Rallis India Ltd

NSE:RALLIS

Earnings Call Analysis

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Rallis India Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa. Please go ahead.

[Gavin Desa]

Thank you, Ryan. Good day, everyone, and thank you for joining us on Rallis India Limited's Q2 and H1 FY '25 Earnings Call. We have with us today Mr. Gyanendra Shukla, the Managing Director and CEO; and Ms. Subhra Gourisaria, the Chief Financial Officer.

Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the results presentation.

I now invite Mr. Shukla to begin proceeding with the call. Over to you, sir.

[Gyanendra Shukla, executive]

Thanks, Gavin. Good morning, everyone, and thank you for joining us today on our Q2 fiscal year '25 earnings call. As mentioned by Gavin, I have alongside with me Ms. Subhra, our CFO.

Let me begin the discussion by delving into the industry landscape initially, post which I will discuss Rallis' specific developments. We continue to witness mixed signals across agrochemical demand recovery in global markets. Volumes are largely back across key markets and AI is through lower pricing, though lower pricing continue to impact realizations production from China continues to be high and margins are stressed across geographies. And domestic market rainfall was erratic with the spatial distribution causing floods and dry spells in different parts of the country.

On an overall basis, monsoon season 2024 concluded with roughly 8% of a normal rainfall, impacting the key agricultural regions like Rajasthan, Gujarat, Western Madhya Pradesh, Maharashtra, Telangana State and AP. Kharif '24 sowings as of 20th September reached about 110 million hectare versus 108.8 million hectare last year. Area under paddy has gone up by 2%, pulses by 8%, maize by 4%, whereas area under cotton has declined by 9%. Extensive rain in some part of the country, especially during mid August to September period, which is a key demand period for agrochemical companies did create growth challenges for the industry at large, continuous rain resulted in lower application of pesticide sprays, which in effect led to lower volume growth, especially in the herbicide category.

The IMD predicts October to December rainfall to be 112% of long-term average, potentially affecting Kharif crop harvest. La Nina conditions which may cause below-normal temperature in Northern and Central India, could lead to cold wave events. Export market demand recovery is still not very promising. Lower prices and volatility are making chemical players also seen an inventory buildup. China continues to keep the market well supplied. Demand in the U.S. has been relatively better. Demand remains uncertain in Europe due to operating challenges with unrest in Middle East further adding more pressure.

Moving on to Rallis specific developments. We had a robust Q2 performance on the back of a strong double-digit volume growth in domestic market. Our revenue stood at INR 928 crores versus INR 832 crores of Q2 '24 and profit of tax at INR 98 crores, which is 20% higher than the previous year similar quarter. Crop Care delivered a strong volume-led revenue growth of 7%. Within Crop Care, growth is domestic-led with export business continuing to remain under pressure. Seed revenue is up by 48% due to better Kharif liquidation. EBITDA for quarter 2 fiscal year '25 stood at INR 166 crores, higher by 24% compared to Q2 previous year.

Moving to the individual business-wise performance. Our export business has displayed resilient performance and focus on maximizing volumes and driving capacity utilization for our plants. In Metribuzin, we have done highest ever volume in first half '25 with half volume surprise -- with half year volume surprising fiscal year '24 volume already. Hexaconazole is also showing good momentum, and we are working on expanding debottlenecking to serve the increasing demand. Pendimethalin is on good track and long-term demand being steady. Our workaround capacity expansion with new efficient technologies should also be commercialized by the end of financial year. Acephate market continues to be under pressure in the U.S. and Brazil with key input raw material at lowest ever price.

Across technicals, we're also steadily working on expanding customer base and securing registrations with more global players to improve over sales. In CSM, we are working on new relationships and alliances with global players. On the back of 3 new contracts in fiscal year '24, we have further successfully completed pilot scale production of pre-commercial quantities of Flavocide, a novel insecticide for Bio-Gene Technology Limited, an Australian company. We are confident that these new partnerships will meaningfully contribute to both top line and bottom line in the years to come.

Moving into domestic crop care, our growth was 11%, with volume growth of 17%. Quality of growth was also good with future growth categories like Herbicide and Crop Nutrition witnessing 25% and 29% growth, respectively. Herbicide category is under-indexed within our business, and we are consciously working on improving the share progressively. Within Crop Nutrition, GeoGreen did highest ever volume in H1 with organic category volumes. Our new product launches such as Clasto for Cotton Whitefly and Mark Plus. Protein soybean herbicide showed good promise, and we are confident of the potential for a scaleup. Within Crop Nutrition, Nayazinc and water soluble fertilizers, which is a comfort range are scaling up fast.

We also conducted our key dealer and retailer meetings to improve the engagement. Our excellence around expanding targeted reach and penetration leveraging digital is also in good momentum. We have commenced the work on rationalizing the portfolio and sharpening focus across key markets, and you'll hear more of it in the quarters to come.

Moving to seed business. It recorded a INR 141 crore revenue with 48% growth over previous year's, mainly due to lower Kharif '24 volume returns resulting from calibrated placements leveraging Seed-Say digital tool. Seed-Say is an AI and ML based sales forecast modeling tool based on historical sales and other business factors. We will further work on improving the tool to keep sales return under check. The near-term outlook for the business, particularly export business remains challenging. Domestic business has a positive outlook on the back of good reservoir level. Our efforts are now directed towards improving customer centricity, softening the portfolio choices, expanding alliances and leveraging digitalization across the operations. We launched Anubandh Edge, a unified retailer management app for both Crop Care and Seed business.

