CONTENTS

1. Introduction
2. Objective and Scope of the study
3. Background of the selected companies and SWOT
analysis
4. Methodology and Analysis
4.1. Revenue Recognition
4.2. Inventory Valuation
4.3. Depreciation and Fixed Assets
4.4. Common Size Analysis (2023 only)
4.5. Ratio Analysis
4.6. Cash Flow Statement Analysis
5. Summary and conclusion

LIST OF TABLES
1. Table No. 1: SWOT Analysis
2. Table No. 2: Revenue Recognition
3. Table No. 3: Inventory Valuation
4. Table No. 4: Depreciation and Fixed Assets
5. Table No. 5: Balance Sheet of all companies
6. Table No. 6: Profit and Loss Statement
7. Table No. 7: Ratio Analysis of all companies
8. Table No. 8: Cash Flow Statement Analysis

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Executive Summary

1. Introduction

The pesticide industry is responsible for developing and manufacturing chemicals used to control
pests in agriculture, such as insects, weeds, and fungi. It has a long history, with synthetic
pesticides emerging in the 20th century. Pesticides are highly regulated due to environmental and
health concerns, and they have raised issues related to unintended harm to non-target species,
water contamination, and human health risks. There's a growing interest in alternative pest
control methods, and the industry invests heavily in research and innovation.

At a compound annual growth rate (CAGR) of 2.6%, the market for pesticides and other
agricultural chemicals is anticipated to increase from $84.5 billion in 2019 to $86.7 billion in
2020. The COVID-19 epidemic and the containment efforts are mostly to blame for the global
economic downturn that is causing the poor growth.

With 27% of the global market for pesticides and other agricultural chemicals in 2019, Asia-
Pacific was the market's largest region. With 24% of the global market for pesticides and other
agricultural chemicals, South America was the second-largest area. The Middle East was the
smallest region in the world market for agricultural chemicals and pesticides.

2. Objective and Scope of the study

This study aims to compare the financials of 6 companies spread across high cap, mid cap and
low cap in the pesticide industry. The scope of the study is to execute horizontal, common size
and ratio analysis on the company financials and interpret the findings based on the concepts and
learnings from our Term-1 program of Financial Accounting at the Indian Institute of
Management, Visakhapatnam. The analysis of the financial statements for each company is done
by going through the annual reports of the companies that are published on their website. The
views in this report may or may not represent the actual position of the companies considered in
this study.

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The scope of this study is also guided by the sample report, the “Group Worddoc Skeleton”
document and the “Exide industries” excel spreadsheet shared by the professor.
3. Background of the selected companies and SWOT analysis

Punjab Chemicals & Crop Protection Limited (PCCPL) is an Indian company specializing in
agricultural chemicals and crop protection products. They manufacture pesticides, herbicides,
insecticides, and fungicides to help farmers protect their crops. PCCPL operates in India and
potentially other markets, with a focus on research and development for sustainable solutions.
Regulatory compliance and environmental concerns are key aspects of their industry.

Bayer Crop Science is a global subsidiary of Bayer AG, specializing in agricultural solutions.
They offer seeds, crop protection chemicals, and digital farming services worldwide. The
company focuses on research and sustainability, aiming to provide farmers with innovative and
environmentally responsible solutions. Bayer Crop Science adheres to strict regulations,
collaborates with industry partners, and plays a vital role in addressing global food security
challenges.

Rallis India Limited is a subsidiary of Tata Chemicals, focusing on agricultural solutions. They
offer crop protection products, seeds, and services. Rallis emphasizes sustainability and invests
in research and development. While primarily operating in India, they also export their products
globally. The company adheres to strict regulatory standards and collaborates with industry
partners.

Shivalik Rasayan Ltd. is an Indian company specializing in agrochemicals and chemical

products. They manufacture and market agricultural solutions, including pesticides, herbicides,
insecticides, and fungicides. The company likely emphasizes research and development for
sustainable solutions and adheres to regulatory standards.

Heranba Industries Ltd. is an Indian agrochemical company based in Gujarat, India. They
specialize in manufacturing and marketing agricultural chemicals, including pesticides,
herbicides, insecticides, and fungicides. The company focuses on research and development and
adheres to regulatory standards.

