Kaveri Seed Company Limited (KSCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kaveri Seed Company Limited Q2 and H1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and thank you for joining us on the Kaveri Seed Company Limited Q2 and H1 FY '22 earnings conference call. We have with us today Mr. Mithun Chand, the Executive Director. Before we begin, I would like to point out that certain statements made or discussed on the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks that the company faces. The company does not undertake to update them. A statement in this regard is available for reference in the presentation. We will begin the call with opening remarks from Mr. Mithun Chand, who will address updates on the market environment and take you through the strategic imperatives of the company. We will then have the forum open for an interactive Question-and-Answer Session. I would now like to invite Mr. Mithun Chand to share his views. Over to you, sir.

Thank you, Rishab. Good day, everyone, and a warm welcome to Kaveri Seed Company Limited quarter 2 and the first half '22 results conference call. I hope that all of you are safe and healthy with this pandemic. I will touch upon our financial performance for the quarter under review, post which I will go through the half yearly numbers. During the quarter under review, net sales stood at INR 147.56 crores as against INR 134.02 crores in quarter 2 FY '21, an increase of 10.11%. EBITDA stood at INR 21.56 crores for quarter 2 financial year '22 versus INR 27.12 crores in quarter 2 '21. PAT stood at INR 12.83 crores versus INR 22.40 crores during the quarter 2 of '21. During the half year under review, net sales stood at INR 777.34 crores against INR 853.5 crores in first half '21. EBITDA stood at INR 236.27 crore for first half '22 versus INR 337.58 crore for first half '21. PAT stood at INR 217.57 crores versus INR 319.82 crores in first half '21. The Board of Directors had approved the payment of interim dividends at 200%, that is INR 4 per equity share of INR 2 each on the profits of the company for the financial year '21-'22 on the equity share capital of the company. This translates to total cash flow of INR 23.39 crore. Total cash on books as on September 30, 2021 remains at INR 374 crore. Moving on to our business highlights. Cotton continues to pay significant challenges. HTBT or illegal cotton occupied about 18% to 20% of the cotton area, thus impacting overall branded seed market. Lower incidence of pink bollworm, however, offered some relief and resulted in good quality cotton. Maize acreages have seen a good improvement in AP, Telangana and Karnataka states where Kaveri enjoys a higher market value. We also registered a strong growth in rice. Continuous rainfall in quarter 2 across all major states had vegetable sowing, impacting vegetable seed business significantly across industry. Coming to crop by performance. In first half '22, volumes in first half '22 are down by about 24.62% and revenue by [ 26.52% ]. Gained cotton seed market share in Gujarat and Haryana lost in AP, Telangana and Karnataka and Maharashtra. Non-cotton business is up 11.49%. Revenue growth was driven by volume growth in rice, new products in hybrid rice and selection price and price increase in key lead hybrids across crops. Maize volumes have decreased by 30% and revenue by around 19%. Strong improvement in contribution from new products up from 40 metric tons to 500 metric tons year-on-year. KMH8322 and KMH8333 are the 2 key contributors to performance. Contribution of new products has gone up significantly from 8.85% to [ 23.59% ]. Hybrid rice revenue grew by 44.35% in first half '22. Selection rice revenue grew by 15.6% in first half '22. Revenue grew by 15.6% in first half '22. Our endeavor will be to continue to grow our non-cotton business. In line with this, we continue to strengthen our R&D and infrastructure to deliver quality and revenue to the farmers. Our R&D strengths are visible in the form of several new products in rice, maize and vegetables. Concurrently, we will continue to explore viable organic and inorganic opportunities, and we'll return excess cash to shareholders. We are happy with our performance during the quarter, keeping in mind the challenging macro environment. We look forward to improving performance going forward. Now, we will open the floor for the question answers.

[Operator Instructions] Our first question is from the line of Nitin Awasthi from InCred Equities.

My first question was regarding the new scheme, which is being followed for approval of GMO crops in India. So what we given to understand is that now the state government -- a particular state government needs to approve the GM crop before the GEAC approves it or considers this. And so, could you just shed some light on this, how does this scheme work and have we applied to almost all the states with all our crops, or how are we going about it?

So as of now, we have GMO approved only in cotton, and that too in BT 2. So most of the hybrids, which we are selling, are approved and with no more further permissions are required to take from state governments. When coming down to the new technology, it's not yet finalized yet. Once it's finalized, then we need to follow he procedures given by the government, but it's too early to comment upon it.

