Rallis India (NSE:RALLIS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Rallis India Limited Q1 FY 'twenty seven Earnings Conference Call. We have with us today Doctor. Ganender Shukla, Managing Director and CEO Mr. Bhaskar Swaminathan, Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the results presentation. As a reminder, all participant lines will be in 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.

0:45 I now hand the conference over to Doctor. Shukla. Thank you, and over to you, Doctor. Shukla. Thanks. Good morning, everyone, and thank you for joining us today on Rallis India Q1 fiscal year twenty seven earnings call. As mentioned, I have alongside myself our CFO, Mr. Vascar Sominathan. I will start with a synopsis of the industry landscape before addressing development specific to the company. Q1 was characterized by a weak demand environment and sustained pricing pressure in the Indian agrochemical space. While the supply chain was not materially disrupted, it remained fragile and cost sensitive with volatility in raw material availability, freight and logistics. Dependence on Chinese inputs continued to influence sourcing dynamics, while selective disruptions and inventory constraints created intermittent supply tightness.

1:37 However, the market did not face a structural shortage. The key takeaway is that cost remained elevated while demand recovery was insufficient to support price hikes resulting in continued margin stress across the sector. The Middle East war likely affected the agrochemical sector in Q1, mainly through higher feed stock energy and freight cost, which compressed margin even when selling prices were adjusted upward. That said, the price increases triggered by Middle East supply disruptions are expected to partially offset the volume led trend. Companies with imported intermediates or fertilizer linked input exposure are more vulnerable than those with the stronger domestic sourcing. Margin pressure was likely strongest for businesses that could not fully hedge energy and freight costs quickly revise the realization. The sector also faced uncertainty rather than a onetime swap because even a ceasefire of cost does not immediately normalize energy and shipping cost.

2:34 Additionally, at the start of the seasonal Lineara was described as a probable threat to a weaker monsoon because it tend to warm the Central And Eastern Pacific, which disrupts atmospheric circulation and can reduce the monsoon flow over India. Official and media reports said that IMD linked it below normal rainfall outlook to developing a linear conditions, especially for the second half of the season. Market witnessed aggressive channel filling in March ahead of anticipated price increases, delayed onset of the South monsoon weighing on ground consumption, cumulative rainfall deficit below normal and lagging Kharif sowing deferred placements. The late arrival of this year's monsoon and the resultant delay in Kharif sowing impacted a great chemical uptake across the domestic market.

3:20 As for IMD's latest available update, overall India's seasonal rainfall remained about 15% below normal. This was a data as July 8, and obviously, there has been some recovery since then. IMD's latest long range seasonal outlook for the 2026 South West Monsoon projects below normal rainfall for the country overall, most likely about 90% of the normal period average with a modest error of plus model error of plus minus 4%. Monsoon core churn is most likely to be below normal. Reason why the data suggests that Central And Western India has improved softly in early July, while East, Northeastern part of South continues to lag, especially in Karnataka. Rainfall, soft falls in July, in June and early July, so slowed the Kharif sowing, especially in the rain fed belt and for crops like paddy, maize, pulses, soybean and groundnut.

4:15 If rains arrive and burst after a dry start, farmers often resow which raises seed and crop protection users. Farmers tend to move towards shorter duration crops, drought resistance varieties and move away from water sensitive crops where irrigation is limited. Northwestern, some Eastern, Southeastern pockets may fare better while Central Peninsula and core anchor regions face higher selling stress. As of end June twenty six, Kharid sowing was significantly lagging last year with only 17% of the normal area covered. But as we move forward, I think there has been a significant progress as far as crop acreage is concerned. Based on the latest indication, it is about 17% behind. The crops like cotton and ground nut are probably the most significant, which are lagging behind.

5:04 If you go by the water situation, the Central Water Commission report quoted on July 17 that reservoir level had risen to 34.4% by July 16 from 26% on July 2. A ten year average is higher than the current level with current storage at 98% of the normal. So reservoir level minus Karnataka, I think, seems to be in a good situation. The fiscal year '27 Karit MSP regime is broadly supportive of crybodiversification, sharper hikes in oilseed pulses in cotton. It stand out while Paddy and Meij saw only modest increases. The government approved MSP for different 14 different crops for the marketing season of twenty six-twenty seven with estimated procurement of about 80,000,000 metric tons and estimated payout of about INR 2.6 lakh crore.

5:56 The pricing framework remains aligned with the policy of keeping MSP at at least 1.5 times the cost of production. The relatively stronger increase in oilseed and pulses suggested an intent to increase shifting away acres from Paddy and move towards more diversified crop mix. From an agrochemical perspective, this is constructive for demand diversification, it is particularly relevant for pulses and oilseeds, where input users in crop protection needs differ from those of Paddy. Volume may shrink as acreage has declined, but margins are likely to remain stable to slightly soft. Integrated firms with balanced portfolio, combining seed, crop protection and nutrition product are better placed to navigate the volatility market. It is also likely to favor low cost producers with a broad export presence and disciplined working capital management.

6:46 On the biostimulant category regulatory framework, India significantly modernized the biostimulant category framework. Under the FCO with a standardized specification for humic acid, furbic acid and seaweed formulation. This move should help bring regulatory clarity, product reliability and market formalization. For fiscal year twenty seven, the cleaner consensus is that agrochemical are expected to grow around 6% to 8% in India, while seed is likely to grow mid to high single digit, but it will depend on the crop. Autumn certainly will see a significant decline. The global crop protection market is estimated at roughly 70,000,000,000 to $80,000,000,000 in calendar year '26. Depending on the definition, it is expected to grow at 4.5% to 6% CAGR, supported by rising food demand, limited arable land and need to improve farm productivity. Global crop protection markets are being saved by tighter regulation, supply chain derisking, rising biological adoption and continued innovation in formulation and new modes of action. Demand growth remains strong in emerging market, while pricing margin pressure and climate driven crop volatility continue to influence the sector. The near term outlook remains dependent on the Middle East conflict as well as the rainfall situation.

