SUMITOMO CHEMICAL INDIA LIMITED (SUMICHEM) Q4 FY23 Earnings Concall Transcript

SUMITOMO CHEMICAL INDIA LIMITED (NSE:SUMICHEM) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Chetan Shantilal Shah — Managing Director

Suresh Ramachandran — Chief Commercial Officer

Kunal Mittal — Senior Vice President of Planning & Co-ordination Officer

Masanori Uzawa — Non-Executive Director

Sushil Marfatia — Executive Director

Analysts:

Swati Hiroo — Ratnabali Investment — Analyst

Kapil Agrawal — Itus Capital — Analyst

Anandha Padmanabhan — PGIM India AMC — Analyst

Gagan Thareja — ASK Investment Managers — Analyst

Chintan Modi — Haitong Securities — Analyst

Ankur Periwal — Axis Capital — Analyst

Bhavya Gandhi — Avendus Wealth — Analyst

S Ramesh — Nirmal Bang Securities — Analyst

Lakshminarayanan K G — Tunga Investments — Analyst

Prashant Biyani — Elara Securities — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Nitin Shakdher — Green Capital Single Family Office — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Sumitomo Chemical India Limited Q4 and FY’23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict.

[Operator Instructions]

From the management today, we have on the call Mr. Chetan Shah, Managing Director; Mr. Sushil Marfatia, Executive Director; Dr. Suresh Ramachandran, Chief Commercial Officer; Mr. Masanori Uzawa, Non-Executive Director; Mr. Kunal Mittal, Senior VP, Planning and Coordination Office; Mr. Anil Nawal, Chief Financial Officer; Mrs. Deepika Trivedi, Company Secretary; and colleagues from SGA, their Investor Relations Advisors.

Now, I hand over the call to Mr. Chetan Shah, Managing Director of Sumitomo Chemical India Limited. Thank you and over to you, Mr. Shah.

Chetan Shantilal Shah — Managing Director

Ladies and gentlemen, a very good afternoon to all of you, and welcome to the conference call to discuss the financial year ’23 performance and our company — of our company Sumitomo Chemical India Limited. Kindly let me give a brief overview on the agri-input industry landscape during the year. Financial year ’23 started with a very good first and second quarters, 25% growth in revenues as well as in profitability versus financial year ’22. This was mainly due to good water level in the fields, pre-monsoon showers, low-cost opening inventories, increased cost — increasing cost wherein industry and trade partners are building up inventories, and overall positivity in the market in the first half of 2023.

However, the situation suddenly turned adverse in second half due to the following key points. Number one, low insect infestation and limited volumes’ offtakes in financial year ’23 caused by weather-related disturbances such as late monsoons, erratic and uneven rain pattern, excess rains towards the end of monsoon period, all these resulted into higher channel inventories and overall pessimism in the market. Second, Chinese market opened up post-COVID, and that we saw excess supply situation as the market prices started getting softer and softer.

The above two factors caused double impact, low demand, higher inventory, excess supply and falling prices. Most industry players and channel partners attempted to reduce inventory levels drastically in the second half of ’23. The situation was further aggravated due to similar trends in other key export markets like Latin America and some of the Indian players have sizable exports in this territory.

Due to above challenging factors, our domestic volume growth and margins were impacted in the second half. Large part of growth was due to price increases in all our portfolio segments. The modest growth can also be attributed to the decline in revenue from fungicide segment. If we ignore the challenging situation in domestic market in second half, overall, it is reasonable performance in the domestic market.

We introduced almost 10 new brands, four in insecticides, four in PGR and one in fungicide during the year. Six out of these 10 brands are under section 9(3) of the Insecticides Act, which means that it was for the first time introduction. Several of these unique 9(3) first time registered in India after years of efforts and expected to ramp up over next few years, and we are looking forward to — for a robust growth in these brands.

Even though exports were lower in the second half as compared to our internal estimates, overall, we achieved a very good growth in export market, in line with our strategic direction to increase exports. As compared, the upstream [Phonetic] in exports partially mitigated the decrease in domestic market. The company’s recent capacity expansions are expected to support the positive momentum in export market. Overall, we are proud of our teams who worked together in this challenging situation and delivered a respectable performance, in line with our past trends and overall strategic direction. We look at this situation as a small pause, which gave us an opportunity to reflect on our strengths and business fundamentals with a strategic theme for the current year, which is called BACK to the CORE.

In near short term, our current assumptions are as follows. Efforts are taken to minimize impact of above-mentioned challenges, are expected to start showing trend reversal in near term. There should be limited adverse impact of El Nino weather situation, assuming current projection of 95% monsoon level and no impact on crop acreages. Growth is expected to be driven by volumes. This is a very, very clear message that during the year, the volumes of all our brands have to be increased, both for existing portfolio and the products which we have introduced recently.

The input cost prices are at lower level and profitability should return to normal levels in next couple of months, and when weighted average of inventories goes — cost gets adjusted to current market levels. However, these assumptions and market situation is expected to be dynamic, and we will need to monitor the same on regular basis going forward in next few weeks and months. It does not take — we have this negative trend — we hope this negative trend turns into positive trend as quickly as it turned negative in the first place. By focusing on business fundamentals, our company will be ready to take best efforts to maximize the potential in any situation.

With that, I will now hand over the call to Dr. Suresh Ramachandran to give more information on our operations. Thank you.

Suresh Ramachandran — Chief Commercial Officer

Good afternoon, everybody. Thank you very much for taking time out for joining our call today. Hope my voice is clear to all of you. Throughout the previous fiscal year, we implemented several strategic initiatives to fortify our business fundamentals. This included expanding our strategic marketing, demand generation function, product development, channel partner analytics team, as well as prioritizing the implementation of more rigorous commercial policies from a long-term sustainable business perspective.

Our portfolio comprises of 200 brands across the entire value chain, including 20-plus mega brands with strong brand recalling. Our distribution network comprises of over 15,000 direct distributors and 60 depots and there also is across the country, making it one of the most extensive distribution networks in the country with maximum number of branches. The growth of our domestic Agro Solutions business was primarily driven by price appreciation in FY’23 — FY’22-’23. The notable growth in Animal Nutrition and environmental health markets can be attributed to increase in both volume as well as price. Export growth was driven by a combination of price as well as volume increase.

