Coromandel International Ltd
NSE:COROMANDEL
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Coromandel International Ltd
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Ladies and gentlemen, good day, and welcome to the Coromandel International Limited Q4 and FY '20 Earnings Conference Call hosted by PhillipCapital (India) Pvt. Ltd. [Operator Instructions] I now hand the conference over to Mr. Deepak Chitroda from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.
Thank you, Lizanne. Good afternoon, everyone. So on behalf of PhillipCapital, I welcome all participant who have logged into the Q4 FY '20 quarterly results conference call of Coromandel International Limited. From the management team, we have Mr. Sameer Goel, Managing Director; and Ms. Jayashree Satagopan, CFO of the company. I'd like to thank management for giving us opportunity to host this call. Now I request Ms. Satagopan ma'am to first begin with the opening remarks and followed by some details on the numbers, after which we can start with the Q&A session. And thank you, and over to you, ma'am.
Good afternoon, everyone, and thanks, Deepak, for organizing the conference call. I'll first give an overview of the business environment experienced during the year, including the COVID situation, followed by the company's performance and the Q&A session.As you know, the country witnessed an above-normal Southwest and Northeast monsoon during the year, resulting in improved crop sowing. Food grain production for the year is expected to be at 296 million tons, higher by 4% compared to the previous year. Company's key markets of Telangana, Andhra, Karnataka and Maharashtra received above-normal rainfall, which increased the reservoir levels and the canal irrigation.During the year, the Kaleshwaram project on Godavari river was inaugurated, which has resulted in assured irrigation in the northern districts of Telangana. Agriculture in Telangana and Andhra Pradesh continue to perform well, thanks to the active engagement of the state governments, increased irrigation, desilting of canals and tanks and the income support schemes that has been extended to the farmers. Agri output in Telangana has grown by more than 150% since 2015. On the subsidy front, the nutrient rate under NBS for 2021 has been marginally reduced from the '19-'20 level. The overall allocation of subsidy in the Union Budget has also been reduced by 11% to INR 71,309 crores, with the same level of reduction across NPK and urea. The industry has received INR 10,000 crores under the Special Banking Arrangement in March 2020, although there is still a significant subsidy backlog of INR 36,000 crores for the industry. Further, on the Direct Benefit Transfer relating to fertilizers, the government is expanding its scope. During the year, pilot testing was conducted, linking the POS machines with soil health cards to promote benefits of balanced nutrition.On the Crop Protection side, the Pesticide Management Bill 2020 was introduced in the parliament during the year. The bill seeks to regulate the highly fragmented agrochemical markets in India and ensure availability of pesticides with minimum risks. This bill, when passed, will replace the Insecticides Act, 1968. Very recently, the government has come up with a notification recommending ban of 27 molecules, providing 45 days' time for the industry to respond. A technical task force has been formed by CCFI, Crop Care Federation of India, to prepare product-wise technical response to the draft notification. Crop Protection companies and the industry forums are making necessary representation to the government before the deadline.Let me give you an overview of the fertilizer industry performance. For the quarter, phosphatic fertilizer industry sales has improved by 7% to 42 lakh tons. The complex fertilizer sales increased by 10%, while DAP increased by 4%. Phos acid price for Q1 2021 has been finalized at USD 607 per metric ton. In Q4 FY '20, the price for phos acid was $590 per metric ton. As far as the full year '19-'20 is concerned, overall, the industry has grown by 8% to 200 lakh tons from 186 lakh tons last year, with an 8% and a 7% growth coming from DAP and NPK, respectively. DAP imports have come down by 55 lakh metric tons for the year vis-à-vis 66 lakh metric tons last year. Coromandel's full year performance. Coromandel had a strong performance in FY '19-'20, driven by the Nutrient and Allied businesses and a good recovery in our Crop Protection business. The company continues its focus on offering superior farm solution, introducing new generation products, improving its cost and operational efficiencies through backward integration, smart sourcing and managing its working capital. Coming to Coromandel's fertilizer performance for Q4, our phosphatic volumes increased by 17% to 6.9 lakh tons. This was well supported by the good demand in the Rabi season. Manufactured product sales was at 6.8 lakh tons and imported DAP sales was 0.14 lakh tons. The unique share grade has moved up to 38%. During the quarter, our phosphatic fertilizer plants operated at 87% capacity utilization, recording a production of 7.8 lakh tons. As far as the full year '19-'20 is concerned, our phosphatic sales volume increased by 4% to 31.4 lakh tons. Consumption, as reflected through the point of sales from retailers to the farmers, increased by 12% to 31.6 lakh tons. Sale of our own manufactured products has gone up by 11% during this period to 30.7 lakh tons, whereas imported DAP sales for the year was at 0.7 lakh tons. Market share for the primary sales has marginally come down to 15.7% from 16.3%. The company has maintained its market share for the point of sales at 15% -- 15.8 percentage. The fertilizer business relaunched Gro Smart, which has been very well received by the customers and has created a niche in the market. During the year, our phosphatic fertilizer plant operated at 86% capacity, recording a production of 29.8 lakh tons. Captive acid production from Vizag and Ennore was at 2.8 lakh tons for the year, which is up by 18% compared to prior year. Phos acid plant, which was commissioned during the third quarter, is running pretty smoothly. Our SSP business registered a 1% sales volume growth with a sales volume of 5.7 lakh tons during the year. It continued its leadership position with a market share of 14%. Production volume for the year increased by 7% to 6 lakh tons for the SSP business. On the Crop Protection side, during the quarter, our Crop Protection business turnover has gone up by 20% to INR 429 crores from INR 358 crores last year. The business registered a good growth in H2 after a soft H1, which was constrained due to the production at our Sarigam facility. On a full year basis, Coromandel's Crop Protection business registered a decline of 6% during this year. Crop Protection business continued to introduce several new products in the market. During this year, the business has launched 6 new products, including 2 in-house manufactured technical, which is pymetrizone and pyrazosulfuron. 