Sharda Cropchem Limited (SHARDACROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Sharda Cropchem 3Q FY '24 Earnings Conference Call, hosted 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.

Yes. Thank you, Seema. Warm welcome to all the participants on the 3Q FY '24 Earning Call of Sharda Cropchem. From the management, we have Mr. R.V. Bubna, Chairman and Managing Director; Mr. Shailesh Mehendale, CFO; and Mr. Dinesh Nahar, GM, Finance, on the call. Without any delay, 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, Mr. Bubna.

Thank you, Manish-ji. Good evening and very warm welcome to everyone present in this call. Along with me, I have Mr. Shailesh Mehendale, our CFO; and Mr. Dinesh Nahar, General Manager, Finance; and SGA, our investor relations advisers. Hope you all have received our investor deck by now. For those who have not, you can view them on the stock exchanges and the company website. I'll give some background. We specialize in marketing and distribution of wide range of agrochemical products. That is herbicides, insecticides, fungicides and biocides, catering to the diverse global customer base. We prepare comprehensive dossiers and seek registration of our products in our own name. We allocate substantial resources and establish a foothold in the markets. Our total product registrations stood at 2,901 as on 31st December 2023. Additionally, 1,075 applications for product registrations globally are at different stages of approval. The CapEx for the last 9 months of FY '24 stood at INR 276 crores. For the full year, we expect the CapEx in the range of INR 350 crores to INR 400 crores. For Q1 (sic) [ Q3 ] '24, the revenues have got reduced from, 1-0-1-7, INR 1,017 crores to INR 632 crores. We have seen a volume reduction of approximately 20% year-on-year on our products. Volumes of agrochemicals reduced by 21% year-on-year and volume of non-agrochemicals reduced by 16% year-on-year. Revenues got reduced mainly due to weaker demand because of drought season in Europe and adverse weather conditions in NAFTA region. Also there has been lower product price realizations across all the regions. Gross margins have got reduced from 30.5% to 26.2% in Q3 of financial year 2024. The finished good prices have also reduced substantially. We have done stock revaluation as our accounting policy, and that has impacted our gross profit and [ profitability ] to the tune of INR 7 crores in QY (sic) [ Q3 ] FY '24 and INR 91 crores in the 9 months of FY '24. The company is seeing an improving trend in Q4 FY '24. With this brief review, overview, I would now like to hand over the call to our CFO, Mr. Shailesh Mehendale, for discussing our financial performance. Thank you, everybody. Over to you, Mr. Shailesh Mehendale.

Yes. Thank you, sir. Good evening, everyone. Coming to quarter 3 financial '24 performance. Revenues stood at INR 632 crores in quarter 3 FY '24 versus INR 1,017 crores in quarter 3 FY '23, with a reduction of 38% year-on-year. Coming to the split: Agrochemical business reduced by 40% year-on-year to INR 508 crores, whereas the non-agrochemical business reduced by 29% year-on-year to INR 124 crores. Gross margin stood at 26.2% in quarter 3 financial year '24, as against 30.5% in quarter 3 financial '23. The finished good prices have also reduced substantially. We have done stock revaluation, as per accounting policy, and that has impacted our GP and profitability to the tune of INR 7 crores in quarter 3 FY '24. EBITDA stood at INR 47 crores in Q3 FY '24, which is mainly due to the decline in the gross margins; and increased other expenses, which are relating to strengthening of our global workforce to support future growth. PAT for the quarter stood at INR 4.6 crores. Coming to 9 months financial -- '24 financial performance. Revenues stood at INR 1,851 crores in 9 months FY '24 versus INR 2.63 crores (sic) [ INR 2,563 crores ] in 9 months FY '23, a reduction of 28% year-on-year. Coming to the split: Agrochemical business reduced by 30% year-on-year to INR 1,424 crores, whereas the non-agrochemical business reduced by 20% year-on-year to INR 427 crores. Gross margin stood at 19.8% in 9 months FY '24, as against 28% in 9 months FY '23. We have done stock revaluation, as per accounting policy, and that has impacted our GP and profitability to the tune of INR 91 crores in 9 months FY '24. EBITDA stood at INR 19 crores, whereas PAT level reported loss of INR 112 crores for FY -- 9 months FY '24. Working capital days as on 31st December 2023 stands at 131 days. We remain debt-free company and holding cash and cash equivalents of INR 370 crores as on 31st December '23. The company is seeing an improving trend in quarter 4 of FY '24. Thank you. We can now open the floor for questions and answers. Thank you.