That concludes my opening remarks. I will now hand over it to Subhra, our CFO, for a detailed analysis of the financials. Over to you, Subhra.

[Subhra Gourisaria, executive]

Thank you, Dr. Gyanendra. Good morning, everyone, and thank you for joining us today for our Q2 and H1 earnings call. I'll walk you through our financial performance for the quarter post which we shall commence the Q&A session.

Starting with the top line for the quarter, our revenue stood at INR 928 crores as against INR 832 crores for the same period last year. Volume growth has been encouraging at 17%, with pricing challenges impacting overall growth. EBITDA for the quarter was INR 166 crores as against INR 133 crores for the same period last year. Profit after tax for the quarter stood at INR 98 crores as against INR 82 crores for the same period last year.

Moving on to business-wise performance. Domestic Crop Care registered a growth of 11% with 17% volume growth. Domestic demand was buoyant with positive monsoon and better commodity prices. Overall, Rabi outlook is also positive with increased reservoir levels. As far as Seeds is concerned, a calibrated placements in Kharif helped us maximizing liquidation in the context of stock shortage to ensure most effective utilization of the inventory. Seeds business has grown by 48%. We are significantly pleased with the response we're getting for our Cotton Hybrids Diggaz and believe it has significant growth runway.

Our focus will primarily be on 5 key crops: Cotton, maize, millet, mustard and rice. We believe focus on such selective crops will aid in driving scale. We aim to gradually build our presence across these 5 crops with focus on profitability. In exports business, lower prices continue to impact revenues and demand recovery continues to be slow. Sales of Metribuzin and hexaconazole maximized, whereas for Acephate specifically continues to remain soft. Our efforts on expanding customer base and product portfolio going to help win more resilient business. Our efforts continue to be directed towards driving focused execution, both at the front and the back end. This includes portfolio optimization, territory rationalization, removing overlaps and driving cost efficiencies and simplification across the value chain.

Our actions across portfolio refresh also continues with 2 new products in Crop Nutrition and 3 products in Seeds launched during the quarter. We also continue to be relentless on improving capital efficiency, both for fixed capital and working capital. We plan to adopt a measured approach in export segment and will not set up capacities until we have contracts in hand and have improved utilization for already set up capacities. Our inventory levels have moderated. Collections have also improved though in some stressed markets, collections improvement will continue to be a focus.

We have a healthy cash and liquid balance of INR 229 crores as of 30th September. We envisage that spends on CapEx would be around INR 100 crores. We also expect to commence the construction for integrated R&D center in a phased manner soon.

In summary, we are implementing various initiatives and a drive towards achieving consistent, competitive and profitable growth.

That concludes the opening remarks. We can now commence the Q&A session.

[Operator]

[Operator Instructions]

Our first question comes from the line of Tarang from Old Bridge Capital.

[Tarang Agrawal, analyst]

Congratulations for the strong set of numbers. A couple of questions. First, on the seeds business. What do you think drove your volumes? I mean you've indicated enough that it was because of calibrated placements, but would it, therefore, be fair to presume that your expectation of sales return for Q2 was materially lower than what actually turned out?

And second, within the seeds business, how are the volumes for Aatish and Diggaz for FY '25? Because the commentary seems to suggest that you are quite optimistic on the offtake of Diggaz but the fact of the matter is that cotton across industry was pretty bad for Kharif of '24?

[Gyanendra Shukla, executive]

Yes. So thank you for your comments. I think what drove volume, I think one of the things I have, we have been saying is, look, we are trying to be better in forecasting how much we place and where we place. The investment we are making on digital capabilities we talked about Seed-Say that basically takes into account what is likely to be accepted in the market and the other parameters, which we're using that helps us in placing the product in the right quantity at the right places.

Now these are still early days, but I would say that certainly has helped us in placing the product at the right place in the right markets and helping reduce the return. So the difference between previous years and this year is a significant low return compared to the previous seasons, and that led to overall net sales going up.

Coming back to the specifics. I think Diggaz as we have said earlier also has done very well. Literally, we had negligible return, I think. Now this is one product which has crossed more than INR 50 crore brand of the total cotton. And we are very bullish on Diggaz for the north. Aatish of course, is a product, I think it's a mature product is rather on decline. We were very careful about building inventory of that.

So as we move forward in the field, I think I've been talking about managing this business for profitability. And it comes from also managing operational efficiencies, and that's where a combination of digital tool, better planning and better placement will help in a long way, making sure that we are not losing money on one side as we try to generate revenue.

[Tarang Agrawal, analyst]

Sure. Just a follow-up on this. I mean, typically, from what I understand is that your seeds portfolio is skewed more towards rice and maize followed by millet and cotton, right? If I look at H1 acreages for maize and rice, generally, it's been a good Kharif for both these crops for various reasons.

So how much of your performance in H1 rather than looking at it in Q2 and Q1 basis would be a function of those end markets really doing well? And how much would you attribute it to -- because there is the function of the market having done really well, rainfalls being fairly dispersed, fairly continuous, which hasn't been seen in the last 3 years at least?

[Gyanendra Shukla, executive]

Yes. So if you start looking at portfolio, I think, look -- so rice, obviously, we didn't have enough seed, otherwise, we would have sold more. So rice has done an overall well for us. So whatever quantity we had, I think we have been good in liquidating that. Cotton though is one crop, it has gone down from 12 million hectare to 11 million hectare but 11 million hectare is still a very large crop, right? So from that perspective, I would say, we were still able to capitalize because of the good demand of our products.