8:10 So all of that means that sector recovery remains uneven. U. S. Demand is still supportive, but Brazil remains weak and key agree linked end markets. China continues to drive pricing pressure and supply chain risk, especially for API and intermediates. There's no India stock buildup in the latest data, which likely reflects a balance sheet offset. Higher production was absorbed by demand and trade assumptions, leaving ending stock stocks ending stocks broadly unchanged. Moving on to... So this was a general commentary. Moving on to Rallis' specific development, we had a reasonable quarter one fiscal year twenty seven performance despite the fact that several factors impacted planning, including the war in West Asia, which led to panic buying up commodities with significant price increases and delayed monsoon in India.

9:00 The overall demand was subdued. Severe heat wave in Q1 delayed showing due to delayed onset of monsoon farmer crop switch. Reduction in crop record is coupled with extensive spread of illegal HTBT cotton. Great channel rest to secure fertilizer, which resulted in cash crunch for crop protection, causing conservative inventory stocking slower liquidation. The domestic formulation, the growth was driven by aggressive placement liquidation efforts and volume scale up. Talking about quarter one numbers, our revenues stood at crore versus INR957 crore last year. EBITDA improved by 23% to INR480 crores from INR150 crores in quarter one of 'twenty six.

9:47 Profit after taxes stood at INR125 crores versus INR95 crores of previous year quarter. Exceptional items include profit on sale of property of INR 2 crore. Our overall capacity supply, Jason, has slightly increased in Q1 in comparison to Q1 of fiscal year twenty six. New launches initiatives during the quarter, we have launched four new crop care products, one two herbicide, one insecticide and one soil and plant health category product tailored made for ginger and turmeric. In seed business, we have launched quite a few new products for North India, herbicide tolerant direct seeded rice under the Chania brand to promote direct seeded rice as well as short duration of Bajra variety.

10:40 So in all, we have introduced nine new products in seed. Digital marketing and intervention continue to promote products through Anubal, the age scheme, pharma QR code reward scheme and enhancement in some purpose program. Anuband Edge initiative is a retailer level digital platform to support retailer engagement and benefit schemes and enabling tighter integration between dealer and retailers. Retailer registration as on June end was 56,000. Farmers QR code project sales and better product knowledge sharing with the farmer. Our initiative Tampark Plus continues to farmer level demand signals to generate actionable insight and improve sales conversion. We have launched idea to impact platform in Q4 of last year to establish an open innovation ecosystem to source, validate and commercialize Agree Innovations. Still now we have received encouraging participation of party applications out of which two are in the pilot stage.

11:39 We are continuously using tech assisted marketing initiative to promote products and generate demand. Digital led field heavy van campaigns balance focus on physical and digital connect with focus on key products. Right? We are uneasily enabling digital led... We are increasingly enabling digital led engagement that is strengthened, data driven decision making enhances farmer outreach and adviser productivity. We are also shifting towards high margin sustainable and farmer centric offerings, including biological and next generation product. So that concludes my opening remarks. I will now hand over it to Bhaskar, our CFO, for a detailed analysis of the financial situation. Over to you, Bhaskar. Thank you, Doctor. Ganinder. Good morning, everyone, and thank you for joining us today for our Q1 FY 'twenty seven earnings call. I'll walk you through our financial performance for the quarter, post which we should commence securitization.

12:33 Starting with the top line for the quarter, our quarter FY 'twenty seven revenue stood at $10.22 crores as against INR $9.57 crores for the same period last year, resulting in an overall growth of 7%. Overall volume growth has been 2% with pricing and growth of 5%. Overall EBITDA for Q1 FY 'twenty seven stood at INR 184 crore, higher by 23% compared to INR 150 crore in Q1 of the previous year. Profit of profit after tax at INR 125 crore versus INR 95 crore of Q1 FY 'twenty six, which is 31% higher than the same quarter of previous year. Crop Care segment grew by 7% to INR $6.97 crore in Q1 FY 'twenty seven from INR $6.52 crore in Q1 FY 'twenty six due to both volume and price growth and new product promotion, increased digital engagement as well. The volume growth is 2% and price growth is 5%.

13:34 Within the Crop Care segment, the domestic B2C witnessed a 19% growth in Q1 FY 'twenty seven registering INR $5.34 crore revenue vis a vis INR $9.04 crore in Q1 FY 'twenty six, which was driven by volume growth of 15%. Crop production category grew by 18% and registered Q1 FY 'twenty seven revenue of INR $4.55 crore vis a vis INR $3.86 crore in Q1 FY 'twenty six, which was driven by volume growth of 16%. Soil and plant health category grew by 10% to INR 62 crore from INR 56 crore in Q1 FY 'twenty seven in comparison to Q1 FY 'twenty six, driven by price growth of 13%.

14:19 We applied prudent pricing approach to drive the margins in the category. Exports top line grew by 28% to INR 110 crore from INR 152 crore due to 35% degrowth in volumes. The reasons for degrowth are due to lower demand for EUR 2,000 and million coupled with competitive China market prices. The price competitors aggressively impacted volumes of Assafate, Pendi, CF and Hexagonal. There were delays and uncertainty in shipping time lines due to port condition or logistical challenges, our CSM Q1 FY 'twenty seven revenue displayed promising growth by lodging 191% growth to INR 24 crore from INR 8 crore, driven by rebound in peak sales volumes.

15:10 Total B2B revenues stood at INR 163 crore vis a vis INR $20.03 crore as decline of 19% was primarily due to volumes, which degrew by 26%. In the crop care segment, we are focused on expanding our customer base and product portfolio is enhancing go to market strategy. We are driving focused execution across frontline and operational functions by optimizing the product portfolio, rationalizing territories, eliminating overlaps and simplifying costs across the value chain. We are continuously putting efforts into increasing customer centricity through digital initiatives to reach out to channel partners and customers, implementation of customer satisfaction surveys and identifying new growth areas. Moving to Seeds business, Seeds revenue grew by 6% to INR $3.25 crores in Q1 FY 'twenty seven from INR $30.05 crores in Q1 FY 'twenty six due to 6% price growth. We witnessed acreage drop in North Cotton and intense competition in Southern And Central Cotton.

16:14 The overall sea supply in terms of volume was sufficient, but delayed due to non availability of dryers, processing facilities and concentrated arrivals coupled with labor shortages on the supply chain side. We will have a clear liquidation picture to emerge by end of July. In the seed segment, our primary focus will be on five strategic crops, cotton, maize, millet, mustard and rice. A selective and concentrated approach in these crops is expected to drive operational efficiency. Overall, we remain disciplined in improving capital efficiency across both fixed capital and working capital. At quarter end, our inventory levels remained elevated in comparison to the same quarter of last year. Collection cycles remained smooth.

