Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking Limited. Thank you and over to you, sir.
Yeah. Thank you, Yashashwi. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Dhanuka Agritech. From the management, we have Mr. M.K. Dhanuka, Managing Director, Mr. Rahul Dhanuka, Chief Operating Officer, and Mr. V.K. Bansal, CFO on the call. Without any delay, I would like to hand over the call to Mr. Dhanuka for opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Mr. Dhanuka.
Thank you, Mr. Manish. Good afternoon, ladies and gentlemen. Myself, M.K. Dhanuka, Managing Director of Dhanuka Agritech Limited. I hope all of you are doing well and keeping safe. Thank you for joining us in the conference call for results of Q1 of FY 2022/2023. I have with me Mr. Rahul Dhanuka, Chief Operating Officer, and Mr. V.K. Bansal, CFO of the company. Dhanuka Agritech Limited is a leading agrochemical company in India, focusing on branded sales in the market. The company's strength lies in the manufacturing and marketing of formulated products. The product portfolio is spread across insecticides, herbicides, fungicides, and plant growth regulators. Dhanuka Agritech is working with the vision of transforming India through agriculture. Our belief is that when we transform the lives of farmers by enhancing their productivity and quality, in turn enhancing their income, we are making a small contribution in transforming India.
We work in all major crops in India and have implemented the best-in-class technology to ensure a smooth and efficient supply chain. Dhanuka have a pan-India presence through its marketing team and warehouses in all major states across India. With three manufacturing units and 41 warehouses across India, Dhanuka caters around 6,500 distributors and dealers and around 80,000 retailers. Through its extensive network, Dhanuka reaches out to approximately 10 million Indian farmers with its products and services. Dhanuka has more than 1,000 techno-commercial staff, supported by a strong sales and marketing team to promote and develop new products.
It was due to the efforts of this team that Dhanuka was able to secure higher growth in the focused products in comparison to the generic product portfolio, which in turn help us to protect the bottom line to a certain degree in a challenging quarter. Dhanuka's strong R&D division has world-class NABL-accredited laboratory as well as an excellent team for new product registration and development. Dhanuka has international collaborations with 10 leading global agrochemical companies from the U.S., Japan, and Europe, which helps us to introduce the latest technology in India. This year, the rainfall has been uneven, and although the overall rainfall is above average, east and north region have suffered from very less rainfall, whereas south and west have seen unprecedented rains resulting in floods.
The rainfall has covered most of India in July, except for the eastern region, and July plantings and consumption were up to the mark. Moving on to the financial performance for the last quarter. Our revenue from operations stood at INR 392.73 crores in Q1 of FY 2022-FY 2023 versus INR 363.79 crores in Q1 of FY 2021-FY 2022, representing an increase of 8% over the corresponding period of last year. EBITDA stood at INR 68.33 crores in Q1 of FY 2022- FY 2023 versus INR 68.86 crores in Q1 of FY 2021-FY 2022. Profit after tax stood at INR 49.11 crores in Q1 of FY 2022- FY 2023 against INR 48.6 crores in Q1 of FY 2021- FY 2022.
The zone-wise percentage share of turnover for Q1, FY 2022/2023 is North 30%, East zone 9%, West zone 44%, and South zone 17%. Product category-wise share of turnover for Q1 of FY 2022- FY 2023, insecticides contribution 27%, fungicides contribution 11%, herbicides, which grows at the initial stage, 52%, and others 10%. The shareholders of the company in the 37th annual general meeting held today at 11:00 A.M. declared 300% final dividend, that is INR 6 per equity share, having face value of INR 2 per share. The board has already paid 400% interim dividend to the shareholders as declared in its board meeting dated February 2, 2022. The total amount absorbed in the payment of dividend for this year is INR 65.21 crores.
