Dhanuka Agritech Limited (507717) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dhanuka Agritech Q4 FY '21 Earnings Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking. Thank you, and over to you, sir.

Thanks, Malika. On behalf of Antique Stockbroking, I would like to welcome all the participants on the call of Dhanuka Agritech. From the management, we are Mr. MK Dhanuka, Managing Director; Mr. Harsh Dhanuka, Director; Mr. Rahul Dhanuka, Director, Marketing; and Mr. VK Bansal, CFO, on the call. Without further ado, I would like to hand over the call to Mr. MK Dhanuka. Over to you, Mr. Dhanuka.

Thank you, Mr. Manish. Good afternoon, ladies and gentlemen. Thank you for joining us for the Q4 FY 2021 Results Conference Call. I have with me Mr. Rahul Dhanuka, Director Marketing; Mr. Harsh Dhanuka, Executive Director; and Mr. VK Bansal, CFO of the company. I would like to start with a message on the pandemic situation, which has been problematic to say the least. The current second wave has affected each and every family across India in some way or the other. I have -- I hope you all are doing well and keeping safe, along with you near and dear ones during this unprecedented situation. Dhanuka Agritech is a leading agrochemical company in India. The company strength lies in the manufacturing and marketing of branded [indiscernible]. The products portfolio is largely distributed across insecticide, herbicide, fungicide and plant [indiscernible]. Insecticides was a significant portion of the overall strength [Technical Difficulty]

Sorry to interrupt, sir, your voice is breaking. We are unable to hear you.

I don't know why voice is not clear.

Now, it's better, sir. You may go ahead.

Okay. Dhanuka Agritech is working towards the goal of transforming India through agriculture by working with farmers closely to improve their production and quality in enhancing their income. We cater to all major crops in India and have implemented the best-in-class technology to ensure a smooth and efficient supply chain. To service the diversity of Indian crops and needs of the farmers, the company has a wide range of products in its portfolio, with over 80 brands in [Audio Gap] venues and dust. Dhanuka has a Pan-India presence through our marketing offices in all major states across India. With 3 manufacturing units, 40 warehouses and 14 branch offices across India, we cater to about 6,500 distributors and dealers and around 80,000 retailers. Through this extensive network, Dhanuka reaches out to approximately 10 million Indian farmers with its products and services. Dhanuka has more than 1,000 techno-commercial staff, supported by a strong marketing team to promote [Audio Gap] has world-class NABL accredited laboratory as well as an excellent team for new product registration and development. Dhanuka has incremental international collaboration with 9 leading global agrochemical companies from U.S., Japan and Europe, which helps us to introduce the latest technology in Indian farmlands. Agrochemicals was declared an essential commodity by the government of India, and we were able to start our operations in first week of April 2020, unlike many other businesses. During the current lockdowns also, we are running our operations smoothly except few challenges in some locations. Safety of our operations and team is our #1 priority, and we have taken several steps for the welfare, including 100% reimbursement of vaccination fees for those opting for vaccination at private establishment. We have also offered 100% pay to those employees who are not in a position to work from home. Now moving on to financial performance. For the last quarter, I'm delighted to share that our [Audio Gap] an increase of 21.09% over the corresponding period last year. And for the financial year 2020, '21, it is INR 1,387.47 crores, which is 23.87% up over last year. EBITDA stood at INR 73.36 crores in Q4 of FY 2021, up 34.73%. And for the FY 2021, it is INR 302.81 crores, up 52.50% over last year. EBITDA margin improved from 23.93% in Q4 of FY '19, '20 to 26.62% in Q4 of FY 2021, and improved from 17.73% in FY '19, '20 to 21.82% in FY 2021, which is an improvement of 409 bps, inclusive of other incomes. Profit after tax is at INR 68.64 crores in Q4 FY '20, '21, up 24.78% compared to the corresponding period last year. And it is INR 210.56 crore in FY '20, '21, up 48.85% year-on-year basis. Cash margins improved from 17.13% in Q4 of FY '19, '20 to 17.65% in Q4 of FY '20, '21 and improved from 12.63% in FY '19, '20 to 15-point [Audio Gap] FY '20, '21, an increase of 250 bps. I would like to place on record my deep appreciation to all the stakeholders for their continued support to the company. And due to their good wishes, Dhanuka is able to perform all-time record results in top line and bottom line. The Board of Directors has recommended 100% dividend, that is INR 2 per equity share, having face value of $2 per share, which will absorb INR 9.32 crores subject to approval of the share trust fixed Annual General Meeting scheduled on July 29, 2021. Friends, the zone wise percent share of turnover [Audio Gap] March 31, 2021, is [Audio Gap] North zone, 25.84%; East zone, 11.14%; West zone, 31.76%; and South zone, 31.26%. The [Audio Gap] 41.0%. [Audio Gap] Herbicides, 29 point [Audio Gap] And others, 12.39%. The last year monsoon [Audio Gap] and as per IMD report, the monsoon is expected to be normal in this year as well. This has brought a smile on the faces of the farmers. The monsoon onset date is June 1, 2021, in Kerala. And it is expected to progress fast to Karnataka, Goa and other states gradually. Area under summer crops has shown an increasing trend in the country this year. The Ministry of Agriculture and Farmer's Welfare has informed that sowing of summer crops is 21.5% higher this year in comparison to corresponding period last year. The total crop area has increased to 7.37 million hectares from 6.07 million hectares. The area sown under pulses, oil seeds and rice has increased this year. Sowing of pulses has increased to 1.28 million hectares, which shows nearly 100% increase. Areas sowed under oil seeds have increased to 1.05 million hectares, which is 16% higher from previous year. Sowing of rice has also increased to over 3.9 million hectares, which is an increase of around 16% in comparison to last year. It is expected that in this kharif season, the sowing of the soybean, pulses and other oil seeds will be higher because the farmers are getting very good rates for these crops. And the sowing for cotton increases will be reduced to some extent. The company will work towards engaging with all the participants across the value chain, both upstream and downstream, to deliver a strong kharif season and build a solid momentum for the FY '21, '22. As discussed last time, the company has also started working on its projects situated at [Audio Gap] to the [Technical Difficulty]

