Nath Bio-Genes (India) Limited (NATHBIOGEN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to FY '25 Nath Bio-Genes' Limited Conference Call, hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepika Sharma from Go India Advisors. Thank you, and over to you, ma'am.

Good evening, everyone, and welcome to the Q2 and H1 FY '25 earnings call of Nath Bio-Genes Limited. We have on the call Mr. Satish Kagliwal, Managing Director; Dr. Devinder Khurana; Mr. Amol Gupta, Chief Financial Officer; Mr. Harish Pandey, Business Lead; Dr. [indiscernible] Lead. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risk that the company made. May I now request the management to take us through the financials and the business outlook, subsequent to which we will be opening the floor for Q&A. Thank you, and over to you, sir.

Thank you, Deepika, and a warm welcome to all of you. This is Satish Kagliwal, representing Nath Bio-Genes. I take this opportunity to thank you all for joining today's call. The agriculture is currently riding a wave of huge optimism. The minimum support price of [ eligible Rabi crops ] has increased for the 2025-2026 marketing season. With the government expected to be right to ensure [indiscernible] prices for farmers and for most crop [indiscernible]. These timely hikes bring fresh motivation to farmers and open new avenues for growth. At Nath Bio-Genes, we have always prioritized providing high-quality seeds that meet the requirements of our farmers. Our portfolio, particularly in [ durable ] crops like wheat, mustard and vegetables, such as tomatoes or [indiscernible] chili, is poised to benefit from this [indiscernible] tailwind. R&D has always been [ the key ] to our growth strategy, and we've enhanced on advancing our efforts in this area. [indiscernible] and test [indiscernible] This [ test ] allows us continue advancing all [indiscernible] product lineup. Cotton remains a core part of our portfolio, with paddy [ strategies ] being a key driver of our future growth. Beyond cotton, we maintain a strong focus on maize, bajra, vegetables and plant nutrients, ensuring a well-rounded and [indiscernible] product offering. While we continue to improve the quality of our products, we're also making strides in expanding our marketing reach, working to establish a well entrenched distribution [ network ] for [indiscernible] like [indiscernible]. The momentum between the [indiscernible] supported by the [indiscernible], set the stage for a strong second half of financial year '25. Building on our solid distribution and product quality, we've made significant progress internationally too, particularly in Philippines and Uzbekistan. Uzbekistan, our joint venture has seen notable advancements with production of cotton seeds in over 600 hectares of land. Harvesting is currently underway, and we are optimistic about the results. Once successful, [indiscernible] [ further ] expansion and extending the same strategy to neighboring countries over time. In Philippines, after successful trials, we are currently preparing for trial marketing of our products in the upcoming season. Hence, with these developments, we are confident we have ability to maintain a strong product pipeline while keeping a sound financial position and expanding our market presence. I would like to announce now that Mr. [indiscernible] has taken over to charge of CFO from Dr. Devinder Khurana. Mr. [indiscernible] has been with the company for a few years now, and has been mentored for the CFO role as a process of succession plan. Dr. Devinder Khurana will continue to be with the company as Senior Vice President of the company. His role also has been enhanced and he will be involved in multifarious activities to help the [ growth ] of the company. At this point, I'd like to invite Mr. Devinder Khurana to walk us through the financial and operational highlights for the first half. Thank you very much.

Thank you, sir. At the outset, I would like to inform you that our credit rating has seen a double-up gradation from BBB to BBB+. This is a confirmation of our operational stability. During the previous communications, I had made a point that our company would continue the cotton story. Hybrid paddy would be emphasized upon, and we would lay enhanced effort on non-cotton, non-paddy NCP portfolios. The same has been pursued over the last 2, 3 years. The results are evident in the growth in top line as also in the bottom line. Our diversified product portfolio has once again delivered strong results for H1 FY '25, led by our top-performing cotton hybrids, Sanket and JUMBO, which both have shown growth in volume and value. Cotton saw an 11% increase in value over this period. The cotton and paddy segment also recorded a 8.1% year-to-year growth. Although the paddy volume dropped by 4.5%, the value increased by 5.48%, aligning with our focus on hybrid seeds. Maize had a bumper season with year-to-year value growth of 35.18%. Bajra also performed well with a value growth of 7.6%. Overall, our field crops grew by 2.3% in volume. However, the value growth was 9.62%, supported by better prices. Our NCP portfolio also expanded by 7.3% in value, with the vegetable segment recording a 12.3% increase in the value. You may wonder that I have not touched upon volumetric growth. Kindly note that we have been strategically working on the product mix to get better pricing with lesser volumes. This reduces the burden on logistics, but ensures the top line and margins. From a financial perspective, FY '25 top line clocked INR 276.07 crores, depicting a growth of Y-to-Y 7% as compared to H1 FY '24. The gross profit margin has been maintained at 51%. The EBIT for the first half stands at INR 42.18 crores and the profit after tax is INR 36.78 crores. Our working capital has significantly improved, and we maintain a comfortable position in terms of debt, being 0 debt. The operating cash flows remain positive. Although we used a cash deposit of INR 75 crores as of March '24 for the current [indiscernible] operations. Now I would also like to hand over the floor to Mr. Amol Gupta to kindly address the gathering. Mr. Gupta?

