nacl industries ltd share price Management discussions

Economic overview Global economy

In recent years, the global economy has been witness to transformative events that have left an indelible mark on its course, shaping its trajectory both in the past and potentially influencing the path ahead. The International Monetary Fund (IMF), in its January 2023 report, forecasted a decline in global growth from an estimated 3.4% in 2022 to 2.9% in 2023, followed by a slight recovery to 3.1% in 2024. These growth rates are lower than the historical average of 3.8%\ indicating the lingering effects of recent challenges.

The first major event was the outbreak of the pandemic, which led to a contraction in global output. The subsequent lockdown measures, disrupted supply chains, and reduced consumer spending had a substantial impact on economies worldwide. Another significant development was the Russia-Ukraine conflict, which resulted in the disruption of the supply chain. Economic activity in China also slowed down in the fourth quarter amid multiple large COVID-19 outbreaks in Beijing and other densely populated localities.

The consequences of these events set off a chain reaction that heightened the upward surge in inflation. It caused prices to rise across various countries, affecting the purchasing power of individuals and businesses. To address this issue, central banks across different economies acted by implementing interest rate hikes. These monetary policy measures were aimed at curbing inflationary pressures and stabilising the economy. The consequences of these events and actions have been reflected in global economic growth.

While signs of monetary policy tightening are visible and have started to cool demand and inflation, the full impact of these measures is expected to be realised gradually, with the effects possibly extending until 2024. Global headline inflation, which had reached its peak in the third quarter of 2022², has begun to recede. The prices of fuel and non-fuel commodities have declined, contributing to a decrease in headline inflation. This suggests that the downside risks to the global economic outlook remain elevated. While measures to control inflation are underway, the full impact is anticipated to materialise gradually, and the economic outlook remains susceptible to potential risks.

^{1 World Data

^{2 Global Inflation Tracker: Q3 2022

Indian economy

The Indian economy has shown remarkable resilience and recovery following the pandemic,
outperforming many other nations in the fiscal year 2022-23. According to the data
released by the National Statistical Office (NSO), Indias real GDP is at 7.2%³.
RBI projects headline inflation at 6.8 per cent in FY23, which is outside its target
range.

Flowever, the increased private consumption has spurred production activity and led to
improved capacity utilisation across various sectors.The revival of consumption has been
made possible by the governments successful efforts in achieving near-universal
vaccination coverage, which has restored peoples confidence and brought them back to the
streets.

The impressive growth rate reflects the robust fundamentals of the Indian economy,
positioning it as the fastest-growing major economy globally. Despite the challenge of
managing inflation, the Central Bank has implemented policy measures to address the
inflationary pressure, demonstrating the proactive approach taken by authorities.

Looking ahead, the RBI foresees a slight moderation in economic growth to 6.4% in the
fiscal year 2023-24, citing potential risks arising from geopolitical tensions and
tightening global financia I conditions. The growth of exports may have moderated in the
second half of FY23. Flowever, their surge in FY22 and the first half of FY23 induced a
shift in the gears of the production processes from mild acceleration to cruise mode.

Overall, the Indian economys resilience, backed by strong fundamentals and successful
vaccination efforts, has propelled it towards a robust recovery, surpassing expectations
and positioning it as a standout performer on the global stage. While challenges remain,
policymakers are actively managing inflation and anticipating potential risks to sustain
the positive growth momentum.

The Hindu "Ministry of Finance

Agriculture sector Global landscape

The global agricultural sector is facing challenges like climate change, population
growth, and resource scarcity. Agriculture plays a vital role in economic development,
representing approximately 4% of the global GDP⁵. In certain least-developed
countries, it can constitute more than 25% of the GDP⁵ with more than 50% of
the workforce employed in the sector. Governments are taking steps to address food
insecurity, and technological advances are being used to improve food production.

Agricultural value chain partners have played a significant role in this transformation
by using practices like irrigation, input management, mechanisation, and innovative
techniques.

Precision agriculture is a promising technology that uses sensors, drones, and data
analysis to optimise farming practices. It has the potential to increase yields, reduce
costs, and make farming more sustainable. Vertical farming, another promising method,
involves growing crops in vertically stacked layers, particularly useful in urban areas
with limited land. It allows for year-round crop production regardless of weather
conditions.

Notably, the year witnessed significant developments in agri-biotechnology. Argentina
commenced the cultivation of Genetically Modified (GM) wheat⁶ using the HB4
drought- tolerant technology. At the same time, China initiated large- scale pilot trials
of indigenous GM events in maize and soybeans, paving the way for future
commercialisation. The Philippines successfully carried out the cultivation of Golden
Rice, which addresses Vitamin A deficiency. Several African countries also took important
strides in embracing biotechnology solutions for their agricultural sectors.

