UPL: India is the leading player in the global agrochemical industry, capitalizing on its competitive advantage to become a leading producer and exporter of chemicals. Agriculture will be India’s backbone. It was important to help the GDP of India. India’s agricultural sector depends on agribusiness chemicals to improve the production of foods.
The agricultural chemical sector has an important role in the rising demand for high-quality agricultural goods and needs in farming techniques. In this field, the company is investing in research and development of eco-friendly goods to improve the production of agricultural goods. Governments are promoting the modernization of agricultural methods. This will help contribute to agricultural advancements and economic prosperity.
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Industry Overview Of UPL
India is the fifth largest economy in the world. India’s agribusiness industry is a significant contributor to the economy with a growth rate of 8 to 10% in FY25. India is the fourth-biggest producer of agrochemicals in the world and the 12th-largest exporter of chemicals globally. Government support, low cost of resources and strategic partnerships with global operate this industry.
The Indian agrochemicals sector is projected to reach $13.08 billion in 2029 and improve at a CAGR of 4% from 2024 to 2029. The industry faces the problem of cheap imports from China, and unpredictable weather will affect demand. The industry is recognizing to long-term benefits of investing in agrochemicals for sustainable growth. India is a positioning hub for innovation, research and developments to boost modern agrochemical outputs.
Company Overview Of UPL
United Phosphorus Limited (UPL) is Established on 29th May 1969 over 55 years ago, and the founder is Rajnikant Shroff. The company was renamed in October 2013 as UPL Limited. UPL Limited is one of the leading providers of sustainable agricultural solutions and services. It is the 5th largest agrochemical company worldwide. UPL has 43 manufacturing facilities and 18 research & development facilities across the globe.
UPL manufactures and distributes agrochemicals industrial chemicals, chemical intermediates, specialty chemicals and pesticides. The company focuses on both agricultural and non-agricultural products.
The company is leveraging the business and unlocking value from various platforms such as Advanta, Specialty Chemicals, India Crop Protection and UPL Corporation.
The company has more than 14,000 product registrations, a presence in almost 138 countries, access to 90% of the world’s food basket. As of FY24, UPL has reported more than 10,000 employees globally.
Segments and Subsidiary Company Financial Analysis
UPL Corporation Ltd
It is the world’s 6th-largest crop protection company, with sales in over 130 countries. UPL’s revenue has decreased from 419.8 billion to 308.8 billion by 26% because of destocking in key regions, pricing pressure and unfavorable weather. The company has almost 10% volume growth compared to FY23. The price decline is offset by input cost and improved mix and growth in some markets like China, Africa, Mexico, and Australia. The Company has a new launch in sustainable solutions such as Feroce, Evolution, Shenzi, Nimaxxa and YUKON.
UPL Sustainable Agriculture Technology (UPL SAS)
It is the world’s 6th-largest crop protection company, with sales in over 130 countries. It agrotechnology platform Nurture is connected with almost 3 million registered farmers, more than 85,000 retailers and 25,000 dealers.
The UPL SAS revenue has decreased from 4326 Cr to 2845 Cr in FY24 by 34% because of price and volume reductions by 7% and 27% respectively. Along with this, the weather affects the lower production of cotton, rice, cotton, pulses, and oilseeds. In addition to this, the UPL’s fixed costs are reduced by 15% YOY and cash generation of INR 1000 crore in FY24.
Advanta Enterprises
It is the leading corn seed platform in India and the company has strong performance in the seed business. It has a regional mix of Asia/AME (49%), Americas (38%), Australia (11%) and Europe (2%) in FY24. The company has a revenue share of the crop of Field Corn at 45%, Grain & Forage Sorghum at 22%, vegetables & Fresh Corn at 12%, Sunflower & Canola at 16% and other crops of 5%.
Adanta’s revenue has increased from 3558 Cr. to 4148 Cr in FY24 growing by 17%. The revenue increased because of price by 6% and volume by 9%. The EBITDA growth is more than 19% compared to last year. The company has key technology brands such as Igrowth, Vertix, aphix and AIC.
UPL Specialty Chemicals
UPL is the number 1 specialty chemicals company in India. The company’s revenue decreased from 11280 Cr to 8821 Cr in FY24 by 26%. But the EBITDA margin is up by 130 bps YOY to 12.6%. The key strength is the ability to quickly scale up the non-captive business by leveraging the captive business’s large asset base, vertical integration, and complex chemical expertise.
