Coromandel International Ltd
NSE:COROMANDEL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 039.5
1 806.45
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Coromandel International Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Coromandel International Limited Earnings Call hosted by Nirmal Bank Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. Ramesh from Nirmal Bang Equities Private Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. On behalf of Nirmal Bang Social Equities, it gives me great pleasure to invite you all to the first quarter FY '22 Conference Call of Coromandel International Limited. We have with us Mr. Sameer Goel, Managing Director; and with Jayashree Satagopan, Executive Vice President and Chief Financial Officer, to take us through the highlights of the results and then take the Q&A. Here, we're seeing [indiscernible] the rest of Health and stay safe. Let me hand over the proceedings over to Sameer Goel. Sameer all yours.
Yes. Good afternoon, everyone. Ramesh, am I audible?
Yes, yes, you are.
Okay. Good afternoon, everyone. I hope, like Ramesh is saying, everyone is keeping safe and healthy. Thanks, Ramesh, for organizing the conference call. I'll give the overview of the business environment experienced during the quarter, followed by company's performance and also the Q&A. The GDP contraction last year was 7.3%. Indian economy is expected to recover in FY 2022, boosted by increased public investment, vaccine rollout and surge in domestic demand. Various rating agencies have indicated a sequential 9% to 10% GDP growth for the year -- for India during the year. I think in spite of the tough operating environment, agriculture sector remains to be a bright spot, and its GVA grew by 3.6% during the past year. Overall, India registered healthy growth, the core food gains grew 305 million tons, which was over another bumper year last year and also the horticulture output was 330 million tons, again over a bumper harvest last year. In FY 2022, the global food price indices continues to remain firm, driven by strong demand for cereals and vegetable oil, fall in inventory levels and there are rumors of some stockpiling by China. In India, thanks to record food grain procurement, wheat was 43.3 million tons, which is an increase of 11% over last year by the government trajectory, the cereal prices have remained stable. During the quarter, Indian agriculture export rose by 40% to USD 8.9 billion, and they've broken into the top 10 countries for agriculture exports. The Southwest monsoons as we know was erratic, but now has recovered well. And in the last 2, 3 years, have covered the entire nation and reduce the deficit to 1% of the long period average as of 26th of July. As you know, the -- as the June forecast have predicted this to be better than the long-term average. Our key markets actually have received very good rainfall. Telangana is over 24%, Andhra Pradesh 47%; Karnataka 23% and Maharashtra plates, like you have read in the papers are caught up at 33%. And the reservoir levels, particularly in South and West India remains well above the normal long-term period average. The crop sowing, however, is currently down at 9%, but will catch up fast as the monsoons keep spreading. And especially this will be good in our addressable market. Now coming to the overall performance. Firstly, fertilizer industry for the quarter. DAP and complex industry family sales was down by 14%. This year, 43.7 lakh metric tons versus 50.6 lakh metric tons previous year. Industry point of sale was also down by 13% over last year, 39.6 lakh metric tons vis-a-vis 45.5 lakh metric tons previous year same quarter. Industry complex sales grew the quarter and it is at 25.1 lakh metric tons versus 24.4 lakh metric tons over the previous year, increasing by 3% year-on-year. Major raw material prices continue to get firmed up. The main reason is all the 4 big agricultural markets have done well last year with record production in the [indiscernible], China and India.Cost asset prices for July to September quarter 2 FY '22 continues to increase and got finalized at $1160 per metric ton compared to quarter 1 prices of USD 998 per metric ton. With the increase in phos acid prices, the government had increased the subsidy on phosphorus under the NBS scheme, effective 20th May 2021. With the subsidy increase, companies are holding the MRP of DAP to ensure lower fertilizer prices for the farmer. Due to the increased demand and also due to certain supply issues with the major suppliers like annual turnaround of the plant or plant maintenance, there has been a constraint on raw material such as ammonia, sulfur and also the price increases have been seen in MOP and sulfuric acid. Coming now to Coromandel performance. Like you have all seen Coromandel had a strong all-round year performance in the quarter FY 2021 driven by turnover growth from top Protection business and sustained performance in [indiscernible] and Allied business. The company continues to work on its operational efficiency, cost initiatives, superior product mix and new generation products for sustainable long-term performance. The performance was further supported by external factors like good monsoons in the company's key markets and also good reservoir levels. One issue also was that last year, same period because of COVID, the government had put certain restrictions in terms of production and especially in terms of man-power, while this year, it was to continue the business for the state. So coming to the sector-wise performance, the Nutrition and Allied business had a good quarter. Nutrition segment revenue grew by 9%. Performance of the segment was helped by smart sourcing, economies of backward integration cost efficiency during the quarter. New product launches by the fertilizer business, specially our move [ from grade to ] brands like Groshakti, Gro Smart, Gro Plus are doing well in the market and helping the farmers to improve their productivity. We are also promoting balanced nutrition and especially specialized grades as compared to generic grades like DAP.On the sales front, DAP and complex volumes were at 7.8 lakh tons, which are lower than 6% over the prior period. However, manufactured DAP and complexes remain at the same level as last year. Imported product volumes was down by [ 84% ] there were some constraints in the right pricing and availability of fertilizer in the international