Dhanuka Agritech Ltd
NSE:DHANUKA
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Dhanuka Agritech Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Dhanuka Agritech hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking..Thank you, and over to you, sir.
Thank you, Rutuja. I welcome all the participants to the 2Q FY '23 Earnings Call of Dhanuka Agritech. From the management, we have Mr. M.K. Dhanuka, Managing Director; Mr. Rahul Dhanuka, Chief Operating Officer; and Mr. V.K. Bansal, CFO, on the call.
Without any delay, I would like to hand over the call to Mr. Dhanuka for opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Mr. Dhanuka.
Thank you, Manish. Good afternoon, ladies and gentlemen. Myself, M.K. Dhanuka, Managing Director of Dhanuka Agritech Limited. I hope all of you are well and keeping safe. Thank you for joining us in the conference call for results of Q2 FY '22-'23 of Dhanuka Agritech. I have with me Mr. Rahul Dhanuka, Chief Operating Officer; and Mr. V.K. Bansal, CFO of the company.
Dhanuka Agritech is a leading agrochemical company in India, focusing on branded sales in the market. The company's strength lies in manufacturing and marketing of formulated products. The product portfolio is spread across insecticides, herbicides, fungicides and plant growth promoters. Dhanuka Agritech is working with the vision of transforming India through agriculture. Our belief is that when we transform the lives of farmers by enhancing their productivity and quality, in turn, enhancing their income, we are making a small contribution in transforming India.
We work in all major crops in India and have implemented the best-in-class technology to ensure a smooth and efficient supply chain. Dhanuka have a pan-India presence through its marketing team and warehouses in all major states across India. With 3 manufacturing units and 41 warehouses across India, we cater to around 6,500 distributors and dealers and around 80,000 retailers. Through this extensive network, Dhanuka reaches out to approximately 10 million Indian farmers with its products and services.
Dhanuka has more than 1,000 techno-commercial staff, supported by a strong sales and marketing team to promote and develop new products. Dhanuka's strong R&D division has world-class NABL accredited laboratory as well as an excellent team for new product registration and development. Dhanuka has international collaboration with 10 leading global agrochemical companies from U.S., Japan and Europe, which helps us to introduce the latest technology in India.
This year, the rainfall has been very uneven. And although the overall rainfall is above average, East and North region has suffered from very less rainfall, whereas South and West has seen unprecedented rains resulting in flooding in many regions.
Coming to the financial performance for the quarter 2 of FY '22-'23, revenue from operations stood at INR 542.9 crores in Q2 FY '22-'23 versus INR 438.82 crores in Q2 of FY '21-'22. EBITDA stood at INR 97.52 crores in Q2 of FY '22-'23 versus INR 82.16 crores in Q2 of FY '21-'22. Profit after tax was at INR 72.02 crores in Q2 of FY '22-'23 versus INR 63.37 crores in Q2 of FY '21-'22.
The zone-wise percentage share of turnover for Q2 FY '22-'23 is as under: North India, 26%; East India, only 8%. The growth and the top line has suffered majorly in East zone because of the deficit in rainfall. West zone, 37% and South zone 29%. Product category-wise share of turnover Q2 of FY '22-'23: insecticides, 37%; fungicides, 21%, herbicides, 31%; and others, 11%.
The Board of Directors of the company in its meeting held today has approved the proposal for the buyback of 10 lakh equity shares of the company for an amount not exceeding INR 85 crores at a maximum price not exceeding INR 850 per equity share of INR 2 each. The buyback is subject to all applicable statutory approvals.
We are happy to inform that company has set up the Dhanuka Agritech Research and Technology Center at Palwal, Haryana on 6 acre land equipped with our laboratory facilities and a training hall with a capacity of 100 farmers. The R&D center will also be able to facilitate the demonstration of package of practice of various crops as per the season for increasing their quality, yield and income. The Honorable Chief Minister of Haryana, Shri Manohar Lal Khattar, has very kindly given his consent to inaugurate our R&D center at Palwal on November 4, 2022.
After the initiation of the export department in September, we have started receiving queries from international markets for our current product portfolio and we expect these leads to be used for export of products coming from Dahej plant as well. Further, we are ready for launching our new range of biological products in the month of November with an initial portfolio of 6 products. These products are currently being sourced from the best third-party vendors in the industry.
