Ladies and gentlemen, good day and welcome to the Q2 FY 2023 earnings conference call of Rallis India Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin D'Sa from CDR India. Thank you, and over to you, sir. Thank you. Good day, everyone, and thank you for joining us on Rallis India Limited's Q2 FY 2023 earnings conference call. We have with us today Mr. Sanjiv Lal, Managing Director and Chief Executive Officer, Mr. S. Nagarajan, Chief Operating Officer, and Ms. Subhra Gourisaria, Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the result presentation shared with you earlier. I now invite Mr. Lal to begin proceedings of the call. Over to you, Sanjiv. Thanks, Gavin. Good morning, everyone. I have along with me, Mr. S. Nagarajan, our Chief Operating Officer, and Ms. Subhra Gourisaria, our Chief Financial Officer. We will start with a brief overview of the industry before I move to Rallis specific developments. On an industry level, Q2 was a challenging period for the domestic business as adverse monsoon patterns impacted trade and on-ground activities. The effect of the monsoon is well publicized, but just to recap. While the overall monsoon during the season remained 7% in excess of normal compared to the 1% deficit of the previous year, distribution remained erratic, with 13 subdivisions experiencing excess rainfall, 17 subdivisions receiving normal, and 6 subdivisions remaining deficit. Delayed monsoon and erratic distribution impacted sowing, which was 1% lower compared to the previous year. Sowing activities, notably rice, was down 4% year-on-year. Pulses was down 6%. Oilseeds down by 2%. While coarse cereals was up by 5% and cotton sowing was higher by about 6%. Despite uneven distribution during the monsoon season, water storage levels across reservoirs stood at a healthy level. Higher reservoir levels, coupled with good soil moisture, augurs well for a successful kharif season. As far as international business is concerned, the industry has had a good performance till now. Moving on to Rallis specific developments. Starting with our headline numbers. We reported a revenue growth of 31% over the previous year, driven largely by our international business. Performance of domestic business, as mentioned earlier, was mainly impacted by monsoon vagaries, which has led to lower sowing activities, in turn leading to a lower volume growth. EBITDA for the quarter stood at INR 118 crores, leading to a margin of 12.4%. Margins has improved versus last year due to the higher growth. PBT margins are lower with respect to last year driven by higher depreciation and lower investment and other income. While we did undertake calibrated price hikes during the quarter, the overall quantum wasn't commensurate with the higher input prices leading to lower profitability, specifically in our international business. On the domestic front, we were able to maintain our margins through a focus on mix and pricing. Profit for the quarter stood at INR 71 crore against INR 56 crore during the corresponding period last year. Moving on to individual businesses, starting with domestic. As indicated, the overall environment has been challenging for the industry as erratic monsoons, lower pesticide sprays due to excess rains, and somewhat low pest infestation across some regions impacted overall volume growth for the business. Key paddy growing states in Eastern India, UP, Bihar, Jharkhand, and West Bengal received deficit rains, leading to a decline in sown area. In addition to paddy, we also had instances of cotton crop getting damaged in key states, including Maharashtra, Gujarat, and Telangana as well due to excess rains. While herbicides continued to perform well, especially in North India, sales of insecticides and fungicides remained muted. Some of our herbicides like Tata Panida, Pepe, Oncho and RICEUP, though have registered double-digit growth. In terms of our initiatives towards introducing newer products, we have so far introduced two 9(3) products and four 9(4) products during the year. These products are largely directed towards scaling up our presence in cotton and paddy. Furthermore, we are also working towards expanding our distribution network and also working closely with the e-com channels. Moving on to the seeds business. While the overall environment remained challenging, I am pleased to report that some of our newer launches, particularly Diggaz, our cotton hybrid, has seen a sharp pickup in volumes on a year-on-year basis. While the overall numbers is small, 1.7 lakh packets we sold versus 20,000 packets in the previous year. Another positive development is regulatory approval from two states for biosafety research level trial related with two of our genetically modified events in cotton and maize. Both these are herbicide tolerant as well as insect resistant. Furthermore, we have started trials on maize in Karnataka and hopeful of commencing trials on cotton in the subsequent Kharif season next year. As far as international business is concerned, we have seen a sharp growth in business with volumes improving. Utilization rates for Pendimethalin, toxaphene, methyl acetate remain elevated, underscoring the key demand for these products. Metribuzin sales has started showing early signs of pickup following normalization of inventory. Also, as indicated in earlier calls, we continue to focus on growing branded formulation sales in Southeast Asia and Africa. We have submitted several applications for dossier registration in Asia, and are also engaging in business development discussions in U.S. and Turkey. In terms of contract manufacturing segment, we expect TKK shipments to commence from Q4 after a gap of two years. The two recently won CM contracts, contract manufacturing business opportunities, which in a way reflects our commitment towards reviving and growing contract manufacturing business, which will take two to three years to reach meaningful scale. As indicated in previous calls, we are also working towards reducing our dependence on China for meeting raw materials for some of our products, and I am happy to report that we have made good progress in that area. We are now sourcing 100% of our requirement of two of our products locally, though these are relatively smaller imports. Also, for two of our more important intermediates, for one, we are now sourcing 20% of the requirements locally and targeting sourcing 80% of the other intermediate locally by year-end. These two intermediates we used to import 100% earlier. We have entered a long-term understanding with the suppliers for one of these products, and while the commercials may be on par with the import costs, uncertainty over availability of raw material will cease, which will help us better plan our production cycle and meet customer demand. To conclude, we expect the business to pick up pace in the second