Sumitomo Chemical India Limited (SUMICHEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sumitomo Chemical India Limited Q4 and FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. From the management today, we have on the call Mr. Chetan Shah, Managing Director; Mr. Sushil Marfatia, Executive Director; Dr. Suresh Ramachandran, Deputy Managing Director; Mr. Kunal Mittal, Senior VP, Planning and Coordination Office, Mr. Anil Nawal, Chief Financial Officer; and Ms. Deepika Trivedi, Company Secretary; colleagues from SGA, their Investor Relations adviser. Now I hand the conference over to Mr. Chetan Shah, Managing Director of Sumitomo Chemical India Limited. Thank you, and over to you, Mr. Shah.

Thank you. Ladies and gentlemen, a very good afternoon to all of you, and welcome to the conference call to discuss Q4 and financial year '25 financial performance of our company. First of all, let me begin with saying that India's agriculture sector continues to play a foundational role in the national economy. Accounting for almost 46% of country's employment in financial year '24, up from 44.1% in financial year '18. Improvements in irrigation coverage, input availability, constitutional credits have significantly bolstered the sector's resilience against climatic shocks. These strides are now translating into robust output with record production achieved in financial year '24-'25 and a targeted 1.5% year-on-year increase in kharif food grain output for financial year '26. India's farm exports tell a compelling story, more than doubling over the past decade to surpass $48 billion, outpacing growth in both manufacturing goods and services despite intermittent export restrictions, India's agriculture policies have demonstrated their global impact with price shocks, [ reaffirming ] across international markets during export bans and on staple like rice and onions. India's agriculture sector is an inflection point with strategic policy support, enhanced awareness and technological integrations. The industry can only meet -- not only meet domestic food security targets, but also fortify its leadership role in global agri trade. The domestic environment for agricultural inputs has recently seen a turn for better, underpinned by favorable monsoon and a strong rabi season signaling green shoots of recovery. On the global front, the agrochemical export landscape continues to grapple with pricing pressure and climate volatility. Nonetheless, with channel destocking largely behind us and ordering patterns normalizing in key export markets, the industry is poised for gradual stabilization, prices appear to have bottomed out, providing a bridge for recovery in subsequent quarters. Before I invite my colleagues to share more information on our company's performance, I would like to highlight a few important points. In financial year '24-'25, our team delivered 20% volume growth in our branded business. In Indian domestic market at 30% plus volume growth in exports over last year. In addition to several premium branded products in our existing portfolio, several products newly launched in the last 3 years or so, contributed to this volume growth. We are extremely pleased with our team's performance to deliver such volume growth. Our team also delivered highest level of profitability in financial year '24-'25 both in terms of absolute PAT numbers and also in terms of percentage margin across all levels, EBITDA and PAT levels. Further, we are ready to launch several new products in financial year '25-'26. Among such portfolio, one newly launched patented global blockbuster product is our special mention. The product INDIFLIN which is an original invested -- sorry, which is formerly a Japanese innovation by our parent company has demonstrated impactful performance in a few markets wherein this was launched in the last couple of years. We are also thankful to Indian regulatory authorities for granting fast-track approval of this product under a special window for new global launch products. Our teams are launching this product in India as a name of EXCALIA MAX and based on various technical evaluations and free trials data of global performance and in India, we feel this can be a next blockbuster product from Sumitomo. I request my colleague Suresh to talk more about this very soon. Before that, I think it is also important to mention that the technical or the active ingredient, as you call it, for this newly launched globally blockbuster product will also be made by us in India within next 12 to 15 months. This will be made in our existing Tarapur plant and all the trials and technical evaluation has been completed. While we are finalizing plans to set up new greenfield plants at Dahej for manufacturing multiple products for our parent company SCC, we thought without making this newly launched global product at Tarapur in interim would help us accelerate ramp-up of this production in Indian market and also provide early experience of manufacturing new patented products to our projects and manufacturing teams. These experience would be very helpful to leverage when we set up larger level of greenfield backward integrated plant for global requirements over the next couple of years. Our Dahej plant remains intact, we already have secured the environment clearance valid for 10 years. Planned capacity requirements and our overall site layout designs are ready. We plan to soon start work on setting up multiple greenfield plants at Dahej for multiple SCC innovative products and intermediates and technical studies for the same are in very, very advanced stage. We plan to invest as informed earlier, an initial investment of INR 300 crores to start with. And we are prepared for more investment depending on the number of products we finalized and the time that will be required to put up each and every plant. These Dahej manufacturing capacity expansion initiative is very strategic long-term growth strategy for us at SCIL as well as for our parent company SCC as diversification of existing Japanese manufacturing facilities and also newly launched global product expansion plans. My colleague Kunal will cover more about this little later. Thank you very much. And with that, I will now hand over the call to my colleague Suresh to talk about our performance. Thank you.

