Now I hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.
Thank you. On behalf of Antique Stock Broking, warm welcome to all the participants on the 1Q FY 2025 earnings call of Sharda Cropchem. Today we have Mr. R. V. Bubna, Chairman and Managing Director, Mr. Shailesh Mehendale, CFO, and Mr. Dinesh Nahar, GM, Finance on the call. Without any delay, I would like to hand over the call to Mr. Bubna for opening remarks, post which we will open the floor for Q&A. Thank you, and over to Mr. Bubna.
Thank you, Manish. Good afternoon and very warm welcome to everyone present on the call. Along with me, I have Mr. Shailesh Mehendale, our CFO, and Mr. Dinesh Nahar, General Manager, Finance, and our SGA, Strategic Growth Advisors, are there on the call also. Hope you all have received our investor deck by now. For those who have not, you can view them on the stock exchanges and company website. As you are aware, we are engaged in marketing and distribution of a wide range of agrochemical products, that is, herbicides, insecticides, fungicides, and biocides, catering to diverse global customer bases. We prepare comprehensive dossiers and seek registrations in our own name. We allocate substantial resources and establish our foothold in the market. Our total product registrations stood at 2,928 as of 30th June 2024.
Additionally, 1,040 applications for product registrations globally are at the approval stage, or I would say they are in the pipeline. The CapEx for Q125 stood at INR 78 crores, and we expect the CapEx to be in the range of INR 400 crores-INR 450 crores for the full year. For Q1 FY 2025, the total revenue has grown by 23% to INR 785 crores, with substantial volume growth of 41% year-on-year, mainly through agrochemical segment, with Europe nearly doubling and being a major contributor to the Q1 FY 2025 revenue growth. Volumes from agrochemicals grew by 49% year-on-year, and non-agrochemicals degrew by 39% year-on-year. Gross margins are at 29.2%, and they have come back to normalcy. We expect this to improve in the financial year with the prices expected to increase. With this brief overview, I would now like to hand over the call to our CFO, Mr.
Shailesh Mehendale, for discussing our financial performance. Thank you very much.
Thank you, sir. Good afternoon, everyone. Coming to Q1 FY 2025 performance, revenues stood at INR 785 crores in Q1 FY 2025 versus INR 638 crores in Q1 FY24, with an increase of 23% year-on-year. Coming to the split, agrochemical business increased by 43% year-on-year to INR 679 crores in Q1 FY 2025, whereas the non-agrochemical business decreased by 35% year-on-year to INR 106 crores in Q1 FY 2025. Gross margins stood at 29.2% in Q1 FY 2025, as against 8.7% in Q1 FY24. EBITDA for the quarter stood at INR 88 crores, with EBITDA margin at 11.3% as compared to a loss of INR 66 crores in Q1 FY24. PAT for the quarter stood at INR 27 crores, as compared to a loss of INR 89 crores in Q1 FY24. Working capital days have also improved in the last three months by 21 days and stand at 137 days as of 30th June 2024.
We remain a net debt-free company and have cash and equity investments of INR 624 crores as of 30th June 2024. We can now open the floor for the questions and answers. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Viraj from SiMPL. Please go ahead, sir.
Yeah, am I audible? Hello?
Yes, sir.
Yeah, thanks for the opportunity. Just a couple of questions. One is on the Agchem business. The volume growth in key end markets, is it more due to channel refilling or given concerns on freight issues we are seeing due to the Red Sea crisis? Or is it more driven by the consumption within these things?
See, the main factor has been the use of the few stocks which were lying with the manufacturers and in the channel throughout the seas. Those stocks are getting reduced and consumed, and the operations are moving towards normalcy.
Can you give some color on inventory levels where we are now compared to a normal cycle? So if you have to understand a normal cycle, are we still at the normal cycle, normal levels, or are we even below that, end of the inventory?
No, I would not say it is below. It may be slightly more, but it's difficult to give the figures because when I'm talking about the inventory, there are so many manufacturers globally, and the figures are not available to us.
No, I meant at the inventory in the channel, not at the manufacturing level.
