Sharda Cropchem Ltd
NSE:SHARDACROP

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Sharda Cropchem Ltd
NSE:SHARDACROP
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Price: 815.2 INR 0.06% Market Closed
Market Cap: 73.5B INR
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Earnings Call Analysis

Summary
Q1-2025

Sharda Cropchem Reports Strong Q1 FY '25 Performance

Sharda Cropchem saw a 23% increase in total revenue, reaching INR 785 crores for Q1 FY '25, primarily driven by the agrochemical sector, which grew 43% year-on-year. Europe significantly contributed to this growth. Gross margins improved to 29.2% from 8.7% the previous year. The company's EBITDA reached INR 88 crores with a margin of 11.3%. Despite challenges, the company remains debt-free with cash and equity investments totaling INR 624 crores. The CapEx is projected to be between INR 400 crores to INR 450 crores for the full fiscal year.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

from 0
Operator

Ladies and gentlemen, good day, and welcome to Sharda Cropchem Q1 FY '25 Conference Call hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.

M
Manish Mahawar
analyst

Thank you. On behalf of Antique Stock Broking, warm welcome to all the participants on the 1Q FY '25 earnings call of Sharda Cropchem. Today, we have Mr. R.V. Bubna, Chairman and Managing Director; Mr. Shailesh Mehendale, CFO; and Mr. Dinesh Nahar, GM, Finance, on the call. Without any delay, I would like to hand over the call to Mr. Bubna for opening remarks. Post which, we will open the floor for Q&A. Thank you. And over to Mr. Bubna.

R
Ramprakash Bubna
executive

Thank you, Manish. Good afternoon, and very warm welcome to everyone present on the call. Along with me, I have Mr. Shailesh Mehendale, our CFO; and Mr. Dinesh Nahar, General Manager, Finance. And our SGA, strategic advisers are there on the call also. Hope you all have received our investor deck by now. For those who are not, you can view them on the stock exchanges and company website.

As you are aware, we are engaged in marketing and distribution of wide range of agrochemical products that is herbicide, insecticide, fungicides and biocides, catering to diverse global customer base. We prepare comprehensive dossiers and seek registrations in our own name. We allocate substantial resources and established our foothold in the market.

Our total product registration stood at 2,928 as on 30th of June 2024. Additionally, 1,040 applications for product registrations globally are at the approval stage, or I would say, they are in the pipeline.

The CapEx for Q1 '25 stood at INR 78 crores, and we expect the CapEx to be in the range of INR 400 crores to INR 450 crores for the full year. For Q1 FY '25, the total revenue have grown by 23% to INR 785 crores with substantial volume growth of 41% year-on-year mainly through Agrochemical segment with Europe nearly doubling and being a major contributor to the Q1 FY '25 revenue growth. Volumes from Agrochemicals grew by 49% year-on-year and Non-Agrochemicals degrew by 39% year-on-year.

Gross margins are at 29.2%, and they have come back to normalcy. We expect this to improve in the financial year with the price is expected to increase.

With this brief overview, I would now like to hand over the call to our CFO, Mr. Shailesh Mehendale for discussing our financial performance. Thank you very much.

S
Shailesh Mehendale
executive

Thank you, sir. Good afternoon, everyone. Coming to quarter 1 FY '25 performance revenue stood at INR 785 crores in quarter 1 FY '25 versus INR 638 crores in quarter 1 FY '24 with an increase of 23% year-on-year. Coming to the split, Agrochemical business increased by 43% year-on-year to INR 679 crores in quarter 1 FY '25, whereas the Non-Agrochemical business decreased by 35% year-on-year to INR 106 crores in quarter 1 FY '25.

Gross margin stood at 29.2% in quarter 1 FY '25 as against 8.7% in quarter 1 FY '24. EBITDA for the quarter stood at INR 88 crores with EBITDA margin at 11.3% as compared to a loss of INR 66 crores in quarter 1 FY '24. PAT for the quarter stood at INR 27 crores as compared to loss of INR 89 crores in quarter 1 FY '24. Working capital days have also improved in the last 3 months by 21 days and stand at 137 days as on 30 June '24. We remain net debt-free company and have cash and equity investment of INR 624 crores as on 30 June '24.

We can now open the floor for the questions and answers. Thank you.

Operator

[Operator Instructions] Our first question is from the line of Viraj from SiMPL.

V
Viraj Kacharia
analyst

Am I audible?

Operator

Yes, sir.

V
Viraj Kacharia
analyst

Just a couple of questions. One is on the Agchem business. The volume growth in key end markets, is it more due to channel refilling or given concerns on freight issues we are seeing due to the Red Sea crisis or is this more driven by the consumption with new secondary change?

R
Ramprakash Bubna
executive

The main factor has been use of the huge stocks which was aligned with the manufacturers and in the channel throughout the things. Those stocks are getting reduced and consumed, and the operations are moving towards normalcy.