So market has gone down by 10%, but the products which were in demand, they have still done well. That explains cotton and rice. Millet, our portfolio, I would say, is still not competitive to be in the leadership position. We are working on it and same applies to the maize. But maize because we didn't have a lot of inventory, we were still able to sell. We could have sold more if we had inventory. But yes, as we move forward, I think we are getting good traction in our cotton. And I think our biggest hope or biggest success will come when we are able to crack a good product for South and Central, which we are working on. Rice, we have a good portfolio. Millet, I think we are working on and maize is something also work in progress.

[Operator]

The next question is from Nirbhay Mahawar with N Square Capital.

[Nirbhay Mahawar, analyst]

Sir, just a follow-up on the Diggaz. What is the target market size right now? And what is our market share as of now? And so what is our aspiration?

[Gyanendra Shukla, executive]

So Diggaz market primarily is targeted towards northern part of the country, which is a 3 adjoining states of Punjab, Haryana and Rajasthan where cotton is grown. So if you say how much India has grown, Punjab grows about 2 lakh hectares, Haryana grows about 5 lakh hectares and Rajasthan has similar area. So it's about 1.2 million hectares, 10% of the total cotton area gets planted in that place. That's where this product is getting planted. Now that area, particularly in Punjab and Haryana has been under pressure, but still, I think, 1 million hectare in a concentrated pocket is a sizable area. And we believe we still have significant headroom to grow given the performance of Diggaz in coming years.

[Nirbhay Mahawar, analyst]

Sir, could we give these numbers in terms of number of packets we are selling versus total market share?

[Gyanendra Shukla, executive]

I think, look, we are in production right now, right? We would have a fair estimate of how much inventory would become available by February, March. So at this point of time if I have even, say, 2 million packer, I can say, sell all of it, right? But I know we are not going to get that kind of production because of this wet season, also production becomes very, very challenging. So I guess this question, if you ask me in the month of February, March, I'll be able to give you a better projection.

[Operator]

The next question is from the line of Siddharth Gadekar with Equirus.

[Siddharth Gadekar, analyst]

Sir, on the seed business, just wanted to understand that have you taken any price hike given there was a shortage of seeds in the market? And can you quantify between value and volume growth during first half FY '25?

[Gyanendra Shukla, executive]

Subhra, you want to talk about break?

[Subhra Gourisaria, executive]

Yes. So price hike, we took -- so because the mix also changed significantly because cotton as a portfolio has become one of the -- has become our largest crop in the portfolio. So there's a combination of price and mix sitting there. But if I slice it, there's a large part of the gain which has come from volume, price and mix and not so much from volume because inventory was already constrained. But cotton has done well. Paddy in the circumstances that Dr. Shukla spoke about, given the constraints of inventory, we were able to liquidate whatever we had. Maize -- followed by maize there also returns were very low. So it's a combination of both price and mix, which has contributed to the growth.

[Siddharth Gadekar, analyst]

And secondly, in terms of our sales return, can you quantify the number that was there in the last year's base number and this year, what was the sales data?

[Subhra Gourisaria, executive]

So I wouldn't be able to quantify. But if you look at first half returns, first half performance itself, as I said, that if you look at -- if I give you some products, for instance, because we were sitting at almost zero returns. It was practically zero return. Paddy was also no net return except for some small returns we had to take and maize as well makes very low returns. So it was largely in millet compared to last year. Last year, we were -- as Dr. Shukla alluded, there was also technology, which helped in terms of digital placement, plus also some interventions we did in terms of identifying the right distributors, placing it with the right kind of inputs in terms of marketing inputs. So all of that helped in reducing the returns.

[Operator]

The next question comes from the line of Abhijit Akella with Kotak Securities.

[Abhijit Akella, analyst]

Just a follow-up on the previous question. On the seed revenue growth for the first half, which is about 2% for the first half, I'm talking about. If you could please just split it out in terms of volume versus price and mix, that would be helpful.

[Subhra Gourisaria, executive]

So Abhijit a large part of it, as I said, has come from volume and mix. So high single digit would come from price and mix and volume would be largely flattish.

[Abhijit Akella, analyst]

Okay. Got it. Similarly, possible to just split it out for the domestic crop care business as well, please, Subhra. And then I just have one quick follow-up.

[Subhra Gourisaria, executive]

Sorry, domestic crop care?

[Abhijit Akella, analyst]

The same split between volume and price?

[Subhra Gourisaria, executive]

The domestic crop care first half you wanted, right? So domestic crop care has had a minus 6% price degrowth. I'm talking about formulation business. And the volume growth is positive at 18%.

[Abhijit Akella, analyst]

Right. And just one last thing. On the Bio-Gene project we have, if you could please just help us understand the revenue model that we are kind of envisaging there. Will it be -- do we derive some cut of the royalty that Bio-Gene makes from its license into its commercial partners? Or do we instead supply the molecule directly to Bio-Gene's licensees? How exactly do we make money in this project?

[Gyanendra Shukla, executive]

So I think, look, this is a new arrangement. The way it starts in the beginning is we have a supply on track. We set up a facility produced for them, and we make margin there. But in the future, there may be a possibility of getting distribution rights of these products.

[Operator]

The next question comes from the line of Rohit Nagraj with Centrum Broking.

[Rohit Nagraj, analyst]

Congrats on a very good set of numbers. Sir, first question is on the industry front. So in your commentary, you also mentioned that there has been -- the market is well supplied from China. However, our performance is otherwise in such a challenging environment. So what is your understanding in terms of, a, immediate impact of the well-supplied market on the volumes across different geographies? And b, when we will see any pricing improvement given this context?

