Punjab Chemicals & Crop Protection Ltd Management Discussions.

The global growth forecast is still uncertain due to factors that are difficult to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, supply disruptions, the repercussions of the dramatic tightening in global financial market conditions and shift in spending patterns.


Power of science, ingenuity of scientific community and best of global cooperation is at display in fighting Covid-19 pandemic. Thanks to one of the fastest discovery and approval of vaccines, world population is getting vaccinated at a very fast pace. Despite reduced mobility, economies continue to adapt to new ways of working, leading to a stronger-than- anticipated rebound across regions.

The global growth forecast is still uncertain due to factors that are difficult to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, supply disruptions, the repercussions of the dramatic tightening in global financial market conditions and shift in spending patterns. The IMF also highlights that the strength of the recovery projected may vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to crosscountry spill overs, and structural characteristics entering the crisis.

Even while growing vaccine coverage lifts sentiment, differential recovery across geographies may give rise to divergent policy stances, particularly if advanced economies benefit sooner than others from wide vaccine coverage. Future developments will depend on effectiveness of policy actions to limit persistent economic scarring; the evolution of financial conditions and commodity prices; and the adjustment capacity of the economy Moreover, strong cooperation is needed to resolve economic issues underlying trade and technology tensions, as well as gaps in the rules-based multilateral trading system.


CY2020 saw unprecedented disruptions to lives and livelihood across the country due to extreme measures taken to limit spread of the pandemic and caused a detrimental impact on the economy The pandemic induced challenges into industries and businesses and the economic activities had to shift into low gear, if not standstill. Although recovery is now underway, a strong second wave and fear of more such waves looms large in India and some of the ASEAN economies.

Furthermore, output may also remain below pre-pandemic levels through the medium term, while returning to full capacity might take longer than anticipated.

Given second wave and staggered lockdowns in recent months, IMFs growth projection for India is likely to get revised once again to be more conservative. The government is also planning to take several bold makeovers through measures such as supply chain reforms for agriculture, rational tax systems, growth oriented policies and a stable Financial System. The Union Budget FY2022 was designed to focus on being socially inclusive and growth-augmenting. Higher Government spending, focus on infrastructure and policies announced in this budget are expected to help sustain corporate recovery and improve longer-term prospects.


After strict lockdown of last year, response to second wave has been more calibrated to avoid severe disruption to economic activities. India began administration of COVID-19 vaccines on 16 January 2021. The first phase rollout involved health and frontline workers followed by residents over 60 years of age and further followed by age category of above 45 years. As of 30 April 2021, India has administered 15.5 crore doses overall, including first and second dose of the currently-approved vaccines. Vaccination drive is expected to pick up pace in coming months with Government of India announcing a detailed road map to cover entire population under vaccination program.


The United Nations General Assembly declared year 2020 as - International Year of Plant Health, understanding the important role played by crop protection chemicals in achieving global food, nutrition, health, wealth and environmental security.

The agrochemicals industry has been evolving over the past many decades with new active ingredients, product innovation, clearer regulatory regime, and improving product efficacy. Considering the global population growth, the future of agrochemicals looks bright. The need for crop protection and increase yields is growing along with rising consumer demand for sustainably produced food. Agrochemicals are also playing a role in tackling climate change through reducing the need to convert forests to farmlands, and thereby reducing potential greenhouse gas (GHG) emissions.

India is the fourth-largest producer of agrochemicals in the world.

The Indian agrochemicals industry is valued at around INR 42,000 crore out of which domestic consumption is worth around INR 20,000 crore, while exports during the same period are worth around INR 22,000 crore. The Indian agrochemicals market is expected to register an 8% CAGR to reach INR 27,000 crore by FY22 and INR 34,300 crore by FY2025.


The chemical industry has played a pivotal role in shaping up the Indian economy and providing livelihood opportunities to more than two million individuals. The Indian government recognises chemical industry as a key growth element and forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. Over the past year, following were key notable developments in the industry:

• In January 2020, exports of organic and inorganic chemicals grew 2.55 % YoY.

• Under the Union Budget 202122, the government allocated Rs. 233.14 crore (US$ 32.2 million) to the Department of Chemicals and Petrochemicals

• 100% FDI is allowed in the chemical sector under automatic route with exception to few hazardous chemicals

• The agrochemicals industry has been buoyant led by normal monsoons and remunerative prices, all of which has resulted in an acceleration in agricultural activities

• In October 2020, the government urged players in the agrochemicals industry to come out with new molecules of global standards for the farmers benefit, while CropLife India, the industry body, pitched for stable policies and regulatory regimes to boost growth in the sector.

• In November 2020, Indian companies started witnessing interest from strategic investors led by Japan, Korea and Thailand, as they seek to diversify supply chains from China.

At present, a significant percentage of Indias agrochemicals are met by imports. This gap often creates sizeable opportunities to support the development of large-scale capacities and infrastructure for manufacturing various products.

A major emerging trend for the industry is India placing itself as the go-to substitute for China. The key reasons being:

• The US-China trade tension has created an uncertain environment for manufacturing in China

• Anti-pollution measures in China will also create opportunities for the Indian agrochemical industry in specific segments.

