In an exclusive interview with Pravin Prashant, Editor, Indian Chemical News, S. K. Chaudhary, Founder & Director, Safex Group shared his views on the company's recent acquisitions, growth plans, technology adoption, and future expansion. Excerpts of the interview:
How is Safex Group contributing to the Indian agrochemical business? How do you look at the future?
Safex Group began its journey in 1991. Many of the companies – Briar Chemicals Limited, IndoSwiss Chemicals Limited, Smith N Smith Chemicals Limited, Shogun Organics Limited, Him Bio Agro, and Best Crop Sciences - were added during the course of the 30 years long journey. The agrochemicals industry is growing at 7-8 percent annually, subject to normal weather conditions. Comparatively, Safex Group has been growing quite fast, achieving a 24% growth in the last 5 years. The organic growth has been 15% and the rest has been inorganic through acquisitions. In the last 18 months, we have acquired three companies - Briar Chemicals Limited, Shogan Lifesciences, and Shogun Organics Limited. We aspire to become the number one agrochemical company in India and globally and we hope to continue the current growth rate.
What is the status of acquisition of companies and what portion of revenue coming from outside India?
The acquisition of the companies is complete as these are complete buyouts. Only Briar Chemicals is located outside India and the annual revenue is expected to be around Rs. 700 crore.
With the acquisition of Briar Chemicals, what would be revenue and profitability numbers of Safex Group in FY2022-23?
If we take the revenue from the date of acquisition in October, 2022 to March 31st, 2023, it would be around Rs. 300 crore. The annual revenue is expected to be around Rs. 1,200 crore and profitability would be approximately Rs. 175 crore.
How is Briar Chemicals acquisition different vis-a-vis others?
There are two things about Briar Chemicals - One, it is outside India and second, it is a CDMO (Contract Development and Manufacturing Organization) company where major thrust is on specialized manufacturing processes. The company manufactures Active Ingredients and Intermediates for the world’s topmost agrochemical players. This has changed the focus of the group. The best part about Briar Chemicals is that it has completed all the verticals of the agrochemical industry, be it brand formulations, technical manufacturing, specialty chemicals manufacturing, and storage solutions.
Are you planning to set up a CDMO unit like Briar Chemicals in India?
We haven’t yet thought about it but we can plan a CDMO company in India in the long run. Before we go ahead with such a plan in India, we would like to consolidate Briar Chemicals first.
How many manufacturing plants does Safex Group have in India?
We have six manufacturing plants in India - Two units in Jammu & Kashmir besides one each in Himachal Pradesh, Rajasthan, Gujarat, and Maharashtra. While we are fairly spread out in terms of manufacturing facilities in Northern and Western parts of India and have presence across major cities of the country.
What is your total production of agrochemicals in India?
In case of formulation units, one has to look at sales rather than capacity. Formulation units can be produced in large quantities. We are expecting Rs. 200 crore business in Shogun Organics in FY 2023-24. Capacity wise, the Pune plant will manufacture 1,000 tonnes of Active Ingredients.
What are your expansion plans in 2023? How do you plan to achieve the same?
We want to consolidate in three ways - Exports, Active Ingredients manufacturing in India, and optimization of manufacturing business. The whole team is working towards achieving the same. Optimization is a continuous process and we are reviewing it on a regular basis. Optimization is under discussion and whatever needs to be done will be done.
Safex Group is exploring both the Indian and global market in a big way so innovation will play a huge role. What is your innovation strategy?
There are a lot of molecules going off patents including herbicides, weedicides etc. We are establishing manufacturing facilities at Maharashtra plant to manufacture the latest of patent molecules. These include the entire range of herbicides, pesticides, weedicides, etc. which is a major area of growth.
Apart from developing patent molecules, are you looking at developing in-house molecules through R&D?
Developing new molecules is something very typical and beyond the scale but we are doing it at our level, whatever we can. Shogun Organics has one patented molecule that we have studied and are developing its formulations currently for household use and for agriculture as well. It is a lengthy process and will take a year or so to become fully commercial.
There is a growing focus on organics in agrochemicals. How do you see the organic market in India and outside India?
It is very much hyped out but the reality is different. Life won’t be easy without pharma for humans, similarly for crops, agrochemicals are important to treat their diseases. When we talk about organics, we don’t think of masses. With the absence of agrochemicals, the production will decrease by almost 25 percent and cost will become four times. Then it will not be just a matter of affordability but people won’t have food to eat.
If we take the case of Sri Lanka where agrochemicals were banned due to the Presidential order, the situation became worse and the economy went down. The Sri Lankan model has shown the relevance of chemicals for agriculture productivity. There are many misconceptions about agrochemicals including the myth that these cause cancers but there is no conclusive evidence to prove that.
The company is planning to invest Rs. 100 crore into agri-technology. Which technologies are you looking at?
We want to go directly to the farmers so we are building an e-commerce platform that delivers quality products to farmers at their doorsteps. The trial run of E-commerce is underway and the platform is expected to be launched in April, 2023.
Are you planning to implement drone technologies?
I think drones are not suitable at a very large scale in India. Currently, we are evaluating it from a commercial angle and don’t find it viable yet. Once we feel that it would be valuable for farmers we will take the plunge.
There are a lot of fake and spurious products in the market. How will agri-technology help the farmers to find out the difference?
I don’t think there is any such technology. We may check the duplicacy of the products but we can’t find if someone has produced below standard agrochemicals intentionally or not. The technology can check barcodes etc. and that we are in the process of implementing.
What are the CSR activities planned this year by Safex Group?
Education and sports have been our thrust areas and we will continue with these areas. We would be adding two more areas including the chilled water for school children and distribution of hygiene products in schools and colleges.
Are you fully funded or would you be raising funds?
We are fully funded and won’t require any funds as of now.
What are your expectations for the agrochemicals industry from the Budget 2023?
There is 7.5% custom duty on Intermediates and 10% on Active Ingredients. The gap is very small and this should increase, meaning either the custom duty on Intermediates should get increased or there must be a decrease in custom duty on Active intermediates. This will help Indian manufacturers. From the farmer’s angle, I would request the government to decrease the GST percentage from 18 to 12%.
Are you looking at the FPO route for promoting products?
Presently, we are not looking at it but we may definitively look at the FPO route for promoting our products.