markets. The company market share in quarter 1 moved up to 18.1% versus 16.4% for quarter 1 last year. SSP quarter 1 was 1.86 lakh metric tons, which was a growth of 44% over last year. Market share improved to 14% from 10% last year. Last year, as you are also aware that we had some constraints in operating our SSP counts, which wasn't the case this year. On the manufacturing front, our DAP and complex fertilizer accounts operated at 73% capacity. Part of the reason was the annual turnaround was completed at [indiscernible] during the first fortnight of the quarter. Also, we had certain raw material constraints, mainly from one of our main suppliers because they had [ acquired at the plan ], but things have been restored by now. The de-bottling and operating efficiency for sulfer production has reached a new high during the quarter. Tablet projects initiated during last year has progressed well during the quarter. The [indiscernible] evaporator, which is basically to convert the low asset to high asset, the liquid fertilizer plant and other infrastructure projects are near completion and shall be ready for Q2 for operation. The business has started work on increasing granular capacity at our 2 SSP plants also. On the crop protection side, the crop protection registered a very impressive growth of 49% in revenue in the quarter, supported by strong performance by export and B2B market. Last year, as we had mentioned, there was issue in operating our plants due to the COVID restrictions imposed by the moment. Crop Protection continues to work on new product development and have launched 6 new generation molecules across the categories during the quarter for the ongoing kharif season. New products include 4 insecticides, one each of fungicide and herbicide. The new product launches by the company will help invest its portfolio. The strategy of introducing new generation products is helping in our farmer connect initiatives and improving farm productivity. The business has built a rich product pipeline backed by strong R&D capabilities and is participating in global innovators to further strengthen its product offering. On the manufacturing side, CPC plants operated with increased capacity utilization of 79% vis-a-vis last year of 45%. Coromandel continues to promote green solutions through its organic fertilizer and biopesticide business. During the quarter, the company expanded its [ lean base bar ] extraction capacity by 50%. Company is [indiscernible] new plantations for over 700 acres, mainly to look at sourceability. For the company is also promoting resource efficiency used through mechanization, water-soluble fertilizer and working on novel solutions like liquid fertilizer application like reinjections, et cetera.Continuing to sustainability journey, the company has released its first sustainability report as per the GRI core standards. The company continues to be serving the farming committee during the lockdown through that extensive retail network, even our dealers did very well to keep their shops open. The retail stores are functioning in all proportions amid COVID wave 2. The stores strictly follow safety protocols and continue to support the farming committee by offering agriculture solutions, including product, farm advisory and mechanization service. Business has improved its operational efficiency and has leveraged technology to reach out to the farming community. As you are aware, during the quarter, with the surge of COVID's second wave, the company gave utmost importance towards ensuring safety of people and running of its plant safely. All major plants operations were with adequate safety measures and ensure continuity availability of products to the market. With the focus of normal monsoons for a third consecutive year and good reservoir levels in the company's key markets, we expect good traction on the ongoing kharif season. Coromandel and it's varied product offering focused on cost efficiency and innovation will continue to work towards improving farm productivity and prosperity of the farmer. Now I'll hand it over to Jayashree for talking through the company's financials, which can be followed by Q&A.
Thank you, Sameer, and I will now provide updates on the company financials. Turnover for the first quarter company recorded a consolidated total income of INR 3,686 crores during the first quarter vis-a-vis INR 3,224 crores, during the first quarter of last year. New teams and allied businesses contributed to 83% share and the remaining 17% came from Crop Protection business. In terms of subsidy and non-subsidy share, it stands at 76% and 24%, respectively, during the quarter. Previous year, it was 80% and 20%. As regards to profitability, the EBITDA for the quarter was at INR 486 crores as against INR 415 crores of the last year. In terms of subsidy/non-subsidy shares, it stands at 74% and 26%, respectively, during this quarter. Previous year first quarter, it was 79% and 21%, respectively. Net profit after tax for the quarter was INR 338 crores in comparison to INR 251 crores for the corresponding quarter last year. We had a subsidy outstanding INR 1,149 crores as on 30 June 2021, vis-a-vis INR 2,585 crores during the previous year. Subsidy outstanding includes INR 360 crores, which has been claimed and pending with government for payments. During the quarter, subsidy received from the government was INR 493 crores comparative figure last year was INR 513 crores. Good business performance, working capital management resulted in overall positive cash balance for the company. We had an interest income of INR 11 crores vis-a-vis interest cost of INR 23 crores last year. The balance sheet continues to remain strong. Company continued to maintain deposits which we have earmarked for specific growth-related investments. CRISIL Limited has reaffirmed rating of the company and revised the outlook from stable to positive. On the ForEx front, during the first quarter, rupee was trading in a very broad range between 72.25 to 75.33. Coromandel has been following the Board-approved hedging strategy and remain conservative, dynamically covering its exposure and managing the portfolio well. In terms of the overall financial performance, the company started the year with a strong note with a good performance in quarter 1. We thank you for your interest in Coromandel and for joining us on this call today. We will now open the session for question and answer.
