IPLNSEQ2 FY2023November 21, 2022

India Pesticides Limited

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151turns

10analyst exchanges

0executives

Key numbers — 40 extracted

38.8%

presentation uploaded on the exchanges and our website. During the quarter our revenue grew by 38.8% supported by increased demand of existing products and new product launches. Our margins were imp

Rs.70 Crore

performing well and we expect their demand to grow going forward. Further to this we have planned Rs.70 Crores capex for expansion at Sandila plant in FY2023, 4000 metric ton capacity at our Sandila plant wi

rs,

c ton capacity at our Sandila plant will be additionally added under phases over the coming quarters, one herbicide and one intermediate will also be added there. An update on our Hamirpur project, EI

Rs. 253 Crore

iscuss Q2 FY2023 results. Taking you through the financial highlights, the total revenue stood at Rs. 253 Crores as against Rs.182 Crores in Q2 FY2022 i.e., Y-o-Y robust growth of 38.8%. EBITDA in Q2 FY2023 st

Rs.182 Crore

Taking you through the financial highlights, the total revenue stood at Rs. 253 Crores as against Rs.182 Crores in Q2 FY2022 i.e., Y-o-Y robust growth of 38.8%. EBITDA in Q2 FY2023 stands at Rs.55 Crores, E

Rs.55 Crore

inst Rs.182 Crores in Q2 FY2022 i.e., Y-o-Y robust growth of 38.8%. EBITDA in Q2 FY2023 stands at Rs.55 Crores, EBITDA margin was 21.7% in Q2 FY2023. The PAT stood at Rs.37 Crores in Q2 FY2023 as compared

21.7%

i.e., Y-o-Y robust growth of 38.8%. EBITDA in Q2 FY2023 stands at Rs.55 Crores, EBITDA margin was 21.7% in Q2 FY2023. The PAT stood at Rs.37 Crores in Q2 FY2023 as compared to Rs.42 Crores in Q2 FY2022

Rs.37 Crore

BITDA in Q2 FY2023 stands at Rs.55 Crores, EBITDA margin was 21.7% in Q2 FY2023. The PAT stood at Rs.37 Crores in Q2 FY2023 as compared to Rs.42 Crores in Q2 FY2022. The revenue from exports stood at Rs.122

Rs.42 Crore

EBITDA margin was 21.7% in Q2 FY2023. The PAT stood at Rs.37 Crores in Q2 FY2023 as compared to Rs.42 Crores in Q2 FY2022. The revenue from exports stood at Rs.122 Crores as compared to Rs.78 Crores in Q2

Rs.122 Crore

7 Crores in Q2 FY2023 as compared to Rs.42 Crores in Q2 FY2022. The revenue from exports stood at Rs.122 Crores as compared to Rs.78 Crores in Q2 FY2022 showing a healthy growth of 56% and domestic revenue st

Rs.78 Crore

ared to Rs.42 Crores in Q2 FY2022. The revenue from exports stood at Rs.122 Crores as compared to Rs.78 Crores in Q2 FY2022 showing a healthy growth of 56% and domestic revenue stood at Rs.128 Crores as comp

56%

ports stood at Rs.122 Crores as compared to Rs.78 Crores in Q2 FY2022 showing a healthy growth of 56% and domestic revenue stood at Rs.128 Crores as compared to Rs.100 Crores in Q2 FY2022. Revenue

Guidance — 20 items

Tejas Sonawane

opening

“All our recently launched products are performing well and we expect their demand to grow going forward.”

Tejas Sonawane

opening

“Further to this we have planned Rs.70 Crores capex for expansion at Sandila plant in FY2023, 4000 metric ton capacity at our Sandila plant will be additionally added under phases over the coming quarters, one herbicide and one intermediate will also be added there.”

Tejas Sonawane

opening

“An update on our Hamirpur project, EIA report was accepted by MOEF and meeting with EAC is underway.”

D K Jain

opening

“Agarwal, our Hamirpur project is on schedule.”

