Local demand to prop up crop protection SMEs: CRISIL SME Tracker

Firm domestic demand will prop up the Indian pesticide industry despite a contraction in exports this fiscal, according to CRISIL Research.  

Exports, which account for 55 per cent of the pie, are likely to decline by 3 per cent due to lower demand from key importing nations such as the US, Brazil and France.

However, the domestic-focused industry is expected to grow about 6 per cent, keeping overall growth at 1-2 per cent.

Domestic offtake of herbicides is expected to increase amid labour shortage in a few states. In the insecticides and fungicides segment, an expected increase in kharif crop acreage by 2-3 per cent should support growth. 

Large players are expected to reap the benefit of lower crude oil prices, SMEs, which account for 15-20 per cent of the overall industry and have an over 50 per cent dependence on imports, face disruption in raw material supplies and increases in prices of imported raw material. 

While margins of large pesticides players are expected to expand50-60 basis points, supported by higher demand and lower crude oil prices, SMEs are likely to see a slightly lower expansion.

SME clusters such as Ahmedabad — more focused on domestic manufacturing — are expected to fare better compared with those in Delhi and Hyderabad, which have a larger share in exports.