Rallis India Limited (RALLIS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to RALIS India Ltd. Q2 and H1F527 Earnings Conference Call. We have with us today Dr. Gyanendra 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. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Dr. Gyanendra Shukla. Thank you, and over to you, Dr. Shukla.

Thank you. Good morning, everyone, for joining us today for Rallis India Limited Q2, an H1 Fiscal Year 27 earnings call. As mentioned, I have alongside with me our CFO, Mr. Bhaskar Swaminathan.

Good morning.

Let me begin the discussion by pitching into the industry landscape initially, post which I will discuss Rallis specific developments. Our domestic market, India's first, India's agri-input sector faced significant headwind during the 26th, I mean, just ongoing Kharif season is just getting concluded amid deficient and erratic rainfall. So, a lot of crop exchanges, subdued farm economics, and heightened competitive intensity. Moisture stress across Cree agriculture states like Maharashtra, Andhra, Karnataka, Telangana, parts of Punjab, and Haryana affected crop prospects for paddies, 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 remain uneven contingent on the crop condition, irrigation, availability, and revival of farmer profitability. On global markets, commodity prices and nasty margin, since April 2026, global agricultural market have experienced farmer commodity prices. In September, the FAO food price index rose 1.45% month-on-month, while its cereal price index has increased by 5.1%, driven by higher wheat and maize prices amid Black Sea logistical disruptions and adverse weather conditions. Vegetable oil and sugar prices also is dependent on the back of import demand, weather concerns and production uncertainties across key producing regions. Although global cereal production is forecasted to decline in 2026, the projected harvest remains the second largest on record, indicating tighter supply condition rather than a widespread shortage. The Middle East crisis has heightened energy and freight cost, Increasing pressure on agrochemical manufacturers. Input cost and margins. The farmer crop prices could support farm economics and agrochemical demand. The benefits may be offset by affordability constraints, competitive pricing, and costless 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 agricultural intensification. The OECD FAO 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 statistically 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 U.S. $70 billion in 2026, although growth will remain sensitive to 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, distributor resistance, weather-related disruptions, and heat waves in Europe, which have affected crop conditions and input application patterns. For Indian companies, the key indicators 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. 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 costs may put pressure on manufacturers' margins, while elevated fertilizer costs could 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 and purchasing activity. As far as Rabi outlook is concerned, the outlook remains sensitive to winter rainfall, soil moisture, and irrigation availability. IMD's northeast monsoon forecast of 80 to 112 percent of the long-term period average is relevant to southern peninsular India, but does not guarantee adequate rainfall across the country. The major reservoirs held approximately 70 percent of the capacity below 10-year average of 76 percent, with the southern region facing relatively greater irrigation concerns. These conditions could influence ruby acreage, crop yield, and farmer spending, particularly in water-stressed areas. The crop yield and the government's ruby MSP increases for 2728 range from 0.97 percent For wheat to 10.3% for safflower and mustard rising, 6.6% and then until 5.5%. 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 Q2 performance on the back of insufficient rainfall in the key agrochemical consuming states like Punjab, Haryana, Maharashtra, Andhra, Karnataka, Talinganai, Our quarterly revenue stood at 858 crore versus 861 crore of Q2 of previous year. Overall, EBITDA for Q2, fiscal year 27, stood at 126 crore, lower by 18% compared to Q2 of the previous year. Profit after tax at 85 crore versus 102 crore of quarter to a fiscal year 26, which is 17% lower. Approximately 43% of India received 19% deficient rain in comparison to the long-term, long-period average this monsoon season, which delayed the Kharir sowing. It resulted in slower liquidation and high carry forward inventory. Due to prolonged geopolitical situation, channel farmers prioritized the stocking for fertilizer rather than agrochemical. Fertilizer's availability had been a concern due to logistical challenge. We'll talk about new initiatives and launches. During the quarter, we launched four new crop care products, namely Silentra, which is an insecticide, Marcellus, a fungicide, Blitoxoper, a fungicide, Trinage, a herbicide. We have altogether launched nine new products during fiscal year 27 across categories. In seed business, we have launched six new products across vegetable cotton base in the quarter two of fiscal year 27, which takes the overall tally to 15 new products. And Fiscala 27, which includes cotton hybrids for North India, herbicide-tolerant seed rice introduced under Dhania brand. Digital marketing interventions continue to promote products through Anuband Edge scheme, farmer QR code reward schemes, enhancement in Sampark Plus and seed saver application. 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 of September 26th ended, has crossed 60,000, including seed and common retailers. Farmer QR course project 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, Sumpark Plus continues to capture farmer-level demand signal to generate actionable insight and improve sales conversion. We have reached 4.23 lakh farmers in Sampark Plus through regular engagement and social media posts. We had launched Idea2ImpactInnovation platform in Q4 of Fiscal Year 26 to establish an open innovation ecosystem to secure, validate, and commercialize agri-innovation. Till now, we have received encouraging participation of 42 applications out of which two are in pilot stage and 28 are under review. Seatshore application enhances visibility and traceability of farm-level operations and improves data availability for decision-making. We are developing Seatshore 2 version, which will be high-performing, future-ready, and more cost-effective. We are also coming with new R&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. We are accelerating the launch pipeline for proprietary research-led varieties and high potential. Our long-term priorities include strengthening customer-centricities, opening portfolio choices, accelerating new product launches, expanding strategic alliances in farmer reach, and leveraging digitalization to enhance operational efficiency and drive sustainable growth. That includes my opening remark. I will now hand over to Mr. Vaskar, our CFO, for a detailed analysis of financial situation. Over to you, Vaskar.

