Best Agrolife Limited (BESTAGRO) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1FI27 conference call of Best AgroLife Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. 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. The statements are on the guarantee of future performance and involve risk and uncertainties that are difficult to predict. Today, from the management side, we have with us Mr. Surendra Sai, Executive Director, and Mr. Vikas Jain, Chief Financial Officer. I would now like to hand the call over to Mr. Sureen Rasai for his opening remarks. Thank you, and over to you, sir.

Good afternoon, everyone. A warm welcome to all. Thank you for joining us today to discuss Best Agroly's financial performance for the first quarter of the current financial year. This year started with an apprehension regarding the monsters. The early predictions indicated that in 2026 itself, El Nino could become the strongest event in the last 150 years and may push global temperatures to The impact on monsoons and its cascading effect on sowing and agriculture was a concern. In the first quarter of FY27, the key observations were delayed monsoon. While the deficit rate Thank you.

The question and answer session. Anyone who wishes to ask a question may press star and 1 on the touched on telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment. Participants, you may press star and 1 to ask the question. Question is from the line of Desha from Sapphire Capital Partners. Please, go ahead.

Hello. Am I audible, sir?

Yes. Yes, ma'am. Go ahead.

Yes. Thank you so much, sir, for this opportunity. Couple of questions, sir. Firstly, we've seen very strong gross margin improvement and EBITDA margin improvement. So, we alluded to the fact that it was because of the product mix. Could you elaborate a bit more on what has worked right for us? And we've seen 37% increase in the patented products volume. So, where are we seeing the most traction and how sustainable are these margins?

So, with respect to product mix, so there were two points. One knees. We cut the tail mostly. There are many direct products, which we decided to discontinue. So, that portfolio went down. And secondly, we also launched a new patent portfolio of three products. So, in addition to our previous nine products, we launched further three new products. So, as of today, we have around 12 patent products. And the increase in this patent portfolio went up by 37%.

Right.

In this segment, also, one of our key products, which is Ronfen, plus our three new products contributed at much higher pace, resulting in, if you see our overall portfolio of branded, in last year, it was around 45%, and this year, we reached around 65% in patented sales within our branded. So, this was the reason that the margins went up. And this will continue because, this is part of your second question, that these are sustainable. This will sustain because the portfolio of generic, obviously, once we have discontinued, will be lower. And as in when we are launching newer products, the proportion of trading will obviously go up, and then the margins will remain at higher levels.

Right.

Yes, Desha?

Yeah.

Yeah, just to add to what the... Very valid point is about sustainability. Now, what happens over the ground field and, you know, farmers and dealers is that there is a preponderance of wanting to have a bar. And a large number of the specialized in taking care. And they pulled out the gross margin. What we have been observing on the ground... It's happening on my...

Disha, sorry to interrupt you. We were not able to hear your question. Can I request to repeat from the beginning, please?

Hello, am I audible now?

So, in essence, in our previous calls as well, we had given an indication to say that the company is moving towards more specialized products. So our patent portfolio across... Over the last two years have been going up. And this year, in addition to launching three new products, we cut few of the low-margin generic products. So, we believe in current year or in future, it should be anywhere higher of 60%. Now, depending upon season, the crop, it could vary. So, we believe it would be anywhere between 60% to 70% where our patent portfolio should remain. Also for a total brand of sales.

And any four launches planned for this year, sir? Except for the three that we've already done? We've already done.

So, three launches which we have already done and been already there in the market. As of now, no new products for the current year because once we have launched, this would obviously take care of the current and the next season. But yeah, there are pipelines for which the products will come. Now it could be... Starting in January or it could be next year or as well. It all depends upon the... But yeah, already three are in the pocket, and pipeline is already there.

Okay, and just last question from my side. In terms of the demand and what sort of overall growth should we expect for this year and for the next year? How are you seeing the overall demand environment?

See, in the sense, if you have spoken to me saying things 10 days back, then we would have been in a worse situation because the rainfall was pretty lesser as compared to what we are today. So, within a span of 10 days, we see a lot of coverage which has happened. So, obviously, still the situation is difficult in few of the pockets of the country. But we believe at least we are better off than what we were 15 days earlier. And what we understand is it should get better in next 10-15 days. So, if all this goes pretty well, then... You will see the consumption also following and the growth also comes in the same manner.

