Insecticides (India) (NSE:INSECTICID) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to Insecticides (India) Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines 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 miss Sejal Patel from MUFG InTime. Thank you, and over to you, ma'am. Thank you, and welcome to q one and three months FY twenty seven earnings call of Insecticides (India) Limited. Today on this call, we have with us mister Rajesh Kumar Agrawal, managing director mister Sandeep Agarwal, chief financial officer Mr. Devinder Kumaray, Chief Operating Officer and Mr. Roshan Sood, Chief Marketing Officer.

1:00 Before we proceed with the call, I would like to give a small disclaimer that this conference may contain certain forward looking statements, which are based on beliefs, opinions and expectations of the company as on date. These statements are not guarantee of future performance and involve risks and uncertainties, which are difficult to predict. A detailed disclaimer has been given in the company's investor presentation, which is uploaded on the stock exchange. Now I would like to hand over the conference to the management for the opening remarks. Thank you, and over to you, sir. Thank you. This is Rajesh Agarwal. Good evening, everyone, and thank you for joining us for the Q1 FY twenty twenty seven earnings call.

1:48 The first quarter of FY 'twenty seven was shaped by an unusual start of the agricultural season. Channel activity started in March ahead of the anticipated summer hike. A delayed and annual monsoon coupled with high temperature across several regions impacted sewing activity and delayed demand for crop protection products. While this affected industry performance during the quarter, we believe that still there is ample opportunity to recover. With windfall improvement and CapEx picking up, we expect agriculture activity to gain momentum in the coming months. Talking about iron. Iron has established itself as a potential fully integrated agrochemical company.

2:40 Even in slower environment, the quarter highlighted the importance of our build of building a business that is not dependent on single growth or product strategy. Over the last few years, we have focused on creating multiple growth drivers through premium products, R and D, technology partnerships, thorough research, international markets. These investments are helping us building a stronger and more diversified growth platform for the future. Within the core business, premiumization continues to gain traction Granuvia and Espanolis, both launched in the collaboration with Corteva Adefense, were introduced through extensive engagement with dealers, distributor, retailers and farmers across the country.

3:50 We see these products as multiyear opportunities where increasing farmer acceptance can build meaningful contribution over the coming years. These launches are supported by our continued focus on R and D and technology partnerships. During the quarter, we continued working with Corteva, Nissan and OZ Agriome to access differentiated technologies and molecules. While our internal R and D teams remain focused on developing products suited to the Indian market, our work with OET Agrio on a new molecule discovery is also progressing, helping to strengthen the pipeline for the coming years.

4:37 The next step is to translate this product pipeline into wider pharma adoption, and this is where our distribution entry and business become important. During Q1, we conducted more than 3,600 formal meetings, 600 field days were organized, 1,400 demonstrations and over 15,000 formal visits were made by the team of IL, and these were all supported by more than 8,500 distributors and 17,000 retail customers. These engagements helped us to maintain strong pharma connect even as the funeral started. Our INSECTICID Crop Solution program.

5:25 It is an important extension of this approach as it demonstrates complete crop solutions and their economics directly in the pharma field. Following the soft pharma acceptance and demonstrated ROI from the existing strategic plots, we are now planning to double the number of plots in 20 the 20 the at the field level and create stronger product pool for the differentiated portfolio. Along with the core business, Faroe Research contributed to make progress during the quarter.

6:13 More than 40 crores are already commercialized. We are expanding its portfolio and distribution footprint while developing B2B and pet to pet opportunities. The focus remains on scaling cars into a meaningful second growth platform over the medium term. Our international business also continued to gain momentum during the quarter with registrations, partnerships and customer opportunities being developed across Latin America, Europe, Asia. With this opportunity, providing food, including as we are taking calibrated approach to establish these relationships before its beginning with the expectation that successful engagement can develop into meaningful medium term opportunities.

