Monsanto India Ltd Merged Management Discussions

GLOBAL ECONOMY

After recording a strong growth in 2017 and early 2018, the global economic activity softened notably in the second half of the year. Escalating trade tensions between China and the United States (US), uncertainty about the Brexit outcome, subdued trade growth, geopolitical tensions and tightening financial conditions were the major challenges that impacted growth. Resultantly, the global economic growth moderated to 3.6% in 2018 as against 3.8% in 2017. These factors have also led to deceleration in growth across advanced economies and emerging markets. Further, growth is expected to remain softer at 3.3% in 2019 before picking up to 3.6% in 2020. Improved market sentiments, accommodative monetary policies, recovery in commodity prices, the waning of temporary bottlenecks in the Euro area and gradual improvement in conditions of stressed emerging economies are the factors anticipated to drive growth from the second half of 2019.

(Source: IMF World Economic Outlook, April 2019)

INDIAN ECONOMY

Indias Gross Domestic Product (GDP) is estimated to grow at 7.3% in FY 2018-19, and an average of 7.5% in the following two years, according to the World Banks forecasts. India will thus retain its ranking as the worlds fastest-growing major economy. The pick-up in growth is attributed to an upswing in consumption and growth in investment activity with the dwindling effects of temporary disruptions associated with Goods and Services Tax (GST) and demonetization. The implementation of the landmark measure and its role in the formalization of the economy have enthused the industry.

Despite global headwinds, Indias growth outlook remains robust. The most recent ‘Ease of Doing Business Report by the World Bank underlined Indias significant progress on this front with the nation moving up 23 notches to be ranked 77^th out of 190 nations. As of March 2019, the Nikkei India Manufacturing Purchasing Managers Index stood at 52.6. This, along with the highest ever GST collections of Rs 1.06 lakh crore in March 2019 indicates the expansion in manufacturing and construction. Private consumption is projected to firm up and investment growth is expected to continue as the benefits of recent reforms begin to materialize and credit rebounds. The Reserve Bank of India (RBI) slashed the benchmark repo rate by a quarter percentage point to 6.25% on account of benign inflation outlook in February 2019. This has been quite a welcome move for the industry and is expected to uplift economic growth.

(Source: IBEF)

Going forward, there are many other remarkable factors to propel the growth of the economy at an accelerated pace including moderate inflation, declining fuel prices, recapitalization of banks, insolvency resolution, simplified taxes, greater access to banking, and others. Expectations of a near-normal monsoon rainfall in 2019 as per the Indian Meteorological Department (IMD) forecast is expected to improve rural incomes and boost the performance of the agriculture sector. Further, reforms such as income support to farmers to alleviate agriculture distress, healthcare for the economically less privileged, and thrust on infrastructure development and construction are expected to bolster demand and improve the business climate.

OVERVIEW OF INDIAN AGRICULTURAL SECTOR

India is the largest producer of spices, pulses, milk, tea, cashew and jute and the second largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. This strong multi-crop focus has made the agriculture sector the backbone of the Indian economy and a major contributor to the countrys GDP, along with fisheries and forestry. Over 58% of the rural households depend on agriculture as their principal means of livelihood. Currently, India is also the worlds fourth largest producer of agrochemicals.

As per the provisional estimates of Central Statistics Office (CSO), the share of agriculture and allied sectors, including agriculture, livestock, forestry and fishery is expected to be 14.39% of the Gross Value Added (GVA) during FY 2018-19 at 2011-12 prices. According to the estimates, the expansion in agriculture and allied sector activities is projected to increase to 2.7% in the current fiscal as compared to growth of 5.0% in FY 2017-18.

Indian agriculture witnesses 2 agricultural seasons- Kharif and Rabi.

Cropping Season	Period of Year	Major Crops Grown
Kharif Season	July-October (Monsoon)	Rice, maize, sorghum, pearl millet/bajra, finger millet/ragi (cereals), arhar (pulses), soyabean, groundnut (oilseeds), cotton, fruits and vegetables
Rabi Season	October-March (Winter)	Wheat, maize, barley, oats (cereals), chickpea/ gram (pulses), linseed,mustard (oilseeds), rice, mustard, fruits and vegetables

Agriculture is the engine of the countrys economic growth and a key to farmers success. Indias population continues to grow at a brisk pace, while the amount of arable land remains limited. Besides, the increasing scarcity of natural resources and climate change threat intensify the loss in farming income. The need of the hour is to provide the right policy framework and infrastructure to farmers to facilitate growth and enhance productivity. For this to happen, agriculture needs deep reforms to boost productivity by reprioritizing crops sown, creating a new technological ecosystem, and revamping market distribution.