Because new articles had been pointing out that Rallis has already applied to BT corn and BT cotton in Karnataka. That's why I asked this question.

BT corn is not approved by government. That's edible crop and it needs to go central government discussion. So nothing is approved as of now.

Okay, sir, noted. And we had, even in the last con call, stated that we are looking out for acquisitions. And during the last quarter, there was actually Bayer sold off its seed portfolio to Crystal Crop. Was that an acquisition we were eyeing? And if that was the one we were eyeing, then are there no major portfolio for sale out there? Or are they still -- what do you call, portfolios for sale out there, and we're still trying to eye and get them?

So, we are trying different options into that. That's not the only way to go. We said that we are exploring the options. We are not finalized yet. We are open for it. That's what we meant to say.

Okay, sir. Sir, last question from my side. How much of the maize business comes from the government side? And how much of it did not come through during this quarter?

The business what we lost now. So majority, the volumes, what we lost like the 25%, 30% of the revenue is basically from the government revenues only -- the government volume only. Otherwise, in the trade business, what we call, what we sell directly to the farmers are through distributors. So we have increased our market shares in most of the states.

Which government, state government, was this business lost from?

Basically, the Central and Northern India, Madhya Pradesh, Maharashtra and Rajasthan. These are the state governments. There is some part in Chhattisgarh also. These are the governments where we usually get bulk sale from subsidy in the kharif part, that we couldn't get this year because of the pandemic, as the government couldn't call for any tenders.

[Operator Instructions] Our next question is from the line of Abhijit Akella from IIFL Securities.

Just on that maize question again, so could you just help us understand how much was the government tender business in totality, say, last year, maybe FY '21 overall or 1H of FY '21 first half? And what has it fallen to this year? And what should we expect going forward? Should we assume that there are no government tenders that come in the future in maize or in other crops?

Basically, if you see, most of the states, even what we sell maize in Karnataka and Andhra to some extent are through subsidies – are through government bodies itself. But we don't have a direct subsidy from the government. We get a very minimum subsidy, that is INR 5 or INR 10 per kg from the government that we don't consider the major subsidy. And we directly sell it to the farmers. Whereas in the states of MP, Maharashtra, Rajasthan and some parts of Central and Northern India, they call for a one-time tender to supply it. And usually, that tender we get in the month of June to August. Basically, that’s for the first quarter sale, [indiscernible] in the second quarter. That business we couldn't get it, but overall, that turned out to something close to 2,000 tons, 2,300 tons. The revenue what we lost, that's like 2,500 tons of sale in May is basically from those tenders. And usually, we won't bank on this tender because there's a lot of uncertainty in that. But there are, if you see the trade business, which we do in Maharashtra, which we do in Andhra, Karnataka, Maharashtra and second half of the business and basically to sale, and we are gaining market shares on that.

Okay. So just to clarify, last year, we had 8,500 tons of maize sales in the first half. This year, we have 5,900 tons. So the decline is about 2,500-odd tons. All of that says basically the government...

More than 2,000-plus tons, 2,200 tons is from subsidy sale. And some 200 tons to 300 tons is across sales and basically the second half that is from coming Tamil Nadu. Tamil Nadu is a very small portion.

Okay. So point number one, now in the second half, we should have an okay rabi season for corn. I know acreages are not up and maybe farmers are preferring oilseeds over maize. But question #1 was, how is the outlook for rabi corn? And then number 2, next year's kharif season, this government tender business we should assume won't be there, right? So at least the base will be easy for next year's kharif?

Yes. You rightly said, this should be the base. And every time before the base what we are calculating and every time we don't consider this as a normal business to the one-time business which we're doing. But usually, what we are trying -- what we are getting the 2,000 tons, 2,500 tons is there for the last 6, 7 years. Even though it's a one-time sale, but most of the governments, one of the other governments do, and we usually will be getting the 2,000 ton for sale. This time, the current call and the entire 2,000 ton got almost zero sales. But if you take the second half of the rabi, even though there's an inclination towards the oilseeds, the may serves us slightly better than last year and the last year base was very small because in second half of last year, entire Bihar was down. But by continuing the second half base, definitely, we should do better in the second half of this year than first.

Okay. Understood. Sorry, just one last thing on this maize point. One is, is the margin on the government tender business lower than your retail margin? And number 2, is this year's absence of government tenders because of COVID and therefore, next year once COVID impact goes away, we can expect some tenders to come back?