The company has successfully established enduring positions in several export markets. During the year, our company experienced good growth of sales in African and Latin American countries. part from shipments to our parent company in Japan. The company has received regulatory approval for selected products, which have exhibited robust demand and will serve as a strong base for expansion of our export business in the coming years. Our insecticides, herbicides, fungicides and PGRs are experiencing good demand with our robust supply chain and renowned brand names we are poised to capture market share from an organized place. We anticipate good growth, stability and profitability in the herbicides, PGR and bio rationale product segments.

In order to mitigate the effects of seasonality on our company, we have diversified our product portfolio to encompass both Kharif and Rabi crops and are focused on augmenting our PGR segment’s contribution. Our strategic plan includes upcoming product launches in this segment, which will further solidify our position as one of the top leaders in the industry. The new products and brands that we launched during the last fiscal year have been accepted by the channel partners as well as distribution network and has had a decent beginning given the limited time that these products had in the market over the last few months.

As a part of our ongoing efforts, we consistently evaluate for our product portfolio to identify any gaps and work towards them. In that process, we are anticipating to launch at least another two products in the current fiscal year. Our company’s robust field promotion initiatives have enabled us to establish direct connection with farmers, thereby facilitating their access to optimal farm management techniques. This in turn empowers them to enhance productivity and operate more efficient agri business.

By leveraging real-time feedback, we have the opportunity to enhance our relationship with farmers, gained valuable insights into their needs and drive growth as an organization. We have directly reached out approximately 4.4 million farmers and about 30,000 channel partners. Furthermore, we have implemented digital marketing as a supplementary to conventional marketing methodologies to enhance consumer product awareness and educate farmers on optimal farm management practices. Our portfolio comprises of 23 websites across nine local languages and multiple social media platforms, which have yielded staggering 20 million digital engagements.

With that, I hand it over to Mr. Kunal Mittal, our Senior Vice President, Planning and Co-ordination Office to take us through the next segment.

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

Thank you, Mr. Shah and Dr. Suresh. So first, we will start with our consolidated financial performance for Q4 financial year 2022-’23. In this quarter, our top line in financial year 2022-’23 Q4 was at INR652 crore, as compared to INR664 crores in the previous year. The sales growth was impacted due to several headwinds in domestic agrochemical industry as explained in detail by Mr. Shah. Challenges in the domestic market were partially offset by export sales. Q4 is not a major consumption period for the domestic agrochemical industry, and we believe our performance is respectable in the current extraordinary adverse situation.

The Insecticides segment recorded a flattish growth trajectory. Fungicides and Metal Phosphides segment witnessed poor demand, which was moderately compensated by strong growth in Animal Nutrition division and Environmental Health Division. EBITDA was at INR81 crores in Q4 financial year ’23, as compared to INR109 crore in the same period last year. Profit after-tax stood at INR72 crores, as compared to INR75 crores in the same quarter last year. While the margins at gross level were lower, our company quickly focused on controlling the overhead cost and the cost management. These efforts ensured that our overhead costs were lower and at net profit levels, our margins were largely in line with our past trends.

Coming to our consolidated performance for financial year ’22- ’23, which in our view is a more reflective situation of the — more reflective for the current situation. The revenues from operations in financial year ’22-’23 were at INR3,500 crores, which was increased by approximately 15% as compared to financial year ’21-’22 when we had recorded revenues of INR3,061 crores. In domestic market, large part of the growth was due to price increases across our portfolio segment, whether it is Animal Nutrition, Environmental Health and whether it is exports market. In all the segments, we delivered price increases. In exports market, the growth was both on account of volume growth, as well as price growth.

The sales growth in financial year ’23 was primarily driven by impressive growth in Herbicides segment, which was contributed by multiple products and not just one particular product in Herbicides segment. And in several of these products in Herbicides segment, we have very good market share. The share of exports in the total revenue increased from 22% in ’21-’22 to approximately 25% in financial year ’22-’23. This was on account of increase in the exports to Latin America, Africa and some other important markets, and increased shipments to our parent company in Japan. In financial year ’22-’23, Insecticides contribute to about 43% of the total revenue, while Herbicides was 24%, Plant Growth Regulator and Fungicides, both contributed approximately 9% each in our revenues.

EBITDA margins witnessed a growth of 11% from INR600 crores in financial year ’21-’22 to INR667 crores in financial year ’22-’23. Our EBITDA margins were 19% in financial year ’22-’23, as compared to 19.6% in the previous year. We were able to sustain our operating margin as a result of our initiative to pass on the higher input costs. This was further aided on improvement in our operating leverages, better product mix, cost optimization and better cost management, especially in the second half, and we continue to realize our synergies.

PAT for financial year ’22-’23 witnessed a jump of 19% to INR502 crores from INR423 crores last year. We maintained higher inventory levels as compared to previous quarter on account of the approaching Kharif season. However, as compared to the March 2022 levels, inventories are at much lower levels and this indicates our collective actions, in line with the dynamic and challenging situation in the market, especially in the near term. During the financial year ’22-’23, our collections were at INR3,676 crores as compared to INR3,458 crores during financial year ’21-’22. This also indicates that our team’s ability to generate ground level demand and liquidation, which is followed by the actual collections. No sales in our sector should be considered final till the material is consumed and collections are realized, and our teams continue to keep this in mind and follow disciplined practices even under challenging situation.

Our net working capital stood at 124 days in financial year ’22-’23, as compared to 133 days in financial year ’22. This improvement is largely due to the lower inventory levels, which were partially offset by fall in payable days because we have been purchasing at immediate payment basis for some of our purchases. We have cash and cash equivalent amounting to INR827 crores as on 31st March, 2023.

On the manufacturing side, since our overall volumes were lower, our production levels were also lower, especially in the second half. However, all our operation’s team focused on the strategic cost optimizations efforts. And this was our response to the challenging market situation.