Thank you. Thank you, Chetan bhai. Good afternoon, everybody on the call, and thanks for joining us today. FY '25 was a year of steady recovery and strategic progress for Sumitomo Chemical India Limited. The company delivered a resilient performance marked by consistent volume growth across key segments despite a challenging pricing environment that persisted throughout the year. Our revenue growth for the year was primarily volume-led underscoring the strength of our domestic franchise, robust channel engagement and timely execution of demand generation initiatives. This was complemented by sustained improvement in operational efficiencies and cost optimization measures, which enabled us to expand margins and deliver strong growth in profitability. We delivered 11% revenue growth over a year-on-year basis led by substantial expansion in volumes across both domestic and export markets despite adverse pricing trends that impacted realization by approximately 10% in both segments. The performance underscores our commercial agility and execution strength further reinforced by improved asset utilization and optimized distribution efficiency. Profitability saw a significant uptrend during the year. Our EBITDA grew by 33% and PAT by 37%, with both margins reaching their highest levels in our history. The result of superior product mix, strategic sourcing, procurement discipline and early liquidation of high-cost inventory. EBITDA margin improved by 339 basis points year-on-year to 20.1%, while net profit margin expanded by 308 basis points to 16.1%. Our domestic business remained a key growth engine supported by healthy kharif season, strong rabi season and deep engagement through initiatives like our flagship campaign called Every Day Farmer's Day campaign. Through which we reached over 1 million farmers and many thousands of channel partners across the seasons and across the country, which helped us in that robust growth. Exports, though challenged in quarter 4 due to global market headwinds around select molecules posted a meaningful year-on-year full year growth. Our strategy of geographical diversification and product realignment enabled us to maintain resilience in key markets. We launched several new products in the last financial year, which includes products like Meshi, Portion, Ormie, and also, we received latest registrations for 2 next-generation SCC molecules, namely EXCALIA MAX and Lentigo which are herbicide. We also commenced commercial production of CTPR, that is Chlorantraniliprole at our Tarapur facility, advancing our backward integration strategy. Our subsidiary Barrix Agro Sciences also delivered a commendable performance in its first full year under with SCIL with revenue growth of 82% and turned around from a negative EBITDA margin to a positive 16%. Together, these efforts has culminated in making SCIL a much leaner, stronger and more future ready. Now coming to the outlook for FY '26. Building on the momentum of FY '25, we enter FY '26 with renewed strategic intent and operational confidence. This year is poised to be a period of growth supported by a favorable agroclimatic outlook, early monsoon onset and stability in commodity pricing and sowing patterns. Our focus will remain firmly on driving volume at growth, scaling up recently launched products and sustaining margins through tight cost controls and optimized operations. The commercialization of EXCALIA MAX and Lentigo both high-potential patented molecules from SCC is expected to significantly enhance our competitive position in key crop segments. Apart from SCC molecules, we are also poised to introduce another 3 to 4 products under 94 registration in India. We will continue to reinforce our domestic franchise through deeper channel penetration, customize farmer engagement program and digital-led demand generation. The third season of EDFD to be launched from June 15, which has already been communicated to our teams on the ground will further scale our outreach and grassroot impact. While export markets present selective challenges, particularly in Latin America, our agile approach, expanding footprint in Africa and Asia and robust product pipeline will help balance risks and capitalize on emerging opportunities. We also remain committed to improving operational metrics. Our efforts around inventory control, receivables discipline and working capital management will continue to be a core priority even as we prepare for the next phase of scale. With this multipronged strategy, we are confident of delivering another strong year, making FY '26 a defining year of resurgence or SCIL anchored in innovation, execution excellence and market agility and discipline. With that, I will hand over the call to my colleague, Mr. Kunal, to talk about our CapEx plans.

Good afternoon, everyone. Now coming to our new CapEx plans as part of our long-term strategy to expand our manufacturing capabilities and our manufacturing skill set and also to align with our parent company, SCC Japan's global vision, our Board has approved 2 strategic CapEx initiatives aimed at expanding our skill set, cost efficiency and also supporting the innovation delivered by the technical teams in India. So first such project is brownfield expansion at our Bhavnagar site for a very important SCC global molecule. We are expanding our production capacity at our Bhavnagar for this strategically important SCC invented and a globally successful molecule. If you recall, for the similar product, we had set up a capacity about 1 to 2 years back and with the success of this first plant and the initial capacities in last 2 years, we have consistently delivered the product at our globally acceptable, highest quality standards, meeting all quality standards, demonstrating very high utilization of this plant capacities and extremely competitive cost situation, including our ability to react to the global pricing pressure and competitiveness. So with this kind of confidence which our technical teams have demonstrated, our board was very pleased to approve this CapEx to enhance our capacities with a further investment of about INR 55 crores. And with this, we are targeting to double the capacities and it will also mean this entire additional capacities can be used to expand our exports to our parent company. This plant is expected to be completed by Q4 financial year 2026-'27. This facility will enhance our ability to support the global requirement of a very important SCC molecules. And SCIL will be able to meet 40% to 50% of the global requirement. And in the future, depending upon the success and the volumes of this product and this project, we can even consider in the future if there is a need to further expand these capacities. The second project, which we want to highlight is, again, a brownfield project at Tarapur. This product, as earlier was touched upon by our Managing Director, Chetan, is a recently launched global molecule, which is expected to be a blockbuster product. And in India also, this product has recently received regulatory approval for sales in the Indian market. We will be manufacturing this product at our Tarapur facility, and we will be using our existing facility with some modifications in the equipment and the line to be able to manufacture this product. The estimated CapEx for this project is less than INR 10 crores, and the time lines are very similar to the first brownfield project of Bhavnagar, so the Tarapur brownfield project is also expected to be completed by financial year '26, '24, '26, '27 Q4. This investment will also allow us to demonstrate SCIL's ability to manufacture newly launched global innovative patented molecules. And this will give us sort of confidence to both our technical teams in India and our parent company that SCIL can manufacture new and the recently launched products as well. And it is something which is kind of a new initiative being done by our company with the support of our parent company. And we will also be able to support the global expansion of this product in the future. And with this, the 100% of the global demand is expected to be met -- 100% of the domestic demand in India is expected to be met from the production from India in the next 2 years or so. This will also be a very strategic step towards a state-of-the-art much, much larger capacity, backward integrated greenfield facility for the same product at Dahej. And as Chetan mentioned, that the experience of this product in our Tarapur existing facility will give more confidence to our teams in India and Japan that SCIL can set up much larger level, backward integrated facilities in the future. We are at currently at the advanced level of technical evaluation in discussion with our parent company. And once this is completed, we will provide update. In next 1 to 2 years, our technical team will work in parallel on both the initiatives these 2 brownfield expansions, as we have mentioned, 1 in Bhavnagar, 1 at Tarapur. And at the same time, in parallel, we are continuing to work towards setting up a new greenfield facility at Dahej and maybe for this particular product and some more additional products. So Dahej strategy remains for multiple products and multiple plants to be set up in next 3 to 5 years. I think our Managing Director has also mentioned about our Dahej expansion and its importance, and I don't need to emphasize more on this. So with this, now I request my colleague, Mr. Anil Nawal, to please talk about the financial performance of the company.

