Godrej Agrovet Limited (GODREJAGRO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Godrej Agrovet Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mit Shah from CDR India. Thank you, and over to you.

Thank you. Good afternoon, everyone, and thank you for joining us on Godrej Agrovet's Q2 and H1 FY '22 Earnings Conference Call. From the company, we have Mr. Nadir Godrej, Chairman of the company; Mr. Balram S. Yadav, Managing Director; and Mr. S. Varadaraj, Chief Financial Officer. We would like to begin the call with brief opening remarks from the management, following which we will open the forum for an interactive question-and-answer session. Before we begin, I'd like to point out that certain statements may be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would like to now invite Mr. Nadir Godrej to make his initial opening remarks. Thank you, and over to you, sir.

Good afternoon, everyone. I welcome you all to the Godrej Agrovet conference call. I hope you are doing well and are staying safe. The second wave of COVID-19 in Q1 fiscal year '22 had significantly impacted the economic recovery seen in the preceding quarter, especially in rural India, which had much stricter lockdown. After a good start to the south-west monsoon, it was marked by extreme localized rainfall events and unusually dry August and an abnormally wet September resulted in lower kharif soil. COVID-19 cases started declining steadily in Q2 fiscal year '22. Key macroeconomic indicators such as GST collection, Purchasing Managers' Index, unemployment rates, et cetera, also signal a recovery. We expect the economic recovery to be faster in the second half of the year. At Godrej Agrovet Limited, we continue to focus on employee safety and business continuity. I'm happy to share that 100% of our eligible employees have been vaccinated with at least 1 dose, and 85% of employees have been vaccinated with both doses. Moving to the financial and operational performance. The key highlights and developments for the second quarter and the 6 months ended 30th September 2021 are as follows: Q2 fiscal year '22 and H1 fiscal year '22 was a mixed bag for Godrej Agrovet Limited. The total income registered a healthy growth of 25.4% and 26.7% respectively, in the current quarter, and the half-year over the corresponding previous period. The consolidated profit before tax recorded a modest growth of 3.1% and 2.7% respectively for Q2 fiscal year '22 and first half fiscal year '22. Please note that for the second quarter and half-year of fiscal year '21, total income includes INR 9.6 crore and profit before tax -- sorry, total income excludes INR 9.6 crore and profit before tax excludes INR 4.8 crore of income earned from sale of real estate. Our consolidated balance sheet remains strong with net debt to equity of 0.58 as on 30th September 2021. Now I will discuss the key financial and business highlights of each of our business segment. In Animal Feed, the growth momentum in volumes continue in Q2 fiscal year '22, across feed category resulting in robust growth in revenues, then profitability. The segment revenue and segment results grew by 48.8% and 21% respectively during the quarter on the back of volume growth of 20.6%, so the half year, the segment sales grew by healthy 41.4% and segment results were up by 26.8%, realization of R&D benefits and introduction of new products supported improvement in the segment results. We had a very good quarter in the Vegetable Oil segment. Our segment revenues and segment results grew by 36.9% and 88.5% respectively. Higher yields and higher end product prices contributed to the growth. Prices of crude palm oil and palm kernel oil increased by 55% and 76% in Q2 fiscal year '22 over Q2 fiscal year '21. Our oil extraction rate show increase by 1% in the quarter. For the half year, our segment revenues and results have grown by 53.2% and 131.1%, respectively. In the stand-alone Crop Protection business, segment revenue registered a de-growth of 12.6%, segment results also declined by 24% as erratic and inconsistent monsoon rain resulted in lower sowing of major crops in the kharif, and reduced application opportunities for our agrochemical product. Margins were further impacted by deep inflation in raw material prices, which could not be absorbed, resulting in lower margins in pesticides. Even for the half year in the September 2021, our segment results declined by 7.6%. Moving to the performance of our subsidiary. Astec Lifesciences posted a decline in revenue and EBITDA in Q2 fiscal year '22 of 33.8% and 29.9% respectively. The performance for the quarter was adversely impacted by the closure of the plant due to floods for about 15 days. The global shortage of containers limited the ability to ship goods resulting in deferment of sale. However, we believe that on a full year basis, Astec will maintain moderate growth in its top line and profitability levels. After a challenging first quarter, our poultry subsidiary, Godrej Tyson Foods Limited, registered a revenue growth of 40.4% in Q2 fiscal year '22 and EBITDA growth of 12.2% supported by higher volumes and improved realization in Live Bird and Yummiez segments. For the half year, Godrej Tyson has reported an EBITDA of INR 9.9 crore, a de-growth of 67.5% primarily on account of higher feed costs due to significantly higher raw material prices. Our dairy subsidiary, Creamline Dairy Products Limited's performance was impacted by higher milk procurement prices as compared to the previous year. During the second quarter, revenues increased by 9.7% year-on-year, but EBITDA at INR 4.1 crore was lower than the corresponding previous period. We launched Fruit Yogurt, which has received an encouraging initial response. For the half year ended September 2021, revenue grew by 11.1%, but EBITDA declined by 95.3%. The revenues from value-added products grew by 38.2% year-on-year in Q2 fiscal year '22 and 27.1% year-on-year in the first half fiscal year '22. GAVL's joint venture in Bangladesh, ACI Godrej, recorded another quarter of strong performance with revenue growth of 17.5% in Q2 fiscal year '21. Growth was driven by strong volume across all feed category: cattle, poultry and aqua feed. This concludes our business and financial performance update for the quarter and half year. With this, I close my opening remarks. We will be now happy to take your questions.