But the inventory that I mentioned was including the manufacturers as well as the channel. It is difficult to make a guess. We can only make an absolute, I mean, approximate guess that the inventories were consumed, and they are still getting consumed.
In terms of demand, what is your sense getting across key markets like Europe or NAFTA? I'm looking at this because in the annual report also, you talked about growth to be driven by a mix of volume and pricing power. If you can elaborate, what are we seeing incrementally in the marketplace which will drive better pricing and volume?
See, the demand has been very good. As we have mentioned to you, the volume of agrochemicals has grown up by almost 49% compared to the same quarter last year. Europe has been the major and biggest contributor. Europe, the demand in the quarter one has been almost double the demand in the same period last year.
Okay. Sir, in the Agchem business, if you look at the EBIT margin, despite such a healthy growth in sales, one would think margins should normalize to at least 6%, 7% in quarter one. Historically, we have done at least 5%-7% EBIT margin in the first quarter. This quarter, despite such a healthy growth in volume, our margins are quite low. Was there any one-off or any further inventory provision?
See, the margins are also dependent upon the price levels. Some products that we are selling at $90 per gallon are being still sold at $20 per gallon. So last year, the company had to bear a very heavy loss by devaluation of the market prices. Now, the devaluation process has stopped. If we are selling at $20, they're also sourcing at maybe $17 or $18. The same product when it was being sold at $90, our sourcing price was about $70-$75. So in terms of percentage, absolute terms, the margins are still at a very low level.
So the spread or the percentage should be even higher, if not same, right? Because, say, on a $30 realization, the sourcing is $17. That's again, say, $70-$75 on a $90 realization. So in percentage terms, actually, margin would be, if not better, at least same as a normal cycle, no?
I think you have not heard me properly. I did not say $30. I said $20.
Okay. Okay.
We are selling at $20. We are sourcing at $17 or $18.
Okay. And on the other expenses, sir, what is driving such a sharp increase in other expenses? So last year, also, we had a very healthy base, and there were some one-off expenses in Q1 last year. So what is driving the other expenses, and how should we understand that for the rest of the year, both in terms of margin and growth?
Sir, one is, I would say, legal and professional fees. Second is foreign exchange loss.
How much is the foreign exchange loss?
I don't understand.
How much is the FX loss in this quarter?
About INR 8.31 crores.
This compares to how much of Q1 last year?
Last year, there was a gain of INR 9.5 crores.
Okay. Fine. I'll come back and see. Thank you.
Yes, please.
Thank you. Our next question is from the line of Preet Malde from Piper Serica. Please go ahead.
What is his name?
Preet Malde.
Preet Malde.
Yeah. Hello, Mr. Bubna. So I had a question. In the agrochemical prices, before the prices dropped so drastically, they had even climbed up pretty high. So as you're saying that some molecules that were $90, you are selling it now for $20. Now, what should be a ballpark figure that this would be considered as a normal pricing? So do you think that the normal pricing level is now $90, which was before the price drop, or is it somewhere around $15, $16? I'm just giving an example on the terms of the pricing example that you gave.
See, $90, in my opinion, is too far. It's only gradually going up, and it also depends on many other factors, including the cost of raw materials, cost of manufacture, and all that. So it may take quite some time to reach up to $90, but it would go up to $30, $35, $40. Maybe by end of the year, it may go up to $40.
Okay.
It's just a guess.
Okay. Okay. Makes sense. And you're saying that the inventories have started normalizing, the inventories being refilled. So what is still holding the prices down in these markets? So if the general sense is that the market has normalized, so what is still holding the prices down?
See, the market share. Nobody wants to lose the market share.
Okay.
You understand? Market share is one of the important factors.
All right. And just one more question. Historically, we've seen that Q4 has been pretty heavy for us with good top lines, good margins. So do we see that trend continue?
Yes, please.
Okay. Okay. [Foreign language] . Thank you so much.
Thank you.
Thank you. Our next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Thanks for the opportunity. I just wanted to understand the growth triggers on the non-agrochemical side. So there has not been recovery in the non-agrochemical volume yet. So how are we seeing the trend in that business?
