Dhanuka Agritech Ltd Management Discussions.


Economic Overview

Being the third largest economy in the world in terms of purchasing power parity, India has an ambitious mission to improve living conditions across the under privileged section of the society and become a high middle-income Country by 2030. More than 90 million people came out of poverty and improved their living conditions during 2011-15 period backed by resilient economic growth. In the recent years, however, India has experienced a decline in the growth rates. The Country is home to over 176 million impoverished people and there is an increasing thrust to encourage inclusion which is evident by governments emphasis on reforming policies to transform the rural landscape, fast track infrastructure development, achieve financial inclusion and develop human capital.

Although India has steadily achieved economic growth, often the development has not been uniform across the society. Major structural reforms in indirect taxes, distress in rural economy and rising unemployment in urban areas have slowed down Indias journey towards poverty eradication since 2015. Despite improvement in regulatory landscape, private investments and exports remain subdued during this period. India scores low on key parameters such as education outcomes and female labour participation which highlights its substantial development needs. Indias progress is key for achieving worlds objective of eliminating poverty and fostering shared prosperity and achieving UN Sustainable Development Goals (SDGs) by 2030.

The latest challenge of Coronavirus pandemic arrived when Indias economy was already facing challenging times. The extreme impact on economic activities caused by the outbreak of COVID-19 has overhauled the emerging trend in recovery of the Indian economy. As per the International Monetary Fund (IMF), Indias FY2020 GDP growth rates expected to be 4.2% as against 5.0% estimated by Indias statistical department. IMF trimmed its FY2021 GDP growth estimate to 1.9% from 5.8% projected in January 2020, factoring in the impact of the Great Lockdown to tackle COVID-19 outbreak.

However, the IMF estimates a sharp recovery in economic activity in FY2022 at 7.4%.


Demand and changing income levels

58% of Indias population depends on the Agriculture Sector as a source of primary income and consumer spending is forecasted to reach US$ 3.6 trillion by 2020. Demand for processed foods and agricultural products have increased with rising urban and rural incomes, urbanisation, young population and healthier lifestyles. There has been a general shift towards convenience foods, organic and diet foods and from carbohydrates to meat products.

Global Advantage

Favourable climate, large agriculture sector, livestock base, coastline and water resources have all been beneficial to India.

Lower cost of production compared to its competitors has also proved to be a bonus. Packaged food industry in India is expected to become the third largest in the world with US$ 65 million by 2020. India is the largest producer of spices, pulses, milk, tea, cashew and jute the second largest producer of wheat, rice, fruits, vegetables, sugarcane, cotton and oil seeds; and the fourth largest producer of agrochemicals. India has the tenth largest arable land and possesses 46 of the 60 soil types globally. Food grain production is estimated to reach a record 291.95 million tonnes (MT) during the 2019-20 crop year. Growth in gross value added (GVA) by agriculture and the allied sectors stood at 3.7% in 2019-20.

Food Grains and Commercial Crops Production (MT)

Crop 2017-18 2018-19 2019-20
Rice 112.76 116.48 117.47
Wheat 99.87 103.67 106.21
Total Cereals 259.6 263.14 268.93
Total Pulses 25.42 22.08 23.02
Total Food Grains 285.01 285.21 291.95
Total Oilseeds 31.45 31.52 34.18
Sugarcane 379.9 405.41 353.84
Cotton (million bales of 170kg each) 32.8 28.04 34.89
Jute & Metsa (million bales of 180kg each) 10.03 9.82 9.81

Source: IBEF

Agriculture and Allied Sectors Growth

GVA of the agriculture and allied sectors grew at a CAGR of 4.7% between FY2016-2020 (at constant 2011-12 prices). Agriculture, forestry, and fishing sector grew 3.7% in FY2019 while the GVA was estimated at Rs. 18.72 trillion in FY2019. The Ministry of Agriculture was allocated Rs. 2.83 Lakh Crores as per the Union Budget 2020-21.

