[1] METALS

The impact of coronavirus disease 2019 (COVID-19) on Indian metals companies is likely to be
felt more through the impact on prices and margins than on demand and volumes.
Demand to be impacted only marginally, volume impact to be offset from lower imports

 Indian steel companies sell nearly 75-80% of their volumes domestically while the balance is
exported. Domestic steel consumption is split as infrastructure and construction 60%,
engineering and capital goods 25% and autos and white goods 15%.
 COVID-19 could impact the domestic auto and white goods segment due to supply chain
linkages with China which in turn could impact the steel demand from these segments. As
for infrastructure & construction and engineering & capital goods segments, we not do not
expect any adverse impact on demand from COVID-19. We anticipate a potential overall
adverse impact on domestic steel demand of 3-4% in the near term from COVID-19, with
the impact being higher on flat products than long products.
 We have also seen steel exports from China declining in the past month due to the difficulty
in operating the port infrastructure. In that event, the Indian steel companies could be able
to offset any weakness in domestic demand through more exports, limited the impact on
overall volumes. We would however like to highlight that the Chinese export-import trade
has started to pick slowly in the past week.
 As far as non-ferrous companies are concerned, we do not anticipate any impact on their
volumes as imports into India would likely decline due to the impact of COVID-19 which
would enable the Indian companies to gain market share domestically

Raw material supply chain unlikely to be impacted

 There will unlikely be any impact on raw material sourcing or supply chain for the Indian
metals companies as most the raw materials are procured either domestically (iron ore,
bauxite etc.) or non-Chinese imports (coking coal, metal concentrates etc.).
 Companies could benefit from lower raw material costs, as energy costs (coal, oil, gas etc.)
have been declining due to the anticipated demand impact of COVID-19. This could partly
offset the adverse impact on realisations, particularly for companies that do not have
captive raw material supply.
Realization to be impacted if demand continues to weaken
 LME metal prices have declined sharply in response to the anticipated impact on demand
from the COVID-19. YTDCY20, LME has declined by 12% for zinc to USD2019/t, 8% for
aluminum to USD1663/t and 9% for copper to USD5573/t.
 Similarly the HRC export prices from China, Korea and Japan have declined by ~5% in the
past month to ~USD480/t which could put pressure on domestic steel prices when regional
EXIM trade normalizes
Manufacturing presence of Indian metals companies in China is negligible
 None of the Indian steel companies has a direct manufacturing presence in China which
means there should not be any disruption to their production/ output
 Hindalco has a small presence through an automotive aluminum finishing mill with a
capacity of 100ktpa, being doubled to 200ktpa, where it produces heat-treated aluminum
sheet for Chinese and Asian automotive sector. It is currently producing 60ktpa from this
facility which is only ~2% of total volumes for Novelis.
Key losers
 If the spread of COVID-19 does not come under control and the metal prices remain weak
as seen currently, we estimate a potential negative impact of 11-36% on FY21 EBITDA for
our metals coverage companies.
 For our sensitivity analysis, we assume LME metal prices to remain at current levels in FY21
while we assume steel spreads to decline by INR2000/t for non-backward integrated players
(JSW Steel and JSPL) and by INR2500/t for backward integrated players (SAIL and Tata Steel)
 The EBITDA impact would likely be highest for SAIL (at 36%) followed by Tata Steel (at 26%)
due to high backward integration in their operations which would limit the offsetting
benefit to them from decline in raw material prices.
 The impact would likely be lowest for Hindustan Zinc due to offset from higher silver prices
as precious metal prices appreciate in the flight to save haven assets, as well as from the
high cash balance in its books which would limit the adverse impact on PAT.
SENSITIVITY SNAPSHOT

[2] OIL & GAS

 China’s crude oil consumption stands at ~13-14mnbopd currently; the country is the largest
importer of crude oil (~10-11mnbopd) globally.
 China also has the second biggest oil refining capacity in the world. Owing to the
Coronavirus, China’s independent refineries’ run-rate declined sharply in Jan-Feb’20 to
~40% (5-year low), after reaching an all-time high of ~70% in the last quarter.
 In Dec’19, China’s LNG imports slightly overtook Japan’s volumes (the world’s largest LNG
importer) for the very first time.
 China is very important as a global chemical producer. According to ICIS, China accounts for
>50% of the global capacity for several product groups, including the polyester chain,
purified terephthalic acid (PTA), polyvinyl chloride (PVC), methanol, and methyl tertiary
butyl ether (MTBE).

