India Pesticides Limited (IPL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to India Pesticides Q2 FY '26 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Viral Shah from Dolat Capital. Thank you, and over to you, sir. Yes.

Thank you, Samar. 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 Q2 and H1 FY '26 Earnings Conference Call. From the management team, we have with us Mr. Anand Swarup Agarwal, Director; Mr. Vishwas Swarup Agarwal, 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 will open the forum for the Q&A session. Thank you, and over to you, sir.

Thank you. Thank you, Mr. Viral. Good afternoon, ladies and gentlemen, and welcome to the Q2 FY '26 Earnings Call of India Pesticides Limited. Before I begin, I want to take a moment to condemn the recent terror attacks. Our hearts go out to the families of the bereaved, and we stand in solidarity with everyone affected by the tragic incident. Friends when we spoke in June this year, we had laid out a clear road map for the year. I'm happy to share that we are delivering exactly in line with what we have committed. And in many areas, we are moving ahead of our own expectations. The strength of our execution and the consistency in our performance truly reflect the discipline with which we are preparing our company for long-term global scale. Let me start by touching upon how we are tracking versus our guidance. For the year, we have guided revenue of around INR 1,000 crores and INR 56 crores already achieved in the first half, INR 565 crores, we are comfortably on track, supported by the recovery we are seeing in key export markets as well as the domestic market. On margin too, we continue to deliver well. Against our guidance of 18%, 20%, we have already achieved 18.6% in H1, backed by better utilization, operational discipline and improved cost efficiencies. On the CapEx side, out of the planned spend for IPL and Shalvis, we have already deployed INR 52 crores and rest of the projects are progressing smoothly as per schedule. Utilization has been a key theme for us this year, and I'm pleased to share that technical utilization has moved up meaningfully to over 73% as global destocking eases and demand visibility improves. Our CR-DMO engagement is also progressing well with several global innovators in active discussions with us. Now coming to the performance of the quarter and the half year. Revenue for H1 grew 26% year-on-year. EBITDA for the half year stood at INR 108 crores, up by 53% with margins at 18.6%. PAT grew 48% to INR 67 crores. We continue to remain a 0 debt company funding all our growth through internal accruals. Beyond the financials, we have been strengthening our business fundamentals with a sharp focus on export. Over the last few quarters, our team have been meeting customers more frequently across Australia, Europe, North America and South America, understanding their needs, expanding the market for our molecules and working with key partners to secure a large share in high potential products. This combined approach, deeper customer engagement and future-ready facilities position positions us to respond faster to global demand, improve supply chain efficiency and strengthen our competitiveness in international markets. As we scale, we are equally committed to the vision of Atmanirbhar Bharat. We continue to invest in Make in India capability, reduce external dependencies and deepen our integrated manufacturing footprint so that the company becomes even more resilient and globally competitive. Our investment at Shalvis continue to progress strongly, and the team is actively identifying and developing the specialty molecules. By next year, we expect Shalvis to contribute meaningful with around INR 100 crores in revenue, strengthening our specialty chemical road map. On the domestic side, the extended monsoon has set up a very encouraging environment for the Rabi season. Marcial labor and swing conditions across key belts are favorable. And based on general movement and activity on the ground, we expect the second half of this year to be strong as well. Our strategic projects are also moving ahead as planned. Our formulation capacity has now scaled up to 10,000 metric tons. Our backward integration project for 26 DEA at Sandila is progressing well. Looking ahead, we continue to remain deeply focused on our long-term vision for the company. As shared earlier, we are working towards scaling IPL to a revenue of INR 3,000 crores by 2030, supported by our integrated manufacturing model, backward integration, investment in specialty chemistry and a sharper global footprint. Our commitment to Atmanirbhar Bharat and Make in India mission is central to this road map. We are consciously reducing external dependency, strengthening domestic capabilities and building a manufacturing ecosystem that is globally competitive with rooted in India self-reliance story. The long-term plan guidance every strategic decision we take, and we are confident of achieving it with discipline and consistency that IPL has always demonstrated. Taken together, improved export traction, a favorable domestic cycle rising utilization and the progress across our strategic initiatives give us full confidence in meeting our full year revenue guidance of about INR 1,000 crores with margin as promised in the 18%, 20% range. Our focus remains on innovation, operational discipline in building a globally competitive [indiscernible] and resilient organization. Thank you. Thank you for joining us today, and thank you for your continued support. I pass it over to our CEO, Mr. D.K. Jain.

