Rallis India Limited ($RALLIS)

Ladies and gentlemen, good day, and welcome to Rallis India Limited Q4 and FY '26 Earnings Conference Call. We have with us today Dr. Gyanendra Shukla, Managing Director and CEO; and Mr. Bhaskar Swaminathan, 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. [Operator Instructions] Please note that this conference is being recorded. I now invite Dr. Shukla to begin the proceedings of the call. Please go ahead.

Thanks. Good morning, everyone, and -- for joining us today on Rallis India Limited Q4 and fiscal year '26 earnings call. As mentioned, I have alongside myself, our CFO, Mr. Bhaskar Swaminathan.

Good morning, everyone.

I'll open with an overview of the industry landscape before addressing developments specific to Rallis. The Indian agrochemical sector is currently transitioning from a buyers' to a sellers' market due to war-induced supply constraints and rising prices. Post Iran war, the industry shifted to a sellers' market with signs of panic buying and holding. Supply chain disruptions persist, but inventories help most companies avoid damage. Agrochemicals, particularly glyphosate, is facing pass through and China supply chain disruptions amid global tensions. The prices of other generic AIs like glufosinate, [indiscernible], metribuzin, [indiscernible] et cetera hit near-term cost inflation wave likely to compress downstream margins. Quarter 4 is typically slow for the domestic market for agrochemicals. In addition, the rabi season has not gone well owing to the unfavorable climate. As per the official data, the unseasonal rain and hailstorms have damaged the wheat crop across 2,000 hectares with wheat suffering the maximum impact. At the end of March '26, summer sowing is progressing at a slower pace, down 4.7% year-on-year, primarily driven by decline in rice, cereals and oilseeds. Within cereals, bajra sowing has improved by about 9%, while maize has declined by about 8%. In oilseeds, ground nuts sowing is significantly lower, down by 12.7%. Pulses is a bright spot with total area rising by 17%. [Audio Gap] drive early deficit in North and Central and Western India and which are key sowing areas, while South and East may see a relative better monsoon. Well-distributed precipitation during key sowing windows can partly offset deficits, whereas erratic patterns such as prolonged rice spells or excessive concentration tend to be more disruptive. Erratic patterns risk 5% to 10% demand cut for herbicides and insecticides. In integrated firms with balanced portfolios of seed, crop protection and soil and plant health tend to face less impact. Expanding irrigation coverage to 55% of the rural land has notably reduced monsoon dependence on key crops for India. And also, on the rural diversification into dairy poultry and allied sectors now contributes roughly 1/4 of the income per household, providing a structural buffer against rainfall deficits. The MSP framework, key indicator for kharif '25-'26, is broadly supportive for oilseeds, pulses, millets and cotton. While the hike in paddy is relatively modest. From the agrochemical and seed industry perspective, this is positive for crops such as cotton, soybean, ground nut, maize, pulses and millets, provided monsoon distribution and reservoir levels remain supportive. Sector -- agriculture sector may see a 3% to 4% growth in fiscal year '27. Seeds category remain a structural 5% to 10% CAGR story depending on the portfolio of the companies. Volumes might shrink due to less acreages, but margins are expected to remain stable to soft. The markets would favor low-cost producers with export breadth and tight working capital discipline. The near-term outlook remains contingent on the evolution of Middle East conflict, while healthy reserve levels of approximately 54% are supportive for ongoing season. Reduced acreage and forecast of below monsoon rainfall could possibly pose some risk. India's FCO 2026, this was a key bill, which was brought to regulate biostimulant fertilizer, standardizing humic acid and seaweed formulations, thereby improving product reliability and regulatory clarity. I think this is very good positive development for the long term. The global crop protection market estimated at approximately $70 billion to $75 billion in 2026 and is projected to grow at a CAGR of 5% to 5.5%, supported by rising food demand, limited arable land and need to improve crop productivity. On supply side, globally, China-linked supply concentration remains a key issue, especially for active ingredients and intermediates, where export restrictions, price shifts or freight disruptions can quickly affect availability and cost. Elevated raw material and logistics costs continue to pressure manufacturers, while global weather uncertainty and changing crop patterns added demand volatility. Global recovery in this sector is visible but uneven. U.S. demand is supportive. Brazil is weak. China-led pricing pressure remains a key concern. India's rising stock -- rice stock position remains strong. But the latest report [indiscernible] does not indicate any fresh increase from March to April. Global rice stocks have increased, including a comfortable supply situation and the possible pressure on the global rice prices. So that's a global overview. Moving on to Rallis specific developments. We had a reasonable quarter 4 performance despite soft rabi season and geopolitical unrest. Our quarter 4 revenue stood at INR 456 crores versus INR 43 crores previous year. EBITDA improved by 96% from -- to minus INR 1 crore from minus INR 19 crores in Q4 fiscal year '25. Profit after tax stood at minus INR 15 crores versus minus INR 32 crores of quarter 4 fiscal year '25. Exceptional items include profit on the sale of some property land for about INR 3 crores in Aurangabad. Across the technical portfolio, we are continuously broadening our customer base and securing additional registration with global players to drive share gains. In metribuzin, the volumes have decreased in quarter 4 in comparison to quarter '25 volumes. Pendimethalin volumes have increased. Hexacon volume also have increased, and there has been some decrease in the acephate volume. So pendi and hexa has done overall well. There's some shrinkage of volume in metri and acephate. Overall annual capacity utilization has improved in fiscal year '26 compared to '25. On new launches, we have currently launched Alstor, a dual-action granular insecticide and Fiplam, which last year we had announced, but we were not able to launch because of some quality constraint. It has been launched now. It will help in managing both a broader spectrum insecticide to manage both sucking and chewing pest. We have also obtained registration for a 3-way rice herbicide. And in past, I've been talking about growing herbicide segment. So this is an addition to that. It will be called Spiro. We are working on the launch plan. In Q4, we had launched an initiative called Idea2Impact to establish an open innovation system to source, validate and commercialize agri innovations. We have also launched Saksham, a GIS platform, which enables scientific identification of high potential strategies for target market expansion. On our new initiative, Sampark Plus captures farmer level demand signal to generate actionable insights and improve sales conversion and move in inventory as needed. We're also using tech-assisted products and generate demand, digital led field AV van campaigns, farmer and retailer level digital schemes and enrollment of retailers on Anubandh Edge platform. So all these platforms are [ digital ] driven. This is [Audio Gap] centricity goals as well as retailer and distribution connect. As a result of improved manufacturing efficiency and operational excellence, Rallis has achieved record production levels. We have enabled digital-led engagement that strengthens data-driven decision-making and enhances farmer outreach and our advisory productivity. We are also shifting towards high-margin, sustainable and farmer-centric offerings, including biological and next-generation product. That concludes my opening remarks. I'll now hand it over to Mr. Bhaskar, our CFO, for a detailed analysis of the financial situation. Over to you, Bhaskar.