Sorry to interrupt, sir. This is the conference operator. I'm disconnecting your line and reconnecting you again, sir, because we are losing the audio. Ladies and gentlemen, please stay connected till I reconnect the management. Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.

As discussed last time, the company has [Audio Gap] although the progress is [Technical Difficulty]

Hello, sir. We are unable to hear you, sir.

I don't know what is the reason.

Sir, is there any other number? Sir, give me a minute.

Can we start question and answer? Hello? Manish jee?

Yes, Malika, are you there?

We have the management line reconnected. Over to you, sir.

Yes, Malika, we can start the question-and-answer session, please.

Okay, sir.

I'm just finishing. The company has a strong pipeline of section 9(3) product, which should drive the revenue growth in coming years. We have received 1 9(3) registration, which is a herbicide, which the company will launch in quarter 2. And another 9(3) registration is expected to be launched in quarter 3 of the financial year. Mr. RG Agarwal, chairman of the company, has received an award as business leader of the year by Award Leadership Conclave on February 17, 2021. And Mr. VK Bansal, CFO, has been bestowed with CFO100 Award in March '21. Thank you very much for your kind attention. We will now take the questions from you, which you may have. Thank you very much.

[Operator Instructions] The first question is from the line of Rohit Nagraj from Sunidhi Securities.

Yes. Congrats for a very good set of numbers during the COVID-affected year. Sir, my first question is in terms of our in-licensed molecules. So how the revenue from in-licensed molecules has changed over the last maybe 4, 5 years? What is the proportion within FY '21? And how do you see it over the next maybe 3 to 5 years because we have garnered a significant amount of relationships with a few of the global agrochemical majors and introduced a state of products in the Indian market. So how has been the performance, if you could just take through the journey? And how are we expecting in the next few years?

Bansal jee, you would like to reply the question?

Mr. Bansal?

Hello. I'm audible?

Yes, sir.

Yes. You see percentage share here from in-licensed molecule is around 40%. And it is improved over a period of time by 2%, 3%. By 200 to 300 basis points, basically.

Yes, sir. And sir, how are we seeing this in the next 3 to 5 years? So will there be any significant focus from our own R&D and to introduce 9(4)? Or would there be more focus of in-license molecules?

I think in-license molecule percentage share would remain in the -- basically in current -- in line with the current percentage share. It may improve by another 100 basis points.

Sure. Understood sir. Sir, the second question is in terms of the greenfield CapEx for Dahej. Any development? And if you could just share a little more on this particular aspect?

Yes. In case of the Dahej, work has already been started but because of the COVID situation, there was a little bit delay. But we are expecting our Phase 1, it shall be completed by March '22, and Phase 2 must be completed by March '23.

All right. And have we already received EC for the same or is it under progress?

Could you repeat your question, please?

The environmental clearance, have you already received it? Or is it under progress as of now?

It is, I think, is under progress.

The next question is from the line of Saleel Dalal from JM Financial.

Yes. So sir, I had a question on distribution margin on your product. Sir, if your -- typically, what would that be? For example, if you sell a particular product at INR 100, what is the price the farmer would pay to the retailer?