4 new formulated products were also introduced during the year. All these product launches have received an encouraging response from the market. Further, during the year, the company has commissioned 3 new plants for manufacture of pymetrizone, pyrazosulfuron and Mancozeb WDG. Major infrastructural upgrade, including new warehouses at Sarigam and Dahej and a pilot plant upgrade at Ankleshwar, has been completed. The business has strengthened its R&D, its technology transfer and product development functions. During the year, 62 new registrations have been taken. This is both for the Indian and global markets. Specialty Nutrients business continued to perform well through its focused product approach. Fitsol Pomegranate, a crop-specific product, and 2 in-house manufactured products, Novozin and Bosmax, which are based on in-house R&D technology development, were introduced during the year. Business is collaborating with the pharma produce organization, cooperators, seed companies, agri universities to increase its reach and market development. The business has also been very successful deploying digital initiatives, connecting with the end customers. Our retail business had a good quarter and the year with improved product offerings and continuous engagement with farmers, complemented by good monsoon. Retail business witnessed a good growth in non-fertilizer business. It strengthens its technology interventions in the area of crop diagnostics, farm advisory and mechanization. On the biopesticide front, acquiring the biopesticide and integrating with the Crop Protection business of the company has enabled us to provide integrated pest management solutions. The bio business has improved its product offerings, sourcing capabilities and extraction efficiency during the year.On the organic front, our company has highly diversified product range, including City Compost, Pressmud, K-ash, which is potash derived from molasses and other products. The organic business continued to perform well during the year. With increased focus on organic products, biopesticide, biostimulants, biosurfactants, along with our traditional fertilizer nutrient and crop protection, Coromandel continues to promote greener solutions in improving overall soil health and farm productivity. To sum up, Coromandel has significantly progressed during the year, improving its customer connect, market development and branding initiatives, its product offerings and enhancing its people capabilities. Let me now provide an update on COVID-19 situation. As we all know, at the end of the year, the economic activities were severely impacted by COVID-19. Several nations, including India, have adopted a complete lockdown of their economy, in line with the recommendation of the World Health Organization to contain the spread of this pandemic. In India, the agriculture sector has remained relatively insular to COVID-19. The government has classified agriculture and related industries under essential commodities to ensure food security and provide livelihood opportunities to the rural workforce. The government, both at the central and at the state level, have been proactive in ensuring their support to the farming community and minimizing disruptions in the supply chain to ensure agri inputs availability. The government has announced several stimulus package, including front loading of PM-KISAN fund, concessional credit worth INR 2 lakh crores, agri infrastructure fund and a moratorium on agri loans, to name a few. Furthermore, the government has announced 3 major reforms in the area of agri output marketing, which is expected to result in improved price discovery for the farm produce.These reforms include increased participation of private players, deregulating fruits and vegetables, reforming the Agriculture Produce Market Committee, which is the APMC, and promoting contract farming. These reforms shall help the Indian farmers with faster adoption of superior products, smarter delivery mechanisms, digital and agri technology penetration. Indian agriculture is geared up for a second Green Revolution in the years to come with all these reforms. Let me now talk about the company's response to COVID-19. Coromandel has prioritized the safety of its employees and the sustainability of its operations. All the plants are operating as per government guidelines with utmost care for the safety and social distancing. Retail centers have been operational and are following social distancing norms, while dealing with our end customers, our farmers and also utilizing digital tools to fulfill customer requirements.To ensure business continuity and swift response to any situation, a rapid response team has been formed across the business units and the functions. Coromandel stands and support with the center and state governments as well as the local authorities and remain committed to the farming communities in these challenging times. Company's relief and rehabilitation initiatives includes the distribution of masks, hand sanitizers, hand wash soaps and other daily essentials in and around its area of operations.Further, the company has been educating farmers on the aspects of safety and hygiene through its retail and dealer network. With the government reforms in the agri sector, higher reservoir levels and the prediction of a normal Southwest monsoon, Indian agriculture is expected to witness a good Kharif season during the coming year. Let me now move on to update on the financials of the company. For Q4, the company registered a consolidated total income of INR 2,881 crores, growing by 9%, with Nutrient and Allied businesses contributing to 85% and the remaining 15% coming from the Crop Protection business. Corresponding numbers of the last year's fourth quarter, Nutrients was at 87%, CPC 13%.In terms of a subsidy-nonsubsidy breakup, Q4 revenue share is 78-22, which compares to 80-20 last year. As regards to profitability, the EBITDA for the quarter is INR 391 crores as against INR 259 crores last year, registering an increase of 51 percentage. In terms of subsidy-nonsubsidy breakup, Q4 EBITDA share was at 72-28 vis-à-vis 73-27 in the previous year. The consolidated net profit after tax for the quarter is INR 234 crores in comparison to INR 110 crores for the corresponding quarter last year, with an increase of about 112 percentage.For the full year, the company recorded a consolidated turnover of INR 13,177 crores, very close to last year's numbers. Nutrient and Allied business contributing to 87 percentage share and the remaining 13% coming from Crop Protection business. Corresponding numbers of last year, Nutrient 86 percentage and CPC 14 percentage. In terms of subsidy-nonsubsidy breakup, the year's revenue share is about 80-20, which is same as last year. As far as profitability is concerned, the company recorded an EBITDA of INR 1,732 crores for the full year as against INR 1,444 crores last