Consolidated Q4 FY '24-'25 financial performance. Despite overall pricing headwinds, we recorded revenue of INR 679 crores in Q4 FY '24-'25, which is up by 1% as compared to INR 674 crores in Q4 FY '23-'24. Sequentially, the revenue was up by 6% from INR 642 crores in Q3 FY '24-'25. Gross margin in Q4 FY '24-'25 are 40% as compared to 41.7% in Q4 FY '23-'24. EBITDA came at INR 120 crores in Q4 FY '24-'25 as compared to INR 140 crores in the same period last year, sequentially, EBITDA was up by 13% from INR 106 crores in Q3 FY '24-'25. EBITDA margin in the current quarter stood at 17.6% as compared to 20.8% in Q4 FY '23-'24. Profit after tax stood at INR 100 crores in Q4 FY '24-'25 as compared to INR 110 crores in the same quarter last year. Sequentially PAT was up by 14% from INR 87 crores in Q3 FY '24-'25. PAT margin stood at 14.7% vis-à-vis 16.3% in Q4 FY '23-'24. Now coming to our consolidated performance for financial year '24-'25. Revenue from operation in H1 FY '24-'25 stood at INR 3,149 crores -- so there's a correction, but it's not H1. It's a full financial year stood at INR 3,149 crores, up by 11% as compared to INR 2,844 crores in FY '23-'24. In financial year '24-'25, domestic agrochemical revenue contributed about 78% of our overall revenue, with export contributing the rest. In FY '24-'25, insecticides contributed for 40% of total revenue, while herbicide plant growth regulators and fungicides contributed about 21%, 11% and 10% of total revenue, respectively. From a business mix standpoint, our domestic business continued to exhibit strong momentum, growing 8% year-on-year in FY '25, contributing 78% to revenues. Export revenue surged 22% year-on-year, supported by penetration into newer geographies despite Q4 headwinds. In FY '24-'25, sales to South America and North America increased by 78% and 44%, respectively, as compared to the same period last year. Our full year gross margin expanded by 337 basis points year-on-year to 41%, underpinned by favorable product mix, document efficiencies and proactive liquidation of high-cost penalties. FY '25 also marked the highest profitability in company's history. EBITDA stood at INR 632 crores in FY '24-'25 witnessing a jump of 33% as compared to INR 475 crores in '23-'24. Our EBITDA margin stood at 20.1% in FY '24-'25 as compared to 16.7% in the same period last year. The profit after tax for the financial year amounted to INR 506 crores, reflecting an increase of 37% compared to the previous year's figure of INR 370 crores. Now we'll take a pause here and request moderator to open the floor for question one by one.

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

Just wanted to ask a couple of questions from my end. Sir, what is the revenue expected from the 2 new molecules that we've received registration for EXCALIA MAX and Lentigo?

See, we are just about to launch this kharif season. Our first primary objective is to ensure proper launch acceptance by the farmer through demand generation, activity and deliver the performance exceeding the expectations of the farming community. That's our first objective. Obviously, once the farmers accept this molecule, based on its merits and performance, I think it will go into -- our aspiration is big, but we can't commit to any number at this point of time given the potentiality that it has done very well. Wherever this product was launched, we expect it to be a good number business for India also.

Okay. So currently, the technical might be imported from Japan and we might be just formulating it or the entire formulation is being imported at the moment?

No, we are importing technical and formulating it in India.

Formulating in India. And with respect to the Bhavnagar molecule expansion that we are saying, is it a patented one, the brownfield expansion that we are planning INR 55 crores? Or is it a patented one? Or is it a generic product?

It is not a patented one, but it is a proprietary, which means it was innovated by SCC and still at this point of time, we continue to have a very strong global market share in this product. So it is out of patent now, but it continues to be a proprietary.

Proprietary product. Fair enough. And just one more thing on the specialty basket. Largely, it has been constant only. So if you look at this year number, specialty has been closer to INR 900 crores. 2 years back also, it was somewhere close to INR 1,000-odd crores, whereas our gross margins have improved drastically in the last 2 years to 41%. Is it possible to guide at least on the gross margin? What is the long-term sustainable gross margin? And what is the outlook for specialty as a portfolio? I mean, from INR 1,000 crores, where do we intend to take it maybe double it because we've launched a couple of products in last 3, 4 years. So yes.