Good afternoon. At the first, I'm very grateful for the trust the management has placed. I'm communicatiomitted to carry forward the Nath vision and goal while collaborating closely with the team to drive our success. Our success means not only company, but the stakeholders also. Together, we will build on our accomplishments and continue exploring new growth opportunities. Thank you, once again, Khurana sir, over to you to continue.

Thank you, Amol. And now I would like to open the forum for questions, please.

[Operator Instructions] The first question is from the line of Dipesh Sancheti from [indiscernible]

Am I audible?

Yes, please.

Yes. Okay. How has the recent increase in minimum support price for Rabi crops influenced the overall strategy and the sales outlook?

What you are asking is that the MSP, if it has been raised by the government, then whether it will affect our seed sales, something like that, [indiscernible]?

Yes, something like that. So is there any strategy or I mean, will that affect the sales?

Okay. So I think we have Mr. Harish Pandey here, he is the business lead. He will answer this question. .

Yes. Definitely, it will help us because when government increases the MSP, farmer attracts to buy the better seeds to get the better pricing at the time of sale. When we goes to the mandi, it will get you better prices. So it's good for us.

Okay. And what specific growth opportunities do you see in this Rabi crop segment, particularly in wheat, mustard and vegetables, given the current scenario tailwinds?

Yes, because the good rainfall has been received. So definitely, it will help. It's not through the last seed, it will help to the entire industry, right? And definitely, the [ seed sales ] will go up and the farmer will get the better yield because [ Rabi ] [indiscernible]. So it's not only 1 or 2 state, maximum states are [indiscernible].

Okay. And can you elaborate on your R&D initiatives, especially the disease- and the pest-resistant seed. Are they giving you a competitive -- how are they giving you a competitive advantage? And secondly, is the margin better on them?

[indiscernible] would you like to address that please?

Thank you very much for this question. We are approaching the disease resistance in both conventional ways as well as molecular markers. In [indiscernible] rice, and [indiscernible] in tomato, we are approaching this into a molecular marker in the [ data ] marker system. And in other crops, we are approaching this with the conventional system. This resistance is very important in [ almost all the crops ], especially when the [indiscernible] are facing big losses. Our seeds, which are getting emerged in okra as well as in tomatoes are totally resistant. Our company has taken the policy that without appropriate markets, at least 2 to 3 markets, we should not release a hybrid. Similarly, in rice also, we have [indiscernible] 2 products and we are going to come to the market. This indicates that we also get a better price for especially in okra and tomatoes for this [ disease resistance ].

You said in okra and tomato, you get a higher price...

Yes, higher price.

Okay. And how much does that contribute to the sales?

That will depend upon the market conditions. The quantifiability cannot be addressed at this particular time. However, kindly understand that we are deeply into research, and any product that goes into the market is basically the [indiscernible] company, through labs or outside the lab in the field. So the product will demand the price and the product will also demand the quantity, which is unpredictable at the beginning of the [indiscernible].

And in the -- what are the gross profit margins in the paddy segment, if you can just [ mention this ]]

Overall, the company has been maintaining a gross margin of around 51%, 52%. In Paddy, in hybrid, we have a good margin, close to 60%-plus. So in RF, it goes down to around 40%-plus. Similarly, cotton has different margins. We have crops coming, vegetables is a better margin than wheat. So as a result, overall, if you have a look at it, you'll find that the company has been able to maintain the gross profit margin of 51%, 50% to 53%, depending upon various product mixes. And we are always in the process of maintaining and improving upon it.

Despite the fluctuations in product volumes, still you are able to have maintained the gross profit margin of around 51%. How do you do that [indiscernible]

If you move from -- to hybrid paddy, then your profit goes up definitely with the reduction in volume, right? If you sell something worth INR 100 and you get INR 70, and if you sell something worth INR 100 and you get INR 30, that is where the product mix is better.

