Sharda Cropchem Limited (SHARDACROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Sharda Cropchem Limited by Antique Stock Broking. [Operator Instructions] Please note, that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.

Thank you, Tuja. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Sharda Cropchem. From the management, we have Mr. R.V Bubna, Chairman and Managing Director; Mr. Ashok Vashisht, CFO; and Mr. Dinesh Nahar, GM Finance on the call. Without further ado, I would like to hand over the call to Mr. Bubna for opening remarks. Over to you, Mr. Bubna.

Thank you, Manish. Good day, ladies and gentlemen. A very warm welcome to everyone present here for the earning call of Sharda Cropchem Limited for the Q3 and 9M FY '21. Sharda Cropchem is represented by myself, Ramprakash Bubna, Chairman and Managing Director; Chief Financial Officer, Mr. Ashok Vashisht; and Mr. Dinesh Nahar, General Manager Finance. Talking briefly about our 9-month FY '21 results. Revenues grew by 16% year-to-year from INR 1,127 crores to INR 1,307 crores in the 9-month period, mainly due to growth in Europe by 25.3%, NAFTA by 13.6%, LATAM by 23.2%. There was a decline in ROW by 10.4%. During 9 months FY '21, our volume grew by 11% year-to-year. Gross profit grew by 41% year-to-year from INR 296 crores to INR 419 crores in the 9-month period. Gross margin expanded by 571 bps from 26.3% to 32.0%, mainly due to volume growth and lower raw material costs. EBITDA grew by 78% from INR 118 crores to INR 209 crores. During this period, EBITDA margin expanded by 5.7% -- 5.7 bps to 16%. Profit after tax grew by 314% from INR 23 crores to INR 95 crores attributed to higher margin, higher foreign exchange gains and lower effective tax rate. Net working capital stood at 71 days as against 84 days for the same period last year. With this brief overview, I would now like to hand over the call to our CFO, Mr. Ashok Vashisht, for discussing our financial performance. Over to Mr. Ashok.

Thank you, Mr. Bubna. Ladies and gentlemen, a very warm welcome again and a very good evening to all of you. I will give you a brief about year-to-date 9 months financial performance for Sharda Cropchem. During the 9 months of FY '21, our revenue grew by high double-digit at 16%, as explained by Mr. Bubna. And this is driven by, if we deep dive, volume growth of nearly 11% and favorable foreign exchange gain impact nearly 6.7% and price and mix impact, which was unfavorable to [ 1.8% ]. So in total, [ 16% ] growth year-on-year for 9 months. However, during these 9 months, our nonagro business de-grew marginally by 4.1%. In the agrochemical business, which grew by 22%, all the regions contributed favorably, led by Europe by 26.5%; Latin America, 18.2%; and NAFTA, 17.3%; and rest of the world, 32.9%. So as I just said I showed by level, nonagro business de-grew marginally by 4.1%. So in totality, we grew by 16%. During this 9 months, we generated an impressive cash at INR 214 crores for 9 months of FY '21 against comparatively INR 122 crores last year same 9 months of FY '20. In terms of CapEx, we -- it stood at INR 170 crores for 9 months of FY '21, which was INR 122 crores of same period of last year FY '20. So with this, we open the floor for questions from all the participants. Thank you.

[Operator Instructions] The first question is from the line of Tarang from Old Bridge Capital.

Congratulations for strong set of results. Two questions. One, the gross margin expansion that we witnessed, is it primarily on account of you being able to source your materials more optimally? Or you had some pricing advantage across the regions? And the second is, your working capital intensity is reduced. So it's quite heartening to see how gross margins have improved and working capital intensity has reduced at the same time. So just wanted your thoughts, what led to the working capital release?

So I think I explained why the gross margins grew.

You did indicate that it was on account of lower cost of goods. So that was the only reason?

Yes, sir.

Okay.

And if you talk of -- what was the second question? Working capital?

Yes.

Working capital grew because of a higher amount of creditor days, 129 days compared to 112 days for the same period last year.

Correct. So is it going to continue? So essentially, you've been able to procure your raw materials from your suppliers at a lower cost, and at the same time, been able to defer payments as well.

I think it is both the things. We are also able to get better credit, longer credit from the suppliers.

And what was the reason for this, sir?

Good relationship with the suppliers and better performance, winning the suppliers' confidence in the company.

