1.0 OVERVIEW OF AGRICULTURAL SECTOR
Agriculture is the dominant sector in India and contributes significantly towardsgrowth and sustainability of the Indian economy. More than 50% of Indias populationstill relies on agriculture and allied activities for employment and livelihood. IndianAgriculture has shown impressive progress over the past four decades and has successfullykept pace with the rising demand for food. Today, Agriculture accounts for nearly 14% ofIndias Gross Domestic Product (GDP). It also serves as a source of raw material fora large number of industries. Therefore, a good growth in the agriculture sector has acascading impact on other industries as well. Since more than two-thirds of India lives inrural areas, increased rural purchasing power is a valuable stimulant for industrialdevelopment.
2013-14 was a very good year for Indian Agriculture. Since more than 55% area underagriculture is rainfed, agricultural growth in India is very dependent on the monsoons.2013 witnessed wide spread and abundant rainfall in most parts of India, resulting inrecord food grain production of over 263 Million Tonnes, 6 Million Tonnes higher than theproduction in 2012. Rice production is expected to reach 106.19 Million Tonnes and Wheatproduction is expected to touch 95.60 Million Tonnes. A record production has also beenachieved for Maize (23.29 Million Tonnes), Tur (3.34 Million Tonnes), all Pulses puttogether (19.77 Million Tonnes), nine major Oilseeds put together (32.98 Million Tonnes)and Cotton (35.60 Million bales).The Agriculture sector is expected to show a growth ofaround 4.6% in its GDP contribution during 2013-14.
As a result of the initiatives taken by the Government of India, the share of publicinvestment in Gross Capital Formation in agriculture and allied sectors has been going upin recent years. The increase is mainly due to substantially higher allocation under theRashtriya Krishi Vikas Yojana (RKVY), which was launched in 2007-08 with an aim to boostthe agricultural growth rate and to incentivize states to increase public investment inagriculture and allied sectors.
Based on the resolution adopted by the National Development Council (NDC) to launch aNational Food Security Mission (NFSM) in the country to enhance the production of rice,wheat and pulses, additional components were proposed during 2013-14. These componentswere Accelerated Crop Production Programme (ACCP), need-based inputs under rice, wheat,pulses and coarse cereals, value chain integration, research support to institutions,project to combat climate change (high productivity areas), support to institutesincluding NGOs for assistance to farmers in remote areas etc. All North Eastern stateswere also included under NFSM during 2013-14.
Similarly under the National Horticulture Mission (NHM), new interventions wereincluded in the scheme such as High Density Plantations (HDP), horticulture mechanizationand certification of Good Agricultural Practices (GAP). Besides, cost norms of some of theactivities like setting up of nurseries, area expansion, rejuvenation programmes andprotected cultivation were revised to provide better incentives to farmers for adoptingimproved technologies and cultivars. The cost norms and pattern of assistance forPost-Harvest Management (PHM) were enhanced to encourage private sector participation inbuilding PHM infrastructure.
The priority for the government remains increasing productivity, improving supply chaininfrastructure and improving realization of produce to farmer by facilitating value chainpartnerships.The above initiatives, coupled with private sector participation are expectedto boost the growth of Indian Agriculture in 2014.
2.0 INDUSTRY DEVELOPMENT
The global Seed and Crop Protection market continued to grow in 2013. It posted asignificant growth because of a good demand for innovative Crop Protection products andhigh-quality seeds.
In 2013, the Indian Crop Protection industry grew at an estimated 20%, which wassignificantly better than 2012. This was mainly due to a good and even distribution of thesouthwest monsoon. However, the hybrid Agri-Seeds market registered degrowth of 2% in 2013over 2012, driven mainly by crop shifts and price erosion in hybrid cotton seeds, whichconstitutes the biggest segment in hybrid seeds.