Bansal jee, you are replying the question?

Yes. You see, you are saying if the distributer price is INR 100, what is the price to farmer, right?

Yes. Yes. Correct, sir.

You see, it again, depends. Normally the -- from distributor to farmer, there should be a difference of around 20%, 25%. But if somebody goes the difference is very less, those who are very much generic on what the brands. And in case of the certain molecules like 9(3) and all, the margin is slightly higher. But on a overall basis, there should be a difference of around the price include GST to distributor and the farmer price, there will difference between 25% to 30%.

25%. Right, sir. Understood. And sir, for the products that we have, your chemicals and insecticides and everything, what are the direct substitutes that are available in the market? And how are they priced relative to Dhanuka Agritech?

Could you repeat the question?

Sir, the typical product portfolio that we have, what are the direct substitutes available in the market? And how are they priced relative to our product portfolio?

Yes. So there are many substitutes available for the products we are marketing, except there may be a few products which are especially available with Dhanuka. You would be aware, Dhanuka is having tie ups with several multinational companies. And through these multinational companies, we have some specialty molecules, which are available with few companies only. And they are for specific segments. But most of the products, they have some or the other substitute available in the market.

Right, sir. And so the products that have substitutes in the market, how would be priced relative to them?

Again, there will be a very wide range because of the same problem. The generic product would be a lower price and specialty molecules would be -- could be double of the price of the generic molecule.

[Operator Instructions] The next question is from the line of Varun Gupta from R A Securities.

Yes. Sir, congratulations for a good set of numbers. I just wanted to know, have you received any tie ups with Japanese company to manufacture special molecule in India at your new facility at Dahej? And secondly -- okay, please.

No. We have not received any Japanese product for manufacturing at Dahej because -- there was question chicken first or egg first. So we were basically discussing for providing the products, but the Japanese companies were talking that you don't have any plants, where will you manufacture the product? So now we have decided to put up the facility and Japanese are very -- basically, you can say, fussy. So they would first like to visit the plant, and then they will decide to share the molecule with Dhanuka.

Okay. But we are in talks with them on this?

Yes. Yes, because we have very good relationship with a number of Japanese companies. So we are in talks with them.

Okay. And what is the view on biopesticides? And any future plans to venture to biopesticides?

Right. So biopesticides can be divided into 2 segments: 1 is bionutrients or biofertilizers, which Dhanuka is already marketing since quite many years. Last year, the government has introduced a new guideline, wherein all these products will be covered under the FCO, the Fertilizer Control Order. Other than that, the bio controls, which control the insects of the fungus, are at a very nascent stage in the Indian market. But definitely, they will have a play going forward in the near future.

The next question is from the line of Himanshu Upadhyay from PGIM Mutual Funds.

Congratulations on good set of numbers. My first question is, we have seen a significant issues on the rural side, okay, on -- because of COVID. What are you seeing on the cropping? And how do you see this will impact the business? Can you elaborate some more on this?

So this is really indeed unfortunate that COVID linked situation has spread into rural markets. And we are facing the challenge of health care facilities available in the hinterland. Now while it is happening, it is happening in the middle of off-season of agriculture. April and May are just pre-monsoon. And farmer is just getting ready for the agriculture. I really hope that as monsoons approach, and looking at the current commodity prices and trend, and government's effort to catch up on COVID control measures, we will be much better off by the time sowing is happening and farmer is ready for agri input.

Is it impacting currently the demand in the market? What's your sense, sir? Do you think the...

These are not the relevant months for demand. What we saw last year was pretty unlike situation where there was aggressive and speculative purchase. So that speculative purchase is not happening. Yet the business is not bad.

Okay. Okay. And the backward integration or API, so the CapEx, what we are doing, have you figured the products? Or what is the thought process? Can you elaborate on that? We had announced that.

Initially, we are putting up the formulation unit, which will -- we hope that will be completed by March 2022. Then we will be putting up 1 multipurpose insecticide plant, where we would like to manufacture synthetic pyrocides, which includes cypermethrin, bifenthrin, Lambda cyhalothrin. Et cetera. And after that, we will be putting up a multipurpose weedicide plant. And later on, since we have a huge land available, 1.42 lac square meters area is available with Dhanuka. So we will wait for our Japanese collaborators to basically have some tie up with us. And then we would like to go for some backward integration for intermediates or some other technical on custom synthesis basis and on, basically, you can say, job work basis, et cetera. So we hope that a lot of exports will also happen once we enter into the technical manufacturing because exports are increasing, the overall exports are higher in comparison to domestic consumption.