half of the fiscal. Higher reservoir levels should aid Rabi season and remunerative global agri commodity prices should aid the international business. As far as Rallis is concerned, we believe commissioning of new capacities, introduction of new products and wider distribution reach positions us well to meet the requirements of our customers both locally and globally. With that, I'll now request Subhra to give us the detailed financials. Over to you, Subhra. Thank you, Sanjiv. Good morning, everyone, and thank you for joining us today for our Q2 earnings call. Let me quickly walk you through our financial performance for the quarter, after which we shall commence the Q&A session. Starting with the top line, our revenues for the quarter stood at INR 951 crores as against INR 728 crores generated during Q2 FY 2022, which is a growth of 31%. The growth was largely driven by the strong performance of our crop care business. Domestic business registered revenue of INR 608 crores, higher by 18.2%, primarily due to the price hikes undertaken earlier during the year. Volumes during the quarter were largely benign as far as domestic business was concerned, as erratic monsoon resulted in lower acreage. International business reported a growth of 67.4%, led by both volume and value. Seeds business generated revenue was, INR 28 crore during the quarter. EBITDA for the quarter stood at INR 118 crore as against INR 88 crore generated during corresponding period last year. Margins stood at 12.4% as against 12.1%, higher by 30 basis, largely on expected lines, since the quantum of price increase wasn't commensurate with increase in raw material prices. Profit for the quarter stood at INR 71 crore as against INR 56 crore for Q2 FY 2022, higher by 26%. Moving on to the business-wise performance. Domestic business operated under a challenging environment. Uneven monsoon distribution impacted sowing activities for key crops during the season, primarily paddy and cotton. Paddy constitutes a significant component in our portfolio, and hence the overall lower sowing could have impacted our portfolio more than some of our peers. While herbicides continue to perform well for us, sales of insecticides and fungicides were lower than our expectations. The growth in domestic business as such is largely value-driven, as we have carried forward pricing taken earlier during the year to offset the higher input costs. Despite external challenges, we continue to make steady progress in our attempts towards introducing new products, both 9(3) and 9(4), and expect the momentum to continue during the year. Furthermore, these products are targeted towards plugging the segment gaps in our portfolio. Moving on to the seeds business. While Q2 is the seasonally small quarter for the business, we have seen revenue was INR 28 crore for the quarter. Overall business environment continues to remain challenging for the seeds business, though some of our newly launched products have done well. We have seen significant pickup in sales volume for Diggaz over last year. Our strategy for the business, as we mentioned in the previous calls, continues to be focused on liquidation, cost optimization, and more robust evaluation of new product pipeline advancements. We also accounted for higher provisions on inventory in seeds, adding up to INR 25 crore during the first half of the year. We may see more of such effects coming during the course of the year as we streamline the operations and recognize such provisions so that the business can become more focused on new portfolio going forward. As far as international business is concerned, we've seen a good growth of 67.4% during this quarter, driven by volume and value both. We continue to see good demand for our products, with plant utilization rates for most of them being at optimum levels. Sales of Metribuzin as well has started to improve gradually. Going forward, growth could be largely volume driven as realizations may trend lower with raw material prices cooling off. Our strategy for this segment, as we have indicated, involves increasing our customer set and sales to formulation, which will help us share both volume and margin in the business. Lastly, we started sourcing raw materials for some of our products locally, which not only helps us in lowering our dependence on China, but also helps prepare better plan and production and inventory purchases. As you might have seen, we have experienced challenges on working capital front, especially with increase in receivables for domestic formulation business. Given the overall challenge of delay in monsoon and poor cash flow in the market, our collection days have gone up. However, we do not foresee any risk here, and we continue to focus on our efforts to improve it in Q3. Receivables have also been impacted by our decision to stop the discounting for one of our key international customers. Inventory has indeed been controlled. Several actions, including optimizing production to resist dynamic sales requirements, reduction of lead time across key materials, and also lower impact of prices sitting in the inventory now. To meet the entering cash needs, we used short-term borrowing. However, with the release of cash from operations, we expect the cash flow situation to gradually improve. A quick word on CapEx before I hand it over to the operator. As indicated in the previous call, our overall CapEx for the year should be INR 250 crores, of which we have spent around INR 100 crores during the first half. To conclude, I would like to reiterate that we are taking requisite steps towards growing both our business, domestic and international. New product launches, local scaling of raw materials, scaling up of capacities and wider distribution reach positions us well to grow our business and improve overall profitability going forward. That concludes the opening remarks. We can now commence the Q&A session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to limit their questions up to two per participant and use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prashant Biyani from Elara Capital. Please go ahead. Yeah, thanks for the opportunity. Can you bifurcate top line growth between volume and value? Subhra, can you just help with that number, please? Sure. Prashant, you can go ahead. I'll just pull that data. As we said, international business is largely split between both volume and value, international business growth. Domestic business, it was more price led, with volume being in low single digits. For the Rabi season, cost-wise, do we have high cost inventory vis-à-vis prevailing prices or we would be competitive enough vis-à-vis the current prices? Because prices have been trading downwards in China, so traders might have an upper hand if there's high cost inventory. Yes. More or less, we have tried to work down our