Dhanuka Agritech Limited (DHANUKA) Q3 FY23 Earnings Concall Transcript

Dhanuka Agritech Limited (NSE:DHANUKA) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

M.K. Dhanuka — Managing Director

Rahul Dhanuka — Joint Managing Director

Harsh Dhanuka — Director

V.K. Bansal — Chief Financial Officer

Analysts:

Darshita Shah — Antique Stock Broking Limited — Analyst

Prashant Biyani — Elara Capital — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Ankit Gupta — Bamboo Capital — Analyst

Parth Kotak — Alpha Plus Capital — Analyst

Resham Jain — DSP Investment Managers — Analyst

Himanshu Binani — Prabhudas Lilladher — Analyst

Niharika Jain — Equitas Investment — Analyst

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Manish Mahawar — Antique Broking — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Dhanuka Agritech Q3 FY ’23 Earnings Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Darshita Shah from Antique Stock Broking. Thank you, and over to you, ma’am.

Darshita Shah — Antique Stock Broking Limited — Analyst

Hi. Thank you, Vico. Welcome, all. On behalf of Antique Stock Broking, we would like to welcome all the participants in the third quarter and nine-month FY ’23 earnings call of Dhanuka Agritech.

On the call with me, we have Mr. M.K. Dhanuka, Managing Director; Mr. Rahul Dhanuka, Chief Operating Officer; Mr. Vinod Bansal, CFO; and Mr. Harsh Dhanuka, Whole Time Director.

Without any further ado, I would like to hand over the call to Mr. Dhanuka for this opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, Mr. Dhanuka.

M.K. Dhanuka — Managing Director

Thank you, Darshita. Good afternoon, ladies and gentlemen. Myself, M.K. Dhanuka, Managing Director of Dhanuka Agritech Limited. I hope all of you are doing well and keeping safe. Thank you for joining us in the conference call for the results of Q3 FY ’22-’23 of Dhanuka Agritech. I have with me Mr. Rahul Dhanuka, Joint Managing Director; and Mr. Harsh Dhanuka, Executive Director; and Mr. V.K. Bansal, CFO of the Company.

I would like to draw the attention of the participants that in today’s Board meeting, Mr. Rahul Dhanuka has been elevated from the post of COO to Joint Managing Director, and Mr. Harsh Dhanuka from Whole Time Director to Executive Director, Alliances & Supply Chain. So these are the elevation of Rahul and Harsh, because in times to come, they will have to take the charge from the older generation.

Dhanuka Agritech is a leading agrochemical company in India focusing on branded sales in the market. The company’s strength lies in the manufacturing and marketing of formulated products. The product portfolio is spread across insecticides, herbicides, fungicides and plant growth promoters. Dhanuka Agritech is working with the vision of transforming India through agriculture. Our belief is that when we transform the lives of farmers by enhancing their productivity and quality, in turn enhancing their income, we are making a small contribution in transforming India.

We work in all major crops in India and have implemented the best-in-class technology to ensure a smooth and efficient supply chain. We have a pan-India presence through our marketing team and warehouses in all major states across India. With three manufacturing units and 41 warehouses across India, we cater to around 6,500 distributors and dealers and around 80,000 retailers. Through this extensive network Dhanuka reaches out to approximately 10 million Indian farmers with its products and services. Dhanuka has more than 1,000 techno-commercial staff, supported by a strong sales and marketing team to promote and develop new products.

Dhanuka’s strong R&D division has world-class NABL-accredited laboratory as well as an excellent team for new product registration and development. Dhanuka has international collaboration with 10 leading global agrochemical companies from the US, Japan and Europe, which helps us to introduce the latest technology in India.

Before moving further, with a heavy heart, I would like to inform you about the untimely demise of our Whole Time Director, Mr. Arun Kumar Dhanuka, who left to his heavenly abode on 30th January 2023. Mr. Arun Kumar Dhanuka played a pivotal role in successfully running the operations of erstwhile Gurgaon factory and setting the best standard for Dhanuka operations. He was the man of honor and a master of managing industrial relations. His contributions will be sorely missed. We pray for peace and strength to his family.

This year, the rainfall has been uneven, and although the overall rainfall is above average, East and North region has suffered from very less rainfall whereas South and West has seen unprecedented rains resulting in flooding in many regions.

