India Pesticides Limited (IPL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to India Pesticides Q1 FY '26 Earnings Conference Call hosted by Dolat Capital Markets Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viral Shah from Dolat Capital. Thank you, and please go ahead, sir.

Yes. Thank you, [Harshi]. Good afternoon, everyone. On behalf of Dolat Capital, I would like to thank the management of India Pesticides Limited for giving us the opportunity to host their Q1 FY '26 Earnings Conference Call. From the management team, we have with us Mr. Vishwas Swarup, Non-Executive Director; Mr. D.K. Jain, Chief Executive Officer; and Mr. S.P. Gupta, Chief Financial Officer. Without further ado, I would like to hand over the call to the management for their opening remarks, post which we'll open the forum for the Q&A session. Thank you, and over to you, sir.

Thank you, Mr. Shah. This is Vishwas Swarup Agarwal. Good afternoon, ladies and gentlemen. Season's greetings. I hope you and your family are staying safe and healthy. I take the pleasure of welcoming you all for the Q1 FY '26 Earnings Conference Call of India Pesticides. I hope you all had the chance to look at the financial statements and earnings presentation uploaded on the exchanges and our website. As we commenced FY '26, the agrochemical industry continued to operate within a complex and evolving global landscape. Despite headwinds in international markets, India Pesticides Limited demonstrated resilience and delivered a strong performance across operational, strategic and financial parameters. This performance underscores our focus on long-term value creation through manufacturing scale-up, targeted R&D initiatives and emphasis on a differentiated product portfolio. During the quarter, the company achieved its revenue of INR 282 crores, reflecting a growth of 25.8% year-on-year. This growth was primarily volume led supported by sustained demand in the domestic and strategic product mix catering to both domestic and international customers. One of the key milestones was the successful commissioning of the expanded intermediate PEDA facility. This enhancement strengthens our manufacturing capabilities and reinforces our ability to meet rising demand of Pretilachlor Technical. Looking ahead, the company is on track to expand capacity to 8,500 metric tons per annum by Q2 FY '26, which aligns with our long-term growth plan and supports the government of India's Aatma Nirbhar Bharat initiative. Additionally, the formulation capacity has been successfully augmented by 3,500 MT per annum. Our R&D efforts have gathered momentum, resulting in the development of several new molecules. India Pesticides Limited is increasingly recognized as a trusted partner by both domestic and global players, with all major Indian companies sourcing one or more key molecules from us. Our expansion plans remain firmly on track. During '25- '26, we intend to undertake capital expenditure of INR 52 crores at our existing manufacturing facilities and INR 64 crores at our wholly-owned subsidiary, Shalvis Specialties Limited. As we look ahead in FY '25, '26, the company remains a committed -- company remains committed to executing its strategic priorities and accelerating its growth trajectory. With balanced product portfolio, Strong demand, domestic positioning, expanding manufacturing capacity and advancing R&D capabilities, we are well placed to capitalize on emerging opportunities and navigate the evolving dynamics of the global agrochemical landscape. We are optimistic about the long-term prospects of our company and remain committed to delivering sustainable value to our stakeholders. Now I will hand over further presentation to Mr. D.K. Jain. Thank you.