Our projects team expanded our manufacturing capabilities, in line with our Make In India initiatives, which we had announced. We had earlier announced that we will be investing approximately INR1.2 billion, which is about INR120 crores for two Make in India projects to develop several proprietary products for our parent company and our global affiliates. This is over and above the normal and routine capex, which we have been incurring for our existing products and businesses. Both these projects are progressing as per the expected timelines. One of the projects which is at Bhavnagar facility for one important molecule has already commenced commercial operations in the last financial year, and this is a very important molecule. For the second project, which is at Tarapur, which is a multiple product plant for mainly our AHD products, this plant is expected to start commercial production in the Q1 of financial year ’23-’24. These projects are being implemented both these projects, which we mentioned India projects. These are being implemented — both of these projects, which we mentioned, Make in India projects, these are being implemented in our current facilities, and the operating margins of these projects are expected to be in line with our company’s existing margin range. Both these projects are expected to contribute to the revenue growth in financial year ’23-’24. However, it may not be the full capacity levels in the current financial year, because one of the projects will be started in few months’ time.

A variety of additional products that can be manufactured in India are also being evaluated, and there are discussions at various stages. Once and whenever the projects are approved by our Board for the further investments, we shall keep you updated. Our R&D team is also involved in several product developments, especially in the off-patent segments in the pre-mixture combinations and focusing on the products for the future demand in the Indian domestic market and also in the exports market, and also in high regions [Phonetic] such Latin America, Africa and some Asian countries.

We would like to second what Shah mentioned earlier. We are very proud of all our teams work together in this challenging situation and delivered a very respectable performance in this challenging situation. We have always maintained quarterly performance, may sometime have variations due to weather impact or seasonal impact, and the annual trends are more accurate reflection of the overall performance. Overall, our performance in financial year ’23 is in line with our past track record wherein we have delivered 15x growth in the last 13 years since 2010 when we started focusing on the Indian market. And consistently since 2010, we have achieved growth every year during this journey, and this gives us a confidence that we have built up a fundamentally strong business.

As one of the most diversified platform in Indian agrochemical sector and with a good track record of extraordinary year-on-year growth every year in last 12, 13 years, even in some of the challenging year situation like last year, we continued on the path towards our strategic ambition to take the leadership position in the Indian agrochemical industry.

With this, we would like to take a pause, and we would like to open the floor for question-and-answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answers session. [Operator Instructions] The first question is from the line of Swati Hiroo from Ratnabali Investment. Please go ahead.

Swati Hiroo — Ratnabali Investment — Analyst

Firstly, I just wanted to say that, while I understand the entire industry has gone through a very challenging period, your team has still managed to outperform the entire industry. So I just wanted to say congratulations to the entire team. So my first question is that I wanted to understand, if you could give us a basic sense of how many proprietary molecules are there in Sumitomo Japan and what percentage of that has been introduced in India?

Chetan Shantilal Shah — Managing Director

Thank you for your question. First of all, thank you for your acknowledging our team’s good work. Thank you very much for that. To your specific question, well, the parent company has many proprietary products. And quite a few of them, we are already in Indian market in terms of importing the active ingredient and selling our brands of those active ingredients. So that would be at least 10 molecules, which we would be in the brand business of parent company. And we are manufacturing as of today two active ingredients, which is a part of proprietary products of Japan. And we are in the process of starting the production of five other molecules by the month of — end of June or beginning of July, which will add to that portfolio.

However, I must — even in addition to that, I must say that India is being considered now as the production hub for Japan. And they are in talk with us for many molecules, at least five to six molecules further, so which are the top-class molecules, not the old molecules and they are talking about getting them produced in India. So that is at a feasibility stage, but all-in-all, we have full support from our parent company to make India a very robust production base company.

Swati Hiroo — Ratnabali Investment — Analyst

Sorry, I understand, but I just wanted a sense whether say, 20% of the total basket has been introduced in India, 30%, 40%, and why are we not bringing that entire portfolio to India at one go?

Chetan Shantilal Shah — Managing Director

So it is impossible to do that, number one, because all the products have to go through a very, very rigorous bio efficacy test. We have to convert those products to be usable in India. We have to fix up the ratios, the type of formulation, the strength of formulation, and it is a long, long process. So I think we can take two, three products at a time. The registration process again is a very long process. So it cannot be brought all in one go. And if you see the trend in the industry also of other multinational companies, nobody will bring the entire portfolio at one go. There will be only one or two — minimum two products every year that will be coming in. So that is the way it works, Swati.

Swati Hiroo — Ratnabali Investment — Analyst

Okay, sir. So what percentage, approximately if you could just give me a sense we achieved so far?

Chetan Shantilal Shah — Managing Director

I doubt if I can give you that because, say, we have, as I said, [Indecipherable] 17 products already and Japan could have maybe 40, 50 products, so that way –and also Japan continues to have pipeline products. So it’s very difficult to give you a percentage. But overall, I can assure you that we are on a very good — in a very good situation of getting the approvals from Japan.

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

And this — Swati, Mr. Shah mentioned is only from the marketing and sales side. From the manufacturing side, we have just started with a very limited number of products and there is a very wide variety as Mr. Shah mentioned, maybe 40 to 50 SCC products and currently, we are only producing four or five products in India.

Swati Hiroo — Ratnabali Investment — Analyst

Understood. Okay. So my second question was that Sumitomo Japan has recently made this acquisition in the bio-stimulant space. So I just want to understand how does Sumitomo India benefit from that, and does — does these products in anyway help India reduce say the fertilizer subsidy that we have?

Chetan Shantilal Shah — Managing Director

No, this bio-rational products, yes, these are very interesting acquisition that has made by SCC, and we just have had one meeting with the global colleagues, including Japan and USA to understand what that portfolio means. And in coming months, there are going to be more definitive interactions of how to bring these products into Indian market, and I will request Uzawa-san who is here with me to throw some more light on this.

Masanori Uzawa — Non-Executive Director

Thank you for asking that question. The company, we Sumitomo Chemical Tokyo acquired a very strategic one, which is the bio-stimulant business. And then, so far, that business side is limited and then, the market they’re selling is almost only limited in the United States. However, we are expecting we can roll out that product globally as — once we can get the registration in those regions. So we are targeting some regions. For example, Latin America and the Europe and of course, here in India as the potential market. So we are excited to expand that business we acquired into all of the regions, especially the fastest-growing market here in India.

Swati Hiroo — Ratnabali Investment — Analyst

All right. Thank you, Uzawa-san. Thank you.

Chetan Shantilal Shah — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Kapil Agrawal from Itus Capital. Please go ahead.

Kapil Agrawal — Itus Capital — Analyst

Hi sir, good afternoon. Sir, historically, you’ve been able to protect margins, particularly in the agro industry and even today, you continue to do so. So for the first time, we are seeing pressure both on the margin front as well as on the revenue front. You mentioned China opening up as the primary reason for this. Please help us understand what you’re seeing on the ground and based on your experience from history, how would you look at the situation for opportunities?

