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Corporate Report

Published on: June 1, 2021, 6:06 a.m.
How India Pesticides befriends the farmer
  • Equipped with sophisticated equipment and machinery, the company's facilities make quality, technical grade products and formulations

By Lancelot Joseph. Executive Editor, Business India

He has a degree in law from Lucknow University and has also completed the CA course (intermediate level), because his father, a practising lawyer at Bareilly, wanted him to enter the legal profession. But business had always attracted him more than the legal practice. And, thus it was that, in 1984, Anand Swarup Agarwal managed to set up a small BHC (Benzene hexachloride)  dust-making unit called India Pesticides Limited in the courtyard of the family house at Lucknow.

 “I borrowed Rs10,000 from my father to start the small unit,” he recalls. “And I must have made just about Rs1 lakh a year initially.” He then thought of making pesticides for sugar cane. “And, it really was a bright idea,” he chuckles. Agarwal, now chairman & non-executive director, India Pesticides, has built the company into a Rs650 crore premier agro-chem entity.

From the backyard of the family house, India Pesticides has emerged as an R&D driven agro-chemical manufacturer of technicals, with a growing formulations business. It is among the fast-growing agro-chemical companies in India in terms of volume in 2019-20, says an F&S report. It is also the sole Indian manufacturer and among the top five global companies for several technicals, such as folpet and the thio-carbamate herbicide.

R&D efforts

“Our R&D team comprises PhDs, master’s degree holders in chemistry and a bio-technological engineer. We have two well-equipped R&D laboratories, each of which is registered with the DSIR,” says Agarwal. “Our laboratories are equipped with sophisticated equipment that includes gas chromatography-mass spectrometry and high-performance liquid chromatography machines, particle size analysers, PH meters, Karl Fischer titrators, conductivity meters, melting point apparatus and water purification systems.”

Since 2018, the company’s R&D efforts have resulted in the development of processes for products that are not highly toxic and the commercialisation of three technicals, “the sales of which contributed 39.43 per cent of our revenue from operations in 2019-20 and 55.37 per cent in the six months ended 30 September 2020,” says Satya Prakash Gupta, CFO, India Pesticides. “We are in the process of developing processes for certain technicals, such as two fungicides, two herbicides, two insecticides and two intermediates.” Gupta disclosed that India Pesticides has also commenced construction of two manufacturing units at Sandila, Uttar Pradesh, for making herbicide technicals.

Over the years, the company has developed a niche multi-product portfolio of agro-chemical formulations, herbicide and fungicide technicals, as well as APIs. This diversification has allowed it to de-risk its business. “We have obtained registrations and licence from the CIBRC and the Department of Agriculture, Uttar Pradesh, to make 22 agro-chemical technicals and 124 formulations for sale in India and 27 agro-chemical technicals and 34 formulations for export,” says Agarwal.

He explains that, in the API category, the company has obtained a licence for manufacturing two drugs for sale at Dewa Road from the Drug Licensing & Controlling Authority under the Drugs & Cosmetics Rules, 1945. Its products are exported to regulated markets, including Australia and countries located in Europe, Africa and Asia, and have received product registrations either through their customers or by them. “Our technicals portfolio comprises over eight export grade herbicides, fungicides and APIs,” adds Agarwal.

India Pesticides commenced making technicals for herbicides in 2018, Gupta explains. These are exported and have contributed to an increase in the EBIDTA margins from 20.73 per cent in 2018-19 to 21.61 per cent in 2019-20 and 30.76 per cent in the six months ended September 2020.

“We have developed strong and long-term relationships with various multinational corporations,” affirms Agarwal, 76, commenting on the journey of his company. “And, that has helped us expand our product offerings and geographic reach for the technicals business.”

India is the fourth largest producer of crop protection chemicals in the world and multinationals across the globe are taking advantage of cost-effective manufacturing in India, as also the availability of skilled labour. “India is expected to emerge as an export hub for crop protection chemicals manufacturing, which will be exported to developed and developing economies around the world,” Agarwal observes.

Portugal’s agro-chem major Ascenza finds India Pesticides Limited a ‘qualified’ supplier, after it did a Suppliers Evaluation procedure in 2018. Rallis India Ltd, in its Business Performance Report 2019-20, placed India Pesticides in the ‘Good’ category’ after evaluating the company on various parameters like price, timely delivery of goods, quality of material and adherence to safety norms during transportation.