V
Viraj Kacharia
analyst

So can you give some color on inventory levels where we are now compared to a normal cycle? So if you have to understand a normal cycle, are we still at the normal cycle, in normal levels or we are even below that end of the inventory?

R
Ramprakash Bubna
executive

No, I would not say it is below. It may be slightly more, but it's difficult to give the figures because when I'm talking about the inventories, there are so many manufacturers globally. And the figures are not available to us.

V
Viraj Kacharia
analyst

No, I mean that the inventory in the channel, not at the manufacturing level.

R
Ramprakash Bubna
executive

But the inventory that I mentioned was including the manufacturers as well as the channel. It is difficult to make a guess. We can only make an absolute -- I mean, approximate guess that the inventories have got consumed and they stay getting consumed.

V
Viraj Kacharia
analyst

And in terms of demand, what is your sense you're getting across key markets like Europe or NAFTA? And I'm looking this because in the annual report also, you talked about growth to be driven by a mix of volume and pricing power. So if you can elaborate what are we seeing incrementally in the marketplace, which will drive better pricing and volume?

R
Ramprakash Bubna
executive

See, the demand has been very good. As we have mentioned to you, the volume of agrochemicals have grown up by almost 49% compared to the same quarter last year. And Europe has been the major and biggest contributor. Europe for the demand in the quarter 1 has been almost double the demand in the same period last year.

V
Viraj Kacharia
analyst

Okay. And sir, in the Agchem business, if you look at our EBIT margin, despite such a healthy growth in sales, one would think margins should normalize to at least 6%, 7% in quarter 1. So historically, we have done at least 5% to 7% EBIT margin in first quarter. But this quarter, despite such a healthy growth in volumes, our margins are quite low. So was there any one-off or any further inventory provision?

R
Ramprakash Bubna
executive

See, the margins are also dependent upon the price levels. Some products that we were selling at $90 per gallon are being still sold at $20 per gallon. So last year, the company had to bear a very heavy loss by devaluation of the market prices. Now the devaluation process has stopped. If we are selling at $20, they're also sourcing at maybe $17 or $18. So the same product, when it was a success, was there being sold at $90 or sourcing price of $70 to $75. So in terms of percentage, absolute terms, the margins are still at a very low level.

V
Viraj Kacharia
analyst

Sir, but the spread or the percentage should be even higher, if not same, right? Because, say, on a $30 realization, the sourcing is $17 as again, say, $70, $75 on a $90 realization. So in percentage terms, actually margins will be, if not better, at least same as a normal cycle, no?

R
Ramprakash Bubna
executive

I think you have not heard me properly. I did not say $30. I said $20. We are selling at $20, we are sourcing at $17 or $18.

V
Viraj Kacharia
analyst

Okay. And on the other expenses, sir, what is driving such a sharp increase in other expenses? So last year also, we had a very healthy base, and there were some one-off expenses in Q1 last year. So what is driving the other expenses? And how should we understand that for the rest of the year, both in our margin and growth?

R
Ramprakash Bubna
executive

So one is, I would say, legal and professional fees. And second is foreign exchange loss.

V
Viraj Kacharia
analyst

How much is the foreign exchange loss?

R
Ramprakash Bubna
executive

I don't understand.

V
Viraj Kacharia
analyst

How much is the FX loss in this quarter?

R
Ramprakash Bubna
executive

About INR 8.31 crores.

V
Viraj Kacharia
analyst

And this compares to how much of Q1 last year?

R
Ramprakash Bubna
executive

Last year, there was a gain of INR 9.5 crores.

Operator

Our next question is from the line of Preet Malde from Piper Serica.

R
Ramprakash Bubna
executive

What is his name?

Operator

Preet Malde.

R
Ramprakash Bubna
executive

Preet Malde.

P
Preet Malde
analyst

Yes. Mr. Bubna. So I had a question. In the agrochemical prices before the prices dropped so drastically, they had even climbed up pretty high. So as you're saying that some molecules that were $90 you are selling it now for $20. Now what should be a ballpark figure that this would be considered as a normal pricing? So do you think that the normal pricing level is now $90, which was before the price drop or is it somewhere around $50, $60? I'm just giving an example on the terms of the pricing example that you gave.

R
Ramprakash Bubna
executive

See, $90 in my opinion, is too far. It's too early, it gradually go up. And it also depends on many other factors, including the cost of raw materials, cost of manufacture and all that. So it may take quite some time to reach up to $90, but it would go up to $30, $35, $40, maybe by end of the year, it will go to $40. But, it's early, it is just a guess.

P
Preet Malde
analyst

Okay. Okay, makes sense. And you're saying that the inventories have started normalizing, the inventories start being refilled. So what is still holding the prices down in these markets. So if the general sense is that the market has normalized. So what to extent holding the prices down?

R
Ramprakash Bubna
executive

The market share. Nobody wants to lose the market share, I understand. Market share is one of the important things -- important factors.