7:10 Now the sales of the technicals is catching up and there is good acceptance of these technicals across the world wherever we are going. And we believe that along with the wide lending, our business of technical is going to flourish in the international market, and that will support us in increasing the sales volumes and the sales numbers. On the operating side, crude and petroleum based commodity costs remain an area of pressure during the quarter, impacting parts of both production and region. We continue to address this through calibrated pricing, better product mix and increasing contribution from the differentiated products while remaining competitive. Working capital discipline also remains a priority.

7:57 Deal inventory was slightly elevated due to the slower start of the industrial season, and we are focused on improving We COVID-nineteen We we facility is providing additional capacity and flexibility, while the Sotala Nala project is progressing as planned. The formulation facility at Sotala Nala is expected to commence around April, May, next year, followed by seasonal production by the morning subject to the project schedule. Importantly, the investment made over the past several years are already supporting the business. Investments premiumization, R and D and technology have strengthened our product pipeline, improved our ability to serve customers and created the capacity required for the next phase of growth.

9:15 Operating performance. At the same time, we are approaching the end of this investment cycle. Once the current projects are completed, we expect annual CapEx to normalize around 3040% growth of maintenance CapEx, allowing us to increasingly focus on utilization, cash generation and. As utilization improves, we expect operating leverage and efficiency initiatives to support improvement of growth and ROE with renewal initiatives, lower electricity and fuel consumption and increasing use of AI and other advanced technologies provide additional efficiency benefits for from Q3 onwards, Celsius from September of the year.

10:04 Looking ahead, while delayed monsoons impacted the first quarter, we believe the agricultural cycle has largely been record rather than lost. We believe the investment made in earlier years are now providing the foundation for the next phase of growth. And our objective is to convert the foundation into sustainable growth, the You will see the products which we

12:47 lost last year. So the total sales of those products last year was first quarter INR 1.67 crore. This year it is INR 2.29 crore. Revenue from three licensing products last year first quarter it was around INR 36 crore. Was 20 and The in '20 the other has come down from INR $100,134.05 crores to INR 98 crores. So these are some So now we can open the house for question and answer session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone.

13:55 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble. The first question is from the line of Prashant Biani from Illada Securities. Please go ahead. Yeah. Hi, Rajeej. Sir, on the Sotala formulation and technical plant, how much are we investing separately for formulation and technical? What is the total investment and how much have we invested till date? It will be a project total investment at INR 130 crores. Total investment will go roughly about INR 200 crores.

14:44 Out of which, I think about INR 50 crores will be going in the formulation and 150 crores will be for INR one molecules do we plan to manufacture here? Okay, sir. Thank you so much. Thank you.

15:41 Thank you. The next question is from the line of Ramesh from SJ Investments. Please go ahead. Hi, sir. Am I audible? Yes. Yes. Yes. Thank you. Yes, sir. Nothing. Sir, I just wanted to understand in terms of the ground, understand. Rains have been uneven and everything and, you know, overhang with us. So... And sales also translated to that. How do you see the demand environment right now going forward? If you talk about progress has been good rates across the country. The reservoir situation is improving, and the crops are very healthy. This year, we have also seen the reduction in cotton and yeast crops, but other dry crops are improving.

16:47 So we are seeing the reduction in oil, seeds, pulses, I would say, groundnut also Got it, sir. So overall basis, South is a little compared affected. And right now, over the year, where do you think we'll end up in terms of sales growth, sir? Difficult to give the number, but we should be positive, and that positive impact should be delivered from Q2 itself, I believe.

17:36 Got it, sir. And one question in regards to just understanding the customer final customer, the farmer. So we have co branded products, which are more expensive and Marathon products compared to our other generic products. Could you explain how the pharma is different from our new brand segment, Go branded segment versus Maharakna? Could you just give a broad perspective on who is which bucket of pharma splits for each type of brand? Then it is believed that the expensive products will be bought only by the progressive farmers who have larger base of land.