[Gyanendra Shukla, executive]

So I think given that there was a good rain and commodity prices were favorable, that led to obviously a volume gain. Pricing is something very, very difficult to predict because no matter how much we continue to undermine China, China has capacity and they have ability to supply at very competitive price. So I guess that's a very difficult one to predict. I think what is easy for me, and I've been saying in the past is that I'm going to focus on domestic branded business, where I have to make sure my product -- my product is being used more by the same farmer and on the more crop acres. That's where our focus is because prices are variables. If I'm in a domestic branded business, that also allows me to charge some premium at the brand level. So that's our primary focus because that's something China, we're not going to control. We're not going to really -- are not going to stop China. We're also trying to diversify some of our supply chain domestically to say how do we balance reliance on China versus domestic suppliers, including our own production capacity.

[Rohit Nagraj, analyst]

Sure. Sir, second question is on the balance sheet front. So the trade receivables seem to have gone up to about INR 850 crores from about INR 580 crores on a Y-o-Y basis and top line has grown up by about INR 100-odd crores. So is it due to maybe leaner credit terms offering? Or is there any other reason?

[Subhra Gourisaria, executive]

So trade receivables have gone up from INR 773 crores to INR 852 crores, Rohit. So there is an INR 80 crores increase. A part of it has contributed because of the increase in the domestic sales but there's no concern -- there's no pocket of concern. And there's also an element of some discounting that we had done in the base period for export receivables, which is not there.

[Operator]

The next question is from the line of Viraj from SiMPL.

[Viraj Kacharia, analyst]

Yes. A couple of questions. First is on the seed, what you said is the volume is flat and the growth we have seen is largely a function of price and mix. Am I right?

[Subhra Gourisaria, executive]

Yes.

[Viraj Kacharia, analyst]

So if you look at last year same quarter, we had seen a very strong growth. And the reason for that was that there was a delay in the season from Q1 to Q2. So even on that higher volume base, we have seen a very healthy growth. And this is in background of us seeing a supply shortage in seeds in Q1. So just trying to understand, if we can give some perspective into the crop price growth performance. And when we say the price or the mix element, which is -- of the two, which is a larger factor?

[Subhra Gourisaria, executive]

So I think we have been taking significant steps. I think a couple of years back, we spoke about that in seeds business, we will first reset the business and look at profitability and then start working on growth. As we have mentioned in multiple calls that our cotton hybrids especially North one has done well. There are multiple other hybrids in paddy, maize, which are also doing very well. I spoke about that cotton has now become the biggest crop for us. We have touched along with Diggaz and other brands, we will do almost INR 100 crores.

We've almost already touched INR 100 crores of revenue this year. So it's a combination of -- and that's why when you said that on the back of a good FY '24, FY '25 performance has also been good. We are hopeful that many of the launches that we have planned, we'll be able to scale up. So does that answer your question?

[Viraj Kacharia, analyst]

No, actually, I was just still trying to understand. If you can just still give some perspective in terms of crop-wise performance. And it also comes back to the second question, which I also had on the margin front. See, if you look in terms of the order -- packing order, cotton has usually the lowest margin profile in the segment for seeds. Now for us, when we say cotton is the one which has given the highest growth for us, still despite that, we have seen a very healthy improvement in operating margin. So I'm just trying to connect -- just understand better in terms of both the sales mix profile and similarly, the impact on margins, when we see the price or the mix, how is that given the margin part?

[Subhra Gourisaria, executive]

Yes. The cotton indeed has shown the highest growth, both in terms of top line and bottom line. And it depends on the mix of the products that we have. So you're right at the industry level, maybe cotton is making lower margin, but it depends on the products that you have in the portfolio. So for us, both a combination of revenue growth and the operating leverage and the fact that we have been able to hold overheads or optimize them has helped in operating margin improvement.

[Operator]

The next question comes from the line of Himanshu Binani with Anand Rathi.

[Himanshu Binani, analyst]

Congratulations on a good set of numbers. So sir, I have just one question in terms of the seeds business. So till last quarter, there was a commentary from us as well as from the industry in terms of like the supply side concerns which we had. And as per my understanding, first quarter happens to be the heaviest for the seed industry. So during the last quarter, we have like posted a decline into the seeds business, and that was largely led by the supply side constraints. And all of a sudden, we have been able to post somewhere around the 48%, 50% sort of growth in the seeds business considering a higher base of last year also. So maybe if you can like help me in understanding this.

[Subhra Gourisaria, executive]

Himanshu, we're not able to follow clearly, but I think your question was that despite shortage of seeds how we were able to deliver a better performance in Q2?

[Himanshu Binani, analyst]

Right.

[Gyanendra Shukla, executive]

Yes. So I think it's very simple. I think in seeds what we call is before season, you do the placement, right? And then farmer buys the seed and unsold inventory comes back and that gives you a net return. right? So net of returns, I think while we had shortage on the seed, but our supplies level were -- I mean, were not enough to take benefit of the demand, but they were good enough to really -- they were probably at the similar level. But because we were able to reduce significantly return, that allowed us in still coming to the level of previous year in terms of volume and some price benefit, combination of that.

[Subhra Gourisaria, executive]

So in fact, Himanshu, one thing that probably will help all of you guys, our seeds inventory are one of the lowest across various years now. So the inventory levels have significantly come down. So we have been able to sell whatever was there.

[Gyanendra Shukla, executive]

Or whatever was sellable.

