Earnings Call Transcript - XNSE:DHANUKA 2026-10-30

Operator

Ladies and gentlemen, good day and welcome to the Hanukkah Agritech Ltd. Q2FY27 post-results conference call hosted by Antic Stockbroking. As a reminder, all participant lines will be in the listen-only board and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahavar from Antic Stock Broken. Thank you and over to you, sir.

Manish Mahavar, Head of Investor Relations

Thank you, moderator. I am pleased to host today's Armin Paul of Dhanuka AgriTech, VF Leadership Team, represented by Mr. M.K. Dhanuka, Chairman, Mr. Rahul Dhanuka, Managing Director, Mr. Harsh Dhanuka, Executive Director, and Mr. V.K. Banjo, CFO on the call. Without any delay, I would like to hand over the call to Mr. M.K. Danuka for opening remarks, post which we will open the floor for Q&A. Thank you. And over to you, Mr. Danuka.

M. K. Dhanuka, Chairman

Thank you, Manish Ji. Good afternoon, Danuka, Chairman of Danuka Agnitak Limited, and I welcome you all to the Q2 FY2627 earning conference call. I have with me Mr. Rahul Danuka, Managing Director, Mr. Harsh Dhanuka, Executive Director, and Mr. V. K. Bansal, CFO of the company. On behalf of the entire Dhanuka family, I extend my heartfelt greetings to all our stakeholders and hope you have a joyful Diwali filled with happiness and togetherness. Diwali is not only a festival of lights, but also a celebration of hope, progress, and new possibilities. These values connect deeply with our journey as an organization. As we move forward, we remain focused on empowering farmers, driving innovation, and creating lasting value for our stakeholders. Together, we look forward to creating new milestones and achieving greater success in the years to come. As you are aware, Dhanuka Agritech is among India's leading agrochemical companies with a long-standing commitment towards advancing Indian agriculture through technology-led crop solutions. Over the years, we have built a strong pan-India presence, business with deep farmer engagement, a differentiated product portfolio, and a robust distribution network. Today, we reach more than 10 million farmers across India through 6,500 distributors and over 80,000 retailers. Supported by our manufacturing facilities, 4 and 40 plus warehouses, we continue to strengthen our ability to deliver products across key agricultural markets. The advantage for Dhanuka has been our consistent focus on introducing innovative products in the Indian market. Our partnership with 10 leading multinational agrochemical innovators from Japan, Europe, and the United States continue to provide us access to advanced technologies and differentiated solutions for Indian farmers. Our two R&D centers, supported by NABL accredited laboratories and a strong regulatory and product development team, remain focused on product registration, formulation development, and strengthening our future product pipeline. is experiencing a weak and highly subdued earnings season for the second quarter or FY26-27. Performance across major players is impacted by erratic and uneven monsoon rainfall and persistently high raw material procurement costs. The monsoon rainfall was lower by a sharp 13 percent, with significant regional and monthly variations across key agricultural banks. This has led to compressed volumes and margins across the industry. This weather disturbance significantly disrupted traditional farming cycles, delayed crop care applications, and led to a marked contraction of consumption at farmer level. Due to the dry weather, performance on herbicides were significantly impacted, while insecticide segment had good growth. Despite all these challenges, I am pleased to report that our company delivered resilient performance. Our diversified geographic footprint allowed us to capture demand from regions which had an availability of water resources. While generic crop production saw severe pricing pressure, our attention to specialized products and reintroduction of bio-stimulants, product range from Q2 protected our gross margin. Unlike the high-cost inventory issues, lagging the sector, our proactive raw material sourcing and lean distributed inventory levels ensured zero-channel stuffing and healthy cash generation. Looking ahead, we remain subdued in this year for Q3 and Q4. Channel inventories for Dhanuka are optimal. The initial movement for the upcoming Rabi season looks promising in certain regions. The key for the Rabi season will be performance of South and East Zones. In terms of financial performance for the second quarter, revenue form operations for Q2 FY26-27 stood at Rs. 657.51 crores as compared to Rs. 598.24 crores in Q2 FY25-26, registering a growth of approximately 9.91%. EBITDA for 52.97 crores as against Rs. 136.73 crores in the corresponding quantity of previous year. Profit after tax of 9.02 crores compared to Rs. 93.97 crores in Q2FY2526 reflecting healthy profitability improvement supported by product mix, operational efficiencies, and discipline cost management. Our balance sheet and cash generation continue to remain strong, providing us the flexibility to invest for future growth. The zone-wise contribution to turnover for Q2 FY2627 was North India contributed 31%, East India contributed 12%, West India contributed 28%, and South India contributed 29%. From a product category perspective, insecticide contributed 47%. You will notice as insecticide segment has done very well and 47% share crop came from insecticide segment, 25% contribution from fungicide segment, and only 8% herbicide contribution was there, and 20% others' contribution. At Dhanuka, we continue to believe that sustainable business growth must go hand-in-hand with farmer prosperity and national food security. Our continued engagement with Agriculture Universities, Prashivik Jam Kenes, and other scientific institutions remains an important part of our formal education and technology dissemination efforts. Thank you very much for your kind attention. We would now like to open the floor for questions. Thank you.