Setting up of Dahej plant is progressing as per the scheduled time, and we are expecting production to start from March end 2023. The company has obtained the registration certificates in CIBRC under section 9(3) for the product beside 31% WG for the control of various insects in Chile and launched the products in Q2. We are getting very good response. And unfortunately, we were not having the technical, which was not planned, and we could not able to supply the material in the market as per demand.
I'm happy to inform that the company was awarded in ABSA-2022 in the category the most innovative campaign on horticulture. Further, myself received Zee Business award for the contribution in agriculture sector conferred by the Honorable Shri Manohar Lal Khattar, Chief Minister of Haryana, at MDU Rohtak on 15th September, 2022. The Ministry of Agriculture has issued notification that restricting use of glyphosate through pest control operators only. The industry associations are approaching to the state governments to discuss the effect, implementation, strategies and challenges of implementation of this order.
Being India's leading agrochemical company, we are at the forefront of introducing digital solutions and innovation, streamlining policies and collaborating with various entities to boost the integration of technology across business segments. In the same endeavor, we have tried to boost our reach through online farmer interactions and aggressive use of TV advertisements for all our key products.
We are focused on expanding our market coverage through our network of distributors and our digital platforms, where we engage with the end consumer. Also Dhanuka has tied up with upcoming online platforms like AgroStar, DeHaat, Gramophone and Planting for online sales of Dhanuka products through their platform. We consider ourselves responsible towards securing the farmers' welfare and preserving food security of the nation. We continue to strengthen our association with the farmer-producer organization that is FCOs, Krishi Vigyan chain, KVKs and other critical institutions to increase our business expertise and boost our market presence.
Thank you very much for your kind attention. We would now take the question from you which you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Viraj Kataria from SIMPL.
Congratulations on a good set of numbers in the challenging environment. Just had a few questions. First is on the overall sales growth for the quarter and for the first half. If you can just provide some perspectives in terms of how is the volume price mix been for us? And a related question is, if I look at the contribution margins last quarters, it's been trending -- continues to be lower. And this is despite the share of ITI increasing in overall mix. So I think in the first half, it's close to 2% of overall revenue mix, and it's the highest in last 3, 4 years.
So in that sense, I just want to understand how should one understand the overall contribution margin leading for us in the next couple of years for us. So that is one.
And second question is largely in terms of the operating cost, which we have kind of been able to manage it much better despite the challenges in terms of the RM headwinds. So in which areas or avenues we'll kind -- we will be able to contain the cost?
So the first question is with regard to the value and volume growth. Am I right?
Yes. And relatedly, on the contribution margins.
So you see, Viraj, for volume, there is a difference of around 7% value growth. The value growth is more than 20% and the volume is more than 16%.
Sorry, it didn't -- your voice was not clear. Can you repeat that if it is possible?
You see, the difference of value and volume is 7%. The volume growth is 7% -- 16% plus in quarter 2.
Okay. So 24%, volume growth is 7% and then rest is value?
The value growth is around 24% and volume is around 16%.
Okay. Sure.
And your second question was regarding the ITI index. So we have introduced new molecules besides Cornex and Zanet and Terminal. So we are getting very good response in 3 molecules out of 4. And that's why the ITI index has increased to 14.75% in comparison to 9.8% last year. So we have around 50% growth over last year in the ITI Index. And we do hope that we will be able to get a much larger share of these molecules in the coming year. And definitely, if the 2 site share will increase, then definitely it will have impact on the margins also.
Sir, actually, my question was, typically, the new products -- the contribution margins in new products is always higher. I mean, while they take time to mature and in the initial years one typically invests a lot in brand building and all. So maybe the contribution at the EBITDA level is not much, but in the contribution level, the margin in the new products is always higher. So in that perspective, if we see the increase in share of ITI, despite that, our contribution margins in the current quarter has seen a moderation. We've seen almost 300 basis points moderation in gross margins compared to last year. So any perspective we can share what has driven this? Is this purely under recovery of RM? Or the base business itself has seen an erosion in terms of margins? Any perspective you can share? How should one look at gross margin behaving for next a couple of years?
Right. Your question is absolutely okay. You see, the impact on gross margin is largely on account of the liquidation of high value inventory. As you know, the price were increasing of material in the month of April, May, June. And after that, the decline in grain was started. So there is a hit on the marginal amount of the liquidation of high value inventory. And to some extent on account of the product mix. In the quarter 2, percentage share of the institutional, say, than the bulk sale also increased, say, from 2% to 5%.