[Subhra Gourisaria, executive]

Whatever was sellable. Yes.

[Himanshu Binani, analyst]

Got it. So due to the supply side constraints, the growth of this sort of number is largely led by the prices.

[Subhra Gourisaria, executive]

It's not much.

[Gyanendra Shukla, executive]

It's a lesser returns actually.

[Subhra Gourisaria, executive]

Actually, if you look at first half level, we are flat. First half level, we are 1%. So our Kharif liquidation has been in line with last year. But this is where the placements were lower because of the inventory and because of effective use of technology and better marketing and sales efforts, we were able to reduce returns.

[Operator]

The next question comes from the line of Darshita from Antique Broking.

[Darshita Shah, analyst]

Congratulations on good numbers. My first question was regarding the current channel inventory that we have for the domestic Crop Care business. Is it on a higher end? And are we expecting a lot of sales returns of the Kharif inventory that we have? I mean, a lot of sales returns reflecting in the third quarter of the Kharif inventory that we currently have.

[Gyanendra Shukla, executive]

So again, look, I think this year, planting is higher of overall crops. And also because of continued rain, we expect -- because Kharif season doesn't end in September. Kharif season, particularly in some crop in pulses and some late rice and cotton continues till October. So obviously, there's a required level of inventory in the market. But we are very careful and calibrated. And I think we have a system of making sure we provide based on our best estimate, and this is something we keep trying to learn and improve more. At this point of time, I don't think we have any excess inventory, which we would like to leave in the market because leaving excess inventory also has a lot of other repercussions.

[Darshita Shah, analyst]

All right. Okay. And the second question was regarding the higher tax rate during the quarter, if you can give us some idea on that?

[Subhra Gourisaria, executive]

So Darshita because of this long-term capital gains tax reduction by union budget, there was an unwinding of the deferred tax assets created for both carry forward of losses and long-term capital gains. So that's a onetime impact, which has come for the effective tax rate.

[Operator]

The next question comes from the line of Saket Kapoor from Kapoor & Company.

[Unknown Analyst]

Sir, firstly, in your opening remarks, you did alluded to this extended monsoon and water logging and other issues that affected the after sales that is moisture still remaining in the field -- agriculture field. So taking these factors into account, sir, and the reservoir levels, what should be the growth that we are eyeing for the current year, taking into account the Rabi season and also the extended Kharif part, which just our MD alluded to?

[Gyanendra Shukla, executive]

Well, I think all I have been saying our attempt is going to be we grow better than the market, right? That's our attempt, and that's what we are targeting. I'm certainly not in a position to put a number or give a number.

[Unknown Analyst]

Right. And sir, lastly, we have also been looking for tolling the active ingredient part with other manufacturers. So what kind of business are we outsourcing in terms of we looking into the B2B segment of formulation and the active ingredient portfolio being managed by other players. So what kind of business have we outsourced for the current year? And if you could mention who are the key players with whom we are engaging for the same?

[Gyanendra Shukla, executive]

I think we always talk about our Crop Care business in key -- a few buckets. And first bucket is really domestic formulation. As I've been saying in the past also, that's my #1 priority. Now that obviously, I have to find an optimal point, make versus buy. So those decisions we keep making. Obviously, because of many confidential agreements we have with the parties, we are not able to disclose out names and all. But for us, it's an optimal -- I make a right decision, I'll make on that, what is right for me because we have capacities and we want to use the capacity.

Now then we also have a domestic institutional business where we sell some of our technicals we make on a bulk basis to parties. That's a business for us, but that is not something we are very aggressive about it and we participate in that market, but we are very calibrated because those markets also we want to make sure we are not overexposing now.

The third business is basically international business where we sell and that market remains subdued, but there are nuances there. So Metribuzin has done well for us. Pendimethalin is doing okay. We have done -- on fungicide, we have done well. I think where we have challenges is really Acephate. And we're trying to address that. I've been very candid about it. Do I have a solution? I think we have certain options we are evaluating. And as when those options become executable, we'll certainly get back.

[Operator]

The next question is from the line of Ravi Purohit with Securities Investment Management Private Limited.

[Ravi Purohit, analyst]

Congratulations on good set of numbers. Sir, since you've joined the company in the last couple of quarters, you alluded to changes that you're looking to make both in terms of making our seeds portfolio more profitable, pruning the loss-making parts of it and also kind of working on getting the missing decade back on the CRAMS side, like contract manufacturing or tying up or make or buy or distribute rather than make certain products on the agrochem side. So if you could just kind of give us a brief update on that strategy and what kind of pruning or what kind of things we have already done on the seed side? And what are the opportunities that we are working on, on the agrochem side, working with MNCs particularly, both in terms of licensing to sell in the domestic market and exporting for their requirements?

[Gyanendra Shukla, executive]

So I can give you just a general observation. So the way we are working is, one, we need a product sourcing. So we are aggressively reaching out to discovery-related companies all over the world to really make sure that we have a pipeline and that pipeline remains robust. On the CSM side, I think we are very selective. As I said, we have enough capacity on the ground. We will be very calibrated. First priority to use the capacity to maximum and then get into any new contract before we set up the capacity. So that's the strategy is. But I believe we also talked about this domestic formulation making more efficient. That work we did not want to touch because Kharif season was going on, but we are in the midst of exercise. And that exercise should get completed in a couple of months.

