Please note that this conference is being recorded. I now hand the call over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, Mr. Mahawar.
Thank you, Sanjay. 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. Harsh Dhanuka, Executive Director, Mr. Rahul Dhanuka, Chief Operating Officer, and Mr. V.K. Bansal, CFO on the call. Without further ado, 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 Q4 of FY 2021-22. I have with me Mr. Rahul Dhanuka, CEO of the company, Mr. Harsh Dhanuka, Executive Director, and Mr. V.K. Bansal, CFO of the company. As you know, Dhanuka Agritech is a leading agrochemical company in India, focusing on brand sales in the market. The company's strength lies in the manufacturing and marketing of formulated products. The products 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, and 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, safe supply chain. Dhanuka has 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, we cater to around 6,500 distributors and dealers and around 80,000 retailers. Through this 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 efforts of this team, Dhanuka was able to secure higher growth in its focus products in comparison to generic products, which in turn help us to protect the bottom line in a challenging year. 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 ten leading global agrochemical companies from the U.S., Japan, and Europe, which helps us to introduce the latest technology in India. There was adverse impact of weather conditions in the H1 of the year, which has impacted the financials of H1 of the company. However, it was reversed from September, and the conditions became favorable for consumption of agrochemicals. This has helped the company to recover its performance in the H2 of the last financial year.
The growth in the H2 of last financial year would have been much better if the South India would have not faced the three cyclones and the attack of the black flies in the chili crop. The chili crop in South India has been destroyed because of the attack of black flies, and three cyclones has impacted the consumption of pesticides in South India, where the company got the dent in the growth. As per IMD report, the monsoon is expected to be normal this year, which has brought smiles on the faces of the farmers. Also, the high commodity prices will encourage the farmers to protect their crops with higher investment, and we expect higher consumption of the agrochemicals in this year.
Now, moving on to the financial performance for the last quarter, I'm delighted to share that our revenue from operations stood at INR 318.30 crores in Q4 of FY 2021-22 versus INR 275.56 crores in Q4 of FY 2021, representing an increase of 15.51% over the corresponding period last year. For the financial year 2021-22, it was INR 1,477.78 crores versus INR 1,387.46 crores, which is 6.51% up over last year. EBITDA stood at INR 77.27 crores in Q4 of FY 2021-22 versus rupees 73.36 crores in Q4 of FY 2021, representing an increase of 5.33% over the corresponding period last year.
For the financial year 2021-22, it is INR 296.97 crores versus INR 302.81 crores last year. Profit after tax stood at INR 54.29 crores in Q4 of FY 2021-22 versus 48.64 crores, representing an increase of 11.6% over the corresponding period of last year. For the financial year 2021-22, it is INR 208.78 crores versus INR 210.56 crores in FY 2020-21. The zone-wise percentage share of turnover for financial year ended March 31, 2022 is as follows for quarter four. The North India is 27.49%, East India is 12.71%, West India is 22.42%, and South India 37.38%.
Product category-wise share of turnover for Q4 of FY 2021-22, the insecticide is 44.56%. The fungicide share was 19.49%. The herbicide share was 24.49%, and others, including PGR, was 11.46%. The Board of Directors has recommended 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.
The payment of final dividend will be subject to the approval of the shareholder in the thirty-seventh Annual General Meeting scheduled to be held on 2nd August 2022. As discussed last time, the company is working on its greenfield project at Dahej, Gujarat, as per scheduled plan. Some new initiatives for business expansion that we have taken in the last financial year are investment in drones manufacturing startup, establishment of a biological product division, and a new export division for creating new revenue streams for the company for mid to long-term growth. In the last phone call, we informed that the company has a strong pipeline of Section 9(3) products as the CIBRC has approved 9(3) registration for the company's products.
We are happy to announce that apart from launching Section 9(3) products, the company is also planning to launch three new Section 9(4) products under category Section 9(4) in this financial year. This will drive the revenue growth in coming years. Being India's leading agrochemical company, we 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 platform, 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 Organizations, Krishi Vigyan Kendras, and other critical institutions to increase our business expertise and boost our market presence. Thank you very much for your kind attention. We will 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 handset 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 Mr. Viraj with Securities Investment Management. Please go ahead.