We are happy to inform that the company has obtained approval of the CIB&RC, Government of India, under Section 9(3) of the Insecticides Act for two new molecules. One is herbicide and another is fungicide for formulation indigenous manufacturing. The one product is Cornex, which is a herbicide, which is combination of two molecules, halosulfuron-methyl plus atrazine, which will be used for the control of weeds in the crop maize. The second product is Zanet, which is a fungicide, which is a combination of thiophanate-methyl plus kasugamycin for the control of powdery mildew and bacterial leaf spot in tomato crop. Further, the approval has been granted by CIB&RC to the company for three herbicides molecule and PGR for formulation indigenous manufacture under Section 9(4) of the Insecticides Act.
Setting up of Dahej plant is as per its scheduled time, and we hope that the initial production will start from March 2023. Being India's leading agrochemical company, Dhanuka are at the forefront of introducing digital solutions and innovations, streamlining policies, and collaborating with indigenous entities to boost the integration of technology across business segments. In the same endeavor, we have tried to boost our reach through online farmer interactions and aggressive use of TV advertisements for all our key products. We are focused on expanding our market coverage through our network of distributors and our digital platforms, where we engage with the end consumer. In the same endeavor, Dhanuka has tied up with upcoming online platforms like AgroStar, DeHaat, Gramophone, and Plantix for online sales of Dhanuka products through their platform. We consider ourselves responsible towards securing the farmers' welfare and preserving food security of the nation.
We continue to strengthen our association with the Farmer Producer Organization, FPOs, Krishi Vigyan Kendras, KVKs, and other critical institutions to increase our business expertise and boost our market presence. I'm happy to inform that the July month for the company has gone well and, we had very good growth in the month of July, and we expect similar trend to continue in the months of August and September. We are confident that we will be able to deliver much better growth and much better performance in the second quarter in comparison to the first quarter. Thank you very much for your kind attention. We would now take the questions from you which you may have. Thank you very much.
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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Varshit Shah from Veto Capital. Please go ahead.
Good evening, sir. My first question is that the innovation turnover index has shot up dramatically in Q1 versus the last couple of years. You had been promising that you guys are working, especially as our year indicated multiple new product initiatives. My question is it sustainable this 18% or maybe a range near to this is sustainable or is it just merely because of some timing shift out of Q1 due to for some products which are lower end and hence the ITI is looking optically higher?
I hope I was audible. This is my message to the operator that the sound coming is not very clear. Not only from the first question, Mr. Varshit Shah, but even earlier the sound coming in is not very clear. Can you make it louder for us?
Sure. Mr. Varshit Shah?
Yeah.
Can you please speak a bit louder?
His question is clear to me, but otherwise it is not good enough.
The volume is not correct, right?
Yeah.
Okay. I'll just check that, sir.
Right. Thank you. Responding to the ITI thing, yes, like we said, we have been working aggressively on this front. Again, with our strength on the R&D side front, this is how the Q1 has taken a jump on the ITI index. Because this was a very good period for this new product that we had introduced to take position, this ITI index has certainly jumped up. It will correct to some extent through the year. Yet, as committed, the ITI index will now be only going upwards.
Sure. I think that's really helpful. A question.
Mr. Shah, can you speak a bit louder, please?
Am I audible better now?
Little more please.
Okay. Sir, one thing which I observed was that you have increased your gross profit in absolute terms, which I think has come as a result of ITI, because I think the volumes YoY would have been lower, a tad lower, if I'm not wrong. This is purely on account of change in mix and it's reflecting in IT. Am I connecting the dots right?
You see, in terms of percentage, GP is declined, but absolute, you are right.
Exactly. Absolute has grown, so it has to come from either volume or product mix. There's only two ways to increase absolute GPs.
Yeah. It is the impact of EC product mix, definitely.
Product mix. Right. What is the actually comparable volume growth in case you have, if you can share it in Q1?
Q1 volume growth is not there. Only the pricing growth is there. Value growth.
Understood. Sir, what is the, since you mentioned, I think that Dhanuka sir earlier mentioned that July has picked up. Do you think that H1 to H1 seasonal volume growth could for the industry or maybe could be in the range of 3%-4%, or there might be some challenges to achieve that kind of volume growth number?