Coming to the financial performance for the quarter three of FY ’22-’23. Revenue from operations stood at INR393.37 crores in Q3 of FY ’22-’23 versus INR356.86 crores in Q3 of FY ’21-’22. EBITDA stood at INR51.83 crores in Q3 of FY ’22-’23 versus INR55.02 crores in Q3 of FY ’21-’22. Profit after tax stood at INR46.07 crores in Q3 of FY ’22-’23 versus INR42.52 crores in Q3 of FY ’21-’22.

The zone-wise percentage share of turnover for Q3 FY ’22-’23 is as follows. North zone, 22%; East zone, 11%; West zone, 29%; and South zone, 38%. Product category-wise share of turnover for Q3 of FY ’22-’23; Insecticides, 29%; fungicides, 20%; herbicides, 39%; and others, 12%. So, you will notice that South zone has contributed the highest, 38%, in the top-line of the company and herbicides has contributed highest 39% in the overall turnover.

I would like to inform you that SEBI has approved a buyback of 10 lakh equity shares of the company at INR850 per equity share, aggregating to INR85 crores on December 11, 2022 in the first-go without any observations. The buyback offer was open from December 26, ’22 to January 6, ’23 through the tender offer route. Post completion of the offer period, all the formalities, including extinguishment of shares, completed on January 17, 2023, and the same shall be accounted for in the quarter ended March 31, 2023.

I’m happy to share with you, that Dhanuka has setup Dhanuka Agritech Research and Technology Center at Palwal, Haryana on six-acre land equipped with an advanced laboratory and richer farm for faster commercialization of new products. The R&D center is able to facilitate the demonstration of package of practice of various crops as per the season for increasing the quality, yield and income of the farm. This center was inaugurated on November 4, 2023 by the Chief Minister of Haryana, Shri Manohar Lal Khattar Ji.

After initiation of the export department, in September, we have started receiving queries from international markets for our current product portfolio and we expect these leads to be used for export of our products coming from the Dahej plant as well. Further, we are ready for launching our new range of biological products under the sub-brand Biologic with an initial portfolio of six products. These products will allow Dhanuka to offer sustainable and environment-friendly solution to farmers. Under CSR initiatives, Chiranji Lal Dhanuka Charitable Trust have constructed a healthcare center at Govardhan in Mathura district in UP, in the name of Dhanuka Healthcare. This was inaugurated by Shrimati Hema Malini, MP from Mathura, on November 20, 2022.

I regret to inform that there is a delay of around three months in completion of the Dahej plant and now we are expecting production to start from July 2023. The delay is mainly because of late delivery of plant and machinery by the suppliers. Although those were placed well in advance, but suppliers are delaying the supply and delivery of the plant and machinery.

The agriculture is one of the main space of the Indian economy as it accounts for around 19% of the gross value-added of the economy and employs more than 50% of the country’s workforce. The Government of India recognized the importance and potential of digital agriculture to improve the productivity and sustainability of the country’s agricultural sector and launched the digital agriculture mission.

Dhanuka through its vision of transforming India through agriculture is focusing in technology and digitization. We are promoting the use of drone technology in the agriculture sector and signed up with various agricultural universities as part of this effort to boost crop production and contribute to fulfilling the national mission of making India a USD5 trillion economy. We consider ourselves responsible to our securing the farmers welfare and preserving food security of the nation. We continue to strengthen our association with the farmer producer organization, that is FPOs, Krishi Vigyan Kendras, that is KVKs, and other critical institutions to increase our business expertise and boost our market presence.

Thank you very much for your kind attention. We will now take the questions from you, which you may have. Thank you very much.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Mr. Prashant Biyani with Elara Securities. Please go ahead.

Prashant Biyani — Elara Capital — Analyst

Yeah. Thanks for the opportunity. Congratulations to Mr. Rahul and Mr. Harsh for the new role. Rahul ji, how do you see the channel inventory in the market right now?

Rahul Dhanuka — Joint Managing Director

Could you repeat that question, Prashant? Thanks for your wishes.

Prashant Biyani — Elara Capital — Analyst

Sir, how do you see the channel inventory in the market right now?

Rahul Dhanuka — Joint Managing Director

Right. So, rabi has been pretty good in terms of the consumption, especially in South India. So, to that extent, the channel inventory has significantly moved forward. However, toor crop in Maharashtra and gram crop in Madhya Pradesh and Gujarat has had a setback. And similarly, East India also not received larger consumption. Again, North India, channel inventory in terms of wheat herbicide has been moving fast. So, overall, for South and North, I don’t foresee channel inventory to be high, yet West and East are still stabilizing in terms of what is the consumption and what could be stuck as channel inventory.

