Rallis India Limited (RALLIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rallis India Limited's Q1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India.

Good day, everyone, and thank you for joining us on Rallis India Limited's Q1 FY '22 Earnings Call. We have with us today Mr. Sanjiv Lal, the Managing Director and CEO; Mr. Nagarajan, the Chief Operating Officer; and Ms. Subhra Gourisaria, the Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the results presentation. I now invite Mr. Lal to begin proceedings with the call. Over to you, [ Sanjiv ].

Well, thank you, Gavin. And good morning, everyone, and welcome to this call. Thank you for joining us on this call. As mentioned by Gavin, I have alongside with me over our call Mr. Nagarajan, our Chief Operating Officer; and Subhra Gourisaria, our CFO, to begin the call with a quick overview of the sector and the trends that we observed during the quarter, after which I will move to Rallis-specific developments. Domestic demand during the quarter has been quite healthy. And there is a good, positive growth over last year. Even in international business, we have witnessed good momentum. We did not see any panic buying from the trade and farmers domestically as we had seen last year. And also, unlike the first wave, the second wave of the pandemic has impacted rural hinterland, with most distributors, dealers being directly or indirectly affected by it. We have accelerated our focus behind collections and this continues to be one of our top priorities. Furthermore, while the overall headline numbers for rainfall during the current monsoon appears to be healthy, the timing and spatial distribution hasn't been uniform. As far as commodity prices are concerned, soy, maize, pulses and cotton, among field crops; and green chillies, grapes and apples, amongst fruit, have been higher. Prices for bajra have fallen significantly year-on-year. In terms of international markets, chemical prices have shown a steady upward trajectory. COVID-related disruptions continue over logistical movements, in turn impacting costs and availability of key raw materials. However, we believe the situation should improve gradually with time. Moving on to Rallis-specific developments. We saw revenue growth of 11.7% driven by a steady performance across domestic and international markets. If we remove the impact of the lockdown spillover of sales which we had in Q1 '21, we have witnessed an overall growth of 19.7%. Growth in the seeds business has been impacted by the purchase of illegal cotton seeds by farmers and crop shifts to soya bean. Competitive pricing environment has limited our ability to pass-on increased input costs. We have also been adversely impacted by the steep cost increase for both inland and ocean freight across our domestic and international business. Employee cost has registered an increase, with reference to the base quarter, where we have -- where we had not given a salary revision to our employees in the previous year. Despite that, EBITDA margins continued to be around 16.4%. Export income was negatively impacted due to ambiguity and delay in announcement of the export incentive schemes. Overall [ PAT ] for the quarter stood at around [ 11.1% versus 13.9% ] for Q1 FY '21. Moving on to individual businesses, starting with our domestic crop care business. As we have indicated in our previous calls as well, our efforts are largely directed towards delivering growth by strengthening our product portfolio and distribution reach. Domestic formulation business registered 34% growth year-on-year basis. This was driven by strong performance of some of our flagship brands. We continue to focus on connect with farmers digitally through video conferencing, through Google Meets, supported by aggressive TVC campaign as well as social media campaigns. I'm also happy to say that we have been delivering on our guidance of introducing a minimum of 2 new products annually. In Q1 of FY '22, we have launched 3 new formulation products. One is a product from our own 9(3) formulation which is referred to as Pepe; and 2 other products, which were also launched through in-licensing. And based on our product portfolio gaps, we have a healthy portfolio pipeline, which is in various stages of development, to strengthen presence in various segments. In terms of international business, we had a growth of 38% after removing the impact of sales spillover into this quarter. Adjusted for [ spillover effects ], growth was witnessed in most of our key active ingredients in Q1. Metribuzin sales were also higher than Q1 of FY '21, but it is yet to pick up to a satisfactory level. I am happy to say that we obtained new registrations in our markets in Africa and Southeast Asia as well. Moving on to the seeds business. We saw growth of 3.1%, which was impacted largely by illegal cotton and a shift in cropping pattern to soybean. We launched a medium-maturity paddy hybrid and 5 new hybrids in the cotton segment. We continued our focus towards building our rabi portfolio, which will iron out the cyclicity in our business. Also, as indicated earlier, we will leverage in-licensing opportunities for mustard and vegetable seeds till the time our own hybrid seeds get commercialized. With that, let me now hand over the floor to Subhra, who will walk you through the financial performance of the quarter. Just to introduce: Subhra, who has recently joined the company as CFO, has over 17 years of experience in business finance, financial strategy, P&L management, controllership; and is well versed in handling financial operations across multi-geographical businesses. Till recently, she was the general manager, finance, home care for South Asia at Hindustan Unilever. That concludes my opening remarks, and it's over to you, Subhra.

Thank you, Sanjiv. Good morning, everyone, and thank you for joining us today for our Q1 FY '22 earning call. I hope all of you are doing safe and are healthy. Let me walk you through our financial performance for the quarter, post which we will commence a Q&A session. Starting with the top line, first. Revenue for the quarter stood at INR 741 crores, as against INR 663 crores reported during Q1 of FY '21. This is higher by 11.7%. Without the impact of carryforward of lockdown sales in Q1 of FY '21, the growth was 19.7%. The growth was higher in crop care business compared to seeds. EBITDA for the quarter stood at INR 122 crores, as against INR 128 crores for Q1 of FY '21. As Sanjiv mentioned, margins have been impacted by the pricing pressure limiting ability to fully pass-on the cost inflation. Employee spends have been -- have gone up by 11 crores since we had, one, not given any salary increment to our employees during the base quarter, [ a natural charge for ] gratuity and leave encashment spends that we had to take during this quarter. PAT for the quarter stood at INR 82 crores, as against INR 92 crores generated during the corresponding period last year. This is lower by 10%. Moving on to business-specific performance. We have seen a steady 31% growth in domestic business on the back of recent product launches. As mentioned by Sanjiv, we have been working towards improving our portfolio by introducing new products in the market. During this quarter as well, we introduced 3 new products, and the initial feedback have been quite positive. COVID-related challenges have impacted our marketing and on-ground activities. However, we believe that the same will change as COVID subsides. Secondly, our effort towards strengthening our distribution reach has been shaping quite well, which should help us better market our products. Our efforts towards exiting marketing acceleration in the wake of pandemic continues to bear fruits. In the seeds business, we generated revenue of INR 269 crores, as against INR 261 crores generated during Q1 of FY '21. This is higher with 3.1% versus this quarter. The growth was impacted by the increase in demand for illegal HT cotton and the crop shift pattern. EBITDA for the quarter stood at INR 83 crores, as against INR 82 crores reported during Q1 of FY '21. Better realizations coupled with stringent management of fixed costs helped in holding onto margin delivery. PAT for the quarter stood at INR 60 crores, as against INR 60 crores generated during corresponding period last year. Moving on to international business. We delivered a growth of minus 8% for the quarter, owing to steady demand across most of our key products. This growth has to be seen on the back of lockdown spillover of INR 45 crores of sales in base period. As mentioned in our previous calls, we are working towards registering new products across our key geographies. Input product prices for most of our products have seen an uptick. As far as the contract manufacturing business is concerned, demand for the molecule PEKK continues to remain subdued with stress in the aviation industry. [ We are nevertheless ] focusing on leveraging our chemistry knowledge and dialogues with [ the ] global players in the agri domain. A quick word on the CapEx before I hand it over back to the moderator. The work on formulation plant at Dahej is progressing as per the schedule, and we expect the unit to start operations by the second quarter. Work on the new MPP plant as well is on track. We expect our CapEx for the current year to be approximately INR 250 crores. That concludes my opening remarks. We can now commence the Q&A session.

