Best Agrolife Limited (539660) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '25 Conference Call of Best Agrolife Limited. [Operator Instructions] This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. Today, from the management side, we have with us Mr. Vimal Kumar, Managing Director; Mr. Surendra Sai, Head of Strategy and Overseas; and Mr. Vikas Jain, Chief Financial Officer. I now hand the conference over to Mr. Surendra Sai for his opening remarks. Thank you, and over to you, sir.

Thank you very much. Good afternoon, and welcome, everyone, to the earnings call post our third quarter and 9 months ending of the financial year 2025. I will talk briefly about the industry landscape and will explain the business, while Mr. Vikas will take you through the financial performance. So let me start by saying this season has not been kind to our farmer customers and the agricultural community, especially in the South. This is a region from where we expected much better performance. The recent cyclones in the South India brought unusual weather patterns, caused delays in the monsoon cycle and extended the period of rainfall. This pattern affected the crop cycle. Primarily the states of Andhra Pradesh, Telangana and Tamil Nadu were impacted the most. We had been expecting stellar performance from these states, but we witnessed a dull season. At the same time, our chilli prices have dropped by around 35% from an average of around INR 19,000 per quintal in January of '24 to around INR 10,000 to INR 12,000 this year. This put significant financial pressure on the farmers. They were in cash count and making them -- and it made them reduce their outlook in terms of the crop protection products. The financial pressure also delayed some of our expected payments. A similar unexpected performance was also observed from cotton growers. We were very -- initially very confident that despite the delayed start of the monsoon, the season will pick up and result in good numbers. However, there was continuous rainfall that disrupted critical herbicide applications as well as the granular treatment. On the paddy side, farmers are generally habituated to carrying out at least 5 sprays per season. But this year, they were able to manage only 2 sprays. All these at the end of the day impacted the demand side. We have observed the seasonality and the changing market scenario with significant agility from our side to balance the changing market dynamics and we need to be able to respond to the correct schemes and the correct sales push. This has become extremely important in our shift towards the B2C business. Given that we have been shifting towards the B2C model with an expanded branded product portfolio and an expanded dealer network, we observed this quarter the absolute need for business agile and focus on timely liquidation. The focus is and this requires a huge amount of focus from the sales and the marketing team. We will be implementing actions to identify areas where the performance has not been as expected and we are absolutely certain that we need to take corrective actions. We realized that our B2C push needs us to be very sensitive to the changing ground dynamics. We intend to have this finely tuned. We have invested in building our sales team, especially in the southern part of India. And this shift was very essential for our long-term growth and pan-India presence. This push also affected our profit margin in the short term due to a higher cost base. Although this change is crucial for our future, it is putting some pressure on our profits right now. Corrections and improvement are our primary focus. No doubt, this current season was a tough one for us, but it also offers valuable lessons for us of the future. Products that need fewer applications will help the farmers' sales be productive even when the weather is not ideal. Our product portfolio are designed to improve or rather reduce the number of sales. We continue to work on that. Development of resilient products are the key and focus on R&D inventing homegrown products to the farmers is important. Our portfolio of patents continues to grow, but we will regularly and carefully introduce picky products. Coming to some important updates during the quarter. During this quarter, we have announced the formation of a strategic partnership between Best Agrolife and Shanghai E-Tong Chemical Co., which is a publicly listed agrochemical manufacturer based out of -- based in Shanghai, China. This partnership formulates to an MoU will focus on joint research, manufacturing and developing new products for the global market. This partnership will also explore new opportunities for product registration and potential factory cooperation through joint venture in leveraging best practices to expand market reach. Eastern Chemical specializes in production and export of herbicides, fungicides and the company holds a significant number of registrations across a large number of international markets, including Brazil and Vietnam. We are very happy to move from a buy-sell relationship to a cooperative R&D-based relationship for the global market. This is a shift from a typical MoU with an Indian and Chinese company. In another positive development, Best Agrolife has been granted a patent by the OAPI or the African Intellectual Property Organization. This is a patent for Ronfen and this is a 20 years valid patent. We also have been granted a patent [indiscernible] a new manufacturing process for [phenoxymethyl lie oxillate ]. This is an important patent for us as this is a precursor for the manufacturers' [ struggle in ] fungicides. This adds to our plan of deriving backward chemistry for the manufacturing of important fungicides such as [ Thiophanate Methyl ] and Trifloxystrobin. [indiscernible] the need to enhance our marketing efforts and optimize our sales structure and performance. We are increasing our focus in branding, awareness campaigns and demand generation activities to solidify our presence in the market. Simultaneously, we are evaluating the structure of our sales team for agility, efficiency and performance. Let me put it this way, our Q3 results are not to our expectation. We view them as an opportunity to fine-tune our operations for better margin. We intend to tighten our belt by reducing cost, by optimizing our operations and extracting maximum efficiencies. Despite the challenges, we remain confident in our long-term strategy. We understand that there will be demand fluctuations, but we are focusing on delivering value to our stakeholders. Strengthening the product portfolio and our R&D efforts will no doubt yield results. We will remain focused on stabilizing our financial performance in the upcoming quarters. We intend to bring down cost as a percentage of sales and be better equipped to navigate current and future challenges. Our primary focus, as always, continues to be on IP generation, technical R&D, new formulation research and development of innovative products and we will continue with renewed zeal. Thank you for your support through these times. We look forward to addressing your questions that you will have during the call. I will now request our CFO, Mr. Vikas Jain to take you through our financial performance. Over to Vikas, please.