Yes, definitely. Usually, they were supposed to take off the tenders and they just delayed the process and the season got delayed. Usually, they encourage maize acreage in this area. And the maize acreage also significantly down with our ability to calling off tender to the governments. But I think definitely we can't guarantee that, most probably that the tender business should come back. But as a calculation purpose, it is always better to take the base of this year as a normal sale, which is a guaranteed sale and which can actually see plus or minus of the sale based on the trade.

Yes, and the margin on that?

Margins are slightly down when compared to the normal trade. But when we sell the seeds, all the other expenses being same, we get a better margin in that. But if you calculate on only that volume base in the business, the volumes are much lower. And even this year, we had a high written sales returns during the first quarter and the second quarter because most of the stock, we couldn't sell it. And even the businesses what we -- even tender business has been strong pre-sale in the other parts of India. Even that got written back, and we had a huge inventory ride off also. That's also included in dividends. And that's what we mentioned in the past quarter also.

Okay. Understood. Got it. Just one last thing, and I'll get back in the queue. When I -- the subsidiary company revenues seem to be up quite significantly this quarter. The way I arrive at it is by doing consolidated minus standalone. So any reasons for that specifically?

See, this time, most of the cotton seed more in the unbranded segment. Being that an unbranded segment, the sale was high, but if you see the margins were lower. So basically, in subsidiaries, we sell cotton. Cotton is the major component in subsidiaries.

[Operator Instructions] Our next question is from the line of Sarvesh Gupta from Maximal Capital.

My first question is, I think we also had some plans...

Sorry to interrupt, Mr. Gupta, if you're on a speaker mode or hands-free mode, can you please switch to a handset? We can't hear you clearly.

[indiscernible]

Sorry, I am not able to hear you.

Mr. Sarvesh Gupta, we can't hear you clearly, sir.

[indiscernible]

Sir, your voice is breaking up.

Is it better now?

Yes.

Sir, I was asking earlier, we also have some plants on HTBT [indiscernible]

Your voice is breaking, Sarvesh, but anyhow I got some of your question. We will never bid in HTBT, because it's not approved by the government. It's called an illegal BT. What we said earlier, if I recollect what we said that if the government approves HTBT, we will be also be in line for offline. But as of now, it's not officially approved, and we're not there in HTBT. We will never [indiscernible] in HTBT.

Okay. So -- but do you see this trend, the sort of the legal cotton et cetera normalizing next year because of the COVID we got impacted this year, so do you have any sense of how things should play out in the coming years?

Usually, the HTBT popularity is picking up. But this year, most of the HTBT has vested a loss in terms of the performance. The performance was very minimal and the farmer got affected large. So what we see is that -- what the industry thinks is that the HTBT will not move in the way how it moved in the last year, but still we need to see for next 3 months and then arrive at a conclusion because they're still in the harvesting stage.

Understood. And sir, any thoughts on like maize for us hasn't really grown at a very rapid pace, even though it is at a small-scale in the last few years, if we see that performance has not been of a very high growth. I mean, primarily, your non-cotton portfolio is growing because of rice. Any thoughts on how that particular segment can perform? Because you always give a guidance about non-cotton performance, but that is basically hybrid rice, but our performance in maize has not been that of high-growth and other segments are still very small. So when we say non-cotton, it becomes basically just the hybrid rice, more or less. So how do we see growth in that side? And what steps do we need to take to increase the growth rate in that particular segment?

You rightly pointed out, maize is not going at such in what we have anticipated. In the last 5, 6 years, it remained stable or in the sideways of 5% to 10% plus or minus based on the rainfall and the other competitive crop commodity prices. But if you see maize outlook for a long-term -- on a long-term basis, as the government is also proposing for the ethanol plants which require maize as a major input, what we see in maize -- by this stabilizing now, what we see that maize has got a very good future going forward and it will definitely grow in the coming years. And the industry feels that maize can provide more than 10% to 12% as an average for the next 5 to 10 years on a long-term basis, leaving apart the here and there, but we see a good future for the maize. In the non-cotton segment, not only maize, all the crops are growing. Rice is growing, maize will grow, vegetable crops which is a major contributor which has grown in a good comparison with a base, even we see a good growth in vegetables. And we're trying to add some more royalties also for us, not in this year, but during -- I'm talking about 5- to 10-year view. These are the crops which will definitely fuel the growth going forward. And what we've stated earlier, non-cotton segment will definitely grow as much faster than the cotton. And if you see our guidance, if you go back to 3, 4 years back, we were saying that our non-cotton portfolio will be more than 60% of that, which we have achieved right now. And still going forward, non-cotton will contribute much faster base than the cotton, even on this base.

