Rallis India Limited (RALLIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rallis India Limited Q1 FY '27 Earnings Conference Call. We have with us today Dr. Gyanendra Shukla, Managing Director and CEO; 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 that are difficult to predict. Our detailed statement in this regard is available in the results presentation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Shukla. Thank you, and over to you, Dr. Shukla.

Thanks. Good morning, everyone, and thank you for joining us today on Rallis India Q1 fiscal year '27 earnings call. As mentioned, I have alongside myself, our CFO, Mr. Bhaskar Swaminathan. I will start with synopsis of the industrial landscape before addressing development with respect to the company. Q1 was characterized by a weak demand environment and sustained pricing pressure in the Indian agrochemical space, while the supply chain was not materially disrupted, it remains fragile and cost-sensitive with volatility in raw material availability, freight and logistics. Our dependence on Chinese inputs continue to influence sourcing dynamics while selective disruptions and inventory constraints created intermittent supply tightness. However, the market did not face a structural shortage. The key takeaway is that costs remained elevated while demand recovery was insufficient to support price hikes, resulting in continued margin stress across the sector. Middle East war likely affected the agrochemical sector in Q1 mainly through higher feed stock energy and freight cost, which compress margin elements when selling prices were adjusted upward. That is the price increases triggered by Middle East supply disruptions are expected to partially offset the volume led drag. Companies with imported intermediates are fertilizer linked input exposure are more vulnerable than those with a stronger domestic dosing. Margin pressure was likely strongest for businesses that could not fully hedge energy and freight costs are quickly revise realization. The sector also face uncertainty rather than a onetime swap because even a ceasefire or cost does not immediately normalize in shipping cost. Additionally, at the start of the season, El Nino was described as a probable that a weaker monsoon because they tend to warm the central and Pacific, which disrupts atmospheric circulation and can reduce the monsoon flow over India. Official and media reports said that IMD linked it below normal rainfall outlook to developing El Nino conditions especially for the second half season. Market witnessed aggressive channel filling in March ahead of anticipated price increases delayed onset of the Southwest monsoon being on ground consumption. Cumulative rainfall deficit below normal and lagging kharif sowing in deferred placements, the late arrival of this year's monsoon had the resultant delay in kharif sowing impacted agrochemical uptake across the domestic market. As per IMD's latest available update, overall India's seasonal rainfall remained about 15% below normal. This was the data at as 8th of July. And obviously, there has been some recovery since then. IMD's latest long range, signal outlook for the 2026 southwest monsoon projects below normal rainfall for the country overall most likely about 90% of the non-period average. So most plus model are up plus minus 4%. Monsoon core shown is more likely to be below normal. Reason why the because suggest a Central and Western India has improved supply in early July, while East, North Eastern part of South continues to lag, especially in Karnataka. Rainfall shortfalls in July, June and early July, saw slowed kharif slowing, especially in the rain-fed belts and for crops like paddy, maize, pulses, groundnut. If rains arrive in burst after dry start farmers often resow, which raise seed in crop protection users, farmers tend to move towards shorter duration crops, drought resistance for ITs and move away from water sensitive crops where irrigation is limited. Northeastern and some Eastern Southeastern pockets are better while Central Peninsula and core rain face higher sowing trends. As of end June 26, kharif sowing was significantly lagging last year with only 17% of the normal covered. But as we move forward, I think there has been a significant progress as far as crop is concerned. Based on the latest indication, this is about 17% behind. The crops like cotton and groundnut are probably the most significant, which are lagging behind. If you go by the war situation, the Central Water Commission report quoted on 17 July that reservoir level had risen to 34.4%. By 16th of July from 26% on 2nd of July. A 10-year average is higher than the current level with current storage at 98% of the normal. So reservoir level minus Karnataka, I think seems to be in a good situation. . The fiscal year '27 kharif MSP regime is