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

Good evening, everyone. I'm Radhika Arora, the Head of Investor Relations at UPL. On behalf of the management team at UPL, I would like to welcome you all to the FY '24 Capital Markets Day. Whether you're in the room or joining us through the webcast, I do believe, the hours spend with us today will be very valuable in understanding the strategic direction of the company. You'll get a chance to hear from and interact with the business leaders of the platforms. So with that in mind, I will get off the stage in just a bit. But just before that, a few logistical pointers. First, on Q&A. There's a lot of information in today's presentation. And we want to make sure that you hear it all before opening it up for the questions. The session will start with a presentation by our Chairman and Group CEO, Jai Shroff; CFO, Anand Vora; CEO of UPL Corporation, our International Crop Protection Platform, Mike Frank; CEO of UPL SAS, our India Crop Protection Platform, Ashish Dobhal; Benjamin Marolda, Global CEO of Advanta Enterprises, our Global Seeds platform; and Raj Tiwari, CEO of our UPL Specialty Chemicals Limited. Lastly, please make sure to check out the safe harbor statement about the forward-looking statements. So with that, please silence your phones, sit back and we start the presentation. Let's welcome on stage, our Chairman and Group CEO, Jai Shroff.

Thank you, Radhika. Welcome, everyone. Pleasure to be here. This -- for UPL, this has been a very difficult year. And for the industry, it's been a very difficult year, too, particularly in the last 30 years or so of my very active involvement in the business. I haven't seen 2 major markets, which have had a big slowdown like we had this time. And in the past, we've been able to anticipate them better and react better. But it has had some setbacks in the past also. But anyway, we -- hopefully, this is behind us and what doesn't kill you makes you stronger. And we look forward to that. Just running through the numbers for the last year. We had revenues of INR 43,000 crores, which is lower by 20%; INR 5,500 crores of EBITDA, which is down 51%; debt up by INR 600 million; and number of days up by 22 days. So focus for the coming year and coming years is really to focus on profitable business, which is focused on improving working capital. And, I think, the whole industry, as I talk to my colleagues around the world, is focused on that. And I believe that we will see a dramatic improvement. At UPL, we will focus on growing our platforms whether it's Advanta, it's Specialty Chemicals, Crop Protection India or the UPL Corporation as a global crop protection leader, improving cash flows and deleveraging the business and unlocking as much value as we can over the next 2 or 3 years from the various platforms, which each individually are leaders in its own space. Crop protection, looking at the -- all the platforms, UPL Corporation, a global crop protection leader. We expect the Brazilian market and the U.S. market to recover, and we will see some benefits there. At SAS, the team is completely focused on launching so many new technologies and really focusing on improving our brand presence and cash flows. On the seed business, Advanta is leading its way on the corn seed platforms in India where there is huge demand on all the forages and other platforms around the world. Today, there is a huge interest in different aspects of the seed business, which is biofuels, and we see Advanta continue to gain market share there. On specialty chemicals, we have the internal manufacturing platform and the other specialty chemicals. UPL plans to invest and continue to grow and stay one of the largest specialty chemical companies in India. Reimagining sustainability, it is the theme of the future, and UPL is actively involved in various platforms, whether it was COP28, our whole NPP platform for agriculture, which is growing, doing better. And part of so many value chains, whether it's sugarcane in India, cocoa, rice sustainable rise in UP. And there's a lot of interest from the food companies to transition to buying traceable food, which is more sustainable. So on sustainability, when we talk about sustainability, we are talking about our Zeba platform, which is to reduce water, our ProNutiva platform, which is to really focus on soil health and crop productivity. The -- on the sugarcane project, which we can talk a little bit about is already engaged with a number of sugar mills in India to really improve the productivity of sugar product, sugarcane production, reduce water and reduce fertilizer. And we believe that the impact of this on the environment will be huge but not only that, it'll improved profitability for the farmers. And you can see the impact of that on a real-world basis in various places. Transitioning to green impact. Today, we have 62 megawatts of green power, and we intend to, in the next year, double that. We will -- we've already started production of green hydrogen, and we continue to expand growing our whole green chemistry platform, which there is a huge transition in Europe and in the U.S. towards companies demanding green chemistry. And we believe that UPL will lead the way in the specialty chemical sector. Thank you very much, and I hand over to Anand.