[Operator Instructions] We take the first question from the line of Viraj from SiMPL.

Just a couple of questions, which are -- first is if you can just [ probably give the ] figure for sales return in the 9 months 2024 and for the quarter. And...

1 minute, sir. May I know your good name?

Viraj.

Mr. Viraj, your voice is getting cut in-between. And also it's not loud enough, so can you speak a little louder and maybe bring the headphone closer to your mouth?

Sure. So can you give me the sales return figure for the first 9 months and for the quarter? And second question is on other expenses. You talked about higher investment in your whole workforce, but when you look at our own employee cost, it's hardly 1% to 2% of our sales, so what is driving this higher expenses for last few quarters for us? So...

1 minute. The sales return figures...

[indiscernible].

Mr. Viraj, the sales return figures are not readily available, so we'll be able to provide it later.

Sure, sir.

And employee costs...

[indiscernible].

1 minute...

[indiscernible].

See. We have expenses. We [ don't have ] the employee costs so much, but we engaged more than 300 people outside India; and all those people are working with us as a -- consultants. Instead of having employee-employer relationships, they are consultant and client relationship. So client -- consultancy charges have gone up by almost 18.5% year-on-year. Similarly, professional charges have gone up by 48.2%. Business development expenses are also professional and marketing expenses of the consultants. That has gone up by 26%. Service charges have gone up by 46%. And total, these expenses have gone up by 24.5%, all the expenses that I mentioned, if they are put together.

Okay. And would -- this rate of investment will continue in the P&L. Or...

Rate of...

Investment.

[indiscernible].

Yes.

Yes, Mr. Viraj, it will continue because it is not a onetime process. If we take up any product for registration, then the process of registrations last maybe 2, 3, 4, even 5, 6, 7, years. You cannot stop them in-between. And this is a backbone of our business model. We -- in order to get entry into the market, we have to have a lot of registrations [ in ]. You cannot market any of agrochemical products in any country without having the registration of that product and that formulation of the same molecule in that country, so if we have to stay in business, we have to continuously -- continuing the investment in these registration processes, which is our capital expenditure...

No. What I was asking was the rate of growth in some of these expenses, like the consultancy and the service charges, the business development. Will that the rate of growth will -- largely continue in coming years as well? Or this is like more of a onetime. We should kind of [ need ] these kind of...

[indiscernible] registration costs. The rate of growth will increase because the process of registration is becoming more expensive, more difficulty and more time consuming. As far as other costs are concerned, they would be -- I mean the increase will not be very much. It could be also controlled too on the lower side. It depends.

Okay. Second question was on the competitive dynamics side. Now if you look at, say, this particular quarter, we have seen a volume degrowth of somewhere around 21%, 22%. Now if you look at the actions of some of the larger Chinese players -- say there's a player called Rainbow, and there are other similar ones. And last 1 year alone, some of these guys have acquired, say, plus 1,100 registrations, each player, so -- and they are looking to increase that pace of registration acquisition to participate in a lot of generic molecules play, as against being a manufacturer. So for some of these major markets which we cater to, if you can give any color in terms of how the competitive dynamics has played out. So this growth -- degrowth of 20% is more driven by end market demand as being lower. Or you're seeing competition dynamics also changing.

No, sir. This degrowth has nothing to do with the registration costs. The degrowth is mainly because of the reduction in the prices of these products, mainly the reduction in the prices of [ same products ]. In some products, the prices have gone down to about 25% of what was prevailing 1 year back then. So the degrowth is mainly on account of the -- this reduction in the prices.

No, sir. What I'm asking is this degrowth of 20% in volume which you've seen in quarter 3. Is it also driven by increase in competitions? Has there been any market share loss or change in market shares in the major markets which we cater to? Or it's more driven by end market mainly...

[indiscernible] the main reason is the degrowth of the market [ itself ] because of the adverse weather, drought in European region; and complicated whether in the United States. It is only because of these factors.

Okay, just one last question and I'll [indiscernible] queue. If you look at the working capital again, right: We've seen a very sharp increase both in receivables and inventory, so do we see any risk of further provision either for bad debts or for inventory write-offs in coming quarters?

