Bayer CropScience Ltd:Annual Report 2023-24 Analysis

Bayer CropScience Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Bayer CropScience Ltd. is the Indian subsidiary of Bayer AG, a German multinational pharmaceutical and life sciences company. While Bayer AG was founded in 1863, Bayer CropScience as a distinct entity emerged later. Its history in India is tied to acquisitions and the evolution of the agricultural chemicals industry.

Headquarters Location and Global Presence #

The headquarters of Bayer CropScience Ltd. in India is located in Mumbai, Maharashtra. Bayer CropScience operates globally with a significant presence in major agricultural regions around the world.

Company Vision and Mission #

While a specific, publicly stated vision and mission statement for Bayer CropScience Ltd. in India might require further research on their official website or annual reports, generally, Bayer CropScience, as part of Bayer AG, focuses on:

• Vision: “Health for all, Hunger for none.”
• Mission: Developing innovative solutions for sustainable agriculture, ensuring food security, and improving the health of plants and animals.

Key Milestones in Their Growth Journey #

• Early Entry: Bayer’s presence in India dates back several decades through its parent company’s operations.
• Acquisition of Aventis CropScience: In 2002, Bayer acquired Aventis CropScience, significantly expanding its crop protection portfolio and global reach, including its operations in India.
• Expansion and Innovation: Continued investment in research and development, leading to the introduction of new crop protection products, seeds, and digital farming solutions tailored for the Indian market.
• Focus on Sustainability: Increased emphasis on sustainable agricultural practices and integrated solutions to address the challenges of climate change and resource management.

Stock Exchange Listing Details and Market Capitalization #

Bayer CropScience Ltd. is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India. Its market capitalization fluctuates based on market conditions and the company’s performance. You can find real-time market data on the BSE and NSE websites.

Recent Financial Performance Highlights #

To get the most up-to-date financial performance highlights, refer to the latest annual reports, investor presentations, and financial news releases from Bayer CropScience Ltd. Key metrics to look for include:

• Revenue growth
• Profitability (EBITDA, Net Profit)
• Market share gains
• Investment in R&D
• Dividend payouts

Management Team and Leadership Structure #

The management team typically includes:

• Managing Director/CEO: Responsible for the overall strategy and operations of the company in India.
• Heads of Business Units: Leading key areas such as Crop Protection, Seeds, and Environmental Science.
• Functional Heads: Covering finance, marketing, supply chain, and human resources.

You can find details of the current leadership team on the company’s website or in its annual reports.

Any Notable Awards or Recognitions #

Bayer CropScience Ltd., or Bayer AG as a whole, may have received awards and recognitions related to:

• Innovation in agricultural technology
• Sustainability initiatives
• Corporate social responsibility
• Employee relations

Their Products #

Complete Product Portfolio with Categories #

Bayer CropScience’s product portfolio is extensive and includes:

• Crop Protection:
  • Herbicides: For weed control in various crops.
  • Insecticides: To manage insect pests affecting crops.
  • Fungicides: To control fungal diseases in plants.
  • Seed Treatments: Protecting seeds from diseases and pests during germination.
• Seeds & Traits:
  • Hybrid Seeds: Developed for higher yields and specific traits (e.g., insect resistance, herbicide tolerance). Covers crops like corn, cotton, rice, vegetables, and oilseeds.
• Digital Farming Solutions:
  • FieldView™: A data-driven platform for optimizing farming practices.

Flagship or Signature Product Lines #

• Crop Protection Brands: Many well-known brands of herbicides, insecticides, and fungicides.
• Seed Brands: Specific hybrid seed brands tailored to different crops and regions.

Key Technological Innovations or Patents #

• Traits: Development of crops with improved traits (e.g., insect resistance (Bt technology), herbicide tolerance).
• Formulation Technology: Improved formulations of crop protection products for enhanced efficacy and reduced environmental impact.
• Digital Farming Platforms: Data analytics and decision support tools for precision agriculture.

Manufacturing Facilities and Production Capacity #

Bayer CropScience has manufacturing facilities in India for producing crop protection products and seeds.

Quality Certifications and Standards #

Bayer CropScience adheres to international quality standards and certifications such as:

• ISO 9001: Quality Management System
• ISO 14001: Environmental Management System

Any Unique Selling Propositions or Technological Advantages #

• Integrated Solutions: Offering a combination of crop protection products, seeds, and digital tools to provide comprehensive solutions for farmers.
• Innovation: Strong focus on R&D to develop new products and technologies.
• Global Expertise: Leveraging Bayer’s global knowledge and resources to address local challenges.
• Stewardship Programs: Promoting responsible use of crop protection products and sustainable agricultural practices.

Recent Product Launches or R&D Initiatives #

Recent activities are focused on:

• New crop protection product formulations with improved efficacy and safety.
• Development of hybrid seeds with enhanced traits.
• Expansion of digital farming platform capabilities.
• Sustainable agriculture solutions and biologicals.