[Operator Instructions] The first question is from the line of Rohit Nagraj from Emkay Global.

Sir, the first question is on the increases in input costs. So we have seen that across the board the costs have increased. Now on the contrary, we have not been able to pass it on, so what is our perspective in terms of incremental cost increases which are happening and whether we have the ability to pass it on completely over the subsequent quarters.

So there will be some price corrections that we will keep taking. And a lot of the pricing is really determined by what's happening in the market in terms of competitive action, also in terms of the ability to the -- of the farmers to pay for it. So we will judiciously look at any kind of price correction as the season progresses.

Sir, the second question is on the international business. So again here also we have seen that it has got impacted because of the logistical issues both in terms of inbound as well as outbound. What is our sense on this, that whether the situation is still continuing in a similar fashion? Or will it recover in the coming quarters? And with regards to this, do we have to take certain changes in terms of how we are approaching the global market?

No. The issue -- yes, go ahead, Naga. Go ahead.

[indiscernible] -- yes. No, you're absolutely correct. I think, the quarter 1, we have actually witnessed significant challenges on the international business on the freight front. As you are aware, the -- one is, of course, the rates have gone up significantly, freight rates. We have also found that it was difficult to actually secure availability of shipping containers. It has been a global impact. Certain markets have obviously been impacted a lot more than other markets. One way to look at how things have progressed, let's say, in the latter part of June and, let's say, early part of July, compared to how things were in the earlier part of June and the latter part of May, suddenly, I think, there is a little bit of an improvement in terms of availability, but the rates still continue to be quite high. From our point of view, the way we are approaching this is that obviously we are trying to take preemptive action wherever possible as regards the raw material front in terms of making sure that our production doesn't suffer from [ want of ] raw materials. As far as outbound shipments is concerned, we have also been focused on trying to sort of book the containers, book the shipping lines as much as possible under the circumstances. That is how we've been navigating, so far. With regard to how things might move forward, I guess it is a little bit difficult to predict, but from our point of view, these are the actions that we are [ taking here ].

Yes. That's helpful. Sir, just one last clarification, on the strategic perspective. So on the contract manufacturing, anything that we have finalized in terms of products in terms of application areas? And when do we have a definitive understanding of where we want to proceed on this [ front ]?

Look. On our contract manufacturing, as we've said, for us this is important area. And it is an area where we have started focusing on only in the last year, 1.5 years; and as already mentioned in my previous call, that we have put a good structure in place for business acquisition. Discussions are currently underway with multiple potential partners. And it is still work in progress. There's nothing to confirm as of now. It will take its own time, considering that we have not been very active in this part of the business. So it will take its own time and we are putting the necessary resources behind it. So as of now, there is nothing to report.

[Operator Instructions] The next question is from the line of [ Varshit Shah from Vito Capital ].

Congratulations, Subhra, for joining Rallis. Sir, my question is pertaining to that if you see your pricing and pricing action has been slightly lagging behind competition. So is that assessment correct? And hence you were able to slightly garner a higher market share in the domestic business. That's my first question. Probably it is for Naga and Sanjiv's.

Okay, Sanjiv, can I go ahead?

Yes, Naga, you can go ahead, please.

Yes. I think, if one were to kind of ask the question in terms of what has contributed to our improvement in market share, frankly, I would say it is less to do with the pricing action and more to do with some preemptive works that we have undertaken in Q4. One of the important things that we had focused on was making sure the learnings from the previous years with respect to availability of particular SKUs or particular products is improved because we do have a challenge of producing some of the SKUs in a given period of time because of the labor intensity. And since we had felt that in Q1 we are likely to face the kind of challenges that actually we did face, we had taken some of these production in Q4 itself. And thereby, we had built up some amount of finished goods inventory. Particularly I'm referring to the smaller SKUs. And that allowed us to be able to improve in PAT to some degree. The other one, of course, is that, if you look at our herbicides segment, we did introduce Enzip as a product last year. And we also introduced [indiscernible] this year. We also gained volumes on the back of that. Plus we also gained volumes on some of our legacy products, strong brands that we have, so one would think that those are probably the biggest drivers for our increased volumes and perhaps improved market share as well, though we will have to wait for the market share figures [ that will be ] end of the year when we have industry -- proper industry information. With regard [ to ] pricing, certainly like what Sanjiv mentioned, we do have a portfolio where there are certain brands where we are able to sort of pass-on the cost increases fully, but there are, of course, brands where we do have to keep in mind the effective price point for the farmers as well as what the competitive actions are. So we do have a mix. And for those cases where we have been perceiving a significant competitive pressure, we have chosen not to pass-on [ different ] costs, but certain other cases, we have been able to do that. But I think the broader drivers for the improved volumes in the domestic market is more coming from the actions that I described.

Sure. That's helpful. And just one more thing. So if you see FY '21. We had sort of -- we were unable to ramp up some of the newly launched molecules because of the physical movement restrictions, so where are we on that in terms of now further progress? And how much of that -- probably not a particular number but probably -- is that also one of the important element in the growth acceleration which we have seen in Q1 on a like-for-like basis excluding the impact of the spillover? And just one last question, on the MEIS impact: So what was the full year MEIS incentive, either in percentage terms or absolute terms, in FY '21? That's it.

