The current year’s outlook for Rallis India is quite encouraging, says an elated Sanjiv Lal, Managing Director and CEO. The company expects the current year to be good as adequate water levels in reservoir bode well for the upcoming ‘rabi’ season. With acreage and crop prices improving, the company believes the sector is wellplaced

Reviewing the performance of the company during the first quarter (April to December), Mr Lal says the going has been very good. During the first two quarters ended September 2020, sales turnover stood at Rs 1,387.71 crore, up by 1% yoy. OPM was higher by 210 bps to 17.7%, resulting in a rise in OP by 15% to Rs 245.05 crore. PBT before EO grew 19% to Rs 228.25 crore. The company reported EO income of Rs 1.65 crore, comprising profit on sale of flats compared to nil. PAT stood at Rs 174.82 crore, up by 20% yoy. During the Q3 ended December 2020, the total income of the company went up by 6.33 per cent to Rs 578.11 crore compared to Rs 543.68 crore in the corresponding quarter of the previous financial year. “During the current crop season, our business has witnessed a favourable demand resulting in an overall growth of 7 per cent. In the domestic market, growth in the rabi sowing area was supportive and our domestic crop care business grew by 15 per cent and the seeds business by 38 per cent, albeit on a smaller base,” he says.

According to S Nagarajan, Chief Operating Officer, the agrochemical industry has been among the handful of industries that has been able to recalibrate and restore normalcy across business operations following the Covid19 challenges. Barring a few issues, the industry is more or less back on track. Domestically, the industry has been very buoyant, led by a normal monsoon and remunerative prices, all of which has resulted in a spurt in agricultural activity

DOMESTIC CUSHION

According to Mr Lal, the crop care division’s overall revenue declined 6% yoy mainly due to a drop in international business. However, the domestic crop care business grew 8% yoy largely contributed by volume growth of 10% and a bit of price correction downward. Pressure on Metribuzin in the international business continued in the second quarter as well, both on the volume and the price front. The contract manufacturing business also witnessed a degrowth in both products — Metconazole & PEKK (Poly Ether Ketone Ketone). In the international business, barring Metribuzin, many of the other products registered volume growth over the previous year. However, the company expects things to gradually improve from here on, which should drive the international business.

The seeds business registered growth of 29%, led by volume growth in maize and better price realization in paddy. Inventory levels were high compared to the previous year, largely due to stocking of critical raw materials to meet the demand for Q3FY21. The company’s approach to prioritizing cash flow has resulted in an increase of cash from operations of Rs 276 crore in Q2FY21 versus Rs 227 crore in the previous-year quarter.

Maintaining that “collection-focused initiatives have helped the company continue strong performance on collections, resulting in reduced working capital days to 65 from the previous year of 104 days,” Mr. Lal adds that the company has opted for a lower income tax rate from the current year. The effective tax rate is 24%. The domestic business continues to grow at a steady rate while internationally things are stabilizing, which should help overall growth of the business going forward. The company expects growth of 10-12% in the agriculture sector for the current financial year. India tends to be on the lower side of agrochemical consumption with 0.6 kg per hectare of land compared to some benchmarks which are 5- 7 kg per hectare. The company’s overall capex implementation has been impacted due to Covid-19 and was delayed by 2-3 months. The formulations plant at Dahej is expected to be now completed by March 2021. The company expects capex of Rs 160-170 crore in FY22 and a similar amount as well in FY23.