UPL Limited (UPL.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the UPL Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Gupta, Head of Investor Relations. Thank you, and over to you, sir.

Thank you, Yusuf. Good evening, everyone. On behalf of the UPL management team, I thank you for joining us today for discussing the financial performance for Q1 FY '26. The investor presentation, press release and the financial statements have been made available on our website, and we take it that you have read the safe harbor statement. From the management team, we have with us today, Chairman and Group CEO, Jai Shroff; Group Chief Financial Officer, Bikash Prasad; CEO of Global Crop Protection Business, Mike Frank; CEO of India Crop Protection Platform, Ashish Dobhal; CEO of Seeds business, Advanta, Bhupen Dubey; CEO of Specialty Chemistries Platform, Superform, Raj Tiwari; and other members of the leadership team. Before we begin, I would like to introduce you all to Bikash, our new Group Chief Financial Officer. Bikash has joined UPL earlier this year in January and has officially taken over from the 1st of June 2025. Bikash will be taking us through the overall performance for UPL Limited for the quarter. This will be followed by Mike, who will share his detailed remarks on UPL Corporation followed again by Bikash, who will cover the other platforms in brief. We will have the Q&A session post that. With that, I now hand it over to Bikash. Bikash, over to you.

Thank you, Anurag. Good evening, everyone, and a very warm welcome to UPL's Q1 FY '26 Earnings Call. Thank you for taking the time to join us today. Before presenting the financial highlights, I would like to take a moment to express my sincere gratitude for the opportunity provided to me to serve as the Group CFO of UPL. It is a privilege to join a company with such a distinguished legacy of growth, transformation and innovation. And I'm committed to advancing UPL's mission of sustainable value creation for all shareholders. Q1 presented a challenging macroeconomic landscape, particularly across Brazil and broader Latin American markets, where lower commodity prices led farm income interest, higher interest rates and volatile currency continue to impact distributor performance. Additionally, ongoing geopolitical uncertainties, including concerns around U.S. tariffs continue to influence market sentiments and trade flows. Further, China oversupply-related AI pricing pressure continues to exacerbate overall business climate. Before we delve deeper into the financial performance, I would like to take and share key updates on our liquidity and ratings development. The first being prepayment of scheduled $250 million long-term loan due in September 2025, paid with a strong liquidity generation in Q4 FY 2025. Second, we exercised redemption of perpetual bonds at the first call totaling $400 million in May 2025 earlier this year. The third update is the rights issue committee approving payment of the second and final call of INR 180 per partly paid equity share aggregating to INR 1,688 crores or $200 million. This amount represents 50% of the total issue price of INR 360 per share, comprising INR 1 towards face value and INR 179 to our share premium. The record date has been set as today, that is Friday, August 1, 2025. We expect the proceeds to come in by end of September, subject to regulatory clearance. The final update is on the recent outlook upgrade by two global ratings agencies, Fitch and S&P from negative to stable. I'm pleased to add this is a strong endorsement of our financial resilience, strategic clarity and commitment to sustainable value creation. Our actions reflect our continued focus on capital efficiency, deleveraging and long-term stakeholder confidence. Starting with the Q1 FY '26 performance overview. We had a strong start to this financial year 2026, delivering a robust first quarter. Our EBITDA reported a double-digit growth led by significant improvement in contribution margin. Additionally, we also improved on our leverage ratios while lowering our working capital, underscoring our financial discipline and relentless execution towards operational excellence. In Q1 FY '26, we reported revenue of INR 9,216 crores, around 2% higher versus last year. This was driven by 1% increase in pricing and favorably supported by exchange impact. At the platform level, we reported double-digit growth in UPL SAS, our India Crop Protection business, which grew by 13% versus last year and Advanta, which was up by 20%. I'm pleased to share that the growth in both these platforms was driven by a mix of volume and pricing, indicating our strong market presence and good acceptability of our products. Supporting this growth was Superform, our newly rebranded Super Specialty Chemicals platform, which was up by a robust 9%, led by volumes. Our Global Crop Protection business, UPL Corp, had some seasonality-related challenges in Brazil, mainly in the insecticides volume, resulting in overall decline in the revenue by 3% versus last year. My colleague, Mike will cover this in detail in his remarks. Among key reasons, growth was driven by India, up 21% and was supported by North America and Europe, both of which grew by 8% each versus the previous year. This was partially offset by decline in Latin America, mainly Brazil, as highlighted earlier, and rest of world, where we faced some challenges on seeds and crop protection. Both these regions declined by 10% versus last year. Our contribution increased to INR 4,001 crore, a significant 12% jump versus last year. The margin was over 43%, an improvement of around 390 basis points versus previous year. This performance was driven by improved product mix, favorable pricing, apart from higher capacity utilization and lower input costs, mainly in the Crop Protection segment. This also reinforces our commitment to operational efficiency and strategic sourcing, leading to favorable cost position. The SG&A expenses amounted to INR 2,698 crores, an 11% increase year-on-year. This was mainly due to one-off Brazil distributor restructuring impact. It is to be noted that this is noncash in nature and will subsequently unwind over the period of recovery horizon. Despite increase in SG&A, we delivered a strong EBITDA of INR 1,303 crores, up 14% year-on-year. I'm also pleased to share that EBITDA margin stood at over 14%, improved by 150 basis points versus last year, driven by improved contribution margin. Profit before tax or PBT at a loss of INR 190 crores, significantly lower versus a loss of INR 455 crores last year. This movement was driven by EBITDA at INR 1,303 crores, up from INR 1,145 crores last year. Depreciation and amortization expenses increased from INR 660 crores to INR 731 crores as planned. Significant reduction in net finance costs, down from INR 740 crores to INR 631 crores this year, mainly driven by lower working capital requirements and debt prepayment. Increase in net exchange losses from INR 143 crores to INR 178 crores, mainly from higher cost of hedging in Brazil as a result of increase in local interest rates. Our hedging strategy continues to provide a risk mitigation tool against extreme currency fluctuations in key markets. Share from associates and joint ventures increased from a loss of INR 32 crores to a gain of INR 18 crores in this period. Additionally, the exceptional items declined to INR 9 crores from INR 49 crores previous year. Profit after tax or PAT narrowed to a loss of INR 176 crores, a significant improvement from a loss of INR 528 crores last year. Reported PATMI or profit after tax and minority interest stood at a loss of INR 88 crores, an improvement of around INR 300 crores versus last year, driven mainly by improved EBITDA, lower net finance costs and exceptional items. Moving on to key balance sheet items. Our net working capital in June 2025 was INR 11,025 crores, a significant INR 3,300 crores lower versus the previous year same period. This positive development was supported by continuous focus on inventory management and tighter credit controls led improved collections. In terms of days, net working capital was at 86 days, lower from 121 days in the previous year, a reduction of 35 days. Inventory days stood at 110 days a reduction of 7 days, while payables were at 152 days, up from 131 days the previous year. The receivables were at 129 days, lower by 6 days versus the previous year. We also saw a reduction in noncourse factoring by around $45 million on a year-on-year basis, equivalent to about three days lower in U.S. dollar terms. Moving on to the net debt. As of June 2025, net debt stood at INR 21,371 crores or $2,492 million reflecting a reduction of INR 6,129 crores or $806 million compared to INR 27,500 crores or $3.298 billion in June 2024. However, net debt increased sequentially versus March 2025, largely due to the impact of perpetual bond redemption, INR 3,409 crores or $400 million and higher working capital requirements in line with business seasonality. I'm also happy to share that our key gearing ratios, that is net-debt-to-EBITDA and net-debt-to-equity have shown remarkable improvement compared to Q1 last year. The net-debt-to-EBITDA improved from 5.4x last year to 2.6x, driven by strong operational performance and capital efficiency. This ratio was at 1.7x in March 2025 due to seasonality led higher collections in that period. Simultaneously, the net-debt-to-equity ratio improved from 0.9x to 0.6x versus last year. As I hand over to my colleague, Mike, who will take you through the performance of our Global Crop Protection business or UPL Corp I would like to highlight that our business has shown remarkable resilience in this quarter, underpinned by improved operational efficiency and prudent financial management. Further, our effective capital management, significant reduction in net debt and improved gearing ratios reflect our continued focus on strengthening the balance sheet and creating long-term sustainable value. I now hand over to Mike, who will take you through the details of UPL Corp. Mike?