Kilpest India Ltd. is an Indian company operating in the agrochemical sector. They are engaged
in the production and distribution of agricultural chemicals, including pesticides, herbicides,
insecticides, and fungicides.
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SWOT Analysis:
Company name Strength Weakness Opportunities Threat
1. Punjab low debt-to- Environmental Expanding into Changes in
Chemicals & equity ratio Concerns: emerging climate patterns
Crop Protection implies lower Increasing markets can open can affect crop
financial risk and scrutiny on up new customer cycles and pest
interest expenses. environmental bases and populations,
impact can be a revenue streams. impacting the
weakness to demand for crop
PCCP's products. protection
products.

2. Bayer Strong Brand Environmental High Potential Climate Change:

Cropscience Ltd. Reputation: Concerns: use of Drugs: should Changing
subsidiary of pesticides and start dealing in weather patterns
Bayer AG, a has faced high potential and increased
well-known and criticism for its drugs. Intense environmental
respected global potential Competition: challenges can
brand in the environmental The agricultural affect crop yields
pharmaceutical impacts, Fall in industry is highly and disrupt the
and agricultural Consumer Health competitive. agricultural
industries, Stocks Sales, sector, Local
in PE Buy Zone Dependency on Collaboration:
with Reasonable External Factors: growth
Durability Score, heavily reliant on opportunities in
and Rising external factors international

4 4
 Momentum like weather markets by
Score, conditions. partnering with
local players.
Despite having
local expertise,
Bayer can offer
execution
expertise and
global processes.

3 Rallis India Inefficient use of High Momentum Stocks are

Limited capital,RoCE Scores (greater affected by weak
declining in the than 50) monsoons
last 2 years
Turnaround
Inefficient use of companies- loss
shareholder to profit QoQ
funds,ROE
declining in the
last 2 years
Inefficient use of
assets,ROA
declining in the
last 2 years
Annual net profit
declining for last
2 years

4 Shivalik Company with Inefficient use of The chemicals Shivalik Rasayan

Rasayan Ltd. Zero Promoter capital to industry has Ltd. competes
Pledge, Company generate profits - shown growth with other key
with Low Debt, RoCE declining potential, players in the
Book Value per in the last 2 suggesting an industry, and
share Improving years, -9.0%; opportunity for market
for last 2 years Inefficient use of the company to competition can
shareholder benefit from be a potential
funds-ROE industry trends; threat to the
declining in the Shivalik Rasayan company's
last 2 years, - Ltd. is set to pay market share and
10.7%; Decline a dividend per profitability;
in Net Profit with share in company's past
falling Profit September 2023, performance
Margin potentially indicated a

5 5
 attracting decline in EPS in
investors and full-year 2023
shareholders compared to the
previous year,
which may pose
a threat to
shareholders'

5. Heranba Wide variety of Effluent waste is Manufacturing of Outstanding legal

Industries Ltd products in not controlled, Intermediates, proceedings
synthetic change in govt sale of branded involving the
pyrethroids policies could formulations, company
close the offers ample
company opportunities to
enhance revenue
and profitability
6. Kilpest India Company with Suboptimal RSI indicates Industry is
Ltd. low debt, rising deployment of price strength. dependent on
profit margins, capital and monsoon and
and a consistent shareholder Showed highest pest attack. With
improvement in funds reflected in recovery from a global warming
Book Value per the declining 52-week low. weather patterns
share over the Return on are becoming
past two years. Capital unpredictable,
Employed The subsidiary which is a risk.
(RoCE) and company 3B
Return on Equity Frequent weather
BlackBio
(ROE) over the changes-
Biotech has
past two years. drought, dry
successfully
weather, and
expanded its
Ineffective floods could
business, with
utilization of affect
strong customer
assets for profit profitability and
demand for its
generation, as revenue.
diagnostic kits
evidenced by the
covering various Capital market
decreasing
parameters. It is volatilities could
Return on Assets
consistently impact our
(ROA) over the
striving to capital access.
last two years.
introduce new
diagnostic kits to
meet the
Annual net profit demands of both A shift in
has been existing and competitors'
declining for the potential marketing
customers. This strategies,
6 6
last 2 years. endeavor is heightened
positioning competitive
Kilpest to pressure, and the
enhance their emergence of
global presence, disruptive
and they are technologies and
already marketing
expanding into practices such as
international genetically
markets. modified/hybrid
seeds,
With the largest digitization,
range of CE-IVD biotechnology,
products in the organic farming,
molecular and online sales
diagnostics of crop
segment and protection
Kilpest’s products, all have
growing the potential to
portfolio, they influence
are considered as revenue,
one of the profitability,
leading market share, and
molecular sustainability.
diagnostic kit
manufacturers
not only in India
but also in the
international
markets.
Since the
industry offers
moderate
opportunity for
growth due to
increase in use of
Agro chemicals
by farmers, there
is significant
export potential
to neighboring
countries that
remains
untapped, and
the company is