Okay. Then are we doing something about our debt? I mean how much is the debt? And if you can segregate the debt in the long term? And what is the working capital?

I think you need to go through my balance sheet, and you should have also heard when I said that we have 0 debt. And we have had 0 debt for almost about 5, 7 years now. We don't have any long-term debt.

Okay. And what is the ROE of the company then?

ROE of the company, I have not yet calculated the way you asked me you for it. Maybe I can let you know [indiscernible]?

Fine.

The next question is from the line of [indiscernible], individual investor.

As per the results, it shows that the inventory at the end of Q2 is INR 160 crores. So it is fair to understand that this inventory will be liquidated in Q3?

We give you H1 and H2 results [ separately ] because by the end of September, the current season is over, the sale are over, the sales have been clocked and the sales return have also been booked. Now the inventory which is lying at the end of H2 -- H1, sorry, also includes the cotton which is going to be sold in next Kharif, because cotton gets to [indiscernible] only once in a year. [ Our predicament ] that this inventory will get liquidated in H2, not Q3 in any case. H2 is Rabi. The vegetables and maize and certain other crops, which go through, yes. But as far as cotton is concerned, it is going to go over to the next year. That's happening potentially year after year.

So out of INR 160 crores inventory, how much inventory is going to be liquidated in H2?

Maybe around INR 50 crores, INR 60 crores.

Okay. And what was our inventory level at the end of Q1?

We don't [ mark ] it to Q1 because Q1, you have made the sales inventory is lying into the market, the sales return has not been booked, the rains have not set in and the returns have not yet come. So I would request -- I have already requested the inventors -- our investor community not to judge the company on Q basis, please do it on H basis. It's much, much, much easier for all of you.

Okay. Sir, what is total available land we have on lease for seed cultivation as on today in India?

We go through seed cultivation through organizers and farmers for our production. And the state we take land on leasehold rights and it goes to around 15,000, 20,000 acres or even more at times. It depends, it keeps changing with the crop, it keeps changing with the season, it keeps changing with the state.

Okay. Do you have any advance order book as on today for Q3 and Q4?

In seeds there is nothing called advance order book. Let's not compare seed industry with manufacturing industry. What we have is advanced booking will come through advance of sales. Last year, the advance booking was well above INR 70 crores, INR 80 crores, which was for the next year. So there's nothing called advanced book because that happens only in the manufacturing industry. In seed industry, we have advance which is received against sales, provided your product is good and your market demand is high. And we normally launch our advancd booking schemes in summer onwards. And by March, they are closed for Kharif.

Understood. Sir, who are our main competitors in India?

Now that would also depend from crop to crop. I think I'll let Mr. Harish Pandey handle that.

Okay. So you're asking [ crop ] by competition?

No, no. I'm asking general question the way we have the product mix, who are our competitors in India?

Competitors like Rafi is our competitor, [indiscernible] is our competitor, [indiscernible] is our competitor, or you can take [indiscernible] is our competitor. These are the 4, 5 big companies who are competing with us.

Okay. And do -- are we planning for any inorganic growth in terms of JV with local seed manufacturers as of now?

No.

No, not yet, not yet. I made the statement about 1.5 years back. Let the company stabilize in the kind of growth targets that we have set for ourselves, once we cross INR 500 crores top line then maybe we will think of further diversification. As of now, sorry.

Okay. Sir, you mentioned about Uzbekistan, 600 hectares of land where [indiscernible] successful, and this land is used for the crop for seed cultivation. What can be expected revenue from this?

I'll let answer this [indiscernible] Uzbekistan as a country with a good beginning. We started seed production. We have [ already ] started research there. And based on the success of this particular initiative, which will be done by January, February, next year's plan will be [ from that ]. So all will depend on how next 6 months we really fare in terms of quality of seed production and demand for seeds and also sales. In sales, how we really go through it, how is the initial response based on that. In the month of February, March, we'll be having next year's plans. Everything goes well, at least we should double seed production there. And also improve the genetics through our research. This is the kind of plan I can tell you about [ for this time ].

Sir, what was our spend on R&D last year and this year?

Around INR 8 crores to INR 10 crores.

For this year or last year?

I think you can open the balance sheet. There is a separate schedule which gives our R&D expenses detail-wise for last year also as well as for this year. So -- but we generally maintain around INR 9 crores to INR 10 crores which we have been spending on research.

Okay. And sir, what is the contribution of vegetable seeds normally in our revenue if you talk about H1, H2 or entire year?

