Dharmaj Crop Guard Limited ($DHARMAJ)

Ladies and gentlemen, good day, and welcome to the Dharmaj Crop Guard Limited Q4 FY '26 Earnings Conference Call hosted by TIL Advisors. [Operator Instructions] Participants are requested to ask your questions in Hindi. Also note that this conference call is being recorded. I now hand the conference over to Mr. Sayam Pokharna from TIL Advisors. Thank you, and over to you, sir.

Thank you Vara. Welcome, everyone, and good afternoon. Thanks for taking out the time to join us today in the Q4 and FY '26 Earnings Conference Call of Dharmaj Crop Guard Limited. The investor presentation and press release has already been uploaded on the stock exchange and on the company's website. To take us through today's results, we have with us from the management team: Mr. Ramesh Talavia, Chairman and Managing Director; Mr. Jaman Talavia, Whole-Time Director; Mr. Vishal Domadia, Chief Executive Officer; and Mr. Vikas Agarwal, Chief Financial Officer. We will start with a brief opening remarks on the business performance for the quarter 4 and for the year from Mr. Talavia. Followed by remarks on the financial performance by Mr. Agarwal, and then open the floor for Q&A session. I would like to remind you all that anything and everything from this call that represents any outlook for the future and can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties have been detailed in our annual report. With that said, I would now like to hand over the call to Ramesh sir. Over to you, sir.

Good afternoon, everyone, and I thank you for joining us today for the Q4 and FY '26 Earnings Conference Call for our company. We are pleased to report that for the full year FY '26, Dharmaj recorded revenue of INR 1,138 crores, reflecting a 20% year-on-year growth. For Q4 FY '26, revenue came in at INR 234 crores, registering 11% year-on-year growth even against relatively stronger Q4 FY '25 base. At the profitability level, EBITDA for the full year stood at INR 101 crores, registering a growth of 34% year-on-year, while net profit stood at INR 55 crores, up to 57% year-on-year. We have reported a strong overall financial performance, which had been delivered in volatile operating and industry environment, including uneven monsoon and seasonal demand, continued pressure on technical realizations through most of the year and, more recently, the emerging disruption from West Asia crisis and its impact on key raw material availability. Let us start with our Formulations business. Within Formulations, our Domestic Institutional segment delivered a healthy growth of 15% year-on-year FY '26, supported by consistent performance across the year. Our Branded Formulations vertical, however, was muted, coming in 3% growth for the year. The Kharif season in '25 started on robust note, and Q1 FY '26 was in fact our strongest quarter for the Branded Formulations. However, the following Q2 FY '26 was not as strong as we had anticipated. This was mainly on account of erratic and uneven matter of monsoon towards the latter part of Q2, particularly in late August and September. Which resulted in a subdued agrochemical demand across the country. Some regions experienced excessive rainfall, creating an uneven demand environment. The Rabi season that followed was also muted across the country, affected by lower than expected price attack and elevated industry channel inventory spread had built up from the stronger Q1. Together, these seasonal factors marginal growth for our Branded Formulations vertical over the years. We believe the underlying demand environment for our brand portfolio remains intact, and we expect the situation to normalize in FY '27. In our Active Ingredients business, this was a landmark year for our technical plant. Our Domestic Active Ingredients business grew 37% year-on-year for FY '26, and we operated ahead our own internal capacity target through the year. The most significant milestone on this front is when we had set as a key strategic objective for FY '26, which was achieving PBT level breakeven at our technical plants. Through most of FY '26, realization demand under pressure and a meaningful recovery only began to emerge after February 26. The recent upticks we have seen since then has been largely driven by rising input cost across the board, reflecting the broader impact of West Asia situation on key materials. We are monitoring this closely. On the export front, we made strong come back in FY '26 after a challenging FY '25 that was affected by external market disruption. Our focus at the technical plant remain on what is within our control, improving capacity utilization, improving our product mix towards the higher margin molecule and progressing increased captive consumption within our Formulations division. This factor, in our view, offer the most reliable path to improving the profitability of the Active Ingredients business, independent of where the extenal pricing environment settle. On our expansion initiative city, our new dedicated Herbicide facility near our Formulations site in Kerala GIDC, Ahmedabad is progressing in line with plan and is expected to be commissioned in quarter 3 FY '27. This facility will support the long-term growth of Herbicides portfolio and release capacity of the aging facility, which is particularly important during the next peak Kharif year. We view this expansion as an investment in a category with strong structural demand growth. As I look at FY '27, our growth outlook is positive with expected of 18% to 20% overall top line growth. Our internal focus for the coming year is clear year. First, we will continue to scale up utilization at our technical plant, improve the product mix and increase the captive consumption of Active Ingredients within our Formulations business. This is our most important level for company-level margin improvement going forward. Second, we will work to return our Branded Formulations vertical in stronger growth as the seasonal headwind from FY '26 normalize. And third, we will maintain and build on the momentum in our Domestic Institutional and Export segment, which is expected to show good growth in current year. I'm confident that Dharmaj is well positioned to deliver a strong FY '27. For the financial highlights, I would now invite our CFO, Mr. Vikas Agarwal.