So then would it be reasonable to presume that this is going to be your normal creditor days going forward?

I think so.

And secondly, our account receivable efficiency has improved due to effective collections we have.

Accounts receivables have gone down from 103 days to 99 days.

Yes. Yes. Yes, sir.

What was your name, Mr. Chintan?

No, no. Tarang Agrawal from Old Bridge Capital.

From?

Old Bridge Capital.

Okay.

The next question is from the line of [ Amit Deshpande from FairDeal Investment ].

Congratulations for very good numbers. And normally, even last few years, we saw the profits mainly accrued in the last quarter, that is the Q4 and to some extent, Q3. So -- but this time, the growth in our business has been excellent through the entire year, that is all the Q2 and Q3 has been very good. So actually, this -- similar thing which happened earlier, was it due to some product mix, et cetera, and/or it will happen again also in this year?

I mean I think it is -- has to do with the general atmosphere. When the world was very much concerned about corona, people were not very active, and we were able to be more proactive with our suppliers as well with our customers.

So before, this time Q3, we had also very good results. The Q4 also is expected to be good considering the current trends?

The Q4 is expected to be good. But Q3, the base of last year was much weaker, so we have been able to show better performance. Q4 of last year was also excellent. So it will be a very tough progress to beat Q4, but we hope to maintain it.

Okay. And another thing is this Europe, our turnover, that is our sales, are around 40% to 50%, as you have mentioned. So the current lockdowns, et cetera, it is not going -- affecting our business?

No. Current lockdown is not affecting our business. In the last 9 months, right from March, Europe was supposed to be having lockdowns, but the factories were working, all our goods were getting processed and repacked without any hurdles and the transport was also working very smoothly. So most of the operations as far as our products were concerned was very normal.

So it is going to help us only because the other industries may suffer, but we are out of that?

The only thing I would like to mention here is that recently, the freight rates, [indiscernible] freights from China to rest of the world have increased astronomically with the [indiscernible] of 5, 6, 7x the normal freight rate. That is because of less number of ships traveling to China and less containers available for export out of China. But we hope it will smoothen down in the course of time.

The next question is from the line of S. Ramesh from Nirmal Bang.

Congratulations on your good performance. So just wanted to get your thoughts. One, in terms of your dependence on China for imports, what is it in the current quarter?

So we are dependent upon China throughout the year, including the fourth quarter.

Okay. So...

Adversely impacted. In fact, China has proven to be a very good partner and good support, giving the quantities in time and prices were also very reasonable.

Okay. So in your view, the kind of trend you are seeing in the raw material costs, are these likely to sustain in the coming quarters?

These are all affected by the law of demand and supply. Because of demand from other quarters or our competition or our peers, we were able to get better terms and better prices. There was a surplus available in China for the products that we are dealing in.

Okay. So in terms of your trend in between formulations and your AI, there's a significant increase in the share of formulations. So how do you see this performance in the formulations shape in the coming quarters?

This should continue.

Okay. So...

At the same level -- formulations should be almost at the same level. The AIs had increased in the last year or a little bit before last year, mainly because of demand from many multinational companies who are not able to secure the AIs on their own, and we were able to supply them at a competitive prices. But that trend has -- that has not happened this year.

Okay. So if you're looking at the current discussions in the industry about investing in backward integration, are you having any plans to invest in sourcing our own materials from local manufacturing? What are your thoughts for the future?

Yes. At present, that alternative doesn't exist. The local industries are not able to produce the quantities that is required by the international market and also the product mix. Our portfolio is much bigger. Not more than 50% -- or 45% -- more than 45% goods are not manufactured in India. So we have to either not supply or supply it from China.

[Operator Instructions] The next question is from the line of Rohit Nagraj from Sunidhi Securities.

Congrats on a good set of numbers. Sir, the first question is in terms of the raw material availability and prices. So we have seen that recently in the last quarter, the availability for some of the raw materials has been an issue from China. And also the prices have also started inching up. So how are we seeing that trend until now in the month of January? And what is your expectation in the near future?

We have a good demand of our products in the fourth quarter. And in order to meet the demand of our customers, we start sourcing the products or goods mainly in the third quarter. So as far as current financial year is concerned, most of our requirements have been already fulfilled. The goods are either in transit or have already reached their destinations. There is an increase in that trend of increasing the prices in China for many products now, but we will not be impacted so much because of this increase, and we'll have to see what happens after 2 months.