The Indian Crop Protection market is expected to witness a growth in consumption due tofactors such as growing farmer awareness, hybridization, increasing farmer income,increasing demand for food, increased focus on R&D and expansion of contract farming.Several factors such as a growing population, rising agricultural commodity prices,increased adoption of new technologies and growing farmer preference towards high-valueand high-quality products will drive future growth in the industry.
Nearly 30% of Indias potential crop yield is lost due to insects, diseases andweeds. Hence, pesticides play a crucial role in protecting crops from these biotic stressfactors. This helps to increase crop yields, which is important due to the shrinkingcultivable land in the country on one side and growing food demand on the other side. Butthe consumption of pesticides in India although low has been gaining a strong footholdprimarily against the backdrop of growing farmer awareness, increasing incomes, increasingalternatives to dependence on monsoons, government initiatives, self-sufficiency in foodgrains and other factors.
Rising middle class, stronger consumer awareness and emergence of modern retail willdrive the demand for good quality and safer products. Concepts such as Maximum ResidueLevels etc. will play a vital role in catering to these demands, while fostering thelaunch of modern crop protection chemicals and increased industry focus on crop safety.
In order to provide comprehensive answers to the problems that farmers face today,Agrochemical and Seed companies are stepping up their efforts to come closer to endconsumers. This has not only helped them to increase awareness about their brands andtheir benefits to farming, but also helped in promoting concepts like hybridization,focusing on increasing productivity, Return on Investment (ROI) concepts and adoptinginnovative farming solutions.
3.0 REVIEW OF FINANCIAL AND OPERATIONAL PERFORMANCE
Bayer CropScience Limiteds Revenue from operation (Net) increased by 19%, fromRs. 27,253 Millions in 2012-13 to Rs. 32,452 Millions in 2013-14. Profit beforeexceptional items and tax increased by 13%, from Rs. 3,885 Millions in 2012-13 to Rs.4,408 Millions in 2013-14.
Today, market leadership is the most sought-after business objective for any brand. Itgives leverage to the brand to create better value and hence invest in future growth. In2013-14, your Company initiated a strategic, internal "Market LeadershipStrategy" to accelerate its current leadership position in India. Under thisinitiative, the broader strategic objectives have been translated in to "Must WinBattles", which outline how we can strengthen our leadership position in our key cropsegments viz. Rice, Vegetables, Fruits, Cotton & Pulses. We have also identified"Key Enablers" which are the key action points that will help us win our"Must Win Battles".
Innovation is going to play a key role in our ambition of accelerating marketleadership. Innovative products, process innovation and innovative solutions will helpfarmers differentiate us from competition. In order to provide comprehensive solutions tofarmers, we are focusing on concepts such as "Bayer Labhsutra", which helpsfarmers achieve better ROI by adopting Bayers "Seed to Harvest" packages.In 2013, we conducted more than 1,000 field demonstrations to explain this concept tofarmers in geographies across India. Farmers have seen convincing results from BayerLabhsutra, in the form of an increase in quantity and quality of produce and increased netprofits.
In the year 2013-14, Bayer CropScience Limited successfully grew its innovative CropProtection segment with flagship products like Confidor, Regent, Nativo and Belt Expert.The fungicides segment grew at an exceptional rate of over 40%. We launched two new CropProtection products Lesenta and Solomon which received a very good response.
In the Agri-Seeds segment, hybrid rice continued to do very well in 2013-14. Arize, ourflagship hybrid rice seed brand grew by about 30%. We launched several new hybrid seedproducts such as Arize 6129 Gold in hybrid rice, First Class in hybrid cotton, ProAgro5222 in hybrid mustard and ProAgro 7701 Gold & ProAgro 9444 Gold in hybrid millet.Despite a 2% degrowth in the overall growth of the Seeds industry, the Seeds business ofyour Company improved its market share by 18% in 2013 over 2012.