Thank you, Dr. Gyanendra. Good morning, everyone, and thank you for joining us today for our Q4 and FY '26 earnings call. I'll walk you through our financial performance for the quarter, post which we shall commence on the Q&A session. Starting with the top line for the year, our Q4 FY '26 revenue stood at INR 456 crores as against INR 430 crores for the same period last year, resulting in an overall growth of 6%. Overall volume growth has been 5% with pricing growth by 1%. Overall EBITDA for Q4 FY '26 stood at negative INR 1 crores, higher by 96% compared to last year of negative INR 19 crores of the same quarter. Profit after tax stood at negative INR 15 crores versus negative INR 32 crores of Q4 last year, which is 52% higher than the previous year same quarter. Crop Care segment grew by 5% to INR 425 crores in Q4 FY '26 from INR 405 crores in Q4 FY '25 due to volume expansion, new product promotion and increased digital engagement. Moving to domestic B2C, 15% growth in Q4 FY '26 registering INR 255 crores revenue vis-a-vis INR 222 crores in Q4 FY '25, which was driven by volume growth of 14%, primarily led by insecticides. Soil and plant health category grew by 27% to INR 47 crores from INR 37 crores in Q4 of FY '26 in comparison to Q4 FY '25. We registered a robust volume growth of 29%. The volume effect is due to growth in micronutrients and biofertilizers. Moving to seeds business. Seeds revenue grew by 23% to INR 31 crores in Q4 FY '26 from INR 25 crores in Q4 FY '25 due to 8% volume growth and 15% price growth mainly driven by cotton and millet. Exports top line degrew by 33% to INR 77 crores from INR 114 crores due to degrowth in volumes and revenue from metribuzin and pendimethalin. CSM products, Custom Synthesis Manufacturing products, in Q4 FY '26 revenue displayed promising growth by launching 15% growth to INR 66 crores from INR 41 crores of last year, driven by both volume and price growth. [Audio Gap] stood at INR 170 crores versus INR 182 crores with a decline of 7% primarily due to volumes. For the full financial year period, top line revenue stood at INR 2,897 crores, reflecting a growth of 9% year-on-year. Crop Care revenue stood at INR 2,416 crores, reflecting 8% growth year-on-year, driven by volume expansion despite price softening. And seeds revenue increased to INR 481 crores, delivering 15% growth year-on-year, supported by cotton and maize, along with improved contribution from in-licensed products. The B2C business recorded growth of 5%, delivering INR 1,657 crores revenue, primarily contributed by 9% volume growth. The B2B business recorded growth of 14%, delivering INR 759 crores of revenue supported by both volume and price growth and expansion of the customer base. In the Crop Care segment, expansion of our customer base and product portfolio is enhancing business resilience. We are driving focused execution across frontline and operational functions by optimizing the product portfolio, rationalizing territories, eliminating overlaps and simplifying costs across the value chain. In the Seed segment, our primary focus will be on 5 strategic crops, cotton, maize, millet, mustard and rice. A selective and concentrated approach in these crops is expected to drive operational scale and efficiency. Overall, we remain disciplined in improving capital efficiency across both fixed capital and working capital. At the quarter end, our inventory levels remained slightly elevated in comparison to the same quarter of last year. Collection cycles remain smooth. We have a healthy cash and liquid balance of INR 541 crores as at 31st March 2026. Our continuous approach towards improving digital-led initiatives is helping us reach targeted customer groups with greater momentum. In parallel, we are undertaking portfolio rationalization and sharpening our focus on priority markets to enhance operational efficiency, strengthen market presence and improve profitability, whereby we remain committed to achieving consistent and profitable growth. That concludes our opening remarks. We can now commence the Q&A session.