high-cost inventory, Prashant. I think we are in a much better position today than what we were maybe three months back because we have had to take some margin, lower margins, especially for liquidating some of the high-cost inventory that we were holding. Okay. Just a related question. Other costs are broadly under control for us, but on the gross margin, by when do you think we can turn the tide? Because for the last three, four consecutive quarters, we have seen a reduction in gross margin. S. Nagarajan, would you like to take that? I think we have to disaggregate our business into two parts: crop care and seeds. Within crop care, I would say if you look at domestic and international, again, disaggregatively, if you look at it on the international front, we have had challenges in Q2 and also in H1, partly contributed by the high costs that we had some inventories in our hand, and of course, contributed also by the competitive position in our markets, where the price levels we could not kind of transfer the raw material cost increase. The impact of the high cost inventory, like what was mentioned, we have whittled down that inventory. That effect is something which is now behind us. However, of course, in terms of the forward market, the competitiveness could continue in the international business. If you look at the domestic business, I think domestic crop care business, I would say that while we have not been able to fully pass the costs forward, the costs themselves are abating right now, so that is actually a little bit more positive situation. Now, separate from the crop care business is the seeds business. In the seed business, certainly I think we have some distance to go. As was mentioned, we are in the process of optimizing our expenses, so that we are able to improve the profitability. We are also recognizing some of the inventory provisions and so that also has an impact in terms of the margin levels. These are the broad drivers and these are the areas we are focused on. Specifically in terms of how long it might take, it's a little bit hard to say. I think I would say that domestic is little ahead, international is following, and then the seeds is behind in terms of the trajectory of improvement. Prashant Biyani, the other thing which impacts us when the price hikes, when the raw material hikes are high, your percentage margin will always come under pressure because your pricing goes and sits in the denominators. In terms of percentage, it will always look a bit slow compared to the earlier quarters. Sure. Lastly, ma'am, internationally, in which geographies are we seeing pricing pressure? There's certainly some pricing pressure which we are seeing in Brazil. Otherwise, I think for most of the international business it has been, I would say, a very good year if you see results and performance of many of the international companies. There has been pricing pressure for us at least in Brazil. Okay. Thank you, sir. Thank you for your time. Thank you. The next question is from the line of Aditya Jhawar from Investec Capital. Please go ahead. Yeah, thanks for the opportunity. Congratulations on the good set of numbers. My question is again on the margin front. Now, specifically if you can shed some light in the sense of few parameters. When you look at raw material pricing, there is an expectation of freight cost reduction. You mentioned that the high-cost inventory overhang is no longer there. What could be the impact of expected pricing? You know, that is one. Second, on the same margin front, you know, in the export business, there is a big currency depreciation as well. The pressure that we have seen is over and above the positive impact of currency depreciation or the currency depreciation impact is yet to come into our numbers. The first question is on margins. Yeah. Madhavi, let's take the first round margin, and Subhra, you can take the question on Forex then. Yes. Margin, yes, Aditya, the high-cost inventory is pretty much behind us. I think in terms of the margin pressures for us, we would say it is in specific pockets where we also have pricing challenges. As you would appreciate, the combination of the products that we sell and the markets where we sell, that is really the combination that can determine you know the level of pricing flexibility that we could have. As was already mentioned, in Brazil, we do find pricing pressures for the product that we sell. We are also finding pricing pressures in the Southeast Asian market for another product that we sell, and these are large products from our point of view, and therefore the margin pressures are continuing there. However, for the products that we sell in the U.S. market as well as for the products in the European market, we have had much less. In fact, I mean, U.S. has been pretty, we've been actually having much better pricing flexibility there. Europe is following that. That is really the situation. The improvement will also depend, apart from our cost, freight costs and other things which you are right in pointing out, they are all improving. It'll also depend on the prices that we are able to charge in the market. That is really the variable that's a little bit hard to predict. I wonder if that gives you some background to how we are thinking about it. Yeah, absolutely. You know, sir, one thing to add on that, do you know, expect that situation to start improving from this quarter and, you know, in second half of the year and going into the next few quarters into the next financial year? You know, are we seeing that, you know, the margin trajectory should improve, and this is a kind of a bottomed out margin for us? That is a little bit hard to say because there are two confounding variables at least. Maybe there are many more. One is of course that the commodity prices are still continuing to be pretty high, even in these markets, right? I think, so to that extent you would expect the crop economics to be quite favorable. However, as you correctly pointed out, there is the broader context of inflation, the broader context of these things playing through into the agrochemical market space itself. So as you know, some currencies have in fact depreciated far more than the Indian currency. That makes it that much more difficult in terms of affordability of the farmers in those countries. That actually feeds back through as pricing pressures to even suppliers. That piece is a little bit hard to say. We are hopeful that in some pockets where things have not been good from a weather point of view, right? You've had droughts, for example, in Europe. We are hopeful that that is something that will change. These are two or three of the things that influence the pick-up rate in that trajectory. Shubhra, you want to just cover the Forex point? Yeah. Yeah. Most of our purchases and even the exports, imports