Primary Customers #

Target Industries and Sectors #

• Agriculture: Farmers growing various crops including cereals, pulses, oilseeds, fruits, and vegetables.

Geographic Markets (Domestic vs. International) #

Bayer CropScience primarily serves the Indian agricultural market.

Major Client Segments (agricultural, industrial, residential, etc.) #

• Farmers: Smallholder farmers, commercial farmers, and large agricultural enterprises.
• Distributors and Retailers: Companies involved in the distribution and sale of agricultural inputs.
• Government Agencies: Involved in agricultural development and regulation.

Distribution Network and Sales Channels #

Bayer CropScience employs a multi-channel distribution strategy that includes:

• Direct Sales: Sales to large agricultural enterprises.
• Distributor Network: A network of distributors and retailers covering various regions.
• Retail Outlets: Company-owned or franchised retail outlets.

Major Competitors #

Direct Competitors in India and Globally #

• Syngenta: A global leader in crop protection and seeds.
• Corteva Agriscience: A major player in seeds and crop protection.
• UPL Limited: An Indian multinational company involved in crop protection.
• PI Industries: An Indian company focused on crop protection chemicals.
• Rallis India Ltd: An Indian company part of the Tata Group, focused on crop protection.

Competitive Advantages and Disadvantages #

Advantages:

• Strong Brand Reputation: Benefit from the Bayer brand.
• Extensive Product Portfolio: Offer a wide range of solutions.
• Global R&D Capabilities: Access to cutting-edge technology.
• Integrated Solutions: Combine crop protection, seeds, and digital tools.

Disadvantages:

• Price Competition: Facing intense competition from generic and local players.
• Regulatory Challenges: Subject to stringent regulations on crop protection products.
• Public Perception: Facing scrutiny regarding the environmental impact of certain products.

How They Differentiate from Competitors #

• Focus on Innovation: Investing in R&D to develop differentiated products.
• Sustainable Agriculture: Promoting sustainable practices and developing eco-friendly solutions.
• Digital Farming: Leveraging data and technology to optimize farming practices.
• Customer Service: Providing technical support and agronomic advice to farmers.

Future Outlook #

Expansion Plans or Growth Strategy #

• Geographic Expansion: Focus on penetrating underserved markets in India.
• Product Portfolio Expansion: Introducing new products and solutions.
• Digital Transformation: Investing in digital technologies to improve efficiency and customer experience.
• Strategic Partnerships: Collaborating with other companies to expand their reach and capabilities.

Upcoming Products or Innovations #

• New Crop Protection Products: Developing more effective and environmentally friendly formulations.
• Genetically Modified (GM) Crops: Continued research in GM crops.
• Biologicals: Investing in biological products as sustainable alternatives to conventional pesticides.
• Digital Farming Tools: Developing advanced data analytics and decision support systems.

Sustainability Initiatives or ESG Commitments #

Bayer CropScience is increasingly focused on:

• Reducing the Environmental Impact of Agriculture: Promoting sustainable practices such as reduced tillage, crop rotation, and integrated pest management.
• Conserving Natural Resources: Developing water-efficient crops and promoting responsible use of water and fertilizers.
• Supporting Farmer Livelihoods: Providing training and resources to help farmers improve their yields and incomes.
• Reducing Greenhouse Gas Emissions: Developing climate-smart agricultural practices.

Industry Trends Affecting Their Business #

• Increasing Demand for Food: Growing global population driving demand for higher crop yields.
• Climate Change: Extreme weather events and changing growing seasons impacting agricultural production.
• Water Scarcity: Limited water resources posing challenges for irrigation.
• Pest and Disease Resistance: Increasing resistance of pests and diseases to conventional pesticides.
• Consumer Preferences: Growing demand for organic and sustainably produced food.
• Digitalization of Agriculture: Increasing adoption of digital technologies in farming.

Long-Term Vision and Strategic Goals #

Bayer CropScience’s long-term vision is to be a leading provider of sustainable agricultural solutions, contributing to food security and improved livelihoods for farmers. Key strategic goals include:

• Driving Innovation: Investing in R&D to develop new products and technologies.
• Expanding Their Market Presence: Reaching more farmers in India and globally.
• Promoting Sustainable Agriculture: Integrating sustainability into their business practices.
• Building Strong Relationships with Customers: Providing excellent customer service and technical support.

