Best Agrolife Limited (539660) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '26 Earnings 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 on date of this call. The statements are not a 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, Whole-Time Director; and Mr. Vikas Jain, Chief Financial Officer. I would now like to hand over the call to Mr. Vimal Kumar for his opening remarks. Thank you, and over to you, sir.

Thank you very much. Good afternoon. I welcome our investors, analysts and shareholders to the Q2 FY '26 earnings call. Thank you for joining us today and your continued trust in company. This year, the kharif season has once again reminded us that the Indian farmer are heavily dependent on monsoon. The rains have been very difficult and very seasonal. Many parts of the country experienced heavy and untimely rainfall. Several key regions experienced floods causing crop damages and losses. According to the Indian Met Department, the country received about 8% above normal rainfall during August and September '25. However, Punjab and Haryana recorded 40% to 50% higher than normal rainfall, leading to floods. Rajasthan and Haryana recorded 40% to 50% higher than normal rainfall, leading to floods. Rajasthan received 30% excess rain. In Maharashtra, more than 6 million hectares of farmland were affected by floods, water logging and submergence. Overall, a challenging situation for the farmers. These extreme conditions caused serious damage to the major kharif crops such as soybean, maize, cotton and pulses. Many fields remain submerged for long periods and many farmers faced delayed harvesting and crop losses. At the same time, heavy rains also washed away pest infestations with fewer number of sprays. As a result, demand for agrochemicals remained weak in several regions. The early rains were good for the kharif sowing and supported the crops, but then the excessive rainfall at the last stage of Harvesting Washed Away All the Gains. Unseasonal rain condition until late August, September and October, these rains resulted in substantial crop losses, especially for cotton, soybean, pulses, groundnut and vegetables. Looking ahead, the positive for the rabi season are plenty of groundwater and dams full of water, but the poor kharif season leads to delayed rabi sowing and farmer losses and financial stress. Overall, we have seen the demand for agrochemicals being disrupted. Despite these challenges, Best Agrolife has navigated the season with discipline and resilience. We carefully managed our operations, maintained strict control on inventory and stayed close to our customers through our strong field presence. Our focus has remained on maintaining leaner inventories and financial discipline in every aspect of our operations. This year, we did significantly less replacement and sold our products closer to liquidation period. This strategy has been a great positive for us. Traditionally, the agrochemical industry experiences the bulk of sales return in the third quarter. However, with our revised sales return policy and our reduced preseason order placement strategy, we expect significantly lower sales return in quarter 3 FY '26 compared to previous years. This reflects our proactive approach and strong operational planning. Our focus will be profitable and long-term growth. Another major strength this year has been our growing portfolio of patented products. Patented products now contribute to more than half of our brand portfolio. This shift is slowly enhancing our brand value. Our margin profile will continue to improve and our competitive advantage will continue to grow. Today, whenever I speak with our customers, farmer feedback, I hear only positive feedback about our products. Despite the lower revenue, the quality of our revenue mix has improved. We are selling more of our patented products. Looking ahead, I'm optimistically positive. The outlook for the rabi season is cautiously favorable. With focus on research and development, operational discipline and significantly lower sales return in quarter 3, I am confident that Best Agro is well positioned for growth and profitability. Thank you. Now I request our CFO, Mr. Vikas Jain, for the detailed financial performance.

