Dhanuka Agritech Limited (507717) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the PhilipConnect conference call on agrochemical trend, including COVID-19 impact. [Operator Instructions] I now hand the conference over to Mr. Deepak Chitroda from PhillipCapital. Thank you, and over to you, sir.

Thank you, and hello, everyone, and welcome to PhilipConnect Conference Call Series. So today, we have with us management of Dhanuka Agritech Limited represented by Mr. MK Dhanuka, Managing Director; Mr. Rahul Dhanuka, who is the Director Marketing; and Mr. VK Bansal, who is the Chief Financial Officer, basically, to understand the current agrochemical trend, including the impact of COVID-19. So without wasting any further time, I now hand over call to Mr. Rahul Dhanuka for his opening remark, and then we can start with the Q&A session. Thank you, and over to you, sir.

Thanks, Deepak. Good evening, friends. This is Rahul Dhanuka, Director Marketing, Dhanuka Agritech Limited. I along with my CFO, Mr. VK Bansal, join our MD, Mr. MK Dhanuka on this call, and take the opportunity to welcome you on this call. Thank you, friends, for joining in. A quick take from my side on our performance is that till the COVID-19 slowdown and lockdown hit us, we were going full steam. And overall, Q4 performance has been good. Our CFO will be sharing the micro details of the numbers soon. Overall, rabi has been good for the country, and crop yields and crop status down South in paddy and up North in wheat looks favorable and positive. Upcoming monsoon is also forecasted to be good. So according to me, the kharif outlook is favorable and positive. In short term, it seems it is the domestic consumption of agriculture commodity, which is going to drive the demand for agrochemicals. Export-oriented crops have taken a hit in last few days and will continue to have a slow takeoff in few weeks to come till globally the COVID-19 situation settles down. Domestic consumption of food products is stable and is expected to increase, although no recent data is there. However, it seems that the domestic consumption in terms of per capita consumption is not going to come down significantly. Of course, animal feed market might be impacted. However, there is not a favorable assessment around that. Meat and chicken consumption probably would come down, which could reduce the maize consumption, which is a major ingredient for animal feed, which means people might move in for more vegetarian choices and vegetarian options. So maize could be replaced by fruits and vegetables wherever it can be and by cereal crops. MSP support by the government is very loud and clear, so farmer has a good choice to sell his product on MSP to the government or would sell to the private players. I think so private players will not be losing the opportunity of doing their part of the procurement in agriculture because that would be necessary to run the plants, the food processing units. Of course, harvesting has been delayed due to shortage of labor. Labor is not available for doing harvesting or vegetable picking in many markets. That is a cause of concern for the farmer. Harvesting could be delayed, and this delay in harvesting could have some impact on kharif sowing, and I will talk about it a bit more later. Liquidity cash flow is going to be a challenge in the market because of this lockdown. Money flow has slowed even in rural markets. However, various initiatives taken by the government in terms of putting cash in hands of the farmer, direct benefit transfers and other measures taken for supporting SME and MSME will help money circulation getting restored sooner than later. It is this restoration of money circulation, which will eventually boost all businesses and agriculture and agrochemicals also. At Dhanuka, we help the food and nutritional security of the country. And I think so even in these testing times when the country is impacted by COVID-19, the food and nutritional security will hold utmost important, which is also pretty evident from the fact that the government has incorporated food, fertilizers, feed and agrochemicals in essential commodities, and it is these facilities which are being offered a opening amidst of lockdown. So that being important for the country, I think so agriculture will be back on track pretty fast. Talking about delayed sowing, the primary kharif crop which comes first, very importantly, is cotton. So probably some sowing of May could be delayed by a couple of weeks, but that won't impact cotton significantly because cotton is hardly any summer crop, only in highly irrigated areas farmer goes for early sowing, which is not really recommended because it causes insect attack, it causes increased insect attack. So this delayed sowing will not negatively impact much in terms of cotton acreages or cotton yield. However, cotton acreages might come down depending upon the global demand of cotton yarn or fiber, if at all if it moves into a discretionary spending that could have a spiraling slowdown impact in short term. However, wheat, pulses, sugar, fruits and vegetables and all domestic consumption would hold the agriculture as -- us in a strong position and will also lead the economic recovery of the country in short term. At Dhanuka, we run almost a rural FMCG model. We are significantly geared up to service our trade channel and eventually the farmer as soon as the lockdown opens up across the country. As I talk, we have more than 81 consignments, which moved out from our facilities about a week ago. And now with the relaxations offered by the government, these consignments are reaching their destination. Our warehouses are opening up for few hours, and shops in the market are also opening up for few hours, resulting in movement of agrochemicals in short term. With that, I would request all of you to be safe wherever you are and pray for safety for everyone around you. Thank you, and handing over the call back to you, Deepak.