[Operator Instructions] The first question is from the line of Aniruddha Joshi from ICICI Securities.

Sir, 2 questions from my side. The Vegetable Oil segment has done extremely well during the quarter. So with palm oil prices remaining higher end, even the various news flows also indicating it remaining at a higher level. Can we expect similar performance in H2 as well? Or do you see any cost pressures, et cetera, that can build up in business model? And also how is the progress in terms of the new hectares added in terms of that new hectares that -- fresh hectares as well as the hectares which can be used for the plantations also? That is question #1. And then second question, obviously this is repeated in the earlier quarters also, but still. Dairy business continues to remain still in lackluster mode and now with inflation expected in dairy, maybe after the flood season, so how do we see the Dairy business from the value creation perspective over next 2 to 3 years? Yes, that's it.

So first question is that, yes, prices have been extremely good in the Oil Palm segment, but all our profits have not come only from price variance. I think there is a substantial improvement in efficiency also. And if you remember, in my last meeting, I said that we have taken help of consultants called Renovate to work on efficiency parameters. But we also have initiated several R&D initiatives, which have improved our oil extraction ratio. So when you see our annual numbers, we will show a significant improvement in our OER, which is a direct injection into our profitability, because we pay on the weight of the fruit. So definitely, oil price is not likely to come down in next few months. But of course, they will not remain at the level of H1. Today, the prices are close to about INR 106 and you know that the government has reduced duty from 32.5% to 27.5%. But having said that, the reports are still very bullish, so my sense is that prices are going to remain like that till February or March. Next question you asked is that how will be the second half? So second half normally 70%, 30%. 70% of the fruit comes in the first half and 30% comes in the second half. But this year is likely to be different because of the change in the monsoon pattern. So we are likely to have a split of about 62% to 63% in the first half, and about 37%, 38% in the second half, which is very, very encouraging considering the oil extraction ratio and all the efficiencies that have kicked in the latter part of the second half, which will continue in this quarter also. So we are very bullish on that, I think, unprecedented profit and improvement in efficiency will be changed. So let me also brief you on expansion plan. You must have known that this expansion in Oil Palm has started by central government. I think one of the meetings have been held in North East, where lot of mistakes by the company and the government were discussed. And we have been invited by Arunachal Pradesh government. Our first team has already gone and looked at an opportunity of anything around 35,000 to 40,000 hectare. Of course, lot of work needs to be done. We have also had made a laundry list of things which the state government has to do. So I think that MOU is likely to be fine next week -- next quarter, sorry. As far as the regular increase is concerned, I think, a net increase of 3,000 to 3,500 hectares will happen this year also, which is happening for last several years. And I must also tell you that 18th of November is the meeting of that national oil mission, Oil Palm in Hyderabad focused at Telangana, Hyderabad, Karnataka and Tamil Nadu. So let us see the government is putting their best foot forward, but I must also say that the states are still dragging their feet and not fulfilling their obligations. So we will let you know what is the progress maybe in the next quarter. But we are very optimistic because the team is very, very -- this team is very, very, I would say fair. On Milk, yes, you're absolutely right, we are still not out of the hole we are in. Our big hits to the volumes in milk, work because of our over-dependence on institutional segment. I think that has not picked up. I can only say that about 10% to 20% of that decline has come back. And we are hopeful that as the months go by, we will continue to improve our milk volumes, particularly critical segment. Whatever little growth you have seen over past several months is all retail, which we are very happy, which we are all very happy about, because it is very sticky. The second thing is that the positive part is very good growth in value added products in the future. The salience is still low, but I think tug along at 50%, 60% growth per annum on the base, we have I think 2, 3 years later, we will make this business more sustainable from profit point of view. The third thing is that, yes, we have 30% dependence in our business system on milk prices and there has been no flush in -- buffalo milk prices, sorry. There has been no flush in the Buffalo milk. Actually, the prices are gone up by about 10% in last 3 months, which is a big hit to us. And second thing is that the cow prices, particularly in southern India have not dropped in spite of flush because cooperative continue to support the farmers by paying good price. So we are in a little bit of fixed, but I think that progressively, things will improve as the salience improve. Products are doing well and we are hopeful. Of course, I've been telling that in several quarters, but I think several steps we have taken, I think we will see some improvement in the coming quarters.