Thank you, Vimal ji, and good afternoon to everyone. I will now take you through the financial performance for the quarter and half year ended September 30, 2025. For Q2 FY '26, the company reported a revenue of INR 516.8 crores compared to INR 746.6 crores in Q2 '25, marking a 30.8% year-on-year decline due to unfavorable weather conditions. The moderation was expected as we consciously focused on optimizing inventory, streamlining channels and aligning production with actual market demand to reduce working capital stress. Gross margin stood at INR 169.6 crores compared to INR 252.1 crores in Q2 FY '25. While the absolute margin declined, the product mix improvement towards higher-value patented formulations supported overall profitability resilience. EBITDA for the quarter was INR 77.5 crores as against INR 147.1 crores in the same period last year, translating into an EBITDA margin of 15% compared to 19.7% in Q2 FY '25. Sequentially, however, margins have shown improvement, reflecting the impact of tighter cost controls and efficiency measures. Profit after tax for Q2 FY '26 was INR 38.3 crores compared to INR 94.7 crores in Q2 FY '25, resulting in a PAT margin of 7.4% versus 12.7% last year. For H1 FY '26, revenue stood at INR 898.1 crores, EBITDA at INR 123.3 crores and PAT at around INR 58.2 crores, reflecting a phase of realignment and strategic consolidation. During the quarter, we maintained a strong focus on cash flow discipline, expense rationalization and balance sheet efficiency. Our efforts on reducing OpEx and improving collections from trade partners have started yielding results, helping us sustain financial stability in a volatile environment. The business is steadily progressing towards stabilization with notable improvements in key operational areas, including lower sales returns and optimization of operational expenses as well as a tight control on inventory. Inventory levels have decreased by INR 207 crores from INR 873 crores in H1 FY '25 to INR 666 crores in H1 FY '26, marking a 24% year-on-year reduction. Through strategic restructuring across regional operations, the company has achieved an OpEx reduction of 13% compared to Q2 FY '25 and 11% compared to H1 FY '25. We believe this belt tightening will be base for our future. As we enter the rabi season, we expect volume growth to recover, driven by improved farmer sentiment and stronger demand for our wheat and potato-related crop solutions. With reservoirs filled and soil moisture levels favorable, the outlook for the next quarter is positive. Moving into the second half of FY '26, our primary focus will be on returning to profitability in Q3 and Q4. We are aiming to achieve an EBITDA margin of around 13% to 14% with an approx turnover of around INR 1,500 crores for the fiscal year. In summary, while Q2 was impacted by short-term challenges, we are confident that our strategic focus on operational efficiency, innovation and financial prudence will help us to deliver strong performance in the second half of FY '26. With that, I'll hand over to Mr. Surendra Sai.

Thank you, Vikas ji. Good afternoon to everyone on the call. Notwithstanding a tough half year, we remain positive about our future direction. Agrochemical business globally is subjected to unexpected peaks and troughs. We are cognizant of this unpredictability and the management focus has been towards building a sustainable and a predictable business. It is this endeavor that will be our focus. We believe that the steps taken by us in terms of expense reduction, sales policy, inventory control and focus on analytics and the use of R&D will weather us through the H1 storm, if I may say so. Our IT systems are maturing as we roll out SAP automation and analytical dashboard. Each step will strengthen the organization. We are determined in setting the direction for becoming an agritech R&D-based company, Our R&D and IP teams were successful in garnering a new and novel nano urea [indiscernible]. This is our first foray into the field of nano materials. In H1, we added 4 more patents to our IP portfolio. Our basket of intellectual property now includes synergistic patents, synthesis patents, nano formulation patents, and we hope to make more breakthroughs with agritech patents. Our ability to synergize these R&D efforts into a sustained top line and bottom line will be our goal. As a forward-looking company, our commentary would be incomplete without mentioning the role of AI. Developments in the arena of generative AI are transformational. Every week, there are new foundational models being released and new use cases for AI are being conceptualized. There is a significant scope for adoption of AI in the Indian context. We are cognizant of this transformation and as a company, we will adopt, develop and benefit from this revolution. Exports is an area of focus and our business in Africa is continuing. As previously stated, after the successful completion of 3 consignments, we have been awarded further orders based on our quality. The feedback from the customer has been overwhelmingly positive. This year, we hope to do around $1 million business with this customer alone. We have started generating revenue from our China subsidiary and look forward to end the year with $6 million to $8 million in revenue generation. In terms of international trade, we are actively looking at rupee and RMB trade as a natural hedge against the dollar volatility. Our patented product registration in Mauritius, Sri Lanka and Vietnam are progressing. Our active ingredients and formulation products are moving through the approval process in Taiwan, Mexico, Thailand, Vietnam and other key markets. With these efforts, we are strategizing on creating additional revenue streams in the coming years. We are actively pursuing opportunities in the Kenyan market to commercialize our patented products and establish a market presence in East Africa. I thank all the participants, investors, shareholders and well wishers for taking the time to attend this earnings call. With this, I will conclude the short update, and we are now open for questions.