P
Preet Malde
analyst

All right. And just one more question. Historically, we've seen that Q4 has been pretty heavy for us with good top line, good margins. So do we see that trend continue?

R
Ramprakash Bubna
executive

Yes, please.

Operator

Our next question is from the line of Aejas Lakhani from Unifi Capital.

A
Aejas Lakhani
analyst

I just wanted to understand the growth triggers on the non-agrochemical side. So there has not been recovery in the non-agrochemical volumes yet. So how are we seeing the trend in that business?

R
Ramprakash Bubna
executive

See, in general, there is a lack over drop in the demand. And one of the factors contributing to the lack of demand is high freight rates. The freight rate forms a substantial part of the growth here. And because of this Red Sea, this winter, and other things, both the rate as well as the time of travel is quite high. So that is leading to the lower or drop in the volumes as well as revenues.

A
Aejas Lakhani
analyst

Got it. And on the agrochemical side, are you already seeing the prices improving? Or is it an anticipation that the prices will improve in the coming quarters?

R
Ramprakash Bubna
executive

See, the price will improve when the demand is more than the supply. Today, the demand and supply is matching with each other and people do not want to know the market share, so people are not very keen to get better margins. They want to have the same market volume, not market share. This situation will change gradually, and that's very normal and natural.

A
Aejas Lakhani
analyst

Okay, sir. And sir, last, on to your CapEx, which we are doing or rather the registration which we are doing, so historically, in last few years, you have been doing somewhere around INR 250 crore annual registration. This year, the number you are guiding is INR 400 crores, INR 450 crores. So can you give some sense what kind of opportunities you are seeing and how do you see this registration impacting our growth in the coming years?

R
Ramprakash Bubna
executive

Mr. Lakhani, you are not very well informed about the CapEx that we are spending in the last 2, 3 years. You see, last year, we have spent INR 420 crores; previous year, 2022/'23, our CapEx was INR 360 crores; but in '21/'22, it was also INR 415 crores. So for the last 3 years, we've been spending in the range of INR 400 crores to INR 420 crores. And this is going to more or less at the same level of slight improvement increase compared to the average of last 3 years.

Operator

Our next question is from the line of Darshita from Antique Broking.

D
Darshita Shah
analyst

The first question is regarding the FY '25 guidance. We had given a 15% to 18% on volume growth guidance with 15% to 18% EBITDA margin. Do we still retain that?

R
Ramprakash Bubna
executive

Yes, please.

D
Darshita Shah
analyst

Got it. Okay. My second question was regarding the higher inventory days that we have seen on a Y-o-Y basis. What would be the reason behind that?

R
Ramprakash Bubna
executive

I have not understood your question very clearly, madam. I would request you to speak a little louder.

D
Darshita Shah
analyst

Yes.

R
Ramprakash Bubna
executive

So that I can understand your question.

D
Darshita Shah
analyst

Yes, Bubna. I was just saying that the inventory days has increased on Y-o-Y basis from 85 days to 103 days. So I just wanted to understand the reason behind the increase.

R
Ramprakash Bubna
executive

Madam, this increase is not very substantial or abnormal. This is a part of the normal business operations. And there are many factors, but I cannot pinpoint what is the exact factor, which is leading to. But I think the inventory level is fairly normal.

D
Darshita Shah
analyst

Got it. Okay. Thirdly, on the pricing front on -- if we were to look at the volume number for the agrochemical business, what we can see is that on a sequential basis, the pricing has improved. So is that the case from fourth quarter to first quarter? Has the pricing improved? Or is there some benefit of better product mix in the agrochemical business?

R
Ramprakash Bubna
executive

Madam, the pricings have improved very marginally, not very much comparable to Q4 last year and this year. But the trend is on the improvement, because even the manufacturers are very unhappy with the current prices. And on every given opportunity, they like to have better prices. Their margins are almost 0.

D
Darshita Shah
analyst

Got it. And the next question was largely on the -- if any sales return -- abnormal sales return we have seen in the second quarter as of now?

R
Ramprakash Bubna
executive

No. Not so far.

D
Darshita Shah
analyst

Okay. I want -- I had some...

R
Ramprakash Bubna
executive

We have to proceed for the rest of the year. Because, the last year was a very, very abnormal situation. Otherwise, sales results have never been so exhausted value towards the last year.

D
Darshita Shah
analyst

Got it. If we can get the segmental, the reason, why is volume for the agrochemical business.

R
Ramprakash Bubna
executive

For Q1?

D
Darshita Shah
analyst

For fourth quarter, yes.

R
Ramprakash Bubna
executive

Yes, for the first quarter.

D
Darshita Shah
analyst

Yes. For the first quarter, the reason, why is agrochemical volumes?

R
Ramprakash Bubna
executive

Yes. In Europe, it is something like 5 million units. NAFTA region is about 4 million units, LatAm 0.6 million units, and rest of the world about 0.35 million units.

D
Darshita Shah
analyst

Okay. Can we get the region-wise gross margins?