Thank you. So now, we can start with our Q&A session.

[Operator Instructions] We have the first question from the line of Varshit Shah from Emkay Global.

First of all, wish all of you safe during these challenging times. So my question is around -- is more around the supply chain. So what we understand from -- my understanding from the channel is that, at least, the imports are all -- the ports are working and the materials are delivered. Now I know that you have -- you will, of course, be procuring some raw materials from China and some of it is locally procured. So what is the status there in terms of making our products available in the market at the right time during the kharif, assuming that we can move the products before kharif? And -- that's my first question.

Varshit, this is Rahul, and thanks for your question. You got the piece, right, that a lot of material has already been moved from China earlier, and our customs is working over time to clear these consignments. As of now, as I understand, though the customs is supposed to work probably 24/7, lot of export consignments are facing challenge. Almost anything which gets exported from India is facing some challenge and so are import consignments. They are coming in relatively slower. Once these consignments, they move in, then processing them in our formulation units is not going to be a tough task and then delivering them back to the market is going to be easier. Now, as of now, the supply chain would involve basic technical grade materials, then intermediates, emulsifiers and solvents. The supply chain will also include the manufacturers of duplex boxes, paper labels, corrugated boxes, HDPE and PET bottles and so on. The entire supply chain is practically in a shutdown mode, so which is going to cause the delay in restoring the ecosystem. Our plants in this period, normally in Feb, March, April, they are stocked up with offseason production technical material as well as a lot of packing material. So while the plants have been in shut down mode for the month since lockdown happened after 22nd, we are hoping our plants to get activated soon. And they have sufficient raw material and packing material to run for a while after which we will be dependent on our supply chain to get active and get active faster so that we can churn out the protection chemicals to the farmer. Did I answer your question, Varshit?

Yes, yes. So Rahulji, may I follow up on that. So what I understand is we have some stock of technical and packaging, so probably we have -- we can move something in the interim. But then I think maybe a lockdown beyond, say, 15, 20 days in the April probably could then cause disruption and the supply chain has to be restored before that. Is my understanding correct?

Okay. So for Dhanuka, we had, as I shared with you, 81 shipments waiting in transit. As these shipments, they reach their destination, they will activate the consumption. Now the consumption itself is in a slowdown mode for a while. Incidentally, as you might be aware, wheat is ready for harvest in North India and Central India, and paddy is ready for harvest in South India and East India. Agrochemical activity is at its minimal as of now. Fruits, vegetables and sugarcane, and there are very few crops which are active as of now. So yes, pocket-by-pocket farmer is in need of crop protection chemicals. But otherwise, for all practical purposes, we take March, April and even May as the offseason period. So talking about economic numbers, I don't think so our business would largely be impacted, assuming that we will be up and running soon after the lockdown. So lockdown is till 14th. And even for the next 10, 15 days, if it takes our supply chain -- our indigenous supply chain to activate, it will not cause any problem or any disruption to our channel and our farmers in sourcing the product. There will be sufficient in the pipeline.

Right, right. And just in case, if it takes longer the domestic supply to resume, can you substitute that with import maybe with a slight hit on the margin, but it can keep our engine running. So at what point will you have to decide it? Is it middle of May or still take that, call it, the end of the May? I know it's a tricky question, but...

Call regarding what?

Yes, so what I'm -- what my question is that whatever you procure domestically, I think you will also have the option to import, right? So it will be a -- generally be a choice between either import or procure locally. Assuming that the local supply chain takes longer time, will you be open to importing it and still get your stocks ahead of the competitors in the market? Or you think you have sufficient time even if the domestic supplies ramp up by, say, middle of the May?

