Economic Overview
GLOBAL ECONOMY
The world economy rebounded at a healthy 6% in CY 2021, after a 3%
decline during the COVID-19 pandemic in CY 2020. The reduction in pandemic-related
limitations and lockdowns, and the increased vaccination effort across countries,
contributed to this fast-paced recovery.
Global commerce recovered sequentially throughout CY 2021, not only in
terms of products but also in terms of services, with the former reaching pre-pandemic
levels in Q4 CY 2021. Altogether, global commerce hit a new high of US$ 28 trillion in CY
2021, up 25%, from CY 2020 and 13% higher than the pre-pandemic level of CY 2019.
(Source: https://economictimes.indiatimes.com/small-biz/trade/exports/
insights/global-trade-growth-likely-to-be-subdued-in-2022-after-hitting
record-high-of-28-5-trillion-in-2021/articleshow/89715595.cms)
Besides the loose monetary support policies during rising inflationary
pressures, the fiscal support was partially extended in CY 2021 for complete resumption of
economies. A significant upside recovery was witnessed among the advanced market owing to
high vaccination rates. Advanced economies grew at 6% in 2021, more than making up for the
cumulative drop in GDP in 2020. However, the Russia-Ukraine conflict further hindered
global economic progress. It contributed to economic downgrades for 186 countries,
although most of them will continue to grow. The war disrupted global trade in energy and
grain, leading to higher risk of food shortages in Africa & the Middle East.
OUTLOOK
The economic performance of emerging market has varied considerably,
since the onset of the pandemic. The goods exporters have generally fared relatively well,
while service exporters have struggled amid the lack of tourism. Moreover, vaccination
rates and policy choices have added to this variation. Higher rates of vaccination can
ward against pandemic-related shocks to domestic demand. They also reduce risks for
potential tourists and enabled policymakers to impose fewer restrictions on mobility and
border controls, given better protection of their population. Although, growth in emerging
market economies is likely to continue this year and the next, risks remain weighted to
the downside. Another wave of infections may possibly lead to weaker economic growth,
particularly for countries with low shares of fully vaccinated populations. Government
balance sheets, meanwhile, have mostly weakened as the pandemic-induced recession reduced
revenue. Whereas, expenditures grew as countries provided support to their populations,
while their economies stalled. Further rising interest rates in the United States can
weaken emerging market currencies and exacerbate inflation.
INDIAN ECONOMY
India was one of the fastest-growing economies in the pre-pandemic
world. The year FY 2022 witnessed several positive moments, as compared to the crosswinds
faced in the earlier fiscal. The economic growth in CY 2021 has been dented due to
COVID-19 and other geopolitical reasons. The Indian economy is expected to rebound and is
likely to regain its tag of one of the fastest-growing economies globally, in the
medium-term.
Indian economy is expected to maintain robust growth momentum in the
medium term largely driven by consumption and investment wherein consumption is
anticipated to grow by 9% in FY 2022, which is slightly below previous forecast of 9%.
(Source: Fitch solutions)
Moreover, rural and urban unemployment levels continued to improve
after the worst phase of the crisis. Rapid urbanisation, rising consumer aspirations and
increasing government support for digitisation, Production Linked Incentives (PLI) and
other similar policies are anticipated to push the growth further. At this pace, India is
forecasted to be among the world?s fastest-growing economies in CY 2021. Going
forward, IMF forecasts India?s GDP to grow at a faster pace than other economies.
OUTLOOK
The Indian economy is poised to maintain robust growth momentum over
the coming quarters, largely driven by consumption and investment. Consumption is expected
to grow at a healthy rate, underpinned by the recent easing of restrictions and a slow
strengthening of the labour market. Economic headwinds could start to mount once again as
several factors come together. On an average basis, oil prices will remain elevated,
weighing slightly on purchasing power. The anticipation of monetary tightening over the
coming quarters will lead to a slight tightening of financial conditions, and base effects
will prove less flattering.