[Operator Instructions] The first question is from the line of [ Hemant M ], an individual investor.

Coming to my questions, sir, my first question is related to our patented revenues. We have done around INR 290 crores in H1 this year compared to INR 357 crores last year. So in the AGM call, you were mentioning that you were placing a few patented products before the season. So can you give the breakup of this INR 290 crores? How much you have placed before the season?

So you're talking about only patented products?

Yes, yes, only patented products, yes.

Yes. So patented products are -- strategy. So this year, we had decided that as against placing 50 to 60 products, our focus would be only to place patented products. So the placement had happened before the start of kharif season. Now for rabi, the placements would start from November end, and the main sales will happen in December.

Okay. And how much of this INR 290 crores is liquidated till now for the retailers?

So we have almost -- in October, we got 90%, 95% of our sales return back as was endeavored this year by changing our policy. So whatever we have got back was around 10% to 12% of our sales from the patented products. So we have got everything back. So there's hardly anything left from the kharif season in the market. There might be something where small here and there liquidation might be pending. But other than that, 90% to 95%, everything is liquidated. And for the sales return, what we had in October, we had adequately made provision in September itself. So we have made enough provision for the actual returns what we are supposed to get in October. And that way -- and our returns are a little lesser only as compared to what provision we have made.

What is the provision for Q2, sir?

So September, we have made a provision close to INR 80 crores.

Okay. And coming to the Q1 numbers, if you include the provision of INR 50 crores, we have done around INR 430 crores. How much of this INR 430 crores is liquidated till now? And what is the sales return?

So liquidation is, as I said, for kharif season, most of our returns have been -- come in October, and there's hardly any liquidation which is pending.

So this includes...

[indiscernible] because of the delay in season in South, there might be some where the season is going on a little bit, but most of it has been liquidated and whatever is not there, has already been returned.

This includes generic products as well, right?

Yes, yes. So our overall strategy was to ensure that have to a much lesser sales return, which includes for both generic as well as our patented products.

Okay. So with the new approach, we might do well in Q3 this year with all these changes, whatever we have done. But if we see our Q4 revenue last year, only INR 90 crores came from branded revenues and balance INR 180 crores came from technical. So if we see our technical margins are very less compared to branded revenues. We need to do at least INR 27 crores, INR 28 crores PAT in Q4 to be PAT positive. So what will be the approach for this year to be PAT positive, both Q3 and Q4?

So last year, what you see at INR 90 crores is not just INR 90 crores, but gross was much higher, and we had sales return also in Q4. So now this year, we have ensured that all the kharif-related sales return has already been closed. But last year, we had certain material which came back later on in Q1 as well, which we would not see this year. So last year also, our branded sales was much higher. It was almost double, but because of sales return, it was only INR 90 crores what we could have seen. But this year, we will not see such kind of sales return and the sales of branded itself will be higher, and the technical sales would be a little lower as compared to previous year.

Okay. And next question is related to the patented launches. How many were planned in the next 12 months?

You are talking about new products, which we have to...

Yes, yes, new products, sir, yes. How many were planned.

Yes. New products -- no, this year, we already have launched our products like BEST MAN, we have already launched. And one product which we have launched is haloxyfop plus imazethapyr SHOT DOWN, the brand name SHOT DOWN, which we have launched already. For this year, we have launched. But for next year, we have planned for new products also, next financial year.

Can we expect 3 to 4 products, sir, in the next 12 months?