Thank you, sir ji, and good afternoon, everyone. Coming to our performance during first 3 quarters of FY '25 to our strong demand for agricultural products, primarily driven by an on-time monsoon which led to all agrochemical companies including ours to post substantial [indiscernible] of higher demand. However, as we enter Q3, we face a shift in the market dynamics. While [indiscernible] Q3 significantly impacted through activities, the lack of supporting prices for key commodities like tomatoes and chillis influenced farmers' willingness to [indiscernible] production solutions. Traditionally, with healthy crop conditions across the country, [indiscernible] resilience of crops further decreased the need for pesticides. All these factors combine to create a challenging revenue environment and weak cash flow in the market added to these challenges. In addition to this market sentiment, increased competition drove down prices across the sector. The aggressive push for sales is at a price war for the rice mill margins across the industry. Our [indiscernible] operations for Q3 of FY '25 stood at INR 274 crores compared to INR 215 crores in Q3 of FY '24. There has been increase in branded business by way of new product introduction and volume growth from the existing products. This growth was compensated by reduction in the institutional business by around INR 72 crores. Further there was around 20% reduction in the product prices. In terms of profitability, our Q3 FY '25 EBITDA was around negative INR 6 crores and we realized of INR 24 crores for this quarter. There are significant improvement in the gross margins from 23% during Q3 FY '24 to 33% in Q3 FY '25 due to higher sales of branded products. The loss majorly is on account of foreign currency loss of approximately INR 11 crores. Further, due to lesser institutional business, there was impact on the top line and the bottom line. Also the investments that we made on the manpower and branding affected our profitability in the short term that reassured that this is benefit in the long term. All said, an important takeaway from this quarter is that we need to focus on improving cost efficiency by reducing fixed cost as a percentage of sales, we'll be in a better position to handle the current challenges and strengthen our financial future. We are focusing on cost optimization this quarter and are willing to reduce cost. Further, with respect to cash flows, cash flow from operations for 9 months was positive INR 177 crores and for the quarter, it was around INR 32 crores. I hand over back to Sai ji.

Thank you very much. Just as a closing remark, I would like to say that in short, Q3 FY '25 presented several challenges. But we are absolutely confident that with continuous effort to optimize operation and strengthen our financial strategy, we'll be in a better position to overcome these hurdles and we intend to be able to pave a way for sustained and profitable growth in the coming quarters. Thank you all for joining us today. We'll be ready to take the questions now.

[Operator Instructions] The first question is from Ram Tavva from Equinox Capital.

So I have a couple of questions. So what baffles me is in the last earnings call, which happened in the month of October, you were very optimistic that this quarter will be very good, even the next quarter and around INR 1,800 crores, something odd will be the top line for the next 2 quarters. And October means almost 45 days of the season might have gone. But suddenly, why is the core performance of this that the performance was not so good when compared to last year? So can you just add some color towards that?

Yes. So as I mentioned, first thing, with respect to branded business, we are improving as we have been since last few quarters and that also can be seen in the improvement in the top line as well as in the gross margin. However, this quarter reduction is mostly because of the reduction in our institutional business and also that we have taken good provision for Q3 expected sales we've done. So last year percentage in Q4 was also higher. However, we have taken cognizance of that and has provided in Q3 itself so that we don't have a similar situation as Q4 like we had last year. So that's the reason you see that we have a little higher losses in this quarter.