Industry Overview
GLOBAL CROP PROTECTION INDUSTRY
In CY 2021, the worldwide Crop Protection Chemicals market was worth
US$ 84 Bn. Looking ahead, the market is estimated to reach US$ 111.4 billion by CY 2027,
with a CAGR of 4% from CY 2022 to CY 2027. The world population is predicted to approach 9
Bn people by CY 2050, up from roughly 8 Bn at present. Furthermore, with increased
urbanisation and more people living in cities compared to the countryside, the amount of
agricultural land is diminishing. In the next few years, crop protection chemicals are
projected to gain higher significance in enhancing agricultural output. These chemicals
are predicted to increase agriculture productivity by eradicating pests that diminish
yields. This leads to higher productivity per acre and reduces the need to transform
natural areas like woodlands and forests, native grasslands, marshes, grasslands, and
other wildlife habitat into farmland. The Crop Protection Chemical industry has been
transforming over the years, over robust growth coupled with changing crop mix trends and
environmental regulations. Growing population, declining arable land, food security, and
the need for augmented agricultural productivity are the significant factors driving the
demand for higher agricultural output. This will lead to growth augmentation in the Crop
Protection industry, globally. Brazil, the United States, China, Japan, and India are the
largest Crop Protection Chemicals market in the world. The market size of Brazil crop
protection chemicals in CY 2020 was valued at US$ 10.01 Bn. India has the fifth-largest
market in the world, with US$ 2.59 Bn in CY 2020.
REGION-WISE
The market has been divided into four regions: Europe, North America,
Latin America and Rest of the World (ROW).
EUROPE
The European Crop Protection industry (ECPA) made a series of bold
pledges to support Europe?s new Green Deal, including a € 14 Bn investment in
innovative technology and more environment-friendly products by CY 2030. The Crop
Protection market in Europe is expected to register a CAGR of 4%. Increased knowledge,
changes in agricultural techniques, and technology are few of the reasons for
Europe?s large crop protection market share.
NORTH AMERICA
North America is the world?s third-largest Agrochemicals market,
with the United States contributing the most income and volume. Pesticides and fertilisers
are the two most important segments of the agrochemicals business, with fertilisers
accounting for about 70% of sales.
(Source: https://www.globenewswire.com/news-
release/2021/04/19/2212128/0/en/North-America-Crop-Protection-
Chemicals-Market-Analysis-Outlook-to-2026.html)
LATIN AMERICA
The Latin America market is now being driven by strong development in
the Agriculture sector, and the extension of cropland. Additionally, as people consume
more plant- based foods, crop protection agents are becoming more necessary to increase
agricultural production and promote food security. Rising levels of urbanisation and
limited farmland availability, notably in Brazil and Argentina, are driving up demand for
crop protection chemicals. Many government entities in Latin America are working to reduce
the need to convert natural areas such as forests, native prairies, wetlands, and animal
habitat to farming. As a result, crop protection agents are increasingly being used to
provide high agricultural yields per land.
INDIAN CROP PROTECTiON iNDUSTRY
The Crop Protection Chemicals market in India was valued at US$ 3 Bn in
2020 and is projected to reach US$ 4 Bn by FY 2026. The market is projected to witness a
CAGR of 6% during the forecast period. In India, synthetic pesticides have been
extensively used for alleviating the estimated 45% gross loss of crops due to the
infestation of pests and diseases. Major factors driving the Indian market, includes
greater demand for food grains and limited availability of arable land, along with
increasing exports, growth in horticulture and floriculture, and increasing public
awareness regarding pesticides and biopesticides. The Biopesticide market is likely to
witness the fastest growth in comparison to synthetic chemicals in India. It is expected
to witness double-digit growth during the forecast period. This segment has more relevance
today since trends show that people prefer more eco-friendly options over noneco-friendly
products. Moreover, they are becoming more health-conscious.