Thanks, Jai. Good afternoon to you all, and a warm welcome for joining us today. All of you know that it's been a challenging year, probably the most challenging year in recent times. But to the credit of the leadership team, we look at it as an opportunity to restructure the business and adapt to the market realities by rightsizing the organization and making it future ready through innovation, improving share of differentiated and sustainable products and moving our focus towards improving margins and operational cash flows. With that, I'll start with the results for Q4. Talking about the Q4 results, we saw a sequential improvement in performance versus Q3 by recovery in volumes as well as in margins. Our revenue for the quarter stood at INR 14,078 crores, reflecting a decline of 15% versus that of the last year. The decline was primarily due to lower prices, which fell by 15% year-on-year. Of the 15% decline in prices, approximately 5% was on account of onetime transitory impact of higher rebates. Excluding which, the decline in prices -- decline in price and revenue was about 10%. Having said that, volumes were in line with last year, which is quite positive and indicates that demand is gradually improving. Recurring volumes was largely led by continued growth in our differentiated and sustainable portfolio. The share of which expanded by 7% from 29% last year to 36% this year. Contribution margins continued to be impacted by the transitory impact of higher rebates to support the channel partners and liquidation of high-cost inventory. Adjusted for these impacts, both our contribution and EBITDA margins were in line with those of last year. As impact of lower realization was offset by improved product mix, lower cost of products -- lower cost of goods and rationalization of overheads. This is quite encouraging and lends confidence that our margin profile should improve in the coming financial year. The cost optimization initiatives, which we undertook in the first half of the year has paid off as we were able to reduce our fixed overheads by 17% year-over-year in Q4. This helped us to improve our EBITDA margins to be in line with last year, adjusted for the twin transitory impact that we spoke about earlier. Our net finance cost declined by 4% versus that of the last year on account of reduced factoring. While overall tax charge was lower, the effective tax rate looks significantly higher as we continue to pay taxes in some geographies and at our manufacturing plants and seed platforms as they continue to generate profits. The PBT was lower in line with the drop in contribution margins. Exceptional costs for the quarter were higher at INR 106 crores versus INR 29 crores last year, mainly due to the onetime severance cost as we restructure our business. Overall, we are pleased to say that the quarter ended in profit. Before moving on to the full year's performance, I would like to touch upon the continued strong product performance by our global seed platform, Advanta Enterprises, which reported a robust 34% growth in revenue and 38% growth in EBITDA for Q4. Now for the full year's financial results. As Jai highlighted earlier, this has been very challenging and an unusual year for the industry as a whole. The full year's revenues stood at INR 43,098 crores, showing a 20% decline over that of the previous year, impacted by industry-wide channel destocking and excessive pricing pressure in the post-patent space, which was aggravated by the transitory high rebates extended in Brazil, U.S. and India to support our channel partners. Excluding for these transitory rebates, the decline in revenue was 15% as against the reported 20%. While the destocking impact, particularly had starter impact in North America and Brazil, the rest of the world region bucked the trend and grew 9% in FY '24, which is quite noteworthy amidst the ongoing industry downturn. Adjusted for the transitory impact, our contribution margins were in line with last year, and improved product mix in the form of higher share of differentiated and sustainable products, which stood at 35% this year versus 28% last year, coupled with higher contribution from our seeds platform and lower cost of goods offset the impact of lower realization on the adjusted basis. Furthermore, through focused optimization measures, we were able to reduce our fixed overheads by $150 million versus last year. Most of the reduction in overheads around -- most of the reduction in overheads, of which about $100 million was due to -- was structural in nature, and we should see the benefit of that come by in financial -- in this financial year also. The balance $50 million was on account of lower bonus payout this year due to the business underperformance, which we are confident will be normalized in the current financial year. As a result, the EBITDA margins adjusted for the transitory impact, is lower by 2% in financial year '24 as against the import -- as against the reported 8% margin decline. Moving on to items below the EBITDA. Now our net finance costs increased by 10% year-on-year, mainly due to the rise in benchmark interest rates on borrowings and an increase in quantum of debt. Overall, the average cost of debt for the year stood at around 9 -- 7% per annum. FX loss for the year, that is -- the exchange impact, the exchange loss for the year stood at INR 1,290 crores versus INR 777 crores last year. This increase was due to devaluation in currency in certain markets such as Argentina, Russia and Turkey, where hedging is either not possible or is economically unviable. The steep devaluation in Argentinian peso by almost 300% had impact of about INR 471 crores, of which INR 256 crores was just an impact on a single day when the currency was devalued almost 300%. Overall, we reported a net loss of INR 1,200 crores for the year. This was pretty much in line with what we have guided for at the end of quarter 3. Moving on to working capital. We saw an increase by 22 days for the year from 64 days to 86 days. This was due to higher receivable days, which are up by 22 days from 102 to 124 days. Of these 22 days, the increase -- or 22 days increase, 7 days was attributed to reduced factoring. As far as our inventory and our payables are concerned, more or less, that increase of about 13 days, increase in inventory, is offset by increase in payables by the same number of days. Moving on to the net debt, our debt position. The net debt increased by $600 million to $2.66 billion. Looking ahead, in FY '26, as Jai mentioned, deleveraging is foremost priority for all of us. In line with this, we expect to bring down our debt next year through improved operational cash flows. Additionally, we are in the process of completing necessary formalities for the rights issue and pursuing capital raise opportunity at our other platforms. With that, I would like to invite Mike, on stage, who will take us through a detailed performance of International Crop Protection business. Thank you.

