Sharda Cropchem Limited (SHARDACROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Sharda Cropchem Limited, 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, Steven. 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, GM Finance, on the call. Without further ado, I would like to hand over the call to Mr. Bubna for opening remarks, post which we will open the floor for Q&A. Thank you. And over to you, Bubnaji.

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 Q1 FY '22 (sic) [ Q3 FY '22 ] . 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 Q3 FY '22 results. Revenues grew by 78.2% year-to-year from INR 494 crores in Q3 FY '21 to INR 880 crores in Q3 FY '22, led by strong volume growth across geographies and better product mix and price realization. Europe grew by 124%. NAFTA grew by 76%. LATAM grew by 18%, and rest of the world by 19%. During FY -- during Q3 FY '22, agrochemicals to non-agrochemical mix stood at 82% versus 18%. Agrochemical business grew by 80% year-on-year. Europe grew by 124% year-on-year. NAFTA grew by 82%. LATAM grew by 27% year-to-year. Rest of the world grew by 5%. Formulation and active mix stood at 94% versus 6% in Q3 FY '22. Non-agrichemical business grew by 71% year-on-year during quarter 3 FY '22. NAFTA grew by 52%. Europe grew by 127%. Rest of the world grew by 80%, and LATAM grew by 36%. The company continues to strengthen its product portfolio by prudently investing in new product registrations. Sharda Cropchem's total product registration stood at 2,645 on 31st December 2021. Additionally, 1,099 applications of the product registrations globally are at different stages of approval. The CapEx stood at INR 203 crores as on 31st December 2022 versus INR 170 crores in the same period last financial year. With this brief overview, I would now like to hand over the call to our CFO, Mr. Ashok Vashisht, for discussing our financial performances.

Thank you, Mr. Bubna. Good evening, everyone, on the call, and thank you for attending the call. I'm pleased to give you a brief on the quarter 3 FY '22 financial performance. During the Q3 FY '22, our revenue surged by 78.2%, which was mainly driven by a strong volume growth of 50.9%, favorable price and product mix to the tune of 26.5%, coupled with exchange gains of 0.8% during the quarter. On a year-to-date basis, that's for 9 months, our revenue grew by 64.1%. So we reached to INR 2,145 crores in FY '22 from INR 1,308 crore last year same 9 months. Gross profit grew by -- gross profit for the quarter grew by 75% from INR 171 crore in quarter 3 FY '21 to INR 298 crore in quarter 3 FY '22. Gross margin slightly reduced to 23.9% in quarter 3 FY '22, mainly because of slightly higher freight costs. On geographical mix, Europe region was the highest contributor during the quarter 3, followed by NAFTA and ROW. In terms of year-to-date, gross profit grew by 57.8% from INR 419 crore last year 9 months to 60 -- INR 661 crore in 9 months FY 2022. EBITDA registered a very strong growth of 97.1% for the quarter. We recorded EBITDA of INR 201 crore in quarter 3 FY '22, and the EBITDA for the 9 months ending 31st December 2021 was INR 102 crore, so thereby, a growth of 97.1%. The EBITDA margin expansion was by 222 bps, and we reached to 22.8% in quarter 3 FY 2022, mainly driven by economies of scale, our effective cost management and which was marginally setted off by the higher freight cost. Year-to-date EBITDA grew by very impressive numbers by 96.6% from INR 209 crore in 9 month of FY 2021 to INR 411 crore YTD 31st December FY '22. Profit after tax grew by 112% from INR 48 crore in quarter 3 FY 2021 to INR 102 crores in quarter 3 FY 2022, thereby a growth of 112% on a quarter-on-quarter basis. Year-to-date profit after tax, that is for the 9 month, grew by 80.8% from INR 95 crores in FY 2021 for 9 months to INR 172 crore in FY 2022 on a year-to-date basis. Cash profit stood at INR 161 crore as compared to INR 89 crore in quarter 3 last year. We continue to focus on working capital efficiencies, and net working capital in terms of number of days stood at 72 days as at 31st December 2022. Thank you very much again for being on the call. We now open the floor for the questions. Thank you.

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

congratulations for extremely strong set of numbers. I have 3 questions. Number one, sir, if you could give us some sense on different components of CapEx for a registration in terms of costing, say, for instance, when you're incurring CapEx for a registration, how much would it cost to get the bioequivalent studies? How much will registration take? And what are the other components? And typically, the time it takes to get a registration up and running.

Hello? are you finished with your question, Mr. Tarang?

