Insecticides India A stock with good Opportunity size

While all sounds good (including the R&D, new product launches, positive sales and PAT growth), the red flag at the moment appears to be the generation of ZERO Free Cash Flow by the Company over the period of last 9 years.

If the sales and/or profits are not translating to cash despite revenue growing from 250 crores to 1100 crores+, appears to be a cause of concern.

Moreover, the business is cyclical in nature and depends a lot on normality of monsoon season coz company derives ~40% of its revenue from Jul-Sep quarter. Considering the volatility, working capital is required to maintain inventory which is reflected in the financial numbers of annual reports.

Considering that UPL Limited also caters to crop protection segment, it generates huge free cash flows.

Could not comprehend why Insecticides does not have the same trend.

Disclosure: Not holding


Had been digging more about the finer aspects of the business and found this document apparently provided to BSE for a QIB offer:

Though a bit outdated, gives unique insights into the business including the break-up of sales of ‘navratna’ products and the capacity utilization (as at March 31, 2015).

For ready reference, have jotted down the pointers including the bear case (refer PDF attachment).Analysis - Insecticides India.pdf (484.6 KB)


Agrochemical maker Insecticides India Ltd (IIL) has received an environment clearance for setting up a pesticide manufacturing unit in Bharuch, Gujarat that will entail an investment of Rs 40 crore, according to an official document.

The union environment ministry has given the go-ahead to IIL’'s proposed project after taking into account the recommendations of a green panel.

The clearance, however, has been given with some conditions, the document added.

As per the proposal, IIL wants to set up a pesticide and pesticide intermediates manufacturing unit with a production capacity of 2,500 tonne per month at Dahej in Bharuch district in an area of 52,000 square metre.

The estimated project cost is Rs 40 crore and will generate direct and indirect employment for 150 persons.

IIL has six formulation units in Chopanki (Rajasthan), Samba and Udhampur (Jammu & Kashmir), Dahej (Gujarat). It also has technical synthesis plants at Chopanki and Dahej to make technical grade chemicals.

2 Likes good blog post

What are you trying convey via the image of you can explain would be helpful to all? :slight_smile:

Invested at current levels waiting for bumper results due to very positive commentary by management in the last quarter and also release of new products.


In the first half, company generated profits of 66 crores vs 87 crores in FY20. Debt reduced to 62 crores with Cash & Cash Equivalent of 82 crores. It is available at 870 crores Mcap, 12 PE compared to peers trading at ~20 PE.

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Q2 21 Concall:

  • Many areas suffered due to floods, heavy rains particularly North eastern areas. Heavy rains also impacted the Central zone. Despite having good rainfall, opportunity to use pesticides was lower
  • Operations were impacted due to lockdown restrictions on travelling(being in touch with customers/distributors/farmers)
  • Total branded sales declined by 15% due to uneven rainfall and less pest infestation. Maharatna sales decreased by 4% while other branded sales decreased by 25% y-o-y
  • Institutional sales increased by 9%
  • During the qtr, company was more focussed on cash sales. Working on Cash & Carry basis, small credit given to certain areas. Credit days were 100-150 days. Trying to reduce this to 120 days. Focusing now on converting into cash sales. More than 50% of business will be in Cash & Carry Model. Debtors will be lower going forward.
  • Focused on improving WC cycle, WC cycle reduced to 115 days in 1H21 vs 184 days in 1H 20
  • 156 crore cashflow generated from operations
  • Debt reduced by 128 crores
  • Interim dividend of 2/share. 20th Nov - record date
  • 10 new products will be launched in the next half. 3 products launched in Q2- Master stroke, dominant and Mahir. These 3 products contributed 10.6 crores to topline during the qtr. Launched 5 products in first half.
  • Lethal Granules received good response
  • Kadaki (partnership from Japan) - will be launched this month. Supremo will come in next 3-4 months time.
  • By next year, loss in Thimet will be recovered by these 3 products i.e Supremo, Lethal and Kadaki
  • Will strengthen manufacturing units at both the plants, also strengthening formulations at all locations
  • 60000+ retail outlets
  • Capex guidance- 50 crores for this year, 50 crores for next year. Expanding majorly at 3 locations. Things will be up in phases. Some plants will be completed this fiscal. Biggest expansion is in Dahej(technical synthesis), it will be completed in next fiscal. Chopanki plant expansion(formulations & technical plant) will get completed in this fiscal. Benefits will start accruing from next FY.
  • Most of the funds generated from operations will be used towards capex, working capital and in registrations.
  • Once registrations are done, will start with trials and be ready for the next Kharif season.
  • Export target of 100 crores, will not reduce the target. 1H 21 exports - 22.2
  • Will be positive in topline and bottomline for FY21.
  • Do not see much improvement in margins. From next fiscal, focusing on bringing new products.
  • Inventory days is on a declining trend as Thimet is completed liquidated and Nuvan inventory will be liquidated by November 2020
  • On 10 crores exceptional item(fraud committed) : Head of business was the main culprit behind the fraud. He was working with the company for 20 years. Made 3 settlements so far, recovery of 4 crores with a discount being given of 60-70 lakhs. Legal process is still going on, would like to close this case as early as possible. Adopted control mechanism, reduced credit period, multiple checks from finance team and from auditors. Certain suggestions given by auditors will be implemented soon. Invoices will be audited and checked on monthly basis.
  • Do not import any technicals from China. Only for exports, company does buy technicals from China. For some major products, working on backward integration for intermediates for 2-3 products. By the time expansion is complete, will make intermediates for 3 more products.
  • Have to pay MSME suppliers within 45 days.
  • 12 patents received, 18 patents pending

Latest management interview (link)

  • Management is upbeat on margins improving in the next few quarters on back of new products introduced

Company has had one of the highest number of domestic launches in their peer group (data below).

Launches FY15 FY16 FY17 FY18 FY19 FY20 FY21
PI Industries 2.00 3.00 1.00 5.00 2.00 3.00 2.00
Dhanuka Agritech 5.00 7.00 8.00 3.00 7.00 6.00
Insecticides India 3.00 2.00 5.00 5.00 8.00 8.00 7.00
Rallis India 3.00 3.00 1.00 3.00 4.00

Exports have also been growing at a very fast pace, having crossed 100 cr. in FY22.

Agrochemical exports (cr.) FY16 FY17 FY18 FY19 FY20 FY21
Insecticides India 9.00 12.00 34.00 60.00 64.00 61.00

Disclosure: Not invested