So currently, the focus will be on the formulations only for next 2 years in CapEx, and after that, you -- the backward integration will get into -- or we'll start spending on backward integration? Would that be the right thing to say?

Yes. From FY '22, '23, formulations will start and FY '23, '24, the technical production will start.

Okay. And the overall CapEx, what you are getting? Or from FY '20 to '24 would be?

Overall, you may see in the range of around INR 300 crores.

The next question is from the line of Viraj from Securities Investment Management.

Congratulations for good set of numbers. I just have 3 questions. First is, last year, in the same quarter, we had seen some postponement of sales into Q1. So how much that sale was? If you can give any...

It was approximately the INR 10 crores to INR 12 crores.

Okay. And just a related question is, you talked about overall demand still not being that great compared to last year. But -- so just trying to understand this a little better. Is that -- is there now a normalization in terms of placement cycle you see or there is still some kind of preponement and other placement cycles you are seeing because of the rising rural cases -- COVID cases in rural market?

Could you repeat that question?

Sir, are we seeing any -- still seeing any acceleration in placement and pick up at the retail farmer level? Or there is still kind of -- compared to the previous cycles, it's still kind of normal right now?

I think last year was an unprecedented year. When there was postponement of March sales into Q1 and preponement of some Q2 sales into Q1 and also some panic buying by the channel. So all these 3 things are not happening this year. And what we are witnessing is the normal season driven by commodity prices, rainfall and irrigation availability.

Okay. And just last question was on the RM inflation. What we understand is a lot of players have taken price increase in Q4 as well. So for us, what kind of price increase you would have taken in the run rate and the specialty portfolio?

So as a matter of practice, we review our RM cost cycle, and then the effort is to pass on the cost to the end user farmer. And that is what we have done in Q4 also, and ongoing, we will be doing it this quarter as well.

So typically, what [indiscernible] of price increase would have taken and would that be sufficient to cover the RM accretion we've seen so far?

Yes. Absolutely. It's more than sufficient to cover the RM cost increase and its impact.

The next question is from the line of Resham Jain from DSP Investment Managers.

Congratulations on a very eventful year. So I have 2 questions. So first is on the crop side, soy is seeing a very good year. And expected, as you mentioned in the opening remarks, is that acreage will increase. And historically, we had a very good market share within the soy portfolio, which somehow has not done well over the last few years in terms of the soy acreage itself. So any expectation from your soy portfolio, especially Targa Super, which was kind of blockbuster product earlier. So any thoughts over there?

So thanks for bringing up the brand name, Targa Super, an all-time favorite with the farmer and with me also. Targa Super has done really well last year because it finds favor with oilseed and pulses and cotton and groundnut and soybean. Now Government of India has made special efforts every year, especially for increasing pulses and oilseed area and recent announcements, you would have seen that there is a special effort being made to increase oilseed acreages, including soybean and groundnut. So we foresee good traction on Targa Super, Sakura and Max-Soy, our specialty offering for soybean, cotton and almost all pulses and oilseeds. Increased area of pulses and oilseeds is extremely favorable for Dhanuka portfolio.

Okay. Understood, sir. And sir, given that the last 2 years, especially last 18 months, have been a very strong year for us compared to the whole industry, so if you can share general increase in our market share within the industry. And also your expectation for FY '22, how do you see the overall growth, a good base, which you are seeing in the last 18 months? Yes, that's it.

It is in the difficult times that the real test of the processes and the relationship is tested. And it was in last financial year, 2021, that our relationship with our channel was put up to test and vice versa. We were able to reach out to our channel partners very aggressively and support them in the situation of pandemic. Dhanuka was one of the first few companies to have activated operations in early April. As an outcome, we did probably much better than the markets. And our market share has grown in 2021. We are expecting a good performance of monsoon. We are expecting a good performance on commodity prices front. And eventually, we really hope to be performing extremely well and above-average in this year as well. We are completely prepared and really optimistic about FY '22.

The next question is from the line of Varshit Shah from Emkay Global.

Congratulations on a good set of numbers. I think our margin performance is really commendable despite all the challenges. My question is, sir, on the Dahej front, so you mentioned that you will have the formulation unit CapEx going construction in FY '22. So can you break up the time line of spending INR 300 crores? So I see that there is a INR 50 crore increase in the gross book this year. So is that also pertaining to Dahej? Or is this not pertaining to Dahej? And if you could split up the CapEx spend on year wise?

Right. You see this year, the very insignificant amount of Dahej is nothing, just like that. And this year, the increase coming only because of the lease of this -- our corporate office. There is a provision now, we have to create the right to use asset, and the corresponding liability in the noncurrent liability, you will see that. So major increase is around INR 35 crore is on account of the new office, right. In terms of you see breakup of the investment in Dahej, we are, I think, in the year, current financial year, '21, '22, we are expecting an investment of around INR 80 crores to INR 90 crores. And around INR 130 crores in the year two, that is '22, '23. And remaining is '23, '24.