I think so at Dhanuka, we are really well placed when it comes to the supply chain of technical grade material, either imported or domestic. That is not something I am worried about. I am more worried about the SMEs and MSMEs ancillary units servicing us. So technical grade material is not a concern as far as I see.

Right, right, right. So Dhanuka...

And in the short term, in the period defined by you, it is not a big concern. The bigger concern is the SMEs, MSMEs, the ancillary units activating themselves.

[Operator Instructions] We have the next question from the line of Levin Shah from ValueQuest.

Sir, firstly on this, so how are we placed in terms of our raw material procurement? So are we able to get material from China or from other regions where we are importing?

I lost you in between for few seconds, Levin, could you please repeat?

Yes, sir, I just wanted to know about our raw material situation, our procurement currently. So are we able to get material from China and from other markets? Are we basically able to import raw materials?

Thanks for that question. And I'm very sure if my distributors, my channel partners are listening to my answer, they will be extremely delighted. At Dhanuka, as you know, we run an asset-light model, and we are a debt-free organization. We normally use this period for procuring the material, raw material in offseason and also pack them in our production units. So that's what our factories are busy with as the lockdown happened. So we really have good stocks of the raw material available with us in short term. Supplies from China have restored to a great extent and shipments have started happening from China. A lot of our material, which was already in pipeline, is landing at ports and is in the process of clearance from customs or is in the process of transport from ports to our factories. And it is this transportation which is taking more time than the actual supply from China. Apart from China, one of our supplies are specialty and key products that are coming in from Japan. Japan has not gone in for any kind of a shutdown. It's only Tokyo where they are controlling or restricting the movement. Practically, all other prefectures of Japan, all other manufacturing units are under operation. And we are expecting all our Japanese products to come to us in time and complete quantity, and we are hoping to have good business opportunities with all these products. Third element of our supply comes from the domestic manufacturers. So domestic manufacturers, which were impacted by shutdown, will take their time to restore operations, you must be in touch with many of them. And I am very sure as soon as they restore operations, we'll benefit because of our relationship with each one of them, and the -- being a good paymaster also. So in 4 parts, I have sufficient inventories in my plant, I have sufficient inventories in pipeline from me to my channel. I have sufficient inventories coming in from China and from Japan, so I am left only with the concerns on domestic manufacturer, the picture will become clear in another week, 10 days.

Okay. Sir and -- this was on the availability front, but if we were to see prices, so how have the raw material prices moved recently? So we had China shutdown last month and the month before that. So has that in any way impacted our raw material prices?

Raw material prices are probably at an all-time low or sinking because of heavy inventory pileup in China. They had their material available, but the transportation was the first thing to get hit. So raw material prices are not going up. Subsequently, crude prices got a hit, which is the basic raw material for almost all chemical products. So that is not going to help increase the raw material prices. So I don't see any raw material prices increase. However, some traders might be using this opportunity to make a quick buck in short term and a short while. So something in terms of real emergency, we'll only see a price hike, which will be very temporary and very localized and case to case. Otherwise, in general, no price increase.

Okay. Sir, and one last follow-up is on this -- so if we were to see the current situation, if this lockdown continues, let's say, till the month of -- for the entire month of April and maybe into May, worst-case scenario, so then how will this impact our demand? Or if in the current state of lockdown, if this continues, will we be able to maintain our growth? Or there would be some issues transporting the material to the last mile?

See, last mile connectivity in this peak lockdown, government has allowed agrochemicals. So the supply chain is just stabilizing to that opening. I don't see that government can take any chances with agriculture. And we all know the adage, "Everything else can wait, but not agriculture." So I think so after health, after basic food, it is agriculture, which has duly received government attention, which has duly received logistical attention, which has duly received all the support from district and state authorities. I don't foresee the last mile connect being a challenge.

Okay. So just -- do you mean to say that if there is, let's say, normal monsoon this time around and situation stays as it is, we will be able to grow or basically, there would be some growth in the industry as well?

