Sharda Cropchem Limited (SHARDACROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sharda Cropchem 4Q FY '21 Post Results Conference Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking. Thank you, and over to you, sir.

Thank you, Melissa. On behalf of Antique Stockbroking, 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, General Manager, Finance on the call. Without further ado, I would like to hand over the call to Mr. Bubna for opening comments. Post which, we will open the floor for question and answer. Thank you, and over to you, Mr. Bubna.

Thank you, Mr. Manish. I welcome all the participants in this conference call. Good day, ladies and gentlemen. A very warm welcome to everyone present here for the earnings call of Sharda Cropchem Limited for Q4 and FY '21. Sharda Cropchem is represented by myself, Ramprakash Bubna, Chairman and Managing Director; our Chief Financial Officer, Mr. Ashok Vashisht; and Mr. Dinesh Nahar, General Manager, Finance. Talking briefly about our FY '21 results. Revenues grew by 19.6% from INR 2,003 crores in FY '20 to INR 2,396 crores in FY '21, mainly due to growth in Europe by 20.2%, NAFTA 23.6% and LATAM by 30.6%. There was a decline in rest of the world by 3.7%. During FY '21, our agrochemicals and non-agrochemicals mix stood at 86% agrochemical and 14% non-agrochemicals. Agrochemicals business grew by 22.2%. Europe grew by 20%. NAFTA by 26%. LATAM by 24.6%. And rest of the world grew by 17.1%. So there was a growth in all the 4 regions for agrochemicals business. Non-agrochemicals business grew by 6%. This is comprising of Europe 22.4%, NAFTA 12.7%, LATAM 87.1%. On the other hand, rest of the world degrew by 33.4%. The company continues to strengthen its product portfolio by prudently investing in new product registrations and enlarging the level from the existing registrations. Sharda Cropchem's total product registration stood at 2,543 in the FY '21. Additionally, the company has 1,128 product registrations in pipeline. The CapEx during FY '21 stood at INR 309 crores versus INR 162 crores in FY '20. We are pleased to share that Board of Directors of the company have recommended a final dividend of INR 3 per share, taking the total dividend payout for FY '21 to INR 5 per share as compared to INR 4 per share last year. With this brief overview, I would like now to hand over the call to our CFO, Mr. Ashok Vashisht for discussing our financial performance. Mr. Ashok.

Thank you, Mr. Bubna. A very good evening to all of you, and thanks for joining the call. So I will take you through the financial performance of the company for FY '21. So during FY '21, our revenue grew by 19.6% on a year-on-year basis. This was mainly driven by very strong volume growth at 21.5%. And during the year, exchange gains was also favorable to the tune of 6%. And we were having a gross mix and price impact of around 8%. So in nutshell, the revenue growth is essentially driven by volume growth, which was 21.5% year-on-year basis. So if we talk about gross profits, so we grew by 23.6% from INR 614 crores in FY '20 last year to INR 760 crores in this year FY '21. So in terms of gross margin basis, so we grew by 104 bps from 30.7% in last year to 31.7% FY '21, driven by volume and overall from yearly basis product mix. In terms of favorable product mix, so Europe and NAFTA continue to be the growth engine for Sharda Cropchem. And when we talk about EBITDA of percentages performance, so there also in line with the revenue growth and volume growth, we delivered EBITDA of INR 455 crores, against INR 351 crores in FY '20. So in terms of growth, it's very high double digits at 29.8% for year-over-year basis. And we have expanded EBITDA margin by 150 bps to 19% in FY '21. So if we talk about profit after tax. So profit after tax for FY '21 was at INR 229 crores from INR 165 crores last year, so a very impressive growth of 39.2% in terms of PAT. So if we talk about cash profits, so we are at -- we reached INR 400 crores in FY '21 in comparison to INR 302 crores last year, so thereby further strengthening of the balance sheet of the company. In terms of working capital efficiencies, so we were at 86 days against 74 days. So the -- actually, a little break up of net working capital, which you might have seen in our investor presentation. So this is -- there is a -- mainly driven by accounts stable wherein we have more -- done from early payment. Otherwise, in terms of inventory, accounts receivable, we continue to be efficient and deliver the working capital targets. So with this, we now open the floor for questions. So thank you.