and exports are actually denominated in U.S. $. As a company, we are net exporters, so our export size is much larger than the book size. In fact, the currency depreciation, if you ask me, works better for us, especially because we are a net exporter as a company. As far as financial management is concerned, we have a policy signed off by the board of covering all imports and exports, so we're fully covered in terms of the currency exposure. As there is no further impact which is expected in the subsequent quarter. As Nagarajan rightly pointed out, if rupee continues to be holding much more steady versus other currencies versus dollar, there could be that impact which we might see in terms of export growth. That's the only variable there. Otherwise, since our exposure to other currencies is almost negligible, we do not have except for dollars is almost negligible. We don't foresee any big concern there. It was more that the benefit of currency depreciation. I'm sorry to interrupt you, Mr. Jhawar. May we request you to please rejoin the queue? Sure. Thank you. The next question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Hi, good afternoon. I have a couple of questions. One, first on the seeds business. You know, you spoke in your opening comments about some newer idea of cotton seed where versus 20,000 packets you've sold 1.7 lakh packets. Did I hear it correctly? If so, was it a like-for-like comparison versus the full period of last year and this year? No, you heard it correctly, Mr. Agarwal. It is one of our newer hybrids. This has actually performed very well. We believe that the sentiment in the market for this particular hybrid is also extremely positive, which is encouraging us for scaling it up. We will be scaling it up gradually, not dramatically. We are looking at doubling our sales in the next Kharif. This is again a Kharif cultivation, whatever we had to do for the year is done. Got it. You know, overall on your seeds business, I mean, looking at the performance for H1 since H1 FY 2020, the business has lagged quite a lot. If I recall in Q2 of FY 2022, there was some indication about a strategic rethink on the business. If you could give us some sense on what's happening and, you know, what are the challenges that you're seeing on ground, except the obvious that paddy sowing this half year was lower, and it's the biggest proportion of your overall seeds business. Yeah. In fact, you know, some of our hybrids, which have been doing very well, they seem to be losing favor. Our replacement products have been coming into the market, but they are yet to scale. That is one issue that we are dealing with. The other issue is related with our vegetable seeds business, which has not been performing in the manner that we had expected, despite forming a separate line of business with a separate focus on that. This is also being reviewed, and we will be scaling back on this specific line of business and merging it with our field crop business. These are some of the decisions that we will be operationalizing during the course of the year. Okay. On balance sheet, you know, if you could explain why have debt. I mean, you did allude to the cash cycle in the domestic market was poor, so that led to the debt and expansion. If you could just give us some more details in terms of, you know, your debtor days, say on 30th September 2021 in the domestic business versus what it is today. Because it seems quite a lot. What is happening on the ground which has led to, and if I were to sort of juxtapose it with the fact that your overall crop protection business has only grown 8%, and that too largely pricing led, in an environment where cost push has been significant on the raw material front. If I just combine those two factors, the on-ground situation seems extremely difficult. Just give us some more nuances. It'll be better for us to be able to, you know, understand what's actually happening on the ground insofar as the domestic business is concerned. Do you want to go? Yeah, go ahead. On the domestic front, there is certainly an increase in terms of outstandings compared to last year. That is certainly more than a proportionate increase, which you would expect based on the sales increase. There are certainly pockets in the market where we are finding stress in terms of collections. That is right. However, like it was mentioned in the opening remarks, we think that it is not something which is bound to create a risk from our point of view. We do expect to collect this. There is an elongation of the collection cycle, and that has been contributed by multiple factors. As you know, one, of course, is in terms of the eastern part of the country, there has been a reduction in terms of rainfall to the deficit rainfall. Liquidation has got hampered there. Unfortunately, some parts of the western side of the country have also got impacted because of excessive rainfall and therefore leading to skipping of sprays. At one level, there is a pressure that is coming from the liquidation, let us put it this way, liquidation that is hampered. Secondly, even from our own approach, we had moderated some of our payment incentives in the beginning of the year, which of course we have since improved upon. To that extent, we also feel some of that may have also played a part. Having said this, we think that this is something that should revive Rabi, we are still hopeful of, and some of these elongated cycle on the receivable days should settle down. This is our impression. With respect to your question on the overall balance sheet, I think it's a combination of domestic as well as exports. The receivables there is a combination of both. There, like it was again mentioned in the opening remarks, compared to last year, we had decided to not discount the receivables from one of the international customers, and that is a sizable effect also. I think these two factors broadly cover the overall receivables. Yeah. The only one last one is also international customers, the mix of the customers. Because the customers with varying credit periods, and given that international customers in export sales was relatively high in the Q2, that also plays in terms of the amount which is sitting on the balance sheet as on 30th September. But international customers, there's no overdue at this stage, just to mention. No, pardon me hopping on those. Thank you, Mr. Agrawal. Hello. May I request you to please rejoin the queue? Sure. We have participants waiting for their turn. Thank you. Participants, in order to ensure that the management is able to address questions from all participants, please limit your questions to two. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead. Hello. Good morning, and thank you very much. My first thought is now again going back to the increase in debt and the receivables. And if you're saying that some of it is because of the varying credit period in the international business which has been growing. If the international business continues to grow at this pace, which seems to be the you know trajectory you are likely to achieve, when do you think that you'll be able to bring the receivables under control and bring down your gross and net debt? Can you give us some sense of what you're doing with respect to bringing it under control? First and foremost, we're going to look at working capital overall because there'll be some production. Inventory will also be optimized. But overall, what we said is in quarter three, we'll be focusing more on receivables reduction and also looking at how do you optimize the overall inventory levels. Coming back to debt, we did have some interim debt, as I said, during the quarter. There might be requirement of more interim debt during the course of the quarter, but we expect the cash flow from operations to gradually improve towards the end of the year. What is the kind of debt you expect, say, by the end of the year compared to what you reported for September? I don't think it will be a significant increase. Maybe a 50 crores increase, maybe further there, INR 50 crores-INR 100 crores. Okay. Sanjiv Lal, one last thought. In terms of your CapEx, when do you see the capitalization of these assets, adding to your top line and EBITDA? Can you give us some sense in terms of the timeline? We expect this to start you know kicking in from next financial year. We'll be commissioning our new MPP plant this year towards Q4. We expect the revenue streams to start from FY 2024, S. Ramesh. Thank you, Sanjiv. Thank you, Subhra. All the best. Thank you. The next question is from the line of Viraj Kacharia from Securities Investment Management. Please go ahead. Yeah. Hi. Thank you for the opportunity. Just have two questions. First is on the international business. You know, you alluded that in some regions you kind of face pricing pressure. In some regions, we've actually seen a good healthy growth in volumes and prices are sustainable. So, you know, if you kind of you know also talk a little bit more in detail in terms of what are those molecules on those reasons why you're kind of seeing a pressure and similarly for U.S. or Europe, you know, what we understand, you know, from the community of the global platform leaders also is you know, you've seen a very drought type of situation in those markets as well. That's also led to a lot of inventory buildup for those markets. But our commentary has been quite contrary otherwise. Just want to understand, you know, where is the disconnect? No, Viraj, you're right. There are some drought conditions, and it could potentially be pressure points for us. There are pricing pressures coming from, as you mentioned earlier, from Brazil and Southeast Asia for two of our products, which is basically Acephate and Hexaconazole for these two markets respectively. While Europe has certainly had a period of drought, our understanding is that the sowing is unlikely to get affected in Europe. I think it is still work in progress, so to say. We will of course continue to focus on getting our capacity utilizations by positioning material in the market appropriately. Any perspective we can share on the inventory situation in these markets? I mean, is it inventory kind of at the optimum level? Are we seeing already quite a sizable inventory for our key molecules in those markets? Viraj, I don't think we have that kind of full understanding, but qualitatively, the comment that you made that the inventory levels are high is also our understanding. Okay. Second question is on the international market again. You know, you talked about pricing pressure, but generally the RM environment has also been on the downward trend, you know. Since the high-cost inventory is now out of the window for us, how should one understand the margin, you know, part, especially on the international business for us? Yeah. I think the raw material prices are certainly trending down. The freight costs are also trending down. One way to understand it might be that in certain products which we are selling in those markets where the impact on our pricing is not very high, for those certainly the margins should be improving. For those markets where we continue to face either an inventory overhang, as you put it, in the market or pricing pressure for a variety of reasons, Hexaconazole, Acephate, the raw material price drop may have to be shared with the customer to stay competitive in terms of our pricing. It would boil down to the mix of revenues that we are able to secure from all these different geographies in terms of the blended margin where we might end up. In fact, it was an earlier question, that is why it was a little bit difficult. There are many factors that influence this, and therefore it's very little bit difficult to predict the movement as we go forward. As you can appreciate, our focus is to try and maximize what we can in these markets where we have a relatively benign situation. If I can squeeze in one question. You talked about CMO, two new products being launched. Are they from new customers or existing customers? Any perspective you can share? What kind of molecules also will they be? New CMO. Contract. New customers. We had mentioned that actually we had mentioned this, I think in the previous quarter only. This is where we have finalized one contract manufacturing opportunity for a formulated product. The other is for active material which will get commercialized during FY 2024, all going well, because the registration has to be done by the customer including adding the Dahej SEZ as the source. That is why I mentioned that it'll take about two to three years for getting the revenues to start flowing in from these contracts. These are new customers. Yeah, these are new customers, yeah. Okay, thank you. Good luck. Thank you. The next question is from the line of Soumya V from Spark Capital. Please go ahead. Thanks for the opportunity, sir. The question pertains to Pendimethalin and Metribuzin. Can you give a broad range of what is the YOY price increase in these two molecules that you have seen? That's the first part. Second part is, in terms of the volume growth in these two molecules, how much of this is led by the end market growth, and is there a market share shift that you're seeing in those molecules? Yeah. Soumya, in terms of the price change, I think it may not be very prudent for us to share that because these are very customer specific. Pendimethalin, our growth has been fairly good during H1. Metribuzin, we are seeing the business coming back because there had been an issue over the last couple of quarters where we were unable to get the kind of volumes that we are capable of producing. We are seeing some