R
Ramprakash Bubna
executive

Pardon me?

D
Darshita Shah
analyst

Region-wise, gross margins.

R
Ramprakash Bubna
executive

Yes. Madam in Europe, the gross margin is about 35% to -- 35.5%, NAFTA region 22%, LatAm 32%, and rest of the world, 38%. And average, just to overall, it's about 31%.

D
Darshita Shah
analyst

Got it. Can we get the reason-wise registrations breakup?

R
Ramprakash Bubna
executive

Yes, please. In Europe, the registrations are 1,625; NAFTA, 300; LatAm 750; and rest of the world, 250.

Operator

Our next question is from the line of S. Ramesh from Nirmal Bang Equities.

S
S. Ramesh
analyst

Bubna, so you talked about very healthy volume growth Y-o-Y this quarter. Sir, can we get an understanding of how this volume growth is comparing to equity it on first quarter of FY '23, this is 2 years ago, because last year was an abnormal year. So when we want to compare this volume on a normal year, FY '23, what it would be like?

R
Ramprakash Bubna
executive

Sir, this is a very unique question, that you want me to go back to the year before. Normally, we come prepared for the previous year, but give me 2 minutes, I will try to restock for you.

S
S. Ramesh
analyst

Yes. So just to understand how it works out on a normal basis.

R
Ramprakash Bubna
executive

Yes. You asked me about volume, no?

S
S. Ramesh
analyst

Yes. Volume growth, yes.

R
Ramprakash Bubna
executive

Sir, we don't have the figure for the Q1. We have got a full year. Now that will be irrelevant then. We don't have readymade information about Q1 of the previous year. I mean, previous to previous years.

S
S. Ramesh
analyst

Okay. So no, if you were to assume this 49% kind of, it gets extrapolated for the entire year, did you compare it with full year FY '23, what it would look like, just to get a sense in terms of what would be the normalized volume growth once things get to stabilize?

R
Ramprakash Bubna
executive

Sir, conservatively, we feel that there will be a volume growth of 15% to 20%.

S
S. Ramesh
analyst

Okay. Okay. So -- and if you were to look at the gross margins you have achieved, it's a question of being able to ramp up your revenues and my understanding, then you'll be able to go back to normal EBITDA margins and perhaps improve your RoCE. So if you were to look ahead, say, over the next 4 to 8 quarters, what is the best guess you can take in terms of when you will see the -- some kind of discipline come back in terms of people trying to get market share and the excess supply coming down. And when you do see pricing power improving and margins improving on a sustainable basis. Would it be, say by the Jan-March quarter next year? Or would it be somewhere in the first half of next year? When do you think that will happen?

R
Ramprakash Bubna
executive

I would say in the Jan-March of the next year.

S
S. Ramesh
analyst

Jan-March. Sir, finally, if you're looking at your capital expenditure, you've done about INR 1,200 crores of capital expenditure. So if you were to take your asset base, and look at a onetime asset turn, you should be able to do about INR 4,000 crores, right? So if prices don't fall, and with this 15%, 20% volume growth, would you be in a position to achieve this INR 4,000 crores revenue from the current base, say, in the next 2 to 3 years?

R
Ramprakash Bubna
executive

Yes, please.

Operator

[Operator Instructions] Our next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.

B
Bhavya Gandhi
analyst

Sir, my first question is regarding the sales force. I see that the full year sales commission has been closer to INR 4-odd crores, whereas our sales force is closer to 500 people in terms of number. So can you just throw some light? Do we show it under some other expense as well?

R
Ramprakash Bubna
executive

Sir, I'm not understood your question. Can you please repeat what you are saying and where did you get this?

B
Bhavya Gandhi
analyst

So, in the annual report, you mentioned INR 4.5 crores of commission, sales commission. Hello?

R
Ramprakash Bubna
executive

1 minute, sir, let me see, where are these figures.

B
Bhavya Gandhi
analyst

Sir, around INR 12-odd crores. INR 12-odd crores is the sales commission. When it comes to the total number of sales force, we have around 500 odd people, right?

R
Ramprakash Bubna
executive

No, no, not that much. I would say that our number of people should be in the range of over 350 to 400.

B
Bhavya Gandhi
analyst

Okay. 300 to -- okay. And do we show other any commission or other expenses that we give to salespeople under any other head?

R
Ramprakash Bubna
executive

Sometimes, we give them some incentives. We set some targets and if that those targets are achieved, then we give them some kind of incentives.

B
Bhavya Gandhi
analyst

Okay. And your total employees are 180-odd -- 180 employees, right, permanent employees. So where do you mark this 350-odd sales force? They are categorized under which category?

R
Ramprakash Bubna
executive

These are all our team members outside India. This 180 are the team members who are in India and who are employed on the salary, employer-employee relationship basis. Foreign countries, we do not hire those people on the employment basis, but we hire them as consultants or we engage them as consultants, because in many countries, there are a lot of complicated employee benefits and other things, which were difficult to predict and calculate and upload. And our commissions payable is just related to the sales volume that they generate. And sometimes the commissions are also fixed, but we know what is our commitment and liability.