[Operator Instructions] We have the first question from the line of Rohit Nagraj from Sunidhi Securities.

Congrats on good set of numbers for Q4 as well as overall for the financial year '21. So the first question is, post the quarter, have we seen any kind of disruptions in terms of our product or raw material availability as well as in terms of dispatches because we have been hearing the second COVID wave and the logistics because of which perhaps been impacted both locally as well as globally. So have we seen any kind of such disruptions happening post the quarter in third quarter?

No, sir. As you have seen -- I mean as you must have heard from the media, first of all, our business model is we are sourcing most of our raw materials from China. And you must have heard from the media that China has not been impacted by the second wave of COVID at all, and China's economy has grown in this period as compared to rest of the world. So there has not been any disruptions post this quarter in China and the current quarter is running very smoothly.

Understood. That's good to hear. Sir, the second question is in terms of the growth which we have seen in the -- in Q4. So was this particular growth driven partially by inventory restocking because the channel inventories probably were lower and that's why we have seen such a massive, almost 25% kind of growth? So is there any element of inventory restocking? Or is it a natural growth because of overall good sentiment across the market, the commodity prices have been good and agri commodity, particularly, the prices have been quite vibrant globally, so that has benefited the overall growth?

I think this growth has been mainly driven by our product mix, our getting new registrations and getting deeper into the markets. The psychology overall has been subdued because this is COVID-19. But agrochemicals and agriculture have been received priorities by the public as well as the authorities and the governments. So there has not been any adverse impact of the lockdowns on the agricultural activities, including manufacture and supply of agrochemicals around the world. And since 98% of our actions are outside India, the company has not also been affected by the impact of COVID-19. And the growth has been in the normal economic function, greater approach to the market and better product mix.

[Operator Instructions] We have the next question from the line of Somaiah V from Spark Capital.

Sir, first question is on the gross margin. So in the current quarter, there is a decline in gross margins. And in the presentation you had referred to, it is to do with the product mix. Can you help us understand a bit more on this? I mean you had a -- you had mentioned that last year, the product mix was more favorable. And also as a follow-up, how do you look at gross margin going forward, especially in the context of rising Chinese technical prices?

See, if you compare only quarter 4, then there is a decline in the gross margin because the gross margin in quarter 4 of previous year was exceptionally high. But if you take the total year's performance, then the gross margin is better than last year. So quarter 4 of last year was exceptionally better, and we are starting from an exceptional rate. That is why there is an apparent decline in the gross margin for this quarter. I was being able to explain you?

Yes, sir. Just one follow-up on that. So how do we look at -- I mean, was there any impact in terms of rising RM prices in this quarter? Or have you seen anything in the month of April, May? And how is the -- now price increase that's been generally taken up by the global majors. How is that happening across geography?

I'm not aware that the multinationals are taking any price increase. But if the multinationals do increase the prices, then Sharda Cropchem will be benefited. Because we don't have -- besides our selling prices independently on our own. We are only following the footsteps of the multinationals. We cannot go away from their strategy that -- it is not in our interest to reduce the prices. And we can't increase the prices beyond certain limits because we cannot exceed the prices of the multinationals. The market always has a preference for multinationals who have been there in the business for several years. So to answer your question, the price rise has been very steady and normal.

Helpful, sir. And sir, on the input prices for you, in terms of raw material prices, so you have seen an increase in prices in the last few months, sir?

That was there, but I think that is also getting tempered down in the very recent past. Availability is there and the prices are getting tamed.

Okay. So if I get it right, so you're saying there was an increase, but now it is kind of getting a bit slow down on that?

Yes, it is a dynamic situation. Sometimes they tend to increase and sometimes they tend to come down. Right now, the price levels are very normal and flat.

Got it, sir. Sir, and just a question on the Q4. Can you just provide the volume price and FX mix that you gave for FY '21?

One minute. The volume in Q4 of '21 was 71,73,000 can be kilograms or liters as compared to 54,27,000 in the Q4 2020. For NAFTA region, the volume has been 62,40,000 compared to 42,01,000 in the FY '20 with an increase of 48.5%. In LATAM, the volume has been 5,72,700 as compared to 5,07,000. This is an increase of 12.9%. And rest of the world, the volume has been 8,75,500 as compared to 7,58,000, which is about a growth of 15.5%. Overall, the volume has been 1,48,60,000 as compared 1,08,93,000, an overall growth of 36.4%. I have finished. Hello?

