Rallis India (NSE:RALLIS) Q2 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to Rallis India Limited Q2 and H1 FY 'twenty seven Earnings Conference Call. We have with us today Doctor. Gyanindra Shukla, Managing Director and CEO and Mr. Bhaskar Swaminathan, Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the results presentation. Please note that this conference is being recorded. 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. I now hand the conference over to Doctor.

0:54 Gyaninder Shukla. Thank you, and over to you, doctor Shukla. Thank you. Good morning, everyone, for joining us today for Rallis India Limited q two and h one fiscal year twenty seven earnings call. As mentioned, I have alongside with me our CFO, mister. Good morning. Let me begin the discussion by pitching into the industry landscape initially, post which I'll discuss Rallis specific developments. Domestic market, India's first... India's agreed input sector faced significant headwind during the '26... I mean, this ongoing Kharif season is just getting concluded amid deficient and erratic rainfall.

1:39 There are a lot of crop exchanges, subdued farm economics, and heightened competitive intensity. Moisture stress across agriculture states like Maharashtra, Andhra, Karnataka, Telangana, parts of Punjab, and Haryana affected crop prospects for paddy, soybean, maize, cotton, and pulses. Weighing on demands for herbicide, fungicide, and insecticides and seed treatment products. Softer product prices, higher trade discounts, and channel inventory pressure further constrained fresh purchases. Consequently, domestic demand recovery is likely to renew... Remain uneven contingent on the crop condition, irrigation availability, and revival of farm... Farmer profitability. On on global markets, commodity prices and margin, since April 2026, global agricultural market have experienced commodity prices amid the weather related supply risk and geopolitical disruptions.

2:35 In September, that PO... FAO food price index rose 1.4... 5% month on month, while its cereal price index has increased by 5.1% driven by higher wheat and maize prices amid Black Sea logistical... Sea logistical disruptions that was that was weather conditions. Vegetable oil and sugar prices also strengthened on the back of import demand, weather cons... Weather concerns and production uncertainties across key producing reasons. Although global serial production is forecasted to decline in 2026, the projected harvest remains the second largest on record indicating tighter supply condition rather than a wide spread shortage. The Middle East Crisis has heightened energy and freight cost increasing pressure on agrochemical manufacturers, input cost and margins.

3:26 The firmer crop prices could support farm economics and agrochemical demand. The benefits may be offset by affordability constraints, competitive pricing, and cost in... Process channel replenishment keeping the sector's recovery uneven. The global agriculture sector is expected to expand over the medium term supported by rising food demand, productivity improvements, and agriculture intensification. So ECDFAO projects global agriculture production value to increase by 13% by 2035 with Asia, Sub Saharan Africa, and Latin America emerging as key growth reasons. Latin America remains strategically important given its substantial soybean, maize, and cotton acres. While North America and Europe are mature input intensive markets, the global crop protection market is estimated at US 70,000,000,000 in 2026.

4:19 Although growth will remain sensitive to farm farm economics, weather regulation, and product affordability. For Indian exporters, favorable currency movements may support rupee realizations, but sustained volume recovery remains critical. International sales may also face pressure from subdued channel demand, distributes... Due to distributor resistance, weather related disturbance... Disruptions and heat waves in Europe, which have affected crop conditions and input application patterns. For Indian companies, the key indicator to monitor are active ingredients and intermediate prices, freight rate, rupee moments, export order volumes, channel inventories, and farmer affordability. Recent UN and international agency assessment also warned that prolonged shipping disruptions could affect crop yield and food prices into 2027.

5:08 For the agrochemical industry, broader firmer crop prices can improve farm economics and support demand for herbicide, insecticide, and fungicide, particularly in export oriented agricultural regions. However, higher crude oil, energy and freight and input cost may put pressure on manufacturers' margin, while elevated fertilizer cost would constrain farmers' overall input spending. The outlook is therefore cautiously constructive companies with strong distribution network, differentiated products, efficient manufacturing and disciplined cost management are in better position to benefit. A sustained recovery in agrochemical demand will ultimately depend on the persistence of higher crop prices, improved farm economics and recovery in channel inventory purchase... Purchasing activity.

5:54 As far as Ravi outlook is concerned, the outlook remains sensitive to winter rainfall, soil moisture and irrigation availability. IMD's Northern Northeast monsoon forecast of 80 to a 112% of the long term period average is relevant to Southern Peninsula India, but does not guarantee adequate rainfall across the country. Major reservoirs held approximately 70% of the capacity below ten year average of 76%. With the southern region facing relatively greater irrigation concerns, these conditions could influence rugby acreage, crop yield, and farmer spending, particularly in water stressed areas. The crop yield and farm... The the government's Rabi MSP MSP increases for 2728 range from point 97% for wheat to 10.3% for safflower and mustard rising, 6.6% and until 5.5%.

6:52 While higher MSPs provide a measure of price support, actual farm return will depend on yield market prices and procurement. Moving to Rallis specific developments. We had a muted q two performance on the back of insufficient rainfall in the key agrochemical consuming states like Punjab, Haryana, Maharashtra, Andhra, Karnataka, Telangana, etcetera. Our quarterly revenue stood at $8.58 crore versus $8.61 crore of q two of previous year. Overall EBITDA for q two, fiscal year twenty seven stood at $1.26 crore, lower by 18% compared to q two of the previous year. Profit after tax at 85 crore versus $10.02 crore of quarter two of fiscal year twenty six, which is 17% lower.