Given the importance of the agriculture sector, the government has been taking several steps for its sustainable development. India has embarked on an ambitious mission of doubling the farm income by 2022. The increasing investments in agriculture infrastructure and growing use of seed and crop technologies for improved yield will offer synergistic opportunities for the growth of Indian agriculture.

(Source: IBEF)

Production

The cumulative rainfall in the country during the monsoon season (June to September 2018) was 9% lower than Long Period Average (LPA) of 89 centimetres. However, most of the major crop-producing states witnessed normal monsoon rainfall. Resultantly, the Ministry of Agriculture (MoA) anticipates production of most of the crops for the agricultural year 2018-19 (July to June) higher than their normal production. The total foodgrain production in 2018-19 is estimated to rise significantly by 15.63 MT than the previous five years (2013-14 to 2017-18) average foodgrain production. Second advance estimates of the Dept. of Agriculture forecast the foodgrain production in the country at record 281.37 MT for 2018-19.

The Ministry has pegged the rice production at a record 115.60 MT on account of substantial increase in production during the Kharif season. Also, sugarcane is expected to record new highs and touch 380 MT, indicating yet another year of higher sugar production. Oilseeds production is estimated at 31.50 MT, which is higher by 1.62 MT than the production of 29.88 MT recorded during the same period of the previous year.

Estimated production of major crops (In Million tonnes)

Crop	2018-19 (second advance estimates)	2017-18 (fourth advance estimates)
Rice	115.60	112.91
Wheat	99.12	99.70
Coarse	42.64	46.99
Cereals
Maize	27.80	28.72
Pulses	24.02	25.23
Oilseeds	31.50	31.31
Sugarcane	380.83	376.90
Cotton*	30.09	34.89

*million bales of 170 kg each

(Source: Ministry of Agriculture)

Exports

India ranks among the 15 leading exporters of agricultural products in the world. Total agriculture exports from India grew at a Compounded Annual Growth Rate (CAGR) of 16.45% over 2010-18. Between April 2018-February 2019, agriculture exports touched USD 34.31 billion. The Agriculture Export Policy, 2018 was approved by the government of India in December 2018. The new policy is aimed at raising Indias agricultural exports to USD 60 billion by 2022 and USD 100 billion in the next few years with a stable trade policy regime.

According to the Agricultural and Processed Food Products Export Development Authority (APEDA), exports of agricultural and processed foods totaled USD 21.61 billion during April-October 2018. During this period, exports of marine products reached USD 4.18 billion, while that of basmati rice and spices touched USD 2.48 billion and USD 1.84 billion, respectively.

As per the report published by Food and Agriculture Organization (FAO) of the United Nations in December 2018, aggregate cereal exports in 2018-19 marketing year (April-March) are forecasted at 14.2 MT. India is a leading exporter of rice in the world. Rice exports in the 2018 calendar year are estimated at 12.2 MT, 9% above the five-year average, reflecting bumper availabilities and steady demand. Moreover, tea exports from India reached a 36 year high of 251.91 million kgs in the calendar year 2018.

(Source: IBEF) Foreign Investments

According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about USD 2,092.86 million and USD 472.14 million, respectively, during the period April 2000 to December 2018. During the same period, the FDI inflow in the food processing industry stood at USD 8,915.69 million.

SEASON-WISE REVIEW OF AGRICULTURE IN 2018-19

Kharif Season 2018

Favoured by decent monsoon rainfall in North West India, Central India and South Peninsula, the Union Ministry of Agriculture has estimated Indias total acreage under Kharif crops in 2018-19 to be nearly 1% higher than the area covered last year. In July, the Centre approved the increase in the Minimum Support Prices (MSPs) for all Kharif crops for the 2018-19 season to ensure that the farmers receive a fair price more than their farming costs. Several parts of Bihar, Jharkhand and eastern Uttar Pradesh experienced drought in the initial months of the southwest monsoon season. (1^st advance estimates).

Indias foodgrain production during the rain-fed Kharif season is estimated to reach a record 142.27 MT in 2018-19. Production of rice, the main Kharif crop, is likely to increase to 101.96 MT in 2018-19, 4.46 MT higher than the previous years record of 97.50 MT. Farmers, however, are expected to harvest a lower volume of pulses – 9.01 MT, compared to 9.34 MT last year. Sugarcane production is estimated at 380.83 MT in Kharif 2018-19, up 1% from 376.90 MT in 2017-18. (2^nd advance estimates).