Thank you, sir. Good afternoon, ladies and gentlemen. I take this pleasure in welcoming you all to the Q2 FY '26 Earnings Conference of India Pesticides Limited. Let me begin with a brief update on the industry scenario. The global agrochemical sector is showing early signs of recovery, driven by volume and an uptick in demand across key international markets. While the domestic environment was impacted by heavy monsoons and challenges in the pesticide application cycle, we observed resilience in our core export segments, which helped offset headwinds of the domestic market. In quarter 2 FY '26, we achieved ever highest total revenue of over INR 295 crores, which is a 26% Y-o-Y growth. This outcome reflects our disciplined execution and strategic focus on long-term value creation. EBITDA for the quarter was INR 54 crores, up 37.6% Y-o-Y with margins expanding to 18.3%. Our net profit increased to INR 32 crores, a 22% increase from last year with a PAT margin of 10.7%. Export sales nearly doubled to INR 140 crores, supported by improved offtake in Europe and Australia, while the domestic revenue remained at INR 150 crores. During the quarter, we marked a significant milestone in capacity expansion. Our formulation facility annual output increased from 6,500 metric tons to 10,000 metric tons. In addition, our Board approved a backward integration project at Sandila for producing 4,000 metric tons of 26 DEA, which will strengthen our supply chain and reduce our dependence on imports and will also help us in our margins. Our CapEx plans are being executed as per projections. Our R&D-led innovation strategy remains aligned with the launch and scale-up of differentiated high-value molecules, further strengthening our competitive position. On the sustainability front, we made significant progress through our flagship CSR initiatives like Chuppi Tod; Halla Bol, Samagra Sudhar Project, and Nirmal Jal Pariyojana. Looking ahead, we remain optimistic, supported by the consistent momentum in exports, gradual recovery in the domestic market and the positive impact of our ongoing capacity expansions. Our diversified product portfolio, integrated manufacturing value chain and continued emphasis on operational improvement position us well to maintain this growth trajectory and create long-term stakeholder value. Thank you very much. I now invite our CFO, Mr. S.P. Gupta, to take you through the financial details of this quarter. Thank you.

Thank you, sir. Good afternoon, ladies and gentlemen. Thank you for joining India Pesticides Limited conference call to discuss Q2 and H1 FY '26 results. Taking you through the financial highlights for the quarter and half year. For the quarter 2 FY '26, total revenue was INR 295 crores with a 26% growth over Q2 FY '25. EBITDA was INR 54 crores, up 37% Y-o-Y with margins increasing to 18.3% from 16.6%. Net profit reached INR 32 crores, up 22% with PAT margin of 10.7%. The margin improvement was driven by better operating leverage and ongoing cost efficiencies. For the half year ended H1 FY '26, total revenue was INR 579 crores with an increase of 26% as compared to INR 459 crores in H1 FY '25. EBITDA increased to INR 108 crores, an increase of 53%, supported by higher gross profit and improved operating efficiency. Net profit for H1 FY '26 was INR 67 crores, an increase of 48%. On geographical mix, export revenue increased to INR 140 crores, nearly doubling from INR 74 crores in Q2 FY '25. International market is showing signs of recovery and inventory levels are normalizing across key geographies like Europe, U.S.A., Japan, et cetera. Domestic revenue was INR 150 crores, marginally lower as compared to Q2 FY '25 due to limited pest infestation caused by heavy rains basking of the pest. In terms of revenue mix, technical and API accounted for 66% and formulation 34% in Q2 FY '26. Capital expenditure of INR 52 crores has been planned in IPL and INR 64 crores in our 100% subsidiary. Both are progressing as per schedule. Return on capital employed improved to 18.8% in Q2 FY '26 from 17.6% in Q2 FY '25, reflecting a focus on capital efficiency. We have healthy net cash and cash balance of around INR 80 crores. Working capital days have reduced significantly from 255 days as at 31st March '25 to 174 days in September '25. With a strong order outlook, expanded capacities and stable raw material pricing, we are positioned to continue our growth in the coming quarters. With this, we would be happy to take your questions.

