Sumitomo Chemical India Limited
Know the Company
Sumitomo Chemical India Limited (SCIL) is a subsidiary of Japan’s Sumitomo Chemical Company (SCC), which holds a 75% stake in SCIL. As the flagship entity of its parent company, SCIL integrates the innovation and quality for which SCC stands. SCIL’s extensive product range caters to the diverse needs of the agricultural sector, offering crop protection products, storage pest control solutions, bio-pesticides and plant growth regulators, etc.
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SCIL has Five modern manufacturing facilities across Gujarat and Maharashtra, located in Bhavnagar, Gajod, Tarapur, Vapi, and Silvassa. These facilities focus on the production of technical-grade pesticides, formulations, and metal phosphide. The company’s research and development capabilities are strengthened by three DSIR-approved labs in Mumbai, Bhavnagar and Gajod.
Product Portfolio
SCIL offers a wide range of products for the agricultural industry by helping farmers protect their crops from weeds and fungus. Its products and services are outlined below.
Crop Protection: SCIL offers a comprehensive range of insecticides, fungicides, miticides, and herbicides that are highly effective against specific pests and crop diseases. These products are designed with sustainable crop protection technology, ensuring both potency and safety. They enhance agricultural productivity by delivering high efficacy, low toxicity, and a reduced environmental impact.
Biologicals: SCIL leverages its R&D expertise to develop effective alternatives to agrochemicals, utilizing natural substances for environmentally friendly pest control. This approach protects crops while preserving the ecosystem.
Plant Nutrition & Plant Growth Regulators: SCIL offers several of plant growth regulators and nutrition products, which empowers farmers with effective solutions for improved crop yields and optimal outcomes.
Fumigants and Rodenticides: The Company also manufactures efficient fumigants and rodenticides which combat postharvest losses, ensuring every grain is saved. They protect harvest and maximise yields with its effective solutions.
Household Pesticides: Being one of the pioneers in the Pest Control pesticides, SCIL market with innovative products and modern age formulations. The products are effective against mosquitoes, flies, cockroaches, black flies, nuisance flies, and flying insects, among others.
Custom Solutions: Sumitomo Chemical’s Custom Solutions Division is a key player in the development and supply of active ingredients. Company’s dedication extends to ensuring product effectiveness, minimizing toxicity and excelling in formulation technology.
International Business: SCIL supplies technical grade and formulation products to its distribution partners in different regions like Latin America, North America, Asia Pacific, Africa, Middle East & Europe spanning over more than 50 countries. It offers different technical and formulations leveraging synergies within SCC in the international market too.
Strengths
SCIL’s commitment to high-quality agrochemical solutions supports agricultural productivity and sustainable farming practices across the globe. The Company is a leading player with a well-balanced portfolio of both technical and formulation products, supported by backward integration for select molecules. Sumitomo Chemical has a strong presence across all product segments, including insecticides, herbicides, fungicides, fumigants, rodenticides, plant nutrition products, bio-rationals, and plant growth regulators. The company is among the few that offer both chemical and biological products in its portfolio. Additionally, it provides plant and crop growth regulators and nutrients.
In addition to its own products, the company is involved in the marketing of proprietary products from its Japanese parent, Sumitomo Chemical Company, in the agrochemicals, animal nutrition and environmental health segments. It also distributes products from its U.S.-based affiliate, Valent BioSciences, in the domestic market.
The company leverages its robust R&D capabilities to drive innovation in developing new products, processes and technologies, which provides it with a competitive edge while ensuring healthy growth. By continuously enhancing its R&D efforts, SCIL is dedicated to effectively addressing the ever-evolving market needs. The company’s deep market understanding, and research capabilities are reflected in the successful launch of nine new products over the past 18 months which includes 3 fungicides, 4 insecticides, and 2 plant growth regulators.
The Indian government’s support and policy reforms are playing a key role in shaping the outlook of the Indian agrochemical market. Initiatives such as the Make in India Mission and Atmanirbhar Abhiyan aim to boost domestic manufacturing, reduce import dependency and promote self-sufficiency in agrochemical production.