Well, for the first one, we do -- first question. We do find challenges even this year from the standpoint of physical work, as far as demand generation is concerned, because as you would recall, in quarter 1 we did have -- though we did not have a nationwide lockdown like we had last year, we did have regional lockdowns which limited our ability when the second wave happened. Certainly things are easing up, have been easing up since, you can say, middle of June, but I think, if you take an overall quarter perspective, like we had mentioned in the last analysts call as well, we had -- investor call as well, we had prioritized safety above anything else. So we have got impacted. However, what we did this year is that, learning from the experience of last year, we did increase the amount of effort on the distance marketing front. There were 2 kinds of learnings. One is, of course, the intensity of work. And second is in terms of improved efficiency in distance marketing. We would reckon that we would have perhaps reached almost twice the number of farmers that we reached last year through distance marketing work this year. So that is how we have been dealing with this for this quarter.

Sure. So is it okay to assume that the benefits of the newly launched products are yet to kick in? And probably it will gradually pick up as we go along the year, subject to obviously COVID-related hiccups.

Certainly. I think, if you compare FY '20, FY '21 and FY '22 first quarter, certainly the level of physical demand generation work that we were able to do in FY '20, we are still not able to do. And when you talk about products like Pepe, for example, what Sanjiv mentioned about, which is actually a product which requires a fair amount of demand generation work, I don't think we have yet got the full benefit of it. However, certain other products which are comprising of [ highly genericized ] active ingredients where the farmers are already familiar with the product, those products are -- likely do not that much benefit from the demand generation work.

Sure, [ got this ]. And my question on the MEIS incentives. [ That's all my questions ].

Subhra, would you have those figures, MEIS? Would you have that?

Yes. So the MEIS. Of course, as you know, there has been some bit of ambiguity, and hence we have stopped recognizing that as a revenue. So we have seen an impact of close to 3 crores in this quarter because of nonrealization or ambiguity around announcement of MEIS scheme.

Sure. So just a clarification for it: What was full year MEIS as incentive [ was in recognition ] last year? And how much of that was 1Q? And so to help us model for this particular full year.

So I wouldn't have the full year numbers handy. And it also depends on how much was the export revenue we do. As I mentioned, for Q1, we have seen an impact of 3 crore from MEIS.

[Operator Instructions] The next question is from the line of Madhav Marda from Fidelity.

I have 2 questions. The first one was on the contract manufacturing business that we are speaking about. If I understand right, there are quite a few players in India who have -- who are sort of well entrenched in this business since maybe about 10-odd years. I just wanted to understand. Is there a specific type of chemistry or something in our competitive positioning that we are trying to focus upon that will help us differentiate versus these peers who've been in the market for longer [ than us ]?

Well, so the -- actually there is a lot of work which we are doing on multiple chemistries. Of course, we've been very good at certain chemistries, but as part of our overall portfolio where we are adding new products to even our international business, there's a lot of work happening on multiple chemistries. So we are not limiting ourselves to the type of chemistries that we can take up for any CM kind of opportunity. Your observation is correct, that there are some well-entrenched players. And therefore, it becomes all that more important for us -- or rather, I will say, the kind of effort that is required to try and bring in CM opportunities for our company. And that is where the work is currently underway, Madhav.

Just a follow-up to that. Like basically this would be CRAMS work that we would be doing. Or would it be just contract manufacturing? Or is it like some part of research and custom synthesis also? How would that work out for us?

No, no. Actually currently some of the discussions which we are having is also including some amount of synthesis work. So we can call it CRAMS. We can call it CM, but these are not the patented molecules. So let me just also clarify that. What we are working on is not the patented molecules.

Okay, got it. And my second question was to the domestic crop care business, where we had a 31% growth. Could you break it down in terms of price and volume growth for the quarter?

Subhra, would you like to share the number?

Yes. We specifically do not talk about volume and price growth, but on a broad basis I can say it has a fair mix of volume and price growth because it also varies depending on -- as Naga alluded, between different products where we have a market premium where we're able to command higher price growth vis-a-vis some products where we -- for getting market share. We would have less -- we would have not taken pricing very aggressively.

The next question is from the line of Abhijit Akella from IIFL Securities.

So just one follow-up on the domestic formulations growth. So this is the second successive year of strong growth in this quarter for us. Last year also, we had grown, I think, some close to 25% in domestic formulations in 1Q. Just wondering. This number might be rather high compared to what the industry might be expected to do for this 1H for the kharif season overall, so should we expect that there were some amount of channel filling this quarter and growth will probably slow down a little bit in 2Q? Is that how we should look at it? Or do you think this 25%, 30% growth can be sustained even in 2Q?

No. I think...

Abhijit, see -- Naga, let me just take that. Abhijit, we do have a very, very good approach in terms of how we are placing product; and it is really based on demand. And last year, you will recall that there was some amount of panic buying of -- by the trade because we didn't know whether material will be available or not. That is not the situation this year. So there is a certain amount of expectation that we have from the -- where the monsoon has picked up, and on that basis only, we are placing our material. And one of the points that Naga has already pointed out is that there was some expectation of certain SKUs that were more important which we missed out on last year which we were able to do this year with better planning. So that has also helped us in the current quarter. And we do expect a reasonably good kharif, so we don't think that we have overplaced any material. It's been done very judiciously in terms of what we expect to sell. Naga, you may like to add.

Yes, no, absolutely. I just wanted to add just a last point, what you mentioned, that we have felt fairly comfortable with the level of channel inventories that is there for our products, but like you correctly point out, Abhijit, the first quarter is always a placement quarter. We will have to wait for the full H1 of -- understanding the trends with regard to kharif. Last year, for example, as per the industry data, the growth rate in the industry was -- the full year growth rate was closer to 9% to 10%, although in the first quarter we did have -- we didn't have much higher growth because of the panic buying because of various factors that happened last year. From our point of view, certainly I think we have done -- learned from the happenings of last year. And we have that -- or have been able to supply some of the materials that we identified might be required, and that is also one of the contributors for our growth.

That's helpful, yes. So just on the -- the other question I had was on the CapEx budget. I think Subhra mentioned about INR 250 crores for this year. If it's possible to just give us a rough breakdown of the major components of that in terms of projects.

