Bharat Rasayan Ltd Management Discussions.


The Indian economy registered a growth of 4.2% in Financial Year (FY) 2019-20, much lower than the 6.1% in FY 2018-19 (Source: IMF). Wage stagnation, job losses, rising rural unemployment rates, stressed non-banking financial companies and decline in credit growth caused a sharp drop in domestic demand. On the supply side, excess idle production capacity and lower private investments further dragged down economic activity. The Government of India undertook initiatives such as liberalising sectors to attract foreign direct investments, upfront capital infusion in public sector banks to alleviate liquidity concerns and reducing corporate tax rates to revive private investments. The Reserve Bank of India (RBI) provided a monetary stimulus by slashing the repo rate to 5.15%, a cut of 135 basis points in FY 2019-20, to boost demand and private consumption.


The global economy in Calendar Year (CY) 2019 has seen one of the slowest growth rates since the 2008 financial crisis. The International Monetary Fund (IMF) estimates that the global GDP (Gross Domestic Product) may have registered 2.9% growth in CY 2019, significantly lower than 3.6% in CY 2018, and that there will be a negative growth of 3% in CY 2020. A slowdown had been anticipated early in the financial year, because of the US-China trade relations, concerns over Brexit and the consequent stress on the global manufacturing and trade. Country-specific shocks such as liquidity crisis in the Indian banking sector and flooding in eastern Africa pulled down the performance of emerging market economies. Climate-related disasters, ranging from hurricanes in the Caribbean to drought and bushfires in Australia also affected global business sentiments.

The biggest calamity was the outbreak of coronavirus in the beginning of CY 2020, which grew from a local problem in China to a global pandemic in a matter of weeks in early CY 2020. Lockdowns in most of the affected countries saved lives but were a huge blow to economic activities and the impact will be felt for a long time to come. To counter the losses and prevent a complete economic breakdown, governments and central banks around the world have unleashed unprecedented amounts of fiscal and monetary support. Nonetheless, warning of a recessionary effect was issued by top analysts.


The share of agriculture and allied sectors in the Gross Value Added (GVA) of the country at current prices has declined from 18.2% in FY 2014-15 to 16.5% in FY 2019-20. Despite the decline, it continues to be the largest source of livelihood for about 58% of Indias population and its growth ensures inclusive economic growth of the country.

Agriculture inputs play a decisive role in enhancing crop production. With arable land declining, production of crops can only be increased by using quality inputs through a scaled-up country-wide effort. Concerted efforts are being taken to transform agriculture, improve farm productivity and farmer prosperity, achieve food security and environmental sustainability.

Agrochemicals are chemicals that help boost crop productivity through prevention of destruction of crops by pests such as insects, weeds, fungus, etc. The global economy, in general, and Indian, in particular, is facing a multitude of challenges such as to feed an evergrowing population, reducing arable land bank and dealing with adverse climatic changes. Under such circumstances, the traditional methods of growing more crops are rendered inadequate. There is a growing acceptance to launch advanced agrochemical solutions to achieve higher field productivity.

Agriculture which contributes to 16.5% of the GDP and provides employment to nearly half of the countrys population, plays an important role in the Indian economy. India is a leading farm producer as well as an exporter of many agro commodities. Its agro economy faces multiple challenges which is

reflected in the relatively lower productivity compared to the advanced economies of the world. Science provides solutions to address some of these challenges and in turn, these provide opportunities for businesses involved in agriculture inputs.

Indian agriculture is on a growth path, with an increase in investments and private funding in the past few years. The sector is expected to grow with better momentum in the next few years, owing to an increase in investment in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs, time, better port gate management and fiscal incentives will also contribute to this upward trend. Furthermore, the increased use of genetically modified crops is also expected to better the yield of the Indian farmers.