broadly supportive of crop diversification, sharper hikes in oilseed pulses and cotton. Stand while paddy and maize are only modest increases. The government of SP for different -- putting different crops for the marketing season of '26-'27 with an estimated procurement of about 80 million metric tons and estimated payout of about INR 2.6 lakh crores. The pricing framework remains aligned with the policy of keeping at least 1.5x the cost of production relatively stronger increase in oil seed and pulses. So just a intend to increase shifting away acres from paddy and move towards more diversified crop mix. From an agrochemical perspective, this is constructive for demand diversification, it is particularly relevant for pulses and oilseeds, where input users in crop protection needs to differ from those of paddy. Volume may shrink as acreage has declined, but margins are likely to remain stable to slightly soft, integrated firms with balanced portfolio combining seed, crop protection and nutrition product are better placed to navigate the volatility. Market is also likely to favor low-cost producer with a broad export presence and disciplined working capital management. On the biostimulant category, regulatory framework, India has significantly modernized the biostimulant category framework under the FCO with the standardized specification for humic acid, [indiscernible] formulation. This move should help bring regulatory clarity, product reliability and market formalization. For fiscal year '27, the cleaner consensus is that agrochemical is expected to grow around 6% to 8% in India, while seed is likely to grow mid- to high single digit, but it will depend on the crop. Cotton, certainly, we'll see a significant decline. The global crop protection market is estimated at roughly $70 billion to $80 billion in calendar year '26. Depending on the definition, it is expected to grow at 4% to -- 4.5% to 6% CAGR, are supported by rising food demand limited arable land and need to improve farm productivity. Global crop protection markets are being saved by tighter regulation, supply chain derisking, rising biological adoption and continued innovation in formulation and the new modes of action. Demand growth remains strong in emerging market, while pricing margin pressure and climate-driven volatility continue to influence the sector. The near-term outlook remains dependent on the Middle East conflict as well as the rainfall situation. . So all of that now -- means that hectare recovery remains uneven U.S. demand is still supportive, but Brazil remains weak and agri linked end markets. China continues to drive pricing pressure and supply chain risk, especially for API and intermediates. There's no India stock built up in the latest WASDE data, which likely reflects a balance sheet offset. Higher production was observed by demand and trade assumptions, leaving ending stocks -- ending stocks broadly unchanged. Moving on to -- so this was a general commentary. Moving on to Rallis specific development. We had a reasonable quarter 1 fiscal year '27 performance despite the fact that several factors impacted planning, including the war in West Asia, which led to panic buying up commodities with significant price increases in delayed monsoon in India. The overall demand was subdued, severe heat wave in Q1 delayed sowing due to delayed onset of monsoon, farmer crop such. Reduction in crop rate coupled with extensive spread of illegal HTBT cotton. Trade channel rest to secure fertilizer, which resulted in cash consumer crop protection causing conservative inventory stocking slower liquidation. The domestic formulation, the growth was driven by aggressive placement liquidation of course and volume scale up. Talking about quarter 1 numbers, our revenue stood at INR 1,022 crores versus INR 957 crores last year. EBITDA improved by 23% to INR 184 crore from INR 150 crore in quarter 1 of '26. Profit after tax stood at INR 125 crores versus INR 95 crores of previous year quarter. Exceptional items include profit on sale of property of INR 2 crores. Our overall capacity utilization has slightly increased in Q1 in comparison to Q1 of fiscal year '26. New launches initiative. During the quarter, we have launched 4 new crop care products, 2 herbicide, 1 insecticide and 1 soil plant health category product very tailormade for ginger and turmeric. In seed business, we launched quite a few new products for North India, herbicide-tolerant direct-seeded rice under the Kokkonda brand to promote direct-seeded rice as well as short duration of bajra variety. So in all, we have introduced 9 new products in seed. Our digital marketing and intervention continue to promote products through Anubandh Edge Schemes, Farmers QR Code, Reward Schemes and enhancement in Sampark+ program. Anubandh Edge initiative with a retailer level digital platform