Abhijit, in the last quarter, we had given a split of what would be the key heads of CapEx. So largely that does not change. We are in the same [ parts ] of delivering some of our existing projects, which are related to -- one is commissioning of the [ CZ ] formulation facility during this current quarter and trying to accelerate as far as possible the multipurpose plant that we are building in the SEZ at Dahej. So these are our 2 big projects which are currently on the ground. Many of the other projects are already coming towards closure, which is related with the metri re-siting into one particular plant which we have already talked about. So that is already coming up for commissioning during this month. And apart from that, there are 2 other open projects, which are also getting closed during this month and early next month, for our 2 existing products which we are bottlenecking. And of course, we do have a lot of expenditure related with the digitization, automation and all those kind of projects which are also currently underway. Apart from that, we have the new R&D center. So that is something that is running a little slower than planned. We are still awaiting certain approvals related with name change in all of the land. It's still something that is pending. So that has got delayed because of the availability of people for getting the name change done in the various [ khatas ] and all that are maintained by the various authorities. So that is one project which is still running behind schedule, and only once all the paperwork is done can we really start the construction. So that is one project which is running slow. That is the new R&D center. And in the meantime, what we've already done is we've added significant additional capacity in our existing facility which we have in Bangalore. And we've also added more people. And we are currently running there in 2 shifts to avoid any delay in any of the projects that we want to undertake. Apart from that, we're also working with some [ CROs ] for some of the projects that would have otherwise been taken up in house. So the -- if you can just refer to the investor call deck of last quarter. There is no significant change in the overall approach that we are taking on CapEx.

The next question is from the line of [ Tarang from Old Bridge Capital ].

A couple of questions from my side. One, if you could give us your ITI for Q1 FY '22; and the similar figure for the last year, same quarter; and the second, some sense on the competitive intensity in the market. And how are the consumption patterns right now in the hinterlands given the high commodity prices; strong kharif, rabi last year? But then there's the impact of COVID-19, the second wave going to the rural land as well. So just wanted to get your thoughts on that.

Naga, would you like to...

Yes, yes. I will take the second one, first, just to sort of give you a little bit of an overall theme of how we have seen the industry moving. As you know, the rains started off very well this year, but however, after the third week of June, there has been actually a slowdown. And this is what was mentioned in the opening remarks by Sanjiv, that there has been a bit of a soft kind of a monsoon or a [ fast ] kind of monsoon. So -- but however, I think it got revived in the last, let's say, 10 days or so. And we are therefore hopeful that the original prediction of normal monsoon will prevail. With regard to, therefore, the [ zone ] area, we don't see much of a difference. In fact, the estimates that are made are plus or minus 1% [ or ] 2% of last year, not very different. The progress of [ zone ] area was good early, but then it kind of slowed down. Therefore, the season's progress has actually been a little slower compared to last year, but like I said, we are still hopeful that the overall acreage will be reached. In the market, the [ growth ] of credit has been good. Agricultural credit in May '21, [ what was it ], 10% growth compared to 5% in May '20. So it's certainly a favorable situation, but because of the variation in the rains as well as because of commodity prices, we do expect quite a bit of crop shift. The commodity prices have -- soya bean has been rolling very high this year compared to last year. [ Product ] is also higher than last year, as is maize and some of the pulses like [indiscernible]. And so this crop shift is something which has implications in our portfolio, for cotton certainly in our seed portfolio and for also hybrid paddy in our portfolio because in some of the North Indian markets there have been an increase towards [ OP varieties of collection rice ] compared to hybrid paddy. On the fruit and vegetable front, green chillies, grapes, apple, these products have had good commodity prices, so that is actually a favorable situation. Bajra is one crop where the commodity prices have actually gone down significantly over last year. And that has implications, for example, from our portfolio, but net-net it is expected that the farmers will adapt to the situation through these kinds of crop shifts, so the farming profitability is also expected to be actually higher on a per-acre basis compared to last year. With regard to COVID, you are absolutely correct that this second wave has been more damaging, I should say, for the rural areas. We have had some of our channel partners who have got impacted because of COVID. Some of them [ have passed away ] as well. We are working through some of the challenges that it consequently creates. Movement has been a challenge. The freight rates have actually gone up substantially, so net-net one would say that quarter 1 has been a challenging and difficult quarter. Towards the end of June, one would say that things have certainly begun to look up. And we are hopeful that, as we come out of the second wave kind of a situation, things will stabilize. Of course, the fear is there in everybody's mind and -- with regard to the third wave, which all of us are aware of. And from our point of view, we are prioritizing employee safety, partner safety. In those areas, we are continuing to focus on. That's broadly in terms of how the quarter has been. If any particular aspect of the quarter you would like to sort of ask, I can respond and then go to the ITIs.

No, this is all right. Just the only thing while on the cropping part -- and I understand. I wanted to also understand from the rural consumption perspective. As in, are the farmers -- because you said that you did face some competitive intensity on pricing which sort of pushed the gross margins. So are the farmers willing to spend more given the strong seasons that they've gone through in the past? Or you don't see any such trends emerging.

No, no. I think, on that purchase behavior, certainly last year also, we had -- you'll recall, at the beginning, there was this feeling that farmers might down trade. Or there might be some kind of value purchases in the sense of, let's say, more generic products at lower prices. That is not something which we witnessed last year as well. And we don't expect that, that would happen this year too. As long as the product is differentiated, because the season has started off on a very, very promising note, we do expect the same trends to continue even in our first quarter. For example, like I mentioned, some of our legacy brands which are strong have contributed to our growth. And at least the channel has been willing to stock it up. So I think they share the perception that the farmers will be open to -- and in fact, in some of the markets like North India we have found the farmers being willing to invest in these products, as long as they are differentiated.

Sure. On the ITI question...

See, on the ITI. Normally I think ITI would make sense to look at from an annual point of view because there are certain products that we will be introducing in Q2 and we will also be introducing during rabi as well. So right now only 3 products have been introduced, so it is therefore unlikely to provide a good measure of what we are introducing this year. Of course, the point to make is that in the previous years, whatever we have introduced, those would contribute to a certain revenue share; and also that quarter 1 is a placement quarter largely, except in North India. And therefore, with all of those caveats, I can say that at this point in time it is trending better than what we had hoped for the first quarter. So it is about 6% right now, but I think we will have to wait for the full year to really see what the ITI percentage ends up being.

The next question is from the line of Chintan Modi from Haitong Securities.

Sir, on the international...

Sorry to interrupt you, Chintan. Can I request you to speak a little louder?

Yes. Can you hear me now?

[ Much better, yes ].

Okay. Sir, on the international business side, when we look at the growth [indiscernible] lower in the base quarter. Could you give us some sense like how much was the volume contribution? And [ what would be in ] the pricing? Because last year, we have seen a steep [indiscernible] in prices. So wanted to understand that lower prices in the base quarter has already started kicking in. Or it will kick in from next quarter.

Yes.

So I think -- Sanjiv, shall I go ahead and respond on this?

