PUNJAB CHEMICALS & CROP PROTECTION LIMITED
CONTENTS About PCCPL Industry structure Business model Agro Chemicals Divisions Two key acquisitions & benefits Business structure post acquisition Other division highlights Competitive landscape Future strategy Financial highlights Shareholding pattern 2
ABOUT PCCPL From manufacturing basic chemicals such as oxalic acid, PCCPL is a fast-growing agrochemicals & formulations company with synergistic pharma, industrial chemicals & international trading divisions. PCCPL has a comprehensive product portfolio, strong brand presence & a wide distribution network. PCCPL’s products are well accepted in the domestic retail market & are also exported to large MNCs & brands across 60 countries covering 5 continents. Acquired two companies in the last two years : Sintesis Quimica SAIC based in Argentina and Agrichem based in Netherland. The company’s shares are listed in BSE, Ludhiana and Delhi Stock exchanges. 3
2007: Stake in Source Dynamic PLC, US 3 decades of moving up the value chain 2007: Acq. Of Agrichem Netherlands (SD Agchem) 2006: SDAG Chem. 85% stake in SQ Argentina 2006: Formation of SDAG Chem. Belgium 2006: Amalgamation of all group companies ADIL / IA & IC / STS / PAURAJ 2003: Separate manufacturing facility for pharma sector Alpha Drug India taken over from DSM 1993 - 1994 : Focus on agrochemicals & spl chemicals. 1983 : Diversified into diethyl oxalate & specialty products 19 th November, 1975 in joint collaboration with Excel Industries Ltd, Mumbai and PSIDC under the name of Punjab United Pesticides & Chemicals Ltd 4
Our presence PCCPL has 7 state-of-the-art manufacturing plants at strategic multi-locations. All plants are ISO 14000 and ISO 9001 certified. 5
ABOUT PCCPL All products are manufactured in compliance with current Good Manufacturing Practices (c. GMP's) for both domestic and international markets. The plants are situated at different locations which ensures that the production process is never hindered due to vagaries of climate, supplies, markets or labour problems. Strategic location: Formulation plant at Chiplun which is in close proximity to major horticulture farms in Maharashtra & also cater to the southern tea gardens. 6
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INDUSTRY STRUCTURE Insecticides Herbicides Fungicides Agro chemical industry In terms of vertical levels of business, the market can be segmented into three types: Intermediates for technical Technical & their bulk formulations Small pack branded formulations PCCPL is present in all three segments across all vertical levels of business 8
PCCPL Agro chemicals Division 75% of Revenue Technical Bulks Mainly exports Industrial Chemical Division 10% of Revenue Formulations Pharma Division 10% of Revenue International Trading 5 % of Revenue Intermediates for technical oxalic acid derivatives Retail market Insecticides Pesticides Fungicides Herbicides Biological agro products 9
o Insecticides o Herbicide o Fungicides o Plant Growth Regulators o Bio Products o Sulphur Range 10
World’s largest producer of oxalic derivatives K E Y Forward Integration – niche herbicides & biogradable Wide product basket & in house R&D for new molecules Robust local distribution network S T R E N G T H S Export to 60 countries All seasons revenue 2 key acquisitions Immense growth potential in the industry 11
ALL SEASON BUSINESS, DE-RISKED, DIVERSIFIED First 6 months of fiscal excellent domestic market sales (formulations) Next 6 months is an excellent season for agro technical business abroad. Exports to nations where agriculture is important Israel & Europe Netherlands, Belgium, Holland). Key acquisitions will enable the foray into the international formulation segments. Strengthen product pipeline & biological agro product range. 12
FULLY INTEGRATED Oxalic acid & • World’s derivati largest producer. ves • 40% for in house i. e. raw material for agro bulks. • Will also be used as raw material by the 2 newly acquired companies. Agro • In house raw material for chemical formulation bulks Formula • tions & Phosphorous Sulphur based. • Export: Europe, Israel, South East Asia, Latin America, USA. • Did not focus on competitive area of pesticides & insecticides. • Clients: Syngenta, Agan, Dow Chemicals, etc. • Developed environmentally friendly & niche segments. • Will also supply to Agrichem & Sintesis. • Biological crop. • Future: Regulated markets. Agrichem has a good portfolio of registered crop protection products in Europe. Sintesis Quimica has a comprehensive biological products & formulations range. 13