Understood. And any guidance for the cotton portfolio for next year, given the rapid increase in the price of cotton that we have seen as well as the broad base effect of this year?

This year, we have seen a huge rise in the commodity price of cotton and the output is low when compared to the previous year. As I suggested, that this time, as I indicated earlier, because most of that [indiscernible] performance was not that good with the HTBT, hybrids, and even with the erratic monsoon. So what we see the initial feel is like this cotton acreages will go up next year. But anyhow, I said we can take other 2 or 3 months to get a clear view on it. But right now, the positivity exist for the quarter. And even in maize spreads are sitting at INR 17 to INR 18. We give a good price for the farmers. And all the vegetable prices are also up. So most of the crops look good at the present prices. But down the line, in the month of the next -- I mean, to say the next con call for the next quarter, we'll have some sort of a fair bit of idea how the acreage might move for the next few quarters.

We'll take our next question from the line of Sumant Kumar from Motilal Oswal.

So, my question is related -- we are seeing that the textile industry is growing at a faster pace, and we need a higher cotton post the Xinjiang ban. And still we are struggling inside. The cotton industry is still stagnated. So what are the challenges overall cotton seeds industry is facing to take the approval of BT 3 and other cotton seeds what we are working, so India cotton production is likely to increase from here?

Yes, so basically 2 points in this. One is the overall acreages in India and second is the introduction of some new technology content. Coming to the first point, in India, the cotton acreages were coming down in the last 5, 6 years on a year-on-year basis. Before, the cotton prices remained slightly downside or the yields of the cotton was not that attractive because of the pink bollworm. This year, the prices are up. The quality of the cotton is good, but the deals are very low. And as of now, the farmer insemination towards cotton might go up and some states like even Telangana are now promoting cotton for the next year because of [ their discouraging rights ]. So that gives us some sort of positivity for the cotton crop. And the other point is regarding the technology. Technology takes time because the central government need to approve it and after approving, it takes at least 2 to 3 years to get into the market. Minimum time is 2 to 3 years, but it will take much more time. So technology, we're not yet performed now, because once approval -- we can't say when it will be approved. Once it gets approved, then we can talk about the technology. But in the short-term basis in a year or 2, cotton looks good as of now. But anyhow, we'll get to know clear clarity in the next quarter.

So what is the issue? Because the overall HTBT or illegal cotton is already reached the 18%, 20%. And if the government is not going to allow, it might have a higher market share also in stitch industry is going to lose.

Yes. That's what I explained earlier. As of now...

What the other company -- all the companies like you are doing and approaching the government because it's going to hurt the overall farmer economics also? If you are buying illegal seeds, there is not quality seeds, the yield is going to decline, and we need a higher cotton going forward, if the government is promoting higher textile export. So we need to rectify this thing soon. So have you talked to the government? Is the industry association talking to the government?

If we continue to do what we are doing, but for the last 5, 7 years, minimum of 5, 7 years after the introduction of second BT 2, we are continuously following up with the government. And government is also watching very closely. There are many other related issues just kind of a quarter in giving the technology, which government is looking into, and they are working a model for that. And most of the technology providers and as the industry both are representing government. And even the government bodies working with the seed industry and the technology providers to get for the solution. But we are awaiting for that. Once we get the solution, definitely we will let you know.

Is royalty the major issue?

Royalty is [ 0 ] now.

No. I'm talking about for the new technology, is royalty is an issue?

So, royalty might be one part, but this is not a major issue. But there are other issues related to technology and biodiversity.

We'll take our next question from the line of Varun Bang from Reliance PMS.

Sir, we've seen significant drop in revenue share from new products in cotton segment. This year, we understand this is because of the HTBT issue. But structurally, how are we looking to create stickiness around some of these products, which are supposedly better? And what is the long-term potential there?

Definitely, the cotton acreages are going to increase in the branded seeds. These are the new products which will take the market share. But this year, as we said, because of the HTBT going up and COVID conditions and not a good sentiment for the cotton crop has resulted in downfall of some products. But if you see a longer-term, this all stabilizes. Definitely, these are the products which we are going to market going forward. It's a temporary basis, and we don't see it as a serious or a major consolidation in terms of the cotton growth.

But how are we looking to create farmer stickiness around these products? What is the strategy?

Basically, in terms of the -- I will say, just the products need to perform, then only the farmer will pickup. And these products are really doing well. And it has performed well in the previous years also. This is the only year where we've lost market share, not because of the performance, because of the other issues. And the reason I said, we're pretty confident that we have the products going forward and will definitely have it booked -- in the coming years.