7:38 Approximately 43% of India received 19% efficient rate in comparison to the long term long period average this monsoon season, which delayed the Khari sowing. It resulted in slower liquidation and high carry forward inventory due to prolonged geopolitical situation channel. Farmers prioritize the stocking for fertilizer rather than agrochemical. Fertilizers availability had been a concern due to logistical challenge. We'll talk about new initiatives and launches. During the quarter quarter, we launched four new crop care products, namely Silentra, which is an insecticide, Marcellus, a fungicide, Blytox supper, a fungicide, Trinage, a herbicide. We have altogether launched nine new products during fiscal year twenty seven across categories. In seed business, we have launched six new product across vegetable cotton base in the quarter two of fiscal year twenty seven, which takes the overall tally to 15 new products in fiscal year twenty seven, which includes cotton hybrids for North India, herbicide tolerant seed rice introduced under brand.

8:45 Digital marketing interventions continue to promote products through 101 scheme, farmer QR code reward schemes, enhancement in subpart plus and application. On a one that 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 of September 26 ended has crossed 60,000 including seed and common retailers. Farmer QR post project help in... Helps in better product knowledge sharing with farmers. This helps in strengthening retail farmer royalty program, sales traceability, and return tracking. On it, our initiative, Sampark Plus, continues to capture common level demand signal to generate actionable insight and improve sales conversion.

9:34 We have reached 4.23 lakh farmers in Sampark Plus through regular engagement and social media post. We had launched idea to impact innovation platform in q four of fiscal year twenty six to establish an an open innovation ecosystem to ensure... Secure, validate, and commercialize agree innovations. Till now, we have received encouraging participation of 42 applications out of which two are in pilot stage and 20 are... 28 are under review. SeatShore application enhances visibility and traceability of farm level operations and improves data availability for decision making. We're developing seeds to your two version, which will be high performing, future ready, and more cost effective. We're also coming with new r and d center in Navi, Mumbai for which onboarding of various consultants on project as well as government licensing has been completed. The project is running as per the plan and likely to be commissioned by April 27.

10:29 We are accelerating the launch pipeline for proprietary research led varieties and high yield potential. Our long term priorities include strengthening customer centricity, softening portfolio choices, accelerating new product launches, expanding strategic alliances and farmer reach, and leveraging digitalization to enhance operational efficiency and drive sustainable growth. That includes my opening remarks. I will now hand over to Mr. Vascar, our CFO for the... For a detailed analysis of financial situation. Over to you, Vascar. Thank you, doctor Rallis Good morning, everyone, and thank you for joining us today for our q two and h one FY twenty seven earnings call. I'll walk you through financial performance for the quarter and half year, post which we shall commence the q and a session. Starting with the top line for the quarter, our q two FY twenty seven revenue stood at rupees $8.58 crore as against rupees $8.61 crore for the same period last year, resulting in an overall flat growth kind of.

11:26 Pricing growth of 5% was offset by similar volume degrowth. Overall EBITDA for q two FY twenty seven stood at rupees $1.26 crore, lowered by 18% compared to rupees $1.54 crore in q two of the previous year. Profit after tax stood at rupees 85 crore versus $10.02 crore of q two FY twenty six, which is 17% lower than the same quarter of previous year. Crop care revenue grew by 4% to $7.88 crore in q two f y twenty seven from $7.60 crore in q two f y twenty six due to 6% price growth. EBITDA decreased by 2% to $1.26 crore in q two f y twenty seven from $1.29 crore in q two f y twenty six. That increased by 1% to 88 crore.

12:19 Crop production degrew by 3% and registered q two FY twenty seven revenue of $4.57 crore vis a vis $4.74 crore in q two FY twenty six, which was tracked by volume degrowth of 7%. Soil, plant, and health grew by 22% to rupee 72 crore in q two FY twenty seven from rupees 61 crore in q two FY twenty six, driven by price growth of 15% and volume growth of 7%. Demand for inorganic manure increased due to short availability of traditional fertilizers and import dependent raw materials. Going to institutional category, total b two b revenue stood at rupees $2.32 crore vis a vis $1.98 crore in q two f y twenty six, a growth of 17% primarily due to eight percent volume growth and 9% price growth.

13:12 Exports grew by 2.5% to $1.65 crore. There was lower demand for pentamethasone AI in Europe coupled with pricing challenges from China market. We also witnessed constrained availability of raw material partly due to supply chain disruption and prioritized allocation to India b to c crop production business, which impacted volumes of select products. Example,. There are also delays and uncertainty in shipping time lines due to port condition and logistical challenges. CSM q two revenue displayed promising growth by lodging 12 times growth compared to the last year, talking a revenue of 27 growth this time, driven by a rebound in PEKK sales volumes.

13:59 The one thing b two b grew by 11% to 39 in q two, f point twenty seven on a base of 33 crore of q two of previous year. Moving to seeds. Seeds revenue due... Degrew by 31% to 70 crore in q two compared to 101 crore of last year q two FY twenty six. This was mainly due to 26% volume decline. EBITDA decreased almost to zero in q two twenty seven from 25 crore of last year. Fat decreased to negative 4 crore from 16 crore of last year in the same quarter. Placement of millet, mustard, maize, and vegetable seeds were as the plan, but the acreages of barley and cotton declined due to lack of water leading to lower placement.

