Natco Pharma to Demerge Agrochemicals Unit, Shareholders to Get New Stock

Natco Pharma's agrochemicals business generated ₹60.62 crore in FY25, representing 1.48% of the company's total turnover.

The demerged entity aims for focused growth and independent market positioning.

The Demerger Details

The Board of Directors of Natco Pharma Limited has approved a plan to demerge its Agrochemicals business into its wholly-owned subsidiary, Natco Crop Health Sciences Limited. This process is expected to take effect from October 1, 2026.

Shareholders of Natco Pharma will receive one ₹2 equity share in the new company for each share they hold in Natco Pharma. This aims to unlock shareholder value by establishing two distinct, focused companies.

Meanwhile, Natco Pharma plans to establish a new wholly-owned subsidiary in Nigeria with an investment of up to USD 100,000. The company also intends to close its Australian subsidiary, Natco Pharma Australia Pty Ltd, by September 2026.

Strategic Rationale and Shareholder Value

This demerger is intended to provide operational independence and specialized management for both the pharmaceutical and agrochemical businesses. It aims to boost strategic focus, operational efficiency, and unlock shareholder value as each segment pursues independent growth.

The proposed listing of Natco Crop Health Sciences Limited on stock exchanges will offer it direct market access and its own valuation. Natco Pharma will keep a 20% stake in the new company, providing ongoing strategic backing.

Business Background

Natco Pharma, headquartered in Hyderabad, operates diversified businesses including pharmaceuticals and agrochemicals. The company has a history of expanding its global reach, establishing numerous international subsidiaries in markets like Brazil, Canada, the US, Indonesia, and Colombia.

Its agrochemical unit, Natco Crop Health Sciences, has developed products like Chlorantraniliprole (CTPR) since roughly 2019-2022. As part of this strategic reshaping, Natco plans to launch a Nigerian subsidiary while closing its Australian operations.

Key Changes for Shareholders and Operations

• Shareholder Rights: Existing Natco Pharma shareholders will receive one equity share in the demerged agrochemical firm for each Natco Pharma share they own.
• New Entity Listing: Natco Crop Health Sciences Limited is slated for listing on BSE and NSE, giving it a distinct stock market valuation.
• Operational Focus: Natco Pharma will focus on its core pharmaceutical business, while Natco Crop Health Sciences will drive independent growth in agrochemicals.
• Natco's Stake in New Unit: Natco Pharma will retain a 20% stake in the demerged company, ensuring continued strategic alignment.
• Global Footprint Adjustments: Setting up a Nigerian subsidiary and liquidating the Australian entity reflect ongoing adjustments to its global operations.

Potential Challenges and Scrutiny

• Manufacturing Quality Concerns: Natco Pharma received a US FDA warning letter in April 2024 regarding manufacturing issues, including poor cleaning and potential cross-contamination at its Telangana plant. Although it was later classified as Voluntary Action Indicated (VAI) in September 2025, past quality issues remain under scrutiny for its manufacturing operations.
• Patent Disputes: The company is involved in ongoing patent litigation with Novo Nordisk concerning Semaglutide, with the final outcome awaiting a court decision. While no significant financial impact has been reported, these disputes can create uncertainty.

Competitive Landscape and Valuation

Key pharmaceutical rivals include Sun Pharma, Divi's Laboratories, Torrent Pharmaceuticals, and Zydus Lifesciences. While Natco's agrochemical division is smaller, the wider Indian agrochemical sector features companies like UPL Ltd. and PI Industries. Natco's P/E ratio, around 11x as of March 2026, is notably lower than the Indian Pharmaceuticals industry average of 25.6x, possibly indicating different market perceptions or potential undervaluation.

Agrochemical Business Contribution

The agrochemicals business generated ₹60.62 crore in turnover as of March 31, 2025, representing 1.48% of Natco Pharma's total consolidated turnover for FY25.

Next Steps and Approvals

• Regulatory Filings: Securing 'no-objection letters' from BSE and NSE for the demerger plan.
• Shareholder and Creditor Approval: Gaining required approvals from shareholders and creditors of both Natco Pharma Limited and Natco Crop Health Sciences Limited.
• NCLT Approval: Final approval of the demerger plan from the National Company Law Tribunal (NCLT).
• New Entity Listing: Successful listing and trading of Natco Crop Health Sciences Limited shares on stock exchanges.