No, I don't foresee any provision for these things. These -- working capital has gone up mainly because of poor sales on -- by our customers. And that is responsible -- that is because of adverse weather and drought situation in many important countries, but this is not likely to continue year after year.

We take the next question from the line of Rohit Nagraj from Centrum Broking.

Am I audible, sir?

Yes, you are audible, Mr. Nagraj.

Yes. Sir, first question is on the supplies from China. So we've been hearing during the entire 2023 and your comments also that there have been significant supplies which have come from China. So what is your assessment currently in terms of whether the supplies have alleviated or the momentum is still continuing and general understanding of inventory situation across different regions of your operations?

Mr. Rohit, the situation in China continue to be the same. All the manufacturers are sitting with huge inventories. Some of them reduced their production. Some of -- they have closed the plants, who had more than 6, 7 plants, but they're still -- the inventory level is still continuing to be very high and very uncomfortable for entire world. And [ what was the ] second part of your question?

Right, right. And -- sir, the inventory situation across different markets. What we hear is Latin America still has a lot of generic inventory. So your understating of the same...

Mr. Rohit, these are not available as in public domain. It's very difficult to make an assessment, and it does not help us in our business model. We can only tell you that there are inventories also in the pipeline and also in the destination countries.

Sure, sure. That's helpful. Sir, second question is in terms of the Red Sea issue; and the freight costs, which have jumped almost 2x, 3x, from China to the European region. So what is your understanding whether there will be a significant impact during Q4 in terms of the freight costs for us given that we will be supplying -- we are originating our materials from China and supplying into different geographies?

Sir, it is just the beginning of the Red Sea disturbance. The freight rates have already gone up more than 3x, but it has not made any significant contribution into our business because this is not the correct period for us to make excessive shipments. Most of our goods have already been transported to the destinations. So Sharda Cropchem is not so much affected, but I cannot comment about the entire industry.

We'll take the next question from the line of Preet Malde from Centra Insights.

Can you please pronounce the name a little more clearly and louder?

It's Preet Malde, sir.

No. Your voice is -- again got subdued.

Yes, sir. This is Preet Malde over here.

Malde...

Preet, yes, Preet Malde.

Preet Malde, okay.

Yes. So I have a few questions regarding the registration costs. I mean...

Mr. Malde, which company do you represent?

Centra Insights.

Which one?

Centra Insights.

Centra Insights...

Centra Insights, okay.

Yes. I understand that the registration costs have been going up significantly. Historically, we have been able to maintain more than 20%, 25% ROCE levels, so what can we expect from now on? We have been -- to maintain 20%, 25% ROCE levels and around 5 to 6x asset turnover. So what can we expect now?

Sir, we think that the same rates will continue. As and when these registration costs are becoming more expensive, it is also becoming prohibitive for the competition. So this trend will continue.

Okay. And do we see the prices coming back to normalcy in any sort of near future in the next quarter or in the next year? What is the guidance that you can give?

See. I'm not an astrologist. I can only give little comment. In the near future, no, but within a year, I am quite hopeful that they'll go up.

Within the next year...

Yes.

Okay. And our capital guidance for INR 350 crores to INR 400 crores remains the same, right?

It may remain the same or it may even go up.

It may even go up, so I actually want to understand. If the registration costs are going up, what -- how much have the registration costs gone up since the last year, if you can give a number in percentage?

Sir, as I explained you, this is not year-on-year. One process registration take 5, 6, 7 years, so I can only tell you that the requirement of the authorities is going up year after year. The data they require and the detail they require are also going up very much, but this is very arbitrary. There's no hard-and-fast rule or trend or practice in this field, so it's very difficult for us to comment.

Okay, okay. So our turnover ratios and profitability ratios won't be affected so much. Because it is going up for the whole industry.

Yes, Preet.

The next question is from the line of Himanshu Upadhyay from o3 PMS.

My first question is, last time when we met, you said that the -- our major focus is on getting the receivables back, okay? Or collection is the priority for us. And right now also, if we see, the receivables remain high [ only ]. Or they have increased. Can you give some analysis on receivable days? And how much will be pending for more than 6 months? And is -- it's still the highest priority. Or you think the payments and everything started smoothening out.