D K Jain

opening

“The application has been accepted and listed for presentation tomorrow i.e 15th of November at the Ministry of Environment Expert Committee, we hope to get a positive result.”

Satish Kumar

“So, in spite of that I understand there is increase in power cost or logistics all that we expect there is a drop of 1 or 2%, but here the operating margins have fallen by more than 10% over a period of three quarters.”

Karan Shah

“What portion of this inventory would still be there that has been carry forward towards the third quarter and where we will be facing this pressure and secondly, if you can quantify the amount of inventory loss that was there in this quarter.”

Karan Shah

“Okay, and remaining 45% of the inventory will be utilized in the third quarter, is it safe to assume that?”

S P Gupta

“Entire high-cost inventory will be utilized and it will be in this quarter only.”

S.P. Gupta

“But next quarter onwards we are quite hopeful.”

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Risks & concerns — 6 flagged

Industry faced challenges in terms of raw material prices with logistic constraints also creating pressure on the business.

— Tejas Sonawane

Though we could pass on some of these to our customers, but full pass on was difficult and number third major reason was that there has been tremendous increase in the energy cost, the fuel what we are using though we are using green fuel, we are not using any fossil fuel, that way we have green certification, we are using green fuel.

— D K Jain

Sir, customers they are also under severe pressure because they don’t get so much of price increase at their end.

— D K Jain

What portion of this inventory would still be there that has been carry forward towards the third quarter and where we will be facing this pressure and secondly, if you can quantify the amount of inventory loss that was there in this quarter.

— Karan Shah

But internationally we have not found any challenge up till now, even the Ukraine-Russia war because we don’t have a serious business in Russia or Ukraine there is not much of effect at all.

— D K Jain

Passing of the increase in prices, that is always a difficult task because the customer they also have their own limitations and though we have good discussions and then at least partial increase we are able to effectively do.

— D K Jain

Q&A — 10 exchanges

Good afternoon. Sir, my question is regarding the dependence of India Pesticides Limited for raw material from China, the latest credit rating report released by CARE as on 6th October 2022. They say that we are dependent on Captan raw material from China and based on annual report also we could fairly say that around 40% of our raw materials we are importing. But what we were told that the company is fully backward integrated for all the products that they are selling and it is basically they are procuring the commodity type of chemicals from the domestic market. Can you clarify on this?

D K Jain

Thank you, sir. Actually, the Captan raw material we are not sourcing from China, we are sourcing very miniscule if any. But more than 90% of the critical raw material we are sourcing outside China and it is not a commodity product but all other chemicals required for Captan production are sourced locally from India itself that is number one. The dependence of us on the raw materials of China are for some other products are there. Because we are backward integrating some of the products what we are making and there we are trying to reduce the dependence on China imports. But sir, are you sayin

Hi! Sir, thank you for the opportunity. Sir, my question is regarding the price pass on and raw material inventory. I assume we have high-cost inventories that was procured in the previous two quarters and that has impacted our gross margins in this quarter as well. What portion of this inventory would still be there that has been carry forward towards the third quarter and where we will be facing this pressure and secondly, if you can quantify the amount of inventory loss that was there in this quarter. Thank you.

S.P. gupta

The high-cost inventory as on 30th September was around 55% which we have purchased earlier and there is no inventory loss as such since we are selling our product on profit only, but only margin has declined since we have consumed high price raw materials. So, our margin has declined, but there are no inventory loss we have booked. Okay, and remaining 45% of the inventory will be utilized in the third quarter, is it safe to assume that? Entire high-cost inventory will be utilized and it will be in this quarter only. It will be consumed and sold. Okay, and how was the price passed on across ma

Thanks for the opportunity. With regards to the gross margin earlier we have always maintained that our gross margins will remain at around 50% plus including as you had mentioned in earlier calls that the new molecules, the new products which you are adding they will all have a 50% plus gross margins. Last two quarter we have seen for the first time after almost four-five quarters the gross margin fell below 50%, in first quarter it was around 48.5% and in the current quarter it is around 43%. So, in medium to long-term say next one, two, three years how do we look at our gross margins?

