RALLIS - Rallis India Ltd Share Price

Management's outlook for Rallis India Limited emphasizes a cautiously optimistic perspective shaped by favorable agricultural sentiment and a gradual recovery in the global agrochemical market. Notably, the Indian agrochemical sector shows signs of stabilization, driven by positive monsoon conditions and significant increases in crop production, which is estimated at 354 million metric tons"”up 6% year-on-year.

Key highlights from management include:

• Q1 FY '26 revenue reached INR 957 crores, a 20% increase compared to the previous year, with profit after tax (PAT) rising to INR 95 crores from INR 48 crores.
• Crop Care and Seed businesses reported substantial growth, up 16% and 38%, respectively. The Crop Care segment experienced a double-digit volume growth of 13%.
• EBITDA surged to INR 150 crores, a 57% jump from the prior year.
• The sustaining demand led to a notable increase in channels for herbicides and soil health products, indicating continuous sales momentum.
• The company launched 9 new products in Crop Protection and 14 in the Seeds segment, aiming to enhance portfolio gaps and cater to diverse crop needs.
• The management remains committed to investing in digital tools and AI to improve operational efficiency and customer engagement, thereby supporting long-term growth.
• The seed business, particularly in cotton, is expected to maintain a prominent share, with cotton currently representing over 33% of the seed portfolio, bolstered by successful performance in recent seasons.

Overall, Rallis expresses confidence in maintaining robust growth, focusing on effective inventory management, and expanding its global customer base while striving for a steady improvement in margins and a targeted EBITDA margin of 15% to 20% in the longer term.

Here are the major questions and answers from the Q&A section of the earnings transcript:

1. Question: "How much is the top line from the 9 new Crop Protection products and 14 new seed products that we have introduced?" Answer: The contribution from these products is still being evaluated since they were recently launched. They are showing good traction, especially in the cotton market, which had earlier gaps that our product launches aim to fill. As for specifics, we will have a clearer picture around October when we analyze volume trends and customer experiences.

2. Question: "How has the cost structure altered since you took over, especially for fixed and variable costs?" Answer: We're focused on operational efficiency. We've restructured our sales teams and invested where necessary to maintain stable fixed costs while aiming to reduce them over time through scale. For variable costs, as we utilize our plants fully, we anticipate efficiencies will improve, impacting both fixed and variable costs positively.

3. Question: "What about the performance of our Diggaz hybrid cotton, and what about sales trajectory concerning potential stagnation?" Answer: We've surpassed 1 million packets of Diggaz hybrid cotton. While historical trends indicate sales may peak and then decline, we have follow-on hybrids in development that should mitigate concerns about stagnation. For the upcoming years, we're optimistic about sustained performance.

4. Question: "Is the recent performance in our exports driven by low comparative base or genuine recovery?" Answer: It's a combination of both. There's indeed a general recovery in the market after destocking, and we also added new customers. Furthermore, early purchases for certain products may impact our upcoming quarters positively.

5. Question: "How is channel inventory looking for herbicides and seed products?" Answer: For cotton, we anticipate a tight inventory situation with no significant risk due to solid management. While some crops like rice and maize faced shortages earlier due to processing challenges, the current outlook is still stable for both seeds and herbicides.

6. Question: "Can you clarify the impact of digitalization tools like PlanGuru on demand forecasting?" Answer: These tools improve our forecasting capabilities by removing human biases from decision-making, as they aggregate data over time for better accuracy. PlanGuru, in particular, will help us manage stock dynamically by providing SKU-level forecasts and better stocking strategies for our portfolio.

7. Question: "What are your long-term expectations for ROCE and ROE?" Answer: Growth in margins and controlled capital investment is pivotal. Our target is to achieve a 500 basis point improvement in margins, which should aid ROCE and eventually lead to an increase in ROE as profitability scales up.

8. Question: "What is your perspective on the recent cotton acreage challenges due to external pressures?" Answer: Cotton remains crucial, but we need to address challenges like illegal seeds in certain areas. We're developing competitive products for remaining segments and ramping up innovation to ensure long-term growth in the cotton segment.

9. Question: "What will be the expected contribution from the newly launched products?" Answer: It's still early to provide exact figures as we are in the initial phases of these product launches. However, many new products are expected to be higher margin due to their mix and we will have more precise data by the next quarterly results.

10. Question: "Can you explain the breakdown of Crop Care revenues between domestic and exports?" Answer: This quarter, B2C revenue is INR 449 crores, while the B2B segment, which includes exports, stands at INR 203 crores. The exports have shown a year-on-year growth of 23%, primarily driven by institutional sales and contract manufacturing.

These summaries encapsulate the essence of the Q&A section, capturing key insights and numbers shared by the management.