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

Dear shareholders, good afternoon, and a very warm welcome to the 37th Annual General Meeting of UPL Limited through video conferencing facility. [Operator Instructions] Please note that further requirements, the proceedings of the Annual General Meeting will be recorded and available on the website of the company. I now hand over to Mr. Hardeep Singh, Lead Independent Director of UPL Limited. Thank you, and over to you, sir.

Good afternoon, friends. I have a very pleasant duty. As you all must know, our respected Chairman, Shri Raju Shroff received the coveted Padma Bhushan Award 2021 from the Government of India for his outstanding work in trade and industry. I believe he was the only business leader to be so recognized this year in 2021. Born in Kutch, Gujarat, Raju Bhai pioneered red phosphorus manufacturing in 1969, giving a vital impetus to the indigenous chemical industry. In the 1980s, UPL started to launch a number of crop protection products and is now among the leading total crop solution providers globally. His dedication to UPL and his bosses is unwavering. His many awards are a testimony to this legendary business leader. Here are a few of them: AGROW Lifetime Achievement Award in September 2015 in London; UPL has been listed by the world CSR Congress as 1 of the top 50 most caring companies; Ernst & Young Entrepreneur of the Year Award in 2013 for manufacturing; Indian Chemical Council Lifetime Achievement Award; Lifetime Achievement award by Chemexil; President's Gold Shield for indigenous development of technology in 1972. It is a matter of great pride for us that Raju bhai has been wonderfully recognized by the government for his lifetime achievement and contribution to the cause of agriculture and as a leader of UPL. May I request all of you to join me in congratulating Raju bhai and rejoicing a great leader and a great man. Thank you. I now request Raju bhai [indiscernible] proceedings.

We'll ask the secretary to do the formalities.

Thank you. Thank you so much, Mr. Hardeep Singh sir. The requisite quorum is present, and with the permission of Chairman, we may call the meeting to order. As the members are aware, Annual General Meeting has been convened using audio visual means as per the circulars issued by Ministry of Corporate Affairs and Securities and Exchange Board of India. The company has taken all possible steps to ensure that the shareholders are provided an opportunity to participate in the AGM either through videoconferencing facility or watch the live webcast of the AGM proceedings and also vote on the resolutions. As the AGM is being held through video conferencing, the facility for appointment of proxies by the members is not applicable. As per the provisions of Companies Act 2013, the statutory registers are required to kept open at the AGM and are available for inspection of members if they so desire. The Board of Directors have appointed Mr. Bhaskar Upadhyay, practicing Corporate Secretary as a scrutinizer to scrutinize the remote e-voting and e-voting at AGM process in a fair and transparent manner. He is also present at the meeting. The notice dated 12th of May 2021, convening this meeting and a copy of the annual report for financial year ended 31st March, 2021 have already been circulated electronically to the members of the company. And with your permission, we take them as a read . The reports of statutory auditor and on the stand-alone consolidated financial statements do not contain any qualification or adverse remarks, and hence, it is not required to be read. Now may I request the Chairman to commence the proceedings of the meeting. Thank you.