Yes. Thank you, Bikash, and hello, everyone, and welcome to our first quarter earnings call. Before we review the quarter, I'd like to start by providing some color on the global crop protection market. We continue to see strong Ag chem demand at the farm gate level despite low commodity prices for row crops. Farmer margins are under pressure in most markets, and this is creating more demand on the post-patent side of our business. The financial health of our dealers and retailers is generally steady with the exception of parts of Brazil, where a few retailers continue to have liquidity challenges. As we have previously indicated, channel inventory levels for UPL stock have returned to normal levels, and we are seeing restocking occur as expected and positively to meet growing demand. As a positive indicator, we currently have a stronger order book compared to this time last year. So turning to our Q1 performance; in the first quarter, we posted slightly lower revenue compared to a similar period last year. However, our contribution margin and EBITDA growth showcases our resilience of our business model and the value of the productivity initiatives that we've implemented. While our Q1 revenue was down by approximately 3%, I'm pleased to report a 13% increase in our contribution margin versus Q1 of last year, expanding our margins by almost 500 basis points. We also posted 23% growth in EBITDA compared to Q1 of last year, reflecting a margin expansion of more than 135 basis points. Overall, margin expansion was a result of COGS improvement and higher capacity utilization, a proof point that our efforts focused on supply chain efficiency are paying off. The lower revenue versus last year is primarily due to product phasing, along with pricing pressure in the insecticide segment, specifically in the LatAm region. Other major segments such as fungicides posted both volume and robust revenue growth, led by Mancozeb in Brazil and North America. Herbicides benefited from volume and revenue growth, resulting from strong in-season demand for key products such as Clethodim and Metribuzin in Brazil, Europe and North America. Our insecticides portfolio in the first quarter faced seasonal headwinds due to pricing pressures, particularly in Brazil and some product-phasing closer to use, as I mentioned earlier. Our NPP BioSolutions business benefited from a mix of improved pricing as well as higher volumes led by Europe. Turning to our SG&A. We continue our strong discipline on discretionary spend. However, as mentioned by Bikash, we had a key distributor in Brazil phased their payment plan as part of an extra judicial process, which created a $13 million ECL accrual impacting this quarter's result. This is a noncash impact, and we do expect it to unwind over the recovery period. Let's now review the Q1 performance for our regions. In Latin America, our revenue declined by approximately 12%. As already indicated, Brazil was impacted by pricing pressure on some molecules as well as a shift in phasing of some of our products from Q1 to Q2. We are optimistic that our focus on operational efficiencies through strong execution and adoption of a sell-out model, coupled with our increased customer focus and strong product portfolio, we will see a recovery in Q2 in LatAm with good growth in the second half of the year. In North America, we grew by 6% versus last year. This region continues to experience strong in-season demand for our products with normal to low levels of channel inventories. Our growth was driven by a robust herbicide portfolio with molecules like Metribuzin, Clethodim and [indiscernible] exceeding last year's Q1 sales. We also posted higher revenue from key molecules such as Mancozeb and acephate. Turning to Europe; our [Technical Difficulty] over the previous year. Revenue growth was driven by higher volumes in key herbicides such as flufenacet and supported by fungicides such as Captan as well as growth in Thiopron, which is a biofungicide product that sits within our NPP portfolio. We continue to see high growth, specifically in Germany, Italy, Belgium and Spain. In Africa and Asia-Pacific, we posted commendable growth in markets such as Indonesia, Japan and both Eastern and Western Africa. However, this was offset with headwinds primarily related to pricing in China and a few other markets, resulting in a net 2% lower revenue compared to the same quarter last year. Turning to our outlook for the second quarter and the full year. We remain confident in our growth targets for FY '26. And as we indicated in our Capital Markets Day presentation in May, the growth this year will be weighted towards the second half of the year. From an SG&A perspective, we are continually leveraging tools and technology to transform how we operate across all functions, improving our operating model and driving efficiency throughout the enterprise. Our focus on cash generation continues, and we are optimizing our inventories and driving best-in-class working capital management, as you can see in the results. On the Marketing Excellence front, we continue to strengthen our new product pipeline, positioning ourselves firmly to deliver on our commitment of $130 million of new revenue from product launches this year, mostly coming in the second half of the year. In closing, I want to thank our team for their unwavering dedication and our valued channel partners for this year's -- for this quarter's performance. I'm confident that we will achieve robust growth in both revenue and margin as the year progresses. With that, I'll now hand it back to Bikash, who will take you through the performance of our other platforms.