I was just -- I mean, I'm not sure if I missed it. Earlier, you had mentioned it. I was looking for the -- also the volume, price and FX percentage for Q4, Y-o-Y percentage?

Volume, price. So Mr. Ashok will answer this question.

Yes. So actually if you see -- as he explained, Mr. Bubna, the volume is higher by 36%. But then there was a price and mix impact of nearly 17%. Then there was a favorable ForEx impact nearly 5%. So overall, the growth which we have seen in terms of rate is 20%, 22% for quarter 4.

[Operator Instructions] We have the next question from the line of [ Rajiv Sehgal ], an investor. We have the next question from the line of Rohan Gupta from Edelweiss.

Sir, 2 questions from my side. First is on our growth. Sir, we have seen that many players in the global market, they have shown a huge growth in Latin America market. But our growth rate are only driven by Europe and NAFTA. So can you just throw some light that are we focusing only on these geographies, and cautiously not in increasing our sale from Latin America market or there is a growth kind of in that market?

So on -- in Latin America, there are some issues, political turmoil and economic setbacks. So the exchange rates are also -- the currencies are going down against the dollar, and because of the general economic stress, the payments are not very regular. There are delays in the payments and people are not buying big quantities. So all these effects has a natural tendency of Latin America business getting slower. As against that, Europe economy is strong and stable and so is the case with NAFTA. Thirdly, we are investing very heavily on the registrations. And the compliance of rules and regulations are strictest in Europe and then in the NAFTA region. In Latin America, there is some elasticity in implementation of the rules or regulations. So some people take advantage of the situation and bring some products and thereby reduce the margin, that is at a lower price. So the margins also get subdued in the Latin America. So these are the 3 factors which drive the growth of the business for Sharda.

[Operator Instructions] We have the next question from the line of Sachin Kasera from Svan Investment.

Congrats for a good set of numbers...

Mr. Kasera, I'm sorry to interrupt. We are unable to you hear you clearly, sir.

Is it better now?

Yes. Yes.

Yes. Congratulations for a good set of numbers. I had a couple of questions. First was, you mentioned in previous query that we have been making heavy investments in the registration, and because of which this heavy investment in the last 2, 3 years, the cash in the balance sheet has not increased significantly because most of the cash flow is going there. So is it now a new and permanent feature for our company? Or this is like a temporary phase of 2, 3 years, and then in the next 1 to 2 years slowly it will come down, and we'll start to make good cash flows and again, the cash in the balance sheet will go up?

Sir, I would say that the process of investment in the registration is more or less a continuous process. We have still a lot of scope to enter deeper into the market. And for deeper entry, we require good product mix, and the registration process in Europe is becoming more and more expensive, more and more strict. So I feel that at least for the next 2 years, our investment into the registrations will continue. It is also not totally decided by the company or its management. There are many factors which influence the investment in the registrations. One is the progress of the process of registration. Sometimes the process takes place at normal pace, sometimes it gets subdued because of many factors beyond the control, because of bureaucracies involved, because of the weather situation, when the -- probably sometimes the impact of the -- influx of the diseases. So the process of registration has a lot of uncertainty. I would say if you ask me to reply in a simple way, the investment into the registrations will be in the range of about INR 200 crores to INR 250 crores for the next 2, 3 years.

But sir, in that scenario, if we see from a INR 335 crores cash in the balance sheet, the cash has come down to almost INR 260 crores, INR 270 crores. And last 2 years, we have not made any significant cash flow post investment to the registrations. Even our margins have come down and our return on capital is going down. So if you're going to work on this model, then the cash will keep on depleting and the returns will keep coming down. So over a medium term, how do you create value for the shareholders with such a change in business model scenario?

I will ask Mr. Ashok to reply to this question.