[Operator Instructions] The first question comes from the line of Prashant Biyani with Elara Capital.

Sir, the first 3 bullet points of your commentary on Slide 12 portrays a very pessimistic scenario, but your performance was pretty contrary to that. And I just wanted to know, especially on the gross margin part, what drove healthy margin improvement at the gross margin level?

So I think when we put a commentary, it is based on what was happening in the market, right? So last year, we started with a very heavy early rainfall that impacted the herbicide uses in crops like soybean and cotton. So that was a big impact. Then we came to end of kharif season, massive rain led to decline in consumption of insecticides. And as you move forward towards rabi, actually rain suddenly stopped in September. And as a result, there was an impact on pest disease pressure and all. So if you see the context of overall year development has been a little bit choppy. So it indicates that, nothing else. Having said that, I think our focus is to -- those events will continue to happen, how do we move forward and deliver better performance on an ongoing basis. Now gross margin, obviously, is a combination of our ability -- so 2 things -- I mean, again, it's a segment by segment. I think our contribution in seed and soil and plant health business continues to remain robust. When we say crop protection as a category, there's always a mix of products. And if any one of you might remember, I've been talking about 2 trouble child for us, Clasto and Benzilla, right? So we are trying to actually liquidate that inventory. I think we have done with majority of it. That led to compression of margin in quarter 4 because we had to liquidate that inventory. We just cannot keep it. Otherwise, it becomes a write-off.

Sir, I meant -- sorry, you meant that these 2 products inventory was liquidated before Q4 or during Q4?

No, no, during Q4.

But we delivered a decent margin expansion at the gross level. So...

[Audio Gap] you're looking at it, right?

No, I'm looking at Q4 specifically on gross margin.

From the perspective of crop protection or seed?

Both. Seeds, I mean, is a small thing only, mainly on the Crop Care side.

So look, I think the margin expansion, if you see from what I know, our CSM business delivered higher margin because we had a contract, though it is a smaller business, but there is a clause where we can actually get some benefit if volumes drop below certain thresholds. So that helped. SPH business was slightly better. Overall, B2B business, exports were better, seed was better. So that's what is reflected in overall number. On crop protection, stand-alone basis it was marginally down because -- B2C business because of Benzilla and Clasto.

Okay. Sir, how are you seeing the initial demand for kharif?

So 2 things are happening. I think right now, everybody has gone into a wait-and-watch mode. First of all, the rainfall, El Nino impact, nobody knows. The other thing, which is people are looking at how government will be able to mop up sufficient fertilizer. These 2 factors might have some -- and then third one is always the commodity prices, right? So rainfall pattern, commodity prices and fertilizer, these 3 factors will determine to what extent farmer will plant what. When we plan our business, we plan on a normal basis because I believe each 3 of factors -- for example, I believe that if farmers get 10% less urea, it will not impact the yield because farmers are used to using high urea because they're highly subsidized. More than urea, phosphorus potash are going to be more critical. When it comes to rain, there's a forecast of 8% less rain over LPA. But again, that -- there have been instances where rainfall has been 8% lower or even much lower. But distribution was good and it arrived timely. So as a result, it didn't have much negative impact. So I think a lot of unknowns and war-led petrochemical disruption, supply chain, solvents, energy costs, everybody increasing the prices of raw material, all of that, when you factor in, it is very, very difficult to put a finger and say, look, what will happen. What we are trying to see is that historically, in -- I mean, my agriculture lifetime experience in 40 years, there have been 2 worst droughts. Even then area zone does not go below 85%, 95%, even 90%. So farmers will plant something. They might make different choices. They might also downtrade on the kind of seed they buy. They may not buy very premium seed. They might reduce some fertilizer consumption. And unless they expect a good income, they may opt for lower-cost crop protection product versus high-cost crop protection products. So it's too difficult to say. From our perspective, we are trying to secure as much as possible supply for kharif. And we'll also seek opportunities to pass on at least the cost increase.

Sir, just lastly -- sir, our crop B2C business growth was driven by insecticides. Sir, why would insecticide sales grow this much when there is -- this would be a herbicide placement season?

I mean, so let me tell you. Placement, I think, first of all, we have not gone for any significant placement more than what is required in quarter 4 because some of this was low-cost inventory, and we would like to sell in quarter 1 because there's an opportunity to realize higher price. And so -- but -- I mean, I keep saying that, look, don't look at our business on a quarterly basis. That's not the right way. Always look at our business on H1 basis, H2 basis. So if you say H1 story, I was telling H1, if you see our business, actually, the leading growth had come from fungicide and herbicide. And in H1, because of August, September rain, insecticide users had dropped. As a result, insecticide business had declined. Come to H2, actually, our herbicide and insecticide have done better, right? Whereas fungicide has slightly gone down because there is a driver of the lesser diseases. But on a yearly basis, I would say we are slightly down on insecticide because of the impact which got created in H1. We are up on fungicide, and we are significantly higher on herbicides. So on a yearly basis, our herbicide business is up by 15%, fungicide by 5% and insecticide is down by 3%. That means the B2C business has gone by 4% overall.