Sir, I don't recollect I said that this is our highest priority. Because receivables have been our priority also, but I don't think I ever used the word highest. It will continue to be our priority and it's very normal.

Okay. Okay. And when you say that the market situation is improving, in the starting comments, is it you are saying that the demand is improving? Or you're saying the prices have stabilized. Or you are saying both the things are improving.

Can you repeat your question once again, Mr. Upadhyay?

You said that market situation is improving, okay, in the initial comments, okay? Is it because of, demand side, you are seeing an improvement? Or the prices have stabilized and hence you're saying the situation is improving. Or both have started improving. Any thoughts...

Sir, I mean, present scenario, price is not a big incentive because everybody is having enough stock. And when I say improving, I said -- it is improving, but the speed of improvement is also very small. It has not picked up in a big way. It is improving because many Chinese factories have stopped their production. They cannot afford to hold the stock for such a long period. It's just a big strain on their finances, so the productions have gone down, but availability still continues to be in abundance.

And the final, let's say -- or distributor end, okay, in NAFTA and Europe and Lat Am, still the inventories are very high. Do you think the situation has improved...

[indiscernible].

[indiscernible].

The inventories that...

Mr. Upadhyay, these figures are not in public domain. It is anybody's guess. All I can tell you is that the inventories are there and the enthusiasm of the distributors or the customers is lacking. Earlier, the distributors and customers [ used to be ] very anxious to build up the stock and inventory, but at least in this year, they are delaying the decision of purchasing because they feel that the inventory situation is very comfortable. And they don't feel very anxious or nervous of not getting the products.

And one thing. You stated why we are not yet present in India. It is because the payment terms are not very great in India, okay? And outside India, the payment terms are much better, okay...

I -- can you repeat your question, please?

One of the earlier transcripts, you have stated that why we have not focused on India was because the payment terms are not very great, okay? The payment gets generally very delayed from the distribution side, okay, but if we look at...

[ I have not made this ] statement as bluntly as you are quoting me. Main reason for our not being present in India is the registrations. In India, the manufacturers are the registration holders also. And we don't have our own manufacturing, so even if we get the registration, we have to depend upon the manufacturers, who themselves are also marketing the same product in the same market. So that is why the Indian market doesn't fit into our business model. We are asset-light company and we outsource everything. That model does not work in India when there are so many manufacturers present in India for most of the products.

We'll take the next question from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.

Am I audible?

Yes, please...

Yes. Just wanted to know. What has led to the growth in insecticides as a segment? Because that has grown 21% vis-à-vis herbicides and fungicides. Is it due to some specific region or better placement? If you can just help on that front.

Sir, it has grown up, but in the absolute terms, the growth is not so much from INR 97 crores to INR 118 crores. And there's no specific reason. It all depends upon the cropping pattern and the climates. In general, the insecticides have a bigger demand in tropical countries. In the cooler countries, the insecticides have very less demand, so we have not spent our energy in trying to analyze, but I don't think it has any specific reason. It's just normal. It happens.

Okay. Got it. And also, with your experience in agrochem over the years, just wanted to know: Whenever this restocking happens, is it like a steep recovery, or is it like a gradual recovery where distributors start restocking? I mean, if we want to model our numbers, is it like next year could be a sudden bounce back? Or is it going to be a gradual recovery here on?

I think it is going to be a gradual recovery. It's not going to be steep or, all of a sudden, big demand.

Okay, got it. And also just wanted to know: What is our amortization policy with respect to registration? For the newer registrations, like what sort of policy -- I mean across -- for how many years we amortize our registrations, if you can throw some light on that.

See, we amortize our capital assets over a period of 5 years. And that has been the practice right from beginning and it continues to be the -- remain the same even at present.

Okay. And also, from an end demand consumer standpoint, just wanted to know. How is the sentiment? Is it like the end demand is also still getting affected? Or is it only because of the channel inventory we are facing demand issues?

Sir, nobody is excited in this, our market today. Everybody is suffering. Even the end user who had purchased the product 6 months back is nervous because the current prices are much lower than what the inventory he has. So there's no excitement among anybody about the demand.

Okay. Got it. And just one last question, wanted to understand. Whenever we supply to NAFTA, Europe, is it to third-party distributors, or is it to our own distributors? Or like what is the business model? If you can throw some light on that.

