UPL Limited (UPL.NS) Earnings Call Transcript & Summary

Yes, we can hear you, sir.

Chairman, Rajju, bhai, Mr. Jai and other Board of Directors. My name is Anil Parikh from Bombay. Sir, in this COVID-19 pandemic, we all are sitting in unusual situation and in difficult times and attending this videoconference for the first time. And we find it a little difficult to attend this meeting through VC conference. But I hope if everything goes well and we will meet again next year physical meeting. So I would like to request everybody to kindly don't continue with only VC, also we should have physical meeting. And secondly, sir, you are allowing only 2 minutes to speak, that is not reasonable. We are talking to you once in a year. Why you are putting restrictions on us. Don't put restrictions. Maybe if we extend more than 5 minutes, then you can discontinue us. But at least allow us 3 to 4 minutes. That is my humble request. Secondly, our CS team, Mr. Sandeep, you are welcome from Reliance to this organization. And there is a huge growth available here and you have ample opportunities to show your strength. So Sandeep, I would like to have your strong presence in the company. Sir, as far as our financials are concerned, I'm audible exactly, Sandeep?

Yes, sir, you are audible, sir.

You're audible.

Okay. Our strong -- going through our strong financials, our revenue has gone up to 20% over last year, EBITDA 22% up, PAT is 51% up, net worth is 21% up. And even you have declared dividend of INR 6, sir, excellent performance. And I would like to congratulate all the Board members for reducing our debt to INR 4,400 crores. Now sir, as rightly said by my previous speaker, what balance is remaining our debt, I would like to know. Sir, my next question is pertains to North America, where we have only 1 R&D center and we have a strong presence of 211 products. Sir, are these sustainable with only 1 R&D center and 1 plant? How much plants we have there, I don't know exactly, but only 1 R&D center in my opinion is not advisable. So what are your plans in increasing new R&D centers and capital expenditure in North America region? Sir, the next question is, I have gone through, but I could not understand [Indiscernible] for Mexican farmers. If you can explain in the detail that would be better. Sir, I have seen that we have degrowth of 7% in European region. You mentioned reasons like dry and hot season and many more reasons is written over there. So I would like to have your views on European performance coming year and next year? Sir, also, we have acquired this year 1 Chinese company Laoting Yoloo with more than 150 products and state-of-the-art plant there. So I would like to know, in view of Chinese market, what is Chinese market considering the tension between India and China, what you foresee opportunity there? Sir, also in related-party transactions, wherein we have a lot of subsidiaries, but you have not mentioned any value terms there. So if possible kindly send me a physical copy of subsidiaries, all subsidiaries.

Mr. Parikh [Indiscernible]

Hello.

Sir, even there are other shareholders who want to speak, it is my humble request....

I'm now ending up. I would like to support all the resolutions strongly and hope you too better and better future of UPL. Thank you.

May I now request [ Shobna Mehta ] madam to speak.

[Foreign Language] Good afternoon, everyone. [Foreign Language] How are you all? [ Shobna Mehta ] from Surat. [Foreign Language] Thank you very much. Wish you all the best.

Thank you so much madam for your kind wishes. Now we have last shareholder named Madam [ Manjula Joshi ] and Mr. [ Rajendra Prasad Joshi ].

Hello, can you hear me, sir?

Yes. Not very clear, but we can hear you.

Not clear? What to do then, sir. Sir, I'm speaking, just give me a chance.

Go ahead, please.

Respected, Chairman, sir, Board of Directors, other dignitaries who are present in the meeting, sir, myself [ Rajendra Prasad Joshi ] from Mumbai. Sir, at the outset, I will remember our prayers, Company Secretary, M.B. Trivedi. Sir, he must be attending this meeting. That's why I wish him a very happy and healthy retired life. And our thanks to him for cooperating us during his tenure. Sir, I also welcome our new Company Secretary, Sandeep Deshmukh and wish him all the best in UPL Limited. Sir, I also appreciate the services rendered by Deputy CS, Pritam Tanna today -- sorry Karan Tanna and also [indiscernible] Patel, they are been a very, very good services. Sir, my compliments to company secretary and his team for excellent annual report. Annual report is having a best presentation with pictures, give all details with facts and figures. Sir, I am happy to note that our company is fifht largest crop protection company globally. Sir, I would like to know what is our rank among Indian companies? Sir, my congratulations to management for excellent financial performance this year. It is a highly commendable that revenue from branded products increased by 80%. Our total revenue also increased by 30% to INR 35,756 crores. Profit after tax also grew by 38%, to INR 2,801 crores. EBITDA also increased by 22% on CAGR. Sir, we are very happy that you are giving us a dividend of INR 6 per share. Sir, our company is consistently paying the dividend, and it is very, very highly appreciated. This performance is sustainable, possible, very sustainable due to various strategic steps taken by the present management. Sir, I appreciate the CSR activities carried out by company. In place of statutory requirement of 2%, our company has spent 3.54% of net profit on CSR activities. Sir, where I suggest that our CSR activities are carried out aboard, I would suggest that we should concentrate in our domestic areas also. Sir, in addition to the question I already send my e-mail, I have 2 more questions. One is any more acquisitions on card in coming years? Second is, what percentage of foreign shares to total shares? Sir, this I wish all the best to the company and I also support all the resolutions. Thank you very much, sir.