to support retailer engagement and benefit schemes and enabling tighter integration between dealers and retailers. Retailer registration as on June end crossed 56,000. Farmers QR Code helps in better product knowledge sharing with the farmer. Our initiative Sampark+ continues to capture power level demand signals to generate actionable insight and improve sales conversion. We launched Idea2Impact platform in Q4 of last year to establish a -- to establish an open innovation ecosystem source, validate and commercialize agri innovation. Still now, we have received encouraging participation of 40 applications, out of which, 2 are in the pilot stage. We are continuously using tech assisted marketing initiative to promote products and generate demand. Digital-led free levy van campaigns, balance focus on physical and digital connect with focus on key products drive. We are uneasingly enabling digital-led -- we are increasingly enabling digital-led engagement that strengthen data-driven decision making enhances farmer outreach and adviser productivity. We are also shifting towards high-margin, sustainable and pharma-centric offerings, including biological and next-generation products. . So that concludes my opening remarks. I will now hand over it to 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 Q1 FY '27 earnings call. I will walk you through the financial performance of the quarter, post which we should commence the Q&A session. Starting with the top line for the quarter. Our quarter FY '27 revenue stood at INR 1,022 crores as against INR 957 crores for the same period last year, resulting in an overall growth of 7%. Overall volume growth has been 2% with pricing and growth of 5%. Overall EBITDA for Q1 FY '27 stood at INR 184 crores, higher by 23% compared to INR 150 crores in Q1 of the previous year. Profit after tax at INR 125 crores versus INR 95 crores of Q1 FY '26, which is 31% higher than the same quarter of previous year. Crop Care segment grew by 7% to INR 697 crores in Q1 FY '27 from INR 652 crores in Q1 FY '26 due to both volume and price growth and new product promotion, increased digital engagement as well. The volume growth is 2% and price growth is 5%. Within the Crop Care segment, the domestic B2C witnessed a 19% growth in Q1 FY '27, registering INR 534 crores revenue vis-a-vis INR 449 crores in Q1 FY '26, which was driven by volume growth of 15%. Crop Protection category grew by 18% and registered Q1 FY '27 revenue of INR 455 crores vis-a-vis INR 386 crores in Q1 FY '26, which was driven by volume growth of 16%. Soil and Plant Health category grew by 10% to INR 62 crores from INR 56 crores in Q1 FY '27 in comparison to Q1 FY '26, driven by price growth of 13%. We applied prudent pricing approach to drive the margins in the category. Exports top line grew by 28% to INR 110 crores from INR 152 crores due to 35% degrowth in volumes. The reasons for degrowth are due to lower demand for pendimethalin in Europe, coupled with competitive China market prices. The price competitors aggressively impacted volumes of acephate, pendimethalin and hexaconazole. There were delays and uncertainty in shipping time lines due to port congestion or logistical challenges. Our CSM Q1 FY '27 revenue displayed promising growth by lodging 197% growth to INR 24 crores from INR 8 crores, driven by rebound in Peak KT sales volumes. Total B2B revenue stood at INR 163 crores vis-a-vis INR 203 crores, a decline of 19% was primarily due to volumes, which degrew by 26%. In the Crop Care segment, we are focused on expanding our customer base and product portfolio is enhancing go-to-market strategy. 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. We are continuously putting efforts into increasing customer centricity through digital initiatives to reach out to channel partners, customers, implementation of customer satisfaction surveys and identifying new growth areas. Moving to Seeds business. Seeds revenue grew by 6% to INR 325 crores in Q1 FY '27 from INR 305 crores in Q1 FY '26. due to 6% price growth. We witnessed acreage drop in North cotton and intense competition in South and Central cotton. The overall seed supply in terms of volume was sufficient, but delayed due to nonavailability of dryers, processing facilities and concentrated arrivals, coupled with labor shortages on the supply chain side. We will have a clear liquidation picture to emerge by end of July. In the Seed segment, our primary focus will be on 5 strategic crops, cotton, maize, millet, master 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 quarter end, our inventory levels remained elevated in comparison to the same quarter of last year. Collection cycles remain smooth. We have healthy cash and liquid balance of INR 309 crores as of 30 June '26. That concludes our opening remarks. We can now commence on the Q&A session.