Yeah. Hi, thanks for the opportunity, and congratulations for a good set of numbers into the challenging environment. I have just three to four larger questions. First is, you know, if we look at our old brands or product sales, performance over last 7 years, you know, the sales have grown by around 10% CAGR between 2014 and 2021. If we exclude the high growth of 2021, the growth has still been a healthy 7% growth. So just trying to understand where are we seeing this growth, coming to us from, you know, in the old product brands and products, and how much of this is volume-led as against price-led. So any perspective you can share on this.
I'll take that, Mr. Viraj. You know, this growth is actually being driven by Indian agriculture and Indian farmers, I would say. There are three dimensions to it when it grows. One, more and more land is coming under chemically treated or chemically protected. Two, farmer is using relatively high-value products for higher price of commodity that he is getting. And three, farmer is using more of the products to ensure that the entire life cycle of the crop is well protected in terms of both quality and quantity. These three dimensions are the ones which are bringing in the growth, augmented by a reliable monsoon and good commodity prices.
For us, this growth has been coming in from a very, very strong weedicide portfolio, right from Targa to Sempra and our last year launch, Onekil and two more, three more weedicide launches coming in this year. A very strong weedicide portfolio which matches with non-availability of farm labor. That's one. Second is, we have introduced couple of very powerful fungicides for export-oriented crops, horticulture crops like pomegranate and grapes, which have been very well accepted. This is, what is bringing in the growth. The additional dimension to add there is a strong channel which, picks up Dhanuka's generic products as compared to other companies as a preferential treatment to Dhanuka's quality and Dhanuka's service, which brings the growth to Dhanuka. Yeah.
Just to follow up on this. One is, how much of this is—I mean, what will be the volume versus price mix? You know, when I look at this old product brand sales performance over the last, say, five or seven years, any perspective you can share there? Do we have any further avenues, either in terms of increased coverage or more crop applications which can help sustain this mandate? I mean, why I'm asking this is because, you know, what we understand is, typically after any new product which we get exclusive supply for sale in domestic market, after the third or the fifth year, you know, the new joiner competition kind of creeps in and one typically sees a significant price erosion.
For us, you know, when we say the major products, how would have their volume versus price mix been? You know, how should one look at the sustainable mandate for growth, you know, not in the near term, but if I have to look at, say, next three-five year kind of a view.
Well, I can't really answer that in terms of next three to five years because of the extreme uncertainty around the back-end supply chain for now. Yet it will not remain that way for long. It will stabilize over a period. For us, a large chunk of the growth is driven by our specialty products, which have relatively stable supply chain and stable pricing from our principal companies. Now, that's a tricky balance. Now, overall, as a value growth this year, you know we have grown by 6.51%. The volume growth this year has been about 3.13%. Yes, I completely understand the price erosion possibility when the generics come in one after the other. We try to ring-fence that by constantly upgrading the life cycle of the product by either developing new formulations or developing new variants.
That's what keeps us ahead of the competition, and that's also what keeps us in the fresh view of the farmer, wherein we are constantly trying to solve the farmer's next problem. Yeah.
Just one more question, and that is largely on the NPI index. I mean, you know, as you said, you know, we have taken quite many initiatives over the last couple of years. I think the cutting the tail in the distribution network or running incentive of programs for the top performing dealers or, you know, the launch pipeline has also been quite decent. Still, somehow the NPI index continues to remain low, and this is before COVID as well.
Is it that, you know, the, in terms of products which we are launching, they are more niche in nature and, whatever scope or opportunities we had, and that has largely been utilized because incrementally, you know, whatever opportunities we had, they are kind of conflicting in terms of product profile one may have and versus the potential, pipeline from the partner. Any perspective you can share in terms of the ITI, how should one look at it going forward?
Yes. There are two elements to the NPI index. One is the 9(3) registration. There is some noise at the back end if we can mute the line. Yes. Thank you. 9(3) registrations have their long gestation period of six-seven years since you put in the pipeline to when it comes out and gets commercialized. That is one thing. Second is various 9(4) or me-too products that we introduce.
When you say, you know, tail cutting, this is also one thing where we kind of decided to optimize after a peak of 20% ITI in 2017-18, where we realized that we have introduced some products which are not going to sustain beyond three years. We kind of corrected our approach there, and we are now introducing relatively more stable products which have relatively higher potential and market access. We have kind of optimized the new introductions, the 9(4) introductions. The 9(3) registrations have certainly got an impact of about six-10 months extra because of COVID. Few of our registrations, as you are aware, were delayed in this COVID cycle in 2020 and 2021 also when the registration body, registration committee did not meet or approve the registrations.