In the future, agricultural value chain partners will play a pivotal role in further
advancing the transformation of agriculture. They will face both challenges and
opportunities posed by climate change, deteriorating soil health, increasing pest
pressures, the demand for safer food, biofuels, and the emergence of new technologies. To
expedite this transformation, global value chain players are collaborating with one
another, harnessing their individual strengths, and tapping into the potential of
disruptive start-ups within the agriculture ecosystem.

However, the progress in agriculture-led economic growth, poverty alleviation, and food
security are facing threats. Various factors such as disruptions caused by COVID-19,
extreme weather events, pests, and conflicts are affecting food systems, leading to
increased food prices and growing hunger. The Russian- Ukraine war has also affected the
global agricultural sector due to disrupted exports of wheat, corn, and fertiliser. This
has led to higher food and fertiliser⁷ prices, making it challenging for
farmers and impacting food security in many countries.

Despite a few challenges, the global agricultural sector is making progress.
Sustainable agriculture practices like crop rotation and no-till farming are being
adopted, organic food is gaining popularity, and there is an increasing demand for
processed foods, especially in developing countries.The global food supply chain is
expanding, but food safety remains a growing concern.

The agricultural sector is complex and dynamic, but innovation is driving progress. The
future is uncertain, but new products, technologies, and practices will be crucial in
ensuring sufficient food supply for the growing population.
^{5The World Bank ⁶Re uters

^{7IFPRI Blog: Issue Post

Indian landscape

The Indian agricultural ecosystem boasts diverse Agro-Climatic Zones, Agro-Ecological
Regions, and soil types. The success achieved in the past 75 years is attributed to the
hard work of farmers, the expertise of scientists, and supportive policies from the agri
value chain partners. India is currently a leading producer of various crops, including
rice, wheat, cotton, pulses, jute, sugarcane, spices, plantation crops, fruits, and
vegetables. Agriculture contributes 18.396^s to the GDP and engages 45.5%
workforce according the NSSOs latest annual Periodic Labour Force Survey (PLFS) report
for 2021-22 (July-June). The Ministry of Agriculture accounts for 2.8%⁹ of the
total Union Budget.

As India moves towards a technology-driven and knowledge- based economy, the
transformation of agriculture is expected. Agri value chain partners will drive this
transformation through the adoption of technology. Several policy initiatives and budget
announcements reflect this vision, including regulatory guidelines on gene editing,
deregulation of drone usage, environmental release of GM Mustard, digital infrastructure
for agriculture, horticulture clean plant programme, and initiatives for natural farming
and bio inputs service centers.

The government is undertaking significant measurestostrengthen the agricultural sector.
One key initiative is the creation of a Digital Public Infrastructure for Agriculture, an
open source and interconnected platform. It aims to provide inclusive solutions,
increasing farmers access to inputs, market intelligence, and support for agricultural
start-ups. Additionally, the PM PRANAM programme encourages the use of alternative
fertilisers.

A substantial investment of Rs.2,516? crores has been allocated to computerise
63,000? Primary Agricultural Credit Societies (PACS), improving credit services. Direct
payments of Rs.2.37¹⁰ lakh crore will ensure assured income for wheat and paddy
farmers through minimum support price (MSP). Efforts are underway to expand oilseed
cultivation, reduce import dependency, and promote millet production. Innovative measures
like kisan drones will be employed for crop assessments, digital land records, and
targeted spraying of pesticides and nutrients, enhancing productivity and sustainability.

The Indian agri-input industry, encompassing fertilisers, seeds, pesticides, farm
machinery, and irrigation equipment, supports agricultural production and has experienced
significant growth due to increasing food demand, rising incomes, and government support.
Indian agriculture faces challenges related to climate change, monsoon-dependent farming,
fragmented landholding, storage infrastructure, soil degradation, access to credit, price
volatility, and low farmer income. Collaboration between the government, private sector,
farmers, trade channels, and civil society is necessary to address these challenges.

The agriculture sectors performance has been strong, supported by measures to enhance
crop productivity, ensure fair returns to farmers, promote diversification, and improve
market infrastructure.The sector is projected to grow by 3.5% in FY 2022-23, with
increased production of food grains, oilseeds, sugar cane, and cotton. Despite
restrictions, agriculture exports have remained robust, and India expects total
agricultural exports to exceed the $50 billion mark recorded in FY 2021-22. Continued
growth and development of the agricultural sector are crucial for food security and
sustainable agriculture in India.
^{sMinistry of Agriculture & Farmers Welfare ⁹PRS
Legislative Research

^{10Wint : Union Budget 2022-23 for Agriculture Sector in India ¹¹
Ministry of Finance

Agrochemical sector Global landscape

The global agrochemicals market size was estimated to be approximately $235.2 billion
in 2023 and is assured to generate revenue over $282.2 billion by the end of 2028,
projecting a CAGR of around 3.7%¹² from 2023 to 2028.The World Bank reported in
2022 that fertiliser prices have experienced a significant increase due to multiple
factors. Rising input costs, supply disruptions resulting from sanctions on Belarus and
Russia, as well as export restrictions imposed by China, have contributed to this upward
trend.