So in the specialty portfolio also, we have a range of products, like even some of the segments like Animal Nutrition, EHD even, they qualify for specialty portfolio. So while you are right that the overall specialty portfolio has remained same. But within specialty portfolio, we are upgrading our portfolio with a newer and higher-margin product. So fundamentally and strategically, whatever we need to do that is being done. And that is what has caused and resulted into increase in our gross margins. And then all the new products launched by the company in the last 3 years, which are mainly towards the agro division of the company. And as Dr. Suresh also touched upon, these products are seeing good traction in the market. And as a company, we don't push that in the initial 1 or 2 years itself, the product volume should ramp up to a very high level. And historically, also always, we have delivered consistent growth over 3 to 5 years in terms of volumes ramp up. So with the volume ramp-up of this newer product, the share of specialty should enhance in the future. And from the margin point of view, as you can see at the company level because of the strategic initiatives of new products and high-margin products. The overall margin profile has gone up by about 3%, 3.5% from 37.6% to almost 41%, and our endeavor will continue that we want to maintain this kind of margin going forward. And we don't believe that there is anything onetime or kind of exceptional items in these margins, which gives us some sort of indication that these margins are not sustainable. So we are very confident to be able to maintain and sustain these margins.

Yes. Just to add one comment over what Kunal said, as I mentioned during my initial comments, we launched a campaign called Every Day Farmer's Day meetings, right, across the country. where the teams have been given a mandate of selected products, which we shortlisted based on the margin and potential of future, including the new products, the focus of the team has been channelized into those kind of products, which gives higher returns to the company. So that is also helping us in terms of product mix.

Fair enough. And just one more thing on the exports to Japan. So that number has dipped again for this year. I think we had guided that at least we will be doing INR 125-odd crores this year and INR 250-odd crores next year by supplying to the parent. That has again missed. So if you can just help us understand what is not working or what we are trying to improvise by supplying it to our parent Japanese exports on that front, as well as on the Nufarm?

So this exports to our parent company, Japan, it consists of several products and 1 or 2 products we were already making earlier. And recently, we expanded capacities to add 5 or 6 products. So some segments and some product out of this due to say, delay in registration globally or due to the global volume slowdown situation in last 1 or 2 years, what has caused. So we are seeing that there is a little bit of a delay in some of the products ramp up. But at the same time, while the same facilities, we have upgraded to be able to make other products. So overall, in the terms of capacity utilization, we are in satisfactory level and instead of exports to Japan, we have been able to make some products in India itself. If you see our investor presentation on Slide #5, we have also mentioned that we have started the commercial production of a very important product called CTPR which recently got off patent and we have started manufacturing that product also in the same Tarapur facility, and we have started sales of this product in Indian domestic market. So in terms of utilization of these facilities, we are enhancing the utilization level every year. In terms of exports to Japan, yes, there is a little bit of a slowdown and some delays, but we are on track to grow it consistently. And with this 2 new projects, which we have announced, we will be able to further enhance both the volumes and also the product portfolio, including 1 newly launched product also.

Just last thing, on the Nufarm because the INDIFLIN product is already launched in the LatAm market. So how are we seeing the response? And are we still supplying Tebuconazole to the LatAm markets and outlook for LatAm markets?

Yes.

Yes. So we are supplying Tebuconazole, how much this volume, I mean, how much Nufarm has performed, it is kind of a third party in terms of that way, it is a private company. So their numbers are not in public domain. But whatever you can see in the public domain, this product seems to be working well and has made a lot of impact in the Brazilian market. But the specific numbers, we don't have access to, and it is not in public domain.

Our outlook for exports to LatAm market?

You are talking about this particular Tebuconazole for INDIFLIN combination, right?

Yes. Yes. And overall outlook as well for LatAm?

Overall, LatAm picked up early last year, first 3 quarters did well in the quarter 4. It went a little bit sluggish. But based on our market information and all, it seems to be coming back on track. We need to wait for 1 or 2 more quarters to really see to come back to normalcy. We are optimistic.

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

So my first question was largely on the CapEx side, the 2 incremental CapEx, which you have announced. So maybe if you can like give a better sense in terms of the revenue and the margin expectation from those? And second, on the Tarapur site, this INR 10 crore CapEx, so this is largely catering to the domestic branded business or this would be for the exports?

Yes. So first, I will take the second question. You are right. As we have mentioned in the presentation also. In the Tarapur, it is not -- we are just modifying the lines to be able to manufacture this new product, which is globally also recently launched product. And primarily for a few months production will be utilized only for the Indian domestic market. And for the global requirement, we have to still study more and set up a new greenfield site at Dahej with the backward integration. So this site primary purpose is for Indian domestic market because in Indian domestic market itself, we are expecting, as Dr. Suresh mentioned, very good ramp-up of the volumes and impactful performance in the Indian market. And on your other question, the first part, which is about the CapEx, which we are undertaking. So the margin profile of this is expected to be similar to the projects which we have delivered earlier.

Okay. And the revenue targets?

That is something -- that is an evolving situation because sometimes some of these products, the pricing goes up and down as per the global situation. So at this point of time, it is very difficult because we are still actually 18 months away from the commercial production. So whatever is the sales price based on that, the top line goes a little bit up and down. But from a margin point of view, we are confident that this product should be able to give us a good return on investments. And even at the company level, as you can see, like from the peak revenues of INR 3,500 crores, even if the revenues are lower, but as you can see, the profitability-wise, we have delivered the expectation. So the same kind of philosophy are also coming up with all of these CapEx projects, we will not be able to very confidently give you how much revenues, but profitability-wise, we'll be in line with expectations.

And sir, the second question is largely on the margin side. So if you can like help us understand the margin differential between the domestic and the exports business for 4Q as well as for FY '25. And how one should actually look into the overall gross margins basically for '26?

So see, as a strategy, I think I mean because it's a commercially sensitive information, we never disclose the specific margin between domestic and exports or between the segments. But as a trend, I think Dr. Suresh has already mentioned, and I request him to a little bit explain more about the outlook and the margin expectation, but we will not be able to give a specific breakup between exports and domestic.