Entire year, we have around 60% coming from cotton and paddy, around 20% coming from other field crops, around 10% coming from vegetable and around 10% coming from [indiscernible] and supplements. Now this is something we have been trying to improve upon by reducing the dependence on cotton and paddy, but -- and increasing the revenues from other bid crops it is happening. But what happens is that when other field crops grow, the cotton also grows and paddy also grows. So as a result of this whole thing remains [indiscernible]. And you had asked for a question on our research, last year, it was INR 9.37 crores. This year, it is INR 11.28 crores.

Okay. Sir, the company is filing GSTs every month or a quarterly basis?

Monthly basis, and we file 16 I think or 18 GSTs every month because every branch is registered with GST. And we have a [indiscernible] of 15 branches all over the country.

[Operator Instructions] The next question is from the line of Avi Agarwal from Arihant Capital Markets Limited.

I wanted to ask if you can provide more details on the progress made in the Uzbekistan joint venture? And how do you plan to scale the cotton seed production [indiscernible]

I had just answered this question. Anything specific in that [ in here ] please? We just answered for the last gentleman.

I couldn't hear it. Maybe if you could [indiscernible]

What we said was that we are into cotton seed production in Uzbekistan. This is the first year in which we have taken 600 hectares of land under quarter 3 production. This year, being the first year, we are producing the local variety there, and growing them and sending them back to the public at large, basically for seed production, okay? And if this goes through properly, which it is likely to go through because we are very sure of it and all efforts have been put. Next year, we will continue this note by increasing the production has also adding -- trying to add our own bit-carrying varieties in the country because they don't have that. And once that goes through, then we'll set up a plant [indiscernible]. Now this is a long drawn-out process, but over a period of time, definitely [indiscernible]

And the next question from the line of Saket Kapoor from Kapoor Company.

Firstly, sir, if you could explain to us what goes into the consolidation of our number? And why are our profits lower on consolidation?

We are consolidating the results with the profit and loss account of Uzbekistan. This is the first year, and the sales have not yet taken place. Although we have taken the production expenses into the inventory for the time being, but the salaries and administrative expenses and all the other expenses will tend to be [ lost ]. So I bear the 90% in my book. That is why there is a reduction in profit of the consolidated results with other such [ stand-alone ] events.

And sir, the JV -- in that JV, we hold what stake sir? I missed your point.

90%.

90% is held by us. And how much have we invested?

As of September, it was around 7, 8 lakh dollars.

U.S. dollars?

Yes.

Right, sir. Sir, when we look at our borrowings, it is -- we do not have any long term, but we have finance costs to the tune of, I think, as mentioned, is INR 5 crores. Yes, that is a working capital [indiscernible]

I have working capital of INR 105 crores [indiscernible]

That's right. sir. And you mentioned about our rating being upgraded also. The last rating with [indiscernible] is dated November '23. Any further update post that [indiscernible]?

I have 2 rating agencies looking after me. One is [ [ Crisil ], and second is India Ratings. India Ratings has already given their current year results and they have taken it up from BBB to BBB+, 1 short double jump. As far as Crisil is concerned, they're still mulling over the results and all those things that we have given. It is expected maybe over next few days. It has gone to the -- it was likely to go to the committee this week or next week.

Sir, looking at the growth aspect other than the Uzbekistan venture which we are currently pursuing, what else would lead to growth as you alluded to the fact that we would be first in to stabilize the operation or to reach to that 500 revenue mark. So what steps are we taking, and by when can we think that taking into account the current product profile, we will be reaching 500. When -- what is our endeavor?

[indiscernible] I would have been faster only, but the markets have their own way, product sales their own way of selling. We are expecting that if we continue to maintain a general growth of around 15% to 20%, 15%-plus, it may take around 2 to 3 years.

Sir, taking into account the current product profile only, we will be achieving this path of 15% to 20% growth?

I would say yes and no, because current profile is also a very flexible profile, which has been changed with the help of the research and development people. So the moment we get -- like Sanket came and suddenly it helped us. Jumbo came, it helped us. [indiscernible] in tomato it helped us. So as a result, product portfolio which is existing well accepted into the market, plus the new products that were expected, maybe this next year, next year. All this will contribute to the growth of the company. Now secondly, we have not yet touched Uzbekistan. If that goes through by end of this year or next year, maybe that will also support. And to add to that, there has been n issue regarding Philippines. I would request MD sir to also throw a light on that. But if that happens properly, that will also give an impetus to the top line.

MD sir will comment on the same?