See, in general, there is a lack of uptick in the demand. One of the factors contributing to the lack of demand is high freight rates. The freight rates form a substantial part of the goods here. Because of these Red Sea disturbances and other things, both the rate as well as the time of travel is quite high. That is leading to the overall drop in the volumes as well as revenue.
Got it. On the agrochemical side, are you already seeing the prices improving, or is it an anticipation that the prices will improve in the coming quarters?
See, the price will improve when the demand is more than the supply. Today, demand and supply is messing with each other, and people do not want to lose the market share. So people are not very keen to get better margins. They want to have the same market volume, market share. This situation will change gradually, and that's very normal and natural.
Okay, sir. And sir, last on the CapEx, which we are doing, or other registrations which we are doing, so historically, last few years, we have been doing somewhere around INR 250 crore annual registration. This year, the number you are guiding is INR 400-450 crore. So can you give some sense what kind of opportunities you are seeing, and how do you see these registrations impacting your growth in the coming years?
Mr. Lakhani, you are not very, very informed about the CapEx that we are spending in the last two, three years here. You see, last year, we have spent INR 420 crore.
Okay.
This year, 2022, 2023, our CapEx was INR 360 crores, but in 2021, 2022, it was also INR 415 crores. So for the last three years, we have been spending in the range of INR 400-INR 420 crores, and this is going to be more or less at the same level of slight increase compared to the average of last three years.
Noted, sir. Okay. Fine. Thank you.
Thank you.
Thank you. Our next question is from the line of Darshita from Antique Stock Broking. Please go ahead.
Yeah. Thank you for the opportunity. The first question is regarding the FY 2025 guidance. We had given a 15%-18% volume growth guidance with 15%-18% EBITDA margin. Do we still retain that?
Yes, please.
Got it. Okay. My second question was regarding the higher inventory days that we have seen on a buy-side basis. What would be the reason behind that?
I have not understood your question very clearly, madam. I would request you to speak a little louder.
Okay. Yes.
I understand your question.
Yeah, Bubna, I was just saying that the inventory days have increased on a year-on-year basis from 85 days to 103 days. So I just wanted to understand the reason behind the increase.
Madam, this increase is not very substantial or abnormal. This is part of the normal business operations. There are many factors, but I cannot pinpoint what is the exact factor which is leading to. I think the inventory level is fairly normal.
Got it. Okay. Thirdly, on the pricing front, if we were to look at the volume number for the agrochemical business, what we can see is that on a sequential basis, the pricing has improved. So is that the case from fourth quarter to first quarter? Has the pricing improved, or is there some benefit of better product mix in the agrochemical business?
Madam, the pricing has improved very marginally, not very much, compared to Q4 last year and this year. The trend is on the improvement because even the manufacturers are very unhappy with the current prices. On every given opportunity, they like to have better prices. Their margins are almost zero.
Got it. The next question was largely on this. If any sales returns, abnormal sales returns we have seen in the second quarter as of now?
No, not so far.
Okay. I had some.
Last year was a very, very abnormal situation. Otherwise, sales returns have never been so exhaustive as it was there last year.
Got it. If we can get the segmental, the region-wise volumes for the agrochemical business?
Yes. For Q1?
For first quarter, yes.
Yeah. For the first quarter.
Yeah. For the first quarter, the reason-wise agrochemical volumes.
Yes. In Europe, it is something like 5 million units. NAFTA region is about 4 million units. LatAm, 0.6 million. The rest of the world, about 0.35 million.
Okay. Can we get the region-wise gross margins?
Pardon me?
Region-wise gross margins.
Yes. Madam, in Europe, the gross margin is about 35%-35.5%. NAFTA region, 22%. LatAm, 32%. And the rest of the world, 38%. And average, overall, it's about 31%.
Got it. Can we get the region-wise registrations breakup?
One moment. Yes, please. In Europe, the registrations are 1,625. NAFTA, 300. LatAm, 750. And the rest of the world, 250.
Okay. That was very helpful. Thank you so much for answering all the questions.
Thank you, madam.
Thank you. Our next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead, sir.
Good morning. Thank you very much for the call. Bubna, so you talked about very healthy volume growth worldwide this quarter. So can we get an understanding of how this volume growth will compare if you were to take it on the first quarter of FY23, which is two years ago, because last year was an abnormal year? So if we were to compare the volume on a normal year FY23, what would it be like?