[Operator Instructions] The first question is from the line of Dinesh Park from Max Insurance.
Congratulations, Sameer, for fantastic -- despite all the COVID crisis. My question is very simple. How do you look at, especially after May 20 government capping the phosphate price and the raw material moving from $800 to $1,000 to what you said $1,160 now. So what do you see our outlook for current year? And how will the company be able to protect, especially in DAP. That's question one. And how do you see the raw material outlook constraints farming out over the next 2 quarters?
So good question. Just on this front. Firstly, we are not a DAP player. We are basically into balanced nutrition and such. We do some manufacturing and exporting of DAP or importing of DAP. So basically, it is our balanced nutritional strategy, [indiscernible]. Coming now to, in terms of taking what you called about the phos acid prices. The good thing is that we have done backward integration at a wider front, and we have had very good output both -- from both the plants this year. And also what you are doing is you're also dispatching assets from [indiscernible] plant. So -- and that is something which we'd increase with the [indiscernible]. So partly, that's how we are managing any of the price increases or the cost increases which are there.And our strategy continues to be to promote balanced nutritional and our specialized grades, which are well accepted with the farmers as compared to general grades like DAP. And the government is also quite happy on how we are able to push balance -- At the same time, in some of the markets, our single superphosphate is doing very well. This used to be a very good fertilizer. It's a much more better when you compare it with DAP because obviously, it has other nutrition in and also added [ phosphate ]. So our teams of Agronomists continue to promote that. Long-term outlook, you had asked just -- the company has taken the outlook, I think, one of the good things about -- on the positive side on COVID was that agriculture, which was regarded as a sunset industry has changed. A lot of investments have come into the rural area. And this is across the world, but also by our [ involvement ] and it's not only helping to feed the nation in this COVID crisis, but also sustaining the economy. All the -- like you have seen, all the -- even FMCG players who are more rural-focused have done better than others, which are more urban focused. And our game plan will be to continue to build on our added -- our specialized products and our engagement with the farmers for their productivity and posterity. And therefore, we continue to see to distribute and deliver. Good news is that, like I mentioned, even exports, India export 1/3 of agri products. Again, value-added products need to come in. But again, that's a very positive sign for the Indian agriculture.
The next question is from the line of Varshit Shah from Vito Capital.
Congratulations on a great set of numbers. My first question is on the margins. So if I were to see there is some improvement for us on a Y-o-Y, but still given the RM cost pressure, you have done a very fantastic job on the nutrient segment margin. So just wanted to check how much incremental, if you were to just split, if you were to just roll out some quality number was the majority of the offset of RM pressure was done through cost-related initiatives and backward integration related initiatives. So that's the first question or there was a significant element of the product mix as well.
Okay. Okay. Yes, Jayashree, go ahead.
Yes. As regards to the clarification on margins, there are 3 or 4 factors one needs to look into, right? One is, obviously, our sourcing strategy in terms of looking into multiple closes for importing our raw material. The second 1 is the flexibility of our plants to process multiple blocks, multiple assets. That gives us a lot of operations. The third factor is running the plant at high-capacity levels, especially with PAP 1 and PAP 2 for the processed production. This quarter, we have done the plant at high efficiency level. The capacity utilization has been good. There was also some benefit. Lastly, in terms of the opening inventory coming in because that carryover is there, but it is quite a modest one. So these 4 factors have actually helped on the cost front in terms of managing the margins. Secondly, we will also look into on the market front. On the market side, our agronomies continue to do a very good job in terms of advocating the right products, which are required for the soil as well as the crop. So the adrenals play in the sales and market is becoming more and more evident. Secondly, on the market side, we have also launched new products or new brands. We have spoken in the past about transforming from grade to brands. So there are 3 or 4 brands that are actually having a good pull in the market. For instance, the growPlus which is in the SSP, Gro Smart, Groshakti, which was launched in the last quarter, [indiscernible], I'm just giving you a few examples. So there is a demand pull for the branch, which is also helping in terms of looking into a better realization. So a combination of all of these, plus with COVID, we have gone ahead on the digital marketing. So there is also the spend that has shifted from physical to digital. Therefore, there is some savings that's coming out of it. All of this is sort of being worked into ensure that margins have been stable. I hope this sort of clarifies.