Specifically, urea prices have surpassed the levels observed during the global food
crises in 2008, while phosphate and potash prices are nearing their 2008 highs. Although
fertiliser prices have somewhat eased from their peak levels earlier in 2022, they still
remain historically high, as outlined in a World Bank commodity report in 2023. This is
partly due to reduced demand as farmers cut back on fertiliser use due to affordability
and availability concerns. Supply-side issues, such as production shortages in Europe and
disruptions from sanctions and trade restrictions, also impact the industry.

In the US market, the prices of glyphosate and glufosinate played a crucial role in
driving significant benefits. Despite dry conditions affecting soybean output and recent
cold conditions impacting maize, Brazils strong agricultural economy contributed to the
overall growth. The Asia Pacific region saw recovery in markets like Australia,Thailand,
Indonesia, and Malaysia, while China and India faced limitations due to unfavourable
weather. In Europe, the agrochemical market performed well in winter crops but faced
challenges in summer crops, particularly in maize, due to dry conditions. Large parts of
Africa were adversely affected by extreme dryness.

Herbicide sales were driven by high prices of key non-selective herbicides, glyphosate,
and glufosinate. The herbicide product line, supported by herbicide-tolerant GM seeds in
soybean and maize, was the largest in the industry. Glyphosate, an amino acid- based
herbicide, dominated the market asthe most cost-effective non-selective herbicide.
Insecticide demand was fuelled by insect pressure and increased crop areas in Brazil.
Fungicides faced mixed performance, with adverse weather impacting sales in the US and
Europe but relatively high demand in Asian markets.

The global agrochemical industry faced challenges with weakening local currencies
against the dollar, leading to higher import costso fagricultural inputs. AsianandAfri can
countries also experienced severe foreign exchange shortages, affecting their ability to
import necessary agricultural inputs. Looking ahead to 2023, the industry anticipates a
more subdued performance as agri commodity prices stabilise, limiting the markets
capacity to absorb further pesticide price increases. European manufacturers are
strategising to overcome challenges such as the persisting energy crisis, high labour
costs, rigid employment rules, and stringent environmental regulations. Major players in
the industry are also considering restructuring their operations and focusing on
biologicals and digital agriculture through collaboration, acquisitions, and investments.

At NACL the FY 2022-23 demonstrated a remarkable growth in exports, the global industry
grew by 6.9%, led by Latin America (17%) and followed by North America (9%). Asia grew by
4%, while Europe, MEA, and Africa experienced a decline of over 3%. NACLs international
business outperformed the industry, achieving a 41% increase in export sales (T84.376 Lakh
for FY23 vs. Rs.60,049 Lakh for FY22) due to heightened adoption of key products in the
American continent, especially in the first half of the year. The Company also diversified
channels and fortified its formulation portfolio, with over 60 registrations across 15
countries during the fiscal year for both existing and new products.

Meanwhile, Indian agrochemical exports continue to outpace the domestic market,
offering opportunities for further expansion. The industry is working closely with the
government to maximise these opportunities and benefit from the cost competitiveness and
supply diversification strategies of global peers.
^{12Marketsand Markets

Indian landscape

The Indian agrochemical market has been experiencing steady growth, with a CAGR of
6%” between 2018 and 2022, reaching around Rs.22,300 crore in 2022. This market is
highly competitive, attracting both domestic and global agrochemical companies. India
utilises approximately 200 active ingredients in around 400 agrochemical formulations, a
smaller number compared to the global usage of over 600 active ingredients.

However, in line with global trends, there is a rising adoption of combination products
containing multiple active ingredients, supported by new formulation technologies that
enhance effectiveness and address resistance development challenges. The industry is also
facing a lot of competing price pressures as the cost of the finished product being
exported out of China is equivalent or less than the cost of the raw material input in
India.

The growth of the crop protection market in India is driven by factors such asthe
increasing demand for food due to population growth, the need to improve crop yields and
quality, and the adoption of modern agricultural practices. Furthermore, the growing
awareness of the benefits of crop protection products and the adoption of integrated pest
management practices contribute to market growth. The Indian agrochemical market is
expected to sustain a growth trend of 6-7% going forward.

In terms of value, the major consumers of agrochemicals in India are paddy, cotton,
soybean, chili, sugarcane, and grapes, which together represent over60%of the domestic
market. Maharashtra and the southern states, followed by Madhya Pradesh and Uttar Pradesh,
are key geographical regions accounting for 70% of the Indian agrochemical market.
Insecticides hold the largest market share (60%), followed by herbicides and fungicides.

The demand for insecticides is driven by the need to control pests affecting major
crops such as paddy, cotton, and vegetables. The industry utilises around 75 active
ingredients for the 165 insecticide formulations sold in the country. Major chemical
classes include organophosphates, diamides, nicotinamides, and pyrethroids.