Source: IBEF Note: FY2019 as per 1st revised estimate;

FY2020 as per 2nd advance estimate, at constant 2011-12 prices

Indian Agrochemical Sector

Indias Agrochemical Sector has under gone multiple structural changes in recent years driven by rising domestic demand, positive regulatory changes, constrained supply from China, significant growth opportunities presented by products goings off patent and opportunities to collaborate with global leaders. Considering over 50% of Indias population depends on farming and the sector has seen challenges in the last few years, governments objective is to double farmers income through higher MSPs for crops, widen irrigation network, improve procurement and provide easy access to credit. Doubling of farm income could lead to increase in agrochemical demand going forward. India is the worlds fourth largest producer of agrochemicals after US, China and Japan. The crop protection market has seen a CAGR growth of 11% in the last Five (5) years and is estimated at Rs. 395 billion in FY2019. 56% of this demand was for exports. In the same corresponding period, domestic agrochemical market grew at a CAGR of 7.5% while exports grew at a CAGR of 13.5%.

Source: GOI, AMSEC Research

Landscape of Pesticides within the Domestic Market

The Indian market largely comprises of Insecticides which consists of 60% of the overall demand followed by Fungicides at 18% and Herbicides at 16% and other categories comprise the remaining 6%, as per Ministry of Chemical and Petrochemical Statistics. Herbicides as a segment has grown steadily in recent years with changing weather conditions (warmer), rising labour costs and increasing cultivation of rice, soybean and wheat crops. Fungicide has grown relatively slower with increasing cropping areas of rice, fruits and vegetables. Bio Pesticides has not seen significant growth yet, but its usage is likely to accelerate over the longer run as environmental awareness grows and farmers cut down on usage of chemical based Pesticides. Also, potential incentives provided by government to encourage the use of Bio Pesticides will decide the segments long-term growth trajectory.

Opportunities and Outlook

Low pesticide consumption in India

Indias per hectare consumption of pesticides is one of the lowest across the globe and stands at 0.6 kg/ha as against 5-7 kg/ha in the UK and 13 kg/ha in China. Farming community at large has limited understanding of the benefits of pesticides which results in lower consumption in India. There is an opportunity for the government and private players to increase awareness amongst the farming community about the economic gains that arise out of sustained use of pesticides.

It is evident that cost of using pesticides is significantly lower than the potential loss in output. As farmers focus on increasing farm yield, their capital allocation towards crop protection is expected to rise. This will be a key driving force for pesticide consumption.

Increased Spending on Irrigation

As per the last reported data, 53% of the total sown area was covered under irrigation in India. The central and state governments have initiated various measures to ensure more area comes under coverage. The Central Government has implemented the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) scheme with an allocation of Rs. 500 billions to be spent over Five (5) years from FY2016 to FY2020. Also, allocation by states on irrigation projects has increased as they are the beneficiaries under the PMKSY scheme. As the efforts to increase irrigated land across the Country bears fruit, it will boost crop development and alleviate chances of crop failures due to scarcity of water.

Indias Dependence on Monsoon

Since only 53% of net cultivated area is irrigated, the remaining area remains dependent on natural rainfall. Rainfall during summer months (June to September) accounts for over 70% of the total rainfall and hence is very critical for the economy. Government authorities have been taking various initiatives to reduce dependence on the monsoon. India received the highest amount of monsoon rain in 2019 since over two decades. Total rainfall recorded on an average was 97 centimetres which was 10% higher than the long-term average. Despite the higher rainfall at a national level, there were deviations on regional basis. Nevertheless, rainfall covered up water requirements in areas which were less irrigated and water levels across reservoirs in the Country were highest in many years.

Pest attacks in India

There has been a growing incidence of harmful pest attacks in India over the decades.




Total Pests Serious Pests Total Pests Serious Pests
Rice 35 10 240 17
Wheat 20 2 100 19
Sugarcane 28 2 240 43
Groundnut 10 4 100 12
Mustard 10 4 38 12
Pulses 35 6 250 34

Source: FICCI

Typically, pests and diseases take away close to 15-25% of food production. It is proven that usage of effective agrochemicals can increase productivity for farmers by 25-50%, hence diminishing losses caused due to pest attacks.

Increase in MSPs for Major Crops

MSP for most major crops has seen a rise of about 30% in the last Six (6) years. Key crops such as paddy and wheat have seen prices increase by 39% and 38%, respectively. The price protection provided to farmers gives them the liberty to invest in modern farming practices.

Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)

The government introduced the PM-KISAN scheme in February 2019 to provide financial assistance of Rs. 6,000 per year in three equal instalments to families of small and marginal farmers with holdings of up to 2 hectares. The total budgetary allocation for the initiative was Rs. 750 billion for FY2020. This scheme is an integral part of the Central Governments aim of doubling farmer income. The government has gone ahead and extended the benefits to all eligible farmers irrespective of size of land holdings. The revised scheme is drafted to cover around 13 Crores beneficiaries with total outlay of Rs. 80,000 Crores for FY2020.

Government Subsidies

The government provides support to framers by providing free power, water, interest subvention on loans and discount on premium for crop insurance and has increased allocation across schemes to ensure input cost for farmers is reduced. These developments should support farmers ability to spend more on pesticides.

Budgetary outlay on Agriculture Scheme (Rs. bn.) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Pradhan Mantri Fasal Bima Yojna 29.8 110.5 94.2 129.8 140.0
Interest subsidy for short term credit to farmers 0.0 134.0 130.5 149.9 180.0
Other welfare scheme- subsidy 0.0 1.0 7.0 45.0 59.0
PM-Kisan 0.0 0.0 0.0 200.0 750.0
Pradhan Mantri Krishi Sinchai Yojana 16.0 20.0 28.0 30.0 35.0
Other centrally sponsored schemes 97.8 101.1 110.6 118.0 125.6

Source: GOI

Generic Players to Benefit in Coming Years

Globally, innovators command close to 70% share in the crop protection market while there main market consists of generics. Within the off-patent market, share of patent products is 20% while generic companies hold the rest. Out of the generic crop- protection market, about 25% is controlled by innovators. This means there are opportunities for generic Companies to garner market share from innovators given their inherent advantages such as low prices and costs, and larger distribution networks. Indian Companies are expanding their distribution networks, creating brands, innovating process technology for post patent molecules, developing better product mix (more combination products, eco-friendly formulations), becoming aggressive about registering post-patent products, and developing relationship with distributors to push volumes at more competitive prices than innovators. Indian farmers are more sensitive towards prices than the ones in other Countries. Therefore, lower-price products offered by generic Companies with a wide distribution network are better placed.

There are several key molecules with a Market Size of over US$200million going off-patent, which will provide a sizeable opportunity for generics players.

Potential for tie up with MNCs in Domestic Market

Indian Companies which partner with leading MNCs in the Agrochemical space earn as much as 50% of the total revenues by marketing the products. Although Indian partners face the risk of termination or change in agreement by their foreign partners, who generally have an upper hand in deals, the Indian market has significant growth opportunities and there is a huge potential for many such collaborations. Leading Indian Companies are expected to gain as large global MNCs look to be part of Indias growth story.

Opportunity in Bio-Pesticides and other Biological Products

Growth in organic foods has led to a lot of interest in bio pesticides and other biological products. Although it poses some amount of risk to traditional portfolio of products, it also presents significant potential for Agrochemical Companies. The use of bio pesticides grew over 12% CAGR to 11,531 MT during FY2015 to FY2019.


Regulatory framework

Globally, the Agrochemical Sector is highly regulated. It can potentially take upto 5 years for Section 9(3) and 9(4) products to get registered and there is a high probability of failure. Also, there is continuous compliance checks which take place and any lapse can severely impact business prospects.

R&D Costs

Over the years, R&D costs have escalated significantly as the regulations have evolved. Typically, Indian companies allocate1-2% of their revenues on R&D, which is significantly lower than the global average of 8-10%. Indian manufactures lack competitive advantage versus global peers in the global landscape for patented speciality molecules.

Ban on Pesticides

NGOs across the Countries revolt against the use of Agrochemical products citing harmful impact on the environment. Manufactures along with industry representatives time and again provide constructive responses in the scenario of government action. The Committee formed based on Anupam Verma recommendation began its review on 27 pesticides in November 2019 and submitted its findings after consultation with pesticide associations and other stakeholders in May 2020. The draft order proposed bans on 27 pesticides commonly used by farmers. If the ban is not overturned, farmers would be deprived of several effective and affordable products.

Rising Raw Material Costs

The cost and availability of raw materials play a vital role for Companies which are dependent on imports. The industry has faced challenges in recent years due to short supply from China.


Dhanuka Agritech Limited ("DAL" or the Company) is a leading Agrochemical Company in India. The Companys strength lies in manufacturing formulations. DALs pan India distribution network consists approximately 7,200 distributors and 75,000 retailers which enables it to have presence across 10 million farmers touch points. Over the years, the Company has built strong strategic partnerships with leading global innovators. The Company has world class NABL Accredited Laboratories and has international collaboration with leading companies of US, Japan and Europe.