Bayer CropScience Limited (2023-24) Financial Analysis #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations decreased slightly from ₹51,397 million in FY2022-23 to ₹51,032 million in FY2023-24, after growing from ₹47,344 Million in FY21-22.
• Profit Before Tax decreased from ₹9,901 million in FY2022-23 to ₹9,414 million in FY2023-24. In the previous year, PBT had increased from ₹8,468 million in FY21-22.
• Net Cash from Operating Activities increased significantly to ₹9,516 million in FY2023-24 from ₹6,093 million in FY2022-23, after falling from 2,155 in FY21-22.
• Earnings Per Share (EPS) decreased slightly to ₹164.77 in FY2023-24 from ₹168.71 in FY2022-23, down from 143.58 in FY21-22.
• Return on Net Worth (RoNW) increased to 26.0% in FY2023-24 from 25.0% in FY2022-23, after falling from 29.0% in FY21-22.
• Debtors Turnover Ratio increased slightly from 5.2 in FY22-23 to 5.3 in FY23-24.
• Operating Profit Margin Ratio increased to 18.8% in FY23-24 from 17.7% in FY22-23.
• The Current Ratio Increased from 2.2 in FY22-23 to 2.4 in FY23-24.

Business Segment Performance #

• Crop Protection: Experienced modest growth in liquidation despite higher material costs and challenging weather, indicating strategic resilience.
• Seeds & Traits: Corn seed sales reached a historic high, maintaining the DEKALB brand’s leadership position for the second consecutive year. Rice seed business showed marginal growth due to operational efficiencies and new hybrid launches.
• Digital Farming: Continued investments were made in digital solutions like FarmRiseTM and drone spray services.

Major Strategic Initiatives and their Progress #

• Better Life Farming (BLF) Alliance: Supported more than 20 million smallholder farmers, with over 2,000 BLF Centers operational in India. The initiative aims to empower 2.0 million smallholders in the Indian Subcontinent by 2025.
• Food Value Chain Partnership: Bayer has 80 Food Chain Partnerships, reaching 405,200 acres and benefiting 1,25,400 farmers.
• Bayer Learning Center (BLC): Over 37 BLCs established across India, to show case product performance, conduct trainings for stakeholders, and promote new farming practices.
• Product Stewardship: Continued focus on training and awareness programs for safe product use, reaching over 3,00,000 farmers.
• Digital Initiatives: Promoted the use of the FarmRiseTM mobile app and drone applications for precision agriculture.
• New Launches: Securing registrations and launching new products like Acerbo for disease management and Makau for use in Rice.
• Regenerative Rice Practice: Started with one acre of land in 2022, farmer Jyothi transitioned to Direct Seeded Rice, expanding the practice to all six acres of her land and also another four acres.

Risk Landscape Changes #

• Geopolitical tensions and trade disruptions are present, along with the potential for food inflation.
• Continued emphasis on managing risks associated with climate change, including water scarcity and extreme weather events.
• Noted increased regulatory requirements and the need for adaptation.

ESG Initiatives and Metrics #

• Environmental: Focus on sustainable farming practices, including Direct Seeded Rice (DSR), to conserve water and reduce greenhouse gas emissions. Renewable energy use increased with solar panel installations.
• Social: Ongoing support for smallholder farmers through capacity building, access to technology, and market linkages. Emphasis on women’s empowerment through the BLF alliance.
• Governance: The Company maintains a Whistle Blower Policy, a Code of Conduct, and a Risk Management Policy. The report emphasizes ethical business conduct and transparency.
• BRSR Reporting: Compliant with SEBI Listing Regulations requirement to have BRSR report.

Management Outlook #

• The management is focused on increasing agricultural productivity in India, given the need to feed a growing population with limited arable land.
• Emphasis on innovation in seeds, crop protection, and digital farming solutions to address productivity challenges and support sustainable agriculture.
• Continued investment in infrastructure and expansion of digital tools to enhance farmer support and engagement.
• Continued caution and financial prudence to meet commitments.

Detailed Analysis #

Financial Analysis of Bayer CropScience Limited #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

Assets:

Liabilities and Equity:

Significant Changes in Major Line Items (>10% YoY) #

• Property, Plant and Equipment: Decreased by 12.2% (522 Million) from 4,284 to 3,762, from 2023 to 2024.
• Current Tax Asset (Net): Decreased by 32.1% (‘568 Million) from 1,768 to 1,200, from 2023 to 2024.
• Inventories: Decreased by 14.5% (‘2,620 Million) from 18,072 to 15,452, from 2023 to 2024.
• Cash and Cash Equivalents: Increased by 34.4% (2,960 Million) from 8,608 to 11,568, from 2023 to 2024.
• Lease Liabilities (Non-Current): Decreased by 42.3% (‘154 Million) from 364 to 210, from 2023 to 2024.
• Provisions (Non-Current): Decreased by 17.7% (‘270 Million) from 1,523 to 1,253, from 2023 to 2024.
• Deferred Tax Liabilities (Net): Increased significantly from 3 to 40, a change of ‘37 million from 2023 to 2024.
• Lease Liabilities (Current): Decreased by 29.6% (‘110 Million) from 371 to 261, from 2023 to 2024.
• Trade Payables: Decreased by 30.7% (‘2,681 Million) from 8,732 to 6,051, from 2023 to 2024.
• Other Liabilities (Current): Increased by 22.2% (‘1,570 Million) from 7,069 to 8,639, from 2023 to 2024.
• Provisions (Current): Decreased by 54.2% (‘612 Million) from 1,130 to 518, from 2023 to 2024.