Yes, sir. I have 2 more. So I'll just -- okay, then I'll just finish them as well. Also, while you're at your assets, if you could -- within the geographies that you operate, some sense on the timing differences of getting the registration approved across geographies and the cost differences. Like which is the most expensive? How much would it be versus some other geography that you would typically get a registration done? And third, if I see your presentation, you've spoken about penetrating deeper into certain markets by deploying your own field force. So what's the thought process behind it? Are you -- what is the incremental sort of spread that you get on realizations by doing that? And what are the strategic advantages that the business gets by doing that? Because I would presume it would also involve a front-loading of a lot of costs on your P&L. So yes 3 questions from me, sir.

Okay. Mr. Tarang, I'll answer your questions one by one. But the question have been very long, so maybe I forget it on the way. First was the components of CapEx. This is something if you have been tracking the agrochemical companies and the registration costs, this is absolutely undefinable. It depends on product to product, country to country, and even within the same country, it depends upon a lot of bureaucratic processes. So it is endless. All -- I mean, we have to -- I mean sometimes, one administration may take 3 years and another product in the same country or same geography, it may take 6 years or 7 years. So that is very difficult to give you these components of CapEx. What was your second question, Mr. Tarang?

Actually, it was something which is sort of -- so sir, typically, what geography would be the most expensive? Say if you were to get a same registration done, which geography would it be more expensive than the other, the most expensive? And in terms of timing, how much time would it take? And which geography commands the most -- is stringent when it comes to the time line for getting the registrations?

The answer to both the questions is Europe, both in terms of expensive and time lines. Sometimes, the products we registered in Europe may cost you EUR 4 million, EUR 5 million or EUR 6 million. And the time can go as high as 8 to 9 years.

And that will be...

[indiscernible] EUR 2 million to EUR 3 million and get a registration in 2, 3 or 4 years.

Okay. And that will be homogenous across all of Europe?

Pardon me?

That would be pervasive across all the countries in Europe?

No, sir. The first registration, in all the countries in Europe, we go step by step. We receive registration in one country first, and then expand our base to the second, third and fourth countries. Here also, the lab results and the active ingredient is approved by one country, which is nominated by the European Union for every product. So that country first evaluated the equivalent of our product with the original product, after having received the approval and registration on the active ingredient, then we apply for a formulated product. And the formulated product has to be approved by each country individually. And the third piece is the number of crops. I mean, we get approval from -- for one crop and then slowly expand to other crops for which the same product is applicable. So it's a very continuous process, long-term process and very expensive. It needs a lot of patience.

Got it. And sir, you spoke about deploying additional man force on the ground in certain markets, which my sense is maybe getting closer to the farmers than you already are. What kind of additional realization would this involve? I mean I'm pretty sure your margins would be a lot better for you to probably do this. And what kind of impact could we see in your P&L as you start deploying the strategy?

Mr. Tarang, most of our products are sold to the distributors, not to the direct farmers as far as we are concerned. The products go from distributors to the retailers and sometimes directly to the farmers. The only contact we have directly with the farmers are some cooperatives who buy in a bulk way and then distribute to their members. We put people on the ground -- field force in the ground only to get the feedback about the usefulness of the product, performance of the product, and demand and things like that, but the dealings are done with the distributors.

Okay. Because the presentation said forward integration, build own sales force. So that is again would be restricted to the distributors, correct? .

Yes, sir.

[Operator Instructions] The next question is from the line of Pujan Shah from Akash Ganga Investments.

Hello. Am I audible?

Yes, please. But what is your name? I didn't understand your name properly.

Pujan Shah.

Pujan?

Yes.

Okay.

Sir, my first question would be on this -- we have a great growth in this agro business. And so can you just give us a brief outlook about this type of such a -- type of growth? And would it be sustainable for -- you can say, for the next 4 to 5 years? And which -- are we getting traction from these new products which we have registered, or it has been getting a traction from our old product portfolio?

Mr. Pujan, it is both. Getting traction from the old products as well as the new products. New products take a little extra time to establish -- to find the acceptability in the market. But the old products who have been already established and accepted by the market, farmers and consumers, it also depends upon the weather, many other factors to get the traction.

Okay, sir. Okay. And sir, on the industry outlook, if you can give some broad guidelines?

Beg your pardon?

Industry, the industry outlook for agri business. Like will it be sustainable? Or you can say this would be sort of a 3 to 4x event which we are seeing or which we are seeing from China Plus One or any other sort of thing? Can you just give a broad outlook on the industry?

Sir, the industry outlook is very good and positive. As you know, the population of the world is increasing and the number of people who is dead is continuously increasing, and so the demand for agricultural commodities and agrochemicals. So there -- we are in this business for the last more than 25 years. And we are seeing that the global volume of agrochemical demand has increased from about $45 billion to around $70 billion now, and it is continuously increasing. So outlook is positive.

