MONSANTO INDIA LIMITED

Analyst's Meet held on SEPTEMBER 25, 2001

GLOBAL OVERVIEW | COMPANY'S FUTURE | CHALLENGES TO OVERCOME IN MIL | STRATEGY FOR MIL | DIFFERENT OPPORTUNITIES | COMPETITIVE ADVANTAGE | QUESTION & ANSWER SESSION

GLOBAL OVERVIEW

• A 100 year old global company was incorporated in 1901. From a multi-divisional company (including chemicals and pharma) it is now only an agriculture company.

• Two key operative segments:

1. Agriculture productivity

2. Seeds and genomics.

• Corporate goal is to create value for "farmers" and "Shareholders". 15,000 committed employees worldwide. Global size of sales is US $ 5.5 billion.

• Monsanto is a "science" based corporation.

• Discovery process: Genes à seeds (including breeding & Plant Bio tech) à customer

• Tremendous change is reshaping the agriculture business. By 2002, it expects increase in food need and demand by 75 per cent.

• With land supply being a constrain, current production is not in position to satisfy demand. New technology has to be the order of the day.

• The growth of corporation protection chemicals has almost come down to zero.

Herbicides	47 per cent
Lusecticide	28 per cent
Fungicides	20 per cent
Others	05 per cent
Total	100 per cent

• The old practices are being obsolete with the initiation of New technology and marketing strategies. Monsanto is moving to :
  

1. Seeds / biotech / genomics

2. E-commerce

3. Partnering
   

• It plans to shift away from chemicals to biotechnology / genomics.

• New Products have been innovated

  -Acetamilides

  -Roundup

  -Biotechnology

  -Genomics
  

• Monsanto is also leader in Marketing Innovation.

• Monsanto is facing intense competition globally. It is facing stiff competition from:

Company's	Competitive edge
BASF	Cost leverage & innovative product pipeline
Syngenta	Cost leverage and marketing presence
Bayer	Whether Aventis will merge ?
Dow	----
Dupont	----

• Monsanto is in the field of chemicals, seeds and Biotechnology.

• MIL focussed on integrated Indian agricultural operation in line with global re-alignments last year. The idea was to build a premier agri-input company in India.

• Three companies were merged together to form Monsanto India Limited (MIL). A large company with a turnover of Rs.250 crore and 320 employees. The activities performed by these companies are now carried out by MIL alone.

Company	Unit	Products
Monsanto Chemicals of India Ltd. (MCIL)	Manufacturing Unit	Machete, Lasso, Avadex, Roundup
Monsanto Enterprises Ltd. (MEL)	Marketing and distribution
Monsanto Technologies India Ltd. (MTIL)	Seeds and Biotechnology	Corn and sunflower seeds and Biotech

• With the access to a global robust product pipeline of Monsanto Inc. USA, all the global products and technologies will come to India through Monsanto India Limited.

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COMPANY'S FUTURE

• Fundamentals for growth in India are very sound.

• While population is increasing, plateauing crop yields is the worrying factor.

• Need to grow 100 mln. Mt and there is a need to grow (50 per cent) more food by 2020.

• MIL being a leading provider of seeds, herbicides & traits (biotech), new inputs / technologies hold the key to this productivity enhancement.

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CHALLENGES TO OVERCOME IN MIL

• MIL has to seek solution for diversity in regional culture, farm practices, climatic conditions, variety of crops and multiple planting seasons.

• Over 100 mln. small farmers, low education and poor farm economics. Under developed infrastructure and fragmented distribution.

• No IPR protection and large local "generics".

• Intense competition with all MNCs well entrenched.

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STRATEGY FOR MIL

• It is planing to build a strong platform for growth on a diversified herbicide business.

• It will focus on long term commitment. The crops for growth are Rice, Corn, Wheat and Soyabean.

• MIL will be moving from chemicals to seeds and then to Traits (Biotech).

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DIFFERENT OPPORTUNITIES

Rice opportunities

• Rice is grown on a large acreage of 100 mln. acres. Current herbicide treatment is still very low (only 15 to 18 per cent today) Growing at 6 to 8 per cent p.a.

• Large potential:

  -Herbicide - 45 mln. acres

  -Fungicides - 10 mln. acres

  -Seeds (Hybrid) - 30 mln. acres.

  Portfolio: Macreshete, Fastmix (Herbicides)

  Mantaf (Fungicides)

  Roundup is an important product.

• Hybrid seeds will be accessed from Joint Ventures. It also plans to launch New products.

Corn Opportunities

• Corn is grown with stable acreage of 16m acres. Demand is increasing with major user being starch and poultry industries.

• MIL has a growing hybrid seed market but Herbicide business has no market today.

• It has opportunity to develop herbicide business and introduce global brands like Asgrow, Dekalb, Lasso.

Wheat opportunities

• Wheat is grown on 66m acres. Current herbicide market is large but extremely competitive.

• MIL Portfolio : Herbicide - Monlon

Soyabean opportunities

• Soyabean is a crop with fluctuating acreage and its production is mainly based on rain.

• Usage of Herbicide is very low.

• MIL product is Lasso.

Exports

• Exports being a key thrust area for MIL, it touched Rs. 25 crore last year. Herbicides were exported to Srilanka and Bangladesh and corn seeds to South East Asia.

Risks to MIL

• Since agriculture is dependent on Monsoon (100 per cent products are imported atleast 8 weeks in advance) this involves heavy risks to MIL.

• Depreciation in the Rupee affects MIL directly with large imports is from US.

• MIL will also have to face the high Indian import duty, which is currently at 41 per cent

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COMPETITIVE ADVANTAGE

• Building the best-in class organisation.

• Making market development happen.

• Building powerful brands that deliver value.

• Building capability to manage multiple alliances and partnership.

Outlook of Current year 2001-02

• Karnataka, Andhra Pradesh and Tamil Nadu experienced drought in current fiscal.

• A good year for the pesticides industry but seeds and herbicides business is under pressure.

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QUESTION & ANSWER SESSION

• As far as inventory is concerned, March end is a peak period.

• Industry norm for debtors is 90 days. Farmers pay only after they get cash either from market or from government.

• The difference between high and low of inventory + debtors is multiples of 3 due to seasonality.

• Self life of seeds is 9 months whereas for chemistry is 2 years. 6 to 8 per cent seeds were written off of total sales.

• Rupee depreciation means dent on margins particularly in competitive products.

• Joint venture with Mahyco 50:50 for marketing of biotech cotton seeds and 74:26 for marketing of seeds. Both this joint ventures are by parent company and not MIL.

• Parent Company is 51 per cent investment in Joint Venture with EID Parry (Hybrid rice seed business).

• R & D centre of Bangalore also belongs to parent Company.

• Brand premiums are very thin in agricultural products (say between 1 and 5 per cent).

• Biotechnology play will come in India only after 3 to 5 years.

• The 100 per cent exemption for 5 years is over for MIL's first plant in Silvassa incorporated in 1996.

• Seed business that is 20 per cent of MIL's total business is 100 per cent indigenous.

• Transfer pricing policy is on cost basis.

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