So because of that, the hit in the gross margin. And that will continue in Q3 as well this year. But going forward, after, you see, the next year or in a couple of years, our gross margins, see, we should be able to maintain around -- 35% to 36% gross margin level we should be able to maintain.
And you are right that in new molecules which are under Section 9(3), the margins levels are always higher. But 9(4) molecules that were me-too products, the margins are lower. So this year, we have launched 4 products. So Terminal is one product which is a me-too product, and the share in ITI index for Terminal is higher. So since it is not a 9(3) molecule, so margins in Terminal were lower. That is the reason that overall it has also impacted the margins.
So again -- sorry to harp on this, and this is just a follow up on the contribution margin. Historically, we've done close to 37%, 38% north. There have been years where we've gone above 40% also in terms of contribution margins. When you say -- I understand this year we had an impact in terms of high cost inventory. But if you have to look at next 3 to 4 years, your communication means is that it should be around 35%, 36%. So just trying to understand where is the disconnect?
I mean, as share of ITI improves, over a period of time, this should in a way kind of aid your overall contribution margins. But what you're saying is it will still largely be around 35%, 36%. So just trying to understand the disconnect.
Yes. You see, when we are introducing new molecule, margin is good. But at the same time, our new [indiscernible], they were introduced 4 years, 5 years ago, we are losing certain margin. So overall, we are, you see, confident to deliver gross margin around 35% to 36%. 38%, yes, we delivered in the past, 38% or 39%. At times it is because of even the trend is increasing side. If the price increases for a particular year, that particular quarter, we can deliver much more because we always get the advantage of the carryover inventory that point of time. But largely on sustainable basis, I think 35%, 36% appears to be realistic.
Okay. And in terms of operating costs, which elements we have seen savings or lower cost inflation? So again, last couple of years, both in terms of employee cost and other expenses, you've done a very good job in terms of containing this cost. So just trying to understand how we've gone about achieving those savings. So if you can elaborate?
You see, in terms of cost, I think after COVID, this year was absolutely a normalized year. Therefore, increase was there. I think costs will -- this particular year, I think we'll be able to maintain our costs in terms of the sale percentage going forward.
[Operator Instructions] The next question is from the line of Yogesh Tiwari from Arihant Capital Markets.
I had a question on China. So there are some news of disruption in -- of lockdown in China. So just wanted to understand if there's any supply chain disruption from China like we had in Q1? And what would be our exposure to China in terms of percentage?
This is my request to the operator. The voice is not very clear. Can you do something to make it better?
Mr. Tiwari, the thing -- I've kept the handset nearby to you. Can you please keep it at a distance because it is sounding muffled?
Am I clear now? Hello?
Yes. Go ahead.
Yes. It's not just in terms of clarity, but if you could be louder?
Is it better now?
Yes.
Yes. So my question was on China. So there were news of lockdown in China. So is there any supply disruption similar to what we had in Q1? And what would be your exposure to China in terms of percentage?
Okay. So the supply disruption in China is actually a new norm, and we have now seen it happening in 2020 in over, then that continued in '21 and '22 also. Every month, the disruption has showed up itself in a different form. And now the supply disruption is not a Chinese factor alone. The supply disruption is because of logistics, because of the supply chain disruption at the back end in many manufacturing units, availability of key basic materials. So many things are impacting the supply chain in different forms.
Our new update on China every morning, sometimes talking about disrupting microchips or sometimes disrupting iPhones or sometimes disrupting chemical plants, is we have to take that in stride. Normally, this means a delay of 15 to 20 days and nothing else.
But is this delay leading to increase in cost for the company?
Could you repeat that?
Yes, just to repeat. So as you told that there's a delay of 15 to 20 days for raw materials from China. So is this leading to any cost increase because of this delay?
No, cost increase, I don't think so is much there because of the delay. It is the opportunity lost with disruption.
Okay. And my second question is on the upcoming season. How do you see the demand for the upcoming season given there was erratic rains and uneven rains? So what -- how do you see the demand?
So widespread rains across the country has actually elevated the groundwater as well as the soil moisture. So this is really favorable for the favorite crop, wheat, right now. So we are quite hopeful of wheat acreages going up significantly across the country. Demand of oil seed means that the mustard acreages will also remain high. So these are the 2 crops certainly going to take up space.
