Chirag Rajendra Shah

K. J. Somaiya Institute of Management

Studies & Research, Mumbai.

Rallis India Ltd.

Equity Research Report

COMPANY INFORMATION:
Rallis, a Tata Enterprise is a subsidiary of Tata Chemicals, with its business presence in the farm essentials
vertical. It is one of India’s leading crop care companies.
From being just an pesticides player, the Company has widened its portfolio by diversifying across the
agriculture value chain – ranging from plant protection chemicals to hybrid seeds, plant growth nutrients
and soil conditioners. The Company has manufacturing facilities at four sites: Ankleshwar and Dahej in
Gujarat; and Lote and Akola in Maharashtra. All these are modern facilities in terms of technical
knowhow and practices. Its business is supported by the Rallis Innovation Chemistry Hub (RICH), which is
focused on product development and process chemistry to bring the latest crop health products to the
farmers.

The Company’s operations are divided into domestic and international business. The domestic business
focuses on enhancing farm productivity and farmer income across India. For this, the Company associates
with farmers at each stage of the farming cycle by providing quality seeds, plant growth nutrients and
agrochemicals, thus are ensuring an integrated crop management system. It also engages in safety
awareness campaigns “You are Safe” on usage of crop protection by farmers and channel partners. The
Company also helps farmers improve their farming practices through various hand-hold approaches.

On the international business front, the Company manufactures and markets technical-grade crop care
and branded formulation either directly or through alliances. The Company also leverages its knowledge
in process chemistry to undertake contract manufacturing activities in the areas of agro chemicals and
polymers, for leading global companies. It is a preferred partner owing to its execution capabilities, low-
cost advantage, customer relationship management and reliability in terms of quality and supply
The company’s 2,300 distributors reach more than 40,000 retail counters across the country covering
more than 80 per cent of India’s districts. Rallis is known for its deep understanding of Indian agriculture,
sustained contact with farmers, quality agrochemicals, branding and marketing expertise and its strong
product portfolio of comprehensive crop care solutions. Agricultural solutions from the company benefit
more than five million farmers.
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Its consolidated total income reached Rs 2,014.61 crore (US$ 288.25 million) in FY19 and Rs 1,930.36
crore (US$ 276.20 million) for 9MFY20.

Founded: 1948
Industry Name: PESTICIDES & AGRO
CHEMICALS
House Name: Public Sector
Traded as- REGISTERED CORPORATE OFFICE:
BSE: 500355
Address: 156/157, 15th Floor, Nariman Bhavan,,227, Nariman Point, Mumbai-400021
NSE: RALLIS
Tel. No.: 022-66652700
ISIN:  INE613A01020
Email: investor_relations@rallis.co.in
Headquarters:
Website: Mumbai, Maharashtra, India.
http://www.rallis.co.in/

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JOURNEY SO FAR:

Company was incorporated

1948

Acquired Teddington Chemical Factory (P) Ltd

1958

Merged with Reddington Chemicals

1961

Merged with subsidiary Ralli Chemicals Ltd

1978

Marketing alliance with the world's largest producer of fertilisers,

1998 Norsk Hydro

Marketing alliances with global players like Syngenta, Bayer and

2004 Dupont

Acquired majority stake in Metahelix Life Sciences

2010

Launched two new products Zygant and Ayaan for rice crops
2019

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Global view of Agrochemical Industry:
Agrochemicals market worldwide is projected to grow by US$71.6 Billion, driven by a compounded
growth of 4.7%. Fertilizers, one of the segments analysed and sized in this study, display the potential to
grow at over 5.2%. The shifting dynamics supporting this growth makes it critical for businesses in this
space to keep abreast of the changing pulse of the market. Poised to reach over US$167.6 Billion by the
year 2025, Fertilizers will bring in healthy gains adding significant momentum to global growth.

The global seed market continues to expand, as the demand for food will grow unabated in the backdrop
of world population anticipated to reach 10 billion by 2050. One of the major trends, which have
influenced the seed market worldwide, is the significant shift in farming practices.

Agrochemical Industry in India:

India is an agrarian country, where more than 50% people are dependent on agriculture for their
livelihood and is the largest producer of spices, pulses, milk, tea, cashew and jute & the 2nd largest
producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. Uncontrolled pests
significantly reduce the quantity and quality of food production. It is estimated that annual crop losses
could double without the use of crop protection products. Food crops must compete with 30,000 species
of weeds, 3,000 species of nematodes and 10,000 species of plant-eating insects. Agrochemicals are the
last and one of the key inputs in agriculture for crop protection and better yield.