S.P. Gupta

We are expecting our gross margin to stabilize around 50%. Okay, and that could happen in next two- three quarters? Yes, this quarter it may not happen since we are carrying high price raw material and other inventory. But next quarter onwards we are quite hopeful. Okay, and in terms of gross margins can we assume that the 43% could be among the worst margins which is possible from here on you may see some improvement or maybe stable gross margins for next one or two quarters but not further deterioration? Further deterioration will not be there but it will improve gradually in next two quarte

Good afternoon, sir. First of all congratulations on the growth in business. I have two questions, one when we see the balance sheet we are seeing a consistent increase in the inventory values. Can you share what is happening on this front and why?

S.P. Gupta

Ayush ji, there are few reasons, one important reason is, we have purchased a lot of inventory in Q1 thereby lot of disruption in logistics and due to raw material prices were increasing, so we have contracted a lot of inventory for our production, high-cost inventory. Secondly, in last quarter we have started one herbicide which will be used in fourth quarter of current year and first quarter of next year. We are building up stock of that herbicide since it is big herbicide in India. The inventory has already started declining in October and November, inventory in absolute number has declined

Thanks for the opportunity. We have done commendable volume growth during the quarter and first half. Did we see any demand side challenges from domestic market or exports market given that there has been lot of issues in the European market which is going on plus US has inflationary pressures. So, any demand related setbacks that we are currently facing or any order where postponements or cancellations of that sort any happening. Thank you.

D K Jain

We have not yet received any cancellation of orders up till now. But there are some challenges in Europe because Europe this year has been very dry. But now people are planning for the next year, we have not received cancellation of the order and on domestic front there has been erratic monsoon all across India that has resulted in somewhat different utilization of our capacities in different regions. This has slightly affected us in few of the molecules in the domestic sales. But internationally we have not found any challenge up till now, even the Ukraine-Russia war because we don’t have a s

Hi Sir, good afternoon. Thanks for the opportunity. First question is on the current capacity utilization, if you can just give some number. What is the current utilization rate?

S P Gupta

It is around 77%-78%. Okay, and we have plans close to Rs.70 Crores more capex with the 4000 tons additional capacity that takes our total technical capacity to close to 28,000 tons? 27,500 tons. Right, so on this the new product also which you mentioned on the herbicide product which has been launched in this current year with the Rs.100 Crores turnover. On that if you can give some more clarity, what is this product and whether it is exports market and how much potential you see going forward on this. This product is herbicide mostly used on rice and majority it will be sold in India. It is

Congratulations for a good set of numbers. My question is more on the broader side because of this crisis in Europe and because agrochemical the demand is also increasing. Are we getting enquiries from export markets more for contract manufacturing or CDMO kind of enquiries or even do white labeling from them. Is there any kind of tail winds that we are seeing on that front.

D K Jain

We are getting lot of enquiries from overseas with multinationals and they keep coming to us and they keep on asking new products. We have regular discussions with them, we are open to any contract manufacturing also if they require there is no doubt about it. We are in discussion with many multinationals on this account and we have identified few products with them. We are already working on those products which we would be implementing at our Hamirpur site. Okay, that is great to hear. Secondly, form the new products that we will be introducing over the next few quarters. Are they majorly go

Hi! Namaskar, to you all. I have just a couple of questions. One is this quarter we have done good sales i.e increased. Is it due to exports or domestic. I just want to under a little bit about the mix of export versus domestic this quarter and what is projected. De we expect growth coming from exports or domestic growth.

S P Gupta

This quarter our export has grown by 56% and domestic has grown by 28%. Also, more on export front. Okay, and what is the future hold like one year from now, what is like export versus domestic this quarter would that hold or do we have any specific focus on export or domestic. Just want to understand that. We are projecting around 50% from export and 50% from domestic in medium range. Okay. Thank you sir. That was first one, second question I have is like this quarter we have our cost of goods sold increased rate. I just wanted to understand it is due to the imported raw material or domestic

Thank you for the opportunity. In the opening remarks you have mentioned the environmental meeting is expected to happen tomorrow and in the investor presentation you have mentioned that you are confident of commissioning the Hamirpur plant by Q4 FY2024. So, one question is are you confident of getting this approval by this quarter and once you get that are you confident of commissioning because you had mentioned you will do in block wise commissioning of the plant at Hamirpur. You would be able to start the first block before Q4 of next year?