Kharif Crop Production (In Million tonnes)

Crop	2018-19 (2nd advance estimates)	2017-18 (fourth advance estimates)
Rice	101.96	97.50
Maize	20.22	20.24
Jowar	1.92	2.10
Coarse	31.30	33.89
Cereals
Pulses	9.01	9.34
Sugarcane	380.83	376.90

Rabi Season 2018

According to the Agriculture Ministrys data, the Rabi plantation area reduced in 2018-19, primarily due to rainfall and hailstorms in major parts of North India and drought-like situation in few states. Pulses and coarse cereal crops were the worst hit by the drought situation. The acreage for wheat cultivation also fell substantially compared to the acreage in the previous Rabi season. The shortfall was mainly on account of erratic rainfall during south-west monsoon this year and the resultant carry over of the ground water for the Rabi season.

Low monsoon and post-monsoon rains have pulled down post-Kharif and Rabi production. Meanwhile, India is expected to harvest a lower rapeseed and gram crop in this season on account of lower monsoon rainfall. Indias wheat production in 2018-19 Rabi season is estimated to be 99.12 MT, marginally less than 99.70 MT in the previous year.

Rabi Crop Production (In Million tonnes)

Crop	2018-19 (2nd advance estimates)	2017-18 (fourth advance estimates)
Wheat	99.12	99.70
Maize	7.58	8.47
Pulses	15.02	15.89

CHALLENGES IN THE INDIAN AGRICULTURAL SECTOR ADDRESSED BY MIL

Low Yields: India ranks among the top countries in the world in production of various food grains such as rice, wheat, sugarcane, fruits and vegetables. Despite this potential, the farm yields are 30-50% lower than that of developed nations as per the data of Ministry of Commerce and Industry. Fragmented land holdings, poor infrastructure, inadequate use of farm technologies and farming techniques, decrease of soil fertility and insufficient irrigation facilities are the leading contributors to low agricultural productivity. The net area under cultivation is close to 141 million hectares, out of which 73 million hectares are unirrigated and rainfall dependent.

(Source:https://www.livemint.com/Opinion/OvstoyR3XDFE8KWI lsm6XO/Opinion--Reforming-Indian-agriculture-by-sprinkles-and-drip.html)

After rice and wheat, maize is the third most important field crop in India. Currently, Indian maize is performing comparatively low in terms of yield as compared to the world average, with the difference in yield between India and the world as much as 130%. This large gap in yield of maize production in India and the rest of the countries is a serious concern. Similarly, for other crops, Indias productivity remains substantially lower than the rest of the world. It is imperative for India to increase yields given the huge area of available cultivable land and the expanding population.

Hybrid seed production is predominant in modern agriculture and one of the main contributors to the dramatic rise in agricultural output. Across the world, hybrid seeds are increasingly being used by the farming community. In addition to benefits such as pest resistance, drought tolerance, etc. the use of hybrid seeds also help farmers increase their yields. The Department of Agriculture and Co-operation is implementing a Central Sector Scheme known as ‘Development and Strengthening of Infrastructure Facilities for Production and Distribution of Quality Seeds since 2005-06 on an all India basis. The objective of the ongoing scheme is to ensure production and multiplication of high yielding certified/quality seeds of all crops in sufficient quantities and make the seeds available to farmers, including those in remote areas, not easily accessible by rail/ road on time.

Over the years, Monsanto India Limited (MIL) has been empowering Indian farmers through its wide portfolio of high-yielding improved hybrid maize seeds. Developed through intense Research and Development (R&D) efforts, each seed variety has advanced characteristics to successfully meet the agronomic challenges of the concerned farming region, leading to higher and better-quality yields. Implementation of Breeding 3.0 to drive improvements in breeding methods and mechanize field testing, leveraging predictive analytics for data-driven decisions, and centralized operations are among the significant initiatives undertaken by the corn breeding team to deliver high-quality products, which eventually led to better returns for farmers.

Crop Losses: Weeds, insects and diseases are the three main biological factors causing economic losses to farmers. As per the data of the Agriculture Ministry, yield losses in India are estimated to be in the range of 15-25% due to pests. Weeds cause massive damage to crops and deplete the soil nutrients and moisture, thereby diminishing the crop yields.

Chemical crop protection solutions play a vital role in achieving sustainable agriculture and minimizing crop losses. Use of crop chemicals helps control pests and diseases and boosts farm productivity, resulting in higher profits in the hands of farmers.

The Company provides effective and superior quality weed management solutions through its high-quality glyphosate. Roundup, one of the most trusted herbicide brands in the market, has been successfully addressing farmers concerns relating to weed control and providing greater economic benefits to them.

Illiteracy and Skilled Labour: About 64% of the rural India population is illiterate as revealed by the Socio-Economic and Caste Census 2011. Illiteracy, lack of awareness about recent developments and poor socio-economic background of the farmers are the fundamental reasons for low agricultural productivity. In spite of the large-scale mechanization of agriculture, most of the agricultural operations are conducted using simple and conventional tools. Also, the improper training of farmers on use of modern techniques has translated into inefficiency and lower produce.