Okay, okay. That is it from my side. All the best. I'll get back in with you. Thank you.

Thank you, Desha. Next question is from the Lion of Rayhan Syed from Tremita Asset Managers. Please go ahead. Yes, sir.

A little louder, please. Hello. Am I clear, ma'am?

Yeah, please, continue.

Yeah, sir. My first question is around your print index portfolio size. So, yes, sir, your print index portfolio is now contributing to 54,000 of vintage sales in part of the next 27 versus 45% last year. While branded sales must increase 39% from 35%, so what is the medium-term target for making this product contribution? And can this portfolio cross 75-80% of branded sales over the next 2-3 years? Like, what do you ask? What's your view in this deal?

It was not clear. So if I understand correctly, one of the questions was whether our portfolio of patent will go up to 80%, right? That's one of the questions. Yeah, yeah, yeah. Since we are, have to provide an entire portfolio of products, and generally how it happens is the season starts with generics, so our team has to engage with dealers and start with generic products, followed by specialized products. So it's very difficult for any company to just work only on specialized products. 5% and balance would be... I understand this was with respect to margins, you were asking on the generic trend.

Yeah, yes, that's a reason, yeah.

We work at the field level to create awareness among farmers, so the margins are higher here. So, till the time we are selling higher patent, our margins will obviously be on.

Okay, okay. My second and last question is on your market share regarding about Kharic season. So, you're considering the strong growth in Petment products despite the weak Kharic season. Can you please quantify its current market share as in general crop protection market and what do you expect this share to be over next three years?

See, in the sense, with respect to the season, it generally happens on like a day-to-day basis to say that, okay, today there was a good rainfall in, say, any part of the country. So then discussion on the sales team picks up there and then starts selling and the liquidation happens. So it's never about as a general condition, but the improvement in rainfall ensures that it improves in the business. So, and also, as I said, 15 days back, we were in not so good situation. But since we are speaking today, we are a little better off. So, and we are confident that within the next 10 days, it could be further better. So, it all depends upon the monsoon and how it is covering the country. And the best part about our product portfolio is we are there across almost all the states covering most of the crops. And providing better solutions. So, wherever there might be few pockets, for example, one or two of our patents, the sales are a little lower, but we are better off in other four products. So, that will continue.

So, just to add on to your query, I think maybe you are also looking from a perspective of a longer-term growth prospect. Would that be the right? Understanding? You are looking for that information?

Yeah, yeah, sir. Like, what do you argue for the long term regarding this kind of crop protection market? Like, how you are seeing?

Yes. So, from a macro perspective, while the crop protection market growth in India has been relatively on a modest scale, there are a lot of intricacies on a crop by crop or a region by region sort of a situation. The more detailed sort of analysis on that would take a longer time, but on a very high level, there are two, three things which are happening. One is, of course, the pest resistance. Although the IPM sort of a methodology has been promulgated by the government and is attempted to be followed by a lot of farmers, the integrated crop protection and the way to be able to juggle among different pesticides to be able to get the maximum yield with Modest. It's difficult to reach. In one-liner, there is an increasing amount of.

I'm going to press star and want to ask a question. Question is from the line of Amit from Robo Capital. Please go ahead.

Sir, we started tracking the company recently, and, you know, we see that last three years, I mean, three years back, you know, we used to do almost 190 crores of fat, and last three years, our revenue as well as bottom line has, you know, dropped substantially. So, could you just quickly summarize what were the challenges for last three years?

So, yeah, in a sense, for one quarter, we are discussing, so for two years, it will be much longer discussion. But quickly, if I summarize, one of the years, we had a challenge with respect to China price crash. So, just a year before that, we launched in a big way in B2C segment, which is through dealership network, our own brands. And we had a very good year, so also our inventories were higher, our procurements were higher, and suddenly there was a price crash, which affected our existing inventory, and it became like we had to sell at much lower gross margins. The next year, majorly, if I say, was because of the seasonal factors, we got a lot of sales return, and that also impacted our number. Also, in our factory operations, we were trying a lot on newer products and products which are not easily available in India and trying to compete. We spend a lot of time on those products, and the capacity is... Good morning, everyone, and welcome to the call. Over the last two years, because of which the numbers are at the top-line level as well as. B2C in the sense we are pretty new in the B2C segment, so we are learning since last 3-4 years, but also we are one of the fastest growing in the segment, wherein if I say that in 3 years from branded business, we went up from 400 crores to 1000 crores, and with the strategy of producing B2B, so we went higher in branded products. Because more of it, you get. It's your heart. We have much larger efforts on the market, on the field. So that also we spent higher in the last three years, but now we are trying to manage. These were the factors, but from whatever learnings we had, we are back to our growth phase.