Forward Brent curve deepens to <USD60/bbl after the outbreak

 The International Energy Agency (IEA) has stated in its Feb’20 OMR that Coronavirus will
cause global oil demand to decline by ~435kbpd YoY in 1QCY20 (biggest quarterly drop
since the Global Financial Crisis in 2009). It has cut down its 2020 oil demand forecast by
365kbpd to 825kbpd (lowest since 2011).
 However, the market expects oil demand/supply to balance out in 2HFY20 as compliance
for production cut (agreed from Jan’20) increases and demand revives (once the impact of
Coronavirus subsides).
 Our crude price estimate for full-year FY21 stands at USD65/bbl. Our sensitivity analysis for
a decline in crude price of USD10/bbl leads to FY21 EPS change of -9% for ONGC and -14%
for Oil India.

Refining margins improve from lows to ~USD3/bbl

 Led by the spread of the virus, Sinopec has implemented 10-35% refinery production cuts in
Shandong, Guangdong, and Hubei, depending on local demand and logistical constraints.
 However, low crude prices are encouraging China’s independent refiners to return to
production with various refiners (and petrochemical units) starting to book cargoes for
deliveries in Apr-May’20.
 Generally, GRM increase by USD0.7-1.0/bbl for a decrease of USD10/bbl in crude prices.
This should result in FY21E EPS sensitivity of 9-15% for OMCs and ~7% for RIL (standalone).
 The improvement in SGRM (Feb’20 average at USD3.2/bbl v/s USD1.6/bbl in 3QFY20) has
primarily been on account of FO (from –USD25/bbl to –USD9/bbl), in addition to the
marginal revival in Gasoline and Naphtha cracks while Gasoil has declined <USD10/bbl (from
USD14/bbl in the last quarter). Since FO accounts for 23% in SGRM compared with 0-10%
for Indian refiners, the jump in SGRM would have much lower benefit for Indian refiners.

Gas – JKM Asian spot prices at decade low of <USD3/mmbtu

 China’s state-owned company, CNOOC, has declared force majeure on LNG contracts. Qatar
is in talks with China to redirect supplies along with Indonesia, which has deferred its supply
to China (Indonesian supply expected to restart from Apr’20)
 According to some news articles, struggle for economic activity revival at key manufacturing
hubs should keep a lid on NatGas demand, triggering LNG trade flow disruptions (in Feb’20,
globally 14-16 cargoes were diverted to other regions than their original destinations).
 China’s average LPG imports for Feb’20 declined ~35% YoY to 218,500mt (v/s ~340,00mt in
Feb’19) as various factories and restaurants remained shut.

Petrochemicals
 Outbreak of Coronavirus and logistical restrictions has led to almost full-storage inventories,
forcing various downstream enterprises to either shut their units or have delayed
production restart post the Chinese New Year.
 Polyethylene (PE) plants are also running at a lower capacity as complete shutdown of the
units is not feasible owing to the higher costs. China has 9 PDH plants with capacity of
5.7mmtpa, which were operating at utilization rate of 65-75% v/s 90% in Feb’19.
 These have led to recovery in the PE (+35% QoQ), PP (+27% QoQ) and PVC (+39% QoQ)
margins since the start of the year.
 For RIL and IOC, an increase of 10% in Petchem margins should result in FY21E EPS
improvement of ~6% and 2%, respectively.

Short-term impact on Indian companies

 OMCs: The improvement in SGRM should have much lower benefit for Indian refiners.
Nevertheless, lower oil prices would result in lower fuel prices and losses. OMCs should also
continue to enjoy healthy marketing margins, partially absorbing the adverse impact from
poor GRMs.
 PLNG: The lower spot price environment should encourage higher imports from power
consumer boosting utilization at all LNG terminals.
 GAIL: There might be some concern on the profitability of the hedges for GAIL in the current
low LNG price environment. However, the company has hedged all the US cargoes (except
for 8). With commissioning of 2 fertilizer plants and the Kochi-Mangalore pipeline from
1QFY21, the company expects ~8mmscmd of incremental gas volumes.
 RIL: Improvement in petchem cracks with feedstock flexibility and low LNG prices should
lead to better petchem margins QoQ. However, premium to SGRM may decline for the
quarter. Petrochem margins, nonetheless, are likely to remain subdued in the medium term
led by the weak economic outlook and the strong additional supply globally over the next 2-
3 years (RIL expects the petchem market to balance out by 2021-22). We have built in GRMs
of USD10/USD11 per bbl for FY21/FY22 (in line with its FY16-19 average) factoring in the
enhanced delayed coker capacity and the widening of crude blend window for maximizing
distillate yields prior to the IMO.
 CGDs: Lower Brent prices (USD62.0/bbl in 2HFY20 YTD v/s USD65.6/bbl in 1HFY20) should
result in lower crude-linked LNG prices. CGDs may be able to improve margins for the
industrial segment.
We reiterate Buy on GUJGA on it being the biggest beneficiary of the NGT thesis (already
saw an example at Morbi). Industrial pollution has a limited role to play in both IGL and
MAHGL. We maintain Neutral on IGL owing to expensive valuations and MAHGL due to
concerns over limited growth.
Sensitivity snapshot