In 2013-14, your Company initiated a number of new and innovative projects which helpedus gain an edge over competition. Rice farmers in India face issues related to labouravailability, reliability and increasing costs due to a short transplanting window.Farmers in intensive cultivation areas are looking for alternate solutions. With the"Bayer GrowPro" initiative, your Company offers customized "Bayer HealthySeedlings" which can be mechanically transplanted in the field for Rice farmers.Mechanical Rice Transplanting combined with post transplanting advisory through the BayerGrowPro Program will provide added value for farmers and create competitive advantages foryour Company.
We believe that sustainable partnerships with our value chain partners can go a longway in collaborative growth. Your Company leverages these eco-systems through its"Food Chain Partnerships", which aims at providing farmers with innovative cropprotection products, seeds and services, as well as advisory on optimal use of productsand applications. Farmers benefit through better market access, more secure income, bettertechnological solutions, higher yields and cost-effective, sustainable use ofagrochemicals. In 2013, your Company signed 31 food chain partnerships, across 140locations, covering more than 62,000 hectares and benefitting 79,000 farmers.
Knowing our consumers well, is the best way of servicing them. Your Company hasundertaken a massive farmer profiling exercise to segment 3 Million farmers. Theseinsights will help us in reaching and serving them better. We operate in a highinflationary environment; hence quality of sales is as equally important as quantity ofsales. We continue to strive for improving our efficiency and effectiveness in operations.We have undertaken several commercial excellence initiatives to improve our informationmanagement systems in order to serving our consumers and channel partners better.
The Environmental Science business maintained its position as the market leader in theareas of Public Health and Professional Pest Management (PPM). Your Company launched twonew products in 2013, Quick Bayt for Adult fly control and Agenda 25 EC for termitecontrol. Your Company also relaunched Responsar after a gap of 4 years. Both theseproducts will help future growth for the Environmental Science business of your Company.
In the PPM segment, your Company increased its footprint by engaging directly withlarge Pest Management Professionals (PMPs).
These activities yielded good results in growing the Pest Control Operations (PCO)business. Your Companys "Bayer Network Program" which is a globalcertification programme for PCOs was piloted in India and now has been institutionalisedacross the country. Your Company has 51 Bayer Network PCOs in 22 cities across India andhas increased its sales by 33% among the Bayer Network PCOs.
4.0 OPPORTUNITIES AND OUTLOOK
The Indian economy has undergone several structural changes over time. There has been asharp decline in the share of agriculture to Indias GDP from 55% in 1950-51 to 14%in 2013-14. However the importance of agriculture has not decreased. Despiteagricultures reduced contribution to the national GDP, a significant section ofIndias rural workforce depends on agriculture for their livelihood. The pressure onagriculture to produce more and raise farmers income is high. Though India hasachieved self-sufficiency in food grain production, our country still faces a highprevalence of malnourishment and rural poverty. Under these circumstances, there is agreater need for increasing agricultural productivity and agriculture will always remainan important agenda point for policy makers. The importance of sustainable agriculture andof higher crop yields and quality in producing sufficient food on a limited amount of landwill increase in years to come. Therefore, the outlook for companies providing CropProtection, Seeds and other agri-inputs continues to be positive.
Innovation-driven companies will achieve better consolidation in terms of valuecapture. Better quality molecules, hybrid seeds and the range of other productswell-suited for high-value agriculture will ensure growth. Swelling farm incomes,encouraged by good commodity prices, will further encourage farmers in spending onqualitative inputs for achieving higher yields, better quality and a more favorable ROI.Increasing labour shortage and its ever increasing cost will drive mechanisation inagriculture. Farmers will look for mechanised solutions in the area of variousagricultural operations.
Foreign Direct Investment (FDI) in retail will have an unprecedented effect on theagri-food sector. The most significant provisions are those relating to back-endinfrastructure and the requirements for 30% of products by value to be sourced from smalland medium enterprises. These policies will have a major impact throughout the entirevalue chain. Farmers, who are the most important link in the value chain will benefitimmensely. Currently their key concern is getting a good price for their produce withminimum wastage, reliable demand and access to timely inputs and information.