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 actively
registering new
products in these
markets to
leverage this
opportunity.
Table No. 1: SWOT Analysis

4. Methodology and Analysis

Methodology used for analysis is created condensed balance sheet and multi-step profit and loss
statement for companies. Then using them carried out horizontal and vertical analysis. Different
ratio analysis (Liquidity, solvency,profitability,operating,dupont) were conducted and objectives
are written with comparisons.

4.1. Revenue Recognition

The analyis on the revenue recognition of the 6 companies chosen are performed below. This is
done to assess when and how the revenue is recognized in each of these companies.
Company What revenue Are these Are these Does this
name recognition policies your policies policies analysis
company followed in the consistent in consistent indicate that
recent years? all the recent with the way the reported
years? the company revenue figures
carries out its of your
business? company are
aggressive or
conservative?
1 Punjab The company has followed Yes Yes Conservative
Chemicals Ind AS 115, Revenue from
& Crop contracts from customers
Protection
2 Bayer Bayer CropScience follows Yes Yes Conservative
Cropscience the revenue recognition
Ltd. policies outlined in the
International Financial
Reporting Standards
(IFRS). These policies
require revenue to be
recognized when the entity
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 has transferred the
significant risks and
rewards of ownership of
the goods or services to the
customer, and the amount
of revenue can be
measured reliably.

3 Rallis Revenue from the sale of Yes Yes Conservative

India goods is recognized at the
Limited time when control passes
to the customer, which is
usually related to the
shipment/delivery of the
goods.
Interest income from
financial assets is
recognized when it is
probable that a financial
benefit will accrue to the
company and the amount
of income can be reliably
determined.
Dividend income from
investments is recognized
when the shareholder has
the right to payment

4 Revenue is recognised to Yes Yes Conservative

the extent that it is
probable that the economic
benefits will flow to the
Company and the revenue
can be reliably measured,
regardless of when the
payment is being made.
5 Heranba Company recognizes Yes Yes Conservative
Industries revenue at the point in time
Ltd when the products are
delivered to customer or
when it is delivered to a
carrier for export sale,
which is when the control
over product is transferred
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 to the customer
6. Kilpest Revenue is recognized on Yes Yes Conservative
India Ltd. completion of Sales of
goods or rendering
services. Sale is exclusive
of GST and packing and
forwarding charges
collected from customers.

Table No. 2: Revenue Recognition

Observation:
We observe that the revenue from all the companies is recognized when the risk and rewards of
ownership, control over the good is transferred to the customer. These policies are consistent
over the years in all the companies, they are consistent with the way the business carries out its
operations and the revenue figures indicate that the company takes a conservative approach to
revenue recognition.

4.2 Inventory Valuation

The analysis on the inventory valuation of the 6 companies chosen are performed below. This is
done to assess how the company evaluates the ending inventory that includes raw materials,
work-in-progress goods and unsold goods at the end of the financial year. It is an asset
calculation technique to improve asset management.

Company name What inventory Are these policies If your company has
valuation policies consistent in all the changed its
your company has recent years? inventory valuation
used in recent policy, how it has
years? affected its reported
COGS figures and
its profits?
1 Punjab Chemicals Inventories are valued Yes NA
& Crop Protection at lower of cost or net
realisable value.
2 Bayer CropScience Weighted average Yes NA

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Ltd. cost (WAC)
3 Rallis India Limited Inventories are Yes NA
measured at lower of
cost and net realisable
value after providing
for obsolescence and
other losses, where
considered necessary.
Cost includes all
production or
conversion costs and
other costs incurred in
bringing the goods to
their present location
and condition,
including relevant
taxes and other levies,
transit insurance and
receiving charges.