Thank you, Dr. Narewad. Good morning, everyone, and thank you for joining us today for our Q2 and H1 FI27 earnings call. I will walk you through financial performance for the quarter and a half year, post which we shall commence the Q&A session. Starting with the top line for the quarter, our Q2 FI27 revenue student Rs. 858 crore, as it gains Rs. 861 crore for the same period last year, resulting in an overall flat growth, kind of. Pricing growth of 5% was offset by similar volume G growth. Overall, a bidder for Q2 FI27 student Rs. 126 crore, lowered by 18% compared to Rs. 154 crore in Q2 of the previous year. Profit after tax stood at Rs. 85 crore vs. 102 crore of Q2 F526, which is 17% lower than the same quarter of previous year. Crop care revenue grew by 4% to 788 crore in Q2, FY27, from 760 crore in Q2, FY26, due to 6% 5 crore. EBITDA decreased by 2% to 126 crore in Q2, FY27, from 129 crore in Q2, FY26, and increased by 1% to 88 crore. Crop production de-grew by 3% and registered Q2FY27 revenue of 457 crore vis-à-vis 474 crore in Q2FY26, which was dragged by volume de-growth of 7%. Soil plan and health grew by 22% to Rs. 72 crore in Q2FY27 from Rs. 61 crore in Q2FY26 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 B2B revenue stood at Rs. 232 crore vis-a-vis 198 crore in Q2 FY26, a growth of 17% primarily due to 8% volume growth and 9% price growth. Exports grew by 2.5% to 165 crore. There was lower demand for pendimethalin AI in Europe, coupled with pricing challenges from China market. We also witnessed constrained availability of raw material, partly due to subnation disruption, and prioritized allocation to India B2C crop production business, which impacted volumes of select products, e.g. S.E. fade, hexagonal. There were also delays and uncertainty in shipping timelines due to port congestion and logistical challenges. CSM Q2 revenue displayed promising growth by lodging 12 times growth compared to the last year, clocking a revenue of 27 crore this time, driven by rebound in PEKK sales volumes. Domestic B2B grew by 11% to 39 crore in Q2 FY27 on a base of 33 crore of Q2 of previous year. Moving to seeds, seeds revenue grew by 31% to 70 crore in Q2, compared to 101 crore of last year, Q2 FY26. This was mainly due to 26% volume decline. Ebitda decreased almost to zero in Q27 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 planned, but the acreages of paddy and cotton declined due to lack of water leading to lower placement. On a positive note, North cotton farmers reported higher productivity, coupled with healthy prices, strengthening confidence for future seed adoption and cotton cultivation. For the rapid seed production cycle, active planning and organized engagements are underway for pearl millet, paddy, maize, and sunflower. Coming to H1 performance, total H1-FY27 revenue stood at 1,880 crore versus 1,818 crore of H1-FY26 last year, resulting in growth of 3%. Croc is H1 27 revenue clocked Rs. 1485 crore vs. 1412 crore of H1 last year, resulting in growth of 5%, primarily led by price growth. Seed H1 revenues stood at Rs. 395 crore vs. 406 crore of last year, resulting in a degrowth of 3%, due to volume decline of 6%. HY27 EBITDA stood at Rs. 311 crore, which is 304 crore of H1 last year, resulting in growth of 2%. And H1 PAT of FH27 stood at Rs. 210 crore, which is 197 crore of H1 of last year, resulting in growth of 6%. We have focused on accelerating priority brand growth through shopper market execution, targeted production, product promotion, and enhanced physical and 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-led 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 in the DGP. Overall, we remain disciplined in improving capital efficiency across both fixed capital and working capital. 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 high-value product offerings. We have cash liquid balance of about 211 crore as of 30th September 26. That concludes our opening remarks. We can now commence Q&A session. Thank you.