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

Now my first question on the seed business there. So if I look at not quarterly, but let's say, on an annual basis, we have done reasonably well this year, along with some sort of stability or improvement coming in the EBITDA margin as well. Given your commentary of focusing on those key 5 crops, how do you look at growth or ramp-up in this business over the next 2 to 3 years? There have been issues of lower inventory earlier. But despite that, we are seeing some margin uptick possibly because of better pricing. So your thoughts on, one, volume growth, pricing growth and margin outlook for this business?

Right. So I think in one statement, I can say pricing across the board will be higher because when you have to -- when the commodity prices go up, we have to compensate more to the growers. And that has to be -- we have to figure out a way to continuously increase the price. Now when it comes to yearly construct of the seed business, to me, 4 crops are more important, cotton, rice, maize and millet. And each one of those crops actually had delivered growth last year. Cotton, in fact, had grown by almost 35%. Maize had grown by 20%. Millet growth was 8%. And there was a small growth in rice because rice seed was -- availability was a challenge. Now when I look forward, I think cotton probably this year, again, will deliver highest growth followed by maize and rice and then millet, millet because of the limited area. In fact, millet might surprise us. In a less rainfall area, sometimes millet area also goes up. So that's how I see it. So I expect a combination of price and volume growth and expecting to deliver high double-digit growth again this year.

Sir, just one follow-up. High double digit is a volumetric growth that you're looking at or it includes the pricing also?

It's a combination of volume and price.

Okay. Sure. And on the margin front, should we expect to sustain these margins or maybe even improve given the realization improvement?

I cannot predict that. But obviously, effort is when your business grows, cost would not grow in the same proportion, that should have positive impact on the margin. But in seed, for example, last year, we suffered because we had higher prices for drying and processing and all. This year, there is other phenomenon because sowing crop was on time by everybody else and harvest came at the same time. As a result, there was a certain capacity constraint for dryers, which is a primarily third-party activity. As a result, companies have to pay incremental cost for drying in the paddy open field. When you dry in the open field, what we call pat drying, it also sometimes can lead to lesser recovery. So all of those factors are not known yet. I think we are in the process of preparing for kharif and inventory and costing and everything probably will be known towards end of the quarter. And how season fares from a consumption perspective is only known when first half is over.

Sure, sir. Second bit on the Crop Care side, if you can share your thoughts and comments on the specific products, acephate, pendimethalin, et cetera, how is the macro behaving, especially given the supply chain volatility globally, both on capacity as well as on the product front?

So I think as far as domestic branded business is concerned, availability is not a constraint. We are okay. Now when it comes to our export business, I think there are 4 primary molecules we deal, pendimethalin, hexaconazole, acephate and metribuzin. I continue to remain positive on metribuzin and pendimethalin and hexaconazole. There is a structural challenge on acephate side because the same people those who supply us raw material, they compete with us in the American markets. So as a result, there's always a challenge to supply those markets. Having said that, given some supply challenges also, we are trying to prioritize domestic market for a product like acephate and trying to balance it, not lose the customer at the same time, see where we are going to be able -- we will be making more money. There are other products like metalaxyl, and we make kresoxim -- kresoxim methyl we make. Those are relatively smaller products.

Next question comes from the line of Viraj with SiMPL.

Yeah. Just couple of questions. First just to clarify, you said this [indiscernible] B2C gross margin has softened in the quarter and whatever increase we've seen on a consol basis is a mix of B2B exports and seeds. Am I right?

Yes.

Okay. And also, with regards to the double -- yeah, just [ Q4 and driven through the ] heavy volume growth which you saw in B2C in the quarter gone by, that would also be largely a function of the [ previous investment ] we would be doing for insecticides or maybe for the biostimulants for the upcoming quarter. Would that also be a right understanding?

Actually, contrary to what we should have done, we have not done that. We have been very conservative on replacing the stock, right? So we have only sold what is required because as the sentiment change, we might have an opportunity to have a higher realization. As a result, we haven't aggressively pushed the stocks.

Okay. Any color you can give in terms of inventory in the system for the market?

So look, at this point of time, if you go to the market, while it seems challenging environment, but every product is available, right? And we haven't seen any early sign of price increase because consumption has not begun yet, right, except the cotton seed where probably in Northern India, we are midway in the season, some of the crops we sell [Audio Gap] in season. So it's too early to predict. But yes, on seed, cotton prices were not increased by the government. So they remain flat. So we have to rely on volume and cotton is going to be roughly 20%, 25% of our projected cotton seed business. So from that perspective, no price increase. All the price increase opportunities will come in rice, maize and millet. Cotton is primarily a volume game. Same way, crop protection, I think because of rain and all, no. So yes, companies do place some, the normal inventory. We haven't done anything beyond normal inventory.