Sir, this is a very unique question. You want me to go back to the year before. Normally, we come prepared for the previous year. But give me two minutes. I'll try to research for it.
Yeah. So just to understand how it works out on a normal basis.
Yeah. So you asked me volume, no?
Yeah. Volume growth, yeah.
Sir, we don't have the figure for the Q1. We have for the full year. Now, that will be irrelevant then. We don't have ready-made information about Q1 of the previous year. I mean, previous to previous year.
Okay. So no, if you were to assume this 49% kind of, you know, it gets extrapolated for the entire year, if you compare it with full year FY23, what would it look like? Just to get a sense in terms of what would be the normalized volume growth once things stabilize.
Sir, conservatively, we feel that there will be a volume growth of about 15%-20%.
Okay. Okay. So if you were to look at the gross margins you have achieved, it's a question of being able to ramp up your revenues, in my understanding. Then you will be able to go back to normal EBITDA margins and perhaps improve your RoCE. So if you were to, you know, look ahead, say, over the next four to eight quarters, what is the, you know, best case you can take in terms of when you would see, you know, the some kind of discipline come back in terms of people trying to get market share and the excess supply coming down? And when would you see pricing power improving and margins improving on a sustainable basis? Would it be, say, by the January-March quarter next year, or would it be somewhere in the first half of next year? When do you think that will happen?
I would say January-March of the next year.
January-March. Okay. So finally, if you're looking at your capital expenditure, you're down about INR 1,200 crore of capital expenditure. So if you were to, you know, take your asset base and look at a one-time asset turn, you should be able to do about INR 4,000 crore, right? So if prices don't fall and with just 15%-20% volume growth, would you be in a position to achieve this INR 4,000 crore revenue from the current base in the next two to three years?
Yes, please.
Okay. Thank you very much. I'll join with you. Wish you all the best.
Thank you. Thank you.
Thank you. Ladies and gentlemen, a reminder to all participants, please limit your question to two per participant. Should you have a follow-up question, we request you to rejoin the queue. Our next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead, sir.
Yeah. Thank you for the opportunity. Sir, my first question is regarding the sales force. I see that the full year sales commission has been closer to INR 400 crore, whereas our sales force is closer to 500 people in terms of number. So can you just throw some light? Do we show it under some other expense as well?
Sir, I have not understood your question. Can you please repeat what you are saying, and where did you get this?
So in the annual report, we mentioned INR 4.5 crore of commission, sales commission. Hello?
One minute, sir. Let me see where are these figures?
Around INR 12-odd crores. INR 12-odd crores is the sales commission. When it comes to the total number of sales force, we have around 500-odd people, right?
No, not that much. I would say our number of people should be in the range of about 350-400.
Okay. 300 to okay. And do we show any commission or other expenses that we give to salespeople under any other head?
No, sometimes we give them some incentives. We set some targets. If those targets are achieved, then we give them some kind of an incentive.
Okay. And your total employees are 180-odd employees, right? Permanent employees. So where do you mark this 350-odd sales force? They are categorized under which category?
These are all our team members outside India. This 180 are the team members who are in India and who are employed on the salary-employer-employee relationship basis. Foreign countries, we do not hire those people on the employment basis, but we hire them as consultants. Or we engage them as consultancy because in many countries, there are a lot of complicated employee benefits and other things which we are difficult to predict and calculate and afford.
Okay.
Commissions payable is just related to the sales volume that they generate. Sometimes the commissions are also fixed. We know what is our commitment and liability.
Got it. Let me just ask you in another way. Out of the INR 266 crore legal and professional fees, how much would be the sales incentive? Or what all things are included in the legal and professional fees?
No, sir. Legal and professional fees do not include any of these incentives. The incentives are there only in the consultation charges and professional fees. I mean, not legal.
If you can help me understand, what is this INR 266-odd crore legal and professional fees for the full year FY 2024?