Right, sir. That's helpful. Sir, the second question is, you just mentioned that the shipping cost and freight rates have gone up substantially. So will it have any impact on our shipping from China to European countries or the LATAM/American countries in the near future?

It will have. But as I mentioned, our shipments in the month of February and March are going to be not so big because we have already covered most of our requirements.

All right. That's -- sure. Sure. That's helpful. Sir, just a last clarification on our guidance. So last quarter, we had indicated that in the second half, we expect revenue growth of about 5%, 10% more than first half. And in first 9 months, we have done about 16%. So is there any change in terms of our guidance on top line and the EBITDA front?

I would say that we still want to maintain 10%, plus or minus a few percent.

The next question is from the line of Vishnu Kumar from Spark Capital.

Sir, if I understand right, you -- in the areas where you sell, your competition was not present. So you had an extra opportunity this time to place more volumes than normal. And second, at the same time, you've gotten much lower pricing from China. Is there the understanding right?

Yes, but there's a small correction. I said that our competition were not so proactive, that doesn't mean that they were not there. They were not there, but many of the people are concerned about corona and were concerned about what will happen in the future and things like that. So they were not so proactive as we were.

Are they active now, sir? Are they rather proactive now? Have they come back...

Yes, sir. Now people are getting used to corona. People have started learning to live with corona. Corona is not so fearful now as it was in the initial few months.

Got it, sir. Sir, if you could -- for the fourth quarter, if you could -- third quarter, if you could just give the volume, price and currency, again? I just missed that number.

Beg your pardon?

The volume, FX and price/mix, sir?

1 minute. You want for the quarter, no?

Yes, sir.

The price has had an impact of 5%, currency impact was about 7% and volume impact was 17%. Overall, 29% for the quarter.

Got it, sir. Sir, essentially, my question is only on the gross margin. We have -- in the last couple of years, we did see the margin shrink. Now sustainably, how much do you think in the forward-looking, let's say, in the next 1 year, you think, at least we are going to be in a materially better trajectory on gross margins and reasons if any, sir?

So if we look forward to a little improvement in the gross margins for this financial year, we have improved considerably in the first 9 months, and we would be able to show better gross margins on the full year. And we have also received some new registrations, which have helped us to get better margins. Because initially, when you get a registration, it has a second and third registrant, then the margins are better. But over the course of time, if some more competition receives the registration also, then there is an adverse impact on the margins.

So you have got some registration, where you are the second or the third player, this is from third quarter, is it, sir?

See the registrations came in the first or second quarters, but the impact came in the third, and it will also head in the fourth quarter.

Is this for the weed, soy, corn crops in U.S., sir?

Beg your pardon?

Is this for the U.S. market or Europe? And which crop would that be?

I would say overall, mainly for Europe and U.S. and North American market.

Okay. Sir, then one final question. We had multiple CFO exits in the last couple of years. Any specific reason you do attribute? I know it's personal reasons, but just any thoughts on that.

Sir, if you know it's a personal reason, then what else can I add? It is a fact, it is due to personal reasons. One CFO's father was sick, and he was staying in hospital. So he had to move instead to take care of his father. Second CFO went for similar reasons. All personal reasons, sir.

Got it, sir. And just one final question on the CapEx part, trajectory for next -- this year, next year, sir? And if you could probably try to help us understand whether our Europe CapEx reregistration is completed?

Mr. Vishnu Kumar, no?

Yes, sir, correct.

Mr. Vishnu Kumar, the cost of registration is increasing also exponentially high. The government authorities, the assessing authorities, who used to charge nominal fee, now they started looking at some more kind of profits in this business because they feel that operators and the players in the agrochemical market are making profit, then why not the government. So first of all, the costs are increasing. Secondly, the requirement of the authorities to qualify for registration are also increasing tremendously. So these 2 factors. Earlier, the reregistration process was very simple and not so expensive. Now there are new demands for the new reregistrations also. So the trend for CapEx is on the rise.

Or put it differently, sir, at least, have we reregistered 50% of the molecules, whatever we need to do, is that at least? Or any rough number percentage that you can attribute, like say, okay, we are halfway through in terms of the reregistration in terms of molecules? Or anything that you can help us understand. At what stage are we in terms of the overall CapEx for reregistering? That is what I'm trying to understand.