So this quarter, Q4, what is the expectation and what will be the top line or bottom line closing numbers, tentative numbers by the end of the year?

So still the season is going on. Only thing we cannot give an exact number to say what could be a top line, bottom line, but it will not be the worse what we had last year. It will be a reasonable quarter, even though we might have some losses, but not to the extent what we had in previous year.

So the top line, like you promised INR 2,200 crores is not achievable this year. And last quarter, you guys promised that it will be around INR 2,000-plus crores top line. So is it achievable or is it not?

So INR 2,000-plus crores looks -- we'll not be able to achieve that in this year because of the factor that the technical sales were a little lower and also a few of the important crops where we have very strong presence, especially in the South, didn't pan out the way we thought because still it's just about November, we are pretty confident and pretty much on the target to achieve all those numbers. But based on current situation, what we see, we will not be able to touch INR 2,000 crores. But yes, considering the profitability and all, gross margin and all those and working capital on those parameters will be improving, but will not be like the worst situation like what we had in last Q4.

If I may add, if I may add, there are 2 things which is there. So overall we wanted to achieve and what we wanted to expect in Q3, that expectation would have been carried forward and that optimism will have carried forward into the Q4 and the eventual year closing. We have observed that the Q3 performance is not up to our expectation. We did expect to do much better. This would certainly have an impact on the year closing. That said, the 2, 3 things that are very positive for us that Q3 that the margins from the branded sales continues to be good. This is something that we'll take it forward. What we need to do is to be able to see, ensure that the sales cycle and the marketing cycle is agile enough to be able to run on all cylinders despite challenges being on the graph. This is something -- that is something that we are very serious about, we are understanding the reason. We will take you [indiscernible]. And yes, we are already into the Q4 [ audit cycle ]. These changes will take a little bit of time to be able to come into play, but we are very cognitive of the fact that our agility and our ability to handle the sales in a much better manner is something very, very important for us. I think I have repeated more than once that we consider this as a serious quarter, but we will be taking action.

The next question is from Raaj from Arjav Partners.

In quarter 2 call, we said that quarter 3 is looking good and things are on track. So I just wanted to understand that when we said that, what assumptions have we made and what exactly happened and where exactly we got it wrong?

So with respect to expectation, I think the high expectation, including us and all the industry we had in November also. So where it went wrong was because if you remember that this year, the rainfall had extended by 1 more month. So this additional rainfall what we had that issued -- created issue with respect to various crops, especially the crops where we are little stronger in chillies and tomato and cotton. So later on, we were still hopeful because the rain got extended and we were still hopeful that the liquidation will happen. However, it did not happen as per our expectation. So it was just in the month of December that the market realized that okay, now further liquidation is not possible and that's how it got reversed.

And sir, may I know the figure for sales return for Q3 FY '25?

Sorry?

I just wanted to know the amount of sales return we had in this quarter?

Sales this quarter was 274 crores.

No, no, I'm talking about return.

Sales return?

Yes.

Sales return, this quarter we had close to INR 180 crores -- sorry, INR 130 crores.

INR 180 crores was in quarter FY '25 compared to?

INR 130 crores and last year, it was around close to INR 160 crores. So this year, it was around INR 130 crores, whereas till about mid of October, till end of October or November, we were expecting it to be around INR 80 crores to INR 90 crores. So this additional INR 30 crores, INR 40 crores backwards in our top line as well as bottom line.

All right. And sir, going to Q4 FY '25, we had reported a loss of around INR 72 crores in Q4 FY '24. So this year's Q4 is also looking the same as last year's Q4?

No. So I repeat again, we will not have such high losses what we had last year. So this will be a better quarter than what we had last year. The losses will not be so high.

All right. And sir, how about FY '26, would you like to comment anything on that?

So FY '26, I think through change in strategy which we are doing now with respect to our cost optimization, so what we have realized is, okay, we have built up a good team across India. However, based on performance of various zones what we have been having since last 1 month, we understand that there are various places, various territories and regions where we can consolidate. So we will be consolidating all those and ensuring that the per employee performance is much better than what we had this year. So this year, we had much higher strength of employees. Otherwise, the per employee performance didn't come to our expectations. So we are consolidating various regions to ensure that each employee we are getting the number what we expect. And based on that, next year, also that few of the products which we have presently close to 8 patented products wherein half of them were [indiscernible], we see a full potential coming next year. So next year will be -- revenue would be -- for all these products at full potential, plus with current cost optimization what we are making, we'll have a much lower OpEx. And already with respect to working capital, we see that we are doing working capital very -- because of the bumping of last year, we had much higher inventory, but this year we see that the inventory levels also will be go down. So across all parameters, we see that the performance will be much, much better in FY '26.

