CRISIL Equities has assigned “CRISIL IER” fundamental grade of ‘3/5’ to Insecticides India (IIL). The grade indicates that the company’s fundamentals are ‘good’ relative to other listed equity securities in India.
The assigned fundamental grade reflects the doubling of IIL’s market share from 1.2% in FY05 to 2.4% in FY10 amidst high competition in the domestic pesticides industry. An effective branding strategy - launching self-owned brands, acquiring ‘high recall, but off-shelf’ brands and entering into a technical collaboration with a foreign player - has enabled IIL to log higher growth than the industry.
Moreover, the grade factors in IIL’s successful foray in the technical segment, an input to manufacturing formulations, which is expected to enhance the company’s profitability through backward integration. IIL’s diversified product portfolio, pan India distribution network and capacity expansions - in the formulations and technical segments - also support the grade.
However, the grade is constrained by the fact that IIL’s margins are relatively lower than that of its peers because of its product portfolio, which is skewed towards lower-margin generic formulations. Further, IIL’s branding strategy entails higher advertising spend. Industry risks such as unpredictable weather conditions, lengthy and expensive registration processes, risk of ban on certain pesticide products and threat of pest-resistant biotech seeds further moderate the grade.
CRISIL IER (Independent Equity Research) is an independent, unbiased opinion on fundamentals and fair valuation of the company. CRISIL IER encompasses a comprehensive analysis of the four pillars of sustainable value creation, namely: Industry and business prospects, financial performance and outlook, management capabilities and corporate governance.
IIL manufactures insecticides formulations for crop protection. It has two formulations manufacturing units: one each in Chopanki, Rajasthan and Samba, Jammu.