Insecticides (India) Limited (INSECTICID) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Insecticides India Ltd. Q1FR27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Ms. Sejal Vastar from MUFG Intense. Thank you, and over to you, ma'am.

Thank you, and welcome to Q1 and 3 Months FY27 Earnings Call of Insecticides India Limited. Today on this call, we have with us Mr. Rajesh Kumar Agrawad, Managing Director. Before we proceed with the call, I would like to give a small disclaimer that this conference may contain certain forward-looking statements which are based on beliefs, opinions, and expectations of the company as on date. These statements are not guaranteed of future performance and involves risk and uncertainties which are difficult to predict. A detailed disclaimer has been given in the company's investor presentation, which is uploaded on the stock exchange. Now, I would like to hand over the conference to the management for the opening remarks. Thank you and over to you, sir.

Thank you. This is Rajesh Agarwal. Good evening, everyone, and thank you for joining us for the Q1 FY27 coming call. The first quarter of FY27 was shaped by an unusual start of the agricultural season. Channel activity started in March ahead of the anticipated current hike. A delayed and uneven monsoon, Kapal with high temperature across several seasons impacted and delayed demand for crop protection products. While this affected industry performance during the quarter, we believe that still ample opportunity to recover with windfall improving and KK is picking up, we expect agriculture activities to gain momentum in the coming months. Talking about RL, RL has established itself. As a potential fully integrated agro-chemical company. Even in slower environment, Dr. Kata highlighted the importance of building a business that is not dependent on Over the last few years, we have focused on creating multiple growth drivers through premium products, R&D, technology partnerships, caro research, international markets. These investments are helping us building a stronger and more diversified growth platform for the future. Within the core business, criminalization continues to make connections, with our Maharasma and Focus Maharasma portfolio contributing around 64% of the business. During the quarter, Ushparta has strengthened this portfolio to new product launches and collaborations. Granuvia and Spino S, both launched in the collaboration with Coteva Agri-Fans, were introduced through extensive engagement with dealers. Distributors, retailers, and farmers across the country. We see these products as multi-year opportunities where increasing farmer acceptance can give meaningful contributions over the coming years. These launches are supported by our continuous focus on R&D. Thank you. Thank you.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prashrant Biyani from Elara Securities. Please go ahead.

Yeah, hi Rajji. Sir, on the Sotanala formulation and technical plant, how much are we investing separately for formulation and technical? What is the total investment and how much have we invested till date?

It will be a project total investment. The total investment will go roughly about two hundred crores, out of which I think about twenty crores.

And, sir, in technicals, which molecules do we plan to manufacture here?

If we talk specifically of Sopanala.

Thank you so much.

Thank you. The next question is from the line of Ramesh from SJ Investments. Please go ahead.

Sir, I just wanted to understand in terms of the ground and grains have been uneven and everything overhang with us, and sales also transmitted to that. How do you see the demand environment right now? Going forward?

If you talk about the reservoir situation is improving and the crops are very healthy, what we see is measuring the Got it, sir.

So overall basis, South is a little competitive and right now over the year, where do you think we'll end up in terms of sales growth, sir?

It's difficult to give the number, but we should be positive, and that positive impact is...

And one question in regards to just understanding the customer, final customer, the farmer. So, we have co-branded products which are more expensive and Maharatma products compared to our other generic products. Could you explain how the farmer is different from our new brand segment, co-branded segment versus Maharatma? Could you just give a broad perspective on which bucket of farmer spits for each type of brand?

It is a matter of awareness. What we are doing is we are connecting with a lot of people. We are developing the two-way communication system with infrastructure. We have developed farmer apps, retailer apps. We are trying to change the technology to them. So we have to show the ROI. The farmer is not different. He has to believe. So, we are able to fill the money. So why are we exalted?

Just to understand how the value chart is for the company and what they want each brand to expand into, the ideal vision.

Thank you very much.

Your voice is a bit muffly. No, sir. Now it's clear.

Yes, sir. So, just one last question, sir. Sir, you mentioned the fact that depending on awareness, the farmer chooses the brand, right? So, it's just trying to understand during the initial stages when you're trying to make them try and innovate a product, what do they trust more? Is it usually a Maratna brand or is it a foreign brand with our co-branding on it?