Yes. So I may just add just 2 lines onto that. So the key takeaway for us from this particular quarter is that there needs to be a very good way of being able to monitor each territory's ability to change and take corrective action despite any changes in the weather patterns and the cropping patterns. And that is something that we will be doing. We also have been able to identify certain areas of, I would say, inefficiencies and which is what we'll be addressing them on a strong footing.

Next question is from Deepak Poddar from Sapphire Capital.

Yes. So I just wanted to understand now, I've been tracking this company for some time now. I mean what I have noticed is that whatever we guide, we always fail to achieve basically. So I mean, where is the gap? I mean even last year, FY '24, we were targeting some 30% growth, 20% EBITDA margin. We fell short by a huge margin. This year also, I think we are targeting -- we were targeting 15%, 20%. I think we'll have a negative growth, right, given the -- so where is the gap basically? I mean, why is that we always fail to achieve what we have been guiding or what we have been saying?

You have got disconnected.

Hello?

Moderator, can you hear us?

Hello?

Yes, we can hear you. Sir, could you please repeat your question, Mr. Poddar?

Okay. So what I was asking that I've been tracking this company for some time. And what I've noticed is that whatever we have been guiding even for last year also, we had failed to achieve by a huge margin. I mean, last year also we were targeting some 30% growth and 20% EBITDA margin, we failed miserably. And this year also, I think the gap is too huge. I think we were targeting 15%, 20% and we would be seeing a negative growth. So I mean, where is this gap coming? I mean, how is that always we fail to achieve what we have guided or targeted for ourselves? I mean, can you throw some light on that would be very helpful.

Yes. So as I mentioned that we had built up a sales team considering that our numbers and the growth will be coming from this because we have built a pan-India team and also we have the products to back them. However, this year's -- obviously 2 years, we have been just about managing at the same level. So one is there is an improvement in the branded business and a significant improvement, which is the way we are moving forward. So the reduction what you see majorly is coming from the institutional business, which is a conscious decision to reduce. So we are having success in building our brand and able to do it successfully. However, what you see is that the initial issue with respect to higher OpEx that has been built, however, the benefit of which we should be getting in next 2, 3 years. So yes, we have not been able to match the 20% numbers what we have been saying since the last 6 months or so. But the main particular reason for this is that first, we have built up the team. However, the sales based on climatic conditions and the seasonal factors, we are not able to achieve that. So that we are rationalizing now in this quarter because we understood, okay, building a team immediately and trying to get results has not given immediate results, but still able to give negative impact on this. So we are optimizing our cost and we are consolidating our people to have that improved performance. So yes, we are learning from whatever we have done in last 1 year and certainly, we will see improvement in Q3 as well.

Okay. But I mean, in terms of margins, I understood what you said. But in terms of top line also, I think we fell short by a huge margin, right? I mean, is that something that our products are not getting traction and that's why we are getting so high sales returns and our products are not good? So what is the thought process there? I mean, there is a huge difference of what we expect and what we are actually achieving. I mean, not in this year, I mean, it's 2 years in a row, right?

Yes. So again, that's right when we see number as a value figure. But when you break this number into various businesses, so branded business, we have done tremendously well. We have been growing since last 2 years at 50% to 70%. So that we have been able to do. The top line reduction is basically because of 2 reasons. One is the institutional business, which we are trying to reduce. That's the reason you see the similar top line not been able to achieve. And secondly, this year, there has been a price reduction of close to 20%. So if you see current numbers, with 20% reduction, our volumes have been much higher. But because of the 20% reduction, we see at the same value.

So when did this price reduction happen? I mean, why we were -- as a investor, we were not kind of informed during the last call that this price reduction is happening?

No, in the previous call also, when you see in between June and September, we had indicated that there was a huge China dumping which has happened. And in our previous quarters also this 20% was there and we had guided accordingly that there was a price reduction of 20% in the earlier calls as well. And with respect to sales return, so generally the trend is that in case we want to grow, you need to place the material well in advance because almost all the players are having good amount of inventory with them and would be ready to place at any point earlier than the season and which we also did considering we have pretty good products. But now once we are in the season, we see that various crops, which there is pretty strong, doesn't work out as per our expectation, then there are little higher sales return. Yes, so we have factored -- so if you see we had done provision last quarter as well and we have done this quarter as well for the coming quarters. So there might be some increase in the sales return here and there, but yes, it doesn't impact our overall strategy of the branded business.