Okay, sir. And my last question would be, are we focusing right now in new geographies? Or we are focusing on this -- our previous geographies only, and we have been concentrating over there? So can you just give some broad on that -- idea on that?

See, Mr. Pujan, we have been dealing with some -- most of the geographies for the last many years. But now we are concentrating on enlarging our portfolio for each geography.

The next question is from the line of Dhaval Shah from Svan Investment.

Hello. Yes. Hello, sir. Congratulations on great numbers, sir. Sir, I have a couple of questions. First, to start with, sir, if we look at our long-term sales growth, it has been in high double-digit, but something has really changed for the company in the last 4, 5 quarters. So if you could elaborate, is it -- has our distributor switched a supplier and chosen our company to procure more? Or have we added a new -- expanded our market? I mean, what has really changed, which is giving us such high growth rates and along with good margins? Secondly, we've been procuring from China. And we hear different stories in the last 6, 8 months regarding the cost pressure and the supply bottlenecks that China is having. But our company seems to be quite resilient from all those problems. So can you give us some understanding what exactly -- what has changed for us in the last 4, 5 quarters? And what sort of growth do you foresee going forward?

Mr. Dhaval, you are talking about the last 4, 5 quarters. These 4, 5 quarters have been very unique. We have passed through such a big crisis, such a big hassles and so many difficulties. We have been a little prudent and -- in choosing our strategy. We have been able to choose right products and right quantities in spite of increasing the prices, foreseeing that at the end of the day, the world will have to be paying those high prices. So many of these strategies and our direct communication and contact with the market has helped us in planning these strategies. And I think they will be sustainable.

Okay. So you mean -- so this growth rate -- what will be the normalized growth rate do you think is sustainable?

See, growth depends upon many factors. The number of products and portfolio is one of the important factors. But it also depends upon the climatic conditions that sort of sowing patterns of the crops and various agri commodities. I feel that the growth rate will continue very positively.

Now that's a great -- good statement. And sir, but have you won any higher wallet share from a distributor in terms of -- they have switched to us because whatever be the product mix or whatever be the price increase, such high 70%, 60% kind of growth, I'm unable to understand where are we getting that growth from. Or did we have a -- some exclusivity for some product in some geography and there? So if you can little bit elaborate.

Sir, we don't believe in exclusivity. And we don't like to be exclusive with any distributor for any product as far as we can tell you. Because at the end of the day, one distributor will be able to cover a limited geography in his territory, and not a big way. I think the biggest factor that has helped us is some sort of a -- I mean, our better position compared to our competitors. We find in the competition the distributor asks for some products, and we try to give a higher price, we do it gradually, which means that the competition has not been able to provide it, and that is a factor that has helped us a lot.

Okay. So did we go and book some large quantities with our -- from where we are procuring? And because of the supply bottlenecks, we were ready with the product and meet the demand? Has that helped us?

Yes, something like that. But the path has not been so easy, very difficult. The biggest problem that we are seeing is in the logistics and the freight and the delivery of the cargo. Can you believe sometimes our ship has to wait for 4 to 6 weeks at the distribution port after reaching the port. To find a bed on the port, sometimes, it takes them 4 to 5 weeks, which is totally unimaginable and unexpected. Clearing the cargo and taking to the consumer may take another 2, 3, 4 weeks. So we have been able to really sort of -- I won't use the word smartly, but we've been able to perform better on these ones compared to competition.

Okay. More efficient. Got it. So sir...

[Operator Instructions] The next question is from the line of [indiscernible] from Spark Capital.

My first question is with regards to the volume breakup that you can really give across geographies and the gross margin breakup across geographies.

One minute. I'll give you the volume data first. In Europe, the volume was 4.35 million. Yes, 43 lakh, 58,000 kilograms. NAFTA, 33,000 kilo of -- I mean 32 lakh kilograms. Latin America, 7.7 lakh kilograms. And rest of the world, 10 lakh kilograms. Totally, about 95 lakh kilograms. What was the next question?

The geography-wise gross margin breakup.

Geography-wise gross margin. Europe, the gross margin was in the range of 36%; NAFTA, 37%; Latin America, 14%; and rest of world, 23%; overall, 34%.

That's helpful. The second question is with respect to the raw material sourcing cost. So are you seeing any slowdown, if any, from China, from the peak that you saw last year, or it's still continuing to remain at the same rate?

We have a feeling that from this year onwards, starting from 2022, there is some easing of the situation. Now in terms of availability of product and sustainability of the prices, sir, prices may be slightly declining.

