Dhanuka Agritech Ltd Management Discussions.


The Indian population currently stands at 1.3 billion and is estimated to rise to 1.7 billion by 2050. India is the second most populous country after China in the world. According to United Nations statistics, India will surpass China to become the worlds most populous country by 2022.With the economic growth in absolute terms, Indian economy is likely to reach US $10 trillion by 2030 making India 3rd largest economy after China and US. Today more than 34% of Indias population lives in cities and account for more than 60% of food consumption which leads to a change in dietary needs of country.

India is an agrarian country, where more than 54% of population is engaged in agriculture and allied activities and accounts for INR 17.67 trillion (USD 274 billion) in 2018, contributing (17.4%4) Gross value to countrys GDP.

India is 2 largest food grain producer in the world after China. Food grain production has grown at CAGR 2.8%between FY 15-19 with 281.4 Million tonnes of food grain produced in FY19, out of which share of cereals(91%) and Pulses (9%). Production of horticulture is consistently exceeding food grain production from FY15-19 and grown at CAGR 2.6%. Horticulture production is growing due to many advantages compared to large scale crop farming like more remunerative, low water utilization with small farms, faster turnaround and increasing demand due to change in lifestyle. Fruits (35%) and vegetables (66%) together forms 91% share of total horticulture production in India.

Apart from agriculture other allied activities like dairy and animal husbandry have grown consistently from FY17-19. Indias total Exports from Agricultural and processed food products in FY 19 stood at 1.28 lakh crore with 7% increase compared to FY 18 out of which exports from Basmati rice, pulses and dairy products increased 72% and 22% respectively.

Agriculture and food industry are closely connected industries, Indian food and retail market is projected to touch US$ 4826 billion by FY 2020 which also remains key driver for growth of agricultural produce.

Indias food grains demand is estimated to be 355 million tonnes by 2030. India, today has food surplus status, however the pressure of constantly increasing population, declining arable land, small land holdings, High monsoon dependency and declining soil fertility are major threats of Indian agriculture to sustain the growing populations food need sand global nutrition needs is biggest concern. Hence, India will have to adopt the sustainable measures to maximize efficiency across value chain for sustainable output.


As per the latest annual report (2017-18) released by the Department of Chemicals and Petrochemicals the production installed capacity of agrochemical players in India is around 292 (000 MT).

A pesticide has two main components, namely, the active ingredient(s) and the inert ingredient(s). The active ingredient is the one that gives a pesticide its pesticidal action. Its called the technical grade of a pesticide. The active ingredient is the technical grade of the pure pesticide. A pesticide is rarely applied in its pure form. It is usually formulated by adding inert ingredients that improve storage, handling, application, effectiveness or safety. The inert ingredient does not have any pesticidal action.

Pesticides are first manufactured as technical grade product, which has 85% or more of the active chemical ingredients as it has a higher commercial purity. The active ingredients are then mixed with inert ingredients (solvents, adjuvant and fillers) to achieve the desired formulation. The active ingredient kills the pest whereas the inert ingredient facilitates ease of handling, spraying and coating on plants.

Production of agrochemicals has grown at a CAGR of 4.3% during FY14-18. In the current financial year, production has risen by 2.9%. To feed a rising population, food production needs to be increased, creating a case for the need for more agro-inputs for better production and yield of various crops. With the growth of population in India, there has been a subsequent increase in the production of crops. Food grain production has grown at a CAGR of 1.8% and horticulture production has grown at a CAGR of 3% during FY 14-18.

Production of agrochemical has also increased in-lieu of the new product additions which are formulated to combat the pest attacks.

Growth Drivers

To achieve higher crop yields, crop protection chemicals are expected to play a significant role. Simultaneously, it will also be critical to use them judiciously to maximize benefits and minimize the impact on non-targeted species.

Budgetary support: The Government of India has continuously been providing budgetary support towards reviving the rural economy and increase the farmers income. A number of measures and initiatives have been proposed and announced during the FY19-20 budget for the improvement of the agriculture sector and the rural economy.

Going forward, it is expected that the government will be increasing the level of agri-credit, to be provided, corroborating it to be beneficial for agri and agri-allied manufacturers. Availability of rural bank credit can increase the demand for pesticides.

Off Patent Molecules: The share of Off patent products as compared to patent products and proprietary off-patent products has been increasing over the years. Agrochemicals worth USD 4.1 billion are expected to go off-patent by 2020. This provides significant export opportunities for Indian companies which have expertise in generic segment.

Increase in demand for food grains: India has 17% of the worlds population. An increasing population, need for food security and high emphasis on achieving food grain self-sufficiency is expected to drive the demand for crop protection chemicals.

Growth of horticulture: Fruits and vegetables account for nearly 90% of total horticulture production in the country. India is now the 2nd largest producer of fruits and vegetables in the world and is the leader in several horticultural crops, namely mango, banana, papaya, cashew-nuts, areca nut, potato and okra.

