India has an edge over China as a CDMO destination: Experts
Chemical

India has an edge over China as a CDMO destination: Experts

With tough environmental norms and data protection concerns in China, Indian CDMOs could emerge as a potential replacement

  • By Rahul Koul | January 13, 2025

As the agricultural industry in India continues to embrace technological advancements, the strategic collaboration between crop protection companies and Contract Development and Manufacturing Organizations (CDMOs) will remain a cornerstone of progress. CDMOs offer unparalleled flexibility, allowing agrochemical firms to focus on innovation without being constrained by manufacturing bottlenecks.

In this context, the experts spoke on the topic, ‘CDMOs: Accelerating Crop Protection Growth’ at the fourth session of the second edition of AgroChem Summit 2024 organized by the Indian Chemical News in New Delhi on December 13, 2024.

The session was moderated by Udeep Agarwal, Principal, Kearney who highlighted the latest trends in the space.

“There is a lot being done, both on the demand and the supply side, as well as on the regulatory side to tap into opportunities and provide our farmers with agrochemical solutions. Within CDMO space, it is much more stabilized and a lot of activity has been happening. There is a lot of pressure on global innovators in terms of capital cost as there is not enough to spend on the entire value chain, from R&D to marketing. They need to find additional capital for manufacturing as well and that is where low cost countries such as India. China, etc, comes into that part of the value chain. It requires long term strategic partnerships, rather than transactional relationships that consist of traditional supply agreements,” Udeep Agarwal said adding that both under demand side and supply side, the macro has been favourable towards us.

“We estimate today is that the value of CDMO exports from India is close to around $US 3 billion, with a couple of companies already crossing US 1 billion in their topline in the unlisted space. In the listed space, there is a company very close to US$ 1 billion dollars and then a few others in a couple of $US 100 million,” Udeep Agarwal added.

Abhishek Aggarwal, President & COO, Bharat Rasayan Ltd. said, “The CDMO is basically divided into two areas, the first being contact manufacturing of patented molecules and the second is contract manufacturing of generics. We are able to break the monopoly of China because in generics, it was the mass production which was actually diverting all the MNCs to go to only China and not to India. If we see the difference between the new molecules and the generics, most of the CDMOs are coming for the new molecules with the reason being protection of the IP rights. The kind of protection which Indian companies are able to give to the multinationals is not being given by the Chinese players because we all know that China is capable of copying everything without understanding CDA or NDA norms. The Indian companies are more preferred in terms of contract manufacturing for the new products as they were able to maintain that trust even during Covid-19 pandemic.”

“Earlier India was being looked after as a second alternative with just 10% to 20% of share in contract manufacturing but with disruption in supply chain in China which happened more than 6 times due to environmental norms, shipping issues etc. Comparatively, India has developed that trust level in terms of consistency. 

“When you go to China, you will have to open the data fully for new molecules which is not the case in India. These factors are pushing India as the player. So first of all, it was about breaking the monopoly, later it was getting the trust and third was making it delivered with full protection of IP rights and being consistent in quality. It is not only about the Indian company who needs the multinationals or the Japanese players but they also need us. 

“Indian companies are required to manufacture campaign based molecules that even China does not have as they are used to long term campaigns and long term production. Indian players need government support for more ease of business because it is a very capital intensive or revenue intensive model where companies are investing Rs. 500-600 crore. Because of risk, Indian companies are taking the support of the government and if it continues, we are here to stay in contract manufacturing,” added Abhishek Aggarwal.

Harish Mehta, Senior Advisor, Crop Care Federation of India said, “The concept of contract manufacturing is not a new concept as a lot of Indian companies, and multinationals, over the years, have been partnering up with each other for certain benefits. In terms of agrochemicals, it would be primarily outsourcing of manufacturing. Secondly, it is the entry in the market can be much faster as it has multiple units all across the country on pan India basis.

“It has been seen over the years that whenever MNCs have started manufacturing the product in India, the cost has come down by 30-70%. I have data which has been given to the government and personally feel that this trend has to be continued so that Indian manufacturers are able to make something which is of quality and of higher purity.

“End to end support, right from preparing raw materials to making technical at the production site, the R&D, marketing and logistics is required these days. Also, a lot of companies would not specialize in equipment and the capacity is not utilized. So this is an arrangement which can be definitely used. The scaling of a production is much easier in terms of this kind of an agreement where you can produce the same product at different locations.

"One important factor is meeting deadlines when you are exporting. It is something which is linked with your pricing and profitability. We can meet deadlines only if we can supply in time and as per specification. The agrochemical industry is all geared up in terms of capability, capacity and is available to meet any kind of a requirement, which is not only made for the domestic industry but also for the exporting countries.

“However, we have a few challenges. With pollution norms in India being much stricter as compared to Europe and other countries, it puts Indian companies to a kind of disadvantage. Also there is a notion that Indian companies don’t do enough R&D but on the contrary, they have got their own labs, equipment, plant machinery, manpower, scientists etc. I believe that even if the multinationals are spending a billion dollars globally but it does not give any advantage to India as we are not aware how much is actually spent here,” added Mehta.

Arush Dhawan, Co-founder & COO, Covvalent said, “Agrochemicals is one industry where the penetration of technology is still lagging. Technology can play a supporting role, an enabler or front runner to the industry. As a support function, it is fairly penetrated into the day to day functions, moving away from excel and doing things on cloud basis to ease the tasks. When I talk about tech as an enabler, it is about doing things efficiently. This to a large extent has been lacking. 

“Both in agrochemical as well as pharmaceuticals, they have this one particular requirement that we would love to see the technology in the entire supply chain. That is one space where technology has not yet penetrated because a lot of activities are still happening manually. I think that is something we are heavily investing in. We are building a team which essentially builds this tool to automate the processes going ahead.

“In the future, technology will play a front runner role. BASF is working on the super computer ‘Curiosity’ where they are aspiring to design the protein structure. It will essentially start opening new doors for you. Generally, once we get a molecule, the R&D team looks at creating a Spidernet, and then figures out the cost. Compared to this manual process that takes 3 days, the AI scan can give you the best possible route, costing and commercial viability in 5 minutes. Second use case is whenever we create a new molecule, we keep it for stability study for 3-6 months. 

“With technology, these things will have an impact on how quickly you are able to turn around, send your product in the market. We have to become a super power in the chemical industry, not just agrochemical. For that technology has to become a front runner and we will have to start figuring out the new opportunities. We have received feedback from our international client that the turnaround time with the Indian companies is slightly higher as compared to the Chinese companies. This is where the tech can help us to address its,” added Dhawan.

AgroChem Summit 2024 themed ‘Capturing Value Through Collaboration, Innovation & Disruption’ was supported by the industry associations including ACFI, BASAI, Croplife India, CCFI and PMFAI.  The Gold Partners of the event were Corteva Agriscience and Godrej Agrovet. The Associate Partner was Bayer Limited.

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