I meant, crop protection for the industry, not specific to us, any color you have on the -- you can give on the inventory in the system because even Q2 was bad and rabi has not been that great. So any color you can give in terms of the inventory in the system?

So I think inventory has come to a normal level. I mean 2 years ago, this whole industry was suffering from a lot of inventory hangover. I think that has reached to a normal level now. Now obviously, I don't have company-by-company detail. I don't have insight into other companies. But there are enough indicators in the system to say people have inventory what they need. They're not carrying forward a lot of excess inventory.

Okay. No, because where I was coming from is, as you alluded in the earlier part of the call as well is that any cost increase which we are witnessing right now, we will be looking at opportunity to pass through. So in that sense, especially on the generic piece, just to understand the factors we are looking internally, which gives us confidence that we will be able to pass through.

Yes, we are one of the first ones to announce price increase because we cannot absorb all the cost. Because season -- consumption season has not yet begun. So it's very, very difficult to say how market will behave. But every company is kind of indicating they have to pass on cost increase. Otherwise, they will all become -- they will face a very challenging time.

Okay. And last question was on the exports of the B2B field. Any update in terms of the pipeline, in terms of new molecules, which we have commercialized or hoping to commercialize?

So current year -- so last year, we did start making -- there's a molecule called pencycuron. Besides that, when that happened in the last quarter, I think we'll still rely on old molecule. There are 2, 3 new molecules. So we have narrowed down the list which used to work. Now we've got about 3 molecules, which should get introduced in the next 2 to 3 years. We are in the advanced stages of establishing processes, working with the, what you call, buyers. And obviously, there's a registration process that has to happen parallelly.

Next question comes from the line of Saurabh Jain with HSBC.

My first question is, can you please give us...

Mr. Jain, sorry for interrupting. You sound a little lower. Can you just speak a little louder, please?

I'm saying, can you give us some sense on how is the trends you're looking at in April across all the 3 businesses in terms of volume growth and maybe some sense on the pricing?

So if you say April, April basically -- some season for tea gardens starts in the Northeastern side. That is -- from a consumption perspective, is normal. Apple season seems to be normal across Himachal and Jammu. Then you have cotton season, which begins in North for seed. This is a low crop protection month and low SPH month, right? Because all of that will start with the rains when they start coming in the month of -- end of May in Kerala and pre-monsoon showers, some places, it happens. So it's too early to predict that. But as I was saying, farmers will plant the crop even in the worst monsoon years. We haven't seen acreages dropping. I think what farmers do start doing in downtrading, right? So they might use lesser price than they might price seed. In some cases, they might go for saved seed, all of that happens. Given the uncertainty around rain and commodity prices and everything else, seed indication, I think we'll have a fair seed indication by end of May in terms of sentiments towards crop. Crop protection, I think, is very, very difficult to predict any trend before end of May or early June.

And what about global trends? Because you earlier alluded to the fact that there is some sort of panic buying that is being set in. Are you seeing any trends that indicate that the trade channels are looking to fill up the products and volumes are moving early?

Not early. So North America is the biggest season where placement happens in the March, right? Now their purchases would have happened in the fourth quarter calendar year last year. So I think what is important for North America is the rainfall because their agriculture is highly rainfall dependent. Brazil had a decent season, not an outstanding season. But global commodity prices actually still are not reflecting in the commodity prices around the globe. Commodity prices continue to remain relatively soft, which means at least what is sitting on enough inventory of everything.

And have you also increased -- you're taking some price increases in the global portfolio?

Everywhere. I mean, wherever possible, we have to increase. Otherwise, we'll be paying the money from our pocket.

Understood. And trying to tie this with the disruption that we are currently witnessing, and you also mentioned that the margins in the B2B business has improved, would it be fair to assume that the worst of the margins are behind and with the price increases that we might undertake the margins can here onwards trend on a positive side and it can get better?

In last 5, 7 years, this industry has learned a lot, right? So there was a COVID and there was a Ukraine war and now this is new war. And every time, new learning is coming, right? So during COVID period, everybody got engaged in the farming as a result, companies did very well and supply chain was disrupted, but still material was available. Then came Ukraine war, there was a shock of petroleum prices that subsided. That -- but that COVID thing also led to a lot of inventory buildup because 1, 2 year did well, third, fourth year, a lot of inventory, then war happens. Now that has become normal. Now we are dealing with a new thing, right? So too frequent, too many things happening, and now we are also talking about El Nino. So all I know is that farmers will plant the crop. Southeast monsoon based on what it looks is going to be good. Punjab, Haryana, Western UP, part of Rajasthan and eastern Madhya Pradesh all irrigated or get, what we call, a short rainfall. So the risk is only a few pockets in the country. So for example, Marathwada reservoir could be a challenge. There could be a challenge in Saurashtra, there could be a challenge in Rayalaseema. Other than that, there are pockets of challenge. But I would say still agriculture, farmers will -- that's a basic thing, right? Will happen.

Understood. My last question...