Mr. Vishnu, it's a very dynamic situation. It is very difficult to say 50% because every quarter, there are some products which are going into the reregistrations and some products which are getting increased in the process of reregistrations. So it's very difficult to say 50% or 75% because it is a dynamic situation. This percentage you can attribute if the situation was static, but it is not the case.

Okay. Sir, what will be broad CapEx trajectory for the next couple of years? Sir, if you could just give a number to us roughly in the next couple of years?

Mr. Kumar, you are very much familiar with our business model, and we have been repeatedly saying the process of registration or reregistration is very unpredictable. Sometimes you can get a registration in 2 years' time, sometimes it may take you more than 5, 6, 7 years. And these time period of registrations cannot be calculated in advance. And whatever calculations we do, they go wrong.

The next question is from the line of Chetan Thacker from ASK Investment Managers.

Congratulations, sir, for good numbers. Just one question. If you can share that volume number by region in agrochemical.

Volume, Chetan, by region in agrochemicals?

Yes, sir. For this quarter. For this quarter.

For this quarter?

Yes.

So in Europe, it is 21,76,000; in NAFTA, it is 20,00,500; in LATAM, it is 5,90,000; rest of the world, 9,90,000. Total, [ 5,75,300 ] -- sorry, 57,53,000.

The next question is from the line of Bharat Gupta from Edelweiss Securities.

Congratulations for a great set of results. Sir, my question pertains regarding the NAFTA region. So have we seen any relaxation in terms of the taxes which was there due to China and U.S. trade war issues? So has there been any sort of a relaxation?

Mr. Gupta, this information is all in the public domain. We don't have any special access to the information. Till date, the new President has not visited this issue at all to our knowledge. And when we -- he will take a decision, it will be known to everybody. So, so far, there's no such change.

And sir, how has been the pricing environment in both the markets, in Europe and North America?

Pricing environment, there's not much of a change. At least there's not much increase. It is more or less static.

And sir, in regard to such a spurt in the volumes which we are seeing, so do you attribute it to a preponement of sales in regions pertaining to Europe? Because Q4 is a very big quarter for us. So has there been any advanced placement or any shift of sales from Q4 to Q3?

Gupta, preseason buying is a normal tactic in agrochemical market. Most of the customers would like to have their goods in their possession at least 2 months before the actual application. So there has been a slight increase in the preseason buying in the quarter 3 for us.

Sure, sir. And sir, 1 last question. Can you give us a gross margin breakup geography-wise?

Yes, sir. You want it for Q3?

Yes, sir.

In Europe, it was 41%; NAFTA, 32%; LATAM, 21%; and rest of the world, 21%.

The next question is from the line of Tushar Sarda from Athena Investments.

Congratulations, sir, on excellent set of results. I just wanted to understand on -- since we follow an asset-light model, our ROC and ROE should have been very high. And they were high in the past, and it's come down over the last 2, 3 years. So what is the outlook on this? And if you can explain how will this go up over the next 3 to 5 years.

This is for the quarter? See, there has been a decline in our ROC and ROE over the period of 5 years. We hope this will be the bottom. We look forward to it going up slightly step by step.

Yes, sir. But what is the reason for decline, sir? Is it increase in working capital or contraction of margins? And how do you see this going forward over 3 to 5 years? What steps are we taking to address the reason for decline in the ROC, ROE?

Sir, one of the main and principal reason is increase in the CapEx, increase in the cost of registrations.

The next question is from the line of Rohan Gupta from Edelweiss Securities.

Sir, a couple of questions, sir. Sir, first is which you have already explained, just wanted a little bit more on the same thing. Sir, rising freight costs. So that definitely, we are seeing, has gone up almost 6 to 7x. And the impact is severe from China to Europe market and where maximum of our supplies are there and a lot of our business comes from there. So you mentioned, sir, you have enough raw material or enough inventories as of now to cover for entire Q4? Or you see that there is a need to increase the prices in these markets, sir?

Gupta, I do not think I said that we have got the entire requirement. What I'm saying, the requirement now, from second half of January till March, our volume of shipments will be significantly lower. We have not stopped shipments. We have not got all the requirements. But see, first of all, in the next month, there's going to be almost 15 days of dullness in Chinese situation because of their New Year holidays. And the amount of container, amount of quantities that we want to ship is much lesser compared to what we had in the previous quarter.