Okay. That's helpful. And my second question is, sir, on the FY '23 CapEx for technical manufacturing of largely pyrethroid, and you mentioned some of the names, sir alluded to some of the names. What is the key reason for getting -- selecting this set of molecules? Is it because of availability of raw materials in the vicinity? Or -- and would that be fully backward integrated? That's my first question.

No, they will not be fully integrated. Basically, these molecules are also basically consumed by Dhanuka in its own branded formulations. So we foresee that 40%, 50% of the -- basically production will be consumed by Dhanuka in its own formulation. Only 50% capacity we will have to basically market to the other companies. So one is that reason. The second one is the technology is easily available with the Vice President, which we have appointed, and he is quite familiar with the production of these molecules. So that's why initially we have chosen these molecules to start with. Eventually, we would like to go for some specialty molecules by tying up with Japanese companies.

Sure. And one last question from my side. So do you think that the industry -- I mean, not specifically asking in guidance, but industry can probably easily cross the double-digit margin from the revenue growth for FY '22?

Yes. Definitely, we are expecting double-digit growth in FY '22 also.

The next question is from the line of Ankit (sic) [ Ritesh ] Gupta from Kotak Securities.

This is Ritesh Gupta from Kotak. Sir, just 2 questions from my side. One is on the margin side because this year, the margins have been strong. So if you could just give me some sense in terms of how the raw material prices are behaving in near term and how do we expect them to deliver over the next 2, 3 quarters? And then the second one is, if you could just highlight some of the key molecules that you have in the 40% in-licensing share. So these are the questions from my side.

Sorry to interrupt, Mr. Gupta, but there is a disturbance coming from your line. Request you to mute your line when the management answers your question.

Yes. So I had 2 questions. This is Ritesh from Kotak. One is, on the margin side, how do you expect the next year to pan out, especially given that last 1 or 2 years have been reasonably good in terms of raw material prices, at least at the industry level, how they are behaving, especially the imports from China, et cetera. And the second one is on the in-licensing share of 40%, if you could just highlight what are the key molecules that you that formed as part of 40%? I would understand that would be one of the largest, but what are the other ones in that?

Vinod?

Yes. You see, as far as margins are concerned, in terms of gross margin, we are expecting the same level of margin in the year '21, '22, despite significant increase in some of the molecules or some of the raw materials. In terms of EBITDA, we would like to see -- basically have seen kind of EBITDA, there could be a little bit then continuous decline or positivity in terms of the margins. And the second part of your question, I would -- with regard to the -- could you repeat your second part of your question?

Yes. In-licensing share of 40%. So what are the key molecules there in that 40%?

Key molecules are normally, what is Targa Super, Sakura, Sempra, Conika, Lustre, Mortar, Caldan, Fuji and then the Cover -- Liquid Cover, these are the main ones.

Okay. And this would be in the same order, right? I mean, in terms of the size, these molecules would be in the similar order kind of [indiscernible]?

Largely, you're right.

Got it, sir. And just on the gross margin question, you said that some overdue prices have increased, but you still expect your margins to remain pretty much intact as last year on the gross margin [indiscernible]. So if you could just elaborate a bit on that? Is it because of the improving product mix for you? Or how does it work? I mean, would you take price hike? How...

You see it is 2 way. One is yes, product mix is always there. Number two, we have been able to pass on that increase to the customer.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Yes. Just seeking a couple of clarifications. The line was not audible. So we are looking at the margins, the EBITDA margins to expand. That's how we have put it, right?

No, we are not looking for -- we are saying we are trying -- we'll try to maintain that same level of -- you see EBITDA. There is significant improvement in the EBITDA margin this year, so we are saying we'll try to maintain the same level of EBITDA margin in the next -- in the current financial year.

Okay. And second clarification I was thinking was you gave a comment that there was some channel filling and preponement which happened in quarter 1 last year. So you were referring to a high base for quarter 1, but for FY '22, you expect to grow the business. That's how you mentioned? I was confused in these 2 different comments.

Could you repeat your question, please?

I said, sir, you mentioned in the -- to one of the participants that Q1 last year had a channel filling and some preponement of business of Q2 into Q1 and some postponement of business from Q4 into Q1. That's how you mentioned. So you were referring to a high base of Q1, that's how you were putting it? And you expect '22 to grow? Or I was confusing this comment actually.