In India, several Government agencies, such as the Ministry of
Agriculture and Farmers Welfare, the Department of Biotechnology (DBT), and the Ministry
of Science and Technology, have been promoting the research, development, and
commercialisation of biopesticides.
Thus, with increasing demand for food grains, reduction in arable land,
and increasing agricultural exports, the Pesticides market in India is booming during the
forecast period. However, a shift from synthetic to bio-based fertilisers is expected to
be seen in the long-run.
Global Crop Protection Market Category-wise
HERBICIDES
Herbicides is the largest type-based sub-segment of the market studied.
It was valued at US$ 26 Bn in FY 2020, and is expected to reach US$ 34 Bn by FY 2026,
witnessing a CAGR of 4%. Herbicides are chemical agents that are used to kill or inhibit
the growth of unwanted plants, such as residential or agricultural weeds and other
invasive species. The ease of application is a big advantage of chemical herbicides over
mechanical weed control methods. This also helps save labour costs.
FUNGICIDES
The fungicides sub-segment of the market studied, was valued at US$ 17
Bn in FY 2020, and is expected to reach a value of US$ 21 Bn by FY 2026, witnessing a CAGR
of 3%. Fungicides are mostly used in fruits, vegetables, and cereals. The demand for
fungicides is majorly driven by cereals and vegetables across the world. During the
forecast period, the fungicides sub-segment of the market studied is expected to expand at
a slower rate, than the insecticides sub-segment of the market. This is due to lesser
development and lower adoption of fungus-resistant crops as compared to insect-resistant
crops.
iNSECTiCiDES
The insecticides sub-segment of the market was valued at US$ 15 Bn in
FY 2020, and is expected to reach a value of US$ 19 Bn by FY 2026, witnessing a CAGR of
4%. The growing population, the rising demand for food, contracting agricultural land
area, and the loss of crops, owing to the incidence of pests and diseases, are the
significant factors that are driving the market for crop protection chemicals.
BiO-BASED
The bio-based sub-segment of the market was valued at US$ 5 Bn in FY
2020, and is anticipated to reach US$ 12 Bn by FY 2026, witnessing a CAGR of 15%.
Increasing concerns among people regarding the food products they are consuming, along
with the consequences of those on their health and the environment, is pushing the market
players to shift from synthetic to bio-based chemicals. Farmers using biopesticides in
their agricultural produce, lessens the chances of toxicity in the food chain.
Additionally, simple residue management techniques and low R&D investments in
developing new biopesticides is driving the bio-based sub-segment of the global market.
OTHERS
The Other Crop Protection Chemicals segment of the market is valued at
US$ 1.53 Bn in FY 2020, and is estimated to reach at US$ 1.82 Bn by FY 2026, registering a
CAGR of 2.4%. Other crop protection chemicals include molluscicides, plant growth
regulators, dessicants, rodenticides, and acaricides, of which molluscicides, acaricides,
and rodenticides form the largest share.
These products can be applied as foliar spray, granular formulation,
seed treatments, or for any form of soil treatment except for rodenticides, to which they
are applied as baits. Molluscicides, includes metaldehyde, methiocarb, ferrous phosphate,
among others of which, metaldehyde accounted for the largest market share, followed by
methiocarb. Metaldehyde is widely used in molluscicide products, because of its easy
availability and inexpensiveness.
EUROPE
European region is stepping toward the reduced usage of chemical
pesticides, which are harmful for the environment and animal population in the region. For
instance, in CY 2018, EU banned neonicotinoids to protect the bees. However, this led to
an increase in focus on Integrated Pest Management (IPM) practices, coupled with rising
R&D on biological control substances in the region. This has substantially increased
the popularity of bioinsecticide products in the recent years.