• The government plans to implement production-link incentive system with 1020% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters.

• The Government may encourage R&D activities through developing public-private partnership (PPP) models, sourcing superior manufacturing technologies and molecules from leading global players and countries or improving the public sector research.

• Large local marketplace and superior manufacturing skills across the value chain will develop and grow the domestic market.

• India can position itself as a global agrochemical production hub amidst this volatility.


Established in 1975, Punjab Chemicals and Crop Protection Limited (PCCPL) is today a fast growing listed agrochemicals company, with a synergistic portfolio of Specialty Chemicals. Going forward, the Company has the vision to become a major Indian player in the fast-growing CRAMs segment, and be a preferred partner for manufacturing performance chemicals. The Company has already started the contract manufacturing of some key technical products for various multinationals, both Indian and foreign.

Today, Punjab Chemicals has strong R&D capabilities and a comprehensive product portfolio that enjoy a high level of trust from our institutional customers.

- All products are manufactured employing International Standards for safety, quality and timely delivery.

The plants of the Company are located at Derabassi, Lalru and Pune. All three plant are ISO 9001:2015 certified, whereas Derabassi and Lalru plant are ISO 14001:2015 certified and Pune plant is FSSI certified.

Punjab Chemicals Promoters and the Management have rich experience in the agrochemical business, playing a key role in developing the business.

The Companys apt domain knowledge and experience gives a substantial competitive advantage for expanding its business in existing markets and entering new geographies. The Companys business and operations are led by qualified, experienced, and capable management team.

Punjab Chemicals ability to attract and retain the key management personnel and the in-house team propels it to streamline the registration process, thus optimizing registration costs and the time involved.


Over the last year, the pandemic brought life to a standstill. Heavy losses to mankind and industry were registered worldwide. The business environment changed in a fundamental, irreversible, and rapid manner. Our efforts over the last few years have been focused on building a strong foundation for a resolute business. We are happy to have not only waded through the difficulties created by the pandemic, but also thrived through it and grown stronger.

Agrochemicals fall under essential sectors and is one of the few sectors to have limited impact due to pandemic. Strong foundation laid over last few years benefitted the company and we outperformed market and economy in FY2021.

Our strategic initiatives and successful strides in the CRAMS space positioned us to exploit the opportunity. In the year, we generated significant new businesses from clients in Asia Pacific and European regions.

The unit, which suffered due to fire in July 2019 at Derabassi is fully refurbished and reinstated with better safety and productivity.

This and better market conditions enabled the Company to take on larger orders from both existing and new clients. The capacity utilisation at our Derabassi plant was 80%; Lalru plants was 73% and Pune plant was more than 95% during FY 2021.

In the CRAMS space, the Companys R&D team is making fresh inroads into product and process research on several new molecules. Company is continuously looking for new molecules to be added to portfolio and is in dialogue with various existing and new customers.


Business Highlights (Consolidated)

(Rs. in crore)
Particulars FY2021 FY2020 Growth (%)
Net Sales & Operating Income 678.18 549.56 23.40
Other Income 1.83 13.13 -86.06
Total Income 680.01 562.69 20.85
EBITDA 9733 55.57 75.15
Depreciation 14.86 15.35 -3.19
PBIT 82.47 40.22 105.05
Interest & other Finance charges 13.46 18.14 -25.80
Profit Before Tax 69.01 22.08 212.55
Tax Expense 19.93 11.33 75.90
Profit after Tax 49.08 10.75 356.56
Cash Profit 63.94 26.10 144.98
Total Income Tax Expenses 1993 1133 1133
Profit/(Loss) after Tax (PAT) 4908 1075 1578
Other Comprehensive income/(expense) for the year (net of tax) (46) (164) (26)
Total comprehensive income for the year 4862 911 1552
Earnings per share (EPS) 40.03 8.77 12.87
Basic and diluted (in Rs.)
Reserves (excluding Revaluation reserve) 13227 8549 10224


Ratio Analysis (Consolidated) 2020-21 2019-20 Variance
Debtors Turnover Ratio 10.64 9.96 6.83%
Inventory Turnover 4.31 3.87 11.37%
Interest Coverage Ratio 6.13 2.22 176.13%
Current Ratio 1.09 0.85 28.24%
Debt Equity Ratio 0.61 1.01 -39.60%
Operating Profit Margin (%) 12.13 7.15 69.65%
Net Profit Margin (%) 7.22 1.91 278.01%
Return on Networth 33.96 11.00 208.73%


Punjab Chemical continues to mitigate key risks across all levels of operations through structuring and continuously identifying, assessing and deciding on responses.

Changes in government policies

The Company complies with the laws, rules and regulations of multiple countries due to global presence, which might affect the decision-making process. Any modifications in the governmental policies related to agriculture and any adverse alterations in policies relating to the agro-sector-like governments cut-down in agricultural expenditure, contraction of incentives and subsidy systems, new export policy for crops, fluctuation of commodities prices-will impact the Companys business. The stated factors could lower the farmers ability to obtain a minimum support price for the crop-output which might reduce their ability to spend on agrochemical, thereby impacting the Companys market demand and sales.