Yes. That's right. Last year, Q1 was unprecedented. And this year, we are not expecting any growth in Q1 because last year the growth was more than 70% than the Q1 because of the postponement of the Q4 of the previous year and the preponement of seed of the Q2, of the -- that particular year. So this year, there should be some decline in the Q1 numbers in terms of the top line.

Okay. Okay. And lastly, sir, one more question. What is the status on that 27 products -- the banned -- which was supposed to be renewed and-- banned by the -- in India. So any update there?

Yes. So that subject is on hold, and the government is not moving on the banning of those 27 products, which was also according to us, was not a rational approach. We had directly, and through our associations, represented to the government to take a rational approach towards offering farmer variety of choice of specialty products as well as generic products. And as of now, that is what is prevailing and all the products are available to the Indian agriculture.

The next question is from the line of Pritesh Vora from Mission Holdings.

You mentioned about the double-digit growth. Is it based on the number of acreage showing more? Or what are the criteria which will lead to double-digit growth?

See, the primary criteria around double this growth are 2. One is good irrigation opportunity. So we have a good monsoon forecast. And a lot of irrigation opportunity, which has been activated by recharging of groundwater and expansion of canal irrigation and expansion of electricity availability. So that is number one, availability of irrigation through monsoon and otherwise. Number 2 is commodity prices. So we are looking at commodity prices already going up, and in future, also expanding. Especially when we are looking at oilseeds and pulses, Dhanuka has a special position in oilseeds and pulses portfolio. And we are looking at these 2 segments expanding significantly in the country because of, one, direct demand, you are aware that India imports a lot of food oil, which is palm oil from Malaysia and Indonesia.So we want to substitute that from local production of oilseed. And we also import a lot of pulses for the protein consumption of largely vegetarian population. So India is also working on a lot of substitution of pulse import by increasing acreage. Government of India, all the state governments are supporting that this time. That is what we are banking our growth plans on.

Right. My second question is about the Japanese -- you mentioned that once the plant will be ready, then the Japanese will come for inspection, and then something can happen. So what are the one-time we are talking about? What is the size of this business for Japanese?

So as of now, we are sticking to the fact that we are putting up a technical plant, which will support us big time in our own captive consumption and growth in the domestic market. It will also give us opportunity to look into export markets and export opportunity. You would appreciate that formulation business versus our diversified backward integration business is completely different. That's a different opportunity, which we will explore as we go forward.

Okay. Understood. But I could not see any major CWIP in your balance sheet. So is the plan is still early stage or...

Yes. You will see CWIP in the current financial year, which means the next year basically because investment has to be made in this financial year. Last year, there was hardly any investment.

The next question is from the line of Chintan Modi from Haitong Securities.

Yes, sir...

Sorry to interrupt, Mr. Modi. Sir, there is a disturbance coming from your line, sir.

Yes. I hope I'm good now. Sir, my question is on the receivable days improvement that we have seen during the year. Do you expect that to kind of remain at same levels during the next year? Or there could be some reversal?

You see there was a big improvement in the last year. Our average at question period were reduced [indiscernible]. The momentum is maintained, and we are expecting to maintain the same level. But yes, see -- 5, 7 days, deterioration cannot be overruled. However, we are trying to maintain the same level.

Okay. Got it. And secondly, sir, can you quantify what is the average price hike that you would have taken?

Average price for what?

Price hike recently to compensate for the cost increase?

Cost increase -- the cost increase was basically in few generics, not all the brands. You see, in some molecules, we were able to pass on the entire increase to the customer. In some molecules, there is a delay of 15 days or 1 month. Overall, we have been able to pass on because of that only, we were able to maintain our gross margins. Otherwise you will -- different demand in the same level.

No, I understand that, sir. Sir, for the next year, for the upcoming kharif season, what is the effective price hike that you would have taken, is what I'm trying to understand?

Effective price or what purpose you are telling? I could not get your question.

The products, sir. The products that we sell, the average price hike across.

You see average price will normally take the same as the prevailing price in the previous financial year, normally.

Okay, sir. Could you give us -- what was the split last year -- so of the 24% growth, what was the volume growth rate? And what was the price-related growth rate?

That's right. So the actually price growth was less than 1% as a while.

Sorry, I didn't catch that, sir. Can you please...

You see, our overall growth was 23.87%, right? So volume growth was a little lower by around 0.5%. So the price increased by around 0.5%.

Yes. So sir, the same price hike that I'm talking about. This year, how much effective price hike that we can expect? That is what I'm talking about.

So basically, I'm expecting another 1% to 1.5% increase in the price as a whole.

Okay. And that will be sufficient to kind of maintain your gross margins that you are saying?