17:02 We have healthy cash and liquid balance of INR $30.09 crore as of June thirty six. That concludes our opening remarks. We can now commence on the Q and A session. Thank you. We will now begin the question and answer session. The first question comes from the line of Ankur Preetwala Access Capital. Please go ahead. Yes. Hi, sir. Thanks for the opportunity.

17:47 First question on the exports market. How are you seeing the product wise demand as well as the pricing scenario there given that Chinese competition on pricing sort of still keeps depressing? So your thoughts there first. Okay. We go one more. Yes. So thank you, Ankur, for asking questions. So I think export, I must say, is challenging unless you have a branded business in the countries you operate. So as far as CSM is concerned where you have a contract with the company, think it is okay, still fine because you can discuss with the counterparty and negotiate terms and conditions. As far as catalog products are concerned, I think we have to remain competitive.

18:36 And one of the products where we face challenges are really SFA because raw material has to come from China and then we have to process back and sell it to countries like Brazil and US. And then also China is also competing directly in those markets. So other than that, I think we are quite competitive. Now we can compete with China. And again, it only depends on the demand situation. CSM, not a challenge, I mean, because you have a contract. It is only the catalog product where challenge becomes significant. Sure, sir. And on the other products, Pendi and other products are... So Pendi, Metropogen, Hexiconazole, are still competitive. I think we are able to compete. And including Metallaxil.

19:22 So I think other than SFA, it's not a big challenge. Okay. Great. On the CSM side, we were thinking of or we had talks earlier that to increase the share of CSM here. Any luck there in terms of the... Yes. So we did start making a product for customer in US. So first shipments have gone this year and subsequent one. So first shipment is well received, you know, from a quality perspective and everything else. We are in the process of, you know, securing more customers. But I mean, as I've been saying in the past, that's a slow burn. It takes time to keep cultivating. There are three, products we're working badly on CSM. And one will be already with an existing customer where we make and supply one product. So we're going to be adding those products, but they're all slow rate. On catalog category, we are going to launch, I would say, three to four products in next three years.

20:24 And we are at that different stages of either advanced registration or pilot production and trying to increase some commercial quantities. Sure, sir. Just next week on the domestic part. If I heard the initial commentary right, we are looking at a lower cotton acreage for this financial year at least, given the macro, the rainfall and the risk. And since our portfolio is slightly heavy on the crop price on the cotton side, what are your thoughts on the domestic growth overall for this year? So cotton, I would say anybody operating in crop protection sector. So we have stakes as far as cotton is concerned both in crop protection as well as seed.

21:11 Now seed, we have already factored in that this year. It is unlikely that cotton business will grow. Two things have happened. We were pretty heavy on Northern Side and North Side Punjab and Haryana cotton area significant decline. Even in South and central, our two factors are playing, a, it's a rain fed area when it rains less. Farmers plant anyway less cotton. On the top of that, there has been lot of spread of illegal HGBT cotton, which is being sold. So cotton, I think we are looking at, you know, maybe as we year end, maybe flat year, but we are focusing quite a lot on rice and maize and millet where we had launched quite a few product in last few years. This year, again, we have launched product in patty, maize and millet. So focus has shifted right now for the current season to be more aggressive on other crops.

22:06 I think cotton will remain important. In my view, cotton will recover. I mean, these kind of rainfall situation happen once in a while. They do not have to happen every year. Sure, sir. And just on the domestic crop protection growth as well? Yes. Cotton is one crop that takes a lot of sprays. Now last year, if anybody remembers commentary, we said, look, cotton area, well, there was a lot of area. Didn't... Farmers did not get chance to spray the crop because it was raining too much. Right? Now while cotton area may go down, but sometimes this intermittent rain, whatever crop has been planted, cotton prices remain, I think, quite supportive. So farmers, those who have planted, if they are able to do field operations, it may have only marginal impact at the end of the day. So I mean, this is something looking at a crystal ball and saying what will happen from the rain rain perspective in September, October, you know, August. It's very difficult to say, but I I wouldn't be very pessimistic at this point of time. I would say sometimes, you know, good distribution of rain even if it's marginally lower.

23:19 Even if 90%, 95 of the normal cotton acres get planted might still lead to similar situation as last year. Sure, sir. Thanks a lot for your detailed answers. Thank you and all the best. Thank you. Thank you. Next question comes from the line of Puneet with FJ Investments. Please go ahead. Hi, sir. Thank you for the opportunity. So I wanted to understand in terms of the Lena effect that everyone's been really talking about, Has it transpired in the ground? Or how is the sentiment on the ground as far at this point of time? So Alino certainly is a reality. Country has seen deficit rainfall. But you have to understand, roughly 50% plus of the area in the country is irrigated, has some kind of source of water.

24:10 It's only the 50% which is highly rainfall. So I mean as as we see because of the delayed rain, there has been delayed sowing, but there's also been catch up. Right? You know, farmers... Because most of our farmers, are not thousand acre, 5,000 acre farmer. They're able to quickly plant their crop. The only thing that changes is crop set. Right? So for example, this year, pulses area has gone up, but we know for sure that groundnut area in has gone down because of delayed rain. We know cotton will be planted less, but rice rice seems to be on track. So so it it varies from area to area. May certainly, initially, it was thought that maize will not be planted, but maize maize is getting planted. Some of the coarse grain, bajra and all in the marginal areas in Rajasthan might get impacted.

24:57 So it's a mixed picture. I still think that even in the worst case scenario, 90%, 95% of the crop will get planted. Clarity is yet to emerge what farmers would prefer. I mean, soybean has got plant there is in between soybean seed related challenges, but farmers did plant all those crops. So to me, crop gets established, at least on those areas, I'm sure farmers will try to protect because commodity prices are also firming up in anticipation of lower yields this year. So when it comes to volumes, do you think it will be more flattish or a marginal degrowth for the year? Because I understand that if the swing will happen, but the volumes might still take effect for the year. So for example, I mean, so it's a very difficult question to answer. Assuming including insecticide, fungicide, herbicide and on a national area basis on an average, say, three sprays are happening, and I don't know whether it's three or four or two.