As a leading player in the agriculture sector, the Company remains deeply committed to deploying the best technologies for the welfare of the farmers. Leveraging the burgeoning mobile penetration rate in the rural areas, it provides context-based agronomic information via SMS to the countrys farmers across the entire agricultural cycle. The farmer connectivity platforms of the Company are aimed at educating the farmers with the right information for a successful harvest.

OTHER AGRICULTURAL INPUTS

Agriculture is one of the most important pillars of the Indian economy and indispensable for the economic prosperity of the farmers. Despite a conducive policy environment and healthy demand for agricultural produce, productivity is fairly low. Indias burgeoning population and the rise of its middle-class have been fuelling the demand for better quality and quantity of food. With limited land availability and irregular climate, it is imperative for the country to give the farmers the right policies and technologies for improved output.

It is fundamental for farmers to aid their harvest with agricultural inputs in order to maximize yield. Farm inputs comprise seeds, fertilizers, crop protection chemicals, farm machinery and other allied services essential for a crops success. Seed is the most basic and critical input for attaining higher crop yields and sustained growth in agricultural production. The usage of hybrid seeds has been growing exponentially due to their high yield and resistance to biotic and abiotic stress. According to Goldstein Research Report, the Indian hybrid seeds market is estimated to reach USD 6.9 billion by 2025, growing at a CAGR of 11% over 2017-2025.

Further, improved weed control with herbicides has the potential to increase crop productivity. Farmers need quality solutions to manage their seeds effectively. An increasing number of farm areas are facing labour shortage to control weed fields as millions of people move from rural to urban areas. This has led to a vast scope for rapid adoption of herbicides for enhanced farm output. A culmination of all these factors along with the use of innovative technology in agriculture will support the needs of a flourishing nation.

OPERATIONAL REVIEW

DEKALB hybrid maize seeds

DEKALB is MILs globally recognized brand of high yielding hybrid maize seeds. It is renowned for its rich and diverse maize germplasm pool and breeding excellence and enjoys superior trust and confidence of the farming communities across the country. DEKALB hybrid seeds have enabled farmers to increase their crop yield significantly and sustainably.

During the crop year 2018-19, the corn acreage for all three crop seasons (Kharif, Rabi and Spring) reduced across the country by over 10%. With the overall market for maize seeds remaining subdued, DEKALB hybrids registered a volume de-growth in the year under review. Despite the challenging market environment, the Company continued to hold on to its market share driven by new product launches announced in the current as well as previous years. The Company also made encouraging progress towards widening its offerings in the key markets of Uttarakhand and Madhya Pradesh.

In the Kharif season, the Company performed very well as compared to the industry in the markets of Madhya Pradesh, Odisha and Rajasthan and DEKALB became the topmost brand in the state of Karnataka during the year. Good performance in these markets was achieved despite the late onset of monsoons which resulted in delayed sowing of maize. While the overall market for maize seeds declined resulting in reduced sales of the Companys hybrids, the new launches have shown good traction during the season.

The Rabi season was extremely challenging, during which the overall demand for maize seeds fell by 15-20%. This was largely due to the emergence of the new pest, ‘Fall Armyworm, in South India. The demand for Companys hybrids was also impacted due to this market development. The Spring season witnessed incessant rainfall in the month of February, resulting in shrinkage of overall market for maize seeds by over 15%. Nonetheless, the portfolio of new launches has been significantly contributing to growth even in this tough environment.

In addition to providing hybrid seeds, the Company focuses on strengthening connect with farmers by providing contextualized agronomic services. The Companys ‘Dr. DEKALB platform offers important information to the farmers across the crop cycle, including real-time updates on market prices, weather alerts and other relevant support services, by sending them SMSs. These critical agronomic solutions facilitate improved farm productivity.

As on March 31, 2019, 1.115 million corn farmers were registered on the Dr. DEKALB platform, as compared to 1.028 million on the same date in the previous year, signifying enrolment of 86,344 new farmers.

Keeping pace with the changing times, the Company also shares agronomic advice digitally. The FarmRise mobile application, available free of cost, leverages the knowledge of skilled agronomists to provide farmers with easy access to agronomic information. An important development during the year was the launch of Dr. DEKALB on the FarmRise mobile application, to automate the process of providing agronomic advisories to farmers. Thus, farmers will benefit from better and customized advice based on their location by simply sharing their location details on the application. With the ‘DEKALB ResolveIT platform, the Company has been rapidly addressing farmers concerns and offering them efficient after-sales solutions to ensure that right farmers have access to the right products.