They will plant the seed.

Sure. That's helpful. My last question, at this point in time, are you facing any disruptions in terms of your procurement of raw material or technicals or very high pricing, which you would believe that it will be difficult to pass on?

So there was a period when every company left, right and center was issuing force majeure letter and they said, wait, right? There was a time when they will say, we are giving you a price for a quantity, confirm within 3 hours. Otherwise, after 3 hours, it cannot. I think all of that is over now. There's a bit of normalcy. So when this wars started, I mean, things looked very chaotic. But there some order is getting established. Yes, obviously, we have to pay higher for everything. And then we have to figure out a way to see how much we can increase. Obviously, it will depend on what competitive products also do. [Audio Gap]

Okay. So let us see if this thing seems to continue more than what we earlier expected. Would you expect any disruptions in the manufacturing in the next few critical months, month of May and June?

So I think as far as kharif is concerned, we have covered ourselves quite well. Se seed is all domestic, no problem. Soil and plant health is by and large covered largely domestic. Where we have a crop protection, which is a domestic side story, 5 ingredients we produce on our own. Some of the other ingredients, we have suppliers where they might want higher price, but we have secured supply. So it's not a straight answer. I would say I'm covered by and large for the kharif. It goes beyond June.

Next question comes from the line of Rohit Nagraj with 360 ONE Capital.

Sir, first question is in your opening remarks, you mentioned that the margins will be stable to soft. And in terms of the cost increase, we have already experienced that the raw material cost or sourcing cost has increased. We'll be passing on to the farmers by increased prices. But given that the monsoon is expected to be low, how much ability do we have in terms of increased cost completely passing on to the farmers? And secondly, will there be any negative impact because generally, the sentiment will be negative plus as you also explained, there will be down trading, which will also happen. So I mean the farmers may go for branded generics to the normal generics. So just a broader perspective would be helpful.

So branded generics actually helps Rallis because this is where we operate. We are selling generic products. We are not an inventor company, right? As far as planting is concerned, we know that farmers -- I mean, as I said, farmers even in the worst condition will plant the crop. And if they go for lower cost seed, lower cost of -- lower priced product, it does help Rallis, both on the seed and crop protection and other category side. What we don't know is basically a fertilizer -- how much government will be able to provide fertilizer will farmers be making different choices. Government has not increased any prices for the farmers. So all price increase currently, if you see is being absorbed by the government. And as I said, look, even if 10% less urea is available, it actually doesn't -- it will not have any serious impact on the agriculture production. It might have a sentiment. So some people think that for growing corn, you need more fertilizers. So if they don't get enough urea, they might say, okay, plant, less corn. But then there's the other side of the story where they can easily sell that for the industrial users. So it's not a straight answer. I would say let's assume agriculture will happen. There will be cost increase and companies will have opportunities to pass on the cost increase unless there's a total failure of agriculture. Monsoon doesn't come in at all in June and July. I mean, that has never happened in the history of human kind.

Sure, sure. And just second question, in terms of cost increases till now, what is the kind of cost increase that we have observed in percentage on an overall?

15% to 25% is generally the range.

Next question comes from the line of Ketan Chawla with Affirma Capital.

I just had a clarification on the earlier question. So the 15% to 25% cost increase is on account of raw materials and what proportion of this are we passing through versus what we're absorbing?

So as I said in the beginning, right now, it's all placement, right? We have tried to pass on all. We have announced the price increase. I think everybody is working. So there's always a carryover inventory, which comes from January, February, March that was supplied at the low price. I think that will get exhausted and then new prices will start getting established in the market. That's how market start. So all the new supplies, we have been supplying at a price [Audio Gap].

Understood. And in terms of -- based on where -- how you see the market right now, how long do you expect this 15% to 25% cost increase? Are you expecting this to percolate for first half of this year?

Look, most of the kharif inventory people will build by June. So for kharif, this cost increase, you have to assume that it has happened, right? It's already a reality. We cannot ignore that fact because we are sitting in May -- sorry, we are getting into May now very soon. And most companies would like to procure raw material even if something has to be sold in July, August and September because there's a lead time of shipping, bringing in processing, packing and supplying. So generally, it's a 100 -- 90- to 150-day cycle depending on the product and crop. For herbicides, anyway, every company has made all the arrangements because herbicides need to be supplied in May and June for consumption in June and July, right? So herbicide is all done. Insecticides also start early, that's happening. Fungicides come later on. So I think you have to assume this cost increase even if, say, war settles tonight, we have a surprise announcement that war is over, right? [ State of arguments ] is open, right, is normal. It's going to take 3 to 4 months to unwind, to make kharif. This is a reality. We'll live with it. We'll have to live with it. We don't have a choice.

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

Just first of all, one clarification on the numbers, the revenue breakdown. Bhaskar had given us a number of INR 255 crores for B2C sales for the quarter compared to INR 222 crores last year. Just wondering if it might be possible to also give us a crop protection component within that specifically?

Yes, he will be able to provide that. So you are looking at a breakup of -- so those are micro details. But by and large, I would say it is split between SPH and Crop Protection, 20% and 80%, but we'll get back to you details separately because these are split.