Next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

I had 2 questions. As we have seen in most of the...

Sorry to interrupt, Prakash. May I request you to speak slightly louder? Your voice is a bit feeble.

Yes, sure. I was saying, as seen in most of the sectors, smaller players are finding it difficult to manage growth in these challenging times, especially given what inflation we are seeing across sectors. So which segment do we think we can see higher market share gains? Is there an opportunity in 2, 3 segments in which we are operating? And in the first half, what are the price hikes we have taken in the Animal Feed and Dairy segment? And lastly, on the Food side, how are we planning inventory and procurement given the variations on in food cost on a weekly/daily basis?

Prakash, so if you ask me both in cattle and poultry feed, we have benefited partly because of other players becoming a little weak and not able to find working capital that easily. And you must have also seen that the soya milk prices, which is the cheap ingredient of shrimp feed and poultry feed. In poultry feed, soymilk inclusion is 25%, in shrimp feed it is 35%. Everybody has got its profitability except that. So why this magic has happened? So one of the things that we've been talking about all our R&D initiatives to bring in substitutes for such volatile raw material, and I think full benefit of that can be seen in the Poultry Feed segment, where our market share has gone up, and our profitability. We would be the only poultry feed player in the country, even though several companies are unlisted for profitability in the first half. The second thing I must tell you in cattle feed, we had a very big problem. We were the #1 company in the country, but not a single state we were #1. And I think with new launches, with very high performing feeds, at least in Maharashtra we have retained the #1 position once again. And we believe the growth we view in cattle feed, which we have shown in the first half, which is growth of about 14% will be continued in the second half also and may improve. Here again market share gains are there. After years of decline for last 2 years, we are showing improvement in Shrimp Feed segment, and this year we have again grown shrimp feeds by about 40%. Of course, it is on a low base from last year, we were 15,000 and we are close to 22,000. But that also is also reflective of the fact that we are doing something right there. Of course, the profitability took a very big hit because soya extraction of from INR 40,000 to about INR 1,00,000 a tonne and the quality of soy they uses -- what is used in poultry. Similarly, in oil palm plantation also, we would see improvement in market share. Of course, it was not a good year from a volume point of view in fruits. But in terms of oil extraction ratio, backed by R&D, imports and efficiency improvement, we will see a improvement in OER. And OER year is very precious, you know that.

Yes.

