1. OVERVIEWOF AGRICULTURAL SECTOR
Agriculture remains a dominant sector of the Indian economy both in terms ofcontribution to gross domestic product (GDP) as well as a source of employment to millionsacross the country. Over 50 per cent of the rural households depend on agriculture astheir principal means of livelihood. Agriculture, along with fisheries and forestry,accounts for one-third of the nations GDP and is its single largest contributor.Agriculture derives its importance from the fact that it has vital supply and demand linkswith the manufacturing sector. The total Share of Agriculture & Allied Sectors(Including agriculture, livestock, forestry and fishery sub sectors) in terms ofpercentage of GDP is 14%. As per the estimates released by Central Statistics Office,Agricultural exports constitute a fifth of the total exports of the country.
For the 12th Plan (2012-17), a growth target of 4% was set for IndianAgriculture. Deficit monsoon of 2014 and unseasonal rains of February-March this year tookits toll on the overall food grain production in the country, pushing down the totaloutput during 2014-15 by nearly 5%.
The latest government estimate puts the figure of total food grain production duringthe 2014-15 crop year at 251.12 million tonnes which is lower by 13.92 Millions tonnesthan last years record food grain production of 265.04 Millions tonnes.
In order to keep up the momentum gained during the 11th Plan and achieve the targetedgrowth rate of4% during the 12th Five Year Plan, a focused approach was adopted to avoidthe overlap between various schemes. All ongoing 51 schemes of the Department have beenrestructured into five missions viz. National Food Security Mission (NFSM), Mission forIntegrated Development of Horticulture (MIDH), National Mission on Oil Seed and Oil Palm(NMOOP), National Mission for Sustainable Agriculture (NMSA), and National Mission onAgricultural Extension & Technology (NMAET); five Central Sector Schemes viz. NationalCrop Insurance Programme (NCIP), Integrated Scheme on Agri-Census & Statistics(ISAC&S), Integrated Scheme of Agriculture Marketing (ISAM), Integrated Scheme ofAgriculture Cooperation (ISAC) and Secretariat Economic Service; and one State Plan Schemeviz. Rashtriya Krishi Vikas Yojana.
Recognizing the importance of the Agriculture Sector, the Government during the budget2014-15 took a number of steps for sustainable development of Agriculture. These stepsinclude enhanced institutional credit to farmers; promotion of scientific warehousinginfrastructure including cold storages and cold chains in the country for increasing shelflife of agricultural produce; improved access to irrigation through Pradhan Mantri KrishiSichayee Yojana; provision of Price Stabilisation Fund to mitigate price volatility inagricultural produce; mission mode scheme for Soil Health Card; setting up of Agri-techInfrastructure Fund for making farming competitive and profitable; provide institutionalfinance to joint farming groups of Bhoomi Heen Kisan through NABARD;development of indigenous cattle breeds and promoting inland fisheries and other non-farmactivities to supplement the income offarmers.
2. INDUSTRY DEVELOPMENT
The global seed and crop protection market continued to show dynamic development in2014. There was a further tangible increase in the demand for high-value seeds.
In 2014-15,the Indian Crop Protection market grew at an estimated low double digitrate, which was less than 2013-14 but still better than expected despite deficientmonsoon. Area under Rice recovered in spite of late rains and provided opportunity forincreased usage of herbicides. Cotton acreages increased to record 12.7 million ha.Excellent prices of Fruits & Vegetables led to increased usage of high value products.There was considerable reduction in acreages of Pulses & Soybean.
2014-15 was again a mixed year for the seeds business. Poor monsoon affected HybridRice & Millet crops. However Cotton had an excellent year with record acreages. Theoutlook for these crops remains positive subject to normal monsoon.
India has ~190 Million hectares of gross cultivated area and the scope for bringing newarea under cultivation is severely limited. Available arable land has been reducing and isexpected to reduce further. India has low crop productivity as compared to othercountries. At the same time, Indias pesticide consumption is also low as compared tothe world average. Hence, increased usage of pesticides could help the farmers improvecrop productivity.
Government initiatives to provide credit facilities to farmers in the rural areas willprovide boost to the agriculture industry. Access to finance would encourage them amongstothers to use more pesticides and high value seeds in order to improve the crop yield.
Apart from this, factors such as growing farmer awareness, hybridization, increasingfarmer income, increasing demand for food, increased focus on R&D and expansion ofcontract farming are expected to drive consumption of agrochemicals & seeds.
