Feature

Advantage Multinational

With global agrochemical cycle turning, Indian companies with a strong international presence will be a good bet

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Over past three years, the global agrochemical market has come under some rough weather  with sales declining by around around 8% to 9%. There have been many reasons: unfavourable weather conditions, delaying planting patterns in key markets such as Latin America, severe drought situations in Mexico and Australia, and dry weather in Southern Europe. Inventory had piled up and prices were stagnant. But with inventory levels coming down and demand starting to pick up, things are definitely starting to look up for the global agrochemical industry and in particular for Indian companies with a significant exposure to exports.

In fact an improving global scenario is going to more than make up for the not-so-rosy picture on the domestic front.  The implementation of Goods and Services Tax (GST) and demonetisation were one-off but they have slowed down the movement of goods from the warehouses. 

In September 2018, there was good news. Food production in the kharif (July to October) season was predicted to hit a record high and monsoon arrived on time; but the investors were still not excited about agrochemical stocks. With record production, agro commodities were commanding only low prices, which led to poor sale of agrochemicals, and rains were erratic.

In the rabi season (October-March), the agrarian distress continued to persist. Sowing as of December 14, 2018, which accounts for 81% of the total sowing in rabi season, was down 5.25% year-on-year to 47.6 million hectare compared with 50.25 million hectare in the previous rabi season. “This is of concern, because the rabi crop accounts for 40% of India’s agricultural produce... in both volume and value terms,” stated a CRISIL note. While there is distress in the rural economy, Indian  agrochemical companies will find relief in overseas markets and some of the export-oriented companies are poised for recovery in sales and profit. 

Global Focus

The global tailwinds include an improvement expected in demand from Brazil and Europe, depreciation in rupee, vendor consolidation and production curbs in China. India’s export-oriented agrochemi

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