GSP Crop Science Limited (GSPCROP) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the GSP Corp Science Limited's Q1 FY27 Earnings Conference Call. As a reminder, all participant minds 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 touchstone phone. Please note that this conference is being recorded. 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 the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Bhavesh Shah, Managing Director from GSP Co-op Science Ltd. Thank you, and over to you, sir.

Yeah, good morning, everyone, and thank you for joining us today on our Q1 F527 earning call. I am Bhavesh Shah, MD and chairman of the company, with me, Shensh Shah, Executive Director, and also Ed Sector, IR agencies. I hope all of you have had the opportunity to review our financial results for the first quarter of 2017. Overall, the financial performance in QR FY27 was stable, especially concerning the volatile operations environment. We are a research-driven agrochemical company specializing in the development and manufacturing of insecticide, herbicide, and pesticides, also plants PGR. In India, with over more than 40 years experience in the agrochemical industries, GAC is built on strong foundation of diversified product portfolio of technical and formation, established customer relationships, and growing presence across domestic and international markets. As a core of our business, in our manufacturing capability, we operate multiple manufacturing facilities across India, producing both technical and formulation. Technical form the active ingredient used in crop production products, while formulations are the finished products that ultimately reach farmers. At GSP, we are not a single format agrochemical company, rather an integrated one. Some companies in India are only made formulations and some only manufacturing technical. We are doing both technical and manufacturing. We operate across three different channels, domestic B2B, domestic B2C, and also export. Now, we have more than 6,000 distributors in India. Our comprehensive portfolio for the domestic market includes more than 200 product formulations, also more than committee technicals. Strong innovation pipeline, us, we have more than 100 patent already granted product and also we have applied more than 100 applications under process. Our export portfolio also, we have almost 175 plus formulation and 60 plus technical product. Giving the capability to address diverse crop protection needs across market. Also, we have invested in that way in relation to manufacturing of technical to lower our dependency on import. Allow me to throw up some light on patent and product strategy. Many large global players have patented products. As the second approach expires, we positioned ourselves to be among the first movers in India to launch the new molecule domestically. A multi-layer effort involving field trials, safety testing, R&D, and other regulatory clearance for Indian markets. These results, we are the first generation product, as a first generation product, we are the first mover in India to introduce the product. And that gives our first-mover advantage. In our portfolio, we also create proprietary independently patented combination product also. They address broader spectrum of paste or crop issue. Our life cycle of a molecule, this allows us to monetize in a twice. First, as a sustainable and sustainable product with, naturally, commodities as a molecular and third, and second, as a product gets resistance. So, we are introducing a proprietary combination which is sustainable and also price, power, also margin, and also we are molecular as much cost of the product. This includes a patented product, and with this combination patent product, GAC also getting a good margin, and also farmers are getting a very good product for a longer product control, and also they are getting reasonable price. So they can get more yield by using a new patented product. In our history also, few years, we have launched many products, presented products, with excellent control, with longer residual control, and with that, we are very strong in many crops, like peri, sugarcane, vegetables, pulses, cotton, and also in future also, we are planning to launch Thank you very much. So, for financial, I will now

take you through the financial performance of the company for the quarter one of F527. During the quarter, the company has reported a revenue of 386 crores as compared to 377 crores in the last quarter one of the last financial year. Revenue even broadly stable during the quarter with strong momentum in the domestic business. However, it was partly offset by temporary raw material constraints in the international business. Within our domestic business, which you have to see, as Bhavesh has just mentioned, our focus on the patent and portfolio, we are seeing good growth in the volumes of the products that we have recently launched, like PCT410 and the products like Fyter, who are gaining good scales and good volumes. We have seen good growth in these products in the quarter one. Along with this, we have also seen a good growth and momentum from our B2B customer who have been co-marketing these patented products with us. So as a strategy when we are launching these products, these combinations in our B2C business, we also offer these products to our co-marketers in our B2B business to increase our presence at a farmer level through their distributor network also and make this product more available and more accessible. In terms of the overall segment. Thug. During the quarter FTC, the split between the C business is almost, the domestic B to C business has been at around 45%, the domestic B to D business is roughly around another 45%, and the export business is around 10%. The export business typically gears up in the age 2 of the financial year where the season particularly in Latin America, major market being Brazil, where the season is predominantly in the age 2 of our financial year. Also, let me highlight that, you know, currently, our business is more curry flesh. So, H1 is very important for us, and out of even H1, Q2 becomes very critical, because that is where the main monsoon and our demand consumption happens. During the quarter, which is the global geopolitical development and climate related risk and certain volatility, there were certain supply chain disruptions and certain anticipations from the customer, where due to pricing there were certain holdback of image that we had seen. Overall, the realization in the business has been better. The gross margin has improved. This improvement is broadly due to the increase in the product mix that is there, wherein we have moved more towards our specialty and differentiated products. Then on the cost part, there has been an increase in the employee cost, which is due to the annual increment impact of the wage and the slight increase in the headcount also. Secondly, the power fuel cost has also gone up slightly, that is mainly due to the increase in the cold rates that has happened. The overall EBITDA EPC has stood at around 11%. There is other income that is there which is reported which is mainly due to the sale of land that It was there of the company, and so overall, The depreciation also ECC has increased, and this increase in depreciation is mainly due to the capitalization of the backward integration plant that we have at Dehesi Saika, which was not capitalized in the last quarter. Correspondingly, the depreciation has also increased. The interest cost has decreased due to the repayment of loans from the IPO funds that were there. Finally, the profit after tax has increased by almost 16% to 26.4 crores in the first quarter. As you might be aware, ICRA has upgraded our rating from A to A plus stable for our long term as well as short term facilities A1. This upgrade is majorly due to the repayment of borrowing from our IPO and the continued good performance of the company. I think with this, we would like to conclude our opening remarks, and operator, we would like to open the questions. Thank you.

Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone 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 while the question queue assembles. The first question comes from the line of Kareena Jain, an individual investor.

Please go ahead.

Hi, congratulations, a good set of numbers. My question to you is, could you update more on the current mix between the technicals, the formulations, and the branded patented products, and how do you see this mix evolving?

Hi, Kareena. Thank you for the question. So, the current business mix is almost from a three distribution channel. It is 45% branded, 45% B2B, and 10% is export for the current quarter. From a formulation and technical perspective, almost 75% of our business is formulation, 25% is technical. Within the B2C business that we do, which is a branded business, out of which currently we are at almost 22% of our branded products that we do as a part of this B2C business, our aim is to almost double it over the period of three years.

Okay, I have one more question. So, how do you think about the growth trajectory across the B2B and the B2C in context to export businesses over the next few quarters and years per day?

So, we are seeing good demand in our overall domestic market and with this patented portfolio, you know, as I said earlier, the B2C, we are able to create a differentiated strategy for particular crops like paddy, as we said, nails, sugarcane, and this, with this differentiated strategy, even the B2B customers are attracted well while they are having a gap in their portfolio to support it through our patent and combination products that we have. So we have seen good growth in this segment particularly of differentiated products which is also resulting into good margin because these are a slightly better price as compared to the galerics that we offer. So we are seeing that we will almost overgrow the expected industry growth that is there typically. So we will be growing at a rate faster than the industry growth rate and we will be having more market share in different pockets of the country where we are already strong like say Maharashtra or states like Gujarat where you know we are already predominantly very strong.

Does that answer question, Karina?

Thank you. The next question comes from the line of Ankit Redker, an individual investor. Please go ahead.

Good morning, everyone, and thank you for the opportunity. So, sir, I have some questions. So, I'll start with the IPOs related. Could you just provide an update on the utilization of the IPOs.it? And the timeline for the deployment of the remaining point that we have right now.

Good morning, everyone. So, the IPO funds, the objective of the IPO is repayment of loan, and we have repaid the loans as per the object during the quarter. The remaining amount that is still to be utilized is a small amount that is there, which is pending the settlement from the banks for the brokerages. Once we get an exact working for that expense relating to the brokerage, which in my understanding takes two to three months from individual banks. Then we'll be able to close the IPO account. So, as of now, whatever was the objective, other than the general corporate purpose, we have repaid the loans that we had taken as an object of this IPO.

Okay. Okay. Okay. Okay. Okay. Okay. I just wanted to understand in terms of the number, like, I mean, mostly I'm... Talking on this raw material thing, so can you just provide me how this raw material is employing our margins in future, how are you going, what are the measures you are taking in terms of the raw material and that sort of thing?

Sure, sure. So for raw materials, there are two parts. One, in the last quarter what we have seen that there is some volatility in the pricing of the product because of the geopolitical situation. So availability was not a question but the prices were very volatile due to there were some products that are linked to petrochemicals. So because of which there was some volatility. There were some logistical challenges in the earlier part of the quarter. Secondly, due to the depreciating rupee from last quarter, almost the depreciation is 10-11%. So because of which also there is some impacts that we are seeing on our raw material prices. Secondly, overall because of the product mix, we are seeing the margin expansion that has happened is more because of the change in the products that we sell. So because of which the margins have typically expanded. But there is an increase in the raw material cost that is there. In certain cases, say particularly in B2B business, we are able to pass on this cost to our customer. But in B2C business, there is a time lag between passing the cost of increase of the inventory to the customer. But then we have the inventory to cover those increasing costs. So fairly in the first quarter, we were stable from that perspective.

Okay, so just related to the raw material, now I mean just talking on the business side, as we have international business, we have a presence in the industry side. We have presence in Brazil, US and Africa, right?

Yes, and some parts of Southeast Asia also.

Okay, so how to see the demands from their side? And what are the opportunities are there still? And how are you going to take such kind of opportunities and taping the market? Can you just give me some clarity on it?

Sure. So, Brazil predominantly being the largest market globally, so there is a lot of pressure in terms of the demand in Brazil. Because of this volatility in pricing also, the customers were not very keen on buying it earlier, so that delay, we have seen there is a delay in terms of their buying factor. And once they delay, then what happens is then timing in terms of reaching the material to them becomes very important. So that time we have seen that certain orders, because China is having a better logistics model, we have seen that in spite of weeding cost competitive, certain orders were transferred to China also. So, there at the last moment, because the buying was delayed, and now timing is becoming an important factor, that is where we see that there were some hiccups that we faced in the first quarter. Overall, the demand is not very great currently. We are expecting that, you know, that deshocking and the material that is required for the upcoming season will start from October. We see that demand should then begin in September for the H2. So that is what the overall, you know, position in terms of Brazil is. Brazil, we are seeing, we are a bit cautious also because we are seeing liquidity issues in Brazil where is the credit is also a challenge. So we are currently more focusing on the B2B customers where we have some established relations to do our business in Brazil. For remaining geographies in Latin America also, we are identifying small pockets like Argentina and Uruguay where we are having some second-year distributors with whom we are planning to do tie-ups for our products so that we can sell it to them and they can contribute in their strength geography. So that is the overall strategy for international business. Parallelly, we are also doing our registration. For upcoming products that are in the pipeline, to then, you know, exploit our manufacturing facilities more round the year, wherein, you know, once we have a good molecule which is registered in the other parts of the world also, this user, we can use it to then sell in the different time of the year. So that is the overall export visibility. Okay, okay, got it.

And sir, how would you assess the progress of this current season so far? I mean, what factors are you seeing in terms of the athletes, bomber sentiments, and agrochemical demand?

See, basically, I am giving you a reply. So, basically, in the initial first quarter, because of this war, and even volatility of this crude price, and after that, even IMD declared that this only no effect, so everyone, even including farmers and farmers, even formulators, so they delayed everything, buying and everything, but now, by God's grace, Thank you very much. We are very strong in particular insecticide and fengicide and because of this gap in rain so this insect will increase and definitely GSC is very strong in insecticide so we will get benefits particular this quarter.

Thank you, sir. Thank you so much for giving me this opportunity. Thank you.

The next question comes from the line of Krisha Jain from Pallada Family Office. Please go ahead.

Hello. Thank you for the opportunity. So, I just have two questions. The first would be what is the opportunity to further increase the share of high-margin and differentiated products in the portfolio.

See, basically, we introduced almost 12 products in last three years, and the segment and crop, see, is very, very huge and very large. So, for next three years, we see that there is no even saturation will come in next three to four years, and huge opportunity in these oil crops, and see, basically, our target is next two to three years. We are doubling our patented product share, and we are also coming with new products or in new segments, missing segments. See, basically we are not, we don't have any product for hobby site, so we are coming with that product. Also coming with, for the particular potato, this patented product is missing. So, like this, we are also coming where we have GAP. So, and because of the efficacy of our products, whatever products we have launched, the efficacy of these products are very, very good, and all farmers and even our general partners are very, very happy. So, next three years, our growth will be very, very good.

Okay, and could we also provide more color from the current capacity utilization across technical and formulation facility and the headroom which is available for growth?

So, the current technical capacity utilization is around 70 to 75 percent, wherein we have some scope to grow the technical base. There is also a possibility to change. So, we have certain plants which are multi-product plants. So, we have an opportunity to swap our products where we can have high value products and which are low volume. So, that is also an opportunity. The pipeline that is coming in future, out of those products, there are certain products which are high value, low volume. So, we will be able to accommodate that in our existing facility. Formulation plant, the utilization of formulation plant is around 25-30%. But formulation plant typically is not a bottleneck because it is a simpler process. There is no chemical synthesis or reactions that take place which also could be outsourced. So typically the facilities of formulation are designed to cater to the peak season. So that is where the utilization remains low in the formulation plant. So currently it is around 25-30%. Okay, thank you. Thank you.

The next question comes from the line of Shravan Modi with Syndicate Family Office. Please go ahead.

Good morning, sir. Thank you for your question.

Sorry to interrupt, Shravan, you are not audible. Your voice is breaking up. Please use your phone on the handset mode in case of it is on his way. Yes, yes, you are.

Thank you so much for the opportunity, sir. My first question to you is, which interest is currently offering the largest in the four years?

Yes, waking up again, could you please change your location, if possible? No, sir, you only explain it, sir. Okay, thank you. The next question comes from the line of Anirudh Sharma with Ekant Investments. Please go ahead. Can anyone please go ahead? Yes, please go ahead with your question.

Yeah, hi. So, my first question is that,

is it the objective to increasingly move towards formulations and brand products? Yes, good morning. So, the objective is that we will be moving more to the formulation products here. But in formulation, we are focusing on all the three verticals that we have. So, we are increasing our formulation business through our own brand, which is the B2C business. That is the main objective or goal. But that is also being supported by our B2B business, wherein also we are increasing our contribution from formulation business in B2B also. By introducing or sharing with them the specialized formulation so that their portfolio gap can be filled as well as for us, we can make our patented product far more reachable to a farmer. So overall, yes, formulation business is something which is where our core focus is. Okay, okay, understood, sir. And what is your current market share, sir? So, from a domestic market, if you see, our market share currently is not that great. It would be, say, around 3, 3.5%, wherein we see that it is a good opportunity for us to grow, because in a market like India, wherein, you know, we have good manufacturing base also, we see that any market share from a company aside, it is easier for us to scale to, say, 7 to 8% market share. So, that is what we are aiming in the upcoming times to reach to that level.

Okay, okay. One last question. So, are you seeing any meaningful change in the farmer behavior or product preferences that could alter your portfolio mix?

Yes, we are seeing some farmer behavior changes which is positively affecting us. So, in the areas, to give you an example, say, in an area like West Bengal, where the farmers earlier were very fragmented, small farmers, with having less capacity to spend. Now, with more awareness and with the groundwork that the companies like Art have been doing, the awareness of specialty chemicals has been increasing, and because of that, their adoption to specialized molecules is increasing, and they are also seeing the results of that, because of which they are moving towards this direction. The new generation of farmers that are coming are more aware, they are more connected to social media, they have their own ways of assessing a product, because of which we are seeing that now a farmer is in a position to evaluate himself that what is good for him and get maximum value out of it. And also now, secondly, what we are seeing is that they are moving towards preventive kind of strain also, which is the trend in the developed market. So earlier, what was happening was that it was more of a curative kind of a market, where only after the infestation, the farmers were using the insecticides or fungicides. But now, as a precaution also, farmers are being more aware and have started using it on preventive basis, so that the crop damage is minimal. So, these are the changes that we are seeing in the Farber behavior pattern. Okay, sir. Understood.

Understood. That's it from my side, sir. Thank you for the opportunity. Thank you. Thank you.

The next question comes from the line of Shravan Modi with Syndicate Family Office. Please go ahead.

Good morning, sir. Thank you so much for the opportunity. My first question to you is, sir, could you please elaborate on the current R&D pipeline and the number of technical products you expect to use over the next few years?

See, basically, we have two R&Ds. One is technical R&D and second is formulation R&D. So, every year in particular technical, we are coming with every year one or two new products. And accordingly, we have built up and our R&D is capable. And even we have to generate all data generation. It takes a minimum four to five years. So in for future, for next five years, already we have started all work and we will come with one or two technical products every year. Number one. Number two for formulations, patented particular formulations. So that is also we are already we have pipeline for next four to five years. Every year we will come with two to three new patented formulations.

Right? Right, sir.

Right, sir. Also, currently, international markets offer the largest growth options for us, and which one are we targeting next, like, in the coming pipeline?

See, basically, mainly our focus is Latin America. See, because there are two reasons. One is their crop and our crop is almost similar. Number two, their season is almost reverse, opposite of Indian market. So, once our Indian market or Indian season completes, Kharib season, which is main season in India, so their season starts. So we can, whatever we manufacture technical, so we can utilize that technical in second half. So our technical plan can be run 12 months. So our main focus is Brazil and USA and Latin America. Definitely, we are also planning through Africa and even Asian countries, but as a volume, as a value, these are the main market.

Thank you, sir. Thank you, sir. Thank you.

The next question comes from the line of Priya Dhakar, an individual investor. Please go ahead.

Congratulations, sir, for your results, and thank you for giving me this opportunity. My question is, like, what actually differentiates the GSP's approach to patent-less formulations and the combination products from other domestic agrochemical players?

So, yes, so the differentiation factor that we have is that while, you know, we are working on this combination. Patent that we get, there are three major differentiation that is there. One is that our combinations that we generally offer to the farmers are of the newer technicals that are available in the market. So the technicals that are getting off patent, which were not even easily accessible or very at a high cost due to it being under the ICR protection with the multinationals, once they get off patent, we typically have our combinations around those technicals which are generally new. So, the farmer is getting access to a newer chemical which means safer, more effective, and the resistance issue is not there. That is the first part. Second, the solution that we are encompassing by, you know, having a different partner to these off-caten molecules, the idea is to do an extensive field trial and to understand the farmer level difficulty that, you know, while at the stage of a crop, what is the issue a farmer is facing and how do we solve it? We have to solve it in a way that is getting a holistic solution that by having one spray the ultimate objective that is used to achieve the target pest if there are one or more we can address a larger bunch of issues by using it in the one spray. So that is the second area where we want to have a maximum value addition in terms of the farmer that is there. The third thing, we try to innovate different formulations in terms of the application formulation that is there. Like, we have introduced SE, PEPO emulsion formulation, few years back in which we were the first one in India to launch. We have REG-G formulations, we are coming up with OD formulations. So, all these differentiated formulations also make it easier for the farmer to use or more effective. The spread of the active ingredients or their synergy is much more better with a good formulation so their effectiveness at the crop level increases. So, these are the three main differentiating factors that we typically have while we are envisaging a patented formulation product.

Okay. Also, I would like to share the company's next-term growth target and also can you help us understand what are the three milestones that are that the investors should actually charge to assess whether the GFC is on track with its medium-term growth ambitions?

So, we are, we may not be able to broadly, you know, give the complete detail. From a broadly standpoint, if you have to see, we have been growing at almost, say, 15% kind of a rate. That is what the expectation is that we will be growing at around 15%. We are seeing a better growth in terms of EBITDA and BAT margin because of two reasons. The change in the product mix to a more differentiated.

A reminder to all participants, you may press star and 1 to ask a question. The next question comes from the line of Ayushi, an individual investor. Please go ahead.

Hi, sir. Good morning. My first question was regarding PAD. PAD was 26 close this quarter. Can you give us a sense of how that splits between domestic B2B, domestic B2C, and exports? Just the direction, like did the 240 basis point improvement in gross margin this quarter come mainly from B2B mix or from something else?

Hi, Ayushi. Good morning. From a pet perspective, it is very difficult to segregate the pet at a business level because we have not a common expenditure that are there that will be sitting at the EBITDA level. But from a margin perspective, at a gross level, whatever increase that we are seeing in the margin, gross margin, that is mainly supported due to the increase of the share of petrogate products into B2C business, and also good margin in the B2B business, wherein we are seeing this overall growth of the percentage points that we are seeing. Overall, as I said, the pet margin will increase because of the reduction in interest cost also during the year, and we are expecting the EBITDA to be somewhere around 12 to 13 percent is what the expectation is.

All right. And my second question was about other income. Other income was $83 million this quarter against $26 million last year. And you said that most of this increase is profit on sale of Lee's land. Two things. First is that the sale of the 66,000 approximately square meters to Indo-GSP, the promoter group company, for $23 crores that the board approved in April. So second, how much of this 83 million was that one-off gain? Because if I strip it out, profit before tax looks roughly flat against last year's 29 crore rather than up 18%. So what should we assume for a normal quarterly other income run rate from here? Is there any more land or non-core assets left to sell? What is your outlook regarding other income?

No, so out of these 8 crores, almost 5.7 crores is this other income for the land sale that is under consideration which you specifically mentioned. There is no other income that we planned that will be there in the upcoming quarter. The run rate per se, you know, with the increase or the impact of certain increase in the manpower cost because of which the increase in the G.P. has not materialized into the business income at the patch level, but overall we are seeing up the growth in the patch because of this sale in land. This is a one-off event which we don't expect in the remaining three quarters. The remaining three quarters we see that as per the expectation we see that the business would grow based on the operational efficiencies that we see.

All right, thank you. And considering that we're now six weeks into Q2, how is this season shaping up versus last year? Is the material shortage behind you or is it still constraining what you can supply to the peak?

No, so I think you see material supply constant is not there currently. We are seeing in the six weeks. Particularly July, the month also has been supportive also. It has covered major part of the country. We are seeing that the progress is good. From the last year also, whatever the anticipated growth that we are seeing, we see that by Q2, we will be able to achieve the anticipated growth that we plan. So we are on right track for that. For South India, we see currently the three states, Andhra, Tenangara, Karnataka, they are still waiting what kind of a situation, particularly from the monsoon standpoint. But overall, other constraints in terms of inputs, etc., we don't foresee any other constraints, and we are on the track of achieving the projected goals.

No, my concern was just because last year, Q2 was around 60% of the full year sped. So, that's why.

Yeah, absolutely. So, I'll say that we anticipate that would be the case even this year, and the absolute number would increase as compared to last year because of the growth that we were anticipating, but proportionately, it would be somewhere around this kind of a ratio.

All right. All right. Thank you. Thank you so much.

Participants, please press time, one who asks a question. The next question comes from the line of Myra Mittal, an individual investor. Please go ahead.

Thank you for the opportunity. Sir, my question is, what will be the current contribution of B2B and B2C as per the domestic revenue and how you expect this move to evolve over the next few years?

So, overall within the domestic business, so at an annual level our domestic business is almost 80%, our export business is 20%. Outcome is 80%, it is equally split between B2C and B2B. We see that going forward 3 years, this kind of mix would broadly continue. We expect the branded business to go to 45-50%, whereas remaining say 35% will be then B2B business. Export broadly for the upcoming three years will be somewhere around 20% only. That is what we are seeing as a mix for the upcoming years.

Does that answer your question, Myra?

Thank you, sir.

Thank you.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shail Shah for the closing remarks.

Thank you, everyone, for joining the call and for your questions. We look forward to discussing the same in the next quarter call. Best wishes from our side. Thank you. Have a nice day.

Thank you, sir. Ladies and gentlemen, on behalf of GSP Corp Science Ltd. that concludes this conference call. Thank you for joining us and you may now disconnect your lines.