sahyog credits ltd Management discussions

Global economy

The global economy is navigating through dynamic times. According to the International Monetary Fund (IMF), theres a foundational resilience in the global economy. While there might be a slight deceleration in the growth rate from

3.4 percent in 2022 to 2.8 percent in 2023, the optimism is evident with projections indicating a stabilisation at a healthy 3.0 percent in 2024.

The IMF anticipates a downward trajectory in global headline inflation, reducing from 8.7 percent in 2022 to a more moderate 7.0 percent in 2023. This easing is attributed to declining commodity prices, which signifies a potential for more stable market conditions.

In essence, while there are complexities to be navigated, the global economic canvas offers opportunities for growth, innovation, and resilience in these transformative times.

Indian economy

The Indian economy has demonstrated its resilience by rebounding from the pandemics impact, achieving complete recovery in FY22, and is now poised to surpass pre-pandemic growth levels in FY23, outperforming many nations.

Managing inflation has been a challengeforIndia, further exacerbated by European turmoil. However, with government and RBI interventions, along with easing global commodity prices, retail inflation been has successfully brought below the upper tolerance target set by the RBI in November 2022.

Challenges persist in the form of a depreciating rupee, potential policy rate increases by the US Federal Reserve, and a widening current account deficit due to elevated global commodity prices and sustained Indian economic growth.

Despite these challenges, India remains consistently projected as the fastest-growing major economy by global agencies. In FY23, the economy is expected to grow between 6.5-7.0 percent. The resilience of the Indian economy, driven by private consumption, stimulated production, increased capacity utilisation, and generated employment opportunities, reflected in declining urban unemployment rates.

Looking ahead to FY24, robust growth is anticipated, driven by dynamic credit disbursement, capital investment cycles, and improved balance sheets for the corporate and banking sectors. The expansion of public digital platforms and the implementation of initiatives such as PM GatiShakti, the National Logistics Policy, and Production-Linked Incentive schemes aimed at boosting manufacturing output will contribute further to economic growth.

Global agriculture

Healthy, sustainable, and inclusive food systems play a pivotal role in achieving the worlds development goals.

With a projected population of 9.7 billion people by 2050, agricultural development becomes a powerful tool to end extreme poverty, promote shared prosperity, and ensure food security. Compared to other sectors, the agriculture sectors growth is two to four times more effective in raising incomes among the poorest.

Agriculture not only drives economic growth but also contributes significantly to global gross domestic product

(GDP), accounting for 4% of the total. In least developing countries, agricultures contribution to GDP can exceed 25%, highlighting its crucial role in these economies.

However, the progress made in agriculture-driven growth, poverty reduction, and food security is facing significant challenges. Multiple shocks, including disruptions caused by

COVID-19, extreme weather events, pests, and conflicts, are impacting food systems, resulting in rising food prices and an alarming increase in hunger.

Despite these challenges, the global agriculture market demonstrates promising growth. In 2023, the market expanded from $12,245.63 billion to $13,398.79 billion, achieving a compound annual growth rate (CAGR) of 9.4%.

Looking ahead, the market is projected to reach $19,007.8 billion in 2027, with a CAGR of 9.1%.

Global grochemicals

The global agrochemicals sector is experiencing a significant upswing in demand, driven by the indispensable role of crop protection chemicals in supporting the backbone of the agriculture industry worldwide. As the worlds population continues to grow while arable land diminishes, maximising crop yields has become of paramount importance in todays landscape. With the global population rapidly approaching 8 billion people, an astounding 16 billion meals per day are required at a minimum. To meet this staggering demand, crop protection chemicals play a crucial role in safeguarding crops and ensuring food security for humanity.

The global agrochemicals market, valued at USD 66.6 billion in 2020, is projected to reach USD 91.7 billion by 2025, growing at a compound annual growth rate (CAGR) of 6.5%. This growth is driven by the increasing population worldwide, coupled with a rise in affluence, which has led to a shift in consumption patterns.

Indian agriculture

Agriculture holds a prominent position in Indias burgeoning economy, making significant contributions to its overall growth. With approximately 54.6% of the nations workforce engaged in agricultural and allied activities, this sector accounts for 17.8% of Indias gross value added (GVA).

The Indian agriculture sector is poised for continued growth, with a projected expansion of 3.5% in FY23. As Indias population continues to rise, creating a surging demand for food and agricultural products, the significance of the agriculture sector becomes even more critical.

Indian agrochemicals

Indias position as the fourth-largest producer of agrochemicals globally speaks volumes about the countrys prowess in the agricultural sector. With an ever-growing domestic market and a robust export industry,

Indias agrochemicals sector is primed for significant growth and innovation.

gest exporter of lar Indiasemergenceasthefifth-agrochemicals in terms of value and the third-largest in terms of volume further underscores the countrys significance in the global market. In 2020 alone, India exported USD 3.4 billion worth of pesticides, accounting for approximately 7% of global exports. Looking ahead, India aims to amplify its export potential, targeting nearly 60% of the domestic agrochemicals production by 2025.

While China currently dominates the global pesticide exports market with a market share of around 37%, India is poised to strengthen its position. With a projected increase in export share to approximately 10% by 2025, India is set to become a key player on the global stage, contributing to the worlds agricultural needs.

