insecticides india ltd

July 2012

Insecticides India

Contents

Sections

1 Indian agrochemicals sector 2

2 Company ovierview 5

3 Business description 9

4 Summary financials 15

5 Growth strategy 17

1

1. Indian agrochemicals sector

1.1 OverviewIndia is the 4th largest producer of agrochemicals by volume and 12th largest by value

Indian agrochemical industry (US$ bn) Domestic agrochemical consumption (by segment)

Split of consumption by crop type Split of domestic market by region

Source Broker notes, Company

Total c.US$ 1.6bn

Total c.US$ 1.6bn Total c.US$ 1.6bn

Significantly lower agrochemical usage in India implies strong growth of c.10% p.a. expected in the near term

Agrochemicals consumption in India skewed towards insecticides given the tropical climate and type of crop plantation

Crop losses in India range from 20% to 30% owing to suboptimal and inadequate usage of agrochemicals and is estimated to be worth c.US$ 20bn per year

1.6 1.7 1.9 2.5

2.8

4.9

-

1.0

2.0

3.0

4.0

5.0

6.0

2006 2007 2008 2009 2010E 2015P

US

$ b

n

Insecticides62%

Herbicides21%

Fungicides17%

AP24%

UP17%

Punjab 14%

Hary ana 10%

WB9%

Maharashtra7%

Gujarat6%

Others13%

45%

23%

9%

7%

6%3%3%2%2%

Cotton Paddy SorghumFruits & veg Wheat ArharGroundnut Bajra Others


3

1.2 Robust growth prospects

Arable land stagnation Rise in MSP

Low pesticide consumption Increased institutional credit flow

Structural enablers in Indian agrochemicals sector to catalyze strong growth trajectory

Rising pressure to increase food productivity given land shortage/stagnation and rise in population

Increasing awareness of farmers Rising prices of crops on the back of Minimum Support

Prices (MSP) Use of costlier hybrid seeds Current under penetration of agrochemicals in India

– Pesticide consumption amongst the lowest globally Labour shortage for agricultural activities on the back of

NREGA Continued financial support from Government through

subsidies and greater flow of institutional credit

India is expected to emerge as a hub for the procurement of generic agrochemicals as well as new generation products

105

110

115

120

125

130

135

FY

80

FY

83

FY

86

FY

89

FY

92

FY

95

FY

98

FY

01

FY

04

FY

07

FY

10

m h

ect

ares

880 980 1,030 1,110

1,080 1,100 1,120 1,285

2,000 2,300

3,000 3,200

-

700

1,400

2,100

2,800

3,500

FY09 FY10 FY11 FY12E

Rs

/ q

uin

tal

Paddy Grade A Wheat Arhar

17.0

12.0

7.0 6.6

2.5

0.4

-

3.0

6.0

9.0

12.0

15.0

18.0

Tai

wan

Japa

n

Kor

ea

US

A

EU

Indi

a

Kg

/ hec

tare

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

FY

00F

Y01

FY

02F

Y03

FY

04F

Y05

FY

06F

Y07

FY

08F

Y09

FY

10

RS

bn

Source Department of Agriculture, research reports


4

2. Company ovierview

2.1 Company snapshotInsecticides India (“IIL”) is an integrated agrochemicals company engaged in R&D, manufacturing, marketing and distribution of agrochemicals in India

Shareholding pattern

Outperforming the index

Listed company, established in 2001 Amongst top 10 agrochemicals company in India with

an estimated 5% market share Large and diversified product portfolio Track record of new product launches

– Judicious mix of in-house development, brand acquisitions and technical collaboration / marketing arrangements with global players

Wide sales & distribution network across India Established manufacturing infrastructure for both

technicals and formulations

– Recently commissioned new units with sufficient capacity to enable sustained long term growth

– New state-of-the-art technicals manufacturing facility and R&D facility is in pipeline

R&D center recognized by DSIR and Ministry of Science & Technology

Accredited with NABL (R&D facilities), ISO 9001:2000, ISO 14001 and OHSAS 18001

– GLP accreditation expected soon0

100200300400500600700800900

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb

-10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

Dec

-11

Feb

-12

Apr

-12

Jun-

12

IIL SensexNotes Figures have been rebased to 100

762

114

Promoters74.7%

FIIs5.9%

Others19.4%

Notes Shareholding pattern as on 31st Mar 2012


6

2.2 History & development

Entered into 2nd collaboration with AMVAC (for Nuvan)Finalized marketing arrangement with Nissan

Insecticides India (P) Ltd. incorporated

Undertook establishment of manufacturing facility at Udhampur

IPO & listing on NSECommissioned technicals plant at Chopanki

Converted to Insecticides (India) Ltd.