year, which is a growth of 20 percentage. In terms of subsidy-nonsubsidy breakup, EBITDA share is 75-25. Last year, it was 68-32. Consolidated net profit after tax for the year is INR 1,065 crores as against INR 720 crores in FY '19, a growth of 48 percentage. ROC was 27% vis-à-vis 21% in the prior year.Let me now give a brief on the subsidy side. Subsidy outstanding end of March 31 was INR 2,316 crores. Last year, the number was INR 2,392 crores. The outstanding subsidy includes approximately INR 100,000 crores that has been claimed and pending with the government for dispersal. This number is before the Special Banking Arrangement of INR 52 crores. Last year, company received INR 204 crores on account of Special Banking Arrangement. During the quarter, the subsidy payout from the government was relatively low. Coromandel received INR 94 crores in Q4 vis-à-vis INR 432 crores in last year. During the year, Coromandel generated INR 2,230 crores of cash from its operation after adjusting for its working capital changes. The internal cash generation has been used to fund its capital expenditure programs, pay out tax-free dividends and also introduction of its working capital loans. The company intends to use this cash generation in reducing its debt and more so for investing in its long-term strategic growth aspirations.The balance sheet of Coromandel continues to be strong, with a debt-to-equity ratio of 0.037. The net debt of the company end of the year stands at INR 1,207 crores. Its long-term credit rating has been affirmed as AA+ by CRISIL. On the ForEx front, as you would have seen, during the year, rupee has been quite volatile, registering a depreciation of 9.4%, a steepest fall in the last 6 years. Rupee traded in a broad range of $68.20 to $76.38. Owing to COVID, we saw a steep depreciation in the rupee in the last quarter, especially in the month of March, when rupee depreciated to $76.38. Coromandel has been following its hedging strategy and dynamically covering its exposure, thereby minimizing the impact of currency depreciation. Interest. The finance cost for the quarter was at INR 34 crores, excluding the Ind AS 116 related adjustments. It is lower compared to INR 65 crores of interest cost that the company incurred in the similar period last year. The savings has been primarily on account of efficient working capital management and lower rate of borrowings. For the full year, the interest cost was at INR 200 crores excluding Ind AS adjustments. Last year, similar period, the cost was INR 251 crores. The company has passed on the, benefits of DDT with the Board approving a dividend of INR 12 per equity share for the year. The dividend payout ratio is 33.2 percentage.Thanks once again for joining us and your interest in Coromandel. With this, we can open the session for question and answers. I would also like to inform that our Managing Director, Mr. Sameer Goel, has joined and would be pleased to respond to your questions.
[Operator Instructions] The first question is from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Sir, my question is on this recent proposed ban, which was announced last week. These 27 molecules -- I assume that even Coromandel is manufacturing Mancozeb and chlorpyrifos. So one is while it talks about manufacturing, whether it includes domestic and export? Number two, if you can also give us some clarity with respect to what are the sales that we derive from these products that are in the banned list?
Thanks for the question. I think this is a hot topic now. As I was mentioning, there are 27 molecules that have been included in the list recommending -- with a recommendation for ban. Now as far as Coromandel is concerned, there are primarily 4 of them: Mancozeb, malathion, acephate and monocrotophos. The company is evaluating and is going to be responding along with the industry in terms of the data that has been sought for. As you know, Mancozeb is -- out of these 4 molecules, only monocrotophos is a red triangle molecule. Now as far as Mancozeb is concerned, Coromandel has a substantial revenue from Mancozeb, close to about 50 percentage. This is a broad spectrum fungicide which has got a very good efficacy across various markets. It has not been banned except for 1 country, which is Saudi Arabia. So -- and India is the major manufacturer of Mancozeb, along with Coromandel, Indofil and UPL. So this molecule is key not only for the pests in India but also for the global market. As I said, the company is working along with CCFI. There are some data that has been asked for. So those inputs are being provided, and it will be taken up.If you take a look into 27 molecules and the overall volume, it's slightly more than about a couple of -- it's about close to a couple of billion dollars. That's a huge number for us to look into. The government is, on one hand, actively promoting Make in India and also looking into increasing farm productivity. Some of the molecules -- most of the molecules listed here serve both the purposes of providing low-cost crop protection solutions to our farmers in the country and are also being exported to global markets. Therefore, we do believe with the right representation with the government we will be able to come up with probably few products which are in the red triangle with a time for phase out like how it happened with the Anupam Verma Committee recommendations in the past.
My second question is, if I look at this recent locust attack, which is actually happening, one is, I understand that some of these products, which we manufacture also, can be used towards this -- as a pesticide into this. I mean, but from a farm economics or the yield perspective, I mean, I understand that it happens probably post the Rabi season. But just wanted to hear your thoughts whether it will have an impact on the produce, whether it can actually benefit us in terms of better usage of agri inputs in those areas.
So basically, firstly, locust attack, which originated in Africa and then came in Iran and then came across the borders, if you've not seen an attack, it's a very deadly attack. I've seen it in my childhood at our farm. So it's not something which is good to see from a farmer's point of view. The good news is that we have 2 of our products, both on the chemical side and on the bio side, which are very effective against locust. And one of them is, of course, the product which we are talking about, and we have spoken to the government also with few other manufacturers, which is monocrotophos...
Malathion.
Malathion. And the other one is the NeemAzal which is there, which is our bio product. So these are very effective, and that is something which we are talking with the government. It's also used by the public system. So these can be sprayed on locust and at least ensure that this spread doesn't happen. This normally happens when there is excessive rains in especially the desert climate, and that's when the locust ends up thriving, and they come in whole.