So these are a few areas where we have gained market share. I can definitely say that fish feed was one area where we were very optimistic, but the party spoiler was COVID. Because what happens in fish is that the safest way to keep inventory is to keep it in water. So that's what happened in April, May and June, but the farmer did not harvest. Of course, harvesting happened in the next quarter and now placement has started so we are excepting major improvement in fish feed also and improvement in our market share also. Plus in Yummiez and in value-added products, we can share, we have data from Nielsen. Well, our market shares have grown particularly in Yummiez, which is the value-added chicken and vegetarian products in Godrej Tyson Foods Limited and Nielsen tracks settings flavored milk et cetera, where our trends have improved. So I think what has hit us very badly, I would say is the cost inflation, particularly in our Godrej Tyson business and our Milk business and then our Shrimp Feed business. Of course, we are benefiting in the Animal Feed business and Poultry business because of that.

And if you could comment on how are we managing the procurement, inventory and something on the kind of price hikes, which we absorbed? Any further price hikes on that, well, given what we are seeing on the input side?

So except for 1 area that is shrimp, where the price hikes could not be taken because Andhra Pradesh is very active in price controls and everything. And I think that harassment continues in all industries, including us, where we could only pass on less than 50% of the cost increase. In other areas, we were very prompt, and 100% of cost increase was passed on albeit with the time lag, particularly cattle feed and fish feed and poultry feed. So there we don't have a problem. Personally, I love this situation because this is where our muscle will come. At one time, we were holding 4 months stock of corn and 5 months stock of soya meal and about 4, 5 months stock of other proteins and that you can see flowing into our profit statement. And in spite of the fact that we took some time in increasing prices, almost there was a 2, 3 week lag every time we took a price increase. And I must also tell you that I think some way the government numbers and the industry numbers and production have to be taken with a pinch of salt. There are reports in April on soya meal excess in the country. The price was INR 33,000 ex-Indore. And the price in August was INR 1,00,000 ex-Indore. So I think we just have to make sure that we improved our information and I think this is an opportunity for us, it's not a problem anymore.

Next question is from the line of Abhinit Kulkarni Tequity Investments.

Sir, I have 2 questions. The first one is on capital employed. So in FY '21, I remember we moved partially away from supplier financing to short-term borrowings. So this had an impact on our capital employed presentation. So my question is, during the last 2 quarters, have we seen more migration from supplier financing to short-term borrowings? That is one. And the second one is the investor presentation mentions that milk procurement prices have remained significantly higher. So I just wanted to know what percentage of a milk procurement today happens from farmers versus via agents? That's all from my side.

Working capital?

On the capital employed, our drive to sort of move from acceptances to borrowings continued close to INR 600 crores is what the sort of drop in acceptances has been vis-a-vis H1 of last year. And that's what sort of has flown directly in increasing our borrowings. And so that's on the capital employed, and yes.

So we procure about 700,000 liters of milk per day and we had started direct procurement from the farmers. For last 1 year, little bit of setback there because we have maintained whatever we were procuring directly from the farmers, which is close to about 17%, 18% of our requirement. And because of COVID, I think that could not be accelerated. But I think the effort has started once again in there. Then we have our own collection centers, which are run by third parties, which is also similar to our own procurement. That account -- and they are paid a service charge on per liter, so they don't control the price or anything. So that would be about 50% of our procurement. And about 30% of our procurement is through some of the agents and from some supplier to procure the milk charge their fixed margin and give it to us.

Next question is from the line of Saurabh from Asian Market Securities.

Sir, what was the FFB for this quarter?

So that's -- that is what I wanted to say that volume wise -- hold-on.

Yes.

So last year in H1, we did 3.21 lakh tonnes. This year we have done 3.06 lakh tonnes. Now there is a shift in the FFB procurement, so my sense is that this deficit of about 15,000 tonnes will be made up in November itself. So we will come back to whatever we had budgeted. And over the year, there will be growth of about 8% to 10% easily.

And what was the oil extraction ratio?

Good question. OER last year was 16.81%, first half. Today we are at 17.75%. Last year Q2 was 17.33% and I'm very sure will be above 19% this year.

19% for the full year?

No, no. Second half.

Second half, okay.

But my sense is things are improving, may get to almost close to that number on yearly basis also.

Okay. The second question is on the growth projects. So we have a couple of CapEx coming in the animal feed and also on the Astec side. So just I want update on the, specific on the animal feed side, the status of the project and the timing?