Thank you, Vishwas ji. Good afternoon, ladies and gentlemen. I take this pleasure of welcoming you all for the Q1 FY '26 earnings conference of India Pesticides. Let me begin with a brief update on industry dynamics. The global agrochemical market is showing early signs of recovery, driven by a revival and demand and gradual improvement in prices. Inventory levels across distribution channels have largely normalized and raw material prices remain stable. Overall, we see signals of positive global tailwinds, and we expect this trend to continue through FY '26. Our revenue for this quarter, as already stated, is at INR 282 crores, which is 25.8% more Y-o-Y and 34% more Q-on-Q. This performance reflects both healthy market conditions and the success of our execution strategy. During the quarter, we undertook several key initiatives to strengthen our operational capabilities. Number one, commissioned the expanded PEDA, intermediate facility, increasing the capacity from 2,000 tonnes to 6,000 tonnes per annum with a further scale up to 8,500 metric tonne per annum on track for Q2 FY '26. This expansion enhances supply chain efficiency and provides a cost advantage. Successfully commissioned the expansion of our formulation plant, adding 3,500 metric tonne per annum of capacity. We continue to reinforce our position as one of the leading producers of India's top-selling rice herbicides and their key intermediates. We continue our focus on innovation and premiumization, yielded positive results, driving an improvement in gross margins. We constantly prioritized value over volume, reflecting our long-term strategy of sustainable profitable growth. This disciplined approach also led us to an improvement of -- in ROCE to 18.3% from 14% of a direct outcome of better product mix and efficient capital allocation. For the year 2026 and onwards, number of product launches are in pipeline. There are almost 2 -- there are 2 products in IPL and 3 products in Shalvis are lined up for launches this year -- next year. These launches will further diversify our portfolio, enhance market reach and strengthen our position in high-value segments. I would like to highlight our expansion plans for FY '26. We have earmarked the capital expenditure of approximately INR 116 crores for this year. INR 52 crores for the existing site and INR 64 crores for Hamirpur site. The majority of this investment will be directed towards capacity expansion and new product additions, which we expect will further accelerate our growth momentum. Our R&D capabilities forms the backbone of our manufacturing strength with in-house laboratory infrastructure, including file plant and formulation facilities equipped with advanced analytical instruments. We have the capability to develop, scale up and manufacture differentiated technologies with precision. This innovation driven approach not only strengthens our product pipeline, but also reinforces our self-reliant manufacturing model in line with the Make-in-India vision. Looking ahead, we remain optimistic on the back of improving export demand, while stable input costs provide a supportive macro backdrop. Internally, our growth momentum will be supported by progress on a strong new product pipeline, expansion of our premium offerings and continuous improvement in operational efficiency. Our strategic framework remains consistent, profitable growth, self-reliant manufacturing, continuous innovation and a focus on delivering long-term stakeholder value. With a fully integrated foundation and disciplined execution, we are confident of sustaining this growth trajectory through FY '26 and beyond. Thank you for your support and partnership. I now invite our CFO, Mr. S.P Gupta, to walk through you the financial details on this quarter. Thank you. S.P. Gupta ji?

Thank you, sir. Good afternoon, ladies and gentlemen, and thank you for joining the India Pesticide conference call to discuss Q1 FY '26 results. Taking you through the financial highlights for the quarter. Total revenue for Q1 FY '26 was INR 282 crores as compared to INR 224 crores in Q1 FY '25, an increase of 25.8% by Y-o-Y. We registered an EBITDA of INR 52 crores, an increase of 62.6% as compared with the same period -- same quarter last year. EBITDA margin stood at 18.4% in Q1 FY '26, expanding 4.17% Y-o-Y. This is in line with our projections for the year. Net profit for the quarter stood at INR 35 crore, an increase of 79.2% Y-o-Y, with PAT margin of 12.3%, expanded 3.6% Y-o-Y. On geographical split in Q1 FY '26, our revenue from export stood at INR 87 crores as compared to INR 77 crores in Q1 FY '25. And domestic revenue stood at INR 188 crores as compared to INR 143 crores in Q1 FY '25. We saw an increased revenue on all the fronts. Revenue from technicals and formulations stood at INR 194 crores and INR 81 crores, respectively for the quarter. There has been a robust increase in Herbicide business during the quarter. INR 116 crores of CapEx has been planned for FY '26 for both India Pesticide Limited and 100% subsidiary Shalvis Specialties Limited. India Pesticide Limited has its strong balance sheet with the ability to generate good free cash flow. Company is planning to fuel its CapEx plan primarily with internal accruals. CapEx will help company to continuous growth trajectory, both in top line and bottom line. With this, we would be happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Mr. Ankit from Adezi Ventures Family Office.

Congratulations on a good set of numbers. I firstly wanted to understand what is the outlook that you have for revenue growth and for EBITDA margins for FY '25 and '26? And what gives you the confidence with regard to utilizing all these additional capacities that are coming on board?

Sir, the revenue target, what we have fixed is INR 1,000 crores for FY '26 with the margin between 18% to 20%. And even this quarter also, we have achieved an 18.4% margin, which is in line with our expectations. And we are expanding the capacity of our intermediate plant, and we are going to put one more block. So that also utilization would be more than 70% of our capacities.

And what gives you the -- just a continuation of the question, but what gives you the confidence of the utilization of these additional capacities?

No, confidence level is a very good, sir, because we know we -- whatever products we are making, we normally have some arrangements in advance. So as soon as we start manufacturing, we can immediately market it. So there should not be any problem. The normal capacity utilization of around 70%, we should be able to achieve.

Understood. And I also saw that you have 32% of your revenues from exports. So what percentage of your revenues have the potential to be impacted by these U.S. tariffs that have been announced on India?

U.S. tariff, they will not be substantial on our products because the tariffs whatever has been declared by the U.S. administration, India and China both are in the similar range. And these are the 2 major countries who are exporting the agrochemicals to U.S. So we don't see any impact on our products from U.S. tariffs.

Just to add we are exporting just 3% to 4% of our turnover to U.S. tariffs only 3% to 4%.

3% to 4%, okay. And...

That too they are very niche product.

