Sharda Cropchem Limited (SHARDACROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sharda Cropchem Limited Q1 FY '26 earnings conference call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar. Thank you, and over to you, sir.

Yes. Thank you, Anushka. On behalf of Antique Stock Broking, warm welcome to all the participants on the 1Q FY '26 earnings call of Sharda Cropchem. We have Mr. R. V. Bubna, Chairman and Managing Director; Mr. Shailesh Mehendale, CFO; and Mr. Jetkin Gudhka, Company Secretary from the management. 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, Manishji. Ladies and gentlemen, my name is Ramprakash Bubna. Good evening and very warm welcome to everyone present on the call. Along with me, I have Mr. Shailesh Mehendale, our CFO; Mr. Jetkin Gudhka, Company Secretary; and SGA, our Investor Relations advisors. Hope you all have received our investor deck by now. As you are aware, we are engaged in marketing and distribution of wide range of agrochemical products and that is herbicides, insecticides, fungicides, biocides, et cetera, catering to diverse global customer base. We prepare comprehensive dossiers and seek registrations in our own name. We allocate substantial resources for securing registrations of our products and thus establish our foothold in the market. Our total product registration stood at 2,981 as on 30th of June 2025. Additionally, 1,021 applications for product registrations are at the approval stage. Coming to industry dynamics. The global agrochemical market is showing signs of recovery, driven by revival of demand, complemented by gradual recovery in prices. Inventories have come to normal levels across distribution channels. In Q1 FY '26, our total revenue have grown by 25% to INR 985 crores, with overall volume growth of 13%. This performance is attributable to global revival in demand and recovery in pricing. Europe remains major contributor to the overall growth. Volume from agrochemical segment grew by 11% and non-agricultural segment grew by 59% on a year-to-year basis. With input cost stabilizing, our gross margins have expanded by 630 basis points to 35.5%. We expect gross margins to be in the similar range in the financial year 2026. EBITDA for the quarter stood at INR 142 crores, which is a growth of 67% on year-to-year basis. PAT for the quarter has stood at INR 143 crores, showcasing a growth of 424% on a year-to-year basis. Working capital days stood at 100 days as on 30th of June 2025, showing an improvement by 18 days as compared to March 2025. CapEx for the quarter stood at INR 114 crores. Cash and bank and liquid investments stood at INR 791 crores as on 30th of June 2025. As we step into 2026, we aim to increase the product registrations with a planned CapEx of INR 400 crores to INR 450 crores, backed by strong pipeline that reflects our resilience and growth focus. We maintain our stance for FY '26 revenue to grow by 15% to the healthy EBITDA margins in the range of 15% to 18%. With this brief overview, I would now like to hand over the call to our CFO, Mr. Shailesh Mehendale, for discussing our financial performance during this period. Thank you so much. Over to Mr. Shailesh Mehendale.

Yes. Thank you, sir. Good evening, everyone. Coming to the quarter 1 financial year '26 performance, revenue stood at INR 985 crores in Q1 FY '26 versus INR 785 crores in Q1 FY '25 with an increase of 25% year-on-year. Coming to the split, agrochemical business increased by 25% year-on-year to INR 846 crores, whereas the non-agrochemical business increased by 31% year-on-year to INR 139 crores. Gross margin stood at 35.5% in Q1 FY '26 as against 29.2% in Q1 FY '25. EBITDA grew by 67%, which stood at INR 142 crores with EBITDA margin at 14.4%. PAT stood at INR 143 crores versus INR 27 crores during last year, showing 424% growth on a year-on-year basis. Working capital days stood at 100 days as on 30th June '25 with an improvement by 18 days as compared to 31st March '25. We remain debt-free company and have cash bank liquid investment of INR 791 crores as of 30th June '25. We can now open the floor for question answers. Thank you.

[Operator Instructions] The first question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking Private Limited.

Sir, is it possible to share the gross margin geography-wise, region-wise gross margins for each region?

One minute. Just give me a second, please.

Yes.

Yes. The gross margin was Europe region was 43%, NAFTA region was over 26%, LatAm 28% and rest of the world, 26.5%; total 35.5%.

Got it, sir. Sir, and what has led to this substantial growth in the European region, where our revenues have grown 43% Y-o-Y, if you can throw some light on that?

The growth on the agrochemical sector and good demand and good weather conditions to promote the agrochemical business, agricultural business, which is supported by agrochemicals.

Okay. And sir, on the revenue front, is it possible to break down in terms of product mix, ForEx, and volume value growth, what is the broad bifurcation, if you can provide?