Yes. Generally, our export business, primarily we export technical grade. In technical grade, generally, the margin is slightly lower than the formulation. In formulation, which is primarily domestic market, we invest quite a bit of marketing and promotional activities. Naturally, the margin would be slightly higher compared to the technical grade pesticide. We have delivered a record margin like when Anil spoke or Mr. Chetan Shah spoke, we delivered the highest-ever margin in terms of absolute number and also in terms of percentage. And during my comments also, I mentioned that we would like to further strengthen it with the launch of the new products with more focus on intense demand generation, high margin, gross margin products. Our endeavor is to increase the margin compared to what we delivered in '24-'25.

So sir, maybe differential basically into the exports and the domestic margins. Any ballpark numbers would be good.

Sorry, we will not be able to give any forward-looking specific numbers.

The next question is from the line of Chintan Modi from Haitong Securities.

Sir, could you highlight how much was the revenue achieved from those 5, 6 molecule in FY '25, which is specifically made for the parent?

So see, as you can see -- see, we do not give the specific product-wise breakup and all, but you can see that from the numbers in the presentation, the total exports to Japan is at about INR 100 crores plus levels.

Second, with respect to the margins. See, for these products that you are talking about like the 2 new plants, which are newly launched products that you will be manufacturing. So when you do this for the -- your global requirements, the process and everything is similar to what Japan follows or there is some process innovation that is being done in India by the Indian team?

So I think these 2 are the different products. One is a newly launched product, and one is a product which we are already selling in India for many years and already making in India for now 2, 3 years. So on that particular product, a lot of innovation has been done by SCIL in India. And even before starting the manufacturing 2 years back, lot of process innovations were done and those kind of activities in terms of process innovations and some efficiency improvements on a gradual and consistent basis continues by our team on a regular basis without significantly changing the characteristics of the product. So that kind of activities continues. For the second product, which is just a newly launched global product which will be starting the manufacturing in the next 18 months or so. So for that to start with, we are following the global processes. And gradually, once we start the manufacturing, we will look at the opportunities to optimize the processes. And also when we set up a larger scale new plant, which is the backward integrated at Dahej for the global requirement that time also, we will see that how much process innovations can be done.

And so in a similar context, so the margins that you make on such kind of products that where you would have done some process innovation. Is generally higher than your domestic margins or similar to the domestic branded business?

Broadly, it is similar. And what I think we have always maintained whenever we announce any kind of CapEx is that any of these investments will not be negative for our existing company level margin. So in these kind of projects also, we are earning at a company level margin, but I think Dr. Suresh also touched upon because some of these products, we are exporting technical to our parent company. So in terms of margins for formulations or margins for marketing and distribution of the product, that is something which comes in the global affiliates, and that is something where the both efforts and margins are not being -- coming to SCIL, but at the same time, in the domestic market, we get also the margins for the formulations, for distribution, for marketing and all those kind of activities because we currently take that much effort and costs also.

Also, the process innovation is not only important because these are no more -- these are off-patent products. So it is not always true that you will know it or you have a process improvement only for making profits. Sometimes you have to be technologically ready to face competition from China or any other part of the world, basically China. But you have to be ready to compete with that. So the process innovation is also an important part as to how well you can be in a competitive position. So you can't afford to lose your volumes.

Understood. Sir, one last question is with respect to your parent company has come out with a business plan '25 to '27, wherein they have mentioned about some foray into semiconductor chemicals in India. So I would like to understand if you have been in talks with the parent company on these lines?

Yes. So yes, you are absolutely right in our parent companies strategic growth plan, they have announced that our ITCM sector which deals with this kind of a chemicals and semiconductor chemicals is looking to expand into India, and we are in discussions with them, and we are jointly evaluating the opportunities in India. No decision has been made at this point of time. But we are studying the Indian market in terms of the overall evaluation of the semiconductor and all those kind of things. But we are very much hopeful that whenever our parent company decides to expand this business in India, we are hopeful that SCIL should be considered suitably by our parent company.

Understood. And sir, with respect to...

Sorry to interrupt, sir. I would request you to please rejoin the queue for your follow-up question. [Operator Instructions] The next question is from the line of Ankur from Axis Bank.

Congratulations for a good annual performance. First question on our capital allocation as well as the CapEx plans. If I look at the time frame over FY '22 to '24, we had seen some sort of ramp-up in our CapEx -- annual CapEx to around INR 100 crores, INR 150-odd crores annually. But again, slow down in FY '25, while we are sitting at a strong cash balance of INR 1,500 cores, INR 1,600 crore plus and generating more. So just wanted to gather your thoughts. How should one look at this pace, given that Dahej is still largely underutilized as an asset?

So Ankur, see what has happened is, as you are aware that last 2 years, the global agrochemical industry faced significant challenges. If you look at the results, especially volumes of any agrochemical company all over the world or in India, everyone has suffered significant volume drops due to several structural problems. And now those things are coming back to the normal. So in last 2 years, it was a very, very difficult situation. Some of the projects, which we had approved before this kind of a challenging situation we completed. But in last 1 or 2 years, there was certainly that there was -- due to the challenging volume situation globally, it was less confidence for us to go ahead and incur CapEx and add up more and more capacities. But now since the situation is coming back, we have restarted that kind of a process. And we have approved some of the projects. In addition to that, there will be a normal CapEx, which we anyway incur for some existing products, debottlenecking. So with all of these things, now we feel that we will be back to the normal trend. And you're absolutely right, last 1 or 2 years, there was a slowdown in CapEx, but we feel that going forward, that situation should be behind us. And going forward, we should be having more confidence to be able to add capacities both for our domestic requirement and also for the global requirement.