The Europe Crop Protection market was estimated at USD 27.73 billion in
CY 2021 and is projected to reach USD 32 billion by CY 2026, at a CAGR of 5%, from
20222027. Crop protection is the widely used chemical across Europe to safeguard crops
against various insects. The growing demand for food safety is due to stringent quality
regulations that is driving the market. Increasing awareness in farming practice and
technology are the reason for Europe to hold significant demand for crop protection.
The demand for biopesticides is increasing, owing to the increase in
demand for organic and completely natural foods.
(Source- https://www.marketdataforecast.com/market-reports/europe-
crop-protection-pesticides-market)
NORTH AMERiCA
Farmers in the North American Region have increased the usage of
insecticides on major crops, especially corn, as it accounts for most of the harvested
acreage in the region. Thus, to address the growing concern for reduced harvest, along
with environmental and human health, the farmers are judiciously increasing the usage of
insecticides, fuelling the crop protection chemical sales. Besides, the United States is
also a major contributor to the increase in global demand for fungicides in the crop
protection division.
The North America Crop Protection Chemical markets origin is synthetic
and bio-based that includes insecticide, fungicide, herbicide, and other crop protection
chemicals. The North America Crop Protection Chemical market is expected to clock at USD
43 billion by CY 2026 at a CAGR of 5%, from 2022-27. The worldwide pesticides consumption
is more than two Mn tons per year and
North America accounts for 25% of the global share.
This chemical is used for crops, including cereals, grains, pulses,
fruits, vegetables, oilseeds, and non-crop plants like ornamentals and turfs.
LATiN AMERiCA
Latin America is the world?s second-largest contributor,
accounting for more than a quarter of worldwide market share. The Agricultural industry in
this region has had enormous growth, with substantial increase of farmland, allowing the
Crop Protection Chemical market to grow at a record pace of 6%. Crop protection chemicals
are predicted to reach a market worth of USD 20,000 Mn in Latin America. The herbicides
category, dominated the market, accounting for more than half of the sales. This category
is predicted to develop at the quickest rate throughout the forecasted period, with a CAGR
of 4%. Despite its large market share, this area is very susceptible to exchange rate and
value fluctuations owing to political and economic factors. Closed economies and tax
increases have an indirect impact on the crop protection business. Due to its large market
share, the herbicide business in the region has experienced multiple mergers and
acquisitions by various corporations.
DEMAND DRiVERS
INCREASING DEMAND FOR FOOD AND AGRICULTURAL PRODUCTIVITY
According to the Food and Agriculture Organization (FAO), the world
population is expected to grow by over a third, or 2 billion, between 2009 and 2050. At
the same time, per capita income is also projected to grow across the world. With the
increasing per capita income and growing population, the demand for food is also estimated
to grow, globally. For instance, as per FAO, the food demand in the United States is
expected to increase by 50-90% by 2050. Many factors, such as climate change, the outbreak
of pests, lack of investments, and limited agricultural land, makes it challenging to
produce enough to ensure food security. Due to the increasing population, global food
production needs to increase by about 70% by 2050 to meet the growing food demand
globally.
INCREASED AREA UNDER ORGANIC FARMLAND
In response to the growing need to meet food sufficiency and the
importance of safe farming practices, the global Organic Food industry has recorded
exponential doubledigit growth rates. Over the last three decades, organic food and
farming have continued to grow across the world. Since biopesticides are chemical-free,
they are used on a large scale in organic farming. Hence, the market demand for
biopesticides is increasing with the growing popularity of organic food and beverage
products across the world.
ADOPTION OF GENETICALLY MODIFIED CROpS
Genetically Modified (GM) crops were first introduced in the United
States in 1996. At presently, these crops are widespread in the United States and
worldwide. Many products, including corn meal, oils, and sugars, are derived from these
crops and are being commonly used for food preparation worldwide. Famers have accepted GM
seeds, as their benefits exceed their costs. However, the adoption of these crops boosted
the use of crop protection chemicals, due to the increase in difficulty to kill insects.