Volume value, yes, let me see. Now volume in European region, it was 6,565,000; NAFTA, 3,870,000; LatAm, 805,000; rest of the world, 417,000; total 11,657,000. And year to year, it's about 13.2% growth.

Right. And sir, can you just throw some light on the ForEx gain? That has been substantial for this quarter, almost INR 70 crores plus. So if you can just throw -- is it because of the euro appreciation? And how do we see this going forward?

See, it is mainly dependent upon the cross-currency exchange rates. Our business model is that we source from China and all the sourcing is done in U.S. dollars. And about 45% of our sales is in European region, which is in euro currency or some of the countries' local currencies like Polish zloty or Czech krona and other things. So whenever the euro-dollar exchange currency improves, then we stand benefited and profited. Last year or about 6 months back, the euro-dollar exchange rate was $1.04, $1.03 to a euro. Currently, the same exchange rate is $1.17 to a euro. So this is more than 12% increase in the exchange rate, which is a straight benefit to Sharda's business.

The next question is from the line of Rudraksh Raheja from ithought Financial Consulting.

My first question is, could you elaborate more on this Q1 growth, 25% sales growth? And was there any upfronting of sales in anticipation of tariff hike? And can we assume this kind of growth to be sustainable?

Sir, your second part of the question was not very audible. The voice got mixed up. Can you please repeat this question once again?

Yes. Sir, this 25% sales growth in quarter 1, was there any upfronting of sales in anticipation of tariff hike?

Was there any what?

Upfronting of sales.

Upfronting, what does that mean?

That the customers were assuming that tariffs may hike, so they preordered a lot of materials.

No, it's not -- it was very normal. The customers were buying their normal requirement. In some cases, of course, the tariff matter, which is being discussed by the current U.S. President, this has been exciting and also depressing some people, but that is not very much in. Our customers have bought their normal requirements and not very excited to buy more.

So, sir, we should assume that this can sustain over the coming periods?

Yes, please.

Good to know that sir. Second question is regarding the gross margin expansion, which is the highest in the last few years. So can we assume this number to be sustainable as well?

More or less, yes.

And sir, did it have any inventory gains or something like that? And if yes, how much?

No, there's not been any substantial or remarkable inventory gain at all.

Tariffs for China are already declared. And sir, what's the impact on our business that we expect going forward?

Very little, because today China is considered to be a factory to the world. So even U.S. does not have much of an alternative sources to source from. And we are able to pass on all the tariff increase to the customers in U.S. and they gracefully accept it, knowing what is the situation.

Yes. If I can squeeze in one last question. How do you see the pricing situation?

Sorry to interrupt Mr. Rudraksh. Sir, could you please go back in the queue as there are several participants waiting for their turn?

Yes, sure.

The next question is from the line of Viraj from SiMPL.

Just 2 questions. One is on the non-agchem business. If you see for last 3 quarters, our volume growth is much higher than value growth. So there's a negative realization which is playing out for the last 3 quarters in a row. And last 2 quarters, the realization drop is even sharper. So just trying to understand what is causing this sharp drop in realization. Especially in Q1, you would have higher tariff on imports from China. So one would think the realization growth would be there to some extent. But even in Q1, we have seen a negative realization. So what is driving the negative realization? And what is driving the higher volume growth?

Have we noticed any negative realization? Mr. Viraj, we have noticed any negative realization. So I do not understand what you mean by that.

So if you look at our volume and value numbers which we report for the non-agchem business, we have seen overall sales growth of 31% and we talked about a value -- volume growth of 59%. So there's a negative realization or negative price growth of 28%. Similarly was the case in last quarter and the quarter before.

No, we have not looked at it from this angle. And it has not drawn our attention in the past. I'm not able to make any comment instantly.

Okay. So can you give some perspective on the non-agchem business, especially to U.S.; post the tariff, what are we seeing in terms of the demand, and similarly in terms of the pricing there?

See, we had gone through one short period of time when the President of U.S.A. had increased the tariff rate to 125% over and above the existing tariffs. So people were not very much encouraged. They were in fact, discouraged. Then suddenly, he brought it down from 125% to about 30%. That excited the customers and they rushed to buy as much as they could. I mean, fearing that it may go up to again 100% or so. So that was a short period of time when people bought in a very good quantity.

Okay. And was there any element of prebuy, or given that there's still uncertainty on tariff -- what can play out for the rest of the year -- was there any element of prebuy in the non-agchem business?

No, sir. And normally, if you understood our non-ag business, our non-ag business does not have much of an emphasis on the stock keeping and then using it. People buy as per the requirement. And it is just like a tailor-made business. Every customer has a specific requirement, specific sizes and different qualities. It's not very common. So we are supplying to them as per their requirements. And that requirement may not repeat -- normally doesn't repeat with the next customer.