All right. Thank you, Anand, and great to see everyone here again this year. Over the next 15 or 20 minutes, I'd like to do 4 things. Firstly, I'll cover our business results, both from a Q4 and a full year standpoint for FY '24, look ahead towards FY '25, talk about our very exciting pipeline, and then I'll finish talking about a couple of the key markets that were extremely challenging this year and what our path to recovery is in those specific markets. So as both Jai and Anand mentioned, FY '24 was an unprecedented year with the business impacted, really, on multiple fronts. We'll go through the performance in detail, along with the steps taken during the year to lay the foundation for our future growth over the coming years. So overall, on the positive side, grower demand for our products and technologies continues to be extremely robust. And in most markets and most crops, farm gate price for commodities is still high on a historical level and farmer margins are strong, again, in most crops and in geographies where we operate. However, the gap between sell-in and sell-out within the channel persisted throughout last year, and we expected the channel demand to normalize, in particular, in the second half of FY '25. So moving to the financial results. Our fourth quarter revenue was down versus last year, driven primarily from pricing, and we experienced margin compression largely due to the transitory impact of higher-than-normal rebates and selling through higher cost inventory. This quarter, adverse weather conditions occurred in Brazil and Europe, further impacting our volumes and affecting the top line. However, we're beginning to see the signs of green shoots in our performance. Our margins in Q4 improved sequentially and was on par with last year on a normalized basis. Additionally, the relative share of our differentiated and sustainable segment was up, driven by volumes, indicating a wide adoption for these offerings. We remain on track with our overhead optimization plan and have rationalized our spend significantly through a change in our operating model. In the quarter, we also reduced our receivables significantly. So turning to our regional performance. Our major markets continue to face destocking and pricing challenges. In Brazil, as I mentioned, diverse weather and higher returns aggravated the situation. Other parts, though, of Latin America, in particular, Mexico and Argentina, continued to perform very well, significantly outpacing the industry growth. In North America, we continue to face pricing challenges in herbicides, such as glufosinate, clethodim and s-metolachlor, and rebate-related support impacted our revenue in this region by approximately 10%, with a direct impact, of course, on our margins. In Europe, volumes declined due to excess rains and floods in the western and northern parts of the region, and destocking in the band of high-margin bifenazate also impacted regional performance. In the Rest of World region, which comprises primarily of Asia and Africa, our performance was outstanding in that region, and we greatly outpaced the broader market. This is, of course, a fragmented market, but our broad product offerings and proximity to the farmer gives us the leading position in many countries to work with the dealers and the channel to create superior agronomic and service solutions. Speed, service, reliability and cost-effectiveness are all aspects of our strategy in this region. So looking at the full year, as I said, FY '24 was definitely an unusual year. We experienced rapid price decline in most post-patent products, aggravated by a steep increase in China AI capacity, creating pricing pressure within the channel, and this really happened as we started Q1 of last year. And because of this pricing pressure and inventory that had built up in the channel the preceding few years, it resulted in a near freeze of purchases right as we started the year from a sell-in standpoint, and distributors started to postpone their purchases and also began renegotiating on the current inventory that was still existing in their warehouses. The same situation happened with farmers, not from a destocking standpoint, because normally, farmers don't stock a lot of inventory. But farmers also, as they saw prices decline, they also froze their purchases as long as they could, right up until the time they needed to procure so that they could apply it on the field, just to make sure that they were buying at the lowest possible price as they saw prices come off their highs. So our volumes declined in the year by 7%, which seems like a lot, but that was really top-tier performance when you look at the industry's performance overall. However, we had many of our top post-patent products impacted by the overall price reduction and hit again with channel rebate pressure, thereby resulting in 22% price decline across our portfolio over the year. So while addressing these challenges, we took a conscious decision of clearing out our high-cost inventory and we slowed production of new material to manage working capital, causing some negative impact from unabsorbed overheads in our P&L. So while some spillover is still expected in the first half of FY '25, most of these impacts are now largely behind us. Moving to regional performance. Again, North America and Brazil faced significant pricing challenges in the herbicide segment in particular, with high rebates and destocking. And while contribution margin was down, it was still on par with last year when we adjusted for the transitory issues. And look at those onetime issues, we can see that margins on a year-over-year basis are really relatively flat, which gives us a lot of optimism as we go into FY '25. Among key regions, as I mentioned, LATAM faced significant price decline, mainly in Brazil. Brazil revenue was affected by excess returns apart from higher-than-normal rebates. And together, these had a significant impact on our contribution margins. As I mentioned, performance in other parts of Latin America were very strong. In North America, as you can see, it was impacted, mostly by post-patent herbicides, such as glufosinate, clethodim and s-metolachlor. These 3 products resulted in the vast majority of our revenue decline and margin compression in the region. On the positive side, we have increased our NPP sales in North America. In Europe, the decline was led by destocking and product bans, which impacted volumes. And in the Rest of the World region, the revenue on the year was nearly flat. UPL, as I said, greatly outperformed the industry average. China, in particular, had strong volume growth in herbicides and insecticides, while our Africa business also had strong performance. Our differentiated and sustainable segment continues its strong trajectory. During the year, we grew our volumes in this area by approximately 10%, enabled by a ramp-up of products such as Evolution, Feroce, both in Brazil and other new product launches. Additionally, input cost tailwinds in Sperto and Evolution also helped maintain our segmental margin at greater than 40% in this differentiated and sustainable segment. Though this volume -- through this volume growth, we have improved our overall mix of differentiated and sustainable to 35% of our sales versus 27% in FY '23, and we're on path to achieving approximately a 50% share of our mix by FY '27, which has been our target for the last few years. Our focus on innovation and solving farmer pain points is demonstrated with strong revenue growth from new products. Further, a majority of our launches were from differentiated and the sustainable segment. Each of these recent launches, as you can see on this page, have met with noticeable success and are on path to becoming real strong and near blockbusters or blockbusters in our portfolio. A major action taken this year has been to make the organization, what we would call, future ready. And we've taken several steps to lay the foundation for our medium- to long-term growth. These include simplifying our operating model to drive efficiencies, cost optimization and reducing our discretionary spend. The first 2 enabled a lower cost base for the future through regional and subregional realignment and to build an agile organization. Further, we have moved some work to our global business centers to drive efficiency and excellence while delayering the overall organization. This has helped us reduce our net head count by 11% while improving our overall agility, our customer focus and our operational excellence. While we continue investing in strategic growth projects such as NPP and sustainable solutions, including launch excellence, implementing tighter spending controls, all of that led to savings in our overheads. Overall, I see this initiative with two-fold benefit. First, it has helped us in a conscious strategic reset of our cost, bringing an efficient operating model with a lower cost base. And second, it's helped us identify growth opportunities in key markets and segments where we are now focusing even more our resources more precisely. So looking at FY '25, this year, we see strong farm gate demand for our products. And while challenges persist, it's evident that growers are shifting towards effective and sustainable outcomes, which is the base of our business model as a priority and our focus for FY '25 and beyond. So first, focusing on margins over volumes is one of our key priorities. And by improving our product mix, SKU rationalization and by leveraging our FY '25 launches, further we expect input tailwinds this year, and we've also negotiated better commercial terms with virtually all of our externally sourced AI suppliers. Second, by generating additional cash largely through working capital improvement in markets such as Brazil, where receivable days are traditionally longer, we will move our sales closer to the use period, allowing us to reduce DSOs. We'll also prioritize reducing our inventory through use of data and analytics and using our AI modeling in our demand planning processes. Finally, by driving innovation and leveraging our differentiated and sustainable solutions, we have a strong pipeline this year with over $85 million of new product revenue expected, and we also anticipate further ramping of our recent launches from the past few years. Looking specifically at our sustainability solutions segment, which we often call natural plant protection or NPP. This comprises biologicals, biocontrols and biostimulants. This will continue to be a driver for future growth for UPL. This segment is estimated to grow, globally, at approximately 10% over the next 5 years. And with our current portfolio and our exciting new pipeline, we have ambitions to outpace the market with a CAGR of approximately 14% over the next 3 years, and I'll show you some of the products in our pipeline here in a few slides. So to achieve these objectives in our portfolio, we aim to expand our focus to what we call hero products, our real big hitters through higher penetration and geographic expansion. For example, we have a product that's branded as Yukon. It's a biofungicide and it has excellent control on downy mildew. This is a technology that we launched in Europe with great success. And in FY '25, we're now launching it over many parts of Latin America. Our focus on biocontrols is also enhanced by our OpenAg collaboration with ecosystem partners like Novonesis. For example, a new biological soil health solution for controlling nematodes branded as Nimaxxa, was successfully launched in Brazil this past year, again, with outstanding and industry-leading results. and we're now awaiting registration in the U.S. for launch of this brand in the coming season. So with such innovation ongoing, we have 10 new active ingredients in our NPP pipeline, and we are well placed to deliver around $700 million of top line in this business by FY '27. We want to also be closer to the grower to better understand their pain points. So for this, we're empowering our sales team through what we call our NPP Academy. It's an online digital training program, covering 28 of our hero products with cross-pollination sessions across the globe and creating incentives for our entire sales organization. In Brazil and Europe, we've also created over 100 NPP field promoters across 20 countries to generate demand, covering the unique nuances in each of the markets. Further, we are leveraging our ProNutiva program to solve grower pain points through spray programs combined with conventional crop protection and low residue programs that are NPP products for disease control. Two such examples are for bananas in Central America and pomegranates in Europe. On the crop protection and sustainable solutions side of our pipeline, it's also very robust, as you can see here. And it's really built around customer centricity with a strong focus on resistance management, be it insects, plants, disease or weed control. Our new products are therefore a healthy mix of traditional crop protection products as well as biosolutions. On a risk-adjusted basis, our current pipeline is approximately $5 billion of peak revenue per annum, of which around $1.5 billion annual sales is expected by FY '27, with approximately 75% of that new revenue being incremental. I would like to emphasize that we have 26 molecules in our entire development pipeline and 17 new solution platforms, both up by 1 versus what we reported at our Capital Markets Day event last year. Additionally, 80% of our pipeline is in the differentiated or sustainable segment, again, up 2 points from our presentation last year, which really demonstrates our focus and our priority, including our R&D in this area. So over the next 3 slides, I want to take you through our recent launches and our more detailed review of our robust R&D pipeline. This is in line with what we presented last year, and I'm happy to share, on this slide, that we have delivered several innovative products across categories and many of the projects have advanced to the next phase gate. We have a strong pipeline for the near and future growth. There are some names that you are already familiar with, such as Evolution, Feroce, Shenzi, PREVIEW. Each of these offerings address specific pain points for the grower, and all of them play an important role from a resistance management standpoint. So here on this slide and the next slide, I'll show you our pipeline products, including the current status. This spans across crops and regions, as you can see, as well as various stages of product development, ranging from validated efficacy, which is our Stage 2, all the way to launch readiness in Stage 4 just prior to expecting regulatory approval. On this first page, you can see our robust pipeline for weed and disease technologies. All of these products, along with those on the next page, constitute our peak pipeline revenue of $5 billion, which has been risk adjusted according to the development phase. Each of these technologies have passed our screen for being an important tool, helping farmers with both resistance management and further farm sustainability. On this slide, our pipeline for NPP, seed applied technologies and insecticides, you can see, is very strong. We also have some interesting new technologies advancing through various stage gates in our R&D process. I would also like to add that for several of these offerings, we are very excited about their peak revenue, as I said, over $5 billion in total from our pipeline. In FY '24, post-patent products for row crops were significantly impacted in North America and Brazil. For us, this has led to significant value erosion and consequent impact on overall performance as we have shared. With this, our immediate priority is to once again show profitable growth and improve cash generation in these markets. Our strategy to get back is two-fold: One, we are working closely with our channel partners to focus on sell-out and to align our supply chain with their demand forecast. Additionally, we are leveraging on B2B sales and pushing for private labels where there's an opportunity. Further, we're also targeting large growers and leveraging on retail collaboration -- on our retail collaboration, specifically in Brazil and South Africa. Our strong pipeline in FY '25 is expected to drive margin accretive volumes. Ramp-up of our recent launches in Brazil and herbicide offerings for row crops, such as our new Intrava DX in the Midwest are expected to drive revenue growth in these key regions. We also see potential in expanding our bulk business in the U.S., specifically for herbicides in the Midwest. In Brazil, we will continue to maintain our leadership in insecticides with our sucking pest platform, namely Perito, Sperto and Feroce and generating cash in these regions is critical given their overall size within our business. Our primary focus will be to ensure inventory optimization and liquidation as well as positioning the sales closer to use, specifically in Brazil, to manage working capital more efficiently. Another key step is aligning credit terms with the product margins. This will be achieved through a more detailed mapping of timing of sales with the product margin, SKU rationalization and reducing lower margin sales as well as through quarterly working capital improvement targets. Impact of these initiatives are expected to be amplified by leveraging our internal capabilities, including supply chain, excellence, R&D, marketing as well as our data and analytics tool set. So before I hand it over to Ashish to review the India UPL SAS business, I'd like just to reiterate that in FY '25, we will bring the business back on track through profitable growth prioritizing margins over volumes, cash generation and driving innovation for value creation. We remain on track for 50% of our sales from differentiated and sustainable products by FY '27, driven by new launches and with an innovation rate in FY '27 expected to be in the mid-20s. I am confident in the resulting positive impact through our operating model upgrade to drive organizational efficiency and excellence. I'll now hand it over to Ashish to review our business, UPL SAS. Thank you.

