Rallis India Limited (RALLIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rallis India Limited Q3 and 9M FY '25 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. Thank you, and over to you, Mr. Desa.

Thank you. Good evening, everyone, and thank you for joining us on Rallis India Limited Q3 and 9-month FY '25 Earnings Call. We have with us today Dr. Gyanendra Shukla, the Managing Director and CEO; and Subhra Gourisaria, the Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussion 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 Dr. Shukla to begin proceedings of the call. Over to you.

Thank you, Gavin. Good evening, everyone, and thank you for joining us today on our quarter 3 fiscal year '25 earnings call. As mentioned by Gavin, I have alongside with me, Subhra, our CFO. Let me begin the discussion by dwelling into the industry landscape initially, post which I will discuss Rallis-specific developments. As far as crop sowings are concerned, rabi sowings are roughly 16.5 million hectares, which are down by 0.5% over last year. That is the data available as on 27th of December, with oilseed lagging by 5%, wheat area is up by 2%, rice area is up by 5.6% and pulses area is more or less same as last year. Reservoir levels are better compared to last year by plus 24% and 139% of the overall normal storage as of 26th December. While the overall redline for the monsoon is positive, spatial and timely distribution was uneven. Also post monsoon season with two cyclones, Dana in October, Fengal in December created trade inventory pressure. Companies also resorted to aggressive trade schemes to liquidate the carryforward inventory, creating pricing challenges. Seed production continues to face the challenges for the second year in a row with volumes under pressure despite a steep increase in input cost. Agrochemicals export demand continues to remain weak due to oversupply from China, price deflation and reduced margin. In 2024, the Chinese agrochemical market underwent significant change marked by global companies adopting supply chains and exploring strategies like internationalization, increased transparency amidst challenges of overcapacity strengthened partnerships. All the key regions have seen degrowth in agrochemical mainly in Central and South America, followed by North America, Europe and Asia Pac and Middle East, East Africa in 2024. Moving to Rallis-specific developments. During our -- during Q2, our revenue was INR 520 crores, which is a 13% degrowth and PAT was INR 11 crores versus INR 24 crores last year, mainly due to volume drop in export. Our domestic agrochemical business registered volume growth despite intense market competition. Export business continue to reel from market challenges resulting in a degrowth of roughly 38%. Our long-term effort to expand the customer base and improved cost competitiveness continues. Seed business was same as -- almost flat as last year at INR 30 crores versus INR 32 crores last year. Moving to individual businesses-wise performance. Our export business was down by 38% with volume dropping by 34% and price dropping by 4% over Q3 of previous year. We faced weak demand for most of our key products in Q3. Hexaconazole is showing good traction with process debottlenecking helping the business register highest ever volume outlook for the year. Even in metribuzin, our volumes are strong on YTD basis with positive outlook from one of the global majors. Acephate, as highlighted in the earlier calls, continues to face margin challenges due to steep volatility in the input cost materials and high supply situation. We are working on several alternatives, including flexibilizing the plant and optimization of overheads to improve the profitability. Pendimethalin is facing pressure due to high inventory with the customers. In line with our strategy on improving the process efficiencies, we are going to go live with the continuous stirred tank reactor process in pendimethalin this quarter. We're also in the final stages of commercializing new technical Metalaxyl-M from our reverse engineering pipeline and are confident of the long-term potential of the product both for domestic and international markets. Even in the CSM business, our efforts on expanding customer base and working on new chemistries is progressing well. We have also set up labs for new chemistries and are working with 10 new customers. We are confident these efforts will start contributing meaningfully to our top line and bottom line in the years to come. To drive synergies, we have also brought all B2B businesses under one roof. This will help drive strategic partnerships and alliances for both domestic and international markets. Moving to domestic market, Crop Care business grew volumetrically but was down by 2% due to a steep price correction. However, on a YTD basis, the Crop Care business has grown by 6% with volume growth. Our key focus segment of Herbicide and Biologicals & Specialty Solutions have grown by 41% and 21% in volume, respectively, in domestic business during this quarter. Within Biologicals & Specialty Solutions, Geogreen, Ralligold Green, Ralligold granule and biostimulant significant did highest ever sales on a YTD basis. Water soluble fertilizer has also scaled up fast with 80% growth in the last 9 months. However, we recognize these segments need far more focus and nurturing to improve resilience and drive both top line and bottom line improvement. Our innovation turnover index is in high teens, in line with our ambition. We believe there is still a gap in our ability to launch, scale new product and our talking -- and our taking efforts to revamp our go-to-market and 360-degree market approach. Our digital-based influencer approach to improvement -- improve engagement with the farmers is also being piloted, and we expect to roll out this nationally soon. We are also working on boosting the digital marketing approach and have gone live with WhatsApp for Business to improve farmer connect. Moving to seed business. We recorded INR 30 crore revenue as against INR 32 crore in previous year, mainly due to lower hybrid mustard sale. However, this is in a small quarter of the business. On YTD basis, business has delivered 1% revenue growth and 50% growth in profit before tax. This is in the context of product constrains with limited -- which limited our scale up of the new launches. For example, Diggaz. Cotton has become the biggest crop with sale of more than INR 100 crores, and we are optimistic of the potential of this segment. To conclude my opening remarks, I know -- I will now hand over the call to Ms. Subhra, our CFO, for a detailed analysis of our financials. Over to you, Subhra.