[Operator Instructions] The first question is from the line of Vidhi Shah from CRK. As there was no response from this participant, we'll move on to the next one. The next question is from the line of [ Maitri Shah ] from Sapphire Capital.

I have a few questions. So firstly, on the export side, we've seen our sales double from INR 74 crores to INR 140 crores. Going forward, what do you see the contribution from export sustaining? Do we see the 48% contribution remaining at this level for the next 1-year to 2 years? Or do we see it going down a bit from the next quarter once the domestic demand again kicks in?

For this quarter, it was INR 48 crores, but our medium-term target is around INR 55 crores to INR 60 crores, 60% domestic and around 40% export mix. And export demand in key geographies like Europe and Australia and Japan, we have good order book from these geographies.

Do we share our order book figures? Do we have the order book number, if we could share that also the split between domestic and export?

Yes, that can be shared, no problem. We already have published that. So we will share with you, no problem. You can contact our Company Secretary, he will send you.

Okay. Also, you mentioned that we have a INR 3,000 crore target. When do we plan on achieving that FY '29 or FY '30?

This is FY '30-'31, -- that's what we have planned. And we are progressing towards that, yes. That is a long-term vision. But short-wise, now this year, we have planned for INR 1,000 crores revenue for which we are on track.

Okay. And what sort of CapEx do we need to put in place for reaching such like a 3x growth in our revenue? Also, what sort of split do we expect once we reach there from formulations going forward? And also the margin profile would look like once we reach those revenue numbers?

No, we are working constantly to maintain our margins in the range of 18% to 20% -- that is what we are aiming at, and we are working on that. We are already achieving these. And of course, there will be increase in our formulation as well as technical manufacturing capabilities at our new site under Shalvis what we are taking and further expansions on that. So that is a long-term project what we have undertaken for FY '30 and '31 to reach about INR 3,000 crores revenue.

Okay. And the new backward integration project that we are putting in for INR 65 crores, what sort of margin accretion can we get from that project? 4,000 metric ton on the...

Yes. See, madam, that is more of a strategic nature in the sense we want to reduce our dependence on the import of this material because we are already making the forward integrated molecules from this. So it will reduce our dependence on import as well as it will help us in increasing our overall margins of the product because we will not be selling this product in the market, but we will be utilizing primarily for our in-house production of further intermediate and the final product from this.

Okay. And so this 4,000 metric ton is totally the utilization is only this much? Or do we need further backward integration or to increase more of this project our capacity will...

It will be more or less it should be equal. Maybe it requires some shortage is there, then we can buy from the market. But otherwise, I think it will meet our requirements.

[Operator Instructions] The next question is from the line of Ankit Gupta from Bamboo Capital.

Congratulations for a great set of numbers given the tough environment the industry is going through, especially on the domestic side. Sir, we have seen quite a few technical as well as formulation players reporting subdued numbers during this quarter, impacted primarily by domestic markets where the excess rainfall has impacted the overall sales. So can you share your views on how we have outperformed the market, especially in domestic market where our sales haven't grown, but they haven't declined also compared to other players, like what other -- the growth other companies have seen? And secondly, on the export market, how is the export market doing? Because we have doubled our sales in exports. So if you can talk about the export market pricing and the overall demand?

In export market, there is a demand increase. We are getting increased inquiries from our customers. And number two, we have visited a lot of our customers in their factories and offices across the world, including Australia, Europe, U.S.A., et cetera. And that has given a more personal touch to the business, and that's how we have got increased orders from -- of our various customers across the geographies. That is number one. Number two, of course, we have to be cost competitive when compared to other manufacturers. So we have been able to do that by slightly improving our efficiencies in our production as well as the raw material consumption, so we could meet their cost requirements. And we hope that next year also, it will continue in the similar way. And for -- in the domestic market, though there was the impact of the heavy monsoon across India, we -- initially, we had sold some quantity in the last part, there was some impact. But we have increased our bulk formulation capacity. So our bulk formulation has helped us in maintaining the overall revenue more or less at the same level as last quarter.