[Operator Instructions] The first question comes from the line of Ankur Periwal with Axis Capital.

First question on the exports market. How are you seeing the product-wise demand as well as the pricing scenario there, given that Chinese competition on pricing sort of still keeps depressing. So your thoughts there first.

Yes. So thank you, Ankur, for asking question. So I think export, I must say, it is challenging unless you have a branded business in the countries you operate. So as far as CSM is concerned, where you have a contract with the company, I think it is okay, still fine because you can discuss with the counterparty and negotiate terms and conditions. As far as catalog products are concerned, I think we have to remain competitive. And one of the products where we face challenges is really acephate because raw material has to come from China and then we have to process back and sell it to countries like Brazil and U.S. And there also -- China is also competing directly in those markets. So other than that, I think we are quite competitive. We can compete with China. And again, it only depends on the demand situation. On CSM, not a challenge. I mean, because we have a contract. It is only the catalog product where challenge becomes significant.

Sure, sir. And on the other products, pendi and other products, are we seeing...

Pendi, metribuzin, hexaconazole, we are still competitive. I think we are able to compete. And including Metahelix. So I think other than acephate, it's not a big challenge.

Okay. Great. On the CSM side, we were thinking of or we had talked earlier that to increase the share of CSM here. Any luck there in terms of the ramp?

Yes. So we did start making a product for a customer in U.S. First shipments have gone this year and subsequent volume. So first shipment is well received from a quality perspective and everything else. We are in the process of securing more customers. But I mean, as I've been saying in the past, that's a slow burn. It takes time to keep cultivating. There are 3, 4 products we are working parallelly on CSM and one will be already with an existing customer from where we make and supply product. So we are going to be adding those products, but they're all slow rate. On catalog category, we are going to launch, I would say, 3 to 4 products in the next 3 years. And we are at the different stages of either advanced registration or pilot production and trying to increase some commercial quantities.

Sure, sir. Just next bit on the domestic part. If I heard the initial commentary right, we are looking at a lower cotton acreage for this financial year, at least given the macro, the rainfall and the new risk. And since our portfolio is slightly heavy on the crop side -- on the cotton side, what are your thoughts on the domestic growth overall for this year?

So cotton, I would say anybody operating in crop protection sector. So we have stakes as far as cotton is concerned, both in crop protection as well as seed. Now seed, we have already factored in that this year, it is unlikely that cotton business will grow. Two things have happened. We were pretty heavy on northern side and North side, Punjab and Haryana cotton area significant decline. Even in South and Central, 2 factors are playing. A, it's a rain-fed area when it rains less. Farmers plant anywhere less cotton. On the top of that, there has been a lot of spread of illegal HTBT cotton, which is being sold. So cotton, I think we are looking at maybe as we year the end, maybe flat year, but we are focusing quite a lot on rice and maize and millet where we had launched quite a few products in last few years. This year, again, we have launched product in paddy, maize and millet. So focus has shifted right now for the current season to be more aggressive on other crops. I mean, cotton will remain important. In my view, cotton will recover. I mean these kind of rainfall situation happen once in a while. They do not happen every year.

Sure, sir. And just on the domestic crop protection growth as well.

Yes. So cotton is one crop that takes a lot of sprays. Now last year, if anybody remembers commentary, we said, look, cotton area, while there was a lot of area, farmers did not get chance to spray the crop because it was raining too much, right? Now while cotton area may go down, but sometimes this intermittent rain, whatever crop has been planted, cotton prices remain, I think, quite supportive. So farmers, those who have planted, if they are able to do field operations, it may have only marginal impact at the end of the day. So I mean, this is something looking at a crystal ball and saying what will happen from a rain perspective in September, October, August. It's very difficult to say, but I wouldn't be very pessimistic at this point of time. I would say sometimes good distribution of rain even if it's marginally lower, even if 90%, 95% of the normal cotton acres get planted, might still lead to a similar situation as last year.

Next question comes from the line of [ Pranit ] with SJ Investments.

So I wanted to understand in terms of the El Nino effect that everyone has been really talking about. Has it transpired in the ground? Or how is the sentiment on the ground at this point of time?

So El Nino certainly is a reality. Country has seen deficit rainfall. But you have to understand roughly 50% plus of the area in the country is irrigated has some kind of source of water. It's only the 50%, which is highly rainfall. So I mean, as we see because of the delayed rain, there has been delayed sowing, but there's also been catch-up, right? Farmers -- because most of our farmers, they are not 1,000 acre, 5,000-acre farmer. They're able to quickly plant their crop. The only thing that changes is crop set, right? So for example, this year, pulses area has gone up, but we know for sure that groundnut area in Sourashtra has gone down because of delayed rain. We know cotton will be planted less, but rice seems to be on track. So it varies from area to area. Maize, certainly, initially, it was thought that maize will not be planted, but maize is getting planted. Some of the coarse grain, bajra and all in the marginal areas in Rajasthan might get impacted. So it's a mixed picture. I still think that even in the worst-case scenario, 90%, 95% of the crop will get planted. Clarity is yet to emerge what farmers would prefer. I mean, soybean has got planted. There was in between soybean seed-related challenges, but farmers did plant all those crops. So to me, if crop gets established, at least on those areas, I'm sure farmers will try to protect because commodity prices are also firming up in anticipation of lower yields this year.