And in maize and rice segment also, I mean, some of the new launches are doing extremely well. So do you think this share -- revenue share from these new launches will maintain? What we are -- I mean the growth what we are maintaining for the last 1, 2 years, do you think we'll be able to maintain that?

Definitely, the products which are doing well will definitely will be -- the same revenue will definitely go up in those areas. Apart from that also, there are many headwinds which are in the pipeline, which are in the initial stages. So we have got very good pipeline in most of the crops, but we'll definitely result in good revenues coming forward. Not only in maize and rice, even in vegetables, for bajra we are doing extremely well in that of the pipeline.

Our next question is from the line of Anurag Jain, Shareholder.

First -- my first question is how much of the buyback expenses have been booked in the second quarter?

I just need to check that one out, but majority of that was completed in the quarter 1. And few lakh shares – 2 lakh or 3 lakh shares got completed in the first week or second week of October, and that we've already implemented to the exchanges. The amount of share what we got on a daily basis.

My question was, like, the other expenses have gone up significantly. So they would have a one-time element of buyback expenses. So how much was that in -- of buyback expenses in the other expenses?

I don't think buyback expenses have come in the other expenses. That's a different thing.

Okay. And my second question was like -- I'm sorry, this point is being asked again and again, the illegal HTBT cotton. Do we know how does the economics for the illegal HTBT cotton workout for the partner? Like what is the difference in the feed cost? What is the difference in other expenses for the partner? And what is the difference in the yield? Do we know this? Or we will know this only after when the harvest is completed?

So one thing, the difference in the seed cost because we're basically into the seed business. The difference in the seed what we sell, what the branded company sell and HTBT. So target gets only varies between INR 150 to INR 200, not more than that. So, that's not a major cost for the farmers. But what we need to see is that the quality of the hybrids, because technology is not the only one which use the yield, it only protects the yield. The hybrid needs to have a potential to give yield. So if you see this year hybrid, most of the hybrids are lagging in terms of the productivity. So, that's the reason the yields are lower. Now the farmers are understanding that but as I said, we need to wait for other 3 or 4 months to see this at least the initial HTBT coming forward. But as of now, it doesn't look bright at this point of time for the HTBT for the next year.

Okay. Sir, when you say the difference is INR 150 to INR 200, how much does this translate in percentage terms?

So the seed cost is like INR 750 a packet, they get at INR 500, INR 550. So in terms, that is a 20%, but on broad base. And the farmer expense more than 15% to 20% per acre, and spending INR 100 and INR 200 for the good seed doesn't matter much. In terms of that percentage, [indiscernible].

Our next question is from the line of Nishith Shah from Aequitas Capital Investment.

Sir, I want to understand what is our R&D spend target for the year and for next year as well?

See, year-on-year, we are increasing more than 20%, 25% on the absolute terms in R&D, so that will continue for the couple of years because we had many people in R&D and there are many new habits, many new technologies which we are adding because we have added biotechnology lab last year. Now we are starting a new R&D plant. So if you see in that percentage base, it should be, on a year on basis, it should be more than 40%, 50% now for the next 2, 3 years.

In absolute term, what is our target for this year?

That depends because you're constructing R&D plant. Based on the completion of that, we need to see. For the new R&D plant, what we are constructing now, we're [ spending up to INR 30 crores to ] INR 40 crores, but that will be spend over a span of 1 and 1.5 years’ time. Some will come in this year and some will come in next year.

Okay. And sir, in terms of crops for this R&D, what are we targeting for next 3, 5 years?

Basically, the crop what we have now and apart from that we are concentrating on the oilseeds basically mustard, and we are working on soya also now. Apart from that, we are strengthening our existing portfolio basically in terms of vegetables, rice, sunflower, bajra and all of the crops. Apart from that, we're trying to say that we're adding new crops in terms of the oilseeds.

Our next question is from the line of Ghanshyam Gupta, an individual investor.

Relating to the impact of profitability, how much storage has been made for [indiscernible]. How much has made for the budget?

How many -- can you please repeat your question? I'm not able to...

How much provision has been made for bad debts. It is stated in your [indiscernible] that the net profit was lower due to provision of bad debts [indiscernible] 2020. So what is the amount?

So you're talking about the bad debt? So the bad debt what we've given you in the last quarter, not much has been added in the second quarter. In fact, we got INR 2 crores or INR 3 crores from what we've provided in the previous years.

And my second question is, as of today, whether the entire provision has been made? As of today?