According to the India Meteorological Department (IMD), CY 2019 was Indias seventh warmest year since nation-wide records commenced in CY 1901. Indias annual rainfall in CY 2019 was 109% of the Long Period Average (LPA) rainfall (in the 50 years from 1961-2010), as against only 91% of the LPA in CY 2018. Production of most crops was estimated to be higher in FY 2019-20 than their average annual production on account of the favourable monsoon during the year. The 2nd Advance Estimates released by the Department of Agriculture Cooperation and Farmers Welfare, estimated the total Foodgrain production in India at a satisfactory level of 291.95 Million Tonnes (MT) in FY 2019-20. This was 7 MT higher than the countrys output at 284.95 MT (as per the 4th Advance Estimates) in FY 2018-19 and 26.20 MT higher than the previous five years average production. The Government of India has announced several pro-farmer initiatives to double farmers income by 2022 and provide growth impetus to the agriculture sector. These include the Pradhan Mantri Kisan Maan Dhan Yojana (PM- KMY), Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), the e-NAM portal to promote One Nation One Market, Direct Cash Benefit Transfer, and growth impetus to horticulture.


The global agricultural input market is expanding rapidly on account of growing food demand from a world population that is estimated to reach approx. 10 billion by 2050. The rising population, coupled with declining arable land, is significantly changing farming practices to achieve higher yield per acreage. Crop care and crop protection markets worldwide are adapting to these changing needs and playing an important role in improving farm productivity, environmental sustainability and farmer prosperity.


Only 20% of the total cultivated land globally is irrigated, but it contributes 40% of the entire food produced worldwide. Irrigated farming is twice as productive as conventional methods per unit of land. Since agriculture has 70% share of water withdrawals globally, efficient and effective water management continues to be a core factor in sustainable farming operations. This has made irrigation a key priority for several economies.


A global economic recovery depends to a great extent on the pandemic being brought under control, containment measures being scaled back and trade and manufacturing activities being gradually restored without causing a second wave of contagion. The IMF estimates the world economy to decline by 3% in CY 2020 followed by a recovery and growth of 5.8% in CY 2021. The shape and speed of recovery in the United States (US) and China will be the key to determining the nature and traction of the global economic recovery.


Crop protection chemicals play a critical role in maintaining and enhancing agricultural output by minimising plant diseases, weeds and pest damages to crops. The global crop protection industry stood at US$ 65.59 billion in CY 2019, recording a growth of 0.8% over CY 2018 level of US$ 65.09 billion. Brazil and Argentina have been the biggest markets for crop protection worldwide.

Crop protection chemicals play a major role in increasing agriculture productivity. They help in minimising plant diseases, weeds, and other pests that damage agriculture crops, and thus increasing and maintaining year-on-year crop yield. Around 25% of the global crop output is lost due to attacks by pests, weeds and diseases. India is the 4th largest producer of agrochemicals, after the US, Japan and China. In India, better timing and spatial distribution of rainfall, higher pest incidence, and steps by the Government to improve farm income are expected to increase the application of agrochemicals. The industry faces several challenges due to strict environmental regulations. Crop protection comprises of insecticides, fungicides, herbicides and bio-pesticides. Indias pesticides consumption is currently one of the lowest in the world among other economies.


We have installed effluent treatment plant. All effluents generated at plant are segregated into hazardous and non-hazardous categories and they are effectively treated, recycled and reused, wherever possible.


Being actively engaged in product and process development activities across various segments of its businesses, Research & Development (R&D) is an integral part of the Companys operations. We have dedicated R&D plant at Bahadurgarh, Haryana is certified by the Ministry of Science and Technology, Government of India with pilot plant having a qualified team. We also have R&D Plant at Dahej, Gujarat having NABL Certification from National Accreditation Board for Laboratories as a certified research lab, alongwith Pilot plant. Both the plants are working round the clock working on new chemistries.


In addition to ISO 9001:2015 for Quality Management, the professional commitments of high order have earned the rating of ISO 14001:2015 for Environment Management System and also ISO 45001:2018 Certification for Occupational Health & Safety norms. The Company is also registered with global mercantile data compiler and rating agency Dun & Bradstreet.


Your Company has highly qualified and dedicated team of professionals in various work profile to focus on quality improvement in existing products, marketing the products to prevailing customers and exploring new domestic and overseas customers for the Company. Your Company achieved a turnover of 1231.87 crores registering an increase of about 23.84% over previous year turnover of 994.69 crores and earned a Profit before Tax (PBT) of Rs. 205.19 crores and Profit after Tax (PAT) of 157.64 crores.

Apart from loyal customer base that the Company is enjoying since last several years now, many more new domestic as well as overseas customers are added to the portfolio of the Company during the year & same is expecting to increase in near future due to Companys commitment of supplying high quality product in a time bound manner.