Thank you, Ramesh sir. Good afternoon, everyone. While most key points have already been addressed by Ramesh sir, I would like a few additional aspects for everyone's benefit. Before turning to the balance sheet, a few points on profitability and capital ratio. Our full year EBITDA margin stood at 9% compared to 8% in FY '25, supported by higher scale, improved operating leverage and move to PBT level breakeven at the technical plant. Return on capital employed improved to 18% compared to the prior year. Return on equity improved to 12.9% from 9%. This ratio reflect both the stronger operating performance during the year and the gradual payback from the greenfield technical capacity we commissioned earlier. On the working capital front, the closing inventory stood at 2,074 million, up significantly from 1,385 million last year. This was mainly on account of the management taking a prudent call in March 2026 to secure additional raw material inventory to protect production continued through the Kharif season given the uncertainty around input ability and the pricing cost due to the West Asia prices. Our cash conversion cycle extended to 87 days from 67 days in FY '25. This was largely a concern of additional inventory we built here over the Kharif season. We expect that cycle to ease as this inventory is consumed. On the asset side, net block stood at 3,097 million, with fixed asset turn improving to 4x from 3x as utilization of the capacity created by our investments continue to improve. On leverage, we continue to maintain a healthy balance sheet. Long-term borrowings have we reduced to INR 51 million to INR 64 million, reflecting a discipline improving. Working capital borrowing has increased to INR 809 million from INR 514 million, which is commensurate with the deliberate inventory building we undertook. Our gross debt-to-equity ratio stood at 0.29x as of March 31, 2026, unchanged from last year, supported by net worth of INR 4,491 million against INR 3,944 million a year ago. Our debt servicing capacity remains robust, supported by an EBITDA of INR 1,005 million and strong operating cash flow. With this, we can open the floor for the question and answer. Thank you.

[Operator Instructions] The first question is from the line of Praneeth from SJ Investments.

First of all, I'd like to congratulate you guys for the impressive performance able to do in terms of profitability and revenue. But I wanted to understand in terms of formulation, what's happening? Because year ago, our split was mostly towards B2C compared to B2B. Now with the [indiscernible]...

Hello?

Am I audible?

Yes. Please use a little less volume actually. An you are not clear.

Is it better now, sir?

Yes. Can you ask your question in Hindi, please.

[Foreign Language] What is the forecast management has regarding the B2B was the B2C split?

You are not clear yet actually in volume. Your voice is getting breakup actually. We can't get you properly. Can you repeat your question and go a little slow so it will be...

Sir, am I audible now sir?

Yes praneeth. You may proceed. Please ask your question in Hindi and please go a little slowly.

Yes, sir. [Foreign Language]

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Sir, the Branded Formulations...

Every year around 75% improvement.

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Got you. [Foreign Language]

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So thing is that B2C was [indiscernible] because the technical plant, the two Formulations was only the [indiscernible]. When we started technical plant, technical production has come. That is why we see that B2C overall is growing. Percentage-wise, it's going down. But overall, if you see -- so it was at par only. So last year, we have 3% growth in B2C. Now overall margin side, it should be -- B2B is around 15 to 20 is the margin. And in branded, we have 35% to 40% margin. For technical, we have 20% to 25% margin. This is GP product.

So EBITDA-wise, B2C would be 25%...

What I told right now, it is GP margin.

Retail margin, basically gross profit, is it, the 25%?