25:56 I'm just giving you an example. If on an average three sprays are happening, and last year in 2030% of the area because of the weather factor, one is spray got missed, so maybe three became 2.7, right, average. Now 90% area, if that if that crop gets sprayed more for farmers to protect their crop, we might still come back to the same number. Think it will be very situational. There are years where rainfall has been low, our protection is still done well. So too early to predict. I think if you ask me this question in the middle of August, I'll be able to give you a better picture. It's too early to predict. Understood, sir. Coming to the pricing, I think this quarter we took a large pricing increase and most of our growth was price. So do you think we'll be we're to take more pricing because going forward or have we completely passed on our pricing like raw material price increases to the pharma?

26:54 So I think now focus has to be primarily be competitive in the market. I think price increase during the mid season is generally very difficult. So whatever price increases have to happen have happened. And somewhere we have been able to pass on the full cost increase, somewhere partially and somewhere none. But on an overall basis, I would think there'll be marginal positive impact from the price. Majority of the growth has to come from volume and that's where your market excellence, your ability to work with the dealers, distributors, farmers in real demand, be very agile on positioning stocks in the market, all of those factors will come to play. And as I've been talking in the past, we have been very active in that area, more active than probably would have been in the past.

27:44 Sir, I was actually referring to because we had in the last few months, we had a large pricing business of input commodities, right? Were we able to pass on, let's say, like 0.8 or one, the entire part of it or only like 80% of it? Where are we in the overall passing on level so far? So so so I mean, overall, we have tried to increase the But if you remember, I I talked about when I discussed the April result in the March. We said, look. We are the first one to increase the... Announce the price increase we did until April, was hardly any realizes in the market. But off late, the market has moved on, and price increases in I don't know, effective. It depends on the product. Having said that, will everything will translate to margin? Answer is probably no because you also have to make sure that you don't become uncompetitive in the market. We have to, at the end of the day, sell what we have produced. So will there be a price increase on overall basis? Answer is yes. Will there be more volume increase this year? Our emphasis will be to sell more and capture market there because I also believe this year might be challenging for quite a few small small players where they might have working capital issues or, you know, money to promote and be aggressive in the market, and that's where player like organized players will try to take advantage.

29:02 Got it, sir. But in terms of, like, the channel inventory, I think we have little elevated compared to last year. But how was the overall... Like, in terms of the market, how was the channel inventory so far? So channel inventory, I would say, is normalized now. It was more worrisome a month ago. I think off late, we have seen even in crops like soybean. But there's a shift, for example, there's a lesser demand for a pre emergent herbicide in soybean, but there's more demand for post emergent herbicide. So in these situations, what happens, farmers will wait. So if they have sown the seed soybean, they'll say, okay. Let me ensure that my crop emerges first, then I'll put money on the import. So this year post emergent herbicide demand is much more stronger than the preemergence. So as I said, because of the situation, mix will change.

29:50 How it will change, it will depend on the situation on the ground. But we have to be ready for all the eventualities. Understood. So but do we expect any more returns compared to last year, this year extra because of the situation or like is the returns level going to come down next this year? So return is another challenge, but I think every company including ours, there's a method by which we account for returns. This year, we would be more cautious in accounting for returns. Probably, we'll add on the... Add on accounting more rather than less. Right? Because you don't know the situation or situation you want. And there's... So there's always a formula and... Which is also there's AI driven model, customer feedback, dealer distributor feedback.

30:35 We try to factor everything. Am I provisioning enough? Answer is yes. How that enough is... How much enough that is going to be enough? I don't know. Oh, that's a similar fair understanding, sir, because it's so uncertain. You just wanna put as much progress possible. What are offtakes if it's going to offtakes? Yeah. So I mean kind of thing. We have causes about that situation certainly. Got it, sir. But you also mentioned this line of unorganized get probably consolidating. So do you think how how... Like, what kind of impact can this have to organize players? Because you mentioned working capital issues this year is going to affect them badly. So do you think the organized hit... How much do you think it will improve? So so this is the sector that suffers from oversupply. Right? So there's a slight... Less supply in the market. It helps companies improve their return metrics and everything else.

31:27 There's always more supply than the market can take. That's the reality of this market. I mean, we'll see it be it crop protection. So I don't... Think the larger challenge, we are not talking here is money getting stuck because of the fertilizer. Right? Because when fertilizer deficit, because of this war situation happened, everybody stopped fertilizers. So money went to fertilizer, and then fertilizer liquidation got delayed because of the delayed rain. As a result, obviously, every company will have a delayed offtake of crop protection product and subsequent impact on the cash flows. Got it, sir. So... But in terms of the raw material spiking, do you think it's... If you see it stabilizing and going down, or do you expect these levels to continue because crude and everything has been stabilizing? So about a month ago when the... This MOU was signed between two countries, I think things have started looking...

32:25 Things have cooled down and prices that has started trending towards norm. But the last five, seven days of development... I I mean, at this point of time, there's an end up inventory for Kariv. So nobody is panicking. As a result, it is not seen. But I think as fresh buying starts, we would see that and I have to because we're not buying a lot now. We have and we have a stock enough for the current season. It's only when Ravi procurement will start now in the month of August. You know? We will see how situation is, but I'm sure things which are directly correlated, for example, people buy cyclohexanol c nine as a solvent, that is actually linked to crude prices. People increase up and down as soon as, you know, crude prices go up and down. So is it a general trend? I I I think most of the people have stopped for the, so there's no panic at this point of time. Will it if this situation persists, will people have to pay higher price than Rabi input? The answer is yes.

33:27 Okay. So you expect the steel price to go up from here? It depends. I mean, it depends how horrible you are. Okay. But have you seen any tapering down, let's say, from the peak? Like what percentage have you They taken significantly down from the tapered down. Right now, because demand supply situation is normalized. So you don't see that spike. It's only when people go go for a stocking for next season. Things are starting there. Got it, sir. I understand competitiveness. You mentioned that we want to remain competitive and we don't want to raise the prices too much. Have you seen any new players or, like, the existing players getting more aggressive in the market now that they're becoming more competitive and they're feeling more aggressive in the market? I mean, not noticed. I think everybody has the same challenge. Everybody would like to optimize their income and profit. So I haven't seen that kind of panic moment. Can that happen?