Thank you for that. When do you see our top line reaching, say, 1,500 crores? And also, for a sustainable margin, is it fair to say that about 13% or 13-14% will be a sustainable margin for the business? I'm not asking for a specific year, but in general, how do you see sustainable margins for the business?

Yes, so, as I said, the reasons for each of the years were obviously different, because of which, and as I mentioned, that we were pretty new in the sense, because we keep on comparing ourselves with years who are 20, 30, 40 years in the industry. Obviously, we have to be compared, but we have our own challenges which we faced and which we improved. So, what you mentioned is right, at EBITDA levels of... We have achieved earlier as well, at much higher of 15% as well. So, 13-14 is a pretty reasonable ask to achieve for us under normal circumstances, and we are pretty confident that at each of the years, we should be able to have this levels of 13-14%, not as a specific guidance for this year, but yeah, but we are pretty confident that seeing that RQ1 went... Good and including July numbers, which already is ending today, which we see the results, the sales are going pretty good as per expectation. So, that number should be easily achievable. Even turnover as well, we are pretty confident. If not, touching it, but okay, if we are even closer also, the point is, till the time our specialized portfolio is higher, we will ensure that profitability will be higher. So, top line could be little here and there, but yeah, we are confident of easily.

Right, sir. And my last question is on the revenue growth, you know, on a slightly longer term basis, like three, four year basis. What do you think will be like a revenue CAGR? What is your internal aspiration to grow revenue?

Last year, in March 26, and from year on, we should be, in the sense, the plan is to easily be, achieve a growth of 10 to 15 percent each year. Now, there could be years where it could be a little higher and then a little lower as well, but yeah, on an average, each year should be anywhere between 10 to 15 percent.

Great, sir. Thank you. That's it for mine.

Thank you. Thank you very much. Next question is from the line of Kaushik and a visual investor. Please go ahead.

Yeah, congratulations on a good set of numbers. So, looking at the numbers, and I have been following the company for the last three to four years, so are you sure that you are not front-loading high-margin branded products to distributors in Q1? Good numbers and, like, take it in the Q3 and Q4, like, you have been doing in, like, last three years, or as in the nature of the...

All are patented products, but still, because of the delay in the season, our patented portfolio and especially few of the products are for South, and the season starts from August itself. The sales of patented products will continue. for the field. I'll see a little pollution. Yes.

I want to understand what are the margins of our retentive products and of the genetic products.

In the sense, it would be difficult to say that the Varyak was part in yet. Basically, patent, depending upon different patents, we have different margins, but as you can see...

If you can give a difference between the margins, how many basis points would the patent reports be higher in terms of gross margins?

Sorry, I couldn't get you. What was your last sentence? So, broad range is for most of the patented products, we are like... 40% plus margin, and for generics, it's in the range of, say, gross margins in the range of 15 to 25, 30%.

In this quarter, did we see any increase in raw material prices? So, I want to understand inflation in our raw materials. We were able to pass.

Could you be a little louder and repeat it, please?

If there's inflation in our raw materials, if our raw material costs go up, are we able to pass on the price hikes?

In the speech I had mentioned two things. One is we were aware that the prices were going up and in first week of April, even before the season started, we had increased our prices and then for further few of the products, we did a second round of increase in first week of May. So for most of the price increase, we have been able to pass on and for some of our patented products, rather we had done a selective increase as well. Overall, our price increase is positive, in the sense we were able to pass on the cost increase, and for selective products, we had increased a little higher as well.

So this quarter, did we have a low-cost inventory, which we had built up earlier, before the prices started increasing, and is that the reason that our margins are good in this quarter?

Good morning, sorry, but we are losing your audio in between. Can you please come in a better reception area?

Yeah, so I just understood the question, so possibly I'll just answer. So one is, yes, we had a little bit of inventory which was at low cost, which always happens in the sense, you always have 60 to 90 days of inventory. So there was part of inventory which was at lower cost. And then, obviously, there were a few inventories which during the panic time of Feb to March and April, we had imported at a higher price as well. And then later on, the prices stabilized as well. So, it's an average of low cost in inventory, buying at the time when there was a shortage situation and later on stabilization also. So, it's a mix of all three. So, not necessarily that are gross margins.