The product portfolio is largely distributed across Insecticides, Herbicide, Fungicides and Plant Growth Regulators segment. Insecticides contributes significant portion of the overall revenues and the Company aims to ramp up presence in the fast-growing Herbicides segment. DAL is aggressively working towards the goal of Transforming India through Agriculture by initiatives like doubling farmers income. The Companys latest innovative sales process guides the farmers effectively on crop solutions through channel partners and a dedicated team. It also Latest technology driven platform ensures smooth reach of products to farmers with readily available stock on demand. Issues like inventory cost, blockage of fund and uncertain demand and supply are being managed by this platform. Automatic orders and IT infused structure are its highlights.


Dhanuka continues to remain debt-free, due to robust Financial Management. Additionally, it has a healthy Net worth of Rs. 707.70 Crores as on 31st March, 2020. ICRA has accorded (ICRA) AA- rating for fund based limits and (ICRA) A1+ rating for non-fund based limits of the Company (placed under watch with negative implications).

This is a matter of pride that your company has awarded "NATIONAL BEST EMPLOYER BRAND 2019" by World HRD Congress on 16th February, 2020.

Mr. Mahendra Kumar Dhanuka, Managing Director of the Company conferred with the award "MOST RESPECTED ENTERPRENEUR" by Hurun Report on 4th December, 2019 at St. Regis Hotel, Mumbai.

Mr. VK. Bansal, CFO of the Company was conferred the award "100 BEST CFO" on 22nd November, 2019 at Mumbai.


In March 2020, the outbreak of COVID-19 pandemic across the world resulted into a global health crisis. It compelled governments across the world to enforce stringent lockdowns which restricted economic activity. The Company was prompt to implement various measures to protect employees, communities and operations to ensure supply chain was not impacted. DAL also encouraged non-critical operations to work from home and carry out interactions electronically. The Company adheres to social distancing norms across sites and the staff is encouraged to maintain two metres distance from co-workers and other stakeholders who operate in and around the sites. The Company closely engages with suppliers, vendors and distributors to ensure there is a minimal impact on business operations. The pandemic is expected to slowdown overall business activity across key sectors in India. However, since our products fall under the essentials category, your Company do not foresee any major impact to the business due to the corona virus pandemic.


• Revenue from Operations increased by 11.36% from Rs.1,005.83 Crores in FY2019 to Rs.1,120.07 Crores in FY2020.

• Profit before tax increased by 17.34% from Rs.153.95 Crores in FY2019 to Rs.180.64 Crores in FY2020.

• Operating Profit before tax increased by 17.56% from 133.64 Crores in FY2019 to Rs.157.11 Crores in FY2020.

• Net profit increased by 25.66% from Rs.112.58 Crores in FY2019 to Rs.141.47 Crores in FY2020

• The Company reported an EPS of Rs.29.73 in FY2020 compared to Rs.23.02 in FY2019.


Segments % of FY 2020 Revenue % of FY 2019 Revenue
Insecticides 43% 43%
Fungicides 15% 15%
Herbicides 31% 29%
Others 11% 13%


Particulars FY 2020 FY 2019
Debtor Turnover 21.64% 21.74%
Inventory Turnover 22.31% 20.56%
Interest Coverage Ratio (Times) 117 173
Current Ratio 3.37 3.64
Debt Equity Ratio (Times) 0.01 0.03
Operating Profit Margin 14.03% 13.29%
Net Profit Margin 12.63% 11.19%
Return on Net worth 19.99% 17.53%

Note: All above figures are based on Standalone Financial.

There is no significant change in any of the Key Financial Ratios of the Company in comparison of previous year.


DAL follows a rural FMCG model. Relationships with the domestic manufacturers and distributors have helped the Company sustain inventories in the pipeline during the lockdown period in March to May 2020. The Companys product portfolio falls under essential commodities hence no major impact is expected on the business performance in FY2021 due to the outbreak of COVID-19. The Company will work towards engaging with all the participants across the value chain both upstream and downstream to deliver a strong Kharif season and build a solid momentum for the remaining part of FY2021.Expectation of a normal monsoon this year should boost agri inputs. The Company has a strong pipeline of Section 9(3) products which should drive the revenue growth in the coming years.

