
4,208
2,771
15.2
6.1
496
2,276
42
101
2,216
618
1,598
26
1,572
3.5
8.1
3.5
FY16
16,279
(10.6)
7,405
980
1,324
4,268
2,302
14.1
(16.9)
446
1,856
137
136
1,857
390
1,467
37
1,430
(9.0)
7.4
(9.0)
FY17E
18,680
14.8
8,033
1,494
1,483
4,673
2,997
16.0
30.2
499
2,498
86
72
2,513
608
1,904
1,904
33.1
9.8
33.1
FY18E
21,927
17.4
9,538
1,754
1,661
5,281
3,693
16.8
23.2
549
3,144
104
42
3,206
770
2,435
2,435
27.9
12.5
27.9
(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Long-term Debt
Short-term Debt
Total Debt
Minority Interest
Net Deferred Tax liability
Net Block
CWIP
Goodwill
Investments
LT Loans & Advances
Inventories
Trade Receivables
Cash & Equivalents
ST Loans & Advances
Current Assets
Trade Payables
Other Current Liabilities
Current Liabilities
Net Current Assets
FY14
FY15
FY16P
FY17E
FY18E
194
6,986
7,180
261
507
768
105
180
315
8,549
194
7,951
8,145
268
985
1,253
101
224
357
10,080
195
8,796
8,990
262
633
895
38
218
388
10,529
195
9,965
10,159
112
483
595
38
218
388
11,398
195
11,460
11,654
112
283
395
38
218
388
12,692
4,182
211
1,859
187
1,077
3,295
1,679
157
298
27
5,456
3,051
1,372
4,423
1,032
8,549
3,996
265
1,958
187
1,101
3,942
2,477
127
279
26
6,851
2,882
1,396
4,278
2,573
10,080
3,976
603
2,591
187
1,097
4,048
1,966
171
351
56
6,592
2,737
1,781
4,518
2,075
10,529
4,504
603
2,591
187
1,097
4,350
2,303
207
351
56
7,267
3,071
1,781
4,852
2,415
11,398
4,759
603
2,591
187
1,097
4,806
2,703
925
351
56
8,841
3,604
1,781
5,386
3,455
12,692
Page | 37
Cash Flow (Consolidated)

(Rs mn)
Reported PAT
Non-operating income & EO
items
PAT from Operations
Interest
Depreciation
Capex
Free cash flow (FCF)
Investments
Non-Operating Income
Debt Issuance
Dividend
Interest
EO Items
Key Ratios
FY14
1,553
FY15
1,576
FY16P
1,430
FY17E
1,904
FY18E
2,435
46
(38)
92
58
69
1,507
123
407
(230)
1,807
(587)
1,221
(187)
46
(728)
(545)
(521)
(124)
(1,191)
(112)
157
1,613
101
496
(1,487)
724
(431)
292
(119)
(38)
(588)
485
(550)
(101)
(166)
(31)
127
1,339
136
446
(106)
1,815
(800)
1,015
92
(708)
(358)
(569)
(136)
(1,062)
44
171
1,847 2,366
72
42
499
549
(531)
(326)
1,886 2,630
(800)
(800)
1,086 1,830
58
69
(742)
(731)
(300)
(200)
(735)
(940)
(72)
(42)
(1,107) (1,182)
36
718
207
925
PROFITABILITY (%)
GPM
EBITDA Margin
EBIT Margin
APAT Margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax Rate (%)
Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Other Current Liab & Prov (days)
Debt/EBITDA (x)
Net D/E
Interest Coverage
PER SHARE DATA (Rs/sh)
EPS
CEPS
DPS
BV
VALUATION
P/E
P/BV
EV/EBITDA
OCF/EV (%)
FCF/EV (%)
FCFE/MCAP (%)
Dividend Yield (%)
FY14
FY15
FY16P
FY17E
FY18E
42.3
15.0
12.6
8.7
22.7
23.1
20.1
45.4
15.2
12.5
8.6
20.5
20.2
17.8
48.5
14.1
11.4
8.8
16.7
16.0
15.1
49.0
16.0
13.4
10.2
19.9
19.9
18.1
48.5
16.8
14.3
11.1
22.3
23.3
20.7
28.8
2.2
69
35
7
64
29
18
0.3
0.1
17.5
27.9
2.0
79
50
6
58
28
49
0.5
0.1
22.5
21.0
1.6
91
44
9
61
40
43
0.4
0.1
13.7
24.2
1.7
85
45
8
60
35
43
0.2
0.0
34.8
24.0
1.8
80
45
7
60
30
42
0.1
(0.0)
75.3
7.8
9.9
2.4
36.9
8.1
10.6
2.5
41.9
7.4
9.6
2.5
46.2
9.8
12.4
3.2
52.2
12.5
15.3
4.1
59.9
26.8
5.7
15.8
4.4
3.0
2.7
1.1
25.9
5.0
15.1
1.7
0.7
0.5
1.2
28.4
4.5
18.0
4.4
2.5
2.2
1.2
21.3
4.0
13.7
4.6
2.6
2.5
1.5
16.7
3.5
10.9
6.6
4.6
4.4
2.0
Page | 38
RECOMMENDATION HISTORY
CMP
235
215
207
149
197
209
Reco
BUY
BUY
BUY
BUY
BUY
BUY
Target
265
265
240
200
250
250
Dhanuka 1 yr price performance
700
650
600
550
500
450
400
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-16
May-16
Mar-16
Feb-16
Jan-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
350
May-15
May-16
Apr-16
Mar-16
Feb-16
Jan-16
200
Dec-15
100
Nov-15
300
Oct-15
150
Sep-15
200
400
Aug-15
500
Jul-15
250
Jun-15
600
May-15
300
Date
24-Jul-15
8-Oct-15
27-Oct-15
19-Jan-16
28-Apr-16
13-May-16
Insecticides 1 yr price performance
700
Aug-15
TP
Jun-15
Rallis
350
Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Page | 39
Disclosure:
We, Satish Mishra, PGDM, & Deepak Kolhe, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or
arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of
warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for
information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be
construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any
locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HDFC
Securities Ltd or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may
not be reproduced, distributed or published for any purposes without prior written approval of HDFC Securities Ltd .
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived
from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.
It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HDFC Securities Ltd may from time to time solicit from, or perform broking, or other services
for, any company mentioned in this mail and/or its attachments.
HDFC Securities and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies)
mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and
other related information and opinions.
HDFC Securities Ltd, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any
action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc.
HDFC Securities Ltd and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report,
or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report.
HDFC Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any
other assignment in the past twelve months.
HDFC Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report
for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction in the normal course of business.
HDFC Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research
report. Accordingly, neither HDFC Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is
not based on any specific merchant banking, investment banking or brokerage service transactions. HDFC Securities may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served
as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research
Report.HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475
HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel,Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com
Page | 40

