Sumitomo Chemical India Limited (SUMICHEM) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sumitomo Chemical India Ltd. Q2 and H1FI 27 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 involve risks and uncertainties that are difficult to predict. 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 touchtone phone. Please note that this conference is being recorded. From the management, today we have on the call Dr. Suresh Ramchandran, Managing Director, Mr. Kunal Mittal, Executive Vice President, 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 over the conference to Dr. Suresh Ramchandran, Managing Director of Sumitomo Chemical, India Limited. Thank you, and over to you, sir.

Thank you. Ladies and gentlemen, a very good afternoon to all of you, and welcome to the conference call to discuss. This is my first earnings call since taking charge as Managing Director on 1st September of 2026, and I would like to begin with a few words on the transition. First, on behalf of the entire SCIL family, I would like to extend our sincere thanks to Dr. Mukul Asher, who completed his term as Chairman and Independent Director on 31st August 2026 for his outstanding leadership and immense contribution to our journey over many number of years. As we shared on our last call, Mr. Chetan Shah completed his term as Managing Director on 31st August, 2026. Following shareholders' approval, he has been appointed as non-executive, non-independent director, and has been also appointed as Chairman of the Board. Mr. Sushil Marfathya also completed his term as Executive Director on 31st August, 2026. On behalf of the entire SEL family, I want to place on record our deep gratitude to both of them. Over many years, they've built the teams, distribution reach, channel, the manufacturing base, the brands, and above all, the culture of discipline that this company stands on today. We are fortunate that Mr. Shah continues to guide us as chairman and Mr. Marfathia as advisor, and both of them remain available to us in an advisory capacity. We also welcome Mr. Anand Mohan Tiwari to the board as independent director. The new management structure which presented to you in May is now fully in place. Mr. Kunal Mittal as executive vice president, together with senior vice presidents Mr. Hajime Shinomiya and Mr. Fumio Suzuki anchors the senior management team. Our commitment to you is continuity. The strategy, the financial discipline, and the farmer-first approach that delivered our results over the last several years remain unchanged. What we are adding is a sharper focus on execution, which we call our good-to-great initiative or good-to-great transformation, about which Mr. Kunal will speak. Now, coming to Indian agriculture and agrochemical industry, how did the industry perform over the last six months of the current financial year? H1, FY27 was one of the most difficult first halves for the Indian agrochemical industry in over a decade. The main reason was the erratic and unpredictable monsoon. The southwest monsoon arrived late and started weak. June rainfall was about 35% below normal. Generally, June month rainfall is very critical for the sowing operations by the farmers. Because of the delayed rainfall, the sowing of the crops, key crops, were delayed until mid-July. July rainfall was close to normal. Of course, it did not cover the shortfall of the June rainfall. August was dry again, about 16% below the normal rainfall, and September did not make up the shortfall. Overall, the season ended with a deficit of almost 13% of the normal rainfall. As per the IMD, this was the fourth weakest monsoon since 2001 and the weakest since 2015. Rainfall was very uneven. East and Northeast India had their lowest monsoon rainfall since 1901. And the South Peninsula was about 24% below normal. Of the 23 key agricultural states, 16 had deficit rainfall of more than 10%. Some even went up to 30-40%. Several states, including Maharashtra, Karnataka, Andhra Pradesh, and Rajasthan, have declared drought in large parts of their area. Furthermore, India as a country, IMD, has declared it as officially a drought year. Farmers were able to complete sowing with whatever water that was made available, was available by the monsoon, and Kharif acreage ended a little bit lower than the normal, about one and a half percent below the normal. Rice was the main exception, with the acreage almost lower by 4%. However, there were very few days of above-normal rainfall during the season, and crops faced long dry spells at the stage when they needed the inputs most, which impacted the agrochemical consumption. Delayed sowing and dry spells reduced herbicide consumption. In August and September, farmers skipped spray rounds, which lowered demand for insecticides and fungicides. Industry reports also show that farmers cut back on total overall agricultural inputs. Production of key crops such as rice, cotton, soybean, groundnut, pulses, and oilseeds is now estimated to be lower than by almost 10% depending on the crop. To begin at the beginning of the year, between March and May, the cost increased because of the Middle Eastern war. The technical prices went up, weaker rupee depreciation, and high packaging solvent and price cost added up to the overall cost of the inputs. Companies including SCIL passed on these increases to a large extent. However, because of the erratic monsoon, sensing that the season was not going to be normal, from June onwards, the prices started falling down. Some companies took the price correction. Some companies decided to maintain the price. The industry, their core, carried high-cost inventory into the period of lower volume and software price. We focused, the HCL team focused on key products which were critical for our success. Those products performed very well. Our key brands like Flumi Oxygen, which is Sumimax, Meshi, Ipskaya Max, Portion, ProGip, NatureDip, and Tribasic Copper, all grew in both volume and value. All of these were our specialty products. Together, these products grew about 22% in value over H1 of last year, despite the very weak monsoon. We launched two proprietary products in the last quarter. The first one is Topgrain, a patented grain-filling biostimulant technology developed by our affiliates, Metomo Biorational Company. In the entire world, we are proud to announce that India is the first country to commercially launch this product anywhere in the world. We have introduced it to a limited number of farmers this season, and our teams are measuring the yield benefit at the time of harvest, which is currently going on. The second product is Helibax, which is an insecticide launched in a limited extent starting from August to control key capitalists. We also continue to strengthen our digital approach. Our Xcalia Max campaign ran across several platforms, and one influencer video crossed 1.7 million views. Our SULIMAX campaign run the Gen.AI-led creative about at the AppTech India, New Delhi. Each year, we run more than 1,000 digital campaigns, reaching out to 17 million plus digital touch points. So our normal activities, we increased in reaching out to farmers through various means, including digital and physical through our employees as well as contract workers. Now, coming to the second half of the year, how the outlook looks like. We expect H2 of the current financial year to be remaining challenging for three main reasons. One, El Nino. The World Meteorological Organization expects El Nino to strengthen further, peak around December and continue through February 2027. It could be one of the strongest El Nino events since 1950, with rugby season, unfortunately. Second, water availability. Current estimates mention that reservoir levels across the country are at about 71% of the capacity and at least 25% lower than the last year at the same time. Since ruby crops depend largely on irrigation, water availability and soil moisture will decide how much area it is planted. Third, the northeast monsoon, it began on 15th October. It has rained well in a couple of areas in southern geography. IMD expects reasonably normal rainfall over the south peninsula. This should help the second season crop, but southern region starts with a large shortfall from summer. This led to lower soil moisture conditions compared to normal period. There are also some positives. Lower harvest estimates have pushed up the commodity prices, whether it's rice, cotton, pulses, oilseeds, all the commodity prices are going up, which means that the farmers are getting the benefit in terms of income, which would put them in a position to invest in their second crop, in crop protection, apart from other agri inputs. Where crop area holds up and prices remain firm, we expect consumption to be broadly normal. Price area is expected to decline because in southern states, rice cultivation is discouraged because of the low water availability. Chili depends on November-December rains, primarily in Andhra and Karnataka. On the positive side, grapes, season is looking better. Wheat is expected to be normal. Cumin is expected to be normal. States like U.P., Chattisgarh, these states, looks to be normal as of now, and the normal crop area would come. Our H2 priorities are stated below. Focus resources where demand is holding up. The states I mentioned, you know, like U.P., Chattisgarh, some parts of Mandra, Karnataka, and Tamil Nadu, which has rained well, our focus is in those areas to Do the business. Drive key products. We will push Excalia Max, Portion, Gibralic Acid, and Top Grain. For Top Grain, currently the team is following up on the rice launch to demonstrate to the farmers. There are good positive feedbacks which will help us to introduce it in the wheat in the rubby season starting from February. The consumption of this product will start. Manage channel and inventory carefully. We will continue to supply the channel based on the actual demand on the ground, and we have started steps to bring our own inventory down through H2. Price, product by product, we will keep adjusting prices to market conditions and realistic situation while protecting our margins. We also possibly see an opportunity outside of glyphosate due to recent regulatory restrictions on a competing product. Our goal for H2 is to grow over last year's sales, Where the market allows, while protecting profitability. Our portfolio reached strong relationship with farmers and channel partners, positioners well to do this. With that, I hand over to Mr. Kunal Mithal to take us through the next portion of this call. Over to you.