We'll move on to the next question, comes from the line of Nitin Gosar from Invesco Mutual Fund.
Just 1 question. From here on, the cash flow generation looks pretty healthy with no impending offbeat CapEx around. How should we look at Coromandel from hereon, say, from next 3-year to 5-year perspective? Which are the areas which are on top of the mind for capital deployment and to grow from hereon?
Right. Just on that, basically, likely we have said in our long-term strategy, we are looking at increasing our investments in Crop Protection and specialized nutrition and also in our retail business, apart from looking at investments in R&D and the new molecules and including any project investment, which is required in fertilizer. So we hope this business to continue to grow exponentially like we have done in the past. So that's where we are looking at it. And we do expect our cash flows to be comfortable. Do you want to comment?
Yes. The cash flow situation, if you look into it last couple of years, have been quite comfortable with our long-term strategic plans. We do see there is enough opportunities for us to deploy the funds, especially looking into our higher EBITDA businesses. While we will continue to focus on our large and stable business, which is our Nutrient and Allied, there is an increased interest in Crop Protection, Specialty Nutrients and also expanding our footprint on the retail front. So that's how we intend to utilize our cash, both in terms of investments in fixed assets as well as any other opportunities that might come up.
Okay. Just a follow-up on that. A, on CPC business, how should we see Coromandel from hereon, more domestic, more export? Like how should we look from 3-year, 5-year perspective? And on fertilizer business a bit. If at all, the CapEx was to happen, it will happen on the front-end which will lead to more volumes or will it be more on the back-end side?
Okay. So Crop Protection has opportunities to grow both in the domestic markets and the global markets. We are seeing very exciting opportunities in both the spaces. So that's not going to be a constraint. We have leaders who are working on each of these specific domestic markets as well as the global market, and there is a very healthy collaboration and competition to grow the business. So I would leave it there. As far as fertilizer is concerned, we had indicated in the past that we would be looking into debottlenecking our facilities, both at Vizag and Kakinada. So that's going to be involving some CapEx. Apart from that, if there are opportunities for us to do any further backward integration, that would also be considered. The major ones are done. As you know, we have now 2 phos acid plants at Vizag and we have one in Ennore that have given us self sufficiency in terms of acid for both Vizag as well as our Ennore operations. So we would evaluate any further scope for backward integration because that will actually help the company both in terms of supply security for our key raw materials as well as conserving the foreign exchange because this fertilizer industry is highly import intensive.
We're also looking at major investments. When I say investments, not in terms of this thing, but resources in R&D and working superior products and also looking at different formats of fertilizers which are coming in, which are more crop-specific from a marketing point of view.
Got it. This was very helpful. One final bit, what should be the CapEx outlook for next 1 year?
For the current year, let me talk about 2021, right? For the next 2 -- for the current year, we had put together a CapEx plan of close to about INR 400 crores. However, given the COVID situation, there could be a little bit of a push out of our CapEx because we also want to be conscious of health of the laborers and the workmen who come to the facility. So the first focus is going to be to ensure that our operations are fully functioning. All the critical essential CapEx will be carried out. Some of them might be spilled over by a quarter or so. These are very dynamic situations. So we'll have to wait and watch and see how we can optimize on this. I also believe in the next couple of years our CapEx should be in the region of about INR 300 crores, INR 400 crores. I'm not talking about any large investments. I'm just talking about a normal operational CapEx that would be about INR 150 crores to INR 200 crores. Apart from that, we are also looking into putting up specific multipurpose plants for our Crop Protection, looking into certain customized fertilizer plants which would be smaller scale. So there are plants that we have, and that would average about INR 300 crores, INR 400 crores per year.
[Operator Instructions] The next question is from the line of Tarang Agrawal from Old Bridge Capital.
Just to take it further from the earlier participant's question, how do you envisage your revenue split to be, say, 5 years from now between Crop Protection and crop nutrition?
Earlier, we used to give a guidance of wanting to get our profit or EBITDA close to 50-50. The revenue for fertilizer business, given the scale, is going to be large. However, we were looking at how we can improve our overall profitability. So both these businesses have tremendous scope to improve, but one is not going to be at the cost of another. So I would look at the improvement in our overall profitability share rather than a revenue share, and we are moving in the right direction. We, of course, had a bit of a setback last year with our Sarigam facility's operation which was suspended for about 3, 4 months' time. We are hoping to get back to normal soon in terms of focus for new molecules introduction, both on the technical and formulation side.
I think one of the things you have to -- we have to talk about subsidy and nonsubsidy than the nutritional business. We continue to grow our nutritional business exponentially, which is on specialized nutrition, on organic and also on Crop Protection on the bio side. So these are the things which are -- and at the same time, our retail also is focused on non -- which is what is done is on the nonfert side. So that is something which you have to take. So when you look at our figures, it should be looked at subsidy versus nonsubsidy instead of nutritional into Crop Protection, and also...
So would it be -- would a 1:1 split between subsidy-nonsubsidy 5 years from now on a profitability basis be the right way to look at it?
It's a good direction to go for. But the good news is we are doing very well with our fertilizer business also.
Okay. Ma'am, sometimes in your opening remarks, you mentioned that your net debt was around INR 1,200 crores as on 31st March. But when I look at your balance sheet, the short-term borrowings are at INR 1,625 crores and cash under current assets is at around INR 50 crores. So what other cash equivalent am I missing? And where is it exactly in the balance sheet?
So you're right. That's why I called it out as a net borrowing. Our gross borrowing is at INR 1,600 crores levels. We also have investments of about INR 400-odd crores.
And that would be under what head, ma'am?