Thank you, Ajit. Good afternoon my dear shareholders, fellow directors, ladies and gentlemen. Also good morning -- good evening for all the participants joining from other parts of the world. I hope all of you and your friends are keeping good health and doing well. At the outset, I would like to thank Mr. Hardeep Singh for his kind words, and I'm grateful to my other colleagues on the Board for their best wishes. I would now like to introduce my colleagues on the Board who are attending this AGM: Mr. Jaidev Shroff, Director and Global CEO; Mr. Vikram Shroff, Director; Mr. Arun Ashar, Whole-time Director; Mr. Hardeep Singh, Lead Independent Director and Chairman of Audit Committee; Mr. Pradeep Goyal, Independent Director and Chairman. Thank you, Ajit. Good afternoon my dear shareholders, fellow directors, ladies and gentlemen. Also good -- good evening for all the participants joining from other parts of the one. I hope all of you and your friends are keeping good health and doing well. At the outset, I would like to thank Mr. Hardeep Singh for his kind words, and I'm grateful to my other colleagues on the Board for their best wishes. I would now like to introduce my colleagues on the Board who are attending this AGM: Mr. Jaidev Shroff, Director and Global CEO; Mr. Vikram Shroff, Director; Mr. Arun Ashar, full-time Director; Mr. Hardeep Singh, lead Independent Director and Chairman of Audit Committee; Mr. Pradeeep Goyal, Independent Director and Chairman of Stakeholders Relationship Committee; Dr. Reena Ramachandran, Independent Director and Chairperson of Nomination and Remuneration Committee; Dr. Vasant Gandhi, Independent Director and Member of Risk Management Committee. We also have with us Mr. Rajendra Darak, Group CFO; Mr. Anand Vora, Global CFO; and Mr. Sandeep Deshmukh, Company Secretary attending the AGM. We also have representative from Statutory Auditor, [ BSR & Co. LLP ]; Cost Auditor, Mr. RA&Co.; and Secretary Auditor, Mrs. N.L. Bhatia & Associates. Now with your permission, I begin with my formal address to the shareholders. Thank you all the members who have joined the Annual General Meeting today. It is the second year in a row that we missed opportunity of physical interaction with you due to COVID-19 pandemic. The year 2021 brought unprecedented difficulties with COVID-19 affecting the people around the world. I have no doubt that the global community will defeat it soon and we all can return to our normal lives. Amidst this difficult environment, the company delivered a solid performance, thanks to the hard work and the commitment of our employees. We made numerous achievements over the past year, including the robust financial performance, which is another step towards our company's progression. At the outset, I would also like to place on record appreciation for contribution from Mrs. Usha Rao-Monari, who was an Independent Director on the Board and had to step down on account of potential conflict of interest arising from our appointment as United Nations Development Program as Undersecretary General and Associate Administrator. We wish her success for a great opportunity -- for this great opportunity. I'm proud that your company showed a strong commitment to the reason of making tomorrow bigger and made a solid progress in growing and transforming the business. Your company showed tremendous ownership during the unprecedented lockdown to ensure food security for the world while most of our employees started working seamlessly from the home, the team at our plants resumed operation adhering to the government's health advisories and protocols. Supply chain team ensured the product delivery despite several constraints. The team constantly displayed a growth mindset and lead the philosophy of customer first. Now let me take you through some of the salient features of 2021 year. UPL consolidated revenue from operations increased in 2021 by 8% to INR 38,694 crores from INR 35,756 crores in previous year. And its EBITDA grew by 15% in FY 2021 to INR 8,559 crores from INR 7,452 crores in previous years. UPL continued to deliver on its commitment to deliver regularly its balance sheet and reduce the gross debt from INR 5,039 crores to net debt by INR 3,140 crores. UPL was included in Dow Jones Sustainability yearbook 2021. Also ESG rating agency from the Netherlands, Sustainalytics rated UPL as #1 among the agrochemical companies globally. As the world was battling the COVID-19 pandemic last year in March 2020, UPL COVID response team went into overdrive worldwide immediately. In India, UPL contributed nearly INR 100 crores towards the CSR. The Board has recommended dividend of 500%, that is INR 10 per equity share of INR 2, each for financial year ended 31 March 2021, subject to approval by shareholders. In this emerging world order, UPL is remaining sustainability drive by relentless pursuit of goals that are often impossible to achieve by the most. Our purpose of open edge is contender around the remaining sustainability agriculture. Over the past few years, we have invested in transforming ourselves from agrochemical company to provide a holistic and long-term solution for the entire food value chain. Your company is certain that the action taken in the last few years will be building a lean block of the growth in the future as the economic environment improves and moves towards normalcy. It was certainly our endeavor in UPL to put in our best efforts for sustained growth benefiting all the stakeholders. UPL continues to bend on your confidence and trust in the safe and standard in its business worldwide. On behalf of Board of Directors, I sincerely thank all the employees, shareholders, customers and other stakeholders for continued support in the company's endeavor. I am grateful to the Government of India, all the state governments and government of various countries where we operate for their assistance and corporation. I also express my sincere thanks to the regulators, stock exchanges, bank and institutes for the support provided to the company regularly. I look forward for seeing you in person in the next year. Thank you very much. Thank you.

