Coromandel International 2020 Annual Report Takeaways!

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  • India is the 2nd largest agricultural producer globally, with a net trade surplus. Its productivity levels have remained relatively low, resulting in a low farm income.
    • 1st Green Revolution was driven by Agri-inputs and resulted in achieving self-sufficiency in food grains.
    • 2nd Green Revolution will be powered by smart agricultural practices – superior products, smarter delivery mechanisms and agri-technology adoption.
  • Reason for lower productivity in Indian agriculture?
    •  constrained by the structural limitations and resource constraints:
      • Small landholdings
      • Monsoon dependency 
      • Lack of output marketing infrastructure.
  • What becomes inevitable with the further resource shrinkage and the need to feed an ever-increasing population?
    • Agriculture needs to reinvent itself, adopt smart technologies and sustainable agriculture practices.
    • Initiatives in the areas of direct benefit transfers, Agri loan subvention, direct marketing, efficient procurement and exemptions to Agri input operations, promoting farm mechanisation, etc. were introduced.
    • The COVID crisis has accelerated the digital adoption in the areas of digital marketing, farmer and dealer engagement and supply chain.
  • R&D & Capex highlights:
    • ‘Product as a Service’ will be a key theme in the future.
    • Backward Integration: Commissioned our second Phosphoric Acid plant (India’s 2nd largest manufacturer and marketer of Phosphatic fertiliser) 
    • In the Crop Protection segment, Established 3 new plants for the manufacture of Pymetrozine, Pyrozosulfuron, and Mancozeb WDG. 
    • Infrastructure upgrades including new warehouses at Dahej and Sarigam and pilot plant upgrade at Ankleshwar were also undertaken.
    • Analysing soil, weather, and crop data through various new-age, in order to empower the farmers with predictive farming skills. 
      • Added 30 new Nutri Clinics to extend farm advisory and crop and soil diagnostics services to the farmers.
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  • CDMO opportunity in the Agrochemical space due to low cost & geopolitical issue:
  • The Government has announced major reforms:
    • On the income side, Minimum Support Prices have been set at 1.5 times the cost of cultivation. Focus is to double farmer’s income asap.
    • The Government is pushing the farmers to participate through National Agriculture Markets, & presently ~1000 mandis are connected electronically.
    • Direct Benefit Transfer (DBT) has stabilised in Fertiliser wherein farmer’s purchase is getting captured through ~2.25 lakhs point of sales.
    • Piloting models to develop linkages between soil health and farmer purchases.
    •  Under Make in India, India is likely to achieve self-sufficiency in the Urea sector as 7-8 million tons of additional capacities are likely to come up in the next 2-3 years.
    • Increase in agriculture credit by Rs 3 lakh crores, improving the situation in water-stressed districts
  • Exports of agriculture and value-added products have a huge potential to grow. 
    • Going forward, the agriculture sector will attract investments from both the Government and private sectors, which will help to improve farm productivity and income.
  • Financials have compounded over the last 5 years while making the balance sheet stronger (debt/equity from 1.1 to 0.37)  with consistent cash flows (OCF for FY20: Rs 1867crs)
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  • Business Verticals:
  • Fertiliser: Sales volumes have moved up by 4% to 31.4 lakh tons driven by the manufactured product sales volume, which increased by 11% to 30.7 lakh tons.
    • Plants operated at their highest ever capacity, producing 29.8 lakh tons of phosphatic fertilisers during the year.
  • Crop Protection:  key focus area and growth engine for your Company
    • 6 new products, including 2 from indigenous technical manufacturing (Pymetrozine and Pyrazosulfuron ethyl), one patented indigenous combination, and 3 co-marketing.
    • Sales declined by 6 percent, largely on account of curtailed production of the Sarigam plant during Q1FY20.
  • Specialty Nutrients: 2 new products: Fitsol pomegranate and Bosmax.
  • 4900 permanent employees. 
    • Employees other than managers had an increase of 13% in salary.
    • Managerial personnel had a salary increase of just 5%.
  • Promoters reduced stake by 0.15% (stake: 61.63%)
    • 6 out of the top 11 institutional shareholders increased stake.
  • 8% of trade receivables impaired (Rs 135crs).
  • Some of the important risks:

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The post Coromandel International 2020 Annual Report Takeaways! appeared first on JST Investments.

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