Again I tell you, B2B, we are having 15% to 20%. In export also, we are saying 15% to 20%. In Brand, we have 35% to 405. And in Technicals, we have 20% to 25% GP margin.

Understood, sir. The only concern I have is going forward, let's say, if technicals plants -- let's say, the B2B business starts scaling up the overall margin compression might happen from at least past high levels. I understand absolute might grow. But I was just wondering in terms of, let's say, the overall margin with the herbicides plant also starting up, where can we expect the long-term margins?

Herbicide, we already have in our existing plant there. Only thing is that there is a space issue. So what we are doing, we are having a Herbicide formulation plant near our existing plant. So overall, if you see the margin will definitely going to improve. Right now, we are having 8.73 EBITDA margin. That will be improved to double digit in next 2 years.

Understood, sir. The reason I was specifically asking, because the B2B side has a little lower margin compared to a B2C side, right, at the end of the day. Absolutely. So the reason I was asking was especially with Herbicides is as that plant scales up, revenue will go faster from that division, right? So as a result, overall consolidated level, so the margins come..

Yes. Okay. Yes, technical is totally [indiscernible]. I agree with you.

So let's say, right now in the next 2 years, probably Herbicide plant will set up and there will be some operational -- that breakeven will take a year. So when do you expect the herbicide plan to become completely, let's say, profitable? And let's say, once it's profitable, do you think the margins...

No. I'm telling you, herbicide is already -- we are having our Herbicide facility in our existing plant...

So when I mentioned...

We are keeping our existing facility to there. So there will be some margin lift. There is a space, We are just shifting. It is not there, we are not in herbicides. We are doing Herbicides formulation right now also.

Sir, actually, I think I understand we're doing already the herbicide and we're just shifting into a bigger plant for better utilization and better capacity, right? I was just wondering, once we shifted, it will take some time for us to get to profitability, right? Or will it not..

No, no, there is no reason. It will -- because even existing plants already have that facility, and we will do it in a better way only. So there will be no impact on our margin or anything. It will start at as per only.

The next question is from the line of Rajat Setiya from iThought BMS.

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Yes sir.

Congratulations on good set of numbers. [Foreign Language]

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So last year, we have a GP margin of 19%. In current year, we have a GP margin of 22%, and EBITDA is around 5%, which was negative last year.

5% EBITDA.

5% EBITDA.

So I think last year, though, minus [Foreign Language], right?

[Foreign Language] And we are only 58% capacity plus or minus.

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[Foreign Language] The Technicals, what was the contribution is only 25% of total sales. So we have to consider that. So my PBT level, I am at in our Technicals.

PBT level...[Foreign Language]

Around INR 22 crores.

Around 22 crores. [Foreign Language]

Yes. The PBT is now at breakeven.

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Last year or current year?

Current year.

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Okay, sir. [Foreign Language]

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Okay. [Foreign Language]

No, that will be grow around 5%, 5% to 8% it will be grow, Yes. 5%.

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Next year, it will be [Foreign Language]. But I don't think there will be much increase in that.

The next question is from the line of Sanjay Ladha from Bastion Research.

Congratulations, sir. [Foreign Language]

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Correct .[Foreign Language]

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Next question is from the line of Disha from Sapphire Capital.

Am I audible? Yes. Sir, my first question is again on the export segment. You mentioned that you received 2,3 countries registration [Foreign Language]

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Okay. [Foreign Language] So when do reach that level?

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8% to 10%. [Foreign Language]

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Sir, how do you see the overall EBITDA margin to FY '27?

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Okay. Okay. [Foreign Language]

CapEx around INR 50 crores [Foreign Language]

[Operator Instructions] The next question is a follow-up from Pranit. We'll move on to the next question. It's from the line of Nitin Prajapati from Suyog Management.

Congratulations.

Thank you.

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[Operator Instructions] We have a question from the line of Yogansh Jeswani, Mittal Analytics.

Am I audible?

Yes.

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Right, sir. [Foreign Language] So you did a good job today in divesting for this. [Foreign Language]

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[Operator Instructions] The next question is from the line of Rohit from iThought BMS.

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Yes.

For a very good results, congratulations. [Foreign Language]

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Ladies and gentlemen, as there are no further questions, we will end the call now. On behalf of Dharmaj Crop Guard Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.