Okay. Sir, second question is on the agchem business. The gross margin region-wise which we gave, for Europe and NAFTA, we have seen a very sharp jump in gross margin, say, from 36% to 43% for Europe as against 22% for NAFTA. What explains this jump in gross margin for us?

See, we have gone through a very difficult period in our business in the last 2 years, particularly about 1.5 years back when there was a lot of inventory in the channel and the prices had taken a very severe beating. That had also affected our gross margins substantially. Now the gross margins have got back to the normal and what you're comparing is with the period which was abnormal. Do you understand?

So if I look at the rest of the year, what factors you are looking internally, which gives you confidence that this margin will sustain?

Because there's a much more and very good stability in the business today. Last 1.5 years, we had gone through a very adverse turmoil. That turmoil does not exist anymore.

Okay. Just one request and I'll come back to queue. Any thoughts on surplus cash, because I think we were around INR 550 crores, INR 600 crores. And in Q1 alone, we are close to INR 800 crores. So any thoughts on how we want to use surplus cash? Because even with the CapEx of INR 450 crores, this cash level will just build up further. So any thoughts on how we want to use this surplus cash?

We want to run our business very comfortably and peacefully. So we are ready for any adverse situations and still we are able to maintain our business.

Any thoughts on increasing payout, sir?

Yes, we have. We have declared 2x dividend in this last quarter. So we will be more liberal in giving payout dividends or any such things, rewarding the shareholders who have stayed with us for so long.

The next question is from the line of Rajat Setiya from ithoughtpms.

Just wanted to check in the agchem business, what has been the change in pricing situation in Q1?

The pricing situation has improved over the previous quarter and it is -- the rate of increase is very slow, but it is steady.

Sir, our sales grew by 25%, volume was 11%. So are you saying that 14% -- price is increased by 14%?

One minute. Let me look at the figures. Sir, this has increased. This is a revenue increase I am talking about. Volume growth has contributed to about 13% and foreign exchange impact has been another 13%. Price and product mix has been negative 1%. Totally 25%, 25.4%.

Sure. And sir, similarly, non-agro volume growth is 59%, but revenue is 31%, so prices have not declined as what you have mentioned in the previous participant's answer. So is it because of the change in product mix that value growth is lower than volume growth?

No, I feel it is more -- contributed more to the freight rate scene. The freight rates have increased substantially and that has contributed to the increase in the revenue.

Okay. And we also -- I think I heard that volumes have increased 59% or so. Is that correct?

The increase of 59% is in the revenue, if I am correct -- I'm sorry. It is 59% in the volume. You are right.

Yes. But sales is 31% increase. So the difference, does that not mean that prices have fallen, or how will you help us understand this?

Sir, it is a product mix.

Product mix. So lower value products, we have sold more in this quarter. Is that how it is?

Yes.

And sir, our gross margins, which you have said that they will probably maintain in rest of the year as well, around 35%. So what is the reason that our gross margins have increased so much? Even price increase is not much.

Mainly foreign exchange.

But foreign exchange is reflecting below gross margin, if I'm not wrong, in the P&L statement.

There's also increase in the volumes. As I explained, volume has contributed about 13% and ForEx impact is also about 13%.

Sure. Sure, sir, I want to understand the gross margin, which is sales minus cost of goods sold.

Sorry to interrupt, Mr. Rajat. I would request you to please go back in the queue.

Actually, ma'am, this last question, I think it was not well understood or maybe I couldn't explain well. I'm still at the last question only, ma'am. So, sir, I was saying sales minus cost of goods sold, gross margin. So that number is 35%, which is the highest in the last many quarters, and you are saying it will sustain. So what led to this increase, sir? Yes, so what led to this increase? Yes, sir. So what are the factors that drove this?

It is because of the stability in the business, no impact of excess inventories and no expense of the -- no adverse situation of people canceling their orders at the last moment or returning the cargo. It's the stability of the business.

The next question is from the line of Rohit Nagraj from B&K Securities.

Yes. Congrats on good set of numbers, including the volume growth. Sir, first question is in terms of the margins for Q1. So our gross margins have improved. There is a benefit of ForEx. But excluding the ForEx, our EBITDA margins are closer to 15%. And you mentioned in your commentary that gross margins for the entire year will hover at similar levels. And our guidance is about 15% to 18%. So incrementally, will the EBITDA margins be more towards 15% or they will tend more towards 18%, excluding the ForEx part, which we have benefited substantially during Q1 and it may not recur in the subsequent quarters. So just your perspective on this?