Yes, absolutely.

The next question is from the line of Deepak Kolhe from B&K Securities.

Congratulations for good set of numbers. Am I audible, sir?

Yes.

Yes. Sir, my first question is, sir, can you please guide on like which are the products you are going to launch in the next 1 or 2 years? And how do you see innovation turnover index moving currently?

Yes. So in current year, we are expecting to launch 293 products. And in next financial year also, we'll be launching 293 products. So -- and other than this 290 plus, there would be certain in-licensed products as well. Talking about ITI index, so financial year '20, '21, our ITI index is close to 10.5%. And in next year, that is FY '21, '22, we are expecting it to be close to 12%.

Okay. Okay. And sir, also, can you please, once again, repeat the zone-wise and segment-wise the revenue breakup for fourth quarter?

You see zone wise, there is the immediate number revenue for the year, the North contribution is 26%, East is 11%, West is 32%, and the South is 31%.

Okay. And segment-wise, sir?

Segment wise, you see for the -- if we talk about the year, insecticide contribute 41%, fungicide is 17%, herbicide 30%, and the others is 12%. If you talk about quarter, insecticide 50%, fungicide 17%, herbicide 21%, others is 12%.

The next question is from the line of Rohan Gupta from Edelweiss.

Sir, first question is, [indiscernible] Rahul, we have seen that in current year, definitely, the rural market is impacted by COVID, but there is a lot of support given by the government, similarly like last year. We've also seen that agri commodity prices across have gone up and so has also likely to benefit to the farmers. In such a condition, just wanted to understand from you how is net-net farmer cash positions are? Vis-à-vis last year, are they still better off or it's poorer than last year? That is one. And second, do you see that this rising commodity prices is going to have a much positive impact on overall agri input industry demand?

Right. That's a very encompassing question, Rohan. And you would notice that the government is literally going all out to support the farmer in the agriculture. In terms of the cash flow, if you look at, then a big chunk of cash flow comes to farmer from the direct purchases by Food Corporation of India or Cotton Commission of India. Now in North India, what we are witnessing is that government is doing direct transfer to the farmer's bank account. And so if we were to take this piece as an example, then the cash flow is improving for the farmer with the direct money flowing into his bank account. And he has a better say and control on this money as compared to in past, when the commission agent would have a first say and control on the money. So farmer's cash flow to that extent would increase. Opening of eNAM and weekly markets and other mechanisms being adopted by the government would also actually improve the cash flow. Now if you look at commodity prices going up, commodity prices going up would also improve the farmers' cash flow. COVID will continue to run like a wave. From one state, it will go down in another state, it will catch up. And this is going to remain there for about another 30 to 45 days as most experts are predicting by the time central government and the state governments, they catch up with medical facilities and vaccination programs. What we are witnessing now the COVID wave and absence of agriculture activity is coinciding. April and May and mid-June are not the high activities of agri input or agriculture activity. So if we witness the right sowing in the month of June, then agri input industry will certainly witness upside in the coming monsoons.

Okay. And the guidance of -- Dhanuka jee gave roughly double-digit growth in the current year. So can you be more specific, like what kind of volume growth one is looking or you are looking for the current year, sir?

So we are looking at a reasonable volume growth, like our MD explained, it would be a lower double-digit growth for the year, I think so. I can just simply add, in terms of the government support, if the fertilizer prices were going up, the government has backed it up with significantly increased subsidy. If the subsidy would not have increased, then the cash flow of the farmer would have diverted towards fertilizer and other agri inputs like pesticides would have left wanting. With the supply being available, the cart is again balanced and agri inputs like agrochemicals and other agri inputs, will certainly stand to gain with opening of pockets by the government. And we certainly expect double-digit volume growth in our portfolio.

Right, sir. Right. And just a last question from my side. Sir, in last 2 to 3 years, we have seen that our other expenditures has been almost averaging at close to INR 130 crores every year. I understand that last year, we have also because of the pandemic year, we have tried to control it as much as possible. So despite a very solid revenue growth, our other expenses didn't increase too much. It has been just averaging at almost INR 130 crores from last 4 years. Do you see that the current year being a decent year for the agri activities and the revenue growth is already back now, are we focusing on increasing the farm-level activities and the kind of rural spending in terms of advertising branding, which we used to do earlier, is going to come back in a big way? Or still it is going to be controlled and is likely to remain in the same level in absolute term, like INR 130 crores to INR 135 crores in this year also?