MD sir? Hello? Okay, maybe he'll come back, but let me tell you. Philippines, we have been qualified for almost about quite many years, and it has been Philippines, Philippines, Philippines. Finally, last year, we got our provisions and the trials were conducted and things were very well accepted. And this year, we are trying to sell case to the government. And if that goes through this year, the next year will become a multiple of growth.

Okay. And sir, in Philippines, how -- what is our business model there? It is again through a JV only that we are, and what have been our business?

It is only a direct export of the government. If that establishes, then we'll come to know what is to be done. That's a little [indiscernible] as of now.

Okay. And can I see the last few years, what has been the business we have done with the Philippine government?

0.

Okay. So currently, we are only creating the [ paper ] and getting the enrollment and the certification done?

Yes. So that, in any seed industry, in any country, it's a long, drawn-out process, it takes 5, 7 years because there are [ hundreds ] of tests that has to be done in every country. It happens in India also. But once we are broken that, then the sky is the limit.

Okay, but you were mentioning that we are at inflection point for them. If you could just complete that part of the story. MD sir is available now?

For the reason because now this year, the sales is given on a larger scale, and if that's [ home ]-- as the demonstration trials are performed, then maybe by the time we come to our next con call, we'll be able to elaborate much better on that.

Sorry, I missed your point. Come again, please?

I said that once the demonstrations are closed and the product reviews are good, the acceptance is okay by the government, then we go for larger production areas. There, it is government controlled. The government is buying and government will sell or plant it itself, or whatever happens. If that goes through this year probably the next -- maybe next year, we'll be able to upscale the exports.

Okay. And when we will hear about it, sir, what is the time line?

Maybe after 1 crop year, maybe next year.

One more year we have to wait from -- for the government.

[indiscernible] on Philippines for company to grow? No. I have a domestic sales happening. I have domestic [ sales ]] having capability of going beyond 500. And [indiscernible] rely on Philippines to take the company forward. I think something -- not -- something missing. Typically, it is the cherry on the cake, if it happens, it will happen. Definitely it will happen. Let's not bank upon Philippines for Nath Bio-Genes to grow.

Right. Two small points. H2 generally is seasonally weak quarter. As you already well mentioned that we cannot look at our...

H2 is a weak half year. You are trying to say that?

Yes, H2 generally is traditionally also and other seasonality also, the reflection is there in the numbers also. So how -- as per our understanding, how should the second half look for the current financial year?

Generally, it is around 70-30. That is the basic [ routine ] industry norms until you are very strong in vegetables and supplements, which we are trying to be, not yet. So as a result, I'm expecting another -- maybe around INR 80 crores to INR 100 crores added in the H2.

Okay. And sir, when you mentioned about the fee registered to pesticide, can you elaborate a there is no need of spraying of fungicides or insecticides on the harvest, if you could just give more clarity on the same.

[indiscernible], sir, would you please like to explain?

Yes. There is resistance to virus, means the virus will not appear. Otherwise, if the virus appears, there will be losses to the crop to the tune of 50% to 70%. So that much of yielding sales to the farmers. So that only resistance is very important in this. For example, in cotton, BTG imparts a resistance to [indiscernible]. Otherwise, we have to spray from 4x, 5x. And in spite of spraying there will be about 40% to 60% losses. So resistance will bring you that much of recovery from the losses.

Sir, last point I missed about the spraying and what you mentioned?

If, for example, the BT cotton, which is resistant to bollworm. In case it is non-BT cotton, then the farmers used to spray about 4x to 6x to control the bollworm. In spite of that, continues to be a great losses to the yield. Now with the introduction of PTT, the cotton is resistant to bollworm. That means to say that 40% of the losses that whatever they need to have that is being recovered and then insecticide sprays [indiscernible] like that.

Okay. So it will act as a prevention. We need to spray.

It actually prevents.

[Operator Instructions] The next question is from the line of Reena Shah, an Individual Investor.

Just wanted to know how you have diversified your portfolio in maize and bajra and how it can help you to offset the challenges for crop segments?

Ma'am, diversification is not only in maize and bajra. Our company has a fully diversified portfolio because we are into cotton that is fiber, then we are into field crops, which consists of paddy, maize, bajra, wheat, then we are into oils, which is mustard, then we are into vegetables, which is like tomato, okra and such other vegetables. And then we are also into the nutrient and supplement segment. So all the major 5 segments of seed industry are covered by Nath Bio-Genes India Limited. And when I say maize or bajra, it is like promoting. You get good products, you promote maize, if there is a [indiscernible] cycle, the losses or anything else of others [ because ] every product, every crop is supposed to perform the way it is supposed to perform. There is no setting up, every diversification portfolio goes forward. The whole diversified portfolio goes forward.