One minute. You see, I will give you a broad, I mean, I don't have the precise information. We are engaged in the process of registering our products. For the purpose of registrations also, we require a lot of legal advice many times to negotiate our data compensation with the innovators and reply to the authorities on many technical and legal matters. Sometimes there are also some arbitrations for which we have to hire the legal professionals. These are mainly to see that we are following the law and nobody is accusing us for any violation of the law.
Okay. Okay. Got it. Just one last thing. So broadly, if you were to amount the total expenditure for those 350 sales force, how much would be the approximate number within the other expenses?
Sir, I would say it will be in the range of INR 100 crore-INR 105 crore.
Okay. That would be broadly under which head?
Under the head of legal and professional expenses. But then the subhead of legal and professional is business development.
Okay. Got it. Okay. Yeah. Thank you so much. That's it. I'll get back in with you.
Okay.
Thank you. Our next question is from the line of Archit from B&K Securities.
Good afternoon, Bubna ji. Thanks a lot for the opportunity. Sir, my first question is on a comment you made earlier with respect to the Chinese manufacturers still not happy with the selling price of agrochemicals and the fact that they are hardly making any margins. Sir, what in your view are these external forces that are compelling them to be non-profitable or very marginally profitable and still do business? What is the situation in China that is compelling the situation?
Sir, the biggest factor is the question of survival. They all want to survive. They have some of the manufacturing capacity. Chinese are competing with Chinese. You understand? All of them are struggling to survive and have some market share of the share of the market.
Understood, sir. Sir, a follow-up to the same one. You earlier mentioned about how the prices have collapsed and the cost of manufacturing also being a function of the final selling price. Would it be fair to assume that Chinese companies or Chinese manufacturers are still manufacturing these active ingredients at a much competitive price, which is why your customers still prefer China as a base of procuring their raw materials and the distinct advantage that you have having presence in China through our business model? Would that continue to stay?
Sir, your question has been very long, but my answer is very brief. Yes, that will continue to stay. I carry an impression that China is a factory to the world today. All the developed countries have stopped the process of manufacturing because of the cost and a lot of regulations and controls, particularly related to environment and human health. This is not so exhaustive in China and the developing countries. Because of the economic reasons, most of the manufacturing has shifted to China.
Understood, sir. Thank you. Thanks for the clarification. Thank you.
Thank you.
Thank you. Our next question is from the line of Dhara from ValueQuest. Please go ahead.
My question has been answered. Thank you.
Hello?
Hello. Now, the way?
I can't understand. What is the question? Hello? Hello?
Hello, sir. Sorry to interrupt. The line from Dhara has been disconnected.
Okay.
Okay?
No, actually, she said, "My question, sir," and answered it. She said so. So she has no more questions. Okay. Good.
Our next question is from the line of Gautam from MEA Invest. Please go ahead, sir.
Thanks for the opportunity. Just I would like to know that, like I can see, we are having high trade receivables, like more than 40%-45%. So do you see any risk in that, and what is the reason behind this?
One minute. Let me see whether the facts that you said. Let me verify the facts. My friend, the trade receivables have gone down from 192 days in the fourth quarter to 132 days in the first quarter of this year. So there is a lot of improvement. In the fourth quarter, the trade receivables are high because the sales volume in that quarter is very high. And now, slowly, it is coming down to normal.
Like we can expect that in the coming years, trade receivables will come down? Like it's more than 40% annually?
Coming quarters, it will come down. But coming years, the trends would remain more or less the same because our business is a seasonal business, and the maximum sales volume comes in the quarter four. And quarter four is always the highest amount of figure of trade receivables.
Okay. Do you see any risk in this, like having high trade receivables?
This is very normal, sir. I don't see any risk.
Okay. Thank you, sir. Thank you so much.
Thank you.
Thank you. Our next question is from the line of Shyam Garg from Ladderup Finance Limited. Please go ahead, sir.
Thanks for the opportunity, sir. Most of my questions have been answered. My first question is with respect to if you can give us a product margin in each region in agrochem business.
Product margin? That's a good question. I will repeat my answer once again. The gross margin in Europe has been around 35%-36%.
Also, I'm asking for product margin in agrochem business in each region. For example, Texas has 35, then likewise.
Product margin figures, I don't have.
Okay.
I don't have the product margin figures.