Expansion of modern retail will also drive consumer demand for newer and betterproducts which will increase crop diversification. This will help farmers leverage thelatest technologies and crop varieties to meet changing demand patterns.This will alsodrive employment opportunities in rural areas. While the government has taken proactivesteps to give remunerative prices to farmers, the full benefit will flow to them with thestrengthening of procurement and improved distribution systems.
Your Company with its strong focus on providing innovative solutions is well-positionedto partner farmers in this journey of achieving higher productivity. With a strongpipeline of products which are aimed at providing comprehensive solutions to diversefarming needs, we are confident of achieving the desired business objectives.
Understanding farmers requirements and providing customized solutions has beenthe strength of your Company over the years. 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.
5.0 RISKS, CONCERNS AND THREATS
While there has been a significant increase in production of foodgrains and otheragricultural produce in the recent past, there are a lot of challenges in IndianAgriculture. More than 55% of area under cultivation is dependent on rains. Our CropProtection and Seeds businesses are directly influenced by the amount of rainfall, itsdistribution and water reservoir levels. This has a direct impact on the choice of cropscultivated by the farmer and total cultivated area during the year. Under suchcircumstances, the industrys performance will largely depend on timely and adequaterainfall.
There has been a continuous decline in the average size of farm landholdings. As aresult, the adoption of technology by farmers and investment on latest inputs becomes verydifficult.
Growth of generics will continue to put pressure on innovation driven companies. Thiswill create a downward pressure on prices of off-patent products and is expected to remainso in the short and medium term. Your Company will continue driving value added pricingwith its innovative portfolio and brands, as well as integrated crop solutions combinedwith services and advisory.
Availability of labour, credit/finance for small and marginal farmers, commodityprices, adoption of new farming techniques and timely implementation of irrigation andother major initiatives like post-harvest solutions will have a direct impact on theprogress of this industry.
The regulatory framework for the registration of new products is quite complex, timeconsuming and cost-intensive. Your Company believes in pro-actively managing theregulatory environment by collaborating with regulatory authorities to ensure smooth flowof innovative products for Indian farmers.
Being a socially responsible and environmentally conscious company, we have undertakenseveral projects for safe distribution and application of Crop Protection products. Ourfocus is not only on introducing safer products in the market, but also educating andadvising channel partners and farmers on safe product handling and usage. Your Company isa frontrunner in driving initiatives to advise on the regulatory environment in India andenhance Product Stewardship endeavors.
6.0 CORPORATE SUSTAINABILITY AND SOCIAL RESPONSIBILITY 2013
At Bayer CropScience Limited, sustainability is an integral part of our businessstrategy. It lies at the core of all our business decisions,right from product andsolution development to selection of partners in procurement, manufacturing anddistribution and throughout our internal business and organizational processes. We supportthe principles of sustainable agriculture in order to overcome challenges such aspopulation growth, the growing demand for food, feed and renewable raw materials, limitednatural resources and climate change.
One of the key objectives of our sustainability strategy is to balance economic growthwith ecological balance and corporate social responsibility. Our global corporate missionstatement: "Bayer: Science For A Better Life" outlines the scope of our socialcommitment. Our Corporate Social Responsibility (CSR) projects focus on the areas ofscience and education, health, social needs and community projects.
6.1 Empowering farmers
India is a major global exporter of grapes. In order to help farmers enhance grapeproduction, Bayer CropScience Limited joined hands with UNIVEG, a leading supplier offruits and vegetables in Europe. Further, your Company organized a "Grape Forum"in Nasik on August 20, 2013, to discuss key trends and address the challenges in grapeproduction. Approximately 250 local farmers had the opportunity to learn more about thesafe and sustainable production of high-quality table grapes from an array of experts.