[3] INFORMATION TECHNOLOGY

First order impact to be limited to few Tier-II companies

 Exposure of Tier-I companies to highly impacted geographies like China is limited. In case of
other impacted geographies like Singapore and Hong Kong, we understand that business
continuity has been taken care of through flexi options like work-from-home, etc.
 Similarly, exposure of Tier-I IT companies to impacted verticals, such as Travel,
Transportation and Hospitality within APAC, is also limited as share of the overall revenue.
We estimate < 1% of Tier-I revenues to be impacted over 1HCY20.
 Exposure of some Tier-II companies (e.g. Mindtree, Hexaware and NIIT Technologies) to
Travel, Transportation and Hospitality verticals is meaningful.
 Given the ongoing travel restrictions, partial and full shutdowns of some airliners and
hospitality players, we estimate worst-case earnings impact of up to ~5% for mid-cap
companies like Mindtree, Hexaware and NIIT Tech.

Second order impact – a key monitorable

 A key consensus building in for the IT sector is the acceleration in global GDP growth (3.3%
in CY20E v/s 2.9% in CY19).
 This assumption may now need a reset given the disruption faced by multiple businesses
across geographies because of COVID-19.
 Core geographies, from the perspective of Indian IT, such as the US, the UK and EU have so
far remained largely immune to the COVID-19 related contagion. This is a silver lining
despite the risk of a downgrade to global GDP growth estimates.
 A large concentration of electronic products are assembled in China. This includes semi-
conductors, Printed Circuit Boards (PCB), complete systems for consumer electronics, etc.
 Hence, a ripple effect should be felt throughout the technology value chain including
hardware, software, IT services and ER&D players. It should be noted that some players in
this value chain (such as Apple and Microsoft) have already called out the fact that COVID-
19 is impacting their earnings.

No material impact on deal closures yet

 Our discussions with IT companies indicate some delays in the decision-making process and
deal closures within the APAC region. This can be attributed to full/partial shutdowns in
these geographies.
 Beyond APAC, no such delays in deal closures have been noticed so far.
 We understand that sales teams are largely located onsite, near the clients.
 Accordingly, the ongoing travel curbs are not disrupting business continuity in terms of
sales/deal closure processes.
 Ceteris paribus, among our IT coverage, Mindtree, Hexaware and NIIT Technologies
should face the highest brunt of COVID-19.

Worst case impact of Coronavirus to be ~5% on our 4QFY20/FY21E EPS estimates for MTCL,
HEXW and NITEC

EPS Estimates (INR) Worst case - EPS (INR) Sensitivity (%)

S.No. IT firms
4QFY20E FY21E 4QFY20E FY21E 4QFY20E FY21E
Tier-I
1 TCS 22.5 98.6 22.3 97.6 -1% -1%
2 Infosys 9.9 42.8 9.8 42.4 -1% -1%
3 Wipro 4.4 18.3 4.4 18.2 -1% -1%
4 HCL Tech 10.6 45.3 10.5 44.8 -1% -1%
5 TechM 13.2 57.7 13.1 57.1 -1% -1%
Tier-II
6 LTI 24.2 106.7 24.0 105.6 -1% -1%
7 Mindtree 11.7 48.8 11.1 46.4 -5% -5%
8 Hexaware 6.1 24.4 5.8 23.2 -5% -5%
9 NIIT Tech 19.0 88.4 18.1 84.0 -5% -5%
10 Mphasis 16.4 63.8 15.9 61.9 -3% -3%
11 Cyient 8.9 40.7 8.6 39.5 -3% -3%
12 Persistent 11.1 48.1 10.8 46.7 -3% -3%
13 Zensar 1.7 9.9 1.6 9.6 -3% -3%
[4] AUTOMOBILES