One notable aspect that highlights the immense growth potential in Indias agrochemicals sector is the per capita consumption of crop protection chemicals per hectare. Compared to developed nations like the United States and Japan, Indias per hectare consumption stands at a mere 0.6 kilograms. In contrast, countries such as

Taiwan, China, and Japan utilise double-digit kilograms per hectare, signalling a significant opportunity for growth and improvement in agricultural productivity.

Company overview

Best Agrolife, a prominent agrochemicals manufacturer in India, has established itself as one of the top 15 companies in the sector. With a focus on sustainable agriculture, the Company is experiencing rapid growth as it continues to offer a diverse range of products including Technicals, Formulations, Intermediates, and Public Health solutions.

Renowned for its niche product category, Best Agrolife is dedicated to delivering high-quality, innovative, and cost-effective crop protection solutions to farmers worldwide. The

Company has an extensive portfolio of over 87 Formulations, encompassing Insecticides, Herbicides, Fungicides, and Plant Growth Regulators. These formulations are meticulously developed using in-house manufactured active ingredients, ensuring optimal effectiveness and performance.

Operating within a robust business-to-business framework, Best Agrolife serves prestigious corporate clients and multinational corporations both in India and abroad.

Financial overview

Ratio	FY23	FY22	% change	Reason for variance
Current Ratio (in times)	1.38	1.51	-8.12%
Debt-Equity Ratio (in times)	0.78	0.42	84.72%	Higher ration in current year on account of increased working capital loans limits owning to increase in operations and related operational use. Increase in shareholders fund is on account of increase in current year profit.
Debt Service Coverage Ratio (in times)	2.51	7.43	-66.19%	Decreased primarily on account of decrease in net profits mainly attributable to lower operating profits and higher net finance charge during the current year.
Return on Equity Ratio (in %)	0.14	0.39	-64.43%	Decreased primarily on account of decrease in net profits mainly attributable to lower operating profits and higher net finance charge during the current year.
Inventory turnover ratio (in times)	4.96	5.42	-8.48%
Trade Receivables turnover ratio (in times)	5.61	6.22	-9.48%
Trade payables turnover (in times)	6.39	5.31	20.19%
Net capital turnover ratio (in times)	7.06	5.78	22.18%
Net profit ratio (in %)	4.47%	10.23%	-56.34%	Decreased primarily on account of decrease in net profits mainly attributable to lower operating profits and higher net finance charge during the current year.
Return on Capital employed (in %)	14.29%	28.67%	-50.15%	Decreased primarily on account of decrease in net profits mainly attributable to lower operating profits and higher net finance charge during the current year.
Return on Investment*	-	-	-	-

* No income has been received on investment in the year ended March 31, 2023 and March 31, 2022 hence reported as Nil.

Outlook

Driven by strategic initiatives and a focus on growth and efficiency, Best Agrolife is poised for a promising outlook in FY24. The Company aims to achieve a robust 30% revenue growth and maintain an EBITDA margin of 20%.

With a strong emphasis on innovation, the Company is set to launch new and innovative products that not only cater to market demands but also offer higher profit margins.

This strategic move will position the Company as a leader in specialised products, marking a significant shift from generic offerings.

In order to expand its market presence, BAL is ramping up its distribution network and focussing on branded products. This targeted approach will enhance customer engagement and create greater brand recognition.

The Company is maximising backward integration efforts to improve operational efficiencies. By streamlining its supply chain and production processes, the Company can enhance productivity and cost-effectiveness, ultimately driving higher profitability.

Expanding footprint in the global market remains a key priority for BAL. The Company is dedicated to expanding its export business, tapping into new markets and leveraging its strong product portfolio to establish a strong international presence.

Human resources

At Best Agrolife, the immense value of human resources is recognised as key drivers of the Companys growth. With a steadfast commitment to employee development, the Company actively engages with its workforce to empower them. By investing in continuous learning and training, Best Agrolife equips its employees with the necessary expertise to excel in their roles.

Establishing a formidable brand presence is another strategic focus for the Company. Building a positive reputation as an employer of choice is pivotal for securing and nurturing top talent. By nurturing a supportive and collaborative work environment, the Company aims to ensure employee satisfaction.

Throughout FY23, employee relations at all tiers remained cordial, and the Company remains committed to maintaining this harmony in future. As of 31 March 2023, Best Agrolife boasted a workforce of 700+ permanent employees.

Internal control systems and their adequacy

At Best Agrolife, a robust system of internal controls has been implemented to ensure the protection and safeguarding of the Companys assets. This comprehensive framework minimises the risk of unauthorised use or disposal of assets and ensures that all transactions are properly authorised, recorded, and reported.

With the objective of optimising resource utilisation and boosting operational efficiency, the Company has established an effective mechanism. This mechanism facilitates close monitoring of operations, guaranteeing that resources are employed efficiently and in alignment with pertinent laws and regulations. The internal control systems have been judged as adequate and satisfactory by the auditors.

Cautionary Statement

Statements contained in the Management Discussion and Analysis and other sections of the report, which detail the objectives, projections, estimates, and expectations, may be deemed as forward-looking statements. It is crucial to recognise that actual results might deviate considerably from these statements owing to various risks and uncertainties.

The Companys operations can be affected by factors such as economic and political conditions, not only in India but also in other countries where Best Agrolife operates. Furthermore, fluctuations in interest rates, alterations in government regulations and policies, tax laws, statutes, and other incidental factors can influence the Companys operations.

Evaluating Best Agrolifes future prospects and performance necessitates consideration of these factors and uncertainties.