Thank you, Dr. Suresh, and good afternoon, everyone. We will try to cover two parts in this. First is about our transformation initiative, and second, something about our operational numbers and our capex plans. So, first, about the good to great transformation, which Dr. Suraj briefly touched upon. With the new management structure in place from 1st of September, we have launched a company-wide program situation. Our company delivered a stable performance.

Starting from Q2, FI27. Revenue from operation was Rs.907 crore, compared with 930 crore in Q2, FI26, down by 2%. Gross profit was Rs.369 crore, down 8%. Gross margin which was 40.7%, down to 40 basis points, year on year, due to higher cost inventory. However, compared with Q1 FI 27, gross margin improved by 149 basis points. Operating cost was well controlled. Employee expenses were Rs. 70 crore and other operating expenses were Rs. 113 crore. Both were largely flat year-on-year. Operating EBITDA was Rs.197 crore, down 15%, with an EBITDA margin of 20.5%, down 297 basis points. The net profit which was Rs.157 crore compared with Rs.178 crore last year, down 11%, with a net profit margin of 17.3%. For H1-FI27, revenue from operation was Rs.1971 crore compared with Rs.1987 crore in H1-FI26, down by 1%. From a product mix perspective, insecticides demand the largest contributor at 38% of H1 revenue at Rs.743 crore, down 4%. Harbicide contributed 25% at Rs.488 crore, down 6%. Metal phosphate grew 18% to Rs.186 crore. The animal nutrition and environmental health grew 14% to Rs.207 crore. Thank you. Thank you. Included an exceptional income of 26.9 crore. This was the insurance claim received from business instruction caused by fire at our Vavnagar plant in FY23. Including this, profit before tax was 498 crore of 4%. Net profit was 372 crore of 5% from Rs 356 crore. The net profit margin improved by 96 basis points to 18.9%. Earning per share for half-year was 7.45 rupees, against rupees 7.13 last year. Now foreign currency, so finally, let's have a word on foreign currency. Given continued volatility in the rupee, as we have explained before, our export and imports are broadly balanced.

Thank you very much, sir. The first question is from the line of Nitish Rege from Chris Capital. Please go ahead.

Good afternoon. Could you please share some update regarding the semiconductor chemicals

Yeah, so I think as I think you would have seen in some of the media coverages, our parent company Sumitomo Chemical Japan, which has a separate sector which is called ICTM, which is having this kind of a semiconductor business globally. They are one of the leading players in this particular segment. And our parent company is looking at India with keen interest. Our parent company has also made some announcement about this. And recently, MOU has been signed between one of the leading semiconductor players in India, which is developing a first fabrication plan for semiconductors in India, which is expected to become operational in a very short to medium term kind of a period. So, this MOU has been signed, and as per our latest understanding, more strategic discussions continues to be undertaken between such strategic customers and our parent company, and also some of the additional stakeholders, including the Indian government, because it is a very, very important project, even from the Indian government side. So the discussions are underway, a strategic level with various stakeholders involved in this project, and in the future, as and when this project...