Okay. Sir, with respect to the CapEx we have done in the last three years, what has been the volume growth and margin in those products in which we have received the registration in the last three years compared to the existing products?
Which one? What's your name?
Sir, Shyam Garg.
Okay. Shyam, your question is very unclear to me. You will have to just speak a little slowly and loudly so that I can understand the question.
Sure, sir. In the last three years, we have spent on registration.
We have done?
We have spent around INR 400 crore-420 crore on registrations of new products in different regions.
Yes, please.
What has been the margin on those products compared to the existing products that we had?
You see, the margin on recently registered products is always high compared to the margins on the existing products. It's a very simple answer to this. The process of registration is a continuous process. We may be the second, third, or fourth generic registrant for a product. But over a period of time, there can be five to eight generic registrants. The competition increases and the margin shrinks. For the new products, we could be the second, third, or fourth. The competition is less and the margins are better.
Okay, sir. So for the last year, if you can give us?
Sorry to interrupt, sir. Because several participants are waiting in the question queue. I request you to join the question queue.
Sure. Sure. Thank you. Thank you for answering my question.
Our next question is from the line of Raaj from Ārjav Partners. Please go ahead, sir.
Hello. Am I audible?
Yes, sir.
Yes, please.
Out of total registration that we have, it is around 2,925, right? So how much of that generates to sales for us? How much of them are active?
I would say about 80% of them are active.
80% of them are active out of 2,925?
Yes.
All right. Sir, could you please give an outlook for FY 2025 and FY 2026 in terms of sales and in terms of EBITDA?
FY 2025? I have already given, no?
Just, I actually skipped the point on that. So can you please repeat it?
Increased by 15%-18%. EBITDA is going to improve also to around 15%-18% compared to much lower of only negative in some quarters last year.
All right. All right. And so for FY 2026?
What is that?
For FY 2026, can you provide an outlook?
FY 2026 is too far.
All right. So, sir, your.
FY 2025 and then go to FY 2026. Because situations keep on changing. A lot of factors. It's a continuous moving situation. So there can be a lot of things, and we do not like to make guesses.
Understood, sir. So sir, your FY 2024 EBITDA was 9.59%. So for FY 2025, can we expect an EBITDA of around 15% or so?
Sir, I don't know whether you have been hearing. I repeated this question many times. We expect EBITDA to go up to 15%-18% in the next year, FY 2025.
Okay. Thank you. All the best.
Thank you.
Thank you. Our next question is from the line of Chinmay from Prescient Capital. Please go ahead, sir.
Hi, sir. Thank you for taking my question. A little general question from my side. So the oversupply issue and the return of inventories that happened last year, you said that it was a rather unprecedented event. Now that things are revising, are we making any efforts, or are we doing something on a more structural level, or maybe in terms of our contracts with customers, or maybe sourcing to insulate ourselves better from such shocks going in future? Is there any scope for any such things? Just would like some color on this.
Your name is Mr. Chinmay?
Yes.
Mr. Chinmay, we cannot make our own rules in the market. We have to still survive and continue, and we have to follow the stream and the way the stream is moving. And if we like to be unique, then we'll have to go out of the market. Even the multinational companies have all the innovator companies have accepted those things, return of the market, and giving them longer credit and other things. And we cannot be alone. We have no such special qualities or situation that we can form our own rules.
Got it, sir. Understood.
Thank you.
Thank you.
Thank you. Our next question is from the line of Paras Adenwala from Capital Portfolio Advisors. Please go ahead, sir.
Yes. I heard you mention that over the last three years, you spent on average about INR 200 crore per year for CapEx. Would it be fair to conclude that a large part of that would be for registration of your products rather than CapEx? Because yours is an asset-light business.
Sir, I think most of our CapEx is for registration of the products. We are not investing or, I mean, spending any capital on acquiring or building up tangible assets. All these are only for acquiring the intangible assets, which are registrations.
Okay. Since last year was a challenging year, would it be fair to say that over FY 2025 or maybe FY 2026, we will definitely return back to your average asset turnover ratio that we've seen in the past?
Average asset turnover? Yes, please.
Okay. All right. Great. I think these are the only two questions. Thank you very much.