In South India kharif, paddy acreages were lower, which now due to availability of water should come up aggressively in South India as well as in East India. Crop damages in kharif prompts the farmer to go for his earning protection through rabi planting. So again, we are hopeful of rabi planting and rabi acreages to be overall be higher.
Okay. And in the last quarter, basically, in the last 15 days of September, there was heavy rains and flooding in North India, basically, Uttar Pradesh. And we have a huge exposure in North India. So were there any sales affected because of this erratic flooding in the last half of Q2?
So erratic rains especially if heavy, then they do impact the consumption at the farmer end. We see opportunity is lost. That is one. And standing water in the field means that the further opportunity even if the rain has stopped gets impacted. So yes, this heavy rain has certainly impacted consumption for the farmer and for the industry.
[Operator Instructions] The next question is from the line of Resham Jain from DSP Investment Managers.
Yes. So a few questions. First one is on inventory levels at the industry level for agrochemicals. What is your sense -- given that the kharif season has not panned out as expected, how are the inventory levels and the situation currently at the marketplace?
I would feel that the inventory levels would be substantially higher, relatively higher for sure, both at the channel as well as the industry end. So industry would be holding relatively higher inventory.
Okay. And what is the situation for us at Dhanuka?
So in channel, we normally don't hold high inventories. But at our end, yes, our inventories are relatively higher.
Okay. Got it, sir. And do you think because of the better outlook of rabi things should be -- things should get normalized in 6 months? Or some of the molecules may get used only in the next kharif season now?
Some of the molecules are very specific. But as of now, I don't see which one would be impacted. In fact, most of the products which are specific are rabi specific. Kharif products will still have opportunity in rabi also. So most of the kharif products will have rabi opportunity in South India as well as in East India.
Okay. Understood. And sir, the second part is on the technical plant at Dahej. You mentioned that from March '23 onwards, it will commission and production will start. But any more further insights on it compared to what you were envisaging, let's say, 6 months or a year back? Is the overall -- in terms of expectation of the kind of products you were thinking about manufacturing and any other opportunity which is emerging there?
Actually, the plant will open up many opportunities in the new world order and a huge traction on China Plus One overall chemical demand. So we are banking on all that traction around us. As of now, our narrative is that we start production, we go live in March and then play from there.
The next question is from the line of Rohit Nagraj from Centrum Broking.
Congrats on a good set of numbers. Sir, first question is in terms of the high-cost inventories which impacted our 1H performance. So have we exhausted all the inventories and now we have come to the low-cost inventories in Q3?
Actually, it is not because, you see, the declining trend is continuing. You see, the inventory which was procured in the month of June, largely liquidated. But whatever we procured in July or in August, there is a decline in trend. So in the quarter 3, there will be impact on the high value inventory as well.
All right. Sir, second question is in terms of exports. So we have recently started in the month of September our export unit. So have we started feeding the market based on the products that we plan to manufacture in our new facility or the products where we have got inquiries from the exports market? So have we started sending samples and getting those approved before the commercial supply starts?
Yes. So we are exploring the export markets from all these angles and we are really hopeful to catch some elements there very aggressively, and more so, once our technical plant comes up.
Right, sir. Got it. Just one clarification on the guidance. So we have said that revenue guidance will be double-digit growth. And as I understand, the EBITDA margins will be at the same level as it was last year. So effectively, our top line growth will also reflect absolute EBITDA level growth as well. Is the assumption right?
You see, in terms of percentage, there will be decline in EBITDA margin.
The next question is from the line of Anurag Patil from Roha Asset Managers.
Sir, for our Dahej plant, is there any upward revision in the total roject cost?
Not significantly. Earlier, we were expecting we will invest till March around INR 210 crores. Now as per our estimate, it is going to be INR 225 crores.
Okay. And sir, what would be the revenue potential of this plant? A very broad number...
[Foreign Language]
Sir, what will be the revenue potential from this plant?
You see, we are working on it. We'll share in the last quarter call.
Okay, sir. Okay. And sir, one last question. What was our glyphosate revenue contribution? Is it material enough to affect?
No. Glyphosate contribution in our portfolio is hardly 2%. And as such -- there are 2 parts to it. One, the contribution in our portfolio is hardly 2%. 2, the order doesn't stop us from selling glyphoste. So we continue to sell. And as we see it and as we interpret it, we'll continue to sell going forward also. And the regulation doesn't stop us from selling. The regulator only -- the regulation only says that it is to be used by PCO. So this is an ecosystem which the state governments are working on. Industry has provided all the required support to the state governments to create a PCO network and ecosystem so that the farmer, Indian agriculture is not deprived of glyphosate applications.