Sir, but in terms of volumes, do you think it will be more a flattish or a marginal degrowth for the year? Because I understand that if the sowing will happen, but the volumes might still take a hit right for the year?

So for example, I mean, so it's a very difficult question to answer. Assuming including insecticide, fungicide, herbicide and on a national area basis, on an average, say, 3 sprays are happening, and I don't know whether it's 3 or 4 or 2. I'm just giving you an example. If on an average, 3 sprays are happening. And last year in 20%, 30% of the area because of the weather factor, 1 spray got missed. So maybe 3 became 2.7, right, average. Now 90% area, if that crop gets sprayed more for farmers to protect their crop, we might still come back to the same number. I think it will be very situational. There are years where rainfall has been low, crop protection has still done well. So too early to predict. I think if you ask me this question in the middle of August, I'll be able to give you a better picture. It's too early to predict.

Understood, sir. Coming to the pricing, I think this quarter, we took a large pricing increase and most of our growth was price. So do you think we're going to take more price increases going forward? Or have we completely passed on our price -- like raw material price increases to the farmer?

So I think now focus has to be primarily be competitive in the market. I think price increase during the mid-season is generally very difficult. So whatever price increases have to happen have happened. And somewhere we have been able to pass on the full cost increase, somewhere partial, somewhere none. But on an overall basis, I would think there will be marginal positive impact from the price. Majority of the growth has to come from volume, and that's where your market excellence, your ability to work with the dealers, distributors, farmers generate demand be very agile on positioning stocks in the market, all of those factors will come to play. And as I've been talking in the past, we have been very active in that area, more active than probably would have been in the past.

Sir, I was actually referring to because we had -- in the last few months, we had a large price increase in the input commodities, right? Were we able to pass on, let's say, like 0.8% or the entire part of it or only like 80% of it? Where are we in the overall passing on level so far?

So I mean, overall, we have tried to increase the pass. But if you remember, I talked about when I discussed the April result in the March, we said, look, we are the first one to increase -- announce the price increase we did. Until April, there was hardly any realization in the market. But of late, the market has moved on and price increase is effective. It depends on the product. Having said that, will everything will translate to margin? Answer is probably no because you also have to make sure that you don't become uncompetitive in the market. We have to, at the end of the day, sell what we have produced. So will there be a price increase on an overall basis? The answer is yes. Will there be more volume increase this year? Our emphasis will be to sell more and capture market share because I also believe this year might be challenging for quite a few small players where they might have working capital issues or money to promote and be aggressive in the market, and that's where players like organized players will try to take advantage.

Got it, sir. But in terms of, let's say, channel inventory, I think we have a little elevated compared to last year. But how is the overall -- like in terms of the market, how is the channel inventory so far?

So channel inventory, I would say, is normalized now. It was more worrisome a month ago. I think off late, we have seen even in crops like soybean, but there's a shift. For example, there's a lesser demand for pre-emergent herbicide in soybean, but there's more demand for post-emergent herbicide. So in these situations, what happens, farmers will wake. So if they have sown the seed soybean, they'll say, okay, let me ensure that my crop emerges first, then I'll put money on the input. So this year, post-emergent herbicide demand is much more stronger than the pre-emergence. So as I said, because of the situation, mix will change. How it will change, it will depend on the situation on the ground, but we have to be ready for all the eventualities.

Got it, sir. But do we expect any more returns compared to last year, this year extra because of the situation? Or like is the returns level going to come down next year?

So return is another challenge, but I think every company, including ours, there's a method by which we account for returns. This year, we would be more cautious in accounting for returns. Probably we'll on the -- on accounting more rather than less, right? Because you don't know the situation, how situation evolve. And so there's always a formula and which is also there's AI-driven model, customer feedback, dealer distributor feedback. We try to factor everything. Am I provisioning enough? Answer is yes. How that is -- how much enough that is going to be enough, I don't know.

Got it, sir. So is it a fair understanding, sir, because it's so uncertain, you just want to put as much product as possible, whatever offtakes is going to offtake.

Yes. So we are cautious about that situation certainly.

Got it, sir. But you also mentioned this line of unorganized probably consolidating. So do you think how -- like what kind of impact can this have for the organized players? Because you mentioned the working capital issues this year is going to affect them badly. So do you think the organized share -- how much do you think it will grow?