Thank you, Mike. Let me now also provide a quick update on our other three platforms, which are our India Crop Protection business or UPL SAS. Second, Advanta, our seeds platform; and third, our specialty chemicals focused platform, Superform. At UPL SAS, we posted a strong quarter with revenue growing by a robust 13% versus last year, led by a strong 9% growth in volume and supported by 4% improved pricing. This was driven by herbicides and supported by favorable season. Further, our successful new launches such as Centurion EZ and Canora EZ also supported improvement in product mix. Our contribution margin was 32.7%, up by around 450 basis points and led by a favorable mix. This also drove EBITDA margin to 22.3%, an improvement of 540 basis points. Advanta, our seed platform delivered double-digit revenue growth year-on-year, fueled by robust volume expansion of 12%. Key contributors to this growth included corn in India and Thailand as well as grain sorghum and sunflower in Argentina. A strong price increase helped mitigate the impact of higher production costs and lower recoveries in Thailand. Despite overall margin pressure and increased investments for new market entries and product launches, our platform EBITDA rose by 5%. Superform’s growth was primarily driven by higher volume. Our Super Specialty Chemicals or SSC segment grew by a strong 21% versus last year. The platform reported 50 basis point improvement in contribution margin at 24.9%, driving its EBITDA up by a strong 7% versus last year. I would also like to take this opportunity to highlight that our robust financials and business performance have been enabled by our continued focus on the sustainable initiatives and actions. We have strongly delivered on our 5-year ESG commitments for FY '25, helping create long-term stakeholder value. Further, we are now setting up an ambitious target for FY '30 in which we target to reduce water consumption, carbon dioxide and waste generation by 60%. We also remain committed to empower our communities through Institutions of Excellence built over the decades and create sustainable livelihood in rural areas. Whether it is endangered species conservation, forestry initiatives or water savings, we remain committed to protect and uphold our biodiversity. UPL takes pride in its exemplary governance driven by a strong and experienced Board, both at Group level as well as platforms and heavily supplemented by a passionate and experienced global leadership team. I'm also pleased to share that this is reflected in creating a highly motivated and productive workforce as evident from our superior engagement score well above the industry benchmark. Our strong practices have also led to several international accolades, including global accredition by FTSE and DJSI and other awards and recognition. To summarize, Q1 has been a positive quarter with broad-based improvement in the overall quality of earnings. On the P&L front, our revenue grew by 2%, a strong contribution margin at over 43% and improvement by 390 basis points, double-digit EBITDA growth with margin improvement of 150 basis points and lower interest expense and exceptional costs led reported profit after tax and monetary interest improvement of around INR 300 crores. Similarly, on the balance sheet, our working capital days improved by 35 from 121 days to 86 days with a reduction of INR 3,300 crores. Improved net debt with a reduction of over $800 million post redemption of perpetual bonds in May 2025, amounting to $400 million. To conclude, we remain cautiously optimistic on Q2 and for the rest of the year, which we broadly expect to be margin accretion led growth. We maintain FY '26 guidance, as already shared during our Capital Markets Day earlier this year at 4% to 8% growth in revenue and 10% to 14% EBITDA growth versus last year. Finally, I would like to thank our team for their efforts and our valuable stakeholders around the world for their trust and support. I'm confident on delivering our financial commitments in FY '26. Thank you, and I look forward to your questions. With this, we are now open for Q&A.

[Operator Instructions] First question is from the line of Saurabh Jain from HSBC.

Good performance, I would say, in most of your businesses. I have a few questions relating to the recent industry developments. The first thing, we -- recently, China has kind of looking -- been looking to introduce certain measures in terms of trying to support the chemical prices wherein they wish to kind of take some old capacity out of the system. Given that you also have a fair presence in China, what would be your take on the situation? How these measures you see, can they create a meaningful impact on the pricing? And any views over there would be helpful.

Yeah. Hello Saurabh, thank you for the question. It's Mike here. Look, as we are continuing to experience from China, I would say overcapacity continues. And the pricing that we've seen over the last 18 months is also quite similar. There's a few products where we're starting to see, I would say, some green shoots where either there's been some reduction in capacity or some consolidation. And so we are seeing a few products where prices are starting to increase. But generally speaking, at this point in time, we're not seeing a significant movement in pricing. Our base plan this year assumes that pricing remains consistent out of China. Obviously, if there is further actions, that would be upside to our business case. As you can see from the growth in our contribution margins, we are very competitive with our manufacturing capability to compete even at these low prices. And if there is any improvement going forward, that will be constructive to our margins.

Can you share some more details over here, which products you are noticing price increase? And if possible, have you taken any price increase in any of your key molecules in China or globally?

Yeah. I would say there's a couple of key molecules in our portfolio where we've seen some increase in price. One would be Clethodim, another one would be Mancozeb, where we are starting to see some prices increase out of China, which is giving us the opportunity to also review our prices in the marketplace around the world, which we are doing. So those would be a couple of examples that are important to our portfolio. Maybe the third one would be s-metolachlor, which is also a significant product for us. We're also seeing prices out of China start to increase in s-metolachlor. So those would be a couple of examples of where we're seeing, again, somewhat I would call green shoots what we're seeing from China.

Okay. So the price increases, is it already a part of your 1Q results or it has been more of a decent action, which will be reflected in 2Q?

