Dharmaj Crop Guard (NSE:DHARMAJ) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Dharmaj Crop Guard Limited Q2 and H1 FY 'twenty seven Earnings Conference Call hosted by TIL Advisors. As a reminder, all participants will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Saiyam Pokhana from DIL Advisors. Thank you and over to you Mr. Pokhana. Thank you, Michelle. Welcome everyone. Good afternoon. Wishing you all a very happy Diwali and greetings of the festive season on behalf of Dharmaj.

0:46 Thanks for taking out the time to join us today for the Q2 and H1 FY 'twenty seven earnings conference call of the company. The investor presentation and press release has already been uploaded to the stock exchange and on the company's website. In case you wish to be added to our mailing list, please feel free to reach out to us. To take us through today's results, we have with us from the management team Mr. Ramesh Talavya, Chairman and Managing Director Mr. Vishal Dharmajya, Chief Executive Officer and Mr. Vikas Agrawal, Chief Financial Officer. We will start with a brief opening remarks on the business performance for quarter two and for the half year from Mr. Talavya, followed by remarks on the financial performance by Mr. Agarwal, and then open the floor for Q and A session.

1:34 I would like to remind you all that anything and everything that is said on this call that represents any outlook for the future, which can be construed as a forward looking statement, must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties have been detailed in our annual reports. With this, I would now like to hand over the call to Ramesh sir. Over to you, sir. Good afternoon, everyone, and thank you for joining us today for Q2 and H1 FY 'twenty seven earnings conference call of Dharmaj Crop Guard Limited. Let me begin with the operating context because it has said everything about this quarter. The 2026 monsoon season has been one of the weakest India has seen in over a decade and extended dry spell more particularly in Western India, has held to a softer season for the agrochemical industry.

2:36 As per the IMD, seasonal rainfall over the country stood at 87 percentage of its longer period average, which is the fourth lowest since 2001 and the weakest since 2015. It is against this backdrop that for H1 FY 'twenty seven, revenue from operations stood at INR 716.7 crore, in line with INR114.6 crore in H1 FY 'twenty six. EBITDA stood at INR 81.6 crore, with the EBITDA margin at 11.4 percentage compared to 11.5 percentage last year. Profit after tax stood at INR 51.3 crores, up 3% year on year.

3:27 In a current season where industry demand was held back by rainfall, we have held our top line, held our half year margin and grown our profit. For Q2 FY 'twenty seven, revenue from operations came at INR 332.6 crore, a decline of 4% year on year. This decline is on account of our technical business. Our formulation and export business have remained resilient throughout the H1 FY 'twenty seven. Now coming to business segment wide performance. In formulation, both our verticals have remained resilient. Institutional formulation grew 2% year on year in Q2 and 3% in H1.

4:17 Blended Formulations grew 5% in Q2 and 2% in H1. Given the weak current season, carbon level consumption has not come through as earlier expected, which has held back growth in our branded verticals. What matters to us is that the vertical has held its ground and we believe the demand base for our brand remains intact. In export, we have carried forward the recovery of FY twenty twenty six. Export revenue was flat year on year in Q2, while H1 export grew 50% year on year to INR 60 crore. Export now accounts for 8% of our revenue compared to 6% in H1 last year.

5:09 And we expect that export to remain as a growth driver for us in the second half. Our technical business has been the main headwind this year. Revenue declined 27% year on year in Q2 and 20% in H1. As discussed on our last call, the West Asia crisis has affected both input pricing and demand pattern in technicals market and realization in the merchant market have remained steady. Through this period, we have aligned our active ingredient production with the captive requirement of our formulation business, which protects blended profitability at the company level and keeps the plant utilized.

6:01 We will remain agile in this business until the external environment normalize. Now on margin, the Q2 EBITDA margin stood at 7.3% compared to 9.2% in Q2 FY 'twenty six. The gross margin stood at 18.6% compared to 21.8%. Two factors explain this. First, higher input cost across the board. You will recall that in March, we had built raw material inventory ahead of the current season, which protects our margin in Q1. Purchase made after West Asia crisis at higher price are now flowing through our cost of goods and the effect is visible in Q2.

6:50 Second, rapid margin in the technical business, we are working to pass this higher cost on to end customer over Q3 and we accept technical margin to recover in coming quarters. Let me now turn to the business outlook for the rest of the year now. At the start of the year, we had set out an expectation of 18% to 20% top line growth for FY 'twenty seven that expectation rest on normal monsoon. Given this monsoon has turned out to be a weakest in over a decade, Kharif demand has been subdued across the country, across industry and the technical market has not recovered in the way we had expected.