of the Metribuzin demand coming back. Pendimethalin, we may see some softness in H2, but we are trying to work through that with other customers as well. Would you like to add anything, Mohit? Maybe if it is, though we can't share the price rate change, I can share with you that we have more than 60% growth H1 to H1 in terms of Metribuzin revenues. We have more than 20% growth in Pendimethalin. Thank you. One more question. Pertaining to exports only, I mean, let's say from FY 2022 where we are around INR 800 crore, I mean, in let's say three-year timeframe. Is there a target that we are looking at probably, you know, doubling of revenues? You know, anything like that? I mean, and is there a models that we are looking at probably, you know, more focus on CRAMS or in the current international business itself, you know, adding more capacity? Any path that you would take to kind of achieve whatever the vision that is there in the export business? Soumya, actually, this is being articulated by us regarding the share of international business vis-à-vis our domestic business. Currently we are at around 33%-35% of our crop care crop protection business coming from exports. By FY 2026 we expect it to be at around 40%. This is really manufacturer-led exports business. This will include contract manufacturing as well as what you may refer to as catalog sales from our current portfolio and the new AIs that we will be commercializing starting FY 2024. Got it. Thank you. Thank you. The next question is from the line of Faisal Zubair Hawa from H.D. Hawa & Co. Please go ahead. Yeah. Can you hear me? Yes, sir. We can. Please go ahead. How are we doing on the biostimulants, biofertilizers and bioseeds front? You know, we are, you know, the next, you know, with the ESG environment and, you know, so much emphasis on the, you know, clean and, you know, carbon-free environment coming in. How, what is our percentage revenue at present? Like five years hence, what do you see this being as a percentage of total revenue? I'm sorry, I couldn't quite get your audio through correctly. My other colleagues, if they've understood it, they will add to. What I hear you say is that what is it that we are doing on the biologicals, is it? Yeah. Yeah, the biologicals, what is their total percentage of revenue at this point of time? What it will be like, you know, four to five years hence, and how do you feel the whole space moving? Yeah. Understood. Actually, you know, we are looking at biologicals as part of our crop nutrition portfolio within our crop care category. This category has been growing quite nicely over the last two years for us. Even this year the growth has been fairly decent during. 25%-30% Almost 30% growth has come from this category of crop nutrition, which is a combination of biological products, soil health products, as well as water-soluble crop nutrition products and micronutrients. This category we are considering as the crop nutrition category, and this has been growing quite nicely. It is an area of focus for us. Last year I think we did about 150, 145. 145-odd crore and we are looking at least 20% growth in this category even during the current year. We've added products in this category, mycorrhizal type of products. We've added biostimulants. We've added some new products to this category. We will also be coming up with certain products related with mobilization of NPK from the soil during the course of this year, if not for Kharif next year. There's a very focused plan that we have on this category and we see it as a future growth engine. Sir, how fast could we have, you know, higher than ROE, ROC metrics in Rallis? ROC in the short term obviously is under pressure for the fact that we are investing in newer capacities which will take some time to start delivering the full returns. Also we spoke about that the working capital is at an elevated level. However, if you ask us our ambition is definitely to be in high double digit in terms of ROC. Would it be possible like three and a half years hence? It's difficult to give a time horizon, but as the capacities start getting boosted, the ROCs will progressively keep improving. We'll also keep investing further. We have so far committed only about INR 550 crore out of our INR 800-odd crore. Our intention is to keep investing in manufacturing capacity as well. What is our capacity utilization in all the plants? Mr. Hawa, may we request you to please rejoin the queue. We have participants waiting for you. Okay. Thank you so much. Thank you. Participants are requested to please press star and one to ask a question. The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead. Thank you, sir. My first question is basically regarding the Brazilian market. Yogesh, may we request you to please speak a little bit louder. We cannot hear you clearly. Am I audible now? Hello. It's very low, sir. Is it better? Yes, yes. Please go ahead. Yeah. My first question is basically on the Brazilian market. If you can give me an approximate split of the product mix between herbicides and insecticides for the Brazilian market? Yogesh, you know, for us, the biggest product that we export into the Brazil market is Acephate. We have got registration for our Metribuzin formulated product in the Brazilian market. Acephate is moving fairly well, and our formulated herbicide formulation has also started picking up quite nicely. We see expansion of that during the next few years. We've also got a registration of a formulated Acephate product where we will be starting business now. Sure. It's like Acephate, we have already started, Metribuzin will take time. No. Acephate, technically we were already selling. Metribuzin formulation, we have started. Acephate formulation, we will be starting. Okay. There is some pricing pressure in the Brazilian market. Is it, like, there's more pricing pressure on insecticides versus herbicides? No, I don't think. I think it is hard to generalize like this. Certainly from our point of view in our portfolio, like Sanjiv mentioned, insecticide is the dominant portion. Metribuzin formulation which we are selling will constitute a very small proportion of the total revenues that we make from Brazil. We are witnessing pricing pressures in Acephate. Sure. Sir, and one last question on the crop nutrition business. Just to understand, if the margins on the crop nutrition business would be in line with the overall company margin or it would be higher? I think, generally, they will trend a little higher than the overall margins, Yogesh. Okay. Thank you, sir. That's all from my side. Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Aditya Jhawar from Investec Capital. Please go ahead. Yeah. Thanks for the follow-up. Just, you know, looking at this changing backdrop between the domestic market and international, if you can give us a sense that what is the current margin differential between both the businesses? It's hard to, Aditya, call out that what is the specific margin difference because it depends on the products that we are selling. Overall, yes, the margins are slightly lower in the international market versus domestic market. As and when we start improving our share of formulation business, we expect the margins to gradually improve. Okay. Thanks, Subhra. Secondly, in the international business, what is the current split of revenues between our own branded formulation, you know, the contract manufacturing that we have recently started developing and the, you know, the legacy business? On the contract manufacturing, we'll not give that split, but just generally, you know, as we are trying to build our formulation business in the export business portfolio. That is about 20% of our export business is currently formulated products, Aditya Jhawar. Okay. Twenty percent is formulated. Is there any other split that you can share between the 80% of the export business, Sanjiv? I think we limit it at that, Aditya, because you know, we don't have too much opportunity or too much business in contract manufacturing. Okay. Splitting it may be a little problematic for us. Perfect. That's it from me. All the best. Thank you very much. The next question is from the line of Darshita from Antique Stock Broking. Please go ahead. Hi. Hope I'm audible. Yeah. Yeah. I just had one question regarding the EBITDA of the seeds business. I wanted to understand what would the provisioning look like for the second half of the year for FY 2023. Also what kind of EBITDA or the EBITDA loss that we have currently. What is the quantum of loss? If you could provide some range or something for the years coming, as in for FY 2024, FY 2025. If you could provide some range. For the second half of the year, what is the kind of provisioning are we seeing? See, Darshita, firstly we do not give forward-looking estimates, so it's difficult to say what the EBITDA would be. But Q3 and Q4 for seeds is relatively smaller for us. Hence, if you look at even the historical trends, you would have seen that we make loss during this period because the revenues are very small and hence because of the cost it comes as a loss. On top of it, as we mentioned, we're looking at a complete review of all the costs, and there could be some additional provisions that may be necessitated as a part of this exercise. Is there any number in mind? I guess the first half is about INR 25 crores. Is there any guidance that you can give in terms of the number or... No, we are working toward that, Darshita, because. Okay. We've taken whatever was required at this point of time as part of Q2. We've already taken absorbed that hit, but we're working through the numbers and we'll come back maybe to you sometime later. All right. Thank you. Thank you. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead. Hello. Thank you very much. We heard the growth numbers in Metribuzin are 60% and Pendimethalin are 20%, and you are having a plan to set up an MPP. In terms of the transfer business, what is the headroom you have in Metribuzin and Pendimethalin in terms of available capacity is not utilized. Secondly, can you give us some sense in terms of what is the kind of revenue or additional tonnage you can you know sell from the MPP, which will be useful for us to you know build that into our model. Ramesh, the MPP, as you'll be aware that we are going to be doing a couple of products there, including the contract manufacturing product that we have. We will be starting small as expected because of the need for registration and all which is already commenced. We will see the revenue coming from the MPP a little later in FY 2024-FY 2025, and scale up only thereafter. As far as pendimethalin is concerned and Metribuzin is concerned, you will be aware that we had sort of separated these two plants and made individual plants for pendimethalin as well as Metribuzin. The net result is that we've landed up with getting, I would say, low-cost debottlenecking happening. We have now good headroom in Metribuzin plant, as well as the ability to scale up even the Pendimethalin capacity with minimal investment. Okay. Thank you very much. Thank you. The next question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Thank you. Thank you for the opportunity again. Just on the domestic business, in the manner in which the crop protection business has moved, how would you rate the on-the-ground situation this year versus, say, the situation last year or the year before? That's one. Number two, in terms of your receivables for your exports business, if you could give us the number of days that were probably, say, on September 30th last year, and what would that figure be on September 30th, 2022. Mr. Agrawal, in terms of on ground domestic business between this year and last year, I think I would say that it is more or less similar. If you will recall, last Kharif also there was this whole issue about consumption because of the way the rainfall was playing out. In a way, the same thing has played out even this year. Last year we had seen a fairly large rollover of inventory into H2, and it is our assessment that there's going to be a lot of rollover of inventory of all agrochemical companies into H2 as well. There is going to be considerable amount of pressure in terms of liquidation of agrochemicals in the market. What is good is that the ground level activities, at least for us, is at a very good level in terms of engagement with the farmers and engagement with the trade. Something that we had sort of dialed down last year because of the pandemic situation, which is not playing out this year at all. Our ability to engage at the field level, farmer level, distributor level, et cetera, is much better this year for us and I guess for the other players as well. That is, I would say, similar to what was there last year, but in a way different. Nagarajan, would you like to add something? No, I think that is right, sir. Similar. On the international customers, you asked that what is the impact of the debtors days on hand. As we said, there's one impact of the higher proportion of sales plus the mix of customers, plus the discounting that we have stopped for one of our key customers. I would say that it is at least 30%-40% days on hand is higher compared to the previous year. There's a significant increase in debtors that you are seeing with coming on account of that. Thank you. Thank you. The next question is from the line of Faisal Zubair Hawa from H.D. Hawa & Co. Please go ahead. Yeah. Mr. Faisal, please go ahead with your question. Your line is unmuted. Yeah. So I mean, how is it, Subhra Gourisaria, that you can now create you know better value for the shareholder? Because you know we are at almost like