So as we enter the new year, we would be able to actually go with a completely, what we call, streamlined portfolio approach where we maybe be looking at tail and say, look, whether this state is desirable or not. So we're in the process of doing that exercise, and we'll take every step because ultimately, goal I have been saying, look, for me, ultimate measure of success is going to be return on capital, right? And that has to come from various measures, including revenue cost and optimizing profits wherever possible by looking at the portfolio.

[Ravi Purohit, analyst]

And we'll appreciate if you could kind of give a brief update on that in every quarter, I don't know, maybe part of the presentation or part of the press release. And sir, my second question is on seeds portfolio, right? I think you've, of course, run a fairly large and profitable seeds business under Monsanto and Bayer combined. So what is the sense that you get here in terms of the potential scalability of the seeds portfolio? We are really subscale in that sense. And at higher scale, seeds is a very, very profitable business if done right. So if you could just kind of share as to what would be your medium-term to long-term strategy would be on scaling up the seeds business?

[Gyanendra Shukla, executive]

So fundamentally, we said we are going to participate in 5 crops, right? And I can give you -- I mean, these numbers keep changing, but back of envelope number. Cotton seed market is about INR 3,000 crores. Hybrid rice seed market is about INR 2,500 crores. So that makes it INR 5,500 crores. Millet market is about INR 1,500 crores -- sorry, about INR 700 crores, not INR 1,500 crores. It's 1,500 tonnes. So about INR 500 crores, so that makes it 6,000 tonnes. And then there's another mustard of around INR 500 crores. So we are operating in an inverse of -- and then add other crops like maize, inverse of INR 10,000 crores of seed market, which is almost 50% of the total seed market.

Now if you see our market share in that is roughly 4%, right? -- of INR 20,000 crores, 2% of INR 10,000 crores is 4%. Our objective should be that we start growing our market share in that segment. And I guess different crops are at different stages. In terms of portfolio readiness, I think right now, we are slightly better in cotton, followed by rice, followed by, I would say, maize and millet. That's where we are. And so increasingly, you will see as we try to grow our volume and market share.

You say in next 1 to 2 years, more gains are going to come from cotton, a little bit from rice and then subsequently from millet and maize. But our aim would be that, look, we come to respectable at least a high single digit or low double digit. It all depends on the portfolio because I think the cotton cost -- I mean, every seed business is a product business. There's nothing called new to here, your product must perform. Otherwise, even you can give it -- give free to the farmer, won't buy.

[Operator]

The next question is from the line of Bhavya Gandhi with Dalal & Broacha Stock Broking.

[Bhavya Gandhi, analyst]

Just wanted to know what is the absolute export number for the quarter and for the first half.

[Subhra Gourisaria, executive]

So in the meantime, you can ask another question, my computer is having some issue.

[Bhavya Gandhi, analyst]

Sure. I'll wait in the queue or maybe whenever you can answer the question.

[Operator]

The next question comes from the line of Somaiah with Avendus Park.

[Somaiah Valliyappan, analyst]

So just want to understand on the domestic crop care, strong volume growth there. One, if you can give us some color on that in terms of -- is it industry growth rates are at the similar level or there has been market share gain? This is one. Any part of the portfolio that has led to this kind of growth or between formulations and in the B2B -- I mean which of the segments have kind of done very well in volume growth?

[Gyanendra Shukla, executive]

Actually, I don't know. I couldn't hear the question clearly. Can -- do you mind repeating the question?

[Somaiah Valliyappan, analyst]

Yes, yes, I can. Am I audible now sir?

[Gyanendra Shukla, executive]

Yes.

[Somaiah Valliyappan, analyst]

My question was on the domestic Crop Care, the volume growth, quite a strong growth. Just wanted to understand, is this more of an industry trend or we have had market share gains? That is one. And second, any part of the portfolio or any regional -- region has shown strong performance that has led to this kind of a growth that you want to highlight? And also between B2B and the formulations, which of these segments have kind of really done well to get this kind of growth?

[Subhra Gourisaria, executive]

So 2 things I can tell you, look. So it's very difficult to say if I have gained market share or lost market share because Kharif season is on. I think that clarity will probably come by November and December. But the segments which have done well for us is really herbicide relatively and also our Crop Nutrition business.

[Somaiah Valliyappan, analyst]

And probably between the B2B and the formulations, any color on that, sir?

[Gyanendra Shukla, executive]

Well, I think I won't boast a lot about B2B. I think it's really, as I've been saying, our story first has to be about how do we strongly continue to grow our domestic business.

[Operator]

The next question is from the line of [ Ritik Jain ] with Nirmal Bang Securities.

[Unknown Analyst]

My first question is on, when can we expect export to see normal volume growth?

[Gyanendra Shukla, executive]

Well, I think look, export is a very competitive business. I think what we are trying to work on and I have been talking about this is, look, we are working on multiple fronts. One is just the existing product portfolio. So I think we are having a good traction on Metribuzin, Pendimethalin and hexaconazole. But we have challenges on Acephate. But having said that, we are also looking at various relations effects. First of all, how to optimize and increase the sales of existing portfolio and then start working up some of the pipeline products. We don't have like big products, but there's a decent pipeline developing. Our team is working on the ground. It will only show improvement in the coming years. Having said that, Acephate will continue to be a troubled, I think is a troubled channel, I would say. We have to work on it.

[Unknown Analyst]

Okay. Got you. And yes, if the seed business sustains its growth of first half of FY '25, what is the ROCE one can expect from the seed segment on a sustainable basis?