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their test on telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Manish Mahavar, Head of Investor Relations

Gentlemen, the first question is from the line of Mr. Storov, Jan, from HSBC.

Operator

Please go ahead.

Sourabh Jain, Analyst — HSBC

Hi, thank you for the opportunity. Sir, a little bit louder, sir. Thank you for the opportunity and many congratulations on very strong numbers. It kind of has surprised us when we look at some of the other companies, how they have delivered the current quarter. Can you please help us understand in more detail what led to such strong growth that you delivered of about 10% if you can break it down by, you know, the, you know, whether, how were you able to kind of gain market share in any of the regions or is it like more product-specific growth? How should we read this?

Rahul Dhanuka, Other

This indeed is a product-specific growth from the domain of insecticides. So, we all understand and appreciate it was an El Nino year. Internally, we kind of regrouped to understand that what kind of challenges farmers will face with an El Nino year and what will be the opportunities. And what we arrived at is that insecticides will have a better opportunity as compared to insect herbicides and fungicides. So we put extraordinary focus on our insecticide portfolio like LANEVO, MIAKO, MOTAR and on plant growth regulators and nutritional products for the farmer. We also kind of focused on the opportunities where water was available And channelized our energies, our demand generation activities, our working with the farmer in terms of education in the difficult situation, working with the channel, all was re-configured. Also, looking at the situation, we were not front-loading the market, front-loading the channel in quarter one. Anticipating the situation, we were not front-loading in quarter one. So, we were able to service the channel with the required products with agility from our supply chain. So, these three things is what led us to, you know, deliver this kind of the business.

Sourabh Jain, Analyst — HSBC

Thank you. Would there also be an impact of last, you know, year, the same quarter, there was a decline in the revenues? Would you also believe that this might be just like more than what we could have delivered otherwise, and going forward the next couple of quarters, the growth might actually moderate from what it delivered in Q2?

Rahul Dhanuka, Other

Yeah, so Q2 growth, of course, does reflect what we delivered in last year, the same quarter. It would certainly have a reflection of that. And we are maintaining, at Dhanoog Agritrade, we are maintaining our single-digit growth for the year. So, this 10% growth is not an indication of what we can expect in other two quarters.

Sourabh Jain, Analyst — HSBC

Okay, that is useful. Secondly, when I look at the segmental breakdown that you have provided, it seems north region you have grown fantastically well, about 22% in the quarter, and the first half your growth is at about 12%. So, is it like mirroring what's happening at the industry level that the north is doing better, or you were able to kind of capture market share in the north region, and if yes, then what has driven that?

Rahul Dhanuka, Other

Thank you. That I won't be able to, you know, kind of anticipate very clearly. I would certainly say North is industry's favorite. Got it.