Key customers

“The fact that several of our customers have been associated with our company for over 10 years speaks volumes about their confidence,” Agarwal says. “I do not have to say anything about my third-party testimonials. And some of our key customers include crop protection majors such as Syngenta Asia Pacific and UPL. In fact, revenues generated from sales to the top 10 customers represented 58.59 per cent of our revenue from operations in 2019-20, which went up to 69.27 per cent in the six months ended September 2020. Our long-term relationships have allowed us to plan our capital expenditure, enhance our ability to benefit from increasing economies of scale with stronger purchasing power for raw materials and a lower cost base, thereby ensuring a competitive cost structure to achieve sustainable growth and profitability.”

The company’s facilities at Dewa Road, Lucknow, as also Sandila and Hardoi in Uttar Pradesh have an aggregate installed capacity for agro-chemical technicals of 19,500 tonnes and formulations of 6,500 tonnes. It has also obtained permission from the MoEF to expand its unit capacity at Sandila to 30,000 tonnes. “Both the facilities are equipped with sophisticated equipment and machinery, which enable it to make quality, technical grade products and formulations, thereby minimising the number of employees required to operate them and reducing costs,” says DK Jain, CEO, India Pesticides.

Mumbai-based UPL, a global number five in food systems, regards India Pesticides as a ‘valued supplier’ and thanks it for its tireless efforts in maintaining the supply of essential goods, despite facing challenges of staff, labour, resources, and state permissions. “Although the times are tough, UPL, along with partners like you, will remain strong and operationally stable,” says R Janakiraman, global head, procurement & strategic sourcing, UPL.

Rahul Arun Bagaria, non-executive director, India Pesticides, points out that the company has a special focus on pollution prevention measures with dedicated teams working on them. “Our manufacturing processes contribute towards reducing raw material consumption, solvent consumption and water consumption, resulting in reduced effluent and solid hazardous waste,” Bagaria points out. The manufacturing units have implemented water recycling systems and have become zero discharge units. Solid hazardous wastes are sent to a common hazardous waste treatment and disposal facility. “We have demonstrated consistent growth in terms of revenues and profitability over the last 36 months,” adds Gupta.

India Pesticides’ total revenue from operations increased by 89.43 per cent from Rs253.2 crore in 2018 to Rs479.6 crore in 2020 and was Rs333.8 crore during the six months ended September 2020. The company has emerged as a zero-debt entity and, says Gupta: “We have been able to maintain our debt position. Our long-term debt-to-equity ratio has gone down from 0.09 times in March 2018 to 0.03 times by September 2020.”

India Pesticides now plans to go public, with a target to raise Rs800 crore in funds and has filed its draft red herring prospectus with market regulator SEBI. The public offer comprises a fund-raise through a fresh issuance of shares amounting to Rs100 crore and another Rs700 crore through an offer for sale by Agarwal. The price band and other modalities will be decided in consultation with the issue managers Axis Capital and JM Financial.

The global agrochemicals market was valued at $62.5 billion in 2019 and is forecast to reach $86 billion by 2024, growing at a CAGR of 6.6 per cent. The rising population across the world, accompanied by improving affluence, is seeing a shift in consumption patterns. The growth in the world population has led to higher demand for food crops, which has triggered greater crop production, for which advanced agricultural practices are necessary.

Using chemicals on land to fight diseases, insects and weeds increases the productivity per acre or hectare, thus feeding the growing population. Owing to the growing population, there is also a threat that agricultural land area may have no or limited growth. With limited growth in land and high demand, there is a necessity to increase productivity and thus, chemicals are used to reduce damage to crops of interest.

India has been ranked fourth globally in the production of agro-chemicals (crop protection chemicals/pesticides) after the US, Japan and China. “The Indian crop protection chemicals market is valued at $2.1 billion, which is anticipated to grow at 4 per cent in the next five years to $2.6 billion by 2024,” says F&S Report.

Recent border issues with China have triggered the self-reliant India initiative, reducing the sourcing dependence on China by the Indian agro-chemical industry. The ‘China plus one’ strategy avoids over-investing in that country alone. “Several multinationals are taking proactive steps to reduce dependence on China for their manufacturing operations and looking at India as an alternative option,” says Agarwal.

“We also intend to work with our existing customers to identify new products that will be mutually beneficial,” he says. “With the proposed expansion of our manufacturing capacity, R&D capabilities, advanced manufacturing facilities, experience in manufacturing products that adhere to stringent guidelines and our ability to register products in India and abroad, we believe we are well-positioned to capitalise on these opportunities in the agro-chemicals sector.”

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