Prashant Biyani — Elara Capital — Analyst

And sir, the excess inventory in West and maybe to some extent in the Eastern part and for the crops in North, how do you see them stabilizing or getting normalized? And is it going to be a overhang for the next season?

Rahul Dhanuka — Joint Managing Director

Now this will depend upon what practices are adopted by different companies and the industries. Some of the channel inventory will be pulled back by the industry. So that would probably reflect within this quarter. And if the companies are not going to pull-back that inventory, then it will reflect in the next quarter.

Prashant Biyani — Elara Capital — Analyst

Sure. And sir, on the Dahej plant side, if you can share some broad numbers as to how much should we pencil-in in terms of financials for ’24 and year after. I mean, to what utilization do you target to operate the plant, the asset turns and some margin numbers, if you have calculated?

Rahul Dhanuka — Joint Managing Director

So we are expecting in year one production value of around INR50 crores, some of which will be used for captive consumption and some of — part of it will be sold to other customers.

Prashant Biyani — Elara Capital — Analyst

And sir, for the captive consumption, how much will be the cost saving for us?

Rahul Dhanuka — Joint Managing Director

Yeah. The cost saving will be in the range of 10%.

Prashant Biyani — Elara Capital — Analyst

Only 10%?

Rahul Dhanuka — Joint Managing Director

Yes.

Prashant Biyani — Elara Capital — Analyst

Is it because the technical prices have fallen or otherwise 10% is pretty low in terms of cost saving?

Rahul Dhanuka — Joint Managing Director

Yes, definitely we can see in North, three to four months, the prices of major generic technical had been coming down. So that is one of the reasons.

Prashant Biyani — Elara Capital — Analyst

And on the third-party sale that we will do, how much could be the margins on that?

M.K. Dhanuka — Managing Director

Mr. Prashanth, you see, in terms of margin [Technical Issues], because this will be our first year, so as Mr. Harsh is saying, 10% is sort of minimum, it could get better. So, you see, in case of [Indecipherable] in the year one, margin maybe little shaky, little less. We are working hard on — the rest of it, we’re probably of better off after two quarters basically, because [Indecipherable] one quarter, probably start in July or we will be better off to another two very similar in September.

Prashant Biyani — Elara Capital — Analyst

Okay, sir. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Mr. Rohit Nagraj with Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Yeah, thanks for the opportunity, and congrats on the new generations for elevating in the management cadre further. Sir, first question is, in terms of high-cost inventories, so last two, three quarters, we had seen this issue, now that this high cost inventory is completely depleted and from Q4 onwards, we will come back to the normal inventories at lower cost? Thank you.

M.K. Dhanuka — Managing Director

Yeah. Very significant or large part is already depleted, but whatever is left, we are hoping almost everything must be liquidated in the Q4. From new financial year start — new beginning with the start. And I’m sure there should be a significant improvement in the gross margin in the next financial year.

Rohit Nagraj — Centrum Broking — Analyst

Sure. That’s encouraging. Sir, second, on the volume growth. So, in Q3, what was the volume growth and pricing and the same for nine months, where we have grown by about 6% — 7%?

M.K. Dhanuka — Managing Director

Yeah. Volume growth in Q3 is around 2.5% and in nine months, we are expecting is around 5.5% to 6%.

Rohit Nagraj — Centrum Broking — Analyst

Okay. So, the nine-month, entire 6.5% growth or majority of it is through volumes?

M.K. Dhanuka — Managing Director

Correct.

Rohit Nagraj — Centrum Broking — Analyst

Okay. Okay. Fair enough. Sir, third question on the Dahej project, so as I understand earlier, we had total capex of INR300 crores with INR160 crores in the Phase 1. Now, it has got deferred till July, what would be the capex number for Dahej during FY ’24 and in FY ’25?

M.K. Dhanuka — Managing Director

You see, by the end of this financial year, our capex will be in the range of INR200 crore, and in year ’23-‘ 24, it might be around INR60 crores.

Rohit Nagraj — Centrum Broking — Analyst

So, FY ’23, INR200 crores will be in the CWIP, right?

M.K. Dhanuka — Managing Director

Right.

Rohit Nagraj — Centrum Broking — Analyst

And then, next year additional INR60 crores will get added. So by end of FY ’24, the total capitalization for this project would be closer to INR250 crores to INR260 crores. Hello?

M.K. Dhanuka — Managing Director

Yeah, that’s right.