Okay. So sir, if I assume that the freight cost and higher freight cost continues, then -- and you also mentioned that the competition or the competitive intensity was slightly lower because of the COVID environment. I just want to understand, sir, if the higher freight cost persist, will we be in a position to increase the prices in subsequent quarters to cover the high shipment cost? Or we have to take some impact on our margins, sir?

Rohan, if -- I would like to throw some light on our business model. See, we are a generic company, and we get into a molecule after the molecule gets off patent. So for all practical purposes, as far as the prices are concerned, we follow the innovators and multinationals. If the multinational reduces the price, we have to reduce it. If they increase it, then we get a chance to also increase ourselves. We do not decide the prices on our own. We cannot because our market share is very small compared to the total world demand.

So sir, on that extension, given that our dependency is more on China and other competitor or innovators are not so much dependent on China for the raw material availability, so probably if they don't increase the cost or they don't increase the prices, we have to suffer on margins, right, sir?

Rohan, your first assumption is not correct. Including the innovators, they're all dependent on China. China is a factory to the world today. The production in rest of the world has come down considerably over the last 15, 20 years on account of pollution and environment concerns. So everybody is dependent upon freight out of China and everybody is dependent upon China, including multinationals. When I visit the factory, sometimes, I see that our goods are being packed and stacked very much close to the multinationals [indiscernible], multinational drums. Also the multinationals have almost shut down their production because they cannot afford considering the requirements and standards of pollution controls. The cost is very prohibitive and very exorbitant.

Right. Sir, second question is just on our segmental assets, sir. So agrochemical assets on quarter-on-quarter has gone up from INR 1,600 crores roughly to INR 1,900 crores, that is close to INR 300 crores increase in segmental assets. That probably may be possible because of the higher receivables, while the revenues has not gone up so much. So sir, just wanted to understand that a lot of receivables have increased in the current quarter? And/or is that -- or any other reason for that, sir?

You see our sales in the quarter 3 was higher than the sales in quarter 3 last year. [ Similarly ], our sales in quarter 4 are the highest. So at the end of quarter 4, our receivables are at the peak.

No, sir, that I agree. But I'm talking about from Q2 to Q3, generally, we see sir this jump from Q3 to Q4. But this time, we have seen that sales from Q2 to Q3 has not increased so much from INR 425 crores to just INR 500 crores, that is INR 75 crores roughly increase. But our assets have gone up significantly by INR 300 crores. And generally, we see in Q4, this increases significantly because revenues increases significantly in Q4, sir. So I'm just asking that is it higher inventories or receivables which has caused this change, sir?

It is because of the higher inventory, preparing ourselves for the fourth quarter.

Some impact of account receivables also because we did high sales in this quarter.

Yes, but that is roughly INR 75 crores only, [ so not a good number. ]

Yes.

The next question is from the line of Nitin Agarwal from DAM Capital.

Sir, I want to go on with this increase which has been happening in the in the agri commodity prices over the last month, 2 months, have you seen -- are you seeing any changes in the market dynamic because of this, sir, in terms of the volume offtake for agrichemicals in general?

Sir, you want to repeat your question again? And speak a little slowly and loudly, sir.

Sir, what I mean to ask is there has been a very strong increase in the prices of all the agri commodities over the last few weeks and few months. Is that having any impact on the demand dynamics for the agrichemicals in general, sir?

In general, if the agro commodities prices go up, the demand for agrochemicals do also go up. But we are not seeing any such impact or connection at present. If agro commodities continue to be having higher prices, then the farmers will be encouraged to use more chemicals to protect their plants. And that situation will come only from the application stage that is the first quarter of next financial year. At present, there is no such connection.

Okay. Sir, this probably something will be an impact if this continues probably more to be felt in FY '22 onwards?

Yes. If the prices of agro commodities go up, then the showing also increases. You understand me?

Right, sir.

And when the showing area has increased, then the demand of agrochemicals is naturally going to increase.

Right, sir. And sir, for this year, for the 9 months, what has been our impairment that we've taken?

What is that? 1 minute, Mr. Agarwal. Please hold on. In Q3, our impairment was INR 5.7 crores.

And sir, what would be this number for 9 months?

9 months is about INR 8.7 crores.

Sir, this is significantly lower than what we've done in the last 2 years. So is this...