Thank you. Good morning -- good evening, everyone, and thank you today for joining us for Q3 and 9 months earnings call. I'll walk you through our financial performance for the quarter and 9 months, post which we can commence the Q&A session. Starting with outline for the quarter, our revenue stood at INR 522 crores as against INR 598 crores for the previous year. Domestic business registered volume growth of 3% in the backdrop of intense market competition, agile pricing, improved margins in the domestic Crop Care business. Also in the domestic Crop Care business, Herbicides and Biologicals & Specialty Solutions have maintained good growth momentum. Export business continued to face headwinds with business registering a degrowth of 38%. However, we are quite confident of the long-term potential with actions taken around expanding customer base and improving cost competitiveness. Seeds business was INR 30 crores as against INR 32 crores for the last -- previous -- last quarter same period. Profitability for the company was impacted due to challenges in the exports business. Our efforts continue to be directed towards optimizing the overhead costs, including portfolio rationalization, refresh of the portfolio, territory rationalization, removing overlaps and driving cost efficiencies and simplification across the value chain. Our inventory levels have been brought down without causing any business opportunity loss. Collections have also improved despite high market competition. We continue to have healthy cash and liquid fund balance of more than INR 200 crores as of 31st December. We will continue to drive capital efficiency. Other recent initiatives will help us in our pursuit towards consistent, competitive and profitable growth. Our CapEx has been moderated, in line with the demand, and our focus is to firstly improve the utilization and ROI of the already invested CapEx. We have recently received Board approval for solar panel installation in our manufacturing units, which will help reduce electricity costs and also carbon footprint. That concludes our opening remarks. We can now commence the Q&A session.

[Operator Instructions] The first question comes from the line of Viraj with SiMPL.

Yes, I just had a couple of questions. One is, if you look at the environment, generally we are in and the segment performance we reported, exports has seen a sharp degrowth with pricing pressure. You've seen -- talked about pricing pressure in domestic. And seeds per se, contribution is not that big in current quarter. So what explains this sharp jump in gross margin? We have seen almost 300 to 350 basis point increase in gross margin. So can you just give some perspective on what is driving this?

So Viraj, gross margin, I think one is, of course, I spoke about the domestic business has been able to improve margins through the actions taken on pricing front and also ensuring that we keep our inventory levels at the right level. And also there's a mix factor which plays because the international business did not deliver well. So given both these factors are helping improving margins. Seeds, albeit small, as you said, but has still been able to improve both gross margin and profit before tax.

But generally, say, in terms of pricing also, even in domestic, we have seen almost 5% decline in price realizations. Just still trying to understand the gross margin piece. I understand there can be a mix play between international and domestic. But even in domestic, we have seen a very good mid-single-digit kind of a decline in price realizations. So if you can explain that.

As I have mentioned in the previous calls, look, so we operate in a very complex, competitive environment. Our effort is to continue to drive margin as a primary thing because that is something is very, very important for long-term profitability of the business, sustainability of the business. But there are factors when you have a significant export business that goes down, obviously, brings the averages up. We can get maybe more details at a later stage, but combination of factors, sometimes you get advantage in terms of raw material costs and all. So various factors can help. But our effort will continue to remain that and as we have been talking in the past of domestic seed, Biologicals & Specialty Solutions, which we used to all crop nutrition in the past, we want to continue to drive domestic business because that's where certainty in spite of competition, is still more certain given our brand equity.