Sourabh Jain, Analyst — HSBC

And Chairman, sir, also mentioned that, you know, going ahead, South and the East zone will be the key zones to be watched out for. So, how to read this better? You mean south and east zones, they will be most challenging zones for the industry and for Danuka because of the macro situation and the rest of the regions are better placed. Is that right reading?

Rahul Dhanuka, Other

In general, quarter 3 and quarter 4, we get returning monsoons. So, this returning monsoon influences eastern India, which is mostly Bengal, some parts of Bihar, Urissa, Chhachisgarh and entire south India. So, that's why the focus and the attention will be on the areas which receive this returning monsoon and so a good business opportunity.

Sourabh Jain, Analyst — HSBC

Okay. So, are you more positive on the southern and eastern India for the rest of this year or you have more confidence in the other regions? Because my sense for that…

Rahul Dhanuka, Other

Compared to central and western, we are more confident of the southern and eastern region.

Sourabh Jain, Analyst — HSBC

And despite the fact that the rainfall has been disappointing, the reservoir levels are very bad in those regions.

Rahul Dhanuka, Other

It is a relative thing. The relative situation of Western and Central India is worse than Southern and Eastern India. And so now the Western India and Central India opportunity of rainfall is almost over, whereas South and East still has the opportunity of rainfall. So we are positive about these opportunities materializing better than Southern and Western India.

Sourabh Jain, Analyst — HSBC

Okay. Sure, fair enough. Thank you so much, and all the best. I'll join back the queue.

Operator

Thank you. The next question is from the line of Mr. Rushabh Shah from BuggerLog PMS. Please go ahead.

Rushabh Shah, Analyst — BuggerLog PMS

Hi. Thank you for the opportunity. I have two questions. First one is a product named Lani We had launched in May 24, and we had also mentioned that this product has a market of 1000 crores, and you mentioned that it has done well. So, I just wanted to know how it has performed for us, like this particular product, and alongside two products, we had also launched Sporch and Microsuper. So, could you please let us know how these products have done?

Rahul Dhanuka, Other

Certainly. So, Lanevo is the insecticide we were talking about. Dhanuka has introduced Lanevo in collaboration with Nissan Chemicals of Japan. This product has done really well this year as well. It has been a favorite product for the farmers of Chili Belt of South India and rest of the country also. So, Lanevo is one of the products which is leading this growth of quarter two. Purge was a herbicide launched in Soya Bean, which performance has been moderate and was mostly between June and July. It was hit by a poor monsoon situation in Maharashtra, Gujarat, and Madhya Pradesh. So we are almost at par when it comes about Purge. And Microsuper is another product which has received a lot of trust and attention because this makes the crop situation drought resilient. So Microsuper is going to be a favorite product for the next quarter as well. And it has already done well so far.

Rushabh Shah, Analyst — BuggerLog PMS

Okay, so can you please let us know in terms of revenue how much Lanivo has done? Because you had mentioned that this product has a market of 1000 crores.

Rahul Dhanuka, Other

I appreciate your interest, yet we are not sharing product-specific numbers on this channel. Fine, fine.

Rushabh Shah, Analyst — BuggerLog PMS

Okay. And so my next question is, these buyer products which we were incorporating to companies in Brazil and Europe, and also some distributors, so just wanted to know where are we on those things, because the Indian business, we have started to reflect in balance sheet. But just wanted to know more about Brazil and Europe.

V. K. Bansal, CFO

So, our European subsidiary was established, and the intention of the subsidiary, both the European and the Brazilian subsidiary, is only to hold the registration, not to conduct any commercial activities. So, that is the situation around the subsidiaries. Regarding the customer appointment, we have appointed customers in about 14 countries, and we have purchase orders in hand from 5 countries, 5 of the customers, and we are in discussion with the other customers who are raising the purchase orders, as well as looking for more customers where we have not appointed as yet.

Rushabh Shah, Analyst — BuggerLog PMS

Okay. Thank you, Samad.

Manish Mahavar, Head of Investor Relations

Thank you, sir.

Operator

Ladies and gentlemen, a reminder to all, please press star 1 to ask any question. We have next question from Viraj Kacharya from Zimple. Please go ahead.