The Company continues to leverage technology internally in pursuit of its goal of supply chain optimization, operational excellence, delivery of improved services to farmers and stimulating its product portfolio with new hybrids. Through DEKALB Advantage, between September 2017 and August 2018, 65% of corn volume sold was tracked. Besides, this initiative saw healthy participation of 12,000 retailers during the year.

Moving ahead, the Company continued with its brand campaign ‘Seed Your Success across all crop seasons to sustain DEKALBs strong brand recall and presence. In Uttar Pradesh and Bihar, the Company successfully conducted the ‘Child Education Program in partnership with NGO partner United Way of Mumbai. Under this program, it launched exclusive scholarship programs for children of its farmer customers in its efforts to motivate and support them.

Another remarkable outcome for the Company was acquiring the leadership position in the Net Promoter Score (NPS) during the year. The NPS metric is a key measure of brand equity and awareness. This significant enhancement underpins the persistent faith and confidence reposed in the DEKALB brand by the farmers. Further, the Companys breeding team has developed high-quality products and automated field testing leveraging advanced technologies and predictive analytics. Breeding 3.0 methodology has been instrumental in building a stronger pipeline and revolutionizing breeding methods. These efforts have played a pivotal role in delivering value and prosperity to farmers.

ROUNDUP

Roundup is an environmentally sustainable glyphosate herbicide that provides efficient post-emergent weed control.

Its use enables powerful and consistent weed control resulting in significant cost and resources (labour, time, fertilizer and water) savings. It is primarily used in tea plantations and pre-plant rice in agriculture and in non-agricultural places like roadsides, public spaces, alongside railway tracks and gardens. It has proved to be highly effective in controlling over 300 variants of weeds across 125+ countries.

In FY 2018-19, the Companys Roundup business recorded excellent performance with sales of nearly 9.8 million litres. Driven by its exceptional quality, Roundup is hugely accepted by farmers as a valuable tool for convenient and safer farming. Numerous promotional activities and campaigns were conducted by the Company to increase the market share and maintain its position for Roundup in the current fiscal. Besides, the brand has been successfully establishing its presence in the tea gardens of eastern India for many years.

During the year, the Company organized the ‘Display Contest campaign, along with others to generate awareness about the brands superior quality and extend its reach.

FINANCIAL REVIEW

During the financial year (F.Y.) 2018-19, your Company posted a Profit After Tax (PAT) of Rs 151.66 crore as compared to previous years PAT of Rs 164.56 crore (lower by 8%). Total Comprehensive Income decreased by 8% from Rs 168.51 crores in 2017-18 to Rs 154.45 crores in 2018-19.

Revenue from sale of products for the year under review decreased to Rs 657.91 crore compared to Rs 667.44 crore for the previous F.Y. (lower by 1%).

Your Companys seeds (DEKALB) sale is lower at Rs 449.99 crore in the F.Y. 2018-19 vis--vis Rs 481.78 crore in the F.Y. 2017 - 18, (lower by 7%) due to a challenging Rabi and Spring season.

Net Sales of Roundup during the year stands at Rs 207.92 crore (increase of 12%) compared to the previous year net sales of Rs 185.66 crore (including excise duty) driven by higher volumes. Revenues for 2017-18 includes excise duty up to June 30, 2017 which is discontinued with effect from July 1, 2017 upon implementation of Goods and Services Tax (GST) in India.

OUTLOOK AND OPPORTUNITIES

A sharp increase in Indias growth rate is expected on the back of implementation of dynamic reforms and appropriate fiscal policies. The ease of doing business has improved substantially and the country is on its way to robust development. Strengthening domestic demand is likely to offset weaker export growth. Strong consumption, driven by rising incomes, as well as subdued inflation will support the growth momentum. The governments major push is on providing relief to the middle class and lower middle class, digitalization of the economy, enhancing transparency and catalysing investments. Overall, the ingredients for sustainable economic expansion are in place.

The IMD has predicted near-normal rains during the four-month monsoon season in its April 2019 forecast. Monsoon rain is the lifeline of Indias farm-dependent economy as nearly half of the countrys farmland is deprived of irrigation. Quantitatively, the seasonal monsoon rainfall is likely to be between 96% of the LTA with an error of +/-5%. Normal monsoon rains are expected to augment agricultural and wider economic growth.

(Source: https://www.livemint.com/industry/agriculture/ imd-monsoon-forecast-offers-respite-for-indian-agriculture-economy-1555324396563.html)

Further, the sectors favourable growth outlook, its contribution towards employment generation, its significance for rural population, and its role in ensuring food security has made the government more inclined towards bringing reforms across the sector. Some of the major government initiatives are discussed below:

The Interim Budget 2019-20 has identified agriculture sector as one of the key drivers of the Indian economy. Towards this, the government of India has introduced several reforms to address the farm distress.