34:21 We will see at this point of time. Generally everybody is holding on. Everybody seems to be very optimistic. Understood, sir. Thank you so much for your time. Yes. Thank you. Next question comes from the line of. Please go ahead. Yes. Thank you, sir, so much for giving me this opportunity. My question is about long term value creation. Like, the agrochemical industry is remaining quite competitive. So I wanted to know, like, few years from now, what do you believe will be Rallis India's strongest competitive advantage? So I I think our comp... So, I mean, two things. One thing is our our brand, I think, is our biggest strength, I must say.

35:18 The other thing, we we are actually working on the portfolio because brand alone will not be enough. We are not able to supply product which farmer will need at the competitive price. So our focus on R and D is much more sharper than in the past and we continue to put more effort on increasing our R and D output or collaboration efforts. You know? I think combination with these three things and really our customer outreach now more trackable with a lot of digital investment. These three core areas, as we have articulated and being a little bit more aggressive on seed as well as while in plant health, which are high margin business. I think combination of these things and being being on the top of fixed cost. I think these four, five factors should ensure that we remain competitive in the marketplace and a formidable player. And as I said, look, these businesses margins cannot be tracked on a quarter on quarter basis.

36:19 Two years ago, we said we are on that we want to deliver 500 basis point over a period of five years EBITDA margin. We are... Think we're on the track. That's how people should say that. Thank you, sir. Now talking about R and D, like Rallis has been consistently investing in R and D, product registration and the capabilities, manufacturing capabilities. Like you have taken a difficult decision of impairing certain development assets, then how do you ensure that whatever has been invested, like that gives like how do you go with the project evaluation so that every rupee invested today generates superior returns? So so I think two two things fundamentally I've talked about in the past. A, focusing on r and d. So few things we stopped doing. We said we'll not research vegetable seeds because, you know, we were not competitive. We will not invest money on GM crops.

37:20 We stopped that. So we got very focused on only doing r and d on when it comes to seed five crops. Soil and plant health business primarily was dependent on third party products. So we took a conscious choice to build capabilities in that areas. To that extent, we have started taking steps. So while we will continue to in source product from other r and d and provide them market access, but we would build our capabilities and soil and plant health segment as well because I believe that's very critical, not only for Indian agriculture, but also bringing robustness to our portfolio and offering more comprehensive solution to the farmer. And even in soil and crop protection, we actually have focused on two areas more. One is really being very sharp, laser focused, and develop... We we have... I mean, portfolio department, which has been strengthened.

38:18 We have added a layer of product development team between marketing, r and d, and sales so that we have more rigor in what we do, how we do. And then we also have put a strong b to b team, which is focusing and reaching out to global collaborators to access new products. So combination of things will ensure that we remain competent. You so much, sir. Sir, my last question, like as a shareholder, if I meet you again after three years, so what are the measurable outcomes that you would want me to see in Rallis India that would conclude that there has been some structural transformation that has happened and, like, the the... Yeah. You... That it has been transferred into a higher quality business delivering sustainable growth and superior shareholders.

39:08 Let me ask you a question. What would be your expectation three years down the line from us? Three years down the lines, I want to see Rallis as the only company that is coming to everyone's mind when we think about investing in this sector or segment. Okay. So Rallis should be top of mind is that's what I hear. Right? I mean, obviously, I mean, all what I said I am doing, that's a single aim that we should be seen as a significant player in transformation of agriculture at the same time, no delivering superior return to shareholders. I mean, that's all we are working for. And that will not come unless we manage our back end processes, well, be it R and D, product advancement, be it cost competitiveness, collaborations, manufacturing operations. So I think those are the components how part of it. Our goals are very aligned with their aspirations.

40:05 And ultimately, shareholders look for delivery of margins. Right? So we want to be a consistent company which delivers 15% plus EBITDA margin even in a bad year. So that kind of consistency and stability we want to bring in. Thank you so much, sir. Thank you so much. You. Next question comes from the line of Rajakumar Veddinati with RK Investments. Please go ahead. Good morning. Thanks for the opportunity. Can you hear me? Yes. I can hear you. Good morning. Yes. Good morning. Sir, just two questions. So the first question is this rupee depreciation, how much it has improved the competitiveness of Rallis with respect to the B2B business?

40:58 Yes. I think it's a double A, so to be honest, when you buy raw material in dollar, you also end up paying more rupees. But I think because we are a net exporter, net net it is positive for us. No. I know it's positive, but I'm asking because you are still saying that you're facing competition from Chinese. So just want to know, has it not helped you improve your competitiveness? I mean, it does on an overall basis. And that's the reason in spite of delivering lower volume on export, our profitability contribution to the business has grown. Okay. So it has added to the profitability.

41:47 Okay. So but do you see yourself bettering the competition go forward with the current rupee levels? See, I think look, so we are competing with Chinese players as well as Indian players in overseas market. So, obviously, when it comes to Indian players, I don't think our situation gets any worse. Right? With Chinese players, it is product specific. So for example, I keep saying is a problem because they have to buy raw material from the same supplier who also produces and sells to customers in Brazil and US. So I think there are one or two products that are there specifically. But otherwise, by and large, in other products, are confident. Okay.

42:34 Okay. Got it, sir. So the second question is, I want to know what is your outlook on the sugarcane and the chilli crop? And I also want to know what how much contribution you get from these two crops? So chilli is an important contributor to us, not only to us, but in general for crop protection industry. One of our product was badly impacted last year, Cluster we sell because of Chile and because commodity prices were very low. This year, Chile planting intentions are positive, even commodity prices are high. So I think this year, actually, we'll see recovery. Now sugarcane, I think it just... As of now, it... It's a crop which takes a lot of water.

43:20 Right? While planting is there, how water situation will evolve, I think is a little different. As of now, I would say, Socartin is also broadly positive. Okay. And this incrementally, will it improve your top line and sales, I mean, significantly? It should, yes. I mean the products which are specific to Chile have suffered last year. It should lead to positive sentiment. Now it is all going to happen in quarter two, so I can't really say how things will evolve. But by and large quarter two and three where Chile products go, I mean at this point of time, I have no reason not to be optimistic. Okay. Sorry to labor on the same question. So I just wonder whether so the Chili improvement Chili will it help you in terms of showing the growth on the domestic crop test segment? Yes, it should.