It would be under current assets.
Other current assets?
Yes.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
Sir, first question is the nonsubsidy revenue that you mentioned for the full year and the difference between the nonsubsidy revenue and the Crop Protection revenue, which works out to be roughly about INR 942 crores. So that is mainly Specialty Nutrients and retail business, is it?
Yes. We have Specialty Nutrients, retail as well as organic.
Can you give a breakup of how much the...
Anything other than Crop Projection gets into the Nutrient and Allied businesses.
So for the full year, can you give a broad breakup of how much is specialty, retail?
We could possibly take this question off-line, please.
Okay. Yes. And ma'am, I realize that this number, with INR 950 crores, for the last 3 years, it has been in that range. But in the calls, you keep highlighting that you're growing the Specialty Nutrient business. So is there some other business which is declining, that is why this overall number does not increase much over the last 3 years?
Our Specialty Nutrient business has been registering a very, very good growth in the last year. We also had what we would call as a bit of a challenge last year, which we discussed on our retail, especially because of the drop in our key markets, Rayalaseema and North Karnataka. So that has also come back this year.
Retail has done very well this year. So there was a bit of a slowdown earlier years, but it's come down this year.
And this year compared to last year, you would also see that our fertilizer MRP has come down, which is also driven by the lower raw material prices.
Understood. Understood. Ma'am, second question is that our total capacity is about 3.3 million tons. I just want to understand how much scope do we have for debottlenecking and brownfield expansion at our existing sites? We might not do it now, but I just want to understand how much overall potential is there on a brownfield and debottlenecking basis.
So our nameplate capacity comes to 3.5 million tons. It's not 3.3 million tons.
Okay.
And we do have -- in few months because of this demand-supply situation, especially during the peak seasons, our plants sometimes even operate slightly above 100%, right? So -- and there is a month which we are normally utilizing for our annual turnaround. I think this is a normal phenomenon for most of the fertilizer plants. So there is enough scope for increasing the capacity, unlocking the capacity in the plant by debottlenecking, both in Kakinada and in Vizag because these are our 2 large plants. It also depends upon the mix that we are using, right? Today, Coromandel has about 13 types of fertilizers that is being manufactured in our plants. So some of them may have a slightly lower throughput compared to other products. So it depends upon the mix, which itself can help in increasing the overall capacity utilization. Second is debottlenecking some of the operations. Obviously, if we want to look into some of the specialized or customized fertilizer, as I was mentioning, there could be specific investments which may not be very high, but look into smaller units that can cater to those niche segments. So long and short, we could theoretically go up by another 2 million to 3 million in terms of our capacity utilization.
2 to 3 what -- sorry, 2 million to 3 million tons?
Yes.
Another 2 million to 3 million tons.
That's right. That's right.
That is when -- sorry?
See, we are currently operating at 86%. We can easily operate over 100% capacity. That's what Jayashree was saying. And we have a gap in terms of nameplate this thing and it also depends on throughput. So we can increase these numbers. One of the things which we also look at strategically is the ratio between -- we want to produce what is called own grades, unique grades and our own fertilizers. So we always look at the ratio between what we want to do for DAP. We can also look at importing DAP and produce more of NPK as and when we require it, depending on the market demand. So I don't think our capacity is any constraint as far as our numbers are concerned because we want the quality of sales to happen than the volumes to happen.
The next question is from the line of [ H. R. Gala from Finvest Advisors ].
Congratulations for the team of Coromandel for giving such an excellent result. And Jayashree, you had a marathon speech in the beginning. One thing is missed out. How much is the ForEx gain or loss in FY '20?
Yes. Just 1 second. Thank you, first of all, for your kind words.
We can take another question by the time Jayashree is looking at it.
Yes. No problem. No problem. Okay. My second question is, what will be the long-term plan we will have for Crop Protection because, I think, government keeps on coming with something or the other, and that changes the equations of the industry. And within the company, what kind of strategies we should have? So how do you want to plan out because you have got big plans for Crop Protection coming out with the new molecules, et cetera? So what is your thinking on that, sir?
No, like you see, for us, we are quite clear. We are working -- we set up our R&D center in 2015. We have actually invested in what is called our tech transfer team, got very good people and also have a pilot plant and also now have product development and registration team and -- apart from manufacturing. We have set up what is called the new generation molecules. Last year, we were able to launch 3 molecules which are unique to us in India. This is pymetrizone. We also were able to get pyrazosulfuron with a collaboration, and also we launched Mancozeb WDG, which actually we were early on doing a third party. There are plans to bring in such molecules, which after developing, working with the farmers and also with collaboration with other co-marketing companies, to get new molecules. The good news is we had a 67% growth in these new molecules. We are strengthening our marketing team along with the Agronomist team out there. So the business will depend on -- continue to depend on some of the modules, like we said on Mancozeb, which is actually a big resistance breaker and one of the most trusted molecules over the years. But we are fastly growing some of these what is called high-value, low-volume products which are very beneficial for the farmers. And both -- and this is both for our domestic market and also for -- and same thing will apply for the export market, where we are looking at converting our B2B businesses into certain countries into B2C model wherein we can also take -- capture the front-end value.
Yes. How much was export Crop Protection in this year, FY '20?
We are just getting to the number, but it's roughly around 50%.
Roughly, 50%?
Around 50%.
Around 50%.
Yes, yes. And if you can just tell me the ForEx gain number or loss?
See, ForEx more than a gain or loss, what we do is there is a premium cost and then there is a mark-to-market, right? On an average, we incurred about INR 100-odd crores between the premium and mark-to-market. On the exports front this year, our total number is about INR 627 crores.