But in terms of price reduction, if you would have indicated, but you were quite positive on third quarter numbers, right? I mean, you were saying we will not see any sales return and all. I mean, in spite of -- I mean, this price return, if the price decrease, you would have indicated last quarter, but you were still very positive on third quarter performance, right?

Yes. So we were almost...

There's a big disconnect, right, with what we were saying in spite of you knowing that price were reducing, your performance would not be good then because price is reducing and then it would be very difficult for farmers to then invest in agrochemical products that you have.

Yes, Mr. Poddar. In fact, if you talk about -- if you see this third quarter, there is -- if you see our expense side, that is much higher. But if you see our -- the gross margin are still there. So the basic thing is, if I say in a broader term, you can say we are into the B2C business where this kind of pain we had to take because B2C business, we have increased a lot from last year to this year and the last year to the previous last year. So that you can say that is the main reason because when we go into the B2C, there are expenses and everything will be the same where if we -- the third quarter sale is not there or there are any impact, so that will come. So we can say it is not for always, but for this year, it is there. And we are hoping that this expenses we think like investment on our brand business is that next year will be very good that we think.

Mr. Poddar, we request you to rejoin the queue for follow-up questions. We move to the next question from Preet from Company Wealth Financial Advisors.

I still want to continue with what the last participant was saying. So here is -- I think the company that you guys are, you keep on doing same things in con calls, which you have no idea in following up. Let me give an example. Last con call, the numbers were released in the second week of October because the reason you say it is that because the SAP system is there, you get all the information earlier, you will be able to give data and all subsequent results will be early. Now because the December results are bad, the results are pushed to now the 14th of this month. I mean this really says that con calls information is given without any seriousness. And to me, this is gross negligence also and significant lack of corporate governance. I mean why would you keep on saying anything that you say without any intention of following up or sending clarifications if you don't follow up? The management here is seriously lacking and should be held accountable for this kind of gross negligence.

Yes, Mr. Preet. Thank you for your question. Yes. In fact, about the delay of this -- you are saying earnings results that the delay is not for any intention or anything because that doesn't serve any purpose. Sooner or later, that has to be done and we have declared our results. The results delays just because of our internal meeting with the brand business, with the reviews, with the next year planning because generally, year plan we do from -- in January and February only. Even now even our budget meetings are going on for the next financial year. So that is the main reason which we were busy in this -- that's the only reason for delay. Your first question is delay, that is the only reason.

The next question is from Komal from ASK Investment.

How do you think you manage the balance sheet? And what are your plans for fundraising? I mean, currently, you are having receivables of INR 1,000 crores and inventory over INR 1,000 crores and no bank will give you debt and no equity investors would be interested. It all points down to confidence. And how will you be able to go through this? That's my first question.

So with respect to working capital, so compared to last year's cash flow, we have been able to generate close to INR 170 crores in 9 months, positive cash flows and INR 32 crores for this quarter. For inventory, yes, last year it was higher because of various reason and failure of a bid completely. So inventory has been going down. So presently it's only INR 700 crores...

Could you make it clear because I'm not able to understand. I mean...

Yes. So I was saying that, okay, let me repeat. With respect to overall cash flows, we have been positive INR 177 crores for 9 months and INR 32 crores for the quarter. Our working capital was much higher last year. And this year, we have been able to generate positive cash flows. So our 6 months was profitable as well. Now this quarter because of various reasons, what we had mentioned, we had some losses. Our inventory and receivables both put together are much lower than previous quarter as well as previous years. Our loans, we have repaid during last 9 months. So there is no issue with respect to any bankers not giving us loans or whatever we had -- in fact, we have repaid loans in last 9 months. So we don't see anything with respect to the balance sheet, what you had mentioned.

What is the current borrowing? Currently, how much is the debt?

Our current borrowing is to give you the exact number, we have about INR 500 crores.

Okay. And are you sure that...

Mostly working capital side. Yes, all are working capital.

Yes. What about the preferential because you have allotted at some INR 650-odd right? And are you sure that you will be able to receive the remaining amount? What are the thoughts there?

So we have already received the 25% committed amount from the investors. And with respect to balance, obviously, this is a long-term investment which our investors have shown on us. So one quarter difficult performance will not relate with respect to our overall performance of the company in future as well. So obviously, we see a better future for the company and we are pretty confident because people have invested at INR 640. We are pretty confident that our share price will be back to those levels so that we feel confident to pay the balance 75% as well.