Material Development in Human Resources / Industrial Relations

Innovation is in the Value system of Dhanuka and we believe in living our values. At Dhanuka we continuously work on bringing innovative HR practices which are designed on principles of Simplification, Standardization, Automation and Analytics. Under these principles of Simplification, Standardization, Automation and Analytics, various initiatives have been taken during Financial Year 2019-20:

- Continuous process improvements based on feedback and inputs from multiple stakeholders, past experiences and industry best practices (Recruitment and Selection, Leave & Attendance Management and Off-boarding) intended towards giving better employee experiences

- Automation has been key focus in last year towards bringing all HR processes on a common HRIS which is simple to understand and user friendly, to increase speed and quality of delivery, reduction in paperwork and more empowerment for things to move on their own.

- Focus on enhanced HR service delivery through introduction of HR Generalist, a single point of contact to each employee.

- Building a Learning organization has been another strong initiative that has been in focus.

Dhanuka Agritech Limited is committed to providing a robust learning platform and at the same time building the capability of its employees. Dhanuka has a dedicated Learning and development team which works in close partnership with the business leadership team, to augment the learning and development requirements of employees and making them future ready. We engage in multiple learning interventions internally and externally and partner with many prestigious institutes like IIM-A, XLRI, etc.

The recognition of "NATIONAL BEST EMPLOYER

BRANDS AWARD 2019" is another feather in the cap which is a validation of our endeavor and our continuous efforts towards bringing Innovative HR Practices aimed towards building GREAT EMPLOYEE EXPERIENCES at Dhanuka.

The Company had 995 permanent employees at March 31, 2020.


At DAL, employees learning, and development is of upmost importance. The Company has separate dedicated team for learning and development of employees. To enhance employee skills, the Company also provides internal as well as external training to its employees. These programs not only help enhance skills but also workplace productivity. DAL has also been recognized as Great Workplace based upon the assessment conducted by the Great Place to Work Institute, India. The Company has engaged many learning partners, Indian as well as multinational organizations who have helped us by sharing the best practices and helping in developing our employees.


Safety at workplaces of paramount importance to the Company. It continuously strives to ensure various training and awareness programmes are conducted throughout the year. Aim is to maintain highest standards of safety across factories and workplace and ensure latest best practices are implemented across the business to bring operational efficiencies and save energy.


The Companys endeavour is to maintain regular engagement with all its stakeholders to ensure their concerns are addressed and expectations are met. Dynamic processes are in place within the Company to ensure integration of feedback from various stakeholders such as suppliers, customers, employees, and investors on a routine basis. By trusting employees, partnering with suppliers and dealers, and engaging with local communities, we work towards not only serving but also delighting our customers.


DAL has adequate systems of internal control in place, which is commensurate with its size and the nature of its operations. The Company has designed and put in place adequate Standard Operating Procedure and Limits of authority manuals for conduct of its business, including adherence to the Companys policies, safeguarding its assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. These documents are reviewed and updated on an ongoing basis to improve the internal control systems and operational efficiency. DAL uses a state-of-the art ERP system to record data for accounting and managing information with adequate security procedure and controls. DAL has duly appointed internal auditor as well as the Company has its own in-house internal audit team which keeps checks on every system operating in the Company. Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve the Companys operations. It brings a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

A CEO and CFO Certificate, forming part of the Corporate Governance Report, confirm the existence and effectiveness of internal controls and reiterate their responsibilities to report deficiencies to the Audit Committee and rectify the same. The Company has appointed M/s. Manoj Ritu & Associates as their internal auditors, which in turn submits quarterly reports to the Audit Committee.


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 the business environment. The performance of the crop protection industry and other Agri-inputs is dependent on monsoons, pest and disease incidences on crops. 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. Many Agrochemical Companies have foreign exchange exposure either in the form of forex loans or exports and imports. For Companies which operate largely in the domestic arena, any major forex movement may affect profitability due to fluctuating import costs.

While on the one side input costs could increase, weak monsoons could reduce pricing flexibility, thereby affecting margins. To minimize the risk, a comprehensive and integrated risk management framework is followed by the Company.


Statements in this Management Discussion and Analysis contains "Forward Looking Statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to DALs future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, several risks, uncertainties, and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. DAL undertakes no obligation to publicly revise any forward-looking statements to reflect future/ likely events or circumstances.