Working Capital Trends #

Analysis:

• Net Working Capital increased from 21,189 to 23,081 from 2023 to 2024, indicating improved liquidity.

Asset Quality Metrics #

Analysis:

• Provision for Expected Credit Loss increased from 386 to 456.

Debt Structure and Maturity Profile #

Maturity Profile of Lease Liabilities:

Off-Balance Sheet Items #

The off balance sheet items related to contingent liabilities, as per note 35 are detailed below:

• Claims against the Company not acknowledged as debts towards:
  • Direct Tax Matters: ’ 2,718 Million
  • Indirect Tax Matters: ’ 2,698 Million
  • Litigation/claims filed by customer/vendor/third party: ’ 89 Million
  • Litigation/demands raised by other Statutory Authorities: ’ 25 Million
• Bayer received notice for the company and 15 other companies for damage recovery of 1,617, related to Endosulfan.

No guarantees or other financial commitments besides those included in the financial statements.

Operating Performance Analysis #

Income Statement #

Revenue Breakdown #

By Segment #

• Crop Protection: Modest growth in liquidation, despite challenges like higher material costs.
• Seeds & Traits: Revenue growth driven by increased customer acceptance, improved acreages, and new hybrid launches in Corn (DEKALB brand). Rice seed revenue grew marginally.

Geographical Revenue Breakdown (FY 2023-24) #

• India: ₹48,184 million
• Germany: ₹1,804 million
• Bangladesh: ₹551 million
• Other Foreign Countries: Remainder

Cost Structure Analysis #

• Cost of Materials Consumed: ₹27,184 million in FY 2023-24.
• Purchases of Stock-in-trade: 1,393
• Changes In Inventories: Increase of 539
• Employee Benefits Expense: ₹4,354 million.
• Other Expenses: ₹7,867 million, including job work charges, freight outward, and advertising.

Margin Analysis #

• Operating Profit Margin: 18.8% in FY 2023-24 (7% improvement from 17.7% in FY 2022-23).
• Net Profit Margin: 14.5% in FY 2023-24 (slightly decreased from 14.8% in FY 2022-23).

Non-Recurring Items #

• Exceptional Item (FY 2022-23): Profit of ₹1,038 million from the sale of the Environmental Science business.
• Impairment of Non-current Assets (FY2023-24): Loss by impairment of 155 million.

EPS Analysis #

• Basic and Diluted EPS: FY 2023-24: ₹164.77; FY 2022-23: ₹168.71.

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

• FY 2023-24: 9,516 Million INR
• FY 2022-23: 6,093 Million INR
• Profit Before Tax (FY 2023-24): 9,414 Million INR, (FY 2022-23): 9,901 Million INR
• Depreciation and Amortization: (FY 2023-24): 740 Million INR, (FY2022-23): 795 Million INR
• Impairment of Non-current Assets (FY2023-24): 155 Million INR
• Exceptional Item (FY 2022-23): (1,038) Million INR
• Finance Costs: (FY 2023-24): 196 Million INR, (FY2022-23): 223 Million INR
• Net changes in working capital showed a positive impact due to decrease in Inventories by 2,072 Million INR.

Investing Cash Flow (ICF) #

• FY 2023-24: 4 Million INR
• FY 2022-23: 833 Million INR
• Main Components includes: Purchase of Property, Plant and Equipment/ Intangible Assets, Proceeds from sale of Property, Plant and Equipment, proceeds from sale of Environmental business, sale and purchase of current investments.

Free Cash Flow (FCF) #

• Not directly calculable from provided data, requires capex breakdown.

Working Capital Management Efficiency #

• Debtors Turnover Ratio: FY 2023-24: 5.3 times, FY 2022-23: 5.2 times. Indicates a slight improvement collection efficiency.
• Inventory Turnover Ratio: FY 2023-24: 1.7 times, FY 2022-23: 1.7 times. Statistically no improvement of inventory management.
• Trade Payables Turnover Ratio: FY 2023-24: 3.6, FY 2022-23: 3.7. A slightly lower ratio may indicate a faster payment to suppliers.

Dividend and Share Buyback Trends #

• Dividends:
  • Total Dividend (including interim) FY 2023-24: 6,292 Million INR (140 INR per share).
  • Total Dividend (including interim) FY 2022-23: 5,842 Million INR.
  • Dividend Payout Ratio: Showing an increasing trend.
• Share Buyback:
  • No share buybacks in FY2023-24. Previously, there was the buyback of 1,020,408 shares.

Debt Service Coverage #

• Interest Coverage Ratio: FY 2023-24: 49.0 times, FY 2022-23: 40.7 times. Indicates strong and improving ability to cover interest expenses.
• The company has not taken any loans.