Commissioned first manufacturing plant at Chopanki

Acquired leading brands of Montari Industries (Ranbaxy group company)

Commissioned 2nd manufacturing plant at Sambha

Received ISO 9001-2000 certificationSet up R&D lab at Chopanki

Acquired exclusive right to sell Thimet in India (collaboration with AMVAC, USA)

New R&D unit set up after receiving Govt. accreditation

Undertook establishment of multi-product manufacturing facility at Dahej

1996 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Acquired brand Monocil from NocilCommisioned Dahej and Udhampur plants

2011 2012YTD


7

2.3 Management team

Finance

Pankaj GuptaCS

P.C. PabbiVice President

Production

Sanjeev AggarwalGM

Rajesh Aggarwal (MD)

Information Technology

Sandeep AggarwalCFO

H.C. SharmaDGM

H. C. Aggarwal (Chairman)

Marketing Admin & HR

K.V. PatelUnit Head

R. S. VermaSr. Manager

M.K. SinghalGM

V.K. GargGM

Sanjay VatsGM

Purchase

V.K. SinghalGM

Abhai ShankerGM

Anil TyagiProject Head

B.P.S. RanaDGM

S.K. ChoudharyProject Manager

Sanjay VatsGM

Venkat RaoGM

R&D

Dr. MukeshDGM

Ashok BangdeGM


8

3. Business description

3.1 Diversified business model

Diversified by segment Diversified by geography

Strong presence across categories Strong in-house manufacturing

Highly defensible, backward integrated and diversified business model

Strong presence in insecticides and herbicides segments

– Segment focus and mix is strategically aligned to requirements of the Indian market

Formidable pan India presence with footprint across major crop producing regions in India

Catering to both Branded formulations (B2C) and Institutional sales (B2B) market

– Especially strong in Branded formulations

Focus on in-house manufacturing and backward integration

Diversified portfolio across segments, regions and customers; strong brand presence and recognition; in-house manufacturing and grassroots distribution infrastructure

Notes FY12 figures are provisional; All charts above depict segmentation of FY12P gross sales

61.5%

28.0%

6.7% 3.7%

Insecticides Herbicides

Fungicides PGRs

Total = Rs 5,541m

16%

17%

10%11%8%6%

32%

Punjab A.P. HaryanaMaharashtra UP KarnatakaOthers

Domestic Branded sales = Rs 4,341m

79%

21%

Branded formulations Institutional sales

Total = Rs 5,541m

92%

8%

Manufactured in-house Traded

Total = Rs 5,541m


10

3.2 Large product portfolio

Large portfolio across multiple segments Exceptional track record of new product launches and portfolio augmentation aided by

In-house product development through

– Backward integration

– Enhanced focus on R&D

Acquisitions of ‘high recall, but off-shelf’ brands and their successful re-launch into leading brands

– Lethal and Monocil are recent success stories

Technical collaborations with leading global agrochemical players

– Plan to repeat success of Thimet with Nuvan

Marketing arrangements with principal partners

IIL’s product portfolio comprising of over 120 branded products, over 10 technicals and over 750 SKUs

23

11

8

1

65

25

20

18

88

36

28

19

0 20 40 60 80 100

Insecticides

Herbicides

Fungicides

PGRs

Institutional Branded formulations

Track record of launch of new branded formulations

5 5

7

3

8

0

2

4

6

8

10

FY08 FY09 FY10 FY11 FY12P


11

Marketing initiatives Dedicated awareness initiatives provide

information to farmers on various aspects of agriculture and use of agrochemicals

Participation in national and international conferences, exhibitions and fairs

3.3 Sales & marketingIIL enjoys market leading positions in several of its major products - a testimony to its strong branding and marketing initiatives and the extensive distribution reach