That really helps. And my second question is on the subsidy stand. So we see continued increase in the raw material prices. So now you've already seen 1 increase from the government on the subsidy front. So as an industry, what is the possible scenario going into Q2 versus Q3? Will the government further subsidy or probably now the incremental pressure will be passed on in the form of higher MRPs.
Again, another good question. The government had increased the subsidy for P. This happened on 19th May 2020 as all of us know. The subsidy for NK and S where we have seen some increases in raw material prices, however, has not been effective. So we are working with the government to see in order to promote balanced nutrition, how the subsidies can be evenly distributed between NPK and S. So that's 1 part of the whole equation. The second thing is, as raw material prices go up, there would also be some flexibility in terms of pricing in the market, if the government is going to hold on to the current subsidy levels. This is something which the industry is also considering. So these 2 aspects should sort of help address the raw material prices increase that's happening currently. We also believe probably after the cherries season, we should see some softening in the raw material prices. For instance, ammonia, we had both the large suppliers into India, getting on to ATA and 1 of the main suppliers also had a fire in their plant. Their facility has just started operations. And therefore, we think that these prices should eventually soften. Similarly, there are trends which are coming across other raw materials. While this increase has been quite steep over the next couple of quarters, we expect a gradual comeback on the raw material prices.
Sure. If I could just squeeze in 1 last. So if I were to see your very impressive improvement in the market share. And whenever this we have a scenario led RM cost pressures actually increased. And given that our relatively better ability to manage on the cost front, this helps us actually to improve market share faster. So while I understand and when thinking on the raw material, let's say, cools off, there will be some normalization in market share, but net debt will be much -- having a much higher market share than probably, let's say, a year ago. Is that assessment correct? And that is it from my side.
Market share is primarily depends on the volumes that are being supplied to the market, right? So overall, currently, we see that the inventory level -- the channel is much lower compared to last year. That's because of 2 good years, consecutive years of monsoon, record kharif and Rabi. This year also the monsoon prediction is good. We have seen that there's been good rainfall and reservoir levels in our key markets. The rest of the India is also catching up with a low channel inventory and very high cost of procuring, say, for instance, DAP or other NPKs in the global market, the demand for fertilizer is going to be tight. And the supply is also going to be based on the capacities that are available in the plant for supplying to meet with the demand. So it is a question of a demand and supply situation. We think we will try and maximize the production at our plants and ensure that we are able to meet up with the requirements of the farmers indeed ongoing for each season.
The next question is from the line of Trilok from Birla Sun Life Insurance.
Just wanted to understand from the margin pointers that you've highlighted. Is there -- could you just quantify the inventory gains that you had in this quarter? [Technical Difficulty] Thanks for the detailed answer on the margins from the previous question. I just wanted to ask one point. How much -- could you quantify the inventory gain we had in this quarter?
What would you like to know? The inventory gain?
That's correct.
We have to come back to you on this. I don't have the numbers as such really available. But that's 1 portion of the entire gain. We can take this offline.
The next question is from the line of Sumant Kumar from Motilal Oswal Financial Services.
So my question is regarding the margin. And overall, we have seen ammonia price almost doubled from March to July. And processes also recently increased 11%. So how are -- how much price increase we have taken? And how much margin is protected in the coming season?
Sorry Mr. Kumar there was a slight disturbance coming from your line. You're requested to mute your line when the management answers your question.
Well, the ammonia prices as of March was around $375. And it has gone up to [ $535.73 ] during April, May, June, obviously, was an aberration, as I was mentioning with both the large suppliers of ammonia going on ATA and 1 of them impacted you to fire incident in their factory. We have considered pricing not just of ammonia, but also of other key raw materials like sulphuric acid, phos acid in our MRP calculations, while we have also taken the benefit of our backward integration and cost efficiencies, while [indiscernible] overall pricing decision.
So should we have already increased the price or when we are going to increase?
We have -- as I was mentioning, the government had increased the subsidy is on 20th of May from INR 10,000 to INR 24,000 on DAP. The MRPs were roughly INR 24,000 per metric ton for DAP. However, given the fact that the subsidy increase was primarily on P and not on NK and MS. And as Coromandel is primarily an NPK player, we have taken necessary pricing actions on some of our NPK grades. As I was mentioning earlier, this is taking into account the raw material price increases, the subsidy increase that has come in some of our cost efficiency, including capacity utilization and backward integration. So this has already taken place.