Just a follow-up on that. So this CapEx expansion that we plan to do, this will be largely for the debottlenecking led or, let's say, for the domestic business as a market? Or it is largely dependent upon newer products ramp-up from the export market from Sumitomo from our parent perspective, and that will be the bigger driving factor here.

Both, both. But I would say the second part will be the bigger driving sector. The first part anyway continues, the debottlenecking and those kind of a small thing, but expansion of manufacturing for more products, additional capacities for the global requirement, that is something which is expected to drive the utilization of Dahej and also the CapEx plan going forward.

Second question on our margin profile as well as the specialty revenue bid. You did alluded towards rejig in the portfolio, which has probably kept the revenues flattish, the specialty part of it. Is that rejig largely over, and hence, we should see a sharper sort of revenue ramp-up starting FY '26? And second committed question to that is on the gross margin improvement there, should this trend continue in the coming years as well, given that newer product ramp up launches, et cetera, still accelerates? Or there is some cap to that EBITDA or gross margin that you want to maintain?

No. So you are right that this process of maybe slow down in some of the low-margin products in specialty and focusing more on new products and high-margin product, I believe this cycle will continue for some more time. So in our portfolio, there are still some products in our specialty, which are not yielding very good margins and maybe there could be a slowdown of some of these products. So that kind of exercise may continue for maybe 1 more year. And this should naturally result in higher margins. So as you have seen last year also, since we reduced focus on some of the low margin product and focus more on high-margin new products, our margin profile improved. So while the top line may have some problems because of this, but at the margin level, it should be positive for the company and for the long-term interest of the company because we want to less focus on the products, which are adding very low margin, requiring a lot of investment in terms of working capital and that kind of a decision and evaluation is being done for the low-margin product.

Sure. Earlier, just following up on that. Earlier, we had mentioned that we are good at 20% odd EBITDA margin there. Does that thought remain the same? Or because of the operating leverage, if theoretically the margin goes up for the 20%, we are okay with that?

I think that ceiling, which we had in our mind that margins more than 20%, which we have been mentioning in the past, I think we are behind that. And we have realized that in this year also, if you see, we have delivered EBITDA margins which are higher than 20%. So we have already broken that ceiling. And from the mindset point of view also, now we understand that since we are not focusing on the top line growth since we are not focusing on some of the low-margin products. Naturally, the margin profile will go beyond 20%, and it may go beyond 20% if the trend continues like this.

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

Can you give us the volume growth for fourth quarter and also explain why there was a dip in gross margin and EBITDA and overall profits were down compared to the last period, especially since the rabi this year was possibly one of the best we've had in recent years.

Yes. If you look at first, let me talk about full year. If you look at our full year as we commented at the beginning, our full year volume growth has been almost 20% both in domestic as well as export market up to quarter 3. Even in quarter 4, domestic market grew very nicely, almost 15%, 16% growth in the domestic market, whereas in the export market, primarily because of LatAm, our volume got hit on account of 2, one, the price dropped compared to the previous quarter 4 and also volume has that slight hit in terms of Q4 compared to the previous year in exports. So these are the reasons why our quarter 4 overall margin has also gone down. But overall, we look forward for continue to better the performance year-on-year and quarter-on-quarter compared to the previous quarter or previous year, that's our endeavor.

Can I just get some housekeeping confirmation on the export number for the year and the quarter. So if I do the calculation based on the segment percentage, I get an export revenue of around INR 690 crores for FY '25 compared to INR 568 crores in FY '24. So is that number, correct?

It is slightly different based on our understanding, it is about INR 677 -- around INR 675 crores to INR 680 crores level in current year. And last year, it was more about -- a little higher than INR 550 crores. And you specifically asked about Latin America. So Latin America revenues because it is already there in the investor presentation. Our -- I think last year, against the revenues of about INR 130 crores, INR 135 crores, this year, we have delivered revenues of about INR 240 crores plus from Latin America.

And for the fourth quarter also, can you give similar numbers, I have a number of around INR 274 crores for exports in 4Q '25. And last year, 4Q '24 I have an export number INR 285 crores.

I think there seems to be some confusion, I think as per us, the numbers for current year, fourth quarter is much lower than what you mentioned.

We are trying to reconcile the year-to-date number. So we don't have a fourth quarter percentage, right? So if you can clarify that, that would be useful to get the base, right?

For us, it is more like I think whatever numbers we have, I think in the annual report also, I think these numbers will come. But as far as the last quarter, current year '24-'25, the export numbers are more in the range of INR 210 crores to INR 215 crores versus last year of INR 260 crores plus. So there is a negative delta of about INR 50 crores in the current quarter coming from the exports. But again, this is again a quarter-to-quarter situation, see sometimes some shipments sailing in December last week versus January last week, first week or so. So I don't think we should look at so much quarter-to-quarter thing in this kind of a market and this kind of a situation. If you see a full year basis, we have delivered significant growth both in Latin America and the overall exports market.

Yes, understood. So in terms of the CapEx for Bhavnagar and Tarapur, are we talking about the 2 products, the fungicide and herbicide which you are trying to launch? Or is the CapEx in Bhavnagar for CTPR?

No, Bhavnagar CapEx is not for CTPR. CTPR is not a Sumitomo molecule. It is a third-party off-patent molecule already several players in India and China, all over the world have launched this product. And we have also started making this product in our Tarapur facility, which was already available. So we have not incurred much of the CapEx for this, and we did not even announce any kind of a CapEx for this, and we have just commented in our investor presentation that we have completed this project and we have already started making this particular product. So there is no CapEx which we have announced for CTPR. And in Bhavnagar, we were making 1 product for our global requirement, wherein we are enhancing the capacities to doubling the capacities. And the Tarapur project is for a fungicide.