No. Maximum 2 products we will launch in next financial year.

That looks like BEST MAN has done very well this year. Congratulations for that.

Yes, definitely, BEST MAN, FETAGEN and SHOT DOWN. These 3 products have done fantastically, really good in field for these 3 products, FETAGEN, SHOT DOWN and BEST MAN. And you are correct, the BEST MAN is also, we're getting very good response, especially on the thrips, which was a really serious issue for the farmer this year, some of the regions. And our BEST MAN has done really good for that on the -- especially for the thrips and mites.

Sir, and my last question, sir. If we see our products like RONFEN, BEST MAN and upcoming product CUBAX POWER EXTRA. All of these were related to sucking pests. So what kind of challenges do you see in terms of scaling these products, maybe next 2, 3 years?

No, it is not like the same because if you talk about FETAGEN, that is mainly the crops....

No, no, sir. I'm asking about RONFEN, BEST MAN and CUBAX POWER EXTRA.

Yes. Yes. Actually, CUBAX POWER EXTRA, what you're talking about, definitely and BEST MAN if you're talking about and RONFEN. If you talk about the RONFEN, it goes mainly on the whitefly and the sucking pest generally if you talk about. And BEST MAN have tolfenpyrad and abamectin and fipronil. There are 2 different chemistries. You can say as a broader way, both are working on the whiteflies and both are working on the sucking pests. But if you go specifically, the BEST MAN is for aphids, jassids, thrips, whiteflies, mites and borers. So it depends on climatic condition and area to area. But it is different sales than RONFEN, because RONFEN mainly is with the diafenthiuron, which goes on the whitefly. If we talk about RONFEN and BEST MAN comparison.

Okay Sir, and in terms of top line target for this year, in the previous call, you were mentioning you will do around INR 1,700 crores. Any reason for the reduction to INR 1,500 crores now?

Yes. No, this is only because of we are being conservative and our total debtors and stocks have reduced a lot, if you see. And even in the last 1.5 years, we have reduced our debt of INR 150 crores. That is also there. So if you talk about that way, so that is the positive side, which we are controlling our debtor and the stocks.

Sir, but if you see the average, if we take INR 600 crores for next 2 quarters, we will do only INR 300 crores per quarter. And we were not able to do positive margins with these numbers from past 2, 3 years. So how confident are you this year to be PAT positive for both quarters?

Yes, definitely, we have changed our strategy for this year, which we already tell in my commentary also that we have changed our strategy. According to our strategy, we are going in the right direction. If it is INR 1,500 crores, INR 1,600 crores, not because of only we are reducing our sales return and control. Also, it is a season failure also in some regions, that is also one of the reasons for the sales. But we are doing conservatively. That is also a fact. But at the year-end, I think all will be satisfied with our numbers and EBITDA margins, that I can say. Either it is less or more, but each number will be satisfied in the terms of inventory, in the terms of debtors, in the term of creditors, in the term of our total, you can say, debt. So if you talk about total, in totality, it will be a good number, I would say.

[Operator Instructions] The next question is from the line of [ Saket Kapoor from Kapoor & Company ].

Sir, as you were replying to the earlier participant that we have made the necessary course corrections wherein we are confident that going ahead, we will be reporting sustainable and predictable numbers going ahead. So sir, firstly, if you could just allude to it in a much descriptive way, what are the few key changes other than the one which you have just explained, if anything else you would have to say that how will the investors will get the sense of your sustainability and predictability coming into force because this is the first quarter wherein the quality of statement has changed definitely from earlier conversation. And secondly, my question to Vikas sir. Sir, in the cash flow, we have seen provision for expected credit loss at INR 8.5 crores. So we have been speaking about sales return, then provisions and then again, there is expected ECL also. So if sir could explain the nature of this line item?