Liquidity Position #

• Current Ratio: FY 2023-24: 2.4 times, FY 2022-23: 2.2 times. Liquidity position is strong and has improved.
• Cash and Cash Equivalents: Increased to 11,568 Million INR in FY 2023-24 from 8,608 Million INR in FY 2022-23.
• Cash Conversion Cycle: Not directly calculable from the provided data. Need days inventory outstanding, days sales outstanding, and days payables outstanding.

Segment-wise Financial Analysis of Bayer CropScience Limited (2023-24) #

Profitability Ratios (3-Year Trends) #

• Return on Equity (ROE): 2023-24: 26.0%, 2022-23: 25.0%, 2021-22: 29%.
• Net Profit Margin: 2023-24: 14.5%, 2022-23: 14.8%, 2021-22: Not available.
• Operating Profit Margin: 2023-24: 18.8%, 2022-23: 17.7%.

Liquidity Metrics #

• Current Ratio: 2023-24: 2.4, 2022-23: 2.2.

Efficiency Ratios #

• Inventory Turnover Ratio: 2023-24: 1.7, 2022-23: 1.7.
• Trade Receivables Turnover Ratio: 2023-24: 5.3, 2022-23: 5.2.

Leverage Metrics #

• Debt/Equity Ratio: Not applicable, as the Company reported no debt.
• Interest Coverage Ratio: 2023-24: 49.0, 2022-23: 40.7.

Working Capital Ratios #

• 2023-2024: 2.2
• 2022-2023: 2.5

Segment-Wise Financial Analysis of Bayer CropScience Limited (2023-24) #

Revenue and Profitability Metrics with Growth Rates #

• Overall Revenue: ₹51,032 million (FY 2023-24), a decrease of 0.71% from ₹51,397 million (FY 2022-23).
• Profit Before Tax and Exceptional Items: Increased by 6.21%, from ₹8,863 million (2022-23) to ₹9,414 million (2023-24).
• Profit After Tax: Decreased by 2.33% from ₹7,582 million to ₹7,405 million.
• Operating Profit Margin: Improved from 17.7% to 18.8%.

Market Share and Competitive Position #

• Corn Seed Market: DEKALB brand retained the 1st position for the 2nd consecutive year.
• Crop Protection: Leading player in the Indian agrochemical market.

Key Products/Services Performance #

• Crop Protection: Modest growth in liquidation. New product registrations secured for ‘Acerbo’ and ‘Makau’, and a me-too registration for ‘Curbix Pro’.
• Seeds (Corn): Significant volume growth, especially for new launches DKC9208 and DKC9217. Three new corn hybrids (DKC9256, DKC9260, and IX8281) were deployed.
• Seeds (Rice): Marginal growth, owing to operational efficiencies.

Geographic Distribution and Market Penetration #

• Domestic Market: Broad presence across India (28 states and 8 Union Territories).
• Export Market: Export sales ₹1,646 million (FY 2023-24), compared to ₹1,863 million (previous year). Serving 12 countries internationally.

Operational Efficiency Metrics #

• Inventory Turnover Ratio: Remained stable at 1.7 times.
• Debtors Turnover Ratio: 5.3, up slightly.

Growth Initiatives and Challenges #

Growth Initiatives #

• Focus on liquidation and channel inventory management within the Crop Protection segment.
• Expansion of the DEKALB brand’s footprint in the corn seed market, including new hybrid launches.
• Development and deployment of digital farming solutions, such as FarmRise and drone spray services.
• Strengthening partnerships through the Better Life Farming (BLF) alliance and Food Value Chain Partnerships.
• Continued R&D investment in new crop protection products and high-yielding seed varieties.

Challenges #

• Erratic weather patterns and climatic uncertainties.
• Geopolitical tensions and trade disruptions.
• Inflationary pressures and volatile input costs.
• Labour shortages in the agricultural sector.
• Low adoption rates of modern agricultural technologies and practices among smallholder farmers.
• Significant social or environmental concerns/risks from production or disposal of products/services.

Segment-Wise Financial Risk Analysis (Agri-Care) #

Strategic Risks #

• Severity: High. Strategic risks, such as evolving consumer preferences (towards sustainable products) and shifts in agricultural practices (Direct Seeded Rice), directly impact long-term market position and revenue streams.
• Likelihood: Medium. Shifts in the agricultural landscape are ongoing, driven by factors like climate change and government policies.
• Trend: Increasing. The push for sustainable agriculture and climate change mitigation is gaining momentum.
• Mitigation Strategies:
  • Investment in R&D for innovative, sustainable products (e.g., Acerbo fungicide, DEKALB® hybrids).
  • Development of “seed-to-harvest” package solutions.
  • Partnerships (e.g., with ADM for sustainable soybean cultivation, BLF).
  • Focus on regenerative agriculture practices.
• Control Effectiveness: Partially effective. Investments and partnerships are in place, but the long-term success of these strategies depends on farmer adoption rates and regulatory support.
• Potential Financial Impact: The report highlights the focus on liquidation that have shown modes growth.