So 2 projects were discussed last time. One was the herbicide plant, which will make sulfonylurea in Astec Lifesciences. I think that has been commissioned and commercial production has started. In chemical plants, normally it takes about a quarter to hit the best efficiencies and the all the expectations in terms of parameters from the plant, I think that is happening at a very fast pace. Some of the products will definitely be exported in this quarter from that plant. The second will be the fish feed plant in North. I think the target date of commercial production in April, the April '22, we maintain that with election of the plant has started with the imported plant, which is already decided and most probably the trial production will start in February '22.

Okay. And sir, the last thing. Any guidance in terms of now volumes for animal feed for this year?

My sense is that same momentum is likely to be maintained. We are in a very strong position. We have good position on raw materials also. So I think that we will repeat our performance of H1 and H2.

Next question is from the line of Abhijit Akella from IIFL Securities.

Just 1 question on the Oil Palm volumes. So FY '21, as we know we had a difficult year because of the whitefly attack and this year's volume recovery is a little bit subdued in relation to that. So has there been any kind of yield loss because of last year's attack> And by when do we expect to sort of get back to optimal levels of FFB shipments?

So there are 2 parts to your question. First and foremost, I think that all oil palm players has started implementing quality centers for fruits, very strongly. Unfortunately, we never had that understanding and now government oil mills like Telangana Oil Fed and Andhra Pradesh Fed are also part of that understanding. The farmers used to harvest prematurely and we would get poor quality fruits. So my estimate actually is that industry is rejecting between 3% to 5% of the fruits and all of us have been major improvement in farmer behavior from the quality point of view in terms of harvesting and time of harvesting in last few months. So I can definitely tell you that about 15,000 tonnes to 17,000 tonnes of our fruit has been rejected and we have not taken that at even lower price also just to improve the behavior of farmers. And that is 1 of the reasons why there is a increase in the oil extraction ratio. And I must also tell you that innumerable research papers say that about 30% of the oils in the fruit comes in last 20 days. So that is what is most critical, as these people just because they want to catch good price or they have some merit to do harvest early and the price -- the price was being paid by the processor because we had to accept since there was no way of punishing them because of the OER. So I think that is one thing, which is a great achievement of this industry and we need to strengthen that. Apart from that, there is another project on with a startup, where infrared technology will be used to grate the fruits and we will trace it all the way back to the farm because now all 35,000 hectares we have in Andhra Pradesh and Telangana has been geotagged. So that is loss 1. Loss 2 is shifting of volumes. So that's what I said that in spite of these rejection, we will post 8% to 10% decrease in volume on a year-round basis.

Okay, sir. Got it. So next year in FY '23, can we sort of aim to get back to the pre-whitefly levels of say around 5.7 lakh tonnes of FFB arrivals?

Easily. But I must also tell you that all that -- now while geo-tagging also we did the census once again. So this problem of uprooting still continues to be rampant in this industry. So if you really ask me, in last 5 years we would have added about 17,000, 18,000 hectares. But once we started geo-tagging and started counting the acreage again, so we realized that actual attrition has been only 7,000, 8,000. There has been continuous uprooting also. Second thing is that because of technology and satellite pictures and satellite monitoring, I think big change would be in case we can do that is to manage this business by trees rather than by hectares. Because once we started geo-tagging, we have to walk the plantation. We realize that plantation should have 145 trees. At least half the plantation because of some of the other reason has between 5 to 15 trees less. So the calculation would haywire when you have 10% uprooting within the plantation also. But I think we have learned a lot and I think increasingly technology will help us monitor this business better.

Sir, one last thing. The income from associate on the P&L is lower year-on-year. Just was hoping for a breakdown between how much of that is due to ACI and how much due to anything, any other items?

For the rest of the year? So Abhijit, we view this [Technical Difficulty]

Yes, sorry, I couldn't catch that.

I said I will give information offline separately, yes.

[Operator Instructions] Next question is from the line of Depesh Kashyap from Equirus Securities.

Just 1 on the Animal Feed business. So now that the soya meal prices have dropped sharply since the end of September, I just wanted to know if you will be able to -- you'll be rolling back the price that you've taken in the last 6 months?