Sir, I feel that the foreign exchange levels will remain at the same level. And our EBITDA margins will also continue in the range of 15% to 18%.

Sure. But if the pricing tend to improve from here on, is it possible that we will stick more towards, say, 18% than on the lower range?

Yes. We feel that the prices are on the way of improvement, but their progress is slow, but they are on the increase.

Right. And second question is in terms of the freight cost, you mentioned that the freight costs have been higher. So during the last 1 month, I mean, post quarter and towards the end of last quarter, how has been the trend? Is it still continuing to be higher and probably that will have its repercussions on the overall logistic cost for us?

It is on the trend of getting higher because of all these worldwide conflicts, particularly Iran, Israel and this Red Sea disturbances. It is -- that's one uncertainty and they are leading to the increase in the freights, and also increase in the time of travel.

The next question is from the line of Himanshu Binani from Anand Rathi.

Congratulations for an excellent set of numbers, sir. So, sir, my first question is largely on the gross margin or the guidance side basically. So what we have been guiding in the last con call, we were guiding for somewhere around 31% sort of like gross margin, while 15% to 18% sort of EBITDA margins. Now after the 1Q results, we have been like increased our gross margin guidance and expect the margins to sustain at 35%, 36% sort of like number. However, we have been like maintaining our EBITDA margin guidance of 15% to 18%. So what is it that is like stopping us in terms of like increasing the EBITDA margin guidance also?

It may go towards 18% or a little more than 18%. I mean, there's no precise calculations for this. This is our -- it's a gut feeling and impression.

Because sir, the gross margin guidance have been like increased by almost 300 to 400 basis points. However, we have been maintaining the EBITDA margin guidance in that range. So ideally that should like typically flow to the EBITDA is what...

No. EBITDA margin estimates earlier were on the lower side of 15%. Now it is on the higher side of 15%.

And sir, the second question is largely on the agrochemical cycle side. So as you alluded in your commentary as well as on the answers for the previous participants that there has been like no sort of like prestocking phase. So is it like more of a cycle which is turning positive now? So from a destocking phase, are we like entering into the restocking phase?

No, it's not destocking or restocking. The people are buying as per their normal requirements with the normal level of inventories, if at all, which happens prior to the season in agrochemical business, and it gets reduced at the end of the season.

Right. Because why I say that is we typically -- Q4 happens to be the heaviest basically for us. However, we have posted this sort of numbers at like start of the year basically. So just wanted to have a sense in terms of like, is it like really is the demand on ground? Or is it like more of a restocking basically?

I feel it is demand on the ground.

The next question is from the line of Riju from Antique Stock Broking.

Sir, if I look at your margins, so gross margins basically improved by 650 bps on a Y-o-Y basis, while the EBITDA margin only improved by 360 bps on a Y-o-Y basis. So there is a sharp jump in the other expense side. So if you could give some lights or give some thoughts on this same, because we have seen a strong volume growth despite that we have a higher other expenses. So if you could give some light on that?

That is very difficult to answer this question. I'm facing this question for the third time in this conference. I mean, offhand, I'm not able to comment. We'll need to go into the detail and then make an answer, you can write to us.

Sure, sir. And a few bookkeeping questions. So if you could provide the registration breakup for the geography -- the geography of the registration breakup.

One minute. Yes. We have 2,981 registrations as on 30th of June. European region is having 1,660 registrations; NAFTA region, about 315; LatAm, 760; and rest of the world, about 248. Total 2,981.

Yes. And sir, in terms of the volume that you have said, like the region wise volume, so you have said it total volume was 11,657, correct? Total volume, yes, right? So, you said that is a 13% kind of a growth. But if I look at your last year number, the total volume was 10,861, which is roughly about 7% kind of a volume growth. So if you could explain this math, like if I'm wrong in the last year volume data or this year, so if you could explain me this thing?

I have not understood the question. Can you repeat the question once again?

Yes, yes, yes. Yes, sir. So this year, our total agrochemical volume was 11,657 metric ton, right?

One minute. This is 11,657 is the total.

Yes. Total volume.

Including agro and non-agro.

Yes. And sir, last year, this was roughly around 10,861. Is that correct?

Last year?

Yes.

No, last year, I have. But I have -- but this is for the quarter 1.

Yes. So quarter 1, so last year Q1, this was 10,861.

Last year Q1, the table I have shows that the total agro and non-agro, the volume was 10,301,000. And this year, it is 11,657,000. And there's a growth of 13.2%.