D K Jain

If we get the clearance in tomorrow’s meeting, surely we should be able to start something by Q4 2024. Because we feel that it will take almost about a year for us to put up the infrastructure and one or two manufacturing blocks and then we will be adding block wise every year. Tomorrow is the meeting and let us see if we don’t get any serious question then we should get it cleared. That is what we are hoping, if we are stuck up here then probably it will get slightly delayed. But if you are able to clear that then we are quite hopeful that in third quarter, last quarter of FY2024 we should be

Thank you everyone for your participation. For any further queries or clarifications please do get in touch with our Investor Relations Team. Thank you once again and have a nice day.

Management

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Speaking time

D K Jain

Satish Kumar

S.P. Gupta

Moderator

Rahul Jain

S P Gupta

Karan Shah

Ayush Mittal

Rohan Gupta

Jay Shah

Opening remarks

Tejas Sonawane

From Dolat Capital I would like to thank the management of India Pesticides Limited for giving us the opportunity to host their Q2 FY2023 earnings call. From the management team we have with us today Mr. Anand Swarup Agarwal – Chairman, Mr. D. K. Jain – CEO and Mr. S. P. Gupta – Chief Financial Officer. Without further ado, I would like to hand over the call to the management for their opening remarks, post which we will open the forum for a Q&A session. Thank you and over to you, sir! Anand Swarup Agarwal: Thank you Tejas. Good afternoon ladies and gentlemen. I hope you and your family are staying safe and healthy. I take the pleasure of welcoming you all for the Q2 FY2023 earnings conference call of India Pesticides limited. I hope you all had the chance to look at the financial statements and earning presentation uploaded on the exchanges and our website. During the quarter our revenue grew by 38.8% supported by increased demand of existing products and new product launches. Our mar

D K Jain

Thank you, sir. Good afternoon ladies, and gentlemen. I thank you for taking out time to join this earning call for Q2 FY2023. During this quarter we continued our journey of product development and customer acquisition. Our business continues to remain resilient despite external challenging environment that has resulted in the highest ever revenues during this quarter. However, our gross margins have been slightly dented due to the following major reasons: 1) Carry over of the high-cost inventory. 2) Increase in the operating and fuel cost. We are optimistic that prices should rationalize in the coming quarters. We have been able to partially counter this increase. We are sourcing most of our raw materials locally and backward integrated in most of our products which has supported our operations. Having the ability to develop chemicals that can substitute and reduce our dependence on imports is an important part of our R&D capabilities. Government focus to make India Aatma Nirbhar ali

S P Gupta

Thank you, sir. Good afternoon, ladies and gentlemen and thank you for joining the India Pesticide Conference Call to discuss Q2 FY2023 results. Taking you through the financial highlights, the total revenue stood at Rs. 253 Crores as against Rs.182 Crores in Q2 FY2022 i.e., Y-o-Y robust growth of 38.8%. EBITDA in Q2 FY2023 stands at Rs.55 Crores, EBITDA margin was 21.7% in Q2 FY2023. The PAT stood at Rs.37 Crores in Q2 FY2023 as compared to Rs.42 Crores in Q2 FY2022. The revenue from exports stood at Rs.122 Crores as compared to Rs.78 Crores in Q2 FY2022 showing a healthy growth of 56% and domestic revenue stood at Rs.128 Crores as compared to Rs.100 Crores in Q2 FY2022. Revenue from technicals and formulations stood at Rs.182 Crores and Rs.69 Crores during this quarter. While our profitability is down we are generating reasonable cash to support capex plans and increased working capital requirement due to high level of turnover. We remain confident of continuing our growth trajectory

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India Pesticides Limited

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