Financial Analysis Of UPL
| FY24 | FY23 | FY22 | FY21 | FY20 | |
|---|---|---|---|---|---|
| Revenue (in Cr) | ₹43,098 | ₹53,576 | ₹46,240 | ₹38,694 | ₹35,756 |
| Net Profit (in Cr) | -₹1,878 | ₹4,414 | ₹4,437 | ₹3,495 | ₹2,178 |
| Operating Profit Margin (%) | 5.24 | 15.16 | 16.11 | 16.63 | 13.6 |
| Debt to Equity | 1.15 | 0.86 | 1.19 | 1.32 | 1.76 |
| ROE (%) | -4.83 | 13.29 | 16.72 | 16.03 | 10.89 |
United Phosphorus Limited’s (UPL) revenue has increased consistently till FY23. UPL’s revenue has increased from ₹46,240 Cr. in FY22 to ₹53,576 Cr. in FY23, growing by 15.87%. In FY24, revenue massively dropped by 19.56% to ₹43,068 crore compared to FY23 because the overall business volume decreased by 6% and a higher rebate impact of ₹2,354 crores including price value decreased by 17%.
The net profit of the company has increased until the financial year 2022. Later, it slightly decreased from ₹4,437 Cr. to ₹4,414 Cr. in FY23. The company’s net profit massively decreased by 142.55% to -₹1,878 Cr. in FY24 because of the lower EBITDA and one-time FX impact of ₹256 crore.
The operating profit margin decreased from 15.16 to 5.24 in FY24 and the net profit margin will be -3.79% in FY24 respectively. The Debt-equity ratio of UPL will be 1.15. The company ROE and ROCE will be -4.83% and 3.72% respectively.
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Why was UPL removed from NIFTY50?
UPL Limited was removed from NIFTY50 on March 28, 2024, because of the exclusion from the NIFTY100 index. The company rank is given based on the market capitalization, which is more than 50 rank are come under the NIFTY100.
The National Stock Exchange of India (NSE) has a benchmark index for NIFTY50. The decision is based on the criteria of the index including market capitalization, Liquidity and Financial performance of the company. The Company has not performed well in FY24 so that reflects in the stock market and company liquidity as well. Shriram Finance has market capitalization and liquidity compared to better than UPL Ltd.
UPL’s revenue has dropped by 19.56% in the financial year due to price and volume reductions, although unpredictable weather will affect the company’s revenue. This has impacted by the stock share of the company from Rs 760 to Rs 450. Now UPL Limited is trading at Rs 551.50. It decreased by 36.22% to an all-time high of stock price.
What lies ahead for UPL?
- HSBC has given a target price of Rs. 730. They believe that UPl will make a profit and revival in FY25.
- Centrum Broking announced the target price of Rs. 613. According to the broker, they performed well in Q4 FY24, so the company will turn around.
- Antique Stock Broking has set a target price of Rs. 660. They say that the government is planning to give a push to the agricultural sector.
Future Plan Of UPL
- UPL plans to focus on improving margin capacity for profitable business, improving cash flows in its operations and realigning sales to improve working capital management.
- UPL Limited is focusing on improving revenue by 4% to 8% and EBITDA growth will be more than 50% in FY25.
- The company expects to generate operational free cash generation to reduce the debt of $300 million to $400 million in FY25.
- UPL is investing in hybrid green energy capacity and transitioning to green chemicals, which will double in upcoming years.
- Environmental sustainability margins will be expected to remain at more than 55% in FY25 and continue to focus on reducing CO2 emissions by 17%, freshwater consumption by 12% and waste generation.
- UPL Limited targeting market share to launching six major products such as rice, vegetables, maize and sugarcane in FY25
- The company is investing money in R&D for high-quality products. This will be expected to have a healthy innovation rate of 25% by FY27.
- The Company is on the path to achieving almost 50% revenue from differentiated/sustainable solutions by FY27.
Financial Metrics Of UPL
The key metrics of UPL Limited are given below.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹551.50 | Market Cap (Cr.) | ₹40,514 |
| ROE (TTM) | 3.75% | ROCE (TTM) | 3.49% |
| ROA (TTM) | 2.15% | Interest Coveragee Ratio | 1.30% |
| Promoter Holding (%) | 32.35% | FII Holding (%) | 33.64% |
| Debt to Equity | 1.15 | Current Ratio | 1.46 |
| Operating Profit Margin | 5.24% | Net Profit Margin | -3.79% |
Conclusion
UPL Limited is the 5th largest agrochemical business globally and the company is planning to improve business cash flows and debt reduction. The company’s revenue is affected by the price and volume reductions. UPL is focused on improving revenue to make profitable business in the upcoming years. It has involvement in sustainability, innovation, and integrated crop management making it a suitable benchmark for the worldwide agrochemical business.
What do you think about UPL ltd? Let us know in the comments below.
Written by Nikhil Naik
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