Thank you so much, Mike. A warm welcome to all of you. Good afternoon. It's great to see all of you in person after almost a year. I'll be talking about UPL SAS. UPL SAS, as we all know, is the crop protection business for India. But it's not just crop protection, we also are pushing the boundaries here to bring solutions for drought mediation technologies. We are looking at climate-smart technologies, precision farming. We are looking at Decco post-harvest services. We are also looking at pure-play agtech. With the whole aim like we talked last year to make sure that the farming becomes profitable and also farming become sustainable. We've had -- this is a company which we formed last year and last year was our first introduction. Since then, I think we've -- like Mike discussed, we've had one of very, very challenging years. In a sense, it's good for us because it has helped us to make sure that we are recalibrating our business, refining our business models to make sure that we are growing, but also growing very, very efficiently, which is something I'll be discussing in my next few slides. As I said, there's a little bit of a course correct. We make sure that we are -- the focus, Q4 was all about sales. We made sure that the focus goes back on cash generation and overhead optimization. We've pushed the sales from Q4, and we are selling now closer to the season, because we've seen that in the last 2 years, there has been a lot of ambiguity in first and second quarter, which are the 2 main quarters for the India business, either it's the Ukraine or it's the China meltdown. We've seen a lot of volatility in the first 2 quarters. And hence, we decided that we'll place it -- we'll place closer to the season just to make sure that we are giving ourselves and also our channel partners that safety net. We went -- we also have prioritized collections, and we rationalized credit terms. The next thing -- this, overall, led us to a 60% decrease in revenue. We also have had a contraction in contribution margin by about 750 bps. This, essentially, was: a, because of product mix change, we place a lot of profitable products for cotton in the Q4, which shifted to Q1 now because we are placing it closer to the season. The second piece, of course, is we had a INR 40 crores unabsorbed factory costs where we have prioritized cash flow over higher plant utilization. The good news, of course, in Q4, is that we've achieved a significant reduction in SG&A to the tune of about 36%. And the best thing is that we realized the cash of INR 500 crores from working capital in Q4. We've had quite historic cash collections of about INR 1,100 crores in Q4, despite lower sales, which is -- and we have restricted further working capital buildup and we further tightened credit. A little bit of an update on our digital business. The revenues were flat, but we've managed to reduce the EBITDA to INR 10 crore loss from about INR 52 crores loss. We've had cost reduction across the platform. How the year pan out for us? So people who would know, know that we are a leading company in cotton. We have a huge market share in cotton and cotton, we all know, went down in terms of acreages by about 10%. And then later on, very, very inclement weather for cotton, whether it was North India, Central or South India, which impacted us more than it would impact anybody else. Summer pulses was a segment that we had made on our own. This segment also was down substantially last year, purely due to weather. And India story is more on the inclement weather that we had last year than any external influences. And to add to that, the Rabi itself, we all know were some of the driest months that we have faced in September, October, November, which meant that the southern Rabi season also didn't take off. And when it's a dry -- overall dry season in Kharif for Rabi, you do a blockbuster product for us, glufosinate. We have 2 brands in the market. where you need intermittent trains for this product to sort of work well, didn't work well at all. So, I think, we did have some generic pressure, but, I think, it was mainly the season which impacted this business. And of course, we delayed the entire product placement or we took it closer to the season to rationalize the channel inventory and improve working capital, which meant that all in all, with INR 2,845 crores, we were down by about INR 34 crores in top line. Once again, as some of our most profitable products are in cotton and summer pulses, as the moment, these 2 crops get affected, our product mix gets impacted, and that puts a huge pressure on the contribution margin. And of course, we had unabsorbed factory costs that I just discussed in Q4, which drove EBITDA down despite improvement in SG&A. SG&A, on an annual basis, was down by 15%. And we, once again, what we set out to achieve also was that we generated a cash of about INR 1,000 crores in FY '24. And more important than that, which we had not done in some time, was improved the receivable days by about 55 days by realignment of sales closer to the season. Digital business, the revenue is about INR 53 crores as compared to last year's INR 72 crores, but there was a significant reduction in the loss to about INR 99 crores against INR 283 crores of last year. Nurture.retail turned positive at CM1 level. We are positive in most of our platforms. We have about 95,000 seed retailers. We are improving the number of retailers who are working on the platform. In terms of our engagement on the app, the numbers have almost doubled down in terms of how much time a person is spending on the app. And we have a lot of exclusive brands, not just from UPL and so on, but from some of the other companies also who are coming on the platform on a regular basis now. Some brighter things for the year '25-'26. We are having 6 major launches. We are trying to -- we know that we have a leadership position in cotton, but that also becomes a problem when the season goes a bit off on cotton. So we are focusing very, very aggressively on rice, vegetables, maize and sugarcane. So in that, we are launching 3 -- 6 new products, 2 key products on paddy, BPH and stem borer, we all know are 2 key products. We are having 2 insecticides on this. We are having 1 insecticides on vegetables. We are having 1 fungicide, a multicide fungicides, which will go in multiple crops, and we are having 2 nonselective herbicides, 1 for plantations and the other for non-crop area. The peak revenue for these would be, for 2 insecticides, INR 250 crores; for insecticide in vegetables, about INR 80 crores; and fungicides of about INR 40 crores; and 2 herbicides of about INR 40 crores. So, I think, this becomes very important. In terms of our innovation rate, we have a very healthy innovation rate of about 25%, which we continue in the coming year also. Strategy going forward, we do have, like I said, we are realigning our business priorities for future. It's good that we got a challenging year this year. The first thing, of course, comes as profitable growth. So we do get -- or regain our volumes in our flagship products, which is Flonicamid and glufosinate with the weather production being somewhat favorable until now. We already have launched a few products in last year. The contribution was not so high because in the first year, you always invest -- tend to invest more. So we are expecting higher contribution from our recent launches. We also are expecting volume growth from some of the new launches that I discussed. Our differentiated and sustainable share goes from 25% to 35%. I think that's going to be key on how we're going to grow business this year. And there's a continuous push on SG&A rationalization. I think it's a continuous activity. We're trying to see wherever we can improve the efficiencies in the business. Lowering working capital, of course, is our second pillar, where realignment of sales closer to the season is not just a Q4 phenomenon. We keep on doing it as we go forward. Rationalization of credit terms, and of course, scale-up of channel financing is something that we are working very aggressively on. The key to our success, we also feel, in terms of cash generation, would be tighter demand planning and inventory controls. The third thing, of course, is to address the white spaces. We -- like we discussed. We have a decent share in paddy. We have additions shared in maize. But the idea is to make the shares bigger. 2x market share is what we are targeting in maize and sugarcane and 1.5x market share in rice by FY '29. In the areas where -- we are present everywhere, but 2 areas, we have sort of identified where we need to get stronger, our East and some of the Southern markets. And the third thing, of course, is identifying the right general partners, selling them a better mix of products and of course, putting up improved market share with them and leveraging all of this through digital analytics to drive operational excellence. I think that's going to be a key that this whole transformation is going to be data-. With this, we are pretty confident that next year, when we'll be standing here, we'll be standing here with a much better performance with much improved numbers. And with that, in terms of improved numbers, I would like to call my colleague from Advanta, Benja, who will talk a little bit about improved performance. Thank you.