Just to add to the question, Mr. Vineet, so one of the key advantages that we have been trying to have is that, you know, we have the technical manufacturing unit, which is sort of... Feeders to the critical and important molecules which go into the patented product. So there is a resilience that gets built, and of course the challenge has been over the last couple of years has been the R&D to be able to have these complex molecules being produced at a price point which is comparable or competitive with China. The advantages of this particular... We have a supply chain, which is a feeder into our important molecules, is a resilience. The result of the fact that it took us a couple of years to get to the call.

Got it, sir. So in terms of now that the prices of our inventory would also have caught up with the increase in the price of our goods, our products, so do we expect some normalization in the EBITDA margins or can we expect this? 20% margin to continue. So, what are your thoughts on that? And for the financial year, 27, I mean, what kind of a margin range can we realistically look at?

In the sense, we are not giving any guidance to say that what could be the future, but generally the Q1 and Q2 are at much higher levels because of the season. So, you will see continuation of what we had done in Q1 and Q2 as well because Q2 is our major season, major quarter. So, you will see higher sales and higher gross margin continuing the way we had done in Q1. Q3, Q4 all depends upon how the rainfall pan out in next 2-3 weeks, and it all depends upon since then also. So, yeah, difficult to predict any specific number with respect to 20% of what we are mentioning, but what we feel is we should be back to our earlier growth trajectory and profitability. So, we are not, in terms of offline-wise, we are not... Very aggressive to say that we will do at higher 15-20% which we used to guide earlier. But now concentration is more on the profitability because we are also reducing some of the genetics which would have been much easier to get our top line so that we are reducing as well as the tail and improving our potential. So Q2 will be good. Q3, Q4 depends on season, how it pans out.

Go ahead, sir. Thank you very much. All the best. Thank you. Thank you, Najee.

Thank you. Participants, remember, start and want to ask the question. Next question is from the line of Sanjay. Sorry. An individual investor, please go ahead.

Hello, good evening. I'm an audible. Yes, please.

Yes, sir.

Go ahead. Yeah. Yeah. So, Sai and Vikas, I mean, really, congratulations on your good operational performance. I mean, it was really tough. The rain was delayed and the situation was not that. So, my, I mean, the margins were good, but definitely top line was a little bit subdued. And so, is the rain started late? Because of that, was there any impact on the top line in Q1? I think it could have been a better call.

This is, of course, in the sense, because the situation was such that it was pretty dry spell. So... Farmers and the dealers tend to delay their purchases. So if the rainfall is across places, then obviously the movement happens. So obviously you would have thought that the quarter would be a little better, but because the deferment of procurement from farmers and ultimately from dealers happens, so something gets... You are right to the extent that call Q1 could have been better with respect to the top line. But yeah, even if the rain happens now, we are confident to... So, a good Q2.

Right, and that means a lot of business has more from Q1 to Q2, and a lot of business has more from Q1 to Q2. So, if the rain continues, we are seeing that Q2 is going to be good if the rain continues, right, compared to last year. That rain continues. My second question was about this. I think funds, I mean, we... Warrant conversion didn't happen last year. I mean, last warrant was issued and those were not converted, so we couldn't raise the funds. Now, for this financial year, whether you have any plans to raise funds and by what means the CapEx plan for this financial year?

Yes, so, Capex presently is on hold in the sense, because in the sense you would have seen that last two years we have been struggling with respect to the number, the top line, as well as profitability. So, we didn't want to shift our focus into newer Capex. Rather, we wanted to first strengthen our existing business. So, Capex plans are on hold. But with respect to the QIP, which we have done, obviously, the last date was around. We are at a much lower level. We are in discussion with the investors to say, okay, what? Good morning, everyone. Thank you.

Get your point in terms of effect. Accurant capability would have helped us produce more material and be able to increase our top-line In a manner that does not stress. We have all the... They're looking for an opportune moment to be able to trigger those.

If we decide to launch the QIP, will it be in Q2 or Q3? I mean, if we decide, I mean, is it something?

Confirmation on that, as I said, is still under...

That's all from my side. Thank you very much, and all the best.