Chetan Shantilal Shah — Managing Director

Well, as I mentioned in my opening remarks, the situation or the conditions of business turned adverse very, very rapidly. And without any warning and we had to act very fast in terms of controlling our inventories, definitely, controlling the prices and not eroding the sales rise to an extent that the market had fallen. Just to give you an example, our — compared to the last year — last financial year fourth quarter, well, we had strategically imported more raw materials for stocking because we saw the price trend going up and — which actually happened in the first quarter of financial year. As compared to that, we reduced our purchases from — for stocking up purpose almost by 20% as compared to the previous quarter. So that is what action we took.

And the ground reality is that prices are falling every week till now. I think we are seeing some stability of pricing, as of the beginning of the month of May, but till April, the prices were drastically following every week. I think now the prices have bottomed out, I don’t see any further erosion of prices in this sector. And we are trying our best to liquidate whatever limited high-cost inventory that we have as quickly as possible and move on to lower-cost inventories. Also, every month on the basis of average cost in principle, we are reducing our cost every month right from January, February, March, April and May. And going forward, we will see the same trend. So I think we should be fine in a couple of months.

Kapil Agrawal — Itus Capital — Analyst

Got it sir. Got it sir. Sir, thank you on this. Thank you.

Operator

Thank you. The next question is from the line of Anandha Padmanabhan from PGIM India AMC. Please go ahead.

Anandha Padmanabhan — PGIM India AMC — Analyst

Thank you for taking my question. Sir, for the year, financial year 2023, what would be the contribution of glyphosate as a portion of your overall domestic business and export business, and if you could give some color on what kind of margins would this product be enjoying for this fiscal year?

Chetan Shantilal Shah — Managing Director

So see, the glyphosate, what we had in the current year, our volumes of glyphosate came down by 17%,

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay.

Chetan Shantilal Shah — Managing Director

But the value of that, even the reduced volume went up by 50%. So it was quite a volatile situation. The prices have corrected as of 1st April. We can predict that prices will still correct somewhat additionally, and I think it should settle down on the onset of monsoon. And we expect to grow — our volume grow our previous levels. So we are expecting growth on glyphosate [Phonetic] both in domestic market as well as in export market. We have got some new registration in African countries for our glyphosate 71% formulation. And we have started the export of this, which also we feel that will increase in the current year, in ’23- ’24.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay.

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

And just to add here in supplement whatever Mr. Shah mentioned, I think overall proportion of glyphosate sales in financial year ’22-’23 was approximately 18%,, which was as Mr. Shah mentioned increased due to the higher prices addition. Historically, if you see last two, three years, it used to be about 15% level.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. And this 18% would have come at higher than corporate average margins given because of the price increase?

Chetan Shantilal Shah — Managing Director

Margins would largely be in line with our company-level margins.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. Okay.

Suresh Ramachandran — Chief Commercial Officer

First half, the margins were high. In the second half, it was slightly lower. So overall, it would be along the corporate level.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. Okay. And how do you see the on-ground situation in India currently given the lack of clarity or some confusion with regard to the government regulation for the product?

Chetan Shantilal Shah — Managing Director

We don’t see any issues in that. In a sense that, first of all, the important thing to note is that government is not talking about any restriction in usage of glyphosate. They are only talking about the mode of usage that how it should be or by whom it should be used. So as you must be aware that the matter is in the court and government has given a date of 19th of July that they will come up with some solution, and we don’t see any solution to this situation. So if we get again postponed or maybe the [Indecipherable] in the circular.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. And with regard to the LatAm market, in the presentation, you had mentioned that there is some sort of a channel hike of inventory in the market. So in the current scheme of things if I look at fiscal ’24, how should we look at the overall export business for the company, and specifically for the LatAm business, how should we look — because LatAm is we know one of the fastest-growing piece for Sumitomo in the last couple of years?

Chetan Shantilal Shah — Managing Director

You are absolutely right. And we are concerned about this situation. However, the LatAm situation is also a matter of fact. I mean, it is not a hearsay or anything. It is absolutely true that they are stuck with very high inventories. And what we feel is that till the first half, that is up to August, the demand may be slow, but we are certain that as the season starts from June, a lot of inventories will get liquidated, and we should be back in normal business conditions with LatAm in the second half.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. Okay. And with regard to the pricing for your supplies to subsidiaries and sister concerns of your parent in the export business, would the pricing– transfer pricing would be in terms of margins? It’s a cost-plus kind of pricing that happens, or it’s more of a market determined pricing to the extent that in case there is a sharp fall in the pricing, you will have to take some hit on the margins also?

Chetan Shantilal Shah — Managing Director

No. So it is on the margin. It is not cost-plus basis, number one. Number two, the prices if it goes down — I think for those molecules, I don’t think we face that kind of situation and because these type of situation is more in generics like glyphosate or Imidacloprid or Acetamiprid or Tebuconazole or something of that sort, but these are the different product lines and we don’t face any such volatility in pricing in terms of input cost as well as our selling price.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. Okay. So if I look at FY ’24 in terms of growth and margins, how confident to — are you of maintaining that 19%, plus or minus 1% margins that you — the guidance that you had given previously you’d be able to maintain in FY ’24?

Chetan Shantilal Shah — Managing Director

Well, our endeavor will be obviously to maintain it apart from the exterior situations and circumstances. Our endeavor will be to maintain this type of margins.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay, but any recovery that should ideally in the current scheme of things, it should be more like an H2 kind of recovery is what one should ideally build in, in the current scheme of things that you’re seeing on ground?

Chetan Shantilal Shah — Managing Director

I’m sure that in part of H1 also, we will see a turnaround. So maybe this situation could be a little bit on a lower side in Q1, but we expect Q2 to bounce back to normal.

Anandha Padmanabhan — PGIM India AMC — Analyst

Okay. Thank you, sir. I will get back to the queue. Thank you.

Operator

Thank you. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.

Gagan Thareja — ASK Investment Managers — Analyst

Good afternoon. I hope I’m audible?

Operator

Mr. Thareja, the audio is unclear from your line. Please use the handset mode.