Viraj Kacharya, Analyst — Zimple

Yeah, hi. Thanks for the opportunity. Am I out of it?

Rahul Dhanuka, Other

Yeah, you are out of it.

Viraj Kacharya, Analyst — Zimple

Yeah, hi, sir. So, first of all, congratulations, I think, for a very good set of numbers in an environment which is very challenging. So, I mean, kudos to you and the team for a very good performance. So, there's a couple of questions I had. One is, you know, if you look at the quarter gone by, you know, we have seen a very good jump in our receivers as well. So, any color you can give that, is there a possibility of a higher sales return going into Q3 for us, given the way inventory is there, you know, in the channel, in the system for the industry? Any color you can save? Is it more of liquidation-driven sales, which we have seen, or is it more of channel-driven sales, which we have seen? And any color on price for the quarter?

V. K. Bansal, CFO

In terms of the value volume, we take back the material very much earlier. So far now, there is a...

Viraj Kacharya, Analyst — Zimple

Okay. Second question was on the royalty income, which we book typically from the Bayer products, and the B2B, the DH sales and EBITDA, as you can get.

V. K. Bansal, CFO

Yeah, yeah, yeah, so this was around 6.5 crore against previous year in quarter 2 is around 4.3 crore.

Viraj Kacharya, Analyst — Zimple

Oh, this is the bear income? This is the income, front income from the bear products, right?

V. K. Bansal, CFO

6.5 crore in quarter 2.

Viraj Kacharya, Analyst — Zimple

Okay, and the sales and EBITDA for the DAHEJ business?

V. K. Bansal, CFO

DAHEJ, the EBITDA is significant. In the half-year basis, DAHEJ loss was around 50% of the previous year. Last year it was around 3.5, now it's around 1.79. Okay, and same, sir? 55 crores.

Viraj Kacharya, Analyst — Zimple

Okay, got it. Just two, sorry? 55 and next one. Okay, just two more questions, sir. See, if you look at our contribution margins, right, even if I remove the royalty piece, you know, we have seen a very good contribution and operating margins in the quarter gone by. Now, this is considering the fact that some of the higher value margin segments like fungicide, herbicides, or even if I look at the ITI index, which is the new products carrier, very high gross margin, that has also been on the lower side, you know, lowest in the last four, five years. Still, we have been able to, you know, report a very good contribution margin and EBITDA margin. So, I'm just trying to understand the factors that is driving this.

V. K. Bansal, CFO

In terms of the gross margin, EBITDA margin, EBITDA margin improvement mainly because of the E-margin are being maintained because of the product mix.

Viraj Kacharya, Analyst — Zimple

So what I meant by gross margin also, you know, the kind of moderation we have seen elsewhere, you know, we have not seen that kind of a moderation playing out for us. And if I look at our own product mix for the quarter gone by or H1, you have fungicides share moderating, you have herbicides, which is also a relatively high margin category moderating. You have ITI shares, you know, new products shared, moderating. And on the top of it, if I look at our overall volume versus value mix, you know, value, there's a negative realization. Still, we have been able to hold on to our overall contribution margin. So I'm just trying to understand from that perspective what is really driving this. Okay, got it. Sir, just one last question. Any color you can guess in terms of the age? I think we are at close to 70% utilization, which we talked about. How are we looking at in terms of further ramp-up, any color in terms of new products, profitability and scale-up we expect over the next two years from Daesh?

Harsh Dhanuka, Other

Yes, so we have recently aligned to do some capacity expansion in the current plant, wherein we will be increasing capacity of existing products, As well as we will be adding new products, two new products in the existing plant itself. So, next year, FY28, we will be having four products in our portfolio, up from two, which we are currently selling.

Viraj Kacharya, Analyst — Zimple

What would these products be? Any color you can give? What are the target markets we are looking at?

Harsh Dhanuka, Other

Mostly, currently, we are looking at Indian market only. International market registrations will take time. We have not initiated the international registrations for these products, but yes, mostly the market will be for India, and the new products being added are mostly fungicides.