B
Bhavya Gandhi
analyst

Got it. Let me just ask you some in another way, out of the INR 266 crores legal and professional fees, how much would be the sales incentive? Or what all things are included in the legal and professional fees?

R
Ramprakash Bubna
executive

Legal and professional fees, these do not include any of the incentives. The incentives are there only in the consultation charges, and professional fees. I mean, not legal.

B
Bhavya Gandhi
analyst

So if you can help me understand what is this INR 266-odd crores legal and professional fees for the full year FY '24?

R
Ramprakash Bubna
executive

One minute. You see, I will give you a broad -- I mean, I don't have the precise information. We are engaged in the process of registering our products. And for the purpose of registrations also, we require a lot of legal advice many times to negotiate our data compensation with the innovators and reply to the authorities on many technical and legal matters. Sometimes there are also some arbitrations for which we have to hire the legal professionals. So these are mainly to see that we are following the law and nobody is accusing us for any violation of the law.

B
Bhavya Gandhi
analyst

Okay. Okay. Got it. Just one last thing. So broadly, if you were to amount the total expenditure for those 350 sales force, how much would be the approximate number within the other expenses?

R
Ramprakash Bubna
executive

Sir, I would say, it will be in the range of INR 100 crores to INR 105 crores.

B
Bhavya Gandhi
analyst

Okay. And that would be broadly under which head?

R
Ramprakash Bubna
executive

Under the head of legal and professional expenses, but and the sub-head of legal and professional in business development.

Operator

Our next question is from the line of Archit from B&K.

A
Archit Joshi
analyst

Sir, my first question is on a comment you made earlier with respect to the Chinese manufacturers, still not happy with the selling price of agrochemicals and the fact that they are hardly making any margins. Sir, what in your view are these external forces that are compelling them to be non-profitable or very marginally profitable and still do business. What is the situation in China that is compelling this situation?

R
Ramprakash Bubna
executive

So the biggest factor is the consumer survival. They all want to survive and they have so much of our manufacturing capacity and Chinese are competing with Chinese. You understand? All of them are struggling to survive and has some market share of the -- share of the market.

A
Archit Joshi
analyst

Right. Understood, sir. Sir, a follow-up to the same one. You earlier mentioned about how the prices have collapsed and the cost of manufacturing also being a function of the final selling price, would it be fair to assume that Chinese companies or Chinese manufacturers are still manufacturing these active ingredients at a much competitive price, which is why your customers still prefer China as a base of procuring their raw material and the distinct advantage that you have, having presence in China through our business model, would that continue to stay?

R
Ramprakash Bubna
executive

So your question has been very long, but my answer is really brief. Yes, that will continue to stay. And I carry an impression -- we carry an impression that China is affected to the world today. All the developed and developing -- developed countries has stopped the process of manufacturing because of the cost and a lot of regulations and controls particularly related to environment and human health. This is not so exhausted in China and the developing countries. So because of the economic reasons, most of the manufacturing have shifted to China.

Operator

Our next question is from the line of Tara from Valuequest.

U
Unknown Analyst

My question has been answered.

R
Ramprakash Bubna
executive

I can't understand. What is the question? Hello?

Operator

Sorry to interrupt the line from Tara madam has been disconnected.

R
Ramprakash Bubna
executive

Okay. I think she said my questions have been answered. She said so. So she had no more questions. Okay, good.

Operator

Our next question is from the line of Gautam from MEA Invest.

U
Unknown Analyst

Just I would like to note that like I can see, we are having high trade receivables, like more than 40%, 45%. So do you see any risk in that? And what is the reason behind this?

R
Ramprakash Bubna
executive

One minute, let me see whether the facts that you said. Let me verify the fact. My friend, the trade receivables have gone down from 192 days in the fourth quarter to 132 days in the first quarter of this year. So there is a lot of improvement. In the fourth quarter, the grade results are high because the sales volume in that quarter is very high. And now slowly it is coming down.

U
Unknown Analyst

Like we can expect that in the coming years, trade receivables will come down, like it's more than 40% annually?

R
Ramprakash Bubna
executive

Coming quarters, it will come down, but coming years, the trend will remain more or less the same, because our business is a seasonal business, and the maximum sales volume comes in the quarter 4. And quarter 4 is always the highest amount of figure of trade receivables.

U
Unknown Analyst

Okay. And so, do you see any risk in this, like having high trade receivables?

R
Ramprakash Bubna
executive

This is very normal sir, and I don't see any risk.

Operator

Our next question is from the line of Shyam Garg from Ladderup Finance Limited.

S
Shyam Garg
analyst

Most of my questions have been answered. So my first question is with respect to, if you can give us a product margin in each region in agrochem business?

