UPL

UPL (post acquisition of Arysta) is the 5th largest agrochemical company and 4th largest seed manufacturer in the world with a considerable presence across major markets such as the USA, Europe, Latin America and India. In line with the global trend witnessed among the agrochemical players, UPL now has a product line to cater to a large part of the agriculture value chain. It has diversified its portfolio across fungicides, herbicides, insecticides, plant growth regulators, rodenticides, specialty chemicals, nutri-feeds, seeds and seed treatment products, post harvest solutions and industrial chemicals. Post Arysta acquisition, UPL has access to its portfolio of bio solutions and seed treatment products, which have further diversified its product line and provided more coverage in the agriculture value chain.

The company is in business of creating sustainable and robust food systems that can withstand the perils of climate change or any other crisis, enabling farmers across geographies to protect their crops; and ensuring food security for billions of people.

The offerings include -

• Providing farmers with high-quality, disease resistant, high-yield several crop seeds
• Help farmers by deploying world class crop technologies with biotechnology
• Crop protections products like herbicides, Insecticides & Acaricides, Fungicides, Adjuvants, Seed treatment, ProNutiva
• Plant stress and stimulation that supports crop stimulation, nutrition as well as protection
• Post harvest solution like grain storage, fruit storage, potato storage, innovation etc.
• Superior plant formulations based on mineral and non-mineral nutrients by the plant in the most technologically efficient manner for agriculture, nursery, industries and home and gardens
• Acquatic solution, the products and solutions focus on aquatic plant and algae management, which include algicides and herbicides in irrigation canals, ponds and freshwater lakes
• BioProtections, BioStimulation & BioNutritions
• Engaging with local farmers and providing needed guidance at all level of agriculture chain

Basically, the company is in business of agriculture (indirectly) and starts with "input" to food value chain i.e. Seeds, Fertilizers -> farming of crops, meats, dairy -> trading of crops, meats, oils / meals, biofuels -> manufactured by food companies like bakery, meat, dairy, snacks, beverages -> sold by retailers like hypermarket, supermarket & corner shops 

Now let's see what are some growth drivers, which might help in increasing earning per share (EPS) of the company apart from profit optimization, shares buyback & inorganic growth 

• The world has more hungry mouths to feed every day. Ensuring food security for over seven billion people is already a huge challenge for farmers, especially with depleting natural resources, shrinking arable land, declining yields, increasing post-harvest waste and rising crop losses. Global population is likely to touch 9 billion by 2050 and 11 billion by the turn of the century. Therefore, seeking sustainable solutions for crop security remains paramount
• China, the world’s largest chemicals manufacturer, is grappling with major challenges with stringent environmental norms, tighter financing and industry consolidation
• Prospering and educated farmers will use more agrochemicals to increase their output
• Increased labor cost / shortage of labors will drive strong demands for herbicides
• Low consumption of agrochemicals in India (0.6 kg/ha versus 13 kg/ha and 5 kg/ha in China and the UK, respectively), relatively lower agricultural yields resulting in reduced agricultural exports and high losses due to diseases and pests are expected to structurally drive increasing agrochemical usage
• Gradual shift is being observed from generics towards specialty products, because of higher effectiveness and increasing affordability
• Patent expiry of 26 active ingredients until CY2022 is also expected to support export growth from India, as it would open up the space for post-patent manufacturers (India has a strong presence in generic pesticide manufacturing) given the majority of exports are off-patent products. 

Let's understand the risks in this business

• Increased regulatory oversight and adverse changes to regulations in key markets
• Competitors’ pricing strategy could put a dent into the Company’s margins
• Manufacturing facilities are exposed to risks from natural calamities, accidents, breakdowns, failure to modernize, and so on
• Due to natural evolution and over-usage, pests are increasingly developing resistance to crop protection products
• Frequent weather changes: drought, dry weather and floods
• Foreign currency fluctuations as company sells its product in 138+ countries
• Amendment of tax rules in 138+ countries