Okay. And sir, how do you see H2 FY '25 panning out in terms of growth?

[indsicernible] Anyway, I'm expecting around INR 80 to INR 100 [ crores ].

INR 80 crores to 100?

Crores.

The next question is from the line of Dipesh Sancheti from Shefali.

Yes, sir. Now I can see from your balance sheet as well as from your profit and loss that you have about INR 9 crores to INR 10 crores of yearly interest. Now what this interest has been paid only on term loan, or is it paying only on the working capital?

I did mention specifically that we don't have a term loan. So INR 9 crores doesn't work on term loan. We only pay interest on the working capital and at times in between in the season, if I made more money for the time being, then maybe I will raise an ICB or two, which gets repaid over 2, 3 months. Then the interest is paid on the deposits of the customers that we are holding in our books. All that put together comes to the interest cost. No term loan [ added ].

And who has the company given about INR 11 crores of loan in that, because there is on asset side there is the INR 11 crores loan pending?

That is a temporary advance, which we had put into one of our ventures in Uzbekistan also, that is one, because that's an asset which is showing into my books. Once Uzbekistan starts paying backwards, maybe the money will be received.

Okay. And sir, I wanted to know where will the sales growth actually come from, because I know that the company cannot be seen quarter-on-quarter basis, it has to be a yearly basis. But how is -- in the next 2, 3 years for a long-term investor, I mean, where will the sales growth will come from?

Cotton should continue to grow, paddy should grow by about 10% to 15%, vegetables should grow by about 20%, 25%, supplements should grow, which has fantastic margins, we should grow around 25% to 30%, maize and bajra have been supporting us. Mustard this year is also doing very well. So as a result, the entire basket will contribute towards the growth of the company.

And you see approximately, I mean, on an average, about 20% growth because most of the factors are growing between 20%, 25%?

I am a very conservative finance guy. I will always say 15%-plus then wherever in between 15%, 25% I'll be very, very happy, you and me both.

Okay. And just my last question, actually, on overall industry as well as on this. Do we have any scheme like a Kusum scheme? Or are we like -- or we should see this company as a B2C company, which only sells it to the farmers. How does the industry work actually?

We see no seed company sells to the farmers. The seed companies will sell to the distributors who sell to the dealers who sell to the farmers. It's a triple chain effect, because there are -- if I'm creating say 15 lakh packets of cotton and 1 farmer is taking 1 package on per acre, I can't be handing 15 or 10 lakh farmers there. So as a result all seed companies go through distributor lanes. We have around 4,000, 5,000 distributors strung all over the country, and we just go to them. They have -- every distributor has on 10, 15 dealers. And every dealer has around 15, 20, 25, 30 farmers. There is not a [indiscernible].

Okay. So there is no government environment or there is no government scheme which has the farmers to get these at a better price?

What Harish Pandey ji is telling me is that small companies do sell it to the farmers. But those -- they are like some [ sporadic ] product sales. Those are not into deep research, and they are very small in numbers, they're small in volume. They can do B2B, but we cannot be run through our distributors only. And it's a time-tested proved model. You were saying something about the government?

Yes, perfect. I mean I understood that the model. I just wanted to know that there is no government scheme in which they procure it and they gave it at a subsidized rate to the farmers? There is nothing later which we participate?

No, we don't -- we have already burnt our fingers in one of the governments, and we are very, very wary of it, thank you very much. We aren't going into that route. [indiscernible] come.

Right. But in the foreign government, what you said that it takes about 5 years for the approval and then you will be supplying it to the government or you will be following the same distributor model?

No, no, no. When I said 5 years, it takes -- it is a question of testing. You put in in '23 and then you get it tested by human being, you get it tested by animal. That is the testing period. Once that is over, then you set up your model depending upon how strong you are into your product and how strong you are in that nation and what is their system.

[Operator Instructions] The next question is from the line of Jinesh an Individual Investor. .

Sir, how many states in India are present as of now?

All the states.

[indiscernible] Okay. Okay.

Can you please elaborate what is the cotton seed market in Philippines as of today?

Okay. Seed cotton, several years ago, being grown in in [indiscernible]. Then due to several reasons, including climate and [ variety ] in the area, and the cotton growing reduced substantially. It is very, very low area now. But the government there is very keen to reestablish cotton as a crop. So they have -- we have been working with the government to sort of promote cotton cultivation into the country. So first step was to go with the right varieties, the right technologies, which has been done. So now we'll -- our task is to bring back the cotton cultivation in Philippines, which was earlier a large area, now is practically beginning from a very low practically 0 area to a large area. So as of now, cotton growing is not much there in Philippines.