So we are going to maintain our margin level, what we have sold in the previous year?
So our intent is to maintain our margin levels. We have indicated that around INR 4,000 to a metric ton is what we are looking into, INR 4,000 to INR 4,250. So we think overall for the year, we should be around those levels. And we'll have to look into the overall year. And as we go along, it is also equally important to see how the raw material prices are going to be availability. All these factors are there. But we do believe that INR 4,000 to INR 4,250 per metric ton is doable.
So my last question is regarding overall utilization level and overall the CapEx plan we have this year and overall longterm strategy for the backward integration of cost?
Yes. The CapEx plan is intact. We have indicated this on our earlier calls as well. Currently, the evaporator, which is a temporary operator is coming off in Vizag, which will help us to concentrate the acids and sent strong acid into Kakinada for their operations. Similarly, a liquid fertilizer plant is coming up. We are also evaluating other opportunities for backward integration. And this is obviously a very long-term plan, and there is discussions that have started in this front.
The next question is from the line of Ankur Periwal from Axis Capital.
Congratulations for a good set of numbers. My first question on the Crop Protection side. So we saw a very strong revenue ramp-up on that side. Just wanted your thoughts what has been driving this growth? Coming from where -- where coming from the last 2,3 years, we have been seeing steady product launches. And is this the benefit of that? Or this is more distribution-led expansion given digital marketing would have opened a dose for other states that have geographies as well, both in India as well as international market.
Sure. Thanks, Ankur, for your compliment. As far as the CPC is concerned, there are 3 factors that actually has helped us during the quarter. The first and foremost is the capacity utilization in all our plants. As last year, COVID struck us, we have certain restrictions posed by the government in terms of operating the facilities multi-shifts. So the capacity utilization in our CPC plant is about 45% compared to 79% currently. The higher production this year has also helped in better liquidation and shipment of our products. That's number one. Second, the export markets have been good. We have seen a good growth happening in exports as well as to our B2B customers in the country. The third factor is traction on new product introductions. Over the last couple of years, we've been looking into introducing new generation molecules. And happy to note that this year, there were 6 products that have been introduced by the company. One of them is a 93 registration. A couple of them are co-marketed products. And out of the 6 products, 3 of them are combination molecules. So this is also bringing into action in terms of sales. However, the new products were introduced only mid of June, and we should see the momentum picking up as we go along into the season during Kharif and Rabi.
Sure, ma'am. That's helpful. From an overall balance sheet perspective, now there are significant cash flows that we are generating given the quicker payment of subsidy as well as the Prospell ramp-up as well. Any expansion plans there, you did mentioned a couple of CapEx plans more on debottlenecking and sort of backward integration on fertilizer. But any significant organic or inorganic opportunities you are evaluating on the overall business growth front?
Well, we do have our plans for capital expenditure, both in fertilizer as well as CPC. Fertilizer in the complex primarily debottlenecking some amount of backward integration, augmenting capacities of our PA tanks, SA tanks, putting up a liquid fertilizer plant. These are all in progress, and we are also evaluating further backward integration opportunities. On the Single Super Phosphate, interestingly, a couple of plants, we are moving from powder into granulated products because that seems to be the future and there is a good success in the granulated plants. So there's also calls for a good amount of investment. The third 1 on the Crop Protection front, we are looking into this year primarily, not in terms of strengthening the structural stability, enhancing the capacity primarily of some of our key products. The third one is also looking into a multipurpose plant. We are also evaluating for purchase of land for further expansion, both in terms of technical as well as formulation. So these are broadly the plans that we have already for our bio plant at [indiscernible], we have invested in the very short 6 months type of a CapEx program, which has actually helped in increasing the bio extraction capacity by 50%. And we intend to look into this more carefully because the demand for bio products is quite high, both domestically and in the international market. Apart from all our internal organic growth opportunities, we are also open to looking at inorganic opportunities. As mentioned in the past, synergistic to our business complements our business model. So these 2 are important. So that's something that we are open about. We're also looking into some sort of investment in the agri startup, though that could be a small beginning. We think it's a very interesting space and a focus area for future. So these are some of the broad areas we are looking into deployment of our capital, trying to get the maximum benefit for all our stakeholders.
Great. Just 1 clarification. Sameer sir, did mention the evaporator to convert the low resin into high to be operational. So will we be -- will this be operational in Q2 and we'll avail the full benefits -- Starting this quarter, Q2 FY '22 or it will be slightly later?
