India Pesticides Says Subsidiary Has Approval To Set Up Factory In UP

India Pesticides expects its total capacity to rise from 23,500 to 57,500 tonnes per annum over the next 3–4 years.

<div class="paragraphs"><p>A tractor sprays fertilizer in an open field. (Photo: James-Baltz/ Unsplash)</p></div>
A tractor sprays fertilizer in an open field. (Photo: James-Baltz/ Unsplash)

India Pesticides Ltd. will be setting up an agrochemicals, active pharmaceutical ingredients and intermediates, and fine chemicals manufacturing unit at Sumerpur in Uttar Pradesh's Hamirpur district.

"With the new plant, total capacity of India Pesticides will increase to 57,500 tonnes per annum from 23,500 tonnes per annum over the next 3–4 years," according to Chief Executive Officer DK Jain.

The new facility will have a capacity of 100 tonnes a day for active ingredients and intermediaries and a capacity of 2 tonnes per day for APIs.

The company's current unit has a total capacity of 23,500 tonnes per annum of agrochemical intermediaries and chemicals and 100 tonnes of APIs. Existing unit capacity will increase to 27,500 tonnes per annum and the capacity at the new site will be additional.

Capex Plans

Incremental capacity addition will require capex of Rs 100–125 crore per year over the next three to four years, which will be incurred from FY24 onward. The company will meet the capex requirement through internal accruals.

India Pesticides has Rs 100 crore in cash on hand, and the plan is to keep redeploying the cash generated as capex. No decision has been taken on external funding, as the company expects that it will be able to meet it via internal accruals. If the need arises, they will be open to considering external sources of funding, he said.

The first block of the new plant will be operational by March 2024 and the company will see revenue recognition start from the same quarter itself. Jain expects revenue recognition as per an asset turnover ratio of 2.5x.

"Growth in FY23 should be around 30%, and growth in FY24 will be similar. The company was able to maintain margins of 30%, which had dipped to nearly 20% in the previous quarter due to high-cost inventory and an increase in fuel costs," Jain said. "Rice husk prices were up 3x, which also impacted margins, but we should be able to close FY23 with 22–24% margins as prices have reduced."

He expects exports to continue to be in the range of 50–60% of revenues. India Pesticides imports approximately 20% of its raw materials from China and 10% from other countries. As China has opened up, he expects the situation to ease out and does not see any major concerns.

2023 Budget Expectations

  • The government should implement the PLI scheme in the agrochemical industry.

  • The government should increase customs duty on technical and formulation imports to give a push to "Make in India".

  • Export incentives have been reduced from 2% to 0.8%, which is against the interests of agrochemical exporters. The government should reconsider the quantum of export incentives.

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