18:39 Yes, that is true to an extent. But even the smaller farmers, pleased the So we are Sir, could you give a broad perspective on how each brand is segmented just to understand how the value chart is for the company and what they want each brand to turn it, like, expand into the ideal vision?

19:35 This is going to talk to them, right, but here, I can talk that COVID-nineteen We have seen in the Hello? Hello? Sorry to interrupt, sir. Your voice is a bit muffled.

20:29 Oh, keep going. Nobody. So do I need to repeat the answer? No, sir. Now it's clear. No. Now is that clear or you need to repeat? No, sir. Your voice was audible, but it was a bit muffled. Okay. Yes, sir. So just one last question, sir. Sir, you mentioned the fact that depending on the awareness, the farmer chooses the brand. Right? So just trying to understand, during the initial stages when you're trying to make them try and innovate a product, what do they trust more? Is it usually a Mahatma brand or is the foreign brand with our co branding on it? Please come back again. Sorry, sir. Am I audible?

21:17 Yes. Yes. Yes, sir. So basically, I was asking, you mentioned that the farmer chooses the brand based on the awareness generated in the market. So I was just trying to understand, during the first phase when we do... When we... There is no insecticides in the product used by the farmer, do they start with the international brand, co branded brand that we sell with Nissan and Oat or would it be Maharashtra brand, the first time they take something? It all depends on what solutions are we giving and they come by by the usage pattern and the awareness level of the farmer. Because if it is a 100%, then it is used first. So it can be from my own R and D or the imported products. So both have their excess.

22:06 Have same to So Understood, sir. So just one last question with

23:38 regards to capacity. We have mentioned that we are putting up a new facility. So just trying to understand without that capacity, what can be the sales maximum sales we'll be able to generate? And with the new capacity, how much more sales can we generate at peak utilization? Just trying to understand the capacity. And this one plant would be sufficient to add the capacity you need?

24:39 The expenditure today, if I talk about today's expense, we have just completed Sopagi expansion. Dahi is on its way for completion. That what expenses are going to have after two years is different. But if the continuous exercise, you want to complete one thing, then you'll start for the next step. So at this moment, since there were many projects in place, I want to complete them one by one. And after I complete a few,

26:10 then I plan to move on. Understood, sir. Got it. Just one last technique. I just I was trying to understand. So when we are partnering with Yeah. Thank you. Please have got... Yes. I'm just asking about... So when we partner with our international collaborators, so when we get the problem... The product, is it that that that that it's in the formulation, we have to repack it here? Or with the... Do we directly get the packaged product here and then we just sample logo? How does it work? The

27:58 market. The market. Pleased are We adding the CDMO business also with with some of our partners. So that are is also in pipeline. Understood, sir. That's it from my side. Thank you so much for your patient answers, sir. You too. Thanks for the interest. Thank you. The next question is from the line of Madhu Rati from Counter Cyclical Investment. Please go ahead.

28:47 Sir, thank you for the opportunity. Sir, I see that our b to b business has grown on, like, by 10% this quarter. So what was the inventory gains or was there any inventory gain because of the pricing increase because of this what? There was a good opportunity, but what is like there was an unexpected increase in the price of metal, plastics, solvents, emulsifiers and also some of the technical and there was a complete supply chain disruption because the time taking from China for travel was even more. And the because of the scarcity of our business and the freight increased. So that complete disrupted the thing, there might be some advantage we would have taken because of the high industry.

29:36 But yes, still at the end of this quarter, we're sitting on inventory. Was there's an increase in the gross profit profitability of the company. So we sometimes say it has happened due to our traction of the new generation volumes. You can say that some portion might be because we were having some older inventories. But, yes, it was a mixed package, because some were some were some were cheaper, and market is very, very close to being at the home. So difficult to comment exactly how much was the contribution from the. Right. And sir, for our b to b... B to c business, sir, what kind of prices have you taken for the focused Maharatna and Maharatna products and for the commodity or the generic products?