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

Sir, just to understand your perspective on the outlook for the coming Rabi. And how you see the impact of the high input prices affecting the volume of sales of protection chemicals? Because in the U.S., there's a concern that the high input cost may result in some slowdown in farmers income. So what is your view on the potential for growth in volume terms for the crop protection chemical industry for the next 1 year?

I feel that there will be some growth in the demand of these products for the crop protection. The agricultural yield will improve. And the consumption of agrochemicals will also go up.

So you are not unduly worried about the current high cost of inputs impacting the farmer incomes and forcing them to reduce acreage or plantar area?

Mr. Ramesh, I feel the worst is over. We are in the -- on the path for a little more comfort zone than what we have seen in the year 2021 and 2020.

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

Sir, just a confirmation, like in terms of our revenue state, what would have been the contribution coming out from the volume growth in the higher realization?

You said -- 1 minute. See, in Q3 this year, the volume -- the contribution by the volume impact, it was 51%. And for the entire 3 quarters ending 31st December, the volume impact has been 53%.

Right, sir. And sir, in terms of realization, sir, what has been the realization that we have taken during this quarter?

Realization? I've not understood the question, sir.

How much pricing increase we have taken during this quarter, sir?

Pricing increase? Yes, yes. Pricing in this quarter has been 26.5%.

Right, sir. Sir, also just to get a sense because it's been a higher realization, like we have taken a decent amount of pricing increase, started eventually reflecting in our numbers as well. So is it primarily because MNCs have also passed it across to their end customers, taking in view the higher commodity prices which are there in the global markets?

It could be. It could be. That is one of the factors.

Right, sir. So simultaneously, with the amount of equal earnings, like the percentage hike has been competitive as per the -- what MNCs have taken? Is my understanding correct?

No. I'm not able to comment on that because it's very difficult to understand the strategies of MNCs. They make it more complicated by giving a higher amount than the price list and then giving discounts or incentives behind the [indiscernible]. But I guess that, that must have been one of the factors.

And sir also, if I look at the gross margin profile, sir, there has been a decent amount of jump if I look at the NAFTA margins or the North America margins. So can you give us a deep sense what have been the key contributors behind such a spike in the gross margins if I see from that thinking?

I think one of the main important factors is availability of the products on the part of our competitors.

So inventory situation has dried up out there in the North American markets? Is that one of the reasons?

Yes, please.

The next question is from the line of [ Siddharth Wadekar ] from [indiscernible]

Hello?

Hello.

Yes. Sir, I had one question. One is regarding, sir, if you look at the active ingredients from China, so Y-o-Y, if I compare for 3Q FY '22 versus 3Q FY '21, it broadly says that it appears that prices have increased anywhere between 30% to 300% Y-o-Y. In terms of that, did we face any challenges in sourcing our active ingredients from China, one? Secondly, have we taken the entire price hike in this quarter or there could be some more price hikes, which could reflect in the fourth quarter?

No. I think we've taken the effect of the price rise in the third quarter. Fourth quarter, we are still to see how the price rise or prices behave. We have to follow the trend in the market.

Because, sir, there was no major inventory gain that we were carrying from low-cost inventory. Because of that, we have seen this kind of a margin increase. Am I -- is that understanding right?

I would say a marginal advantage of the price rise in the inventory.

The next question is from the line of Rohit Nagraj from Emkay Global.

Congrats on very good set of numbers. Sir, the first question is, in terms of the logistics and freight cost, you indicated that in Q3 also, we had seen some pressure. Coming into Q4, how are we seeing the situation? Has there been any alleviation in the freight as well as logistic costs? And given that, for the next couple of months, how are we seeing those rates? Probably, you will have booked shipments from China to other geographies.

Mr. Nagraj, the trend continues to be there. But I think the encouraging thing to be seen is that there's no further increase in the freights. And slightly, there's a small flattening of the freight rates as well as availability of the shipping space. But still very painful, very heavy. But I see the trend is slightly easing now.

Right, sir. Got it. Sir, a second question is, you indicated just for a particular participant that on China availability of materials, it is relatively easing out as far as 2022 is concerned. So given this case, would there be some pressure on us in terms of volume growth, given that for the first 9 months, we have grown because probably the competition was having relatively lesser amount of stocks or inventory and we were better positioned in terms of materials. So would that impact FY '23 volume growth for us?

It will not impact adversely, Mr. Nagraj. We feel it will impact positively.

The next question is from the line of Dhruv from HDFC AMC.