Okay. And that will be mainly Crop Protection, right?
Yes. This is on the Crop Protection front. On the bio, we will have about INR 90-odd crores.
9-0?
Yes.
Okay. And just last question from my side. Do you see this increasing price trend in phos acid price, like from $590, you said it has increased to $607 in Q1 FY '21?
Yes. Actually, it is a very marginal increase, if you see. The whole of last year, we have seen the phos acid prices coming down -- has been falling. So there's been a slight increase this quarter. We will have to wait and watch. This is all a quarterly trend that happens. On the other hand, you also see that the sulfuric acid prices have come down. The ammonia prices are trending lower. So overall RM continues to be soft.
Okay. And on account of this COVID lockdown...
Sorry to interrupt, Mr. [ Gala ]. Sir, may we request that you return to the question queue. There are participants waiting for their turn. The next question is from the line of Bharat Shah from ASK Investment Manager.
Jayashree, you mentioned something, maybe I couldn't really hear properly. What has been the operational cash flow last year, that is FY '20 before -- after working capital but before CapEx?
Yes, just a minute.
Is there any other question while we're answering that?
Yes. The second issue out of the total Crop Protection business, how much is the contribution of the 4 probable likely list of banned molecules out of our portfolio? So what is the turnover of these 4 banned -- proposed banned item?
Okay. First, let me respond to your cash flow question. I was mentioning the cash generated from operations after adjustments for the changes in working capital is about INR 2,230 crores during the year.
Okay. And that was operating cash flow?
Sorry?
This is operational cash flow?
This is operating cash. Yes, yes operating profits before working capital changes, then you adjust the improvements in working capital, then you get to your cash generated from operations. That is INR 2,230 crores during the year.
After existing working capital?
Exactly.
On the -- just to say on the banned molecules, we are very confident including our industry that products which are like Mancozeb, there won't be any issue. It's just the government requires certain data from the industry, which the industry is getting together, including players like UPL and Indofil and supplying them. In fact, on a separate note, we had even a beta scientist and beta write to the government very clearly and even the -- what is called farmers are talking about that how safe Mancozeb has been and how it is so important for the rural economy and the farm income and how it has a lot of combination products and therefore, has to be -- it's vital as a resistance breaker. So that's how we're looking at it. So we don't have an issue there.
But just for knowledge sake. What is the total turnover of these 4 items?
This will be about INR 800 crores to INR 850 crores.
Sorry, how much?
INR 800 crores to INR 850 crores.
INR 800 crores to INR 850 crores. Okay. And operating cash flow after working capital, INR 2,230 crores, what is the figure that you shared for the last year you mentioned?
I didn't give a last year number. I have shared 4th March 2020. The last year number was about INR 900 crores.
INR 900 crores?
Yes.
And subsidy, which was due as on 31st March '19, all the amounts are received, right?
Sorry, I didn't get your question.
Subsidy which was due, what has happened on subsidy, while the -- we have had a slightly higher collection last year as compared to the previous year, but the good news is almost 650 of the old accounts, which is not the DBT account, the government has -- we have submitted and the governments have paid it. So most of the old accounts are now getting cleared. So it is only, which anyway, the government has to do more of the subsidy which is in the DBT system which is there. Here also, what happens is because the government has moved from giving subsidy on production to -- on 90% it used to give on production, nonconsumption. Certain amount of this is what is called channel inventory. We are working very closely with the government, firstly, to follow-up on our claims. In fact, April was a good month when they did give us around INR 532 crores worth of due, which was supposed to come in the Special Banking Arrangement. We're also telling the government and the finance ministry to increase the allocation, because agriculture is a special sector, to release these funds for the industry as a whole, so that the industries can continue to invest. But we are very confident because most of our old claims have got cleared. As a strategy, Coromandel has moved into, instead of working on what is called push from the factories, which a lot of the industry does, we are more on to the consumption side. So like we mentioned on the -- Jayashree mentioned on the consumption side, our sales have grown by 12%. And therefore, we are working more and more towards what the farmer wants to have, and that also helps us to unlock the working capital.
Just to fill in the picture, how much is subsidy payment which was due as on March '19? And how much has been accounted due on March '20?
So you want to know the corresponding period numbers. Is that what you're asking?
I'm saying how much was the due as on 31st March 2019 and subsequently received if that figure? And how much is accounted is due as on 31st March 2020?
Sorry to interrupt, Mr. Shah. Sir, may we request that you return to the question queue. There are participants waiting for their turn.
No, no. I was just finishing that earlier question only. Give me a second, please.
So to your question, although the government last year has cleared close to about INR 650 crores, which relates to 2019 and prior, the rest are all been DBT payments. We still have close to about, I would say, INR 400-odd crores which relates to 2019 and prior, which have been submitted to the government. The focus has been first to pay DBT because it's much easier for them to process. Some of the older claims are all more manual and paper intensive. And they are able to measure internally in terms of how they have been paying off subsidies. So the focus has been on DBT. However, we have been working with the government to see even the older claims getting settled fast. We don't have much there.
The next question is from the line of Varshit Shah from Emkay Global.
Congratulations for the fantastic quarter and a good way to the end the year. Sir, my question is more around the inventory. So I think we have seen inventory days coming down in this 4Q. So do you think that this is slightly on the lower side and you would ramp up your inventory slightly higher by the end of next year because it looks like on the lower side compared to your historical average? So any comments on that? And my second question is on capital allocation, and continuing from the earlier participant. I think you've increased your dividend payout ratio to 33% from 26%. And given the cash flow use you have planned the next 2 years, it seems like you would be able to maintain a higher dividend payout ratio. So is there any formal policy out there? So these are my 2 questions.