44:14 I mean if everything goes from here on as expected. So you will gain chilli? I it's a in every crop and it's a general answer that crop, whether crop is there or not, whether farmers have enough resources in terms of what could raise the crop or not, and then best pressure and then commodity prices. So farmers, if commodity prices are strong and they do not have any risk of not able to grow the crop, they tend to invest in the input. Got it, sir. Thank you so much. All the best. Thank you. Next question comes from the line of Rohit Nararaj with three sixty one Capital. Please go ahead.

45:00 Thanks for the opportunity. So first question is due to the shift in cotton and short duration crops, will there be any impact on the agrochemical consumption for us and generally for the industry? Thank you. So I think it depends. As I said, it's saying as it comes to, so last year, a lot of cotton was planted. I mean, certainly significantly higher than current year, and rainfalls were also very good. But then what happened, it rained a lot in the month of August and September as a result, in spite of a standing crop, farmers did not get time to spray. And then we said, okay. Insecticide business in many crops has suffered because there was a low commodity prices that farmers did not get time to conduct the operation.

45:52 Now... So five, 10% less crop with an open window to farmers, those who have already planted the proper 90% of the acre actually can nullify the impact of lower crop. I think what is important is a decent moisture environment for farmers to continue to grow crop actually might turn out to be more positive than what we think it could be in reality. The second is on the biologicals and biofertilizers. So last year it was impacted because of the ban. So prior to that, what could be the percentage of sales from biological biofertilizers in the total revenues? And will we see a material traction during the ongoing quarter and in Q1 from the biologicals perspective? I think overall, I would say, biologicals would do better than significantly better than last year.

46:53 Right. And any understanding in terms of the overall sales, what could be the contribution? So it's a smaller segment relatively, but obviously it's more profitable. I mean, for example, in quarter one, it has grown by 10%. Now this was also a quarter where crop sowing was low. So as crop sowing picks up and farmers come back to apply various micronutrients and biostimulant, biofertilizers, water soluble fertilizer. I think I expect this to certainly pick up faster than what it has done in the past because there has been a lot of positive regulatory development. As of now, we do not have any challenges of from our portfolio perspective, we're not able to sell. So it should become even more positive in my view.

47:48 Perfect. And just one last clarification in terms of the delay in monsoon, would it have any impact on the seeds production for us? And maybe for the next year season, we may have some scarcity of seeds? I mean and this is a very interesting question because I can tell you in my more than three decades of career, nobody has been able to predict the future in this. So if you remember in '24 and '25, we said we could have sold more because we were getting less seed from production, and it was happening because there was too much of rain in the month of October and November and seed harvesting getting this... Getting... Seed planting getting delayed as a result harvesting or come industries and we took the supply on time.

48:38 Last year... So so majority of the seed other than cotton gets planted in the month of October. Right? Cotton production is already in the field, and in fact, we have taken a proactive step to reduce the production acre this year because each company will carry forward cottonseed inventory, which is good enough to meet, if not all, at least 30, 40, 50% of the next year requirement. Right? So from a seed production perspective, cotton companies will not have a challenge. Now if there's a significant failure of cotton seed production in the current season, this could become a challenge, but nobody can predict. We'll only know in October, November, and December. Now all all May rise, Bajra and other crop production season begins in October, And crop comes from harvest in in the month of March and April, processed, packed and sold, some stored in the cold storage for future.

49:31 Last year monsoon ended in the month of September. As a result, there was a significant planting because the industry has suffered for last two two, three years because of the shortage of the seed. There was a lot of planting of seed crop and rains also cooperated. As a result, this year actually industry has excess production of everything. So there's enough corn, rice, everything is available. And so... But again, it is not enough to cover the next year. Again, seed companies will go for next planning season in the month of September. So if it continues to rain in the month of October, normal planting will get delayed and you get into a challenging situation. In normal course, I would say seed actually in the seed industry is sitting on the surplus this year, which should help us in better managing next season.

50:22 Next question comes from the line of Quintan Chalmat with Guruchi Associates. Hi. Am I audible? Yes. Hi. Alright. Thanks for the opportunity. So my question would be for the seed segment. So first of all, what is the position of our inventory in comparison to the last year? In addition to cotton, which crops are majorly responsible for this variance and what would be the reason for this? As I said, no inventory situation is comfortable. I would say last year our hero was cotton. This year our hero is going to be rice, maize and millet.

51:07 And hopefully mustard because oilseed prices are also covered. Mustard season will come in the month of September. This year because of the factors I explained earlier to the question, cotton is going to be subdued because not cotton did not get planted where we had very high stake with the Kutch. South And Central also cotton area is lower. And also there has been a spread of illegal HD cotton in the northern area. So cotton, I do not expect much growth as we... I mean, when I look at the year end forecast, but other crops we should grow significantly over last year. And I mean, that's the advantage of diversification in seed, soil and plant health and crop protection. One of the other thing works. So last year, cotton took us where we reached.

51:54 This year probably we'll have to rely on other crops. Right. So could I ask which crops are leading to be higher inventory versus last year? Cotton primary. In inventory side. Cotton. I mean, everybody had planned for the production and planting got delayed. Not only delayed, also reduced. And then an illegal HTBT cotton came in the market. Other crops are on similar lines of inventory? So other crops have a... So sometimes, I mean, in rice and corn, some extra inventory is a good problem to have. All right. And sir, second question was with EBITDA margin in seed business has gone up from 26% to 30. So what are the key factors that drove this improvement?

52:43 So I think a key factor really is the mix change. So what happens, cotton, because of the government price control, margins are always lower. Whereas, margins on rice, maize and millet are higher. So when proportion of these products go up relative to cotton margins improve. So those are the it's basically product mix. Product mix. Right. And so how do we compare the need of this year as compared to the earlier year? So productivity wise, I don't also I mean, we can get you the details, but I think this year the challenge at the time of harvest happened was that because of gas, so all seed which gets harvested has to be gas dry, and majority of the drying capacity is located in around Hyderabad and seed intake starts coming in from the month of March.

53:35 When war begin in the month of end of February, those are suddenly gas crisis, if some of you remember, right, including domestic and industrial. As a result, gas was not available and farmers are harvesting crop and saying take away your crop. So we had to actually do what we call pad drying, what we call open field drying of the seed, not only as many companies because they have seed capacity was not available. And harvest was much bigger than the previous year to the extent of 50% in some crop. So while yield was higher, but that may not translate to cost benefit because when you dry the seed in open field, your recovery is less. So whatever gains came from the yield improvement probably got neutralized by the cost of extra drying in the field as well as lesser recovery. So we haven't done that math. I think that seasonal work is still in progress. We would be probably able to give you more clarity maybe later.