Best-in-class pan-India distribution network 230+ sales personnel, 3,100+

distributors and c.50,000 retail outlets

26 depots across 24 locations Unparalleled reach to India’s

fragmented and dispersed end consumer base

Sales personnel split Branding activities Farmer awareness initiatives

Strong focus on Brand strategy Portfolio of over 120 branded products Top selling brands such as Thimet, Lethal, Monocil and

Victor enjoy leading positions in the market Aggressive focus on branding helped IIL gain market share Successful employment of “Umbrella strategy” to introduce

products for new applications and crops Pioneer in using electronic media advertisement

North, 93

East, 21West, 28

South, 80

Central, 15

Total = 237


12

3.4 Manufacturing capabilities

Strong manufacturing infrastructure In-house manufactured products

account for 90%+ revenues One of the best asset turnover

amongst Indian peers

Significant expansion in manufacturing capacity currently underway Expansion in technicals capacity to

provide a significant boost for the institutional segment

Ramp up in formulations capacity to provide sufficient capacity to enable sustained long term growth

Significant opportunity for CRAMS arising out of new facilities

Significant area available for expansion of facilities in Government approved industrial belt for agrochemical production

Udhampur, J&KLiquid capacity – 3.0m L

Powder capacity – 0.6m KgGranules capacity – 0.6m Kg

Sambha, J&KLiquid capacity – 5.5m LPowder capacity – 2.1m KgGranules capacity – 6.1m Kg

Dahej (Baruch), GujaratLiquid capacity – 4.0m L


Chopanki, RajasthanLiquid capacity – 7.8m L


Technicals capacity – 2.0m Kg

25% capacity expansion overall to be completed by H1FY13

Technicals capacity expansion of 10.0m kg to be commissioned by H1FY13

Granules capacity expansion of 7.5m kg planned in the new (third) pant; to be commissioned by H1FY13

NotesDisplayed capacity figures correspond to installed capacity as of 31st March 2012


13

Granules capacity expansion to be completed by H1FY13

International Collaborations & Tie ups

• Technical Collaboration with American Vanguard Corporation (AMVAC) for manufacturing and marketing of THIMET and NUVAN

• Tie up with Japanese giant Nissan Chemicals Industries Limited for Thiafluzamide and Quizalofop

• JV with Oatsuka Agritechno Japan for R&D Centre in India, focusing invention of new agro chemical molecules for international requirements

4. Summary financials

4.1 Summary financials

Net sales and margins

Exceptional annual growth in revenues over last 4 years

Notes FY12 figures are provisional

2,634

3,774

4,501

5,218

10.2%9.4% 10.1%

9.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-

1,000

2,000

3,000

4,000

5,000

6,000

FY09 FY10 FY11 FY12 P

Rs

m

Net Sales EBITDA Margin


15

4.2 Competitive benchmarking

Revenue CAGR (FY08 –FY11) EBITDA margin (FY11)

Asset turnover (FY11) ROCE (FY11)

Notes FY12 figures are provisional

32%

26% 26% 26% 25% 20% 19%

17% 16% 16% 13% 11% 10%

0%

7%

14%

21%

28%

35%20%

17% 16%

15% 15% 13%

11% 11% 11% 10% 10% 10% 9%

15.8x

12.7x

6.5x 6.3x 5.9x 5.5x 4.2x 4.0x 3.8x 3.2x 3.2x

1.6x 1.1x

38% 35% 35%

27% 27% 25% 21%

16% 15% 12%

9.9% 6.7% 5%


16

5. Growth strategy

5.1 Growth strategy

IIL intends to leverage its expertise in successful brand launches, enhanced R&D focus and recently expanded manufacturing capacity to fuel its future growth

Marketing

Research &

development

Manufacturing

Continued focus on establishing strong brands

Employ IIL’s well-tested “Umbrella strategy” to introduce product extensions

Continued focus on R&D to reduce costs and manufacturing time

Capitalize on prior experience to achieve maximum number of technicals registration

Leverage R&D capabilities for CRAMS

Enhanced backward integration with increase in technicals manufacturing capacity

– Enhance margins

– Enable targeting institutional segment

Leverage on location advantage of manufacturing facilities

Exploit gains from upgraded and newly commissioned manufacturing facilities

5. Growth strategy

18

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