Yes, yes. Go ahead.

Yes. So...

Chintan, may I request you to mute your line from your side because of the static coming from your line?

I -- am I audible?

Yes. Go ahead.

Yes. So what I would respond is as follows. If you adjust for the spillover of last year, for all our key AIs, we have actually witnessed growth in terms of volumes. In terms of the price realizations, metribuzin is really the one where there has been a substantial drop through the year last year. So if you see, compared to quarter 1 of last year, the realizations this year are still [ rolling ] lower. So it is not yet in the base. However, if you compare it with Q4 of last year, the prices have been slightly improved on the metribuzin front. So the full impact of the metribuzin drop is not yet reflected in the base quarter. Other products have been [ recently great ].

[ Sure ]. And sir, just to add more on this. Like last quarter also we saw 75% growth. This quarter also, we've seen growth. The momentum is good, so -- but like -- so it indicates that the demand has been good, but do you think there is also a lot of supply coming into the market, which is not allowing the prices to kind of go up at least quite a bit?

Are you referring to the international market?

[indiscernible] international.

So international market, no. In a general sense, the prices for all chemicals have been [ firming ] up. I think that is also something which Sanjiv mentioned in his opening remarks. So specifically to individual products, yes, there could be varying demand-supply position in each of those products. And that is what I mentioned, that in the case of metribuzin, as an example, the pricing have improved over quarter 4, in quarter 1. If you look at -- acephate prices have actually been much higher compared to quarter 4. So it is actually product specific. And in a general directional sense, the prices have actually been increasing in Q1 compared to Q4.

Sure. And just one last question: On the gross margin, I missed your comments whether this reduction in gross margins was largely to do with domestic or international business.

No. The gross margin for both domestic and international business have been stable. It is actually the mix between our crop care business and seed business in this quarter versus the mix in the first quarter of last year. That is the reason for the gross margins reducing. So for example, last year, in the first quarter -- maybe, Subhra, you have the percentage of contribution from seeds and crop care, right, compared to this year. [ Do you want to come in ]?

Yes. So just to add to what Naga was saying. So [ largely ], if we look at, our share of seeds business was close to 35%, and crop care 65%, which has swung the other way. And the mix has come down by 8% for seeds business, and this is given -- driven by the high growth that we saw in crop care business. And we indeed make higher margin in seeds business compared to crop care business. So while on a stand-alone basis each of our segments or business have delivered good margin, it has come down because of the impact of the mix which is sitting in our portfolio. And also to say to what Naga was saying: The way we internally look at gross margin is also considering other variable costs, so with that into account, we can say that the mix has been something which has impacted our gross margins. Does that help?

Yes, sure, ma'am.

The next question is from the line of Amar Maurya from AlfAccurate.

Sir, firstly, I mean, if you can give me, what is the contribution of the organic manure in this particular quarter?

We don't call that out separately. It is [indiscernible]...

Sorry to interrupt you. We are unable to hear you.

Can you hear me?

Yes, sir.

I was just saying that we don't give out this data. It's in the crop care business. We call out the total crop care. It is part of that.

Okay, okay. And secondly, sir, in terms of the CSM or the CRAMS business, as you said, the work is in progress. So if you can, sir, help us. Like how we had -- I mean, any new incubation in terms of the team on the sales side or on the R&D side? I mean how the progress is in terms of building the team for the CSM. Because that, as you said, you are new into the business, and the animal is different than the existing business. So if you can help us. Any new people brought on the CSM to specifically drive the business? That will help us to understand how the progress is.

So Amar, just to clarify: We have been in this contract manufacturing business for the last 2 decades, but it has not been an area where we have been focusing. And that focus, we brought only about 1.5 years back. And to support this part of the business, we have put in place a business team and we've also created a team at the R&D to support the business team. So I have mentioned that we have added resources to the R&D setup. And we have also started working extra shifts and all that so that one is -- the physical distancing and all that we need to maintain. And also there is a limit which is there in terms of number of people who can be at a particular area in one point in time. So keeping all that in mind, one is that we have moved to a 2-shift operation. Second is we've added more chemists, more scientists to our team. And [ second ] is that we have split the R&D team between a team that is supporting contract manufacturing and a team which is working on our own reverse engineering synthesis of the AI portfolio that we are building. That is how we have resourced this particular part of the business to focus on getting opportunities for us.

Okay. So one is that -- one is basically building the portfolio or building the AIs. That is basically the R&D part of the business. I was focusing more from the marketing point of view. Like ultimately somebody has to go and showcase that. So are you saying that, that has been done by the existing sales team...

No, no, no. There is a business team. I mentioned to you that we have put in place a business team, which we can call marketing team. Or we are calling them business development team. So that team is already in place.

Okay, so how many people, sir, in the sales -- I mean, the business team...

2 people, 2 people.

And so based out of India, based out of international market?

Based out of India, currently based out of Mumbai. So any area, even for this, like the way we are dealing -- using video conferencing. These meetings are happening over videoconferencing. So even potential customers are preferring that in the current situation, so that's not an issue as of now, but yes, I mean, once things normalize, people will travel.

Okay. And sir, I mean, in terms of the molecules, like, how many molecules we would be working, like would be at a -- quite at a discussion stage, which can culminate into the business, let's say, in predictable future.

So while without getting into numbers, just to say that the team has got their hands full. So there were enough work to do on the inquiries that we are currently dealing with, including the R&D team.

Sorry to interrupt you. Amar, I'll request you to come back in the question queue for a follow-up question. The next question is from the line of Rohan Gupta from Edelweiss Financial Service.

Sir, first, if you can just give absolute numbers [indiscernible] seed and domestic agrochemicals and exports. You have started this practice of giving these [ update numbers ], but I think [ it's ] not providing the [indiscernible] if you can give absolute number for the current quarter as well for the last year...

Rohan, sir, a lot of disturbance coming from your line. May I request you to speak through the handset?

Sorry. Can you hear me now?

Yes. Go ahead.

[indiscernible].

Okay. Sir, I was asking. Can you give us absolute numbers for the seed, domestic agrochemicals and exports for the current quarter and last year? Sir, you've started this practice of sharing this number on a quarterly basis, but I think that this quarter it's not being provided, so can you just clarify on those numbers, sir?

So it is in the investor presentation. If it is not yet uploaded [ maybe instantly ]: The seed revenue was 269 crores this quarter. Last year, first quarter was [ 261 crores ]. The crop care revenue was 471 crores this year, first quarter; and the last year was 401 crores. The EBITDA and PAT numbers are also displayed and it will be part of the investor presentation...