4 Shivalik Rasayan Ltd. The company follows Yes NA

the FIFO (First-In-
First-Out) method for
inventory valuation.
Inventories are
recorded at their
lower of cost and net
realizable value. If the
management
determines that
certain inventory
items have become
obsolete, expired, or
are non-moving, they
are written down to
their estimated net
realizable value.
5 Heranba Industries Inventories are valued Yes NA
Ltd at lower of cost and
net realizable value.
The Company writes
down inventories to
net realizable value
on account of
obsolescence, expiry
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 and non-moving
inventory, based on
management’s
assessment. FIFO
method.
6. Kilpest India Ltd. FIFO method is Yes NA
followed. Market cost
or acquisition cost,
the lower of the two
is considered.
Table No. 3: Inventory Valuation
Observation:
We see that all the companies approach inventory valuation by taking the lower of the market or
acquisition cost. The FIFO method is followed in most of the companies except Bayers which
considers a weighted average approach to inventory valuation.

4.3 Depreciation and Fixed Assets

The analysis on the depreciation and fixed assets of the 6 companies chosen are performed
below. This is done to assess how the company evaluates the cost of any physical or tangible
asset over the course of its useful life. The analysis on the fixed assets is to understand the
market value or evaluation of the cost of any asset in the financial statement.

Company What depreciation Does this What Have your

name policies your company analysis accounting company
have used in recent indicate that policy your undertaken
years? Are these reported company has impairment of
policies consistent in all depreciation used for any of their
the recent years? Are figures of your accounting of fixed assets
these policies company are their fixed recently? What
consistent with the way aggressive or assets? Which internal and or
a company carries out conservative? concept external factors
its business? (Historical have caused
cost/Fair value) impairment of
your company their assets?
is using? How has
impairment
affected their
financial

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 statements?
1 Punjab “Depreciation on items Conservative Historical cost No
Chemicals of PPE is provided as
& Crop per rates corresponding
Protection to the useful life
specified in Schedule II
to the Companies Act,
2013”
2 Bayer Weighted average cost Conservative Historical cost No
Cropscience (WAC) method. It is
Ltd consistent.
3 Rallis Straight line method. It Conservative Fair value The impairment
India is consistent was primarily
Limited driven by
changes in
market
conditions and
significant
changes in
market
segmental
requirements.
As a result of
the impairment,
the Company
has recognized
an expense of ₹
3,040.96 lakhs
for the year
ended March 31,
2023.
4 Shivalik Depreciation is Conservative Fair value No
Rasayan Ltd. calculated on a straight-
line basis over the
estimated useful lives of
the assets
5 Heranba Depreciation is provided Conservative Fair Value No
Industries on written down value
Ltd based on useful life of
the assets as prescribed
in Schedule II to the

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 Companies Act, 2013.
6. Kilpest Straight line method. It Conservative Fair Value No
India Ltd. is consistent

Table No. 4: Depreciation and Fixed Assets

Observation:
The depreciation of 5 companies considers the useful life and follows the straight line method of
depreciation except Bayer Cropscience which takes

4.4 Common Size Analysis (2023 only)

The common size analysis or vertical analysis of the 6 companies is done below to show the
impact each detail in the balance sheet or the profit and loss have on the company’s overall
performance.
Balance Sheet- Only 2023 percentage

Company 1 2 3 4 5 6
ASSETS
NON-CURRENT ASSETS
Tangible assets 37.81% 9% 25% 50% 19.67% 10%
Intangible assets 0.27% 2% 0% 0% 0% 0%
Financial assets 0.82% 0% 1% 18% 5.17% 13%
Other noncurrent assets 1.10% 5% 15% 3% 1.20% 0%
40% 17% 41% 71% 26.03% 23%

CURRENT ASSETS
Inventories 26.52% 39% 28% 8% 25.63% 10%
Trade receivables 22.62% 21% 18% 5% 33.43% 46%
Cash and cash equivalents 1.17% 19% 2% 3% 8.56% 2%
Other financial assets 5.15% 1% 8% 3% 1.92% 1%
Other current assets 4.53% 4% 3% 9% 4.42% 18%
60% 83% 59% 28% 73.97% 77%
TOTAL ASSETS 100% 100% 100% 100% 100% 100%
EQUITY AND LIABILITIES
EQUITY
Equity share capital 1.93% 1% 1% 2% 3.45% 25%
Other equity 45.05% 57% 61% 81% 66.95% 56%