Congratulations, sir. Very good set of numbers. Sir, first question is a bit repetition of the earlier one. Sir, in the last few calls and this call, you have mentioned that the disruption from China and the freight issue has benefited us because we have been more agile versus probably the competitors. But sir, you also mentioned that this is now easing. Freight is also not increasing further. And China is also improving. So sir -- but still you are -- you don't see a risk to the existing sales or the growth forecast. So what's -- sir, if you can help us what's driving this, probably, confidence in terms of the stability of sales growth.

Mr. Dhruv, [indiscernible] my confidence in. I do not know if the competitors will be able to take immediate advantage of the easing of situation. But we feel that we are feeling more at peace than I think we were in the past.

Sir, it seems basically the distributors, which were buying from you -- which were probably buying from others have shifted to you. And that is why -- because in the earlier call, you mentioned the number of distributors as such have not increased significantly. It is existing distributors buying more from you. So do you see the shift to you by the distributors as more permanent, and they will continue to buy more from you because of some underlying changes which has happened in the market?

Sir, I have not said that the number of distributors have not been increasing.

No. I mean not a significant increase.

We have increased the number of distributors also. If -- I mean, I think there's a small misunderstanding here. And the distributors are finding our service much better to suit their requirements. And they are patronizing us. That's the only thing I can say.

Got it. So even as the situation normalizes, be it from freight or availability from China, you don't see that the current base is declining? And then you grow -- I mean the existing, you can grow on the existing base itself?

Yes, sir. We will be able to grow. It will not affect our growth. Even the situation could go also to our advantage.

And sir, why do you say that? So because now it's improving and now it's easing. So how does it come to our advantage then?

Less painful, less uncertainties.

Okay. Got it. I thought that was benefiting you, this uncertainty and this -- the lack of transparency in the system was benefiting you. But even as it improves, that will also still benefit you?

I'm making a comparative statement. As compared to the competitors.

Okay. Got it. Got it. Sir, the second question was on the use of cash. Now sir, given the sustainability of this run rate, you're generating decent quantum of cash. And your CapEx requirement, I believe, is around INR 300 crores, which can be -- the FCF generation is quite healthy. So sir, any -- I mean, just some thoughts on probably increasing dividend or any use of some capital on this capital allocation thing?

Mr. Dhruv, you'll have to speak a little loudly. And when you were putting your question, there was an aircraft passing over or building. So I could not hear you very clearly. I would request you to please repeat the question once again.

Yes, sir. Sir, I was saying that our FCF generation, free cash flow, generation now will be very strong. And the CapEx requirement, I believe, is around INR 300-odd crores, which can be sufficiently met with the -- I mean, was -- which was already getting met with the existing business. So sir, any plans for probably increasing dividend or using -- I mean, some thoughts on the capital allocation thing?

We are looking into that direction. We are looking into that direction.

On the dividend, okay. Okay. And the CapEx remains at INR 300 crores, right, sir?

More or less.

All right. Then sir, one last question, quick one, is, sir, is it possible to share what would be the market share of some of your, say, for example, the top 3 products? Individually, what will be the market share in these products be? Say, for example, let us talk about Europe. You might have an X molecule, what -- I'd say, top 1 molecule. What would be market share in that molecule for you in Europe? Or any representative statement that you can give us?

Mr. Dhruv, we are a very small price in the world and global market. And our market share will not be more than 10% in any geography, any country for any molecule.

Okay. Okay. So 10% would be max for any -- even it's your top molecules?

It is not a very precisely calculated figure. It is just an estimate that it will not be more than 10%. It could be even 8%, 7%.

The next question is from the line of Archit Joshi from Dolat Capital.

Congrats for a great set of numbers. Sir, I was just trying to understand a bit more on the commentary that you gave from -- for the growth that we have registered, a very healthy growth number this quarter. Sir, is it that other than the dried-up inventory that you are talking about, were there some molecules that were registered of late, which were picked up by distributors, and there was a strong volume growth for some of the molecules, which were in the pipeline and then stratified into sales volumes? Is it that or it was just the inventory situation which helped us? I'm looking at it from a more sustainability perspective. I mean, is this growth can sustain going ahead?

Just give me some time for the aircraft to pass over our building once again. Mr. Archit, when we get a new molecule, it does not have an impact immediately. Ours is a seasonal business. Sometimes, we register a molecule when the product -- I mean, which is off-season for the product, and to introduce the product into the market also takes at least 1 or 2 seasons. So most of this is from the products, which was -- which were registered in the previous year. Some products have do -- have done well during this year.