14:50 On a positive note, North Cotton Farmers reported higher productivity coupled with healthy prices, strengthening confidence for future seeder option and cotton cultivation. For the RAPI seed production cycle, active planning and organizing engagements are underway for pearl millet, paddy, maid, and sunflower. Coming to h y perform... H one performance. Total h one... F y twenty seven revenue stood at thousand 880 crore versus thousand 818 crore of h y f y twenty six last year. The 13 in growth of 3%. Cropped in h one twenty seven revenue clocked rupees $14.85 growth versus fourteen twelve growth of h one last year, resulting in growth of 5%, primarily led by price growth.

15:43 Seed revenues... H one revenues stood at rupees $3.95 crores versus 406 crore of last year, resulting in a degrowth of 3% occurring due to volume decline of six HVA 27 EBITDA stood at rupees 311 crores versus 304 crores of h one last year, resulting in growth of 2%. And h one PAT of f a twenty seven stood at 210 crores versus $1.97 crore of h one of last year, resulting in growth of 6%. We are focused on accelerating priority brand growth through shopper market execution, targeted production... Product promotion, and enhanced digital.

16:31 So it's it's digital engagement with farmers and channel partners. In crop care, key priorities include strengthening the go to market strategy, expanding customer reach, optimizing the product portfolio, and improving sales productivity through territory rationalization and cost efficiency. Digital engagement, customer feedback, and data rate market development will further strengthen channel effectiveness, deepen market penetration, and drive sustainable revenue growth and profitability. In seeds, our primary focus will be on five strategy crops as mentioned earlier, cotton, maize, millet, mustard, and rice. A selective and concentrated approach in these crops is expected to drive operational scale and efficiency. Overall, we remain disciplined in improving capital efficiency across both fixed capital and working capital.

17:22 At quarter end, our inventory levels remain elevated in comparison to the same quarter of last year. We expect capacity utilization to remain broadly stable with growth driven by improved product mix, operational efficiencies, and higher value product offering. We have cash liquid balance of about 211 crores as of 09/30/2026. That concludes our opening remarks. We can now commence q and a session. Thank you. Thank you very much. We will now begin with the question and answer session. The The first question is from the line of Rohit Nagaraj from three sixty one Capital Limited.

18:22 First question is in terms of the sales returns. So have we accounted for the entire sales returns during the quarter? Or will there be some sales returns will be coming in Q3? And then a light question in terms of your perspective on how the channel inventories are currently? And will that have any repercussions on the Rabi as well? So as far as sales return are concerned, all the Khareed related sales return for majority of the market are completed. There might be instances in certain crops where crop does not... Kharif crop does not terminate by September based on the numbers we follow. So for example, Cross Lake cotton or in South where rice planting was delayed even to August.

19:20 Barring those areas, wherever, you know, season is over, it is over for us, and we have accounted for the returns, and we have taken provisions for remainder of the market as well. Right. And any thoughts on channel inventory, sir? So channel inventory, think... So first of all, we are not flooding the channel. We have taken a very conscious effort this year because this year, given there was a highly uneven rainfall distribution, we have gone with the more market based approach, only place the product in the markets where there's a demand, water situation is certain. So it's not a uniform placement everywhere. I I think channel in inventory is only there to the extent it is needed to either conclude Khari season or beginning of the Rabi season.

20:12 So there's no extra channel inventory. Perfect. Second question is on the seeds part. So given that monsoon has been lower, how are we placed for seeds availability for the twenty twenty seven-twenty season? And will there be any possibility of pricing improvement for next year on the seed start? Thank you. So seed, I think last year, if some of you remember, last year, there was a very good production of the seed because rains had terminated on time and seed season... Seed production season starts from October all the way to March. And because this year, seed season has been soft, I think, you know, we have a decent amount of inventory to carry forward and cater to the oncoming season.

21:06 Ability to increase prices will depend on how the monsoon forecast and sentiments build up for the next year. I think based on what I see today, India has never seen two consecutive months in failure. So I'm I'm... I wish, and I hope that monsoon will be returning to the normal. Of course, there's a there's a subdued, what do call, rainfall forecast for January, February month, which means in the areas where water scarcity is there and rainfall was expected, that area will continue to suffer. But wherever there's an opportunity and commodity prices are high and product competitive competitiveness there from our side, we'll certainly try to see price increases can happen. The only crop price increases are not possible is cotton because it is capped by the government.

21:58 Right. Thanks and all the best, sir. Thank you. Yes. Thank you. The next question is from the line of Rashant Biani from Lara Securities Private Limited. Please go ahead. Yes. Thank you for the opportunity. Sir, what explains the inflated inventory this time versus H versus at the end of H1 last year? If you can explain that, it is more relating to raw material or finished products. So it is a combination of things. I think one thing is that when war begin, I know everybody was inventory... Was trying to get the inventory so that when it season turns out to be normal, are in the position to supply.