No, Mr. Agarwal. I am saying that our impairment last year for the 9 months was about INR 2.3 crores. Against this, it was INR 8.7 crores this year.

And sir, this is the way it's going to continue even in Q4?

Very difficult to say at this stage. It could increase because there's no standard formulas to link it with this. We have to study each molecule independently for their impacts and their demand and testing. But in general, if you ask me, it's going to be higher compared to last year.

[Operator Instructions] The next question is from the line of Deepak Kolhe from B&K Securities.

Congratulations for a good set of numbers. Sir, can you please guide us on our tax rate for the FY '21, sir?

1 second. The effective tax rate for FY '21 should be in the range of 30% to 35%.

Okay. And also, sir, if you can give us the breakup of registration pipeline as per geographies, sir?

1 minute, sir. So registrations in pipeline, the total figure is about 1,062. Out of this Europe region is 722; NAFTA, 154, LATAM, 114; and rest of the world, 72. This is as on December 2020.

Okay, sir. And sir, another, sir, there is a registration at the end of the quarter, it's 2,495. Right, sir?

Yes, sir.

And also, if possible, sir, if you can give the breakup of that also will be great, sir.

Sure. Out of 2,495 registrations at the end of December 2020, Europe had 1,290; NAFTA, 225; LATAM, 740; and rest of the world, 240.

The next question is from the line of Rohit Nagraj from Sunidhi Securities.

Sir, we discussed about the raw material prices being reached from China as well as the freight rates. We are certainly covered for Q4. But if -- and my question is whether it will have an impact on Q1? And if it does have, then how does our pricing cycle generally move?

Mr. Rohit, this is a trend -- as I'm telling you, we do not predict, and we do not decide the prices. The prices are decided, first of all, by multinational companies, who, in general, command about 75% of the market. Secondly, depending upon the weather, the showing, some products may have a good demand, some products may have a reduced demand. So it is very difficult to predict overall trend for Q1 at this stage.

[Operator Instructions] The next question is from the line of Ayaz Motiwala from Nivalis.

This is Ayaz Motiwala. Sir, my question is regards to the...

Sir, your voice is not audible. Mr. Motiwala, your voice is not audible.

Yes. Yes. Okay, sir. Is it better, sir?

No, sir.

Hello? Sir, is it better?

Now it is better.

Yes. Okay. Excellent, sir. Sir, my question relates to the [indiscernible].

I'm sorry to interrupt you, Mr. Motiwala, but while speaking, your voice is breaking. I will request you to please check and you may rejoin the queue, sir.

Hello. Is it better or no?

Yes.

Can I ask question now or I can come in the queue again?

So because when you are speaking, sir, your voice is getting break.

Up to now, your voice was good, but then it should not break when you put the question.

I hope so, sir. I'll quickly ask you the question, sir. The question, sir, is that are you -- the volume decline in the ROC trend, you hope that this is the bottom and it's going to turn. And at the same time, you have shared the fact that the registration costs are going up. So my question to you, sir, is, is the productivity of registration, is there some way that you measure it internally on when you are successful with registration, despite the rise of costs of these registrations? And on a 2-, 3-year basis, when you make those sales, are you able to get better productivity and thus, you are confident that your ROCs have hit a sort of a bottom and they're going to turn? How do you see that, sir? That's my question.

Motiwala, I have not done any detailed calculations to answer all your questions. I just indicated a trend, just a trend because we hope our volumes will grow up, our revenues will grow up and that would have a better impact on the ROC. But I don't have any detailed calculation, neither have we prepared anything.

Sure. Sir, can you give one sense of ballpark increase in your registration costs when you were filing 3, 4 years ago and when you are filing now? What do you think is the change in the cost of registrations?

It could be 70% more, it could be 100% more or even 50% more, but it's been very high.

Okay. So you're saying that that's gone up, that by 50% to 100%...

Yes, very high.

And to compensate that, sir, how are you able to manage -- because your margin while dipped for a few quarters, they've come back into the -- the EBITDA margins have come back into the 20% range now. So what have you done while costs have gone up, which is a very important cost such as registration? How have you been able to maintain and manage these margins? Just by scaling offerings?

This is mainly because of margin on individual products which have been introduced in the last year for this year.

Right. But sir, the registration costs have been going up for the last 3, 5 years, is what you're saying, right?

It is. It is. And that has impacted our EBITDA and margins also adversely.