RISE IN THE NUMBER OF RESISTANT PESTS
The number of pests in different crops across the world is rising, and
there is a tremendous increase in the number of pesticide-resistant pests. Crop protection
chemicals can be used to control a variety of pests. However, over time, they lose their
effectiveness as pests develop resistance, which reduces the field performance of the
pesticides. Reliance on insecticide-based pest management of insect pests often leads to
the development of insecticide resistance.
Business Overview
Sharda Cropchem (The Company, We) is engaged in marketing and
distribution of formulation and generic active ingredients in 80+ countries, 500+
third-party distributors, and 400+ sales force. We are among the fastest-growing global
agrochemicals company among the similar performing ventures. The Company has adopted an
Asset-Light business model, which enables us to offer diversified range of formulations
without incremental manufacturing capex. The business drives into 2 business verticals -
agrochemicals business and non-agrochemicals business.
We are also involved in order-based procurement and supply of
non-agrochemical products, including variety of conveyor belts and v-belts that are mainly
used in mining projects, dye intermediates and general chemicals dyes. The Company has
business across Europe, NAFTA, LATAM and RoW.
BUSINESS OUTLINE
The Company aims at penetrating deeper into both agro chemical and
non-agro chemical space, basis enhanced capacity and stronger marketing and distribution
network, spanning across advanced and high-barrier market.
AGROCHEMICALS
At Sharda Cropchem, our core business to protect crop with generic
active ingredients and formulations, via strong marketing and distribution channels.
Third-party manufacturers provide the Company with completed
formulations and generic active ingredients for resale. The Company obtains generic active
ingredients for the development and marketing of formulations, outsourcing the formulation
preparation process to third- party formulators. This allows us to provide a diverse range
of formulations and generic active ingredients in the fungicide, herbicide, and
insecticide segments to protect various crops. Besides, we also serve turf and specialty
markets, and disinfectants in the biocide segment, thereby, meeting a wide range of market
demand.
NON-AGROCHEMICALS
In Non-agrochemical division, Sharda Cropchem has built portfolio with
supply of belts, general chemicals & dyes and dye intermediates. We procure
non-agrochemical products from Chinese and Indian manufactures and supply to our channel
partners.
Business Strategy and Outlook
CONTINUAL iNVESTMENT iN PRODUCT REGiSTRATiONS
We at Sharda Cropchem, have distinct business model that enables us to
stand out in the industry, capitalise on scale and quickly re-deploy our resources. With
the help of the model we continue to identify generic molecules going off-patent and
investing in preparing dossiers and seeking registrations in own name.
FORWARD iNTEGRATiON - BUiLD SALES FORCE
We are leveraging our market presence and execution capabilities. The
Company is adopting the factory-to- farmer approach and aspires to be a one-stop solution
provider. We actively boarded our strategy in Mexico, Poland, Italy, Portugal, USA, India,
Colombia, Hungary, and Spain.
EXPAND & STRENGTHEN DiSTRiBUTiON pRESENCE
Our business is growing year-on-year, backed by expansion of
geographical reach using existing library of dossiers.
We are tracking and penetrating in the existing markets and entering
new markets. We are using two-fold strategy approach to pull our business.
Focus on operational efficiencies
We are moving our focus on revenue generating investments and margin
improvements. The Company measures the proportion of costs incurred during an economy or
financial activity, where lower costs equate with greater efficiency. Our business is
highly scalable that makes it more attractive with efficiency. With this we are
eliminating Non-value added (NVAs) and moving towards better cost management.
sustainability
Increased productivity and value-addition in food systems
Enhanced natural resources and used efficiently
Fostered inclusive economic growth and improved livelihoods
Enhanced the flexibility of communities, people and ecosystems
Adapted governance to new challenges
Sustainability is a macro-term that comprises human right, quality of
life and health. The Agrochemical industry is directly or indirectly connected with the
environment, ecosystem, food system and community as a whole.