Absolutely, absolutely. And what I would do is, I would request my CFO, Mr. Bansal, to take on this question a bit and also explain our situation and our understanding on the numbers. So Deepak, can you request Mr. Bansal to take on that one and more details?

Yes, yes, for sure. So you see, if the monsoon is normal and the lockdown is extended for the, say, by April end or May end, so we are sure growth will be there definitely.

Mr. Chitroda would you like to proceed with your question, while we wait for questions from participants?

Sure, sure. So basically, sir, I have 2 questions. One is, obviously, on the COVID-19 impact, basically, you talked about a lot on the supply side of it. But what if -- obviously, we -- so far, we haven't seen any spreading of COVID-19 in the rural area, so far, and that's good part. But what do you see in the worst-case scenario if this basically extended towards the rural area. So what kind of an impact it can have on the demand side? And of course, if you see, a lot of migration has happened in terms of the workers in the rural area. So do you think it can have kind of a negative impact on the agrochemicals because ultimately, always, we talk about labor shortages and high labor cost and all, right, so this time, there will be a plenty of labors available in the rural areas.

So the last part, there will be plenty of what available?

I'm saying labor shortages will not be there because you have like a lot of people being shifted to rural area.

Right. Absolutely. So this migration has happened at a very cusp of peak labor demand because harvesting is a key activity. Wheat harvesting starts from Central India and comes up to North India and paddy harvesting of rabi paddy in South and boro paddy in East India is about to start in a couple of weeks. And they will need a lot of labor to do this harvesting. So this labor migration away from the heart of Punjab or Haryana back to UP and Bihar will create labor shortage in Punjab and Haryana and, of course, excess labor in UP and Bihar and Chhattisgarh. So labor shortage would be happening in the hearts of Madhya Pradesh or in heart of Telangana or Godavari, where the labor would have migrated to their hometowns, which are relatively poor in agriculture, which means the labor has migrated to Chhattisgarh or Odisha or Bihar, Jharkhand and UP, so there we will see excess labor, and in some states we will see shortage of labor. A lot of mechanization has happened. So in North India, largely, we see combines for harvesting wheat, but still farmer needs labor to manage the whole situation. Now these combined harvesters will be operating in Central India and then moving to North India for harvesting wheat, so that might not be significantly impacted. And similarly, we have harvesting equipments coming in for paddy harvesting, but it is still significantly labor-intensive. So those are mixed challenges and how the dynamics will work out, I'm not pretty sure. Increased offering on MGNREGA is another dimension, which comes in. So how this is going to impact with the migration of labor, there are too many variables at play. And each of these variables will have a social, economic and agricultural impact. It'll be too early for me to peck down and look at each one having its impact. So MGNREGA offering has gone up, which should ideally make labor availability difficult and which can ideally increase the needy side consumption significantly. So I do foresee needy side consumption going up for this year and in upcoming paddy season for sure because of not available labor in the short term. And again, we are really well placed with our pretilachlor offering in paddy, the pyrazosulfuron from Nissan, so we are really well placed for paddy. And in sugarcane, we'll have Sempra to take on the sugarcane weeds. And amazingly, farmer has come down in the middle of lockdowns, requested for the shutters to be opened and taken up weedicides in this window because they don't want to go ahead with their sugarcane sowing and sugarcane growing up where they cannot control their weeds. So this is going to be a mix thing. And I would request for prayers that this settles down quickly.

Sure, sure. And second question, sir, is around the quick takeaway from your side about the Pesticide Management Bill that was announced last month or so. So if you can just highlight what kind of impact it can have on the sector per se?

So Pesticide Management Bill is increasing these regulatory moves around all the agrochemical producers, which will actually make it difficult for the fly-by-night operators for fake and spurious products who play in the market. My audience would appreciate any law is only as good as its execution. So it is the execution, which will really matter. It has been given a lot of tweak. However, lot of delegation is being done to the states. Now that has been a challenge. Agriculture has been a state subject; however, the regulation was central. After passing on this authority at the state level, I foresee execution all the more slower or difficult if that doesn't happen. If the execution is true to the spirit, then this is going to boost the business of companies like Dhanuka, which invest in brand building, which invests in farmer education and companies like Dhanuka, which invest in creating brand equity over a longer period.