22:49 So it need not necessarily be volume. It could be some of the higher price at which we would have procured the inventory. And it is a combination of inventory of seed as well as crop protection. I think seed inventory this year is more elevated compared to crop protection. But I think all the seed which we have in our inventory is fresh seed, which was harvested in the March, April 2026. So it's all good inventory. But, yes, because season did not turn out the way, you know, for example, cotton cotton, North India did not get planted. Other thing happened is that cotton areas shrank on the top of that. There's a lot of illegal seeds which proliferated. But other crop, I think inventory is normal.

23:38 And kind of a a of higher inventory would also be leading to higher price of raw material. Is that So in... On chemical side, yes, some of the inventory we are procuring comes at a higher price. Now this year in the beginning of the season, we did try to pass out some of the cost increases to the customer, but season did not take off as expected. In fact, demand went down. As a result, it it became unrealistic to hold on to the cost increase which we are trying to pass on. Sir, how is your initial estimate of demand patterns for q three? So Q3, I think if you say North and East, if you go Indo Gangetic Belt all the way to the East, East potato there's a challenge right now because see earlier we were able to export lot of potatoes and all to Bangladesh that has stopped.

24:38 As a result, know potato prices are low, but wheat is going to be normal given that commodity prices are low. Rice, I think certain areas in South, probably in Telangana and all where water is not available, rice may go down. Maze area is expected to be normal. But there are lot of Maze area in the central part of India where it used to be dependent on water storage, I think that is going to be challenging. I think the silver line I would say is that while area will remain challenging, but because commodity prices are higher, wherever crop is there, farmers will try to use input to protect and maximize their income and return. What has not turned out well this year is chili crop because chili prices are very high. But unfortunately, in the chili growing area, water situation, particularly in Andhra, is not that good.

25:35 Sir, for North, in particular, how is the herbicide demand pre emergent, and how do you anticipate fungicide demand to be? So fungicide, we will come to know later. I mean, maybe it's a story for December, January, I don't know, February quarter four. At this point of time, herbicide demand is strong, but there is a there is a pressure on prices. Okay. And sir, just lastly, what kind of liquidation growth or decline would you say you saw for your portfolio in Kharif? And how much would be the same for industry? So difficult to say as a unit for the industry, but all I can tell you, we had a very strong growth in insecticide.

26:26 We also had a good growth in herbicide, fungicide segment which suffered with when there's low moisture, you know, and fungal diseases are low. We we had a a good margin uptick in soil and plant health business. We have been able to improve our margin on the seed business while the volumes are lower. So overall, I think it depends on the company and portfolio. The products we launched as new product this year, they have contributed well. New product launches have gone quite well, both particularly on insecticide, fungicide, and herbicide. So from a strategy perspective, what we are saying, our strategy seems to be working and on track. Obviously, we are an agriculture and when this war... I know it's kind of double event happening in a very short period.

27:16 You you you you start the war. The war has started, and within three months, we had a bad news on the rain. And that turned out to be actually worse than what people expected. Correct. Okay, sir. Thank you so much. Thank you. The next question is from the line of from Equius Capital Private Limited. Go ahead. Oh, hi, sir. So first, just on the cotton market, can you give us a sense of what is the kind of eligibility that have come into the market this year? And how much of the overall market size for this year? So so we do a very simple math. I think cotton at the peak had reached to almost 13,000,000 hectares, 12.8. It has come down to about 10, 10 and a half million hectares. So in in progressively, cotton area has come down by 20, 25%.

28:12 On the top of that, on the area which is getting planted and industry estimate is that roughly 25 to 30% of the seeds. So if you said 10,000,000 hectare is where seed gets planted, and on average, farmers are using either two packets equivalent, that that amounts roughly five crore packets. So the five crore, if you take 25 to 30% out as a illegal, then you are left with roughly 3.5 crore package. So that's a big shrinkage where legal packages used to be sold on 5.25 crore package is down to 3.5. Now two things will happen. So I I think what we have to see how illegal will perform and whether that area will continue to grow this year or it will shrink shrink and then again will be recovery of the legal product and and the cotton acreages.

29:03 I think cotton acreages in my view will rebound because cotton prices are very attractive. And... But again, at the time of planting, farmer makes the season based on the related pricing of soybean cotton in May. So that is very too early to forecast. But, yes, cotton has been one of the most challenging crop from a seed perspective. For us, came from North North India planting had actually significantly reduced, and it was very, very difficult to say why it happened. But later on, it turned out that it was... Because farmers are not able to get good harvest because of control and the top of on the top of that, government was not able to release water on time for the cotton planting because all the North Indian cotton is dependent on release of canal water by the government.

29:55 So cotton, I I think if you say from a peak legal illegal packets, it is down to almost 30, 35%. And what would be our market share in cotton currently? Maybe last two, three years. Have we lost any market share to other legal fees? So I would say we have actually held on because our volumes are marginally down compared to last year, and market has run so much. Even in North India, in spite of... So while our number of packets sold would have got reduced, but we have gained market share in North America. Oh, got it. So secondly, in terms of the sales sowing, so this year, we will be going for a crop already given that we have inventory or we will build up some more further inventory? So so some production will need to take place because if if you say last two, three years, I was saying I didn't have enough seed because then planting happens by the time harvest happens. You know, planting demand already starts in the planting area, so we were not able to supply.