Yes. The provision is made as of today. And as a company policy, anything more than 2 years, it will automatically come down to be as provision for bad debts. That's what I was saying, compared to previous quarter to this quarter, there is some addition -- I mean to say there is a reduction in the bad debts. From amounts conclusion, they made INR 2 crores or INR 3 crores of money [indiscernible].

Our next question line is from the line of Rohit Nagraj from Emkay Global.

Sir, the first question is in terms of our rabi portfolio. So over the next 5 years, how do we look at expanding the portfolio because of the cotton concentration, certainly would have been kharif-driven. But maybe 5 years down the line, do we have a meaningful size of 2H revenues, which will come. So what will be the split of maybe H1 and H2 revenues we are looking at from a consistency perspective?

In terms of the percentage, it's divided in terms of first half and second half sales. If it remains in the same manner or slightly better in the -- from the compared provision, but it should more or less looks the same because majority of the Indian crops sums in the kharif. It's not only cotton, but when you talk about rice, hybrid rice, majority of the rice, 90% of the rice comes in the first half. And even made, kharif -- entire kharif, bajra comes from the first half. So the percentage, it should remain same. It will not change significantly. But as on absolution terms, year-on-year, it will have a minimum of 15% to 20% variation on a year-on-year basis. But as a percentage, it should remain same or slightly sideways.

Right. Got it. Sir, the second question in terms of the exports market. So I think we have been trying to explore the opportunities we've been seeding the market. How is the progress over there? And any meaningful revenue contribution, which will come in the next 2, 3 years? Or we are looking at some kind of a positive green shoots for that particular area?

Basically, in terms of the export, we couldn't show much of a difference in terms of the sales compared in the last 2 to 3 years because of many reasons, it might be COVID or it might be some other government-related issues in different states, different countries. But in terms of the performance, in terms of the prospects if you see, export is definitely an area where we are very much confident about, and we'll be definitely doing it. And even the Indian government is also encouraging exports. Down the line, exports will definitely be a good contributor to the revenues.

Our next question is a follow-up from the line of Abhijit Akella from IIFL.

One is, just could you just broadly give us what percent of EBITDA in 1H has come from cotton, just so that to see how low it has gone down?

I need to check that one, but definitely, lower than last year. Because not only in terms of the cotton, EBITDA remained same when compared to previous years in terms of the cotton. But being revenue low, all the fixed expenses have impacted the EBITDAs of all crops, that’s the reason we have seen impact.

Would it be fair to conclude that maybe cotton EBITDA is less than 15% of company EBITDA now this year?

Yes. See, as EBITDAs are lower in most of the profits, usually EBITDA percentage as a whole is lower, definitely that will even drag the cotton EBITDA also.

Okay. And the second one was the illegal cotton seeds, HTBT, those are being sold for a premium to what the branded seeds are sold for, right?

Not really. There are a few things -- very few areas where they were not available. But otherwise, it is much lower than the branded seeds.

Our next question is a follow-up from the line of Anurag Jain, an individual shareholder.

My question relates to what -- this year first half, vis-a-vis the first half last year, what is the difference in sales returns? Sales returns this year in first half vis-a-vis the first half of last year.

Last year, the sales returns were less than 15% or 17%. This year, it's close to [ 20% ] and 30%.

Okay. So like most of that -- because of sales returns.

Sales return and the other expenses being same that have impacted the EBITDA margins because the revenues are down by more than 15%, 20% compared to previous year. And most of the cotton got written from the market may got returns. So these are the 2 which have eaten away our margins and the write-offs are also higher because once the seeds are returned to the factory, we -- it loses its germination [indiscernible]. So usually, we have higher -- higher the sale season, higher the write-offs, even that has impacted the EBITDA margin because that is reflected -- already reflected in the farm.

Okay, sir. And sir, my understanding is that cotton seed can be sold next year also, but the maize feed, whatever is returned its corridor is basically goes waste?

Yes, majority, see in terms of the percentage of the wastages, majority of that we incur in the maize and in non-cotton crops, you can say. Even in paddy, we lose, not hybrid paddy, but research or the selection paddy, even that we lose once it comes back. But -- we will have a minimum loss in that, but the majority of the loss will be in terms of the maize.

That was the last question. I would now like to hand the conference back to Mr. Mithun Chand for closing comments.

Thanks for your participation. And any further inquiries or questions, you can contact our investor desk. We'll be happy to answer that. Thanks.

Ladies and gentlemen, on behalf of Kaveri Seed Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.