Thread by @ValueEducator

Detailed Analysis of Bharat Rasayan - A fully integrated player in the agrochemical space

CMP - ₹ 9,816

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1. COMPANY OVERVIEW
• Bharat Rasayan is in the agrochemicals business where it manufactures intermediates, technicals and formulations. It is also into the CRAMS business where the majority of the customers are global MNCs.

2. BUSINESS AND KEY PRODUCTS
• Bharat Rasayan is present in all parts of the agrochemical value chain except the key starting materials as shown in the image.

• However, the major focus of the company is towards technicals and intermediates. The key products of the company in these categories are as shown in the image.

• The company has a 50% domestic market share in Meta Phenoxy Benzaldehyde which is one of the intermediates used in the making of Lambda Cyhalothrin. The company is among the preferred suppliers in the international market for their key products. The company has a portfolio

of 20-25 molecules and has been working on registering these molecules in different international markets. The company has a presence in international markets such as East Asia, Europe, South America and the Middle East.

3. MANUFACTURING FACILITIES
• The details of the manufacturing facilities are as shown in the image:

• The company established its facility in Dahej in 2012 with an initial investment of $30 million which had a technicals and intermediates capacity of 12,300 MTPA and a formulations capacity of 12,000 MTPA. The company set up its unit in Dahej to reduce the dependence on

its manufacturing unit at Rohtak, Haryana. In September 2019, the company planned to expand its technical and intermediate capacity at Dahej by 16,900 MTPA.

• The company is planning to set up a greenfield project at Saykha Industrial Estate which will come onstream in the

next 2-3 years. The company has done an investment of ₹300- 310 crores and plans to set up 37,400 MTPA of technicals and intermediates and 12,000 MTPA formulations capacity. They filed for the environmental clearance on 28 April 2022 and got the environmental clearance on

17 June 2022. The company has planned this capex to cater to the increasing demand from various MNCs, to expand capacities of intermediate products for backward integration and to expand capacities of some of the key technical products.

4. CUSTOMERS OF BHARAT RASAYAN
• Some of the customers of the company in the domestic market are UPL and Indofil Industries ltd as shown in the image.

• The company sells technical products to BR Agrotech Ltd which then converts these technical products into formulations at its facilities in Kathua, Jammu and Kashmir and Panoli in Gujarat. The formulations produced in these facilities are made as per customer requirements and

then sold to companies like UPL and Indofil Industries Ltd in the domestic market.

• The major MNC customers of the company are Nissan Chemical Corporation, Mitsui Chemicals, Bayer CropScience AG &Syngenta AG which are based in the Japanese and European markets as shown below

• You need to fulfill certain requirements to get business from an MNC. Some of these requirements are product purity and quality, timely delivery, low dependence on China for raw materials and flawless execution. The MNC contracts usually last for 5-10 years with clauses for

raw material price pass-through and auto-renewal till the time the company screws up. As price is not an important criteria for these MNC customers, it takes years to build a relationship with them even for generic molecules. If a company does not screw up, a single contract for

a patented molecule can lead to long contract life, highly sticky relationships which will lead to a better quality of earnings.

• Bharat Rasayan is into CRAMS for its MNC customers where the majority of the contribution comes from generic molecules and about 5-10% comes from

patented molecules. The company is planning to increase the share of patented molecules to 20-25% over the medium term. To strengthen its relationship with MNC customers, Bharat Rasayan has done backward integration to reduce import dependence on regions such as China, Hong-Kong,

Singapore and Belgium. The company used to import more than 50% of its raw materials from China and as a result of their focus on backward integration, they have been able to bring down this dependence to 30% by 2020.

5. JV WITH NISSAN CHEMICALS
• Nissan Chemical Corporation(NCC) is a Japanese based research company & one of the largest manufacturers of agrochemicals in Japan. The company operates globally with the main production site being at Onoda, Japan for proprietary technical products.

The company saw a rise in demand for their new and existing crop products and were looking to invest in manufacturing facilities outside Japan.

• Since 2013, Bharat Rasayan was toll manufacturing Phenthoate which is the proprietary molecule of NCC. This led to building of a

relationship with mutual trust between these two companies.

• Therefore on 18 February 2020, these companies entered into a JV with an investment of ₹150 crores to set up a facility in India for the manufacturing and export of technical grade products.

The name of this JV would be Nissan Bharat Rasayan Pvt Ltd which will oversee the greenfield capacity expansion at Saykha the details of which have been covered earlier. NCC will have a 70% stake in this JV with the remaining stake being with Bharat Rasayan.

6. ENTRY INTO BRAZIL
• The company is planning to enter Brazil which is one of the largest market for agrochemicals
The cost of filing one molecule in Brazil is around ₹5 - 7 crore. The plan of the company for the Brazilian market is summarized in the image below:

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