The stock of Sumitomo Chemicals crashed over 10 per cent on Thursday, after the Union Government officially restricted the use of the widely-used herbicide glyphosate, fearing risk to human and animal health. The Centre has decided that glyphosate will be used only through Pest Control Operators (PCOs).
“Glyphosate is an important product for the company. The order will have no impact on export business for the product,” Sumitomo Chem in a notice to the stock exchanges.
Glyphosate has contributed 16-17 per cent of the Q1-FY23 consolidated revenues, according to Prabhudas Lilladher. In fact, the domestic brokerage expects market share gains in glyphosate for Sumitomo Chemicals, as higher raw material prices have, in turn, made it unviable for smaller players to pass on this sort of inflated costs.
Assessing impact
After plunging to a low of ₹473.75, the stock recovered to close at ₹506.35, down 4.46 per cent over the previous day’s close of ₹506.30.
“It is difficult to assess impact of this order on domestic consumption of glyphosate. It may, however, impact domestic sale and consumption of glyphosate in the short term — at least in the initial period — because, as stated above, currently, the number of trained PCOs in India is not sufficient,” it added.
Glyphosate is a broad-spectrum weedicide in use all across the world for several years. Currently, the number of PCOs in India and their reach and network in rural areas is limited, the company said, adding that “it is taking adequate steps to mitigate adverse impact, if any, arising out of the order.”
Glyphosate has been majorly used in tea plantations in India, where it is applied to control herbicides.
However, share prices of Bayer Cropscience (which faced supply chain issue for its RoundUp brand of glyphosate) and UPL (Interline brand) end higher. While the former gained 1.15 per cent at ₹4,745 , the latter closed 1.78 per cent higher at ₹706.50 on the BSE.
Published on October 27, 2022