30:58 This year... Last year when we went for production, we had deliberately planned for some surplus inventory to bring it to a level where at least when you start the season, you're not waiting for the fresh crop harvest. You you are producing about 30 to 50% of inventory of the following year in advance. Right? Okay. So we are we are back to normal inventory cycle. I think while it looks elevated, but it... It's not an... It's not the right comparison because last two years, had a bad inventory situation. Right? So we would be... I I think going forward, our aim would be to carry forward, particularly in crops like maize, rice, and all 150% of the requirement. Because then you... When you start the following season, you you have opening inventory.

31:44 And and now I think in some props, you might have more than 150% because this production also was very high. As a result, we will slow down. Doesn't mean... New launches, for example, you'd have to produce. Some of the new product launches we made last year where we did not produce lot of inventory because you won't see the initial power response. So at a gross level, we'll still produce something, but it may not be the same product. But it'll not be same as previous years. Got it. Alright. Thank you so much. Yeah. Significantly reduced area. Thank you. The next question is from the line of Raju from Anti Stock Broking Limited. Please go ahead.

32:30 Hi, sir. Thanks for the opportunity, sir. Just wanted to get a sense that how much of our revenue is coming from the Southern States,, and So I will not be able to give you a state by breakup right away, but we will get back to you. I think our... We we have divided the country into something called India one and India two. I will get back to you with the detailed breakup. Yeah. Okay, sir. No problem. And and, sir, in terms of the export revenue, so if we, you know, exclude the CSM segment and if we look at our export business, building the b two b segment for the city. So in the h one number versus the last one h... Last year h one, so the growth has been, you know, in the negative side. So what explains that apart from the apart from the issues that that are facing in the Europe market and the Latin market? So if you could explain that.

33:34 So so two things happen, and it's very, very complicated because you're running the business. You're always, you know, trying to see what is right for the company and for the customer. So when war has started, nobody was sure of whether they will... We will be... Any company will be able to provide enough product to domestic market because by then, this Al Nino situation was not clear that how bad or good it... That it would be. So when when it came to making a decision export versus domestic, I think we were trying to balance between making sure enough enough product is available of domestic market at the same time optimizing margins and keeping customers outside also very happy.

34:19 So part of the degrowth in the export market was deliberate, and we use that as an opportunity to improve the margin. As a result, our margins have not shrunk as much in export market as much as volume. So it was more trying to manage the situation then. I don't think we have lost significant customers. In fact, we have added customers, and we have added new products also in the export market. Understood. So, sir, my follow-up question is to be exports only. So, how do you see the H2E spending given the higher freight costs and and the the challenging environment in the in the in the. So how do you see the growth there in the exposed market?

35:04 So I I think a lot will depend on how this war plays out because I can tell you all of us, you know, compete with China. And China supply chain to America is much closer and much more straightforward than us supplying from India because our products cannot now pass through you know, and also they have to go around. As a result, our cost of freight, cost of insurance, time taken, availability of container, everything is a challenge. So think to to your question, how do we see going forward? I think there are dedicated customers. You know? We will continue to serve them. We're also trying to follow-up with them more aggressively to get orders early so that we can bridge some of the extra lead time we need.

35:53 Having said that, it's a very dynamic environment. Not only for export, even importing raw material or container availability, delay shipment. So a lot of things are linked. For some certain export product, I also need a critical raw material which might which might be coming from import. So so so I think overall, I would say that there are two to three weeks, sometimes four weeks cumulative delay in the supply chain. Understood, sir. And one last thing, I think, in the in the q four and... Yeah. Q four, Confer, you had mentioned that we have delivered, you know, secured some of the RMRT lower cost in the month of May and March. So if we look at in terms of H1 number, the numbers is not reflecting the low cost inventory benefits.

36:42 So if you could explain that and along with that, I can understand that there was an issue in terms of the domestic demand, which impacted the pricing of the domestic CP business. So if you could explain these things and if we didn't have the low cost inventory benefit then in that case, how how how much would have been impacted? Yeah. So if I may just take this question, see, the low cost inventory benefit was already taken in q one because that's where the mix of inventory of last year was a disabled date. But as we proceed to q two, then that weighted average benefit is already lost.

37:33 Okay. And and and this is the period when the the q two was much more challenging than q one because market had already released, but that time the rain is going to, you know, come late, and it was a reality by that time. So that's where, you know, you have to compete with everyone in terms of price. And everyone Understood. But but, yeah, if I can look at your your your q one gross margin, the margins were roughly at around 3038%, while the last two... While the last two... Q one margins that were roughly around 36%. But this year, we had a higher higher growth in terms of the p k k... In in terms of season business and the sales business. So I'm not been able to understand this this this equation.

38:20 See. See. When you see margin at a total level, the mix of products also make a lot of difference, actually, and each of them have a different margin profile. So depending on which, you know, of this material has gone in excess, that's how, you know, it's going to decide. And it's place where Understood. The best domestic both the cases. The mix of product is always different. And in our case, if you see, fungus is supposed to be the best of products for us, and that's taking the beating. Mhmm. Understood. And, sir, if you could bake down your, you know, seeds revenue by the key key cost, that will be very much helpful.

39:06 So what breakup you want? Seed's revenue by the key cost. So seed, I think, now I would say corn is as big as cotton. So corn, I mean, cotton is still the largest, but corn is pretty close to that, followed by, obviously, rice and minutes. Okay. Okay. Thank you, sir. You, sir. Thanks very much. You. The next question is from the line of Rajesharma from President Equity Fund. Please go ahead. Thank you for the opportunity, sir. Sir, my question was regarding the in your earlier comments, in the starting comments, you told that the exports have increased.

