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Aventis: Advantage agrochem

Oct 9, 2000

An amalgamation of Hoechst, Schering, Plant Generic System and Rhone Poulenc, Aventis Crop Sceince (Aventis) has emerged as the leading global player in the agrochemical industry. In India too the company is among the top three players in the agrochemical sector. The company’s main products are for the cotton, wheat and rice crops since these crops comprise over 65% of the agrochemical market. Aventis’ products include Thiodan, Hostathion, Decis and Spark, which contribute almost 50% to the company’s turnover. All these products are insecticides. The international parent however derives only around 20% of its turnover from insecticides with the rest accruing from herbicides, fungicides and weedicides.

Last year Aventis introduced ‘Puma’, the parent’s leading herbicide into India. The company expects this product to reach a maturity level in the current year itself. The company has however continued to focus on insecticides and herbicides rather than focus too much on weedicides since the management has been of the opinion that since India had a surplus of manpower, weedicides can never replace manual plucking of weeds.

The company is also diversifying its focus into crops such as soyabean, vegetables, pulses and mango. Last year the company integrated the manufacturing and the marketing operations of Rhone Poulenc’s agro division. This division had a turnover of Rs 1 bn.

What will be the most interesting part is the fact as to how the company handles the integration of the field forces of the two companies. This is because both the companies have so far concentrated on the states of Maharashtra, Gujarat and Andhra Pradesh. Hence, one foresees a restructuring of the field force despite the company’s announcements to the contrary.

With the large size of India’s agricultural economy, initiatives in biotech and a tighter patent regime would provide a further upside to the earnings in future. The stock quotes at Rs 210 which implies an earnings multiple of less than nine times its estimated earnings its December 2000 earnings.

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