Key takeaways from the Budget:

Allocation for the agriculture sector jumped 144%, from Rs 57,600 crore in the previous years budget estimates to Rs 1,40,764 crore in the interim budget.

(Source: https://www.business-standard.com/article/ economy-policy/modi-govt-s-144-hike-in-agri-spend-not-enough-to-quell-india-s-farm-unrest-119021200139_1. html)

The government announced the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, which will provide a guaranteed income of Rs 6,000 per year to small and marginal farmers in three equal instalments of Rs 2,000 each. This momentous reform will involve an outlay of Rs 75,000 crore for the fiscal year 2020 and Rs 20,000 crore has been allocated for disbursal in the current fiscal.

Interest subvention of 2% was announced for farmers affected by natural calamities to improve the credit uptake and address famers loan-related stress.

An additional subvention of 3% will be given in case of timely repayment of loans. This scheme has also been extended to farmers engaged in animal husbandry and fishery activities.

All 22 crops have been put under MSP. This, along with various pro-farmer policies will support production of agricultural commodities.

The government has earmarked Rs 14,000 crore for the crop insurance scheme- Pradhan Mantri Fasal Bima Yojana for FY 2019-20, as against Rs 13,000 crore a year ago.

Total outlay for the Ministry of Food Processing Industries increased to Rs 1,196 crore from Rs 1,000 crore in the previous budget.

To enhance the livelihood security of rural households, the government has envisaged allocation of Rs 60,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA).

(Source: https://www.business-standard.com/article/news-ians/interim-budget-2019-allocation-for-farm-rural-sector-up-43-119020101427_1.html)

Other Initiatives:

The government announced Rs 15,053 crore procurement policy named Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) in September 2018, with an aim to allow states to decide a compensation scheme and rope in private agencies to ensure fair prices to farmers.

In May 2018, the Government released the Model Contract

Act, including all the services in the agriculture value chain along with contract farming activity. The Act lays special emphasis on protecting the interest of the farmers.

New export policy cleared by the Government in December

2018 to boost the agricultural exports.

100% FDI has been permitted in marketing of food products and in food product e-commerce under the automatic route.

(Source: IBEF)

Growth Drivers

Robust Demand: According to the United Nations forecast, India is the second largest populated country in the world accounting for 18% of the total global population. This rapidly growing population fuels the demand for quality agricultural products. Thus, it becomes imperative for farmers to adopt enhanced technologies, high-yielding seeds, plant growth nutrients, crop protection solutions and other agri-inputs to meet the diversified food needs of the people.

Rising Incomes: As per the CSO estimates, the per capita income of an average Indian has grown 45% over a period of five years, from FY 2014-15 to FY 2018-19. Strong growth in per-capita income is a key demand driver for food items. It has increased the purchasing power of individuals leading to higher consumption of agriculture and associated products.

Farm Mechanization: Mechanization has been identified as a vital tool to increase agricultural production. Farm mechanization helps in raising farm income by boosting productivity and limiting post-harvest losses. The country has been experiencing impressive growth in the mechanization of farms in recent years. Moreover, the government is also focusing on spreading its reach of farm mechanization in low mechanized areas through its flagship schemes such as Sub Mission on Agricultural Mechanization (SMAM).

Growing usage of hybrid seeds and other inputs: Conducive policy reforms and government subsidies have been spurring the use of hybrid seeds. Seeds of improved varieties and hybrids have the potential to enhance crop yields. Additionally, soaring usage of agricultural inputs such as fertilizers, herbicides, among others, has been supporting sectoral growth.

Contract Farming: The introduction of contract farming has been a game-changer for Indian agriculture, providing immense opportunities for its expansion. Private agro-industries provide farmers with specialized farm equipment and technologies. Also, the contract between farmers and buyers insulates farmers from price risk and helps them open new markets, while the companies benefit from continued supply of farm output. The government is ensuring providing an enabling environment for contract farming through policies and incentives.

Increasing area under irrigation: Over the years, sustained efforts for the creation of irrigation infrastructure, coupled with rising investments in irrigation have minimized the dependence on monsoons for the rainfed areas. The government implemented the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) scheme with the objective of expanding the cultivable area under irrigation, improve water use efficiency and enhance adoption of precision irrigation and other water saving technologies (Per Drop, More Crop). These concerted initiatives augur well for the Indian agriculture sector.