40:01 Can you give the volume and which have we increased our exports? And despite, you know, how will fund in the export market? So your line wasn't very clear. Bhaskar, did you follow? Yeah. Yeah. I followed. See, if you are specifically asking about q two, we have done well on the c s... CSM side of it, though, where we have the... That's an export, actually. The p k k is an export item. Yeah. So on export, CSM has done well, and that also helped us protect our margins. No, sir. Basically, which continent we have done?

40:47 Okay. Majority of our exports are basically to Americas, and now we are trying to... In fact, we have added resources in ASEAN as well as Africa, and we have started signing new contracts. So so we expect to know besides Americas also some volume and revenue to start coming from other world areas. But right now, I would say it is bulk of it is to US, Brazil, and those countries. Sir, despite any, you know, have the increases gone up? In India? No. They have significantly reduced now. Not not India in the exports market. In the exports market, yes. I mean, many countries have suffered. US probably had one of the driest, you know, planting season this year. Now Latin America season is just beginning.

41:35 They're they're in South. There have been challenges in many markets, and that's why commodity prices are trending up. So the acreage is So acreage is not only acreage. So nowhere in the world I have seen acreages going up. Acreages have generally reduced, and crop has suffered from moisture stress in many part of the world, including Europe had one of the hottest sun. So compared to the quarter one, quarter two is better or worse? In India or globally? Globally, sir. So globally, if you say in Northern Hemisphere, quarter two is the time when crop is standing in the field. Quarter is... One is the time when it gets planted.

42:22 India planting starts towards end of quarter one, middle of quarter one, and then goes up to quarter two. So globally, I'm saying you look at from a season perspective, don't see from a quarter perspective. So Northern Hemisphere season from a planting perspective as well as crop growing condition has been very challenging, and that has led to overall reduction in use of imports in... Including fertilizers. In fact, fertilizers have been worse sufferer relative to other categories. And we don't have any export in the seeds. Right? We don't have any export in the seeds. Seed is all domestic. Okay. Best of luck.

43:10 You. Thank you. The next question is from the line of Rajat Sethia from Alta TMS. Please go ahead. Hi. Thanks for the opportunity. Sir, you mentioned, I think, in, on this side, you are seeing good demand, but there is price pressure. So pressure on pricing. So wondering, even in a inflationary raw material scenario and with good demand, why are we not able to pass on the prices? Because of excessive supply. So as I said, our insecticide business did well. Herbicide did well. Pungicide, a, there was a low disease pressure. When low disease pressure happens, demand goes down and supply is excess in the market. As a result, it became very difficult.

43:59 Not only consumption reduced, and when consumption goes down, obviously, it has a impact on the prices in the market. So this excess supply is just from domestic players or there is Chinese dumping as well? Well, so if you see direct participation in India is only by Indian players. Many of them, they import from China, and China continues to remain very aggressive in by being a very competitive supplier. Sometimes it is very puzzling. Sometimes you think your your cost of production doesn't seem to justify and people sell at that price. So, yes, China is a supplier, but they're not direct participates. They're not direct participation from brand in Indian market.

44:47 Got it. Got it. And, sir, this El Nino's impact on the next upcoming crop season as well as the next full year, do you see that playing out in the next upcoming season as well? Or Let's say this will impact Ravi season, which gets concluded by February or early March. And then Kharif season starts in the May. So at this point of time, there's no adverse weather forecast. And I I don't think global climatologists have the ability to forecast even that far. Majority of the time is almost like tossing a coin. Even I can say whether it's going to be good or bad. No. It's it's like that. I think we would only know by March and April how the next season is likely to be there. But what I know historically, if you look at the data trend, there has not been two consecutive failures.

45:47 Right? Got it. Got it. Also, the impact of Elino in this season, could it be so worth that it ends up affecting next year despite next year being a good monsoon there? Could that be a case as well? So so I I think it's it's it's a very interesting question you asked. Last year, same time when we were discussing the number, insecticide consumption has gone down, and we were saying because there was too much of rain, farmers could not get inside the field and spray the insecticide. Now this year, we're talking differently. This year, in spite of dry weather, insecticide users have gone up. So it it... I think a lot of a lot of what happens during that period of active field operations also matters.

46:39 To me, it's not the quantum of I know it is always the distribution of rain and timeliness matters more than the actual quantum of rain. This year, quantum has been less as well as distribution has been very erratic. Right? So, I mean, I would expect that normal season to return next year with the elevated commodity prices. I I would expect next season to be significantly better than what we just concluded. Got it. Thank you. Thank you, sir. Wish you all the time. Thank you. The next question is from the line of Darshita from DSP Asset Management Private Limited. I had first my first question was regarding the comment that you made that the next season is expected to be much better due to elevated prices.