Yes, we have rolled back and almost 90% of the reduction in soya meal prices have been passed on and not just by us by the entire industry. And we believe that it is a little bit of a hit to us also because we had imported soya meal from Bangladesh and from Vietnam when there were shortage. And the drop in soya meal prices post 15th October was very severe. So I think for last 2, 3 weeks, we are still using soya meal which is INR 55,000 or INR 60,000 a tonne, whereas local soya meal in our factories is between INR 45,000 to INR 47,000 a tonne. But that's normally only happen whenever the prices fall. But my sense is that November will be better than October and December will be much, much, much better than November. So that happens, so we are not very concerned. I said that it will be a repeat of H1 performance.

Sir, basically in the shrimp feed segment or using the entire animal feed poultry feed also you rolled back?

Shrimp feed we have not dropped, because the government has not allowed us to increase the price, but let me tell you the intervention of government and everything in Andhra Pradesh, whether it is Oil Palm, whether it is cattle feed, poultry feed, fish feed, shrimp feed is progressively increasing. So varies the industry level.

All right. Sir, my question is basically that in the first half, especially in the aqua feed, the industry has seen a very low margins, right, because of the soya meal prices. And now that the prices have come down and you have taken a couple of price hikes in the first half of this year, so will there be a pressure on the government to roll back the prices and give away all the benefits that you may have seen in the second half?

So government may be slightly, I would say lethargic, because this is off season for shrimp. But my sense is that we will be able to maintain the same prices definitely till January, till the next crop season starts. And contribution per tonne doubled in last 3, 4 weeks.

Got it, sir. And sir, what is the outlook on the EBITDA margins for the animal feed segment as a whole? You think it will be like above 7% because the drop in prices?

5.7% segment margin.

So I'll tell you, I think that just because of inflation they've -- also the top line has gone up. So in case you ask me, we normally never budget in the animal feed business EBITDA or profit as a percentage of sales. We budget in the rupees per tonne. So let me tell you, last year we were -- in H1, we were INR 1,748 per tonne EBIT. So this year, we are INR 1,855 per tonne EBIT. And my sense is that this will be definitely maintain that rate.

Got it, sir. And sir, last question on the Palm Oil segment. I think you explained in the last question, but I just wanted to understand again that in FY '20 we did around 5.7 lakh tonnes. And at that time, I think we were having 70,500 hectares under our plantation, right. So the yield was around 8%. but now the area of the plantation has increased, so what is the outlook on the FY '23, like can we actually do more than 6 lakh tonnes of FFB of rivals in FY '23?

So we most likely we will be -- yes, so anything between 5.6 lakh tones to 5.8 lakh tonnes in FY '23.

Okay, sir. The thing that you explained about the 5% to 10% of rejection that the industry are doing so...

Yes, now we will be ruthless because I think the government and the farmers take us for granted. They supply very bad products and government is a very important player in this thing, because they control all formula. And I think it is too farmer centric. So I think that we are very sure that we are going to make sure that OER does not come down at all. So that I think then we will send more and more. And other thing I just wanted to point out that almost in Andhra Pradesh and Telangana, we have almost 30 collection centers in FY '20, all of them were manned by outside supplier. We had outsourced that. And the collection center is a office with all facilities, internet, et cetera, plus a weight scale, plus a big yard. And we have -- we have taken over 1/3 of collection center with our own people there, put cameras there, et cetera. And they're going to take 2/3 of the collection center next year. And wherever we have taken up the collection center, we are -- from that fruits have improved, because we also use this center as training and development place for the farmers. So in another 2-year time, all collection centers will be very sophisticated. They'll be having these infrared tunnels, where we will pass the fruits and get an idea of oil also. So I think we have taken over and I can give a separate presentation on that because whatever changes needed to be made to make sure that our collection is good, fruits come on time without losing quality and we don't take nonsense from the farmer, has been achieved this year. And we are very happy to lose the fruit because marginally these fruits are always bad and I'm very happy that in case the fruit go to competitor, because they get 13%, 14% OER out of it.

Yes. I got it.

Over time, these farmers will make sure they supply good fruit.