Yes, it will be in Q2 of FY '22. What we -- yes, it may take a month or so for stabilization. But what does the evaporator actually do? It actually helps in converting the weak acid into a strong asset. Thereby, when we transfer it from Vizag to Kakinada, it becomes more efficient, both from a supply chain standpoint and also from a consumption standpoint. While we put the pot as a plant now with the plants operating at full capacity or even in some case, slightly higher than the rated capacity. We feel that there is a very good opportunity for us to transport this asset for our operations in Kakinada, thereby reducing the dependency on imports. Our conversion into a strong acid will actually help as I was mentioning, on the supply chain front and also consuming this for products, which will require strong acid. So that's the main benefit of the temporary operator.
The next question is from the line of Abhijit Akella from IFM Securities.
First one, just on the Crop Protection business. Wondering if it's possible to give us some granularity in terms of the export growth versus domestic growth this quarter? And then also volume versus price, if it's possible to share some broad pointers around that.
Yes this is export growth primarily in Mancozeb was around [ 50-odd percentage ] both in Americas and the rest of the world, okay? On the domestic front, the growth has been primarily on the B2B segment, where we have seen a very good traction again on Mancozeb as well acephate as well of our products. Here again, the growth has been in the range of 50% plus for Mancozeb. We also found that there is a pricing differential between different markets in the exports as well as in India. And given that we have opportunities to maximize our sales between the 3 markets, which is Americas, rest of the world and India, the teams have done a good job in terms of allocating the products into the right market, thereby ensuring that we are able to hold on to margins. Like fertilizer, we've also seen a very high and sharp price increase in the raw materials in Crop Protection segment as well, especially for Mancozeb, two key raw materials, EDA and CSQ have seen a high price increase during the last quarter. This has not been the case in the last couple of years. There has been some pricing actions that have been taken and allocation to the right market. This is sort of helped us to hold on to the margin.
So ma'am, on the pricing front, is it fair to assume that maybe out of this 50% revenue growth, maybe 15, 20 points might have come from pricing and the rest from volumes or?
No, I would say that a substantial portion of this would be volume driven because last year, we did not have our plants at Gujjrat operating at full capacity. Therefore, we were constrained in terms of product availability for shipping to the export as well as the domestic market. This year, it is a good relief. Having said that, there has been some amount of pricing that has happened. I would say this is all happened towards the end of the quarter phase, for instance, from June onwards. So that's not a substantial portion of the variance.
Got it. And just 1 last thing. On the fertilizer pricing front now, the 19th May decision by the government, did that already contemplate this kind of further increase in phosphoric acid and ammonia prices? Or does the industry need to take corrective actions? And if so, what's the timeline one should expect? Should one expect that for 2Q, the Kharif season, the industry basically holds on to whatever prices there are and then corrections are taken ahead of Rabi itself?
So it's again a good question. See, as far as phos acid asset is concerned, obviously, currently, there is a good demand for the end product of phos acid across the world, but we do expect a certain amount of softening happening. We have heard about Brazil, you would have also heard about it with the buildup crop actually may be less. And there is also the China factor, which plays in terms of what they're going to import out. But our strategy, like Jayashree has been said that simple is to maximize our own this thing. And therefore, the backward integration, which we have done for the plants and now we're also getting the acid across to our Kakinada plant. And that is something which is doing very well and the PAC2 has stabilized, we can use different type of acids. We can also source different type of rocks and do the conversion. So that's where it is. So currently, obviously, the government is a bit concerned on the phos acid. They have, I believe, at their level, they have taken their top part at various ministries level with the various comments were supplying raw material to us. One of the things which we have said as part of Atmanirbhar Bharat is to look at the imported duties, which are their custom duties, which are there for manufacturers and that they are looking at amicably. Long term, we are also looking at PLI for fertilizer. Whole idea is that we make -- like we have -- like the government is doing for urea is to make NPK cell sufficient. So that's something which we've worked through. And we're also looking at getting subsidy directly in the hands of the farmers so that then he has a choice on what material to buy and obviously companies like us, the innovative one, they benefit from that. So I hope that covers your question.
The next question is from the line of Bharat Sheth from Quest Investments.
Congratulations Sameer and Jayashree on excellent performance in challenging time. So 1 question on this phos acid side. With this converting plant becoming operationally operation. So how much of capacity utilization one can really look or how much additional phos acid for the Kakinada will be met from Vizag plant, that is one. And second, if Sameer we can talk on midterm, our whole reason for the Agro CPC business, including bioside also?