Yes. So with respect to your first question on the predictability. So as we have been discussing since last 2 meetings that this year, we are realigning our quarters. So you would have noticed that we are doing higher sales and higher profit in Q2. And then in Q3 and Q4, we are suffering because of the sales return and incurring losses. So this year, the realignment has already been done, and we already start seeing the results. As we mentioned, inventory and debtors and all those numbers are already under control. Sales return also has gone down by 50% compared to last year. So this will help. And also with respect to the profitability number, because we are increasing our patented portfolio and whatever reduction we see in sales number are either because of the generic products going down or there is lesser sales of technical sales. Otherwise, our patent portfolio is still strong and almost similar to last year. So this is on your first question. For the second question, it's just a temporary provision which has been done because we have put a formula that, okay, beyond certain number of days, we need to provide for the debtors. But November and December being the key collection months, we'll be able to collect those and this provision would be reversed. So you will see in December that there will be a reversal because we use certain formula above certain days of outstanding we provide. So we have, on a conservative basis, provided, which is signed out by auditors as well. But these are not actually bad in that sense because most of our collection generally comes in November and December when the harvest season is on and the cash flow moves in the market. So rest assured that would be reversed in December.

Sir, if you could just give the number for sales return for the second quarter and the first quarter and the provisions which we have made accordingly? Provisions for sales return and the actual sales return, yes.

So second quarter, anyway, it's mostly some part of rabi. So we had around INR 30 crores, INR 40 crores and we had a provision of INR 50 crores. For September, we have done a provision of INR 80 crores and what we are expecting is our returns would be around INR 60 crores. But same thing last year was actually around close to INR 140 crores of sales return. So from about INR 140 crores last year, we are going to have around less than INR 70 crores -- around INR 60 crores to INR 70 crores, for which we made a provision of INR 80 crores.

Okay. So when you mentioned sir, INR 80 crores as provisions and the actuals will be INR 60 crores only. So there will be a reversal of INR 20 crores going ahead in the net from the provision account?

So we will wait for November, December. As for some part of sales, still there is liquidation happening in South. So in case we don't receive much return, then obviously, you are right, it might be INR 20 crores, but it could be INR 15 crores or INR 10 crores also, reversal will happen in December. But anyways, provision is much higher than the actuals.

Right. Sir, my question to Sai, sir, about the international business that sir has alluded to. And I think he mentioned about one of the clients from which we have also got $1 million contract. I missed that number. So out of the total sales for the first half, what portion is towards the international business? And how should H2 shape up in terms of Re-eyeing the international sales?

Yes. So as far as our -- from one customer, for which we have already completed the registration process. So we have done approximately around USD 600,000 to USD 650,000 of business with this customer. And we look forward to another USD 350,000 to USD 400,000 of orders in the next H2. So this is our optimism. And the key point being that this is just from one single customer. There are other customers with whom we are working. This will be a little slow, but we hope that once we are able to start with the customer, our product quality will be beneficial and our pricing will be beneficial that we'll continue to grow. This is an early start. As far as our total overall sales numbers are concerned, $1 million international sale is relatively a very small drop in the bucket. But this is a segment that we'll continue to grow. This is just one aspect of the international business that we are looking at. There is some amount of institutional trading business that we are doing with our China subsidiary also, and that is also sort of generating revenue. Our ability to be able to get profitability and better bottom line being generated and supported from the international business will be something that we'll be looking forward in the next few quarters.

Okay. Sir, can you quantify for the first half, what is the contribution in revenue terms?

In the revenue terms, I had already mentioned that approximately $650,000 was with one customer. And overall, around $6 million top line was from our Chinese subsidiary.

You're talking in dollar terms, $6 million.

I'm speaking in terms of dollars. But in terms of profitability...

Sir, last 2 points I completely missed out. Come again?

Yes. So as I mentioned, in H1, we have done around $650,000 with one customer, and we have around a top line of around $6 million from our China subsidiary. This is only from -- totally from a top line perspective, yes.

And bottom line, sir?

Bottom line, at this particular point of time, we still have expenses. So we are still trying to get these things into a better shape. So this will happen over a period of time.