Mr. Gandhi, none of the distributors are owned by us. They're all independent players. And they act in their own way, seeing the circumstances, the market dynamics; and they take a decision. We don't own or we don't have anything like our own distributor. Many of our distributors are also distributing for the multinational companies and innovators.

Got it. Got it. Got it. Fair enough. And just one more thing, Chinese players who are the manufacturers of our product. Do they also have their own registrations in the markets that [ they come find and we ] supply?

No. So normally, a manufacturer is not interested in registrations. He feels that his capital would be much better if he invests into tangible assets which he can see, even sell at a time of need. Intangible assets are not very exciting and interesting for a manufacturer. If he has extra capital, he'd like to put up another plant or increase the capacity of his plant rather than investing funds into invisible and intangible registration assets.

Got it. And with...

[indiscernible] Gandhi. May we request...

Sir, you put too many questions.

Sure, sure.

We'll take the next question from the line of Mr. Dhruv Muchhal from HDFC AMC.

Sir, yes, for 3Q, you gave volume was -- for agrochemicals division was down 21% Y-o-Y. What is price and FX?

1 minute. You talk about agrochemicals or both put together...

For just agrochemicals, sir.

Do you have [ those things ]?

Yes.

Sir, we don't have figure for agrochemicals. We have, I -- figures for the -- both the [ things or ] total company...

Okay, sir. What was...

FX impact has been plus 2.3%. Volume has contributed to minus 20.8%. And price and product mix has impacted by 19.4%. Overall growth has been going down with almost 38%.

And sir, the other thing was, sir, last time, you had mentioned that -- and, I think, in the previous or the call prior to that, that some of the distributors in North America are saying that -- take away the inventory or give some extended credit period. Sir, is that situation over now, whatever that situation was? Is that over? Or still it continues.

Sir, please repeat your question. It's a little -- there was some small problem with the voice, yes. Can you repeat your question once again?

Yes, sir, yes. Sir, I was saying that, in the prior calls, you had mentioned that in -- distributors in North America were -- because of the lower prices, were saying that, "You either take the inventory or give us some discounts." Sir, is that situation over? Or I mean still that situation -- I mean still it continues in 3Q and 4Q also.

No, sir. That situation was very unique situation when the prices dropped significantly in a period of time. Now everybody has got used to it. Nobody is buying in big quantities. And also the decline in price has gone down considerably.

Okay, okay, got it. And sir, last question is what would be our net cash by the end of -- net cash or net debt by the end of FY -- by December end.

[indiscernible].

You said this end of Q3. Or you said next year...

Q3, sir.

INR 370 crores.

Net cash at the end of Q3 is INR 370 crores.

INR 370 crores [indiscernible], sure, sir. Great, sir.

The next question is from the line of Gokul Maheshwari from Awriga Capital.

Am I audible?

Speak a little louder, sir.

Yes. I'm -- is this okay? Is my voice okay now?

Now it is okay.

Okay. Sir [ Bubna-ji ], you've mentioned 2 important things. One is that the inventory in China on the manufacturing side continues to remain elevated. And on the other side, you're mentioning that you're hopeful of price increases possibly coming in this year. Now 2 questions based on that. I mean, if there is a lot of inventory yet, where do you -- I mean, one way, what we have to see is that a lot of production has to go out of the system, which you did allude to, so can you -- I mean, can you just highlight any point on regarding that?

Sir, I thought you -- I mean your question has been a little longer, and I thought you had provided answers also to the questions yourself. Can you be a little more brief and specific about your question, sir?

Yes. So no -- because I was a little confused that, one way, we are saying there is a lot of inventory in the system. And one way, we are a bit hopeful of price increases, so where...

[indiscernible] -- no, no. Can you repeat the last sentence again?

Yes. Sorry. I'll repeat myself. The second part I was saying is that, somewhere when someone raised the question about price increases and you did mention that we are hopeful, those prices -- price increases come through in a -- within a year, but if we have a lot of inventory in the system, where do you see that hope coming from for the prices increases to happen?

Sir, as I've also mentioned, the Chinese production capacities have been reduced by the manufacturers voluntarily. And that means addition to the inventories is going to be less. And whatever demand is catered to or supplied, the inventory level will go down. And this will contribute to slight improvement in the prices because everybody is suffering and everybody is eager and doing his best to get a better realization, better prices.