So Tarapur project is for that EXCALIA MAX?

Yes. I mean, we don't give any specific product information. But yes, from our commentary, you can get some guesses. But from the commercial and strategic point of view, we don't mention any specific product for any CapEx.

Yes. And so the Bhavnagar CapEx of INR 55 crores, so we conclude it's for the Lentigo herbicide?

No, no. It is not for a new product. It is for a product which we are already selling in India for many years, and we are already manufacturing in Bhavnagar. 2 years back, we had set up a project for that. It is for that product, where we are increasing the capacity. But it is not CTPR what you mentioned, it is some different product. It is an insecticide.

Okay. So just to put all this in perspective, you have invested about INR 120 crores for the 5 molecules to be exported to Japan, right? So is one of these expansion an extension of that investment, how do we raise that?

Yes. Yes.

Okay. So the investments for EXCALIA MAX and Lentigo yet to be made, right, that is supposed -- sometime in the future?

No, no. See, Lentigo there is no plan right now. Lentigo is a product which is a patented product manufactured globally. And in India, we are just launching this product as a formulated product. The EXCALIA MAX or other products, as we have mentioned, this is a globally patented product. The starting point is we will be importing this product technical. We will be formulating in India and selling in India. And we are looking to manufacture that product in India starting maybe in the next 18 months or 2 years with a smaller capacity for Indian domestic requirement. And in the long term, we are technically evaluating if we can set up a global scale backward integrated plant at our Dahej site.

[Operator Instructions] The next question is from the line of Naushad Chaudhary from Aditya Birla AMC.

Two clarifications. First was on the margin side, just wanted to reconfirm all the margin profile of export business because in past in multiple interaction and such, what we should understood is there is a few percentage business between export and domestic margins, has that gap narrowed? Or is there a case that in future, this gap can narrow, if you can comment qualitatively on this, please?

So I think what I understood your question, you were asking about the difference between exports versus domestic margin?

Yes. And can this -- if there is a gap, any -- can it be narrowed...

See as we explained earlier in the exports...

See, the point is that when you compare export business and domestic business, there is a very big difference. The difference in domestic market is that we are talking about selling our formulated brands. We may be manufacturing technicals as well. But when you convert those technicals and you convert them into brands and you market those products or domestic markets, the margins are different. Now we are also selling our technicals in B2B market, right? And exports, we are also selling technical more than the formulation, the reverse of domestic market. So in domestic market, we are selling more of our brands, less of technical. And in export market, we are selling more of technical and less of brands. But if you compare the margin between B2B domestic and export margins in technical, they would be similar. They will be absolutely similar. But you cannot -- brand business margins will be definitely higher than selling a technical either domestic or export.

And second, on the new launches, line 3 and the pipeline which we have, if you can highlight which all key crops are we targeting or focusing or how do you decide which products we have to get in, do we decide where the crops we want to focus on? Or is it purely based on the availability and performance of the product? How do we decide the product?

Yes. See, in India to register and launch any product, it takes somewhere between 4 to 5 years. Obviously, this product was fast track. I'm talking about EXCALIA MAX because there is a special registration system for the newly launched products around the globe. Within 5 years, if it gets introduced in India, there is a special queue in which it gets fast track. So this project was almost started 4 years back. So first, we evaluate the global discovery molecules in India. Obviously, there will be guidance from our global teams also. This product we are launching in paddy against a particular fungal disease, which is prevalent in Indian markets in certain geographies or many geographies, it is present. So it has a very good fitting in India market. So we -- first label, we are getting in label. We got in label, and we will be launching it in the next few days. And we also know that it is fitting in crops like cumin, groundnut, soybean, few vegetables and fruits. Our teams have done an extensive work to find it fit in other crops as well for which label claim dossiers have been submitted, we should be getting it probably in the next 18 months, 24 months -- 18 to 24 months. So our first crop launch would be in paddy, followed by in other crops, it will all be launched. With regard to the other product, Lentigo, which is, again, a rice herbicide, which is a big market because of -- there is an intense labor requirement, generally, farmers look for chemical solutions to control the weed problem in rice. And this is again our global discovered molecules, which we tested a few years back, and it had a nice fit in Indian market. There is an already existing market in India for this herbicide. So we decided to develop and launch this product. Again, this project was initiated 4 or 5 years ago, and we got the registration recently and just first invoicing is happening as we speak. So this product has got a fit only in rice. It will not fit in any other crop.

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

Sir, a question on the -- some sense on the growth outlook for the domestic market for FY '26. Because I was a bit surprised by the negative pricing drag even in 4Q. You mentioned the domestic market grew by about 14%, 15% in volumes, but there were probably the pricing drag. So I thought the pricing drag is largely behind given the base is also weak, but -- so just some comments there and the -- some guidance on the outlook for FY '26 for the domestic market.

Yes. I think just to clarify, I think maybe there is some misunderstanding. We did not mention too much about the pricing specifically quarter-wise, what we have mentioned in our investor presentation and opening commentary, overall, there is a 10% price drop whether it is in domestic business on export business in the current year over last year. And quarter-to-quarter, actually, we don't analyze so much and we don't mention so much. And against that, there is a significant volume. I think in the domestic market, the volumes are 20% approximately, as Dr. Suresh mentioned, so the net growth is 10%. And in the exports market, there's a 30% volume growth, which is causing about 20% total top line growth in exports market. So this is the numbers for the past and maybe some of these quarterly numbers and all there were -- may be some confusion. And I request Dr. Suresh to give little outlook about what you said.