Gagan Thareja — ASK Investment Managers — Analyst

Yeah. I’m on the handset. Is this better? Can you hear me?

Chetan Shantilal Shah — Managing Director

I can hear. I can — we can hear.

Gagan Thareja — ASK Investment Managers — Analyst

Yeah. So the first question is on the tax rate for the quarter four, it is low. Any explanations on why that is the case?

Chetan Shantilal Shah — Managing Director

Yeah, that is because we got some difference of the previous thesis that is just going on, and I think that was a substantial amount. So there is a difference of around 2% or 2.5%. About INR12 crores we got refund, so that’s why you see the lower tax in the fiscal.

Gagan Thareja — ASK Investment Managers — Analyst

Right. And the five molecules that you will start your contract manufacturing for — you had indicated that the potential could be around INR200 crores to INR250 crores, up to what proportion of that big potential do you foresee yourself reaching in this year?

Chetan Shantilal Shah — Managing Director

In this year since we will start the production, say, by July, and we will have only nine months and taking into account certain registration delays or something of that sort, I think we will achieve at least 50% of our target to lit in this year.

Gagan Thareja — ASK Investment Managers — Analyst

Right. And…

Suresh Ramachandran — Chief Commercial Officer

It will be somewhere bit more than 50%, but at this point of time, it is very difficult to predict because the plant has not started the commercial production. And if everything goes well, it could be slightly higher, but that is what is Mr. Shah mentioned, a lot of uncertainty that when it will start and hopefully everything can start and the registrations globally can be in line and then, we can achieve I think our — I think targeted revenues as of this year or certainly by next year, we should be receiving the [Indecipherable].

Chetan Shantilal Shah — Managing Director

No, no. We are attending — we are trying to achieve at least 50% this year. And also let me tell you, I mean, for the for the entire group who is listening that the revenues of ’22-’23 does not include any revenue from our close hard-hitting plant, which we started in Q3 of ’22-’23 in Bhavnagar. So we have produced — we are producing the material, but we have not commercially built any material in the revenues, or it doesn’t come in the revenue of this year. So for ’23-’24, we also expect that, that will have what revenue will be coming in. So that production, we are continuing. And the only reason why we could not invoice our export that product is because of some delay in USA for the approval of the label and the final registration copy that they have to resend. So now, it will — it is all clear and we will start commercial shipments during the year.

Gagan Thareja — ASK Investment Managers — Analyst

Right. So this will be in addition to the other five molecules?

Chetan Shantilal Shah — Managing Director

Right. Right.

Suresh Ramachandran — Chief Commercial Officer

No. This is part of those five molecules. It’s part of those five molecules. There are…

Chetan Shantilal Shah — Managing Director

Four plus one.

Suresh Ramachandran — Chief Commercial Officer

Yeah. So there are two projects, one project already started the commercial production during last year. As Mr. Shah mentioned, no revenue has been achieved. It is only the commercial production and inventory build-up, which we have done so far. And the second project, which involves four multiple products will start — the plant will start operations sometime this year, in next few months. And both of these projects should give us some revenues during current year, and that is why we are confident that Mr. Shah mentioned, that we will have revenues, then all of these revenues in the current year will be incremental, because there was no revenue from this project in last financial year.

Gagan Thareja — ASK Investment Managers — Analyst

So this year, it’s been strong for your exports, 30% growth. Given the situation in Latin America with the channel inventories being what they are, would it be possible for you to give us some idea of where do your exports growth settle in ’24. On the one hand, you have this issue of slowdown in South America and at the same time, you will ramp up your gram piece, so how should we think of the exports growth and product might have — also on the domestic piece, since you have introduced new molecules last year, while the environment is a little subdued between the new introductions and the environment, how should we think of the domestic growth as well?

Suresh Ramachandran — Chief Commercial Officer

Thank you. As Mr. Shah mentioned earlier in his comments, yes, the LatAm market is facing challenges currently, but our — estimated that the current inventory should get liquidated or gained up by the end of first half and second half, normal demand should come up and we could start significant upsides or some upsides at least during the second half of the year, while in the first half, still it’s not zero. Some sales would have — continue to happen. While that has been the LatAm situation, our focus is also on growing the African market where we have recorded good growth last year. We’ve got a couple of new registrations, which we want to build on. And another one is Asian market, where we are focusing to grow. So overall, the exports market will continue to grow, including LatAm. That’s our anticipation at this point of time.

Now coming to domestic market, the new launches, we’ve launched about six new actives or six new 9(3) registration products, which were launched sometime starting from July of last year and could not get the full season, somewhere launched as late as February, one product PGR in apple and now, these products got full season last year. It was all like three months, six months, two months. There is always a craze for new technology among the farmers in this country. So what are we have launched, we have delivered what are our internal targets were for ’22-’23 under the challenging conditions. There’s quite a bit of field promotion activities, brand building activities, digital marketing initiatives, all of those things are be it not let it go despite the challenging conditions. We knew that these are all new products we had to invest, and we did all the groundwork whatever was supposed to be done during any launch here.

And our team’s full focus is on ramping up these new products in the current year. We are quite confident that whatever feedback we are getting either from the channel or the farmers, they’ve all been accepted well and the products have gone as per the plan. And this year also, it would — despite the challenging conditions, people would look for new technologies. And these products would definitely record growth in the company.

Chetan Shantilal Shah — Managing Director

And we would also like to highlight that, see, this one year or two years could always be a lot of variations sometimes, but as a strategy and as a trend and direction, what we have been saying since last two, three years that we will be growing our off-patent molecules growth in exports market, Latin America, Africa, we have achieved and we will achieve it in the future and in addition to that, manufacturing of the proprietary molecules under Make in India, expansion of that portfolio and making more products and exporting it to our parent company and also domestic businesses. So all of these continue to be growing and one year could be up and down as something we are seeing the current situation, but as a trend in medium to long term, we are on that strategy and we will continue to achieve and deliver those strategies in next medium to long term.

Gagan Thareja — ASK Investment Managers — Analyst

Right. And you also talked about five or six more additional molecules, which are under discussion to be brought for production in India. Just to understand, we’ve got — we’ve been given some idea of the scale that the first five can achieve. Is it possible for you to give us some idea of the scale that the next five or six can achieve given that you’re talking of these being relatively larger, if I understood this correctly, relatively large molecules?