Why is there so much uncertainty? I mean, we are doing, we are attending, you know, all these conferences and seminars in India. Our parent has spoken about this in their annual report. We have done the MOU, the stated timeline for the semiconductor plant in India to come online. But despite all this, we have still not announced concrete plans as in the India Sumitomo level entities. So why is this uncertainty about whether to do it, not do it, where to do it, how to do it? I mean, isn't there some kind of clarity yet as to how we are progressing ahead with these plans? And why are these that they are not being shared with the public at large?

Sure. So see, if you see the press release, which was announced by one of the strategic customers in India and also by our querent company, immediately after signing of this MOU, I think the press release did throw a lot of light about this. So this first semiconductor fabrication plant is expected to become operational in India in the next one or two years, as per our latest understanding. However, our products are not the candidates to start immediately. The localization plan is going to take some time. So, I think the discussion at a strategic level is on for certain number of chemicals which are also mentioned in the press release. And our understanding is that once I think both the sides reach a more conclusive understanding about supply of this product and localization of the project, a new announcement will be made. Intentions have already been made by the both sides. I think made it public also and the MOU has also been signed during Semicon 2026. However, dedication to the investors and our shareholders and also our...

And will we have a role to play? I mean, we in the sense, the India entity for which the call is ongoing, will we have a role in this opportunity as such?

As we mentioned, that strategic discussions with all stakeholders are underway at this point of time. Nothing concrete. Once the project reaches a little bit more maturity and a firm level of maturity, I think this kind of a point, I think, which is a very valid question that you asked, what will be the role of the Indian listed company? So, this discussion, we are also expecting to get firm of and finalized in due course of time. But till the time there is this kind of a discussion to reach a certain maturity and firmness, we don't want to go ahead of the time and make certain vague announcements which are more speculative at this point of time.

Understood. Many thanks. Thank you.

We'll take the next question from the line of Prashamp Biani from Ilara Securities. Please go ahead.

Yeah, thank you for the opportunity. Sir, what would be your short-term outlook on exports?

See, exports, if you look at it, even in the H1 assets, you know, our products to many countries have grown. The major setback or the major challenge happened in the quarter two, primarily due to overstocking of some of the products to export to our parent company. That's the only thing. If you look at our third-party products, wherever you export the third-party customers in different countries have grown. Only because of the overstocking or still inventory liquidation is happening in some of our parent company molecules across the globe, and that's where the real challenge is, which we expect to recover in the coming months and quarters.

Okay. And, sir, you also commented on, you know, opportunity outside of glyphosate. If you can elaborate on that, that would be helpful.

Yeah. See, what I meant was glyphosate opportunity has the potential to increase. You know, the competitive molecule, one molecule which is named Paraquat, was recently banned by the government of India. So that is going to leave us a vacuum or space for other molecules to take that space. And glyphosate is one among them. And we'll have to wait and watch and see how it unfolds in the coming months,

And lastly, sir, can you share what is the current Innovation Turnover Index for us?

It is in high single digit.

And how was it last year?

Generally, it's in a high single digit of 9-10% every year on year. That's what we target also.

Okay. Thank you so much.

Thank you. The next question is from the line of Jignesh Kamani from Nippon Mutual Fund. Please go ahead.

Yeah. Hi, Kunal and team. Just on the semiconductor, so all the MAU sign is between client is signed by the parent entity, right? As of now, formally, Indian entity has not signed any MAU with any of the client, right? Is my understanding, right?

Yeah, that is right.

Second, on the current environment, can you have some idea of how is the sales return currently happening, and on the liquidation side, are you expecting if there is any issue on the liquidation in the second half, and since inventory is slightly elevated level, do you need to have a higher provision in the second half on account of that?

No, I'm talking about smithomachemical. I'm not talking about the industry. Generally, as a practice, we do not have sales return policy, okay? Our teams have been trained mentally in a way that whatever we sell must be liquidated. So, to begin with, even in a normal season, the sales return is very low. So, given that this season was very challenging, our teams were also very careful in terms of what the inventory to be built and made sure that almost everything is liquidated. There will be one hour here which will be very minuscule. We don't expect the sales return to be impacting our second half.

Understood. And how is the performance of our new product in like XLMX and everything in the overseas market like Brazil, US, and everything, and how large this product has become globally. So, I just want to understand if you take a two or three downside when we think about manufacturing part of that molecule in India, how large a quantity it can be, just to understand on that size.

Yeah, I think you are referring to Excalibur Max, right? Discipline has been launched in a few countries. I think still few countries are yet to get the registration. It's named as a blockbuster product. Definitely, you know, it's doing well. I mean, these are initial years of launching, you know, A product to get to a maturity stage, it takes about four to five years. The initial feedback is well, very well accepted by the farmers in countries like U.S. and Brazil, wherever it has been launched till now. Of course, in India also been launched last year. In India also, the traction has been very good. We were able to grow the molecule almost by 50% in the first half, despite the challenging season. Yes, I can't put a number to it because that's global information. Definitely, this molecule is going to be one of the big molecules within the sumitomochemical portfolio.

And just to add to the manufacturing part, so as I think you are referring to this manufacturing which we are going to do in Tarapur of this product, so that manufacturing in Tarapur at a smaller level only to meet the India requirement. So currently, we have not approved any CAPEX for setting up the capacity for India for the global requirement point of view. That could be under discussion for future when this product reaches to a little bit more volumes. So at this point of time, this product continues to be manufactured in Japan and in India. For the Indian quantities, you'll be manufacturing by end of this financial year. But there are no firm export plan of indifference from India, which you represent as of now.

Understood. Thanks a lot.

Thank you. We'll take the next question from the line of Prasad Vadnare from Union Mutual Fund. Please go ahead.

Hi, thanks for the opportunity. I have a quick question. You mentioned that we've been launching some of the early stage modules from the global planet in India. Could you please throw some light on the same? And my second question is, like, if you see Sumitomo being a global company, they have multiple subsidiaries in global markets, and they have launched multiple molecules in the global market at different regions, try to look or try to enter into new geography with the existing business. So, what are the thought processes that they build upon? Like, do they usually enter through their existing business or they try to have their different structures? Thank you.