Just to add to it is another dimension. This could be an example of how 2 different departments work, but eventually will converge. Recently, GM mustard has been approved, genetically modified mustard. And the genetic modification there in the mustard is weed control, weed control by application of glyphosate. So that opportunity very much exists. The scientific community acknowledges that. So it is there to stay. It is only that the relevant ecosystem has to come together to make it move.
The next question is from the line of Rohan Gupta from Nuvama Wealth Management.
A couple of -- first, one clarification. You mentioned the volume growth for the quarter is 16% while the balance 7% is value-added growth.
Right.
Sir, isn't it that the price increase has been much higher and sharper given the increase in chemical prices? Or it is that in our value-added product basket or efficiency product basket the price increase has been very limited and most tight increase has been in generic product strategy.
Yes. The price increase mainly happens in generic category. As shared earlier, the prices for the specialty molecules are fixed usually for 1 year. In 1 year, the price is not increased. But unfortunately, because of the devaluation of rupee -- our imports are in dollars. So ultimately, our costing increase because of the ForEx losses. So that is the reason that it has impacted the margins. Apart from the high cost inventory, the increasing of the dollar rate has also impacted the margins of the company.
Okay. Sir, second question is on our buyback. So I understand and you have also earlier mentioned that the company will be on a CapEx mode given this Dahej plant and how you want to go ahead non-stop adding the capacity and also have shown your intention to cater to the export market.
Given that, you still have decided to go with the buyback of up to INR 80 crores this year. So I thought that the company may go slow on the distribution of income to the shareholders. Don't we have any aggressive CapEx plans over the next couple of years beyond this -- the full CapEx which we are already putting in the manufacturing?
So apart from investment in Dahej unit, immediately we don't have any plans because for the bio-division and the export division, we don't need any CapEx. So except Dahej, immediate CapEx plans are not there. And then every year, we are going to basically earn profits of around INR 200 crores. So that way, we don't need any funding and we will be able to manage our CapEx from the internal accruals only.
Okay. And sir, just a third and last from my side, is significant increase in receivables from March to September in the first half. There has been significant increase in receivables, which is there. Any particular delays from the dealers you are seeing? Or by -- such a sharp increase in receivables from -- is it only that delays in -- because of the poor monsoon in the prior season.
If you kind of repeat that?
Sir, we have seen that your receivables have gone up significantly from March to September from almost INR 280 crore...
You're not at all -- Operator, Mr. Gupta is not at all audible.
Mr. Gupta, may we request you to please speak a little bit louder.
Sir, is it better now?
Yes.
Okay. Sir, I was saying that there has been significant increase in receivables, in debtors' levels in the first half. Any particular reason for that?
You see, there was a -- basically cash flow was a little tight in the Q2, because of which the debtors level has increased. But you see, overdue outstanding is a little bit in control, which means the collection is better now in November, and December, we are expecting a good collection. So by the end of Q3, debtors will be in line with the growth of the company.
The next question is from the line of Anika Mittal from Nvest Research.
Sir, my -- sir, I have only one question. Can you provide the overall Indian agrochemical companies' outlook towards the ongoing energy crisis in Europe due to which many companies -- many agrochemical companies in Europe has been curtailing their production? So sir, how are you seeing this situation? Will this situation benefit the Indian agrochemical companies? And how are you seeing this as an opportunity, not only in terms of exporting to Europe, but also to other territories where earlier Europe was exporting?
Your question kind of trailed off for me. So I understand you're asking about the opportunities, but in reference to what? Would you come forward and louder...
Sir, opportunity due to energy prices in Europe.
Yes. Yes, got that. Due to energy prices in Europe, yes. So Europe is in a completely different situation. It has various challenges to deal with right now in terms of energy required for keeping the houses warm and in terms of their own food supply coming from Ukraine and Russia, which were the large suppliers of wheat and sunflower for sure, but a lot of other food items as well.
So Europe has to struggle to get food supply, their fuel supply and for running their chemical plants, both in terms of basic raw materials as well as the energy. So this does open up opportunities in many ways for Indian agriculture as well as Indian chemical manufacturers. Yet this is still opening up. These dimensions are still opening up. So this is not very clear as to how this opportunity will shape up. But certainly, India will have a big role to play both in terms of global food security and supplying basic raw material and key manufacturing chemicals for pharmaceuticals as well as for agrochemicals.