Yes. Ashok this side. Actually, the point which you are making is a very valid point. But the investments which we are putting is for securing the accelerated growth. So when we are investing, so like this year, INR 300 crores, probably INR 300 crores and which will continue. So obviously, the revenue and financial CapEx will be much better. So we -- would we -- in fact compare to what you are saying, we would be actually strengthening the cash with that. And that is the reason -- that is why -- this company is -- the key DNA is to extend market in geographies basically which are complex and where there are entry barriers. So this is actually helping us in terms of getting accelerated growth. So we actually foresee that with all these investments, the cash position will become much better.

So can we assume that at least for the next...

In terms of cash and cash equivalents in comparison to last year. So the cash and cash equivalent was INR 269 crores, which went up to INR 343 crores as at 31 March 2021. So actually, it was tempered, which I don't...

We have to look at the net debt number, sir, because the debt -- last year there was no debt, this year you also have INR 68 crores of debt. If I compare vis-à-vis to your presentation in 2019, your cash and cash equivalent WAS INR 335 crores and debt was 0. And if I adjust for the debt, then net cash and cash equivalent has gone down...

Even the -- we can touch off-line. INR 268 crores was cash and cash equivalent. So even if you're adding temporary debt. So this is temporary only. So still, it is a on high side, in spite of INR 100 crores more investment during this year.

Okay. Okay. And sir, can you give us some sense on the margins? It has come down from 22% in FY '17 to 17.5% last year, this is some improvement to '19. So can we see -- when do we see this going back to that 22%, 23% range during 4, 5 years back or this 18%, 19% is the new normal for us?

So product mix is playing a big role and -- [ on gross margin ] expansion. So in fact, now, we are very near to 20%. So I think we currently can't say when it will, but we can say that these margins will be better, the kind of growth which we have foreseen. And obviously, the costs will be incremental only. So it would be better. Better and better.

[Operator Instructions] We have the next question from the line of [ Rajiv Sehgal ], an investor.

Congratulations to the management on a very commendable set of numbers. If you compare the performance for FY '20 and FY '21, there are 2 line items which have a very significant variation. One is the foreign exchange gain or loss. And the second is the tax expense. I'd like the management to kindly explain the reasons for such significant variation. And does the company have a hedging policy? And do you expect similar variation in the current financial year as well on account of these 2 line items?

The foreign exchange gain and loss is totally a function of cross-currency exchange rates between dollars and various currencies, it is -- which cannot be predicted, and which is not decided by any company on its own. Our business more than if you have seen, most of the buying is done in dollars from China. But the sales are in the local currencies. In Europe, most of our sales are in euros. So last year, the euro-dollar exchange rate was varying from 1.05 to 1.1. This time, it is varying around 1.2. So if I'm selling at the same euro prices, we have a natural increase in the margin of almost 10% in this year. So these are the factors which are leading. Similarly, in the case of Canadian currency or Mexican pesos, all these cross-currency exchange rates have a direct impact on our margins, which cannot be predetermined or controlled by us. So next question was about the tax. Now again, the tax liabilities, there has been an increase in the tax rates by the government of India.

Sir, last year -- just to answer that question. Last year, there was change in the corporate tax rate. So last year, we got onetime impact in terms of reduction of tax liabilities in line with the new rates. So the rate which this is coming for this year, so there is -- you'll see significant difference because of the onetime benefit which we saw last year and this year it is normal. So the tax rate will be in line with the current year FY '21 tax rates for us until unless there is no new change in any tax regulations.

Thank you, Mr. [ Sehgal ].

[Operator Instructions] We have the next question from the line of Himanshu Binani from Antique Stockbroking.

I have some questions on the [ bucketing ] side. So basically wanted to understand on the gross margin region wise, so can you please help us with that?

Yes, please. The gross margin region wise is Europe, 38.7% this year compared to 37.1% last year. So there is an increase this year. NAFTA, 25.1% compared to 24.2%. Latin America, 25.2% compared to 28.1%. Here, there's a slight marginal dip. And rest of the world, it is 26.5% compared to 25% last year. Overall, it is 31.7% this year compared to 30.7% last year. So an increase of 1% on the normal here and percentage wise, it is about 3%.

Yes, sir, can you please share the registration pipeline also, the registration breakup region wise as well as the pipeline region wise?

Yes, sir. The registrations this year is 2,543 and the breakup is Europe 1,326, NAFTA 236, LATAM 744 and rest of the world 237. Total 2,543. Now you asked a question of registrations in the pipeline? Hello?