3. REVIEW OF FINANCIAL AND OPERATIONAL PERFORMANCE
Bayer CropScience Limited's Revenue from operation (Net) increased by 15%, from Rs.32,452 Millions in 2013-14 to Rs. 37,233 Millions in 2014-15. Profit before exceptionalitems and tax increased by 30%, from Rs. 4,408 Millions in 2013-14 to Rs. 5,735 Millionsin 2014-15.
Bayer CropScience Limited is an innovation driven company. The Companys successis based on the development of new products, technologies, processes and business models.Providing new and better solutions to farmers has always been a key priority. BayerLabhsutra is one such approach where the effort has been to offer solutions tofarmers where they can earn more than their conventional practices. In 2014-15, yourCompany conducted 2000 field trials to demonstrate these benefits to farmers ingeographies across India. Farmers have seen convincing results from Bayer Labhsutra, inthe form of an increase in quantity and quality of produce and increased net profits.
In the year 2014-15, Bayer CropScience Limited successfully grew its innovative CropProtection business with flagship products like Confidor, Regent,Nativo andFame. Your Company successfully launched Raxil Easy in 2014 which will furtherstrengthen our position in Seed Growth.
In the Agri-Seeds,we had excellent sales of Surpass First Class. Hybrid rice didrelatively well and established our claim of superior performance even under moisturestress conditions. The Company also launched Arize Swift Gold and Arize 6201 Gold tostrengthen our portfolio in Rice. In Mustard, 5222 was spread across geographies andHybrid 5111 was introduced in the North East for early segment.
In 2014-15, your Company further consolidated on innovative projects which helped gainan edge over competition. Labour scarcity and its increased cost has become a major driverfor adoption of technology in agricultural operations. Rice farmers in India also facethis issue. Labour availability, reliability and increasing costs due to a shorttransplanting window has become a major show stopper. Farmers in intensive cultivationareas are looking for alternate solutions. With the Bayer GrowPro initiative, your Companyoffered customized Bayer Healthy Seedlings which were mechanicallytransplanted in the fields of Rice farmers. Mechanical Rice Transplanting combined withpost transplantation advisory through the Bayer Labhsutra Program provided good value tofarmers and created competitive advantages for your Company.
With an objective of creating shared value, our Food ChainPartnershipsaim at providing farmers with innovative crop protection products, seedsand services, as well as advisory on optimal use of products and applications. Farmersbenefit through better market access, more secure income, better technological solutions,higher yields, and cost-effective, sustainable use of agrochemicals. The Company has beencontinuously extending the scope of these associations with various food retailers,processers and exporters, which have now become an integral part of our business. In2014-15, your Company further strengthened projects in key crop. Today your Company has 33well prospering food chain partnerships, across 147 locations,covering more than 77,000hectares and benefiting more than one lac farmers.
Your Company also completed the ambitious project of segmenting close to 3 millionfarmers of the country. In the process, we generated valuable insights which will go along way in not only providing customized solutions to farmers but also creating a hugecompetitive advantage for your company. We are also piloting suitable technology platformsto automate our demand generation activities using the insights generated from farmersegmentation. It will ensure that we reach the targeted customers in most efficient mannerin a market which is highly fragmented. Your Company is also leveraging differentcommercial excellence initiatives which we undertook over last few years, to serve ourconsumers and channel partners better.
Environmental Sciences aspiration is to provide our customers first-choicesolutions to protect and care for the environment in which we all live, work and play. Itaims to provide greater environmental hygiene and health benefits, as well as to improveliving standards and comfort in the various markets.
Year 2014-15 has been a very good year for Environmental Science business. ProfessionalPest Control business grew at a very healthy rate. We increased our footprint by engagingdirectly with large Pest Management Professionals (PMPs). These activities yielded goodresults in growing the Pest Control Operations (PCO) business. Currently your Company has57 Bayer Network PCOs across India. We also got very good response to new launchesAgenda & Racumin. A new product Sure was launched in March 2014. Premise, atermite control product also had excellent performance.
4. OPPORTUNITIES ANDOUTLOOK
The Indian agriculture sector is expected to grow with better momentum in the next fewyears owing to increase in investment in agricultural infrastructure such as irrigationfacilities, warehousing and cold storage. Factors such as reduced transaction costs, time,better port gate management and fiscal incentives will also contribute to this upwardtrend. Furthermore, the increased use of high value seeds, hybrids and geneticallymodified crops is also expected to better the yield of the Indian farmers. The 12thFive Year Plan's estimates of expanding the storage capacity to 35 million tonnes and thetarget of achieving an overall growth of 4 per cent will also go a long way in modifyingthe overall face of the Indian agriculture sector in the next few years.