So thanks, first of all, for your kind words and compliments. Yes, the company has done pretty well last year and continue to perform over the last few years, as you would have seen. So on the dividend payout, let me take that question first. Our payout ratio, if you look into the past few years, have always been above 32%. It has not been in the 25% range. While the dividend per share would have been INR 5.5, INR 6, INR 6.5, absolute numbers have gone up this year on 2 counts. One is the per se profitability of the company. The second one is also to pass on the DDT benefits to the shareholders. So we are in line with our dividend policy, giving almost a 30% plus in terms of payout ratio.
Your first question on inventory days. What is that?
As regards the inventory days, the inventory value has come down on 2 counts. One, the softer raw material prices that we have seen all through last year, the prices were coming down and that has helped. The second one is also on account of consciously looking into and planning for our raw materials. So both of these have actually helped in our overall inventory reduction. We think we are in a comfortable position. It has also helped in our total working capital management. There are going to be certain periods in the year when our inventory levels will go up, and there are going to be periods where it will be minimal. So that management will happen. The finished goods will move out rapidly during this season, but off-season we will be having inventory as we will continue to manufacture. So this is how this whole game pans out.
And what we look at is anticipation on what will happen to the raw material prices. So depending on what the commercial team anticipate, we look at holding a higher inventory or a lower inventory.
Sure. Sure, sir. Just to sum it up, so this year, we released around INR 540-odd crores in terms of cash flow by way of lower inventory. I think -- so I think most of the gains are actually in this year and next year probably there will not be any major movement, assuming that there's no major volatility in the raw material prices. Is that the right way to assess?
Not really because we're also looking at how we can do efficiency, how we can move closer to the farmers, and there are various factors playing there. So those are some efficiencies which we are getting including in our supply chain. So a lot of factors play in, and that's what I said. But at the same time, I don't want to give a prediction because tomorrow, if we want to hold more inventory for strategic reason, we'll hold it.
We'll move on to the next question that is from the line of Ankur Periwal from Axis Capital.
Congratulations for a good set of numbers. My first question, while you did mention on the debottlenecking initiatives that we can sort of do and drive the growth over the next coming couple of years as well. My question is more on the near-term front. Whether due to COVID or the labor-led issues, how is the utilization right now? And how do you see this Kharif season in terms of the volume growth overall?
So basically, we have what we call in the month of April what is called annual turnaround. So because of the lean season we normally keep -- and that's how we are planning. We anticipated this lockdown even before that, and we did not go for the annual turnaround. We went for some minor replace. Otherwise, we would have had a problem where we opened up our plants and then found that labor may not be available because of COVID and the restriction. So that was well anticipated. We -- however, our plants have started operation. Our main plants, actually, all the 3 lines are running in both the plants. So -- and we are gearing up really for the Kharif buoyancy, which we expect to happen in Kharif. Any other demands, we're also looking at, which we've already done, strategic imports of DAP. Like I said, we concentrate on NPK much more. So that's how we are looking at the picture. So currently, despite COVID, our plants have done very well in terms of being able to manufacture. We are taking all the safety precautions. And therefore, we are anticipating to meet the need. And again, the whole issue is to get everything efficient, so that we don't hold inventory in the system and we ensure that the farmers are able to get the fertilizer which they want. The good news is because the government has done well, particularly on the Paddy front, especially in our markets, and the farmers have been paid upfront, a lot of farmers are actually buying upfront for the Paddy season. So I was out in the market last week and I did see farmers actually -- while they've got their money for the bumper harvest, they are coming to our retail stores which are open to buy for the Kharif season. And we do anticipate with the normal monsoons which are happening a good Kharif season.
That's helpful, sir. Sir, a second question on the fertilizer margin front. Now we have seen the benefits playing out and from an operating leverage perspective the growth coming in, in this year. Do we believe that all the growth levers there on the margins have played out and this is probably the peak? Or do you expect the baseline number which we have been guiding earlier at INR 3,500-plus per ton, to that number -- for that number to increase upwards and maybe to INR 3,800-odd or something? Your thoughts on that front.
Like Jayashree said, that does keep surprising you.
But the full impact of the initiatives that we had taken on the backward integration, the lower raw material prices benefit...
We had a half-year impact last year. The full impact will come.
And plus, as you mentioned earlier, there are more sort of backward integration arrangement which we can do continue going ahead as well?
Both sides. We are working on backward integration, but at the same time, what we are working on is making our brands stronger. So that's the major thing. It's a major shift from -- moving from commodity to a branded products. And this is something which the farmer likes. We are moving more and more as an FMCG company than to look at a fertilizer company. I hope that answers your question.
The next question is from the line of Abhijit Akella from IIFL.
Congratulations on a very good quarter and a very good year as well. So just regarding the EBITDA per ton for the fourth quarter, my calculation suggests that it was about INR 4,200. If you can please just confirm whether that's accurate. And whether there was any FX or any one-off kind of benefit included therein? And then just to follow-up on the previous question is, what's a sustainable number we can sort of look forward to in FY '21?
So thanks, Abhijit. So as we have indicated in the past, we look into the EBITDA per ton on a full year basis. On a full year basis, directionally, we'll be above INR 3,500. You know we were at INR 2,000, INR 2,500, INR 3,000, INR 3,500. It's growing around INR 3,500 to INR 3,800. We'll continue to see how to improve that operating within the economic environment outside. As Sameer mentioned, operational efficiencies to help us from a cost side, sourcing efficiencies to ensure we get continuous supply of raw material to run our plant and the branding and marketing side to also create a pull for our products vis-à-vis competition. So doing all of these, we do believe that we should look for a gradual improvement in our margins. So overall, for the year, I would take a look at around INR 3,500, INR 3,800 types.
