Press Release

January 31, 2022 | Mumbai

Agrochem players to log double-digit growth next fiscal, too

Input costs to pare margins; balance sheets to keep credit profiles stable
Exports will help the agrochemical sector maintain double-digit growth in revenue this fiscal and the next — at 12-13%
and 10-12%, respectively, compared with 15% last fiscal — even as domestic sales growth will be stunted by uneven
monsoon and slower increase in rural incomes.

Steep rise in prices of inputs, especially imported, will lead to a moderation of 150-250 basis points (bps) in operating
profitability in the two fiscals. However, healthy cash accruals and balance sheets will ensure credit profiles remain
stable despite an expected increase in working capital and capital spend.

An analysis of 28 companies rated by CRISIL Ratings and accounting for ~80% of the ~Rs 53,000 crore agrochemical
sector indicates as much. The sector derives equal revenue from exports and domestic sales.

Says Anuj Sethi, Senior Director, CRISIL Ratings, “The China +1 procurement model has been a key tailwind
for Indian players as large export consumers are diversifying their supplier base. This along with continued
healthy demand from Brazil and the US (~45% of India’s exports) and increasing supplies to Europe (~15% of
India’s exports) will lead to exports growing by ~15% this fiscal and 12-13% in the next. Consequently, the
share of exports in overall revenue is expected to rise to ~53% by fiscal 2023.”

On the other hand, after strong growth of ~20% last fiscal, domestic demand growth will see a sharp moderation to 8-
9% this fiscal, with uneven monsoon impacting offtake during the key kharif season (June-October) and moderately
impacting rural incomes. Also, area under sowing has grown just ~1% this rabi season (October-February).

Next fiscal, assuming normal monsoon and modest increase in area under cultivation as well as better rural incomes,
domestic growth will remain stable at 8-10%.

Meanwhile, the prices of key inputs such as glyphosate, glufosinate, imidacloprid and bifenthrin, which are linked to
crude and phosphorous, have increased almost 30% since March 2021. With slowing domestic demand and high
competitive intensity rendering players unable to pass on the input price increase entirely, operating margins are likely
to slip to ~13% in fiscals 2022 and 2023 from ~14.5% in fiscal 2021.

Says Sandeep Narayanan, Team Leader, CRISIL Ratings, “With export demand remaining robust and product
registrations increasing, capital spend will rise to Rs 5,000-5,500 in each of the next two fiscals from Rs 4,200
crore last fiscal. Working capital requirement will also rise due to higher cost of inventory and increasing
exports, where credit period is higher. That said, prudent funding of the incremental working capital and
capital spend will keep gearing comfortable at 0.3-0.4 time until fiscal 2023 (0.24 time in fiscal 2021) while
interest cover ratio is expected to sustain at ~9 times.”

In the milieu, intensity and spread of the next monsoon, sowing levels in the rabi and kharif seasons, and trends in raw
material prices remain key monitorables.

1
For further information contact:
Media relations Analytical contacts Customer service helpdesk
Pankaj Rawat Anuj Sethi Timings: 10.00 am to 7.00 pm
Media Relations Senior Director Toll free Number:1800 267 1301
CRISIL Limited CRISIL Ratings Limited
M: +91 99 872 61199 B: +91 44 6656 3100 For a copy of Rationales / Rating Reports:
B: +91 22 3342 3000 anuj.sethi@crisil.com CRISILratingdesk@crisil.com
pankaj.rawat@crisil.com
Rajeswari Karthigeyan For Analytical queries:
Naireen Ahmed Associate Director ratingsinvestordesk@crisil.com
Media Relations CRISIL Ratings Limited
CRISIL Limited B: +91 44 6656 3100
D: +91 22 3342 1818 rajeswari.karthigeyan@crisil.com
M: +91 90 040 84769
B: +91 22 3342 3000 Sandeep Narayanan
naireen.ahmed@crisil.com Team Leader
CRISIL Ratings Limited
D: +91 22 4047 2667
sandeep.narayanan@crisil.com

About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and
innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans,
certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual
bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt
instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several
innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and infrastructure
investment trusts (InvITs).

CRISIL Ratings Limited ("CRISIL Ratings") is a wholly-owned subsidiary of CRISIL Limited ("CRISIL"). CRISIL Ratings Limited is
registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").

For more information, visit www.crisilratings.com

About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading
ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics
and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: LINKEDIN | TWITTER | YOUTUBE | FACEBOOK

CRISIL PRIVACY

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to
provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER
This Press Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The Press release may be used by you in
full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings Limited (hereinafter referred to as “CRISIL Ratings”). However,
CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its Press Releases for consideration or otherwise through any media including
websites, portals etc.

CRISIL Ratings has taken due care and caution in preparing this Press Release. Information has been obtained by CRISIL Ratings from sources which it considers
reliable. However, CRISIL Ratings does not guarantee the accuracy, adequacy or completeness of information on which this Press Release is based and is not responsible
for any errors or omissions or for the results obtained from the use of this Press Release. CRISIL Ratings, especially states that it has no financial liability whatsoever to
the subscribers/ users/ transmitters/ distributors of this Press Release. CRISIL Ratings or its associates may have other commercial transactions with the company/entity.

CRISIL Ratings Limited is a wholly owned subsidiary of CRISIL Limited.