Supply side threat for 1QFY21 amidst likely weak demand on BS6
Direct negative impact for JLR, MSS; Positive for CEAT
 According to American Composites Manufacturers Association (ACMA), the Indian
automotive industry has seen an increase in imports (~10% CAGR over FY14-19) as well as
an increase in sourcing from China (27% of auto component imports in FY19 v/s 21% in
FY14). This includes direct imports by OEMs and vendors.
 Considering the emerging prolonged threat of slower normalization due to the spread of
Coronavirus, we interacted with key OEMs/component suppliers to assess possible
implication of the same. While most OEMs have adequate inventory cover of components
for at least the next one month, they are also evaluating alternative sourcing options.
 More importantly, both 2W/CV volumes are expected to remain weak in 1HFY21 due to
BS6 related cost inflation, which gives a buffer for any supply-side disruption. However,
companies with global operations like TTMT (JLR) and MSS have direct exposure to China
where impact could be more profound.

China – an important supplier of automotive components…

 In FY19, imported items constituted ~30% of the total domestic component consumption.
China’s share of imported components stood at ~27% (v/s 21% in FY14).
 China is a key supplier of sub components used in engine, electrical/electronics, alloy
wheels, tyres, etc. Also, it supplies key components for EVs including Li-ion battery cells.
 Large part of these imports (except alloy wheels) is sourced by vendors, whereas tyres are
sold in the aftermarket.

…but, Coronavirus threatens to disrupt this supply chain if problem persists

 Most OEMs have indicated an inventory cover for imported components for at least the
next 1 month.
 In some cases, companies like HMCL and TVSL have indicated 10% drop in the planned
production for Feb’20 due to shortage of BS6 component.
 While some plants in China have just started operations, there is no clarity on normalization
of production. Hence, OEMs are evaluating the evolving situation in China as well as
alternate sourcing options.
 Also, many MNC OEMs are evaluating the option of tapping into the global supply chain of
their parent in case the risk of supply disruption fructifies.

Weak demand post BS6 implementation a blessing in disguise for 2Ws/CVs

 Most OEMs (2Ws/CVs) are not looking to immediately ramp up systemic inventory post the
BS6 implementation from 1st Apr’20. This is due to expectation of weak demand in 1HFY21
due to BS6 cost inflation.
 This gives these OEMs some buffer to manage any possible supply side disruption.

Companies with global ops more impacted, but local operations to also get hurt
 Companies with global operations like TTMT (JLR) and MSS have direct exposure to China
where impact could be more profound, partly due higher exposure as well as very high
operating leverage in global operations.
 JLR has ~20% of retail sales (incl. the JV) coming in from China, with EBITDA contribution
upwards of 30%. CJLR’s plant has reopened in the last week of Feb’20 and production
should resume soon. Similarly, over 50% of JLR dealers have resumed operations. JLR’s UK
operations has visibility of parts availability for 2 weeks or more, and it does not presently
expect any disruption due to shortages.
 MSS has direct exposure to China at SMRPBV as well as PKC. SMRPBV has ~8% of its
revenue coming directly from China, whereas PKC has 3 JVs and contributes <10% of PKC’s
revenues. All plants of SMRPBVs in China (except 1) have resumed operations though ramp-
up would depend on OEMs ramping up.
 Our sensitivity analysis for FY21E volume/revenue downgrade by 5-15% indicates EPS
downgrade being the highest for TTMT (93-279%) and MSS (19-56%).
 For companies with India operations, FY21E EPS sensitivity for volume/revenue downgrade
of 5-15% is high for AL (15-42% downgrade), BOS (11-34%) and MM (9-27%).
FY21E EPS sensitivity to volume/revenue impact due to supply disruption

[5] HEALTHCARE

Initial signs of resumption of supplies from China

 We tried to check with various pharma companies the impact of spread of coronavirus in
China and other geographies on raw material availability as well as respective prices.
 There has been resumption in air/sea shipment at gradual pace from China. Further, there
has also been re-opening of operations at manufacturing facilities as well.
 With inventories in place for most of the companies till May-20 and initial signs of
recovery in supply situation, we expect raw material prices also to gradually reduce going
forward.
 The onset of summer would further support in suppressing the impact of coronavirus.
 Accordingly, we expect this short term supply disruption and subsequent rise in raw
material prices may have some impact ~2-3% on FY21 earnings. We await further clarity
to understand if the impact gets restricted to 1QFY21.