We have the next question from the line of Madhav Marda from Fidelity Investments.

It's a question, just on the Orchid Pharma, if there's any update that you could share with us in terms of the promoter pledge, in terms of what's happening there?

Yes. I'm happy to inform the audience that on 31st March, that is yesterday, Dhanuka has made the complete payment. And from today onwards, now Orchid Pharma belongs to Dhanuka Group.

I'm sorry, sir, belongs to Dhanuka Laboratories is it?

Yes, Dhanuka Laboratories is also basically not the part of Dhanuka Agritech Limited, but group is same. So now Orchid Pharma will be controlled by Dhanuka Laboratories Limited.

Got it, sir. And in terms of the promoter pledge, does that get released anytime soon or what's the thing in there?

Pardon, your voice is not clear.

No, no, I'm saying, sir, [Technical Difficulty] for Dhanuka Agri shares, the promoter pledge, does that get released anytime soon?

Sorry, there is disturbance in the line.

Yes, I am responding. You see, there is no pledge of the shares towards this loan. However, we have pledged certain shares towards the bank guarantee, which is going to be released in a day or 2. So therefore, the pledge of shares would be released with regard to the bank guarantee, given the Yes Bank.

We have the next question from the line of Viraj Kacharia from Securities Investment.

I'll just ask 2 -- 3 questions. First is, what is the inventory in -- either with us or in the channel, the overall -- or the industry inventory as of 31st March?

Ideally, industry goes for some inventory positioning in March end. So I think so organizations would have missed that opportunity. At Dhanuka, we hardly do any placements, so we do not have significant pipeline inventory. Like I shared earlier, we had 81 shipments waiting from our plants or general warehouses moving into some of our customers or branch warehouses. So I think so almost all the companies would have their inventories stuck at different stages of logistics and supply chain. And China thing happened way back in January, so that would certainly cause some inventory constraint in the ecosystem for March and April requirements. However, we discussed this in February con call also that this is not a high consumption period. This is largely offseason production and inventory building period. So I think so technical inventory and raw material inventory should not be a constraint in the industry. Finished goods inventory would be a constraint due to shutdown of the plants and assuming that we'll be opening and up in action pretty soon, it will not take industry lot of time to build up finished goods stocks and move it quickly to the market. At Dhanuka, we have 3 formulation units at Keshwana, Udhampur and Sanand. And at all the 3 formulation units, we will be up and running pretty soon and really fast, and we'll be able to service our channel and our farmers really quickly.

Sir, my question was actually, if I look at a year back at the industry and including us, so kind of started with a lot of finished good inventory in the market. But the monsoons being good and the liquidation also been good, trying to get a sense in terms of how much inventory is there compared to a normal demand environment, how much more or how much less the inventory is now in the system? So that was...

Compared to last year -- compared to last year significantly less inventory in the pipeline.

Compared to normal -- normal, yes, pardon?

As compared to last year, significantly lower inventory in the pipelines at all stages.

Okay. And second question was related to the pricing. Since the inventory being lower, the supply chain, I -- what I do understand that the key consumption period is still not begun yet, so I think it comes much later in the cycle than we'll input change. But given the inventory is relatively low, the supply chain is probably trying to get back, is there -- now companies are better able to hold on to the prices, so the kind of raw -- low raw materials, which we are managing to get, there's no really a composition to absolute share of the market? Or just trying to understand -- I also want to understand the pricing part of this?

See, there was a short-term blip for -- you know, I would say a short-term blip you can assume from mid-March to mid-April where the inventory constraint would certainly be felt. However, if we consider the backward chain, that material coming in from China or China as the chemical plant of the world would not be raising prices. In fact, the government has doled out subsidies -- export subsidies in China, then lot of liquidity has been pumped into the ecosystem in China. And there is a lot of logistic facilitation being done, which comes on to say that with the crude prices going down and subsidies in place, the global factory, which is called China, will not be increasing prices. So any northward movement of prices, if at all, could be short-term or product to product. It cannot be generalized in terms of prices going up.