Yeah. I would say a little bit of both. Obviously, Q1 for our Global Crop Protection is a small quarter. It only represents about 15% or 16% of our full year. So that is one aspect to consider. I would say throughout Q1, specifically with s-metolachlor and with Mancozeb, the prices have strengthened as we've gone through Q1. So I would say the opportunity on pricing is presenting itself as we go through the rest of the year more so than Q1.

Understood. My second question is regarding your seed business. So the last transaction, the Advanta transaction, we had raised about $100 million, which was supposed to be funding the future growth of Advanta. So keeping that in mind and also thinking about some of the recent news reports wherein one of the global Ag major Nufarm, they have explicitly highlighted they are looking to divest their seed businesses, which is valued as Nuseeds. So can you give some color because there was some chatter that UPL has shown interest in terms of looking to acquire the seed business of Nufarm. So any clarity on that side will be very helpful.

Bhupen, would you want to answer that question?

Yeah, sure. Thank you so much. Thank you for the question. We also heard the same -- the checker on the media. Advanta, very similar to our parent UPL continues to explore inorganic options as part of our core strategy. You are very much aware about it. Hence, we diligently scout for assets that are great fit for our portfolio and the routine part of our business. Now that you mentioned it, Nuseed is an interesting asset given its geographic spread and portfolio offering. Moreover, it also fits well with Advanta in terms of revenue and cost synergies. However, there is a significant litigation ongoing between two companies, which centers around the enforcement of the license agreement and some critical intellectual property. Advanta remains committed to protecting its IP and commercial rights and are pursuing all necessary legal avenues to protect its asset. The matter is ultimately set for trial scheduled for next year in Federal Court of Australia. Lastly, since the matter is currently sub judice, we are restricted in terms of sharing our further information in this regard. What we can confirm is that we are.

Sorry to interrupt, sir, your voice is not coming. You are not audible, sir. We have lost the collection for Bhupen, sir.

Bikash, can you just provide some color to that as Bhupen was mentioning. Could you just conclude that as well, your thoughts?

Sure, Anurag. As Bhupen was saying that the matter is ultimately set for trial, which is scheduled for next year in the Federal Court of Australia. Since the matter is currently sub judice, we are restricted in terms of sharing any further information in this regard. What we can confirm is that we are unable to explore this specific opportunity until the litigation is finalized. Over to you Anurag.

So I had a follow-up over here. So what is the future growth track of Advanta? How we should see this business growing? And USD 100 million, where you see an appropriate use of that money?

Bhupen, are you there?

No, sir, his line is not connected.

No problem. I'll take it later then.

Next question is from the line of Aditya Jhawar from Investec.

Just wanted some sense on the recent tariff announcement that how is UPL positioned from exporting from India to the U.S. market, which are the categories of our product, which would be exempted and for which category, what percentage of revenue would be impacted? And how is our competition placed, whether in China or in the domestic U.S. manufacturing on specifically on those products where we are exposed to tariffs?

Mike, could you answer that, please?

Yeah. Sure. So firstly, I would say, obviously, this is pretty fresh news, the 25% tariff. If you go back to April timeframe, the original announcement was 26% tariffs on India. And so this was definitely part of our planning scenario. I would say, firstly and most importantly, we don't expect it to have a material impact on our business, either positive or negative. We continue to have a -- at this point in time a beneficial comparative tariff rate versus the Chinese competitors and producers at 25% in India versus roughly 55% from China. The other thing to take into consideration, as you mentioned, is.

The line for Mr. Mike got disconnected.

Bikash, I think Mike got disconnected. Could you share your thoughts on this, please?

Yeah. So what I think Mike explained before he got disconnected was that last year, the duty differential was 25% between China and India. And after the new duty announcement, the duty differential is 30%. So we feel we are better off compared to the last year. However, as an organization, we always anticipated and planned for this scenario. And therefore, this recent announcement doesn't change our financial outcome expectations for this year. For our [ domestic ] market, the new crop year prices will be announced in the coming weeks. And this tariff will be a consideration in our pricing decision.

Yeah. So Bikash just -- but what percentage of our portfolio of North America is exposed to tariffs? And is there competition outside China where possibly there is a lower tariff, whether if it's Vietnam or the domestic supply?

So I think our exposure will be less than 10%.

Outside North America.

Yeah. Total North America if you look at our turnover is between $600 million to $700 million. And out of that, what is getting exposed to this tariff will be less than 10%.

Fair enough and take the follow-up offline. Second question is on impairment on Brazil. So we have taken an impairment of about INR 112 crores in this quarter. So looking into the subsequent quarters, how is the situation? Are we -- should we anticipate more impairment that could potentially come in the subsequent quarter as well?

So as -- I have spoke during my initial briefing that this impairment was a noncash transaction, and this will get reversed over the recovery horizon. There was a restructuring that was done for a distributor in Brazil and where many lenders and major suppliers, including UPL were involved and they supported. And UPL remains the preferred partner for this distributor. Various actions have been planned to recover the outstanding amount. There are some discussions and some agreements we have agreed into with this distributor, which we will not be able to share as it is very commercially sensitive information. But what we can tell you is that our exposure compared to what it was earlier have reduced. Only from the accounting perspective and accounting standard perspective, we had to recognize this. But overall, our net credit exposure have reduced. We have taken this impact and accounting noncash impact, but we feel that over the period of recovery, this entire amount will get reversed.

And maybe Bikash, if I can just add another comment on top of that, just with respect to any other issues. Firstly, from a concentration standpoint, there's not a significant concentration of customers. So -- and when we look at our -- the financial strength of the rest of our customers in Brazil, we wouldn't anticipate any further ECL issues as we go throughout the rest of this year.

Next question is from the line of Tarang Agrawal from Old Bridge.

Quite a few questions. First on the financials, Bikash, we've been consistently seeing reduction in debt, but it's not translating into a reduction in interest cost. So I understand there are multiple factors. Historically, you used to give us a more granular disclosure. So if you could please comment how should we see the interest cost number moving from here on? And a follow-up on that, if you could just give us some sense on how is your costing when it comes to your payables versus your cost of factoring?