Okay. Just two questions. One is on the portfolio. In the presentation also, we talked about churn or pruning in the portfolio. And in the last few quarters, we've been talking about more aggressive approach in terms of leaving out low profitable or loss-making products. Can you give a sense in last 9 months or in Q3, what kind of a churn at the portfolio level we have seen? And is that exercise largely done? Or we would expect further some -- any perspective, where are we in that cycle? That's one. And second is on the export, when do you expect that the decline to kind of settle down, given that we've been talking to MNCs for supplies? So the two questions.

So first thing is on the portfolio. Look, when we talked about portfolio pruning, we were in the middle of the season. Now we have completed the exercise of portfolio rationalization. And a lot of that effect, you would see in the upcoming season because we also don't want to waste the inventory or waste the packaging inventory and all. So that work -- impact of that should be seen in subsequent quarters, right? So products are identified. What we have been very careful is that building inventory of those low-margin old, what you call retail products. So that is one. So the impact of that, we will see in the future. Now on export side, you understand our portfolio, right? Some of -- I mean our portfolio is really not -- is not very new. As we have spoken in the past, acephate had challenges. Pendimethalin now is facing challenges, two products, we had better opportunity was metribuzin as well as hexaconazole. We have a pipeline. For example, we talked about Metalaxyl-M, which we have started making. Our effort would be to not to continue to rely on these products, continue to participate because we have capacity but also flexibilize the plan and keep looking at new opportunities. And even in the existing products, we keep adding customers. And to that extent, we have started investing more time with the potential customers, developing new customers. And some of these things, they do take time because when you get a new customer, you have to supply them samples, they have to test the samples, they have to approve you as a vendor and all of that. But we know that we don't have a very new portfolio. But within that, we are trying to really take maximum advantage of what we have also trying to slowly switch over to newer portfolio. But given the global context of the market, I think global market forecast, given the commodity prices of key commodities like corn and soybean, including wheat remain low. The forecast for '25, 2025, I don't think is very strong as far as international business is concerned, and this is primarily driven by Americas.

Next question comes from the line of Ankur Periwal with Axis Capital.

First question on the domestic crop production business. If I heard the initial comments right, you mentioned YTD we're up 5%, 6%. Please correct me if I'm wrong. I think in the first half, we were up mid high teens, probably more like 16%, 18%. So is there a sharp decline in Q3 and probably key reasons for the same?

So one of the reason is that, and I have probably alluded to that in the past is that, look, Q3 depends on two factors. One is Q3 is a very strong herbicide business, because in Q3, wheat herbicide business is big, sugarcane herbicide business is big and rice herbicide business is big. And I have been highlighting, we have weakness in the herbicide portfolio so some of the work we have started. So Q3 is generally from a herbicide perspective, that's the largest segment is wheat for us. The other two big products which go into Q2 are some specialty products and vegetable and then what we call the continuation of kharif season in rabi. This year, all of you, if you have noticed, there was an abrupt cessation of monsoon during the month of September, right? So it actually didn't rain a lot in October, November, like previous 3 years. So I think it's just portfolio weakness in Q3 and abrupt cessation of kharif consumption as well as weak chili season. This year, chili prices have been very low. So some of those things actually explain why Q3 is slightly weaker for us.

Okay. Sure. Secondly, on the export side, you did mention that pendi also is facing some pressure. If I'm not wrong till last quarter, it was largely acephate, wherein we were facing some challenges, while pendi was doing okay. So any specific comments there, inventory-led issues again cropping up?

Well, I mean, so I think, look, pendimethalin challenges are basically because of the inventory and user level, right? That is what is causing problem, and other thing, I think we probably need to -- we cannot continue to undermine the Chinese overcapacity and their ability to undercut prices in the global market.

Next question comes from the line of S. Ramesh with Nirmal Bang Equities.

In your presentation, can you give us a breakup for this INR 492 crores of domestic revenue and the export revenue? And for the bio and specialties, if you can break it up for us?

So INR 492 crores, large proportion of it, I would say, has come from domestic Crop Care. Biologicals & Specialty Solutions, we have mentioned in the presentation as well, have done well clocking 13% growth on a Q3 basis and even on a YTD basis, it has done 24% growth. International business continues to be a challenge.

Is it possible to give the breakup of the international revenue in number -- in rupee crores?

It's INR 110 crores.

Next question comes from the line of Shaurya Punyani with Arjav Partners.

Sir, would you like to give a guidance as to the top line for FY '26?

So we don't give any forward guidance, but we will talk about -- we will talk in this call on what are the challenges and what are the opportunities for us.

Okay. And sir, one more. Out of the international revenue, what country is the highest like in terms of percentage?