Thank you, Ashish. Good afternoon, everyone. We're shifting a little bit on the markets, moving out of chemicals, moving into seeds. And I understand there's a pretty well-known audience on chemicals, so I was advised to give a little bit of background of what are the differences and similarities between the seeds business and the chemicals business. So of course, we are operating in the same ag sector. But I would like to share 3 main topics in order for us to understand why we are going to be able to see the kind of performance that we were able to deliver and how this compares with the situation that the chemical sector is going through. But first, of course, as I've mentioned, we are serving, yes, the same market segment or the same sector. We are serving farmers But actually, not every farmer is purchasing seeds. In fact, a lot of the chemicals that are being sold are being sold on crops that are perennial. The dynamics are different, while the final user is the same. The dynamics that push -- or generalized changes in the markets are similar, driven by fuel, by commodities, by weather, I guess, COVID taught us logistics, too. But the second point that I wanted to highlight are the differences. So the first and most important difference between chemicals and seeds is on the supply side. While chemicals might have global supply facilities that they can impact global markets. In the seed business, supply is mostly driven by local production. So these kind of challenges that we have seen in the chemicals are very tough for them to happen in the seed business. The second would be products and portfolios. In chemicals, we are dealing with molecules that have more than 40 years old. In the seed business, given products should have or might have a life span of 5 to 7 years. Every 5 to 7 years, we are changing that product. The industry is changing their products. That means that our product is dead and most probably will not come back. Of course, we have long-standing products, but there's a natural balance to come up with new products in order to be able to provide better performance with farmers to keep our market share and to continue providing more value to farmers. And the last point on the differences is the growth drivers. There's very little more land for the seed markets to expand. So value of the seed market is driven by innovation mainly, pulling in new products and new technologies that will add more value to farmers out of which we will be able to share some of it and capture that as a price. The second one would be hybridization. You might be aware that in many regions, farmers are still open or using open pollinated varieties compared to hybrid seeds that are delivering higher performance. And the last one, of course, would be crop or portfolio mix. When a given more viable crop takes over less valuable crop, then the market would be growing. The last point I wanted to share before I jump into the numbers is regarding how we create value as an organization. And that is mainly driven by IP intellectual property and value generation. And that happens through the development of different products, what we call germplasm development. And that is unique, and that is by region. There are very little examples of products that can move around the globe. And that is why you will see that most of the seed companies have a lot of R&D facilities for the same given crop in very different countries because every country has a particularity where that particular crops needs to receive product that have been developed for that particular region. The second one is the level of investments that the company do the germplasm diversity and the access in order to be able to generate different products and new and better-performing products. And the last one that is undermined is time. Time is extremely important because you might be wondering why aren't there a lot of start-ups selling seeds because for developing seeds, it takes decades for you to be able to develop our products and for that product to be reliable enough for a farmer to walk away from a performing product into your own products. And those are some of the traits that we at Advanta have. We have more than 60-year history, and that brand helps us when we come with a new product performance to believe that, that product will perform better than our own portfolio and better than competition. And of course, last but not the least, the people. The people in the companies that help to position that portfolio in the ground for farmers to actually believe and see with their own eyes what we say on our brochures, on our field days. With this being said, I'll go into the numbers. We had a fantastic quarter 4, where we were able to deliver, as Anand mentioned, a 34% growth from INR 835 crores to INR 1,119 crores. The contribution profit -- sorry, most of that revenue came from volume, accounted for 27%, where FX was 0.5% and price 6%. The higher volumes were driven through improved realizations in canola, in corn, in sorghum and vegetables, and we have a very healthy traction volume on vegetables in India. When we go to the EBITDA, where we were able to grow 38%, the first line item would be contribution, where we dropped from 54.7% to 48%. Major of that drop happened because we had higher production costs, and that was basically driven by weather in seeds, whether we like it or not, we deal with modern nature and we produce our inputs on open fields. So we have to deal with that. So we had lower recoveries in India, in Australia, in Thailand and Indonesia and some change in the crop mix. When we look into the expenditure on the fixed overheads and the R&D expenditures, we spent higher than last year, in line with what we were expecting. But of course, they got diluted on a very high revenue, and that helped us to deliver the 38% growth in the EBITDA side, moving from 15.2% of EBITDA to 15.6%. When we look into how the regions performed, we can see in the quarter 4 that basically the Americas and Australia were the biggest contributors in the regions, together with Europe and Asia, because of what I mentioned before, had a lower growth in the quarter 4. When we go to the full year, we were able to deliver a growth of 17% in the top line. Now the growth participation is more balanced between volume and value. Our volume is participating with 9% and price is 6%, and we had a benefit of 2% in the FX. We had a strong traction on all of our 4 pillars, be it field corn, sunflower, canola and sorghum. And this is not one stand-alone growth that we have been having. Advanta has been performing. And when we look into the CAGR on the top line from fiscal year '22 to '24, we have been able to deliver 21% growth. The gross margin in -- when we look into the whole year, we were able to improve from 56 to 57 overheads in line with the EBITDA growth and the gross margin. The R&D expenditures is mainly driven by project-wise. So we delivered what we were expecting to deliver. And that allowed us also to deliver a 19% EBITDA moving from INR 898 crores to INR 1,068 crores, growing also our EBITDA from 25.2% to 25.7%. When we look now into the regional pie, we can see that both our major regions, Africa and Asia, together with America remained their positioning. We see a slight decline in Australia and mainly driven by naturalization of the grain sorghum acreage down there and a slight growth in Europe. When we look into the working capital, we had a slight increase from 85 to 91 working days, basically by lower inventories. We had a slight increase in the receivables, and the payables were a little bit down from 114 to 107 days. Going a little bit more in the details of the crops. The percentage-wise of how these crops participate on our revenue remains pretty stable. So that means that we have been able to grow in all these 4 verticals pretty in similar way for the last couple of years, where, of course, our bigger contributor is corn, and we continue to gain market share. We have very strong and established portfolios. We are also launching new products, and we keep on doing that renewing our portfolio that will give us sustainability and further growth in different markets. And we consistently strengthened our youngest B2C endeavors in the field corn. Going to grain and forage sorghum, and you might remember that this is where we have been driving significant additional value for farmers driven by the igrowth technology and even by the Aphix technology, I believe Bhupen shared those in the past. But particularly in Brazil, it has been a major growth driver for us, the igrowth technology. And the agility to overcome some shortages, as I was mentioning before, that we had at the beginning of the year in Argentina, that is a very important reason for us in grains and forages. And also in Australia, in order to capture every single opportunity that we were able to. When we go to vegetables and fresh corn to other very strong crops in our pillars, we bounced back in Okra by renewing our portfolio and delivering value to farmers, being able to capture that market share and value share back. We continue to expand our portfolio in other vegetable crops and expanding also geographically out of India, there is a center of excellence. And we continue also to build up the strength in verticals for our go-to-market in vegetables. When we keep on talking about seeds, when we are talking about the go-to-market between vegetables and what we call field crops, is totally different assets and domain knowledge that the people on the ground needs to have in order to build the demand and generate the traction. And finally, sunflower and canola, our main oil crops. We have been able to grow this percentage last year, was around 14%. So we grew 2% over the rest of the crops, and mainly driven by a very strong Argentinian portfolio renewal. We have, like, what we call a new generation of products that they are delivering higher dry matter, higher oil content and we have been growing market share like nobody's business in Argentina. And also, we are strengthening very much our go-to-market and our portfolio in Central Eastern Europe. The reason that, that has not been heavily impacted by the Black Sea conflict, while it also was impacted. And finally, Australia, growing significantly and very aggressively, particularly in quarter 4, you might have seen that on canola. We are renewing our portfolio of canola, and we are again also growing market share pretty aggressively. So this was a little bit of what I wanted to share on the Advanta side. So with this being said, Raj, you can take over.