Okay. And finally, I believe you saw pricing growth of 8% last quarter. So I just wanted to understand, was there any ForEx contribution in this pricing growth as well? And secondly, if it was 8% last quarter, how does the pricing look for this quarter versus year-on-year?

The pricing looks more or less stable now because raw material prices have more or less stabilized. So we think that it should continue in a similar way. And foreign exchange, some impact would be certainly there because of the conversion ratios between rupee and dollar.

Okay. Okay. And finally, I mean, if I was to look at your revenue growth. I mean your Indian revenue growth in the Indian market has been very, very strong, I believe. So what is the primary reason? What has been -- what has caused this kind of very good revenue growth in the domestic market?

We have increased our Herbicide capacity. And this quarter is basically Herbicide is being used. So there was a good demand for Herbicides this quarter from India.

And is this the first quarter where in you've seen the impact of this increased capacity?

Yes. This increased capacity, part of the increased capital was operationalized in the last week of April. So we have utilized partial capacity of this increased capacity.

The next question is from the line of Mr. Dhwanil Desai from Turtle Capital.

Congratulations for good set of numbers. Sir, my first question is with respect to this antidumping duty on Pretilachlor, have we seen the full benefit in terms of pricing because of that? And also this growth on the domestic side, is it driven by the increased volume in Pretilachlor, if you can talk a bit about that.

Yes. Pretilachlor, volumes have really helped us in this quarter because this is the main season for Pretilachlor, because it goes in rice paddy sowing. So this was the main season and Pretilachlor sales were good. With this anti-dumping duty, the prices have slightly normalized. Otherwise, last year, we were losing money on Pretilachlor, but now we are getting a reasonable margin in this.

Okay. So that pricing effect has already come in, in terms of -- Okay. And we are increasing this capacity for PEDA from 2,000 to 6,000. So how do we see the incremental ramp-up in Pretilachlor, in terms of overall market share in Indian market? Because other than us, I don't see any major Indian players in this molecule. So what kind of volume we can do this year, if you can talk a bit that.

See, sir, presently, we have capacity of about 6,000 tonnes of PEDA, which is further being augmented to 8,500 tonnes. This will be ready by September, October. And we should be able to meet substantial demand of Indian requirement. Because up till now, it has been now largely imported. So we feel that the Indian customers will get our own product from us. So we should be able to meet at least 70% of -- more than 70% of the Indian requirement we should be able to fulfill.

Okay. Okay. But that asset sorry...

Yes, about...

No sir, that, essentially, this new capacity will come on stream in Q2. So by that time, the season will largely be over, right? So the full benefit of this will get reflected in next year. Is that the right way to look, the 70% number that you are seeing?

This intermediate sales, it starts from November, December itself because people, they buy to this intermediate and then they convert it to Pretilachlor, and then they pack it and sell it and reach the market. So normally, it starts in November, December also. So we should be able to market part of the product from November itself.

Okay. Sir, question, you're talking about overall agriculture environment for technicals is kind of getting better, just in terms of demand. So if you can give us some sense about our base business like Captan, Folpet, Prosulfocarb how is the demand outlook and pricing scenario in some of these products?

The demand for other products, for example, our fungicides like, Captan, Folpet, that is also increasing because India is growing at almost 9% to 10% per year. So in line with that, our product demand is also growing. And especially Folpet, there is some export demand is also coming up because of the banning of some of the products, Folpet Finding is finding as a replacement use. And even in Prosulfocarb, this year, we have seen reasonably good demand, and we feel that it should -- it will continue. Pricing wise, there is some pricing pressure on Prosulfocarb. But we have optimized our process further to reduce our overall cost of production.

Okay. Got it. One last question, and I'll come back in the queue. So sir, last year, we did very well on the formulations side, almost, INR 185 crores, INR 190 crore revenue went to INR 280 crores. So on top of such a high base, do we expect 15% kind of a growth? And if so, what will drive the growth on the Formulation side?

Formulation side. Formulation also will grow accordingly, sir. As our basket of products are increasing, so is our basket of Formulation also increases, number one. And we are increasing our reach to other parts of India where we are not present as on today. And number three, we are getting some bulk formulation orders from our overseas customers. So the formulation growth also will be in line with our Technical growth. As we are making more technical, sir. So the demand for bulk formulation on those technicals will also grow.

Yes, are increasing. Yes.

The next question is from the line of Mr. Ananth Shenoy from AS Capital.

My first question is on the Formulation sales, which were flat in Q1, like INR 78 crores to INR 80 crores. This is despite good monsoons. So like what is the reason for that? And on INR 285 crore base of last year, do you expect growth in the remainder part of the year for the Formulation?

Yes, formulation growth in July, there has been substantial growth, actually, because it's slightly delayed. That is why it has come up, but now it is going out very well.