The full impact of the PAP-2 will come...
Will come in the coming year.
Right. Understood. That's helpful. And my second question was just regarding the nonsubsidy business, the growth outlook for that business in the context of all these operational disruptions, et cetera, that are happening or maybe any softening of demand in certain markets that you are seeing. So -- plus all these issues that have been highlighted by the government in terms of bans, et cetera. So I mean, what kind of growth trajectory could we aim for in CP and in the SND this year?
So like I mentioned, firstly, SND business has been growing exponentially. We will continue to see that growth. Here again, it's the quality of what we sell and not the quantity. So just to give an example, we had -- we invented a product called Bentonite Sulfur which has now become [ Generate ]. We went into what is called Sulfa Max. 3 years ago, the ratio was 80:20 in favor of Bentonite Sulfur. Now the ratio is almost 20:80. And the farmers love the Sulfa Max, and that's what we are selling more on -- in fact, certain markets, we don't even sell Bentonite Sulfur. So the whole idea is to continue to focus on products which the farmers require and which benefits the product. So SND will continue to do that. As far as CPC is concerned, there was a lull in quarter 4, like we mentioned, because of COVID. Actually, April, we were able to because China did resume operations and also the export markets lull was there, so we were able to supply to those markets and customers. As far as both the domestic and the -- firstly I'm talking about from a demand point of view. As far as domestic B2B and export, there is a demand in the market. It's a question of us starting our operations, which we have done in all the plants safely because of all the constraints that the government has put, but all our plants are operating now, as we speak. And it's more of question of fulfilling the demand which is arising from the market.Obviously, this issue on the -- what is called the review of the molecules is something which the entire industry is taking. Quite frankly, it is against the policy of the Prime Minister who says Make in India or what he said was think local, all those things, atmanirbhar. And the industry has made a huge cry because even the commercial industry has taken up because this is a huge export potential. After IT and what is called generic pharma, it is actually the -- what is called Crop Protection generics which can actually be the next biggest thing as far as India is concerned in the international market, especially given the 2 issues around China, one is, of course, the disruption of supplies which hit most of the MNCs, and also the fact that there is -- India is a good position to have a second base for supplying these products. And we also have the R&D and the capability like Indian pharma has. So we don't expect this to -- we expect the government to see the reasons and have that. And especially on Mancozeb which is a product which is a generic breaker, there's a lot of combination molecules. It's almost, if I can say, it's like the paracetamol of the pharma because it is a tried and tested product. A lot of the new molecules, normally they run into a problem in terms of disease resistance early on. So this is something which is tried and tested and a lot of the farmers, everyone is talking to the government about this. So we don't anticipate an issue.The industry as a whole, particularly the lead players, had to submit certain data, which they are in the process of submitting. So that's how we look at it. I mean we talk about one product which is malathion. Obviously, it is required heavily for the locust attack which is there. In fact, you've seen one of the articles of HIL actually exporting to Iran and that's something which is there. So we can -- as India, we can actually stop this menace which is more of a, if I can say, an African South Asia thing on that front. And our bio products, we're also scaling that up to ensure both in the domestic market and international market we can grow. It's more again a question of seed procurement, and we are also improving the efficiencies of our bio plants. So that's how we look at it. Like I did mention -- sorry, I meant to forget. We are looking at new molecules. They have grown by 67%. We are very pleased with that, but the scope is a lot more. So we did introduce 6 molecules and more are in the pipeline on Crop Protection.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Deepak Chitroda for his closing comments.
Yes. Thanks. Firstly, for everyone on the call, I do wish you and your families to be safe and also to ensure that, especially in this COVID environment, so please do remain safe and keep social distancing on that account. It is important. I think, especially when we look at COVID and what's the year ahead, firstly, the company has done well in the last 4 years, which is reflected in all our figures, which we have been sharing with you. It has also given us the ammunition and the cash flows to withstand any of the COVID disruption, which are there, and we are very fortunate on that account. And for example, we talked about labor. We are paying everyone full salaries. We're actually recruiting. We are getting very good talent. We are continuing our products and -- we are continuing our products, and so that's new product weapon. So nothing has changed as far as our LTS plan is concerned.The only thing like we -- Jayashree mentioned is some of our projects, we may delayed for -- just delayed for some time as the labor situation gets better or that thing. But strategically, we are in the right direction. The good thing is agriculture as a whole last year has done well, and Kharif is expected to do as well. And therefore, we are on a sweet spot as far as this is concerned along with health and pharma and other industry. And I think the recent announcement by the government is quite significant if people have not realized that this is what they have done is basically what Manmohan Singh did to -- when he was the finance minister to the financial sector or the Vajpayee government did to the infrastructure. This will unshackle agriculture. It will help the farmers to get more income and reduce the waste. Fewer will play an important role. And we are in a position as being one of the largest agriculture input or a solution provider to take advantage of this. So that is something which we are looking at. It may help -- it may get us to tweak some of our long-term strategy. But we're on course on what we want to do. So thank you very much, and please be safe and happy.
I just wanted to add one more point before we close. As we've also seen excellent performance in the last few years, we are very glad to announce that our Managing Director has been reappointed and his term has been extended. You would have possibly seen announcement in the stock exchange. So congratulations in order to Sameer.
I think it's all teamwork. And I've learned a lot from Coromandel. I've learned a lot from the investors also. So thank you very much. I appreciate your help and support. Thank you.
Thank you.
Thank you. Ladies and gentlemen, on behalf of PhillipCapital, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.