And last question was on other agri input change, especially for seeds or fertilizers. So in terms of seeds, the production really happens a year around the planning and other things. It's usually largely localized. So are we seeing any impact in terms of availability, say, of seeds at the farmer level in major crops like cotton, rice or maize. Are we seeing any issues on those parts yet?

Yes, absolutely. So seed outreach pocket to pocket has been slow, and farmer has not got access to seed in many markets for a while. However, this is not exactly the time of cotton seed sowing. Cottonseed sowing earliest will be happening in mid-May or later. And about 15, 20 days of delayed sowing will not impact cotton acreages, will not impact cotton yield. Fruits and vegetable seeds, especially the cucurbits in this period, muskmelon, watermelon, cucumber, tomato, and the other fruits and vegetables, which are sown in March and harvested in this period of March and April, these fruits and vegetables will certainly be hit in terms of availability of their seeds, availability of labor and availability of the freedom to move around.

Any color on rice and maize as a product?

Rice?

Rice and maize?

Rice is normal, rice shouldn't be seeing any challenges. This is largely harvesting time in South India and East India. North Indian rice sowing will be coming up in June. The Punjab and Haryana government have normally imposed restriction of not starting transplanting before 10th of June. So we have sufficient time for rice sowing to happen. Maize sowing has taken a hit in some pockets, somewhere due to seed availability, somewhere due to maize prices going down; earlier at one point of time, they had touched INR 2,000 and now in some markets it's INR 1,200 a quintal. Maize prices have gone down, maize seed availability has been hit in some pockets, and maize acreages might overall reduce.

We have the next question from the line of Ashish Thavkar from Motilal Oswal Asset Management.

Sorry, I got into the call a bit late. Sir, on our in-licensed portfolio, would that get impacted because of these logistics issues?

In-license portfolio, the products which we get from various multinational companies. So Japan, as I shared earlier, all the prefectures of Japan are operational, offices are on, factories are on. We are expecting very normal supplies of Targa, of Chempa, of all our Japanese products, we are expecting really normal supplies. And other in-licensing products, which come from Europe or America, till our discussions way back in first week of March, the insight was that the supplies could be slow because of the China being hit in terms of -- however, China now pulling along. I think so supplies could be delayed, but would be restored before the kharif starts in June, July.

Okay. Okay. And sir, what is our -- what is the capacity utilization at our factories currently? And supposing on April 14, the lockdown gets withdrawn, then how quickly can we ramp up?

Right. So I will request my CFO, Mr. Bansal, to take on both the questions.

Yes, you see, it depends upon the availability of the labor after the lockdown is over. Normally, we run 2 shifts during season. But however, we have the opportunity to run the 3 shifts, so we can really pick up the -- everything very quickly, but it depends on the availability of the labor basically. That could be a problem, little bit.

Okay. But what -- the capacities are now down, currently, as on the ground, like because of the lockdown...

Currently, the factory is closed.

Okay. And you expect -- okay, and you expect by April 14th the lockdown will get over?

You see, it is a very difficult question. Everybody is expecting the lockdown could be extended. But since our -- just you see, every chemical pesticides are coming under the essential category, so we are hopeful our factories would be operational by next week, by Monday probably.

Okay, by Monday. Okay. The government has already put a notification, right, that these are essential in nature?

Yes, yes, yes. Already, it is there.

Okay. Great, sir. And sir, assuming that everything, the next -- by next Monday, the permissions are on and the capacity starts taking place, for the FY '21 fiscal, since the monsoons were also very good and we are expecting a good kharif season, broadly, what kind of industry growth do you anticipate? And what would be the growth for our company?

You see for industry and our company, growth should be in double digit. You see the government has declared this agrochemical or pesticides under essential category. But thing is that it's still the transportation is not started fully. Until the transportation is fully available, things will not move in that speed which we need actually. But however, because of the prediction of the normal monsoon, we are hopeful the industry growth should be in 2 digits, between 12%, 15% type, and Dhanuka definitely should be more than the average -- industry average.

Okay, great. And raw -- as far as the raw material dependency is concerned, how are we placed? Are the prices of the [indiscernible] now okay and...

Could you repeat your question, please?

On the raw material availability, how are we placed now?