Volume growth number in the first half should be either higher single-digit or lower double-digit.
Connecting that to your annual guidance of double-digit growth, it seems slightly conservative. Because if you even achieve mid-single digit kind of volume growth, you can easily touch 13%-14% revenue growth even though you've taken price hikes.
Yeah, absolutely right.
Fair enough. I think, I'll wait in the queue, for I have more questions. All the best, sir.
Thank you.
Thank you. Participants are requested to press star and one to ask a question. We have our next question from the line of Viraj from SIMPL. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just a couple of questions. First is, I didn't understand the explanation on gross margin compression. Was it more due to the RM pressure or it was largely due to the product mix? And any perspective you can share in terms of how much of the raw material cost inflation has been passed through in the market? That is one.
My request again to the operator, the incoming sound is not very good.
Okay, one moment, sir. Mr. Viraj, I'll try increasing the volume.
Yeah.
Can you also speak a bit louder, please?
Yeah.
I think one question from Mr. Viraj, which is around the explanation on GP. We'll get that answered and then come to your second question, sir. Okay. Please, could you repeat your question? Thank you.
My question was, you know, the gross margin compression which we saw, was it largely only due to product mix or there was an element of raw material cost inflation? In that perspective, we can explain which is, you know, what is the drivers for which has been the larger factor behind the compression. The RM inflation which we seeing across industries, how much of that has been passed on in the market?
You see, it is the impact of both, one portion because of the RM inflation, which could not be passed on fully to the consumer, and it is slightly compensated because of the product mix. If you see product mix could not have been better, so the GP effect could be around 300 basis point and all.
Sorry, can you repeat the last part? GP what?
The reduction in GP could be more than 300 basis points.
You mean if not for the product mix?
Hello?
Yeah. You mean if not for the product mix, the GP contraction could have been 300 basis points?
Yeah. That's right.
Any action on the pricing front which would have taken in the second quarter to just recover the RM inflation?
You see, we have demonstrated that ability in the quarter one itself. We have been able to pass on to a great extent. However, in quarter two we are expecting we should be able to pass on fully.
Okay. Second question is on the other expenses, we're seeing a sharp jump year-over-year. Are there any one-off in that? I mean, any, anything you can share what is driving the jump?
You see, if you compare from the previous year, absolutely right. You see, you will realize, you will appreciate because of COVID in the June 2020 and June 2021, many expenses were not incurred because of COVID, like traveling and vehicle maintenance expenses, regional meeting, farmer meeting, distributor meeting. The expenses were low in the year 2021 and June 2020. If you compare from June 2019 or June 2018, they are in line with our expectation. They were bound to increase because now everything is normalized. This year the full traveling is happening, full dealer meeting, farmer meeting, leader meeting are happening. You see.
Okay. This is a normalized cost base.
Yeah, it's normalized now, you can say. That's right.
Okay. On the Dahej project, can you just provide an update by when do we expect the commissioning?
Commissioning, as MD has communicated, we are expecting the production in March 2023.
Okay, fine. Thank you.
Thank you.
Thank you. Sir, I request you to disconnect your line. We will reconnect you. Okay. Ladies and gentlemen, you're requested to stay connected. We are reconnecting the management team. Yes, sir. We'll proceed. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the opportunity. Am I audible, sir?
Yeah.
First question is again on the Dahej project. How much of CapEx are we envisaging to capitalize during this year? Whether we will be able to fund the entire CapEx through internal accruals or we'll have to take some debt for the same? Thank you.
You see, so far now, we are not taking any debt. We are making the entire CapEx from internal accruals. In the current financial year we are expecting a CapEx of around INR 130 crore for Dahej.
All right. Got it. Second question is in terms of our guidance. On EBITDA we have said that, EBITDA we are expecting almost similar growth in line with previous year. If I check on a year-on-year basis, in FY 2021 our EBITDA was about INR 269 crore and FY 2022 was INR 263 crore. Are we expecting kind of a flattish EBITDA for FY 2023? Thank you.