Okay. Sir, at the end of H1, we have INR 160 crores of inventory. And as you elaborated, mostly this inventory will be sold in next year or two. Sir, are we planning anything to optimize this inventory year-on-year because you're going to occupy most of our working capital?

Yes, but please understand, there are 2 ways of doing it. One is you spread yourself thin, maintain your top line and gain the bottom line. Second is you reduce your working capital dependence, and then you suffer on the top line and you suffer on the bottom line. I prefer to be on the first line, okay? I can have debtors of around 100 years, spread over 5,000 people with everybody owing me INR 2 lakh and I can still maintain that, because working capital is funded beautifully by bankers than by the advance booking coming from the market. So we are heavy on working capital, but we are not suffering because of working capital, rather we are gaining because of the spread of working capital. I think we are a good model.

Okay. So you are going to keep similar kind of inventory level every year at the end of H1. Is this the right understanding?

If you look into the balance sheet and if you go through the working capital available at the end of March, what the analysts will do is divide their working or that inventory by last year's sales, where we forget this inventory like for the next year sale. You expect me to grow by 20%, my inventory would also grow, right? And my debtors will also grow. So the growth itself is [indiscernible] enhance working capital and enhance, what do we say, debtors. But as long as we have funds at the end of the year to fund that, I haven't increased our working capital from the bank for last almost about 3 years now because we are funding in [indiscernible].

The next question is from the line of Saket Kapoor from Kapoor Company.

Yes. Thank you, sir, for the opportunity again. Sir, when we look at our property, plant and equipment, the closing balance as on September is INR 243 crores. So what exactly goes into it because it is 1x or 1.10x asset turnover. So if you could just.

Please go through my balance sheet of March for the time being, okay? Just hear me out. Go through the balance sheet of March and you will find [Technical Difficulty] INR 243 crores, the major chunk is land and not property and plant and equipment. Now that land is being used by the company for the surge operation. I need land because I'm a land-based company. So the fixed assets are hardly INR 2 crores, INR 3 crores. The land itself is INR 243 crores. So reduce that and you find that we come down to [ a level ] which is very, very low. Land cannot be compared for the overall ratios. Please remove that, and you will find we are very, very comfortable, more than that.

And these lands are where the labs are situated also? What is the applicability of the new land bank?

The lab is situated in Aurangabad, where our registered office and head office is, it is right behind where I'm talking and sitting now. Lands are spread in the field areas. We have almost about 450, 300, 400 acres of land. It's well irrigated, well cultivated, all of our [ cultivation seeds ] -- not all of our [ cultivation seeds ], pardon, all of our [ data seeds ] and research is carried out on this land because I cannot give it to outsider, otherwise, my product will get [indiscernible].

Right. And which are the geographies where we are holding this land bank?

This is basically is Maharashtra.

Okay. And these are at market value, sir, the current land bank of INR 243 crores? [Technical Difficulty] .

It was made to market value way back 3 years back or 4 years back when India [ set it ]. So based on that India system, it has been taken on the market value at that particular time.

Correct, sir. Sir, on the use of pesticides, fungicides and insecticide, with the quality of seed, the resistance part of the story, which was explained earlier, does -- you are trying to explain that there's a dependence on the use of the same goes down or we can also claim that there would not be any use, won't be any need of the use of the same to prevent the crop from a particular disease?

[indiscernible]

There is nothing like that. This is a continuous war between plants and [indiscernible]. There will be emerging pests and the emerging strains of viruses, the emerging strains of insects. So this is a continuous process in agriculture. It's very dynamic in nature. So we have to have a continuous [ working ]. There is no end of chemical pesticides in agriculture. There can be new -- safe molecules might come, but this war will continue. [indiscernible] diseases, and they become susceptible to the new races, new resistance, new biotypes. And then the [indiscernible] will increase. Again, we breathe, the corporate cycle goes on, boom and bust cycle.

Right, sir. So no, so my point was when we claim that or when we put forward the seeds in the market in the hands of farmers, putting stress on the point that these are resistant to, say, attack of pest, does that pertain to no uses of these protective fund, we have the claims on the same.

No. We will only say that these are resistant to these pests and diseases.

Okay. Right. But as you mentioned that this is a dynamic situation. Another category of pest may attack. So we need to continue with the...

With the in R&D. Yes, our work should be continue.

And sir, depending upon the R&D partner, how many other seeds or R&D pipeline that we are working with, and particularly with reference to maze, we have seen that because of this, it's all blending and I think the country maker part of the story gaining traction, the requirement for maize crop would may be increasing significantly. So what is our product profile on the maize seed part, if you could just elaborate?