7:45 Taking all of these into account, we now expected to deliver single digit revenue growth for FY 'twenty seven as a follow. We maintain a continuous optimistic view of the second half. Certain changes to domestic rubbish season may persist on account of the weak monsoon, low reservoir level, and we are planning for that. Our focus in the second half is clear, post higher exports sustain our domestic formulation business, restore the technical margins through better cost pass through. We believe this is the prudent approach for a year set by the weak monsoon, and it keeps the company well positioned to build on its base as conditions normalize.

8:41 I would also like to reconfirm that this does not change our long term strategy and outlook. Our Dharmaj 2030 vision of INR 2,000 crore top line remains our central goal, and we are on track to deliver it. The building blocks for a INR 2,000 crore top line are in place, a formulation business that continued to grow despite industry headwind and export business that has made a strong comeback in last one year and integrated active ingredient platform. On the project front, our new formulation facility near Kerala JADC Ahmedabad dedicated to herbicide manufacturing remain on track for commissioning.

9:28 The facility will release the capacity at our existing site and support the herbicide production cycle that begins ahead of next tariff season. For the financial highlights, I now invite our CFO, Mr. Vikas Agarwal. Thank you, Ramesh, sir. Good afternoon, everyone. Ramesh sir has covered the business performance. So I will skip to the numbers and few points on the balance sheet. Starting with Q2 FY 'twenty seven. Revenue from operation stood at INR 32.6 crore, down by 4% year on year. Gross profit stood at INR 61.9 crore, with the gross margin at 18.6% compared to 21.8% in Q2 FY 'twenty six, a compression of about three twenty basis points. This is where the higher input call that Ramesh spoke about.

10:16 Operating expenses were lower by 14% year on year at INR 37.6 crore, which partially cushioned the impact. EBITDA stood at INR 24.3 crore, down 20% year on year, with the EBITDA margin at 7.3 compared to 9.2%. Finance cost was lower by 27% at INR 3.3 crore. Profit before tax stood at INR 17.7 crore, down 21% and profit after tax stood at INR 13.3 crore, down 24 with a PAT margin of 4%. EPS for the quarter stood at INR 3.93 compared to INR 5.13. Moving to H1 FY 'twenty seven. Revenue from operations stood at INR 716.7 crore flat year on year. Gross margin stood at 22.5% compared to 23%, a compression of about 50 basis points.

11:10 EBITDA stood at INR 81.6 crore, marginally lower than INR 82.5 crore last year, with the margin at 11.4% compared to 11.5. Finance cost for the half year was lower by 22% at INR 5.9 crore and other income was higher at INR 2.8 crore. As a result, profit before tax grew 3% to INR 68.6 crore and profit after tax grew 3% to INR 51.3 crore, with a base margin at 7.1% compared to 7%. EPS for the half year stood at INR 15.19 compared to INR 14.78. On the revenue mix for H1 FY 'twenty seven, Institutional Formulation contributed 55% of the revenue, branded formulation 19%, export 8% and the technicals 18%.

11:57 Compared to H1 FY 'twenty six, the share of technical has come down from 22%, and the share of export has gone up from 6%. On the balance sheet as of 09/30/2026, inventory stood at INR 174 crore compared to INR 207.4 crore as of 03/31/2026. As the raw material inventory built year of Kharif has been consumed, trade receivables stood at INR 409.9 crore lower than INR 450.8 crore as of thirtieth September last year. Working capital borrowing stood at INR 74 crore against INR 80.9 crore as of March and long term borrowings at INR 45 crore against INR 51.2 crore. Gross debt stood at INR 119 crore, and the gross debt to equity stood at 0.24x compared to 0.29x of March, with net worth at INR 500.5 crore.

12:54 Capital working progress stood at INR 11.7 crore compared to INR 6.2 crore as of March, reflecting the spend on the Alpefac facility. To close, I would reiterate what Ramesh said on the outlook. Given the season we have had and state of the technical market, we are working on to deliver single digit revenue growth for FY 'twenty one as a whole with our effort in the second half directed at export, cost pass through and the commissioning of the Aldesa facility. With this, we can open the floor for questions. Thank you. Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Questions.

14:01 We'll take the first question from the line of Yugaish Jiswani from Mittal Analytics. Please go ahead. Thank you for the opportunity. Hello?

14:56 Yes, sir. So basically, you can't reach out whatever the activity because of the rainfall has been unredicated. But as such, our plan or our merger activity we are 100% sure that we will be on our target or our merger target at 2013, we will be completing INR 2,000 crore turnover. That will be on track. Time Congratulations.

19:10 Got it, sir. All the best to you and your team for a better you. Thank you, Yuriy. Thank you. A reminder to all the participants that you may please press star and 1 to ask questions at this time. Anyone who wishes to ask questions may please press star and 1 now. Ladies and gentlemen, as there are no further

20:52 questions, with that, we conclude today's conference call. On behalf of Dharmaj Crop Guard Limited, thank you for joining us, and you may now disconnect your lines. Thank you.