MAIN DIVISION I. Agro Chemical Division (ACD). Manufactures a variety of basic chemicals, chemical intermediates, Agro chemicals and specialty chemicals. Agro Division – Derabassi is DNV ISO 14001 & ISO 9001 Certified 14
I. OXALIC ACID & DERIVATIVES Sales of oxalic acid & derivatives accounts for nearly 25% of the Agro Chemicals Division Revenue. PCCPL has an installed capacity of 12000 MT per year of oxalic acid & 3850 MT per annum of oxalic acid derivatives. PCCPL is the world largest producer of oxalic acid. Moved up the value chain to produce derivatives. Oxalic acid is used in the production of various agro chemical bulks, textile processing, leather finishing , metal treatment & in the manufacture of various chemical derivatives. 15
II. FORMULATIONS PRODUCT RANGE Insecticides Pesticides Fungicides Herbicides Biological agro products Basic use Kills insects Kills pests Prevents / treats growth of fungus Soil nutrients. Prevents growth of weeds Nutrients for the soil. Nonchemical based Main Crops Seeds - Wheat, Paddy, Cereals, etc. Seeds – Wheat, Paddy, Cereals, etc. Fruits (grapes, mango, banana, oranges, citrus, apples), Tea, Vegetables (peas, beans, chilli, onion, groundnut), Paddy, wheat. All crops, sugar & beet products Wheat & Paddy 40+ Branded products 13 8 13 7 4 Key Regions & seasons All India, all seasons (Kharif & Rabi) All India, all seasons (Kharif & Rabi crops) Western (horticulture belt), South (tea), north (apples). Western & all. India Environment – friendly. Growing CAPACITY IN FUNGICIDES INCREASED FROM 800 TONS to 2000 TONs P. A. to cater to the increasing domestic demand. 16
OPPORTUNITY MATRIX: STRONG DEMAND ON THE HORIZON India Agrochemical industry in India is the fourth largest in the world (after US, China and Japan) estimated to be Rs 6, 000 -crore. In last 5 years, demand has picked up (11% CAGR) due to better monsoons. Exports account for nearly half of the revenue has been growing at about 25%. India has one of the lowest use of chemical fertiliser per acre of arable land estimated at 75 kg as against 470 kg in Egypt, 430 kg in Netherlands, 270 kg in China, 180 kg in Bangladesh. Prices of agrochemicals in India are one of the lowest in the world. Strong agro boom has lead to the entry of large Indian corporate houses like ITC, Reliance Retail, Godrej, Cadbury India, Himalaya Drugs, etc. which has lead to large corporate & contract farming projects. Several agricultural sectors like horticulture, floriculture, development of seeds, cultivation of vegetables, mushroom under cultivated conditions have been thrown open to 100 % FDI. 17
OPPORTUNITY MATRIX Agrochemicals has an enviously strong industry outlook. Indian food grain production (rice, wheat, coarse cereals and pulses) has grown at a CAGR of 1. 3% while population growth is estimated at 1. 6%. The per capita consumption is also fast increasing. Hence to be self-sufficient production needs to grow at 3. 3% p. a. It is estimated that India will face a food grain deficit of 56 mn tons by by 2018 (&140 mn tons by 2030)* if growth stagnation is not reversed. For this crop yield has to improve dramatically. Use of the agrochemicals in India needs to increase. (*Source Economic Survey, Kotak Securities) 18
OPPORTUNITY MATRIX World wide Estimated global agrichemical market size is USD 40 billion Estimated Global Agrochemical sales (2006) By Region By Category Others 4. 90% ROW* 7% Latin America 0. 168 Europe 0. 26 Fungicides 23. 00% Herbicides 45. 80% Asia 0. 243 North America 0. 256 Insecticides 26. 30% * Rest of the world Strong agro commodity prices underlines the need for higher crop yields. Immense potential for the branded formulation business. 19
OPPORTUNITY MATRIX Export: Agro technical/Intermediates Indian exports of agrochemicals have shown an impressive growth over the last five years. The key export destination markets are USA, UK, France, Netherlands, Belgium, Spain, South Africa, Bangladesh, Malaysia and Singapore. The size of the global market is estimated to appx. USD 30 billion & even 0. 5% share of the global market fetches a turnover of USD 150 million range. The competition in the global market is mainly restricted to MNC’s (which are the originators & creators of various agro chemical molecules), Indian & Chinese players. Not many other countries have necessary technology & processing capabilities, infrastructure, ability to adhere to stringent quality & environmental policies required for the exporting agro technical / intermediates, hence provides an opportunity. PCCPL supplies to several large global originators & creators across 60 countries with large quantities exported to Israel & Europe. 20
TWO KEY ACQUISITIONS In Netherlands and Argentina 21