Okay. So on both your questions, firstly, very good question. So let me talk about each of the businesses. You talked about Bio business, after we've taken over from ERD, Paris finding very good attraction. France, our products are doing exceedingly well, both Azal and other products. In fact, like I was mentioning that we have actually in a very short period of time, increased our extracting capacity by 1.5x. The new plant was inaugurated. It was there in the papers also, which will help us to export and even supply the domestic market more. So that's one. We are also looking at -- which we did last year was converting not just from seeds, but also getting [indiscernible] from the fruit. One challenge, which this year, we -- last year, we faced, but this year has been better is in terms of the availability of the new seats because obviously, the production is one of the biggest challenges we have. And that is something that the team has done well. This time, they were not -- while COVID was there, there were not so much of moment restrictions. And therefore, we are had a augment on this product also. And we continue to develop -- we talk about midterm, we are working with various agriculture industries. Firstly, like Jayashree said, there's an application. So you know come across applicators like the 3 injections, which you do in Canada is doing very well in 2 of our trial markets. And also, we are looking at getting into microbial products, which we are working with TNU and also looking at other even what is called consumer-friendly products and organic. So overall, organic we -- and bio we continue to see it to grow and it's also part of our sustainability agenda, even as part of our supply chain like we have mentioned, we have now had 700 acres of land, which has gone. So that, again, [indiscernible].So that's on bio and we are very firstly, very happy to see its performance and our acquisition of that. And also, we see a lot of long-term prospects in terms of [indiscernible]. Crop Protection, again, like we said, as all the hard work which has been done is paying off. We are now into looking at new generation molecules. We are having talks with various companies, innovators and also our R&D teams are generating markets, which we have also launched both for the domestic and the international market. Good thing is we also have our own retail business, which can help to promote this quarter. So again, Crop Protection again. And now we are looking at even new formulation plants, which can help us to supply the market. So our first thing was to ensure that whichever crop we are in, we be able to service the maxim needs of that crop, given the normal seed. And we do see and therefore, instead of a push, we want to have a pull coming out of it. And that is something, which we are seeing. One thing is we have to sustain the performance definitely and even look at a certain amount of backward integration like we have done in fertilizer on some critical raw materials. And at the same time, also while Mancozeb continues to be a very good molecule, but we have launched new products also like we said earlier on our domestic business, 25% of new molecules, which we have launched in the last 2 years. So we will continue to build upon the new next-generation molecules. So that's where we are on Crop Protection. As far as the phos acid is concerned, again, talking on our needs, it depends on what sort of DHB manufacturers is at a high P grade or is a low P grade, but the needs could be around 5 lakh tons. We are trying to maximize as much production of PAP and we are very -- of both the PAP and also look at alternate rocks in there. And then as like Jayashree said, is to see we can transfer both the weak and the consolidated acid to meet at least minimum of 20% of them apart from what we have from Mandi. I hope that answers your question.
I mean, I mean, CP, Crop Protection and what size would you look to, I mean, in 3 to 5 years, as we are looking for? And with our domestic and export business mix?
We do expect a very high double-digit growth coming from Crop protection. Of course, the year can be different. But overall, CAGR will be in that. And we do expect -- actually, the traction will be both in core markets and also in our domestic market. I mean there's a huge scope to grow in both the markets as our strategy is also we have put up people now in various markets, which are our own people and creating subsidies so that we can also control what is called the end product and the registration. So that is the work which is being done on the export market side. So actually, the scope is huge. And for company quality players like us and now becoming innovators, we will expect this growth to happen.
Thank you, Sameer. And if I -- may I have 1 question. May I take 1 more question?
If it is short, yes.
With this Kaleshwaram project and Polavaram both whenever it works operational full play, how much additional area that we look for our key market?
Right. So let me first start with the Kaleshwaram project, which is selling on and -- but it's not just Kaleshwaram project. It's also all of the good work that Telangana government has done, including the setting of Canal and the tanks and other micro irrigation projects, which are there, both on the Godavari and Krishna river.So what has happened since the state was formed, the agriculture output has gone up by 2.5x, of which regional nitrate is only 7%, right? But it's the availability of water in [indiscernible], which is something which is there and now Telangana has become what is called the rice ball 5 years ago, we used to talk about it. But then there's also what is called diversification, which is happening into foods and vegetables and other -- maze was never a crop grown, but it's also coming up. So a lot of diversification is happening. We have oil seeds in the northern districts, we have chillies, which are coming up in various areas. As far as Polavaram is concerned, which is basically again on Godavari, but it's connecting the Godavari-Krishna River. The current Andhra chief minister almost visiting this project every 45 days. And the whole idea is that once the canal is connected and its operational fully, the issues of having the secondary canal done for what is called the dry Rayalaseema area.And there, again, we see for Telangana, we do see an agriculture boom also coming, especially in the Rayalaseema area of Andhra Pradesh. But currently, a lot of it is rain hit. Now of course, 1 of the things to be done is to do more of value-added crops than just depending on paddy or content and other things. But obviously, for us, it's -- we are in a very fortunate position where both the state governments are very much focused on improving the agriculture and farmer's income.