30:27 This price, like, as I told you that there there was a big expectation of price hike in the month of March. We have taken one hike in March, two hikes in April. And I believe in May also we try to take one hike, but somehow we had to roll it back because the market was very much delayed and the sentiment of the network was very weak. So there were some rollbacks continuously in the month of July. And after that, the market has settled and now the demand is there. So apparently, the impact will understand data, but I can say that there was no much price hike, only the strategic whatever was there in the like cost increase that we could say and that is visible in the results also.

31:20 But extraordinary, it could not be bigger in this market because the demand pattern was low. So it will not be bigger. Got it. And sir, for the coming quarters, so Q2, because all of these raw material pricing increase, is the industry so apart only not only Insecticides or is the industry throughout not taking any price rise and that might affect our margins for the b two c business going forward, or we expect to at least maintain that or we have sufficient inventories, if you could help us understand on that front? I mean, it's a mixed bag. Very difficult to say, like, the variations are very, very high, like solvents are are are... Like, there are fluctuations of 25, 50% in the solvent prices, week to week day to day. So very difficult about talking about a new company.

32:17 But we since are focusing around lot of interesting one for us, actually the premium products. So I don't think that our profitability is going to get impacted in this difficult time also. Got it. Sir, just a final question from my side. How is the... Whenever we take a price, sir, how is the pricing, like like, friction between focused products and generic products. So if you could help us understand, are we able to pass on whatever raw material cost increases we get for the products, or even that is facing some kind of friction from the market? It depends on product to product because if something is not doing well, then yes, there can be issues or if there is a competing product which comes into the market and So there can be cases where you make 20%, 45%.

33:40 Mahatma will sell at around 30 odd percent. Sometimes the profit can go down to 30%, 45%. In the same manner, at some time, something which are at 35% plus in the market. So in special case, you can get a 40% plus. In a low case, you can... It can be 30%. So since there are multiple products in all these ranges because I have a few focus about 16 to 18, and are also 40. So in one word, I cannot explain the complete range, but yes, it varies from product to product and the range functions as that. Got it. And sir, are there any plans for a buyback? Because I think this is a down cycle and we can reduce the equity base for our company. So any plans on buyback?

34:30 There is less than usual process of the company. We buy back after every two, three years, not every year. So it depends. So we have to reward the investor. It can be in the form of dividend. It can be in the form of buyback. So that we decide after we complete this course. Got it. Sir, that was from my mind. Thank you so much and all the best. Thank you. Thank you. The next question is from the line of from Fair Value Capital. Please go ahead. Hello, sir. Am I audible? Yeah. Thank you. Am I clear? Yeah. Yeah. I can hear you very much. Okay. Okay, sir. Okay. Thank you very much for meeting us today. No. Please go ahead. Go ahead, sir.

35:19 Yes. The first question is, given that monsoons were delayed this time, and are we expecting any any suggestion at sales return like the last time we have, it's about 200,000 rupees of sales Yes, sales return possibilities are definitely there. But this year, I see only one or 200,000, not many, number one. Number two, we are very, very cautious, looking at the last year. So the placement was not that strong, what we did in the last year. It was the strategic comp, what we expect to place lower. Otherwise, I could have also a team in sales number by placing more, but we did place very efficiently this year because we were aware because annual announcements were there from the month of February and March.

36:11 So it was also decided. And we also, as a strategy, with generic products and new generation products in a way, so that they are on better stock results. And we will be writing over to the product, actually, in a target. So I think that we should be able to reduce the sales of the customers to at least half what was there in the industry. Okay. And sir, can you help us with the revenues from TYROS and what are its expectations for this year and for the next for TYROS specifically? Cairo is a new company which we had launched and the target is to grow at a CAGR of 100% initially and then it will come down to 50%, 60%.