So this sector suffers from oversupply, right? So there's a slightly less supply in the market. It helps companies improve their return metrics and everything else. There's always more supply than the market can take. That's the reality of this market. I mean, be it seed, be it crop protection. So -- I think the larger challenge, which we are not talking here is money getting stuck because of the fertilizer, right? Because when fertilizer deficit because of this war situation happened, everybody stopped fertilizers. So money went to fertilizer and then fertilizer liquidation got delayed because of the delayed rain. As a result, obviously, every company will have a delayed offtake of crop protection product and subsequent impact on the cash flows.

Got it, sir. So -- but in terms of the raw material spiking, do you think -- do you see it stabilizing and going down? Or do you expect these levels to continue because crude and everything has been stabilizing?

So about a month ago, when this MOU was signed between 2 countries, I think things have started looking as things have cooled down and prices have started trending towards norm. But last 5, 7 days of development, I mean, at this point of time, there's enough inventory for Kharif. So nobody is panicking. As a result, it is not seen. But I think as fresh buying starts, we would see that. And I have to -- because we are not buying a lot now, we have stocked enough for the kharif season. It's only when rabi procurement will start now in the month of August, we will see how situation is. But I'm sure things which are directly correlated, for example, people buy cyclohexanone C9 as a solvent, that is actually linked to crude prices. People increase up and down as soon as crude prices go up and down. So is it a general trend? I think most of the people have stocked for the kharif. So there's no panic at this point of time. Will it -- this situation persists, will people have to pay higher price than the rabi input? The answer is yes.

Okay. So you expect still price to go up from here?

It depends. I mean it depends how war will evolve.

Okay. But have you seen any tapering down, let's say, from the peak? Like what percentage have you?

Significantly tapered down. Right now because demand-supply situation is normalized. So you don't see that spike. It's only when people go for a stocking for next season, things start...

Got it, sir. I understand competitiveness, you mentioned that we want to remain competitive and we don't want to raise the prices too much. Have you seen any new players or like the existing players getting more aggressive in the market now that they're becoming more competitive and they're being more aggressive in the market?

I mean not noticed. I think everybody has the same challenge. Everybody would like to optimize their income and profit. So I haven't seen that kind of panic movement. Can that happen? We will see at this point of time. Generally, everybody is holding on. Everybody seems to be very optimistic.

Next question comes from the line of [indiscernible]

My question is about long-term value creation. Like the agrochemical industry remaining quite competitive. So I wanted to know like a few years from now, what do you believe will be Rallis India's strongest competitive advantage?

So I think our -- so I mean, 2 things. One thing is our brand, I think, is our biggest strength, I must say. The other thing, we are actually working on the portfolio because brand alone will not be enough. We are not able to supply product which farmer will need at the competitive price. So our focus on R&D is much more sharper than in the past, and we continue to put more effort on increasing our R&D output, our collaboration efforts. I think a combination of these 3 things and really our customer outreach now more trackable with a lot of digital investment. These 3 core areas, as we have articulated and being a little bit more aggressive on seed as well as soil and plant health, which are a high-margin business. I think a combination of these things and being on the top of fixed cost. I think these 4, 5 factors should ensure that we remain competitive in the marketplace and a formidable player. And as I said, look, these businesses margins cannot be tracked on a quarter-on-quarter basis. Two years ago, we said we want to deliver 500 basis points over a period of 5 years EBITDA margin, where I think we're on the track. That's how people should...

Now talking about R&D, like Rallis has been consistently investing in R&D, product registration and the capabilities, manufacturing capabilities. Like you have taken a difficult decision of impairing certain development assets. Then how do you ensure that whatever has been invested, like that gives -- like how do you go with the project evaluation so that every rupee invested today generates superior returns?

So I think 2 things fundamentally I've talked about in the past: a, focusing on R&D. So a few things we stopped doing. We said we'll not research vegetable seeds because we were not competitive. We will not invest money on GM crops. We stopped that. So we got very focused on only doing R&D on when it comes to seed 5 crops. Soil and plant health business primarily was dependent on third-party products. So we took a conscious choice to build capabilities in that area. To that extent, we have started taking steps. So while we will continue to in-source products from other R&D and provide them market access, but we would build our capabilities on soil and plant health segment as well because I believe that's very critical, not only for Indian agriculture, but also bringing robustness to our portfolio and offering more comprehensive solution to the farmer. And even in soil and crop protection, we actually have focused on 2 areas more. One is really being very sharp, laser-focused. And we have portfolio department, which has been strengthened. We have added a layer of product development team between marketing, R&D and sales so that we have more rigor in what we do, how we do. And then we also have put a strong B2B team, which is focusing and reaching out to global collaborators to access new products. So a combination of things will ensure that we remain competitive.