47:33 Usually, does that result in higher consumption of agrochemicals? Or does that result in a better consumption or a higher consumption of the specialty specialty chemicals or specialty molecules? How does how does, you know, that impact pan out both in India as well as any comments on global, you know, global countries? How would that pan out? So I think farmers do not... So so there's always what we call when we put the farmers hierarchy in our mind. We say there are always innovative farmers, and they're always a very small single digit percentage where they want to try and experiment new things, which could be coming from innovators. The bulk of the farmers will be follower category where they tend to follow what new farmers have done, and then there's a laggard. So I don't think there's a there's a there's a clear cut to say if there's a good season, only innovators will sell. Farmers are very smart about their economics. They still tend to use products which will work for their farm, and that's where opportunity lies for company like ours to keep educating them. It is what works is more important rather than what is most expensive and most new in the marketplace.

48:50 So I I don't think they follow-up. They follow the math of... They follow economies. They're only 5% farmer, maybe slightly less than that. They will try new product irrespective of... Even if they don't know what the benefit is going to Bulk of them will follow standard crop economics. Got it. So so when we say that the next season would be better, would largely be just because we're resuming normal rainfall and better farm economics. So just, you know, the normalcy finally playing through after two years of down cycle. Having better food green inflation doesn't necessarily mean into anything. No. It does mean it does mean into No. It does mean if there's enough moisture available, crop acreages go up.

49:42 Right? As a result, when overall crop acreages go up, oral consumption also grows. So it it it it does mean something. I mean, as if we just shrink, it means something. When it reaches grow, that also means positive. Got it. And secondly, given the current landscape of import being difficult, freight, container costs being high and overall demand being poor, maybe second year of active demand being poor, are you seeing any difference in the competition? Has that come down a lot of these smaller players that had come up? Are they shutting down their shops? Any change in the intensity whatsoever, competition intensity? So I haven't seen many people shutting their shop, but I have seen a lot of people facing stress on their working capital for sure.

50:30 So would that... I mean, what's your sense on it? Would that result in them In the normal situation, that would help companies which are very well capitalized. That would be a common thinking. But, I mean, I have seen sometimes, you know, these people is... I mean, smaller player in spite of working capital constraints, they're able to try. There's a more figure out. Got it. Okay. That's all from my side. Thank you. I think what what it does, though, put pressure on them, their ability to grow. So they they probably contain their because they have working capital constraint. Correct. Okay. But, I mean, not not a very major change in maybe competition coming down or consolidation happening of All I can tell you...

51:20 So... And this is something I'm sure, I know, you would hear from the market. There are a lot of players who would like to get out of the business and maybe exit. But at this point of time, nobody is willing to relook at their valuations. Everybody thinks, you know, I I think it's a question of valuation. If right valuations come between buyer and seller, I think consolidation can begin. That has not triggered yet, I think. And what would the trigger be, you think? I mean, just better environment. Well, that is something I don't wish. Right? I I always wish farmers well. I think farmers should continue to do well.

52:07 I I I guess what has to be seen is that, look, this industry has seen, you know, post COVID in between there was a good year and constant challenges. It's coming. It's more structural now than season driven. And I think this is something for this this this industry to structurally change. Obviously, companies have to do different things, you know, well capitalized companies will continue to thrive. And gain markets there, companies with new products and good r and d setup. For a smaller player, it's going to remain a challenging place. And government can do a lot of things, you which we keep talking to it... Talk of... Talking to government about it. Got it. Great. Okay. Thank you, sir.

52:59 Thank you. The next question is from the line of Raj Kumar by Denathran from RK Investments. Please go ahead. Yes. Good morning. Thanks for your question. So my question is on the main crop. Given that the government has banned sugar ethanol, just want to know what is the prospects for the mix for the grain, you know, for ethanol and and and also the the crop prospects because it's a multi season. Yeah. So so I think May, to me, the tailwind still exist because of the the food... Mean, what do call feed story continues, animal and poultry feed story continues.

53:48 Now when government is saying don't divert sugar to ethanol, will all... Suddenly, will it give a boost to May? I think prices are very high, but I think they have caveated that with something, and they said, look. You cannot make more than so much of... I mean, so they're they're trying to cap the price of ethanol made through maze. So that on one side, they're saying, I'm not telling maze not to plan, but I'm going to tell marketing marketing companies, you cannot buy maze based ethanol for more than that price. So is that a dampener? I don't think it's a dampener, but it is not that suddenly all sugarcane based ethanol capacity will shift to maize. Because maize suddenly then will start competing with poultry need and all. So I think the way announcement has come, we have to see how it will play out.

54:40 But more important factor is the water reservoir availability is low. So the prospects for Mays are only good in two areas. One is Bihar where irrigation is there and Coastal Andhra where it rains well. Other areas, crop acres will remain challenging. So availability will remain a constraint. So if prices suit up too much, the current policy will restrict to maize being diverted to ethanol. So I I think it'll be a normal season for maize, then there's a spring season that happens after harvest of potato. So that's a later discussion. I think that the way things are things are so dynamic right now for me to say something what will happen in February, March is also becoming very difficult.

55:32 Okay. Okay. And the the second question is on the sugar. How much of contribution we get from sugar as a crop? And also, what is your outlook for it? So sugarcane, I think we are a decent player. We we we can actually have a separate discuss on all which crops contribute to us mostly. But for us, the rice is the rice, some plantation crops, some probably season crop, all of them contribute. You know? One of the thing we were expecting this year is actually to play out well, but looks like chili prices are very high. But the the area where chili gets planted primarily in south, you know, water situation is not that good. So if it rains couple of times in the areas, the chilies planted, I think Portugal might, you know, come back.