Right, sir, right. And lastly, sir, on the Crop Protection business, I think Astec we already know from the last con call that was done separately. On the domestic Crop Protection, if you can just talk a bit because I think earlier target was 15% growth for the full year. But now we are actually declined in the second quarter, so what's the outlook for the full year, sir?

So not very good. Well, let me just tell you 2, 3 things which have happened to us. I think that dry spell -- and that happened to everybody that the herbicide dependent companies are in deep trouble. So that is 1 bad news. And in this quarter also, we will have to take returns, that is point number one. Number two, at one time, we used to make a decent margin on generics. Just because there were less number of sprays, a price war started and we had to reduce the price. And because of that, our profitability almost vanished in generic pesticides, which is almost 1/3 of our business. We were hopeful of launching 1 more insecticide called GRACIA, which is a product from Nissan. But unfortunately, the CIB kept on delaying meetings et cetera because of COVID, this, that and all. A product which would have been launched in July is likely to be launched in December. So that is the third bad news. So I think that this year is not likely to be very good and I will be very happy if we get anything near last year's numbers. But I think the problem maybe more or less with companies, but the industry is facing this problem. On the other side, Astec Lifesciences like companies, I think we are just going to come back with a bang, because now that containers are available, hazardous containers was a very big problem, that is available, the prices are very high. And some of the delays in exporting have also benefited us because the raw material we had for them was at lower cost and the price of the material, which we are exporting now is higher. So I think we'll see some kind of improvement in margin per tonne also. So I think it is a mixed bag. So when you see an integrated play of Astec plus CPB, we may still save our place. But if you are asking me B2C business, I think it is a very, very tough and challenging year for us.

[Operator Instructions] Next question is from the line of Sumant Kumar from Motilal Oswal.

Yes, Hi, sir. So can you talk about the palm oil price outlook?

Sir, would you like to enlighten them sir?

Yes. We expect palm oil prices to be around the same for the next 6 months. Beyond that, it is very difficult to predict, but probably the prices will fall beyond that.

Okay. And now talking about the overall palm oil plant, can you talk about what is the utilization in H1?

Okay. So I think, how do I tell capacity because we have capacity of 70 plus, 60 plus.

Yes.

Yes, so about 180 tonnes of fruit per hour. But the plants are utilized fully for only 100 days, partly for all about 100 days, and nothing for about 125 days to 130 days and rest is maintenance. So my sense is that giving this spread, we -- that we had in FY '21, we had modified one of our plants and increased capacity and sophisticated the equipment also. So we are good for 6 lakh tonnes of fruit in the same spread on the monthly basis. So that is the capacity according to me. Post 6 lakh tonnes, we will have to invest again close to about INR 125 crore in another plant. But 6 lakh tonnes means that we are very good till FY '23.

So what we observed in the past also, apart from the whitefly impact, the competition is getting more FBB versus ours and we have degrown over the years apart from FY '21, where the whitefly impact. So we are getting challenges. Can you talk about that? What are the challenges we are facing in the market?

So I think that -- let me tell you there are 3 challenges. One of the challenge definitely is the whitefly challenge, which we neutralized to almost 90% level this year and we were very happy that we got that opportunity in February and March before the second wave came that we were able to spray and have stringent control. But I can definitely say that 2%, 3% of area is still vulnerable and I think we will have to get back to a more aggressive control in that area. So there be loss of about, my sense is 8,000 to 10,000 tonnes there. Telangana oil Fed prices, which is adjacent to our mill was slightly higher than Andhra Pradesh prices and there were some flight of fruits to them, particularly in the month of July and August, not in month of September, because Government of Telangana realized that the fruits which are coming to them are of very poor quality and actually with the kind of payment they are making to the farmers, they are not making money or losing them. So they have stopped that coaching. so that is another say, 8,000 tonnes to 10,000 tonnes. So I can definitely tell you that this 16,000 tonnes to 18,000 tonnes of fruit which belong to us and which should come to us has gone because of whitefly this year. Last year, whitefly loss was close to 60,000 tonnes to 70,000 tonnes. So I think these are the 2 challenges, plus there is a shifting of tonnage also. So I'm quite hopeful that we will register growth over last year come what may in this year, without counting the 2 losses.