I think to that effect, these two effects will wane out quickly and you'll see a higher NPI index soon.
I will come back in queue. Thank you.
Thank you.
Thank you. Ladies and gentlemen, please limit yourselves to not more than two questions. If you want to ask more than two questions, you can fall back into the queue again and ask more questions. Next question is from the line of Mr. Varshit Shah with Vitol Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. First of all, congratulations for decent set of numbers in Q4 despite the challenge. My question is on more so pertaining to H2 of FY 2023 and going into FY 2024. If my telecheck is correct, some of the technical prices in the forward markets appear that the prices will correct and normalize in the H2 of FY 2023. In H2 of FY 2023, you will have in terms of revenue a pressure in the form of a deflation of some sort, if not a mega deflation. At the same time, your NPI index indicates that some of the new molecules are also lower. The impact because of the mix will be actually higher on the revenue erosion.
My question now is that, do you see a kind of a flattish revenue growth at the industry level in H2 of FY22 and FY23? Would that have some impact on your overall EBITDA margins because of some loss at the inventory level? Or is it too early to call that?
You answered that it's too early to call that. Yet my take is different, Mr. Varshit. Can I get your crisp two questions? I really didn't get that.
Yeah. Okay. I'll repeat myself. What I wanted to ask was that do you see revenue erosion in H2? Because our mix is, when I see the NPI index, is more towards the existing molecules which you already have in over the years. And the pricing probably would be higher because of the normalization of technical prices. Do you see that H2 revenue growth could be flattish on a year-over-year basis because of this deflation? Of course, I mean, there's a difference over at the EBITDA level.
Okay. The deflation thing has, you know, kind of remained hanging since January. In January we were talking by after the Chinese New Year we'll have deflation. In February we were talking that now in April we'll see that. In April we are talking May after the Japanese Golden Week, and in May we are already talking July. The supply chain is choked due to relative erraticity of what's moving out from the global supply chain because of the non-availability of containers and ships which are stuck in a traffic jam, as is a cry from all the industries, not only agri input industry. This deflation thing is relatively elusive. Now deflation, apart from the pricing function, apart from the pricing is a function of two more things. One is demand based upon monsoons, and two is the commodity prices.
Now, these two things being favorable, I don't see that the deflation would have significant impact. If any, that should be compensated by the volume growth.
Understood. Sir, one clarification on the presentation. We have given that the guidance of similar EBITDA. Is it an absolute guidance or is it a margin percentage guidance?
It is in percentage.
Okay. EBITDA margin percentage guidance.
Yeah, that's right.
Sir, one last question from my end. I'll come back in the queue. If we see our inventories, it has not increased drastically from a YOY basis. Going by the paid inventory and higher inventory, higher payables in the balance sheet, it appears that probably you've done higher placements post thirty-first March in the channel. Is that assessment correct? If yes, what is the current channel inventory versus what you want from a normalized monsoon, assuming a normalized monsoon perspective?
We are not making any kind of placement. That is not the Dhanuka's policy. Dhanuka is supplying in time material to the dealers and distributors as per their demand. No major placement has taken place in Dhanuka. Whatever supplies has been made, they are basically in line with the current requirements of the farmers and dealers and distributors. I don't foresee any major inventory for Dhanuka in the channel. You are right that some of the peer companies, they definitely make placement of the material in the month of March, to basically, complete their targets for the year. Their inventory levels will be little bit more. Overall, as Rahul was
The Shanghai port was closed for 1.5 months, and we are still dependent on China for import of technical grade pesticides as well as the intermediates, which are used by the technical manufacturers in India. Demand is more and the supply is less because of the China factor. I don't foresee any reason that there will be less demand because of the high channel inventory.
I think this is helpful. Just to clarify on that, I think our inventory levels have been higher by 17% on a YOY basis. Absolute and of course, I mean, a lot of it is contributed to price rise. From a volume basis, we are largely at the same level, or maybe ±2-3%, on a YOY basis. Is that assessment correct?
You see it is not on the same level. You are absolutely right because of the price increase and the cost will increase. In my opinion, the volume level will increase of around 5-7%, right? 10%-12% on account of the price.
Understood. Thank you so much. I'll get back in the queue. All the best.
All right.
Thank you. The next question is from the line of Mr. Trilok with Dymon Asia Capital. Please go ahead.
