 "Falling rupee is a concern for us: Rajesh Aggarwal, MD, Insecticides India")
Insecticides India Ltd (IIL) has been registering robust growth due to its strategy to offer innovative products to Indian farmers. Last year, it established a JV with Japanese firm with an aim to emerge has leading product inventor from India. In conversation with Rakesh Rao, Rajesh Aggarwal, Managing Director, IIL, throws light on the company’s growth strategies and future plans.
With a good performance in Q1 2013-14, are you expecting much better results in coming quarters?
There are multiple factors for our good performance in Q1 of this year. First, we expanded our capacity by setting up new plant, which have started performing.
Second, introduction of new molecules have helped us increase our sales. We had introduced two molecules this year, while three molecules last year. We are targeting 50% of our branded sales to come from Navratnas (these are nine key brands in Insecticide India’s product portfolio of over 120 brands). These Navratnas are helping us in a big way to overall increase the turnover of the company. We expect Navratnas, along with six other products (referred to as Super Six range) to be key growth drivers for us as far as branded sales is concerned. We are targeting 2/3rd business to come from these 15 products (Navratnas and Super Six).
The overall sentiment in the agriculture sector is excellent. The demand for all types of agrochemical products is good all over the country. So, we expect to build on the performance of Q1 and show much better results in the second quarter. We are very bullish on the agrochemical business in the second quarter.
How has your tie-ups with MNCs helped you?
I believe, in order to grow in the market, you have to be innovative. Innovations can be in terms of setting up new plants; bringing in new technologies & brands; launching products catering new markets, crops, diseases; etc. You have to do something new always in the market.
If you want to bring new technologies in the country, the first thing I followed was bringing global brands into India through collaborations. I bought some of the products, which were leading brands available in the market at that time, from MNCs companies. But these were generic products. Though I was able to offer farmer branded products, the technology to manufacture innovative products was lacking. Hence, we invested in product development through reverse engineering. By this, we were able to develop new process technology and helped us in backward integration by setting up new technical plant for active ingredients in India.
Insecticides India was able to manufacture many of the off-patent products and establish its brands in the market.
To bring patented technology to the table we collaborated with Nishan Chemicals of Japan. The company introduced two new products with them and is planning to launch many more products in future.
We have gone one more step ahead. In September 2012, Insecticides (India) established a JV with Japan’s Otsuka AgriTechno to work on discovery of new molecules. This is a unique initiative by an Indian agrochemicals company. We will be able to offer new molecules to Indian farmers at a reduced cost, and also save on royalties, which has to be paid to market global brands in India.
Insecticides India has been providing complete solution to Indian farmers in a cost-effective way. While we started our journey by offering generic products and then innovative products to our farmers, we aim to bring to the table new molecule through our tie-up with Otsuka AgriTechno.
How soon one can expect the Bhiwadi (Rajasthan) research centre to be operational?
The research centre has already started functioning with a team from Japan working closely with Indian scientists. The new centre at Bhiwadi will be officially inaugurated in November this year. The initial investment in the project is about Rs 40 crore.
Are you planning to increase investment in research for new molecules (inventions) in long term?
We follow multi-pronged growth strategy of buying old brands, improving process efficiency, launching global brands through collaborations and product discovery. All these four factors will drive our business in future.
Are customers receptive to innovative products?
Globally, generic and innovative products (patented & off-patent) have equal share in the market. In the innovative range, patented products account for about 24% of the global agrochemicals industry, while off-patent products’ share is about 26%.
Indian farmers, who did not had access to innovative products before 2000, have shown interest in new generation products since last decade. Today, up to 30% of the market in India belongs to innovative products (both patented and off-patent) since new generation products offer better results and are less toxic.
What are your goals for 2013-14 and 2014-15?
We should be able to touch Rs 850 crore in top line this year, compared with Rs 650 crore in 2012-13. We expect 30-35% growth rate for the next two years.
Is falling Rupee a concern for you?
Definitely, falling rupee is a concern for us. Imports (solvents and raw materials) constitute about 20-22% of our purchases. For last two years, we are showing currency losses in our balance sheet. This year, I feel, again it will be repeated.
Though we are not considering a price hike at this juncture, prices may go up in the coming rabi season.
Are there any plans for capacity expansion in near future?