Sure. Sir, for FY '27, Shalvis also coming in our expansion also there in the stand-alone company. So how should we look at next year in terms of growth and margins?

Which one, sir, which one... Could you please repeat?

FY '27 with our subsidiary also commencing operation and sir, as Anand sir also said that we'll be looking to do revenues of around INR 100 crores from the Shalvis. So how do you think overall as a company on stand-alone as well as on stand-alone basis, how do you see the overall growth of the company on a consolidated basis?

Yes. No, no. See, our subsidiary is also coming up well. It took -- initially, it took a little more time because we have to build the infrastructure part. And then slowly now we have started with the production of one of the molecules we have in a small way, we already started technical grade production. And we want to add more number of molecules this year as well as next year. And we feel that INR 100 crores next year is a very reasonable estimate. And on a stand-alone basis, it will also grow more or less to a Sandila side because the plant size is more or less same, almost 25 acres of land. And we will be building there block-wise. Every year, we will be adding 2 blocks to 3 blocks. So on its full realization in 3 years, 4 years, 5 years, we should be able to achieve almost INR 1,000 crores from there.

So. But FY '27 stand-alone should we expect will reach INR 1,200 crores next year and INR 100 crores will come from Shalvis, INR 1,300 crores top line on a consolidated basis?

We expect at least 20% growth over this year.

On stand-alone also?

On stand-alone also, yes.

Okay. And sir, how should we look at revenues margins next year?

Sorry -- sorry to interrupt. follow-up question, please rejoin the queue for limit questions. The next question is from the line of [ Anil Jain ] from Growealth.

Congratulations for excellent set of numbers in such a challenging environment. Sir, our exports have risen quite dramatically from INR 74 crores to INR 140 crores. So the contribution from technicals and formulations in this INR 140 crores, what would be the contribution?

And primarily, they are technical material and some part of it is by bulk formulation. We don't export ready-to-use formulation in our own brand, but we formulate for our customers. So some of our customers, instead of buying technical, they are buying formulated products in bulk. So it is a combination of this bulk formulation and technical.

Okay, sir. And this CapEx, which we are doing INR 116 crores, out of which INR 52 crores has already come. So when it will start contributing?

This will certainly contribute in next financial year, sir, no problem.

Okay. Okay. And sir, this 21 new registration which you have done in FY '25, what was the expense incurred for that?

Probably please send you a number, we will get back to you because really I don't have the numbers on hand, but we will come back to you on that.

But what should be...

Registration... Depends upon for example, each Indian registration in India, for example, for CIB registration for technical grade material, normally, the expenses is about INR 7 lakhs to INR 8 lakhs. And for formulation, it is about INR 25,000 to INR 30,000. But for export registration in another country, there the expenses are high because we have to develop the complete [indiscernible] bags, et cetera. So that will be accounting almost about INR 25 lakhs -- around INR 25 lakhs each registration. That is a very rough indication I'm giving you. But exact number, if you want, I will send you by mail.

No, no. It's okay, sir. Sir, and our capacity expansion from 6,500 metric tons to 10,000 metric ton undertaken at an expense of INR 2.8 crores. At 10,000 metric tons, what would be the revenue at full utilization?

Revenue... Revenue, it will be around INR 400 crores, 10,000 tons formulation capacity.

INR 400 crores.

INR 400 crores, yes, yes.

And what would be the total formulation contribution of the total company, sir?

Currently, the contribution of formulation for this quarter, it is 34%. But on an annual basis, it is around 27% to 28% last year.

No, no. It will be slightly more. It will be slightly more because we are doing this bulk formulation for some of our customers.

Yes, yes. I heard it, sir. And you told that you were able to sell some more bulk formulation. That's why the revenues have not been impacted.

Yes.

I think is this sustainable for the ensuing quarter also?

Yes, yes. Okay, sir.

Best of luck for such good set of number and best of luck for the future.

The next question is from the line of [ Ajay Desai ] from SJ Enterprise.