Yeah, hi. Good evening, sir. Thanks. Just, you know, from a gross margin perspective, where do you see this, you know, settling down in. You have already highlighted about the EBITDA margin maintain, you know, guidance this year. Do you see, you know, any challenge in context of, you know, taking further prices and offtake by the farmers? Second, how is the placement, how is the season going, for. What's the outlook for next year, at least particularly H1 ? If you can, you know, speak on these two aspects.
You see, as far as gross margins are concerned, we are expecting the gross margin would be in line with this year's gross margin. They should remain almost similar to the 2021, 2022. Right?
Any further price increases, you know, after the, you know, last quarter?
No, no. I'm saying on annualized basis.
Fair enough. Yeah, with respect to the outlook for the H1 and how the placement has been, if you can just talk about it, that'll be helpful because Q-
Outlook is really good because if we see the normal monsoon, so we are expecting this year the growth will be good one in the H1 of the financial year, absolutely.
When you spoke on initial comments about the, you know, Section 9(3) and Section 9(4) products, do we expect any sort of, you know, sales growth in this year? What kind of a targets are you sort of thinking from those products?
We are expecting introduction of about three new 9(3) molecules in Q1 and three new 9(4) molecules again in Q1. Total six products in Q1 we are expecting the introduction. They will definitely contribute to the revenue in this financial year.
Sure. Obviously, large portion will be only happening next year itself. Thank you. I'll come back to you.
Thank you. Ladies and gentlemen, once again, due to time constraints, please limit yourselves to not more than two questions. Next question is from the line of Rohit Nagaraj with Emkay Global Financial Services. Please go ahead.
Thanks for the opportunity and congrats for a good Q4 and overall good performance for FY 2022. The first question is in the presentation we have said that we have established a biological product division and a new exports division as well. If you could just elaborate on when do we see the biological product division coming out with proposed set of products? And on the exports front, where have we progressed, given that probably the first phase of our facility will be ready by end of this financial year? Thank you.
The biological team is right now doing market survey and study, and they are trying to pick up the right elements for enhancing our portfolio and offering the right integrated and comprehensive solution to the farmer, coupled with the chemical solutions that we are already and conventionally offering. I hope to see something taking shape by year-end on that front. Of course, on one side our Dahej plant is coming up, which will boost our export initiative, yet we are starting it now in anticipation of Dahej, as well we'll be doing other generic and formulated exports this year itself. These two divisions have just come up recently, and they would contribute for the future growth of the organization.
All right, sir. Just one clarification on the exports front. Have we talked with any of our existing, you know, relationships with the global MNCs for the opportunity, given that we'll be ready with the plant in next one year?
Those are in talks, yes. Not that I can share something in this group. But we are working on that to leverage our relationship with various multinational organizations.
Got it. Good to hear. Also, second question again, on the China front, that there have been, again, cost inflation issues which are cropping up. Have you been able to take on the price increase rates concerning with the increase in the cost pressure and whether we have been able to pass it on completely, through the price increases? Thank you.
you see, it is not passed on completely, but you see it is for everyone, but we are expecting that will be passed on, you see, some part in Q1 and remaining by Q2 definitely.
Right. Got it. That was very helpful. Thanks a lot and best wishes.
Thank you. Next question is from the line of Jay Shah with Capital PMS. Please go ahead.
Hello. Congrats on a good set of numbers. My broad question is based on the business strategy that now this whole China plus one is taking shape. Just wanted to know how does the management think of going forward? Do we even plan to get into, you know, procuring actives locally? Because now a lot of Indian companies are also making the actives for even these multinationals that we have tied up with. Or do we even think of, you know, going backward and make the actives on our own? Because formulation as such is our, has been our strength and the key area. What is the business strategy just going forward, I just wanted to know.
There are two elements to that. One element is China plus one. That China plus one is, for a while I would say is a myth created by some interests. Let it be. Nothing against it. Yet for Dhanuka, what we see is we want to leverage our opportunities very carefully. One of them being is the chemical production in India, for which the current government and everyone has been working aggressively irrespective of China, which goes on from the Atmanirbhar Bharat perspective, which also goes on from the PLIs being offered for various initiatives in the country. With this, the efforts to boost up manufacturing in the country irrespective of what segment it is, which has been really neglected for long. Manufacturing is going to take a boost and Dhanuka is going to participate there.