Thank you so much for the suggestion from all the shareholders. We're definitely taking all the suggestions positively and we'll try to improve because the improvement is a constant process. So we are just taking 5 minutes break. This would help us to compile answers to all the questions which you have raised so that we can give you satisfactory answers. So I request you to please stay connected. We'll be back exactly after 5 minutes. Thank you so much. [Presentation]

Thank you so much, dear shareholders. May I just request Mr. Jai Shroff to give overview of the business performance of the company to the shareholders with respect to their queries.

Thank you, Sandeep. No, it's a pleasure to speak to all of you and update you, and thank you for your questions. It's been a very challenging year. And obviously, from the numbers, you can see that our teams across the world has -- have really been able to cope with the challenges very well. Fortunately, for us, we are in the food sector and most governments around the world, including India, have understood that food security was a critical issue. And so we have been permitted to operate our factories and our operations and our warehouses. All our people were also given permission to transport -- for transportation and manage the warehouses so that the goods could be delivered. We did have some concerns initially in the earlier part of the crisis. But I think the -- our teams around the world set up very good SOPs to be able to operate our factories and warehouses and offices in a systematic way to improve the safety to all the operators. We have been fortunate that across the world, most of the -- we've had 1 fatality in Advanta, but otherwise -- in Mexico, otherwise, everybody is safe and people who have had some infection have recovered well and are back to work. There are some interesting questions. There was a question about the project in Mexico. Project in Mexico was a farmer engagement project where a farmer brings 2 tortillas, which is like a roti to our people, and we give them a whole package of practices and biosolutions. It was a farmer engagement program where we are focused on farmer intimacy as UPL, and this was a farmer intimacy project where farmers work through -- our salespeople work very closely with farmers where there is an exchange. They give something, we give something. And so it builds a very, very strong identity with the company. There was another question about the specialty chemicals. UPL on a stand-alone basis would be one of the largest specialty chemical companies. When you look at the amount of intermediates we manufacture and another -- so many specialty chemical manufacture, which we use considering the fact that we are backward integrated. If you took a stand-alone specialty chemical business, UPL would be one of the largest specialty chemical businesses in the country with turnovers, if you accumulate [ them all ], we don't -- we integrate the turnovers. So if you look at all the intermediates we manufacture, we would be, by far, the largest specialty chemical company in India because a lot of those raw materials are internally consumed. We have, in the last 3, 4 years, increased our investment in specialty chemicals and some of the plants are commissioning this year and continuing to -- some of them are going to commission next year. There has been obviously some delays, but we are still on track. I think all the projects are running about 30 days to 45 days late, but under the circumstances I believe the team has done a fantastic job of that. We will, at some point, also start sharing the specialty chemical details, so people can realize that UPL is a leading manufacturer of intermediates and specialty chemicals in India. There was another question about about Yoloo. Yoloo is -- China is a good -- big country like India and food security for China is also very important. UPL has a whole portfolio of technologies, which we will introduce and sell in China. And that is a normal business. It's a business-to-business transaction. There's no involvement with any governments. And we expect the China market to continue to grow and UPL to continue to grow our presence in the China market like the Chinese companies have some access to Indian market and they sell products in India. UPL would be one of the companies who exports products made in India to China. As far as R&D center is concerned, UPL has a strategy of a global platform. So R&D centers are maybe in India or U.S., but they specialize in specific technologies. And while our U.S. R&D center is -- we are very excited about it, we call it Tetris and OpenAg center. And I believe that there we have a really amazing group of talent