Congratulations on putting such a great set of numbers. Sir, I have only one question. This is regarding not about the business, but about valuation which market is still unable to recognize for the organization. And we came out with our FPO in 2021 with certain valuation, which resulted in a price discovery of INR 296. And still market is unable to recognize the valuation of the organization and it is quoting 30%, 40%, 50% less. So why don't we come up with a buyback offer and give signal to the market that the valuation is -- which organization feel is way higher. And at least some portion, we can do a buyback from the IPO, which was a combination and 95% of the IPO was towards follow-on public offer from the promoter side. So we need some clarity on this as well?

Actually, we have a lot of -- we are seeing a lot of opportunities. So we have lined up a good amount of CapEx out of our internal accrual. But it's still we discussed internally your suggestion that some portion may be we may reserve for buyback also.

Sure, sir. Because I requested this 2, 3 quarters back also because we need some sign of -- some signals we need to send to the market about our undervaluation because the whole market in the last 4 years between 2021 to '25 has multiplied, but somewhere we are at a loss of 30%, 40%, which is giving pain to the investors.

But sir, buyback will probably whatever surplus we have, if we utilize that in increasing our business by increasing our assets and the production capacities, that will create more value to the company.

Sure, sir. So ultimately, market valuation has to be -- market has to recognize or we can create our visibility more in the market to make sure that there is a proper for the investors, retail investors.

That is a good suggestion. We will really certainly look into that to create more visibility to meet more investors and have more conferences. So that is what we will try to do certainly, sir. That's true. And valuation will certainly come because once the people recognize the importance and the goodness of the company, valuation will automatically come.

Yes. Sure. Only thing is like because it was an FPO and the whole money, 90% money went to the promoters, somehow that has to get reflected. Otherwise, retail investors like us will be at loss.

So yes. Absolutely.

The next question is from the line of [ Manish Badani ] from 360 One Capital.

As you mentioned in your opening remarks that you want to achieve INR 3,000 crores of revenue by FY '31. So I want to just understand that what is the road map for that?

We could not get the… could you please repeat?

I'm just asking that as you mentioned in your opening remarks that you want to achieve INR 3,000 crores of revenue by FY '31. So what is the road map for that?

See, we have a clear road map in the sense we have lined up a lot of products in our portfolio. And we have our subsidiary, Shalvis coming up at a good pace. So that will contribute significantly. And apart from that, we are looking at some other opportunities to increase the total revenue to the estimated figure of about INR 3,000 crores.

Okay. Okay. And my second question is that like in the second quarter, like a lot of companies saw the formulation data in the second quarter. So like what percentage of product returns we saw in this 2Q?

Sir, we are getting some resounding. We are not able to hear you clearly.

Now I am clear, hello? Audible?

Yes, please [indiscernible] mention slowly.

Sir, what I'm asking is that in the second quarter, a lot of companies saw the formulation return as a percentage of sales. So what sort of percentage return we saw in the 2Q?

Percentage of formulations in our total sales.

Yes, yes, exactly.

Yes. It is about 34% of our products are being sold as formulated products and rest is including bulk formulation and about 66% is technical grade material.

No, no, sir, I'm asking about the returns.

Return is more or less same. I think formulation is slightly less than technical.

100 bps, 150 bps points less than technical.

The next question is from the line of Ankit Minocha from Adezi Ventures Family Office.

If I look at your margins for -- EBITDA margins for H1, they have been around -- hovering around 18%, 18.5%. Now considering that H2, you have a lower base of sales and considering the market scenario, do you think for H2, this margin would be maintained in this 18% odd level? Or could this be going lower?

It will be maintained, sir. It will be maintained irrespective of the sales revenue, but it will be maintained between 18% to 20%. That's what we are trying our best.

Okay. Considering the new plant is also coming up and you have expenses related to that, which will kind of slowly fill up the capacity and everything. So don't you think that this would slightly have a negative impact on the margins?

Guptaji.

Actually, our incremental sales will be only 15% to 20% we are projecting. So 80% margin, they are stable. Even for our future incremental sales, we are doing backward integration also. So we are quite hopeful that we will be in that range only.

Okay. Understood. And for '27 in FY '27, what would be your understanding of what could be the sustainable margin for FY '27?