Yeah, I mean, sorry, you know, your voice was echoing from whatever I could understand, I will try to respond. I think your question was, just to rephrase it, is the priority for Sumitomo Chemical Japan, new molecules to enter into a geography like India, is it the local entity that would be preferred or somebody else, if my understanding is correct? So, yes, you know, I think Kunal mentioned that in one of his comments that, you know, India is one of the top tier countries along with Brazil, Europe, US, and of course Japan to be the first tier countries for testing and launch of any new product. So, you could see that Xcalia Max, we registered and launched in India. We registered and launched in India. There are a couple of molecules which are being developed. I mentioned in my remarks that Topgrain, a biostimulant product that was launched just about six weeks ago in India. The first global commercial launch happened in India. Okay, we are very proud of that, and more to come. And there are pipeline molecules that are being tested, which are just coming out of the discovery stage. So, clearly, the priority is for any SEC molecule or SBC, which is Sumitomo Biorational Company, which used to be called as VBS, Valen Biosciences. India is one of the key markets, and of course, you know, the only way they would come to India at this point of time is the priority is to come through Sumitomo Chemical India. So we will have all the access to the new molecules that are being discovered by Sumitomo Chemical or its affiliates, point number one. Point number two, yes, Sumitomo Chemical keeps discovering new molecules. Whether every molecule has to fit in India, maybe not. There are molecules that are being discovered to control soybean rust, which is a big problem in countries like Brazil or Argentina. In India, there is no soybean rust. So, that product would not have a fit in India. So, depending upon the product fit in this country, the product will be tested in India and will be registered in India for introduction.

Thank you, sir. Thank you. The next question is from the line of Nausha Chaudhary from Aditya Birla Mutual Fund. Please go ahead.

Yeah, hi. Hi, thanks for the opportunity. Just one question. On the good to great transformation journey, I wanted to understand what is the thought process behind it, and what exactly are we, you know, aiming to achieve here? If you can, in financial terms also, if you can quantify, what was the need of this, why this idea came in, and what are we trying to achieve?

Yeah, very good question. Thank you very much for asking this question. This is my favorite topic, or our favorite topic within the company right now. See, when we had an assessment of internal situation, we interacted with many people after, you know, we took over our system management. And across the employee population, you know, in different sites and at the company level in head office, Delhi, everywhere we interacted. And one common theme that came out was that we are a good company. How do we become great? You know, we are different from others. Yeah, I mean, this business can run, but unless we become a different compared to the competition, you know, it's going to be challenging for us looking at really the competitive future. So, when we took inputs from all the people and, you know, some of the leaders got together and really ironed out what are the initiatives that you want to do and, you know, we grouped those initiatives into five buckets. I think Kunal described those five buckets and all the functions, all the departments have charted out what are the initiatives that are, they are going to take it up and what is the transformation.

Background noise.

Sir, I would request, Mr. Chaudhary, please mute your line as the management is not able to answer. Thank you.

Yeah, so all the key leaders have identified initiatives under all of these things. Some of them would yield in financial benefits. Some of them are, you know, more of a qualitative benefits. So we are in the process, you know, this just happened three, four weeks ago. You know, the whole meeting and discussion happened three, four weeks ago. So, all those inputs are being collated as of now, and eventually the objective is how do we make sure that we move the needle to become a great company. That's the whole thing. And we would have a financial objective in the near future, you know, all the data is being crunched, and we should have a number, a goal in the next few weeks.

Great, in the sense, within your operating system, or is there something else which we are thinking because of the... The existing end-user we operate in brings a lot of volatility and challenges, so is there any thought process of using the cash or the balance sheet to bring more segments to the business and take it to the new high, or are we trying to make it more and more efficient within the operating range which we have?

Yeah, see, the utilization of cash is a different objective that calls for a larger discussion at the board. Of course, the team is open to give all the suggestions. That's also part of the scope, but this team just cannot take that decision. It will go into a larger level. But at the same time, there are many things that we have identified which can improve our efficiency, you know, simply as simple as, you know, wherever there are repetitive Can we use artificial intelligence? How do we engage people more and reduce that region? How do we be prepared and anticipate the costing structure that is going to come out of China or even manufacturing costs that we have? How do we reduce it? So that would be the largest focus. Of course, deployment of cash is also there as part of a smaller portion, but this team would not be deciding that. We can give ideas which would be taken to a larger forum for further discussions and decision-making.

And any timeline or tentative indication by when we should expect the cache to be deployed or to be used?

When we find a suitable opportunity, we keep evaluating multiple opportunities that come along our way regularly. So, you know, it should fit into our strategic scheme of things, and, you know, we should see a suitable opportunity. So, we can't put a definitive timeline by such and such time we need to use it. So, we keep evaluating opportunity, and for sure, as soon as we have something, we'll come back to you.

Thank you. All the best.

Thank you. We'll take the next question from the line of Rohit Nagraj from 361 Capital. Please go ahead.

Thanks for the opportunity. First question is on the herbicide intermediate plant at Dahej, with 150 crores of capex, what is the kind of asset terms that we are looking at? And, you know, the payback seems to be five years, so effectively the margins will be at company level margins. Thank you.

Yeah, I think so. When we announced this CapEx, we had mentioned the same point which you mentioned, that it is a very healthy turnover ratio, and previous period is less than five years, and the margin profile should be in line with the company-level margins. And all of these things were, I think, in form at the time of approval of the CapEx, and at this point of time, all the assumptions remain true, and there are no change in any of the assumptions.

Right. And second question is, we have also said in the same that this is expected to be followed up with additional project. So, does it mean that we will have to undergo additional CAPEX for any new projects or will the new projects be also part of this 150 crore CAPEX?