Agrochemicals - May16

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Agrochemicals - May16

Hochgeladen von

Copyright:

Verfügbare Formate

SECTOR REPORT

Valuation (on FY18E)

Indias total food demand continues to rise in

Source: Company, HDFC sec Inst Research

We have focused on domestic players like Dhanuka

Dhanuka Agritech Ltd (DAL): (1) Present only in

Revenues (Rs mn)

PAT (Rs mn)

AGROCHEMICALS : SECTOR REPORT

AGROCHEMICALS : SECTOR REPORT

India has the second-largest

Around half of Indias

Indian agriculture under a cloud

GDP has fallen from ~28% in FY94 to ~14% in FY14.

India has the second-largest arable land in the

world after the US. However, the share of arable

Arable Land Vs. Total Lands (As per FY12)

~85% of farmers own marginal

40% of agriculture households

Arable land Arable % of total

Source: World Bank, HDFC sec Inst Research

Owing to the high arable land, India in one of the

India In Food Production (FY15)

Source: Ministry of agriculture, Company, HDFC sec Inst Research

India is the largest producer of spices, pulses, milk,

tea, cashew and jute; second-largest of wheat,

The story of the Indian farmer, however, is not as

glorious. About 36% of the agricultural households

At an all-India level, the average monthly income

of agricultural households between Jul-12 and

AGROCHEMICALS : SECTOR REPORT

Reasons for poor condition of India farmers

There are multiple reasons for lower crop yields:

Lower crop yields

Lower crop yields

In the charts below, we have compared yields of

Yield (000 kg/ha)

Crop yields vary significantly within states. These

can be attributed to an array of reasons such as

Source: MOPSI, GOI reports, HDFC sec Inst Research

Crop yields in different states are

Crop Yields For Food Grains Vs. Irrigated Area

Key reasons for lower yields:

the top-5 crop producing countries. In most cases

(1) Poor irrigation facility, (2) Poor quality and

Source: MOPSI, GOI reports, HDFC sec Inst Research

There are exceptions to the rule. For instance, in

Bihar and Assam the relation between irrigation

AGROCHEMICALS : SECTOR REPORT

Only ~46% of Indias cultivated

India accounts for about ~17% of the worlds

Over the years, there has also been a significant

And since only ~46% of the net cultivated area is

Consequently, the share of groundwater sources

population, but only ~4% of the worlds fresh

Low Irrigation Penetration

The situation is worrisome as

Area under irrigation (%) (RHS)

has increased from 29% to a whopping 62% during

Source Of Irrigation In India

A higher usage of underground

shift in the sources of irrigation in the country. The

Source: Ministry of Agriculture, HDFC sec Inst Research

Source: Ministry of Agriculture, HDFC sec Inst Research