Yes, we are presenting [ median ] maturity. We are presenting [indiscernible], and we also have a sizable single course hybrids. In fact, I have to mention it, [indiscernible] because he is putting up a lot of efforts, probably you might be knowing that our net sales had good traction this time and they have had a good jump in that, and we're expecting maize to grow much faster next year.

Okay. So we are working with new varieties. That is what you are trying to.

Yes, very new, very new. All [indiscernible].

When you mentioned NCB portfolio, can you just elaborate what are we trying to explain?

Sorry, sorry, I just got [indiscernible] a second. NCP portfolio means noncotton, non-paddy portfolio. That means it will consist of field crops. It will also consist of vegetable crops, and it will also consist of plant nutrient supplements. PMS, you are aware, vegetable you are aware. When I say other field crops, it would include mustard, [ jowar ], bajra, beet and maize. So that is what -- and when we say -- you see, what was happening was that CP portfolio has become dominant in the overall growth. We are around 70% plus happening from cotton and paddy. And other -- vegetable and others were not getting the kind of due importance that they were supposed to be given. So 3.5, 4 years back, I had mentioned that we are going to maintain cotton and paddy, we are also going to emphasize on the NCB crop. That is what we mean by that.

Right, sir. And the contribution of plant nutrients and supplements, if you could just elaborate what are we alluding to and how are these sales applicable and implemented?

I did say earlier that it is around -- it should be around 10% of the top line.

And these are applied at the time of sowing, just to improve the core quality of the harvest.

No, no. [ Win Chi Win ], that is our main plant you can supplement, is a photosynthesis product. It is sprayed onto the leaves, and through the process of photosynthesis it is taken in and it is used by the plant. You can compare this product with revisal. It has all the necessary variants and minerals, including some costs of but it doesn't go through the roots. It goes through the leaves in photosynthesis. However, we are also introducing [indiscernible], another product, which is going through the root system, also we are trying to diversify even our P&S segment.

We are diversifying our [indiscernible].

Nutrient segment.

Okay. Sir. And if we can consider this as a value-added product that is the margins because the plant nutrient supplement are higher than -- the gross margins also?

2, 3 years back, I used to get around 70% on that. However, to enhance our sales and top line, we are passing some margins to the market, so that not only we benefit, they also benefit. But it still gives me easily around 60%-plus.

Okay. And sir, going ahead, what are [ growth plans ] for plant nutrients and supplements? Could it reach 10%? So going ahead, what are we eyeing [Foreign Language]

We don't need any research on this. These are ready-made products. The [indiscernible] is in the field and when you spray it it will give good results, it becomes a research-oriented product. There are no [indiscernible] no research involved in that. And secondly, I can't -- P&S has become 30% and then taken by quarter is reducing, or might be crops are reducing. And like I made the statement earlier, the entire diversified portfolio has to grow together. It is a team. We aren't competing with each other. We are supplementing and supporting each other in each product, each crop.

The next question is from the line of Jinesh, an individual investor.

Again sir, what is -- are we planning for any CapEx on plant and machinery or next year?

No. And the reason is very simple, that CapExes are not required, you'll find over my last 5, 7 balance sheet, there are hardly any CapExes. The reason is very simple that I can get the processing done from a vendor. There are people will go down, there are people with processing facilities. I don't need to maintain -- maize, which takes about 15 days, 1 month to be maintained, that plant and machinery for 365 days. So we are low on CapEx. We don't much spend on that. Saves me depreciation, saves me maintenance costs and save me the breakages.

Okay. And whatever plant and machinery we have, what is our current utilization on that?

We are processing our own vegetables in our own plant. We are processing cotton in our own plant. We are packing Win Chi Win or plant nutrient supplement in our own plant.

And what is the utilization as of now of our own assets in terms of plant and machinery?

In [indiscernible] season, we'll work maybe two shifts at a time.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Once again, I will take the opportunity to thank everybody. It is more than an hour, and the interest shown by all of you into our company is heart building. It helps us to continue to strive better and grow better. Down the line, we hope that we are able to meet the targets that we have set for ourselves, which should be a little more than the target that I keep giving it to you. Thank you, and a very, very, very happy Diwali all of you. Let's hope that this Rabi also gives us the kind of quantum that we are looking for. Thank you, and thank you very much.

Thank you. On behalf of Go India Advisors, that concludes this conference. Please thank you for joining us, and you may now disconnect your lines.

Thank you. Thank you.