The next question is from the line of Ayush from Nuvama.
Am I audible?
It is better, Mr. Ayush, if you can speak a little louder.
Sure. Is it better now?
Yes. Please go ahead.
Yes. So firstly, congratulations on a good set of numbers. My question goes back to the gross margin decay issue. So we've seen 6 consecutive quarter of gross margin decay. Firstly -- earlier on in the call, you alluded to some mix change towards in TCs on bulk sales...
Sorry, you're not -- I'm sorry, you're not audible.
Sure. Just give me one second, please. Yes. Is it better now?
Can you speak a little louder, Mr. Ayush?
Is it better now?
Yes. Please go ahead.
Yes. So yes, my question is for the gross margin. We're seeing a sixth consecutive quarter of gross margin decay. Earlier on in the call, you alluded to some mix change towards bulk sales and TC sales. So I mean -- I would just like to understand how that -- or the quantum of impact that it may have going forward on the gross margin?
Secondly, on the Dahej plant which is coming up, if the bulk of the production is for captive consumption, can we not see some gross margin advantage coming from that? And thirdly, how are we placing ourselves when it comes to exports? I'm really sorry to bunch up all my questions, but then I would appreciate if you could take them.
You see, the impact on gross margin is basically because of 2, 3 reasons. I've already shared the major impact in this financial year first half is because of the high price inventory liquidation, one. Second, the impact of the rupee depreciation and product mix. As far as the share of, you see, increase of institutional in bulk, impact is not significant. The overall impact could be 220, 233 basis points in the full first half of the financial year, right?
Okay. Okay.
And second question is with regard to captive consumption of Dahej's production, right?
Yes, that's correct. Yes, sir.
We cannot share this thing now because we are evaluating and making this program. So probably, we will be in a better position to share this thing by the end of the -- during con call to be held in the month of February.
The next question is from the line of Viraj Kacharia from SIMPL.
Just had 2 questions. First is on the export part. So you said in the early part of the call, sir, that you have started receiving inquiries. So both in terms of existing portfolio where you're seeing inquiries, I mean where are we in the registration of those? So just trying to understand that come March 23 when we are commercializing the production, we would be having the registrations for these in place? Or the registrations would be owned by the customers? So just trying to understand what -- where are we in terms of registration both for this -- and second, is in terms of the pipeline for new products for exports. So how is that taking shape?
Right. That's absolutely a very industry-specific and an insightful question, I would say. So registration has 3 dimensions mostly. There are countries and export opportunities where registration is not required, or based upon Indian registrations, we get access to those markets. So to begin with, we are exploring these markets where the registration process is not long drawn or complex.
Then our easy registration markets where we have applied for registration and we'll get probably access to those markets in next few months, so those will be our next target. And third one, we are working on the investment and registration in different countries, which we will expand towards the end of this financial year. So these are the 3 ways in which we are exploring the export market.
So we already have opportunity with some of our existing products, existing formulated products as well with which we are going for the export market access. Meanwhile, we are working for developing products and formulations and recipes relevant for export market, and we are working on that aggressively.
Okay. So for exports, is the -- I mean, what we understand, the larger part of the focus was on technical rather than formulations. But I think what you're saying now is we are looking at exporting formulations in totality. So I mean what changed, just trying to understand?
What? Come again? What...
I think what you mentioned right now is that we're looking at exports of formulations largely other than -- and I think your earlier communication was largely in terms of exports of technicals.
Right. So this is very interesting. As we ventured into exploring the market for technical grade, what we discovered is there is a huge opportunity available to us for export of formulations also, for which we already have capacity as well as capability. So we are just leveraging that.
Okay. So irrespective of Dahej, we can actually look to scale up exports in a material way. I mean -- so just commercialization of Dahej itself doesn't restrict us in terms of scaling up of the formulation piece, right, for exports?
That's right, that, in respect of Dahej, we have a play in export market is what we realize and understand. Yet the export market, which is more of a B2B market, we will certainly need specific levers to stay strong, where Dahej comes into picture. So our in-house production are some of the key levers which we'll use to get bigger in exports. Formulation export, we feel and still we are discovering is not long term or independently sustainable without a technical data, but we are still learning.