Mitigation: The Companys strong diversified product portfolio reduces its reliance on any single country /geography.

Adverse Climate or Weather conditions and reduced pest attacks can lower demand for agrochemicals

The demand for agrochemicals gets adversely impacted by unfavourable climate or weather patterns and pest attacks thereby building-up inventory in the system. The seasonality - of the business, mostly globally and less within India, makes it difficult for an agrochemical player to forecast crop output linking on historic production thereby affecting business operations.

Mitigation: Company has very close interaction with all its customers and monitor supply -demand and inventories very closely. Diversified product portfolio helps company to minimize impact of any one reason/product on companys performance.

Developing Resistance - Contracting the Product Lifecycle

With the passage of time, the effective life of agrochemicals diminishes as the targeted pests develop resistance. Thus, it becomes necessary to consistently introduce new agrochemicals for successfully eliminating pest attacks.

Mitigation: Punjab Chemical continues to invest in registrations for new products, thereby, enhancing its portfolio in multiple geographies.

Exchange rate fluctuations

Being a global player, the Company has exposure to foreign currency revenue mainly in US Dollars and Euros.

Mitigation: Punjab Chemical is a net foreign exchange earner and its exports act as a natural hedge against imports. Additionally, the Company takes plain vanilla hedge against the orders to reduce its exposure. However, any adverse movement in the foreign exchange rates might impact the results of operation, cash flows, liquidity, and financial condition of the Company


The internal controls of the Company are being reviewed from the leading and reputed external agency. This results in an unbiased and independent examination of the adequacy and effectiveness of the internal control systems to achieve the objective of the optimal functioning of the Company.

The scope of activities includes safeguarding and protecting the Companys assets against unauthorised use or disposition, maintenance of proper accounting records and verification of the authenticity of all transactions.

The Company has an effective compliance management system, which gives preventative warnings in case of any violations. To ensure that it is in conformance with the overall corporate policy and in line with predetermined objectives, the independent Audit Committee and/or the Board of Directors regularly review the performance of the Company. The Companys Internal auditors are B.M. Varma & Company, Chartered Accountants, to provide guidance in smooth functioning of risk management policies, building an organisation wide awareness of risks, across businesses and corporate functions; developing formal reporting and monitoring processes; building risk management maintenance plans that would keep the information updated and refreshed; deploying an ERM framework in key business areas and corporate functions; aligning risk management with the business planning exercise and aligning the role of assurance functions.


Most of the innovator companies are facing challenge of depleting research pipeline and losing patent protection for their blockbuster drugs in the next few years. The new drug discovery process is also becoming more difficult with reducing success probabilities and increasing research and development costs. This has opened opportunities to CRAMS players from low-cost destinations like India. PCCPL has found this opportunity and started working with innovators with customs synthesis projects and contract manufacturing of APIs, which result into overall growth in the turnover. In view of the huge potential the CRAMS segment offers to Indian companies, more companies in India may start exploring opportunities for a share in CRAMS segment. This may result in increased competition in the long run. However, with the research and innovation capabilities that PCCPL has developed over the years, the technical knowledge is unparalleled. The Company believes that it can manufacture various APIs/intermediates and speciality chemicals of best quality at a low cost. Innovator companies are now looking to outsourcing their products to our Company. Recognising this opportunity, the Company continued to take initiatives in reducing its costs by employing lean manufacturing techniques & resource management initiatives and broadening the product base.


The Company has continued with its drive to institutionalise and upgrade its HR processes.

The diversified skill sets of our employees add significant worth to the Company. Every organisation which values and appreciates its Human Resource succeeds in its goals and receives positive results. At PCCPL, we always believe in the concept of human empowerment. We passionately believe that human resource is the most important assets of the organisation, as it influences growth, progress, profits, and shareholders values. During the year, we continued our efforts aimed at improving the HR policies and processes to enhance our performance. Our mission is to create a value system and behavioural skills to ensure achievement of our short and longterm aims. The Company, as on March 31, 2021, had 1176 employees on its rolls, compared to 1089 employees in the previous year. We continue to attract excellent talent both from within and outside India to further our business interests. Industrial Relations continue to be cordial.


The Directors are pleased to inform that during the year under review, Company has started moving to next level in Information technology. We have improved on few key processes benefiting business, upgraded its Information Technology Infrastructure, Software, Hardware, Networking & Security.

The goal is to make all business processes as much automated as possible thus increasing the efficiency and accuracy.

Your Company has developed a framework to harness the opportunities presented by prevalence of new-age digital technologies, and transform to become a digitally savvy Agro Chemical company. Various technologies as well as platforms have been piloted to deploy the agenda so that a better and integrated experience can be delivered to our partners and clients

Your company has implemented SAP B1 Hana Ver 10, which is an integrated Enterprise Resource Planning System across all plant and office locations.

Your company has also implemented Software for Thermal & Mask recognition, which is an AI based integrated solution with time attendance, to safeguard the workforce attending factory. Various other steps were also introduced to monitor movement of the employees during COVID period.


Statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "Forwardlooking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand-supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes & other incidental factors.