Operational Risks #

• Severity: Medium to High. Operational risks, such as supply chain disruptions, plant safety incidents, and product quality issues, can impact production, distribution, and reputation.
• Likelihood: Medium. The report references weather uncertainties (erratic monsoon), labor shortages, and incidents with potential for high severity injuries.
• Trend: Stable to Increasing. Climate change and geopolitical tensions pose ongoing operational challenges.
• Mitigation Strategies:
  • Health, Safety & Environment (HSE) management systems with certifications (ISO 14001, ISO 45001).
  • Digital incident management tools.
  • Regular reviews of third-party warehouses, suppliers, and contract manufacturers.
  • Process innovations for energy efficiency and safety.
• Control Effectiveness: Moderate to high. The presence of management systems and certifications indicates a strong focus on operational risk control.
• Financial Impact: The reduction in water use and resource efficiency.

Financial Risks #

• Severity: Medium. Exposure to fluctuations in foreign currency, interest rates, and commodity prices.
• Likelihood: Medium. The Company operates internationally and is subject to global market dynamics.
• Trend: Stable. The report suggests active management, but external factors can cause volatility.
• Mitigation Strategies: *Foreign Exchange: Majority of forex transactions with group companies are in rupee terms, hedging of net exposure for the balance non-group dollar-denominated transactions, natural hedge. *Interest rate: by negotiation of fixed coupon interest rates. *liquidity risks: Maintenance of a sufficient liquidity reserve.
• Control Effectiveness: Moderate to High. Focused hedging strategies and maintenance of liquidity reserves. Debt to Equity ratio not available.
• Financial Impact: Changes reflected in the financial performance, particularly the profit before tax and net profit.

Compliance/Regulatory Risks #

• Severity: High. Changes in regulations or non-compliance can lead to fines, penalties, and reputational damage.
• Likelihood: Medium. The agricultural sector is subject to evolving regulations, particularly regarding pesticides, seeds, and environmental protection.
• Trend: Increasing. The report mentions regulatory data harmonization and potential data protection requirements.
• Mitigation Strategies:
  • Whistleblower Policy and Speak Up channel.
  • Code of Conduct and Corporate Compliance Policy.
  • Compliance & Data Privacy Committee.
  • Statutory Compliance Monitoring Tool.
  • Product registration compliance (e.g., CIB-RC approvals).
• Control Effectiveness: High, indicated by the presence of comprehensive policies, monitoring tools, and dedicated committees.
• Financial Impact: The penalties are represented in Other Expenses.

Emerging Risks #

• Severity: Medium to High.
• Likelihood: Medium.
• Trend: Increasing.
• Mitigation Strategies: The Company is investing in digitalization, R&D, and partnerships to address these issues.
• Control Effectiveness: Currently, it’s in the early stages, with effectiveness dependent on future implementation and adaptation.
• Potential Financial Impact: There has been significant investments in R&D.

Strategic and Management Analysis of Bayer CropScience (2023-24) #

Long-Term Strategic Goals and Progress #

Bayer CropScience aims for sustainable agricultural practices, focusing on increasing crop yields and farm incomes while conserving natural resources. Initiatives like Direct Seeded Rice (Direct Acres) are being promoted. Progress is demonstrated by reaching over 20 million smallholder farmers with agri-inputs, technologies, and advisory.

The company has set environmental targets, like promoting renewable energy consumption by setting up solar power plants. Social targets include increasing women’s participation in the workforce to 33% by 2025 and 50% by 2030.

Competitive Advantages and Market Positioning #

Bayer CropScience holds a strong position in the Indian agriculture market, evidenced by the DEKALB brand retaining the 1st position in the Corn Seed industry for the 2nd consecutive year. A broad portfolio of hybrid seeds, innovative chemical and biological pest management solutions, and extensive customer service contribute to their competitive advantage.

Innovation Initiatives and R&D Effectiveness #

The company is highly focused on innovation, demonstrated by 920 field experiments conducted across 30 crops, testing more than 65 products. Collaborations with over 60 State Agriculture Universities and ICAR institutes for the evaluation of crop protection innovations further support R&D.

The R&D expenditure was 1.70% of total revenue, indicating a significant investment, though this figure did not show growth compared to the previous year. They successfully secured registrations for new fungicide and insecticide products (Acerbo and Makau). The Corn Breeding team is leveraging digital tools, AI, and New Breeding methodologies like Quantitative Genetic Framework and Double Sparse Testing, and deployed 3 new corn hybrids during the year.

Management’s Track Record of Execution #

Management has demonstrated resilience by maintaining revenue and increasing profit before exceptional items in tough market conditions. Successful launch and market acceptance of new products (Curbix Pro, Acerbo, Makau) demonstrate execution capability. The implementation of the new operating model “Dynamic Shared Ownership” aims to increase focus on customers.