And can you also -- can you share also the absolute numbers, sir, [indiscernible]?

Yes. It is also there in that sheet. This year, the share of international business is 28% compared to last year's 36%. That is because, in the last year, these numbers are without adjusting for the spillover.

Okay. Sir, second question. We have seen there is a lot of input cost-driven price increases there in the market across the agrochemicals and given large part of our product basket is generic in nature. So can you sort of give some sense like what kind of price increase in general or average we can expect for this year and how much it has already been in the first quarter? You are still in the process of passing it on, so I am just asking that how much you'll see that the price increases can happen in [ generic world ] for this year [indiscernible].

See, Rohan, I think the way -- maybe, I think, if I can explain the way we are approaching it, it might help. The way we are doing it is that, every month, we have actually executed what you can call a high-frequency pricing approach where we are looking at the changes that we are witnessing at that point in time. And that is because we are finding that the variations are much more frequent than they have been in the past. And based on the kind of changes in our costs and on the basis of how the competitive movements are happening, we are taking very sharp-frequency pricing calls. Therefore, it becomes a little bit difficult to predict for the full year, okay, because -- difficult to predict for the full year because, as you'll appreciate, there are certain products with certain companies we have carried stock. We may have also carried certain stock, which gives us the opportunity to sort of benefit from an increasing price regime. And on the contrary, there could also be the opposite situation where we may have not carried the stock and we are forced to buy in order to cater to the market. So it's hard to actually give you a forward view on what it is likely to be, but this -- and that is because this is the kind of approach that we are taking. As regards what we have already witnessed, I think already Subhra mentioned we have healthy volume growth as well as reasonable price growth. We have passed-on wherever we have been able to, certainly the strong brands that we have which have good market share as well. And in certain other cases where we find that the differentiations that our products enjoy in the market are somewhat weaker, we have not passed-on the full [indiscernible].

And sir, just like last question from my side and I'll come back in queue for follow-up. Sir, this is referring to your annual report of '21. Sir, from last 3 years, our focus has been a lot on the new product launches and driving sales for our branded products, but despite that, sir, and [ a lot many ] products which have been launched in last 3 years, our innovation turnover index has been -- has fallen last year from 16% to 11%. It means that the revenues from the new products actually have gone down in last 3 years, especially last year. Sir, we have created many more initiatives. We have taken many more initiatives like architecture of the brand and new product launches, but sir, it's not somehow getting reflected in the numbers, especially on the new product launches. And that, I think, is continuously depressing our margins also. If you can, sir, share some bit on that, that how you see that this year the new product launches revenues can be -- on the ITI can look like over next couple of years, if you can give some sense on that [ so ].

Yes, certainly. I think what your observation is absolutely correct. We have had a decline in the ITI. Last year was 12%. Earlier year was 16%, but if I recall right, the previous year before that was about 10% or 11%. So we did not get the growth last year. And I think we had mentioned that one of the big difficulties that we have had is that in terms of the demand generation work to scale up. Some of the new products which we think are differentiated, those have got hampered in the market last year. We continue to face those challenges this year also, although that is not deterring us from introducing the new products because we do want to sort of attempt to market these as best as possible and, of course, be poised for any opening in the market that can happen if the COVID were to subside, but your observation is correct that the ITI index last year has been lower. We are hopeful that, as COVID ends, we should be able to engage more in the demand generation activities. Some of the products that we have introduced, including Pepe which Sanjiv already mentioned, these are good differentiated products. And they will need to be backed by good demand generation work because these are not low-priced products. Like you correctly said, from a margin point of view also, they are very, very beneficial, but at the basic level the price points are not very low. So therefore, they require retailing to the farmers, strong demand generation work. We at this point in time are hopeful that things will improve on this front.

And sir, a continuation on the same thing, if I'm allowed to ask the same thing. Sir, we have also observed that the biggest drop in ITI has been in insecticide category, where it has fallen from 20% to almost 9% last year. Is it something, sir, because our focus on reducing the sales from the [ red ranges ] products and insecticide [ falls ] the maximum in that category? Is it something that's regenerating our product portfolio, where we are having a thought process of reducing the [ red ranges ] product sales in our portfolio? Is it something to do with that, that insecticide sales and ITI in insecticides has fallen the most? Am -- is my observation correct, or is there some other reason for that?

No, no, no. It is not related to [ red ranges ] because we have not had [ red ranges ] products for some time in our portfolio and certainly not in the ITI products. So that is not the reason. Maybe, this particular question, one will have to really look at to give you a more thoughtful response. Perhaps we can take it subsequently.

Sorry to interrupt you, Rohan. I'll request you to come back in the question queue. [Operator Instructions] The next question is from the line of Aditya Jhawar from Investec Capital.

Just a couple of questions. The first one is on exports, if you can help us understand that there has been a sequential drop in exports. What could have driven this? Is it because of the container issue? And that's -- and Naga highlighted that, in the new -- beginning of July and last week of June, things were looking better. So does that mean that there could be a sequential uptick in export as the situation improves? A related question is that -- just a confirmation. You also mentioned that in -- exports that -- pricing of the key molecules like metribuzin, that is also kind of improving. I just wanted to confirm. That was the first question from my side.

Yes, that is correct. The price of metribuzin on a sequential basis has improved in Q1 over Q4. With regard to your other point about whether it is about shipping difficulties that have contributed to a sequential change, not really. Because I think, even in a normal situation, if we were to look at a couple of years back, there are variations between Q4 and Q1 of international revenues. And just like in our context, Indian context, these shipments that we make of various AIs to various overseas countries is driven by their local weather conditions. And therefore, the timing is actually more determined by those factors, so I don't think it is actually attributable to sailing difficulties contributing to any reason for the seasonal decline. So Q-o-Q, a decline.

Fair. And I mean the quantum was [ 40% ], which we have not seen in the past. [ That's why that's the question ]. Fair enough, sir. Moving on to the next question: Is -- in a couple of quarters, like, you have indicated a big CapEx plan for the next 5 years, where you had announced about 800 crore of CapEx which we will spend. And out of that, about 400 crore, 450 crore kind of CapEx, you have clearly identified certain action items for that. So the question here is that, since we are -- we have entered into FY '22, is there a line of sight for the remaining 400 -- 350 crore to 400 crore CapEx? Have we identified certain areas where the next phase of CapEx will be targeted towards in terms of specific molecules or specific broad areas that we can target for [indiscernible]?