R
Ramprakash Bubna
executive

Product margin. I have answered that question. But I will answer my -- repeat my answer once again. The gross margins in Europe has been around 35% to 36%.

S
Shyam Garg
analyst

Sir, I'm asking for products margin in agrochem business in each region. For example, prices at [indiscernible] likewise.

R
Ramprakash Bubna
executive

So product margin figures I don't have. I don't have product margin figures.

S
Shyam Garg
analyst

Okay. And sir, with respect to the, what CapEx we have done in the last 3 years? What has been the volume growth and margin in both products in which we have received the registration in the last 3 years compared to the existing products?

R
Ramprakash Bubna
executive

Mr. -- what's your name?

S
Shyam Garg
analyst

Shyam Garg.

R
Ramprakash Bubna
executive

Okay. Shyam, your question is very unclear to me. You will have to just speak a little slowly and loudly so that I can understand your question.

S
Shyam Garg
analyst

Sure, sir. Sir, in the last 3 years, we have done -- we have spent on registration. We have spent around INR 400 crores to INR 420 crores on registrations of new products in different regions. So what has been the margin on those products compared to the existing products that we have?

R
Ramprakash Bubna
executive

You see the margin on recently registered products is always high compared to the margins on the existing products. And it's a very simple answer to this. The process of registration is a continuous process. And we may be the second, third or fourth generic registered for a product. But over a period of time, there can be five, six, eight genetic registrants. So the competition increases and the margin swings. For the new products, we could be the second, third and fourth. So the competition is less and the margins are better.

S
Shyam Garg
analyst

Okay, sir. So any -- for the last year, if you can give us...

Operator

Sorry to interrupt, sir. Because several participants are waiting in the question queue. I request you to join the question queue. Our next question is from the line of Raj from [indiscernible] Partners.

U
Unknown Analyst

Am I audible?

Operator

Yes, sir.

R
Ramprakash Bubna
executive

Yes, please.

U
Unknown Analyst

Out of total registrations that, that we have, it is around 2,925, right. So how much of that generates to sales for us? How much of them are active?

R
Ramprakash Bubna
executive

I would say about 80% of them are active.

U
Unknown Analyst

80% of them are active out of 2,925?

R
Ramprakash Bubna
executive

Yes.

U
Unknown Analyst

All right, right. And sir, could you please give an outlook for FY '25 and FY '26 in terms of sales and in terms of EBITDA?

R
Ramprakash Bubna
executive

FY '25, I have already given, no?

U
Unknown Analyst

I actually skipped the point on that. Can you please repeat it?

R
Ramprakash Bubna
executive

The sales have increased by 15% to 18% and EBITDA is going to improve also to around 15% to 18% compared to much lower or negative in some quarters last year.

U
Unknown Analyst

All right, all right. And sir, for FY '26?

R
Ramprakash Bubna
executive

What is that?

U
Unknown Analyst

And for FY '26, can you provide an outlook?

R
Ramprakash Bubna
executive

FY '26 is too far. First we will provide for FY '25 and then we will go to FY '26. Because situations keep on changing, a lot of factors. It's a continuous moving situation. So they can develop and we do not like to make guesses.

U
Unknown Analyst

Understood, sir. So sir, your FY '24 EBITDA was 9.59% total percent. So for FY '25, can we expect an EBITDA of around 15% or so?

R
Ramprakash Bubna
executive

So I don't know whether you have been hearing, I repeated this question many times. We expect EBITDA to go to 15% to 18%, in the current year, FY '25.

Operator

Our next question is from the line of Chinmay from Prescient Capital.

C
Chinmay Nema
analyst

A little general question from my side to the oversupply issue and the return of inventories that happened last year. You said that it was a rather unprecedented event. Now that things are reviving, are we making any efforts? Or are we doing something on a more structural level or maybe in terms of our contracts with customers or maybe sourcing to insulate ourselves better from such shocks going in future. Is there any scope for any such things? Just would like some color on this.

R
Ramprakash Bubna
executive

Your name is Chinmay.

C
Chinmay Nema
analyst

Yes.

R
Ramprakash Bubna
executive

Mr. Chinmay, we cannot make our own rules in the market. We have to still survive and continue and we have to follow the stream and the way the team is moving. And if we like to be unique, then we'll have to go out of the market. Even the multinational companies have -- all the innovator companies have accepted those same silicon of the market and giving them longer credit and other things. And we cannot be alone we have no special qualities or situation that we can form our own rules.

C
Chinmay Nema
analyst

Got it, sir. I understood.

Operator

Our next question is from the line of Paras Adenwala from Capital Portfolio Advisors.

P
Paras Adenwala
analyst

Yes. I heard you mentioned that over the last 3 years, you spent on an average about INR 400 crores per year for CapEx. Would it be -- would it be fair to conclude that a large part of that would be for registration of your products rather than CapEx, because yours is an asset-light business.