No problem.

You need to drop a mail to [ Jagdish ] separately.

Sure, sure. And when you guided to high double-digit growth for seeds in the next year, just to clarify that basically referring to say something like high teens, right? Is that the range you're looking at?

Yes, I mean, mid-teen. Mid-teen easily.

Okay. Okay. Sure. And there is one comment, sir, you made in the opening remarks that the sector may see 3% to 4% growth in FY '27.

No, that's the GDP growth.

Okay. All right. Understood. But on the Crop Protection side as well, the margins when you mentioned stable to soft [Audio Gap]?

Yes. So I mean, percentage revenue growth will be higher this year because price increase -- so revenue growth probably will be maybe double digit. I don't know what it could be because our input cost has gone up by 15% to 20%. It is going to lead to price increase for sure. It will be 5%, 8%, 10%. I don't know at this point of time because ultimately, many factors are not clear yet. Margins, depending on how competition will rate, how commodity prices will be have, generally in such situations, commodity prices tend to rise. And again, it tends to be crop specific. Other than rice, I expect commodity prices to remain firm on everything else. Rice, global -- globe is sitting on excess supply, including India. Now India, for example, grows a lot of basmati. Now, if Middle East remains disrupted, then basmati demand will go down as a result, farmers may plant less basmati, so they might plant regular rice. They might plant a little bit more maize or some other crops. So I think those are the things too early to say. But again, for maize, they will say, I need more urea. Now if enough -- more urea is not available, will they do something else? Too early to say.

Got it, sir. Just last couple of quick things for me. One is at some point, if we assume that this war ends and the price of crude comes down, how do we sort of protect ourselves from the risk that we may be sitting on high-cost inventories at that point?

Actually, the line -- [Audio Gap] the question well because the line was breaking.

Yeah, am I audible right now? Clearly?

Yes.

You are audible. Please go ahead.

Just asking that...

Repeat the question.

Yes, sure. So just asking that...

[Audio Gap] breaking actually.

Yes, sure. I hope you can hear me now.

Yes, Mr. Akella. You sound loud and clear. Please repeat the question.

Yes. So the question is that assuming the war -- assuming the price of crude comes down by some extent over the next, say, 3 to 6 months, how do we sort of manage the risk that we might be sitting on high-cost inventories at that point in time?

So I think 2 ways to look at it. One is that we don't have to become greedy in holding the inventory, right? So we will go as per the business plan based on what can be sold. So we're not going to hold the inventory. And even if war unwinds in 3 to 6 months, I'm saying we are not building inventory beyond kharif, right? Kharif is something we want to protect. So rabi will -- so I think I can tell you, and I don't know what other companies do. I have every call in the morning. Every day, we talk, right? So we are almost back to a situation during COVID. We were doing calls since morning, 8:00 a.m. to 8:00 p.m. So we're into that situation. We are not -- we are building inventory, which we think is right. We're not building excess inventory because that could be a good opportunity and a bad opportunity. So we are doing -- we are very calibrated about what we buy, what we sell. We'll only buy what we can sell.

Understood, sir. That's clear. Just last quick thing. This liquidation of Clasto and Benzilla in the fourth quarter, was that one of the key contributors to this 14% volume growth that we saw in domestic formulation?

So out of that Benzilla, when you [Audio Gap]. Clasto was more dependent on the chili crop. The finished chili crop didn't get planted, commodities were low. [Audio Gap] chili farmers is Benzilla was no preference of the farmer. So we are launching new products in those segments. At the same time, we have -- we are unwinding inventory completely.

Next question comes from the line of Riju with Antique Stockbroking.

Yeah. Hope I am audible.

Yes.

My question is regarding the inventory. If I look at your FY '26 numbers, I think inventory days a bit higher. So this is predominantly that we are building some inventory at a lower cost, maybe your scenario, or during the year scenario, to protect our margin going forward. So how it is like -- is it RM related or [Audio Gap] compared inventory that we have already built?

No, no, sir, it is not related to what we build for the season. It is related to preparing for -- so I mean, this war thing was almost imminent right from the month of January, right? So we didn't foresaw a war to happen, right -- for war to happen. We did take some risk to build some inventory.

Understood. So these are predominantly RM inventory and maybe a low-cost kind of inventory that you have built.

Absolutely.

Understood. And sir, second thing, if I look at in terms of in the current pricing of the commodities. So in your earlier remarks, you said that you're expecting a good crop in terms of maize and other crops. So if I look at pricing of maize from the month of October, November, so the prices are very low compared to the industry prices. How do you see the impact? Are farmers going to stick to the maize crop or there will be some shift that will happen? If it happens, like what are the scenarios in terms of CP business and in terms of your CP business [Audio Gap]?

So I think, look, low and high has to be seen from the perspective of farmers mix per acre of money. Don't worry about commodity prices as much. I think at the end of the day, it will be a matter of relative economics. So how much I can produce by growing a crop, how much it is going to cost and what price I can sell, to me, they have seen for a period of time. Crop is still very, very competitive to grow.

