Aimco Pesticides Ltd Management Discussions

Global Agrochemical Market

The global pesticide industry is primarily led by the herbicide segment, followed by fungicides and insecticides. In 2022, the industrys global market size was approximately USD 81 billion, with herbicides contributing the largest share at around USD 29 billion, or 35%. The fungicide and insecticide segments added roughly USD 18 billion (22%) and USD 17 billion (17%), respectively, to the global pesticide market that year. In addition to the crop market, the non-crop segment has also played a significant role in the global pesticide industry. By 2023, this segment had reached a market size of about USD 11 billion. These pesticides are utilized in various settings, including homes, gardens, turfs, ornamentals, pest control operations, industrial vegetation management, forestry, public health, and aquatic environments. They serve multiple purposes, such as weed control, disease management, insect control, and plant growth regulation.

With the expected increase in pesticide usage due to their advantages, the crop market is projected to grow at a faster compound annual growth rate (CAGR) compared to the global non-crop market. The global non-crop market is anticipated to grow at a CAGR of approximately 4.1%-5% by 2028, reaching around USD 14 billion. Between 2017 and 2022, the global pesticide market is estimated to have expanded at a CAGR of 5.1%, growing from USD 62 billion in 2017 to USD 81 billion in 2022. However, post-2021, demand has softened due to factors such as geopolitical tensions, supply chain disruptions, and high raw material costs. In 2023, following the easing of export restrictions in China, supply increased, resulting in declining prices and subdued demand.

Global Organophosphate

Market Organophosphate pesticides are among the most extensively used pesticide categories globally, accounting for nearly 30% of total insecticide sales worldwide. This segment is expected to experience significant growth in the coming years, driven by an increasing number of industry participants. Factors contributing to the growth of the organophosphate sector include rising demand for versatile and broadspectrum pesticides and the increasing need to boost food crop yields. Organophosphates are crucial in addressing these essential agricultural requirements. Similar to the global agrochemicals market, the global organophosphates market is predominantly influenced by the Asia-Pacific (APAC) region, followed by North America and Europe.

Global Pyrethroids Market

The global pyrethroids market is expected to continue its upward growth trend. Pyrethrins, natural pesticides extracted from chrysanthemum flowers such as Cinerariaefolium and Coccineum, play a significant role in this market and are used in various pest control applications. The Asia-Pacific (APAC) region leads in the consumption of pyrethroid insecticides, driven by strong insecticide sales due to its large population. Within the APAC region, emerging economies like China, India, Malaysia, Thailand, and Indonesia are key consumers of pyrethroid insecticides, contributing to the regions market prominence.

Global Agrochemical Market

Growth Drivers Increasing Global Population and Food Demand:

As the global population continues to rise, there is an increased demand for food, which in turn drives the need for agrochemicals to enhance agricultural productivity and ensure food security.

Technological Advancements:

Innovations in agricultural technology, such as precision farming and the development of new chemical formulations, are facilitating more efficient and effective use of agrochemicals, thereby boosting market growth.

Sustainable Farming Practices:

There is a growing trend towards sustainable agriculture, which includes the use of eco-friendly and bio-based agrochemicals. This shift is driven by environmental concerns and regulatory pressures, promoting the development of sustainable crop protection solutions.

Scarcity of Arable Land:

With urbanisation and industrialization reducing available agricultural land, there is an increased reliance on agrochemicals to maximise yields from existing arable land.

Emerging Markets and Modernization of Agriculture:

Developing countries are increasingly adopting modern agricultural practices, which include the use of agrochemicals to improve crop yields and quality. This expansion into emerging markets is a significant driver of growth.

Rising Awareness and Adoption of Crop Protection Chemicals:

Farmers are increasingly aware of the benefits of using crop protection chemicals to prevent yield losses due to pests and diseases, leading to higher adoption rates.

Indian Agrochemical Market

The Indian agrochemical industry is a vital segment of the countrys agricultural sector, playing a crucial role in enhancing crop productivity and ensuring food security. As of recent estimates, the industry is projected to grow at a compound annual growth rate (CAGR) of 9% from FY25 to FY28, reaching a market size of approximately $14.5 billion by FY28. This growth is driven by several factors, including government support, expanding production capacities, increasing domestic and export demand, and the introduction of innovative products.

India is the fourth-largest producer of agrochemicals globally, following the United States, Japan, and China, and has emerged as the 13th largest exporter of pesticides. The countrys agrochemical exports have shown impressive growth, with a 14% CAGR from FY19 to FY23, reaching $5.4 billion in FY23. Herbicides have been the fastest-growing export segment, with a 23% CAGR during the same period.

The Indian government has been instrumental in supporting the agrochemical industry through initiatives like "Make in India", which encourages domestic manufacturing and reduces regulatory hurdles. This support has led to increased investments in research and innovation, focusing on developing new molecules, green chemistry products, and sustainable formulations.