The advancement in technology is driving sustainability across value
chain and Agrochemical industry. Agricultural institutes and R&D are taking a step
ahead and practicing towards sustainable agrochemical practice. The demand for organic
food is increasing by double-digit because of multiple health benefits. The growth is
mainly due to the companies resuming their operations and adapting to the new normal while
recovering from the pandemic. The Organic market is expected to reach USD 380.84 billion
in FY 2025 at a CAGR of 14%.
(Source:
https://noadversafy.org/glopal-organic-food-market-re2ort-_202l/)
outlook
Agrochemical industry forms a macro part of growing economies with new
technology globally, that is changing face of food production. It is providing wide scope
in terms of smooth functioning of value chain and also helping for job opportunities
globally. There are a lot more opportunities for the Company to tap into as the demand for
food is increasing due to increase in global population. Further, demand for eco-friendly
pesticidies, which led to an increase in adoption of herbicidies for plant growth
regulators and fungicidies gives additional opportunities for the Company. Agriculture has
always been a bright spot and the demand for agrochemicals is expected to continue.
CULTURE AND INCLUSION
At Sharda Cropchem, we strive to be an inclusive workplace where our
employees reflect the community, find purpose in their work, are valued, and grow and
contribute to their full potential. We strive to meet the needs of our employees,
shareholders, and customers through competitive rewards, policies, and practices. This
supports the Company, as an employer of choice, in every market where we compete for
talent.
Women are undervalued in workplace and organisations, that do not
recognise this, are missing out. Not just in India, but also internationally, Sharda
Cropchem employs 70-80% women. More women increase Company?s success in addition to
tripling the talent pool. Women are rising to the occasion as strong leaders and taking on
the extra work that comes with it, compared to males at the same level.
Women are doing more to assist their teams and promote diversity,
equality, and inclusive efforts.
We onboard the right talent, that empowers Sharda Cropchem to run
independently. At our management level, we carry top notch experienced people, who propels
the Company with a significant competitive advantage in the emerging market and to the
newer geography. In a nutshell, we believe that HRM is the key, when it comes to
successfully and strategically managing people.
RiSK MANAGEMENT
Foreseeing the risk and fencing it with silver lining plays a crucial
role in our business. It drives in stability and adds value to the business and community
as a whole. Our Risk Management System (RMS) is crafted with more than one factor, which
includes, technology issues, strategic management errors, natural disasters, and adding
more with changing era. We follow holistic approach to manage our risk and dilute it.
| Risks |
Impact |
Mitigation |
| Environmental Risk |
Climate plays an essential role in driving our business.
Foreseeing the climatic change and predicting the demand for certain chemical is tricky. |
We hold decades of experience in Agrochemical industry and
have gained strong insights about the countries, where we operate. |
| Delay in Product Registrations |
The delay in product registration and extension of patent,
may cause delay in commencing business activities. Formulations and generic active
ingredients, due to the law, differ from country-to-country, leading to higher risks for
the Company. |
We have taken multiple registrations in different geographies
and are also expanding our product portfolio. |
| Operational Risk |
The value chain of our business comprises of people, system,
process, external and internal events, legal and compliance risk. These are integral to
the business operations. Any lapses thereon may lead to business interruptions. |
We have process in place to review these operational risks
periodically and align our business strategy to mitigate such risks. |
| Changes in Government Policies |
The mandatory rules and regulations might affect our
decisions. Polices, like contraction of incentive and subsidy, new export policy for crop,
impacts on business activity. The constant change leading to continuous modifications is
the challenge. |
We have a global presence, which empowers us, while also
giving us locational advantage. |
INTERNAL CONTROL SYSTEM
The internal controls of the Company are continually reviewed from a
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 optimal business functioning of the Company. The scope of activities
includes, safeguarding and protecting the Company?s 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 the management system 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 Company has renowned Internal Auditors, who provides
guidance in smooth functioning of risk management policies. The Internal Auditors do so by
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.
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