Okay, so -- and I think -- so net-net, in a way, what you're saying is that with a certain level of price increases that inventory can get absorbed in the system.

Yes. It's a natural phenomenon.

Yes. Okay, I think that answers my question.

The next question is from the line of Rohan Gupta from Nuvama.

Sir, my first question is on our increased working capital costs. Both inventory as well as debtors have gone up compared to last year. While the focus was on collections and reducing the inventory, but -- it has still gone up, so it is very muted demand scenario which has impacted this. Or we had just increased the inventories to benefit from the expected price rise maybe in future. Or debtors are not paying. I mean, is that driven by that reason?

No, sir, no. You -- can -- you said -- you put your question in 3 parts. What I feel in general is that the first part is right. Second and parts -- third parts are not right, but if you can repeat, I can answer them specifically each part. And then wait for my answer.

So sir, what was the reason for increase in inventories?

The reason for increase in inventory is slow receipt of the payments and inventory which was returned back to us by our customers. We have not added to the -- voluntarily, we have not created those inventories. These inventories got created because of the return by the customers who could not sell their products.

Sir, the second then, what was the reason for increase in debtor?

Increase in the debtors -- 1 minute. Is there an increase in the debtors?

In absolute term [ is they have ]. In absolute terms, they reduced from [ 1,830 crores from 89 crores ].

Rohan-ji, you'll be surprised, pleasantly surprised. Our debtors have reduced from [ INR 1,830 crores to INR 890 crores ], so almost 50%.

Okay.

Between March '23 and December '23. So we are comparing 4-month period with -- 4 quarters and 3 quarters. Last quarter, our sales are also very high, so that is one of the reasons. I don't have ready figures for December '22 for the debtors, but there is no significant increase in the debtors, sir.

Sir, if I understand our business model right, then we have always and we should always be beneficiary when the prices fall, of the raw materials, because we don't manufacture anything. We just buy from the market. This is a time when we have seen the maximum price fall has happened in China, but on the contrary, where we should have gained in current environment, we still posted weak margins and losses and also have to give probably higher discount to the customers to collect the payments, so sir, is it -- this understanding probably about our business model then is wrong. Because even the raw material prices fall, we won't benefit. When the raw material prices will go up, at that scenario also, we won't benefit, like how we have seen in the post-pandemic environment when the prices were going up, so sir, there seems to be some disconnect in our business model. Just wanted to understand your thought process on that.

Rohan-ji, your question has consumed nearly 4 minutes. I would answer all those questions very pleasantly if you break it down to one question and one answer and then second question and second answer, so repeat your question part by part and wait for my answer.

Sir, I just want to understand. In a -- falling raw material prices, ideally we should have benefited.

I will answer this [indiscernible] our inventory has increased not because of our voluntary purchases. Our inventory has increased because of customers were very enthusiastic, almost 1.5 years ago, to build up the inventory because they have passed through the COVID situation where the material was not available to them as per their demand. So they built up -- they ordered. And by the time the goods were delivered to them, there was a steep decrease in the prices, so they returned the goods to us. And in spite of -- fighting them -- with them and the legal questions and ruining our relations, we -- and following the trend of the market, we gracefully accepted the goods back because they were supplied to them on credit. And they said, "If you don't take it back, we will not be able to pay you," so our inventory got built up un-voluntarily because of return of huge amount of goods by our customers. Now come to the next part of your question.

So sir, when the prices, raw material prices, now have started going up or you are expecting that they -- at least they will not fall and -- over next 1 year because Chinese supply is coming down, so they may go up. Do you think that we will go back to the previous-level margins, sir, at gross level?

Sir, this is I - that's what we hope, but I want to tell you our inventory levels will also go down because we will sell to our customers from the inventory we already have. Our purchases from China have got reduced considerably because there is no fresh demand. Third question -- third part of your question, Rohan-ji.

No, sir. I think that answers both the questions.

We'll take the next question from the line of Manav Kapasi from B&K Securities.

Am I audible?

Yes. You have to speak a little more -- louder.

Okay. So last quarter, sir, you had given gross margin breakup region-wise as well as agrochemicals region-wise volume. So if you can help us with this quarter numbers, sir.

Yes, sir.

Yes.

Region-wise, our -- this...

Gross margin.

Gross margins.