Chetan Shantilal Shah — Managing Director

I think it would be unfair for me to give you the number, but I can assure you that we are in discussion with SCC Japan, and these are all the molecules we are talking about the new technology, new molecules and very, very bright futuristic growth molecules. So — and they are all new generation. So it’s nothing is generic. This is new generation products and with the type of forecast that Japan has for these products in the global markets, it would be a very, very good situation for Sumitomo Chemical India to be manufacturing these products.

Gagan Thareja — ASK Investment Managers — Analyst

But any timelines you could provide as to when you see this fortifying? I understand you don’t — you have to ramp up the first five, but any timelines roughly to work with or this can ramp up?

Chetan Shantilal Shah — Managing Director

We are going to start our development work of — work site in sometime in ’23-’24. And if you take the registration process and installments of plant and machineries, I would say three to four years.

Gagan Thareja — ASK Investment Managers — Analyst

Three to four years. So final question, Indiflin is I think patented molecule, while LatAm is in a bit of a difficult situation, it’s probably more from the point of view of generic molecules. So I wanted to understand whether — if Indiflin is going to do well irrespective of the situation there, in which case for you, Pavecto [Phonetic] is all goes with Indiflin and will therefore that also irrespective of the current situation do well?

Chetan Shantilal Shah — Managing Director

In our understanding, it’s correct. We don’t see any slowdown in Indiflin. And Indiflin as a matter of fact, they have projected very good volumes. So we expect very good orders of ketoconazole in the second half.

Gagan Thareja — ASK Investment Managers — Analyst

And you have no capacity constraints. I think there was some issue. If I recall in the earlier quarters of FY ’23, you indicated you’re sort of at full capacity there. Have you added capacity for [Indecipherable] as well?

Chetan Shantilal Shah — Managing Director

No, we have increased the capacity, and we have enough capacity to cater to the demand of Indiflin plus ketoconazole.

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

Mr. Kaizen.

Operator

Thank you. Mr. Thareja, may we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Chintan Modi from Haitong Securities. Please go ahead.

Chintan Modi — Haitong Securities — Analyst

Yeah, sure. Thank you, sir. Sir, we are — firstly, we had a fire incident that of Bhavnagar site in February. So if you could highlight whether there was any one-off impact because of that in the fourth quarter or we are likely to see some impact in first quarter?

Chetan Shantilal Shah — Managing Director

Yeah, there was an unfortunate incident of fire in our Bhavnagar plant and I wouldn’t say that we had any impact on — due to that in the fourth quarter or the first quarter, because what we have done is both the products, the two products which we have manufactured in that plant, we had enough raw materials in our books, and we have got that same converted into finished PIs [Phonetic] by our reputed two companies on job of leases. So we are being able to fulfill our domestic as well as export demand of these two products as of now. However, the — one of the product, Tebuconazole is primarily the second half product and Quinalphos, which is another product, we are continuing — continuously exporting it to Asian markets. So there is no impact on revenues because of this.

Chintan Modi — Haitong Securities — Analyst

Sure. Secondly with respect to capex, this INR120 crore capex, which we had for these five molecules, I think that will get capitalized within first quarter itself. Can you tell us, beyond that, what kind of capex one should expect for FY’24 and maybe for FY’25?

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

So just to correct, part of the capex has already been capitalized in last financial year, financial year ’22-’23 and part of this will be capitalized in current financial year once the plant start the commercial production. And in terms of the forecast for the capex, as we have mentioned that annually about 12% to 15% of EBITDA, we will look to invest in our capex projects annually for various activities like debottlenecking, sustainability, making the products more efficient, modernizing our plants. In addition to that, whenever something extraordinary like a project-specific capex is approved, we will do additionally. And as Mr. Shah mentioned that I think even if we do something in later this year or next year, it will take three to four years for those kind of projects to come up. So we do not have the estimates right now that how much that additional capex could be, but as and when the Board approves this, we will keep you informed.

Chetan Shantilal Shah — Managing Director

But this project, I think [Foreign Speech]?

Kunal Mittal — Senior Vice President of Planning & Co-ordination Office

But yeah, this will be larger. I think as Mr. Shah mentioned, the last capex cycle for this project, which we did was INR120 crore investment with the revenue potential of INR200 crores to INR250 crores. So the next cycle is expected to be hopefully bigger and more I think important projects, high-value products, so that capex cycle could also be larger for development of our Dahej site, some products for SCC and hopefully, the revenue potential should also be larger as compared to our last cycle, which we are about to complete now.

Operator

Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.

Ankur Periwal — Axis Capital — Analyst

Yeah. Hi sir, thanks for the opportunity, sir. Sir, one question and one clarification. Question on the export side, you did mention that there are potentially more molecules from the parent, Sumitomo Japan, which can potentially come to India. Is there any filter or shortlist or any technicality in terms of chemistry-specific understanding and hence, the target universe will be limited or the technology, etc. can be transferred and there is no restriction on that?

Chetan Shantilal Shah — Managing Director

There is no restriction on that. I think the entire technology transfer can be made. There is no limitation on that.

Ankur Periwal — Axis Capital — Analyst

Sure. And from a timeline perspective, it’s just a matter of time, as you mentioned, since they are looking at India as a core manufacturing base?

Chetan Shantilal Shah — Managing Director

Right.

Ankur Periwal — Axis Capital — Analyst

Okay. And a clarification on the domestic side, you did mention slightly a higher inventory in the system. I wanted to clarify whether that is a scenario, both for our specialty range of products, as well as the generics? And by what time frame, should we expect things to normalize?

Chetan Shantilal Shah — Managing Director

So it is not pertaining to specialty at all. It is pertaining to only generics. That is number one. Number two, as I mentioned that every month, I mean, luckily or fortunately by grace of God, we did not carry huge inventories in this particular fourth quarter of ’23 and our levels of inventory at high cost is coming down every month, because we are replenishing that new price with raw materials every month to a limited extent. So we are seeing that our average costing is coming down in month of May from April and our June prices are also coming down as compared to May. So by end of June, I don’t think we’ll have any old high-cost inventory.

Operator

Thank you, Mr. Periwal. May we request that you return to the question queue for follow-up questions. We’ll take the next question from the line of Bhavya Gandhi from Avendus Wealth. Please go ahead.