We are saying the EBIT should be in terms of percentage in line with FY 2022.
We had margins of closer to about 18%. We'll be having similar kind of margins for FY 2022 as well.
Yeah. So far now you're right.
Right. On the ITI, during first quarter, our ITI has jumped significantly.
Yeah.
It seems that the volume growth as you indicated has been not there. Is it the new products which are coming, you know, at a higher price or these are relatively high margin and high pricing products because of which the EBITDA has jumped significantly?
You see in the case of the products which are covered under ITI, they have delivered a significant growth, value as well as volume. When we are saying there's no volume growth, company has always been the, you know, the total basket of 80+ brands. The product selected, very, very few molecules are coming under the current year introduction +3 years. Those products are delivered with good volume growth.
Right. Got it. Sir, one just last clarification on the new product launches. If I heard it rightly, we have launched Zanet, Cornex and Decide, and we have received three approvals for Section 9(4) herbicides and one for PGR, which probably we have not launched. Is the understanding correct?
These three products that we talked about, Cornex, Decide and Zanet, these are the three Section 9(3) registrations we have got. In Q1 Cornex was launched and activated. One more herbicide which is Terminal was also launched in Q1 and activated. Decide, Zanet and other products will be commercialized in Q2.
Section 9(4) products?
Will also be launched in Q2.
Okay. In total we'll be launching about eight odd products. I mean, as of today's pipeline we'll be launching about 8 odd products. Four of these, you know-
Five for sure. Two we have launched, three more we will launch. At least five for sure.
Got it. Thank you so much. I'll come back in the queue.
Thank you. Reminder to participants to press star and one to ask a question. We have our next question from the line of Saurabh from Asian Markets Securities. Please go ahead.
Yeah. Thank you for the opportunity. Sir, if you can talk about the channel inventory at the end of the quarter and how has been the liquidation in month of July?
Channel inventory is not high because Dhanuka don't believe in making placement with the distributor. The inventory is definitely high with the company because the month of April and May were good when the company was having growth, but June has gone bad because of the delay in monsoon and some sales of June has been postponed to the July month. That's why the inventory levels with the company are higher, but channel inventories are in line with the industry norms only.
Okay. Sir, the raw material cost inflation, so have you passed on or now with the price coming down, you will take the price correction in Q2? Also, if you can give, is there a specific crop where the passing of the higher cost is difficult compared to the other crops?
Like our CFO already said that, we have tried to pass on the cost wherever was possible in Q1 and Q2 also, whatever market can absorb, we will pass on the cost increase as well. In the products where there is a price correction, of course, that cannot be passed on. In terms of the crops which are able to absorb is depending upon the commodity prices, and probably in the last call you were talking about wheat prices have already gone up, paddy prices will also go up, and in July, we are already witnessing that. Practically commodity pricing going up means if paddy can absorb, which is the largest consumer of agrochemical in the country today, all other crops commodities are on a upswing. The cost absorption by the crops is very much there.
It is in the competition and price correction that we may not be able to pass on the cost to the farmer.
Okay, sir. Last thing on the other income side. There's a jump in other income. Is there any one-time element there?
Yeah, it is one-time element. It is, see, because of the selling of two properties of company.
What was the contribution?
Contribution is around INR 20 crore.
Okay, sir. Thank you and all the best.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We have our next question from the line of Rohan Gupta from Edelweiss. Please go ahead.
Yeah, hi, sir. Good evening. Hope I'm audible, sir.
Yeah, Rohan, you are audible.
Okay, sir. Thank you very much. Sir, first question is on a significant increase in stock. You mentioned that definitely after a solid growth in April and May, June was muted. That is the main reason, prime reason that there has been significant increase of almost close to INR 100 crore increase in stocks. Is that getting reflected, sir?