PUNJAB CHEMICALS acquisition in Latin America SINTESIS QUIMICA S. A. I. C. is an Argentine company devoted to manufacturing special chemicals & biological products for industry and agriculture. It was founded in 1951 by a group of Chemical Sciences graduates. 22
ACQUISITION 1: SINTESIS QUIMICA SAIC In FY 06, PCCPL acquired Sintesis Quimica SAIC, a leading Argentine agrochemical & formulation company for USD 10 million. Comprehensive product range. Two state-of-the-art manufacturing facilities in Argentina. Strong distribution network in South America. Services global agro formulation companies like Nufarm, Syngenta, etc. Domestic sales account for 70% of the total revenue; balance is exports. Export to: Latin America, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, Uruguay, Venezuela, China, Thailand, Singapore, Taiwan, Turkey, USA & Canada, etc. Company’s revenues appx. : USD 20 million with EBITDA margin of 12 -13%. Revenue target is USD 35 million in next 3 years. 23
ACQUISITION 1 COMPREHENSIVE PRODUCT RANGE Biological • Inoculants for soya, wheat and corn. Agro based products & formulations • • • Soil disinfectants Sprout suppressants in potatoes, onions, garlic Fungicides Insecticides Herbicides. Industrial and formulation based products • Leather industry • Wood preservation 24
ACQUISITION 1 KEY BENEFITS TO PCCPL Entry into regulated market of Latin America – BRAZIL (BRIC nation) & Argentina Cross sell products. Service reputed brands. Provide a thrust to the development of biological products Widen product basket 25
PUNJAB CHEMICALS acquisition in Netherlands Founded in 1934, Agrichem is mainly focused on formulating generic crop protection products & is one of the leading companies with regulation data (EU basis) 26
ACQUISITION 2 Acquired Netherlands-based, agrochemical company Pegevo Beheer BV (Agri. Chem) for Euro 39. 5 million. Euro 25 million has been paid for acquiring portfolio of registered products. Core activities include: R&D Obtaining & defending Product registrations Formulations Own brand sale & distribution 3 rd parties generics Products are registered in the Netherlands, Belgium, the UK, France, Germany, Ireland, Denmark, Italy, Slovakia, Czech Republic, Belarus and Switzerland. 27
ACQUISITION 2 Undertakes substance formulation for crop protection with a product range of herbicides, insecticides and fungicides. Main crops: Beets, Cereals, Potatoes, Flower bulbs, Fruit dipping & Rapeseed. Key export markets: Belgium, Denmark, Ireland, Netherlands, Switzerland, Germany, England, France, Greece, Austria, Poland, Slovakia, Czech Republic, etc. Agri. Chem has a crop protection registration department, in-house R&D and quality control facilities & its own formulation facilities. Revenue: Apprx Euro 26 million. EBITDA margin appx. 13 %. Target: Euro 36 -40 million in next 3 years. 28
ACQUISITION 2 Agrichem’s GLP Laboratory Advantages: Analysis of all incoming & outgoing products R&D (for product registration purposes) Quality asurance Results Continous quality assurance Decreased timelines with regards to products development 29
ACQUISITION 2 30
KEY BENEFITS TO PCCPL Entry into regulated market; access to data Save on registration cost. Immediate and direct access to the market instead of waiting period of 3 -5 years. 31
ADVANTAGES OF TWO ACQUISITIONS Entry into regulated formulation markets of Europe + South America Access to technical data of registered products which also helps enter into the US market Cross selling of products Provide thrust to biological product range Overall margin improvement of PCCPL due to forward integration 32
FLOWCHART OF SUBSIDIARY COMPANIES OF PCCPL STS UK LTD 100% SD AGCHEM EUROPE N. V. 100 % SINTESIS QUIMICA 85 % (Argentina) SD Agrichem Netherland B. V. 100 % PSD LLC 40 % (USA) SOURCE DYNAMIC 20 % (USA) AGRICHEM B. V. 100 % PG CROP PROTECTION LTD 100 % (England) N. V. AGRICULTURAL CHEMICALS 100 % (Belgium) AGRICHEM HELVETIA GMBH 100 % (Switzerland) NEDAB APS 50 % (Denmark) KAPCHEM LTD 50 % (Ireland) 33
COMPETITIVE POSITIONING PCCPL’s Indian infrastructure is more inclined towards fungicides & herbicides which supports the company’s long-term retail forward integration strategy & growth plan. Since insecticides is the largest segment in India, it is more competitive while herbicides & fungicides is less competitive being a new (niche product). Overseas also the growth potential is immense. Example in developed countries: environmentally friendly herbicides are preferred (account for nearly 65% of the market share) while use of insecticides is declining (barely 20%). Share of fungicides is fast growing and is estimated to be about 15% of the market. 34