R
Ramprakash Bubna
executive

Sir, most of -- I think, most of our CapEx is for registrations of the products. We are not investing or I mean, spending any capital on acquiring or building up tangible assets. All these are only for acquiring the intangible assets with registrations.

P
Paras Adenwala
analyst

Okay. And, so since last year was a challenging year, would it be fair to say that over FY '25 or maybe FY '26, we will definitely return back to your average asset turnover ratio that we've seen in the past?

R
Ramprakash Bubna
executive

Average asset turnover? Yes, please.

Operator

Our next question is from the line of Aejas Lakhani from Unifi Capital.

A
Aejas Lakhani
analyst

Sir, question is that European clients have been wanting to diversify supply chains, and they are adding another geography to over a period of time to diversify this risk. And in that context, sir, you said that China is the factory of the world, and they continue to have lot of advantages from a cost perspective. So could you just contextualize the truth around this?

R
Ramprakash Bubna
executive

Can I do what?

A
Aejas Lakhani
analyst

Sir, I wanted to know your thoughts around this.

R
Ramprakash Bubna
executive

Sir, I think the trend is continuing, and there's no change. I mean, no change. The developed countries do not want to compromise with the environment and the human health factors and issues. So they prefer to buy their goods from China. In fact, many of the multinational companies are setting up joint ventures in China to share the cost and other things. So the trend is continuing. I don't see any reversal in this trend in the near future, the near one and far future.

Operator

Our next question is from the line of [ Ronak Chheda ] from Elvisridge Capital.

U
Unknown Analyst

I have two questions. My first question is on your comments you've made in the earlier call, so I think, you mentioned that some of the factories have shut their units just to manage their cost. Can you provide an update on what is happening there in terms of, are these capacities gone out for good? Or there is a chance that these capacities will may come back when the price realization improves?

R
Ramprakash Bubna
executive

I'm not understood and heard your question very clearly. But probably, you are asking me that many of the manufacturers have shut down their factories in the past. And...

U
Unknown Analyst

Yes, sir. Yes, sir. And are these factories coming back?

R
Ramprakash Bubna
executive

And this is -- they are not happy with that situation. They're waiting for any opportunity they can restart because their investments are lying idle, and there are a lot of fixed costs, which they have to incur even if the factory is closed. So they wait for any opportunity, if they can restart, maybe less margins, but at least they can recover their expenses and costs.

U
Unknown Analyst

Sir, in that sense, then, do you see a longer recovery for prices to come back? Because right now, demand is equal to supply. And if the demand were to increase when these factories were to come back, there would be a very low likelihood of prices coming more from you, sir?

R
Ramprakash Bubna
executive

Yes. Because of these factors, the prices to go up to the level which existed before the end of last financial year, it will take time, mainly because of these factors.

U
Unknown Analyst

Got it, sir. And sir, my second question is on the cost of registration itself. Sir, just to understand our edge in terms of cost of registration for a similar kind of registration if, let's say, we think, INR 100, would there be differential where our competitor would be at, let's say, INR 120 or INR 150? Any color on that would be helpful, sir.

R
Ramprakash Bubna
executive

Sir, again, I'm not -- your wordings -- words are not very clear to me. Are you asking whether the cost of registration for the same product is increasing year-after-year. Is that your question?

U
Unknown Analyst

No, sir. My question is if the cost of registration for Sharda is, let's say, INR 100, would that cost be similar for our competitors or that cost would be higher or lower for our competitors? Just want to understand if there is differential or any edge for Sharda?

R
Ramprakash Bubna
executive

See, if Sharda has registered a product in 2022, and if our competitor is going to make an effort in 2024, his cost is going to be definitely higher than what Sharda has incurred in the year 2022. Have I answered your question correctly?

U
Unknown Analyst

And sir, if it was the same registration in '22, the cost would be similar for -- to Sharda then? Because we would have teams sitting in India vessels of competition.

R
Ramprakash Bubna
executive

If Sharda registered the same product again this year, then the cost of Sharda is also will be high.

Operator

Our next question is from the line of Rohan Gupta from Nuvama.

R
Rohan Gupta
analyst

Sir, my question is on our net CapEx plan. So sir, when in last 2 years, our profitability was slightly muted, you also slowed down your CapEx. And now this year, when you are looking at growth coming back to the margins improving, you are again looking at roughly INR 425 crores to INR 450 crores kind of investment in CapEx in registration. So sir this investment actually is to drive the growth for the future, right? Because the registration which we will do now, will give us a revenue over the next 2 to 4 to 5 years. So I just wanted to understand your thought process, how do you decide on the CapEx number? And if we keep on growing in terms of revenues, our investment in new registrations will always keep on going? Or what kind of percentage you are comfortable in terms of putting this CapEx for the registration?

R
Ramprakash Bubna
executive

Rohan, I think you have not caught up with the figures that I gave to one of our other questioners maybe some time back. Our CapEx in the year ended March '22 was INR 415 crores. In the year ended March '23, it was INR 360 crores. But last year, was the highest, even though the business was very bad, but we have ended up spending around INR 420 crores in the year ended March '24. And this is not in our hand. It is a continuous process and the registration is not a market deal that we pay and we receive. The registration process is very long. Sometimes it takes me 7, 8 years to register a product.