It goes -- I mean, most of our business is primarily American.

The next question comes from the line of Viraj with SiMPL.

Yes. So just on the portfolio pruning part, can you give some perspective, what kind of hit we can see in coming quarters, the portfolio we exclude that's not that profitable or attractive for us to be...

Viraj, can you repeat your question? We're not able to clearly understand.

So we talk about that in coming quarters we would be -- we are trying to express in terms of review of the portfolio and we'll be looking to prune a certain part of the portfolio in coming quarters. So just to give us -- just to get a sense on this what percentage of the portfolio you think is not that profitable and which we may be exiting in the next, say, 6 months or a year.

Yes. So in terms of number of SKUs, it is very significant, right? I think we have a long tail. So I mean, it is a very high double-digit number. In terms of revenue, I think maybe I cannot tell you now, but I can tell you -- I mean, we can have separately discuss them.

So Viraj, this is not a question of less profitable. I think what we are saying is the focus and the effort from the team goes a lot in serving pain, which is where we are looking. The impact is not going to be material on top line and bottom line perspective.

Okay. Second question was...

What is important is that we -- our sales team rather than trying to handle so many SKUs, they put all their energy on a smaller number of SKUs and improving supply chain complexity.

Understood. And from an ITI perspective, say, either for 9 months or the quarter, what will be the ITI index for us?

So we can see -- I mean, I think for me, healthy ITI is we can always keep above 15%, right? At this point of time, we probably are above 15%.

I think it's more to look at it on a longer term and what are the actions we are taking to refresh the portfolio, Viraj.

Next question comes from the line of [ Preet Nagarsheth ] with [ Wealth Finserv ].

The question I have is related to your guidance for -- the domestic guidance at least for quarter 4. So are you seeing continued traction the way you have explained that Q3 has seen increase in volumes and herbicide obviously comes off -- and maybe insecticides, pesticides demands will increase in quarter 4. So do you see a better domestic performance from your side?

Yes. So as I said, look, herbicide, we are strengthening our portfolio. Now a lot of what happens in quarter 4 from a consumption perspective, so crop -- from crop area perspective, it is more or less similar compared to the last year with the change in crop mix. Example, mustard is down, but wheat is up in fact also. So from crop area perspective, it is the same area as last year. A lot of consumption of fungicide and insecticide depends on the kind of pest pressure. So it's very difficult. So you always go by what is the normal pests expected, what is the normal volume vis-à-vis previous year and what is the competitive situation. So difficult to say what will happen. At this point of time, all I can say at least crop is there. Having said that commodity prices are soft compared to even last -- previous years. So -- but if pest pressure is high, farmers would tend to -- I mean, resort to use of chemicals to protect their crop. It's difficult to say how things will evolve because there is no solid mathematical model available to say what kind of pest pressure will happen.

Right. I understand. My question is more in line with how poor the last year was for quarter 4 and for quarter 3 as well with a lot of inventory available in the Indian market, do you see that the larger business scenarios are better off than what they have been? And do you see a continuation of the growth that you've seen in Q3 continue in Q4?

So business sentiment, I would say, remain more or less same compared to last year. If they are not better -- they certainly are not better, they are more or less same depending on the crop. So sentiments are very similar. And what happens next, I think it depends on the external factors.

The prices are low definitely, but volumes will be an indicator.

Next question comes from the line of Abhijit Akella with Kotak Securities.

Sir, first on the rabi season in the Crop Care business. You did mention the fact that those cyclones had created additional trade inventory and maybe also greater pricing pressure because of the trade scheme. So would it be possible to just give us some slightly more color in terms of how things stand at present? Are the inventories still elevated? Or have they been cleared out? And are you still seeing aggression in terms of pricing from the leading competitors?

So I mean I think from what I understand, our pricing pressure continues in the market. And there's no shortage of inventory. I think everybody is sitting on the inventory and leaving in the market to -- because it's [Foreign Language]. Yes. So I mean I think pricing pressure continues and inventory -- there's enough inventory in the market.

Okay. And just last one from my side is on, number one, the seed industry -- seed rather production for next year, how is the outlook shaping up given it's already been through a season, I guess. And -- sorry, sir, yes, please go ahead, please go ahead.

You complete your question. I will make a note.

The other one was just with regard to how the CSM products are performing. For us, I guess, Metconazole is important and then PEKK. So how those are doing? And what kind of traction you're seeing in terms of the newer ones? By when can we expect some contribution from them?