Thank you so much.
Thank you. Our next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead, sir.
Thank you, Bubnaji. Sir, the question is that European clients have been wanting to diversify supply chains, and they are adding another geography over a period of time to diversify this risk. In that context, sir, you said that China is the factory of the world, and they continue to have a lot of advantages from a cost perspective. So could you just contextualize the truth around this?
Can I do what?
Sir, I wanted to know your thoughts around this.
Sir, I think the trend is continuing, and there's no change. I mean, no change. The developed countries do not want to compromise with the environment and the human health factors and issues. So they prefer to buy the goods from China. In fact, many of the multinational companies are setting up joint ventures in China to share the cost and other things. So the trend is continuing.
I don't see any reversal in this trend in the near future or even in the far future.
Okay, sir. Thanks so much.
Thank you. Our next question is from the line of Ronak Chheda from Awriga Capital. Please go ahead, sir.
Hi, Bubnaji. Good afternoon. I have two questions. The first question is on your comments you had made in the earlier calls where you mentioned that some of the factories have shut their units just to manage their cost. Can you provide an update on what is happening there in terms of are these capacities gone out for good, or there is a chance that these capacities will come back once the prices improve?
Sir, I’m not understood and heard your question very clearly, but probably you are asking me that many of the manufacturers have shut down their factories in the past, and.
Yes, sir. Yes, sir. And are these factories coming back?
Listen, they are not happy with that situation. They're waiting for any opportunity they can restart because the investments are lying idle, and there are a lot of fixed costs which they have to incur even if the factory is closed. They wait for any opportunity if we can restart, maybe less margins, but at least they can recover their expenses and costs.
Sir, in that sense, then, do you see a longer recovery for prices to come back? Because right now, demand is equal to supply. And if the demand were to increase when these factories were to come back, there would be a very low likelihood of prices coming back, yes, sir?
Yes. Because of these factors, the prices will go up to the level which existed before the end of last financial year. It will take time, mainly because of these factors.
Got it, sir. And sir, my second question is on the cost of registration itself. Sir, just to understand our edge in terms of cost of registration, for a similar kind of registration, let's say we think INR 100, would there be a differential where a competitor would be at, let's say, INR 120 or INR 150? Any color on that would be helpful, sir.
Sir, again, your words are not very clear to me. Are you asking whether the cost of registration for the same product is increasing year after year? Is that your question?
No, sir. My question is, if the cost of registration for Sharda is, let's say, INR 100, would that cost be similar for our competitors, or that cost would be higher or lower for our competitors? Just want to understand if there is differential or any edge for Sharda.
See, Sharda has registered a product in 2022, and if the competitor is going to make an effort in 2024, his cost is going to be definitely higher than what Sharda has incurred in the year 2022. Have I answered your question correctly?
Sir, if it were the same registration in 2022, the cost would be similar to Sharda then? Because we would have teams sitting in India versus a competition.
If it's the same product again this year, then the cost to Sharda will also be higher.
Okay. Okay. Understood, sir. Okay. Thank you so much, sir, for answering my question.
Thank you, sir.
Thank you. Our next question is from the line of Rohan Gupta from Nuvama . Please go ahead, sir.
Hi, sir. Good afternoon.
Good afternoon, Rohanji.
Sir, my question is on our CapEx plan. So sir, when in the last two years, our profitability was slightly muted, you also slowed down your CapEx. And now this year, when you are looking at growth coming back to the margins improving, you are again looking at roughly INR 425 crore-INR 450 crore kind of investment in CapEx in registration. So sir, this investment actually is to guide the growth for the future, right? Because the registration which we will do now will give us revenue over the next three to four to five years. So just wanted to understand your thought process. How do you decide on the CapEx number? And if we keep on going in terms of revenues, our investment in new registration will always keep on going? Or what kind of percentage you are comfortable in terms of putting this CapEx for the registration?
Rohanji, I think you are not caught up with the figures that I gave to one of our other customers maybe some time back. Our CapEx in the year ended March 2022 was INR 415 crores. In the year ended March 2023, it was INR 360 crores. But last year was the highest. Even though the business was very bad, we have ended up spending around INR 420 crores in the year ended March 2024. And this is not in our hands. It is a continuous process, and the registration is not a market deal that you pay and you receive. The registration process is very long. Sometimes it takes me seven, eight years to register a product. So I cannot stop in between. If I stop, then I'll receive much worse cost. And there are many things.