Despite its growth, the industry faces challenges such as low domestic utilisation of agrochemicals, with usage at just 0.6 kg per hectare, significantly lower than the Asian and global averages. Additionally, global economic uncertainties, competitive pressures, and climate change pose risks to the sectors future growth.

Overall, the Indian agrochemical industry is poised for continued expansion, driven by favourable government policies, strong export performance, and ongoing innovation in product development. The industrys focus on sustainability and backward integration is expected to further strengthen its position in the global market.

Export Markets for Indian Agrochemical

India is a net exporter of pesticides, with exports comprising a substantial portion of the total market size. Between 2018-19 and 2022-23, pesticide exports increased at a compound annual growth rate (CAGR) of 8.1%, rising from 461 thousand tonnes to 630 thousand tonnes. The export value saw an even higher CAGR of 22%, growing from USD 3.2 billion (?225 billion) to USD 5.2 billion (?431 billion).

Major export destinations include Brazil, the USA, Bangladesh, Vietnam, and Australia. Export volumes are projected to grow at a CAGR of 6%-7% by 2027-28, with insecticides expected to increase the fastest at 10%-11%, followed by herbicides at 7.5%-8.5%, and fungicides at 4%-5%. Although India is a net exporter, it also imports pesticides, albeit in smaller quantities. Imports grew at a CAGR of 3.5%, from 117 thousand tonnes in 2018-19 to 134 thousand tonnes in 2022-23.

The value of imports rose at a CAGR of 6.0%, from USD 1.3 billion (?89 billion) to USD 1.7 billion (?140 billion). China is the primary source of imports, accounting for 52% of the total, followed by the USA, Israel, and Taiwan. Indias competitive advantage in the agrochemical industry is attributed to low labour costs and support for chemical clusters. The industry demonstrated resilience during the pandemic year (2021-22), with exports rising by 22% to 648 thousand tonnes and increasing by 38% to ?365 billion year-on-year.

Indian Agrochemical Market Growth Drivers Government Support and Initiatives:

The Indian government has implemented favourable policies, such as the "Make in India" initiative, which encourages domestic manufacturing and reduces regulatory hurdles. This support has led to increased investments in infrastructure and research, fostering industry growth.

Rising Population and Food Demand:

With a growing population, there is an increasing demand for food, which necessitates higher agricultural productivity. Agrochemicals play a crucial role in enhancing crop yields and ensuring food security.

Export Growth and Global Demand:

India has become a major exporter of agrochemicals, with exports growing at a strong pace. The countrys agrochemical exports reached $5.4 billion in FY23, driven by demand from key markets such as Brazil, the USA, Vietnam, China, and Japan.

Technological Advancements and Innovation:

Indian companies are investing in research and development to create new-generation molecules, green chemistry products, and innovative formulations. This focus on innovation helps meet global standards and enhances competitiveness.

Backward Integration and Self-Reliance:

The industry is moving towards backward integration, reducing reliance on imports, particularly from China. This shift is supported by the "China Plus One" strategy, which aims to diversify supply chains and strengthen domestic production capabilities.

Increased Use of Biopesticides:

There is a growing emphasis on sustainable agriculture practices, leading to increased use of biopesticides, which now account for a significant portion of the market. This trend aligns with global environmental goals and consumer preferences.

Company Overview

Founded in 1987, Aimco Pesticides Limited is an integrated agrochemical Company involved in the production, marketing, and export of a wide range of agrochemical products. With a strong emphasis on research and development, AIMCO has operated a Department of Science and Technology (DST)- recognized R&D laboratory since 1995, establishing itself as a leader in the production of technical-grade agrochemicals. In addition to this core expertise, the Company has a significant presence in the branded formulations sector. Its extensive portfolio includes over 305 SKUs, covering insecticides, fungicides, and herbicides, solidifying its position in the industry. Recognized as a 3-star Export House by the Government of India, Aimco has a substantial international reach, exporting to about 45 countries. The Company is committed to maintaining high standards of quality and safety, as evidenced by its ISO 9001, 14001, and OHSAS 45001 certifications.

Business Verticals

Technical Verticals

Aimco focuses on producing technical-grade agrochemicals, known as Technicals, across various categories such as pesticides, insecticides, and herbicides. These products are either used internally for formulations or sold to external formulators both domestically and internationally. The Technicals segment serves clients worldwide, with significant markets in the USA and Australia. The Company has an in-house Research and Development (R&D) centre, recognized by the Department of Science and Technology (DST), supported by a strong R&D team. This expertise aids in process engineering, development initiatives, and the commercialization of off-patent molecules. Currently, Aimcos portfolio includes 11 molecules across different categories, with key products like Triclopyr, Bifenthrin, and Chlorpyrifos (Ethyl & Methyl) being particularly notable. The Company is actively developing products in categories such as herbicides, insecticides, plant growth regulators (PGR), bio-fertilizers, and biostimulants. Aimco is committed to expanding its product portfolio through ongoing process research, securing international product registrations, and commercialising new products.