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 46.98% 58% 62% 83% 70.4% 81%
LIABILITIES
NON-CURRENT
LIABILITIES
Long term financial liabilities 10.07% 3% 1% 3% 0.30% 3%
Other long-term liabilities 3.88% 1% 2% 0% 0.77% 3%
13.95% 4% 3% 3% 1.07% 6%
CURRENT LIABILITIES
Trade payables 21.75% 19% 21% 5% 16.10% 7%
Other short term financial 2% 10% 6% 10.92%
12.19% 4%
liabilities
17% 4%
6% 1.52%
4.81% 1%
Other current liabilities
Provisions 0.32% 1% 1% 1%
39.07% 38% 35% 17% 28.53% 13%
TOTAL EQUITY AND 100%
100% 100% 100% 100% 100%
LIABILITIES

Table No. 5: Balance Sheet of all companies

Observation:

Profit and Loss Statement- Only 2023 percentage

Company 1 2 3 4 5 6
Revenue from operations 100% 100% 100% 100% 100% 100%
Cost of materials consumed 65.26% 47% 57% 54% 69% 68%
0% 1% 6%
Purchase of stock-in-trade 0.35% 0% 5%
Changes in inventories of -2%
finished goods, work-in- -9%
progress and stock-in-trade -2.23% 0% 3% -1%
Cost of materials sold 63.38% 47% 65% 46% 67% 0%
Manufacturing exp (from Notes 3%
of other expenses) 12.93% 12% 9% 12% 3%
Gross Profit 23.69% 42% 26% 43% 30% 24%
Employee benefits expenses 8.30% 11% 9% 18% 5% 15%
other operating expenses (from 13%
Notes of other expenses) 3.28% 17% 10% 5% 20%
Earnings before Interest, tax,
depreciation & amortisation 12.11% 13% 7% 20% 12%
15 15
 (EBITDA) -11%
Depreciation and amortisation 2% 3%
expenses 1.89% 2% 3% 6%
Earnings before Interest & tax 10%
(EBIT) 10.22% 12% 4% 15% -13%
Other Income 0.40% 1% 0% 0% 1% 34%
Finance costs 1.77% 0% 0% 2% 1% 2%
Earnings before tax (EBT) 8.05% 13% 4% 13% 10% 19%
0% 0%
Exceptional items 0% 0% 0% 0%
Earnings before tax 8.05% 13% 4% 13% 10% 19%
Total Tax (Current +Deferred) 2.77% 4% 2% -1% 3% 2%
Earnings after tax (EAT) 5.28% 8% 3% 14% 7% 17%

Table No. 6: Profit and Loss Statement

Observation:

4.5 Ratio Analysis

The ratio analysis of the 6 companies is performed below to gain insights on the companies’
operational efficiency, profitability and to check the liquidity of the company. These ratios help
us decide whether we must invest in a company or not. It lays out the financial position for
investors and stakeholders to decide their next step with respect to the company.

Company name 1 2 3 4 5 6
Liquidity Ratios
Current Ratio 1.55 2.19 1.66 3.38 1.62 5.97
Quick Ratio 0.86 1.18 0.86 3.26 1.13 5.18
Observation: Companies 4 and 6 appear to have the strongest liquidity positions based on both
current and quick ratios

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Solvency Ratios
Debt to Equity ratio 0.47 0.055 0.17 0.06 0.20 0.084
Debt to Asset ratio 0.22 0.041 0.10 0.04 0.10 0.068
Interest coverage ratio 5.76 0.263 10.37 24.80 39.01 -8.099
Observation: Companies 4 and 5 appear to have strong solvency positions with moderate to high
Debt to Equity ratios but robust Interest Coverage ratios. Companies 1, 3, and 6 have relatively
low debt levels and varying Interest Coverage ratios, while Company 2 stands out with an
extremely low Debt to Equity ratio and a relatively lower Interest Coverage ratio.

