India's agrochemical sector is likely to experience muted profitability in FY26, even as export volumes and revenues record moderate growth, ICRA said. The industry is likely to record a 7–9% revenue growth and 5–6% export volume growth, but various headwinds are likely to keep margins in check.
Key Highlights:
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Profitability Issues: ICRA is predicting operating margins to improve marginally only to 12–13% in FY26, below pre-pandemic levels of 15–16%. This is because of sustained global oversupply, particularly from China, which is redirecting US exports to other geographies, thereby pressurizing prices.
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Export vs. Domestic Demand: Exports to the US and Brazil are increasing on account of low inventory and firm prices, but domestic demand is weak, hit by unpredictable monsoons and lower pest infestations.
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Conservative Approach: Firms will be required to adopt tight working capital management and restrict capital expenditure to ensure financial health in the face of continuing pricing and demand uncertainties.
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Risks: Additional Chinese oversupply, weather fluctuations, and policy changes may weigh on the sector's woes.
Overall, India's agrochemical industry will experience some growth in FY26, but profitability will continue to be under strain from global competition and pricing problems.
Sources: BusinessWorld, Economic Times, ICRA