Sure. So as I discussed earlier that we have done the prepayment of our September maturity and the tightening working capital, reducing working capital, that has really actually led to a reduction in the net finance cost. If you just look at the finance cost, which is on the borrowings on the different limits on the working capital and adjusted for the financial income. In dollar terms, our finance cost has gone down by 17% from $89 million during the last year to $74 million during the last year. What do you see that in our published financial that includes some impact of the exchange losses as well. But the right way to look at it would be to just look at the interest cost, excluding the impact from the exchange losses. Interest cost on the borrowings, it has gone down by 17% compared to last year same period.

So Bikash, I mean, because we don't have these disclosures, right, it's difficult for us to probably evaluate what portion of interest cost is on borrowings and what portion is otherwise. So I would request for you to probably disclose this going forward. That will be very helpful. Second, the number is ballpark of about INR 1,000 crores, okay? $74 million translates to roughly INR 650 crores. So what is this balance INR 350 crores?

Yeah. So I said that the net interest cost was $74 million. In INR terms, it's INR 631 crores. In addition to that, we had about exchange loss of INR 271 crores, which is total to INR 1,007 crores, adjusting for the interest income of INR 105 crores.

Got it. Got it. And we've seen a sharp rise in payables and we've seen a reasonable reduction in factoring. So from a financial lens standpoint, which is better? And how do you decide when to increase payables and when to take more factoring?

Sure. thanks for the question and a very pertinent question in the current economic environment. So first, I will talk on the factoring part. So if you look at considering the market volatility like depressed soft commodity prices, geopolitical conflicts, tariff uncertainties and still elevated interest costs, continued credit concerns, we consider factoring to be a strong risk mitigation tool as it is on a nonrecourse basis. We expect our factoring numbers to be in a similar range like last year, subject to seasonality, which should be in the range of, say, $1 billion that we have guided earlier. This particular quarter the securitization number or the factoring number has gone down by $45 million, but it is in line with the seasonality. What happens, the number goes up during Q4. And then from Q4, the reduction starts happening. So once we will get into the Q3 and Q4, you will see that this number will start increasing. And from Q1, the numbers will start going down. So this quarter, you will see on a like-to-like basis, $45 million reduction compared to, say, March, you will see a reduction of about $350 million. That's on the securitization program. The second, I think, again, good question you asked on the payables that how do we look at and what is the pricing that additionally we are paying on the payable front. I mean looking at our strong performance in the last few quarters last year and continued a strong performance in Q1. Now the suppliers are willing to give us much better terms. And the number of days they are giving higher terms as well as the pricing, we are able to get better from them. So I'm not sure that we are getting any additional impact because of the higher payable days. It's more commercial discussions and the comfort of the suppliers on our balance sheet.

Got it. That helps. Mike, in your opening address, you did call out that you're looking at a stronger order book at this time of the year versus the same time last year. Was it specifically for your Latin America business or is pervasive across geographies?

Yeah. Good question. So yeah, primarily, the order book concept is a Latin America concept, specifically in Brazil, where typically, the dealers and retailers at this point in time of the year are negotiating terms for the upcoming season and then placing orders. So that's where we carry a significant order book. And so yeah, it would be geared towards that specific region.

Okay. In Europe, Mike, if I adjust for the currency depreciation because rupee depreciated materially this quarter, the European business in euro terms has been broadly flattish. While I understand Q4 of financial year and Q1 of financial year these are really the March quarter and the June quarter are the bigger quarters. But if I just look at the June quarter in euro terms, it's broadly flat. So how should I look at it? Should I just look at the June quarter or is it more prudent to look at it on those two quarters together?

Yeah. Look, I think as you think about the crop year in Europe, it really is more on the calendar basis that's products are serving the crop year that's currently being grown. Overall, again, we feel good about our performance in Europe this quarter in our Q1. In U.S. dollars, we are up slightly. And as you may know, it's been -- there's been a lot of hot weather across many parts of Europe, impacting a little bit the fungicide business, but our portfolio performed very strong. And so I think on balance, our performance in Europe, both in Q4 of last year and Q1 of this year has been really good.

Sure. Just a couple of more on Advanta. Were there any exceptional spends done this year because the clip from the gross profit to EBITDA has been relatively narrow. So just wanted to get a sense on that. And one on Superform. Just wanted to understand what proportion of Superform revenues are within UPL and what proportion are outside of UPL?

Bhupen, are you there?

Very much here.

Could you take the first question, please?

Sure, sure. So thank you again for your question. I think there are two important elements contributed to this phenomenon. Number one is the cost of procurement of raw seed has gone up. You must have seen in this couple of countries, we have the corn prices are quite robust, the [ non-GM tropical Euro corn ] segment. And second was the recovery from raw corn to the fresh packed one. The recovery also has declined because the time of hype, the harvest, there was some rain in some countries, and that had impacted our yield recovery. So that phenomena is reflected in that difference. Going forward, I think things are likely to be improving significantly in quarter two.

Yeah, Bhupen that gets captured in gross margin, right? But if you see your gross profit increased by 15%, but your EBITDA growth has been about 5%. So to give some numbers, your gross profit increased by about INR 90 crores. EBITDA increased by about INR 12 crores. So there's about INR 78 crores that got spent in between, which is what I was coming to.

These two major elements. Third would be overhead, which if you see that line item there. For the new year, now recruitment has started. So there is third element which comes to my mind.

Okay. So would it be more onetime in nature in your view? I mean, how should we see it? I mean, for the full year, if one were to look at it?

This element which I indicated is onetime in nature because already taken care of in terms of the finished good inventory, which are already ready in our factory. So that's part of it. The overhead part of it, there are two components in terms of the permanent employees and the seasonal employees. Since the permanent employees are part of our capacity building for next 3, 4 quarters, which is a regular activity, which happens in quarter one. But seasonal employees, which are there for the time of harvesting, packaging, et cetera, in the plant, that will now come down. In a month or so, it is -- that element will come down.