Bhavya Gandhi — Avendus Wealth — Analyst

Yeah, thank you for the opportunity. I have two, three questions. So sir, just wanted to understand Sumitomo Japan, they might be — they are going to ship — they are going to manufacture $1 billion of molecules, right, the new patented one, so that end formulation it the value of $1 billion. So can we assume that 30% would be the technical contribution? And will that be the addressable market side? I understand we may not have registrations or technical capabilities, but broadly speaking, possible to quantify that?

Chetan Shantilal Shah — Managing Director

30% of $1 billion will be active?

Suresh Ramachandran — Chief Commercial Officer

So see, these what you mentioned is the sales potential, which has SCC has mentioned for some of the new — latest generation molecules which have been launched. And this is the estimates on a good case basis once the products become mature, but some of these products have just been commercially launched in some geographies. The second products will be launched. So this is a multiple three, four products to be launched across the board and ramp-up to be seen. And hopefully SCC can achieve those kind of estimates and predictions as they have given.

In terms of the manufacturing potential, how many of these can be made in India and where and as and when? I think that is not yet decided, because I think what we have seen in the past is typically for some of these new molecules, the first facility set up very close to the R&D facility and once the ramp-up is happening to a very matured level over three to five years, that is a time when it can be decided whether to set up those capacities in Japan and India. So I think it is very difficult to give you that kind of estimate that out of this $1 billion or $1.2 billion what SCC has mentioned, how much of this will come to India. It is too I think premature to give that kind of estimate right now, but certainly, I think yes, Mr. Shah mentioned that talks are on that if some of these generic molecules and chemistries can be made in India. That kind of a talk is certainly on. We will look at it for sure, but how much and what percentage, what amount, it is too early to commit I mention.

Bhavya Gandhi — Avendus Wealth — Analyst

Okay, but I just wanted to understand that Indiflin and those products, so and all those newer patented molecules, I think they’ve taken almost one and two years into their cycle, right. So what time will they reach their peak cycle, is it in third, fourth year or is it in the fifth, sixth year because I think no new capacity is going to come in Japan, right, or they are going to expand because the older molecules gradually they’ll have to shift to India, because India is the only technical facility, right? So if you can throw some light on that.

Chetan Shantilal Shah — Managing Director

So what I told is precisely that as per the estimates of Japan, these products will require more active ingredient in three years, four years’ time and that is why we are talking today, and we are trying to match that gap of three to four years, whereby we should be ready with the production to cater to the global demand, our increased demand. So that is precisely why we are starting the talk now and ensuring that when they require that additional volume in two years — second year, third year, fourth year, at that time, we have the production facility to cater to that demand.

Operator

Thank you, Mr. Gandhi, may we request that you reenter to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of S Ramesh from Nirmal Bang Equities. Please go ahead.

S Ramesh — Nirmal Bang Securities — Analyst

Thank you and good evening. My first thought is, are we looking at the reduction in the inventory values in the overall price table, there should be a reduction in the top line for first quarter and first half. So looking at volume growth, how will we see the outlook for margins? Are you looking at margins per unit being maintained and thereby [Indecipherable] achieved in percentage margins, their benefits from the new launches, which you will use some increase because if your top line is going down, [Indecipherable]?

Chetan Shantilal Shah — Managing Director

Yeah, so it is a combination of few things. Definitely, we will increase the volume of new launches. That is number one. Secondly, the prices, which are following, obviously, the top line will be affected. So our strategy is very clear that wherever the top line, the prices have fallen off the products, our plan is to increase volume substantially in those products, so that the overall margins at the end of the day is maintained.

S Ramesh — Nirmal Bang Securities — Analyst

Okay, makes sense. And the second question is, if you’re looking at [Indecipherable] solutions, I think you sampled launching some products. So what will be the sources from that and to [Indecipherable], you’ll be able to get the benefit of present that [Indecipherable] biosciences, any thoughts on adding new products within bio products?

Chetan Shantilal Shah — Managing Director

Yes, we are — every year, we are having some products or other. Even this year in the late fourth quarter, we launched one [Indecipherable] product in this segment, and we got maybe half of the season to cater and the product is very well accepted in the market. So we are looking forward to the full season for this product, which is meant for apple in this financial year. Also, there are one or two other products, two products from Valent Biosciences, which are under registration. We hope that we get the registration this year, and that will also be launched. So yes, this segment is very strategic for not only us, but for Sumitomo Chemical Japan, and they are very, very insistent on this segment to grow, and that is why they are making a lot of investments in M&A opportunities of bio companies.

And as I mentioned earlier, this new acquisition that they have made, we have to make a lot of studies as to which of the products of that new acquisition can be brought into India. So all that discussion will start in — maybe in the second quarter in — I think there is a meeting in — global meeting on this subject in the month of July, I suppose, and then, it will be ruled out. So it is going to take time, but surely, both Sumitomo and us, both are looking forward to having some good products out of that range to be introduced in India.

Operator

Thank you. Mr. Ramesh, may we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Lakshminarayanan from Tonga investments. Please go ahead.

Lakshminarayanan K G — Tunga Investments — Analyst

Yeah. Two questions. First is that I understand that we don’t want have any royalty payment towards parent, right. Sir, what is the thought process where — because almost all the Japanese companies have understood that India have royalty payments. So how do you think about it? Do you rule out royalty for the next couple of years [Indecipherable] parent? Thank you.

Chetan Shantilal Shah — Managing Director

Well, I think I can best answer this question that Sumitomo Japan is very clear about the focus in India. India is a very, very important and strategic country for them. They have deliberately not asked for any royalty so far even for technology transfer products. And however, I cannot say for sure what will happen in future. But I’m sure that the royalty even if we have to pay, we will be such that it will not even hurt us at all. It can be token royalty or it can be nominal royalty or it can be anything, but of course, yes, your presumption is right that as of today, we are not paying any royalty to Japan. I can only assure you that I will — on behalf of this company, I’ll try to maintain that status quo forever, but I cannot say that what your family will think, but I’m sure that Japan will helve India as strategic for them. I think royalty is not on their minds. What is on their minds is how to grow Sumitomo Chemical India, how to make the best advantage of manufacturing base over here, and how to supply the products globally at economical rates and how to increase the volumes. I think that is strategy.