Rohan jee, you see last year, there is a significant improvement in the expenses in terms of traveling and the whole. But as an overall basis, yes, you are right because, one, because of office and all. But this year, we are expecting some increase in the other expenses side in the year '21, '22 because last year, a lot of saving on account of -- because we could not do any farmer -- any real meeting -- the distributor meeting. But again, this year, the situation of COVID still persists. So I think the -- and increase must be in some sort of corporate burning type. Otherwise, all other expenses would remain in line with the last year.

The next question is from the line of Resham Jain from DSP Investment Managers.

Yes. So 1 more question on the Dahej project. We are investing like INR 300 crores in Phase 1. So what are the general financial metrics, which you feel -- you are looking at this INR 300 crore CapEx in terms of revenue, asset turns, return ratios? Broadly, if you can explain, once this whole project gets stabilized, let's say, 2, 3 years down the line, what kind of top line return ratios you typically look at?

Right. You see, the investment of INR 300 crores not in 1 phase. We have said we are going to invest around INR 300 crores in 3 financial years, which is '21, '22, '22,'23 and '23, '24. Once we see this money invested, the revenue will start coming in '23, '24 itself. And with this investment, we are expecting a revenue to -- or a very rough estimate, in the year '23, '24 around INR 200 crores and by '24, '25 and '25, '26, we reached up to INR 350 crores or more. And secondly, once we are -- know the market with regard to export and the capital consumption and some part of [indiscernible]. So incremental capacities can be increased with a very, very minimal investment. In terms of margin, we have not very concrete ideas so far, but we are expecting around 12% to 15% sort of EBITDA on this [indiscernible].

The last question is from the line of Probal Sen from Centrum Broking.

Dhanuka sir, just wanted to understand the first phase that you mentioned about the Dahej expansion. FY '23, what can we sort of look forward to in terms of actual impact from the business? Which is, from what I could understand, it's not so much with incremental revenue, but it is also about improvement in terms of the raw material cost mix. So for FY '23 from Phase 1, can we expect a material change in terms of margin profile to the extent of formulations that will be replaced for internal use? And plus, you said 50% of that would be sort of sold to outside parties as well. So how do we look at this from 1 or 2 years down the line?

You see -- you are saying what should be the improvement in our margin because of capital consumption of technical, if I understood correctly your question? Right?

Yes, you said, sir, for the Phase 1, you mentioned that 50% of what you will manufacture in terms of the formulation will be consumed in-house. So I presume that the intention to do this is that we can make them at a cheaper cost than what it cost to purchase it today? Correct?

You see, when we are saying, we are -- we will be able to generate around 12% to 15% EBITDA on the technical plant, which means what? Which means assuming there will not be any impact in Dhanuka because we are -- if we add margin there, so we cannot add a margin both sites, number one. Number two, as far as consumption, this is a very rough estimate. Could be lower than that, right? It depends. If we consume 30% or 50%, we are assuming while consuming in Dhanuka Agritech, we are taking the price as for the saving price to others. Am I able to answer your question?

Yes. Yes. Yes, got it. And sir, the second last question from my side was, when it comes to the growth guidance, which you're talking about double-digit, anything that can change in the next 3 months? I mean -- what I mean is that, as you mentioned that you are building in the payment based on the next 30 to 45 days during the peak to be sort of hit in most of the states or in the rural part. So if the vaccination rise is slower or if the pain in the rural area is prolonged, there is a small downside risk to these growth guidance?

Well, COVID-related uncertainty is extremely difficult to forecast. We do hope that agriculture would continue to be the lever of economy and would not let us down. So rest of it is speculative.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Manish Mahawar for closing comments.

Yes. Thank you, Malika. On behalf of Antique Stockbroking, I would like to thank the team of Dhanuka Agritech for providing us an opportunity to host the call. Dhanuka jee, would you like to make a closing comment, sir?

Yes. I would like to reiterate that due to good monsoon projection and availability of water in the reservoirs, Dhanuka is expecting very good growth in financial year '21, '22 also. We continue our endeavor so that Dhanuka perform better than the industry average and delivers its best to meet the expectation of all stakeholders, including the farmers and shareholders. I wish that the monsoon remains very good as per the forecast of the IND, and the Indian farming community reaps a good harvest in the ensuing kharif season as they did in the last rabi season. Agriculture is the backbone of the Indian economy and the Indian farming community is dependent on agriculture for their bread and butter. So even if COVID with pandemic pertains, basically, farmers don't have the choice, he has to basically go for sowing and do agriculture. So I don't foresee any major impact because of the COVID on agriculture sector. Even the government is talking that they will be all-time -- food grain production, will be all-time record high in this year as well as the coming years. So I hope that in times to come, the Indian farming community will be benefited from the government's initiative and the agri input industry will also get the advantage of that. Wishing you all health and safety. Thank you very much.

Thank you.