Per hectare consumption of pesticides in India is amongst the lowest in the world andcurrently stands at 0.6 kg/ha. On the other hand consumption in developed nations rangesfrom 5-7 kg/ha whereas at 13 kg/ha in China. In order to increase yield and ensure foodsecurity for its enormous population agrochemicals penetration in India is bound to go up.
Sustainable agriculture, higher crop yields and improved crop quality will become moreimportant. There will also be an enhanced role of technology in agricultural operations.Increasing labour shortage and its ever escalating cost will drive not only usage ofherbicides but also mechanization in agriculture. Farmers will look for mechanizedsolutions in the area of various agricultural operations.
Swelling farm incomes, encouraged by good commodity prices, will further encouragefarmers in spending on qualitative inputs for achieving higher yields, better quality anda more favorable return on investment.
Expansion of modern retail will change the consumption pattern. There will be increaseddemand for newer, better products which will increase crop diversification. This willdrive farmers to leverage the latest technologies and crop varieties to meet changingdemand patterns. This will also drive employment opportunities in rural areas.
Your Company is aligning its corporate planning to these long-term trends in theagricultural markets. Our aim is to help shape the future of the agricultural industry,increase its productivity and thus generate profitable and sustainable growth for ourbusiness. We aim to enhance our Crop Protection portfolios by adding new and improvedproducts, concentrating on core brands and offering integrated solutions in major crops.Support for this endeavor is provided by our important technology platform for bothchemical and biological crop protection. We are investing heavily in the expansion of ourproduction capacities to meet rising demand of our products.
5. RISKS, CONCERNS AND THREATS
Indian agriculture primarily is rain fed agriculture. More than 55% of area undercultivation is dependent on rains. Our Crop Protection and Seeds businesses are directlyinfluenced by the amount of rainfall, its distribution and water reservoir levels. Thishas a direct impact on the choice of crops cultivated by the farmer and total cultivatedarea during the year. Under such circumstances, the industrys performance willlargely depend on timely and adequacy of rainfall.
Stringent environment regulations across the world are increasing the cost ofdeveloping new products and simultaneously may delay the introduction of new products inthe market.
It is important to educate the farmers about safe usage of pesticides, such as theselection of appropriate kind of pesticide, dosage rates, frequency and timing ofapplication, as well as operator safety. However it is not easy to reach to the farmersowing to infrastructure issues, regional languages and dialects. The main point of contactbetween the farmers and the manufacturers are the retailers who will have to take a highershare in capacity building and training of framers. Overall the role of agricultureextension becomes very critical in addressing this need gap. Your company recognizes theimportance of this critical requirement of famers. Our network of over 3,000 trained farmadvisors and a well-qualified sales team coupled with our extensive distribution networkwill continue to deliver the right solution at the right time to farmers.
There is a significant share of non-genuine pesticides which can be counterfeit,spurious, adulterated or sub-standard. According to industry estimates the non-genuinepesticides could account for up to 40% of the pesticides sold in India in FY13. Theseproducts are inferior formulations which are unable to kill the pests or kill themefficiently. Some such products do perform but leave by-products which may significantlyharm the soil and environment. The damage through such products is multifold. Some of thekey reasons for use of non-genuine products are lack of awareness amongst the farmers,difficulty in differentiating between genuine and non-genuine products, supply chaininefficiencies, law enforcement challenges and influencing power ofdistributors/retailers.
6. CORPORATE SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY 2014-15
For Bayer CropScience Limited (Company), sustainability basically means futureviability and it forms an integral part of our business strategy. We believe thatinnovation is essential in achieving sustainable economic success. We at Bayer carefullydevelop products and services specifically designed to benefit people. In this endeavour,we are committed to achieving the economic, ecological and social responsibilityobjectives of Sustainable Development.
Ensuring ample food supplies is one of the biggest challenges of our time. The Companyis developing solutions to this problem and has firmly established the topic ofhigh-quality food for all as a central objective of its sustainabilityprogramme. Our mission states Bayer: Science For A Better Life. For theCompany, it is therefore important to contribute to societys future viability andcreate value in diverse ways starting with business strategy which is aimed at creatingvalue for all stakeholders including farmers. It is the inherent nature of our business.
