MONSANTO INDIA LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Industry Structure & Development: With over 400 Million
acres under cultivation and over 60% of our population dependant
on agriculture, the well being of our people and economy depends
to a great extent on the performance of the agriculture sector. Both
the Crop Protection (CP) industry and Seeds industry play a
crucial role in the agriculture sector. The CP industry helps in
protecting crops from damage by weeds, pests, insects and fungus,
both pre and post harvest. The seeds industry provides high quality
varietal and hybrid seeds for farmers which help him to improve
yields of his crops.
The CP industry is commonly referred to as the pesticides industry
and is regulated under a separate statute, the “Insecticides Act,
1968”. The seed industry is again regulated by an independent
statute called the “Seeds Act, 1966” which specifies very stringent
conditions and norms for the commercialisation of seeds.
The two main activities in the CP industry are manufacturing of
technical grade pesticides and formulations from these technical
grade pesticides. Technical grade pesticides are manufactured
indigenously as well as imported. The Indian CP industry is highly
fragmented with the presence of large manufacturers operating on
a national level and several small and regional players.
The Indian seed industry can be broadly divided in two categories-
field crop seeds (FCS) and vegetable seeds. This industry too has
a few large producers operating at the national level and a number
of small and regional producers and marketers.
In an extremely competitive industry, continued growth depends
on bringing new products and technologies through a strong
Research & Development platform and the ability to invest and
develop new markets through in-field farmer level work.
Opportunities & Threats: The fortunes of our Ag industry is
influenced and closely linked to the growth and development of
the overall agricultural sector. With the steady increase in the
population, land available for cultivation is shrinking. This means
we need higher yields to feed a growing population. High yields
generally can be assured by saving loss of crop from the losses
caused by weeds, pests and insects. Higher yields can also be
driven by better quality of seeds.
This is a positive side for the long-term prospects of the CP and
Seeds industry. In addition, current government policies encourage
the growth of the food processing industry and exports of
agro-based products.
The use of hybrid seeds is still very low in India and farmers still
prefer to save and use their residual crop as seed for next season.
But awareness about, the high yield and good quality of produce
from hybrid seeds, attracting them to switch over to new varieties
of hybrid seeds, is growing.
The farmers’ acceptance of modern technologies of farming and
availability of hybrid seeds in several regions is also a positive
indication for the growth of the seeds industry.
Reform of the agriculture sector has not yet been touched upon and
farm sizes and poor farm economies of scale still compel most
farmers to still use old technologies/practices. This affects volume
growth in the use of pesticides and new varieties of hybrid seeds.
The dependence on the monsoon is again a major threat to
an agriculture-based industry. The growing campaign by
environmentalists against the use of pesticides, and the increasing
stress on huge investments on effluent treatment, and excessive
excise duty on pesticides (this, when fertilisers are exempt from
such duties) are other areas of concern.
Productwise Performance: Thanks to timely monsoons, the
agriculture sector is poised for a 5.7% growth in 2001-02, against a
negative growth of 0.2% in the last year. Both our agrochemical as well
as seed businesses have performed well. Our agrochemicals business
grew by 20% with growth coming in from our Machete, Roundup and
Leader herbicides. With the weakening Sri Lankan and Bangladeshi
currencies, we managed to hold on to our export business.
Our seeds business has grown by 33% backed by our good corn
and sunflower hybrids and a growing export business.
Financial Performance: Although the overall margins have
improved, our agrochemical margin continues to be under pressure
because of lower realisation and competing molecules. Our seed
margins have been slightly improved due to superior germplasm
and better adoption.
Our cost management efforts have yielded good results during the
year. Good cash collections have also helped us reduce our working
capital costs during the year.
Outlook : Several factors have a major bearing on our performance
and results: the state of economy, market conditions and monsoon
trends, to name a few. The Indian Meteorological Department has
predicted one more year of good monsoon for this year, which
augurs well for our industry and our Company.
 MONSANTO INDIA LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
We hope to continue with our focus on the growth of our business
which will depend on our ability to penetrate untapped markets
as well as capturing a greater share of the existing market.
The Company will also continue to focus on better cost
management to maintain its competitiveness in the market
place.
Risks & Concerns: The Company depends on imports for most
of its technical material and hence the business is susceptible to
the volatility of the exchange rates and import duties. The overall
economic slowdown has also affected most segments of the
economy including the agriculture markets. Competition in the
market place continues to have an impact on our realisations and
also exerts pressure on our margins.
A good, evenly distributed monsoon, is always a crucial player in
the growth of the agriculture sector and related industries.
Internal Control System: Your Company’s management
continuously reviews the internal control system and procedures
to ensure orderly and efficient conduct of business. Your Company
adheres to its written corporate policies with respect to all
transactions, financial reporting and budgeting.
The Company regularly conducts internal audits either through
external or internal resources to monitor the effectiveness of internal
control in the organisation.
The Constitution of an Audit Committee during the year has further
strengthened the overall control on the business.
Human Resources: The Company has 384 employees as on
31st March, 2002. Our Development, Performance and Rewards
system is linked to our global HR systems and helps us to build an
organisation that will help us be successful in India. Training needs
are regularly identified and internal and external trainers were hired
regularly to impart training.
We have built a team-driven organisation where all employees
work together to create our future.
Cautionary Statement : The statement made in this report describing
the Company’s projections, expectations and estimations may be
a forward looking statement within the meaning of applicable
securities laws and regulations. Actual results may differ from
those expressed or implied in this report due to the influence of
external and internal factors which are beyond the control of
the Company.
For and on behalf of the Board of Directors
R C Khanna Sekhar Natarajan
Director Managing Director
Date: May 22, 2002