Got it, sir. Sir, so basically it will -- was this just like a one-off quarter? I mean, because if you look at the growth numbers, I think in the last 9, 10 quarters, we haven't seen NAFTA doing better than Europe, not just in terms of sales but also in terms of gross margins. So just was a little curious to understand where is this coming from. And would this situation, if not this high, at least in mid-teens, would we be able to see growth in the ensuing quarters?

Yes, sir. That's right.

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

Congratulations on a very good set of numbers. Sir, 2 questions. One is, a, on the non-agro business, sir, what has been the driver for that business? It's also grown very well in this year.

Give me 1 minute. The [indiscernible] are passing over our office. So non-agro business has grown, again, because of our proper strategizing the requirements. And just remember, most of the non-agro business is made to order. In the non-agro business, there is no stocking and selling. We receive orders, and we have to get the products made as per the requirements and specifications of the customers, and then deliver. So probably, here also, our customers have found Sharda a better source to provide supplies and the products within their expected time lines compared to the competitors. So it is basically mainly based on the service and deliveries.

And sir, if you can just help us -- remind us what will be the main products, which are there in this business? Hello?

Hello.

Sir, and this business -- what would be the main products in this business, sir?

Sir, the quality of voice has gone down very substantially. It needs to be improved.

Can you hear me, sir?

Now I can hear you.

Sir, I'm saying what will be the main products that we made for the customers in this business? It is largely the belts business or something else which is there along with it?

No. Largely the belts and also other products. We get them made after we receive the orders from the customers.

And the last question on this one. Is there any -- what was the gross margin in this business in general, over the say, last 9 months or so?

One minute. Gross margin in this business is around 13% to 14%.

Okay, sir. And sir, lastly, on the agrichemical business, you've had about 50% volume growth or thereabouts you mentioned for the 9 months. Is it possible to sort of break it between existing products and new products in terms of what would have driven the volume growth?

It's not so easy. And we haven't done that analysis.

Okay, sir. And sir, just lastly, you also answered that in a -- to the previous participants. But this is a very high growth year. We'll probably be growing 50% or so in our volumes assuming the trend is contained, sustained for the last quarter also. On this high base which is there, what would be -- if you take a 3- to 5-year view of the business, what is a normalized volume growth that one can -- one should -- can think this business can achieve? 15%? 20%? What is the normalized level of volume growth we can achieve, sir?

I would say around 20%.

And with margin -- with some value increases because we are doing relatively more higher value products as we go forward.

I feel that this year, we will also be able to maintain the margins.

The next question is from the line of Sonal Minhas from Prescient Capital.

Am I audible?

Yes, please.

Sir, I had 2 questions. One was around the Europe business. I wanted to understand -- you mentioned that the reason you've done exceptionally well in these 9 months and this 3 -- this quarter has been service and the inventory levels of the competition. But on the service, just want to, sir, double-click and understand what do the distributors actually say about the product in terms of the yield of your product being better than competition? Or is there some other quantitative factor about the productivity of the product which is important? Why am I asking this is to understand also the stickiness of the business over the course of next 1, 2, 3 years given the product specifications. I hope I'm clear on that, sir -- the question, yes.

Mr. Sonal, if I understood your question correctly, do you mean performance of our product compared to the competition?

Yes, sir, performance. Yes, sir, performance. Yes.

I think our product is performing very well. I do not know if you've had any bad experience with the competition. But our performance -- our product is performing very well. And you must know that when we deal with agrochemical products, the quality and a lot of parameters are decided by the registration authorities, which we have to comply with. And our product has to be equivalent in all the aspects to the innovator's product. So when these are the factors, which are taken care of at the production stage, the performance is more or less following unless, of course, there is some variation or deficiency at the stage of application on the part of the farmers or some other adverse weather effects. So there's no complaint about the performance of our products.

Okay. And sir, a follow-on there. What is the pricing gap of our products in general? Maybe we can just compare Europe. Our products versus, let's say, the larger competition there. And has that pricing gap narrowed over the course of last 1 or 2 years? I just want to understand that.

Sir, we try to understand the pricing of our big brothers that is our leaders who are multinational innovators. We try to price our products at about 10%, I mean, around plus or minus 10% of the innovator's product. But the biggest secrecy about the innovator's product is that it is not a very open and transparent information.

I understand. Okay. And this pricing, sir, just on your hunch or whatever you've understood from the distributors, has that gap narrowed because of inventory shortages in the last 1 year?

It could have been, but not very significantly.

The next question is from the line of [ Gagan Thareja ] from ASK Investment Managers.

Am I audible?

No, sir.

Mr. Thareja if you can speak closer to the handset, please. Your voice is not audible.

Okay. Is it better now? Can you hear me now?