37:07 So at this juncture, I can say it is on the path of growing by And the margins, sir, what are the expectations for margins? Will it be too high? Margins are visible in front of me. Margins won't be won't for IAA as it's concerned because the expenses are too much like already you might see in the first quarter I've heard about 100 people in the company. So the service expense is already very high. Sales customers, but already since the 100 people are on goal and there are also third party old people in the market, so I'll review again and it can improve in future. But at this moment, I believe it will have Can you repeat your question? I could not hear it clearly.

38:33 The normalized margins for Tyros, not what they are right now in the initial stage, but what they would be when Tyros goes to a good size. The normalized margin also, you can believe, should be around single digit at the moment. And as it goes up, I'll see you on comment. I'll not say that it will cross double digits now till I achieve something. Yes, sir. And you talked about price hikes. Can you also talk about what the volume degrowth was for both B2B and B2C in this quarter? Yes, the growth is almost similar. B2C or B2B business has shown a little more growth in Q1.

39:20 And in Q2, I think B2B business is going to show a little more growth than B2C. That is the status. So for Q1, the volume growth was similar? Volume growth has not come in, in the Q1 because overall there is a value growth fee growth also and volume growth de growth also. How much was that? Yes, the volume degrowth is about 13%.

40:14 There is a small value growth of about 2% actually, which is visible in Q1. The next question is from the line of Sonia Raghuwanshi from Nirma Securities. Please go ahead. Good evening. Thank you so much for taking my question. Sir, in the previous quarter, the management expected herbicides to record healthy growth after the prior year's returns and pricing pressure. How did the herbicide portfolio perform in Q1?

41:06 And what is the segment wise revenue for Q1? The expectation from herbicide growth is again there in Q1 also. Many products we have touched last year sales and the exact growth because it was delayed. So the growth is going to come get registered in Q2. Definitely, in comparison to last year, more than majority of the herbicides will cross last year's achievements. But yes, we have not touched the figures, which were the dream figures for this year. That is for sure. So talking about the segment wise sales, I'll give it to the CFO to give you the exact breakup of herbicide insecticides and fungicides.

41:56 Yes. The insecticide percentage in B2C is around 33%, herbicide is around 59%, fungicide is 5% and pig wear is 3% in this first quarter. Okay, sir. So my next question is on what revenue did Grenuva and Spinoase generate during Q1? And what are management's revenue expectation from each product for FY twenty seven? Has crossed about five since Q1. Spinalysis is just a beginning. I think a small few like days the year.

42:45 Made 10 crores plus. So both we products put together 30 to 35 crores range is possible in this sector, gross level. When it comes to net level, you have to get 25% out of it. Okay, sir. Just a last question from my side. Management plans approximately double the crop solution plots from the existing 36 plots. What is the exact f five twenty seven target expected expenditure and measurable revenue opportunity associated with these plots?

43:33 Like, if we talk about the expenses, so we are aware that this is going to be a difficult season from the very beginning. So we have not increased any expense budget for the company as a whole, and we'll try to manage to keep existing budgets what we have. There will be expansion, but I told in my speech also that we are working on maintaining our expenses, particularly in the power and DC, which are the two major expenses, so in a controlled fashion, so that we don't increase that. For that, we will be using the solar energy, the wind energy and also the solid fuel to control our expenses. And we are on one job for getting better advantage by the end of this quarter.

44:18 So in the half year, in the next half, we should be able to control it and we are in other words, I can say we have more production with the same expenses. This is the target. So expenses will be performing this way. Growth targets were very aggressive because this is competitive company. We wanted to grow in a major purchase in the first quarter, we have received a contract. So I believe that we'll be improving in Q2 and let's see the Q2 performance because first half is very, very important Okay, sir. Understood.

45:06 Thank you so much. That's it from my side. All the very best. Thank you. The next question is from the line of from AKS Capital. Please go ahead. Hello. Am I audible? Your voice is a bit cracking. Hello? Am I audible? Yeah. Your voice is cracking, but I can hear you. Can you hear me now? Yes. No. I don't know what... Where... Why is the disturbance, but your line is different. Okay. You can ask me questions. Let me try if I'm able to understand. I'll reply. Sir, I had two me questions. In q four, management suggested that our working cycle of approximately one twenty days could potentially be a.