To boost its inorganic growth strategy, SCIL acquired a majority stake in Barrix Agro Sciences Pvt Ltd, a Bengaluru-based company specializing in R&D, innovation, manufacturing and marketing pheromones and other Integrated Pest Management and Integrated Plant Nutrition Management products. These products utilize dispersion technologies to monitor and trap agricultural pests. For its organic growth strategy, SCIL has completed a capex cycle by establishing two new plants to meet global requirements and has commenced commercial sales of products from these facilities, recently. The Company’s immediate focus is to increase production volumes from these newly built plants. Concurrently, the company is planning medium to long-term expansion of its manufacturing capabilities. SCIL has recently acquired a 50-acre freehold land parcel at Dahej and has already applied for environmental clearance for this site, ensuring a comprehensive long-term perspective.
The company’s success is driven by its efficient distribution network which encompasses over 70,000 dealers and 55 depots. Additionally, the company has a global presence in over 50 countries across the globe. Additionally, it benefited from a robust management, diverse and newly launched products, cutting-edge manufacturing capabilities and strong connections with farmers.
Financials
The company’s net profit surged 105% year-on-year to Rs 127 crore for the quarter ending June 2024, up from Rs 62 crore in the same period last year. Revenue increased by 16% YoY to Rs 839 crore, compared to Rs 724 crore in the previous year’s quarter. EBITDA doubled to Rs 161 crore, up from Rs 81 crore a year ago, with an operating margin of 19.2% for the quarter.
Outlook
Agriculture is crucial sector for India, supporting around 50% of the workforce and contributing over 15% of the GDP. It is essential for food security in a nation with a growing population of over 150 billion. The Indian agrochemical industry, which includes crop protection, is highly diverse, comprising small to medium-sized companies dealing in generic molecules, large multinationals with patented products, and firms producing both technical-grade pesticides and formulations. Additionally, there are companies that manufacture intermediates for pesticides. India benefits from low manufacturing costs and expertise in handling hazardous products, making it a major exporter of crop protection products. In this situation, SCIL benefits from the strong support of its parent company and a large product portfolio known for excellent quality.
The country’s strong export performance is supported by technically trained manpower, seasonal domestic demand and production capacities tailored for overseas markets. As India’s population grows the demand for food also rises, while urbanization reduces available farmland. This drives the need for efficient agrochemicals to boost crop productivity and protect soil health. Hence, the market is influenced by rising demand for plant nutritious and advanced crop protection solutions.
The government has implemented several initiatives to support agriculture sector, including increasing minimum support prices (MSP), launching the eNAM portal and providing direct benefits via PM Kisan Samman Nidhi. In addition to this, Govt of India support farmers through National Agriculture Insurance Scheme, which coverage of all food crops. Recent budgets have allocated significant funds to agriculture, aiming to improve farmers’ income to double and encourage the adoption of high-quality inputs. These measures create a favorable environment for the agrochemical industry and farming sector.
Risk
In October 2022, the Central Government banned the direct use of the herbicide Glyphosate by farmers, citing concerns about its impact on human and animal health. According to the notification, Glyphosate can only be used by Pest Control Operators for application in farmers’ fields. Glyphosate, falling under the herbicide category, is a significant product for the company and contributes approximately 14% to its annual revenue. However, the Delhi High Court has temporarily stayed the implementation of the ban and the case is ongoing. If a complete ban be enforced, it could potentially reduce SCIL’s topline by almost 12-15%. Another risk is related to the progress of the monsoon, which is a natural phenomenon.
Sector: Commodities
Market Price: Rs. 530.65 as on today
FV: Rs 10/-
Stock Name: Sumitomo Chemical India Ltd
BSE Code: 542920, NSE Code: SUMICHEM
Market Cap.: ₹26867 Crore
Book Value: Rs. 48.9
Segment: Pesticides- Agrochemicals
Incorporation: 2000
Headquarters: Mumbai, India