Herbicides are the fastest-growing product line, primarily due to the challenges of
labour availability and cost for manual weeding. Paddy, soybean, sugarcane, maize, and
wheat are the major crops where herbicides are extensively used. Amino acids, triazines,
and fops are the main chemical classes in this product line, with 60 active ingredients
used in around 100 herbicide formulations.

Leading active ingredients in the Indian market include chlorantraniliprole,
azoxystrobin, and glyphosate in the insecticides, fungicides, and herbicides product
lines, respectively, aligning with global trends.

NACLs domestic retail business empowers Indian farmers with sustainable crop
protection solutions. With a CAGR of 61% over the past 3 years (versus the industrys
6-7%), this growth is fuelled by strong brand equity, a robust field force, and a wide
distribution network across India. The Company achieved 1,25,395 Lakh in domestic sales
(Rs.83.755 Lakh from retail) in the reviewed year, a 26% increase from the previous years
Rs.99.730 Lakh (Rs.65.851 Lakh from retail). This growth stems from intensified field
marketing, new product introductions, key account management, favourable trade policies,
and team reinforcement.
^{l3Diaital Journal

Product sector performance

The pesticide market in India is projected to experience a CAGR of 4.08%¹⁴
from 2022 to 2027, leading to an estimated market size increase of $549.34 million. This
growth is influenced by various factors, including the increased utilisation of
herbicides, rising demand within India, and the challenge of shrinking arable land. In
India, pests and diseases, on an average eat away around 20-25%15 of the total food
produced.
^{14Tech Navio ¹⁵IMARC

Herbicide market

The size of the global herbicides market was valued at 39.06 billion in 2022 and is
anticipated to reach 71.15 billion by 2031, with a projected CAGR of 7.05%¹⁶
during the forecast period of 2023-2031. In addition, the Asia Pacific region is expected
to witness substantial growth in the global herbicides market. With India and China
hosting the largest populations in the region, they stand as prominent players in the
emerging economies, showcasing impressive GDP growth and an upward trend in disposable
income. As a result, the demand for herbicides in Asia is projected to surge, driven by
the regions sizable population and the rapid economic expansion witnessed in these
emerging economies.

Herbicides are widely used in India to control weeds in a variety of crops, including
cereals, grains, fruits, vegetables, oilseeds, and pulses. The rising demand for
herbicides is fuelled by the necessity to enhance crop yields and productivity in response
to the growing population of the country and the need to bolster food production. Another
major factor is the shrinking of arable land in India due to urbanisation and
industrialisation.

The herbicide market in India is segmented by type, application, and crop type. By
type, the market is segmented into synthetic herbicides and bioherbicides. Synthetic
herbicides are the most commonly used type of herbicide in India, accounting for a share
of over 90%¹⁴ of the market. Bioherbicides are a relatively newtype of
herbicide that is made from natural substances. They are gaining popularity in India due
to their lower environmental impact.

By application, the market is segmented into cereals and grains, fruits and vegetables,
oilseeds and pulses, commercial crops, and others. Cereals and grains are the largest
application product lines, accounting for a share of over 40% of the market¹⁴.
Fruits and vegetables are the second largest application segment, accounting for a share
of over 25% of the market¹⁴.

The growing consumption of cereals and grains in India, coupled with the rising
emphasis on safe cultivation practices, is driving the demand for pesticides. Furthermore,
there has been a notable increase in consumer acceptance and consumption of protein-rich
food, attributed to improved yield, productivity, and the availability of high-quality
agricultural products.

By crop type, the market is segmented into rice, wheat, maize, cotton, soybean,
sugarcane, fruits and vegetables, and others. Rice is the largest crop type segment,
accounting for a share of over 30% of the market¹⁴. Wheat is the second largest
crop type segment, accounting for a share of over 25% of the market¹⁴.

In the FY2022-23, the herbicides category of the Company achieved Rs.16,287 Lakh in
revenue, a notable 43% rise from the previous years Rs.11,374 Lakh. The Herbicide product
line is the fastest-growing in the Indian market, addressing cost and labour challenges.
This trend is expected to persist, and to capitalize on these opportunities, the Company
expanded its portfolio across crops like paddy, sugarcane, maize, wheat, and soybean,
driving the growth of the herbicide product line during the year. Notably, the Company
successfully launched Nagarjuna Dicaught Plus, a combination product to control weeds in
Cotton crop.
^{14Tech Navio ¹⁶lnsight ACE Analytic

Fungicide market

The estimated market size of the fungicide industry in 2022 is $20.8 billion¹⁷,
projected to reach $28 billion by 2027¹⁷, exhibiting a CAGR of 6.1 %¹⁷
during the forecast period spanning from 2023 to 2028.

The fungicide market in India is segmented by type, crop type, and application. By
type, the market is segmented into contact fungicides, systemic fungicides, and biological
fungicides. Contact fungicides kill the fungi that come into contact with them, while
systemic fungicides are absorbed by the plant and move through the vascular system to kill
the fungi. Biological fungicides are made from living organisms, such as bacteria or
fungi, that kill other fungi.