Capital Allocation Strategy #

The company has a dividend distribution policy. A final dividend of ‘35 per share was recommended, and an interim dividend of ‘105 per share was paid, totaling ‘140 per share for the financial year. Capital investments include a new Bead Mill, New ETP Plant, and drum decanting systems to contribute to an increase in production.

Organizational Changes and Their Impact #

The company is implementing a new global operating model, (Dynamic Shared Ownership), to put customers (including farmers) at the center of operations. A change in leadership occurred with the resignation of the Vice Chairman & Managing Director and CEO, and the subsequent appointment of a replacement, along with other board member changes during the year.

ESG Framework #

ESG and Sustainability Analysis #

Environmental Metrics and Targets #

• Reduce greenhouse gas emissions through renewable energy use (solar installations, power purchase agreements).
• Himatnagar site utilizes 50% renewable energy.
• Shamirpet site: 620kWp solar plant, offsetting 650MT of GHG emissions annually.
• Water conservation: rainwater harvesting, Direct Seeded Rice (Direct Acres program).
• Safe disposal of plastic waste, e-waste, and hazardous waste.
• Improved energy intensity per rupee of turnover.

Social Responsibility Programs #

• Corporate Societal Engagement (CSE) focuses on Rural Development, Preventive Healthcare, and Education & Community Engagement.
• Initiatives aimed at nutritional security and promoting crop diversification.
• Better Life Farming (BLF) supports smallholder farmers with capacity building, technology transfer, and market linkages.
• Promotes gender equality through programs like Leadership Link, increasing women in new hires.
• Employee well-being programs: health insurance, wellness initiatives, and employee assistance programs.
• Certifications: “Great Place to Work,” 100 Best Companies for Women in India.

Governance Structure and Effectiveness #

• Board of Directors oversees corporate governance.
• Committees: Audit, Nomination and Remuneration, CSR & ESG, Stakeholders’ Relationship, and Risk Management.
• Board composition: Executive, Non-Executive, and Independent Directors.
• Compliance with Companies Act, 2013, and SEBI Listing Regulations.
• Whistle Blower Policy (Vigil Mechanism) and Code of Conduct in place.
• Web-based Statutory Compliance Monitoring Tool.

Sustainability Investments and ROI #

• Detailed disclosures on sustainability, as per the BRSR.
• Capital investments in energy-efficient equipment and systems (high-efficiency bead mill, solar plants).
• Investments in new ETP plants and waste management systems.
• Research and Development (R&D) expenditure was 1.70% of total revenue.

Regulatory Compliance and Future Preparations #

• Compliance with applicable laws and regulations: Companies Act, 2013, SEBI Listing Regulations, environmental laws.
• Web-based Statutory Compliance Monitoring Tool.
• Taking steps to comply with the requirement of maintenance of back-up of books of account maintained in electronic mode on server(s) physically located in India on a daily basis.
• Orders from various authorities received during the year relating to tax demands and penalties.

Segment-Wise Financial Analysis (Crop Protection and Seeds & Traits) #

Management Guidance and Assumptions #

• Management assumes that the “Differentiated Portfolio” solutions will continue to support smallholder farmers.
• Management’s assessment of property, plant, and equipment depreciation uses estimated useful lives similar to Schedule II of the Companies Act, 2013, except for dryers, where a 20-year useful life is based on technical evaluation.
• Management assumes continued customer acceptance and increased acreages for hybrid seeds, especially corn, and operational efficiency improvements for Rice.
• Estimates of future salary escalations for benefit obligations are based on inflation, seniority, promotion, supply, and demand factors.
• Management consistently uses past assessments, judicial precedents, and expert opinions to estimate the likelihood of outcomes in tax litigation.
• The Company’s liquidity risk policy relies on maintaining a sufficient liquidity reserve based on cash flow projections.
• For ECL on financial assets at amortized cost, the simplified approach of IND AS 109 is applied.

Market Growth Forecasts #

• The Indian Crop Protection Chemical Market was estimated at US$2.3 Billion in 2022.
• Insecticides held a 72.5% market share in India in 2022, followed by herbicides (13.4%) and fungicides (8.9%).
• The Indian seed industry’s size reached US$ 7 Billion in 2023.
• The Indian seed industry is predicted to reach US$18.3 billion by 2032, representing a CAGR of 10.9% between 2024-2032.
• Hybrid seeds dominated with a US$2.3 Billion market share in 2022.

Planned Strategic Initiatives #

Crop Protection #

• Continue focus on liquidation and channel inventory management.
• Advance and propose new innovations for farmers, specifically addressing pest and disease challenges.
• Develop package solutions from “seed to harvest” for key crops.
• Submitted application for registration of five new innovative products.
• Submitted 29 new label extension applications for conventional sprayers and 14 for drone use.

Seeds & Traits #

• Implement new breeding methods like Continuous Cycling (CC) to increase breeding cycles, designed to address global warming challenges.
• Continue development of Short Stature Corn (SSC).
• Utilize digital tools for breeding advancement decisions, apply AI, and new breeding methodologies.
• Enhance field-testing efficiency through double sparse testing.
• Build Bio-economic indices based on customer insights for tailor-made solutions.
• Develop enhanced resistance to pest and diseases in Corn germplasm.

