Major Indian agrochemical companies have suffered a slowdown in growth in key export markets like Latin America and North America during the first half of the current fiscal owing to unfavourable commodity markets there. This has dampened the Indian agrochemical industry's overall performance which had picked up due to a near normal South-West monsoon.
While some firms saw reduced growth in export revenues, some others suffered a decline in export revenues. Analysts and industry representatives point out that these American markets were growing at a healthy rate of 1522% year-on-year for major Indian ag rochemical companies till last fiscal.
They saw subdued business during the first half owing to low commodity prices, harsh weather conditions and higher channel inventory in these export markets.
Exports occupy a significant portion of revenues for the Indian agrochemical sector. India is currently the fourth largest global producer of agrochemicals after the US, Japan and China, according to a report by Tata Strategic Management Group and Federation of Indian Chambers of Commerce and Industry (FICCI). The subcontinent's $5.4-billion agrochemicals sector is expected to reach an estimated value of $6.3 billion by fiscal 2020 with exports accounting for 50%.
According to Rahul Veera, assistant vice-president, Elara Capital said: “The decline in export revenues for the majority of Indian agrochemical companies was mainly due to uneven weather conditions in major economies.“
Major agrochemical exporters like UPL saw growth in global revenues slowing down to 5% at `2,773 crore in September quarter, compared to a growth of 14% that it reported a year ago at `2,632 crore. PI IndustriesBSE 1.05 % saw a decline of 4% in their export revenues at `300 crore during latest quarter.
Similarly , Sharda Crop Chem saw a fall of 15% in revenues from the Latin American market and rest of the world at `53.2 crore. V Vijay Shankar, managing director of NACL Industries, said: “There was almost nil order for contract manufacturing from these markets mainly due to the unevenness in weather conditions.“ Commenting on the performance of UPL Industries, Basanth Patil, analyst with HDFC Securities, said: “Geographies like North America were impacted, owing to another year of a bumper corn crop driving prices down, also reducing rice acreage. Latin America too weighed on the business owing to delayed monsoon.“
Owing to these headwinds in export markets, UPL Industries has slashed its revenue guidance growth for current fiscal to 8-10%, down from 12-15% announced earlier.
Ramprakash Bubna, chairman and managing director Sharda Crop Chem, has attributed the decline in revenues from the Latin American markets to increased competition due to simpler registration norms that was attracting more players.
Source: economictimes.indiatimes.com