Yes. It is better now.

Yes. Sir, my first question is around time line for -- approximate time line for the pending registrations, or what time can they be registered and brought to market?

It's very difficult. Mr. Thareja. We need to [ be very patient ] for these things. No logic works in the process of registrations, and no forecast works over there because we are dependent upon a lot of uncertain factors. One is the bureaucracy of the registration authorities. They have to meet a representative from various ministries to get together and meet to take a decision. Second is the trials on the field, weather conditions, the infections in the -- during the weather. See, there are a lot of uncertain factors. And I don't think it is possible for anybody to make a guess and predict and achieve a defined time line for the registration.

Okay. And to a previous participant you indicated that on your current sales base post FY '22, you think 20% annualized growth is sustainable. Are you talking about volume growth? Or are you saying that it's rupee term growth of 20% which is sustainable going ahead?

Volume growth.

Volume growth. And in terms of pricing, it has been very volatile in the last entire year. Input prices moved up. You've been very proactive and taken price increases and passed them on. Do you foresee a situation where next year prices move down sharply also?

I don't think it will move down sharply. If there is a decline, it will be very gradual and slow.

Okay, sir. A gradual and slow decline. Sir, and this year's 50% volume growth, you indicated that it's partly coming from your competitors not being able to put inventory in the market and partly your own efficiency. If you could give us some ballpark idea as to, one, are your major customers -- or sorry, competitors based out of China itself? Secondly, they've been easing input materials situation. When they come back into the market and try to take back share which they have lost by aggressively pricing, how are you thinking about strategizing around that and sort of maintaining the market share that you've gained in the last year maybe?

Mr. Thareja, your question is long. I have understood some part of your question which is easier for me to answer is our competitors and whether they are from China directly. No, they are not from China directly. So I mean producers believe in production and not investing in the intangible asset like registration. So China is not our direct competitor for any of these markets.

Right. And sir, secondly, I mean, your competitors will invariably, in an easing input material scenario, want to grab back some volume share, which they might have lost in the last year. You indicated that they could not supply and you gained at their expense. So consequently, I am inferring that they will also want to take back whatever share they lost, and therefore, maybe go a little aggressive in pricing. Do you foresee a situation where some of the gains that you have made this year, which have come due to market share gains might not stick or sustain? Or do you feel that now your situation with the distributors is strong enough for you to sustain your gained market share?

Mr. Thareja, you'll find other avenues how to keep the growth of our products and keep penetrating into the market. And what I have stated I'm not saying with full confidence that this has been the fact. I'm saying that this could be one of the reasons why we were able to get a better share of the market.

Right. And finally, the NAFTA margins...

[Operator Instructions] The next question is from the line of Vishal [ Biraia ] from Max Life Insurance.

Just one question. How has been the inventory scenario at the retail level at the distributor level?

Inventory scenario at the retail level, distributor level. Your question is not very clear, Mr. Vishal.

Sir, the retail channel chain in Europe and NAFTA, how has been the inventory at their end, at the retailers end?

See, if I have understood these markets, my understanding in that market is that the retailers don't maintain a very big stock. If they want a product, they send an inquiry, they want the product the next day or the third day. If I tell him that I'm going to get a product, it's on the sea or on the way and take a week, they don't come back to us. So they want product very quickly whenever they come up with the demand.

Right, sir. And so the distributors would be maintaining all the inventory. So what are the kind of inventory levels that they would have? Would they have lower than normal inventory levels?

So the distributor also would maintain minimum inventories. They all depend upon the registration holders to meet the requirements of the inventories as and when they want.

The next question is from the line of Deepak Poddar from Sapphire Capital. Mr. Poddar, may we request you to speak closer to the handset, please?

Hello? Hello?

Still not sufficient. You have to speak a little louder.

And now it's better, sir?

Slightly better.

Okay. Sir, just I wanted to understand now -- you spoke about those several price hikes that you have taken. And in the fourth quarter as well you will see depending upon the raw material situation, how do you place your price hikes. Now sir, I just wanted to understand on the back of these -- so how do you see your EBITDA margin sustainability? Now it has increased over the last maybe couple of quarters and standing about 20%, 21%. So is that the sustainable level that we are looking at going forward?

I think it is sustainable.

Okay. And what sort of improvement we are looking at over and above that, if at all?

It's very difficult to comment. I think it is sustainable, and we would -- our efforts will be to still improve as much as we can.

The next question is from the line of Paras Adenwala from Capital Portfolio Advisors.