Growth in horticulture and floriculture industries is to result in increase in demand for agrochemicals, especially fungicides. As Indias diverse climate ensures production of all varieties of fresh fruits & vegetables, the trend has slowly shifted from production of food grains to horticulture, with production of horticulture consistently exceeding the production of food grains.

Incidence of pest attacks: One of the major challenges to ensure food security and good crop yields is incidence of pests. On an average agro-pests are estimated to cause 15%-20% yield losses in principal major food and cash crops. Pest attacks across various stages of crop life-cycles are affecting farmers. Due to the hot humid climatic conditions prevalent in India, the number of pest attacks has been increasing.

Use of agrochemicals can help mitigate the pest problem and increase crop output by 25%-50%. So far, the presence of more than 40,000 different types of insects have been recorded in India and of these about 1,000 have been listed as potential pests of economical loss plants, 500 pests have caused serious damage at some time and 70 have been causing damage more often.

Changing climatic conditions: Erratic climatic conditions are impacting crop output. Farms need an array of inputs to protect crops from adverse climatic realities. Irregular monsoons coupled with lack of irrigation (60% of cultivable land is non-irrigated) results in low agricultural yield in India.

Damp and warm weather conditions aid in breeding of weeds.

Limited farmland availability: Rapid urbanisation has had a detrimental impact on land availability. The pressure is therefore to increase yield per hectare which can be achieved through increased usage of farm productivity-enhancing inputs like agrochemicals.

Increasing awareness: Educating the farmers about advantages of agrochemicals and its safe usage, will lead to increase in demand. Companies are increasingly training farmers regarding the right use of agrochemicals in terms of quantity to be used, the right application methodology and appropriate chemicals to be used for identified pest problems.


Pesticides if not used judiciously can be toxic and hazardous to mankind and the environment. The Government of India regulates the manufacture, sale, transport, export/import etc. of pesticides under the guidelines of the Insecticides Act, 1968. The Insecticide Act, 1968 is administered through Ministry of Agriculture, Department of Agriculture and Cooperation (DAC). The other vital issues of pesticides industry such as prevention of use of spurious pesticides, quality standards, testing, review of use of pesticides, to create awareness about safe and judicious use of pesticides among the farmer community are also looked after by the DAC. Central Insecticides Board and the Registration Committee are the agencies under the Department to regulate the manufacture, distribution, export, import, ban and usage of pesticides. Insecticide Act is enforced by the State Governments. The Department of Chemicals and Petrochemicals plays the role of a facilitator for the growth of the Industry.

As per this act, no pesticide is allowed for production / import without registration. Compulsory registration is needed for the product in the central level and licenses for manufacture, formulation and sale at the state level. Power to prohibit the import, manufacture and sale of pesticides and also confiscate the stocks is within the preview of Centre Level. Classifications of misbranded insecticides which are divided into the following categories viz; (a) misbranded, (b) substandard, (c) spurious, and (d) duplicate. These classifications have been fixed according to the severity of the offence.For an offence deemed to be misbranded, there is provision for issuing administrative warning of the offence which may be compounded by imposing fine as well as imprisonment.


Government of India is targeting to improve agriculture and alliedsector encompassesactivities andprocess to create strong brand for agricultural and allied products.

In order to drive sustainable agriculture growth, priority will be on reducing loses post-harvest which could be achieved by value addition through food processing sector which has huge growth potential. Hence value driven growth approach should be considered. Focus on enhancing the market linkages and providing information and communication technologies (ICT) enabled Agri- marketing systems which will adds value in pre and post-harvest phases of agriculture value chain.

Paddy accounts for the maximum share of agrochemicals consumption around (26%-28%) followed by cotton (18% -20%). The eight states including Andhra Pradesh, Maharashtra, Punjab, Madhya Pradesh, Chhattisgarh, Gujarat, Tamil Nadu and Haryana account for usage of > 70% of the agrochemicals used in India. Andhra Pradesh is a leading consumer of crop protection chemicals with a market share of 24%.

Agrochemicals are broadly classifies into five types:


Insecticides are largest consumed pesticides with 53% of total pesticides market in India due to its use in high production cropsviz. paddy, cotton, sugarcane and other cereals.

Insecticides provide protection to the crops from the insects by either killing the morby preventing their attack. They help in controlling the pest population below a desired economic threshold level.


Fungicides comprises only 19% of total pesticides markets hare with its application in fruits, vegetables and rice. Fungicides play important role to reduce post-harvest losses in fruits and vegetables.

Fungicides are used to control disease attacks on crops and are used to protect the crops from the attack of fungi. Fungicides are of two types protectants and eradicants.


Herbicides also called a sweedicides are used to kill undesirable plants. Herbicides are second largest and fastest growing pesticides segment comprises 24% marketshare.