Okay. And usually, when we talk about formulation exports also -- so typically, these are 2 distributors in, say, countries which have less regulatory barriers? Or these are primarily to the MNCs? Just trying to understand so that -- because the idea was to over a period of time to leverage the relationship which we have with some of the MNCs and eventually cater to them for the specialty molecules.
At this stage, I would just say that export is a good opportunity. We have just recently learned and are getting into it.
The next question is from the line of Yogesh Tiwari from Arihant Capital Markets.
Am I clear, audible? Hello?
I would request, Mr. Tiwari, to speak a little bit more louder.
Is it okay now? Hello?
Yes, Please go ahead, sir.
Just wanted to understand on glyphosate. I understand it is only 2% of the revenue. But the prices had gone higher in the last few quarters. So are the prices still higher? Or is there any correction you can see in glyphosate?
For last 3 months, prices have been correcting down south, yes. The price has been moving downwards.
Sure. And the other one is on a patent which you -- no, which we have received and the commercialization is in FY '23 -- sorry, in 2023, the herbicide, which has a base in metribuzin. So it would be helpful if you can share what would be the opportunity from this patent? What are the demand dynamics in India for metribuzin?
Well, the patent that we have received is for a herbicide, and it will find its application in sugarcane. Given the current global scenario, sugar prices are up and also sugarcane factor has ethanol opportunity. So these are the 2 specific dimensions which will keep sugar markets buoyant and our products will find huge opportunity and space in yield management in sugarcane. So that is where we see to have a play.
Yes. But this will be like domestic focus?
Mostly domestic focus, yes. Most of our focus is domestic, yes.
Okay. And lastly, on the insecticide portfolio. So if I look at the split, this time, the proportion of insecticide has declined compared to the same period last year. So is there any softening of demand related to insecticides in India?
No, not really. I would say that it was due to heavy rains that the insecticide application did not find adequate opportunity, which also translated conversely into more of herbicide consumption, thereby both in absolute terms as well as relative terms insecticide having come down. So this is just a specific rain dependent pattern, and this is not a long-term pattern in the Indian market.
The next question is from the line of Rohit Nagraj from Centrum Broking.
Just one question in terms of the CapEx and buyback. So we have INR 225 crores of CapEx for Dahej in FY '23. There will be INR 85 crores of buyback and maybe INR 15 crores, INR 20 crores of maintenance CapEx. So effectively, INR 325 crores of investment. Just wanted to know how we are planning to fund this entire investment based on the current cash on hand and the cash flows that we'll receive in the second half?
You see, in terms of Dahej, investment of INR 225 crores to be happened in the year '21-'22 and '22-'23. So effectively, in the year '22-'23, it would be around INR 160 crores. And rest happened in the year '21-'22. And with regard to the investment of Dahej and the buybacks, that will managed from internal accruals plus -- you see, we are holding, say, in the beginning of the year, treasury around INR 300 crore. So out of treasury plus internal accruals for this year, that will be managed.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Manish Mahawar for closing comments.
Thanks, Rutuja. On behalf of Antique Stockbroking, I would like to thank the team of Dhanuka Agritech for providing us an opportunity to host the call. Dhanuka, would you like to make closing comments, sir.
Yes, sure. First of all, I would like to thank all the participants who participated in this con call organized by the Antique Broking. To summarize at last, Dhanuka continues to demonstrate our ability to overcome challenges and emerge stronger despite uncertain business environment. We will aggressively roll out new formulations in the upcoming quarters and would ensure that it reaches to the consumer.
I reassure our shareholders that we are committed to the task of transforming the landscape of agriculture in India and will play an integral role in rewriting the future of a better and new India. Recently, Dhanuka has started a campaign, India ka Pranam Har Kisan ke Naam. We presume that the farmer has not got that respect which he is entitled to because he is working hard in the field, in 50-degree temperature and 0-degree temperature. Because of his hard work, we are able to get the food. And we are only self-sufficient in food now, but we are in a position to export. A lot of countries are suffering for the shortage of food supply.
Recently, we heard about Lanka and now in Europe also the inflation rate has crossed 10%, more than that. So we are thankful to our farming community, and I salute them that because of their hard work we are able to get the food. So this corporate theme, India ka Pranam Har Kisan ke Naam, we are basically made an ad, which we are playing on various TV channels and newspapers and magazines, et cetera. So we hope that this will continue in times to come. Wishing you all the health and safety. Thank you very much.
Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.