Operating Ratios
Inventory Turnover (times) 4.76 1.73 2.55 12.44 5.96 3.19
DSI - Days sales in inventory 76.71 210.37 142.97 29.35 61.21 114.54
(days)
Accounts Receivable Turnover 7.86 2.98 6.28 6.93 4.41 0.86
(times)
DSO - Days Sales Outstanding 46.41 122.50 58.10 52.70 82.71 426.62
(days)
Accounts Payable Turnover 5.69 2.91 3.30 3.46 4.55 3.21
(times)
DPO - Days Payable Outstanding 64.16 125.53 110.75 105.48 80.18 113.81
(days)
Operating Cycle (days) 123.12 332.89 201.07 82.05 143.92 541.16
Cash Conversion Cycle (days) 58.97 207.37 90.32 -23.42 63.74 427.35
Working capital turnover ratio 8.97 2.45 4.32 0.69 2.88 0.64
Asset turnover ratio 1.66 1.10 1.05 0.32 1.79 0.39
Observation: Companies 4 and 5 demonstrate efficient inventory turnover and receivables
management. Company 1 excels in receivables turnover, while Company 6 lags significantly.
Company 5 efficiently handles payables, while Company 1 exhibits the highest working capital
turnover. Company 5 utilizes assets effectively to generate revenue, whereas Company 6 and
Company 2 are less efficient in this regard. These ratios highlight differences in financial and
operational management among the companies.
Profitability Ratios
Gross profit Ratio, GPR 24% 42% 26% 43% 30% 24%
(percentage)
Net Profit Ratio, NPR (percentage) 5% 8% 3% 14% 21% 17%

17 17
Return on Assets, ROA 17% 13% 4% 4% 43% -5%
(percentage)
Return on Capital Employed, 5% 3% 1% 5% 16% 8%
ROCE, ROIC (percentage)
Return on Equity, ROE 20% 15% 5% 5% 66% 8%
(percentage)
Observation: Companies 5 and 4 demonstrate strong gross profit ratios (GPR), indicating healthy
margins. Their net profit ratios (NPR) are also impressive, reflecting robust overall profitability.
Company 5 leads in return on assets (ROA), suggesting efficient asset utilization, while
Company 6 lags with a negative ROA.
Companies 5 and 4 shine in returns on capital employed (ROCE, ROIC), showcasing effective
capital utilization. Company 5 particularly stands out with a high return on equity (ROE),
revealing efficient equity deployment. In contrast, Companies 2, 3, and 1 exhibit lower
profitability and efficiency, with varying margins and returns.

Dupont Analysis
ROE 0.18 0.14640 0.0531 0.044 0.87 0.08435
Net Profit margin 0.05 0.0802 0.0310 0.137 0.21 0.1703
Asset turnover 1.58 1.0569 1.0605 0.256 2.09 0.4018
Financial leverage 2.13 1.72508 1.6171 1.253 1.97 1.2327
Observation:

Valuation Ratios
Price to earnings per share(P/E 21.95 31.97 50.32 67.14 13.69 274.15
ratio)
Price to Book value per share (P/B 54.76 8.94 2.68 6.05 4.70 24.42
ratio)
PEG Ratio -18.71 2.28 -1.17 -2.57 -0.54 15.23
Impression Overvalued Overvalued Overvalued Overvalued Bad stock Overvalued
Recommendation Sell Sell Sell Sell Sell Sell

Table No. 7: Ratio Analysis of all companies

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Observation:

4.6 Cash Flow Statement Analysis

The cash flow analysis of the 6 companies is performed below to provide insights on the position
of the business and its capabilities to pay off any financial obligations and bills.
Company CFO CFI CFF

1 Punjab Chemicals & 5669 L -3648 L -1968 L

Crop Protection

2 Bayer CropScience 5258.45 5263.90 5335.95

Ltd

3 Rallis India Limited 21,682.43 - 14,210.91 -4,104.26

4Shivalik Rasayan Ltd. -1,265.61 L - 6,489.13 L 2,050.63

5 Heranba Industries 122.50 Cr 100.06 Cr 18.08 Cr

Ltd.

6 Kilpest India Limited 1.6451 Cr. -0.0244 Cr. 2.5688 Cr.

Table No. 8: Cash Flow Statement Analysis

Observation:

5. Based on the results of the above analysis, summarize, and justify your observations
to an equity investor about each company and give recommendations. Also talk
about the reporting quality of each firm in brief.

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