Herbicides are majorly used in rice and wheat crops however, due to availability of cheap labour in India those are employed to manually pull out weeds. Herbicides have seasonal demand due to the fact that weeds flourish In damp, warm weather and die in cold spells.


Bio-pesticides are the new age crop protection product manufactured from natural substance like plants, animals, bacteria and minerals.

Bio-pesticides are eco-friendly, easy to use, require lower dosage amounts for same performance as compared to other chemical based pesticides.

Bio-pesticides has a small segment however, the bio pesticide market has higher growth potential in the future owing to government support and increasing awareness about use of non-toxic,environment friendly pesticides.


Other agrochemicals mainly include Fumigants, nematicides and rodenticides which protect the crops from pest attacks during crop storage.

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. Due to recent closure of many factories in China, potential for Indian manufactures to expand in Export market has grown tremendously. Govt. of India is also aggressively focusing on Agrochemical Sector of India, Govt is phasing out old products and future for new products is quite good. 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. Awareness about crop protection is still low in India and the role of agrochemicals in improving farm productivity is grossly undermined as well. Similarly, the importance of using better quality hybrid seeds and organic plant nutrients and micronutrients also remains a neglected area. This provides an immense scope for market expansion.

Challenges of Agrochemical Sector in India

Despite positive growth outlook, agrochemical industries faces various problems as high raw material cost, increased use of genetically modified seeds, safety and handling of pesticides, high Air and water pollution treatment cost, High R&D cost.

Non-genuine pesticides accounts for 20-30% of total pesticides market in developing countries like India which reduces fertility of soil and also harmful for farmers live hold. Government of India has sanctioned new pesticides management bill to reduce use of spurious pesticides. Demand for agrochemical will increase due to increase food grain and horticulture production, export potential, policy support from government to agriculture and allied sector.

Bio-pesticides and herbicides segments of pesticides have higher growth potential due to increase in awareness of eco-friendly pesticides and increasing production of horticulture (fruits & vegetables) respectively. For sustainable farming and growth of agrichemical industry should focus on developing bio-degradable molecules and creating more awareness for use of agrochemical products via interactions with farmers retailer and dealers.

Agrochemicals are the last and one of the key inputs in agriculture for crop protection and better yield. However, India is facing challenge for using agrochemicals in farming due to lack of awareness of such chemicals among farmers. Production of fertilizer has increased at CAGR 11% from FY15-18 due to increased consumption of fertilizers per hectare currently 165 kg/ha (Source: World Bank Data). Further government of India is providing fertilizers like Urea, DAP, Complex fertilizers in subsidize way which has increased consumption.


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. 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. In order to minimize the risk, a comprehensive and integrated risk management framework is followed by the Company.

Internal control systems and their adequacy

The Company 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. The Company uses a state-of-the art ERP ( Microsoft AX) system to record data for accounting and managing information with adequate security procedure and controls.

Company have duly appointed Internal auditor as well as 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 Companys operations. It brings a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, Control, and governance processes.

Financial performance with respect to operational performance

Financial performance For Financial Year 2018-19:

a) Revenue from Operations (Net of Excise) increased by 4.49% from 962.63 Crores lacs in 2017-18 to 1,00,5.83 Crores in 2018-19.

b) Profit before tax decreased by 7.82% from 167 Crores in 2017- 18 to 153.95 Crores in 2018-19.

c) Operating Profit before tax decreased by 11.99% from 151.85 Crores in 2017-18 to 133.64 Crores in 2018-19.

d) Net profit decreased by 10.78% from 126.18 Crores in 2017-18 to 112.58 Crores in 2018-19.

e) The Company reported an EPS of 23.02 in 2018-19 compared to 25.71 in 2017-18.

f) Segment-wise or product-wise performance.

Insecticides 42.65%
Fungicides 15.53%
Herbicides 28.85%
Others 12.97%

g) Return on net worth has declined by 239bps and the decline was mainly due to expiry of tax holiday period i.e. u/s 80-IB for our factory situated in Udhampur, J&K and lower PAT.

Key Financial Ratios:

Particular FY 2018-19 FY 2017-18
Debtor Turnover 21.74% 21.60%
Inventory Turnover 20.56% 21.29%
Interest Coverage Ratio 173 192
Current Ratio 3.64 3.83
Debt Equity Ratio 0.03 0.01
Operating Profit Margin 13.29% 15.77%
Net Profit Margin 11.19% 13.11%
Return on Net worth* 17.53% 19.92%

There is no Significant Change in any of the Key Ratios of the Company in comparison to previous year.