Yes. So on outlook of the seed production, I think seed production is challenging. Is it as challenging as last year? I think it's probably slightly better than last year. But seed production area remains constrain because farmers are always weighing option between growing a commercial crop versus seed crop, but I would say slightly better than last year, right, on a production side. On our CSM pipeline, I know you talked about PEKK and other products. I think, look, our CSM pipeline is there, right, but we are adding to the portfolio. It will be very difficult for me to disclose the name of the customers, but we continue to add more customers, and we have inquiries. We are supplying samples for trialing and testing. I think there are a few products in the pipeline. We did mention today Metalaxyl-M because that is something we have reached the stage of commercial. As we get more details about the other products, we will -- when we get into commercialization mode, than it's a matter of talking. But yes, in other products, we are adding customers particularly metribuzin, pendimethalin and hexaconazole.

Next question comes from the line of Siddharth Gadekar with Equirus.

Sir, I just wanted to have clarity on our multipurpose plant that we had commissioned last year, we were targeting to do Difenoconazole. Have we started anything in that plant or that plant is still idle?

Difenoconazole we took some batches last year. This year also, we are working on a few contract manufacturing opportunities. One of them is with a global major. So the plant is not idle. The plant is used for the purpose it was set up, which is working on various new opportunities.

Next question comes from the line of Archit Joshi with Nuvama Institutional Equities.

I just have one question. Sir, what would be your reading on -- in the global landscape after 6, 7 quarters of the inventory destocking and that onslaught that we've been hearing off. And you also mentioned in your opening remarks about quite a lot of inventory still there in the system in products like pendi. How do you see this panning out from a volume and pricing perspective in this calendar year?

So I think volumes are very comfortable. And whenever there are comfortable volumes, it does put pressure on pricing. But the most important driver of consumption of this product is really commodity prices and that continue to -- I mean, I think if you track soybean prices, cotton prices, wheat crop prices, when you look at the seaborne prices, they continue to trend downward lower, right? And you know the farm income because of the lower commodity prices, farm income are under challenging situation, and I think we understand this China supply dynamics as well. I believe while volumes will continue to grow, I mean continue to grow because farmers are planting crops, they are not leaving the crop fallow, there'll always be pressure on the pricing. And that's why domestic becomes very important for us. I think I've been saying probably for the last 3, 4 calls, our primary focus is to drive domestic. We have lot of opportunities to fix -- I mean we have opportunities in CSM, we have opportunities to participate in international business. But given the scenario there, I'm more optimistic about domestic because that's where we have a brand equity.

Next question comes from the line of S. Ramesh with Nirmal Bang Equities.

So if you look at the outlook for the products which you mentioned are under development in the lab stage, the 10 products you're working on, can you give us some sense in terms of what will be the target market size for these products, when you expect to commercialize them?

So most of our CSM products, they are for diversified set of customers abroad and international businesses tend to primarily get focused towards Asia and Americas, right? So that's the kind of pipeline.

So -- and if you look at the Chinese strategy, I understand they are also planning to get into formulations. So how would that impact Rallis' business? If you see the Chinese formulations supply hitting the international market and your own markets?

So I think that is something we have not been talking in the industry, and I think -- I'm glad you've brought that point because Chinese have started participating directly in those markets. That is something we have to wait and watch. But I believe there will always be opportunities from a diversification perspective from prospective clients to have alternate suppliers, I guess. That's where India is playing a role and will continue to play an increasingly important role.

Next question comes from the line of Ranjit with IIFL Capital.

We have been focusing more on the domestic front this particular year, and will continue to remain focused for the next few years. And that is also a segment which has grown for us in the first 9 months. So just wanted to get a sense how has been the secondary demand by the farmers. Will it be a case of having a bit of an higher inventory and that might become a bit of a headwind for us next year or even the liquidation has been at par, in line with our sales growth?

So volumes generally are good. I think it's a pricing issue right now because this year, kharif was decent. I think it didn't do well in the later part of the kharif and rabi planting is good. So I don't see it as a volume issue. It's largely an issue of pricing when supply is higher.

The liquidation has been at par with the volume growth that we have been doing.

Volumes are higher, that means liquidation is higher.

And that should not be a challenge for the next few years or at least for FY '26?

I think, I mean, the way I see it, look, there are probably -- I shouldn't say too little farmer because we have millions of farmers. There are a lot of companies chasing the same set of farmers.

Next question comes from the line of [ Sivaji Mehta ], an individual investor.