Yes. I was just looking at your numbers for the last 6 to 7 years. And I realized that on a normalized basis, your operating margins are around 24%. So do you think that is something, which going ahead should be kind of -- you would be in a position to reach over there and maintain it?

Yes. We should be able -- you said we will be able to reach there and maintain?

Yes.

But you also said that you have seen that it's around 24% for the last couple of years.

This year and for the last couple of years, it's been lower than that. This -- in the 9 months, again, it's been about -- around 20%, 21%. So you think you would be in a position to reach 24%, which has been a case in the past? You should be able to reach over there once again?

I would say that we should be there between 20% and 24%.

Okay, okay. Secondly, your return on capital employed -- considering the fact that you're essentially a marketing and distribution company, your return on capital employed should be significantly higher than what we are seeing right now. I have seen that your competitors tend to do much better despite the fact that we have a good amount of manufacturing capacities. So what would you have to comment on that, please?

One moment. Let me see. See, I'm not ready to give the answer. You'd like to -- you may contact us directly for this answer. I don't have an immediate answer to this question.

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

Sir, you sounded one of the most optimistic and confident that I've heard at least in the last 2, 3 years on your business prospect. If you could tell us -- I know -- I understand your business, but if you could tell us what is it that you're doing slightly different? Because in general, the U.S. agrochemical market is -- 3% to 5% is the growth rate. The large companies have also grown at 8% to 10% last 2, 3 quarters. But if the growth slows down there, then how should we think about it?

Vishnu, I have not understood your question, sir. Can you repeat once again?

Okay. I was just trying to understand, sir, because the strong growth that you have seen, what is that gives you super confidence that now that the growth rate will be much better than the past? I mean, is there any specific things that we are doing that is going to drive this growth? If so, if you can just spell out a few things that you are doing differently versus what you've been doing until now.

Sir, the biggest factor is our understanding of the market. U.S. market is very strange and difficult to understand. We feel that we understood the market over the last so many years, and then accordingly, play our cards.

Is the last 2-quarter growth, because glyphosate was in short supply price-wise also? And are we seeing a benefit because we are operating in other products which is not glyphosate? Is there any big up volume growth that has come because of this?

In context of glyphosate, it will be very difficult for me to comment. All I can say is that we have been able to meet the demands of the customers for the products that they have asked for. And many times, we have to also decline. In spite of this growth, we have to decline many of the inquiries and demand because we do not have inventories ourselves. Now whether it is related to glyphosate availability and shortage of glyphosate, it will be very difficult for me to comment.

I mean, top 2, 3 chemicals that you can give us names of which you have done well in this season in NAFTA.

The chemicals, we do not disclose in these kinds of meetings, sir. It is our trade secret.

Understood. Sir, just again, circling back on the growth front only. Last one year, things have been really great for the NAFTA and Europe market from a farmer income price point, which seems to change as we speak, that farm incomes are coming down, fertilizer prices have gone up. Generally, the profitability of farmers are coming down. At the time -- I'm asking actually 2 questions in the same one. Farm income coming down, also there seem to be some sense of a restocking that is getting completed. So should we see some of the end market slowdown next 1 year or so? Are you seeing any signs? I know the current trend is very strong now. But 1 year down the line, how do you see the end market and our growth accordingly?

Mr. Vishnu, I can only comment that most of our customers have never complained about availability of the funds with them to make payments on time. We have been receiving payments on time. And with slight incentives, we get payments before time. So that gives an impression that the farmers are [indiscernible] with funds. Now where are they getting from and how are they getting, that is the next level which we have no time to go into.

Got it, sir. And one last question, sir...

[Operator Instructions] The next question is from the line of [ Pushkar Jain ] from Sequent Investment.

Sir I wanted a breakup of volume by region as for the 9 months [indiscernible]

Yes. Have we provided this before? Okay. Mr. Pushkar, the -- I'll give the breakup of the volume for the 9 months. Europe, it is 116 lakhs 64,000 kilograms; NAFTA 87 lakh kilograms; Latin America 38 lakh kilograms; and rest of the world 26 lakh kilograms. Total 268 kilo -- lakh kilograms. Yes, sir?

Can you just repeat the Europe volume, sorry, I missed it.

Europe is 116 lakhs. That is 11.67 million lakhs -- kilograms.

Okay, okay. And this actually has an increase of 50%, right? I mean there is an increase of 50% in the current year as compared to the last 9 months.

Overall? Yes.

Yes, sir. Overall. Yes.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Manish Mahawar for closing comments. Over to you, sir.

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

No, sir. I think we've spoken enough, and there's no further thing to add. The time is also -- we have exceeded the time.

Sure, sir. Back to you, Steven, to end the call, please.

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