PI Industries Vs UPL Limited: The world is made up of chemicals, including us. Chemicals play a major role in all industries. The conversion of raw materials into finished goods requires chemicals. The industry is ever-evolving due to an increase in consumption.
Chemicals must constantly evolve to support modifications to the production process that result in product yield and reduce the risk of harm.
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PI Industries Vs UPL Limited
In this article on PI Industries Vs UPL Ltd, we will fundamentally analyze and compare the companies that deal in the agrochemical.
Company Overview – PI Industries
PI Industries was founded in 1946 under the name of Mewar Oil & General Mills Ltd. Later, in 1992, the company name was changed to PI Industries Ltd. They work on producing goods that are useful for agriculture, such as biostimulants, fungicides, insecticides, and herbicides.
Segment Analysis
The company operates in 30+ countries across six continents and only in one segment, Agro Chemicals. The company generates revenue by producing and distributing agrochemicals, which consist of 82% of active ingredients and intermediates, 17% of formulations, and 1% of others.
In FY23, the revenue breakdown by market presence is as follows: India: 20%; Asia (excluding India): 22.60%; North America: 43.4%; Europe: 9.5%; and the Rest of the World: 4.5%.
Company Overview – UPL Limited
Rajnikant Shroff founded the company in 1969 and began operating in the Red Phosphorous Domain. The company deals in crop protection products such as herbicides, fungicides, insecticides, water conservation, innovative nutrition, seed treatment, adjuvants, bio-solutions, fumigants, and pest control-related chemicals.
Segment Analysis
The company’s revenue is distributed among continents; in FY23, Latin America accounted for 49%, Europe for 16%, North America for 19%, and the rest of the world for 16%, and it earns from one segment: the sale of products under Agrochemicals.
North America accounts for 17% of the market share, followed by Latin America (28%), Europe, Asia Pacific (32%), the Middle East, and Africa (3%) across continents.
Industry Analysis
The Indian agrochemical industry is already worth $6 billion in 2023 and is expected to grow at an 8% CAGR from 2024 to 2032, reaching $9.82 billion.
The industry is expected to grow due to factors such as a rising population, increased awareness of agricultural practices, and farmers’ use of agrochemicals.
These factors help to steady the growing demand for food. Agrochemicals are not only used to increase yield; they are also used to control diseases that can destroy entire crops.
However, the excessive use of chemical fertilizers has made the soil infertile in some of the regions. Organic farming is expanding rapidly. There must be a significant balance between organic and chemical fertilizers to maintain crop yield and quality.
The industry is vulnerable to the effects of agricultural seasons. The conditions of the monsoon season determine how much demand there is for the products.
Climate change and the El Nino effect have created uncertainties about rainfall, causing problems in the industry, especially in India.
PI Industries Vs UPL Limited – Financials
Revenue and Net Profit
PI Industries recorded a 22.5% increase in FY23 to Rs. 6,492 crore from Rs. 5,299.50 crore in FY22. Between FY2019 and FY2023, the CAGR is 22.95%. UPL Ltd. saw a 15.87% increase in revenue, from Rs. 46,240 crore to Rs. 53,576 crore in FY23.
A rise in operating margins allowed PI Industries’ net profits to increase from Rs. 843.80 crore to Rs. 1229.50 crore in FY23. Similar to this, UPL recorded a 0.5% decline in FY23 to Rs. 4,414 crore from Rs. 4,437 crore in FY22, primarily as a result of increased raw material costs and fixed expenses like interest.
Even though UPL Ltd. has higher revenue and net profit than its peer, UPL has performed well in the revenue aspect with a CAGR of 25.15% but lagged in net profit as PI Industries has a better CAGR of 31.61% over five years.
| Particulars/ FY | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | CAGR (4 Years) |
|---|---|---|---|---|---|---|
| PI Industries: Revenue (Cr.) | ₹2,840.90 | ₹3,366.50 | ₹4,577.00 | ₹5,299.50 | ₹6,492.00 | 22.95% |
| YoY Growth (%) | 18.50% | 35.96% | 15.79% | 22.50% | ||
| UPL Ltd. - Revenue (Cr.) | ₹21,837.00 | ₹35,756.00 | ₹38,694.00 | ₹46,240.00 | ₹53,576.00 | 25.15% |
| YoY Growth (%) | 63.74% | 8.22% | 19.50% | 15.87% | ||
| PI Industries - Net Profit (Cr.) | ₹410.20 | ₹456.60 | ₹738.30 | ₹843.80 | ₹1,229.50 | 31.61% |
| YoY Growth (%) | -6.09% | 18.95% | -1.30% | 18.97% | ||
| UPL Ltd - Net Profit (Cr.) | ₹1,575.00 | ₹2,178.00 | ₹3,495.00 | ₹4,437.00 | ₹4,414.00 | 29.39% |
| YoY Growth (%) | -15.53% | 48.28% | 6.31% | -14.17% |
Profit Margins
PI Industries had an OPM of 23.78% in FY23, up from 21.61% in FY22, with a 5-year average of 21.81%. The OPM has been stagnant for over five years and continues to fluctuate. In FY23, the net profit margin was 18.94%, up from 15.92% in FY22. On average, the NPM grows at a healthy rate of 15.79%.
UPL Ltd.’s OPM was 19.03% in FY23, down from 20.57% in FY22, with a 5-year average of 19.46%. NPM has fallen from 9.6% in FY22 to 8.24% in FY23 as a result of rising fixed costs such as interest.
