India is an agrarian country, where more than 50% people are dependent on agriculture for their livelihood and is the largest producer of spices, pulses, milk, tea, cashew, and jute & the 2nd largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton, and oilseeds. Agrochemicals (Crop protection products/pesticides) are designed to protect crops from insects, diseases, and weeds. They do so by controlling pests that infect, consume or damage the crops. Uncontrolled pests significantly reduce the quantity and quality of food production. It is estimated that annual crop losses could double without the use of crop protection products. Food crops must compete with 30,000 species of weeds, 3,000 species of nematodes, and 10,000 species of plant-eating insects. Agrochemicals are the last and one of the key inputs in agriculture for crop protection and better yield. 

Currently, India is the world’s 4th largest producer of agrochemicals after the United States, Japan, and China and has emerged as the 13th largest exporter of pesticides globally.

Agrochemicals can be broadly classified into 5 types: Insecticides, Fungicides, Herbicides, Bio-pesticides, and Others. 

Concerning COVID-19 outbreak, the government is closely monitoring production, and distribution of fertilizers: The Indian Government said it is keeping a close eye on the production and distribution of fertilizers to ensure that soil nutrients are made available to farmers during the upcoming rabi (summer-sown) season, amid this Covid-19 pandemic. 

The Ministry of Chemicals and Fertilizers has also constituted a team to prepare a road map for reforms and achieve higher growth in the fertilizer sector in a medium to long term period. With this, the ministry said that there has been a record sale of fertilizers to the farmers' community and during the first 22 days of April 2020, the point of sale of fertilizers to farmers was 10.63 lakh million tons, up by 32% as compared 8.02 lakh million tons last year. This has led to an increase in stock prices of chemicals and fertilizers company. The Department of Fertilizers (DoF) is also taking up issues at an inter-ministerial level and also with States and Union Territories for addressing operational constraints.

Key takeovers:

The world markets are currently reeling from the effects of the Covid-19 pandemic that is sweeping the globe. While many sectors are under pressure due to the spread of this virus, the impact on Indian fertilizer players is expected to be soft even as a major portion of raw materials for phosphatic fertilizers are imported, according to a report. According to Mr. Ravichandran, ICRA group head and senior vice president, Production in The Hubei province (Largest comprehensive transportation hub in China) is down currently, But the overall fertilizer market remains well supplied due to the build-up of inventories at the producer's end in China as international prices remain weak. As per ICRA's analysis, the domestic industry imports a major portion of the raw materials for phosphatic fertilizers, mainly phosphoric acid and finished fertilizers mainly DAP (47% of total imports in FY19) from China.

The Downward trend:

With the downward trend in Chinese exports continuing for the last couple of years, the impact of the Chinese urea industry on the global market has been reduced. Urea is a raw material used in the manufacture of many chemicals and is also essential in making feedstock, glue, fertilizer, chemical product, and in resin production. A report states that a silver lining for the Indian urea industry in this crisis is on the natural gas pricing front. R-LNG, which now meets around 57% of the natural gas consumption for the domestic urea industry, has been witnessing a downfall in prices.

Key Growth drivers:

In 2019, India was hit by a severe summer heatwave, impacting the rain-fed Kharif crop. This led to a delayed start, but a heavier, longer-than-normal monsoon followed. A spill-lover from Kharif season and a favorable Rabi season helped mitigate the H1FY20 decline while Key growth drivers in recent years include rising domestic demand for crops driven by economic growth and greater support for agriculture via an increase in the government purchase price for crops. However, monsoon plays a very important part, especially for the Kharif crop. Hence, monsoon and higher minimum support price (MSP) in key crops are likely to drive farmer behavior in terms of usage of crop protection in India. Also, budgetary support by government, Off Patent Molecules, and increase in demand for food grains are growth drivers to achieve higher crop yields.

Positive impact on the cost:

Raw material as a percentage of the sale for the top 5 Indian pesticides manufacturer is ~47% according to the Federation of Indian Chambers of Commerce and Industry (FICCI). India imports nearly 50% of its technical grades requirement from China which fulfills 90% of the world’s technical requirement. Increasing raw material cost pressures due to macro-economic factors followed by high inventory due to sessional demand are reducing margins, therefore, the Government should focus on the creation of clusters areas for the chemical industry manufacturing technical grade raw materials under Make in India programme. Also, the industry largely consumes crude oil-linked raw materials which are the second and third derivatives of crude, chlorine, yellow phosphorus and bromine, etc. These are essential raw materials needed for the manufacturing of technicals. Thus, a sharp reduction in crude oil prices will have a positive impact on the industry.

Stock Specific:

Companies like Dhanuka Agritech, Godrej Agrovet, Rallis India, and UPL look good and are trading at attractive levels. These companies had good stability in the last 5 years and have reported growth in revenues and PAT and at the same time had a significant reduction in their debts.


The macro-environment for the agrochemicals industry will always remain positive and will be driven by strong fundamental growth, rising domestic demand, improved export opportunities due to the tight supply from China, strategic partnerships with global counterparts, robust product launches, tie-ups with innovators for new products and substantial prospects to explore products going off – patent. 

Talking about COVID-19, there is no major impact on the production in China, though disruptions in logistics and clearances for any material coming in from China as the virus could affect the supply chain and may result in intermittent spikes in the prices of technicals. But if the virus spreads and a more widespread lockdown is extended, there will inevitably be some disruption to the movement of fertilizer and raw materials to and from ports and plants. 

Some plants, including Zuari, RCF, and GSFC have announced closures while many fertilizer plants are taking annual maintenance, and therefore any disruption in the coming weeks could be mitigated accordingly but if the situation persists beyond April, it could affect the start of the Kharif season.

In the meantime, any further weakening of the INR against the USD will further erode margins for imported fertilizers and raw materials.