No, there is expected to be additional projects because the A site is more a new greenfinch site for future development over the next 5 to 10 years. We are looking to develop the A site. So this is like one step in the overall development of the A site with a 150 crore investment. This is only for one intermediate for one blockbuster rugby site. But like this, there are four or five blockbuster products which have been just launched or expected to be launched by our parent company soon. And each of these require multiple, I think, intermediates and the final TG product. So as a combination of that, the entire strategy for manufacturing this new blockbuster product is being made. And the head side is expected to play an important role in this entire development. So, this 150 crore is specifically a dedicated facility only for this particular intermediate for one herbicide. It is not a multi-purpose kind of a facility. And for each of these initiatives, whenever something is approved by our parent company as an anchor customer and our Indian company board as an investor and as an operating entity, I think we will make announcements suitable.

Thanks for answering all the questions and all the best. Thank you.

Thank you. The next question is from the line of Probil Sane from ICICI Securities. Please go ahead.

Thank you for the opportunity. I just wanted to go back to the maybe the near term a little bit. In terms of H2, traditionally in any case, H2 revenue run rate is much lower than H1 run rate. Given the current environment, Tandar Ranggit actually did much below historical sort of Ranggit, your view on that?

See, our objective is to maximize the opportunity. You know, this country is vast, and there are always going to be opportunities somewhere, okay? Unfortunately, the early signs in South India seems to be okay with the rains in Tamil Nadu as of now, And also some rain forecast or storm forecast expected in Andhra and Karnataka, it augurs well, okay? Time only will tell, you know, how this, you know, second season rains are going to be, you know, spreading out. Having said that, the grape season is looking good. Cummins in that area, grape cultivation area, the season is looking fine with good water availability. Cumin seems to be good. Wheat would be normal in North India or better deep growing geographies, including Western India. And South Paddy will come. If not full, it will come. You know, our focus remains on, as I mentioned, you know, how do we redeploy our resources, which we did in the first half also, and, you know, maintain the margin or improve the margin. So that's what our focus is. This country is vast. There will always be some opportunity. Yeah, it's not a normal condition. To that level, we are preparing ourselves and, you know, Great, sir.

And is it also fair to assume that margin trends will obviously continue to remain a bit more subdued on the lines of what typically happens for us in the second half? Or is there any change in the pattern that you can see for this year?

I think as Dr. Suresh explained, see on the revenue front, while the environment continues to be very challenging, but due to various sectors which were explained, in H1, if you see overall, we have delivered a stable performance. So even in the H2, yes, some environment remains challenging, but also there are opportunities. So as a combination of that, we are expecting a stable kind of a performance, including on the margin front. If you look at our first half margin, while yes, in Q2, it is little bit of a dip because of the inventory situation which we explained. In Q1, we got extra benefit of the opening inventory. But in H2, at this point of time, based on all the information available, our margin are expected to be in a normal kind of a range as per the historical levels. We are not expecting significant, any adverse sectors in either revenues or any kind of a margin, which you refer to. We are not expecting or projecting any kind of significant adverse kind of a situation at this point of time.

Understood, sir. And one last question, if I may. I think you mentioned when you were reading about India being included in the same tier as some of your more advanced countries, that there are plans to launch one to two new products every day. So, that is, you know, specific to the, you know, basically specialized products. I mean, I just want to understand overall what is the kind of product launch schedule that we have, maybe over H2 and for F5-20-8-1.

No, no, these are all long-term projects. What I meant was that, you know, when a product comes out of discovery and Sumitomo Chemical decides that, yes, this product needs to be taken to the market, India would be one of the countries along with, of course, Japan, U.S. and North America and Europe for testing. In the past, India was not the priority country. It was taken, you know, much later once it was commercialized in the rest of the world. Now that has changed. India opportunity is seen as one of the big opportunities, and that treatment is being given to India also. These products will take at least four or five years of introduction. It has to go through the testing process.

And I think what we have mentioned in our commentary and what we refer to is, yes, one to two good speciality kind of a molecule, but actual launches can be even higher, including some of the generics and combinations in the market, similar to the past trends.

Thank you very much for your time.

Thank you. The next question is from the line of Vidrum Mehta from ASK Investment Managers. Please go ahead.

Yeah, thank you, sir, for the opportunity. My question pertains to exports. So, you know, in your opening remarks, you alluded there was some shipment-related challenges which impacted the Q2 exports. So, if you can elaborate that, that is one. Second is country-wise, if you can, you know, help us understand, you know, which country looks more promising in terms of exports over the near to medium term, and where do you see some challenges with respect to, you know, the growth or the revenue growth, you know, country-wise. And thirdly, if I just look at the last two years, you know, probably our annual run rate for export is 680 to 700-odd crores. And, you know, in H1 also, we have clocked, you know, exports of roughly 300-odd crores. So over the last three years, more or less, our export has been flattish, despite the, you know, stronger opportunity with respect to, you know, new launches supported by our apparent. But that doesn't seem to be, you know, accruing, you know, if I just look at last two, two and a half years. And on the contrary, would it be right to assume that our volume growth would have declined? Because, you know, rupee has depreciated by, you know, 10 to 15 percent over the last 24 months from 82, 83 levels to 95 currently. So if you can just throw some color or, you know, give us more insight on the export front.