Thank you very much. May I request Mr. Jai Shroff, Global CEO, to address the shareholders.

Can you hear me?

Yes, we can hear you, sir.

Good afternoon, everyone, and a pleasure to address you today at the AGM. UPL has had a very exciting last 18 months. With the whole challenges of COVID, we have been able to really prove agility in our industry. During this period of challenges, UPL has grown our business and has grown volumes and product on ground across the board in most regions and most markets. It has been a very challenging -- and our -- I commend our teams across the board who have been able to deliver a fantastic performance during these difficult times. UPL has not only been one of the most charitable companies in the industry and in worldwide who has contributed to society. All our teams across the world were encouraged and supported to make social contributions and support the local governments and families of employees and communities around. We have in our annual report and in our sustainability and our ESG report mentioned all the details of all the work done, and I'm very proud of what we've been able to achieve and how much we've been able to help communities. It has been very, very challenging in many other ways also. The currencies in this year have also been very volatile, and this has tested our ability in the financial markets to make sure that we are able to continue to deliver a solid performance. Not only have we grown our EBITDA and profit after tax, we've also been able to reduce our debt substantially by almost INR 3,000 crores. Our deep understanding of chemistry, our deep understanding of the challenges being faced by agriculture and our deep understanding and connect with farmers across the world in different geographies has helped us to continue to innovate. Today, UPL has one of the highest innovation rates in the industry. We have been investing heavily in developing technologies to really solve challenges for farmers and for the agriculture community and the food systems. The challenging being faced-- challenges being faced by agriculture are enormous. Today, the responsibility of companies like us are to work closely with food companies, closely with farmers to solve the challenges being faced by the food system. The demand in the future for the agriculture industry is to make food -- every food more sustainable. Today, UPL has invested heavily in the last 10 years to make agriculture more sustainable and farmers and farming more resilient. As we all know, farmers are the most hard-working community in the world. Today, we often forget how food comes to our table. We take for granted so many things. But when you look at the challenges being faced by farmers, by agriculture, by the food system in delivering that food to your table, you will realize the amount of effort and challenges being faced. New standards of food safety, new standards of traceability, new standards of regulations by different government, all these challenges are being faced by the pharma and the food companies and UPL intends and is a key player in solving these problems which are being faced. Today, we have redefined sustainability. We have -- we are redefining the whole process of how we make decisions, how the food industry thinks. UPL will be a leader in making food systems more sustainable. Today, we have formed our new division, which we just launched called NPP, which is the world's largest BioSolution company by itself. We intend to continue to invest in technologies to grow this business substantially. Even today, you will be very happy to note that this business is growing faster than our conventional business. We have developed our whole platform of reimagining sustainability because we believe that the food systems will contribute substantially towards making the world more sustainable. We have partnered with many organizations around the world. We have the OpenAg approach. We have our OpenAg Research Center in North Carolina, where we are working closely with almost 70 start-ups and technology providers to test and enable them to bring technology to farmers and to the food system. Today, UPL is a leader in so many areas. With our OpenAg approach, we are actually seeing a huge transformation in the way people perceive UPL. UPL is probably the #1 potential partner for anybody who wants to partner with us to develop any technologies to make a difference in agriculture. We are working on soil microbes. We are working on soil science. We are working on decarbonization using agriculture to decarbonize world. We are working on how to develop and to enable farmers to be able to get rewarded and recognized for being more sustainable. These all and this including the whole sustainability for which we have incorporated a new digital company, a new AgTech company, which is probably the world's largest AgTech company already. This company is enabling food traceability solutions for farmers on their phone. They are able to reduce cost. What I promise to the farmers is we will give you 30% reduction in cost. What we will promise you is a 30% increase in yields. This is our endeavor. This is our vision where we think that we can make farmers and agriculture much more sustainable. And the key -- the center of our world is the farmer, and we will enable him to be able to benefit from all sustainability things, decarbonization, carbon credits and so many other things. We are also enabling him to be more resilient personally by offering him different kinds of services and products, which will enable him and his family to live like we do in different parts -- in urban areas. So at UPL, there is a huge transformation happening, and we are getting ready for the next 10 years where the transformation of the whole company will be focused on outcome rather than selling products. We believe that the world is moving towards -- the farmers need somebody who promise them outcome and not sell them products. And this transformation is on the way, and I'm sure you will see so many announcements and processes, which we are including to make the whole agriculture system and the food system much more sustainable, much more reliable and make farmers so much more resilient and make them -- bring them into the financial inclusion. And this is our dream, and this is where we are taking the business to. Thank you very much.