a 1.54x you know market cap. This is the worst you know ever. The you know previous lowest was in the 2009 and 2010 era. How is it that we will create value even because now we are almost being valued as a pure commodity company? Is there some space as far as buyback sort of things concerned? I'm sorry. You might have to repeat your question. Your voice was not coming very clearly. How is it that we could create better value for the shareholder because we are now being quoted at a market cap to sales of almost 1.4x, which is like a commodity valuation, you know, whereas what we are doing is clearly not a commodity. Secondly, as far as patents are concerned, you know, how many patents do we feel that, you know, will come in our favor in the next one or two years? How is, you know, the Metahelix, you know, acquisition really helping us in gaining more, you know, patents over the last two to three years? In terms of the first question, I think from an operational standpoint, we are focused on trying to improve the performance metrics and whether it is in terms of revenue, profitability or return on capital employed. We think that is the way that All the shareholders will get rewards. That is the way that we would work towards improving the shareholder value. As you know, we also have a fairly large CapEx program, which is underway. INR 550 crores out of the INR 800 crores that we have announced, we have already committed or even invested, and the balance is yet to go. Therefore, we would be utilizing the cash generated in the business for investment in the business and apart from- Excuse me. Can you please repeat the line again? Dividend. With respect to patents, the number of patents that we have. Maybe we can get back to you in terms of the number of patents that we have. I'm not sure if you recall the number of patents that we already have. No, off the cuff, I don't have that number. We can revert on this. Yeah. We can revert on this number. Not a problem, sir. With regard to the seeds operation, yes, there are a few patents that we have in the seeds operation also. However, as you know, in the last year, couple of years, you can say, we are finding that there is a need for us to get the operations of the seeds business improved in terms of profitability. That is what we are focused on. We have had some challenges in terms of inventory levels. We have had certain other challenges which we are working through. That is really the focus right now, and that is why we are having the kind of you know, provisioning and so on that we are going through at this point in time. Seed business, we are confident that we will come through this phase, and we should have some good outcomes over a period of time. Sir, this new INR 850 crore CapEx, which will it yield to around INR 1,000 crore revenue two years end? See, some of this is already got commissioned out of this INR 850. As Sanjiv mentioned, some of the bottlenecks had happened at lower cost, which has already started yielding in terms of returns. INR 850 to INR 1,000 correlation is difficult to establish because the investments are across different pockets. What is our capacity utilization in this quarter too, at all the plants combined? Well, for example, our acid-based plant, the utilization is 100%. Pendimethalin has been pretty much close to about 59%. Hexaconazole has been slightly lower because of a lot of inventory of Hexaconazole in the Vietnam and Chinese market. The utilization there has been a little lower. Contract manufacturing plant has been practically running well. We're recording a good utilization in the contract manufacturing facility. TKK has been shut for the last two years, and we will be restarting the plant in Q4 because some orders have started now coming back for this polymer TKK. That's a good sign, a positive sign for one of the other products which is important for us in our CM portfolio. This is the operator. May we request Mr. Hawa to please rejoin the queue, sir. We have participants waiting for the turn. Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Sowmya from Spark Capital. Please go ahead. Yeah, thanks for the opportunity, sir. What would be our current Pendimethalin and Metribuzin capacity in metric ton? Pendimethalin would be close to 5,000 tons per year and metribuzin close to 3,000 tons per year. Also one follow-up on that. In terms of Pendimethalin and Metribuzin, I mean, we have been doing this RM backward integration. Can you just give some color between these two molecules to what level is the backward integration done, sir? As far as Pendimethalin is concerned, what we are doing is, we have entered into a long-term supply arrangement with an Indian manufacturer of the raw material. At this point in time, their plant is coming on stream, but we are getting about 15%-20% of our requirement from them. We do expect that would trend upwards to 70%-80% of the requirement. As far as Metribuzin is concerned, we are presently still dependent on imports. Understood, sir. Helpful. Thank you. Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to the management for closing comments. Thank you. Thanks for all the questions, and I trust we were able to provide clarity to our Q2 results. While we've had a satisfactory performance during the first half of the year, external challenges, as we mentioned, are on the increasing side, because of some drought conditions and also inventory levels. Our international business has had a good run to date. However, because of the drought conditions being experienced in many parts of the world, there's an increasing customer skepticism. Even, we are seeing some overhang on inventory as well as we discussed. We will continue to pursue all efforts to drive maximum utilization of our plants and get volume-led growth, with price growth going to become a challenge, as we see it. On the positive side, Rabi augurs well, and the crop prices are also quite favorable. For seeds, H2 is a relatively small period for us. The priority for us in our seeds business is really to focus on Kharif hybrid seed production and the market development activities for a good Kharif season next year. We are trying to review all areas of costs and optimize them to develop a more focused and agile seeds business. In the process of this review, there could be costs related to inventory and other items for which there may be a requirement of provisioning, which we will continue to assess during the course of the year. Our long-term strategy of driving competitive growth remains on track, and we will keep reviewing all opportunities as relevant. With that, we close the call now and wish you all a very safe and prosperous Diwali. All the very best. Thank you. On behalf of Rallis India Limited, I'd like to close this conference. Thank you for joining us, and you may now disconnect your line.