Sir, one of the specialty chemical players in their earnings call had mentioned that China may start looking at increasing prices of various chemicals post the Chinese New Year. Are you expecting something similar post the Chinese New Year?

A lot of news goes in the media. I think I would really wait for -- see, we have to see for some indications, right? For example, recently, there was a news that because Chinese have increased the price of some of the fluorochemicals related and suddenly, those reduced and it died down very quickly. So I think we will continue to monitor how it happens. And then it's very difficult to predict. I don't have any real insight to say how they will behave.

Sure. Actually, anywhere in the market...

I mean, if there's an opportunity, I think we would not leave any opportunity on the table if there's an opportunity to increase the price.

Right. Makes sense. Sir, and also over the next 2 to 3 years, once things normalize, what is the stable asset turn that you foresee for your businesses, excluding the seeds portfolio?

So seeds, anyway, we don't have any fixed capital. So seeds' asset turn, it's a working capital business. As far as total is concerned, I think I mentioned earlier as well, we don't look at asset turns, but IRR, and IRR should be certainly more than that across the lowest assets that we look into.

Next question comes from the line of [ Sanjay ], an individual investor.

Am I audible?

Yes, Sanjay. We can hear you.

Sir, my apologies, I joined the conference call by about 20 minutes late. So very briefly, if you could tell me what was the reason for drop in our profitability this quarter? And secondly, sir, I just wanted to know as an individual investor, obviously, my query will be skewed towards the stock price performance. So if I see, first of all, there is an underperformance in the last 5 years, and also our revenue growth, CAGR has not been that good if you compare to all the other competitors. Our CAGR is not even increasing by the 10% to 12%. It's hardly 7% to 8%. So how does our company foresee the next 5 years in terms of revenue and profitability?

Yes. I don't know, Sanjay, if you have attended the previous conference calls, but I've been trying to articulate some of the steps we are taking to really turn around this business and bring in line with the industry or do better than industry. There are quite a few things we are doing. For example, this product -- this business is a product business, we are looking at significantly revamping our product portfolio. We had gaps in certain areas, particularly herbicides and also we're working on those. We have now a decent seed business, which has taken a while to stabilize. I think we can continue to deliver on seed. The other area where we are focusing from a product perspective is Biologicals & Specialty Solutions because that's another area where consumers are getting interested, farmers are getting interested. So we're working on those. So that's on the product side. I think we are taking a lot of steps on really customer side because at the end of the day, this business is also demand generation business. If you're a farmer in a village, you are probably approached by 10 different companies in a day. So how do you make decision which company to prioritize? Obviously, product and product performance matters. But we are trying to intensify our customer relationship efforts, and we are trying to get more focus rather than trying to be thinly spread and also trying to leverage on digital. So we're making a lot of investment on digital connectivity with the farmers so that we can serve them better. So that's on the customer side. On, I would say, efficiency side, obviously, we have some assets, and we are also having old portfolios. We are looking at even on manufacturing side how can we make our products better, how can we bring down the cost on production side, what are the other things we can do to add new products to the portfolio. We're also looking at some CSM opportunities. We have a pipeline of companies we're working on. But these things do take time, right? We are reorienting our people capabilities, so we're looking at people capabilities and various other things, a series of steps.

Okay. And sir, just very brief on the reason for drop in profitability this time? I'm sorry, I joined the conference call late. That's the reason.

Drop in profitability, Subhra, you want to talk about?

Yes. Year-on-year, if we see our profitability has dropped significantly. So just what is the specific reason for that, just a small pointer if you could provide?

See, I think for us, seasonal profit -- quarterly profitability is difficult to explain because it's a small quarter and we said that exports business had challenged. On a YTD basis, we are largely flat on PBT basis despite the challenges in the market front. So this quarter, the numbers are lower squarely because of the challenges in export business.

Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

So thank you, everybody, for participating on the call. Agrochemical chemicals export demand continues to be weak. We will try to improve volume growth and margins in a tough environment. Seed business is impacted by availability of inventory, domestic agrochemical demand is positive, but lower prices across products are impacting revenues. Margins are steady with actions around product mix improvement and cost optimizations. We remain optimistically cautious for Q4 overall business plans. Our endeavor would be to improve capacity utilization and take steps to improve market share across verticals. We'll try to maintain EBITDA margin in the short term. Our long-term actions on improving business health is in the right direction and I remain positive for driving competitive, profitable and sustainable growth to create value for all the stakeholders. Thank you very much.

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

Thanks, everybody.