As far as sourcing is concerned, we source the right quality, so long as it is available at, the right prices from wherever it is. Be it the domestic suppliers, which constitute a very, very large percentage of our procurement, or from China and of course the exclusive products from, Japan and Europe. We are balanced out in terms of, where we get the generics from. Yes, the specialty products, the 9(3) registrations are mostly coming from the R&D hub of Japan.
Basically going forward, we, even if we get into manufacturing, you'll be more into innovative formulations rather than going directly to the intermediate or the active state.
Those are two, you know, different segments which will work independently for independent and exclusive success, exclusive of each other. Yet wherever synergies are possible between the two businesses, we will certainly leverage that. Backward integrated manufacturing setup means that we are able to service our channel and our farmers better on the selected products. At the same time, strong formulation and distribution setup means that we are not disturbed by erraticity in short term. We are going to leverage on both the fronts.
Okay. Got it. Thank you so much.
Thank you. Next question is from the line of Rohan Gupta with Edelweiss. Please go ahead.
Yeah. Hi, sir. Good evening, and congrats on a good set of number in a challenging environment. Rahul, the first question from you, for you. You mentioned that volume growth for us was close to 3.5% for FY 2022. From your estimates and being close to the market, what do you think that would have been volume growth for the entire industry in the current year? That first question.
Oh, that's really a challenging one, Mr. Rohan. The industry is talking of not growing in the value terms. Few companies do talk of growing in the range of 8-9%. Most of them talk of negative to flat growth. That is as far as the value growth goes. It's a guess when the volume growth is at 3% for us. Then my guess is, and I don't have a breakdown, I don't have an informed guess here, that the volume growth would anything be between 2-4%.
Okay. Second is that raw material challenges still remains there. As you rightly mentioned, that the inflation is not stopping and we had just only been expecting that the prices will fall down, but they haven't been. Even the logistics challenges has been continuously growing. In that kind of environment, Dhanuka always had a strategy in place to procure raw material well in advance to stock, to have sufficient raw material inventories. But sometimes that has led to negative impact on our margins earlier if the price falls.
I just want to know that how you are building up your current year strategy in terms of procurement of the raw material and keeping the inventories in the current scenario, when the raw material prices are continuously on rise and logistics is still the main challenge.
You have put in something there about Dhanuka which I'll not take it at face value, sir. Dhanuka's strategy is neither to front load our raw material stocks nor is to run dry. We try and maintain a right balance in partnership with our suppliers and vendors. Dhanuka has really long relationship with most of the generic suppliers, be it in India or China, and our relationship with multinational companies run very deep when it comes to planning our procurement, listing, and the price fluctuation. We adopt a very balanced approach. Yes, once in a while, one or the other product would hit a cycle wherein we get benefit of a price escalation due to our inventory, or wherein we get a de-benefit of price de-escalation, if at all in the situation. Now, this is again very unpredictable.
We are going to go aggressively with one approach, which is the customer-centric approach. If Indian farmer needs to protect his crop, he will find a Dhanuka product on the shelves. That is for sure. That is what we live with and that is what we will do.
Sir, being so close to the market and what you have already mentioned in the presentation, the year looks pretty strong as far as the farmer profitability and high agri commodity prices are concerned. You did mention your growth target of double-digit growth on the back of volume growth of 7-10%. Can you also share something on the industry, how you see the industry growth this year? Will it be in line with what you guided or it is likely to be lower or higher?
I think so. Industry growth is something I really won't be able to forecast. This industry is driven by commodity prices and by the favorable monsoons. Those two things being favorable, the industry should look positive in any case.
Don't you think that you're, given the current stage of the industry on a low base of last year, your guidance are slightly on a conservative side with a 7-10% kind of growth? Do you or you think that it's going to be pretty easily meeting those targets and you will be surprising on a positive side? That's what I'm asking.
On one side you are saying, are they conservative and we will be meeting easily, on the other side. No take on that one. What we are giving is very, very realistic, what we feel we are committed to deliver, what we feel the market would accept, as in our customers would accept, and would bring the value to the table. The customer will bring that value to the table, and Dhanuka will bring that value to the customer's table. That's what, that's how we look at the growth opportunity, and that's how we look at our robust double-digit growth.
Fine, sir. I'll come back to you for any further question. Thank you so much, Ravi.
Thank you.
Thanks a lot.
Thank you.
Thank you. Next question is from the line of Ankit Kumar with Alpha Capital. Please go ahead.