Okay. Good. Coming to the business front, I have a question. When you say you are doing branded 64% for H1 and rest 36% is B2B, this 64% is totally manufactured -- I mean, without the 100% we are doing, right, how much is internally manufactured and how much is -- I mean, we are doing sort of trading?

So the branded when we say is all manufactured itself. There's no trading in the branded business. So most of it we produce all the important products we manufacture in-house. For few of the products, obviously, you buy from other companies and then sell directly. So that portion is pretty small. But most of our products are manufactured in-house because most of our product sales, close to 50% to 60%, is contributed by our specialty molecules and those are all in-house.

So when I take 64% branded now, you are saying that totally manufactured by us and the 35% is patented, right?

Yes.

And by next year, how do you see this patented share going up?

So we had -- as Vimal ji said, last 15, 20 days, we have been moving around and having budget meetings with our zonal teams. So we are pretty confident that -- and we have a special stress on our patented products. So we should be anywhere between 40% to 50% of our overall branded business coming from our patented products.

So by next year, what would be the branded and institutional sales number? I mean, looking the percentage-wise, currently we are [indiscernible]...

Overall, we have been able to achieve the target this year to have around 65% to 70% of our business coming from branded. So next year also will be in the same range.

Okay. So next year, you're saying that patented share will go up, but institutional and branded will be same range?

Yes.

So if I may add just to this thing, there will be some percentage of B2B business that will continue because at some point of time, it does help us in multiple ways, although, yes, the margin may not be very high, but then the payment cycles are much more assured. And always in this sort of a business, what happens is we may be having certain products which are excess for us, but shortage for somebody. We may need some product which is a shortage for us, but excess to somebody. So it helps us a lot on the B2B business to be able to support the B2C. So the optimum percentage output would anywhere be between the 30% to -- 25 to 30 percentage for the B2B. So at this particular point of time, we wish to continue with the same strategy of maintaining a mix of around 65% to 70% as the branded business and anywhere between 30% to 40% as a B2B business. That is our strategy at this particular point of time.

And what is the working capital days in B2B?

In B2B, working capital days would be close to 90 to 120 days.

And what about B2C?

B2C also, we are falling in that range itself, close to 120 days.

But suppose if you want to lessen the balance sheet, what would be the strategy for us because we have to keep the balance sheet also in check, right?

Yes.

So with the revenues and...

We have done few policy thinking for last branded business. So with respect to various products, we'll be getting cash prices for our products. So that will manage the balance sheet. So we have enough bank loans to manage this and we are pretty comfortable with respect to the number what we have. And in fact, because we were carrying higher working capital from last year, which has been consistently decreasing quarter-on-quarter and this quarter also, we are taking special stress on our working capital to reduce it further. So we'll see improvement in our balance sheet going forward.

Mr. Komal, we request you to rejoin the queue for follow-up questions. We'll move to the next question. The next question is from Saket Kapoor from Kapoor Company.

Firstly, in terms -- with respect to the sales return, sir, what was the sales return number for last time Q4 as a percentage of sales or just an absolute number, if you could give some color?

So last year, Q3, Q4 put together, so one was from the Kharif season returned in Q3 till December and a little bit in January and December return in Q4. So totally, we had close to 22% from our sales which were sales return last year.

Okay. Can you quantify the number, sir, as you were maintaining that INR 130 crores was the Q3 number last year. This year, it was INR 160 crores or INR 180 crores, I think so. INR 50 crores was the gap.

Last year, it was INR 160 crores and this year, it was INR 130 crores.

Okay. Okay. So this was Q3 last year. And what was Q4 then?

Q4, we had around INR 70 crores last year.

INR 70 crores. Okay. And this year, sir, since now -- by now in the month of February, you would have an inclination how the sales return have been post the December quarter also. So any color you would like to give us on the same?

So liquidations are still going on. We will not be -- give the number because still the season is going on. So this will be clear to us only by end of March. So by that time, we'll be able to give -- have a clear picture.

But you were confidently mentioning that it will be much, much lower than the last year INR 70 crore number.

Yes.

So which understanding is correct, sir? We need to wait or what you told earlier is correct?