[Gyanendra Shukla, executive]

Yes. I think we -- first thing I made a statement that, look, we want to manage this business for profitability. and what I call fit to run, right? I think we have to get to a fitness level where we reach to a stage where our business doesn't make losses at all. And I think we are slowly inching towards that and consolidating that position. And we are also stepping up our R&D efforts so that we are able to launch new products at the same time and are able to take out old products. I think if you just get that cycle right, I think, as I said, look, at a INR 10,000 crore segment we operate, we are just 4%. There's a lot of headroom to grow.

[Subhra Gourisaria, executive]

So I think in seeds, I think what you should understand is the large CapEx investment is only working capital. There's no fixed capital as such. So what Dr. Shukla alluded, it's more important for us to drive profitability and keep the working capital under check. So I think both the actions have started showing some momentum, and we should be able to hopefully improve -- more important is that the seed should not be a drag on the company profitability. So we have to first move to a positive zone and then keep improving it from there.

[Operator]

The next question...

[Subhra Gourisaria, executive]

Just 1 minute. Somebody had asked the number on international business. So we did a INR 143 crores of revenue in Q2.

[Operator]

The next question is from the line of [ Manish Shah ] an individual investor. .

[Unknown Attendee]

So ma'am has already answered that question. Thank you so much.

[Operator]

The next question is from the line of Bhavya Gandhi with Dalal & Broacha Stock Broking.

[Bhavya Gandhi, analyst]

So one -- I mean, you just answered on the 2Q export data. On the one half also, if you can share what was the export data? And on the hexaconazole, I just wanted to understand, it's a big product for us in the export market, whereas other companies are still struggling, maybe the likes of Astec Lifesciences and all this. What strategy are we adopting that our product is still surviving in the export market? Yes. That's it from me.

[Subhra Gourisaria, executive]

The first half revenue for international business is INR 275 crores. As far as hexa is concerned, I think it's a smaller -- it has a smaller overall market, but we are the market leaders there. And we do have strong customer relationship and good registrations even in Southeast Asian markets. And I believe it's a small market. It's a small business, but we are working almost like max-out capacity today. In fact, we have de-bottlenecked some of the capacity, and we are also looking at alternate ways to expand the capacity.

[Bhavya Gandhi, analyst]

Okay. In short, we have some pricing power when it comes to the export market when it comes to hexaconazole because of our relation and maybe because of registration.

[Subhra Gourisaria, executive]

Yes, it's a small market, though.

[Gyanendra Shukla, executive]

It's a combination of registration, customer relationship, quality of the product. I think several factors play together.

[Subhra Gourisaria, executive]

Yes, and also the dynamics that it has with other molecules -- other competing molecules.

[Operator]

The next question is from the line of Tarang from Old Bridge Capital.

[Tarang Agrawal, analyst]

Two questions actually, both on crop protection. One on Acephate. Sir, I mean given your vintage with the molecule and my sense is your experience and scale with the molecule, what do you think right now has happened in the marketplace, which is specifically rendering this particular molecule as a problem child.

I mean, has there been a technological shift? Do you see widespread competition, which is driving the prices down, higher inventory in the marketplace? Or there are only specific players in the manufacturing value chain, which are being extremely aggressive. So that's one.

And second the overall crop protection, if I look at the domestic and exports business, volumes have done reasonably well and this coming from a fairly soft previous year where inventory was sort of a challenge, both in the international and domestic marketplace.

So therefore, would it be safe to presume that while pricing continues to be a challenge for the broader industry, but the destocking challenges that were being witnessed in the previous year, they have come to -- they are effectively addressed. So two questions.

[Gyanendra Shukla, executive]

So -- see, related to Acephate, I think one of the things we have to understand is a very concentrated market. This product is primarily consumed in Brazil, U.S. and a little bit in India, right? These are the 3 primary markets. They probably are 80%, 90% of the total volume. Now our competitor here are actually ADAMA and UPL. Now both of them are significantly backward integrated from a manufacturing perspective as well as they have a significant B2C market as well in these markets. And that I think puts us at some disadvantage. So we're trying to figure out how do we solve this because we don't have B2C presence in these markets. So we're looking at relationship and what kind of relationship we can develop to have B2C indirect presence by having a supplier relationship with the local people there.

Other thing is we are also looking at how can we do some cost reengineering on the manufacturing operations we have got. So a couple of options we are evaluating. I don't have a clear answer. Obviously, we know a few things can be done. As I said earlier also, I think we would like to have a clarity sooner the better, but I think it just takes time because the things we have to understand global dynamics. The easier option is that we are not making to get out of the product, right? I think we're not at that stage yet. We have to just -- whatever we do, we have to make sure we have all the information and we have considered all the options.

[Tarang Agrawal, analyst]

Sure. And for my second question, sir?

[Gyanendra Shukla, executive]

Sorry, second?

[Subhra Gourisaria, executive]

Global crop protection market.

[Gyanendra Shukla, executive]

See, global crop protection market, if you see, is primarily driven by 2 factors. So obviously, North America and South America become very, very important and commodity prices also play a very, very important role. Now there was an uptick in commodity prices beginning of the year, but I think with good production estimates coming out of U.S. and rainfall situation being better in Latin America, commodity prices are relatively softer, particularly for key crops like maize and soybean, including cotton, right? So I think a lot of -- so yes, you're right, destocking is by and large done. As a result, current year numbers should look better. But we have to understand that -- it's not a very buoyant demand. It's not that suddenly 40% more crop is being grown all across. And China continues to supply at a very competitive rate. So I'm not expecting any miracle to happen in this market. I think it's going to be a normal growth period. Prices will continue to remain subdued given the commodity prices and supply situation.