Thank you, Benja. I'll be covering the group's sustainability performance on safety and especially on environmental sustainability and also would be covering the specialty chemical performance this year. So on safety, as a company, this year, we didn't had any our process safety incident. And also our TRFR, which is total recordable frequency rate has been 0.24 as compared to 0.29 last year. And basically, 3 things. One is we continued our safety cultural transformation which was set working at the grassroot level, also worked on the occupational health and safety capability building piece. And the last is on our warehouse management where we did the safety assessment, the GAAP assessment piece of all our warehouses globally. And we have been able to bridge 75% of those gaps and 25% -- rest 25% will be bridged this year. So the safety performance has been good last year. When it comes to -- on the environmental sustainability piece, we have been able to reduce our CO2 emissions by about 17%. We have been able to reduce our freshwater consumption by about 12%. This is -- we should keep in mind that we have -- our volumes has been flat. So even if it is per tonne, we don't get the benefit of volume. So this has primarily been because of the use of greener energy and also by a lot of recirculation of fresh water and water discharges. And last is on waste generation, which has been up by 17-odd percent, that is on account of product mix. We have been -- we continue to be #1 on Dow Jones Sustainability Index. We have been included -- UPL has been included in the CDP supplier engagement or leadership board. And as Jai alluded in the beginning, we have 62 megawatts of hybrid green energy, which we intend to double this year. And we are much ahead and we are on track to achieve our 5 years commitment in terms of environmental sustainability what we've promised 4 years back. On the Specialty Chemicals, our revenue for the year degrew by 26%, which is in line with our captive business degrowth, whereas on the non-captive business in quarter 4, if I talk about our -- or rather for the year, our volumes, except for the key accounts, we are able to grow our volumes by 7-odd percent, especially on pharma, on mining, on chemical intermediates front, we have been able to gain market share in our volumes. Our sodium cyanide volumes grew double. This year has been doing extremely well. And on EBITDA, there has been a degrowth of 17% as compared to revenue degrowth of 26%. Largely on accounts -- so we have been able to achieve that largely on account of better manufacturing efficiencies and cost management -- fixed cost management. And our EBITDA margins were 130 basis points better as compared to last year. So I now call Anand -- no, sorry, I have one more slide to present, sorry. So what are the key strength? So basically, what we want to do is that we want to leverage on our scale. We have hazardous and complex chemistries platform. For example, Cyanide, phosgenation, acrolein, and CS2, chemistry H2S, which we can leverage at your scale. And we can -- we are very much vertically integrated right from energy to feedstock and which will give us a differentiation in terms of our downstream applications. And therefore, we would be able to grow our non-captive business aggressively over the next few years. I now hand over Anand to continue with the further presentation. Thanks.