there, which will help us to develop unique technologies. We also have a research center within Texas A&M, which is University of Texas, where we do R&D on seeds and other biotech traits with -- that is within the Advanta business portfolio. We also have a lot of manufacturing facilities, but total manufacturing facilities in the U.S., I believe we have about 11 partners in the U.S. who UPL manufacturing with. And R&D center wise, we are continuously expanding field stations and R&D centers. And all of the R&D centers are not specific to any 1 country or 1 product, they are broader. And so if you have an R&D center on some technology in India that would cater to global requirements. If we have an R&D center in Mexico that caters to global solutions. So UPL is a very global company, and we would not necessarily build R&D centers for a specific country. I hope that answers the questions. I'm trying to remember any other questions. About Europe. Europe is a challenging market. There is a lot of regulatory involvement from the local regulators and the [ redressals ]. But also, they've had challenging weather conditions. And this year seems to be pretty on track. But last year was a difficult year with drought, et cetera. These -- since we are in the agricultural business, we often get impacted with weather-related issues. There was another question about the impact of excessive rains in India. So far, India looks very good. We are seeing good growth in India. We will benefit from the excellent monsoon and the government has also focused a lot on agriculture. And that is helping us. UPL is also gaining market share. In India, we have a lot of technology intervention and so many other things involved in India, and we are seeing a lot of benefit, and we are trying to give more and more benefit to the farmers. Our idea is to give value to farmers and make sure that they are more and more profitable. And we have a huge program on ProNutiva where farmers sign up to a comprehensive portfolio approach and that is gaining ground today. Anything else? Let me just go through my questions. There was a question on PM CARES Fund. Respected Prime Minister is trying very hard to develop -- to fight this crisis. And we feel it's our duty and our responsibility to support the government in its initiative. COVID kind of crisis is completely unknown. It is not something which anybody knows exactly what is going to happen. At the time, the Prime Minster obviously reached out to all the corporate sector to help. And we feel it's our complete obligation and duty to support the government and to support any kind of initiative. Today, UPL as mentioned in the Chairman's speech, has helped a lot. Today, we have not only supported the Indian government, we have supported Brazil government local authorities. We have supported Colombia, Mexico. We have supported hospitals everywhere. Our people have gone to the local community and seen what they need. This is not a crisis -- this is not a time for we believe as UPL, not a time to ask questions. This is a time to give the trust to the local people who are trying their best. Some ideas may work, some ideas may not work. But after the situation improves, we will be very happy to evaluate what were the successful projects and what were not so successful. And we believe that if there is another crisis, we will learn from this and and be more agile as a company and focus more on what we feel at that time can be more productive. I think that's the question. I think I've answered everything else. We expect the integration. It was a very difficult year for UPL in sense that we have had to deal with an integration of a large company. We've had to deal with the corona, but our teams have done an incredible job. People have not taken holidays and are 24/7 available globally to work. And I'm really thankful to our teams globally who have worked day and night in making sure that we are able to in this really complicated situation and crisis to be able to deliver growth and gain in market share. UPL has gained market share in all the major markets and we believe we will continue to gain market share. We also believe that the second year of integration, we should have some improvements in margins, and we should be able to benefit from the crisis once it is [ streamlined ]. We continue to focus on all the other software issues and communicate with our teams. But as a global company -- as probably India's most global company with presence in almost 130 countries, you can imagine the challenges which we are facing is not something which should be taken for granted. But I'm so happy with all the hard work which we have done and been able to deliver good numbers. Thank you.