Thank you for taking the question. My first question is on growth guidance. As in we are seeing double-digit growth. Will that be equally divided over the year or we expect one quarter to be much better because of low base of last year?
We are saying for the year.
Sorry, sir.
For the year, we are giving the guidance.
Yes, sir. I am asking whether that growth, that will be equally divided over all the four quarters or H1 as well as H2 , or we think H1 will be much better because of the low base of last year?
Okay. We are expecting much better in the H1 of the financial year as compared to the H2 of the financial year.
Sure, sir. That's nice to know. Sir, we earlier used to do buyback. We did it in 2019 as well to 2020 also. Now we've stopped doing that. Any change on policy on that front?
I think it should be decided in the board meeting. I cannot comment just now.
Sure, sir. Last question would be on, as in there are a lot of commodity price hikes, and then also we are saying we'll be able to maintain FY 2022 margin. Any color how are we going to maintain those kind of good margins?
When you say commodity prices, you are talking about chemicals or you are talking about end product agricultural commodity?
Agricultural commodities and all. As in our raw material also would have gone up. How do you think we will be able to maintain our margins?
There are various elements in which we are going to maintain that is, one, our thrust is constantly on our specialty products. Our thrust is continuously on servicing the channel and servicing the farmer. Now, the service to the channel and the farmer brings him back to choosing a Dhanuka product versus the other options available on the table or sometimes not even available. That's how the value would come in. Now, the higher commodity produce price is what will motivate the farmer to invest in his crop and go for additional protection and a proper protection for his crop, which stands to benefit the industry, which stands to benefit Dhanuka.
Raw material prices going up, of course, the effort here is to pass on the price increase as much as possible, and we continuously create a balance between what the farmer is accepting in terms of the price increase and what he does not. We modify our approach to meet the farmer's requirement on the ground.
Sure, sir. Thank you and.
Thank you. The next question is from Soumya V. with Spark Capital. Please go ahead.
Thanks for the opportunity, sir. My first question, with respect to, you know, the RM cost. Excluding freight, how do you see the supply situation from China? Do you see that getting better in coming months? That's the first part. Second part, what is the impact of freight cost to your overall RM?
You see, we are importing the raw materials on CIF basis. That is Cost, Insurance and Freight. Dhanuka is not directly paying freight on the import. Freight is being paid by the exporter only in case of our import supplies. However, the indigenous materials are on both the terms. They are on a for delivered basis also, and some products are on a ex-factory basis also. We are not spending much amount on the freight cost on account of the raw material procurement. However, the freight is incurred on stock transfers from factories to zonal warehouses, zonal warehouses to the branch warehouses. That freight is definitely incurred and that is substantial amount.
The supply situation in China, sir. Do you expect that to get better in the next few months?
Yeah. It is expected that the Shanghai port has also started working and some shipments are taking place from Shanghai. The importers who are importing mainly from China, they are talking that from June first week onwards, the supply situation will be much better. The orders which were placed earlier and which were delayed, now they are saying that in the month of June, we will be able to execute your pending orders. We do hope that supplies will definitely improve from June onwards.
Understood, sir. Was also trying to understand from the angle, that the utilization levels in plants, there are you're seeing some kind of an increase and that will bring more supply in. Was trying to look from that angle.
I cannot get that question.
Can you repeat your question? Please repeat.
No, I was looking from the angle that, you know, probably the utilization levels in recent months have been on the lower side. Is there a possibility of that to kind of improve and then more supply coming in from, China?
In general, various sectors put together, the supplies would increase.
Yeah.
Including the utilization, opening of the ports, de-blocking of the supply chain. All these points put together, the supply would improve.
Understood, sir. Last question. Can you just, you know, help us on your CapEx plan, for this year and next year, and also touch upon a bit on your, the project status, when it's expected to come online and also the asset turns which you have spoken earlier?
Yeah. You see, in case of Dahej, the CapEx plan this year is around INR 120 crore, and other than Dahej, our CapEx plan is around INR 20 crore for this financial year.
Sorry, sir, I didn't get the part on other than Dahej.
INR 20 crore.
Got it. The projects, sir, the status of the projects?
You see, project status is absolutely almost in time, so we are expecting the production will start in the month of March 2023.
Understood, sir. Also the current year revenue, guidance that you have given, anything, is factored from the new projects? Also the new line of business that you had referred to.
No, it is absolutely nil.