There are other reasons also. You see, the prices were increasing because of the Chinese reason. The number of factories in China were closed down, shipment was not taking place. Shanghai port was closed for one month, and there was delay in getting the consignments from China and the other countries from Japan, et cetera. In anticipation of a good season, we basically built up the inventory intentionally considering the price rise and non-availability like situation in the coming season. We geared up for the season, but unfortunately because June has gone bad, so we left over with the inventory. Some inventory was created intentionally for the July, August, et cetera, because, as explained earlier, but some inventory has been left out because of the bad season of June month. We are confident as July has gone very well.
We hope that we will be able to come to the normal inventory situation by the end of the second quarter.
Okay. Sir, since we have seen some softening of the raw material prices, the inventory buildup which has taken place in the last quarter, how do you see that the current pricing scenario? You definitely mentioned that you will be able to match the last year EBITDA margins what we have enjoyed in FY 2022. Is this prices I mean, with the weakening in the prices of raw material and the softening in the prices in the market, and since we are sitting in a huge inventory, do you see that the margin pressure still will be very much visible in Q2 also because of the high cost inventory?
I don't foresee much problem because of the reduction in prices, because the reduction is nominal. It's not a hectic reduction. The price increase was very high, but the reduction in the prices is nominal. I don't foresee that it will have major impact on the EBITDA margin. Definitely as Mr. Rahul Dhanuka has just informed that wherever the price correction has taken place in the raw material prices, it will be difficult to pass on the cost to the consumer. There the cost has to be absorbed by the company. We are basically working in a approach with more thrust on focused product sales. That way our product mix will basically take care of the erosion in the margin in some of the generics where the price correction has taken place.
Okay. Sir, how is the availability of the raw material now and in terms of the logistics challenge, which was pretty much there from China almost couple of months back. If you can just give some sense that how the logistics is working out and especially the shipment from China and raw material availability, how it is now?
It is much better in comparison to the initial April, May, et cetera. The shipments are also taking place. There are some delays happening in getting the consignments. Earlier from China, we used to get the containers in 15 days' time at Nhava Sheva Port, but now it is taking around 20 days' time. Some time has increased, but otherwise the supply situation is normal and we are getting the regular supplies. There is a scarcity in some of the products, but that is always going to remain that some products will always be in a scarcity. Like Propargite is one product, Azoxystrobin is another product. These are in short supply.
Sir, third question is on this market scenario, though you mentioned that August, July has seen a significant pickup in the demand because of the monsoon activities have picked up. How do you see, sir, this farmer's position in terms of cash profitability? Though we understand agri commodity prices still remains buoyant, but definitely there has been some weakness, I think that compared to last two to three months. How do you see that the farmers cash position is right now and their ability to spend on crop protection? How do you see that the current scenario?
Before I attempt on that one, sir, when you said weakness, so you were talking about weakness of what?
Agri commodity prices, like, you know, that we have seen like soybean and some crop prices have weakened in a global market, also in Indian markets also a little bit in last three months.
Which commodities are those?
If you look at the global agri commodity prices, sir, I think that the cotton definitely has weakened in a global scenario. As the corn also has seen some weakness in a global scenario. Even wheat prices also have seen some weakness in a global scenario. That's what I was just referring to that.
Right.
Are we also seeing that the domestic markets also are seeing and how is the farmers' cash profitability?
Right. Sir, my understanding is that the commodity prices are reasonably high enough for the farmer and the agriculture investor in the rural world to be buoyant about it. Well, the wheat price correction, if any, is like, still much better than what it was before the Ukraine situation. All other commodities are really way ahead of their normal benchmark levels in the country. In fact, because of the wheat shortage, we were anticipating that paddy prices will also jump up with the global demand coming in, and we are witnessing paddy price jump significantly happening in July, especially with Middle East demand coming in. Overall speaking, the commodity prices remain at a level where farmers should look forward to a good harvest and a good income.
Now, when in the middle of monsoon, farmers mostly have to depend upon rural credit to invest in fertilizers and in agrochemicals. The rural credit system, both structured and unstructured, is as of now buoyant and capable enough of taking requirements of farmers' credit requirements. Farmer will be meeting his investment requirements from the credit which he takes.