The first question is from the line of Rohit Nagraj from 361 Capital Limited. Please go ahead.

Good morning, and thanks for the opportunity. 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 an allied question in terms of your perspective on how the channel inventories are currently and will that have any repercussions on the Arabi as well? Thank you.

So, as far as sales return are concerned, all the Kharif related sales return for majority of the market are completed. There might be instances in certain crops where Kharif crop does not terminate by September based on the numbers we follow. So, for example, crops like Cotton are in South, where rice planting was delayed even to August. Barring those areas, wherever, you know, Kharib 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, I 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 placed the product in the markets where there's a demand, water situation is certain. So it's not a uniform placement everywhere. I think channel inventory is only there to the extent it is needed to either conclude curry season or beginning of the rabbi season. 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 2027-30 season? And will there be any possibility of pricing improvement for next year on the seeds part? 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 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. Now, 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 monsoon failures. So I wish and I hope that monsoon will be returning to the normal. Of course, there's a subdued, what do you 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 competitiveness there from our side, we'll certainly try to see price increases can happen. And the only crop price increases are not possible as cotton because it is capped by the government.

Right. Thanks and all the best, sir. Thank you.

Thank you. The next question is from the line of Rashant Biani from Alara Securities, Private Limited. Please go ahead.

Yeah, thank you for the opportunity. Sir, what explains the inflated inventory this time versus the end of H1 last year?

If you can explain that, is more relating to raw material or finished products? So, it is a combination of things. I think one thing is that when war began, everybody was trying to get the inventory so that when the season turns out to be normal, we are in the position to supply. So it need not necessarily be volume. It could be 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 of 2026, so it's all good inventory, but yes, because season did not turn out the way, for example, cotton, cotton, North India did not get planted. Other thing that happened is that cotton areas shrank. On the top of that, there was a lot of illegal seed which proliferated. But other crop, I think, inventory is normal.

And, sir, a portion of higher inventory would also be leading to higher price of raw material, is that so?

So, on the 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 on some of the cost increases to the customer, but the season did not take off as expected. In fact, demand went down. As a result, it became unrealistic to hold on to the cost increase which we were trying to pass on.

Sir, how is your initial estimate of demand patterns for Q3?

So, Q3, I think, if you say north and east, if you go Indo-Gangetic belt all the way to the east, east potatoes is a challenge right now because, see, earlier we were able to export a lot of potatoes and all to Bangladesh. That has stopped. As a result, you 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. Maize area is expected to be normal. But there are a lot of maize 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.