56:21 But at this point of time, I think water is the biggest worry for Ravi. Okay, sir. Thank you so much. Thank you. The next question is from the line of Bijat Akhilov from KIE Engineering. Please go ahead. Yes. Good afternoon. Thank you so much for taking my questions. First of all, just to clarify for myself. So you mentioned early on that whatever sales returns had to be taken as well as whatever rebating might have to have had to be be done with the channel partners. That's already done in one h. Right? So for two h, we don't really expect any lingering impact from the. So... Yeah. So I think it is different for different crop. Now if you say Ravi Ravi is primarily a wheat herbicide, a big crop.

57:11 Alright? Now wheat crop, you can already see pressure on the prices of herbicides. So, obviously, we are not a large player, so it may not impact me. And that's why I said... So in every season, every crop, it depends on what your portfolio is. But there's a significant pressure on the prices of herbicide in in Northern India already. When season has not even begun, farmers are just about to start planting a wheat crop in the region, and the prices have already started crashing. Is it too much of trading going on? I don't know. But looks like this industry continues to suffer from excess supply, right, of every key ingredient when it comes to the real market operations, particularly on key key crops and key segments.

58:05 But having said that, as per our present view, whatever provisions have to be made for returns and debate, they've already been made, and that's our hope that there won't be any. Okay. Okay. So at least from your company standpoint, you feel you're relatively safe heading into two years. Yeah. I think... So I I think we're... That way, we have been very disciplined even on returns and all also. I know what we tell you, what what we what we have. Got it. No. That's helpful, sir. Then just a couple of data points I wanted to clarify. One is the CapEx amount for one, it seems really low again, not even 20 crores for the first half. What should we work with from a full year standpoint? Second thing is this net working capital, which has elongated in 1H. Should we expect that we'll be able to collect all of this by the end of the year, so we will generate cash as usual for the full year? Yeah. So I think I I don't see that as a challenge because if you see... Say, for example, we have seed inventory, which we never used to have in last two, three years because of shortage of the seed. Now this year, we have a production, which is good news because then I'm able to supply on time in the next season.

59:20 So from a business perspective, that's a good thing. On the top of that, now I'll be producing less in the coming season. So when you come to March, so I would not be paying for the fresh inventory as much as we would have paid in the past. So I think some of it will start normalizing as we move... We will move March because the tariff supplies will also start by that by that. Now receivables, I think at this point of time, we don't see any red flag. I think it's all under control. So all the networking capital is a combination of seed inventory, which we should have even build in the past. And the combination of, obviously, delayed season also means delayed recovery from the market. So... And and some of the elevated inventory are raw material of the crop protection. So it's combination of that. What happened is that we'll probably moderate purchase now. And as a result, I think end of the end of the year, we would still continue to generate free cash flow.

1:00:23 Yeah. Also the... Yeah. Sorry. I think part, is the... Like, we we have been going very slow on CapEx just being prudent from the time, you know, we have all these bad news. H one, we may have a little bit higher number than that to, you know, prioritize some of the growth initiatives as well as some of the important sustainability, such as... Substance CapEx initiatives. So I can say that broadly h two will be more than h one that way. Okay. But about, say, 50 crores more per year's time point is fair? Little bit more than that, you can say. Okay. Got it. Just two last quick ones for me. One is the other expenses are up about 12%, 13%, both for this quarter and from a 1H standpoint also. So is that primarily freight? Or is there something else over there?

1:01:19 And the other one was just despite a very challenging one, it's... We we seem to have done fairly well by holding revenues and, you know, earnings as well in... From a from a full one each perspective. So... Which seems to suggest we might have actually done a little bit better than the overall industry. What would you attribute this to, especially on the b two c side of things? Is it more prudence or, you know, what what are the key aspects that are driving this? So so couple of things, I I think, you know, we we said, look, we want to complement our portfolio when we did analysis. We are sort of... We said, look, we don't participate in 50% of the market. Alright? So our participation in the segments we were absent, we have started significantly increasing by launching new products in those categories.

1:02:09 Right? So that is helping. For example, this year of the, what do you call, launches which I made in '27 in the current season, they have already significantly contributed, you know, to the extent of 67... 60... About 100 crore. So the products which got launched this year, they have given us additional revenue of 100 crore. Now this is happening in spite of the fact that we have also in a systematic manner in last three years taken out products which we used to sell people years ago. They were not contributing to the revenue and, you know, they were contributing to the revenue, but they were not making much sense from a profit perspective. So for example, if you say last four years, we have dropped roughly 100 crore of revenue of old product. I know that probably 28, 30 products.

1:03:03 And then we have added about 300 crore of revenue. So 200 crore plus. If you take 100 out, incremental 200 crore has been added by by by adding some 58 products. So so a lot of product churn is taking place. So a lot of that is combination of being very focused, though, in in in what we do in the marketplace and also launching new products. Yep. Just the other expense question if you could clarify. The other expense transfer. Okay. So on the other expense side, of course, we can separately give you details, but one color which I can say is that, you know, we do keep looking at, right, M and A opportunities. So there would be fees related to those, actually. So that also comes in.

1:03:54 Thank you so much. You're welcome. Thank... All the best. Thank you. 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. Thank you very much. Thanks, everybody. Thank you. Bye.