Understood. So crop prices might not impact significantly in terms of crop shifting, right?

Yes. I mean it's -- again, I'm saying, for example, rice. So I think a lot depends on global inventory buildup and what country allows to import and what country restricts. For example, India had a restriction on how much maize can be imported. We said we will not allow GM maize commodity, soybean, which is GM grown. So I think a lot of other factors will play. I would say, other than rice, inventory -- global inventory is at the normal level.

Understood. Understood. And sir, in terms of CP business right now, we have done 15% kind of a growth -- so -- in the domestic CP business. So if you could clarify in terms of volume and the deviation growth -- in the 15% growth that we have reported this quarter?

15% growth in which segment?

CP business that we have recorded this quarter.

That is -- crop protection, where did we say 15%? You are saying B2C growth, right?

Correct. Correct. Correct.

Yes. So see, we have -- when we say crop protection business, we primarily have, say, the soil and plat health and there's also crop protection. And -- so these are the 2 major components. Now this is B2C. Within that, there's a higher growth in soil and plant health relative to crop protection. And I have been saying that, look, my focus is to sell more herbicide, more soil and plant health and more seed, right? Because disease sometimes because of moisture and all can come and go, insects come and don't come, right? So actually, our focus segments have contributed more in terms of growth if you see from that perspective.

Understood. So sir, if we remove that 27% kind of a growth in the SPH, so how much will be our B2C CP business growth for this quarter?

It will be flat.

Okay. It will be flattish [ kind of on both ].

I mean, marginal growth. I mean you can say marginal growth, low single digit. It won't be flat, it's still marginally positive.

Next question comes from the line of Nitin Awasthi with InCred Capital.

I just wanted to understand on your new venture, the aquafeed business, what is the current investment and the thought process behind this? And given that Tata in Maharashtra -- the Tata Group in Maharashtra does have expertise in freshwater fisheries with its hatchery business, not business, it's a social commitment perspective, so that linkage and the basic thought process behind this business where we are, what we see to invest, where we want to invest, that if you could outline?

So look, as part of the Tata strategy in agriculture, we did the whole mapping. And we identified this as an idea toward experiment, right? I think it's still at the experimental stage because we believe as economies grow, per capita income grows, more animal origin protein becomes a preferred food, the consumption of fish, which can be grown in land. Even our Prime Minister keeps talking about mission so that we are not only dependent on ocean. We can also have more fish in land. So -- I mean, look, this still is a relatively smaller scale. It hasn't gone to a state [Audio Gap] how much we want to make investment. I would like to see one more year, this year, to say where I am able to take it and then start thinking of this strategy. But yes, it's an important segment. We're trying to understand rather than trying to rush into this segment.

Understood. So the current products in the market are completely outsourced?

So products are outsourced. (0:59:46) [Audio Gap] similar to soil and plant health business, we incubated 7, 8, 10 years ago because when we sold Tata Chemical bulk fertilizer business, we were left with some residual micronutrients, right? So we said, okay, what do we do with this business? So we built this business. Now it has reached to a scale of INR 50 crores plus. So now we are saying, okay, how do we invest more because this we find it very exciting, right? I think aqua is probably where 5, 7 years ago, our soil and plant health business was. So probably 1 or 2 more cycles before we can say anything about it.

Understood, sir. Sir, second question on...

Potential-wise, it is -- but I think, see, there's so much potential in everything, right? We can't do everything. So it's still understanding phase.

Understood, sir. Sir, secondly, on the seed perspective, the whole industry has a lot of GE trials approved, including Rallis, and it's been going on for quite some time now. And given that the new policy of GE, which has come up, which differentiates itself from the GM regulation, do you see, what you call, the traction in that segment increasing exponentially going ahead? Or do you still see hurdles in this segment picking up?

See, when I look at seed R&D, there are clearly 2 components. One is called genetics improvement where you keep accessing genetics and start applying tools to improve the genetics to develop product faster. I think there, we are doing everything which needs to be get done. When it comes to GE, basically, it's not about GM crop now any longer. It's not about bringing gene from outside. The conversation is all about genetic -- gene editing. And gene editing is one space, I think, where while government has cleared the regulation, but the big global multinationals continue to hold patent rights, right? So we would rather -- initially rather than trying to do everything in-house, we would rely on outside skills to get the job work done. And there are technologies we are accessing. For example, our cotton business is built on the foundation of BT technology. Now we are actually launching, what you call, Paryan technology-led rice seed business where there will be herbicide-tolerance gene and will be sold as a bundled product along with seed and herbicide. So we would rather license those technologies rather than trying to invest 10 years on researching those technologies because global multinationals, they have disproportionate R&D on those areas. I think by spending a small money and for the sake of conversation, I can say I will do it, but I would rather prefer accessing those technologies.

Next question comes from the line of Darshita Shah with DSP Asset Managers. We have lost the line of Ms. Darshita Shah. We will move to the next. That is [ Rajkumar Vaidyanathan from RK Investments ].

My question has been answered.

Ladies and gentlemen, we take that as a last question and concludes the question-and-answer session. On behalf of Rallis India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thank you.