Our commitment to sustainability is also aimed at improving resource and energyefficiency. At Bayer CropScience Limited, we are constantly working to reduceenvironmental impact and find innovative product solutions that benefit the environment.
7. PUBLIC PRIVATE PARTNERSHIPS
Operating on a continuum between private enterprises and traditional governmentinstitutions, PPPs (Public Private Partnerships) have become a major vehicle for deliveryof innovative projects in agriculture. Bayer CropScience has also a fair share of theseprojects where we work along with government and generate value for farmers of India.
CITI-CDRA (Confederation of Indian Textile Industries Cotton Development andResearch Association)
The Rajasthan Cotton Collaborative Project is an example of empowering marginalizedfarming communities in a sustainable way. The project was initiated in 2008 in the tribalBanswara district of South Rajasthan and extended to adjoining districts of Bhilwara andRajsamand in 2009. The project was the result of a Public Private Partnership (PPP)between Bayer CropScience Limited and CITI- CDRA (Confederation of Indian TextileIndustries Cotton Development and Research Association) and the Department ofAgriculture, Rajasthan. The project was shifted to 4 central districts of Rajasthan from2012 viz. Ajmer, Nagaur, Jodhpur & Pali. The joint efforts made by all theparticipating agencies along with the dedicated project team led to significant increasein productivity and farm income of the participating farmers which led to Rajasthanemerging as the state with highest Cotton productivity in the country with average 780 kglint /ha in 2014.
Maharashtra PPP-IAD (Public Private Partnership For Integrated Agriculture Development)
The project was initiated in 2011 under New Vision on Agriculture promoted by WorldEconomic Forum (NVA-WEF). Bayer CropScience is actively participating as a technology /supporting partners with 5 projects (2014-15) in Tomato, Vegetables, Grapes, Pomegranateand Rice. So far we have supported 4000 farmers with good agricultural practices therebyimproving their ROI.
Collaboration with CIMMYT for productivity enhancement in Cereal Systems in South Asia
The collaboration initiated in 2009 with CIMMYT (International Maize and WheatImprovement Centre) is to improve rice-wheat cropping system in Indo- gangatic plainsthrough field adaptive research to increase the cereals productivity on a sustainablebasis. The collaboration focuses on use of rice hybrid technology and efficient use ofother key inputs besides encouraging conservation agriculture practices. Thiscollaboration will certainly help decrease hunger and malnutrition and increase food andincome security of resource-poor farm families in South Asia through the accelerateddevelopment and inclusive deployment of new varieties, sustainable managementtechnologies, and policies.
Within the scope of our social commitment, we make targeted strategic investments inthe areas of science and education, health, social needs and community projects. Thiscommitment is an integral element of our corporate policy.
8. INTERNAL CONTROL SYSTEMS
The Company has appropriate internal controls systems for business processes withregard to its operations, financial reporting and compliance with applicable laws andregulations. The Audit Committee of the Board of Directors approves the internal auditplan and internal audits are conducted at regular intervals across various locations andprocesses in line with the approved internal audit plan. Audit observations and follow-upactions are discussed with the management of the Company as well as the Audit Committee.
9. CAUTIONARY STATEMENT
The statements in the Management Discussion and Analysis Report describethe Companys objectives, projections, estimates expectations and predictions whichmay be forward-looking statements within the meaning of applicable laws andregulations. The annual results can differ materially from those expressed or implied,depending upon the economic and climatic conditions, government policies and otherincidental factors.
Vijay Mallya , Chairman
Sharad M Kulkarni , Director
Peter Mueller , Director
A K R Nedungadi , Director
Company Head Office / Quarters:
Bayer House Central Avenue,
Phone : Maharashtra-91-022-25311234 / Maharashtra-
Fax : Maharashtra-91-022-25455063 / Maharashtra-
Web : http://www.bayer.in
TSR Darashaw Ltd
6-10 Haji Moosa ,Patrawala Ind.Estate,DrEMoses Rd Mahalaxm,Mumbai - 400 011
|Scheme Name||No. of Shares|
|Birla Sun Life MNC Fund - B (G)||5,69,662|
|HDFC Mid-Cap Opportunities Fund (G)||5,02,310|
|Birla Sun Life Tax Relief '96 (G)||2,60,190|
|Franklin India High Growth Companies Fund (G)||2,10,000|
|Birla Sun Life Frontline Equity Fund (G)||1,73,333|