So I cannot stop in between. If I stop then I'll be still much worse off. So it's -- and there are many things. I mean, totally, it's not a -- it's not a predictable expenditure, because authorities keep on coming with newer and newer requirements, every 3 months or 6 months. You cannot say that why have you got it now. I have started 3 years back. So things are not in our control. If we want to grow, we have to keep on spending on the registration, and it cannot be directly linked to the performance of any particular year.

R
Rohan Gupta
analyst

Okay. So sir, I was just trying to understand if we link it with the revenue, like how much of your -- 10%, 12%, because now it has gone up to roughly close to 12% to 15% of our revenues or even in terms of EBITDA, almost 50% to 60% of our EBITDA, we are spending on registration. So do we have any particular number in our mind that we will be shift to that number or follow a metric for any future. I mean, that's what I wanted to know.

R
Ramprakash Bubna
executive

Sir my answer is, again, very clear. It is not linked revenue, and it cannot be linked to revenue. It is a continuous process. And revenues will very -- will be variant, but the registration process cannot be stopped. If I stop, then I have to forgo all the costs that I've incurred on that registration until that day, which is also not very good and advisable.

R
Rohan Gupta
analyst

Right, sir. Sir, in terms of the pricing scenario, so you have seen that, that definitely there are some of the chemical plants in China are recently shut, but definitely at any opportunity you mentioned, they will come back. So do you see that the pricing scenario in China and of the chemicals which you buy, will it still remain muted for near term or maybe for this year and for next year as well?

R
Ramprakash Bubna
executive

Sir, it will -- it depends on so many factors. So it will take time for the prices to go up because manufacturers are very keen to restart their plants. They do not want to lose the market share that they are having. And then, it's a question of supply and demand. If the supply is in abundance, then the prices cannot go up. Do you understand me?

R
Rohan Gupta
analyst

Yes, sir. So, I think, the prices may remain, because the supplies are still there. So prices may remain softer only near term.

R
Ramprakash Bubna
executive

But this situation is also very normal. Many people are still suffering and very uncomfortable with the current situation. So these things will definitely have to improve, and they will.

R
Rohan Gupta
analyst

Sir, many speciality chemicals...

Operator

Sorry to interrupt, sir.

R
Rohan Gupta
analyst

Yes, sir.

Operator

Sir, please join the question queue for follow-up. Our next question is from the line of Anuj Sharma from M3 Investments.

A
Anuj Sharma
analyst

Congratulations. Sir, just in terms of the molecules, what could be the contribution of the top 10 molecules to the agri revenues today?

R
Ramprakash Bubna
executive

Sir, your voice is very faint and not audible. I can guess what the question would be, but can you make it a little more clear and louder?

A
Anuj Sharma
analyst

Yes, sir. So what I was asking is, can you share the contribution of top 10 molecules to the agri revenues?

R
Ramprakash Bubna
executive

Yes, sir. The top 10 molecules are contributing about 35% to 40% of our total revenue.

A
Anuj Sharma
analyst

And sir, the next question is if I look at 5 years ago, how many of these 10 molecules would have been there 5 years ago in our list? So what has been...

R
Ramprakash Bubna
executive

Maybe there were not -- many of them were not there. And what is your name, Mr. Anuj Sharma. See, our top 10 molecules do not remain in the list of top 10 every year. They keep on going in and going out. Some molecules which were in the #2 position, they go down to #8 position and some other molecules, which were at #32 position may come down to #4 position, depending again on the weather, the demands and market situation.

A
Anuj Sharma
analyst

Yes, sure. Got it. Sir, second question is on the non-agro revenues.

R
Ramprakash Bubna
executive

Little louder, please. Louder.

A
Anuj Sharma
analyst

Yes. Yes, sorry for that. My question -- next question was on the non-agri revenues. How do you see that segment shaping up in the next 3, 5 years? What confidence are you getting in that business model? And how do you see that improving? Or how do you see that going ahead?

R
Ramprakash Bubna
executive

We are very optimistic, and we are hopeful that things will improve. In fact, in the last year, when the agri business was doing so badly, it is a non-ag business, which has been supported us in terms of revenue, margins and profitability. Last year, this non-ag business was giving much better margins than the ag business, which is depending upon registrations.

Operator

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to management for closing comments.

R
Ramprakash Bubna
executive

Well, I thank you, everyone, for joining us for this call. I hope we have been able to answer all your queries. We look forward to such an interaction in the future. We hope to meet your expectations in the future, too. In case you require any further details, you may contact us or Mr. Deven Dhruva from SGA, our Investor Relationship partners. Thank you so much. Have a nice day.

Operator

Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

R
Ramprakash Bubna
executive

Thank you.

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