54:33 Maybe you can send an email to say we can provide a greater clarity, but we are still working out those numbers. I mean, as soon as harvest comes out, primary focus becomes on whatever is recovered, please process, pack and sell and send to the market. So what has happened, we don't worry. The post mortem and analysis is done later on. Sure. Just one last question, Seed business has grown well this quarter. I believe earlier you mentioned this was led by price improvement. The cost So of this cotton, there's a volume drop, but there's a price price price as well as some marginal improvement, some improvement in the volumes of rice, maize, millet. Okay. And what about the price improvement, sir?

55:21 So if you look at the mix, I think we have about 6% overall improvement. I would say a lot of it is actually driven by price. All right. Will be all from my side. Thank you so much. Next question comes from the line of Abhijit Kaila with Kotak Securities. Sir, there's a 35 crore provision reversal within employee cost, I believe, this quarter, which is shown in footnote six. Adjusted for that, the employee cost would be INR 87 crores, which is up quite sharply both year on year and sequentially. So if you could please just help us understand what the reason for that is as well as the sharp increase in other expenses as well that we see this quarter? Yes. I'll ask Bhaskar to give you the details. Yes. Yes.

56:19 As far as the INR 35 crores number is concerned, 10 crores of that would be more only q four of last year versus q one difference. But like to like quarter June last year versus this, it's not a different ITB. Okay? So that leaves us only with INR 24 crores, which is more a onetime correction only of this year. This is not likely to repeat at all. Sorry, just to clarify, you said the year on year difference is INR 34 crores because of the provision reversal? INR 35 crores is the number, right, out of that? Around INR 10 crores to 11 crores is a difference, which was there in like to like quarter last quarter as well as last June as well as this June. So we do not need to take that for comparison because it it happens every year.

57:12 But 24 crores is a onetime thing, which is specific for this year, can say, but this is not likely to repeat in any other quarter. This a onetime thing which is happening. That's it. I see. So it had Yeah. Exactly. So the increase in the cost would be around 12%, which is normally an inflation, which always happens year on year. Okay. Okay. So 1Q of every year tends to have some of these items which don't recur in the other quarters? Yes, exactly. Exactly. Okay. Understood. And how about the other expenses? Those are up by about 13%, 14%. Is that also fairly normal? See, in certain cases, we have had a certain onetime cost, which also may not be repetitive.

58:00 But then, yes, these costs are there. Okay. And this INR 35 crore provision reversal, if you could please just help us understand what exactly this item is related to? As I mentioned, about INR 11 crores is more about the performance incentive, right, at the year end when we see what is to be given. So we understand what is to be given and then what is not given is reversed in the first quarter because the payouts happened during the first quarter. So any provision difference is settled in the first quarter. And this is this is more a recurring thing you can say. This would be happening in every q one of, you know, every year. However, the balance 24 crores, what is there as a reversal, that's more to do with the certain restructuring and the retirement stuff, which doesn't happen in every year, actually.

58:47 All right. Thank you so much. And so for Mr. Shukla, just one question here. Sir, if I heard you correctly in your opening remarks, I think you mentioned that for the crop protection domestic market, you're expecting or rather the industry is expected to grow at 6% to 8% this year and seed somewhere in the mid- to high single digits. So is are those is that really a reasonable estimate for the year ahead? Mid high minus cotton. Sorry, mid to high minus cotton. Yes. Cotton, you have to exclude from the corn season. Cotton is a challenging year. Right, right. But agrochemicals, still think 6%, 8% is possible for the year despite the Because I think, I mean, price increase will be a reality, right? So it's quite fair to assume because that's the average cost input cost increase unless really it becomes so competitive, so much of inventory in the market that people resort to unnecessary discounting.

59:42 At this point of time, I haven't seen any panic in the market. That means demand supply is probably fairly balanced. So the prices increase alone so take care of that 6% to 8% growth. Understood, sir. And just one last thing, is there a spillover of sales for either of our businesses for production or seeds from 1Q to 2Q? Actually, are very careful because I mean the way we close our years, we try to... I mean, the only thing happens is sometimes return provisions. Right? Because that is very, very difficult to estimate what we have sold in the month of, say, March. Now when you relook at... Also other than, I mean, some here and there adjustment, we are very calibrated and careful about what we say and what we deliver.

1:00:30 I mean, there'll always be some, it'll be part of the normal course of business. Okay, sir. Thank you so much and wish you all the best. Thank you. Thank you. Next question comes from the line of Himani Badatia with ICIC Financial. Please go ahead. Hi, sir. Thank you for taking up my question. Yes. So you mentioned in the opening remarks that the working capital, it has increased on the industry wide. So just wanted to understand what is the working capital that we have at Rallis this year in the June versus last year in number of days? So... Okay. Yeah. First, go ahead. Yeah. So working capital, net to net, you know, it is kind of increased by around, you know, fifteen to twenty day.

1:01:21 Okay. So so so... Yeah. So if you ask me the reason, the reason is more like, you know, the fertilizer availability, the shortage which was there, people clocked to buy that and book that actually. So farmers had blocked their cash first into the fertilizer. So that... That's when they have rationing issues for the other other inputs which they need to spend on. So it's pretty much the same, you know, situation for most of the people in this industry. Okay. Sir, the next question that I wanted to understand was, so so mentioned on the sales return side that it is difficult to predict what could be the sales return or it is an industry wide phenomenon because the... While we have placed it...

1:02:09 We have placed the... In the... Into the channel, it is not very clear as to... They can have a 100% liquidation of the same. So until July 21, as we are sitting today, have you seen any sales return until now? So so so... Yes. I mean, we do. For example, cottonseed for North India would have taken back in the quarter one itself. Right? So it is crop specific, product specific. Now for crop pixel, I think majority of the returns will not happen by June. But whatever was... Maybe we supplied for a busy season, I know, before December quarter, and that does not get sold and there's no opportunity in the March quarter, there's no opportunity to sell in. Curry will obviously be taken back. So it's it's product crop specific.