So both are correct that way. So one is whatever expected sales we plan, that is one thing and the expectation -- expected return. So till now, we are having a season which is going on and we think that the returns will be lesser and our numbers last year because of even higher sales return from our key molecules were the reason that we had losses. But this time, we have taken enough provision in December itself to ensure that we'll not have negative gross margin like last year. So we have done provisions in December so that we take care of the returns what we'll get in Q4, which was a little lesser last year. Last year, we didn't have so much provision, but we have taken a good amount of provision this year.

Okay. And now to the debt part, I think so sir, as on September, we were not carrying any long-term debt. So it is all the working capital requirement only that we need for our business?

Yes. As of now also, whatever we have is all of working capital loans.

Okay. And what portion is in terms of foreign currency, I think so we had a INR 10 crore noncash item in terms of ForEx reversal -- ForEx debit to the P&L. So if you could just explain that part to us? How much is in foreign currency, sir?

So we have close to INR 400 crores, which are payable, which are in foreign currency. So that portion already because suddenly in December, you would have seen there was a huge spike in the USD-INR rates and which didn't happen since last 2 years, but whatever deviation happened just about 30, 40 days. So yes, because of which this exceptional thing which was there in December. So we have close to INR 400 crores worth of foreign currency payable, which we have today.

Mr. Kapoor, we request you to rejoin the queue. [Operator Instructions] The next question is from Hemant, who is an individual investor.

Sir, in the previous answers, you were mentioning that you are trying to consolidate your sales team. But if I compare your B2C revenues with your dealer network, so on an average, you are doing only around INR 10 lakh per dealer per year, which seems to be very less on the -- which seems to be very less. Whereas other players are doing around INR 25 lakhs to INR 30 lakhs per dealer per year. So don't you think this number is very less?

Yes. So you are right to 2 extent. One is, okay, compared to each dealer, our number is lesser. And also as we mentioned earlier that compared to the number of people we have, the per person efficiency also was lower because we expected based on our product portfolio that we'll be able to ramp up our sales much faster. So yes, because of seasonal factors and all those reasons, we are not able to achieve those. But that is the target for next year, as you mentioned, we have 2 things. One is to improve our dealer share, dealer wallet and also to ensure that each employee has completed the performance target for the next year.

[Operator Instructions] The next question is from [ Sagar Shah ], who is an individual investor.

My question is similar to all the participants because we all -- always we try to optimize ourselves, but quarter-on-quarter, we're promising to investors a huge -- in terms of gross margin, in terms of revenue and in terms of top line. But why we always fail to perform and also from last 3.5 years, we're also inspecting your company. But each and every year, we are facing some loss in terms of our expectation. So is there any specific reason in terms of corporate governance or is there anything in terms of, means, our capability to enhance our company portfolio?

See, it's I think for us few answers, we have just about answered this. The important part for us is that we are improving in our branded business strongly. We are improving in our gross margin strongly. And we have a portfolio in future to ensure that whatever steps we have taken to go towards branded should help us in future. Obviously, there would be -- there's a setback in this quarter wherein we are not able to match the performance what we had guided because even we were -- based on the season, based on the on-time rainfall, we are expecting and the kind of investments which we have done in manpower and brand building didn't come out specific. So there is a short-term pain which we are taking that we didn't have the same results what we had expected. But the amount which we are spending on branding and all obviously will not go waste because for the long term, the farmer will ease accepting our products, especially our patented products. So most of our patented products are doing pretty good, which you will not find in the industry that our -- the first patent product itself was crossing INR 300 crores and others are -- one is at INR 200 crores and the others are at INR 100 crores. So this obviously will -- the good acceptance will give us benefit because all the branding amount which we have spent this year will benefit us in future. But as you rightly pointed out, it didn't come out the way we expected because we were also pretty hopeful. But we are taking corrective steps. Since last one month, we have been, as I said, optimizing our cost to ensure that our future sales, gross margin and all already we have achieved to those numbers. We'll achieve higher sales growth with reduced number of people and reduced OpEx, which will certainly improve the future profitability.

The next question is from Murali, who's an individual investor. There seems to be no response from the line of Murali. We'll move to the next question. Next question is from Sanjay, who is an individual investor.

So just a quick question about -- it was mentioned in last call that 2 more cutting-edge insecticides are set to release in Q4. So are you going to be on track to release those insecticides in Q4 or already done or you are on track? And about this income tax department, which is -- the thing is still open, I mean, right [ sharp ] from September '23. So anything you guys are doing to close this quickly because this is really creating uncertainty among the investors? So what is the update on that? I mean, how quickly these things will get closed?