Manish Mahavar, Head of Investor Relations

Okay, I will come back in here. Thank you.

Operator

Thank you. The next question is from Mr. Umang Shah from Banyan Tree Advisors PMS. Please go ahead. Hi, sir. Am I audible? Yes, sir.

Umang Shah, Analyst — Banyan Tree Advisors PMS

You are audible. Thank you for taking my question. Sir, you had mentioned that there were three biostimulant products which you got registrations for, and I think one or two were still remaining. Were you able to get the registrations for the same?

Rahul Dhanuka, Other

We introduced the biostimulant products, denzyme granule and denzyme gold granule already. We have also received the approval for another product, which is denzyme gold in liquid formulation. That product still awaits some process, internal process clearance. We have already received the approval. We will be launching it in December.

Umang Shah, Analyst — Banyan Tree Advisors PMS

Understood, understood. And the second question was, in your opening comments, you mentioned that the industry was carrying a lot of high-cost inventory, but our understanding is that the prices of agrochemicals have been coming down over the last two, three years. So, if you can just explain what is it that we did that we did not carry this high-cost inventory, and was our understanding correct whether the inventory is actually high-cost or low-cost?

V. K. Bansal, CFO

You see, we are not saying that in some molecules, we are also having the high-cost inventory, but at the same time, we became very conservative since July 2026. Our purchases are very moderated from July, so whenever the price was decreasing, we buy on every decrease material. And there are certain molecules which we are having the good inventory, where we get the advantage of the price increase as well, carryover inventory.

Umang Shah, Analyst — Banyan Tree Advisors PMS

Right. Right. Right. Got it. Got it. And this would be one or two quarter phenomena, right? As the supply chain gets normalized. This is not something which would be very different. Like the computers will also catch up to us, right? Understood. Understood. Thank you so much. All the best.

Operator

Thank you, sir. The next question is from Mr. Prashant Biani from Ilara Securities. Please go ahead.

Prashant Biani, Analyst — Ilara

Yeah, thank you for the opportunity. Rahulji, while North has done pretty well in South and West also, the performance was quite good given the kind of deficit rainfall we saw. Sir, which crops worked for us in South and which product or which segment growth in this geography?

Rahul Dhanuka, Other

Chilli is the most important crop which worked in South. In addition to that, some oilseeds and pulses have also done well in South. Cotton prices were very high. Farmer went in for repeated insecticide sprays in cotton as well. East India especially received extraordinary attention with some vegetable prices being very high across the country. It is mostly insecticides like Lanevo and Decide and Motar which have done really well. Insecticides like Miyako which is again a Nissan Chemicals product is in demand. Our products Microsuper and Danzyne Gold which are plant growth Both stimulants and plant growth influencers have done well. So the crop segments and the product segments are, you know, kind of, we anticipated some of these demands and upgraded our supply chain to meet the changing local ground level dynamics that agility has helped us service the demand that the farmer had. And we also re-channelized our demand generation activities, our brand building activities in the right pockets, in the right crops, which has helped us capture that demand effectively.

Prashant Biani, Analyst — Ilara

Sir, in chili crops, was the demand merely in fungicides or insecticides?

Rahul Dhanuka, Other

Mostly in insecticides. Mostly in insecticides. Relatively much lesser as compared to conventional demand of fungicides, fungicide demand was lesser.

Prashant Biani, Analyst — Ilara

And, sir, while for rugby season, we are also cautious and expecting moderate growth, but, sir, how are we placed on the raw material side in terms of pricing, whether, you know, moderate sort of top-line growth, can we still manage to deliver margin expansion on the gross level? Some indication if you can share on the pricing of our raw material inventory.

Rahul Dhanuka, Other

It will be difficult to really predict the pricing of the raw material, which in the uncertain situation has swayed both ways. Some of the raw material prices have come down from quarter one further in quarter two. Many other raw material prices have gone up in quarter two. Wherever Whenever possible, and very selectively and very calculatively, we have passed on the increased cost to the market, as we were able to do, as is also visible in terms of the numbers. Going forward also, our imagination is that we will deliver a low single-digit revenue growth with some, say, about a 100-bit loss in gross margin and a similar or slightly more decrease in EBITDA.

Prashant Biani, Analyst — Ilara

Sir, is this mainly because of that, you know, we would like to play the volume game and try to accommodate less on the pricing side, or the demand environment is weak, and hence we cannot pass on any input cost inflation if we are seen? So, the margin expansion, margin contraction, what would you allude to more?

Rahul Dhanuka, Other

So, market, margin expansion will not be happening is what we imagined in the year beginning itself. The demand itself is under stress. So, passing on the increased cost completely may not be possible. So, that is one thing. Another is, basically, the revenue itself is not going to grow in that proportion. We are talking about single-digit revenue growth. So, that will also put some pressure because the cost will be what they will be. In fact, we are going to make increased efforts on demand generation and visibility where the right in the green pockets and right crop patches. Yes. There is no reduction in the margin.

V. K. Bansal, CFO

Basically, it is the impact of the, majorly on the GST refund side. If you eliminate the impact of the GST refund, then there is no impact on the gross margin.

Prashant Biani, Analyst — Ilara

Will this GST refund impact occur in Q3 or H2 also entirely, or it was limited for Q3?

V. K. Bansal, CFO

Yes, it is occurred in the entire, each quarter, each quarter.

Prashant Biani, Analyst — Ilara

And Bansuji, how much was the biostimulant revenue for Q2 and last year?

V. K. Bansal, CFO

You see, biostimulant Q2, in quarter 2, there is a, as compared to previous year, increase around 3.3 crore, as it is 8.4, 11.7 this year.

Prashant Biani, Analyst — Ilara

8.4 was for which quarter?

V. K. Bansal, CFO

I am talking about the four molecules, Danversa, Danyayam Gold, Danyayam Granul, Danyayam Gold Granul. Basically, quarter two, last year it was 8.4, this year it was 11.7. And as against four, only started with two molecules, which is Danyayam Granul and Danyayam Gold Granul. Danyayam Gold, we are planning to start sometime in December.

Prashant Biani, Analyst — Ilara

Diwali wishes from my side to the management and everyone on the call. Thank you, sir.

Operator

The next question is from Sir Sanjay from SKS Capital. Please go ahead.

Sanjay, Analyst — SKS Capital

Hi, good evening, sir. Congratulations on good state of numbers. So my question is about during the quarter, like last quarter, we have reduced our guidance to a single digit rate Because of the rain and arduino problems on that. And when we said that, I think about a month back or something, you may say that it will be in single digit. And month of September and October again, the rain was very, very less compared to what was estimated or expected on that. So are we seeing now because of this, the rubri season is going to be impacted more than what we expected when we said, okay, to be a single high-digit growth on that? And again, you mentioned that mostly because of the rain is going to be continuing in some areas of the country and very few areas, There you will be focusing during Q3 and Q4. So when the area reduces, the competition is going to grow, and then it will be impacting more on the pricing pressures and all. So are we still now going to maintain our growth for the year in single high-digit or it will be in single low-digit?

Rahul Dhanuka, Other

I think so. The position is that we will be growing by a single low-digit, and that is where we are.

Sanjay, Analyst — SKS Capital

Okay, okay. All right. Thank you very much, and I see you all the best.

Manish Mahavar, Head of Investor Relations

Thank you, sir.

Operator

So, we have a follow-up question from Mr. Viraj Kacharya from Simple. Please go ahead.

Viraj Kacharya, Analyst — Zimple

Yeah, hi. Thanks for the opportunity. Sir, just wanted to get a perspective. You know, we have seen a good amount of launches in the first half, some 93 products. Any color you can give among these which you think has a potential to be a blockbuster or a mega brand over a period of time. So any color into the opportunity landscape and, you know, the market size and, you know, which product you think we have a scope for it to be a very large brand over a period.

Rahul Dhanuka, Other

Mr. Viraj, did we miss hearing you? How many product launches did you say?

Viraj Kacharya, Analyst — Zimple

No, so we had a couple of launches in the first half, and some of them were 9-3. So, I just wanted to get a perspective, you know, if you can share, you know, the addressable market opportunity, and among these, do you think there are candidates, you know, which can, has the potential to become a large brand for us over a period of time?

Rahul Dhanuka, Other

The products that we introduced, so we have launched Polin, which is from Nippon Soda of Japan. This is expected to be a rice blasticide. Rice, as we know, is the largest crop of the country, 42 million hectares, and rice blast covers a large part of South India, East India, and some parts of North India Basmati as well. Currently, its cost position and price position is significantly higher than what market can accept. So we are not expecting it to really catch volumes in short term. That too with the stressed situation where paddy acreages have come down and the propensity to spend on a relatively new product and a high cost product will be lower from the farmer. So But we have introduced some other, and are going to introduce in quarter three, some other plant growth regulators and plant growth influencers, which will certainly have a better traction in our El Nino year.

Viraj Kacharya, Analyst — Zimple

Okay, got it. The second question, see, what we are hearing is there is quite a good amount of inventory in the system from other players especially. And given the way the fertilizer prices and the availability has, you know, behaved, channel and even farmers have prioritized that over crop production, you know, investments or purchases. Correct me if I'm wrong. So, just from our channel or a farmer, profitability or health-wise, any color you can give, you know, is it relatively impacted, you know, the ability to purchase? So, come next year, you know, the season, where to be normal, should one see a more faster normalization, or you think it will take much more normal time for the purchases and the consumption to normalize?

Rahul Dhanuka, Other

So let me talk from the channel perspective first. For the channel partners, in the market, sometimes we feel those results in inflated balance sheet numbers, but at Dhanuka, we don't really follow that practice. Every month, so it is not a quarter-end story for us. At Dhanuka, this is every month exercise that we do with our channel, which is cleaning them up and making them ready for the next month or the next season. Talking about farmer, the commodity prices are at an all-time high. Sugar prices are high. Ethanol policy for chili prices are all-time high. Cotton prices are high. Commodity prices being high, wherever farmer will have adequate irrigation or rainfall available, farmer will go for cropping, for planting, and will make profit. But the number of farmers falling in that category will come down this year because of a widespread El Nino dry and drought situation.

Viraj Kacharya, Analyst — Zimple

Got it. And last question was on the ITI index, right? I think if you see, we've been launching every year a couple of products, at least 4 to 5 and a few viewing 9.3. But, you know, we've seen a moderation in our ITI index. I understand current year is not really a benchmark for one to look at. But going forward, how should one look at, you know, this new product index evolving for us?

Rahul Dhanuka, Other

At Hanukka, we are really strongly committed to introducing new products and new solutions to the farmer, which are matching with the, particularly, ITI organizations, indication of how things will be infused. The changing dynamics require some of the, to become bigger in a given situation. The condition becomes a real favorite with the farmer. So, instead of pushing a hanji site or a herbicide, which will jump up my ITI number, I am focusing more on those products to the farmer. ITI will remain a side effect of my relationship with the farmer, which comes first. Farmer relationship and farmer value creation comes first.

Viraj Kacharya, Analyst — Zimple

Thank you very much, and I wish you good luck, and I wish you and the team are very happy.

Rahul Dhanuka, Other

Thank you, and same to you.

Operator

Thank you. The next question is from Mr. Dhruv Mushar from SDFCMC. Please go ahead.

Dhruv Mushar, Analyst — SDFCMC

Yes, sir. Thank you so much. The government has implemented this e-token system for fertilizers. I'm just wondering, probably from an indirect perspective, does it benefit the crop production market, probably less tagging by these fertilizer companies? Are you seeing any initial signs of that in the markets where it is already operating?

Rahul Dhanuka, Other

I think so. All these state governments as well as the central government has taken a very serious view of this concern raised by the farmer lobbies and also with the channel lobbies. Fertilizer e-token system to streamline sales, distribution and usage of subsidized fertilizer is a very important and relevant step in that direction. Still, whatever value farmer is not able to unlock, especially from phosphatic fertilizer, our products like Dhanzyme and Microsuper helps the farmer unlock the potential of the applied fertilizer, potential of the soil, and potential of the seed as well. So, we try to bring value to the farmer even from the fertilizer investment that he is making.

Dhruv Mushar, Analyst — SDFCMC

But from a tagging perspective, it is not changing anything? The fertilizer companies used to tag and, you know, I mean, push sales of crop protection along with fertilizers. That dynamics is not changing materially.

Rahul Dhanuka, Other

That has changed significantly over the last three to four months because of the state government's pressure and the central government's regulatory vigilance, that has changed significantly.

Dhruv Mushar, Analyst — SDFCMC

Okay. So, is it because of the e-tokens? Because this was always, this was happening for many, many years,

Rahul Dhanuka, Other

I really don't know the influence of e-token, although e-token will certainly bring benefits, but the vigilance has been harsh and sharper. So the execution is there. You know, the existence of the law versus execution of the law is what matters. It has been sharp across the board, Madhya Pradesh, Uttar Pradesh, Bihar, everywhere that we have traveled personally, We have seen the execution has been really sharp.

Dhruv Mushar, Analyst — SDFCMC

And the other question was, you mentioned about launching, for the right side, you mentioned about launching two products, fungicides. I'm just wondering, the plant is still at probably EBITDA loss. The strategy to launch two new products, is it because to get some scale and that is the minimum required to, you know, make an economically operating plant? Or the thought is that you are relatively more positive on the AI market in the next one or two years, And hence, the idea is to probably expand the time for you.

Rahul Dhanuka, Other

I don't think so. We should look at it as a short-term move, which, you know, in a capex would always appear negative in the short-term. Add to it the headwinds chemical synthesis industry has phased over last time.

Dhruv Mushar, Analyst — SDFCMC

If you can mention, what is the capex amount that you're, what is the capex that you're doing, amount?

Rahul Dhanuka, Other

We will be coming up with that clarity probably in the next round, but we are absolutely committed to doing CapEx.

Dhruv Mushar, Analyst — SDFCMC

Thank you so much in all the way. Thanks. Thank you, sir.

Operator

We have next question from Darshita Shah from DSP Asset Managers.

Darshita Shah, Analyst — DSP Asset Managers

Yeah, thank you for taking my question. Rahul, you mentioned that there is a sharp execution of law that you were seeing. Is that also applicable to the newer companies or smaller companies who are selling pesticides without registrations? I mean, is it applicable over there as well? Are you seeing any curtailment on that front?

Rahul Dhanuka, Other

I think so. That front can still benefit from sharper execution and better vigilance. A lot more to be done on that front.

Darshita Shah, Analyst — DSP Asset Managers

All right. Okay. And, I mean, any steps that we are taking or maybe the industry is taking any direction that you can give us as to, you know, where the conversations are going with respect to that?

Rahul Dhanuka, Other

Just late September, Fikki organized, which they call as Cascade, which is about looking at fake, spurious, duplicate products across industries, which included a special session on agrochemicals led by Mr. RG Agarwal. So this is first time that Fikki has included Thank you.

Darshita Shah, Analyst — DSP Asset Managers

Got it. And so, at the start of the call, you mentioned that there's a lot of pricing pressure that we are seeing in the generic products. What we understand is that these solvent prices have actually gone up. We are seeing freight costs also going up. How is it that generic prices instead are facing a lot of pricing pressure, despite the raw material prices going up? Is it because of oversupply, or what could be the reason here?

Rahul Dhanuka, Other

One thing is on the demand side, because we have seen a year of tepid demand. So, we are able to pass on the increased cost only in a selective and a calculated way, which we are doing. Yet, because of the tepid demand, we cannot pass on the entire cost increase to the consumer. So, that's the pressure.

Darshita Shah, Analyst — DSP Asset Managers

Okay. Thank you. Thank you so much.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to management for closing comments. Over to you, sir. Thank you for joining us, and you may now disconnect your lines.

Manish Mahavar, Head of Investor Relations

Thank you.