Yeah, as I mentioned, you know, the major export problem was primarily from our export to our parent company. Our export to the direct export to the third parties have actually increased in H1, okay, thanks to, you know, countries like some of the countries like Europe and Africa, okay. The U.S. also we have got some impact, but primarily our increase happened in Africa and limited to some extent in Brazil as well as Europe. The major setback was in our exposure to Japan, which is almost hard compared to the previous H1. The main reason is, as I mentioned, was the inventory built up that is getting liquidated now. If you look at last 2-3 years, there has always been one or the other unique factors that come into play in the export market, and that has come in this year also. That is the reason. We expect it to come back to normalcy soon. It depends on the country and all those things. But, however, our focus reminds, you know, on export, wherever we have registrations and, of course, our parent company, we continue to do that. And we have the capacity to fulfill their requirement. And in terms of volume, yes, I think the volume has got impacted a little bit in the current year also. I think to be precise about roughly 10%. Roughly 10% volume was impacted. But overall, you know, we expect that in the future, it should come back when the season becomes normal.

Sir, any guidance would you like to give from a medium to longer term point of view? What kind of growth can we expect in the export market?

As a policy, we do not give any forward-looking estimates or a forecast. So it is difficult for us to give any specific guidance. But as a trend, I think a lot of initiatives are being done to grow the business, both in terms of volumes and also overall in the business.

Okay. Thank you. Wish you all the best.

Thank you. The next question is from the line of Jignesh Kamani from Nippon Mutual Fund. Please go ahead.

I just want to understand the opportunity size in the biologics and the PGR portfolio. I believe it's roughly 10% for you, but still denominated by the only thing, the only large product is Gubric Acid. Now you launch top brand this time. I just want to understand parents, if you take about whether a buyer parent has a large portfolio and they acquire barracks also. So how large is the product portfolio put together of the global entity, and out of that, how many are relevant for Indian entity? Some idea. And in the next three to five years, what is the plan to launch some of them in India?

See, bio-rational, you know, as a stated theme, is a very important area for Sumitomo chemical globally as well as in India. You know, that's the reason we acquired Barix a couple of years ago. And, you know, after that, you know, we have been having challenging weather. Last year was complete washout because of rain. This year seems to be more challenging because of the droughts ever since we acquired. But that product has a very good potential. It's very difficult to put a number as of now. But our endeavor is to, you know, make it as big as possible. Okay, yes, Topgrain, we launched just about eight, seven, eight weeks ago, which is a product from Sumitomo Biorational Company based out of the U.S. And this is also a biostimulant. We have just launched seven, eight weeks back, and the first season results are coming out. It seems to be very promising. Fortunately, we have got label claim on the largest acreage crops like paddy and wheat. You know, since we launched late in the season, we could launch, and also we had very limited supplies. We could launch to a limited extent in the current season. The results are encouraging. Now, next year would be the full-fledged launch across the country. Apart from that, we are also planning to launch in the wheat in the month of February, March time frame where the consumption would happen. So, again, you know, the acreage is vast. You know, the results are encouraging, and we expected to make, you know, in both these crops, this as a big product in the coming years.

And since you talked about this opportunity for globally in India, roughly, like I say, globally and in India, about 4-5% businesses, I think, biorationals. If you look at our parent company, maybe it is a $500 million kind of a business, and expect it to grow at a much, much faster pace as compared to the traditional chemistries. And earlier, some of these biorational products, the applications more were towards the fruits, vegetables, and the smaller crops. But now, as Dr. Suresh mentioned, like this top grain and some more products which are coming, they are on a mass crop like rice and wheat. And that is why I think it gives us the positive expectation that some of these biorational portfolio and products can really be scaled up in the future.

It is safe to assume that if you take it from a parent point of view, you have 8 to 10 plus products which can be suitable to India and gradually in a period of 4-5 years, you will be launching every year some of the products.

I think globally, many of the products which are in our product portfolio, they have been tested or they are at different levels of evaluation. Many of those have been launched and that is why we are generating almost 9-10% of our revenue in India from that. So, there are no ready-made products available in other geographies which you can launch in India. Some of the products are under testing and some are being launched. And the future pipeline, I think, whatever is there, that will be available for us to launch in India.

Sure. Thanks, Irak.

Thank you. The next question is from the line of Soham Jain from Dalal and Rocha Stock Broking Limited. Please go ahead.

Yeah, thanks for giving me this opportunity. So, my first question is, our branded share of H1 export revenue rose to 41% from 34%. So, did the branded sales grow in absolute terms, or did the bulk export decline faster? So, I just want to understand, did our A&D and EHD or metal phosphide contribute to this, or how these products are classified? Right, yeah.

First thing, exports are not there in some of the other segment which you mentioned. All our exports are in the agri business, and this is a real growth which is there. It is not contributed by decline in other segment, and last part of this is contributed by Africa as a segment.

Okay, got it, sir. And, sir, if you can also, you know, highlight about the H2 order visibility from our Japan customer, and the where do the customer inventory levels in Japan stand today?

See, the demand side, whatever I think we are seeing because of the global situation, because weather conditions are different, so I think the exports to our clearing company, which anyway is a smaller part of our overall exports at this point of time, is expected to be on the sector side, but in the general exports overall, I think Dr. Sivesh already mentioned some of the points, so overall situation is not so much of the software side. We are trying best how we can recover this, let's say, first half with this high single-digit volume drop which we had. So the work is done. There is not so much of the softness overall, but in our parent company's export, the second half is also expected to be softer side in this year. But from next year, because of certain capex coming in, some additional revenues can come in.

Got it, sir. And still one more question. So, specialty share fell to 28% from 30% in H1, while generic rose to 72% from 70%. So, was this driven by specialty volume or pricing weakness or the stronger generic sales or both? And, you know, and what does it imply in your margins also?

It was more a factor of the generic products witnessing higher prices.

So, our share of Generic chemicals rose. That is what you meant, sir. That is what you meant.

Yeah, sir. The share of Generic has increased because there were higher price rises in Generic in line with the market.

Okay. And one last question, sir. So, with about 2,500 odd crore cash in our liquid investments and cash in our balance sheet, so, you know, and with the reported working capital stress among these smaller players, So, are we seeing any opportunity to acquire brands or registrations and distribution at reasonable valuation?