Sir, the basic consumption starts from June end -- the product consumption starts from June end. So there was a delay in monsoon for few days. So it started around 10th and 15th of July.

So from Q2 onwards, we'll see formulation growth also?

Yes, you will see growth in Q2 also Q3 and Q4.

Okay. Okay. So second question is on the export order book, like how is the export order book Y-o-Y, do you see -- is there any growth in the export order book for us?

Export order book is also growing, sir. That is true. When compared to last year, our export order book is relatively much better. We have orders for our major products like Prosulfocarb as well as for Folpet as well as for Captan, we have got very good export orders.

Okay. So can you quantify like what -- like how much percent export order book is higher?

Percentage, we have to calculate because as we don't have the number readily, we will tell you. Please again, we will -- I will communicate with you.

Okay, sir. And lastly, on the Pretilachlor side, in the Q1, what was the sales of Pretilachlor?

What was the...

What was the sales of Pretilachlor in Q1?

Q1 it's around INR 55 crores.

INR 55 crores. Okay. And other key products like Captan and Folpet, how is the pricing, is it stable? Or like has it gone up?

Pricing now is stable, more or less.

Pricing is stable, but in where it in [euro-denominated] prices, there is some gain on account of foreign exchange depreciation.

Okay. And the last question. In the last call, you had mentioned about 3 to 4 products in -- 2 products in Europe and 1 or 2 products in U.S. that we got approvals last year. So have the products have started for this -- have the sales started for these products? And if so, like can you name the products and what sales you'll see this year?

Sir, we have already have orders for one of the products from U.S., other products we have discussed, they would be requiring the product near the year-end. We -- last week only, I was in the U.S., where we had a conference there. And we had the meeting with our customers. He has indicated that at the end of this year, they will be requiring the major quantities of this product. And similarly, in Europe, we are already in touch and they will also be requiring by year-end.

The next question is from the line of Mr. Kaushal Sharma from Equinox Capital Ventures Private Limited.

Am I audible?

Yes, sir.

Yes. Yes.

Congratulations. My question is on your capacity side. What is current capacity utilization as on date?

Current capacity utilization is around 80%. On a blended basis, Technical will be around 73% and Formulation is fully utilized.

Formulation is -- so you are expecting more than 70% utilization level in this financial year, right?

Yes, yes.

And sir, can you please tell me what is the average we have recently added in capacity [average annualized]...

Mr. Kaushal, could you come again with your question?

Can you put the question to me more clear? We are not able to hear clearly.

Yes. [Technical Difficulty]

Sir, again, there is a static disturbance at your end. [Technical Difficulty] Mr. Kaushal, I request you to rejoin the queue again. We'll take up the next participant. The next question in line is from [Darshil Jhaveri] from Crown Capital.

Hopefully I'm audible?

Yes. Yes. Very clearly.

Sir, firstly great results in Q1. Sir, just wanted to know with -- in Q1, we performed with the new capacities being online only part of the quarter. So is it a fair way to look at the Q2, the new capacity will also be in the Q1 capacity that came online will also be there for the full quarter, so Q2 should be better than Q1? And how do we see the seasonality of our business like in terms of H1 and H2, like is it the ratio is 50-50 or 60-40? Could you help me with that, sir?

Our turnover ratio generally in first half, we are achieving 55% to 56%. And in second half, 43% to 44%. First half major turnover comes from indigenous sale. In second half, export turnover is higher. As far as the capacity in first quarter is concerned, it will be fully operational in second quarter, but the product demand comes from third quarter and fourth quarter. As I already explained the new capacity of this PEDA, major consumption is in third and fourth quarter.

Okay. Okay. So it will be more in Q3 and Q4. Okay. Fair enough, sir. And sir, just wanted to know with regards to our Other income. I know there was some insurance claim, but even without that, it is looks slightly elevated. So what was the part of Other income, sir?

This Other item, it includes higher ForEx gain due to increased euro-denominated export this quarter. Euro has depreciated significantly this quarter and our Europe -- export to Europe was very good during this quarter.

Okay. Okay. Fair enough, sir. And sir, I just wanted to know like in regards to our FY '26, our guidance is clear. But for the next year, FY '27, what is the target that we're looking at? Because as India is also growing, so what is the aim for us to grow at what level and what margins?

Even for the next year, we are envisaging growth of about 15% to 20% in our revenue. And EBITDA margin, again, we would like to keep between 18% to 20%.

Okay. Okay. Okay. Fair enough, sir. And sir, just wanted to know like on ground like how is the macro environment? Like do we see any kind of risk in demand or China, the dumping and everything? So how do we just overall see the market, any kind of risk that can be a speed bump for our growth?

Sir, China, China is already there...