Suresh Ramachandran — Chief Commercial Officer

And just to add here, I think the supplementary information, I think as Mr. Shah mentioned, this is a philosophy of our parent company SCC and wherever transitions are involved, we are not at all talking about royalty. However, in some cases where there are no transactions between our company and our parent company, and we might be using some of the intellectual property of our parent company, there might be from the compliance and transfer pricing point of view, if there is some token royalty required, which may not be like any amounts or any kind of a token amounts from the transfer pricing compliance point of view. And there are no transactions, but only use of the intellectual property of our parent company, those kind of things can certainly be looked into in the future to make sure that we are 100% compliant, but apart from that, from fundamental point of view, as Mr. Shah mentioned, there is no expectation from our parent company to make any kind of money or revenues out of the royalty from India.

Operator

Thank you. The next question is from the line of Prashant Biyani from Elara Securities. Please go ahead.

Prashant Biyani — Elara Securities — Analyst

Yeah. Thanks for the opportunity. My question is for Mr. Uzawa. Sir, your — in your interaction with the SCC management from Japan, how do they plan to use this surplus cash of Sumitomo and secondly, can SCC’s association with Sumitomo India extend beyond agro chemical business?

Chetan Shantilal Shah — Managing Director

Mr. Biyani, on the lighter note, you have asked a wrong question to a right person. He will say give me all the dividend back. Sorry, jokes apart, but yeah, Mr. Uzawa.

Masanori Uzawa — Non-Executive Director

Sure. As you know, as the India’s management mentioned couple of times, here India market is a very strategic one for Sumitomo Chemical parent company Tokyo. So what we are thinking now is spend the money by ourselves, ourselves mean the SCC India to accelerate that growth here in India. So invest in manufacturing, invest in new technology, invest in new products. That is the expectation from SCC Tokyo.

And second question was — maybe that comment will cover the second question as well, I think so if you have further questions, email us at SCI later.

Operator

Thank you. We’ll take the next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Yeah. Thanks for the opportunity. Am I audible?

Chetan Shantilal Shah — Managing Director

Yes.

Operator

Yes, sir.

Rohit Nagraj — Centrum Broking — Analyst

Yeah. Thank you. Sir, again my question is for Mr. Uzawa-san, first is, how much of the global outsourcing for Agro Chemicals does SCC Japan do? And second is again a light question, now we have come — we are at the five end of completion of the first project, outsourcing project. Why are we taking so much time to consider for the next project, given that there will be a lead time of, say, three, four years before we commission the next project, which maybe high value project or capex dependency project? So, between this timeline, there may not be any serial growth from the exports opportunity perspective. Thank you. Hello?

Operator

This is the operator. Sir, we are not able to hear you.

Masanori Uzawa — Non-Executive Director

Yes. As Mr. Shah mentioned previously, Sumitomo Chemical Tokyo have not put any limitation to transfer their products into here in India. And then, the reason why it takes time is the market evaluation is so important. And then, what kind of products should fit in here in India. From the marketability viewpoint as well as the manufacturing viewpoint, we need to carefully take a look at that part. And then once we build out the facility, we do not want to stop that operation after three years or five years, whatever. So that’s why we carefully see those two points. And also, registration is the another issue. It should be any go in my — with the manufacturing plant. So…

Operator

Thank you.

Masanori Uzawa — Non-Executive Director

Sorry, I’m saying — and then, we are not relying upon the third-party manufacturers strategically. The manufacturing site in Japan and the manufacturing sites here in India are the two pillars for Sumitomo Chemical globally. So maybe, there might be misunderstanding, but we keep today high-priority on those two countries, Japan and India as the manufacturing sites.

Operator

Thank you. We’ll take the next question from the line of Nitin Shakdher from Green Capital Single Family Office. Please go ahead.

Nitin Shakdher — Green Capital Single Family Office — Analyst

All right. Good afternoon. And first of all, congratulations to Chetan bhai, Sushil bhai and Uzawa-san for another consistent quarter and the entire management. So, we have INR827 crores of cash. I understand INR75 crores goes into maintenance and INR121.40 crores goes into the plant capex. You have even indicated the plant capex over the last two or three quarters in relation to — can give me exact specifics on the Tarapur expansion, which is supposed to be completed by the first quarter of 2024 and the exact things on the hedge and then, in specific to the Bhavnagar land parcels? So how much of the — on and exactly — what’s the state of the capex in terms of the large cash position? Thank you.

Chetan Shantilal Shah — Managing Director

So we have already capitalized around INR40 crores of Bhavnagar plant in the previous year, in ’22-’23 and around INR80 crores of capex will be capitalized for the plant in Tarapur, which will go on stream in latest by the month of July. And over and above that, of course, as Kunal mentioned that we are allowing regular capex for improvement in process or capacity expansion, something of that sort. That will also continue. So all-in-all, that is the capex distribution. And for the hedge side, we feel that over a period of time, next three to four years starting from this year or later this year, I think we will have the capex flow of almost INR300 crores to INR400 crores.

Operator

Thank you. Ladies and gentlemen, due to time constraint, we will take that as a last question. I would now like to hand the conference over to Mr. Sushil Marfatia, Executive Director, for closing comments.

Sushil Marfatia — Executive Director

Namaste, everyone. Thank you for asking some interesting questions, and thank you to our colleagues for replying the same. We hope you could — you — we would have addressed your queries to your satisfaction. While the commercial forecasters climate predicted below average rains, the IMD predicted normal rains for the current year. The IMD forecast is encouraging news, especially in light of the current uncertainties. It not only just bodes well for the agrochemical sector, but also for the whole Indian economy. The performance of the agrochemical industry in the upcoming Kharif season will be determined by various factors, including timely onset of the monsoon, its progress across the country and equal distribution.

The Indian agriculture industry currently accounts for a modest portion of the global agrochemical production. The Indian agrochemical industry is poised for growth, driven by the increasing awareness among the farmers about benefits of using premium agrochemical products. This trend is expected to result in higher crop yields and improved crop quality, which in turn will enhance the profitability of the farmers. The government and the authorities’ efforts to enhance the agriculture productivity through various reforms and initiatives are expected to yield long-term benefit for all stakeholders. The company’s strategic initiatives to optimize its product mix expand its distribution network and increase production capacities are expected to drive sustained performance going forward. We will continue to monitor the situation and take best efforts to achieve our growth. Thank you for taking your time and participating in this conference call. Thank you very much.

Operator

[Operator Closing Remarks]