Okay. Just last bit, if I'm allowed, and Dhanuka you mentioned in his opening remark about this online platform like, you know, AgroStar and DeHaat and all. The sales and you providing your product through these channels, online platform itself. How do you see that there is an emergence of such online platform in a rural area and a creation of a third market, third party platform that can affect the existing distribution system, like how your company have a dealers and distributor network. Do you see that in next three-five years there can be significant change with this emergence of online platform, or it will be just only very minuscule and how you are gearing up for that?
Right. Though not in next three-five years, but on a longer horizon, farmer would be shifting towards technology use for resolution of his problems and probably for his procurement needs also. We are witnessing that shift having started at a very small level already. Yet, there are two aspects to it. One, that still only 35% of the agriculture remains chemically protected. So a large portion, 65% being not chemically protected, there is a huge scope of expansion and consumption increasing in the country. Multiple channels will be active to service the farmer and deliver the last mile rural connectivity. Technology platforms like AgroStar and DeHaat are going to be such platforms offering such solution to the farmer. Yet brick and mortar is going to remain relevant for a relatively longer time to come.
At Dhanuka, we are looking forward to these new players as possible partners of growing the business. At the same time, not discounting the opportunity of direct reach to the consumer and face-to-face interactions through our Dhanuka Doctors and through our trained retailers. It is, right now the situation is emerging for us to learn. We are playing on both the sides and we are gearing up to play aggressively on the technology front.
Thank you, sir. Thank you very much.
Thank you. Reminder to participants to press star and one to ask a question. We have our next question from the line of Bhavya Gandhi from Dalal & Broacha. Please go ahead.
Sir, I just wanted to know, what is structurally wrong from FY 2017, we had gross margins of 43%-44%. We are down to 36% in FY 2022. Is it because backward-integrated companies are able to price their products better or is there something else?
Probably that was the inventory, the price was increased.
There's some disturbance coming from your end.
Probably the advantage of the carry over inventory largely. In over a period of last four years, because of competition, there is impact on the gross margin undoubtedly. The fierce competition has increased in generic market as compared to 2017, 2018.
Okay. Sorry if it's a repetitive question. Just wanted to know the asset turn for Dahej facility which is coming up.
Could you repeat your question? Dahej, what are you asking?
Asset turnover for Dahej facility which is coming up in FY 2023.
FY 2023, there is no revenue from Dahej.
No revenue from Dahej. Okay. For FY 2024, what kind of asset turn are we looking at?
You see, FY 2024 would be the first year, so we are expecting a revenue of around the beginning in the first year is around INR 50 crore.
Okay. Just wanted to know if you could share cash flow from operations for this quarter. I know you don't give the balance sheet for this stuff, but at all you could provide that figure.
Which figure you want?
Cash flow from operations for this quarter.
Cash flow from operations this quarter. We'll communicate to you. We'll send it on email.
Sure, sir. Thank you so much. Yeah, thank you so much. Yeah, that's it from my end.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We have our next question from the line of Varshit Shah from Veto Capital. Please go ahead.
Hi, Sir again. Thanks for the opportunity. My question is on how you see the equilibrium price on the technical front. As you mentioned earlier, that largely prices are stable or somewhat moderating in certain cases. Do you think that the demand supply equilibrium is largely now established at the global level for most technicals, and now the incremental rate of change will be more a function of raw material rather than the disruptions on the supply chain front?
I think so supply chain equilibrium assessment is too early because the situation has just eased in July. We really don't know if this eased situation will continue, number one. Number two, the news flowing in from China is not very clear that this ease of supply chain is just because of the stuck inventory in the logistics or at the back end also everything is smooth. We absolutely understand that this is the inventory which was stuck in pipeline, which is now flowing in out of China into India and globally. Yet, is this the complete picture or there is more to it? That is yet to be discovered, which will help us understand the supply chain situation in a better way. This is just an emergence of one part of the story and not the complete.