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, February, quarter, four. At this point of time, herbicide demand is strong, but there is a pressure on prices.

Okay, and 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? Thank you.

So, difficult to say as a unit for the industry, but all I can tell you, we had a very strong growth in insecticide. We also had a good growth in herbicide. Fungicide segment which suffered when there's low moisture now and fungal disease are low. We had 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 products this year, they have contributed well. New product launches have gone quite well, both particularly on insecticide, insecticide, and herbicide. So, from a strategy perspective, what we are saying, our strategy seems to be working and on track. Obviously, we are in agriculture, and when this war, and I know it's kind of a double event happening in a very short period, you know, you start the war, the war 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 Siddharth Gharigar from Equius Capital Private Limited. Please go ahead.

Hi, sir. Sir, first, just on the cotton market, can you give us a sense of what is the kind of elegance that has come into the market this year, and how much of the overall market size for this year?

So, we do a very simple math. I think cotton at the peak had reached to almost 13 million hectares, 12.8. It has come down to about 10, 10 and a half million hectares. So, progressively, cotton area has come down by 20, 25%. On the top of that, on the area which is getting planted, and industry estimate is that roughly 25 to 30% of the seed. So if you said 10 million hectares is where seed gets planted, and on average farmers are using two packets equivalent, that amounts to roughly 5 crore packets. Out of 5 crore, if you take 25 to 30% out as illegal, then you are left with roughly 3.5 crore packets. So that's a big shrinkage, where legal packages used to be sold on 5.25 crore packets is down to 3.5. Now, two things will happen. So, 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 and then again will be recovery of the legal product and the cotton acreages. I think cotton acreages, in my view, will rebound because cotton prices are very attractive. But again, at the time of planting, Palmer makes the season based on the relative 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, challenge 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 were not able to get good harvest because of being gold warm control 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. So, cotton, I think if you say from a peak illegal packets, it is down to almost 30-35%.

Sir, and what would be our market share in cotton currently versus maybe last two, three years? Have we lost any market share to us at legal fees?

So, I would say we have actually held on because our volumes are marginally down compared to last year, and market has shrunk 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 particularly.

Oh, God. So, secondly, in terms of the seed 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, some production will need to take place, because 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, planting demand already starts in the planting area, so we were not able to supply. 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 are not waiting for the fresh crop harvest. You are producing about 30 to 50 percent of inventory of the following year in advance, right? So, we are back to normal inventory cycle, I think, while it looks elevated, but it's not the right comparison because last two years we had a bad inventory situation, right? So, we would be, I think, going forward, our aim would be to carry forward, particularly in crops like maize, rice, bajra, and all 150% of the requirements because then when you start the following season, you have an opening inventory. And now I think in some crops, you might have more than 150% of the production also was very high. As a result, we will slow down. Doesn't mean, but new launches, for example, you'd have to produce. Some of the new product launches we made last year where we did not produce a lot of inventory because you want to see the initial farmer response. So at a gross level, we'll still produce something, but it may not be the same product. But it will not be the same as previous years.

Yes.

Significantly reduced area.

Thank you. The next question is from the line of Reju from Anti-Stock Broking Limited. Please go ahead.

Hi, sir. Thanks for the opportunity, sir. Just wanted to, you know, get us saying that how much of our revenue is coming from the southern states, Delmaris, Tetanataka, and Gita Minaru?

So, I will not be able to give you a state by breakup right away, but we will get back to you. I think we have divided the country into something called India 1 and India 2. I will get back to you with a detailed breakup.

Okay, sir. No problem. And in terms of the exports revenue, so if we exclude the PSN segment and if we look at our export business purely in the B2B segment of the city, so in the H1 number versus the last one, last year H1, so the growth has been in the negative side. So, what explains that apart from the issues that are facing in the European market and the Latin market? So, if you could explain that.