Rohit Nagraj — Centrum Broking — Analyst

Yeah. Thank you. Sir, just one last question. In terms of channel inventories, so last time in Q3 — Q2 con-call, we had indicated that for other players, the channel inventories were high. And for us, they were relatively lower. So what is the situation from Dhanuka’s perspective?

Rahul Dhanuka — Joint Managing Director

So, as a matter of practice, we will be cleaning our channel from the inventory within this quarter. We would normally not carry-forward the inventories to impact the next quarter performance. And that is also part of our relationships with the channel that we try to unblock them from unsalable stock, which opens them for taking up lifting fresh stocks for the seasonal demand.

Rohit Nagraj — Centrum Broking — Analyst

All right, sir. Got it. Thanks a lot. I’ll join back in the queue.

Operator

Thank you. Our next question is from the line of Mr. Ankit Gupta with Bamboo Capital. Please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Yes, thanks for the opportunity. Sir, from the Dahej plant, how much can be the external sales for our company at optimum capacity utilization?

M.K. Dhanuka — Managing Director

Sir, you should see the Dahej project as a start-up. It’s basically at infant stage. We are basically interested in getting Dahej facility molecule from our Japanese partners and for this purpose, we have put up this facility. At initial stage, we are entering this technical manufacturing segment for the generic molecules. So, the margins and the sales volume, etc. from the initial one plant will be negligible. This is only a startup. We have put one step ahead in basically showing our capability that Dhanuka can also manufacture technical with pesticides. We will get the Japanese visitors to visit our plant and see our facilities and then share some specialty molecule or intermediate with Dhanuka to manufacture at this Dahej plant. So ultimately the benefits will start coming at a later date when we will start manufacturing a specialty molecule. Initially with the generics, it is just slightly a start-up, and we don’t expect any major chunk of sales and major profitability from the generic molecules.

Ankit Gupta — Bamboo Capital — Analyst

So what you’re saying is that, our long term plan is to get into patented products which currently in the formulation that we do and the technicals are patented partners supplies from Japan or some of your plants across the world?

M.K. Dhanuka — Managing Director

Most likely, you are right.

Ankit Gupta — Bamboo Capital — Analyst

Sure, sure. And let’s say, our plan will also be to not just manufacture technical for our requirement in Indian market, but also to sell it to other parts of the World?

M.K. Dhanuka — Managing Director

It will depend from time to time. If the margins are good, even in generic of some of the product, then definitely we will like to manufacture those molecule in our plants, because there is space to put up nine plant over there right now, we are putting up the first plant only. So the new plants will be installed once we get the basically tie-up with the Japanese partners.

Ankit Gupta — Bamboo Capital — Analyst

Okay, okay, but sir INR260 crores of capex for just one plant seems a bit on the higher side. So, is it that we have the infrastructure for the entire nine plants and the subsequent capex for plant — second and third plants will be much lower, is it like that or how is it?

M.K. Dhanuka — Managing Director

Yes. We have created the huge capacities for storages, because there was a requirement also from the GIDC that we have to construct at least 25% of the area. So, the warehouse facilities has been created for the most of the plant. Similarly the chilling plant and the boilers, that facility has been created for other number of plants. So, we will have not to spend money on chilling plant or boiler at warehousing facilities, etc. for future plants. Only the new plant and machinery and the building for the new plant will be required. So, definitely the capex will be much less in comparison to the first plant.

Ankit Gupta — Bamboo Capital — Analyst

Sure, sure. And, sir, any timelines that you can give us by when we can expect some suppliers operate and product to start, let’s say, ’24 will be a first year of operations. So let’s say ’25 or ’26, can we expect to start some of the molecules for our Japanese clients in ’25 or ’26?

M.K. Dhanuka — Managing Director

It’s too early to basically commit anything because until and unless we have a written agreement with any of the Japanese partners, we cannot commit the timeline. Once we will have the agreement with any of the Japanese partners, definitely we will inform in the coming next phone calls with the investors.

Ankit Gupta — Bamboo Capital — Analyst

Sure, sure. Sir, normally what we have seen with companies who do manufacture technicals, very few have been able to get breakthrough for taking their product. They are few like PI, they can — those have been able to get some breakthrough for manufacturing of patented products. And we being a new — we have been a formulation clear, so getting — although we have relationship with the Japanese customers for decades now through formulations, but getting the technical manufacturing for patented products is not that easy. So how confident are we of securing some orders from them?

Rahul Dhanuka — Joint Managing Director

Yeah. So that’s a very profound statement. What’s the question?