Formulations

Verticals Aimco engages in the production, direct promotion, and export of agrochemical formulations. These formulations are meticulously developed at the Companys Lote Parshuram facility, which is equipped to produce a wide variety of formulations, including EC, SC, SL, WDG, WP, DP, and GR. Aimcos product portfolio includes over 90 distinct formulations. The Company operates in both Bulk (Business-to-Business, B2B) and Branded (Business-to-Consumer, B2C) formulations, showcasing the diverse nature of its operations.

Branded

Aimco directly markets its branded formulations to end consumers in India. The Company offers a comprehensive product portfolio with over 305 SKUs, featuring well-established brands with a history spanning two decades, such as Anaconda, Pyriban, Bykill, and Profenotox. This business vertical is characterised by higher profit margins compared to Bulk formulations. Aimco aims to drive growth in this area while carefully managing its working capital cycle and maintaining a low-receivables business model.

B2B

Aimco sells a wide range of formulations, available in both industrial and retail packaging, to agrochemical marketers and distributors, primarily on an international scale. This segment is marked by high volumes and lower profit margins, but it provides the opportunity to enhance the Companys distribution network and expand its presence in key markets.

Trading

Aimco engages in trading operations, focusing on selected strategic opportunities. This segment is expected to represent a modest portion of the Companys overall business activities.

FY25 Performance Discussion

FY25 presented numerous challenges for Aimco Pesticides and the broader agrochemical industry. The Company operated in an environment characterised by global supply chain destocking, declining product prices, and weak demand across various export markets. These factors resulted in a slight increase in revenue, from ?207.22 Crore in FY24 to ?197.66 Crore in FY25. However, profitability was significantly impacted due to high-cost inventories, decreasing product prices, and intense pricing competition from Chinese manufacturers. The Companys EBITDA increased to ?(2.40) Crore, compared to -?6.41 Crore in the previous year, with EBITDA margins increasing to (1.2)% in FY25 from (3.1)% the previous year.The net loss amounted to ?(7.24) Crore, compared to a net loss of ?(10.05) Crore in the prior year.

Ratio	FY25	FY24	% Change
Current Ratio (times)	0.97	1.02	(0.05)
Debt-Equity Ratio (times)	0.66	0.53	0.26
Debt Service Coverage Ratio (times)	(0.64)	(1.26)	(0.49)
Return on Equity Ratio	(0.23)	(0.24)	(0.06)
Inventory turnover ratio (times)	3.15	3.19	(0.01)
Trade Receivables turnover ratio (times)	4.09	5.83	(0.30)
Trade payables turnover ratio (times)	1.75	1.85	(0.05)
Net capital turnover ratio (times)	(44.12)	125.19	(1.35)
Net profit ratio	(0.04)	(0.05)	(0.21)
Return on Capital employed	(0.13)	(0.20)	(0.31)
Return on investment	0.13	0.00	93.87
Return on Net Worth	(24.95)	(28.07)	(0.11)
Operating Profit Margin	(3.36)	(5.03)	(0.33)

Explanation where change in the ratios is more than 25% between two years:

1. Debt-Equity Ratio (times): Increased borrowing coupled with losses suffered during the year has resulted in higher debt equity ratio.

2. Debt Service Coverage Ratio (times): During the current year on account of the reduction in loss before interest, depreciation, etc. as compared to previous year, there is an improvement in the debt service ratio as compared to previous year.

3. Trade Receivables turnover ratio (times): The decrease in trade receivables turnover ratio is primarily due to increase in average trade receivables, indicating slower collection of dues and drop in credit sales.

4. Net capital turnover ratio (times): During the year the ratio has turned negative due to an increase in borrowings and trade payables.

5. Return on Capital employed: During the current year on account of the reduction in loss before interest as compared to previous year, there is a lower negative return on capital employed as compared to previous year.

6. Return on investment: The significant improvement in return on investment is primarily due to a

higher net gain on sale of investments during the current year.

7. Return on Net Worth: During the current year there is a reduction in net loss and increase in the equity on account of preferential issue.

Outlook

The Company is optimistic about an improved external environment in the upcoming financial year, with signs that product prices may have been bottoming-out and prospects appearing more positive. Additionally, some of the Companys key molecules have seen improved realisations in recent times. Looking ahead, the Company aims to enhance profitability through two main verticals: Technicals and Branded Formulations. Within the Technicals segment, the focus is on product commercialization, with several products in advanced stages of development. Small-scale production of two new molecules has begun at the existing facilities, and another molecule is currently in the pilot phase. As these new molecules progress to commercial scale, the Company will consider capacity expansion projects to seize these opportunities. In the domestic Branded Formulations sector, the Company is concentrating on launching new products and expanding geographically into new states.