Please come back again.

Sorry, sir, am I out of it?

Yes, sir.

Yes, sir. So basically, I was asking, you mentioned that the farmer chooses the brand based on the awareness generated in the market. So I was just trying to understand, during the first phase, when there is no insecticides in India product used by the farmer, do they start with the international brand, co-branded brand that we sell with Nissan and Oat, or would it be Maharatna brand, the first time they take something?

It all depends on what solutions are we giving, and they come by the usage pattern and the awareness level of the farmer. Because if it is a herbicide, then it includes first. So it can be from my own R&D or the imported products. So both have their exercise. Then the farmer also knows.

Just one last question. With regards to capacity, we have mentioned that we are putting up a new facility. So it's just trying to understand without the capacity, what can be the sales, maximum sales will be able to generate? And with the new capacity, how much more sales can we generate at peak utilization? It's trying to understand the capacity. The plant would be sufficient to add the capacity we need.

Thank you.

Just one last technical register and it was fine to understand. I'm just asking about, so when we partner with our international collaborators, so when we get the product, is it that it's in the formulation, we have to repack it here, or do we directly get the package product here, and then we just stamp our logo? How does it work?

Today, when we are partnering with different companies, I'm going to be in the process.

Thank you so much for your patient answer, sir.

Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and 1 on your touchstone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and 1 on your touchstone telephone. The next question is on the line of Madhur Rati from Counter Cyclical Investment. Please go ahead.

Sir, thank you for the opportunity. Sir, I see that our B2B business has grown by 10% this quarter. So what was the inventory gain, sir? Was there any inventory gain because of the pricing increase because of this war?

There was a good opportunity, but what war brought is, like there was an unexpected increase in the price of metal, plastic, solvents, emulsifiers, and also some of the chemicals. And there was a complete supply chain disruption, because the time taking from China for travel was even more, and because of the scarcity of the conditions and the price increase. So that completely disrupted the thing, there might be some advantage we would have taken. Just because of the end. There's a... We sometimes say it has happened before.

The B2C business, what kind of prices have we taken for the Focus Maharatna and Maharatna products and for the commodity or the generic products?

Good morning, everyone, and welcome to the call. Good morning, everyone.

And, sir, for the coming quarter, so Q2, because all of these raw material pricing increased, sir, is the industry, so, not only insecticides, or is the industry throughout not taking any prices, and that might affect our margins for the B2C business going forward, or we expect to at least maintain that, or we have sufficient inventories, if you could help us understand all that.

Again, it's a mixed, but very difficult to say, like the variations are very, very high, like solvents are, like there are fluctuations of 25-60% in these solvent prices need to be day-to-day. So very difficult about talking about individual companies, but we since are focusing around a lot of interesting products, actually the premium products, so I don't think that...

Got it. So just a final question for a moment, sir, how is the, whenever we take a project, sir, how is the pricing, like friction between focused Maharatna and Maharatna products and generic products? So if you could help us understand, are we able to pass on whatever raw material cost increases we get for the focused Maharatna and Maharatna products or even that is facing some kind of friction from the market?

It depends on product to product because if something is not doing well, then yes, there can be issues or if there is a complicated problem. Maratona is... Self-determined, low compatibility. If you have the pride advantage over any journey, And sir, are there any plans for a buyback?

Because I think this is a down cycle and we can reduce the equity base for our company. So any plans on buyback? So that was from mine. Thank you so much and all the best.

Thank you. The next question is from the line of Kunal from Fair Value Capital. Please go ahead.

Hello, sir. I'm on the phone? Yeah, thank you. Am I clear?

Yeah, yeah. I can hear you, Kunal. Okay. Okay, sir. Okay. Thank you very much for meeting us today.

No, please go ahead. Go ahead.