Sure. Last one Superform.

Raj, could you please take that question?

Yeah, sure. So on Superform, I think your question was related to how much is the UPL part of the business and how much? So our anchor customer business share as a part of the total business is about 75% and 25% is all super specialty.

Next question is from the line of Siddharth Gadekar from Equirus.

My question is for Ashish first. Yesterday, one of the larger competitors in India have decided to exit the Indian market. Can you throw some color in terms of what kind of opportunities this could open for the Indian market? And how do we see growth going into next year because FMC was one of the largest players in the insecticide markets in India?

May I request Mike? Mike, if you could take that question instead?

Sure. No, happy to. Yeah. So obviously, we read the same information just yesterday. So it's early days. Look, I think there's a couple of ways to think about it. Obviously, it indicates the -- how highly competitive the India market is. And when you look at our results this quarter and over time, it really shows the durability of our business model and our portfolio and our team. So I think that's kind of one takeaway. Specifically, with respect to this asset, like any development in the industry, we'll evaluate, I'd say, purely on its merits. We'll look at our strategic priorities in terms of deleveraging as well as opportunities in terms of asset additions in terms of how it would impact the [Technical Difficulty] for our shareholders. And so I would just say it's so early that we don't have a specific point of view, but it's something, of course, that we're going to look at and see how it unfolds.

Sir, the second question is on the pricing side. We had last -- in the last two, three calls, we had alluded that the pricing decline would start getting restricted in UPL Corp. But going ahead now, how should we see that in the next two, three quarters? Will it entirely be volume growth or we will have some positive pricing impact also going ahead?

Yeah, that's a great question. Look, I think in this quarter, as you saw in our results, we did have a 1% decline in pricing, which is quite modest. Specifically, as we think about growth in Q2 through Q4, we are expecting growth to come almost exclusively from volume. Again, there's going to be some parts of our portfolio where we will see some price and margin expansion, as I talked about earlier. But for the most part, I think on a blended average basis, the price is going to be relatively flat to pricing that we experienced last year.

Just one last question on this quarter in the pricing impact. Was it largely to do with the product mix or we have seen a substantial decline in any of the product pricing?

Yeah. Again, the pricing decline was quite modest at negative 1%. And yeah, when we look at where the pricing was impacted, there was a couple of products in China and the Philippines that had some impact from pricing. But primarily, it was in the insecticide portfolio in Brazil, where there's a couple of categories of products that have gotten a bit more competitive and retailers and dealers are negotiating very hard on those products. And so we did adjust some pricing specifically in our insecticide portfolio in Brazil. We're going to wait to see how that unfolds through the year, but it did have some negative impact in Q1 on us.

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

So if you look at the UPL Corp P&L, your COGS has come down. So how do you explain that? And is that something which is sustainable over the next few quarters?

Yeah, very much so. One of the benefits that we've seen by reducing our inventory and relatively holding as we think about it now, about a 3-month forward look in terms of inventory, we came into the year with really fresh inventories. And our replacement inventory is at a lower cost than the inventory that we came into last year with. So the benefits that we experienced in Q1, we would expect it to carry over through the rest of the year. And so this margin expansion that we saw in Q1 largely on COGS reduction will carry as we go into the rest of the year.

Okay. So in terms of the utilization rate, can you share what is the benefit you've got in terms of the operating leverage on the EBITDA margin? And is that also something that will sustain over the next three quarters this year?

Yeah. So the specific benefit of the COGS improvement in Q1 in U.S. dollars was about $58 million. Approximately $30 million of that was a result of lower cost of goods, again, being new or fresh inventory. The rest of it, approximately $20 million was as a result of utilization rates. Again, if you think about last year, as we really managed our inventory down, we were reducing our production throughout the year, but especially in the first half of the year. And so as we've now started to ramp up our production and our plants back to normal levels, we're seeing the benefit of that come through the income statement.

And now on the housekeeping, if you look at the reversal of the mark-to-market on receivables and payables, that's a positive of INR 93 crores or INR 930 million. So is that something which is sustainable or will it again go back to a negative number? What is the trend there?

Bikash, I'll turn that to you.

Yes, sure. So the FX has 2 components. The first is revaluation of the balance sheet, which is mainly the trade receivables, trade payables that we have to do end of each month, each quarter. The second component is the realized and unrealized losses on all our borrowings or any other loans or intercompany loans that is there. So there are 2 components. From the numbers perspective, what appears in the P&L, it's splitted. Part of it on the balance sheet part, you can see it on the face of the P&L, which is minus INR 93 crores compared to, say, INR 45 crores of last year. And the second component, which is the realized and unrealized losses on the borrowings and the loans which I just briefed earlier, is included in part under finance costs. Almost INR 271 crores is included under finance costs. So if we want to look at it, we have to combine the 2 to understand the net impact. So while the INR 271 crores is included under finance cost, INR 93 crores credit is sitting on a separate line item. So my recommendation would be that we should look at combining the 2 and then looking at it. From an FX policy point of view, we clearly said that we have a very robust FX policy in place and we cover our short-term FX exposure, the working capital exposure regularly through the various structures that we have either foreign exchange covers or NDFs where we are not able to get covers in a country. And the cost of hedging is the cost of doing business in these geographies, which is effectively passed on to the market. So one leg is sitting, say, on the FX. The corresponding leg or the adjustment has to happen through the pricing. But the way that our Indian accounting standard is that we have to look at these 2 separately. From generally a presentation point of view and all that, most of your other organizations will look at it in line with the turnover and the EBITDA that we are making. But just to answer your question, there is a debit balance sitting under finance cost amounting to INR 271 crores and this is going to be always there. So FX impact will always be there. It's not there onetime. It will always be there. We operate in different jurisdictions. Depending upon the jurisdiction, the volatility can be different. So we are, say, present in all the francophone countries in Africa. The euros are -- the local currency [indiscernible] to euro. There is no volatility between the local currency and euro and then euro-dollar will be covered separately. If you go to Europe, again it's a very stable and we do take cover between euro and dollars. And when it comes to some of the emerging markets like LatAm or the Anglophone part of Africa or some of the countries in Southeast Africa. When we say export stocks to those markets, against those inventory, we will have intercompany payable or third-party dollar payable. And when we sell, suppose during this period if the currency has moved from the historical rate to, say, a new rate, that will go to the FX line item. However, as a business, we always look at what is the currency appreciation or depreciation that has happened and that corresponding impact ideally should be passed on to the market through the sales price. There might be a lag and we might not be able to sometimes fully pass on the impact to the market also. But then we will look at it between how we do our pricing decisions and what is the impact coming at the FX line item. Only just looking at the FX line item will not give you a true picture because the corresponding impact is also sitting it through the increased EBITDA line item. And if you just combine the 2 line items of FX cost in this particular quarter, it has slightly gone up compared to the last year from $17 million to $21 million. And this cost has gone up because the cost of borrowing in Brazil has slightly gone up and similarly in some of the other emerging markets, the local borrowing costs have gone up considering the volatility and still higher inflation rate in some of these markets. And this is nothing, but reflecting the local cost of financing. Today when we export our products to those countries, the payables are in dollar. Now we have 2 options, either we continue our exposure in dollar at 6%, 7% dollar rate or we move to the local borrowings rate and different countries will have a different rate. Like say Brazil will have now 15%, 16%. It's always a choice between your interest arbitrage between the dollar rate and the local financing rate and the currency devaluation. In these emerging markets, we don't want to take any exposure and hence, we remain fully hedged. And for remaining fully hedged, we have to pay for the cost of hedging, which is nothing but the interest rate differential between the dollar financing rate and the local financing rate. And then obviously it is a consideration while taking the pricing decisions, which will reflect in the EBITDA. I know it's a complex topic, but probably sometimes we can take it offline and we can discuss it much more in detail.