Talking about the global level, I think so the vagaries of weather are playing their role in the corn and soybean markets globally, and that will really decide the demand side, which is not very clear as of now. Even in India, the demand side is just opening up, so we are yet to discover how it will open up completely. Paddy is looking up, cotton opportunity is robust, soybean opportunity, groundnut opportunity is robust in India. How the demand will pan out all India, how the demand will pan out globally is yet to be seen. Talking about equilibrium could be too early.
Sure. That's really helpful. On the domestic front, we have seen a lot of companies adding capacities, especially on the herbicide side, fungicide side across the board. From an alternative supply chain perspective, is India kind of stepping up at least in terms of supply or capability, maybe at a slightly higher cost? Do you see that these kind of capacity additions could lay a stronger foundation for the future three-five years? I'm asking a very broad question, not pertaining to Dhanuka itself.
Yeah. You know, we can make it broader in terms of looking at the chemical industry in general. India is certainly emerging as a chemical hub, chemical manufacturing hub from the agrochemicals perspective, from fine chemicals perspective, from pharmaceutical perspective. Chemical industry is looking buoyant in terms of India emerging as a seller, large seller on a global front. Now, a lot goes to the credit of government pushing the Atmanirbhar Bharat campaign and then supporting with PLIs on various fronts. There's also the demand supply arbitrage which came from COVID-linked situation in China, supply chain issues coming in from China. Yet for India to emerge as a leader and to be talked in the same language, same sentence with China is a long way to go.
Now, if we were to expand this discussion, then long way to go means that India has a long distance to cover, at the same time, a huge opportunity to encash.
Sure. I think that's helpful. If I were to stretch this question a bit, in terms of the competitiveness of manufacturing, I mean, since you are also evaluating a lot of projects at Dahej in terms of molecules. From a competitive landscape perspective, has that breach narrowed, at least in a lot of molecules, if not all? Typically we see that molecules where there is very high complexity involved in processing. In India tends to do better on the cost curve. At least in those molecules, do you see that the gap is narrowing between the cost of production in India and China? I think that breach is still out and we need China to settle down on this COVID and then reassess how it stands out.
I know one thing for sure that cost in China has significantly gone up over the last three years. One of the factors towards that was environmental regulations being strengthened in China and the erraticity of campaigns, again, the environmental campaigns run by the government there. Now, how the cost is panning out is yet to be defined. Yet, if we generalize this to an extent that a lot of capacity is coming up in India for different chemicals, Dahej just being one example, many chemical plants are coming up in India, and there is a lot of buzz around investments in chemical, petrochemical industry, fine chemical industry. That buzz certainly talks of one thing, that the demand from Indian market is absolutely existing.
How much is the gap between Chinese and Indian cost, or how much is the gap between Chinese and Indian reliability? Are the two factors which India can leverage as a country. That is something, you know, will vary either industry by industry or if there is a country advantage here, then that becomes too macro to be responded to.
Correct. No, I absolutely agree. Maybe I'll take this over a cup of coffee with you someday.
Absolutely. Most welcome, sir.
Thank you so much, sir. I think all the best to you for the upcoming season.
Thank you.
Thank you. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, thanks for the follow-up. Again, on the Dahej project, we had earlier indicated that we'll be having the formulation plant, one insecticide MPP and one MPP for herbicide plant. However, we were constrained from the customer side, because the plant was not ready and obviously they were awaiting the entire commissioning of the plant. Any positive vibes from the customer in terms of orders or any, you know, headways from that point? Thank you.
I'm wondering on this question because we never brought in anything in reference to the customers here, so well, no relation to that, sir. Our project, Dahej project is on track in terms of its commissioning plan of March 2023, and that continues to be there.
Right. Maybe I did not ask the right question. Basically, earlier we were an asset-light model, and given that our customers were situated outside of India, and they want someone to manufacture or tool manufacture their products, we have now put up this facility. Probably given our long-term relationships, we will be able to capitalize on those relationships to get such kind of orders. I was just referring from that perspective that any customers who have approached us now that we have, you know, clarity in terms of when the plant is going to be coming up, and we will be able to serve them better from that perspective. Thank you.