Higher Excel Crops Ballarpur Excel PCCPL Inds. , Industries GACL PCCPL Mid-level PCCPL Lower end share market Relative United Rallis India Phosphorous Others PCCPL Insecticides Unorganised sector Phosphorous based chemicals Agro chemicals technical – oxalic acid & derivatives Niche. Sulphur-based formulations & herbicides Future – Biological agro products 35
OTHER BUSINESSES Pharma Chemicals Division (PCD) (10% of total revenue) Manufactures anti-bacterial bulk drugs & intermediates of penicillin based antibiotics, Trimethoprim (TMP), Gallic Acid & its derivative products. Trimethoprim, the premium flagship product of the company is a bacteriostatic antibiotic manly used in the prophylaxis and treatment of urinary tract infections (Cystitis). Key clients include: GSK, Ranbaxy. Also undertake contract manufacturing for MNCs like GSK & Ranbaxy. This division comprises of the business of erstwhile Alpha Drugs Ltd. which has merged with PCCPL under a scheme of merger. The manufacturing facilities are located on the Chandigarh – Ambala highway. 36
The Pharma Division -Alpha Drugs – Lalru (near Chandigarh) is ISO 9001 certified. 37
OTHER BUSINESSES Industrial Chemicals Division (ICD) (10% of total revenue) Manufactures Phosphorous based chemicals like Phosphorus Trichloride, Phosphorous acid, Phosphorous Oxychloride, Phosphorus Pentoxide, Phosphoric Acid etc. This division comprises of the business of erstwhile STS Chemicals Ltd. which has merged with PCCPL under a scheme of merger. The manufacturing plants are located at Pimpri (near Pune) and Tarapur (Thane District, Maharashtra) Key Clients: Dr Reddy, GSK, Ranbaxy, Pepsi, Coke, IPCA Industrial Chemical Division - Pune & Tarapur are DNV ISO 9001 certified. International Trading Division (5 % of the total revenue) Explores opportunities in local trading i. e. importing products for local sales. Using inherent market understanding and market trend to identify product in high demand importing to different domestic players. 38
FUTURE STRATEGY Value addition by forward integration for various agro chemical and industrial chemicals. Unlike other agro pharma companies, PCCPL is not foraying into seeds rather it is adopting the branded retail formulations route & is focusing on next-generation environmental friendly biological agro products. Through Sintesis develop biological agro product range. Tie-up also in place with a local company in Hyderabad. Tremendous potential – environment friendly. Product has great potential in US & Canada. Through acquisition consolidate presence in formulation market of Europe, South America, North America and foray into Africa & South East Asia. Major thrust is value-added agro chemical products in the international market particularly in Europe, US & Canada. 39
FUTURE STRATEGY Continuous R&D to introduce latest herbicides and bio products in domestic and international markets (after obtaining registrations). Explore contract manufacturing opportunities. For USA market, PCCPL has formed a JV with local partner & is planning to spend USD 10 million over a period of next 3 years to get its products registered in USA. Exploring opportunities to acquire product portfolio in USA. Evaluating opportunities to backward integrate into phosphorus space. 40
SHAREHOLDING PATTERN Others; 0. 36% Individuals, 40. 49% Corporate Bodies, 8. 90% Promoters, 47. 36% BSE Code: 506618; NSE Code: Punjabchem; Share outstanding: 6. 6 million. Free Float: 3. 5 million shares. Face Value: Rs 10. Institutions, 2. 89% (As on March 31, 2008) 41
THANK YOU Registered office: SCO 417 – 418, Sector 35 -C, Chandigarh – 160 022. Group Corporate office: Plot No. 645 – 646, 4 th/5 th Floor, Oberoi Chambers II, New Link Road, Andheri (West), Mumbai – 400 053. Disclaimer The information contained in this document is intended only for private use during the presentation and should not be distributed to parties outside the presentation. Punjab Chemicals and Crop Protection Limited accepts no liability whatsoever with respect to the use of this document or its content. Statements in this “Presentation” describing the company’s objectives, estimates, expectations or predictions may be “forward looking Statements” within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the company’s operations including demand supply conditions, cyclical nature of the company’s principal markets, changes in government regulations, tax regimes, economic developments within India and factors such as litigationnegotiations. The company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent developments, information or events, or otherwise. 42
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