So with respect to income tax, I'll answer, with respect to product side, Sai ji [indiscernible]. So with respect to income tax, whatever we had issue last year, later on, there was no notices and no responses, anything from the income tax side. And what we believe is and what we understand from the department as well that the issue is closed from their end, even though we don't have a formal, formal letter from them to say that it's closed, but there is no notice and nothing which has come out a single rupee for that raid whatever had happened.

Yes. Regarding the on-track for new products. So we had already been talking about Shot Down, which is a proprietary herbicidal formulation, which Haloxyfop and Imazethapyr. So we are on track for this thing. We are just finalizing the right strategy to be able to take this forward. But I would like to caution that the new products whichever get introduced in the market, they take a little bit of a time to be able to settle down. So they do not have a big bang approach of showing the results in the first quarter itself. We are focusing more in terms of being able to prove the product on the ground to the farmers so that there is a gradual sustained and continuous revenue growth over the quarter. We have also been working on one more insecticide, which is Bestman. But this will see the traction -- some traction in the Rabi season. Short-term, we'll see some sort of a traction from the Kharif season. So we may be able to see the effect of short-term somewhere in the next quarter coming.

Next question is from Ram Tavva from Equinox Capital.

So there is a news saying that the deviation in fund utilization. So can you just throw some light around that deviation in the fund utilization?

Sorry, we didn't understand.

There's a deviation in the fund utilization from CRISIL, there is a report, which you have shared to the exchange.

Yes. Yes. So there is -- yes, yes. So there is no deviation in the fund utilization. So whatever for INR 150 crores, the committed amount from the investor, we have got 25% from them. There's no deviation in the utilization because the balance 75% we are yet to get. So as we're committed, so earlier for INR 200 crores, we had mentioned that INR 70 crores will go for CapEx. But now for INR 150 crores, we have mentioned that INR 50 crores will go for CapEx and balance INR 100 crores will go for working capital. And the initial amount what we got, we have utilized for the working capital purpose. There's no deviation.

Next question is from Veeranna Savadi, who is an individual investor.

My question is a simple question I have. I just wanted to understand what is your view on getting confidence back from FIIs and DIIs investors? It looks like they all lost trust on your company due to non-standing on your words whenever we have -- you guys have a con call. So what is your view?

So yes, you are right to say that based on because this is more a seasonal business and based on seasonal business, if we are in June, there is obviously an expectation which is built and how season is going to pan out, how we are going to sell. And that's how we build our expectation. And when we have done our June and September quarter, based on those expectations, we had given our commentary to say, okay, what we feel about this season. And we are preparing our company based on those situation as of that date. So yes, we have not been able to match that performance what we have been giving in June or September. But what we know is based on our product portfolio, we feel that this is a short-term setback what we are having. And we are pretty sure that we'll be able to come out of this considering that the changes what we are doing with respect to our cost and the learnings what we are having from our previous season.

If I may add, actually, I hear your point that there would be a certain drop in the confidence of FIIs and DIIs. But what I would like to say is that it is based on what our product portfolio, what we have demonstrated in terms of our R&D, what we have demonstrated in terms of patent. In that, there are Chinese companies, there are Chinese very large manufacturers who have decided to work with us as an R&D collaborator. This is -- it's a good step in the right direction. They view us not just as a buyer of Chinese products, but they view us as somebody who can sort of work with them. And the relationship has been built on the premise that we can help them in their R&D, we can work together and we can utilize certain registrations, which the Chinese company have already invested significant amount of money in the past year. That's one area that I wanted to say. The other area is that we had not been able to kick-start our export business. I can be happy to say that we have got the first export order, which we started after some time. And the number of queries and the number of deals which are in progress are a few. We will certainly be working on the export front also to be able to ensure that our dollar payment and the stress on the dollar is sort of mitigated. Overall, in terms of our internal confidence, yes, we are very clear that the way -- the path that we are walking on in terms of R&D, in terms of differentiated products, in terms of patented products, in terms of backward integration, in terms of being able to work on new molecules, in terms of developing R&D collaboration with important companies, we are sure that these things will yield results. Yes, you are right in the perspective that we expected things to be able to fall in place much faster. But yes, they are a little bit slow, but we do look forward to good years to come.

We'll have to take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you all for joining this conference. We will certainly work to keep the stakeholders' value in our mind at the topmost priority. Thank you very much.

Thank you very much.

Thank you, everyone. Thank you, everyone.

Thank you. On behalf of Best Agrolife Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.