OPPORTUNITIES SPECIFIC TO MAIZE

Extensively cultivated crop: In India, maize is extensively cultivated by farmers as it consumes fewer natural resources and can be grown throughout the year. With around 15 million farmers engaged in maize cultivation, it qualifies as a potential crop for doubling their income. Development of high-yielding hybrids suitable to local conditions are expected to augment corn production in the coming years, leading to better lives for farmers.

Diverse applications: Demand for corn has accelerated in recent years driven by its increasing application in poultry and starch industries as well as its usage as a staple food in many countries. Led by its nutritional value, corn feed is widely used by the poultry industries, thereby fuelling the demand for maize. Maize also finds application in the preparation of sweeteners and additives in the food processing industry. More than half the maize produced in India is consumed as poultry feed, while the rest is used as food, animal feed and industrial processing. At the same time, the increased use of maize starch for ethanol production for fuel and edible oils add further value to the crop. As per the industry reports, India would require 45 million metric tonnes (MMT) of maize by the year 2022 aided by the thriving demand and application of corn in various industries. The ever-expanding population coupled with the healthy growth of poultry and starch industries, and consequent demand from these sectors is likely to bolster maize production in India.

(Source : FICCI Report: Maize Vision 2022)

The opportunities, disruptions and changes that are taking place in the economy, will undoubtedly expedite the growth of the agricultural sector. Agriculture reforms, implemented well, have the potential to empower farmers lives and place the economy on a higher sustainable growth trajectory. The Company is well-poised for an exciting phase of growth and expansion facilitated by the positive developments in the sector. Leveraging innovation and technology, the Company remains clearly focused on providing high-yielding hybrid seeds and predictive agricultural solutions to improve the crop productivity and drive value for the farming community.

OPPORTUNITIES SPECIFIC TO ROUNDUP

Weeds are a constant challenge to crop yields. By providing effective and superior quality weed management solutions through its flagship brand Roundup, your Company addresses farmers concerns relating to weed control, thus improving their yields and income.

Roundup is a broad spectrum, post emergent systemic herbicide brand for weed management. It provides efficient weed control and can be used on farms, public spaces, roadsides, alongside railway tracks and gardens. A best-in-class weed control solution, Roundup is the most trusted herbicide brand in the Indian market.

We continue to take new strides into the markets where we have been wanting to be present.

RISKS, CONCERNS AND THREATS

Risks and challenges are an integral part of the day-to-day operations of any business. Effective management of these risks is vital for the continued development of a Company. MILs dedicated risk management team has adopted a set of systems and processes to create awareness of the critical risks and manage them. In doing so, it also ensures safeguarding business opportunities and maximizing profitability. The Company strongly believes that the risks may have a significant impact on the business if not properly assessed and controlled, while the well-handled risks can boost the growth prospects. This section describes the major risks that affect the Company and the key measures adopted to mitigate such risks.

Weather Risks

Climate and weather are significant factors affecting agriculture industry around the world. Floods, droughts, irregular rainfall or natural calamities can lead to a poor harvest and impact crop production. This, in turn, may negatively impact the demand for the Companys products. In India, this risk is intensified with close to 52% of the net sown area still unirrigated and dependent on rainfall.

(Source:https://www.financialexpress.com/budget/economic-survey-2017-18-agriculture-climate-change-likely-to-lower-farmers-income-by-25/1035560/)

Prudent and prompt measures are, therefore, imperative to minimize the impact of this risk. The Company has been making continued investments in R&D to develop a comprehensive portfolio of high-yielding hybrids to suit different seasons and conditions. Additionally, it disseminates relevant agronomic information to the farmers for better yields through its unique advisory services and platforms. Other notable services offered by the Company include toll-free number, customized mobile messages to the farming community to address the vagaries of weather and seasonality risks.

Macroeconomic Risks

Besides being dependent on the natural environment, the agriculture business is also affected by macro-economic environment. Volatility in macro-economic factors such as global demand and supply, inflation, interest rates, wholesale prices, credit policies, commodity prices, among others may impact the demand and supply of agricultural products.

MILs over four decades of presence in the agriculture industry makes it one of the largest and most trusted players amongst the farming community. This coupled with its long-standing experience enhances its capability of overcoming the macroeconomic challenges effectively. Moreover, the growing demand for maize driven by its increasing usage in the feed industry and other industrial applications offsets the risk of subdued demand for the Companys products significantly.

Production Risk

Since the Companys business is dependent on the sale of seeds and agrochemicals, it is highly susceptible to production risks. These risks arise, mainly due to adverse weather, pests, diseases, higher raw material prices, regulatory challenges, human/technological errors, and others.

The occurrence of ‘Fall Armyworm, a dangerous pest from Africa, has been impacting agricultural production across the country. Maize has been the worst-affected crop as most of the maize-growing states in southern India were largely affected by it. Resultantly, it had an adverse impact on the Companys maize seeds production.