By crop type, the market is segmented into cereals, oilseeds, pulses, fruits and
vegetables, and others. Cereals are the largest crop type segment, accounting for a share
of over 30% of the market¹⁷. Oilseeds are the second largest crop type segment,
accounting for a share of over 25% of the market¹⁷.

By application, the market is segmented into seed treatment, foliar application, and
soil treatment. Seed treatment is the largest application segment, accounting for a share
ofover40%of the market¹⁷. Foliar application is the second largest application
segment, accounting for a share of over 35% of the market¹⁷.

The usage of fungicides is increasing due to the prevalence of fungal diseases,
particularly in hot and humid weatherconditions. Diseases such as blast, blight, powdery
mildew, and downy mildew affect crops like paddy, fruits, and vegetables in India.
Strobilurins, triazoles, and EBDC are the popular chemical classes in fungicides, with 65
active ingredients used in approximately 135 formulations.

The Fungicide category of the Company achieved Rs.15,502 Lakh revenue, marking a 16%
increase from the previous years Rs.13,311 Lakh. Despite lower demand due to favourable
weather in crops like Grape, Chilli, Potato, and Tomato, the Company secured decent growth
by leveraging its robust portfolio and marketing activities. During this period, the
Company successfully introduced the Oscar brand, a 9(3) molecule, to control Sheath Blight
in Paddy and Fruit rot / Powdery Mildew in Chilli, receiving positive market traction.
Additionally, the Company launched Kazan, a 9(4) molecule, under the same brand to control
Sheath Blight in Paddy.

Markets and Markets

Insecticide market

In 2022, the global market value of insecticides stood at a substantial $19.5 billion,
with a promising projection to reach $28.5 billion by 2027.This growth trajectory is
primarily attributed to the increasing adoption of insecticides across agricultural
domains as a pivotal defence mechanism against pest and insect infestations.

Insecticides have become indispensable in safeguarding crops from widespread insect
attacks, finding widespread application in agricultural practices worldwide. This
phenomenon finds its roots in the escalating demand for food production on a global scale,
especially in countries like China, India, and the U.S., where agricultural outputs are
pivotal to meeting the nutritional needs of their vast populations. These nations
significantly rely on insecticide solutions to optimise crop yield.

The driving force behind the escalating demand for insecticides is the burgeoning
agricultural sector, spurred by the ever-growing need to cater to the sustenance demands
of a rapidly expanding global populace. This surge in population, as projected by the
United Nations, is set to reach 8.6 billion by 2030 and over 9.8 billion by 2050¹⁹,
triggering an even more pronounced necessity for enhanced food production.

Flowever, this trajectory is not without its challenges. The intensifying prevalence of
pests across diverse crops poses a significant threat, especially considering the
concurrent rise in insecticide-resistant pests. While insecticides present a potent means
of controlling various pests, the development of resistance over time diminishes their
efficacy. This phenomenon underscores the urgent need for robust research and development
efforts within the insecticide sector.

Despite the markets lucrative prospects, stringent regulatory frameworks and the
formidable costs associated with developing new molecules could potentially restrain its
growth trajectory in the forthcoming years. Nonetheless, the intrinsic profitability of
the sector continues to motivate enterprises to invest in pioneering insecticide
solutions.

For the Company, the Insecticide category achieved Rs.48,834 Lakh revenue, marking a
25% increase from the previous years ^39,115 Lakh. Despite challenges from prolonged
rains during the Kharif season, the teams dedicated field efforts yielded

significant growth. Additionally, heavy infestations of Stem borer and leaf folder in
Paddy crop during the Rabi season boosted category volumes.
^{18Statista Research Department ¹⁹Grand View Research

Plant growth regulators

The plant growth regulators (PGR) market is poised to grow from USD 2.9 billion in 2022
to USD 4.5 billion by 2028, with a CAGR of 7.4%²⁰ during the forecast period.
Climate changes induce biotic and abiotic stressesthat impair seed germination, seedling
growth, and plant development, leading to global crop yield declines.

PGRs, such as gibberellins, auxins, cytokinins, abscisic acid, and ethylene, offer a
strategy for plants to combat stress, requiring less than conventional fertilizers.
Advantages include fewer impurities and limited harm to seedlings, making PGRs a business
opportunity in a slow-growing market. Multinational companies have thus ventured into
producing diverse PGR types.

Emerging economies and advanced technologies to tap niche markets are growth
opportunities. However, PGR approval involves extensive trials, prolonged timelines, and
high costs due to regulatory strictness. Obtaining approvals takes years, even for generic
products, as regulatory frameworks remain unclear in many jurisdictions. Limited resources
and unclear rules add complexity, hindering research investment and new product
commercialization.