Digital Farming #

• Promote use of drone application technology for crop protection.
• Advance resource-efficient agronomic practices, digitization, and precision farming, promoting Direct Seeded Rice.

Capital Expenditure Plans #

• Investments in process innovations and energy management systems are planned at production sites.
• Continue Capital investment in bead mill.
• Continued investment in installation of new ETP Plant.
• Continued investment in drum decanting system.
• Installed 620kWp on ground solar plant.

Efficiency Improvement Targets #

Crop Protection #

• Targeted, uniform application of chemicals using drone spray services.
• Reduced batch time cycle for Suspension Concentrates formulation (Himatnagar).
• Formulation automation project to reduce diesel consumption (Silvassa).
• Centralization of loading activities at plant to save on diesel. (Silvassa).

Seeds & Traits #

• Increased speed of breeding cycles through genomic selections and new breeding methods.
• Testing a large number of alleles across wider geographies to improve genomic predictions.
• Use of UAV for population counts through digital imaging.
• Replace old HVAV system of admin building with new one reducing energy consumption up to 10-15% (Shamirpet)
• Installed energy-efficient dust collector(Shamirpet)

Potential Challenges and Opportunities #

Challenges #

• Geopolitical tensions and trade disruptions threatening market stability.
• Inflationary pressures and volatile input costs.
• Labour shortages due to urban migration.
• Climate change-induced uncertainties, including erratic weather and water scarcity.
• Ensuring food security for a growing population.
• Potential regulatory changes and economic disruptions.
• Significant adverse environmental impacts arising from the value chain.

Opportunities #

• Increased food demand due to population growth.
• Low agricultural yield in India compared to global averages.
• Increasing penetration of organized sector in seeds.
• Growing adoption of genetically modified crops.
• Expansion of digital farming solutions.
• Government support for agricultural infrastructure and technology adoption.
• Export opportunities for agricultural products.
• Development and commercialization of new products.

Audit and Compliance Analysis of Bayer CropScience Limited #

Auditor’s Opinion and Qualifications #

• Opinion: Deloitte Haskins & Sells LLP issued an unmodified opinion, stating the financial statements provide a true and fair view of the company’s financial position, performance, and cash flows, in accordance with Indian Accounting Standards (Ind AS).
• Qualification: Exception regarding maintaining backups of electronic books of account on a server physically located in India on a daily basis.
• Key Audit Matter: Revenue recognition required management judgments.

Key Accounting Policies and Changes #

• Consistency: Accounting policies applied consistently across all presented periods.
• Revenue Recognition: Revenue recognized when control of goods transfers to the customer, generally upon delivery. Estimates used for rebates/discounts and returns, deducted from revenue.
• Recent Pronouncements: No new or amended accounting standards had a material effect on the 2023-24 fiscal year.
• No major changes in accounting policy reported.

Internal Control Effectiveness #

• Auditor’s Opinion: Unmodified opinion on the adequacy and operating effectiveness of the company’s internal financial controls over financial reporting.
• Management’s Responsibility: The Board of Directors and management are responsible for establishing and maintaining internal financial controls.
• Key Audit Matter: Management required to make judgments in respect of revenue recognition.

Regulatory Compliance Status #

• General Compliance: Generally complied with applicable statutory provisions, including the Companies Act, 2013, SEBI regulations, and relevant Secretarial Standards.
• Specific Compliance: Compliance with FEMA regarding Foreign Direct Investment and SEBI regulations related to insider trading, listing obligations, and depositories.
• Tax Compliance: Orders received from authorities, along with compounding orders.
• Secretarial Audit found compliances, apart from a few orders received.

Legal Proceedings and Their Potential Impact #

• Pending Litigations: The company disclosed the impact of pending litigations on its financial position.
• Contingent Liabilities: Contingent liabilities related to direct and indirect tax matters, and litigation/claims filed by customers/vendors/third parties. The total amount is material.
• Specific Litigation: A significant suit filed against the company and other manufacturers related to compensation for Endosulfan victims.
• Other than described, no material impact pending litigations reported.

Related Party Transactions #

• Policy Compliance: All related party transactions were in accordance with the company’s Related Party Transaction Policy, in the ordinary course of business, and at arm’s length.
• Material Transactions: Material related party transactions involving the purchase and sale of goods, recoveries, and professional/support charges with Bayer AG (ultimate holding company) and other group entities.

Subsequent Events #

• Dividend Recommendation: The Board of Directors proposed a final dividend of ₹ 35 per share, subject to shareholder approval at the upcoming AGM.
• Resignation and appointment of KMP.

Accounting Quality and Regulatory Risk Assessment #

• Instances of delay in payment of statutory dues.
• Non-compliance of keeping books of account.