Apart from R&D center, I am expanding at all the 3 locations. In Jammu, we have done expansion in Samba unit, while the company is building a new formulation unit in Rajasthan. Insecticides India is also expanding Gujarat facility. All these expansions should show effects from the fourth quarter of this year. This year we are spending about Rs 25 crore in expansion.
With a good performance in Q1 2013-14, are you expecting much better results in coming quarters?
There are multiple factors for our good performance in Q1 of this year. First, we expanded our capacity by setting up new plant, which have started performing.
Second, introduction of new molecules have helped us increase our sales. We had introduced two molecules this year, while three molecules last year. We are targeting 50% of our branded sales to come from Navratnas (these are nine key brands in Insecticide India’s product portfolio of over 120 brands). These Navratnas are helping us in a big way to overall increase the turnover of the company. We expect Navratnas, along with six other products (referred to as Super Six range) to be key growth drivers for us as far as branded sales is concerned. We are targeting 2/3rd business to come from these 15 products (Navratnas and Super Six).
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Third, the monsoon season started early, which supported our business.
The overall sentiment in the agriculture sector is excellent. The demand for all types of agrochemical products is good all over the country. So, we expect to build on the performance of Q1 and show much better results in the second quarter. We are very bullish on the agrochemical business in the second quarter.
How has your tie-ups with MNCs helped you?
I believe, in order to grow in the market, you have to be innovative. Innovations can be in terms of setting up new plants; bringing in new technologies & brands; launching products catering new markets, crops, diseases; etc. You have to do something new always in the market.
If you want to bring new technologies in the country, the first thing I followed was bringing global brands into India through collaborations. I bought some of the products, which were leading brands available in the market at that time, from MNCs companies. But these were generic products. Though I was able to offer farmer branded products, the technology to manufacture innovative products was lacking. Hence, we invested in product development through reverse engineering. By this, we were able to develop new process technology and helped us in backward integration by setting up new technical plant for active ingredients in India.
Insecticides India was able to manufacture many of the off-patent products and establish its brands in the market.
To bring patented technology to the table we collaborated with Nishan Chemicals of Japan. The company introduced two new products with them and is planning to launch many more products in future.
We have gone one more step ahead. In September 2012, Insecticides (India) established a JV with Japan’s Otsuka AgriTechno to work on discovery of new molecules. This is a unique initiative by an Indian agrochemicals company. We will be able to offer new molecules to Indian farmers at a reduced cost, and also save on royalties, which has to be paid to market global brands in India.
Insecticides India has been providing complete solution to Indian farmers in a cost-effective way. While we started our journey by offering generic products and then innovative products to our farmers, we aim to bring to the table new molecule through our tie-up with Otsuka AgriTechno.
How soon one can expect the Bhiwadi (Rajasthan) research centre to be operational?
The research centre has already started functioning with a team from Japan working closely with Indian scientists. The new centre at Bhiwadi will be officially inaugurated in November this year. The initial investment in the project is about Rs 40 crore.
Are you planning to increase investment in research for new molecules (inventions) in long term?
We follow multi-pronged growth strategy of buying old brands, improving process efficiency, launching global brands through collaborations and product discovery. All these four factors will drive our business in future.
Are customers receptive to innovative products?
Globally, generic and innovative products (patented & off-patent) have equal share in the market. In the innovative range, patented products account for about 24% of the global agrochemicals industry, while off-patent products’ share is about 26%.
Indian farmers, who did not had access to innovative products before 2000, have shown interest in new generation products since last decade. Today, up to 30% of the market in India belongs to innovative products (both patented and off-patent) since new generation products offer better results and are less toxic.
What are your goals for 2013-14 and 2014-15?
We should be able to touch Rs 850 crore in top line this year, compared with Rs 650 crore in 2012-13. We expect 30-35% growth rate for the next two years.
Is falling Rupee a concern for you?
Definitely, falling rupee is a concern for us. Imports (solvents and raw materials) constitute about 20-22% of our purchases. For last two years, we are showing currency losses in our balance sheet. This year, I feel, again it will be repeated.
Though we are not considering a price hike at this juncture, prices may go up in the coming rabi season.
Are there any plans for capacity expansion in near future?
Apart from R&D center, I am expanding at all the 3 locations. In Jammu, we have done expansion in Samba unit, while the company is building a new formulation unit in Rajasthan. Insecticides India is also expanding Gujarat facility. All these expansions should show effects from the fourth quarter of this year. This year we are spending about Rs 25 crore in expansion.