Yes, raw material availability as our Director Marketing has already shared, by and large, is okay because China has already started. And as far as technical availability is concerned, we are sure there should not be a difficulty. However, once the lockdown is over, we can face some difficulty with regard to the technical material supplies.

Okay. Sir, so in other sense, the lockdown remains very crucial for the entire agrochemical industry and the sooner it opens, the better it is.

Yes, for the entire country, for all industries, yes, it is very crucial.

And you believe the government is cognizant of this fact, right?

Yes.

We have the next question from the line of Bharat Gupta from Edelweiss Securities.

Sir, Rohan here. Rahul, just wanted to -- I mean, thanks for summarizing in a very cute way and giving the current scenario. My question is on this, though, we may be able to manage on the supply side, given the government is allowing us to operate, my question is more on the demand side. Given the cash flows of the farmers will be impacted in the current scenario, as we have seen the fruits and vegetables market would have been disrupted, which was giving them very regular cash flows, also, nonfarm income and labor income, which they were getting that has also been impacted. Also, we are seeing that some of the crops, like you rightly mentioned that maize crop and even maybe cotton for that per se, may see a drop in prices. In maize, we have already seen a significant reduction in prices, and we believe that prices may remain under pressure. So given this current scenario with the cash flows of the farmers remain under pressure, do you see that there is a risk to demand farmers may consume less and remain slightly less in agri input overall?

Thanks, Rohan, for that follow-up. And what I would like to put it here is that it will really depend upon how the commodity consumption happens. So the larger commodities are being backed up very, very strongly by the government through MSP. For example, wheat is being backed up by MSP. There is stock of some bonus on the stress subsidy of INR 50 to INR 120 in different states. Paddy remains favorite crop of MSP channel. And cotton also, which is not a MSP favorite, has received support from the procurement body. Now MSP being in place, that could be a big boost to the Indian farmer and Indian agriculture. As of now, nationwide efforts are on to service the migrant labor, daily labor and other people who procure food on their own and are out of job as of now. It is at this moment that the MSTP -- MSP, public distribution system, the logistics system of the country and the collaboration, public-private collaboration of delivering the food is being tested. And I see, as of now, as a country, we are faring above average on that food delivery. Now as long as we have mouths to feed, agriculture will be in demand. Yes. Crop to crop, it will vary. Cotton prices will come under pressure. Maize acreages and maize prices will come under pressure. Export-oriented agriculture commodity will come under pressure. And to that extent, demand will also get impacted. However, normal paddy acreage is not coming under pressure. Normal soybean acreage is not coming under pressure. Normal cotton and even other crops, fruits and vegetables, especially are also not coming under demand pressure. Once the seed availability happens, farmers will go back to vegetables because that will be the easiest to grow and fastest to move and convert to cash.

Okay. Sir, second question on this credit crunch in the market. And have you started seeing that your collection have already been impacted though it's very early, but maybe in next 3 to 4 months when our business goes on full swing, you may see some collections not coming on time. And there, the company may see requirements of additional working capital to put in the system?

Absolutely. You're bang on that collections are the first thing to take a hit in such a scenario. I would like to say cash is king whenever the times are tough. So we are, as a country, going through a tough time and cash is going to be the king. Dhanuka, which runs on a very asset-light model and also being debt-free, we are really well placed when it comes to slow down in collection. We are going to reach out to our channel, and we are going to support them in the time of need by offering required credit. And I think, as an organization, we are significantly well placed to meet such requirements in short term as well as in substantial long-term. Credit crunch is going to hit the industry overall because the slowdown of inventory would mean probably a slower turnaround time for the inventory as well as the channel is going to pay a bit slow. So companies, which are able to manage with their internal working capital, internal cash flows, would be able to float higher.

So generally, sir, we see that this kind of tough -- this tough time sometime also abused by the dealers or the system. We have Kohinoor scheme, which, I think that, very adequately places the inventories to the dealers and also helps us in terms of collections from the dealer. So do you see that there will be blanket policy that relaxation in working capital like beyond 30 days no interest charge or no credit blocking, those kind of measures you plan to take? Or it will be very case-specific dealer to dealer like different -- differential treatment for Kohinoor dealers or small dealers will have a differential treatment?