Outlook for '25, '26, as you all seeing the monsoon has come a little early, about a week or so the sentiments are positive. It looks to be, a very, very good season is upon us, and we are all fully geared up. And there is definitely going to be a volume growth. I think I just saw I didn't read it MSP prices have been announced just maybe half an hour back, I didn't read it yet. I'm sure it has gone up at least 5% to 10% on key crops. What I understand is cotton acreage is increasing, corn acreage is increasing, chili acreage would increase, all the key pesticide consuming crops acreage is likely to increase. If the monsoon continues in the same vein what we are seeing for the last couple of days, I think it augurs very well for the upcoming season. If kharif -- the rainfall is good and if the kharif is good, obviously, it will replenish groundwater, which is going to help us in the rabi season also, with the overall sentiment at this point of time looks very good.

And also, we are not really seeing any further price drop because places are quite stable. There is -- whatever has happened has happened. And I think if at all, the price can only inch up from this level, that is what we see.

The next question is from the line of [ Rajesh Joshi from Chris Capital ].

Yes. So I had a question regarding the CapEx you had announced in Dahej a few years past. Regarding the 5 molecules that are going to be in-licensed from the Japanese parent and then you were to supply them. So any outlook/update on that front on the CRAMS front, specifically?

I think we have already clarified this question in some of the earlier questions. So I think because of the global situation in terms of the industry situation, some delays in registration. And overall, yes, the capacity utilization of one plant is lower, but we are taking efforts to enhance the capacity.

That is in Tarapur. See that -- what the plant you were talking about, that was set up in Tarapur. The Dahej plant is a totally different story. So the Tarapur plant, which we had set up got a little bit of hiccups in terms of delays in registration because we -- these are all EHD products and it has to be registered in every country where they wanted to sell this, and there has been some delay over there. So that is the overall project is delayed. But because of that, we are trying to utilize the same plant with minor modification to manufacture other products. And one product we have already started that is CTPR and another product, we'll be starting now, which will help us to ramp up volume of EXCALIA MAX substantially in domestic market. And Dahej is the next step, which I said in my opening remarks, that -- all the plans, all the designs, all the site plants, everything is ready. We are absolutely ready to go ahead. I think the work can start soon. That CapEx is separate CapEx of INR 300 crores.

And what would be the time line for Dahej plant CapEx?

So that will be -- I think we want to start manufacturing certain products to deliver between '27, '28, '29 and '30. So that is the plan. So it will -- the entire range of products, we have been -- we will be doing in phased manner, but it will be definitely some in '27, some in '28, some in '29 and some in '30.

The next question is from the line of Dhavan Shah from AlfaAccurate Advisors.

My question is on the export side. If I look at this FY '25 numbers for Japan, I think the revenue has been declining from INR 113-odd crores to INR 93-odd crores. So any thoughts on this, what led to a decline to the Japanese export? And then...

The number is very similar to the last year number. I don't know where you got this INR 91 crores number. But in our view, I think this number is more I think. Maybe because is this rounding off like in the presentation, there is like a percentage maybe because of that. But this number is very close to last year, almost similar.

And in terms of the export numbers, the contribution right now is roughly 22-odd percent. How much do you see this mix can go up, maybe 2, 3 years down the line once this Dahej plant plus your -- that 5 molecule CapEx that you did, that revenue would also inch up. So how much mix do you foresee for the exports maybe 2, 3 years down the line?

So I think in the past -- see, you mentioned, see, it is very difficult for us to predict because we are trying to grow both. So you're right that because of some of this CapEx and upcoming Dahej site in next 3 to 5 years, there will be good expansion in our export portfolio. But at the same time, in India domestic market, although we are trying to launch many new products, patented products and off-patented products also and also expansion of volumes in our existing. So hopefully, we can grow both. And maybe 1 segment can grow slightly higher or lower than other, but we are very hopeful that both should grow. So significantly, it is not likely to be that exports will become like 50% of the business in 3 years or 5 years. I think the majority of our business will continue to be domestic focus with a very strong expansion in our export portfolio also.

Ladies and gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to Mr. Sushil Marfatia, Executive Director for closing comments.

Namaste, everyone. Thank you all for your asking some very interesting questions and our colleagues for replying the same before we could address your questions nicely. FY '24 has been a year of consolidation, resilience and strategic recalibration for Sumitomo Chemical India Limited despite global headwinds, pricing pressure and market volatility. We have demonstrated robust execution capabilities, delivering strong volume-led growth expanding margins to historic high, launching multiple differentiated product and depending our connect with farmers and channel partners through our initiative such as EDFD campaign. We now enter '26 -- FY '26 with a clear and confident road map, a year we are defining as a year of resurgence, we expect a supportive external environment, with the IMD forecasting and overall normal monsoon, a crucial catalyst for agriculture output and agriculture input demand. This bodes well for the domestic agrochemical sector, and we are structurally well positioned to harness this tailwind. On the strategic front, we are embarking on 2 important CapEx initiatives. The first is the brownfield expansion at our Bhavnagar site for a key SCC invented molecule, building on the strong operating track record of our existing facility. The second is the establishment of our new product lines at our Tarapur facility for recently launched patented molecule. This investment also set the stage for potential scale opportunities, including our readiness to support SCC's evaluation of a large-scale greenfield facility in India. Moreover, our continued focus on optimizing operational metrics, including inventory management, receivable controls and disciplined capital allocation will remain central to our long-term strategy. We see this not merely an efficacy -- efficiency levers but as critical enablers of sustainable growth and value creation. We remain deeply grateful for your continued support and engagement. Thank you for taking the time to join our conference call today. We truly appreciate your participation. Thank you. Good night.

Thank you. On behalf of Sumitomo Chemical India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.