We keep looking at opportunities, but unless they are like really strategic, I think it is very difficult because like just from the point that let's say maybe the market consolidation is happening or someone is facing financial distress, I think it is not an objective because see a few years back, like say we did two acquisitions because these were strategic in the area for us. But if you look at strategic wise, like whether we are not present in any part of India, whether we need to expand the distribution, whether we need to add any new segment like which we are not doing as an insecticide or herbicide or anything like manufacturing we are not doing. So that way, strategically, many of the bases are covered. If we get some really interesting opportunity at affordable valuation, which adds to our strategy journey, surely we are interested. But just because, like say, some other players may be struggling, I don't think those kind of opportunities will really make sense from us from a strategic point of view.

But having said that, we keep looking at the market, and if we feel

there is some strategic rationale, for sure we would be very much interested to deploy the funds.

Okay, sir. Thank you.

Thank you.

Thank you. The next question is from the line of Ankur Perival from Access Capital. Please go ahead.

Yeah, hi, sir. Thanks for the opportunity. Just a few clarification. First, on the export side, you did mention of, you know, a specific product led overstocking and probably it will take some time for that, you know, the Japan demand to pick up. Broadly speaking, this will impact only this year's sales and next year's it should revive or probably this inventory de-stocking could take longer?

As per our understanding, this is only the this year's phenomenon and next year it should come back to the normal. And also because the FX project which we are implementing in Tarapur, they are not export focused. They are more focused to expand our domestic business. So, that is also one of the factors why it is expected to be soft this time.

Sure, and the herbicide revenue contribution should start coming in from the second half of next financial year, from a Japan export perspective.

No, no, the hedge side, that is expected from Q2 financial year, 28-29.

28-29, okay.

Okay. Yeah, what is expected to come is higher utilization of the existing facilities and some increase in the volumes.

Okay, fair enough. And the other markets, you highlighted, you know, Brazil has been doing okay, and we are also expanding our network or maybe, you know, supplying to more countries within the Sumitomo Japan's network there, or it's largely the same existing territories that we were working on earlier?

It's primarily the same existing territories, you know, our affiliate companies and third-party companies, which we have. And depending on the country, we also add new customers and new products to those countries in alignment with the local affiliator.

Sure. Sir, second question, you know, on the broader revenue growth of, you know, So, but this year, wherein the macro is such, you know, if I look overall, our trajectory historically had been to grow ahead of the domestic market, and it obviously grew even faster on the export side. How do you see, you know, the same thing playing out over the next three years? I'm excluding this year. So, let's say, 28 onwards. Should we continue to maintain the same trajectory on the domestic and export fund, or there could be further acceleration given the new product launches, India getting at par status to the global markets, new product launches, etc.? How should one look at it?

Yeah, our endeavor is to, you know, accelerate the growth rate, but everything depends on the environment. You know, nobody thought this year would go even till mid of June. You know, we never thought, we never believed in Nino. That is going to be it. We were optimistic. And last year was completely opposite. It was completely raining all over India. So, if the external environment supports us, for sure, with the kind of products we have launched, and a couple of more products lined up for launching in the next subsequent two years, that should help us to accelerate the growth. Everything depends on the environment. Internally, we have the channel, we have the team, we have the fundamentals very strong. It's just a question of external environment supporting to accelerate our growth.

Sure, sir. And just last bit, on the margins front, I appreciate the cost, you know, cutting and cost controls that we have displayed in the first half, largely maintaining our sort of, you know, EBITDA margins there. All the RM inflation in terms of pass-through, et cetera, is already there. So whenever the revenue ramp-up happens, there will be a significant operating leverage coming in. Wouldn't that be a fair thought?

Yeah, I think that is what our belief is, that is the situation. From RM delta point of view, RM cost delta point, there is nothing negative at this point of time. Yeah, and you mentioned that inventory situation is... Yeah, in the Q1, we got little extra benefit because of low-cost inventory, and some of those sectors have already been reversed in the Q2, which you can see little bit of a drop, few basis points in the margin profile, but through operating leverage, we could monitor the overall profitability situation, And for going forward, we don't expect any adverse situation because of RM escalated costs. Unless the situation changes further, at this point of time, there are no such situations.

Yeah, yeah, that's fair. Thanks a lot, Kunal. Thank you for all the answers.

Thank you. The next question is from the line of Imaneshu Binani from Anandrati. Please go ahead. Mr. Binani, I have an alternative line, please. Yes, sir. Yes, you're audible.

Yeah, so thank you. Thank you, sir, for taking my question. So again, harping on the semiconductor piece of the business. So just wanted a better clarity in terms of how are we actually placed into this. So are we like into the still into the discussion stages in terms of how the arrangement would be, if at all it would be through the in this identity or through a separate whole new subsidiary of the parent or how are we actually placed in terms of like if at all we are going for it. So, which are the products? Anything, any better sense on this should be really helpful.

So, Imanju, I don't know, I think maybe you joined a little late in the call. I think this point was adequately addressed in some of the earlier questions. And just to very quickly summarize, our parent company has signed a MOU with one of a very large anchor customer, semiconductor customer in India, which is developing a lot of those discussions. And whenever the discussion reaches to a mature and firm level, wherein localization and these kind of investments and plans are finalized, the role of Indian listed entity will be finalized in due course, and it will be informed to shareholders. At this point of time, the discussions are not mature to that level for us to make any formal announcement to our shareholders at this point of time. But we are monitoring and the discussions are progressing well between our parent company and various stakeholders.

Got it, sir. So, sir, can we, like, safely assume that maybe there is a high probability in terms of, like, this getting, like, landing into the listed entity than that of the holding subsidiary of the parent?

How should I specifically comment anything at this point of time?

Okay. Okay. Got it, sir. Got it.

Thank you. Thank you. The next question is from the line of Ashish Konajay from Leo Capital. Please go ahead.