So Aditya, the -- one of the areas which we still need to finalize, and that is also dependent on the way our work at the R&D center is going, is we are currently building one multipurpose plant which is largely intended for fungicides, insecticides. We need to build one more multipurpose plant for the herbicides, which is also the work which is currently happening. So we will take that decision perhaps during the course of this year as to when to start the work on that. So this year, we are really focusing on closing out on some of the key projects that we have taken up so that we can start commercializing products from them. So this is the current focus. And during the course of the year, we will take decisions on -- one is the additional MPP for herbicides. And also one more decision which we need to take is on the plant for the intermediates. So that also is something that we will decide perhaps during Q3 or Q4 once we have clarity on the work that the R&D team is progressing on.

Sorry to interrupt [ you, sir ]. I'll request you to come back in the question queue. The next question is from the line of Prashant Biyani from Prabhudas Lilladher.

Sir, the pricing pressure is mainly coming only from metribuzin. Or is it also in the domestic business that we are seeing some sort of a pricing pressure?

No, no. It is there in various products, certainly in domestic market also. We are facing pricing pressure.

Sir, despite the overall environment being good and the underlying demand also relatively better with regular price hikes also, then what could be the reasons for the pricing pressure in the domestic market?

See, actually, the increases in some of the raw materials have been substantial. I mean if you look at increases in certain raw materials like [ acetic anhydride ], for example. These are all substantial increases. These are not small 2%, 5% kind of increases. So therefore, in order to be able to pass-on those kinds of increases, the resultant further prices will have to become substantially higher, which becomes difficult for the customer to be able to bear. So really speaking, I think these are abnormally high cost increases that we have witnessed, and that is the reason why there is a pricing pressure.

We move on to the next part of the queue. The next question is from the line of [ Nirbhay Mahawar from N Square Capital ].

[ If there is a ] significant inventory addition in the seeds vertical. Because I'm sure, sir, you [ would have not ] prepared for a 3% growth in the business.

Yes, we do have, but that is also because we had consciously taken a higher quantity of paddy production in rabi of 2020 because we have, again as a learning from the previous years, found that having some level of buffer stock is useful for us to capture some of the opportunities which we were otherwise losing. And therefore, we had deliberately taken a higher quantity of production. And that production has come in during the course of this quarter, some of which came in after the shipment of paddy seeds for this quarter. Those have been inventoried and therefore there is a higher level of inventory compared to last year.

Sir, if we look at all the 3 verticals domestic, international and seeds, while 2 verticals are showing clear signs of buoyancy, in seeds, from some time, we are seeing some kind of stagnation, so what is our game plan for this? Like do we expect it to increasingly become a smaller size in the overall scheme of things? Or we have some aggressive growth plan here.

No. Actually we don't expect the contribution or the share of that business to come -- become smaller, but you are right that, I think, we have not been able to get the kind of growth that we were hoping to get. In the case of cotton, for example, we had identified it as one of the growth areas. And we did have new hybrids that were approved by the GEAC. We did launch them. So of course, this year was the first year. And in fact, in the opening remarks I think Sanjiv mentioned that we introduced 5 new products. However, in this particular year, we have not been able to gain. We have been affected by the crop shifts that we mentioned. There has been a significant impact in Eastern Maharashtra, a consequence of shift to soya bean. We've also had the challenge of illegal HT proliferating in the market. And therefore, we have, despite our efforts, not been able to increase our business share, business volume on the cotton front. On the maize front, on the other hand, it has been a different factor. We did have some challenges in the rabi production season of last year because of the weather conditions that prevailed then, which led to a lesser availability of maize from a placement point of view. And this is something which is what had in the past affected us in the case of paddy, and that is why we took a higher production in rabi. And certainly for maize as well, we will plan as we go forward, but certainly for this quarter we got impacted because of limited availability. So from our growth point of view, we still think that cotton represents an important area for growth. We have introduced these hybrids this year and we should focus on scaling them up in the years ahead. On vegetables, things have been actually more satisfactory, yes, which is another area which we have brought up in the past as a growth area. And quarter 1 has been satisfactory from our point of view. Of course, we have to also focus on the rabi maize product, which we mentioned earlier, from a profitability improvement standpoint because our portfolio continues to remain kharif weighted. And that is something which our [ building team ] is focused on, but you're right. I think we have work to do on the seed side.

[ Nirbhay ], just to add. Some of the work that is happening on the new hybrid seed development for all our field crops, that is progressing well. And we did mention that it will take a couple of years before we're able to fully sort out our portfolio. We have already launched 5 new products in cotton, which Naga mentioned. Of course, they have to be scaled during the subsequent seasons -- subsequent years. So the -- our pipeline is looking reasonably good and some of the pre-commercial work that we are doing on some of these hybrids is also looking positive. So overall while it has not created the kind of growth that we were expecting, I think there is a positive trajectory that we can see in the coming years.

We move to the next participant. The next question is from the line of Somaiah V from Spark Capital.

The first question is on the -- our projects. First, in terms of the new volumes that is expected to come up, I know you have given a breakup of the projects. So with respect to metri recommissioning or the debottling exercise, can you just provide in terms of quantum what will be the volume expansion in our international portfolio? It could be either probably in a percentage terms or probably in absolute terms in million metric ton, where our capacity will go in each of these projects. That's the first question.

Naga, you may like to just give some detail on that, yes.

Yes, yes, yes. So in the case of -- do you want me to reference to the [ results publication that has been sent ]...

No, Naga, just in terms of what is the overall increase in production which we are expecting. For example, we've more than doubled the metri production [indiscernible] production. So where do we expect the overall volumes to be based on...

Yes. Compared to -- yes, yes, [ all right ]. So in the case of -- yes. Maybe I'll start with metribuzin. Metribuzin, compared to where we were in FY '20, we have more than doubled our capacity. However, what has happened in the case of metribuzin, because there has been a softness in demand, we are not expecting that we will be running at 100% capacity utilization, but from a capacity increase point of view, we have doubled it. We will, of course, be calibrating our production in line with whatever demand [ fillers ] that we get, so that is something which we will take on a month-to-month basis. If you look at pendimethalin: Our capacity has increased by about 25% compared to where we were FY '21 beginning. That one is fully commissioned and it is deployed; and the demand outlook, so far, has also been fairly positive. So we are actually running at more than 90% of our capacity utilization. As far as hexaconazole is concerned, we have increased that also by about 70% of capacity compared to FY '21 beginning. Hexaconazole, also we are having a good capacity utilization situation. And we are clocking more than 85% of -- well, more than 85%, 90% of capacity utilization. These are principally from the export market point of view. In addition, for kresoxim-methyl, we had expanded capacity. We had doubled the capacity. So here the utilization has so far been good, but I think on an annualized basis we would not expect to run at 100% utilization. But maybe it will be a fairly high, maybe something like 70%, 75%, utilization. These are the projects which are completed. We have projects about acetamiprid, lambda-cyhalothrin. These are now getting completed and they will get commissioned in the quarter 2.

