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REGISTER NOW OR LOGINInsecticides India Ltd. (NSE:INSECTICID) is one of the premier names in the crop protection industry. The company manufactures all types of insecticides, weedicides, fungicides, and PGRs for crops and households. It has more than 100 formulation products and 15 technical products.
Insecticides India has two technical synthesis plants and six formulation plants with state of art laboratories and ultra-modern equipment. The company’s products are mainly sold under the Tractor Brand from over 60,000 retail outlets. Its product basket includes 22 technical products, more than 100 formulation products, and 21+ Maharatna products. IIL also launched eight new products in FY2020.
Insecticides India has both domestic and international presence in Africa, Middle East, and Asian markets. It currently exports to over 20 countries. India is the world's fourth-largest producer of agrochemicals and is the 13th largest exporter of pesticides globally.
Insecticides India Positives
i) Integrated Presence across the value chain - IIL has a presence across the entire value chain from research to manufacturing and marketing. It has one of the largest formulation facilities in the country which is fully automated. These facilities are equipped to manufacture all kinds of different formulations of liquid, granules, and powders, as well as toll and contract manufacturing. The company has established its strength in in-house product development, expertise in handling new chemistry, and cost-competitive multistep productions and process development.
ii) Wide range of products - IIL has a product range of more than 100 products that include Agro Chemicals, Household Pesticides, and Biological products. It has four different R&D facilities across India. Insecticides form the major portion of IIL’s revenues at ~60% followed by herbicides (~30%) and fungicides and biologicals (~10%). Kunoichi, Chaperone, Lethal Gold, Super Racer, and Rockstar are a few of the latest innovative products introduced by the company last year. Insecticides India supplies its products in both retail as well as institutional segments. The company caters to end consumers i.e. farmers through its channel partners. It also sells technicals and formulations to companies in the business of formulation. Insecticides India is also enlarging its digital presence to connect and reach out to more and more farmers.
iii) To gain from a large national presence - With almost two-decade-long experience in the field, Insecticides India has established an impeccable reputation for quality, acceptability, and trust of farmers. The company is well-positioned to address the needs of a growing nation like India which is also the second-largest producer of food grains. India's population currently stands at more than 1.3 billion and is estimated to rise up to 1.7 billion by 2050. The insecticides market is estimated to witness market growth at a rate of 9% in the period of 2021 to 2028 and is expected to reach $28.89 million by 2028. With billions of mouths to feed, there will always be a huge demand for food and other agricultural products in the country. IIL is also well-placed to capitalize on the Make in India initiative.
Steady growth over the years
Source: IIL AR
iv) Worldwide presence - Other than having a wide national presence, IIL also has a large international presence. The company started its international business six years back and today is present in more than 30 countries. It caters to more than 100 customers through registrations. IIL supplies both Active Ingredients and Formulations to its overseas partners since 2015. IIL is tied up with reputed labs to generate regulatory data for registrations. These alliances are expected to generate business during the course of the year. In order to cater to the growing international market opportunities, IIL set up a dedicated plant in SEZ, Dahej, Gujarat.
v) Potential growth opportunities - India’s consumption of agrochemicals is still very low when compared to international standards. Agrochemicals play a pivotal role and have the potential to enhance production capacity to address the production of 355 million tonnes of food grains by 2030.
Challenges
Future Opportunities
New Products, Technologies, and Partnerships - IIL is enhancing its presence by focusing on tailor-made products for specialized crop segments. The company has tied up with reputed international companies such as Nissan Chemical Corporation, Japan, and Momentive, USA in the past decade. Insecticides India is investing in world-class innovations and cost-effective solutions for farmers and is also partnering with various international agrochemical players. The company is utilizing reverse engineering to develop products such as Green Label, Hercules, Encounter, and Sofia. It also introduced products like Kayakalp, Mycoraja, Milstim, Prime Gold, and Root Bead, in biologicals. IIL is expecting ten new products in FY2021. Kayakalp is a revolutionary natural catalyzer for the soil.
Expanding International Footprint - The company is also exploring the option to include Active Ingredients, eco-friendly formulations, and contract manufacturing through 100% EOU units in the future export basket. It is working on registration in new countries with more than 100 export agreements. IIL is anticipating expanding to 50+ countries and achieving more than 100 customers by the end of FY2023.
COVID-19 Impact
The COVID-19 pandemic hit the farmers hard, as a result of which, demand for IIL’s products also declined. The pandemic, however, accelerated IIL’s digital presence with products now readily available online. The company continued to enhance capacities, upscale technology, expand its product portfolio, and launch new products during the pandemic.
Valuation
IIL has a market capitalization value of Rs. 1,500+ crore. The company has a ~70% promoter stake with no pledged percentage. Its ROE and ROCE stand at 13% and ~15%, respectively. The company’s shares are currently trading ~9% below its 52-week high price, and have gained by ~55% in the last five years.
Insecticides India recorded revenue from operations of Rs 1,363 crores in FY2020 with EBITDA of Rs 156 crores and margins of 11.4%. Net profit for the year was Rs 86 crores. The company successfully reduced its debt by Rs 175 crore during the year and is targeting to become debt-free by end of Q1FY21. Insecticides recently bought back shares worth 60 crores in the open market.
Insecticides India has a Capex outlook of Rs. 1.1 billion in the next two years for setting up SEZ, synthesis facilities, and backward integration plant in India.
Bottom Line
Insecticides India is expecting future growth to come from scaling global competitiveness, quick response to the market challenges, and strong relationship with partners. The company has the necessary tools and size and scale to transform Indian agriculture to meet the growing food demand in the future and is favorably placed to capture the huge untapped opportunities in India. It continues to invest in brand launches, enhanced R&D focus, and expanded manufacturing capacity. With extensive manufacturing and R&D facilities, international presence, sheer size, and scale, IIL is favorably placed to address the evolving needs and challenges of the farmers.
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