Sir, the line for the current participant has disconnected. So we'll move to the next participant. The next question is from the line of Abhijit Akella from Kotak Securities.

Just a couple from my side. One is within the cost of goods sold line, it seems like there's been a significant increase in the inventory buildup. It seems to be about INR 2,200 crores. This is footnote #8 I'm looking at. So just what exactly was the thought process there? And then should we expect that the production rate at our plants will actually come down a little bit, slow down a little bit in the next quarter or 2 as we digest this inventory?

Raj, do you want to take that question?

Yes, Mike. So Raj here. So if you look at our business; quarter 1, quarter 2 and part of quarter 3 as well where we have an inventory buildup. And then over December, January, February, March; you'll find that because that's where some of the bigger geography, the seasons are there where everything gets sold. So this is nothing unusual. This is part of normal business. Also, if you look at our capacity utilization perspective, the best capacity utilizations are in quarter 1, quarter 2, quarter 3. And quarter 4, generally depending upon the demand aspect at that point in time, we adjust our plant output in quarter 4. So this is nothing unusual. And we don't have a very large inventory buildup like it used to happen -- I mean it used to be earlier. The forward cover is only about 90 days.

Got it. The second thing was just on the impairment loss item. So INR 192 crores is shown on the face of the P&L. You've described this INR 112 crore item pertaining to the Brazilian distributor. What would the remaining INR 80 crores have been attributable to?

Yes. So $13 million or INR 112 crores we explained, which was for a distributor in Brazil. The remaining is, I would say, broadly similar to what we had last year. We had some ECL provisions in Africa, in LatAm.

Okay. Understood. And just one last thing on the debt balance, is there any guidance that we can sort of hold out? I know last quarter we did not for this year, but any thoughts on that front?

No, Abhijit, clearly I mean last year we had not given any guidance on cash flow and the net debt leverage ratio because we were quite comfortable. A year ago the market was concerned about our liquidity ratios when we exceeded 4x. Last year after all the initiatives, our leverage ratio reduced to 1.7x. So we felt that now we are within the comfortable range and hence, we have not given any specific guidance to the market. But as you look at it now, what we have done, we have repaid the $400 million out of the strong cash position that we had at the beginning of the year. Second, $250 million of September obligation also has been repaid. Additionally, we are getting -- going to get $200 million from rights by end of September. And we continue to drive cash generation from operations supported by our disciplined working capital management. And as it is evident in our Q1 financial results as well, you can clearly see that. So considering these factors for the current year, we are quite comfortable with our cash position and definitely see that our gearings will be at a lower level than last year even after repayment of the perpetual bond. However, as we continue to evaluate various strategic options on unlocking value across platform, our focus would be to significantly deleverage our balance sheet in the next year or 2. So we are clearly focused on further deleveraging while we are comfortable with the levels as of now on a business-as-usual basis. But on the next 1 to 2 years' time, I can say that we are extremely focused on further deleverage our balance sheet and we are evaluating various strategic options. At this point in time, we do not have anything material to share with you. But as and when there is something material, we'll definitely share with you.

Next question is from the line of Nitin Agarwal from DAM Capital.

Sir, just taking off from the point that you mentioned, I just referring back to the press release comments from Mr. Jai Shroff regarding the restructuring the performance you're going to pursue. If you can share some thoughts around what are we -- any thoughts around the options that you're considering on that account?

This is too early. As you would have read it in the press release that we are engaging advisers now and there are various discussions, various options which will be evaluated. So as of now, there is no firm decision on any structures, but the idea of engaging the advisers is to look at unlocking value for all the platforms. And when there is -- again, as I said, there is any material development, we'll let all of you know.

Is there a time frame in your assessment right now by when we have some clarity on this way forward on this account?

It depends upon how the advisers are guiding us and what are the options that we are selecting. The time will depend upon the choices that we make. I think it will be too early for us to comment on this.

Next question is from the line of Somaiah V from Avendus Spark.

Mike, just wanted to understand in terms of the season progress both in U.S. and LatAm, your thoughts on that, how it is kind of progressing? That's one. And second question is on the farm economics. So this has been a bit subdued now almost a year after from '22, '23 coming off. Is it because the produce is so high, the [indiscernible] have been doing well or is it because of demand? What is our expectation maybe 6 months out? Can this reverse a bit? Can farming start getting better, which will help us a bit of a pricing?