So, two things happened, and it's very, very complicated because in running the business, you're always trying to see what is right for the company and for the customer. So, when war started, nobody was sure of whether 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 did to be. So, when it came to making a decision export versus domestic, I think we were trying to balance between making sure enough product is available of domestic market at the same time, optimizing margins and keeping customers outside also very happy. So part of the degrowth in the export market was deliberate, and we used 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, my follow-up question to these exports only. So, how do you see the H2E spanning given the, you know, higher trade costs and the challenging environment in the Europe specifically? So, how do you see the growth there in the exports market?

So, I think a lot will depend on how this war plays out because I can tell you all of us compete with China, and China's supply chain to America is much closer and much more straightforward than us supplying from India because our products cannot now pass through Red Sea and all. So, they have to go around. As a result of cost of freight, cost of insurance, time taken, availability of container, everything is a challenge. So, I think to your question, how do we see going forward? I think the dedicated customers, you know, we will continue to serve them. We're also trying to follow with them more aggressively to get orders early so that we can bridge some of the extra lead time we need. And having said that, it's a very dynamic environment, not only for export, even importing raw material, no 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 be coming from import. So I think overall, I would say there's a two to three weeks, sometimes four weeks cumulative delay in the supply chain.

Understood, sir. And one last thing, I think, in the Q4, you had mentioned that we had deliberately procured some of the RIM at the lower cost in the month of May and March. But if we look at it in terms of H1 number, the number is not reflecting the low-cost inventory benefits. 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, you know, the pricing of the low-cost TP business. So, if you could, you know, explain these things, and if we didn't have the low-cost inventory benefit, then in that case, how our margin would have been impacted?

Yeah, so if I may just take this question. See, the low cost inventory benefit was already taken in Q1. Because that's where the mix of inventory of last year versus this year was big. But as we proceed to Q2, then that weighted average benefit is already lost. Okay. And this is the period when the Q2 was much more challenging than Q1, 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 was... Understood, but yeah, if I can look at your Q1 gross margin, The margins were roughly around 38%, while the last Q1 margins that were roughly around 36%, but this year we had a higher growth in terms of the TKK, in terms of season business and the series business. So, I have not been able to understand this equation, Victor, could explain it.

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, gone in excess. Understood. The product is always different. And in our case, if you see, fungicide is supposed to be taking a beating.

Understood. And if you could bake down your, you know, seeds, when you buy these seeds, these crops, that will be very much helpful.

What breakup you want?

Seeds, we do like the key crops.

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 millet.

Thank you. Thank you.

The next question is from the line of Vijay Sharma from President Equity Fund. Please go ahead.

Thank you for the opportunity, sir. Sir, the question was regarding the, in your earlier comments, in the starting comments, you told that the exports have increased. Can you give the value, can you break up, and which have we increased our exports, and despite, you know, in the export market?

It wasn't very clear, Bhaskar, did you follow?

Yeah, I called it. See, if you are specifically asking about Q2, we have done well on the CSM side of it, that's an export actually, the PKK is an export item.

Yeah. So on export, CSM has done well, and that also helps us protect our margins.

No, sir. Basically, which continent we have done?

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 we expect, you 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 U.S., Brazil, and those countries.

Sir, despite any, you know, have the acreages gone up?

In India? No, they have significantly reduced. No, no, not in the exports market. In the exports market, yes, I mean, many countries have suffered. The U.S. probably had one of the driest, you know, planting season this year. Now, Latin America season is just beginning. They are in south. There have been challenges in many markets. and that's why commodity prices are trending up.

So the acreages have gone up, sir.

So acreages, not only acreages, so nowhere in the world I have seen acreages going up. Acreages have generally reduced and crop have suffered from moisture stress in many parts of the world, including Europe had one of the hottest some.

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 one is the time when it gets planted. India planting starts towards end of quarter one, middle of quarter one, and then goes up to quarter two. So, globally, I am 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 inputs, including fertilizers. In fact, fertilizers have been worse sufferers relative to other categories.

And we don't have any exports in the streets, right?

We don't have any export in the seed. Seed is all domestic. Thank you.

Thank you. The next question is from the line of Rajat Satya from Atot EMS. Please go ahead.

Hi, thanks for the opportunity. Sir, you mentioned, I think, perhaps in fungi sites, you are seeing good demand, but there is price pressure. So, pressure on pricing. So, wondering, in an 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. Not only consumption reduced, and when consumption goes down, obviously, it has an 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 by being a very competitive supplier. Sometimes it is very puzzling. Sometimes you think 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 participation. They're not direct participation from brand in Indian market.

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 on the next upcoming crop season?

So this will impact Rabi 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 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 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, right?

Got it, got it. Also, the impact of Enligno in this season, could it be so worse that it ends up affecting next year despite next year being a good monsoon year? Could that be a case as well?

So, I think 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 uses have gone up. So, I think a lot of what happens during that period of active field operations also matters. To me, it's not the quantum of rain. 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 price test. I would expect next season to be significantly better than what we've just been cloning.

Got it. Thank you. Thank you, sir. Wish you all day. Thank you.

Thank you. The next question is from the line of Darshita from DSP Asset Managers, Private Limited. Please go ahead.

Hi. So, good day, sir. My first question was regarding the comment that you made that the next season is expected to be much better due to elevated prices. Usually, does that result in higher consumption of agrochemicals or does that result in a better consumption or a higher consumption of the speciality chemicals or speciality molecules? 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 there's always what we call, when we put the farmers hierarchy in our mind, we say there are always innovator 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 innovation. 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 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 a 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. So I don't think they follow the math of, they follow economics. There are 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 be. The bulk of them will follow standard crop economics.

Hmm. Got it. So, when we say that the next season would be better would largely be just because we're assuming 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 if there is enough moisture available, crop acreages go up. As a result, when overall crop acreages go up, overall consumption also grows. So, it does mean something. I mean, as acreages shrink, it means something. When acreages grow, that also means positive.

Hmm. 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 ACM 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 setting their shop, but I have seen a lot of people facing stress on their working capital, for sure.

So, would that, I mean, what's your sense on it? Would that result in them?

In a normal situation, that should help companies which are very well capitalized. That would be a common thinking. But, I mean, I have seen sometimes, you know, these people, I mean, Smaller players, in spite of working capital constraints, they are able to thrive. There's a more figure out.

Got it. Okay, that's all from my side. Thank you.

I think what it does, though, put pressure on them, their ability to grow. So, they probably contain their own self because they are working capital constraint.

Correct. Okay. But, I mean, not a very major change in maybe competition coming down or consolidation happening.

All I can tell you, and this is something I'm sure 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 re-look at their valuations. Everybody thinks, you know, 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, this better environment.

Well, that is something I don't wish, right? I always wish farmers well. I think farmers should continue to do well. 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 industry to structurally change. And obviously, companies have to do different things. You know, well-capitalized companies will continue to thrive. And, again, markets there, companies with new products, and good R&D setup. For a smaller player, it's going to remain a challenging place. And government can do a lot of things, which we keep talking to government about it.

Got it. Great. Okay. Thank you, sir.

Thank you. The next question is from the line of Rajkumar Vaidyanathan from RK Investments. Please go ahead.

Yeah, good morning. Thanks for the opportunity. So, my question is on the maize crop. Given that the government has banned sugar ethanol, I just want to know what are the prospects for the maize, for the grain, you know, for ethanol, and also the crop prospects, because it's a multi-season product.

Yeah, so I think maize, to me, the tailwind still exists because of the food, I mean, what it is called, feed story continues, animal and poultry feed story continues. Now, when government is saying don't divert sugar to ethanol, will all suddenly, will it give a boost to maize? 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 trying to cap the price of ethanol made through maize. So, on one side, they're saying, I'm not telling maize not to plant, but I'm going to tell oil marketing companies, you cannot buy maize-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 skip 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. But more important factor is the water reservoir availability is low. So, the prospect for maize 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 mage being diverted to ethanol. So, I think it will be a normal season for mage. Then there's a spring season that happens after the harvest of potato. So, that's a later discussion. I think the way things are so dynamic right now, for me to say something, what will happen in February, March is also becoming very difficult.

Thank you.

Okay, okay.

And the second question is on the sugar. How much of contribution do we get from sugar as a crop? And also, what is your output?

So, sugarcane, I think we are a decent player. We can actually have a separate discussion on which crops contribute to us mostly. But for us, the rice, some plantation crops, some rubbish season crop, all of them contribute. You know, one of the things we were expecting this year is chili to play out well, but looks like chili prices are very high, but the area where chili gets planted, primarily in south, you know, water situation is not that good. So, if it rains a couple of times in the area, as chili is planted, I think fortune might, you know, come back. But at this point of time, I think water is the biggest worry for Rabi. Okay, sir. Thank you so much.

Thank you. The next question is from the line of Bijit Akhila from KIE Engineering. Please go ahead.

Yeah, 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 had to be done with the channel partners. That's already done in 1H, right? So for 2H, we don't really expect any lingering impact from the very season.

So, yeah, so I think it's different for different crop. Now, if you say Ravi, Ravi is primarily a wheat herbicide, a big crop, right? Now, wheat crop, you can already see pressure on the prices of herbicides. Now, 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 northern India already. When season has not even begun, farmers are just about to start planting a wheat crop in the Potiala region. And the prices have already started crashing. Is it too much of trading going on? I don't know. But it looks like this industry continues to suffer from excess supply, right, of every key ingredient when it comes to, you know, the real market operations, particularly on key crops and tree segments.

But having said that, as per our present view, whatever provisions have to be made for returns and repeats, they've already been made, and that's our hope that there won't be any lingering impact.

Okay, okay. So, at least from your company's standpoint, you feel you're relatively safe heading into 2H.

I think that way we have been very disciplined even on returns and all also. I know what we tell you, 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 1H 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 networking 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, you know, we do generate cash as usual for the full year?

Yeah, so I think 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 the 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. 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 March because the Kharib supplies will also start by then. 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 net working capital is a combination of seed inventory, which we should have even built in the past. And the combination of, obviously, delayed season also means delayed recovery from the market. And some of the elevated inventory of raw material of the crop protection. So, this combination of that, what happened is that we will probably moderate purchase now. And as a result, I think end of the year, we would still continue to generate free cash flow.

Yeah, also the… Yeah, sorry.

I think CAPEX part, yes, like we have been going very slow on CAPEX, just being prudent from the time, you know, we have all this bad news. H1, 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, sustenance CAPEX initiatives. So, I can say that broadly H2 will be more than H1, that's it.

Okay, but about, say, 50 crores from a full year standpoint 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 1-H standpoint also. So, is that primarily freight or is there something else over there? And the other one was just, you know, despite a very challenging 1-H, we seem to have done fairly well by holding

revenues and, you

know, earnings as well from a full 1-H 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 B2C side of things? Is it more prudence or, you know, what are the key aspects that drive this?

So, a couple of things I think. We said, look, we want to complement our portfolio when we did analysis. We said, look, we don't participate in 50% of the market, right? So, our participation in the segments we were absent, we have started significantly increasing by launching new products in those categories, right? So, that is helping. For example, this year of the... What you call launches which I made in 27 in the kharif season, they have already significantly contributed to the extent of 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 three, four years ago. They were not 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, probably 28, 30 products. 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 adding some 58 products. So, a lot of product churn is taking place. So, a lot of that is a combination of being very focused in what we do in the marketplace and also launching new products.

Yeah, just the other expense question, if you could clarify.

Okay, so on the other side, of course, we can separately give you detail, but one call out which I can say is that we do keep looking at M&A opportunities, so there would be fees related to those actually. So, that also comes in.

Thank you so much. Thank you. 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 RALIS India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your language.

Thank you very much. Thanks, everybody.