I mean, totally, it's not a predictable expenditure because the authorities keep on coming with newer and newer requirements every three months or six months. You cannot say that, "Why have you started now? I have started three years back." So things are not in our control. If we want to grow, we have to keep on spending on the registration, and it cannot be directly linked to the performance of any particular year.
Okay. So sir, I was just trying to understand if we link it with revenues, like how much of the 10% because now it has gone up to roughly close to 12%-15% of our revenues. Or even in terms of EBITDA, almost 50%-60% of our EBITDA we are spending on registration. So do we have any particular number in our mind that we will stick to that number or follow a metric for any future? I mean, that's what I wanted to know.
Sir, my answer is again very clear. It is not linked to revenue, and it cannot be linked to revenue. It is a continuous process, and revenues may vary, will vary in, but the registration process cannot be stopped. If I stop, then I have to forgo all the costs that I have incurred on that registration till that day. This is also not very good and advisable.
Right, sir. Sir, in terms of the pricing scenario, so you have seen that definitely some of the chemical plants in China are still shut, but definitely at any opportunity you mention, they will come back. So you see that the pricing scenario in China and of the chemical which you buy will still remain muted for near term or maybe for this year and for next year as well?
Sir, it depends on so many factors. So it will take time for the prices to go up because manufacturers are very keen to restart their plants. They do not want to lose the market share that they are having. And then it's a question of supply and demand. If the supply is in abundance, then the prices cannot go up. You understand me?
Yes, sir. So you're saying the prices may remain because the supplies are still there, so prices may remain softer only near term?
But this situation is also very normal. Many people are still suffering and very uncomfortable with the current situation. So these things will definitely have to improve, and they will.
Sir, many specialty chemicals play a.
Sorry to interrupt, sir.
Yes, sir.
Sir, please join the question queue for follow-up.
Yeah, yeah. No problem. Thank you.
Thank you. Thank you. Our next question is from the line of Anuj Sharma from M3 Investments. Please go ahead, sir.
Yeah. Thank you and congratulations. Sir, just in terms of the molecules, what would be the contribution of the top 10 molecules to the agri revenues today?
Sir, your voice is very faint and not audible. I can guess what the question could be, but can you make it a little more clear and louder?
Yeah, sir. So what I was asking is, can you share the contribution of top 10 molecules to the agri revenues?
Yes, sir. The top 10 molecules are contributing about 35%-40% of our total revenue.
And sir, the next question is, if I look at five years ago, how many of these 10 molecules would have been there five years ago in our list? So what has been the…
Maybe there are not many of them. We were not there. What is your name, Mr.? It's Anuj Sharma.
Yes.
See, our top 10 molecules do not remain in the list of top 10 every year. They keep on going in and going out. Some molecules will be in the number two position. They go down to number 8 position, and some other molecules which were in 22 position will come down to number four position, depending again on the weather, the demands, and market situation.
Yeah. Sure. Got it. Sir, second question is on the non-agro revenues.
Please, louder, please. Louder.
Yeah. Yeah. Sorry for that. My next question was on the non-agri revenues. How do you see that segment shaping up in the next three, five years? What confidence are you getting in that business model, and how do you see that improving, or how do you see that going ahead? Thank you.
We are very optimistic, and we are hopeful that things will improve. In fact, in the last year, when the ag business was doing so badly, it is a non-ag business which helped and supported us in terms of revenue, margins, and profitability. Last year, this non-ag business was giving much better margins than the ag business, which is depending upon registrations.
All right. That's helpful. Thank you so much for that.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I now end the conference over to management for closing comments.
Well, I thank you, everyone, for joining us for this call. I hope we have been able to answer all your queries. We look forward to such an interaction in the future. We hope to meet your expectations in the future too. In case you require any further details, you may contact us or Mr. Deven Dhruva from SGA, our investor relationship partners. Thank you so much. Have a nice day.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.