Thank you for taking my question. I don't know if I heard right that the Rahej herbicide plant will be operational in Q2 FI 28. And secondly, can you also guide us on how much CAPEX is planned over the next few years?

Right. So, I think on this Harbi side, intermediate, which we are developing in the Dharaj as a first project, that is expected to be commercialized in Q2 financial year, 2028-29. So, more specifically, the calendar year would be 2028, sometime, say, July to October. Kind of a situation. We will see if something can be pre-poned by say a few weeks or so, but at this point of time, this is the same timeline which we announced when we announced the CapEx also, in January 2026.

Got it. And on the future CapEx side, sir?

Yeah, so on the future CapEx, I think in the past, I think we have been always maintaining that about 50 to 70 crore kind of a maintenance and de-bottleneck kind of a CapEx which we have been doing. In addition to that, whenever certain projects, additional projects, special projects are approved, we keep announcing those characteristics. At this point of time, we do not give any forward-looking statement for any of the items. So, it is difficult for us, but as a trajectory, yes, we are working on several opportunities that how we can develop the site for more additional projects and whenever something, all our technical studies have been done for that. which are under discussion with our parent company. Technically, we feel very confident that several of these projects can be implemented, but whenever these projects are approved by our parent company as the key technology provider and the anchor customer, and our listed entity, which is the investor and operating entity, I think whenever these projects are approved, it will be surely communicated with our investor.

Thank you. Thank you, sir, and good luck.

Thank you. The next question is from the line of Abhishek Sharma from Nine Rivers Capital. Please go ahead.

Hello. Good afternoon. Thank you for the opportunity. So I just wanted to understand our strategy, right? We've seen various other peers diversify into other sectors to reduce the at-time exposure. Why have we not taken this call? Why have we been slow in doing this? And just to follow up, right, we have around 2,500 crores of cash, right? If we are not certain in which area, let's say, we want to diversify, is it not better just to return cash to shareholders?

Yes, so on the first point, I think our company's scope, we are part of the agro and life solution sector in our parent company. And the primary focus of that is agro business. But in addition to agro business, we are also diversified into certain segments within the same sector, Such as environmental health product and also animal nutrition product. So we believe that within the sector we are well diversified. For, yes, I think some of the companies you mentioned, we have noticed that some of the companies which are dominantly agrochemical companies have diversified into other segments. But at this point of time, we do not expect that any other segments become a very important driving sector for us in the future. Our primary focus continues to be the agro and these existing businesses like environmental health and animal nutrition. And we see a lot of growth opportunities within this sector itself. So, that is our primary focus. Having said that, our parent company has several additional businesses and sectors, so we keep discussing with them at a strategic level, whenever the time is right, how Indian entity can play part in some of these expansion of these businesses in India, but at this point of time, these discussions are at a discussion level, so whenever things mature, we will certainly be looking to announce, I think, some of these areas, and second point which you mentioned about the deployment of the cash, So, at this point of time, we believe that there are opportunities which are possible for us to deploy the cash in Indian market because India as a market is growing at a very, very fast pace and also the agro business in India is growth and give this cash return to the shareholders. At this point of time, this is our thinking. But you mentioned that if there is no usage of the cash, it should be returned to the shareholders. So, we will put it to the board, and our board will keep taking, I think, decisions. But at this point of time, we all continue to believe that there could be growth opportunities in the company itself.

God, sir, just because, you know, it's been around three years since we've been discussing with the parents, right? And, you know, when will these discussions practice for Indian investors?

So, obviously, when we understand your point, it is very difficult for us to give any specific timelines at this point of time, because several discussions are at various stages, but sometimes these strategic decisions are a little bit more cautious, because we don't want to make any mistakes and take up a little bit of a hurried decision. While, yes, it takes time, but we can assure you that discussions are on, and whenever something reaches to a maturity level, it will surely be announced.

So, because, sir, just a few, you know, the premium at which Sumitomo trades, right, in the market is also basically because of the optionality of getting into pharma, CDMO, electronic chemicals, hemicron chemicals, the business in which the parent is already there. So, you know, once if you're saying that, you know, there is only Atkin which we will focus on, then, you know, the multiples will also, we don't justify the multiples, right? So, you know, just feedback on that side. Sure, we understand, I think, your views.

Mr. Sharma, does that answer your questions?

Yeah, just one last piece of this, we expect better, you know, governance standards, right, coming from a Japanese MNC on this front. There's, you know, a lot of uncertainty around various pieces, especially the semi-column side.

Right, so I think, see, from our side, I think we follow very high standards of corporate government that we want to, I think, communicate to the investor community in a very, very, very realistic situation. So, as the situation is there, we are trying and providing update to our investors instead of providing any speculative or future and forward-looking kind of answer. So, we have been very, very cautious in our communication, and in the future also, we believe that we will follow this, even like, say, whether there is any estimate or projection, we follow A cautious approach, and that is what we believe is better from a transparent government point of view.

Okay, sir.

Thank you. Please and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to Dr. Suresh Ramachandran for closing comments. Thank you, and over to you, sir.

Thank you. Thank you all for your time and your thoughtful questions. We hope we have addressed them. If anything remains, our team on SGA, our investor relationship advisors will be happy to help. The first half of this year tested the entire industry. Through it, SEIL kept its revenue stable, protected its margins, grew net profit, and strengthened its balance sheets. We remained cautious on the near term, but confident in our direction. A differentiated portfolio, deep farmer and channel relationships, a strong pipeline from our parent company, and the team now focused on taking the company from good to great. As we approach Diwali, the Festival of Lights, on behalf of the entire SEL family, I wish you and your families a very happy Diwali and prosperous new year ahead. Thank you once again for your continued trust in Sumitomo Chemical India. We look forward to staying engaged with you. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of Sumitomo Chemical India Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.