Wonderful study that you have on Dhanuka and our channels, Rohan, I must appreciate that. Thank you for putting it that way. We work with our channel as partners. And when we work with partners, we kind of reach out to them in a very customized way. So we will assess what crop, what cash flow situation individual channel partner is facing and we'll customize our offering to them. We are not bringing in anything blanket or standardized. We are also waiting for the situation to actually unfold and become clearer. We are going through not only a lockdown, a normal slowdown. March and April is a normal slowdown period for us. Farmer trade channel is busy with harvesting and collecting grains that arthiya, commission agent system, is busy in harvesting and post-harvest activities. So this is a slowdown period. COVID-19, coronavirus has happened for in Indian agriculture at a time when Indian agriculture was going through its lowest tab -- annual lowest tab. This is offseason for farmers, this is offseason for trade channel, this is offseason for Dhanuka and the entire agrochemical industry. And this offseason is going to rescue us, as a country, when it comes to our food and nutrition security.

And just last question from my side, though, a little bit hypothetical. Labor migration -- generally, this labor migration do happens in month of June or May-June period. I think that this time it has happened early, it has happened a little bit early given the current scenario. What is your thought process on that? I mean, as you rightly, very adequately mentioned that UP, Bihar and these markets may see some excess labor and the shortage may be seen in MP, Telangana, Punjab, these markets. But it has happened in a very quick time. I mean, it has hardly taken 3 to 5 days, this kind of movement to happen. So if the situation normalizes, if we expect that the normalcy will be achieved and by 14th of April the lockdown is lifted, then you see that equally soon that labor will be able to come back to the work, and we may not see too much impact on the activities, which are dependent on labor or it is going to take time or they may spend more time in their hometown or given whatever the reason or the fear of the corona coming back again, it may continue for a little bit longer. I mean, this is slightly hypothetical, but I just want your view on that.

Thanks, Rohan. Before I take on that question, I'll need Deepak's permission because we have overrun the time. So I'll take a quick stab at that, if Deepak allows. Deepak, are you there? With your permission, I'll take on this question.

Yes, sir, you can go ahead with that.

Right. Thank you. So as you yourself qualified the question, thankfully, by saying it is qualified, well, it remains to be seen. They have the opportunity of MGNREGA in their hometowns. At the same time, they would be overcrowded for want of food, for want of medicine, for want of hospitals. So it will be -- they would probably -- with the enterprising effort, they would probably want to come back as soon as possible. Now that would be impacted by demand and supply, how much money they can make in their hometowns or home villages and what is the sense of security they have over there versus what is the sense of security is restored in Delhi, Noida, Gurgaon or in the harvesting fields of Punjab, Haryana and Madhya Pradesh. That sense of security needs to be established for a while. We really don't know right now this migration has happened only for -- from towns and construction sites or this migration has happened even from the rural hinterlands, we really don't know. What we have seen is only pictures of labor migrating. And we have seen this pictures on the border, what is yet to be disclosed is this migration has happened from where, from the construction sites of Delhi, Mumbai, Noida, Gurgaon or from farming lands. If it has not happened from farming lands, we will not see any impact. If it happened at farming lands, this will give another boost to farm mechanization. So your speculative question will remain speculative, Rohan, and I would just top it up with my speculations.

Sir, it looks like the participant has got disconnected. Should we move to the next question?

I think so we are at 5:06 and call time, probably we'd like to call off.

No problem, sir. Would you like to make any closing comments?

Thanks to PhilipCapital and Chorus for organizing this call. And thank you for all the friends and well-wishers who came on this call trying to understand the Indian agriculture situation. I must appreciate and acknowledge the kind of homework my audience comes with. You are really rich with information and ground reality. Thanks for the honor in terms of trying to understand the situation from our perspective. I am very sure we'll be connecting pretty soon with good set of results and outlook for kharif after our Board meeting in mid-May. Until then, wishing you all a very safe period. Have a happy time with your families. Thank you, and bye-bye.

Thank you, gentlemen. Ladies and gentlemen, on behalf of PhilipCapital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.