InvestorQ : Why is CRISIL positive on the agrochemicals sector in India? What is your view on stocks like Tata Chemicals, UPL and Rallis?
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Why is CRISIL positive on the agrochemicals sector in India? What is your view on stocks like Tata Chemicals, UPL and Rallis?

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Arti Chavan answered.
2 weeks ago
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Here is what you need to know about the CRISIL view. Let me first outline why CRISIL expects a positive shift in the agrochemicals industry and later we focus on the specific stocks that you are referring to.

· According to CRISIL, domestic tailwinds are likely to ensure 12-14% growth in the Indian agrochemicals sector in the current fiscal year FY21.

· For the FY20 fiscal year the agrochemicals sector had revenues of Rs.47,000 crore and in FY21, this is expected to grow by 14% to around Rs.53,500 crore.

· The agrochemicals sector has got a big boost from a record Kharif harvest this year and also from continuing healthy exports to specific geographies.

· According to CRISIL, domestic market is expected to grow in the range of 12-15% on a yoy basis on the back of the solid agricultural Kharif output and good rural incomes.

· This growth compares positively with the previous year as higher area under cultivation this year as well as improved MSP for most crops have been the key drivers.

· On the exports front, the export of agro chemicals are likely to see the maximum traction from the US and Latin America.

· In addition, the agrochemical companies enjoy very low levels of debt/equity ratios and therefore good interest and debt service coverage ratios.

While UPL is still getting to grips with its higher debt after the large global acquisition, the other two look more likely to benefit immediately. UPL continues to be a good long term story.

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