Helpful, sir. Just one follow-up on that. So with respect to metribuzin: So we have doubled capacity with -- I mean with respect to last year itself. So in terms of capacity, we are in-line compared to last year, between FY '22 and FY '21, so it's about the utilization rate of this capacity. It is the right understanding?

No, no. FY -- sorry. Metribuzin, we have doubled compared to FY '20, okay, compared to FY '20, because last year also we had increase in capacity. So compared to FY '20, we have doubled.

Got it. And when is the new MPP plant expected to come...

[indiscernible]. I'll request you to come back in the question queue for a follow-up question. The next question is from the line of Faisal Hawa from HG Hawa & Co.

My question to you is that do you feel, due to ESG and different environmental concerns, the entire biopesticides team would work out much earlier than we have envisaged and there could be a huge demand for this kind of biopesticides? That is one question. And second is, sir, [indiscernible] can we look at more acquisitions like we did the Metahelix acquisition? And could we look at such opportunities often?

So just to further highlight. While we did not talk anything during this call on the biologicals, we have already launched a couple of products during the last financial year. And even this year, we will be launching a couple of biological products. This is an area which is important. And even from an export perspective [ or ] some of the crops that are being exported out of the country, there is a need for farmers to use products which reduce the MRL levels for certain kind of chemicals, so we are focused on this category of products. And apart from that, even our crop nutrition portfolio is doing fairly well. We've been adding products. Even during Q1, we did add a product for nutrition related with the apple crop. So that product has already been launched. Last year, we had done a similar kind of crop nutrition product for full year application for the grape crop. So these are areas where we have been slowly adding products to our portfolio. Do we have second question, Faisal?

Yes.

What was that? Just remind me.

My second question is that do we look at more acquisitions like Metahelix...

[ Okay, sure, yes ]. Sorry. I -- no, no. This is something that we constantly look at. And we will make the appropriate decision because it has to be value creating for the -- for Rallis. So we will -- we regularly scan to see what are the things that we need to add to our portfolio. So we will go for acquisitions as and when we find something that will be value creating for Rallis and its shareholders.

But do we feel that the biopesticides movement could really accelerate a lot faster than we had -- have envisaged? And how well prepared are we for that?

Well, let's say that we did have a few biological products in our portfolio over the years. And we have now made a conscious effort in terms of adding more products into our portfolio based on our package of practice that we are recommending for various crops, whether it is seed crops or whether it is horticultural crops. So we have been adding products. We'll be launching new products, as I mentioned. So this is certainly an area of focus for us. We will continue to build this portfolio while we drive crop protection as well.

We move on to the next participant. The next question is from the line of Ashwin Reddy from Samatva Investments.

[ So I have got ] 2 questions. First one is on the contract manufacturing [ bit ]. So I just wanted to understand what specific steps are being taken. Because the reason I ask is I understand there's been a management change and there's been a change in company direction, but contract manufacturing has been a focus area for a long time for the company. So what specific things have changed? And what gives you the confidence that we can crack it now?

Ashwin, I think I've already answered this question to something that I think Amar had asked. So we have, as I've already mentioned, put in place a business team who is engaging with the potential partners. We also have a R&Ds team which is working along with business in the discussions that we are having with various partners. There are certain opportunities that are there for which the R&D team is working on the route of synthesis and costing and also making available samples to the potential partners. So it does go through its own cycle time of getting ourselves qualified to be able to make it at the right price and the right quality that is expected by the partner. So that is work in progress. So we believe that we have a good team in place both at the business level as well as at the R&D level to support this part of the portfolio.

Understood. So broadly what time lines could you give, say, in terms of expecting some -- expecting tangible results, 2 years from now and -- 3 years from now? What do you think is a reasonable time frame for it to have contributing -- that time line, yes.

I will say it is safe to assume that this is not going to happen in the next quarter or the next 2, 3 quarters. This is something that will really start kicking in maybe a year, maybe 2 years from now because, as you know, we do have a capacity-related issue; and as we just answered the earlier question, that most of our capacities are maxed out. Our new MPP plant is getting built. That is embedded in a certain set of products. And we will take decisions on further investments based off the various discussions that are happening. So it is safe to say that this -- any further revenue streams will happen only over a year from now, 1.5 years from now.

Got it. That is helpful. Second question is on the metribuzin front. Like can you give some more clarity on the -- like what's happening at a global level? And when the -- or what is -- or what are the factors that you are looking forward to change? Is it because capacity has come up in parallel [indiscernible]? Or what does -- or how do we track? Or what are the things to look forward to that give you confidence that [ the increase in ] capacity can be utilized in the next 1, 2 years from now? Any broad pointers that you think we should look at?

Yes...

Yes...

Maybe I can take that [indiscernible].

Go ahead.

So I think -- from our point of view, I think we have focused on increasing market access. As you are aware, we obtained a direct registration on Rallis [indiscernible] -- sorry. Can you hear me?

Now we can hear you.

Yes, yes, yes. So we obtained a direct registration in the U.S. market, and that [ obviously gave us the ] opportunity to add those customers. We have begun that work and we have added customers [indiscernible] we will be able to add more customers [indiscernible].

[indiscernible]

Sir, [indiscernible] audio is coming a little feeble.

Is it better now?

Yes, sir.

Yes. So what I was saying is that, from our point of view, we are trying to increase the number of customers to whom we can sell those products. And we are trying to do that through increased registration, one of which has come through for U.S.A. sometime back. And we have already obtained additional customers. We are also doing the same thing in other geographies also. So that is the important aspect from increased utilization of the increased capacity [indiscernible].

Thank you very much. Ladies and gentlemen, I will now hand the conference over to the management for closing comments.

Thank you. So thank you all for joining our earnings call and the questions that were asked. We do hope that we've been able to provide the necessary clarity to all your queries. We do look forward to a positive kharif season ahead despite all the challenges. We are optimistic because things on the ground are certainly showing directional improvement, and we hope to have a reasonably good kharif season. And we will again meet at the end of next quarter with the set of results. With that, it's back to the moderator.

Thank you very much. On behalf of Rallis India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Okay, thank you.