Thank you, Mr. Sanjay. I appreciate your comments. Thank you. A reminder to all the participants, you may press star and one to ask the question. Next question is from the line of Sakit Kapoor, from Kapoor and Company. Please, go ahead.

Namaskar Sundarji, Namaskar Vikas Rai. I hope I am audibed to both of you.

Namaskar Sakitji.

Yes. Thank you, sir, personally, for the opportunity and the opening remarks and the good set of numbers, which were not visible for quite a long time. So, firstly, in continuation to the earlier participants on the CAPEX front, if I'm not wrong, the earlier CAPEX, which was also put on hold. So, what is, firstly, the status on the nature of the sales, wherein we were trying to, I think, so expand our capacity and our existing facilities? So, I think there will be technical part, if I'm not wrong, correct me there. So, firstly, what is the update on the sales?

So, with respect to that CAPEX plan, based on that CAPEX plan, and it says deriving from that CAPEX plan, our growth projections also were given at around, say, 20%. So, in our earlier earnings call, where we said that we are going to go with the CAPEX. So, based on that turnover, we had given the projections of, say, 20% growth. But now, if you see that, since it is on hold, We are back to our normal organic growth from our existing business, which is around 10 to 15 percent. So that is the impact. But as I mentioned, was mainly to stabilize and to improve the existing business. And once we have that confidence, so if one year looks great and once you have that confidence, then automatically the Capex and everything will follow. So that was the reason we thought as a management that we keep it on hold. So that obviously will have some impact on our top lines in future, which We have mentioned that.

Vikalji, when you were mentioning about the current financial year and particularly for Q2, correct me here, you seem to sound confident that with now one month of the quarter underway and definitely with the sales reporting and the weather turning conducive for the industry, you are confident that? We are able to repeat, we are on track to be in line with what Q1 has been, and it is only in Q3 and Q4 we will be able to know how are the sales return going to happen, or can you just...

A lot of efforts. We see good amount of sales coming in July. I would like to August as well, which we see in various parts. I'm better off than minus 40, then today minus 15, and hopefully another one week, 10 days of good rain will ensure that. Thank you.

What percentage of the same caveat already being provided in sales return? And what is our thought process on it?

So we have provided a good amount of sales return. So we have taken a number of say 20% as expected sales return and we have done a provision of around 60 crores. So whatever number you see is actually 60 crores has. That sales return at a little higher level than tomorrow. It should not happen that. which are a higher-growth margin. So we have taken enough before.

You were mentioning about...

Yeah, yes, sir, yes. I'm just adding one line, sir. So basically, just as we were mentioning that, Rabi, we are cautiously optimistic. Overall, as you rightly mentioned, there is a 10 to 15 percent deficit in the rainforest. As far as the south reservoirs are concerned, they are a little bit on the lower side, but the overall reservoir capacity is more or less... as per the long-term averages. So, hopefully, in the south, we should be able to see, you know, as expected, even if assuming there is some amount of a deficiency in the Ravi rain call. So, we are cautiously optimistic. The lot of discussion is on the El Nino and the impact on that. The first half of the year, the El Nino's impact has been there, but relatively less. We will continue to monitor the situation. And we will plan to be able to change our placement strategies and our sales strategy based on how the sort of rugby season progresses.

Sir, because on a comparable basis, last year is not a comparable number on any front. There were many one-offs or the factors that have not played out earlier. So, only to keep the revenue based, so on last year's top line of, I think, so we were at 1,300 or 1,250, I think. Last year was 1,250, on control level. So what should we factor in with 400 crore top line for the first quarter as a number or a growth number on a base of 1250 last year?

We are not giving any projections to say that identity is where we will land because, again, the situation is still dependent upon certain factors which are not in our control, but we are pretty positive with respect to whatever sales we have done and then looking at July, plus the operations with respect to one of our factory last year where we were doing on our newer products, So, we feel we'll be at a better place this year. So, a few of the issues which happened last year and subdued our turnover, we are seeing that those will not play out and we'll be in a better position. So, not giving any number as of now, we believe that. So, we'll see a good effect coming in this year.

Ladies and gentlemen, you will take that as the last question for today. I now hand the conference over to Mr. Surindra Sai for closing comments. Over to you, sir.

All our investors, stakeholders, suppliers, and customers for their support as we transformed our business. We welcome the voice of investors and assure our stakeholders of our intent.

Thank you very much. On behalf of West AgroLife Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.