Experts from your Company demonstrated how pests and diseases can be effectivelymanaged with responsible use of tailored crop protection solutions, thereby increasingagricultural productivity and the quality of grapes. Favorable weather condition is themost critical factor in grape production. Your Company has partnered with the NationalResearch Center for Grapes (NRCG) and Express Weather, a weather forecasting company, tocreate a weather advisory model. This innovative model supports grape growers with theknowledge of correct timing for spraying, in order to achieve better crop yields.
6.2 Successful Public-Private Partnership
The Rajasthan Cotton Collaborative Project is a perfect example of empoweringmarginalized farming communities in a sustainable way. The project was initiated in 2008in the tribal Banswara district of South Rajasthan and extended to adjoining districts ofBhilwara and Rajsamand in 2009. The project was the result of a Public Private Partnership(PPP) between your Comany, CITI-CDRA (Confederation of Indian Textile IndustriesCotton Development and Research Association) and the Department of Agriculture, Rajasthan.The project helped the tribal, small and marginal cotton farmers including women farmersin enhancing cotton productivity and farm income significantly from 2008 to 2011 in thethree districts. In 2012, the project was shifted to four new districts of centralRajasthan viz. Ajmer, Jodhpur, Pali and Nagaur, covering an area of about 55,000 hectares.
During the cotton season in 2012 and 2013, more than 450 project farmer related events,such as farmer trainings, Farmer Field Schools, Field days, Kisanmelas etc. were organizedby a dedicated project team. This led to a 15 - 50 % increase in the yield of cotton seedsof project farmers compared to the yield of non-project farmers in the same area. There isa scope to further expand the project to newer cotton growing districts under the PPPmodel in partnership with newer partners in 2014. The project aims to link project farmersto key stakeholders in the cotton value chain, such as ginners, spinners, textilemanufacturers and garment exporters.
6.3 Model Village Project enters the second phase
The Model Village Project has been envisaged to foster comprehensive rural developmentin villages. The project focuses on key aspects such as knowledge transfer on novel,sustainable ways to enhance agricultural productivity, foster educational initiatives andimprovement of health and livelihood opportunities. Being implemented as a pilot projectin two villages Mangalgudda and Kadivala in North Karnataka, the Model VillageProject aims to nurture rural development through the concept of empowerment.The Model Village Project is based on a holistic approach that nurtures importantinitiatives such as introduction of drip irrigation, facilitating soil testing, organisinghuman and animal health camps, implementing Vidya Prayas scholarships for school-goingchildren, productivity enhancement training for farmers and establishing an Informationand Communication Technology (ICT) lab for Model Village children that resulted inencouraging results.
7.0 INTERNAL CONTROL SYSTEMS
Your Company has appropriate internal control 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 plan. Audit observations and follow-up actions arediscussed with the management of the Company as well as the Audit Committee.
8.0 MATERIAL DEVELOPMENT ON HUMAN RESOURCES AND INDUSTRIAL RELATIONS
The industrial relations situation was cordial and harmonious and continues to be so atpresent. Extensive training was given to workers on cross functional roles. Topicsincluded LIFE (Leadership, Integrity, Flexibility and Efficiency) values, energyconservation, personal effectiveness, corporate compliance, first aid, safe driving, QHSE,emergency handling & firefighting, health & employee safety and risk assessment.The Company appreciates the contributions and initiatives made by all employees towardsachieving improved productivity, flexibility in operations and overall businessperformance of your Company.
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:
Olympia Hiranandani Gardens,
I Floor Central Avenue Powai,
Phone : Maharashtra-91-022-25711234 / Maharashtra-
Fax : Maharashtra- / Maharashtra-
E-mail : email@example.com
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|
|HDFC Mid-Cap Opportunities Fund (G)||5,77,000|
|Birla Sun Life MNC Fund - B (G)||4,46,512|
|Birla Sun Life Tax Relief '96 (G)||2,70,809|
|Franklin India High Growth Companies Fund (G)||2,02,653|
|Birla Sun Life Frontline Equity Fund (G)||1,79,359|