BEST AGROLIFE

Moving up agrichem ladder

New Delhi-headquartered Best Agrolife Ltd is a BSE- and NSE-listed research-driven company serving the domestic as well as global agro-chemical industry with its niche product offerings.

Interestingly, till 2018, the company was a player in the plastics industry, engaged in the trading of plastic granules, plastic raw materials, PVC resin, organic and inorganic chemicals, compounds, solvents, etc., and was known as Sahyog Multi-base Ltd. Towards the end of 2018, it was merged with Best Agrochem Pvt Ltd, thus inheriting the agrochemical business and giving up trading in plastics. Today, it is known for its niche category of products for sustainable agriculture, and offers as many as 70 formulations of various insecticides, herbicides, fungicides and PGRs, some of which have come out of patent only a year ago. These offerings are environment-friendly formulations such as SC, SE, ZC, WG and MEG.

The company has been performing very well on the financial front. During the last five years, its sales have grown at a CAGR of 57 per cent and profit at a CAGR of 25 per cent. What is more, going ahead, the growth prospects are all the more promising. Consider:

Best Agrolife has received the official nod for the indigenous manufacture of cyhalofop butyl by the Central Insecticides Board and Registration Committee. Cyhalofop butyl is a post-emergence herbicide that controls grass weeds growth in rice crops. Best Agrolife is the first Indian agrochemical company to manufacture cyhalofop butyl. As this herbicide controls grass weed growth in rice crops, it can immensely help increase rice production in India. Experts point out that rice crop production in India suffers a yearly loss of more than 15 million tonnes due to weeds, mainly grassy weeds.

BOOSTING RICE CROP

Prior to this, the company received the registration for the indigenous manufacture of propaquizafop technical, another crucial post-emergence herbicide. This herbicide can boost rice production in India to a large extent by minimizing losses. According to experts, the estimated market size of propaquizafop is Rs 350 crore in India and the global cyhalofop butyl market is set to reach is $135 million within the next 3 years.

Even as demand for the company’s products is on the rise, its performance on the financial front is highly gratifying. During the last five years, the company’s standalone sales turnover has made rapid strides from Rs 129.18 crore in fiscal 2018 to Rs 1,134.27 crore in fiscal 2022, with operating profit shooting up from Rs 2.93 crore to Rs 125.10 and net profit spurting from Rs 0.02 crore to Rs 87.07 crore. The company’s financial position has gradually improved and by the end of March 2022 its reserves stand at Rs 286 crore — over 12 times its equity capital of Rs 23.84 crore. The company has been regularly paying dividends of late; the rate for the last year being 20 per cent.

‘TOP 10’ TARGET

After it become a totally agrochemical company in 2018 Best, Agrolife has made rapid strides and during the last four years has emerged as one of the fastest growing providers of technicals, intermediates, formulations and public health products. It has moved up the ladder from being ranked in the top 20 Indian agro-chem companies in 2020 to the top 15 in 2021 and is expected to be in the top ten by 2025. Little wonder that ace investor Ashish Kachoria has started accumulating these stocks to enrich his portfolio!

Going ahead, the prospects for this research-based and innovation-driven company are highly encouraging. Discerning investors will do well to include these stocks in their portfolio.

PERFORMANCE INDICATORS (Rs. in crore)

PCBL

Global power in carbon black

A part of the RP Sanjiv Goenka group, PCBL (Phillips Carbon Black Ltd) is India’s largest carbon black manufacturer and a strong global player in this speciality chemical, with a significant customer base in 45+ countries. The company has four strategically located state-of-the-art manufacturing facilities, andhas also set up R&D centres at Paly (Gujarat) and Ghislenghien (Belgium).

The company has expanded its sweep in three states with a total annual capacity of 5.71 lakh tpa. Today, it also has a dedicated capacity of speciality blacks of 40,000 tpa at Paly and 70 MW of green power. It provides a complete portfolio of products to meet specific requirements across rubber, plastics, coatings, inks and other niche industries globally. A speciality of the company is the fact that it has been continuously reinventing itself in order to make best-in-class products.

PCBL is the first carbon black company in the world to receive carbon credits. The company has put up a heartening show on the financial front. During the last five years, its sales turnover has expanded at a CAGR of 18 per cent and profit has grown at a CAGR of 44 per cent. What is more, prospects ahead are all the more promising. Consider:

PCBL is not only the largest manufacturer of carbon black in the country, providing a complete portfolio of products to meet specific end-requirements of various industries, but is also a strong believer in after-sales service. Its after-sales service and strong technical support ensures a fiercely loyal base of customers from around the world.

CAPTIVE POWER

The company has redefined its business by establishing captive power plants at each factory from the oil-gas waste products from the carbon black manufacturing process, thus creating a sustainable green movement. The captive power plants are at Palej, Durgapur, Mundra and Kochi. As a result of this exercise, the company has heavily cut down on carbon and gas emission and serves green power to large private industrial units and state electricity utilities.

The company is in an expansion mode through debottlenecking projects and has expanded its capacity across all four plants. It has also started work on expanding capacity through a greenfield plant which will be set up in south India.

Export prospects for the company have improved considerably with the closure of some capacities in China on the back of the environmental protection programme of the government, the push for alternative supplies in the wake of the global industry’s ‘China + 1’strategy and increasing feedstock prices for Chinese plants creating a huge market opportunity for an existing carbon black manufacturer like PCBL. As per Notch Consulting, the carbon black market globally is expected to grow at 3-4 per cent annually, indicating an incremental demand of 14 lakh tonnes by the end of 2024. Interestingly, incremental supply during the same period is expected to be 11 lakh tonnes, thereby creating a deficit of 3 lakh tonnes and opportunities for players like PCBL who are expanding capacities.

UP VALUE CHAIN

The company is transforming its business model to move up the value chain with speciality and performance chemicals in order to improve EBITDA/kg realizations. This will lead to an improvement in the bottomline. EBITDA has grown over the last seven years over 2 times at the end of fiscal 2022. With the increase in the share of speciality carbon oil in overall basket (50:50) in the next five years from 65:35 at present, research experts expect the EBITDA/tonne to stabilize in the range of Rs 15,000-15,400 in fiscal 2024 and to increase to Rs 15,000 by the end of FY 2025. As a result, the return ratio is expected to improve from 17 per cent in fiscal 2022 to 22.9 per cent in fiscal 2025. Little wonder that Kotak Securities has recommended ‘BUY’ with a target price of Rs 180.

PERFORMANCE INDICATORS (Rs. in crore)