Hello Sir,

Hope you are doing well.

Agrochemical is an important industry for India, considering we have the largest population to feed to.

2022-23 was bad for the industry with pricing challenges and excess supply from China.

A lot of stocks are down 50% from highs. We therefore decided to look at some leading players to identify potential investment opportunities.

Below, we have shared notes from the Aug’22 credit rating report of Punjab Chemicals & Crop Protection. Hope you find the details useful for your own investments or to add the stock to your watch list.


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Punjab Chemicals & Crop Protection – Notes from Aug’22 Care credit rating report

– General Points

  • Incorporated in November 1975, Punjab Chemicals and Crop Protection Limited (PCCPL) was promoted by Shri S.D. Shroff in association with Excel Industries Ltd and Punjab State Industrial Development Corporation (PSIDC)
  • In March 2006, the name of the company was changed to PCCPL with all its divisions – Agrochemicals, Pharmaceuticals, Intermediates, Chemicals & International Trading, under one umbrella
  • The company specializes in agrochemicals which are key revenue driver for the company (70-80%)
  • It is into Contract Research and Manufacturing (CRAMS) largely for agrochemicals
  • CRAMS accounted approximately ~60-70% of the revenue over the years

– Management

  • Mr. Shalil Shroff (Managing Director), the second-generation promoter has an experience of over 3 decades in the chemical industry
  • Mr. Mukesh Patel (Chairman) is experienced in finance and corporate management for more than 4 decades
  • Mr. Vinod Kumar Gupta (Chief Executive Officer, CEO), a Chemical Engineer, has more than 24 years’ experience in Operations Management in large Petrochemicals and Oleochemicals sector
  • Dr. S. Sriram, (CFO), is a PhD in supply chain management and has 34 years of experience including 16 years of experience in UPL Limited

– Business Details

  • PCCPL has arrangements with multinational companies under CRAMS business model which is based on cost plus pricing mechanism
  • The contract has a tenor of 5 years and most of these agreements get auto renewed
  • Product registration challenges like long tenor, high cost etc., at customer’s end, increases probability of contract renewal by the clients to a large extent
  • Top five products driving revenue of PCCPL contributed around 40% (PY: 55%) of the total sales in FY22
  • Further, the top 5 customers contributed nearly ~72% to total operating income in FY22 (similar to FY21)
  • Major sales to single foreign market, Europe exposes PCCPL’s business to geographical concentration risk
  • The major export destinations are Europe, Japan, Netherlands, Belgium, Israel and Italy

– Raw material

  • Around ~60-70% of the operating cost of the company consists of raw material expenses
  • The company has a long-term contract with the suppliers for key raw materials – Metamitron and Hydrazine Hydrate, imported from Europe, China and Japan
  • Around ~30-35% of its major raw materials requirements are met through imports, hence is exposed to foreign exchange fluctuation risk as well
  • The forex risk is partly covered by natural hedge, PCCPL being net exporter (~60% of sales)

– FY 22 performance

  • During FY22, PCCPL witnessed significant growth of 37.46% in total operating income (TOI) over FY21
  • The growth was driven by healthy demand in agrochemicals and orders in hand under contract manufacturing arrangement
  • Further, addition of new molecules (3 molecules in FY22) and clientele resulted in scaling up at better pace



Disclaimer: This is not a recommendation to buy/sell Punjab Chemicals & Crop Protection. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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