I now request Anand to answer the queries pertaining to the accounts and finance.

Thank you, Sandeep. Thank you, Jai, for excellent update on the business. At this time, I think the questions on finances have been less, and I think it's thanks to the excellent performance. As Mr. Shroff rightly mentioned, it was a difficult year. And despite all the constraints, we delivered revenues of INR 35,756 crores, a growth of 13%, and an EBITDA of INR 7,452 crores. I mean if you were to convert in $1 billion, this is the first year where we delivered $1 billion in EBITDA. So we would like to take this opportunity to thank all our shareholders for their excellent support during this last year where it was a difficult year. At the same time, as Mr. Shroff mentioned, it was the first year where we integrated 2 large companies. But the team, along with the support of all the stakeholders, delivered an excellent performance, and that's all reflected in the numbers. I'll go to some of the questions which have been asked. Although, as I said, there are very few, but I'll nonetheless answer these questions. One of the interesting question was why the profits are up? The profits are up because there are 2 companies which have -- we recently bought Arysta and now we are -- both companies are very profitable. And as a combined entity, typically you will see that the profits may take a bit of a dip, but in our case, we did an integration. The entire team did a fantastic job in integrating, everybody really worked hard. And we didn't see any dip in profits, but we actually grew our profits. As I mentioned earlier, our EBITDA grew by 18% as compared to that of the previous year on a combined entity basis. So we -- because these are for now as a merged entity, therefore, our profits are higher. In terms of debt, yes, we acquired Arysta for a total consideration of $4.2 billion. And part of it was funded by equity of $1.2 billion However, this was taken in our step-down subsidiary. We took debt of $3 billion. If you convert them into rupee terms, roughly about INR 30,000 crores. And as a result, the debt was high. However, as we promised in the first year, we brought down our debt by INR 4,400 crores, roughly $0.5 billion. And we have a similar debt reduction plan for this year. So with this debt reduction, as you would see, by end of March 2021, we would also see a reduction in the interest cost. So we hope to bring down, as I mentioned, by another about similar amounts, anywhere between $450 million to $500 million by end of March 2021. There was a question on goodwill. As per the IFRS, the Ind AS as it is called, goodwill is not to be amortized. Goodwill is subject to impairment testing, which will be done on every year basis. And impairment testing, as most of you would know, is nothing but based on the performance of the company and the profitability, whether the level of goodwill, which is there in the books is justified or not. And as I mentioned, this would be tested every year by our auditors. And if there is any impairment to be done, it will be done. But as of now, we don't see any impairment of goodwill as our performance continues to be better, and therefore, it justifies the level of goodwill that we have on our books. There was a question on hedging policy. We, as a policy, remain fully hedged. So any foreign currency exposure, we take a short-term hedge or what is called as a short-term forward cover and ensure that there is no exposure taken to the foreign exchange, where we have -- where we deal in different currencies. So that's our hedging policy. We keep it very simple. Those were mainly some of the questions. I mean, there was also a question on cost savings due to the e-AGM and the digital AGM, as we call it, as well as the savings in annual report. I think we haven't yet arrived at those numbers, but I don't expect it to be significant. Although I must congratulate the Company Secretary team of Sandeep and all his colleagues, they have come up with an excellent annual report. It's truly -- it's big this time, but it gives a lot more information and it truly reflects the company's commitment to sharing transparently information to all its stakeholders. With that, I will hand it back to Sandeep. Thank you very much.

Thank you so much, Anand. So there were 2 questions from the shareholders pertaining to the secretarial activities. One was -- not mentioning the names of top 10 shareholders. So basically, this requirement was there earlier when annual return was required to be part of annual report. But since the annual report is now put on the company's website as per the new directives of the MCA, this information is available on the website of the company. That is why it has not been added in the annual report. And there were some questions about CSR. So there is a full report about CSR, full transparent report. Also there is annexure, which gives entire spending on CSR right from the day 1 till today. So that annexure is very informative. So I would request shareholders to read that. It will give them full idea about the CSR culture.

I also got a couple of answers to give to them.

Sure.

I think for some other points I missed out. One is, so UPL is by far the #1 company in India. If you look at the Indian agrochemical market, it is about 25 -- anywhere from INR 20,000 crores to INR 25,000 crores, maybe INR 30,000 crores depending on the year. And UPL's stand-alone is INR 35,000 crore company. So by far, we are the biggest player globally in the ranking in India. But not only in domestic sales, we are the largest player by far. We currently look at many, many transactions as and when companies are for sale, but we do not have any acquisitions on the cards right now. We are also looking at many technology investments, and those are small investments to invest into start-up companies. Today, almost 92% of our revenues come from outside India. So about 8% of our revenues come from India, 8% to 10%. I just did mention those questions, I just wanted to answer them. Go ahead, Sandeep.

Thank you, all the shareholders for their active participation, and we really value your support. So may I now request our Chairman to [Indiscernible]

I would like to thank all my fellow Board members, executives of the company and the shareholders for participating in this AGM. I now authorize Mr. N. L. Bhatia, scrutinizer to overseas voting process on the shareholders who have not yet cast their votes. The voting lines will remain open for 1 hour. The voting results will be announced on or before 2 September 2020 and same [indiscernible] to the stock exchange and placed in the website of the company. And that's the end. Thank you.

Thank you, Chairman, for your -- for conducting this meeting in very efficient manner. And thank you, the directors on the Board, my colleagues and all the employees of the company, the secretarial department people also here, and they worked hard to bring this type of Audited Annual report. Thank you. Thank you all the shareholders for participating in today's meeting. Thank you very much.

I'd also like to, on behalf of the Board, thank Sandra Shroff for a valuable contribution to this company. She has been an integral part of building UPL, of UPL reaching where it has reached, and we will miss her on the Board. We are hoping that she will heed to our request and come back on the Board when she can make the time. Our sincerest and deepest gratitude to Ms. Shroff for her valuable contribution to making this company what it is today. We would not be here without you, Sandra.

Thank you. Thank you very much.

Thank you so much. The meeting to be concluded. Thank you so much.