Right. Okay. Sir, and one other way to sort of understand this same subject on margins and productivity of your registration. Sir, you just mentioned that freight and transportation costs as well as potentially some raw material costs sourced from China may be going up in the next season. So when these things happen, the innovator companies [indiscernible], do they compensate you enough for those increases?

Sir, last 2 sentences are not audible. Something has happened to the...

Yes. I must say, do the innovator companies compensate you for increase in the raw material...

No, sir, I'm not able to hear you clearly. Madam, can you help us?

Mr. Motiwala, may I request you to rejoin the queue, sir, by -- after taking your line?

Yes, I will do that.

The next question is from the line of Somaiah V. from Spark Capital.

Sir, if I were to look at probably a slightly medium-term outlook. So amongst your operating geographies, say, Europe or NAFTA, sir, how would you kind of look in terms of emphasis between these 2 geographies? You'll probably want to continue at the current level? Or probably there will be more -- you want to -- in terms of your registrations or in terms of penetration levels, you want to be more in a particular geography? I mean outlook in terms of -- between these 2 geographies, where your emphasis would be in the near to medium term, sir.

You are Mr. Somaiah V.?

Yes, sir.

Mr. Somaiah, see, as I explained to you, we cannot switch our strategies or other things very abruptly and so quickly. The process of registrations is very long, as you know. It may -- one molecule may take 2 years, 3 years or even 5 to 6 years. So we cannot change any strategy about registrations based on the factors that you have pointed out. I've just explained you these are the facts, and we have to live with them.

Got it, sir. Sir, in terms of your volume numbers that you've given for this quarter, in NAFTA and Europe, there has been growth. Though LATAM is small for you, but there has been a slight decline. Is it predominantly because of the late season pickup or anything?

Let me have a look at the figures. Yes, LATAM, there is -- 1 minute, this is Q3. Okay. Yes, there is a drop, there's a drop in the volume in LATAM to the extent of 25%, 26%.

Is it because of the season got delayed because of the, I mean, dry weather there? Or is that the -- is it more of a macro thing? That's what I want to understand.

Sir, I think it is more connected with their state of economy and their political situations. We hear a lot of protest and many kind of changes and accusations against the government. So their currencies are very much unstable against U.S. dollars. And a little bit of uncertainties in their own individual countries' economic situation. I think these are the factors which are there in quarter 3. But if you look at the last 9 months, then LATAM has been very much flat. There's hardly a drop of less than 1%. Only in Q3, it has been there. So there could be some small specific situations, which is difficult for us to throw light on.

Okay, sir, got it. Sir, in terms of your gross profit margins, so you're almost up from 25% to kind of 35% in this quarter. So you had alluded to lower RM costs. But also, you mentioned that you see for some of the molecules, the China RM prices are picking up. So in terms of benefit from a gross margin standpoint, so one is lower RM costs compared to last year. Second, we have also had a product mix benefit, if I understand right, because of the newer registrations that we have got. And also, is there an inventory in that impact? Like because we have done our procurement ahead of the season, and we've got it at a lower price. If we were to compare to today's price, probably, it would have been slightly on the lower side. I'm just asking more from what could be the inventory impact that is within this gross margin numbers?

Sir, I do not have an analysis for that. All I can tell you is that I have told you that the prices are not fixed. The prices also vary, both the raw materials value as well as my sale prices, depending upon the factors which are not controlled by our company. We just sail with them. And I'm only telling you what is the end effect. Did I answer your question correctly, sir?

Yes, sir. One minor clarification there that I wanted to have was, I mean, is there an inventory gain that is sitting -- I mean I understand that you'll not be able to quantify it. But is there an inventory gain that is helping numbers here in terms of gross profits?

Sir, the inventory gain is there if you compare to current prices. But I also know that it is the same case with most of my peers. Everybody has done -- it's not that anybody would willingly delay the procurement till January end or till February. So most of the people are on the same door. I have finished saying. You have any further questions, sir?

The next question is from the line of Rohan Gupta from Edelweiss Securities.

Sir, just wanted to reconfirm gross margins for the quarter geography-wise which you have shared, sir. Sir, as you mentioned, Europe is 41%.

Yes.

NAFTA, 32%.

Correct.

Latin America, 21%; and ROW, 21%.

Yes, sir.