Yes. The first question is, given that monsoons will be late this time? And are we expecting any, in a situation where sales return, like last time we had, about 200 crores is a sales return. Yes, sales return possibilities are definitely there, but this year I see only one or two herbicides swelling, not many, number one. Number two, we were very, very cautious looking at the last year. So the placement was not that strong, what we did in the last year. It was a strategy called, what we had taken to place lower, otherwise I could have also achieved the sales number by placing more. Thank you. Hey, thank you. Yes, the growth is almost similar. V2B business has shown a little more growth in Q1, and in Q2, I think V2B business is going to show a little more growth than V2C.

So, for C1, the volume growth was in there.

Volume growth has not come in in the Q1, because overall, there is a value growth, P growth also, and volume growth, D growth also. How much growth started? How much growth started?

Hello.

Yeah, the volume, the growth is about 13%. There is a small value growth of about 2% actually, which is visible in Q1.

Okay. Okay. Thank you.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touch-tone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touch-tone telephone. The next question is on the line of Sonia Raku and Chief from NIRMA Securities. Please go ahead.

Good evening. Thank you so much for taking my question. So, in the previous quarter, the management expected herbicides to record healthy growth after the prior year's returns and pricing pressure. How did the herbicide portfolio perform in Q1, and what is the segment-wise revenue for Q1?

The expectation from herbicide growth is again there. In Q1 also, many products we have touched last year's sales, and the exact growth, because it was delayed, so the growth is going to get registered in Q2. Definitely in comparison to last year, more than majority of the herbicides will cross last year's achievements, but yes, we have not touched the figures which were the dream figures for this year, that is for sure. So talking about the segment-wise sales, I will give it to the CFO to give you the exact breakup of herbicide, insecticide and fungicides.

The insecticide percentage in B2C is around 33%, herbicide is around 59%, fungicide is 5% and PBR is 3% in this first quarter.

Okay, sir. So, my next question is on what revenue did Granuga and Spinoase generate during Q1, and what are management's revenue expectations of each product for FY27?

Spinoids has crossed about five years. Spinoids is just a beginning, I think a small few years ago. 25 years were generated in 200 years, but the last was almost in this time. I believe granulia can touch about 20 crores in this system, and spinoids can go 10 crores plus. Gross level. When it comes to net level, you have to do it for the device. Thank you.

Okay, sir, just the last question from my side. Management plans approximately double the crop solution plots from the existing 36 plots. What is the exact FY27 target expected expenditure and measurable revenue opportunity associated with these plots?

Like, if we talk about the expenses, so we are aware that this is going to be a difficult season from the very beginning. So, we have not decreased any expense budget. Good morning, everyone.

Thank you so much.

That's from my side. All the very best.

Thank you. The next question is from the line of Diveshwarma from AKS Capital. Please go ahead. Hello, am I audible? Your voice is a bit cracking.

Hello, am I audible?

Good morning, everyone. Thank you. You can ask the question. Let me try it. I'm able to understand. I'll reply.

Sure. I had a tip, sir. Sorry to interrupt, Mr. Nevesh. Please rejoin the queue when your voice will be clear. Thank you. The next question is from the line of Pahar Sharma from DD Capital. Please go ahead.

Hi, sir. Thanks for the opportunity.

Please, I'll be a little louder.

Yeah, hi, sir. So, my first question is that despite the revenue decline, gross margin expanded by 240 basis points, like 31.6%. So, like, could you break down this expansion between pricing, premium product mix, global cost inventory, or we can say backward integration and other factors?

I just told that to me that there was a fatigue.

Understood, sir. Understood. My next question is that, like, what is the current utilization of Dahej, including the recently added capacity, and also what incremental revenue can be supported before another major expansion, like, which is required?

Dahej is a very good question. We are planning to change the product axis. We are dividing the herbicide and insecticide.

Last question is that, like, could management quantify the expected asset turnover and return on capital from the Dahej and Sotanala investment once utilization stabilizes?

Thank you.

That's all from my side.

Thank you so much.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. Ladies and gentlemen, that was the last question. I would now like to hand the contents over to the management for closing comments.

So again, I thank you very much for your active interest. So I can say that Q1 was focused on building the conditions.

On behalf of Insecticides India Limited, that concludes this conference. Thank you for joining us and you may now disconnect.