1. Indian agrochemicals sector 1.1 Overview India is the 4th largest producer of agrochemicals by volume and 12th largest by value Indian agrochemical industry (US$ bn) Domestic agrochemical consumption (by segment)Significantly lower 6.0 Fungicides Total c.US$ 1.6bnagrochemical usage 4.9 17% 5.0in India impliesstrong growth of 4.0 US$ bnc.10% p.a. expected 3.0 2.5 2.8in the near term 1.9 Herbicides 2.0 1.6 1.7 21% InsecticidesAgrochemicals 62% 1.0consumption in India -skewed towards 2006 2007 2008 2009 2010E 2015Pinsecticides given thetropical climate andtype of crop Split of consumption by crop type Split of domestic market by regionplantation 3%2%2% Total c.US$ 1.6bn Others Total c.US$ 1.6bn 3% 13% AP 6% 24%Crop losses in India Gujarat 6%range from 20% to 7% 45% Maharashtra30% owing to 7%suboptimal and 9%inadequate usage of WB 9% UPagrochemicals and is 23% 17%estimated to be worth Cotton Paddy Sorghum Hary ana Fruits & veg Wheat Arharc.US$ 20bn per year Groundnut Bajra Others 10% Punjab 14% Source Broker notes, Company3
1. Indian agrochemicals sector 1.2 Robust growth prospects Structural enablers in Indian agrochemicals Arable land stagnation Rise in MSP sector to catalyze strong growth trajectory 135 3,500 3,200 3,000 Rs / quintal 130 2,800 2,300 Rising pressure to increase food productivity given land m hectares 125 2,000 shortage/stagnation and rise in population 2,100 120 Increasing awareness of farmers 1,400 1,080 1,120 1,285 1,100 115 Rising prices of crops on the back of Minimum Support 700 Prices (MSP) 110 880 980 1,030 1,110 Use of costlier hybrid seeds 105 - FY09 FY10 FY11 FY12E FY80 FY83 FY86 FY04 FY07 FY10 FY89 FY92 FY95 FY98 FY01 Current under penetration of agrochemicals in India Paddy Grade A Wheat Arhar – Pesticide consumption amongst the lowest globally Labour shortage for agricultural activities on the back of Low pesticide consumption Increased institutional credit flow NREGA 18.0 17.0 4,500 Continued financial support from Government through 4,000 15.0 subsidies and greater flow of institutional credit 12.0 3,500 Kg / hectare 12.0 3,000 RS bn 2,500 9.0 7.0 6.6 2,000 6.0 1,500 2.5 1,000 3.0 0.4 500 - - Korea USA EU Japan India Taiwan FY04 FY05 FY10 FY00 FY01 FY02 FY03 FY06 FY07 FY08 FY09 Source Department of Agriculture, research reports India is expected to emerge as a hub for the procurement of generic agrochemicals as4 well as new generation products
2. Company ovierview 2.1 Company snapshot Insecticides India (“IIL”) is an integrated agrochemicals company engaged in R&D, manufacturing, marketing and distribution of agrochemicals in India Listed company, established in 2001 Shareholding pattern Amongst top 10 agrochemicals company in India with Others an estimated 5% market share 19.4% Large and diversified product portfolio Track record of new product launches FIIs 5.9% – Judicious mix of in-house development, brand acquisitions and technical collaboration / marketing arrangements with global players Wide sales & distribution network across India Promoters 74.7% Established manufacturing infrastructure for both technicals and formulations Notes Shareholding pattern as on 31st Mar 2012 – Recently commissioned new units with sufficient Outperforming the index capacity to enable sustained long term growth – New state-of-the-art technicals manufacturing 900 800 762 facility and R&D facility is in pipeline 700 600 R&D center recognized by DSIR and Ministry of 500 Science & Technology 400 300 Accredited with NABL (R&D facilities), ISO 9001:2000, 200 114 ISO 14001 and OHSAS 18001 100 0 – GLP accreditation expected soon Jun-09 Jun-10 Jun-11 Jun-12 Feb-10 Feb-11 Feb-12 Apr-11 Apr-12 Oct-09 Apr-10 Oct-10 Oct-11 Aug-09 Aug-11 Aug-10 Dec-10 Dec-11 Dec-09 IIL Sensex Notes Figures have been rebased to 1006
2. Company ovierview 2.2 History & development Entered into 2nd Insecticides India Commissioned first Commissioned 2nd Acquired exclusive New R&D unit set Undertook collaboration with (P) Ltd. manufacturing plant manufacturing right to sell Thimet up after receiving establishment AMVAC (for incorporated at Chopanki plant at Sambha in India Govt. accreditation of multi-product Nuvan) (collaboration with manufacturing Finalized marketing AMVAC, USA) facility at Dahej arrangement with Nissan 1996 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD Received ISO IPO & listing on Undertook Acquired brand Acquired leading 9001-2000 NSE establishment of Monocil from Nocil Converted to brands of Montari certification Commissioned manufacturing Commisioned Insecticides Industries (Ranbaxy Set up R&D lab at technicals plant facility at Dahej and (India) Ltd. group company) Chopanki at Chopanki Udhampur Udhampur plants7
2. Company ovierview 2.3 Management team H. C. Aggarwal (Chairman) Rajesh Aggarwal (MD) P.C. Pabbi Sandeep Aggarwal Vice President CFO InformationProduction Purchase Marketing R&D Admin & HR Finance Technology B.P.S. Rana Abhai Shanker Sanjay Vats Venkat Rao Sanjeev Aggarwal Pankaj Gupta DGM GM GM GM GM CS H.C. Sharma M.K. Singhal Dr. Mukesh DGM GM DGM Sanjay Vats GM Ashok Bangde V.K. Garg GM GM R. S. Verma Sr. Manager K.V. Patel V.K. Singhal Unit Head GM S.K. Choudhary Project Manager Anil Tyagi Project Head8