1:02:54 All the pre emergence herbicide business for rice, soybean, ground nuts, so that kind of thing will be taken back in this quarter. So it it it changes from crop to crop and product category to category. But it again is a very normal normal thing because there's no point in, you know, leaving product which is not going to be consumed and unnecessary having receivables on the book. Right. Also, sir, one last thing. You also mentioned on the capacity utilization that it has slightly increased from the last year. So could you just help us with what is the levels current year versus last year? And also the kind of CapEx that we have had in the past, what is the incremental sales that we are getting from that? So I think this is not a detailed question. I would ask to know, Sharjeev, to get back to you with the detail because there are multiple plans we have.

1:03:43 This plan is specific, product is specific. He can provide them detail... Detailed version of it. Okay. Awesome. Thank you. Thank you. Next question comes from the line of Riju with Antik Stockbroken. Please go ahead. Yes. Hi, sir. Thanks for the opportunity. First question regarding the some of the media reports suggest that in North India, especially for the CADI cost, farmers are doing the sowing. So so what can... Like, how that can impact in terms of boost emerging herbicides, premiums and and if we have any portfolio, like, if if we have any strong product there, like, how do you see that that that opportunity in this season?

1:04:33 So so as a thumb rule, when farmers move from transplanted rice to direct shared rice, heated rice, consumption of both pre emergence, early post and post emergence increases. So your question is, do we have a portfolio? Yes. And we are launching new products. Even this year, we have launched a new rise of beside including we have started participating by licensing a direct seeded rise technology and we have already sold on a pilot basis some quantity in particularly in Chattipur region. So yes, we are participating in that segment. We're adding product. But do we have any kind of existing product that can existing or strong brand that can take the opportunity or, like, growing the segment since up till now, I would say, revenue was not that much, you know, strong this year. Yeah. So two years ago, I said that, look, our herbicide is our weakness, and we have started adding products.

1:05:41 But as we speak this year, if you say this quarter, just this quarter, actually, herbicide is the largest contributor followed by insecticide and fungicide. And our herbicide business has grown by 12%. Okay. Okay. Understood. Understood. And sir, in terms of second question, I think in 4Q, you have mentioned that we are like we have done some fee buying for the inputs or inputs material in the month of February, early March and September of 05/05. So was there any kind of a positive impact that we have recorded this quarter and if you could quantify the same?

1:06:30 So, I mean, you're right that we did say and we did procure, started procuring inventory because when war started, nobody had a clarity where it is heading and prices were going up every day. So we had to secure inventory for career season, so we did that. And as a result, you know, at the end of the day how season will end, I I must say, at the end of the season, I'll be able to give you a clear answer what was our best weighted average. So this... Something you would have bought lower and again at a high price and all, and then prices have stabilized. And I think now prices might again start coming up again given the worst situation. So yes, I think we do track what is my weighted price increase. And at that point of time, because we had a cash, we were also able to negotiate better discount. I think overall, it should have positive impact.

1:07:22 And also, one last thing I would like to clarify with you that we have seen some of the price hike in the month of March to May, maybe 15%, 20% kind of pricing that we have seen in the channel. So how that scenario to look at prices in the month of March or May and in the month of June? What will be the like how much will be that price hike already there in the system? And how much you have to take it back in terms of like due to the lower consumption? And also, how was the generic product import during those periods because of increasing prices? So I would say price and volume is always what you call is always seen in combination depending on how much you want to sell and what you want to sell.

1:08:22 While... So when we started buying product at a higher price, we also were the... Probably one of the first few to go and increase the price. Price increase was not accepted by the market till really May end. It is really in the June when a lot of material already stopped maybe prior to March quarter got liquidated. Price acceptance, reality of price increase became a reality. But I think for us, what I believe is that it's a combination of when we report the number is a combination of volume as well as price, which is helping us. So just to give you a sense that...

1:09:07 So whatever you sold in quarter one probably is also added carry over from the previous low season prices. They were difficult to estimate. But given the challenges in the season, our priority will remain to strike a fine balance between volume and price, but give a precedence to volume if you have to make it up the season. Understood. And sir, in terms of the imports of generic products by the trader and what about the actual inventory by the importers of generics? So I think it's normal. Initially, it looked like they may not be very active, but a delayed monsoon also gave them opportunity, you some extra time. So at this point of time, I I wouldn't say industry is sitting with very high inventory. City in... Industry is sitting with the normal inventory.

1:10:01 And if things go as per the plan, I think we'll be... I mean I mean, if season cooperates, I think we might be in a decent... Might end up in a very decent situation as well. Understood. Understood. And and, sir, I think I think you have you have clarified in terms of crop sheet and and and all. So if I still look at in terms of maize price and cotton price, so over the last one year period, I think May's price is continuing to trade at a lower level from a PMS field and still getting at a lower level across the Monday. So in the cotton prices have seen roughly around 40, 50% jump over last year period. So how do you see how do you see in terms of profit in in in this season or maybe in next season?

1:10:48 And if if if there is no, like like, there is not enough profit visible from from maize to other crops. So what is the reason that farmers still, you know, sticking towards the maize crops? And if if cotton nickels are are are are going up in that scenario, how do you see the consumption of agrochemical product? So so so as a thumb rule, farmers... So so if you are, say, sitting in with the region, right, you have only two choices. Either you can grow cotton or you can grow soybean in whatever they will not grow normally corn. Right?

1:11:34 Because that these two crops are... So sorry. It is it is cotton or soybean. Now depending on the rainfall situation, they can switch. Right? Now the switch could also be combination of rainfall and commodities. But if they end up planting more of soybean, there's going to be increased consumption of herbicide and less consumption of insecticide and fungicide. If they end up planting cotton, there may be reduced use of herbicide, but insecticide and insecticide will be sitting on the top, maybe 60, 70%, even fungicide might be lower. So I think situation is evolving. What we know that cotton has gone down, soybean and maize has gone up, pulses have gone up. But again, in pulses, they end up planting other than move it's a short duration crop, lesser sprays. If they end up planting two or there's a long duration crop, more sprays. So I think I can give you a general principle how farmer operates.

1:12:28 It's very... And even if there's a long duration crop, pest pressure is lower like last year, too much of rain farmers will display. So how things in world is very, very difficult to say. Understood. Understood. Thanks. Thanks, sir. I think that's all from my end. Yeah. Thank you. Ladies and gentlemen, we take that as the last question and conclude the question and answer session on behalf of Rallis India Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines.