Sumitomo Chemical India Limited (SUMICHEM) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sumitomo Chemical India Limited Q4 and FY26 earnings conference call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involved risks and uncertainties that are difficult to predict. As a reminder, all participant clients 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. From the management, today we have on the call, Mr. Chetan Shah, Managing Director. Mr. Sushil Marpatia, Executive Director. Dr. Suresh Ramachandran, Deputy Managing Director. Mr. Kunal Mittal, Senior Vice President, Planning and Coordination Office. Mr. Anil Nawal, Chief Financial Officer. Ms. Deepika Trivedi, Company Secretary and Compliance Officer and colleagues from SGA, their Investor Relations Advisors. Now, I hand the conference over to Mr. Chetan Shah, Managing Director of Sumitomo Chemical India Limited. Thank you, and over to you, Mr. Shah.

And into October, curtailed farmers' field activities across the country. Thank you. The ruby season recovery was more subdued than we had anticipated. Biostimulants, regulatory constraints affected the PGR and biological categories for a significant part of the pandemic. Thank you. Thank you. We have a good time-level demand forecast and avoiding any short-term performance enhancing measures. Q426 performance that I want to single out for specific measure is the exceptional field engagement efforts that our team has.

We had to be safe. I think that because of the monster. The surveillance segment was impacted by regulatory constraints through March of the year. We are in December of 2025. We have additionally obtained the registration of a new biostimulant called Topgrain from our We generate approximately 8-10% of our revenues from biologicals, already well above the industry average of below 5%. We expect this share and absolute revenue contribution to grow meaningfully from FI27 onwards as the new framework takes full effect. On new products, seven products were launched during FI26. Lentigo and Xcaria Max, which are our proprietary technology, Patented technologies from our parent company. All the products have been accepted very well and we could meet our internal or exceed our internal targets even in a weather affected season. On digital outreach, on our continued expansion of digital outreach to farmers. Pages have been increased. 35% precision targeted digital campaigns. A 60% increase in digital touchpoints annually, with a 17% reduction in engagement costs. Our Sumitomo Connect and Sumitomo Field Connect Field Force applications are embedded in day-to-day operations, and we are rolling out our MDO tracking applications in the current financial year. These are substantive tradability investments, and they will compound our competitive advantage over time. The company also received external recognition for innovation-led marketing excellence, winning the Gen.AI-led Creative Award at the prestigious AgTech India New Delhi event for our digital campaign for Sumimax. Products launched in the past three years now contributes to approximately 8% of our total domestic revenue, a healthy and growing share that reflects the accelerating pace of new product adoption by the farmers. Looking further ahead. Our new product pipeline from SEC Global portfolio gives us strong visibility to the next three to five years. Out of the three or four molecules, only one which is Excalium has been, Excalium Max has been introduced, that is Indifine has been introduced in the past financial year. That leaves us with another couple of more products in the pipeline to be launched in the coming years based on the regulatory approvals. These products that have built, the speciality products that have built our speciality business to 30% of our domestic revenues, and it's the same new technologies where we will focus to build up the volume, will continue to drive the structural quality improvement in our revenue mix over the next several years. Now, let me turn to FI27 and talk about the opportunities and the risks we see. Thank you. Thank you. Demand side, the Indian agriculture sector remains resilient and continues to be optimistic as you would have seen the minimum support price have also been increased by the government of India. However, few risks warrant careful monitoring. First of them is timely and adequate supply of fertilizers for Indian farmers which may influence farming activities and cropping patterns or crop shifts can happen during the upcoming season. Second risk is related to monsoon. IMD has forecast the southwest monsoon to be 92% of the long-period average, placing it in the below-normal capital. And global weather agencies, including NOAA, are indicating 82% probability of El Nino emergence during the May to July period. Indian agriculture today is structurally more resilient than it was a decade ago, with nearly 55% of net zone area having access to ashore irrigation, and that provides a meaningful partial bond. However, our company supply chain planning is on the basis of normal career season, and we are calibrating our inventory build-up and channel stocking accordingly. The actual monsoon arrival over the next two days, few weeks, and the distribution over the next three to four months till September will be the most crucial and important variable for the industry to monitor. On cost and pricing, F527 will be characterized by It wins from depreciating rupee, escalating costs across raw materials, packaging materials, solvents, transportation, driven by geopolitical developments. As cost pressures are built already and continue to build, the company has been gradually and systematically passing on these increases to the market, and we have been recently successful in doing so till now. We plan. To continue following this approach, calibrated product-by-product market conditions and city price management, rather than a one-time blunt increase. We enter FI27 with production running at full capacity and no supply-side constraints. Our planning assumption is that, for now, demand is holding up and cost increases are being absorbed by the market. The situation in Q1-FI27 looks constructive overall, though we acknowledge that Q2-FI27 in the second half of the year will be largely shaped by monsoon outcomes and global dynamics, particularly in the context of the ongoing geopolitical environment. Overall, for FI27, we are cautiously optimistic of the upcoming season based on the situations I described above. With that, I hand it over to my colleague, Mr. Kunal Mittal, to take us through the next segment.

Thank you. Our company's balance sheet remains essentially debt-free. Our cash and cash equivalents, including liquid investments as on 31st March 2026, were at approximately Rs 2113, 2113 crore Indian rupees. Return on capital employed improved to 31% from 29% the year before. In our net worth crew, rupees 3.

107 business points. Profit before tax was Rs. 728 crore of 7% year-on-year at an EBITDA margin of 20.7% and improvement of 64 basis points. An exception charge of Rs. 16.1 crore was recorded in FA26 on account of newly notified level codes. Profit before tax was Rs. 728 crore of 7% year-on-year at a PVT margin of Rs. 22. PBT margin of 22.5%, net profit was 543 crore of 7% year-on-year, at a net profit margin of 16.8%. On working capital, our net working capital just stood at 103 days as of 31st March 2026. Thank you. Approximately rupees 3726 crore rupees as compared to 3534 crore in FI 25 and in case of approximately 5%. These outcomes in what was a challenging collection environment across the industry reflect the sustained discipline of our great management practices and quality of our channel relationship. The company continues to follow a rigorous, margin-based, profitability-first approach to working capital management and we intend to maintain and strengthen our discipline going forward. I also want to talk about our foreign currency exposure as the depreciation of Indian rupee has been a subject of market-wide discussion. Our export and import are approximately equal in value, running at roughly US$70-80 million each. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touch-tone phone. 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.

Your first question comes from the line of

Raj's Joshi from Chris Capital. Please go ahead, please.

Thank you for your opportunity.

No, sir. There is a lot of area disturbance from your side. Is it better now? This is much better, sir. Yes.

Yeah. So, good afternoon, team. I was going through your parents' presentation for the full year that ended recently. And in the presentation on the slide on ICT and mobility solutions sector, which is for semiconductor materials, there is a specific mention of the parents' planning for commercialization of high-quality semiconductor chemicals in India. In their deck. So I just wanted to get your color or your thoughts on how you look at this development and what plans, if at all any, would be for us in this segment.

We are working very closely.

Understood. And so, secondly, on the export piece, right, given the recent, you know, tensions in the Middle East, there's been an uptick in prices of certain products, both technicals and correspondingly from business as well. So, how is that expected to feed into both demand and correspondingly the elevated prices helping us in the margin front to some extent on the export side?

Yes, the price realization has been better, especially from, let's say, late of March, but it may not translate completely into percentage margin because the cost is going up and the price is going up. So it's probably along net neutral or plus or minus. It all depends on how the situation is going to be. If the war continues, if all the costs are going to keep going up or remain at this level, the pricing may be able to continue. More than the pricing, the supplies, which supplier is able to make the supplies as per the customer demand will play a crucial role in terms of the business.

Understood, sir. And in terms of volumes, is there any movement expected there on the export side?

See, it's too early to come in for the current financial year. Yes, the indications are there. It all depends on how the logistics situation is going to pan out, how the... You know, cost escalation is going to happen. How those country customers are going to afford to pay the, you know, in the current situation of cost. If they are willing to pay, then there will be upside. It all depends on, you know, how the situation is going to unfold in the next couple of months.

I understood, sir. And lastly, if you could please call out the revenue number for jails under the custom synthesis kind of division that we have when we sell products to our parent, if you can just call out that number if possible, which is classified as CRAMS or CSM, how you call it.

It is roughly in the range of 100 to 150 crore. Depending upon the market situation in terms of volumes at this current level. And as we have explained that some of the projects are underway in the implementation side. And once those projects are implemented from next year, next financial year onwards, we can, we are expecting some growth in those numbers. But for the time being, this number is roughly in the range of 100 to 150 crore.

Perfect. Thanks a lot for the detail on this.

Thank you. Your next question comes from the line of Propel Sane with ICICI Securities. Please go ahead.

Thank you for the opportunity, sir. I hope I am audible.

Yes, you are audible.

Yeah. Sir, a couple of questions. Firstly, the commentary obviously did talk about the kind of monitorables and constraints that may be there in FI 27, despite demand being resilient, the kind of monsoon uncertainty as well as the Gulf pricing, the Gulf conflict and all. Is it fair to therefore... Look at margins a bit more cautiously for this year. I understand that you did mention that cost increases are being passed on. But, you know, with the kind of momentum one sort of sees in margins being probably constrained by these situations, how should we actually look at the margin trend? Flattish versus this year or even a possibility of some decline that can be there? Just your thoughts on that. That was my first question.

Many years, I've been... Thank you. We are very cautious in ensuring that this cost does not go out of our sustainable margins. It has to be passed on. And we have... Are we sure that our margins are sustainable?

Understood, sir. Perfectly clear. My second question was with respect to inventory levels and working capital. Again, coming back to, you know, the uncertainties with respect to the supply chains of materials and inputs. Has there been any change in the kind of days of inventory that we are holding as of now, particularly for the first quarter?

No, what has happened is that we have deliberately purchased more and deliberately produced more during the fourth quarter in order to be ready for the new... Thank you. All those things, actually, ultimately will benefit us because prices of this packaging material or raw materials are constantly still going up. Right. And what has happened, I mean, what it has really proved to be a...

Got it, sir. Third question, if I may slip one more in. With respect to the new product pipeline, I believe Kunal did mention about the three, four new pipeline molecules that have been under development of which Escalia Max has already even launched and is showing great results. Just wanted to understand for FY27, can we expect any one of these molecules to be commercialized and launched? If you can provide some color on that.

Yeah, as I said, you know, Xcalia Max was launched during last year, and I also mentioned another molecule, which is a group company molecule, Sumitomo Biorational Company, a top-grain, a biostimulant. We got the registration towards the end of last year, which we expect to commercialize in the coming career, and there are one more product which we are expecting registration. Obviously, you know, once the registration we get it, our endeavor would be to launch within the financial area.

Got it, sir. Thank you very much. I'll come back in the queue. All the best.

Thank you. The next question comes from the line of Animesh Jain with Dalal and Bracha. Please go ahead.

Hello, thank you for the opportunity. So, can you tell me about facing any disruption in procurement of raw material or technicals? Because we have permission from our parent company for importing technicals from third party. So, it's for the formulation part or new launches or any disruption in the raw material?

These are for existing products, not for new products. And we are not facing any constraint on our supply chains.

Verification, this point which you mentioned that our parent company is allowed, as Shahsan mentioned, this is for the existing product, and only for two or three very specific.

My next question on Barrick's portfolio, because in last call, you have announced that we are facing some regulatory challenges. So, it's solved or it's still going on? Okay, thank you.

Thank you. Your next question comes from the line of Siddharth Gadekar with Equilius. Please go ahead.

Hi, sir. Just first on the domestic market, what kind of price hikes do we need to take assuming the raw material basket stays where it is today to pass the entire thing to the end customer?

It's very difficult to generalize. Product to product, it varies. Formulation to formulation, it varies. Active ingredient to active ingredient, it varies. On a large scale, can we say, you know, maybe, you know, 10%, 15% cost escalation depending on the product. Some products have even gone up to 20%, 25%. So it's very difficult to generalize. It varies from product to product.

But would it be a fair understanding that the revenue growth would be much higher given that raw material prices have moved higher in FY27, at least for the first half?

It's very difficult to say. The reason I'm making that statement is, you know, suddenly there are two issues. One is we know down the fertilizer supply. We don't know how the monsoon is going to play out, what the crop shift is going to happen, what the farmer demand is going to be there. If competition companies start reducing the price, then we will also are in the same market. We will have to drop the price. The second thing is the war situation. If the war stops tomorrow, yeah, it may take a few weeks or a couple of months for the situation to come back to normal. The minute the war stops and the thing started improving, then, you know, competition or people may not want to hold the price and want to get the volume. So it all is going to be, you know, played on all these developments, which you will have to wait to see the situation how it evolves.

The second question is on the KPX side. We had announced a 150 code KPX for DHH and we highlighted that we are in advanced stages to announce a second phase. Can you give some sense of what are we planning to do in the 150 code also and on the second phase, how large that opportunity could be?

So, as we mentioned last time, in the last, I think, quarterback, we have announced this capex of 150 crore to be developed at our Dahej site. This is the first project coming at Dahej.

Well, this is lastly, for you. And in this, what kind of product would we be doing? Because we have only highlighted it would be an intermediate for the herbicides. We will be doing the N-1 or we will be doing a KSM type intermediate in this?

We will not be able to disclose because this is a business confidential information. But to some extent, it is the ACOR integrated. It may not be KSM, but a good level of integration.

Okay, sir. Got it. Thank you so much.

Thank you. Before we take the next question, a reminder to all the participants, if you wish to register for a question, please press star and one now. The next question comes from the line of Ankur Perival with Access Capital. Please go ahead.

Yeah, hi, thanks for the opportunity. So, first question on, you know, the overall growth, volume growth in FY26, if you can help, you know, on that, maybe a breakup between specialty and how the generic portfolio has been performing.

Okay. If you have closely observed the last year, the prices of most of the agrochemicals were largely stable, by and large stable. So, there was a minimal... You know, growth in terms of price. Most of the increase that you see in terms of revenue is primarily from bond yield.

And also, I think, as I think Mr. Shah also explained, and Dr. Suresh and Manil San also covered in their thing, while the top-line growth is 3%, however, there were some negative factors of, like, say, the animal nutrition business discontinuation, which we mentioned. So, if you look at our pure agro business, it has grown roughly in the range of 5 to 6%, and almost everything through volumes, as Dr. Suresh mentioned.

Sure, Ghanal, that's helpful. Just, you know, within the portfolio, while herbicide has done good for us, will the growth over here will be largely led by the new products or even the existing ones ramped up? And secondly, specifically on PGR as fungicides, fungicides may be seasonal, but PGRs had been growing reasonably well earlier, but they witnessed a sharp decline this year. Anything specific here?

Yeah, I can explain it to you. See, in terms of herbicides, it's a mix of both generic products as well as speciality products. Speciality products, our flumeoxygen, soybean herbicide grew significantly. Second, the newly launched rice herbicide, Lentigo, contributed to the overall herbicide growth. Apart from our, you know, key branded molecule, Mara-71, a different formulation of glyphosate, recorded a very good growth. So, the herbicide portfolio growth is on account of leaks of both speciality and generic portfolio. In terms of PGR, mainly gibberellic acid, GA, again a big product for us, declined on account of really bad grape season. If you had observed at that time in the grapes, There was continuous rain, you know, a lot of grape area got damaged, and the spraying itself did not happen. That had a direct impact on our PGR, that is gibberellic acid portfolio. That's the reason you see a decline in the PGR portfolio.

And just to add, there was also this regulatory challenge, what we mentioned about biological. So in PGR, this one particular product, which is very important, gibberellic acid, Dr. Suresh explained the market concerns, but for several other products in this portfolio, which are bio in nature, including we and our subsidiary Bellix, we both face regulatory challenges. Many of these products could not be sold, like from June to say December or January, so for six months. Thank you very much.

Sure, sir. Thanks for the detailed answer. Second bit on the CAPEX side, just as a follow-up to the earlier, you know, question. What number should we take for, let's say, over 27 and financial aid 28? Because, you know, earlier we also highlighted that there were some products at an approval stage from Japan, which can be possibly backward integrated in India. So any, you know, status update over there?

So, Ankur, whatever capex we have mentioned, they continue on timeline and any additional project which we will announce in future, that will anyway take two years plus to be commercialized. So, I think, and as we have mentioned, I think whatever capex projects we have announced, we are not expecting.

Sure, Kunal. And just last one, if I misquise in, going back to the, you know, the Sumitomo Japan's sort of, you know, presentation, highlighting India to be a, you know, hub here from a semiconductor production, et cetera, perspective. Two parts. One, you know, the cash that we have on the books, will that be a large part of, will the large part of those, that capital allocation will be getting funded here? And secondly, from a technology point of view, from an R&D point of view, from a capability side, where are we, do we need a significant investment from, you know, Sumitama Japan to be transferred here or the existing team, you know, on the R&D side, if you can share some sort there.

It will be an existing team only. We are very good at it. Even Japan has... Pushing us. We need to...

And on your first question, Ankur, about the investment, so you are right that we are accumulating a lot of cash at this point of time. And as our parent company also announced that they want to use India as a manufacturing hub, especially our sector.

That's helpful. Thanks a lot for all the answers, and congratulations, Dr. Suresh, for your new role and responsibilities. Thanks.

Thank you. The next question comes from Riju Dallui with Antic Stock Broking. Please go ahead.

Yeah, hi, sir. Thanks for the opportunity. Now we are talking about, you know, the RM inflation and the cost passing to the firm. So how are we confident of passing cost to the firm? So far, we have done that. But if we look at in terms of the oral economics of the firm, Fertilizer prices already hiked maybe in the last one, one and a half months. And also, if you look at the other agri-communities, the prices are already stopped. So, like, even though we pass on our prices, is it possible that the volume can taper? Because farmers might shift towards the gendered product, not the specialty or banded product. Because of the cost pressure and the inflation.

Yeah, you know, as I explained, there are, you know, a lot of dynamics that is playing on. One is monsoon, you know, that can change the cropping pattern, number one. Number two, fertilizer availability, even before talking about fertilizer price. Fertilizer price, anyway, mostly it is subsidized, and I don't think it's going to significantly increase to the farmer. In terms of supply, fertilizer supply availability can impact the cropping pattern. If you look at way back, 22, 23, you know, all the agrochemical prices have shot up significantly, but still farmers were able to buy and invest in their crop and, you know, got good profits, good crop. So similarly, you know, we will have to wait and see how the competition is going to play, how the monsoon is going to play out, what is the fertilizer supply situation. All these things will play a role in terms of... You know, how much the farmers can absorb the cost. As I mentioned, you know, we are not taking a one-shot decision and trying to see that, you know, recover everything. So, we are taking a calculated decision based on the product, based on the brand, based on the popularity of the brand, we take that call, and that's how it will be, you know, it's a dynamic situation, so the decisions have to be passed, and we are geared up for that, you know, reviewing the situation. On a weekly basis, if not on a daily basis, and take those calls and implement the decisions.

Understood. ...is the least of the...

If I look at your harvest site portfolio growth in the Q4, that was very strong. Can you assume that it partially driven by the price size that we have taken over the month, sorry, over in the month of the March, and also particularly supported by the intermediate rainfall during the late rugby season? Both have, you know, influenced the growth.

See, primarily it is volume growth. You know, yes, price increase happened, you know, that was towards the middle of March or third week of March. You know, the major contribution would have been volume. And probably to some extent, I would say that, you know, since the bar situation was emerging, channel was a little bit skeptical about the availability of herbicides. And probably, you know, they got little early compared to, you know, what they would have done in a normal year.

Understood. And also, if I look at some of the herbicide prices, maybe one of our most dependent herbicide products, glyphosate, the prices have shoot up more than 40% to 50% over the last few months. So, was that kind of a pre-buying in the channel more than the actual demand-driven growth that we have seen in the Q4?

See, it's mostly glyphosate starts getting used only towards the end of April, early May. Before that, it's all stocking up, except maybe a little bit of usage would happen in North. So I would say the cost of raw materials, not only glyphosate, all the raw material costs have gone up. Yes, glyphosate has also gone up. So we also increased the price and the entire glyphosate industry increased the price. And there is stocking up on some of the products by the channel also.

Understood. And one last question regarding the CAPEX that right now we are talking about the, you know, the Senecon CAPEX and some other CAPEX. But if we, you know, look back at, you know, past year guidance about the 300 crores CAPEX at the Diage plant, so far we have only announced 150 crores CAPEX. So, how, like, in terms of how are you confident of, you know, announce another KTX at the DH plan for the Agree intermediates in the near term, and in terms of the product that are already, you know, in process of getting the approval from the parent company. So, how was the status for those products?

So, at this point of time, based on whatever technical feasibility studies we have done and discussed, technically, we are very, very confident, and overall, we are cautiously optimistic that some of these CAPEX projects should get approved, and we should start the implementation.

Understood. And sir, any kind of a timeline or stage that we are into this possible approval?

So, as we have mentioned that we are not looking at one particular point of time to announce a very large capex. We have announced one project just three or four months back, and periodically, like say every year or so, we are expecting, or maybe earlier than that, we are expecting the next project to be announced. Because implementation of, say, five projects cannot be done together. So, let's say, just on earth, every year, for next few years, we can keep announcing one month project.

Understood, sir. Thank you. Thanks for clarifying all my questions. Thanks. All the best.

Before we take the next question, a reminder to everyone, you may press star and want to ask a question. The next question comes from Halvik with ICICI Securities. Please go ahead.

Thanks for your opportunity, sir. I just want to know if you can just give a breakdown between the, you know, what was the volume growth and the pricing, you know, increase in Q4 and full year performance that driven the revenue?

Sir, I think this point was already addressed by Dr. Suresh earlier. If you look at our agro business, overall on a full year basis, the growth was approximately 5-6% and which is fully from volumes. So, I think it was stable. And if you look at the full year basis.

Okay. Sure. That's very helpful. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Sushil Marpatia for closing comments.

Good morning, everyone. Thank you all for asking some very interesting questions and our colleagues for replying the same. We hope we could address all your queries. FY26 was a genuinely difficult year for the Indian agrochemical industry. Adverse weather, regulatory constraint, global uncertainties, and cautious change. All covering in the same year, and yet in that environment, Sumitomo Chemical India delivered its highest ever profit. to the depth of the franchise we have built. Looking at our Are clear? Expansion Program at Bounadar Tarapur in Zahir.

Thank you. On behalf of Sumitomo Chemical India Limited, that concludes this conference. Thank you, everyone, for joining us and the Menardis Connected Alliance.

Thank you.