3. Business description 3.1 Diversified business model Highly defensible, backward integrated and Diversified by segment Diversified by geography diversified business model 6.7% 3.7% Total = Rs Domestic Branded sales = Rs 4,341m 5,541m 32% 16% Strong presence in insecticides and herbicides segments – Segment focus and mix is strategically aligned to 28.0% 17% requirements of the Indian market 61.5% 6% 8% 11% 10% Formidable pan India presence with footprint across major Punjab A.P. Haryana crop producing regions in India Insecticides Herbicides Maharashtra UP Karnataka Fungicides PGRs Others Catering to both Branded formulations (B2C) and Institutional sales (B2B) market Strong presence across categories Strong in-house manufacturing – Especially strong in Branded formulations Total = Rs Total = Rs 5,541m 5,541m 8% 21% Focus on in-house manufacturing and backward integration 79% 92% Branded formulations Institutional sales Manufactured in-house Traded Notes FY12 figures are provisional; All charts above depict segmentation of FY12P gross sales Diversified portfolio across segments, regions and customers; strong brand presence10 and recognition; in-house manufacturing and grassroots distribution infrastructure
3. Business description 3.2 Large product portfolio Exceptional track record of new product launches Large portfolio across multiple segments and portfolio augmentation aided by PGRs 1 18 19 In-house product development through – Backward integration Fungicides 8 20 28 – Enhanced focus on R&D Herbicides 11 25 36 Acquisitions of „high recall, but off-shelf‟ brands and their successful re- launch into leading brands Insecticides 0 23 20 40 65 60 80 88 100 – Lethal and Monocil are recent success stories Institutional Branded formulations Track record of launch of new branded formulations Technical collaborations with leading global agrochemical players 10 – Plan to repeat success of Thimet with Nuvan 8 8 7 Marketing arrangements with principal partners 6 5 5 4 3 2 0 FY08 FY09 FY10 FY11 FY12P IIL’s product portfolio comprising of over 120 branded products, over 10 technicals11 and over 750 SKUs
3. Business description 3.3 Sales & marketing IIL enjoys market leading positions in several of its major products - a testimony to its strong branding and marketing initiatives and the extensive distribution reachBest-in-class pan-India Strong focus on Brand strategy Marketing initiativesdistribution network Portfolio of over 120 branded products Dedicated awareness initiatives provide 230+ sales personnel, 3,100+ Top selling brands such as Thimet, Lethal, Monocil and information to farmers on various aspects of distributors and c.50,000 retail Victor enjoy leading positions in the market agriculture and use of agrochemicals outlets Participation in national and international Aggressive focus on branding helped IIL gain market share 26 depots across 24 locations conferences, exhibitions and fairs Successful employment of “Umbrella strategy” to introduce Unparalleled reach to India‟s products for new applications and crops fragmented and dispersed end consumer base Pioneer in using electronic media advertisementSales personnel split Branding activities Farmer awareness initiatives Central, Total = 237 15 North, 93South, 80 West, East, 21 2812
3. Business description 3.4 Manufacturing capabilities Udhampur, J&K Granules capacity Liquid capacity – 3.0m L expansion to be Strong manufacturing Powder capacity – 0.6m Kg completed by Granules capacity – 0.6m Kg infrastructure H1FY13 In-house manufactured products25% capacity Sambha, J&K account for 90%+ revenuesexpansion overall to Liquid capacity – 5.5m L One of the best asset turnoverbe completed by Powder capacity – 2.1m Kg amongst Indian peersH1FY13 Granules capacity – 6.1m Kg Chopanki, Rajasthan Liquid capacity – 7.8m L Significant expansion in Powder capacity – 3.5m Kg manufacturing capacity currently Granules capacity – 7.5m Kg underway Technicals capacity – 2.0m Kg Expansion in technicals capacity to provide a significant boost for the institutional segment Granules capacity Ramp up in formulations capacity to Dahej (Baruch), Gujarat expansion of 7.5m kg provide sufficient capacity to enable Technicals capacity Liquid capacity – 4.0m L planned in the new sustained long term growth expansion of 10.0m Powder capacity – 2.5m Kg (third) pant; to be kg to be Significant opportunity for CRAMS commissioned by Granules capacity – 12.0m Kg commissioned by arising out of new facilities H1FY13 H1FY13 Significant area available for expansion of facilities in Government approved industrial belt for agrochemical production Notes Displayed capacity figures correspond to installed capacity as of 31st March 2012 13
International Collaborations & Tie ups• Technical Collaboration with American Vanguard Corporation (AMVAC) for manufacturing and marketing of THIMET and NUVAN• Tie up with Japanese giant Nissan Chemicals Industries Limited for Thiafluzamide and Quizalofop• JV with Oatsuka Agritechno Japan for R&D Centre in India, focusing invention of new agro chemical molecules for international requirements
5. Growth strategy 5.1 Growth strategy Enhanced backward integration with increase in technicals manufacturing capacity Continued focus on R&D – Enhance margins to reduce costs and – Enable targeting manufacturing time institutional segment Capitalize on prior Leverage on location Continued focus on experience to achieve advantage of manufacturing establishing strong brands maximum number of facilities Employ IIL‟s well-tested technicals registration Exploit gains from upgraded “Umbrella strategy” to Leverage R&D and newly commissioned introduce product capabilities for CRAMS manufacturing facilities extensions IIL intends to leverage its expertise in successful brand launches, enhanced R&D focus and recently expanded manufacturing capacity to fuel its future growth18
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