Sir, my last question, like as a shareholder, if I meet you again after 3 years, so what are the measurable outcomes that you would want me to see in Rallis India that would conclude that there has been some structural transformation that has happened and like -- that it has been transferred into a higher quality business, delivering sustainable growth and superior shareholders.

Let me ask your question. What would be your expectation 3 years down the line from us?

3 years down the line, I want to see Rallis as the only company that is coming to everyone's mind when we think about investing in this sector or segment.

Okay. So Rallis should be top of mind is that's what I see, right? I mean, obviously, I mean, all what I said I'm doing, that's a single aim that we should be seen as a significant player in transformation of agriculture at the same time, delivering superior return to shareholders. I mean that's all we are working for. And that will not come unless we manage our back-end process as well, be it R&D, product advancement, be it cost competitiveness, collaborations, manufacturing operations. So I think those are the component, how part of it. Our goals are very aligned with our aspirations. And ultimately, shareholders look for delivery of margins, right? So we want to be a consistent company, which delivers 15% plus EBITDA margin even in a bad year. So that kind of consistency and stability we want to bring in.

[Operator Instructions] Next question comes from the line of Raj Kumar with RK Investments.

Can you hear me?

Yes, I can hear you.

Sir, just 2 questions. So the first question is this rupee depreciation, how much it has improved the competitiveness of Rallis with respect to the B2B business?

Yes. I think it's a double hit because when you buy raw material in dollar, you also end up paying more rupees. But I think because we are a net exporter, net-net, it is positive for us.

No. I know it's positive, but I'm asking because you're still saying that you're facing competition from Chinese. So just want to know, has it not helped you improve your competitiveness?

I mean it does on an overall basis. And that's the reason in spite of delivering lower volume on export, our profitability contribution to the business has grown. So it has added to the profitability.

Okay. So -- but do you see yourself bettering the competition go forward with the current levels?

See, I think, look, so we are competing with Chinese players as well as Indian players in overseas market. So obviously, when it comes to Indian players, I don't think our situation gets any worse, right? With Chinese players, it is product specific. So for example, I keep saying SA is a problem because SA have to buy raw material from the same supplier who also produces acid and sells to customers in Brazil and U.S. So I think there are 1 or 2 products that there is a specific issue. But otherwise, by and large, in other products, we are competitive. Okay.

Okay. Got it, sir. Sir, the second question is, I want to know what is your outlook on the sugarcane and the chilli forwarli crop. And I also want to know what -- how much contribution you get from these 2 crops?

So chilli is an important contributor to us, not only to us, but in general for crop protection industry. One of our products was badly impacted last year. Cluster we sell because of chilli and because commodity prices were very low. This year, chilli planting intentions are positive, even commodity prices are high. So I think this year, Chile should see recovery. Now sugarcane, I think as of now, it's a crop which takes a lot of water, right? While planting is there, how water situation will evolve, I think it will. But as of now, I would say sugarcane is also broadly positive.

Okay. And this improvement in chilli, will it improve your top line and sales, I mean, significantly?

It should, yes. I mean, the products which are specific to chilli have suffered last year, it should lead to positive sentiment. Now it is all going to happen in quarter 2. So I can't really say how things will evolve. But by and large, quarter 2 and 3 where chilli products go. I mean, at this point of time, I have no reason not to be optimistic.

Okay. Sorry to labor on the same question. So I just wonder whether -- so this chilli improvement in chilli will it help you in terms of showing the growth on the domestic Crop Care segment?

Yes, it should. I mean, if everything goes from here on as expected. It matter in every crop. And it's a general answer that crop, whether crop is there or not, whether farmers have enough resources in terms of water to raise the crop or not and then pet pressure and commodity prices. So farmers, if commodity prices are strong and they do not have any risk of not able to grow the crop, they tend to invest in the inputs.

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

Sir, first question is due to the shift in cotton and short duration crops, will there be any impact on the agrochemical consumption for us and generally for the industry?