Yes. Can you talk about overall the rabi season, previous year same quarter -- in Q3 and Q4, overall, we have also not done -- overall, we have shown good numbers. But on that base -- and people are talking overall rabi season is going to be good. So what's your sense in that?

Because I believe that rabi season is a insulated season that way. The reason is that most of the crops are very focused on areas where very good irrigation is there. For example, I would say that if you take for example, wheat is the main rabi crop. 98% of wheat is grown in this country in irrigated areas. So that, whether you have a good monsoon or a bad monsoon, it is not affected. Plus the very good rains in September and October beginning in certain parts of the country, caused a little bit damage to the kharif crop, but definitely left lot of moisture and water in the reservoirs -- moisture in this oil and water in the reservoirs. So irrigation for certain oil seeds like rapeseed and say pulses like gram et cetera, will also be pretty good. So I think we kind of risk you see in kharif, because the temperatures are very high in the country. So water is a very, very important input. You don't see that in rabi. So I feel that rabi will be improvement over last year definitely, and you and I will shell out more and more money in subsidies and procurement, et cetera. So I think that story will continue. Sugarcane will be a little short, but again, the government will cover the farmer by increasing the prices. So in rural area, if you ask me, there is not much of a stress. Whatever you read is totally different now. Of course, they were hit very badly by COVID and they are not spending not because they don't have money, just because they know that they need money should there be a third wave. Because whoever had money in the first wave, in the second wave in rural area, they had better chance to survive. So entire rural India is conserving money should there be a third wave and the government is pumping close to INR 20,000 crore per month in rural areas. MGNREGA outlay is going to be about INR 80,000 crore for the whole year. Almost 80 crore people are being fed, more than 50% of them are in rural India. State governments are giving scheme after scheme. I think in most of the states, farmers receive between INR 3,000 to INR 5,000 per month for doing nothing. So I think rural India is in pretty good shape and that will drive growth of economy in the next quarter once they're comfortable and confident that no wave 3 is there. So rural India in pretty much shape. I think the bottom 20% of rural India, which has land in water fed areas and all have been suffering irrespective of whatever happened. So that will continue.

So lastly, sir, can you talk about the government cut basic duty in ag?

So I think government gifted more than $2.5 billion to Indonesian and Malaysian. Because when they started cutting duty, the selling price of oil was INR 120. And every time we cut duty, it came down by INR 5, INR 7 and went back to INR 120. And that is what, because the prices were increased by Malaysia and Indonesia. So, I think that is a very good gift by central government in spite of wisdom shared by innumerable experts in this area. The Consumer Affairs Ministry prevailed and said that we need to reduce the price for consumers. I think the last duty cut definitely had some impact, particularly in soya bean oil and sun oil, et cetera, but not in CPO. CPO prices from INR 120 came down to INR 110. So my only I would say request an expectation from the government is when the prices start going down, they should bring back the duty with the same fervor and promptness with which they reduce it.

So the current duty is 15.25%, correct?

CPO is 5%.

Including everything, total custom duty and crude palm oil 15.25%?

Something like that. I'll just tell you, but it's a single digit, I remember.

And there some surcharge or...

Yes. I have it, [Indiscernible] just a minute. So let me just read it out to you. This is on October 19 was the last one. So the crude soybean oil is 5%. Soybean oil edible grade, nil. Crude palm oil is 7.5%, sorry. Refined bleached deodorized palm oil, RBD palmolein, RBD palm stearin and any palm oil other than crude palm oil mill, crude sunflower seed oil 5%. Sunflower oil edible grade, 0.

Then you have other surcharge also, sir. So total is 15.25% is what I understood.

No, no, no.

CPO is...

7.5% plus surcharge.

8.25%, yes.

8.25%. Yes, 10% surcharge. But I told you it is single digit, not… So we will send you the table, calculation.

Ladies and gentlemen, that was our last question for today. I now hand the conference over to the management for closing comments. Over to you.

Thank you. I hope we have been able to answer all your questions. If you have any further questions and would like to know more about the company, we would be happy to be of assistance. Be safe and stay healthy. Thank you once again for taking the time to join us on this call.

Thank you very much, Mr. Godrej and members of management. Ladies and gentlemen, on behalf of Godrej Agrovet Limited, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.