Yes, sir. Yes, sir.

The registration in the pipeline are Europe 760, NAFTA 133, LATAM 167 and rest of the world 68. Total 1,128.

And sir, I do have one more question basically. So on the growth guidance, how do one see basically in the next few years, basically? So how can one look at the growth for the company going forward?

Sir, the growth is expected to be in the range of 10% to 15%. And as we've explained previously, there are many factors in our business which are very difficult to predict, to forecast and control. And one of them is the weather. So the weather plays a very important role in the growth and demand of our products. Cross-currency exchange rates decides the margins and some factors like corona or anything which may impact like, say, corona's biggest impact on Sharda business has been the cost of logistics. The freight rates in the last 6 months have gone up to about more than 400% compared to last years, ship rates, freight rates and surface transports in Europe and NAFTA region. These could not have been predicted, and we hope this will come down when the situations become -- moves more towards normalcy. But overall, we can say that it's going to grow around 10% to 15%.

And sir, one last question, if I may. So sir, we have seen intangible write-offs, which has been now a constant basis, basically, you have seen. So in FY '19, you have almost INR 142 crores; in FY '20, INR 55 crore; and then in FY '21, it is almost around INR 38-odd crores. So going forward, how one may look at this number basically? So what can be the number basically, so if you can throw some light on.

Ms. Himanshu, nobody can give you a trend or precise information. Again, these are depending upon the factors as the time passes. Now it's -- I mean these are decided by the auditors and our team put together about the use of a particular asset. And many factors which are decided during the course of the year and difficult to predict in advance. But it will be in the range of the same range, maybe INR 30 crores, 40 crores, INR 50 crores. Sometimes the government authorities bans on registrations. Now we already made the investments. So these cannot be predicted in advance. Have I answered the question, sir?

Sure sir. Yes, sir.

[Operator Instructions] We have the next question from the line of Sameer Deshpande from Fair Deal Investments.

Congratulations for the excellent results the company has posted. Actually, because of the tax effect, the real growth in profit seems to be a bit understated. Actually, the profit before tax for this year has gone up by 67%, whereas at the net level because of higher price this year, the profit seems to have -- growth seems to have subdued a bit. But I would like to know regarding the guidance you have given regarding the sale, what is the expected level of operating margin going forward?

Operating margins would remain more or less flat.

Around 18.5% to 19% or so?

Yes, please.

Because currently, they are 18.7% or so. So?

Yes. This is a fair range. You can say you rightly answered the question, 18% to 19% or 17.5% to 18 -- 19.5%.

Okay. And regarding our inventory, it has gone up substantially this year, about INR 150 crores and debtors have gone up by about INR 173 crores. So it is due to the rise in sales these things are happening? Or the inventories are built for any particular reason?

There is no particular specific reason, Mr. Sameer. These are the factors -- you also answered part of my question. With the growth in the revenue and wider coverage of the markets, we have to keep the inventories available. And secondly, our business is a seasonal business. And when the demand comes, they want that product the next day. And our business actually is that if you want to sell a product in a particular region in NAFTA or in European, we have to plan at least 3 months in advance. So that is why we have to keep -- to be on the safer side and sell more, we have to keep higher inventories. And what was the second question?

Yes. And the other question is, regarding this -- the other intangible assets and assets from intangible assets under development, this is the expenditure we incur for new registrations and compliances, et cetera, which is in that figure only?

Yes, please.

So there, once it is -- everything is completed, you try to have about INR 30 crores, INR 40 crores, which you mentioned every year.

Yes, please.

And now with the new government regulation, it seems the goodwill write-off is not allowed as expenditure. So what is the rule for this intangible asset write-off? Is there any change?

Do you have any goodwill -- see our goodwill -- Mr. Ashok informs me that goodwill is about INR 43 lakhs, which is very insignificant.

No, no, no. I wanted to...

Significant investment in the goodwill intangible asset.

So we may take a call. It will not impact our business much. I mean, benefit much.

No, no, I don't want to know about goodwill. I'm saying other intangible assets write-off where that expenditure is allowed for income tax?

It is not goodwill. That is actually the write-off [indiscernible] it is allowed. Yes.