Okay. Sir, we have seen that Europe margins are continuously improving. While LATAM has continuously come down, and at 21% for the current quarter, probably have seen lowest in last 4 to 8 quarters. Though you mentioned that there may be quarter-specific reason, I'm not getting too much in the quarterly detail. But in general, sir, we are seeing Europe margins are declining and LATAM -- Europe margins are improving and LATAM has declined. I also understand that in our business model in LATAM market that these are the high working capital days market because money in Latin American markets come with -- later in cycle. So sir, with this kind of Latin America markets, our margins are continually declining. Do you see that we need to review our Latin America markets business? And also wanted to understand in Europe, the reason for the rising margins, sir.

Rohan, this has always been the case with us, sir. But for better clarification, I will give you a 9-month figure. For the period of 9 months, the LATAM margins have not gone down so much. It was 27.7% for the 9 months last year, and it's 25.3% this year. It's hardly 2.6% decline.

Okay. Okay. And sir, Europe margin, which has been continuously improving, it's led by new product registrations, which you are mentioning have done in Q1, Q2? Or it's the general pricing trend is improving? Or it's less competition, which has helped us in better margins in Europe, sir?

Sir, I have a feeling that on the pricing front, there's not big change in Europe. But on the -- maybe raw material front, there might have been an improvement in the sourcing prices that must relate to this increase in the margins.

Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. Manish Mahawar for closing comments.

Yes. Bubna, I have 2 questions. One, in terms of our write-offs, intangible, you said it will be higher than the last year, right, in this year, particularly FY '21?

Yes.

Sir, what could be the [ contribution ]? Last year, what I can see is around INR 57 crores -- odd crores was a number in the -- for the full year. So what could be the number you are expecting for this year tentatively?

1 minute.

Sir, why I'm asking because earlier you have indicated like this number will be much, much lower versus the last year. Now you're saying it get increased.

Sir, I have given you just my impression and feelings. We don't have any calculations, and we have not done any analysis. I have given you what has happened till Q3 and just a feeling for the fourth quarter. Maybe my feeling -- I mean, my expectation or estimations may not be -- may be correct or may not be corrected. This is just a trend and impression.

Okay. But just -- it will be higher or lesser, just what should we, as an investor, should assume, sir?

Let me see if I have any figures.

Last year, it was INR 57 crores. 4Q, it was INR 55 crores.

INR 55 crores last year.

Yes, it was INR 55 crores last year. And how much was it? How much?

In 9 months. So in the quarter, there was a very big figure.

Rohan, (sic) [ Manish ] as I see, that's not verified figures. Last year, in Q4, the write-off was substantial. In that case, maybe I should say that this year, it may not be so substantial because part of it might have been covered in the Q3. It could be in the same range or very low.

Okay, sir. Sir, last year, we have -- annualized number was INR 57-odd crores, so you are saying it will be same or lesser than this number, right?

Yes, sir.

Okay. And second question, sir, in terms of -- because this quarter, particularly, you said gross margin expansion was happened because of lower raw mat costs, right? So do you think this benefit will continue in the 4Q as well?

Sir, as I've already explained, in the current situation that some of the products in China is going towards shortage and the prices are increasing, so I don't expect the same thing in Q4. But whatever we have sourced, which is going to be sold in Q4, we would be definitely at some advantage.

Okay. Understand, sir. And sir, one bookkeeping question, if you can give. You said the total volume for the quarter is around [ 5 7 ] -- just 1 minute, sir. You said -- 1 minute, sir. It was -- yes, it's a [ 57,61,000 ] metric tons for the quarter, total number volume?

The figure I have is [ 5 7 ] -- you mean agro or nonagro or both?

Agrochemical, you said, total.

Agrochemical total is 57,53,000.

Okay. And what is the nonagrochemical, sir, volume?

Nonagro is 50,00,180.

Can you -- can it be possible to give both the numbers for the last year as well, sir?

Last year...

Same quarter.

This figure was 50 lakhs for agro and 3,33,000 for nonagro.

Okay. Sure, sir. That's all on my part. Sir, would you like to make any closing comments, sir?

No. I would only like to thank everybody who have taken interest, and I'm very happy that people are going into the details of our company, which also helps us to improve and understand our business much better than if we only apply our mind. I'm happy that a lot of people are applying their mind. And by the way of these questions, we learn a lot, and we thank everybody for this. Thank you, Manish.

Yes. Thank you. Tuja, we can close the call, please.

Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.