Agrochemical Industry to Witness 6-7% Revenue Growth in 2025-26: Report

The agrochemical industry’s revenue is expected to grow 6-7% this financial year driven by a revival in global demand and the normalisation of inventories, just as domestic offtake slows following an extended monsoon, a report said on Monday.

The report by Crisil Ratings stated that improved farm sentiment globally will drive up export revenue by 8-9% this fiscal but domestic demand will see the perils of excess rainfall causing crop damage, product returns and delayed field readiness.

"With realisations stabilising after two years of significant adjustments, the overall growth outlook of 6-7% remains more volume-driven than price-led," Crisil Ratings Senior Director Anuj Sethi said.

The revenue of Indian agrochemical industry 6-7% will grow this fiscal, supported by a favourably timed revival in global demand and normalisation of inventories just as domestic offtake slows due to a protracted monsoon that impacted kharif season sales, the report said.

The report stated that the industry's return to its long-term growth range of 8-10% next fiscal, however, depends on exports sustaining the momentum and domestic demand picking up.

Domestic and export markets each account for almost 50% of the industry revenue.

Steady realisations, stable raw material prices and limited US tariff impact will keep operating margins range bound this fiscal and the next, the report stated.

It further stated that modest capital expenditure and stable working capital will likely support leverage discipline, helping maintain credit profiles that have been under pressure in recent years.

Crisil Ratings said the domestic agrochemical prices have stabilised as the post-lockdown inventory overhang of China eased.

Realisations on agrochemical imports from China have remained around $5 per kg, broadly in line with last year, which are expected to stay steady through the year with inventories now balanced and firmer enforcement of environmental norms that will ensure steadier supply flow and keep realisations steady through the year.

"Operating margins of agrochemical makers are expected to hold steady at 12.5-13% year-on-year, but still below the pre-pandemic peak of 15%. This stability comes after a sharp correction in realisations in fiscal 2024 and is supported by better operating leverage, softer input costs and tighter cost controls.

“Annual investments of ₹5,500 crore in import substitution, new registrations and debottlenecking will continue, while steady cash accruals and disciplined working capital management will keep borrowing needs low," Crisil Ratings Director Poonam Upadhyay said.

However, there are key monitorables including any disruption related to climate change, regulatory tightening and currency movement.

Weather shifts are influencing demand patterns, while stricter scrutiny of pesticide use in India and overseas may drive portfolio changes, said the report, adding that currency exchange rate swings in key export markets also pose risks for players with concentrated exposure.