So we are almost at the end of our presentation. Discussing about the outlook for the UPL Group as a whole, for FY '25, we expect to return back to growth, largely driven by normalization of our Crop Protection business, and we expect that to be from effective, I would say, largely coming in H2 of the financial year '24-'25. There would be -- we are expecting a turnaround in our Crop Protection business and largely in markets, I would say, North America, Brazil and India. And, of course, continued strong performance in the seeds business. However, as you would have heard from all the 4 vertical heads, our focus is going to be largely on improving margins, bringing in operational efficiency and in terms of focus being on cash generation. That's going to be the top priority for this financial year. So our revenue guidance. We are guiding for a 4% to 8% revenue growth in FY '24-'25. On the EBITDA side, as I mentioned earlier, focus is going to be on growth, margins, improvement and -- significant improvement in margins, and we are expecting at least 50-plus percent improvement in the EBITDA margins for this financial year, that's '24-'25. As mentioned earlier, again, on the debt reduction, we expect to generate operating cash of about $300 million to $400 million. And almost entirely the cash would be used to reduce the debt. So that's broadly our guidance for this financial year. With this $300 million to $400 million debt reduction, and also, as we mentioned earlier, the rights issue, which is expected sometime by end of Q2 or beginning of Q3, and some capital raise in our other verticals, we expect to end the year with a net debt-to-EBITDA of below 2. With this, I would like to invite Jai and all the 4 vertical heads. And we start the question -- Q&A session. Thank you very much for your attention. Just one quick correction. The 50% growth in absolute EBITDA and not the margins, Mike just corrected me on that. So I stand corrected, it's 50% growth in EBITDA.

This is Prashant from Elara Capital. Sir, how do we monitor liquidation globally? Is there any data-driven thing that we do to monitor liquidations?

Yes. So I think the question was how do we monitor liquidation from the channel? Yes. So there are some markets where we do have access to panel data, which the industry shares and we participate in that. So there's a few markets where we get near real-time information in terms of liquidation. I would say the more common method is through our sales reps. As they call on our distributors and retail dealers that they talk about inventory levels, they walk the warehouses and we consolidate data that way, too. And so it depends on the market. Sometimes it's based on broad market data and sometimes it's more based on internal market research.

Is it possible to do something like one of our innovator competitor does like you are core-driven liquidation? So it is better to control the -- or better monitoring of liquidation?

No, I think that's right. I think -- like Mike said, I think it was primarily driven by the data from our sales reps and our field people. But what we've done is exactly what you are saying is that we've launched a whole new digital ecosystem where each and every product of ours is now QR-coded. We've implemented it recently. That should give us a very good idea of the secondary-level liquidation, which was a big pain.

Yes, maybe just one last point. So we have done some trials in certain markets where we pay the channel rebates. We talk a lot of our rebates. Often in the past, we would pay a rebate based on getting access to the shelf. And so the more they would buy, the more rebates they can earn. What we've realized is that a smarter balance is applying some of the rebate to the sell-out. And so now across the board in all of our markets, at least 50% of our rebates are on a sell-out basis. Again, this doesn't necessarily give us access in real time to inventory levels, but at least by the end of each season, we do get reports on the sellout and the current industry -- or sorry, the current inventory level, which then allows us to apply a rebate to them. So that would be the other change that we're making to our market practice.