Material developments in Human Resources / Industrial Relations

In Dhanuka Employees are like family and from time to time many celebrations are organised for employees. This Year to celebrate Birth Centenary of Late Shri Chiranji Lal Dhanuka ji, founder Chairman of the Company, SAMBANDH events were organised for its employees / stakeholders. Purpose of these events was to make Employees connect with Group Chairman, Mr. Ram Gopal Agarwaland Managing Director, Mr. Mahendra Kumar Dhanuka and to :

• Bring alive the Values and Principles of the Founders of the Company

• Building a robust foundation of SAMBANDH between the Organization & the employees/stakeholders of Dhanuka Agritech Limited

• Increase connect with Corporate and corporate policies through HR

• Inspire our employees to make Dhanuka a great organisation

• Drive sustainability to stakeholder relationships

Learning and Development of Employees

At Dhanuka Employees learning and development is of upmost importance. Dhanuka has separate dedicated team for Learning & Development of Employees, which organizes from time to time many skill development programs and ensures to enhance the potential of employees to the maximum extent. Dhanuka has also been recognized as Great Work Place based upon the assessment conducted by the Great Place to Work Institute, India The Company have 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.


Due to very low level of consumption of pesticides in India as compared to Global norms, Indian Agrochemical Industry has very huge potential for Growth. Lack of awareness, non-favourable perception among farmers, increased use of non-genuine pesticides are key reasons of low kg/per hectare consumption of pesticides in India.

Production of fertilizers has increased at CAGR 11% from FY15-18 due to increased consumption of fertilizers per hectare currently 165 kg/ha. Further government of India is providing fertilizers like Urea, DAP, Complex fertilizers in subsidize way which has increased consumption.

As per FICCI, despite all its achievements, Indian Agriculture is still grappling with challenges like high monsoon dependency, unpredictable weather patterns, reduction in arable land, low per hectare yield, lower farmer incomes etc. After the US, Japan and China, India is the fourth largest producer of agrochemicals. Its valued at $4.1 billion and is expected to grow at 8.3 percent to reach $ 8.1 billion by 2025. Agriculture employs nearly half of Indias workforce and contributes about 17 percent to the nations GDP.

The per hectare consumption in India is 0.6 kg as compared to Chinas 17 kg, Japans 12.5 kg, Germanys 3.7 kg, Frances 3.7 kg and UKs 2.8 kg. Therefore, the crops get affected by pests at various stages in the farming value chain including pre-harvest and during harvest. As the productivity is directly hampered due to pests and weeds, it affects the income levels of farmers. It is essential to protect not only the crop but also the produce as on an average 25% of the yield is destroyed during storage and transportation .( Source: Business today )

As per the India Meteorological Department (IMD), 2018 was the sixth warmest year on record in India with patchy monsoon and average temperature being significantly above normal. The rainfall during the annual monsoon season was less than the original forecast at 91% of the long-term average. Nearly 50% of Indias cultivable farm area is dependent on the monsoon, making it lifeline of the countrys rural economy and agriculture sector. However, most major crops producing states witnessed normal monsoon rainfall, hence the production of food grains for FY 2018-19 is higher.

Globally, analysts and agencies have a consensus that Indian economy will continue to outperform amidst global gloom, albeit at a slower pace. As per the International Monetory Fund(IMF), the Indian economy is likely to accelerate moderately and grow by 7.3% in FY 2019-20 compared to its earlier projection of 7.5%. To support the growth momentum, the Reserve Bank of India is taking the necessary steps to maintain financial stability and to facilitate enabling conditions for sustainable and robust growth. It has already taken back-to-back rate cuts of 25 basis points, resulting in repo rate declining to 6%.

Dhanukas Overview

Leading to commercialization of farms, new technology arrived in agriculture exposing farming system to external economics and technically intensive crop solutions. The increased demand and competition raised the importance of crop solutions reach and availability. Connecting to channel and working on the undisputed supply of crop solution has become the priority for the developing agriculture industry. Offering of crop centric customized products to farmers without compromising the quality makes supply chain much more important. In India the awareness on usage techniques of agrochemicals is very low, this requires continuous guidance on application methods and quality supply of products by the companies. Channel and distributors work closely with the farmer, their expertise on providing education to todays farmer can make them tomorrows leader. Its high time to introduce technology driven services to farmers at affordable cost, generating higher income & bringing prosperity in their lives. Channel & distributors are the intermediate linkage for transferring technology to farmers. In conventional business model, companies have to take and understand struggles of both farmers and channels.

Dhanuka Agritech Ltd. is dedicated towards building strong relationship with all its channel partners and stakeholders. We are aggressively working towards the goal of Transforming India through Agriculture by initiatives like doubling farmers income. Our latest innovative sales process guides the farmers effectively on our Crop solutions through our channel partners and a dedicated team. It also ensures smooth reach of products to farmers with readily available stock on demand as per the latest market scenario. Issues like inventory cost, blockage of fund and uncertain demand & supply are being managed by this new age sales process, Kohinoor. It also offers automatic order processing and complete availability of product in real time.