Sustainable farming gains traction through practices like biofarming, aligning with
consumer demand for sustainable food production. Incorporating biologically synthesized
PGRs in agriculture offers a sustainable approach, countering chemical overuse effects and
aligning with consumers sustainability preferences.

In the assessed year, the domestic retail sector of the Company within the PGR category
accomplished Rs.3,132 Lakh in revenue, marking a substantial 53% rise from the preceding
years T2.051 Lakh. This remarkable expansion in the product line is credited to the
exceptional performance of products and vigorous marketing endeavours.
^{20Markets and Markets

Business overview and financial analysis

NACL Industries Limited (NACL) is an Indian agrochemical company headquartered in
Hyderabad, Telangana.The Company was founded in 1993 as Chemagro International Limited,
and it was renamed to NACL Industries Limited in 2002. The Company started as an Active
Ingredient manufacturer and has built a sizable business in Domestic Retail, B2B and
Exports, with many of the customers being large MNCs with long-standing relationships.
NACL is a leading manufacturer and marketer of crop protection products in India. The
Companys product portfolio includes herbicides, insecticides, fungicides, and plant
growth regulators. NACL also offers custom synthesis and formulation services.

In FY2023, the Company witnessed highest ever sales revenue for the 4th consecutive
year. A staggering revenue of Rs.2,12,855 Lakh was achieved, registering a YoY growth of
29%. This remarkable accomplishment was also accompanied by highest ever figures in both
EBIDTA and PAT. The EBIDTA reached a substantial sum of Rs 20.777 Lakh, while the PAT
amounted to Rs.10,279 Lakh. These numbers exhibited a remarkable improvement when compared
to the figures of Rs.15,725 Lakh and Rs.7,604 Lakh from the preceding year. Overall, the
financial performance of the Company in FY2023 was nothing short of exceptional.

( Rs.in Lakh)

Particulars
2022-23
2021-22

Revenue from Operations
2,11,600
1,63,335

EBITDA margin
10%
10%

Profit before depreciation, tax
8%
8%

(as % of revenue from operations)

Return on Capital Employed
15%
14%

Return on Net Worth
19%
17%

Earnings per share (FV Rs.1 each)
5.18
3.84

Book Value per share
29
24

The details of significant changes i.e., change of 25% or more in the key financial
ratios as compared to the immediately previous financial year along with detailed
explanations are reported here under:

Ratios
2022-23
2021-22
Change
Reason for change

Current Ratio
1.29
1.34
-4%
-

Debt Equity Ratio
1.00
0.92
9%
-

Net Profit Ratio
5%
5%
-
-

Return on Capital Employed
15%
14%
11%
-

Debt Service Coverage Ratio
2.59
3.56
-27%
Increase in borrowings to finance working capital requirements

Return on Equity Ratio
19%
17%
14%
-

Opportunities and risks Agrochemical industrys potential

India is the worlds fourth-largest producer and exporter of agrochemicals. It is
projected that the agrochemical market in India will reach $8.1 billion by 2025,
indicating significant growth potential along the value chain. The agrochemicals industry
in India is expected to experience positive growth driven by solid fundamentals, increased
domestic demand, enhanced export opportunities, collaborations with innovators for new
products, and exploration of off-patent products.

a) Nurturing a diverse product landscape: Within the domestic market,
insecticides have emerged as the dominant force, capturing 60%²¹ of the demand
share, followed by fungicides and herbicides. This diversification in product demand not
only reflects evolving agricultural needs but also underscores the sectors adaptability
to cater to these variations.

b) Fuelling efficiency and competitiveness:The agrochemical landscape in India
is witnessing transformations fuelled by investments and mergers. These strategic moves
have yielded noteworthy advantages, such as cost efficiency, accelerated R&D
processes, and streamlined product development. This concerted effort enhances the
sectors competitiveness and its ability to stay aligned with evolving agricultural
dynamics.

c) Untapped potential in agrochemical usage: Despite its prowess, the current
agrochemical usage in India remains modest at 0.27 kg per hectare², lagging
significantly behind developed nations. This untapped potential signifies an abundant
scope for growth, offering the sector a fertile ground to increase its influence on
agricultural practices and outcomes.

d) Government-led ecosystem enhancement: The

governments commitment to bolster the agricultural ecosystem directly influences the
agrochemical sectors landscape. Support measures like crop diversification, soil
conservation, and water management not only reduce the reliance on pesticides and
fertilizers but also stimulate the development of innovative, sustainable solutions.

e) Tech-enabled precision and efficiency: Emerging technologies like precision
agriculture and drone-based spraying bring unprecedented levels of efficiency and
environmental sustainability. The advent of digital tools in farming operations creates a
platform for agrochemical companies to develop and market digital products and services
tailored to the needs of tech-savvy farmers. These innovations catalyse new growth
opportunities within the agrochemical sector.

