Shreyus G, Ex- Senior Consultant at Avalon Consulting, shared his views on Headwinds in the Indian Crop Protection Market and Potential Green Offshoots, published in AgroSpectrum Asia.
He highlighted how erratic monsoons, subdued commodity prices, distributor destocking, and aggressive pricing by Chinese players have led to revenue and margin pressures across leading Indian crop protection companies. The article also outlines how a strategic shift towards bio-products, specialty chemicals, advanced formulations, and tighter working capital management could help the industry rebuild margins and position itself for a sustainable recovery.
The Indian crop protection market has witnessed a downturn over the past two financial years. Leading players such as UPL and Bayer have faced significant price and margin depletion, raising concerns among shareholders. UPL’s revenue, especially, has nearly reduced by two-thirds from ~18,000 INR Crores to ~5,200 INR crores. This development serves as a bellwether for the major developments in the crop protection industry over the last two financial years. Other players such as Bayer, Rallis India, and Sharda Crop Chem were not spared and reported considerable pressure on their profitability as evidenced by the decline in the PBT margins. These downtrends ride on the back of several major developments in the global markets. Macroeconomic, environmental and competitive headwinds are collectively responsible for fundamentally altering the market dynamics of the Indian crop protection market.
The worsening of the Indian Crop Protection market has led many of the shareholders and CxOs to question the near-term future and possible turnaround scenarios. The slowdown has grappled all the players worldwide, domestic and International.
Therefore, a deeper understanding of the headwinds is key to understanding how to tackle them and the short and long-term strategies that can be developed and executed.
Major Headwinds impacting the industry
A confluence of major headwinds has impacted the prices and margins of the Indian crop protection market severely over the last two years.
Erratic Monsoon patterns and deficient rainfall is a key factor impacting the key agricultural regions in India. According to the Indian Agricultural Research Institute, the total rainfall in 2024 and 2023 (~1,100 mm) has been 5% less than the long-term rainfall average of India (~1,200 mm).
Crop yield has been primarily impacted, initiating a snowball effect on various other headwinds. The crop acreage has declined from ~3,300 Lakh hectares to ~3,300 lakh hectares from 2019 to 2024. The lacklustre rainfall has been the primary reason for reducing the crop acreage. Globally, El Nino has also had a disruptive effect on the reduction of crop yield. Consequently, the demand for agri commodities exports has also reduced.
Subdued commodity prices have compounded the problems, putting financial strain on the farmers. Therefore, many farmers have chosen to reduce their expenses on crop protection, triggering a domino effect on the value chain.
Destocking inventories by the distributors and retailers due to reduced demand from the farmersput immense pressure on the crop protection companies to sell their goods. Last resort actions, such as offering discounts and reducing prices, have impacted the margins of these crop protection companies.
Chinese firms flushing their finished goods at lower prices has further added to the margin woes of Indian crop protection firms. Chinese firms have aggressively entered the global market, competitively pricing their goods and forcing the Indian players to slash their prices.
Improvement in Volumes but erosion of prices
The crop protection companies have witnessed an improvement in the revenues owing to the recovery in the volumes sold but have been witnessing a reduction in the margin levels as evidenced by the tables below.
| Revenue from Operations in INR Cr | |||||
| FY25 | FY24 | FY23 | FY22 | FY21 | |
| UPL | 5,330 | 5,266 | 18,556 | 16,314 | 11,183 |
| Bayer | 5,473 | 4,892 | 4,945 | 4,577 | 4,143 |
| PI Industries | 7,571 | 7,093 | 6,237 | 5,077 | 4,226 |
| Sumitomo | 3,090 | 2,806 | 3,473 | 3,035 | 2,621 |
| Rallis | 2,663 | 2,633 | 2,955 | 2,591 | 2,419 |
| Sharda Cropchem | 3,661 | 2,600 | 3,308 | 2,942 | 2,029 |
| Coromandel | 24,064 | 21,977 | 15,077 | 12,269 | 10,794 |
| PBT Margin of Revenue from Operations | |||||
| FY25 | FY24 | FY23 | FY22 | FY21 | |
| UPL | -4.02% | -0.09% | 3.27% | 3.07% | 1.56% |
| Bayer | 10.74% | 13.27% | 12.69% | 12.59% | 14.65% |
| PI Industries | 27.67% | 24.22% | 19.71% | 17.74% | 17.66% |
| Sumitomo | 17.95% | 13.58% | 16.49% | 17.17% | 15.74% |
| Rallis | 5.78% | 6.21% | 3.48% | 7.03% | 10.06% |
| Sharda Cropchem | 4.59% | -3.78% | 7.04% | 11.54% | 9.86% |
| Coromandel | 8.82% | 8.83% | -79.50% | -41.00% | -15.48% |
UPL has sighted distribution destocking, pricing decline in generics, and oversupply by Chinese production as key parameters for the reduction in revenues and margins.
Bayer has, however, indicated that the pressure on its margin has primarily been through the increase in the cost of goods sold, while it has maintained an increase in revenue by having a good portfolio mix.
However, companies such as PI Industries and Sumitomo have been faring well because of low exposure to generics such as glyphosates and export markets such as Latin America and North America.
The export markets have not fared much better either. Although the quantities exported have been increasing over time, the value has been reducing, indicating the growing presence of Chinese firms and price erosion, leading to pressure on the margins of the companies.
| Unit | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Export Value | USD Millions | 3,422.0 | 4,499.0 | 5,549.0 | 4,324.0 | 4,206.0 |
| Export Quantity | MT | 5,05,215 | 6,34,238 | 6,43,946 | 6,29,403 | 6,73,077 |
Strategic Outlook
Major Indian crop protection companies need to pivot and plan to regain the prices eroded and the margins lost. Indian companies are planning to increase the share of bio products and speciality chemicals to one-third of the total to improve the product portfolio differentiation and improve the product margin levels. UPL, for instance, is planning to leverage in-market R&D to produce advanced formulations and move up the value chain. Last but not least, Indian crop protection companies are planning to optimise their inventory and working capital to stabilise the pricing and position themselves for aggressive competition next season.
Shreyus Gopalakrishnan
Shreyus Gopalakrishnan is a Management Consultant with 4+ years of experience in Business plan formulation, Go to Market strategy, Market entry and Digital Transformation across sectors such as Agribusiness, Manufacturing and IT. His experience prior to Avalon includes working with the strategy department of an Agribusiness startup on areas such as carbon credits and market place platforms for farmers. Personally, he loves travelling to new geographies and exploring new cultures.