Understood, sir. Very helpful. Thank you.
Thank you. Our next question is from the line of Saurabh with Amsec. Please go ahead.
For the opportunity. If you can give the volume growth for Q4.
Yeah. Q4 volume growth is 11%.
Okay. Sir, we mentioned there will be price hike in Q1 as well as in Q2. What kind of quantum of price hike we are looking at over next two quarters?
You see, in the Q1, I'm expecting the price hike as compared to the previous year be into the range of 3-4%, and Q2 might be around 2%.
Okay. Sir, any specific crop where, you know, we are finding difficult to pass on the higher cost?
Every month we are passing on the cost to the consumer because the prices are not rising in one month. They are rising on month-to-month basis. Every month we have our price meeting in which the CFO, the CEO and MD participates apart from the senior team members, and we take the price decision on the basis of the prices of the competition in the market, our increase or decrease in the costing and accordingly, the volumes which we have been able to do in the last month against the clients growth which we have achieved in the last year, last month. These are the basis for taking the decision for price hike or reduction. If the raw material cost is reducing, we reduce the price and if the raw material cost is increasing, we increase the price.
Sometimes it happens that you are not able to pass on the complete cost increase in one go. You take 50% cost increase in one month and 50% you defer to the next month.
Sir, my other question is on export. You mentioned you will start formulation export, so will it be in FY 2023, and have you received the registration for some of the molecules?
Actually, the person who has been basically selected for the post of GM export, he will join in next month end, by June end. Since he's already having exposure to the export, he will take the decision. Some of the registrations we already have for the export and export registration are being granted by the Ministry of Agriculture also in a shorter period. He will advise which of the molecules can be exported on immediate basis without registration in those countries. Those registrations we will apply, and our R&D team is confident that within three months we will be able to get the registration for the exports.
Okay. My last question on the, you know, profitability and the outlook on the e-commerce front. What is the sales or percentage which comes from e-commerce right now, and how is the profitability on to this channel versus the traditional channel?
On e-commerce platform, there is no difference in profitability as of now. They are at a very nascent stage in agri domain for now, but growing very fast. Various models are there, which are servicing farmers and retailers through direct service to them. Currently we are working with four or five such online platforms and many more new such platforms are coming up. We don't see any immediate impact on the margin for the organization as we are working closely with them and focusing on providing the proper services to the farmers and training to the retailers.
Okay. Thank you, and all the best.
Thank you. Next question is from the line of Abhijeet Akella with Kotak Securities. Please go ahead.
Yeah, good afternoon, and thank you. I have two questions. First on the Dahej project. If I recall from your previous guidance, it is about INR 300 crore CapEx with about INR 350 crore revenues and 12-15% EBITDA margins. I just wanted to confirm if these numbers are correct. If so, the, you know, return on capital on the investment seems to be a bit on the lower side, you know, only in the low double digits or so, say 10%, 12% pre-tax. Is that the case? If so, you know, what is the thought process behind going for this investment?
Yeah. You see, in terms of investment, you are absolutely right. The investment will be in the same line, basically up to the FY 2023-2024, around INR 300 crore. That is there. In terms of revenue, that projection is, you see in the next three years, right?
Sorry, sir. I thought you said INR 350 crores on this INR 300 crore CapEx.
Yeah, INR 350 crore in the third year.
At peak, yeah.
Right. The basis behind investment in Dahej in technical manufacturing with the low margins was that the question was whether chicken first or egg first. When we were approaching our Japanese partners to give us some specialty molecule for manufacturing in India, so they were talking that you don't have any technical plant and you are discussing about the product. We waited for some time and then finally we decided that let us start with the generic, but our ultimate goal is to go for the specific specialty molecule of the multinational. Ultimately, the good margins will be coming from those molecules which will be shared by our Japanese partners. Initially, we are starting with generics where the margins will be lower.
I understand, sir. Thank you. The second question I had was on the drone investment we have made, IoTechWorld Avigation. So if I have my numbers correct, I think the valuation of that company is somewhere around INR 150 crores that we have made. So sort of just wanted to check if you could share the headline revenue and EBITDA numbers of the entity. Also just to check, you know, whether an investment in that entity was necessary or we could have, you know, got the drone facility by just partnering with them as a, you know, technology partner or something like that.