f) Rise of contract farming: The burgeoning practice of contract farming
presents avenues for collaboration. Government has made a provision for Contract Farming
in the Model Acts circulated to the States for their adoption. As per the Model APMC
(Agricultural Produce Market Committee) Act, 2003,15 States have provisioned Contract
Farming in their state APMC Acts.

g) Foreign investment: Increased foreign investment in the Indian agrochemical
sector introduces fresh technological advancements, enriching the sectors capacity to
meet diverse agricultural demands sustainably.

h) Sustainability and climate change: Fleightened awareness of environmental
concerns drives the agrochemical sector to priorities sustainability. This manifests in
the development and marketing of biopesticides and eco-friendly practices that cater to
the modern agricultural landscape. Indias agriculture grapples with climate change
disruptions, prompting the sector to innovate resilient solutions. The development and
marketing of climate-adaptive products and services hold promise in addressing the unique
challenges posed by global warming.

The dynamic nature of the agrochemical sector prompts continuous innovation to enhance
crop productivity, reduce environmental impact, and satisfy evolving consumer demands.

While the challenges faced by Indias agrochemical sector are undeniable, its potential
for growth remains vast and promising. Adaptation to the changing agricultural landscape,
coupled with a relentless pursuit of innovation, will undoubtedly determine the success of
companies operating within this dynamic realm. As the sector aligns with evolving trends
and opportunities, it lays a resilient foundation for a sustainable and prosperous future.
^{21TheTimes of India

^{22Ministrv of Agriculture & Farmers Welfare

Challenges

The agrochemical industry in India confronts a range of intricate challenges that
influence its growth trajectory and operational dynamics. These challenges encompass
regulatory complexities, supply chain vulnerabilities, safety concerns, environmental
impact, and perception issues. Navigating through these hurdles requires strategic
innovation, collaboration, and a proactive approach to ensure sustainable and responsible
development within the sector.

a) Registration process complexity: The agrochemical industry grapples with
obstacles that hinder its growth and profitability. Notably, delays in the registration
process for new molecules translate into elevated costs and extended R&D timelines.
Overcoming this challenge necessitates the concerted effort of government and regulatory
bodies to streamline the registration procedures.

b) Raw material cost dynamics: An intricate challenge arises from the increasing
costs of raw materials, particularly as India heavily relies on imports. This reliance
amplifies margin pressures due to macroeconomic shifts and seasonal demand fluctuations.
The prices of raw materials used in the production of agrochemicals, have increased
significantly in recent years. This has led to higher production costs for agrochemical
companies, which has put pressure on their margins.

c) Scaling and focus dilemma: The absence of a robust contract manufacturing
framework presents a formidable hurdle to scalability within the agrochemical industry.
This challenge diverts the industrys focus away from pivotal aspects like molecule
discovery and marketing, hampering its overall efficiency.To overcome this impediment, the
industry must strategically consider the implementation of contract manufacturing. This
would not only facilitate expansion but also streamline core operations, enabling the
industry to channel resources toward innovation and growth.

d) Ensuring safety and health: Safety concerns loom large within the
agrochemical industry, stemming from inadequate handling practices during both production
and consumption phases. Untrained farm workers and laborers often inadvertently expose
themselves to health risks. A solution lies in implementing stringent safety protocols,
both in production environments and in user guidelines. Such measures are paramount in
safeguarding the health of workers and end-users, thereby fostering a healthier and more
sustainable industry ecosystem.

e) Environmental impact: The agrochemical industry grapples with the
multifaceted challenge of environmental impact. High costs associated with air and water
pollution treatment compound the financial pressures on the industry. The erratic rainfall
during the kharif season in 2022-23 led to crop damage This, in turn, led to lower demand
for agrochemicals.

f) Perception and adoption challenges: Negative

perceptions surrounding agrochemical use, coupled with limited training on pesticide
optimization among farmers, significantly impede industry adoption. Moreover, the limited
practical experience in utilising agrochemicals further exacerbates the challenge.

g) Competition from imported agrochemicals: India is a major importer of
agrochemicals. The import duty on agrochemicals is relatively low, which makes it cheaper
for foreign companies to sell their products in India. This has posed a challenge to
domestic agrochemical companies.

Moving forward

The industrys path forward involves collaborative efforts to educate farmers on safe
and efficient agrochemical usage. By fostering a thorough understanding and familiarity,
the industry can transform these challenges into opportunities for responsible growth.

The agrochemical industry playsa crucial role in Indian agriculture and the economy.
Reforms and innovations in technology, irrigation, marketing, taxation and finance, and
agri-input quality are necessary to strengthen Indias position as an agricultural and
economic powerhouse.

Human resources

The number of employees in the Company as on the March 31, 2023 was 1,353. The Company
enjoys cordial and harmonious industrial relations. Training programmes and various
initiatives are being taken to create an environment to enhance individual and team
performance.

