AgroLife Creates a New Niche

In 2020, New Delhi-based agrochemical company, Best Agrolife Ltd, launched dinotefuran, a new generation insecticide for pests such as Brown Plant Hoppers and whiteflies. The market had similar products for six years. Still, Best Agrolife was able to corner 27% market in a year. What worked was company’s backward integration to make the product end-to-end at a time when everyone else was importing from Japan and repackaging and selling in India. Best Agrolife’s cost advantage expanded the market from 1,000 MT (metric tonnes) to 1,350 MT, from ₹400 crore to ₹450 crore. “We took a big share, over ₹100 crore, as several of our competitors also began sourcing it from us instead of importing,” says Raajan Kumar Ailawadhi, executive director, Best Agrolife.

Focus on niche products such as dinotefuran with little or no local manufacturing has helped Best Agrolife enter Fortune India’s Next 500 list for the first time. This also explains 31% jump in net income to ₹905.5 crore in FY2021 from ₹689.9 crore a year ago. Profits zoomed 348% from ₹8 crore to ₹37 crore. The company expects the trend to continue. “This year (FY2022), our top line will be around ₹1,300 crore. Next year, it should be around ₹1,600 crore. We are coming up with new chemistry-led products,” says Vimal Kumar Alawadhi, managing director, Best Agrolife. He says as the company introduces more niche products, EBITDA will rise faster than income. “Today, our EBITDA margin is in the 12-13% range. Three years from now, our turnover will be in the ₹2,500-3,000 crore range and EBITDA at least 20% because we want contribution of generic products to become zero from 70:30 specialty and generic mix at present,” says Alawadhi.

Best Agrolife, among top 15 agrochemical companies in India, has over 160 employees and a 3,000-plus strong distributor network. It sells more than 70 formulations of various insecticides, herbicides and fungicides and has more than 350 product licences. Its key products include Diron, a third-generation insecticide, Pydon, a novel one-shot whitefly control solution, Dongle, a plant growth regulator, and Byju, a post emergence herbicide for tackling grasses, sedges and broad leaf weeds.

The company, which started off by getting import licences to market some agro-chemical products in India, set up its first formulations unit in 2007. However, right from day one, management’s plan was to identify products where India was totally dependent on imports. In 2016, the promoter group acquired a technical (key active ingredient that is basis of the final product) manufacturing plant and started the process of backward integration. “When we took over this plant in 2015-end, technical production capacity was 700 MT per annum. Today, it is 7,000 MT per annum. A few months ago, the unit became part of the holding company,” says Ailawadhi, who joined the company as a professional in 2017 and is not related to the promoter group.

Best Agrolife’s strategy was simple—identify sought-after products and focus on development and registration. The products began to enter production from 2019. It focuses on 9(3) registrations, a category of production registration where the product is the first to get registered, and will often be the only product in the market. “We already have four-five very big molecules. Some days ago also, we cracked a big molecule, Spiromesifen Technical, India’s first,” says Ailawadhi. Spiromesifen acts as an insecticide and miticide that controls red spider mite in brinjal, whitefly & mite in cotton, european red mite & red spider mite in apple, chili & okra, and yellow mite in chili. While the market in North America, Latin America, Europe, Brazil, Spain and Germany is growing at a moderate rate, there is huge demand for Spiromesifen in Asia Pacific.

Another differentiator is its partnership strategy. Best Agrolife did not wait to build its own marketing network to take products to farmers. In fact, in FY2021, 90% of its revenues were generated from its peer-to-peer business under which proprietary products developed by Best Agrolife are marketed by industry’s leading players under a long-term supply arrangement. The list of clients includes UPL, IFFCO-MC, Bharat Rasayan Ltd, ATUL and Mahindra Agri-Business. “It is not contract manufacturing. Even prices are fixed by us. Once we decide the price to be charged from farmers, we maintain that for products supplied by us and sold by our partners. It is as good as our own brand because if they change the source (stop sourcing it from Best Agrolife), they will have to change the brand (name) too,” says Ailawadhi. It supplies on a fixed margin sharing basis.

Shalabh Jain, director of operations, Adama India Ltd., a key business partner of Best Agrolife, says, “Adama has designated Best Agrolife as one of its strategic supply partners. Apart from meeting our product specification and standards, we also appreciate their contribution in delivering us innovative and one-shot crop solutions. These high-precision crop solutions, including some proprietary products, act as real differentiators from conventionals while adding value to stakeholders. We are confident that with Best Agrolife, our strategic business has great potential and promise,” says Jain.

The market is eagerly awaiting a three-way insecticidal combination called Ronfen (for which it has patent rights) which the company expects to launch in March. “Ronfen can control all sucking pests in one shot. So, it is a large market. Out of ₹27,000 crore agrichemical market, it is not less than ₹9,000 crore. Once we come out with the product, we will collaborate with two-three leading companies with our own brand. We can capture 4-5% market in first year itself,” says Ailawadhi. The company expects Ronfen to generate ₹410 crore in FY2023, a quarter of its revenues for the year.

The company has also set up a research and development facility in Noida. The researchers working with its subsidiary, Seedlings India Pvt. Ltd., are trying out not only novel formulations but also safer combinations. The facility also houses a high-tech, fully automated formulation unit, to maintain global standards.

The company, which has four-five products that it can make end-to-end, is also looking at markets outside India as part of its medium-term growth plan. “Turnover-wise, we are still at the starting phase. But we are very aggressive as far as registrations are concerned. We are registering more than 30 products in other countries. Our upcoming products will have international patents also. We will launch our brands directly. Initially, we will target some countries where cropping pattern matches our product line,” says Ailawadhi.

The global agrochemical market is expected to reach $248.7 billion by 2027. The Indian agrochemicals sector is projected to grow at 8% compounded annual growth rate to touch $3.7 billion by FY22 and $4.7 billion by FY25. Further, India, Japan, Australia and Thailand are the highest pesticide consuming countries, making Asia Pacific the fastest growing market for agrochemicals in the world. The central government’s production linked incentive scheme, expected to cover agrochemicals in the coming months, may provide 10-20% output incentives to create an end-to-end manufacturing ecosystem for agrochemicals in India. India’s agrochemical industry is also set to gain with China cutting down its capacities to reduce pollution and global agrochemicals industry looking for alternative sources of supply.

Best Agrolife seems to be in a strong position to utilise these opportunities.