I'll take the second one first. When we do see the drones as a very good growth opportunity. You would probably like to look into this from two different perspectives. One, investment in a startup
The investment in a strategic startup where there is a possibility of leveraging the services, leveraging the technology in the existing business. Yes, the board, the organization, everyone felt convinced about going ahead with this investment, and we are really looking forward to the drone landscape, so to say, the drone airspace changing dramatically with huge thrust coming in from the government, industry, and the farmer looking forward to it. Okay. Thank you. The investment was absolutely necessary. I see. Thank you. Just on the financials, if it's possible to share something. Thank you. Financials we'll share little later. Okay. Thank you.
Thank you. The next question is from the line of Himanshu Binani with Prabhudas Lilladher. Please go ahead.
Thank you, sir, for taking my question. This is I just have one question, and this is regarding to what we are actually mentioned in our presentation that we are actually sitting at INR 20 crore due to the Red Triangle products. Just wanted to have a sense that can you please name the products and-
I can't get you. Your voice is very hazy and disturbed.
Hello.
Could you repeat that? Yeah.
My question was pertaining to the point which you have actually mentioned in the presentation of taking a INR 20 crore hit in the revenues due to the Red Triangle products. I just wanted to have a sense of the name of the product, and secondly, are these products to do with the 27 odd molecules which the government has actually notified in the past. Are those molecules? There were three molecules which I believe were fell into the Red Triangle category. Are these products which we are referring to or is it something else?
No, no. Yeah, thanks. Now I get the question. I'll answer that. Out of those 27 products, there are three products which the government concluded to ban, were already banned in the country for all practical purposes. I recall Methomyl and Phorate and one more product. These products were not available in the country for the last four-five years in any case. That ban was a national thing to happen, and that's perfectly all right. The other products the government has not moved, and probably the entire thing has been shelved and closed. The product that we closed is a Red Triangle product, and that was the only Red Triangle product left in our portfolio, was monocrotophos. We wanted to really come out of the Red Triangle chemistry, and we closed this.
All the other products out of the 27 selected products by the government at that point of time, none of them are Red Triangle products, except for the three the government chose to ban.
This is the decision which we have taken as a company or this is a mandate from the government or something sort of?
Oh, no. We have taken this. This is an executive decision of the company to come out of it.
Sure, sure. Thank you.
Thank you. Due to time constraints, we have reached the end of question and answer session. I would now like to hand the conference over to Mr. Manish Mahawar for closing comments. Please go ahead.
Yeah. Thanks, Andrew. Dhanuka, I have just a few questions, two or three questions, on the company. One, in terms of the price corrections in this situation, suppose you have said like June or what you are witnessing or you are expecting the supply to improve, right, if of course if the raw material correct. Do you think like formulation player, formulator or player like us will benefit in terms of, in the case of price correction?
I don't foresee because as I told you, every month we take the decision on the price front. If the price is basically reduced, we are passing on the reduction to the ultimate consumer. If the price is increasing, we are passing on increase also. We don't foresee that there is going to be any major impact on the financials of Dhanuka because of the price increase or decrease.
Okay. Second, in terms of in the latest, I think this CIB registration meeting, I think there is one of the regulations which is the Section 9(4), similar registration, right? I think there is a consent letter is not required. Rahul, can you highlight what will the impact on the industry and do you think like Section 9(4) as a product will come under pressure or margin will be impacted going forward?
I think so we are still studying the impact, and we are taking a legal opinion also and consulting CIB also in terms of the interpretation of that. Too early for me to respond, but yes, after this call and once we have understood this, we can certainly talk about it, Mr. Manish Mahawar.
This has been approved, right, by the CIB?
Yes. Yes.
Okay. Last one, Dhanuka, can you give me a reason of this other income, higher other income for the quarter?
Other income higher is because of maturity income from the insurance company on account of the key man policy.
Okay. Understood. Sure. Thanks. Thanks, this is from our side. Yeah, Dhanuka, would you like to make a closing comment, sir?
Yeah. Just to add that to summarize in the last, Dhanuka continues to demonstrate its ability to overcome challenges and emerge stronger despite uncertain business environment. Last year was a challenging year, but in spite of that, Dhanuka has really done good. We will aggressively roll out new formulations in the upcoming quarters and would ensure that it reaches to the consumer. We are confident of achieving double-digit growth in FY 2022-23. I do assure our shareholders 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. Wishing you all health and safety. Thank you very much.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your line.
Thank you, Manishji. Thank you all the participants. Thank you.
Thanks, everyone.