Thank you very much. Now I request Mr. Sandeep Deshmukh, Company Secretary to continue with the proceedings.

Thank you. Thank you, Chairman sir, and thank you, Mr. [indiscernible] . Dear members, the resolutions that are proposed in the AGM notice for your approval are: First, ordinary resolution for adoption of audited stand-alone financial statement of the company for the year ended March 31, 2021, along with the report of the Board of Directors and auditors thereon; second, ordinary resolution for adoption of audited consolidated financial statement of the company for the year ended March 31, 2021, along with the report of the auditor thereon; third, ordinary resolution for declaration of dividend on equity shares; fourth, ordinary resolution for appointment of Mr. Arun Ashar as Director; five, ordinary resolution for ratification of remuneration of the cost auditor for the financial year ending March 31, 2022. The resolutions contained in the AGM notice have already been put to work through remote e-voting facility provided by the company. Members who have not yet cast their votes and who are participating in the meeting will have an opportunity to cast their votes during the meeting through e-voting system provided by NSDL. Members can click on Vote tab on the NSDL portal to avail of this feature. The voting lines are open for voting at the AGM for those shareholders who have not yet voted. We have a few instructions for the members who have registered their names for the Q&A session. The participation at this meeting and the facility of joining the AGM through video conference is being made available to the members on first come first serve basis. All the members joining this meeting are by default placed on mute mode by the host to avoid any disturbance arising from background noise and to ensure smooth and seamless conduct of the meeting. The names of shareholders who have registered as speaker shareholders will be announced and those shareholders will be unmuted by the host. The speakers will be required to unmute the audio and click on the video button from their side for 2-way interactions. In case any of the speaker shareholder is not able to join through video for any reason, they can continue through audio mode while asking their questions. We would request the speakers to use the earphones so that they are clearly audible, minimize any noise in the background, ensure that WiFi is not connected to any other device. In case there is any connectivity problem at the speaker's end, the host will move on to the next speaker to join. We would request the shareholders to limit their speech to 2 minutes in the interest of time. The speakers are requested to kindly mention their name and the location from where they are joining and avoid repetition of questions asked by earlier speakers in the interest of time. Once you have asked your question, you can continue to watch the proceedings of the AGM. In addition to the speakers, the shareholders can also put their comments, public queries in the chat box appearing on your screen. To avoid repetition, the Board and management will respond to all the questions at the end. If the member faces any technical issue, they can contact on helpline numbers provided in the AGM notice. Thank you.

[Operator Instructions] I now request the first speaker shareholder, Mrs. Neha Mishra to ask her questions.

Can you hear me?

Yes.