Yes. Thank you for the question. So in terms of the Latin America and U.S. crop progress, I would say for the most part, as you would know, in Brazil the crops have been harvested from this year. They had both a strong soybean and a strong corn crop. So from a supply-demand standpoint, there was additional supply, which impacted I think some of the pricing that we're seeing now in the marketplace. In the U.S., again the corn and soybean crop for the most part is looking quite strong and the anticipation is it's going to be a very large corn crop. So what we're seeing right now is the current Chicago Border trade prices on both corn and soybeans and wheat are subdued. It's a little bit of a mixed signal. Ending stocks, I would say, are high in soybeans, but relatively still short from both the corn and wheat. I think this is the lowest stocks-to-use ratio that we've seen in over a decade. That being said, the entire segment right now is looking soft. If we look forward 6 months, we are seeing some strengthening in future prices, but still in a range that I would say would keep growers somewhat cautious in terms of investment and well below the peaks that we saw a few years ago in commodity prices. And so unless there's a real catalyst in the next 6 months, we would expect the current crop prices or the future indications to likely be close to what we're going to be experiencing as the year plays out.

Just 1 follow-up. I think we did mention that there is a bit of a movement from Q1 to Q2 in basal. I mean what would be the reason for the shift from Q1 to Q2?

Yes. Again as we've talked about for us, it's not about destocking. For the most part, our channel partners have the right amount of stock. I would say in Brazil, there's additional negotiating going on specifically in the insect portfolio. Again if you think about the upcoming season, it's the soybean season that's going to get planted in, say, 45 to 60 days. So a lot of the herbicides have been committed. The insecticides that get used a little bit later in the season, they're still being negotiated. Whereas this time last year, there was less, I would say, delay in being able to fill that demand. So that is part of it. I would say that's kind of a market backed perspective. Then the other side of it is just our phasing of when we're shipping some of our inventory into the channel. Again, we've got a strong order book in particular in Brazil. And so we are purposely phasing just to manage our working capital. We're phasing some of the business into Q2. And so that's what gives us a lot of confidence as we look forward to Q2 and beyond where we can see a good growth opportunity in some of these markets that had a little bit of degrowth in Q1 for us, specifically in Latin America.

Next follow-up question is from the line of S. Ramesh from Nirmal Bang Equities.

So if you look at your segment numbers across the various platforms, the EBITDA adds up to a number which is lower than the consolidated EBITDA of [ INR 1,308 crores ]. I get a number of INR 1,238 crores versus the consolidated reported EBITDA of INR 1,303 crores. So if you can reconcile that, that will be useful so that when somebody wants to do a valuation across the verticals, it helps them. And secondly, if you look at your segment numbers, there is a nonaccrued revenue of INR 639 crores. Is that part of the external business that you do in Superform? What exactly is that?

Yes. So yes, it's Superform. Coming back to your first question on reconciling the EBITDA number. You would have noticed that in the press release and other documents also, we have tried to reconcile that and whatever the other part is there or the corporate eliminations are there, we have clearly called out and reconciled with the final turnover for the group plus each platform. Second, in terms of the EBITDA if you look at it, we gave the EBITDA number for the 4 pure-play platforms. However, in addition to the 4 pure-play platforms, we also have other businesses. One is like, say, UPL Limited as a stand-alone company, which also have some plants. So there are certain EBITDA number that is booked under UPL Limited. We have a Decco business, which is a post-harvest business. So those numbers are also consolidated. But since the focus was more on the 4 pure-play platforms, we have included that and we have called out. And the others numbers adjusting for any corporate eliminations are any which way included in the group numbers.

Okay. So that INR 65 crore difference is mainly coming from the UPL stand-alone, right?

UPL stand-alone, yes, which includes UPL stand-alone plus other businesses which is under UPL, like, say, majority of that is you can say Decco business, which is also included under others.

Yes. So 1 last thought on the deferred tax credit, you've been showing that for some time now. So how much of deferred tax credit you have still left with you for the next few quarters and when does that end?

No, it's not like that it will end. It will be regular like there will be new DTAs which will get created. There will be deferred tax liability DTAs, which will get unwound. So this will be regular. So we cannot say that this balance will become 0. This balance -- the old balances will be cleared, the new balances will come up, but these balances will never be 0. Just to call out the big DTAs or adjusting for DTAs that we have compared to last year, these numbers have gone down for Brazil, it has gone down for U.S.A. So for the key reasons where we have these balances, the numbers have gone down. And another difference that can come up, I think we need to understand from the accounting aspect that if the inventory is more, if our business growth is more on the inventory, which is, say, due to the -- or because of the intercompany, the unrealized margins are eliminated. So when those unrealized margins are eliminated, that time you also create a deferred tax in the books, which will get again unwind when you sell the inventory, right? So some of these balances while accounting-wise it come, but it's not really impact commercially. But we can have a separate conversation on this and take you through. And in Q4, our inventory balance was significantly higher by almost INR 4,000 crores compared to, say, March. And because of the higher inventory balance, there is about INR 120 crores of DTA that got created largely due to the unrealized margins on the additional inventory balance.

So what would be the effective tax rate when you start generating more, moving towards more profitable operations?

Yes. So the effective tax rate for the group, if you look at it, there are multiple factors. And first is the geographical mix. There are geographies where we will have 0 to low single-digit tax rate. There are geographies where will be tax rate ranging up to, say, 40% as well. So it's the geographical mix that we have to look at it. And each quarter or each year, this mix can slightly change. And hence, our -- the profit and the effective tax rate can change from that perspective. But our always guidance to the market is, I would say, on a sustainable basis between 15% to 17% for the group. When you are modeling it, you do consider between 15% to 17% for the group. But these numbers can change I mean quarter-on-quarter, but we have to look at it as 15% to 17% if there are no anomalies in the market.

I think we had all the participants had to ask their questions. I think they have asked it. So thank you very much. And on behalf of UPL Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you.

Thank you, everyone.

Thank you, sir.