[Operator]

The next question is from the line of Abhijit Akella with Kotak Securities. .

[Abhijit Akella, analyst]

Just 2 quick follow-ups. One is with regard to the newer products in the domestic Crop Care business, would it be possible to just share the kind of growth we've experienced from that in the first half of the year? And number two was just on the categories. You did give us some numbers for herbicide and crop nutrition growth. But if you could also please just specify insecticides and fungicides, that would be helpful.

[Gyanendra Shukla, executive]

So I don't know if we have a specific number today to share, but maybe we can say later on. But I guess some of the product launches we have made this year, they are looking very good. Particularly, we had a soybean herbicide launch. That seems very promising. As I've been saying in the past herbicide becomes very, very important for me. And luckily, we have a good launch. Now I think if you wait till rain, November, I think I'll have a clarity on Kharif. That might be the best time for you -- for us to give you some clarity. At this point in time, I would say. herbicide and nutrition have done well. Fungicides are okay, so are insecticide, and that is reflected in overall numbers.

[Subhra Gourisaria, executive]

So Abhijit, I think we published this ITI on an annual basis, Innovation Turnover Index, which will reflect. But it's safe to say that in first half as well, it's tracking well above our -- it's tracking in line with our expectations. Herbicides as a segment, we don't have significant -- our portfolio is under indexed, but we have done well. Fungicide -- followed by fungicide and then insecticide.

[Operator]

The next question is from the line of Viraj from SiMPL.

[Viraj Kacharia, analyst]

Just one question, both in seed and domestic crop care, when we say portfolio rationalization, what kind of a turn in the portfolio you would have seen in the last 6 months? [Technical Difficulty] can you share the absolute cost?

[Subhra Gourisaria, executive]

You're talking about what we've done or what we are expecting?

[Viraj Kacharia, analyst]

What we have done and what...

[Subhra Gourisaria, executive]

So I think what we are looking at a scale portfolio rationalization, which is where either the scale-up has not happened as per expectation or the -- is adding to the complexity. We are yet to complete the exercise, but I wouldn't say that it would have a meaningful impact on the bottom line. .

[Operator]

The next question is from the line of Saket Kapoor from Kapoor & Company. .

[Unknown Analyst]

Madam, if you could give me the CapEx number, which we have done for the last 3 years? And what kind of capacity augmentation is -- has been done in the agrochemical space?

[Subhra Gourisaria, executive]

We have done about INR 650 crores of CapEx out of the INR 800 crores of CapEx that we spoke about in the last 5 years. And if I slice with the big one had gone behind multipurpose plant, which is around INR 200 crores. Multipurpose plant, as Dr. Shukla alluded, there are some challenges in getting higher capacity utilization because of the global situation as well. So we hope to improve the utilization as we start seeing more contracts for it. The next INR 100 crores went into formulation plant, which is helping us, which is working at in line with our expectations or in line with the business case that we have done. Still there's significant headroom for expansion of capacity there. And the last few months went into capacity expansion, debottlenecking of existing capacities, some of the sustenance CapEx we did and digital investments that we spoke about in both in front end and back end.

[Unknown Analyst]

Ma'am, just to add to it for the multipurpose, can you elaborate which products are we addressing to? And what kind of asset turnover can be expected optimum utilization level?

[Subhra Gourisaria, executive]

See, multipurpose plant by name itself is a multipurpose plant. So it's supposed to help you do multiple chemistries before the scale up of the volume happens and then you can set up an individual or stand-alone capacity for it. So we have done multiple products for it, both for contract manufacturing customers and also the Difenoconazole product, the fungicide that we launched last year. So there are a few more products in the pipeline, both from our international business and contract manufacturing that we put there. And depending on how this scale up, we move it to the stand-alone plant.

As far as asset turns is concerned, it's difficult to comment on it today. But I think the -- what we are going to work on is how do you keep improving utilization. And hopefully, some of these products will contribute to our top line in years to come.

[Operator]

The next question is from the line of Somaiah with Avendus Spark.

[Somaiah Valliyappan, analyst]

Sir, question is on the CSM part, CSM business. So what is the strategy here in CSM? 2 years out, how do we see CSM as a percentage of our total revenue share? That is one. And also, if you could just help us with what is the current contribution of CSM in our overall portfolio? And also, I think you mentioned in your opening remarks, 3 contracts. If you can talk about the opportunity set on these 3 contracts, that will be helpful.

[Gyanendra Shukla, executive]

Yes. So look, CSM strategy is -- I think, is very simple. We are not chasing everybody. We are looking at -- see, I guess, big deals, I don't think are available at this point of time. We are relatively late entrant in this game. We are having multiple conversations with various parties. And the different conversations are at very different stage. All I can say is we are generally getting encouraging response. At this point of time, very difficult to put a number, but maybe as things mature, we will start getting more clarity, but things seems to be slowly building up. They certainly are not negative.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the conference back to the management for closing remarks.

[Gyanendra Shukla, executive]

So I think all thanks, everybody, for joining. As I said, agrochemical is witnessing mixed signal of recovery. International business continues to be under pressure. While volumes are better across most technical margins are lower due to competitive context. In domestic market, with current liquidation is slightly delayed, we said no, because of the rain season ended. We are optimistically cautious of the placement. Our endeavor would be to continue running the business to improve market share across verticals. While in the short-term margin will be under pressure, long-term prospects continue to remain good. So thank you very much for joining.

[Operator]

Thank you. On behalf of Rallis India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.