Corporate social responsibility

At NACL, the Company prioritises its relationship with the community and actively
collaborates with community members to meet their needs. At Srikakulam and Ethakota, NACL
focuses on community welfare activities such as providing purified drinking water,
supporting schools and students, offering medical aid, infrastructure In addition to
these, various actions for community development are taken up after discussions with the
villagers and the local administration.

QEHS (Quality, Environment, Health, and Safety) Quality:

NACL operates as a systems-driven organisation with well- defined quality management
systems. The manufacturing sites and R&D facilities are equipped with compliant
quality control laboratories, where qualified and trained personnel ensure adherence to
the highest standards. The laboratories are furnished with the latest analytical
instruments, meeting all the necessary requirements. It is worth noting that the quality
control laboratory at the technical plant in Srikakulam and the R&D facility in
Shadnagar have achieved NABL accreditation.

Environment:

NACL maintains a strong focus on environmental preservation across all manufacturing
locations. At the Srikakulam plant, more than 70% of the land is dedicated to green cover.
Visitors to the plant are encouraged to contribute to this effort by planting tree
saplings.The plant boasts a state-of-the-art Zero Liquid Discharge (ZLD) facility worth
Rs.3,000 Lakh, which efficiently recovers and reuses all water while effectively managing
effluents. Similarly, the Ethakota formulation unit features a substantial green cover and
a ZLD facility. The green belt at Ethakota plays a vital role in maintaining an unpolluted
environment. Effluent treatment and water treatment plants are also in operation,
facilitating water recycling.

Health:

NACL operates well-equipped Occupational Health Centres (OHCs) at both manufacturing
plants, providing round-the-clock medical services. These OHCs are staffed by qualified
medical practitioners and nurses and are equipped with beds, first aid items, medicines,
and an ambulance van to cater to emergency medical needs. Regular medical check-ups and
occupational health assessments are conducted for associates to proactively identify and
prevent health risks. The OHCs are situated in lush- green environments, ensuring fresh
air for optimal well-being.

Safety:

Safety is of utmost importance to NACL, and the Company has implemented robust safety
infrastructure at critical points in Srikakulam and Ethakota. State-of-the-art equipment
is deployed for fire detection and prevention. Dedicated facilities and regular training
sessions, simulations, inspections, and audits are conducted to ensure adherence to safety
protocols. NACL actively engages in participative management to institutionalise

Place: Hyderabad Date: July 27, 2023 safety practices throughout the organisation.
Safety celebrations and awareness campaigns are organised annually during Safety Week and
Fire Week.

Internal control systems and their adequacy

The Companys internal audit system has been continuously monitored and updated to
ensure that assets are safeguarded, established regulations are complied with and pending
issues are addressed promptly. The audit committee reviews reports presented by the
internal auditors on a routine basis. The committee makes note of the audit observations
and takes corrective actions, if necessary. It maintains a constant dialogue with
statutory and internal auditors to ensure that internal control systems are operating
effectively.

Cautionary statement

In this annual report, we have disclosed forward-looking information to enable
investors to comprehend our prospects and take informed investment decisions. This report
and other statements written and oral that we periodically make, contain forward-looking
statements that set out anticipated results based on the managements plans and
assumptions. We have tried wherever possible to identify such statements by using words
such asanticipates, estimates, expects, projects, intends, plans, believes,
and words of similar substance in connection with any discussion of future performance. We
cannot guarantee that these forward-looking statements will be realised, although we
believe we have been prudent in our assumptions.

The achievement of results is subject to risks, uncertainties and even inaccurate
assumptions. Should known or unknown risks or uncertainties materialise, or should
underlying assumptions prove inaccurate, actual results could vary materially from those
anticipated, estimated or projected. Readers should kindly bear this in mind. We undertake
no obligation to publicly update any forward- looking statements, whether as a result of
new information, future events or otherwise.

For and on behalf of the Board

M. Pavan Kumar
Raghavender Mateti

Managing Director & CEO
Director

(DIN: 01 514557)
(DIN: 06826653)}}}}}}}}}}}}}}

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Particulars	2022-23	2021-22
Revenue from Operations	2,11,600	1,63,335
EBITDA margin	10%	10%
Profit before depreciation, tax	8%	8%
(as % of revenue from operations)
Return on Capital Employed	15%	14%
Return on Net Worth	19%	17%
Earnings per share (FV Rs.1 each)	5.18	3.84
Book Value per share	29	24

Ratios	2022-23	2021-22	Change	Reason for change
Current Ratio	1.29	1.34	-4%	-
Debt Equity Ratio	1.00	0.92	9%	-
Net Profit Ratio	5%	5%	-	-
Return on Capital Employed	15%	14%	11%	-
Debt Service Coverage Ratio	2.59	3.56	-27%	Increase in borrowings to finance working capital requirements
Return on Equity Ratio	19%	17%	14%	-

M. Pavan Kumar	Raghavender Mateti
Managing Director & CEO	Director
(DIN: 01 514557)	(DIN: 06826653)