Right. Now I got your point. Yeah, when we are putting up this Dahej facility then it is multidimensional. Of course, we are setting it up for, to some extent for captive consumption, then for domestic and export market and also for toll manufacturing for our various global opportunities. Those are like in talks. Some of them are moving forward with different speeds and as and when they shape up along with the Dahej project's design, then probably would be a good time to bring to this forum.
Right, sir. This is really helpful. One, again, last question in terms of guidance. Based on the guidance on revenue and EBITDA, and what we have done in first quarter, it seems that we'll have to make about average INR 75 crore EBITDA for the next three quarters. What gives us confidence that we'll be able to achieve it? Is it based on the new products which are introduced or based on the IIP, which has gone to about 18% during Q1? What are the parameters with which we are so confident that we'll be able to achieve this particular guidance? Thank you.
You see, we are quite confident in terms of the seasonality. If we are, say, confident of delivering a two-digit growth, I'm sure we should be able to deliver that much of EBITDA.
Sure, sir. That, that's really helpful. Thanks a lot and best of luck, sir. Thank you.
Thank you. We have our last question from the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead.
Hi. Thanks for the opportunity, and hopefully I'm audible. Most of my questions have been answered.
Mr. V.P. Rajesh?
Yeah. Is it better now?
Yes, sir. Please go ahead.
Yeah. I was saying that most of my questions have been answered. I just wanted to ask about your view on the monsoon in North in this month and September. Are you seeing them getting better and therefore by the time season ends, it'll be more normal or you see some deficiencies in these territories?
Sir, you are equally dependent on IMD and Skymet as are we. Please don't take a monsoon forecast on this line.
No, no, because you are closer to the ground source, so that's why I thought you could have.
You know, being where we are, we are really happy the way monsoon has exhibited its performance in the month of July. That has been really heartening. The soil moistures and water tables have gone up. The sentiments in the markets have really boosted. Inventories have really moved. Farmer is looking forward to a good crop. All that is really turning out favorable. We are looking out to a very robust Q2, and we are very positive about it. Some of the indicators are that monsoon will continue to be good in the month of August and September. Although East India might face some slowed or delayed rains still. East India is lagging behind in general and the forecast is it might still lag behind somewhat. Other than that, the country is expected to continue receive good monsoon rains.
Okay, that's very helpful. My second question is on the paddy prices. You said that they have shot up. Do you see them cooling off if the monsoon is good or do you think the sowing season has already passed for that crop and therefore, you know, the prices will remain high?
The sowing season is largely passed for majority of the country. However, south and east still there are sowing opportunities, number one. Number two, in general, India has been a paddy excess country. We normally have excess paddy. Overall, farmer can benefit if the prices remain high at the time of selling also, or India is able to offload a large chunk of excess inventory in the global markets. Both situations India can really benefit. The farmer can really benefit.
Understood. Okay. Thank you so much. That's all.
Thank you. I would now like to hand the conference over to Mr. Manish Mahawar from Antique Stock Broking Limited for closing comments. Over to you, sir.
Yes, thank you. On behalf of Antique Stock Broking, I would like to thank the team of Dhanuka Agritech for providing us an opportunity to host the call. Dhanuka, would you like to make a closing comment, sir?
Yeah, Manish. To summarize, Dhanuka continues to demonstrate its ability to overcome challenges and emerge stronger despite uncertain business environment. We will aggressively roll out new formulations in the upcoming quarter and would ensure that it reaches to the consumer. I reassure our stakeholders that we are committed to the task of transforming the landscape of agriculture in India and will play an integral role in rewriting the future of a better and new India. I once again assure that the second quarter is going to be a fantastic quarter for the company and the industry because of the good rainfall and July has shown the positive path ahead. We expect that similar performance we will be able to do in August and September month, and by end of September we will be able to show much better performance. Wishing you all the health and safety.
Thank you very much.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.