India's agrochemical sector is expected to report muted earnings for the first quarter of fiscal year 2027 (Q1FY27), with exporters likely to outperform their domestic-focused counterparts, according to a report by Anand Rathi.
Subdued Revenue and EBITDA Decline
The report states that agrochemical companies are anticipated to post subdued revenue growth of 3 per cent year-on-year in Q1FY27, while EBITDA is likely to decline by 3 per cent year-on-year. This weak performance is attributed to delayed monsoon rains, which postponed sowing activities and pushed sales into the second quarter of FY27.
Price Rollbacks and Cropping Pattern Shifts
The report also notes that price hikes implemented between March and May 2026, aimed at offsetting higher raw material costs due to tensions in the Middle East, were rolled back amid weak demand. Additionally, an early shift in cropping patterns towards cotton, soybean, and pulses weighed on performance, based on the brokerage's channel checks.
Supportive Factors for Demand
According to the report, lower carryover inventories are expected to create room for fresh channel stocking, while favourable minimum support prices (MSPs) and healthy farm economics are likely to support demand for agricultural inputs. "We believe lower carried-over inventories provide room for fresh channel stocking, while favourable MSPs and healthy farm economics should support input demand," the report said. It added that rainfall distribution during July and August will be crucial for crop development and for clearing channel inventories.
Exporters Poised for Growth
The brokerage said exporters are likely to benefit from improving demand in Europe, North America, and Latin America, along with calibrated price hikes to offset higher raw material and logistics costs. It also noted that a favourable currency environment, with the US dollar strengthening 12 per cent against the rupee and the euro rising 14 per cent against the rupee year-on-year, is expected to support exporters' earnings growth.
Sector-Wide Outlook
The report further said several sectors are likely to post robust growth in Q1FY27 despite uncertainty arising from the West Asia crisis. However, it added that some sectors are expected to face pressure on gross margins due to higher input costs.