Currently, India is the world’s 4th largest producer of agrochemicals after United States, Japan and China
and has emerged as the 13th largest exporter of pesticides globally. India is a net exporter of
agrochemicals and is 13th largest exporter of pesticides and disinfectants in the world.

India has a vibrant seed market with an estimated value of US$ 2.5 billion (US$ 1.5 billion hybrid seed and
US$ 1 billion Open Pollinated Variety). The industry has undergone significant restructuring due to
implementation of progressive policies by the Government. The Indian fertilizer market was valued at `
4,675 billion in 2017 and is projected to reach ` 9,987 billion by 2023, at a CAGR of around 13% during
2018-2023.

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Company Highlights:

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COMPANY MANAGEMENT:
Board of Directors:

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Key Management Personnel:

Name Designation
Mr. Sanjiv Lal Managing Director & Chief Executive Officer
Mr. Ashish Mehta Chief Financial Officer
Mr. Yashaswin Sheth Company Secretary

FINANCIALS OF THE COMPANY:

Balance Sheet
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Equity Share Capital 19.45 19.45 19.45 19.45 19.45
Reserves 795.07 868.98 1,091.72 1,171.13 1,266.48
Borrowings 125.30 89.81 39.00 24.64 72.84
Other Liabilities 495.99 505.81 558.89 762.60 803.84
Total 1,435.81 1,484.05 1,709.06 1,977.82 2,162.61

Net Block 595.39 564.40 573.71 573.66 580.78

Capital Work in Progress 26.47 40.49 42.15 47.32 50.71
Investments 24.19 28.12 239.22 95.60 109.27
Other Assets 789.76 851.04 853.98 1,261.24 1,421.85
Total 1,435.81 1,484.05 1,709.06 1,977.82 2,162.61

Working Capital 293.77 345.23 295.09 498.64 618.01

Debtors 247.75 227.84 263.74 399.67 449.07
Inventory 394.20 402.71 394.38 572.18 673.55
Debtor Days 52.03 54.39 57.87 81.45 82.62
Inventory Turnover 4.41 3.80 4.22 3.13 2.95

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Profit & Loss Account
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Sales 1,737.86 1,529.12 1,663.52 1,790.94 1,983.96

Expenses 1,458.04 1,297.68 1,398.01 1,524.12 1,740.21

Operating Profit 279.82 231.44 265.51 266.82 243.75

Other Income 3.31 14.28 171.18 13.12 30.65

Depreciation 49.58 43.61 47.55 46.31 46.08

Interest 11.96 16.00 9.20 6.61 8.06

Profit before tax 221.59 186.11 379.94 227.02 220.26

Tax 61.79 39.02 82.88 60.01 65.48

Net profit 157.22 143.39 297.46 167.61 155.38

EPS 8.08 7.37 15.29 8.62 7.99

Price to earning 28.09 23.08 16.98 27.65 20.52

Price 227.05 170.15 259.75 238.25 163.90

Cash Flow Statement:

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Cash from Operating Activity 68.06 232.13 407.66 41.39 80.06

Cash from Investing Activity -53.92 -146.90 -289.42 88.80 -51.45

Cash from Financing Activity -16.62 -58.81 -79.69 -104.14 -51.50

Net Cash Flow -2.48 26.41 38.55 26.04 -22.89

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SHARE HOLDING PATTERN:
Share holding pattern:

Standalone Mar-20 Sep-19 Jun-19 Mar-19

Promoters 50.09 50.09 50.09 50.09

Pledged 0 0 0 0

FII/FPI 4.89 4.67 4.49 4

Total DII 24.23 23.43 23.57 25.44

Fin.Insts 0.07 0.14 0.14 0.17

Insurance Co 3.76 4.53 5.16 5.61

MF 15.01 13.26 12.72 13.55

Others DIIs 5.39 5.5 5.55 6.11

Others 20.78 21.81 21.84 20.47

Total 99.99 100 99.99 100

DIVIDEND & RIGHTS:

Dividend:
Announcement Date Effective Date Dividend Type Dividend (%)
05-05-20 17-06-20 Final 250
25-04-19 19-06-19 Final 250
26-04-18 19-06-18 Final 250
24-04-17 09-06-17 Special 125
25-04-17 09-06-17 Final 250
26-04-16 10-06-16 Final 250
22-04-15 12-06-15 Final 150

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Bonus:

Announcement Date Bonus Ratio Record Date Ex-Bonus Date

22-04-10 1:2 09-06-10 08-06-10

11-09-77 3:10 30-11-0001 -

Split:

Announcement Date Old FV New FV Ex-Split Date

29-04-11 10 1 15-07-11

Rights Issue:
Ex-
Announcement
Rights Ratio Face Value Premium Record Date Rights
Date
Date

30-09-91 1:10 0 0 17-05-91 25-04-91

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RATIOS:

Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Basic EPS (Rs.) 9.54 6.63 7.28 13.68 6.49

Diluted EPS (Rs.) 9.54 6.63 7.28 13.68 6.49

Cash EPS (Rs.) 12.7 8.65 9.36 15.85 8.43

Book Value
[ExclRevalReserve]/Share 72.49 64.19 60.62 57.87 47.22
(Rs.)
Book Value
[InclRevalReserve]/Share 72.49 64.19 60.62 57.87 47.22
(Rs.)
Dividend / Share(Rs.) 2.5 2.5 2.5 3.75 2.5

Revenue from
115.76 85.95 77.05 71.26 66.23
Operations/Share (Rs.)

PBDIT/Share (Rs.) 15.19 11.93 12.09 12.64 10.85

PBIT/Share (Rs.) 12.03 9.91 10 10.47 8.9

PBT/Share (Rs.) 12.3 9.66 9.83 18.48 8.49

Net Profit/Share (Rs.) 9.54 6.63 7.28 13.68 6.49

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Key Profitability Ratios:
25

20

15
PBDIT Margin (%)
Net Profit Margin (%)
Return on Networth / Equity (%)
10 Return on Assets (%)

0
Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Liquidity Ratio:

Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Current Ratio
1.7 2 1.94 2.19 1.57
(X)

Quick Ratio
0.96 1.19 1.16 1.47 0.76
(X)

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Inventory
Turnover 3.22 3.89 4 5.67 5
Ratio (X)
Dividend
Payout Ratio 0 37.69 51.54 18.27 23.12
(NP) (%)
Dividend
Payout Ratio 0 28.89 40.05 15.77 17.78
(CP) (%)
Earnings
Retention 0 62.31 48.46 81.73 76.88
Ratio (%)

Valuation Ratios:
Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Enterprise Value
3,443.80 3,240.86 4,612.57 5,092.29 3,321.25
(Cr.)
EV/Net
Operating 1.53 1.94 3.08 3.67 2.58
Revenue (X)

EV/EBITDA (X) 11.66 13.97 19.62 20.72 15.75

MarketCap/Net
Operating 1.52 1.92 3.07 3.66 2.57
Revenue (X)
Retention
0 62.3 48.45 81.72 76.87
Ratios (%)
Price/BV (X) 2.42 2.57 3.9 4.51 3.6
Price/Net
Operating 1.52 1.92 3.07 3.66 2.57
Revenue

Earnings Yield 0.05 0.04 0.03 0.05 0.04

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Peer Comparison:

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TECHNICALS:

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EFFECT OF COVID-19:
Amid the COVID-19 crisis and the looming economic recession, the Agrochemicals market worldwide will
grow by a projected US$51.8 Billion, during the analysis period, driven by a revised compounded annual
growth rate (CAGR) of 3.4%. Fertilizers, one of the segments analyzed and sized in this study, is forecast
to grow at over 3.9% and reach a market size of US$160.7 Billion by the end of the analysis period. An
unusual period in history, the coronavirus pandemic has unleashed a series of unprecedented events

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affecting every industry. The Fertilizers market will be reset to a new normal which going forwards in a
post COVID-19 era will be continuously redefined and redesigned. Staying on top of trends and accurate
analysis is paramount now more than ever to manage uncertainty, change and continuously adapt to new
and evolving market conditions.

Amid the growing push for decoupling and economic distancing, the changing relationship between China
and the rest of the world will influence competition and opportunities in the Agrochemicals market.
Against this backdrop and the changing geopolitical, business and consumer sentiments, the world’s
second largest economy will grow at 6.6% over the next couple of years and add approximately US$16.8
Billion in terms of addressable market opportunity. Continuous monitoring for emerging signs of a
possible new world order post-COVID-19 crisis is a must for aspiring businesses and their astute leaders
seeking to find success in the now changing Agrochemicals market landscape.

My Recommendation:
The agricultural sector is of prime importance in India and definitely will continue to do so. Agrochemical
companies have not taken that a big hit as compared to other sectors. Also the Big Bull Rakesh
Jhunjhunwala himself holds a healthy share in this company.
Hence my view for this script is to BUY on a long term perspective.

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