Indian agrochemical sector to grow 6–7% in FY26

India’s agrochemical industry is set to grow 6–7 per cent this fiscal (FY26), driven by a revival in exports after two weak years, even as domestic offtake slows due to a prolonged monsoon affecting kharif sales, according to Crisil Ratings.

A return to 8–10 per cent growth next fiscal will hinge on continued export momentum and a pickup in local demand.

Margins are expected to remain stable, supported by steady realisations, stable raw-material prices and minimal US tariff impact. Modest capital spending and disciplined working capital should help maintain leverage, improving debt-to-EBITDA to around 1.3 times and interest cover to 7 times.

“Improved farm sentiment globally will drive up export revenue by 8-9 per cent this fiscal. However domestic demand will see the perils of excess rainfall causing crop damage, product returns and delayed field readiness. With realisations stabilising after two years of significant adjustments, the overall growth outlook of 6-7 per cent remains more volume-driven than price-led,” Anuj Sethi, senior director, Crisil Ratings, said in a release.

Exports, which make up about half of industry revenue, are improving as supply chains stabilise. Latin America contributes around 34 per cent of export income, followed by North America (19 per cent) and Europe (12 per cent). The US remains steady, with 80–85 per cent of Indian shipments tariff-exempt and India supplying about 20 per cent of US agrochemical imports.

Domestic prices have stabilised as China’s inventory overhang eases, with import realisations steady at around $5 per kg. Risks include climate-related disruptions, regulatory tightening and currency volatility.

“Operating margins of agrochemical makers are expected to hold steady at 12.5-13.0 per cent on-year, but still below the pre-pandemic peak of ~15 per cent. This stability comes after a sharp correction in realisations in fiscal 2024 and is supported by better operating leverage, softer input costs and tighter cost controls. Annual investments of ~Rs 5,500 crore in import substitution, new registrations and debottlenecking will continue, while steady cash accruals and disciplined working capital management will keep borrowing needs low,” said Poonam Upadhyay, director, Crisil Ratings.

ALCHEMPro News Desk (HU)