Yes, gross margins, sir.

Gross margin -- you want in quarter 3 or 9 months ended quarter 3...

Quarter 3 FY '24, just for the quarter, sir.

Quarter 3, okay. Our gross margin in Europe has come down from 37.7% to 36.4%, very marginal drop. In Latin America, the gross margins have gone up from 24% to 31%. In NAFTA, gross margin have gone down from 27% to 12%. This is the region which has been -- very badly hit us and this is a contribution to high inventories and very poor margins. And gross margin in rest of the world has stayed stable, 25% to 25%.

Okay. And volume breakup region-wise for agrochemicals...

1 minute. Sir, I appreciate these questions, very intelligent questions. Volumes: In Europe, the volumes have gone down from 3,300 to 2,850, minus 13%. In Latin America, the volumes have gone up from [ 422 to 503 ], an increase of 19.3%. NAFTA region, the volumes have gone down considerably from 5,000 to 3,250, amounting to 35.3% negative. Rest of the world, the volumes have gone up from 1,055 to 1,105, almost 5% increase. Overall, the volumes have gone down by 21%, put all the 4 regions together.

We take the next question from the line of Mr. Viraj from SiMPL.

Am I audible?

No, sir. You have to speak a little louder.

So just a couple of questions. One is a little clarification on the cash part. You said the debtors have reduced from INR 1,830 crores to INR 890 crores. So it's almost [ INR 930 crores ] reduction in debtors in last 9 months, but...

You're right, yes. For 9 months, yes, you're right.

But our overall cash component have just increased from, say, INR 323 crores to INR 370 crores, so is it...

Maybe you have to look at the inventory [indiscernible] and receivables. These are the [ 2, 3 ] factors which led to the cash reserves.

No. Receivables have -- you said that it's already reduced by almost [ INR 930 crores ]. So is -- the major part of that is in inventory, right?

Yes, please...

Okay. Just a couple of questions on the non-ag chem business. If you look at this space, right, it's a business that's primarily conveyor belts for us. And the market...

[ I am unable ] to understand. Please speak a little louder and slowly.

Yes. So if you see the business, right, it's majorly conveyor belts is the product which we cater to...

[indiscernible].

Non-agro business.

Okay, non agro, yes.

So can you give some perspective on what is driving growth in this business for us? Because the market is -- you've seen a industry which is a multibillion-dollar industry. And your -- unless there is a consistency in terms of supply and good credentials in terms of manufacturing, companies, usually, they don't entertain new suppliers, so for us, what is driving this growth in this business?

Sir, I can only say one thing: service, quality and transparency. And at the same time, we don't have a very big share of the world market. We may not be having more than 10% of the world market, so a small -- significant increase in our company's market contributes a very small part to the world market.

So if we were to understand the mix in that business, say, between replacement versus new projects, how would that mix be like?

I cannot comment on this. I have not looked into it from that angle.

Okay, but generally is it more of a replacement-driven business? Or is it more of a new project-driven business or...

[indiscernible] demands are replacements.

Sorry, sir. I didn't hear that.

Most of our demand is coming from resellers, distributors in that particular region. We do not have any access to the end users.

Okay. And just one more question on this. If you look at the margin in this business, in last 10 years, we've been earning around 17% operating margin. And in last 9 months, we've earned 24% operating margin, so what is driving such a high margin for us? And why -- if a manufacturer sees this kind of a margin, then what stops him from entering in this, further into [ the end ] market? Because unlike ag chem, there is no registration required here.

Sir, this business is purely service oriented. If you supply the customer quality goods, in time, the customer becomes good friend and he comes to us again and again. I can only say maybe our competitors are not so efficient or so competent to give them the same service. That's the only thing I can say.

Okay. And this increase in margin...

[indiscernible] to influence him or mesmerize him.

But -- okay, so the increase in margin also in the last 9 months to, say, 24%, what is that driven by?

Sir, pure buying and selling things with a little alertness and smartness.

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. R.V. Bubna for closing comments. Please go ahead, sir.

Yes, madam. Thank you, everyone, for joining us. I hope we have been able to answer all your queries. We look forward to such interactions in the future. We hope to meet your expectations in future too. In case you require any further details, you may contact us or Mr. Deven Dhruva from SGA, our investor relations partners. Thank you very much.

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

Thank you.