Moving ahead, the Company remains poised to implement key initiatives across functions to enable itself to face market challenges and leverage the emerging opportunities. It remains focused on improving revenue growth and profitability, driven by high growth segments such as seeds and nutrients.


The Companys total expenses (excluding depreciation and finance cost) increased by 22.59% from Rs.806.84 crores in FY 2018-19 to Rs.989.11 crores in FY 2019-20. Major expense items of the Company comprise cost of material consumed, purchase of stock-in-trade, power and electricity, freight & forwarding outward, employee benefits expenses.

Cost of materials consumed increased by 8.98% from Rs.724.90 crores in FY 2018-19 to Rs.789.99 crores in FY 2019-20 owing to increase in major raw material prices.

Power and Electricity expenses increased by 24.57% from Rs. 19.33 crores in FY 2018-19 to Rs. 24.08 crores in FY 2019-20, largely due to increase in prices of utilities.

Employee benefit expenses increased by 20.45% from Rs. 57.36 crores in FY 2018-19 to Rs.69.09 crores in FY 2019-20 owing to increase coming from annual increment and new recruitment.

Finance costs decreased by 1.26% from Rs. 15.82 crores in FY 2018-19 to Rs. 15.62 crores in FY 2019-20. RISKS AND CONCERNS

The Covid-19 outbreak with its disruptive effects on global manufacturing and trade would continue to pose challenges for the Companys operations in FY 2020-21, and it may affect offtake of the Companys products and exert pressures on its margins. However, following the Governments declaration of agriculture as an essential service, the Company has resumed its operations and does not foresee material impact on its business due to the relaxing of lockdown norms.

Risk management comprises all the organizational rules and actions for early identification of risks in the course of doing business and the management of such risks along with identification of opportunities.

Despite the strong growth drivers, Indian agrochemicals industry faces challenges in terms of low awareness among large number of end users spread across the geography. Managing inventory and distribution costs is a challenge for the industry players in the wake of volatility in business environment.

The performance of the crop protection industry and other agri-inputs is dependent on monsoons, pest and disease incidences on crops. As this years monsoon failure has shown, major fluctuations in total rainfall and its distribution affect the crop acreages and overall productivity and have a direct correlation with sales. Agrochemical companies face issues due to seasonal nature of demand, unpredictability of pest attacks and high dependence on monsoons.

Compliance to growing regulatory norms is a continuing requirement and could lead to delays in obtaining necessary approvals. Changes in guidelines or policies in various geographies may also lead to sudden disruption of business in specified products.

The Companys Internal Audit department plays a critical role in co-ordinating with various department heads to ensure strict adherence to processes established for key business risk identification. It recommends corrective actions to improve the Companys processes pertaining to risk identification and risk handling and ensures adequate mitigating measures are in place. The Company continuously reviews emerging risks such as global consolidation in the crop protection industry, regulatory changes and a probable ban on select active ingredients. These risks are also opening up new opportunities for the Company to grow and it continues to focus on developing novel, effective and compliant products and formulations to tap these emerging opportunities.


The Company has created internal control systems which are commensurate with the size, scale and complexity of its operations. The Company has also identified entity level controls for the organization, covering integrity and ethical values, adequacy of audit and control mechanisms and effectiveness of internal and external communication, thereby strengthening the internal controls systems and processes with clear documentation on key control points. The internal controls are formulated and implemented by the management with an objective to achieve efficiency in operations, optimum utilization of resources and effective monitoring and compliance with applicable laws.


The Company invested in a strong workforce and working environment to report sustainable growth, reflected in the continuous improvement in operating processes and new product introduction. The Company believes in a performance-driven culture.

The Company organized training programmes based on emerging requirements, covering technical, behavioral, customer orientation, safety, code of ethics, product training and other needs. The Company continued to recruit skilled scientific, technical and managerial personnel.


Certain Statements made in this report relating to Companys objectives, outlook, future plans etc. may constitute "forward looking statement" within the meaning of applicable laws and regulations. Actual performance may differ materially from such estimates or projections, whether express or implied. Important factors that could make a difference to the Companys operations; include Government Regulations, Tax regimes, Economic developments within India and countries in which the company conducts business and other allied factors.