That is more on -- which is allowed for income tax, no change in that?

Sorry, could not get you. Can you repeat again, last sentence?

Yes. No, what I was asking, for our goodwill, the government has not allowed from this year the write-off of goodwill as allowable expenditure. That doesn't have any effect for our write-off of other intangible assets, which we are writing off.

So let me clarify, as in tenured assets, write-off doesn't include goodwill at all. So it's purely the newer assets, IPR, and so -- which is allowed. So goodwill, we have not taken up any goodwill actually. As of now -- yes, it's a very small amount, which is coming around [indiscernible].

And are we getting -- the earlier incentive -- export incentives which has been canceled by the government from January, that is the NIEO scheme. Will you be getting any export incentives in 2021?

We have Mr. Sameer speaking?

Yes.

Mr. Sameer, if you study our business model, we do not do any exports. We are doing mainly third country sales. Export means sourcing from India and sending it -- selling the products out of India. Our sourcing of products from India is hardly 2% to 3% of the total business volume. So this doesn't impact -- I mean, affect or impact our business model this year or that year.

[Operator Instructions] We have the next question from the line of Rohan Gupta from Edelweiss.

This is on the agri commodity prices globally. So you have seen that some -- all the prices have gone up globally. And you've also mentioned that you didn't really have competition for all these [indiscernible] and all. So do you see that with the rising agri commodity prices, these companies innovators are going to change the benefit and going to increase the prices for their products or any such indications, which can help us also taking us the prices increases?

Rohanji, I think this question can be better answered by the innovators and not us. Only I can comment is, if the prices of the agro commodities are rising up, then there'll be better cash flow in the hands of users of agrochemicals and farmers. So if they are comfortable with their liquidity, it will affect -- it will impact our business by receiving payments on time or before time on some incentives, which is a good thing for the company. So it will have an indirect impact. Now if the multinationals take advantage of the situation of increasing the prices with the availability of cash flow with the farmers, it will also impact -- affect us positively because we'll follow the trend what the multinationals do.

Right. Sir, on the same expansion, you rightly said that farmers will have a better cash flows in their hands. Can you -- and if there's a reverse situation also, if the multinationals don't increase the prices, and we are genuine companies with almost 20% to 30% discount selling to the innovators. Have you ever seen that in industry of your business that if the farmers had a very solid cash flows in their hand and if the multinationals don't increase the prices, I mean they continue to do that, is there a chance that the farmers can go back to the innovators or on the higher brand from you generally? Can this happen, sir?

No, sir, I don't think that, that trend -- the farmers are smart and intelligent. They know that our product is as effective as the innovators product. It is approved by the authorities of their countries. So in terms of benefit in the farm, there is not much of a difference. And farmers are very smart. They would like to save as much money as they can even if they have a better cash flow in hand. That cash flow is not there to throw away as a carry through to the multinational companies. So I don't think that should happen, which is just a guess.

Sir, second question is on China situation. So you said that China has not been impacted at all by the second wave and the manufacturing operations, we have all seen. But we have seen that mainly, input prices central prices have gone up sharply in last [ 30 to 40 days ]. Was there an impact on -- impact of the rising input prices in our company or our products? We have also seen such kind of price increase? And what is the price increase -- extent of the price increase for raw material which we're buying?

Rohanji, that situation is there only in few products, individual products. We were talking about the trend. There are some products which are in short supply, and they're in short supply because of specific reasons for each product, nonavailability of the raw materials. Now maybe those raw materials are coming out of mining or some such things. So because of some factors which is not in the hands of anybody. And the prices are going up because of the investment in the production capacity, mainly because of nonavailability of raw materials as we understand. And that situation cannot last very long. So everywhere there are industrialists involved and people find a way. People find some solutions to these problems. So this is not going to continue for many years. I think this will be for a very short-term period. Overall, the situation shall improve. Overhead costs are increasing. As I told you, the cost of fuel, petrol, diesel, transportation and a lot of these things are increasing, and they are having impact also on the product -- at the manufacturer level and at the distribution level and registration holder level. But this also cannot continue for very long. For the container that we are paying $1,500 to $2,000 earlier, freight, is we are paying about $6,000, $7,000 or $8,000 because of the nonavailability of the container ships, nonavailability of the ships and the ships are not being moving because of mainly the corona factor this way or that way. But this will improve. This will change. These are not manufacturing things. These are happening because of the circumstances.