To mitigate this risk, the Company has been cautiously exploring new production locations, automating and digitizing operations, strengthening seed processes and offering more stress-tolerant hybrids to farmers. More importantly, it is in constant engagement with them disseminating crucial information and providing recommendations for maximum yield using customized tools and solutions.

Competition Risk

Increasing competitive intensity, availability of substitute materials, rise in the supply of lower-priced products may lead to a decline in demand for MILs products, resulting in loss of market share.

The three cutting-edge breeding stations of the Company in India are resolutely focused on developing high-yielding seeds through extensive research. This has enabled it to develop high-quality and successful hybrids after factoring in the difficult agro-climatic conditions and crop diseases.

This sharp commitment to offer highly-resistant and quality seeds at competitive prices has enabled the Company to circumvent competition efficiently. Further, its farm connect programs aimed to enhance farm productivity have boosted its relationship with farmers and strengthened brand presence. The favourable outlook for maize production in the coming years is expected to fuel demand for the Companys products going forward.

Institutional Risk

Aggressive regulatory interventions and changes in government policies and actions such as price support, food quality regulations, and subsidies may prove counterproductive for the Indian agriculture sector. Given the Companys primary business relating to manufacturing and marketing of hybrid seeds and herbicides, any adverse regulations to this effect such as ban on the sale, distribution and use of glyphosate in some states of the country may negatively impact its business.

Estimates suggest that the hybrid seed market is well-positioned for growth in the near future. The government has been taking encouraging steps to propel the use of hybrid seeds in cultivation and providing special incentives to private companies for R&D. That apart, hybrid seeds are evolving as the absolute solution to combat climate change and enhance productivity led by its intrinsic qualities. All these factors collectively augur well for the hybrid seeds business of the Company. Further, Roundup has become the most trusted herbicide brand in the Indian market with its high-quality weed management solutions, thus enhancing farmers yield and income. The strong brand presence of Roundup along with its growing acceptance by farmers facilitates the Company to withstand the risk involved in its Roundup business.

Realization Risk

Glyphosate acid is the primary raw material used in the manufacture of glyphosate herbicides and is imported by our competitors from China. Its import price remains susceptible to market fluctuations. Besides, the industry has been witnessing various new entrants who are importing low-cost glyphosate and selling herbicides at marginally lower prices in the domestic market. Therefore, this fierce competition poses a threat to the margins of the Company for its Roundup brand.

Numerous marketing and branding activities undertaken by the Company ensure strong brand positioning of Roundup. This gives the Company a significant competitive advantage and enables it to avoid the commodity trap.

Foreign currency Risk

For the procurement of its raw material glyphosate, the Company relies on imports from its parent company. This makes it vulnerable to foreign currency risks. Currency depreciation may have an adverse impact on its margins.

Led by the positive macro-economic fundamentals of the country and strong performance of rupee, the Company has been successful in negating the impact of this risk.

ADEQUACY OF INTERNAL CONTROL SYSTEMS

The Internal Quality Control Systems of MIL are the best in the industry and are governed by detailed SOPs covering all aspects of the business. It ensures proper recording and reporting of every single transaction and stringent adherence to all the applicable rules, policies, statutes and laws. The Internal Auditor is an independent auditor mandated to conduct internal audit. Any observation, discrepancy or recommendation by the Internal Auditor is reported to the Audit Committee who reviews and takes necessary action on the same. The Company also strictly complies with the environment protection laws. Moreover, its employees diligently follow the Code of Conduct formulated for conducting the business in an ethical manner.

HUMAN RESOURCES

The Company recognizes employees as its biggest asset and believes that people are the key to the success of its business. With its products being used in the agricultural sector, it acknowledges that its people need to be equipped with necessary skills to reach out to the farming communities located in rural areas. Besides, constant enhancement of employee productivity and skills is required for them to keep pace with the ever-expanding technology.

The Company is focused on developing the skills and capabilities of its people by providing best-in-class training to them. Building a supportive and inclusive culture that fosters respect for all the employees is a stated objective of the Company. That apart, it constantly endeavours to improve the lives of all the people connected with it- employees, farmers and the local communities with its dedicated efforts. Empowering and enriching the employees through right skilling and guidance drives performance. Towards this philosophy, the Company places special emphasis on personal skill development of its people and the farmers.

CAUTIONARY STATEMENT

This report contains statements that may be "forward looking" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Companys future business developments and economic performance. While these "forward-looking" statements indicate our assessment and future expectations concerning the development of our business, a number of 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. The Company undertakes no obligation to publicly revise any "forward-looking" statements to reflect future/ likely events or circumstances.