Coronavirus created production as well as supply issue

 Since the beginning of Chinese new year (12-Feb-20), the pharma manufacturing facilities
particularly in Hubei and Henan province had not received approval to re-open. Further,
transportation and logistics had slowed considerably, reducing ability to receive raw
material from other province of the country and/or export from China.
Restart of transport/production to provide much needed relief
 While the Hubei province has little impact in terms of raw material availability for pharma
companies, it’s the non-movement of materials between provinces and stoppage of export
from China, which had created supply shortage situation. This led to sharp price rise in few
KSM (Key starting materials) and intermediates. This could have subsequent impact on
gross margins in 1QFY21. However, the recent channel check suggests that the supply has
started via sea/air from China. Further, the production has also started
 Companies clarified that, they have inventory till May-20. Thus, the resumption of
production and supplies would lead to reduction in adverse impact on gross margins. Also,
the onset of summer would enable suppression of impact of Virus.
Spread to other geographies may create demand/supply disruption over near
term
 While the supply of raw material may ease with resumption of operations from China, virus
being spread to other geographies including US and Europe and subsequent lock-down in
these territories may create short term interruption in off-take of drugs. We await further
clarity on this aspect.
We expect 4QFY20 to be better for companies having exposure to domestic
formulation
 In the anticipation of shortage, there has been stocking of medicines in case of chronic
category, driving sales to some extent over near term. Accordingly, we expect companies
with higher share of chronic therapies to benefit from this event.
Short-term spike in raw material may have some impact on 1QFY21
performance
 The rise in raw material cost over past three weeks and prices remaining at elevated level
till normalcy resumes may have impact on profitability of 1QFY21 to the tune of 2-3% on
FY21E EPS. We await further clarity to understand if the impact gets restricted to 1QFY21.

Most of the companies have sufficient inventory of raw material till April-May20 and
continue to monitor the situation closely
Stocking of medicines in anticipation of shortage to benefit companies with
higher share of chronic therapies

[6] CONSUMER DURABLES

 The prolonged disruption due to unfortunate coronavirus incident is emerging as a big

threat to the consumer durables sales, especially as we approach the summer season. China
plays big role in the electronics and appliances industry due to high import content of raw
materials, intermediary supplies or finished goods. The impact is across the product
categories of LED bulbs, air conditioners, refrigerators, washing machines, LED TVs, mobiles
etc.
 As per the commentary of various companies as well as our interaction with industry
participants, India is probably covered for another 1 month in terms of supplies from China.
We also understand that few factories have commenced operations, although they are still
not operating at optimal capacity utilization. There is high risk to summer season sales on
account of unavailability of products across key categories of air conditioners, washing
machines and refrigerators along with other smaller appliances categories. While there
have been comments on alternate sourcing destinations, we believe that apart from higher
cost of sourcing, it may still be difficult to shift entire anticipated supplies from China to
other countries like Thailand, Vietnam and Korea. In fact, the spread of the virus to other
countries, especially South Korea may put restrictions on such moves as well.
 In all likelihood, shortage of product categories is likely to lead to price increases. Our
channel check suggests ~5% of likely price hikes for ACs. However, the situation is far from
being stable and further price increases may not be ruled out. In our view, while price rise
may provide some relief to margins, it may not be able to completely offset the volume loss,
and the net resultant revenue may still be in negative territory. Also, the impact may be
severe for unorganized or marginal players and strong players with superior supply chain
can increase their market share on a relative basis.
 One key observation may be that while the issues may be negative from very near term
basis, the next season expectations may not be weakened as the inventory levels may
remain low for the entire year and subsequent channel refilling may support primary sales.
This also means that price hikes due to shortage may not sustain over next year.

Below are our company wise comments on the issue:

 Voltas: The Company is covered for supplies of Room Air conditioner compressor for
4QFY20. Consequently, it is also looking for alternate supply channels from countries in
South East Asia for 1QFY21 in case the lock down in China is prolonged. Volt-Bek facility has
already started to locally produce its direct cool refrigerators at Sanand facility, however it
may face issues to ramp up beyond April in case of supplies not available.
 Havells: Supplies of components like compressors, lighting and other small appliances have
begun from China. There can be a minor spill over in sales from 4QFY20 to 1QFY21 in case
the shutdown prolongs in China. Alternate sources of supplies are currently evaluated, but
supplies in 1QFY21 will largely be from China only, as development of an alternate source
generally takes around 4-5 months. Lloyd’s facility at Neemrana is fully operational with ACs
being catered from this plant. Proportion of LED TVs has gradually reduced in the Lloyd’s
portfolio and hence any impact on it will be minimal.
 Crompton Consumer: Imports are very low for the company, as gross imports stood at 9%
of FY19 sales. Hence Crompton is least impacted by any disruption of supply chain in China,
with adequate options available for domestic sourcing in India as a back-up.
 Blue star: Blue star imports most for its Air conditioners from China. Forex outgo in FY19
stood at ~50% of its UCP sales. The company is covered till mid-April for supplies, in our
view, but may face issues beyond that.
 Amber: Chinese factories are expected to start from 2nd March onwards. Around 40-45% of
its total cost of material is imported, which includes base metals as well. Alternate sources
of supply exist for base metals. The company is covered for all supplies for 4QFY20.
 Dixon: Around 80% of raw material in LED TVs, 40-45% in Washing machine and ~45% in
Lighting is imported from China.
 Whirlpool: The Company imports compressors for Refrigerator and Motors for Washing
machine. Gross forex outgo stood at 23% of sales in FY19. We doubt if Whirlpool is able to
source products from other locations globally, as those factories may be dependent on
China for supplies in some way or the other.

Sensitivity analysis on earnings:

 Voltas – Assuming 20% decline in UCP sales (or 6% to overall revenues) in seasonally strong
1Q sales, our sensitivity analysis suggests 20% risk to FY21 estimates as we expect price
hikes to be insufficient to cover for volume loss. However, in case of supply side disruptions,
we expect Voltas to increase its market share as the long tail of AC brands would be
impacted most.
 Havells – Compared to peers, Havells has lowered dependency on China. We see risk of 5%
to Havells topline and ~8% risk to net profit. We note that Havells (under Lloyd brand) had
higher AC inventory from the last season and hence, may also see some market share gains
in the upcoming season.
 Blue Star – We see likely risk of 6% to the revenues and ~14% to FY21 earnings due to lower
sales in 1QFY20.
 Crompton Consumer – We see minimal risk to Crompton financials due to the Coronavirus
issue. There might be ~3% risk to our revenue and earnings estimates.
[7] CHEMICALS AND AGRO-CHEMICALS

Chemicals: SRF
 Of the total RM requirement SRF procures 7-10% from China; thus is not material in
nature.
 Company’s chemicals business contributes 44%/45% to revenue/EBIT (FY20). Apart from
China, SRF sources its key raw material fluorspar for the chemicals business from other
locations like Russia, South Africa, Kenya, etc.; thus, company is not materially impacted
by the disruptions from the outbreak of coronavirus.
 The disruption in supply chain caused by coronavirus would further expedite souring from
Indian chemicals players like SRF who have specialized in niche chemistry like fluorine;
which stands as a key positive.

Agrochemicals: PI Industries, Coromandel International & Godrej Agrovet

 PI Industries: (I) RM sourcing from China is in single digit (to total RM requirement) for PI,
and thus, it does not expect material impact from coronavirus outbreak. The company is
covered till Apr’20 for its RM requirement. (ii) Due to supply chain disruption in China, the
demand for PI’s existing molecules from global agrochemical companies is likely to
increase in its CSM business.
 Coromandel International: (I) Indian fertilizer companies imported 6.4MMT of
Diammonium Phosphate (DAP) in FY19 from China, Saudi Arab, Morocco, Zordan and US.
44% of India’s DAP imports come from China which is impacted due to virus thus
Coromandel stands to benefit as it manufactures DAP in India which would aid in gaining
volume and may provide higher prices in near term due to shortage. (ii) Coromandel
sources 25% of its RM requirement from China for its crop protection business (FY19 sales
of INR18b which is 14% of consol revenue) which would be adversely impacted; company
has inventory until April only.
 Godrej Agrovet (GAVL): (I) In the B2C crop protection segment, GAVL has alternate RM
sourcing and has 2-3 months of inventory currently, (ii) With respect to exports in the
Aztec, 25-30% of the total RM requirement is imported from China for which company is
covered till April end. Additionally, shipments from the location where company’s
suppliers are located in China have already started thus doesn’t have material souring
issue and (iii) palm oil prices have corrected from INR80k/MT to INR73k/MT mainly due to
lower consumption in China.
 One common commentary which was seen across domestic agrochemical companies is that
they have inventories upto March/April’20 however, if the production in China doesn’t
resume post that it would have an adverse effect on the domestic agrochemical players.