Risks and Concerns

Despite strong growth drivers, the agrochemical sector in India faces challenges due to limited awareness among farmers, with only limited farmers familiar with agrochemical products and their applications. Managing inventory and delivery costs is complex for industry players, given the widespread distribution of end-users across the vast Indian subcontinent. The increasing presence of counterfeit pesticides, imported formulations without proper technical registration, and adulterated bio-pesticides significantly threaten the sectors advancement. Dependence on a strong monsoon season and rainfall remains a challenge due to limited water canal coverage. Another area of concern is the effectiveness of supply chain management. The industry struggles with issues arising from seasonal demand patterns, unpredictable pest outbreaks, and a heavy reliance on monsoons. Recurring challenges include month-end imbalances and excess inventory within the distribution network. These challenges are uniquely entrenched in the Indian agrochemical industry. To reduce reliance on any single product, customer, or market, the Company is committed to expanding into diverse areas and broadening its customer base. The Companys efforts focus on registering and commercialising new molecules. Acknowledging the inherent risks in its operations, the Company recognizes the need to increase investments and initiatives in Environmental, Health, and Safety standards, particularly as demand for its production capacity grows. These initiatives have resulted in increased yields, solvent reduction, and the separation of effluent streams, minimising waste as much as possible. Looking forward, the Company aims to achieve Zero Liquid Effluent Discharge, demonstrating its commitment to sustainable practices.

ENVIRONMENT

The Company is committed to enhancing its environmental performance by focusing on improving effluent treatment and disposal processes to meet the standards set by pollution control authorities. As a member of the Lote Common Effluent Treatment Plant, the Company ensures that its effluent discharge complies with CETP norms. The Central Pollution Control Board (CPCB) monitors the discharge through online probes installed by the Company. The Company is dedicated to achieving Zero Liquid Effluent Discharge status in the coming years.

HEALTH

To improve employee wellbeing, the Company conducts annual comprehensive health assessments for all staff. A health centre, managed by medical professionals, is located on the Companys premises. Additionally, employees are trained in preventive first-aid measures.

SAFETY

Employee safety is of paramount importance to the Company. Safety visual display boards are prominently placed throughout the plants, highlighting hazard points in each operational unit. Regular training sessions on fire safety and managing hazardous reactions are consistently provided to employees.

Internal Control Systems

The Company has established a comprehensive internal control framework to ensure the protection of its assets. It has implemented effective internal control mechanisms to oversee operational processes, financial reporting, and compliance with relevant laws and regulations. The internal control structure is appropriately designed to match the Companys size and business nature. These protocols ensure the prudent use and protection of the Companys assets and resources, compliance with policies and legal requirements, and the timely preparation of financial and operational reports. The Company maintains robust internal control systems to secure assets and ensure accurate authorization, recording, and reporting of transactions. Additionally, well-structured control mechanisms and monitoring protocols are in place for the procurement of raw materials, inventory, plant and machinery, equipment, other assets, and the sale of goods. The finance and commercial departments are organised to provide adequate support and oversight for the Companys business operations.

Industrial Relations and Human Resource Development

The Company has implemented various strategies to improve the efficiency and effectiveness of its human resources, alongside initiatives aimed at optimising talent acquisition, increasing employee satisfaction, enhancing skills, and promoting talent retention. The Company firmly believes that its human resources are its most valuable assets. It strives to cultivate a productive work culture that enables its workforce to effectively tackle the challenges of a competitive external environment. The Company is proud to have a balanced mix of skilled professionals and executives and is committed to providing ample growth opportunities within the organisation. Comprehensive training programs cover a range of topics, including personal effectiveness, corporate compliance, first aid, safe driving practices, crisis management and firefighting, employee well-being and safety, and risk assessment. As of March 31, 2025, the Company employs over 157 individuals.

Cautionary Statement

The discussions and analyses presented in this MDA, outlining the Companys objectives, projections, estimations, anticipations, or forecasts, might qualify as forward-looking statements under the purview of applicable securities laws or regulations. These statements are established upon specific assumptions and prospects of forthcoming events. Nevertheless, actual outcomes have the potential to diverge from those articulated or inferred. A multitude of pivotal factors, including but not limited to global and domestic demand-supply dynamics, price fluctuations, raw material costs and availability, shifts in governmental regulations, alterations in tax legislation and other legal frameworks, as well as instances of force majeure, hold the capacity to exert influence on actual outcomes, potentially resulting in deviations from the envisaged future performance and outlook.