46:01 Hello? Very clear in Q4. What is this there? Sorry to interrupt, mister. Rejoin the queue when your voice will be clear. Thank you. The next question is from the line of from DD Capital. Please go ahead. Hi, sir. Thanks for the opportunity. I have Please allow me a little louder. Yeah. Hi, sir. So my first question is that despite the revenue decline, gross margin expanded by two forty basis points, like to 31.6%. So like, could you break down this expansion within pricing, premium product mix, lower cost inventory or we can say backward integration and other factors?

46:52 I just told actually that there was a 13% decline in the volumes and there was 2% price in the prices. So this price hike can be due to the focus on the specialty products and some advantage due to inventory also you can say, but the markets are highly fluctuating. The solvent and the plastic prices, plastic and the and the multipart and also other things were highly fluctuating during the quarter. The variations were as I have some solvers, the price doubled. And for many other things, like you don't know what is the price. Today, somebody is saying 100, tomorrow is saying 100 from 30. So that type of variation was there. So in that variation, whatever we could buy, we got it actually and try to manage the quarter and still managing.

47:41 So I believe that the total turnover of the complete drop, so that was the reason that there was effect in this technology, which we should be able to recover in Q2 with improved phasing upon, which are expected after the August. Understood, sir. Understood. My next question is that, like what is the current utilization of the hedge, including the recently added capacity? And also what incremental revenue can be supported before another major expansion like which is required? I think there's a very good question. We are planning to change the product mix. We are dividing the herbicide and insecticide plants, so that will probably happen.

48:28 There are there is about 50%, 60% equipment in new life for the new plant, which we have made. So there is further expansion of power. We have taken a new power connection and we started this. There is a new volume, which is upcoming. So after that complete election, we'll again get some expansion and one thing because we'll be able to meet the new expansion only after that when we have this team also with us. So we are working on that and that should help us in achieving the next year target and this year target also in our discussion. So we are trying to add a few AI and there is some backward integration portion also there and we have identified that which technicals we have to increase in production.

49:18 So we are working according to that strategy. So growth, yes, it has got a good potential of the industry growth. So let's see how the number comes because the season has started with a great difficulty and difficult measures overall. So at this moment, difficult to beat the number, but it has got good potential actually. At least INR 200 crores is possible to be added into the production part. Understood, sir. Understood. Great.

50:13 And my last question is that like could management quantify the expected asset turnover and return on capital from the Dehej and Sultanela investment once utilization stabilizes? We'll keep that number as it comes. Overall, there's a strategy that we have to stress the assets to this core and increase the ROCE. So multiple level improvements are being followed for that. We are working on improving our working capital, increasing the turnover on the current business, reducing the trade base in the market and also doing more calculation and working on the strategic initiatives. So everything is focusing around improving the ROC, and that is my target, which I'm working for study. And we are going to stress on this. We have already we are working on monthly basis. Now we are working to make this weekly meetings of the senior team members to do this actually. So it will be the key focus of the company that I can say. And we'll definitely improve our performance because already the delivery which has come in the month of June is something that actually and we'll see a substantial improvement in this quarter.

51:39 Understood, understood. That's all from my side. Thank you so much. Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touch tone telephone. Ladies and gentlemen, that was last question. I would now like to hand the conference over to the management for closing comments. So again, I thank you very much for your active interest. So I can say that Q1 was focused on building the foundations, including business stability, now available on seasonal drivers, areas of opportunity, areas requiring corrective action, need to move from initiatives to deliverable outcomes is realized and we we are working on primary outcomes, revenue growth, gross margin improvements, profitability, cash generation, and better consumption.

52:58 With this, again, I thank you very much Thank you. On behalf of Insecticides Limited, that concludes this conference. Thank you for joining us. You may now disconnect.