As we can see, PI Industries has a higher OPM and NPM than UPL Ltd., indicating efficiency and cost management.
| Particulars/ FY | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average (5 Years) |
|---|---|---|---|---|---|---|
| PI Industries - OPM (%) | 20.05% | 21.38% | 22.24% | 21.61% | 23.78% | 21.81% |
| UPL Ltd. - OPM (%) | 17.20% | 18.94% | 21.58% | 20.57% | 19.03% | 19.46% |
| PI Industries - NPM (%) | 14.44% | 13.56% | 16.13% | 15.92% | 18.94% | 15.79% |
| UPL Ltd. - NPM (%) | 7.21% | 6.09% | 9.03% | 9.60% | 8.24% | 8.03% |
Return Ratios
PI Industries and UPL Ltd.’s respective ROEs for FY23 are 18.45% and 18.20%. The ratio shows that both businesses are capable of providing decent returns to their investors.
In the case of PI Industries, RoCE is greater than RoE, which indicates that funds are used optimally. But UPL Ltd. has a lower RoCE than RoE, and for a highly leveraged business, the returns are concerning.
The company’s fund utilization raises concerns. The average UPL stands at 12.66%, compared to 17.66% of PI Industries for RoCE.
| Particulars/ FY | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average (5 Years) |
|---|---|---|---|---|---|---|
| PI Industries - RoE (%) | 19.57% | 18.63% | 18.52% | 14.71% | 18.45% | 17.97% |
| UPL Ltd. - RoE (%) | 13.19% | 14.05% | 20.44% | 22.43% | 18.20% | 17.66% |
| PI Industries - RoCE (%) | 25.10% | 23.13% | 22.09% | 17.40% | 21.84% | 21.91% |
| UPL Ltd - RoCE (%) | 9.29% | 9.60% | 13.47% | 15.26% | 15.70% | 12.66% |
Debt Analysis
PI Industries exhibits strong financial stability and minimal debt in contrast to UPL Ltd., which has an average of 1.38 debt to equity and faces high credit risk and liquidity concerns for its obligations.
Since PI Industries is almost debt-free, its interest coverage ratio stays in a healthy range. The ability of UPL Ltd. to pay interest on its annual EBIT has been impacted by its rising interest costs year over year.
| Particulars/ FY | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | Average (5 Years) |
|---|---|---|---|---|---|---|
| PI Industries - Debt to Equity | 0.02 | 0.2 | 0.06 | 0.04 | 0 | 0.06 |
| UPL Ltd. - Debt to Equity | 1.98 | 1.49 | 1.14 | 1.33 | 0.97 | 1.38 |
| PI Industries - Interest Coverage | 76.76 | 33.31 | 28.6 | 65.15 | 37.75 | 48.31 |
| UPL Ltd - Interest Coverage | 2.78 | 2.68 | 3.03 | 3.16 | 2.74 | 2.87 |
Key Metrics of PI Industries Vs UPL Limited
As we have understood their financials, we will take a look at some of the key metrics of PI Industries and UPL Limited.
| Particulars | PI Industries | UPL Ltd |
|---|---|---|
| CMP | ₹3,670.7 | ₹552.7 |
| Market Cap (Cr.) | ₹55,691 | ₹41,486 |
| Stock P/E | 37.43 | 15.23 |
| RoE | 18.45% | 18.20% |
| EPS | ₹88.99 | ₹38.09 |
| Price to Book Value | 6.67 | 1.61 |
| Promoter Holding | 46.09% | 32.35% |
| Enterprise Value (Cr.) | ₹53,448.27 | ₹63,430.75 |
Future Plans
PI Industries
- The company intends to bring five new products to the domestic market in FY24 through JIVAGRO, a wholly-owned subsidiary company of PI Industries under the Horticulture segment, to aid domestic market growth.
- The company plans to expand in FY24 and has scheduled the commercialization of three new molecules and two new process innovations.
- The company is actively investing, increasing its R&D activities to bolster its complex scientific chemistry capabilities to retain and attract new customers in the AgChem segment, and opening a hub in Hyderabad for CRO and CDMO research purposes.
- PI Health Sciences, a subsidiary of PI Ind., has entered into a definitive agreement with Therachem Research Medilab LLC to acquire its subsidiaries in India and US assets, and Plahoma Twelve GMBH for the acquisition of ArchimSpA. The acquisition can benefit the company by allowing it to strengthen its position in the Contract Development and Manufacturing Organization (CDMO) space.
UPL Limited
- The company tends to expand its business by utilizing technology such as artificial intelligence and data analytics to reduce costs, increase supply chain efficiency, and create business opportunities through cross-selling.
- Obtaining patents for different formulations, products, and technologies might enhance its ability to expand its market share.
- UPL SAS Platform received an investment of $200 million from ADAI, TPG, and Brookfield for a 9.1% stake. It is a platform that offers products and services for crop protection, establishment, and post-harvest activities, covering over 90% of crop types grown in India.
- The Global Seeds platform by Advanta Enterprises, a subsidiary of UPL Ltd., is looking to increase its market share by using well-known brands, specialized technology, a diverse range of products, and a reliable network for product distribution. KKR, an investment firm that invested $300 million, indicates platform potential.
Conclusion
As we conclude the fundamental analysis of PI Industries vs UPL Limited, let’s look at these companies in brief.
Both companies are in the agrochemical industry, with more than a thousand crores in revenue, and the prospects lined out by the company look promising. However, both businesses stand at the very risk of government regulations in line with farming activities.
PI Industries, with its low debt and interest costs, has an advantage over the overleveraged UPL, which needs changes in its capital structure, or else it would lead to problems when there is an economic downturn.
What is your view of these two companies? Which company holds more potential? Let us know your comments below.
Written By Santhosh
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