Lastly, is it possible to incorporate that in our PPT going forward quarterly?

Probably not.

Saurabh Jain from HSBC. So wanted to know whether the rebates and discounts, pricing adjustments, it's already passed largely or we still expect somewhat of it to be coming in the next year. And also the views on the high-cost inventory.

Yes. Saurabh. Good question. So as we said in our remarks, I think both for the global Crop Protection business and also in India, much of the pain that we took last year is behind us. We'd say, in high-cost inventory, over 80% of it got liquidated last year. And so there is a little bit that still is yet to be liquidated in FY '25. Most of that should clear in the first half of the year. We're expecting that rebates and returns are going to normalize throughout the year. And so we would expect the incremental hit that we had last year from higher rebates and revals and returns that, that is behind us and FY '25 will be a normalized year on that front.

So just breaking it down. First half of FY '25, can there still be losses at PAT? And do you expect the EBITDA margins to be somewhere closer to 15%, 16%? Last year, first half, we have about 16% to 17% EBITDA margins.

Yes. So what we would expect, again, in the international crop protection market and others can make their own comments, is that, there will be probably some volume growth. And so we would expect the volume increase of 4% to 8% to probably happen quite evenly across the year, maybe a little bit loaded into the second and third quarter. The pricing comparable in Q1 will be a challenge for us, specifically in the post-patent segment. So if you think back to Q1 of last year, the prices were coming down. So in the post-patent segment, there will be some pricing headwinds on a comparable basis. And so we would expect in the first half of the year that there will still be a little bit of margin compression, especially at the contribution level. That will normalize in the second half of the year, and EBITDA will have a similar impact. Obviously, we've got significant SG&A savings that are going to apply on a full year basis this year. So that will be helpful to EBITDA margins, but we're not going to guide on a quarter-by-quarter basis. But I think in the international Crop Protection business, you'll see EBITDA margins and contribution margins increase as the year plays out.

So at least there would be any losses at the PAT level. And that would be safe assumption.

So Saurabh, I think I would like to draw attention that Q1 last year, we had a fantastic quarter, first quarter. And then the Q2, Q3, we saw a sharp decline as the prices -- as there was no demand and due to destocking. At the same time, we saw some price -- the downward trend had begun and came down sharply, the prices for most of the products. So at least in Q1, you will see that probably there won't be -- I would say, you could see a loss at the PAT level. But at the EBITDA -- also, the EBITDA margins would be lower compared to Q1 of last year. But we expect, as Mike said, that probably even out in by end of H1 and H2 is where you will start seeing the growth. So that's currently at least based on what we are seeing the numbers. That's how we expect the year to pan out.

One last question, if I may. So fourth quarter reported, we did about INR 900 crores of EBITDA in UPL Corp, about INR 175 crores at the seed business, and EBITDA loss in India. So probably somewhere INR 1,100 crores from these 3 businesses. The numbers that we have reported is about INR 1,933 crores. So where that balance type of EBITDA is being captured, in which business and how?

It's in the manufacturing business because as you know, we have now separately built the manufacturing vertical. And all -- as per the agreements which we have between UPL Specialty Chemicals, as we call it, and UPL Cayman as well as UPL SAS, we charge cost plus 10% on those sales. Plus, there is the Specialty Chemical business, which we -- which is about -- roughly about INR 1,500 crores to INR 2,000 crores, and that also delivers a margin of -- as you saw, 17% to 18% EBITDA level margins are there. So that's -- those are the 3 additional contributors to that business. Besides, we have, of course, the business, Animal Health business, which is a small business but very profitable. And we have our post-harvest business under the Decco brand name, which also generates about 25% EBITDA margins.

So large part of the margin is captured in the manufacturing entity then, that's my understanding.

Yes. At least for this year, that has been the case.

This is Vishnu from Avendus Spark here. Just wanted to understand the last 12, 18 months has been very difficult for the industry. Going forward, does it -- is the industry going to structurally change, let's say, as a cumulative industry, the big ones do we see the approach of all the company is going to be very different, maybe the medium ones and the smaller ones. If you can talk about how the last 12, 18 months is changing the view of the industry as a cumulative going forward?

I think the industry came off a period during COVID of very long credit, due to very low interest rate regime and great demand for agriculture chemicals, a little bit of instability of supplies from China. So there was anxiety and nervousness. So everybody was carrying a little bit of extra inventory. I think that swung completely the other way in this last 1 year, where -- and the more it's when the other way, the more anxiety in the industry, and I think everybody we lost price discipline. I think going forward, all of the companies have had a similar impact to what we have had. So I expect there to be a lot more discipline across the board. We have seen stabilization of prices out of China, fluctuating a lot less than they were in the rest of last year. I think whatever numbers we see, everybody is stabilized. So the industry will start to normalize a lot more. I think all the companies are trimming their growth forecast. So we were also expecting a much higher growth rate in the next few years. So that's been trimmed. So everybody is adjusting their operating cost also. So I expect there to be a normalization and kind of a new normal, but normalization and much better discipline in the industry.

On the working capital, do you expect the industry to structurally think differently given the high inventory in the later days? Will that change this time? Or it'll -- maybe after a couple of years, it'll go back to being the high working capital-intensive industry.

Yes. I think -- I don't know about a couple of years, what will happen. But at least right now, I don't see -- I see all the companies restructuring. Most of the companies in our peer group, the bigger companies are reorganizing their global setups, cutting costs, cutting down offices, shutting down offices, cutting down countries where they operate. So I don't see that at least for the next few years. And I don't know if -- there is no room in -- there's not enough margin in the business to give credit. So I think the discipline will be there.

Understood. And one last question, if you could discuss a little bit on your thoughts on the generics pricing from China. I mean, do they make money at these prices? Or if they were to return to profitability, when do you expect the situation to normalize on a company level where the generics business would probably make money for a manufacturer?

So I think we've seen the numbers from all the companies in China who disclose our public companies. I don't think they are in a happy situation either. So I mean, they have a little more patients than other people. So -- but I think it should -- there is obviously pressure on everybody to improve margins. And you will see that there, too, I expect.

This is Abhijit from Kotak. First time the results, the Europe region and the rest of the world seem to have done particularly well this quarter, reporting year-over-year growth in revenues. So if you could please just help us understand what happened there. And just with regard to the recent floods in Brazil, is that a concern for our business there?