The next question is from the line of Deepak Chitroda from PhilipCapital.
And congratulations on good set of numbers. So I think most of my questions are answered, but just to basically ask you slightly on FY '22 outlook as a whole. Just want to understand, ma'am, how do you see the volume growth for the entire FY '22 constraint. We have already started kind of a delayed rainfall for 3 weeks. So do you think that extended probably the season of kharif as well as if we expect that extended Rabi will also take place. So do you think that growth of more than 6%, 7%, which we achieved last year, can be sustainable for this year as well?
Yes. The rainfall delay of 1 or 2 weeks shouldn't matter in terms of the volume consumption. In our key markets, we have seen that the rainfall has not been that delayed while you've seen in the central and northern market, there has been a bit of a delay 2 to 3 weeks. That should not impact the consumption, right? Because the reservoir level are also good. The soil moisture conditions is good. The demand from the farmers is good. Channel inventory is low. So we do not see any volume contraction or volume not happening during the year.
Hello?
Yes, Sameer was saying that it was more of a supply issue than a demand issue.
Sure, sure. And my second question is, again, I think, just some clarification in terms of the on the margin side. As I mentioned, a couple of reasons for sustaining margin for the quarter. But what do you think in terms of if we don't see a subsidy announcement or subsidy support by the government probably take place towards the end of, say, October or November. So by that time, the raw material prices will keep on basically at this level. So do we expect some MRP increase again for most of our NPK grades?
Okay. So we sort of covered this in the earlier question. One is how the raw material prices are going to behave, right? The second 1 is in terms of the subsidy per se, whether it's going to be only P or it's going to be distributed between P and K&S. And the third event is the ability to pass on the prices in the market. So we will have to work through it as the months go by or the weeks go by. But that's the way one is to look into this.
Question was about, we had some inventory gain for the quarter. So obviously, we'll not have that particular gain going forward because we have seen some subsidy increase. And of course, that has supported well for the quarter?
Yes. There has been opening inventory gain, which almost all the companies would have benefited it often happens in the case where the raw material prices are only increased right? So it will continue because we have seen this quarter also, there is a price increase that has happened. And as I was mentioning, over the next couple of quarters, the raw material prices should get softened for prices, which is about [ INR 998 ] last quarter is now about [ INR 1160 ], right? So the prices are on a higher trend at this point in time. So one needs to fasten their [indiscernible].
Thank you. The next question is from the line of Vishnu Kumar from Spark Capital.
So thanks for your time. My first question is generally on the volume growth for the company over the next couple of years, what should probably be something that we should work on? And how much as a company we are expecting the fertilizer volume growth to be at? And given the large irrigation projects that is also likely to come over the medium term?
Okay. This is, again, a very relevant question. We talked about it in the past, currently, the company is looking into some debottlenecking operations both in Kakinada and Vizag with a lot of share of the existing capacity. And as an interim measure, we would also be selectively looking into strategically tying up for imports and sale of finished goods, including NPKs and DAP. So that's the game plan for the, I would say, next 1- to 2-year time frame. As I was mentioning, we are also looking into some sort of the backward integration opportunities and how that scales up as well as tying up with the global players for continuous supply of raw material depending on that any further expansion opportunities will also be booked into. And we'll also improve our own capacity utilization within the last couple of years, last year has impacted with COVID. This year, again, we had -- we are still coming in. However, we were able to continue our production because we also took the ATA mostly in March last year. So it will be to continue driving the capacity utilization due from debottlenecking, selective import of NPKs and DAP. And at the same time, looking forward into strategic tie-ups for imports and sourcing of raw material. I would also ask Sameer to add his input here.
Yes. And the main thing, like we said, it's more the quality is under generic. We want to move away from generic into can and we'll continue to improve our share of unit rates, which we supply to the benefit of the farmer, which is more balanced nutrition.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Right. Thanks a lot. I think, firstly for everyone to attend this call. Again, it's on a virtual mode. So firstly, to wish everyone, I hope everyone has got vaccinated. We definitely should be called off protocols to ensure that the wave 3 doesn't come in. But as far as the good news is agriculture, which we are part of, a lot of investment is happening both from the center and the same comment and the focus is there. The new wave will be to improve the assets so that the farmer productivity and sustainability increase. And we are very happy to be part of the churn now and being the largest agri input, you'll see more and more innovation coming from the company side. Thank you very much.
Thank you. On behalf of Nirmal Bang Equities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you.