But sir, are we in position to start on the rising input cost? Or there will be some short-term pressure on them?

I didn't hear the last part of your sentence.

I was saying that this rising input cost, rising raw material cost prices, we will be able to pass it on in terms of raising prices or there will be pressure on margins, sir, in near term?

Both, wherever we are able to pass on. As I have told you because the multinationals cannot afford to keep on paying from their pocket. If they are having higher costs, they will definitely pass on to the consumers, and we will follow the trend. Sometimes because of this situation if the product is not available, in short supply, then we are able to pass it on very easily to the customers. And the customers -- I mean, possibly they know everything and they don't jumble much. In case of our non-agro business, freight is forming a very important part of the cost. So many times even after completing with the contracts, when you approach the consumers that, look this was the freight -- sea freight earlier and sea freight now. After some negotiations, they do come forward. And also to share that cost 50%, 60% or even more because they also need the goods. So, in many cases, we want to pass on, even...

So we will be able to pass on and there will be no impact on margins for any of them?

Yes. So more or less, yes.

Okay. Sir just last question for my side. Sir, you mentioned it was very roughly INR 300 crores kind of CapEx for this year?

Pardon me?

Sir, you mentioned, I think, roughly INR 300 crores kind of CapEx for this year?

Yes, please.

Okay. So how much of that will be for the reregistration? And how much is likely for the reregistration? Sir, if you can just give some breakup of that?

So, this is CapEx. I think reregistration doesn't come under capital expenditure. No registrations fall under the capital expenditure. Reregistration is coming under revenue expenditure.

No, sir. Are we there for the money which we spend on registration?

Sir, I'm sorry to interrupt, we have participants in queue.

We can talk about this later, Rohan.

Yes, sir.

We have the next question from the line of Sameer Deshpande from Fair Deal Investments.

Sir, I wanted to know, regarding the tax rate. This time our tax rate is around 26%. So will that be the same going forward?

Yes, Sameer, yes that will more or less will be same. Last year, we got onetime benefit because of saving the corporate tax rates, wherein we have to reevaluate for tax liabilities and it was one-time benefits and tax rate was too low, at maybe around 9%. So it will be in this range only which is for FY '21 going forward.

Okay. And regarding the earlier participant was asking the question which I just want to know, the new product registrations we take in various countries. And for that purpose, we have to spend the certain money and all those things. So intangible assets, is -- what is exactly the things which go under that intangible assets?

Please be little more detailed, Mr. Sameer. We think that is going up to -- I mean, satisfy the requirements of the authorities including lab trials, lab sample testing by approved laboratories, field trials and a lot of -- all those things are going under registration expenses.

And that goes under the intangibles, and once it is finally commercialized, then you start selling, you write it off?

No, no. See, till we receive the registration, the expenditures are classified under capital work in progress. After we receive the registration in our hand, and we are able to start taking use of it by selling, so the way we have the registration -- I mean, asset created and asset is created when we get the registration certificate in our hand, from that time -- that point of time, it gets capitalized.

And [ charges ] in 5 years, depreciation.

And that is a written off over a period of?

5 years.

It's a depreciation basically. Not written off, depreciated.

Okay. Depreciated over a period of 4 years?

5 years, 5 years.

Ladies and gentlemen, that was the last question. I would like to hand the floor back to Mr. Manish Mahawar for closing comments. Please go ahead, sir.

Yes. Thank you, Melissa. On behalf of Antique Stockbroking, I would like to thank the team of Sharda Cropchem for providing us an opportunity to host the call. Bubna, would you like to make a closing comment, sir?

No, I won't. I would like to thank all of our participants who have joined and who have put in so much intelligent questions. This also helps us to look at the business in a more intelligent way. So we are very thankful to all the participants who have joined us. And if any participants who feels that the time was not enough, and has additional questions, he can contact us later on, on telephone or by e-mail or correspondence. We'll be very happy to answer their questions. And it has been a very enlightening conference call for us.

Thank you, sir. Thank you, management. Ladies and gentlemen, on behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.

Thank you, Madam.