Indian Agrochemical Industry Expected to Experience 7-9% Growth Next Fiscal Year: Report
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New Delhi, Dec 13 (NationPress) The agrochemical industry in India is set to witness a growth rate of 7-9% in the forthcoming fiscal year, building on a modest growth of 5-6% in the current fiscal period, as indicated by a report published on Friday.
This anticipated growth is attributed to stable domestic demand and a rebound in export volumes, as highlighted in the CRISIL Ratings report.
Furthermore, operating margins are gradually recovering, projected to rise by 100 basis points to 12-13%, although still trailing behind the pre-pandemic levels of 15-16%.
This scenario will likely prompt companies to adopt a cautious approach towards capital expenditure, prioritizing the management of working capital to maintain healthy cash flows and stable balance sheets.
Anuj Sethi, Senior Director at CRISIL Ratings, noted that revenue from exports, which constitutes half of the sector's total income, is undergoing transformation.
He stated, “Global companies have largely addressed their excess inventory problems linked to low-priced Chinese supplies and are now placing orders closer to the cropping season to better manage their working capital.”
“While we anticipate robust volume growth this fiscal, revenue growth is projected to be modest at 3-4% due to pricing pressures from competitively priced products from China. However, in the next fiscal year, this may improve to over 7% as these pressures subside,” he remarked.
Domestic revenue is expected to increase by 8-9% this fiscal year, driven by favorable monsoon conditions and sufficient reservoir levels, which are enhancing agricultural productivity.
The report anticipates that this trend will persist, leading to fewer instances of inventory write-offs. Additionally, with improved volumes, profitability in the sector is expected to rise.
“We foresee a slight improvement in the sector's operating margin, reaching approximately 12% this fiscal and 13% next year,” stated Naren Kartic K, Associate Director at CRISIL Ratings.
Effective management of debt and a gradual enhancement in operating profitability are expected to sustain stable debt protection metrics in the near to medium term, according to the report.