Okay. Understood. If you could give me the breakup for the last year data, it will be very much helpful? Last year Q1 data. Last year Q1 volume data.

Yes. Europe was 5,144,000; NAFTA was 4,126,000; LatAm was 623,000; Rest of the world, 408,000. Total 10,301,000.

Sir, RoW, how much the number, rest of the world?

Pardon? Rest of the world, 408,000.

The next question is from the line of Rudraksh Raheja from ithought Financial Consulting.

Yes. I think this may be a repeat of the last questions, but I still want to check. Historically, we have seen like gross margins in the range of 30% to 32% mostly. And this quarter, it's 35%. So any elaborations on that?

See, this is mainly because of a good margin in European region. And Europe is having also a good share of the total revenues and the margins in European region was about 43%.

Okay. And specifically, sir, in European region, did we see any price increases?

There has been some improvement in the prices, and it has been better than the previous quarter.

Okay, sir. Any ballpark percentage around that?

Pardon?

Any percentage that you can give us, quantify it?

Ballpark figure for what?

European price increases.

No, no, I don't have that figure. This is a general statement that I'm making.

The next question is from the line of Archit Joshi from Nuvama.

Firstly, congrats on a solid set of numbers. Sir, my question was lastly related to our CapEx. We have heard you say that the CapEx or rather the registration costs have gone up significantly. And yet we continue to have a very solid registration pipeline. Given that the total number of registrations that we do, do we get economic benefits from all the registrations? I wanted to understand for how long these registrations that we do continue to contribute to our top line and profitability? And how many over a period of time become obsolete in terms of sales? Because given that we have 2,000-plus registrations. I was just curious to find out how much of this actually gets converted into economic benefits or rather sales?

See, Mr. Archit, it is the newer registrations that we get that give us the better margins and the registrations which have been old, there's more competition in those registrations and the margins get distributed. So as and when the registration becomes older and older, the profit margins are going down and the newer registrations are coming with better profit margins. This is the general statement I can make.

Understood. Sir, over a period of time, since we have seen increase in cost of registrations, do we continue to register these 1,000-odd products that we have in the pipeline? Or have you become more selective with regards to having, let's say, go-to-market strategy or something like that, which can be a very targeted play towards certain geographies with certain products? Have you experienced any sort of such strategic changes in our registration pipeline?

Not anything significant that I can make a reply to you. Very rarely. Once we pick up a product for registrations, we pursue it till we get the registration, unless all of a sudden, the product gets banned because of environmental reasons or other reasons. But happens Very rarely.

Understood, sir. Sir, one last thing. Sir, one last question from me. Generally, over the last few years or maybe if you can speak about this year also, how would be the concentration of, let's say, the top 10, maybe 20 products to the top line? Will it be like more than 50%, less than 50%, any ballpark number that you can provide?

Yes, I can provide, just give me a few minutes. You see top 10 molecules have contributed to 36% of the total revenue in the first quarter of 2026. And the top 10 molecules in last year in the same period was about 38%. Top 5 molecules have contributed to 21% this year and 23.5% last year. Top 3 molecules have contributed to 14% this year and 16% last year.

That's really elaborate, sir.

Thank you. I'm happy that my team was prepared for these kind of questions.

The next question is from the line of Viraj from SiMPL.

Just one follow-up question. You said that the reason for drop-in realization of non-agrochemical business is product mix. But if you look at the margins in non-agrochemical business, they have been quite stable around 21% to 23%. So just trying to understand how does the 2 add up.

Can you repeat? I've not understood your question, sir. Can you repeat it once again?

So the answer to previous participant, one of the previous participants to non-agrochemical business, you said the realization drop was product mix being adverse. But if you look at our operating margin in non-agrochemicals...

One minute, sir, you said realization drop. I haven't understood that? I don't think I have made any such statement.

So the non-agrochemical business, if you see, we have seen a realization drop, price degrowth for last couple of quarters. And the answer to that question to one of the participants, you said that product mix is adverse. But if I look at our margin in non-agrochemical business, they've been quite stable around 21% to 23%.

Mr. Viraj, your question is not making much of a -- I'm not able to understand the exact question. Please.

So exact question means, if I look at operating margin in non-agrochemical business, they have been very stable around 21% to 23% in non-agrochemical business. But if I look at the realization, they have been adverse. So while margins are stable, the realization is negative for us.

We will have to look into that. I'm not able to comment right now.

As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

I would like to thank everyone for joining us for this conference call. I hope we have been able to answer all your queries. We look forward to such interactions in 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 of Strategic Growth Advisors, or Investor Relations partner. Thank you once again.

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

Thank you.