Key Highlights

FY'16 was a very challenging year for the company. The year was marked by a back to back drought which rarely happens in India.

Kharif monsoon was down by 12% in FY'15 and 14% in FY'16. Cumulative monsoon was lower by around 33% in FY'15 and by around 20% in FY'16 in India.

Some of the key States like Maharashtra, UP, Karnataka, Andhra & Telangana etc saw rainfalls lower by around 26%, 46%, 20% and 8% respectively in FY'16.

This has a back to back effect on rural income and economy and that's why Rural India is struggling.

Water reserves in major reservoirs have come down significantly in these 2 years.

Further, the prices of cotton, paddy, rice etc are not rising to that extent even thought the production is lower. Whatever rise that we are seeing, ultimately the farmers are not making money out of it.

All these have led to lower Agrochemical business for India and for worldwide as well. Worldwide, agrochemical saw a de-growth of 9% on YoY basis.

As per the management, fruits and vegetables, is the only section of eatables, which has shown a steady increase in prices and demand as well, and farmers also benefitted out of it to a certain extent in India.

As far as Rallis is concerned, exports were lower by around 20% and reached around Rs 400 crore of turnover in FY'16. Exports constitute around 30% of turnover. Brazil which is the main market for agrochemicals for the company was lower by more than 30% YoY.

Domestically, as per the management, more or less, they have held on the market share.

Of the total sales of FY'16, Crop Protection business was around 70% and Non Pesticide business was around 30%. Of this crop protection business, insecticides which accounted for around 75% of sales now accounts for around 55%, while fungicides and herbicides which is the fastest growing segment now accounts for 45% of total sales.

During the Mar'16 quarter, the company completed the 100% acquisition of Metahelix. Total consideration paid for the acquisition over past 5 years stood at around Rs 240 crore. Metahelix reported net sales of around Rs 334 crore up by around 8% YoY. Paddy and Millet constitute major chunk of seeds business for Metahelix while cotton and vegetables share is improving.

Although Metahelix margins currently are lower than Rallis standalone margins which are hovering around 17%, Metahelix will soon reach those margins.

In Mar'16 quarter, there was a small proceeds from sale of land which was received and booked in other income.

Further in Mar'16, depreciation policy on technical life of each component have been reassessed and realigned with the latest Accounting standard and company law, which resulted in lower depreciation. Going forward FY'16 deprecation forms a base for the company on which further depreciation will be calculated.

Also tax rate for the company came lower in Mar'16 quarter and for whole FY'16 year. Dahej plant did some pilot run activities for 2 molecules which its been allocated from 2 MNC companies. Also there was an increase in R&D activities in Dahej. Further activities of Dahej plant will increase and this will result in lower overall tax rate for the company going forward.

Dahej finally received contracts from 2 MNC companies to do some pilot testing and running. Management is confident of ensuring the commercial production of Dahej in FY'17 mostly in H2 FY'17. The company has received all the regulatory approvals for the same.

The company is nearly a debt free company and working capital has improved significantly. As of now it has no plans on surplus cash that will accrue in next couple of years. It has options on organic and inorganic growth as well as giving back to the shareholders.

There will be a land sale deal which is almost through and sum of around Rs 100 crore will flow to the company in H1 FY'17.

Going forward, Management expects a good FY'17, given the above normal estimate of monsoon by the IMD. Also given lower inventory levels, new products and a lower base, things should improve from hereon.

The company had launched around 6 new products in last 12-15 months and another 3 new were planned for FY'17.