Good afternoon, respected Board members, auditors, attendees and my fellow shareholders. My name is Neha Mishra, and I am the CEO of the Fin Lit Project, a new age financial awareness platform incubated at IIIT Delhi and STPI. I'm connecting with all of you at the 37th AGM this afternoon from Delhi, and it is indeed exciting because it provides us opportunity to connect from wherever we are in the world openly and learn about the trajectory that the organization is following. I have been a UPL shareholder for over 4 years going back to the time when I've been investing. And I commend the management value and trust they bring to the brand. It is exciting to see the footprint of UPL expand beyond geographies as a leader in sustainable finance. I take this opportunity to applaud the transparent and genuine effort you all take to bring UPL to where it stands today. In the years, I have generated about 80% returns on my stock price but I am in no hurry to book profits. As a passionate sustainable finance enthusiast, I would want to be with the organization to see it grow and add value to the nation's sustainable development goals in the sustainable agriculture space. As a shareholder, sometimes my only concern is about the unusual volatility the stock exhibits. And whilst I know that management cannot do much about it, but as a panel professional, sometimes it is also my duty to bring it to the view of the management because it can cause a little bit of concern in the lines of shareholders. Before I hand over the baton to the next shareholders, I really thank Mr. Jai Shroff for telling us about the sustainable finance measures that the organization is taking and we would also like to learn a little bit about the execution strategy that the brand has in mind for the next 5 years. Thank you so much, once again, for having me here and for this opportunity. As someone who has a 7-year-old son, I want to hold on to the UPL shares and pass these on as a legacy to my son. Thank you all once again for the opportunity to speak. And I congratulate all of you for successfully organizing the virtual meeting and for providing us a platform to speak about our views and to speak and interact with the management. Thank you so much, Company Secretary, Mr. Deshmukh; and Mr. Karan for organizing this.

Thank you.

I now request Ms. Lekha Shah to ask her questions. Ms. Lekha Shah please go ahead with your question.

Can you hear me, sir?

We can hear you. Please go ahead.

Thank you, sir. Respected Chairman, sir, Board of Directors and my fellow members, good afternoon to all of you. Myself, Lekha Shah from Mumbai. First of all, I'm very much thankful for our company secretary, Mr. Sandeep sir, for sending [indiscernible] investor services and also sending me the AGM notice by e-mail, well in time in such a difficult situation. So I am very grateful to our company secondary, Mr. Sandeep sir. Chairman sir has maintained everything in his opening remarks. And also our Company Secertary, Mr. Sandeep Ji has explained everything in detail. And hence, I have no query regarding the balance sheet. Sir, I would thank to all persons of company for receiving awards and recognition by our various clients during the year 2021. And also I'm glad our company is doing very well in the field of CSR activities. I'm sure that our company award list will get longer and longer the years to come. Sir, I'm happy to see all the good deeds you have done during this difficult time. I praise to God that he shower his blessings upon you. Sir, I would like to ask a few questions. My first question is how is our company operating. Our employees are working from home or they are working from the office. My second question is are all our employees vaccinated against COVID-19. My third question is how many of our employees were affected by COVID-19. My fourth question is, what is the road map for the next 2 years. So I would like to say I strongly propose all the resolutions for today's meeting and my best wishes always our company and its prosperity. Thank you, sir.

Thank you. I now request Mr. [ Kaushik Shahukar ] to ask his questions.

Yes. Sir, let me introduce myself as Kaushik Shahukar from Mumbai. Good afternoon to all. I hope I'm audible.

Yes, you are audible, sir.

Professionally, I am a chartered accountant. Medically, I suffer from dystonia. It means in fair terms 55% of my body is paralyzed, and part of my right hand, my right leg and my speech, I have not, however, treated this as hindrances. As I have mentioned before, despite my medical condition, I have successfully completed my chartered accountancy course as I strongly believe that I'm self reliant and self-dependent. I remind the virtues of UPL that share the same principle of making people serve clients through our ongoing and continuity of its work. You have made and are making some positive change in our society. Sir, if our company can shower some blessings on me, it can change my life too. [indiscernible] I had previously approached our company to work in certification area. Unfortunately, that has not progressed. I would therefore like to use this forum to reach out to you and [indiscernible] when we grow up together. I'm confident that you find my professional achievement a value-add to your esteemed organization and empathize with my condition and support me with certification work. I would like to thank the Board of Director for giving me opportunity to speak and also patiently hearing me. Before I end my speech, I would like to do a special thanks to our entire secretary department, including Mr. Ajit Patel, people with their efforts which have made possible for me. Please accept my sincere thanks from bottom of the heart. I'm also hopeful the company will empathize with me and will relatively consider me. And I support all the resolutions, and I have voted all in favor. I have been always -- will be a proud shareholder for our company. I'm sure I'm audible. Thank you. Thank you so much.

