5 days ago
Seeds of change: How Rallis India plans to double growth without spending big
Rallis India Ltd, a Tata Group company manufacturing fertilizers and insecticides, has been cruising along at a steady pace without much hustle, but a new chief is looking to overhaul the business hoping to accelerate its growth.
Chief executive Gyanendra Shukla, who took charge of Rallis India in April last year, aims to double its revenue in 5 years, including through acquisitions, even as he acknowledging that the company hadn't met expectations.
While Rallis India's business is profitable and stable, shareholders' expectations are different, Shukla said in an interview with Mint, explaining the company's renewed focus on growth after a few tepid years.
'They are comparing us against peers in the equity market and looking at returns and payouts. Frankly, we haven't met those expectations just yet. And that is why accelerating growth has become absolutely critical," said Shukla, who previously held leadership roles at US agrochemical company Monsanto.
'We have been sound financially, but what we have lacked is a little bit of aggression, courage, and risk-taking," he said.
Tata Chemicals Ltd is the largest shareholder in Rallis India with a 55% share, while public investors own the remaining 45%.
Rallis India's revenue inched up about 0.6% to ₹2,663 crore in 2024-25 from ₹2,648 crore in FY24, when revenue had declined 11%. Profit after tax fell 15% to ₹125 crore in FY25 from ₹148 crore in the previous year.
Even so, Shukla is confident the company can achieve high double-digit revenue growth over the next five years without incurring large-scale investments. 'We believe our current capacity is more than sufficient for the next five years."
Shukla added that while Rallis India's manufacturing capital expenditure will be incremental—there are no plans to, say, establish a ₹500-crore facility; 'that is completely off the table for now"—growth can be accelerated through inorganic opportunities.
'We are in active discussions with Japanese and global players to explore potential opportunities and collaborations. If something materialises, our first preference would be to utilise existing assets because that is the most efficient approach," Shukla said.
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Rallis India's growth strategy: From weakness to strength
Shukla expects Rallis India's seeds, soil and plant health, and domestic crop protection businesses to be the company's key engines of growth—the seeds business is where the 'gains will come from", he said.
However, of Rallis India's ₹430 crore revenue in the March quarter—slightly down from ₹436 crore in the year-ago fourth quarter—the seeds business contributed only ₹25 crore while the crop care business accounted for ₹405 crore, which includes ₹37 crore from the soil and plant health segment.
Modern breeding techniques can significantly enhance seed quality without necessarily involving transgenic methods or introducing foreign genes, Shukla said. Even conventional crossbreeding involves gene transfer, but controversies over genetically modified (GM) crops arise when bacterial genes are used, he added.
That said, Shukla believes there are dozens of other advanced tools in modern biotechnology that Rallis India is actively using, and 'that is where gains in the seeds business will come from".
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On areas of improvement for the company, Shukla explained, 'There are still notable gaps in our herbicide portfolio, and we are addressing these through new product launches and potential collaborations. Everything does not need to be manufactured in-house."
Rallis India said in its latest earnings call that herbicides, part of the crop protection business, had become the largest category in the non-core rabi crop (sown in winters) segment. However, the company admitted that it remained weak in this category.
'We are weak on cotton herbicide. We are weak on soyabean herbicide. We are weak on maize herbicide. So, all across categories, we are weak. So that portfolio, I mean that is about 30-35% of the crop protection market," Shukla told analysts during the call on 24 April.
Among Rallis India's key growth strategies, according to Shukla, is to drive expansion through herbicides and fill critical portfolio gaps. This year, the company will introduce two new products, with a rice herbicide slated for next year, the CEO said, adding that some products might be phased out to make room for new ones.
Also read | China's supply cut and global disturbances reduces India's fertilizer imports
A bigger challenge: Global trade
According to analysts at Nuvama Institutional Equities, Rallis India needs to improve its fungicide and insecticide portfolios as some of its products have not been well accepted by the market. The analysts, however, added that the company is actively working to improve product efficacy and better align its offerings with market needs.
Rallis India, which earns about 80% of its revenue from the domestic market, chiefly competes with Dhanuka Agritech Ltd, PI Industries Ltd, UPL Ltd, BASF India Ltd, and Coromandel International Ltd in India. In overseas markets, its main competitors include Bharat Rasayan Ltd, Sharda Cropchem Ltd, Sumitomo Chemical India Ltd, and Meghmani Organics Ltd.
The broader agrochemicals market that Rallis India operates in has been buffeted by some recent macroeconomic and geopolitical challenges.
For one, following the US's trade war with China, there are concerns that Chinese suppliers may dump crop protection inventory that was meant for the US into other markets, potentially disrupting price stability in India.
Also, the global crop protection market experienced a sharp decline in value terms in 2024, hurt by weak agrochemical and commodity prices, high input costs, and unfavourable weather conditions in Europe and the Asia-Pacific, according to AgbioInvestor, a Scotland-based consultancy in the agrochemical market.
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Nuvama said in a report dated 24 April that elevated channel inventory in domestic trade and patchy demand in international markets for Rallis India compromised near-term growth triggers for the company. The brokerage has a 'reduce' rating on Rallis India as it reckons the challenging business environment may restrict material improvement in return on equity from the stock.
Kotak Institutional Equities, which has a 'sell' recommendation on Rallis India, flagged in a report dated 14 April that 'the (fertilizer and agricultural chemicals) industry environment remains difficult, with the tariff war further complicating an already uncertain outlook (for the industry)".
Rallis India's management has clarified that only one of its major products, acephate, is subject to the reciprocal tariffs imposed by the US.
Even so, domestic institutional investors (DIIs) have been gradually trimming their stake in the Rallis India stock, while foreign institutional investors (FIIs) have been steadily increasing their exposure to it. As per BSE shareholding data, DIIs held a 13.78% stake in Rallis India as of March, down from 14.78% in December 2022, while FIIs raised their holding to 11.41% from 7% in that period.
While Nuvama has a price target of ₹182 per Rallis India share, Kotak has raised its target price from ₹210 to ₹230. On Thursday, Rallis India fell 1.23% to ₹318.00 per share on NSE, while the benchmark Nifty 50 inched up 0.53%.