Thank you very much. I now request Mr. [ Harshal Parekh ] to ask his questions.

Yes. I hope I am audible and visible.

Yes, sir.

Yes. Thank you so much for giving me an opportunity to speak at this AGM, and a very heartiest congratulations to Raju Bhai Shroff for receiving Padma Bhushan 2021. One of kind of from a corporate world to be honored with such a highest civilian award we are so very great and very proud that you are -- I mean you are leading the firm, leading. Also many thanks to Chairman sir and the Directors for patiently hearing all the shareholders till now. I can just imagine how calm you need to be on the AGM day. So I mean a couple of good things are, we are called as the world's most caring company out of -- in top 50 companies. And things with this are [indiscernible] the statement being caring is really grateful. Our revenue growth was 8% as compared to last year vis-a-vis the EBITDA has grown by 15%. So even though revenue growth is just 8% increase, the EBITDA grew has -- it has grown by 15%. That is really a commendable job. Normally top line increases then the same gets the effect into the bottom line. But I think our company should do much better in terms of revenue growth in the upcoming years. Also, we have been included in Dow Jones list of sustainable company, that is, again, one step towards a greener solution. Okay. So are we looking for any of the acquisition in food industry? Because now we have expanded and getting into the food chain industry chemical space. So are we looking out for a quicker growth? We can -- maybe smaller companies could be acquired and we can directly target the customer base and start working towards it. Or the second option is what we are actually following is slowly and steadily creating our own client base and helping our company grow. I think other queries are already covered by the Chairman sir in his speech, so I may not again speak on this. One more thing I think I came up as the earlier speaker who spoke about CSR activity in relation to professional work. UPL is very well known for this such type of tie-ups and upliftments. I think we can support him and this would be a win-win situation for our company and for him as well. Hope this is also considered by our Chairman. Our company is doing great, and I hope it reaches new highs every year, just like the share prices, which is soaring every year. Once again, thank you. Thank you very much for giving me an opportunity to speak at this AGM.

Thank you very much. I now request Mr. Vinod Aggarwal to ask his question.

Hello.

Please go ahead.

Can you hear me?

Yes, we can. Sir, you're audible.

Yes. Respected Chairman, Raju Shroff Ji, who was recognized by the Government of India by honoring him with the Padma Bhushan. It's a very salutatious thing which I can always say. Our Global CEO, Jai Shroff; our CS, Sandeep Deshmukh from his team, Amit Shah, certainly, they've helped me join this AGM and they're very nice. And our Global CEO, Carlos Pellicer. Salute to everyone from Mumbai, from Vinod Aggarwal. Sir, I've gone through your annual report. Sir, happy to know that you have got the highest ever revenue of INR 38,694 crores, sir. It's a very high revenue. The PAT was about 8% to 9% of the total revenues at INR 3,692 crores. And the CAGR for the past 5 years has been INR 28 crores in the pack, which is very good. Sir, my only 2 or 3 queries which are there, sir, you still have debt on your balance sheet? Because the acquisition of Arysta, we had taken up debt. How many years can we expect to become debt-free? 2 years, 3 years? Because last year, we paid back INR 3,140 crores. By when can we expect our company to become debt-free? And we are doing OpenAg this thing for the future developers. And you've also joined up with FMCG and [indiscernible] their chemicals and Telesense for storing of grains is very good. This will give us a good return. And we filed that you've got R&D expenditure of 2.5% of our revenues, and you have filed for 1,421 patents you've got and 1,400 formulations, 138 countries we are operating in. Sir, I wish the company all the best, and I hope our revenues keep on growing, and we get more and more, 100%-plus dividends and maybe a bonus also in some time. Thank you. Signing off Vinod Aggarwal from Mumbai.

Thank you very much. The next question is an audio-only question from the line of Ms. Nisha Shinoy.