Ankit Gupta — Bamboo Capital — Analyst

Sir, my question was, very, very few technical players in India have been able to get entry into Japanese patented products, mostly are manufacturing largely generic products. So, how confident are we of getting some relationship with the Japanese customers for manufacturing of technical products?

Rahul Dhanuka — Joint Managing Director

We are getting into this space with a very committed approach, and relatively holistic and a long-term plan. So with that commitment, I think so the initial steps are — the ones that we are taking, setting up a chemical plant in a chemical zone to starting manufacturing some generic agrochemicals, establish our credibility and capability both in that space and grow and build-up from there. Now, this is obviously not a quarter-to-quarter gain, but we could take it on-time, it’s time for India — it’s time for chemical industry in India. And Dhanuka is absolutely well-placed to take advantage of the available opportunities in Indian space, as well as in global space. So we are going to do our best to leverage that.

Ankit Gupta — Bamboo Capital — Analyst

Sure, sure. The last question on, you know the generic products that will be manufacturing, how many products are ready at the labs scale and I think we will be largely manufacturing [Indecipherable] if I’m not wrong.

Rahul Dhanuka — Joint Managing Director

So, more about that probably in next quarter call.

Ankit Gupta — Bamboo Capital — Analyst

Sure. sure. Okay, thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Mr. Parth with Alpha Plus Capital. Please go ahead.

Parth Kotak — Alpha Plus Capital — Analyst

Hi, sir. I have two questions. One is, we had a product launch for the sugar beside [Phonetic] which is Halosulfuron Methyl and Metribuzin combination. So, one, how is the launch? Have we launched the product? Is it an encouraging response from the market?

Rahul Dhanuka — Joint Managing Director

This launch will be coming up next year from Q1 FY ’24.

Parth Kotak — Alpha Plus Capital — Analyst

Okay, okay

Rahul Dhanuka — Joint Managing Director

Most probably Sugarcane acreages are growing with ethanol mixing being made mandatory and wide skill acceptance of that, we are really accepting — looking forward to a good play of our brand Tyzon [Phonetic] in sugarcane.

Parth Kotak — Alpha Plus Capital — Analyst

That’s encouraging sir. And secondly, sir, we’ve been reading reports of El Nino probability being high, for India this year. How do you see impacts, if any, of the same?

Harsh Dhanuka — Director

My request to all the participants on the con-call, please pray for the Indian farmers and Indian agriculture.

Parth Kotak — Alpha Plus Capital — Analyst

Okay.

Rahul Dhanuka — Joint Managing Director

I hope it is taken seriously.

Parth Kotak — Alpha Plus Capital — Analyst

Right, sir, right. And if I could just squeeze in one last question regarding the China reopening, are we seeing dumping from China or probably cost pressure from China because of the reopening phenomenon in our market is just as usual?

Rahul Dhanuka — Joint Managing Director

No, I don’t think so. We are seeing dumping from China, but yes, China has its own play. China is out of the lockdown. But it is not out of the elasticity. So that elastic nature allows sometimes the manufacturer or sometime the trader to play on the prices which still continues and in the whole situation Indian technical manufacturers, Indian chemical manufacturers are receiving good acceptance, which is pretty evident from the performance of various other chemical companies in the country. So I think so India will have its own space and play when it comes to agrochemicals and chemical industry at large.

Now, India being an agrarian economy, would certainly continue to depend upon railfall and El Nino or La Nina as the situation would be. Yet, the powers that we at the center or at the state level have invested significantly in irrigation projects. Both in terms of greenfield irrigation projects, the way they are being done like the Kaleshwar dam in Telangana and many other such projects which have come up over last three years, and also in terms of revising the dead irrigation cannels or irrigation tanks and storage facilities and recharging the wells. So overall, a large area has come under water storage and water holding, which certainly — Indian farmer walk through dangerous situation unpredictable situation of El Nino. So, El Nino could be a game changer, yet availability of irrigation facility would certainly help.

In addition to that, Indian scientists have come up with broad resistant seeds in many crops. Farmers is being educated to adopt those seeds and technologies, which will also help Indian farmers read through difficult situations if such a difficult situation was to emerge. Yet it is still a forecast, and that too not a closure forecast, it is as of now a distinct forecast. We are still waiting for more inputs to come from different countries’ metallurgical departments to really confirm El Nino situation, and then form up our forecast or plans for the year.

Parth Kotak — Alpha Plus Capital — Analyst

That’s helpful, sir. Thanks for the comprehensive answer. That’s all from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Resham Jain with DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Hi, Dhanuka team. So, my question is from the Agri economics perspective. How are you seeing the overall farmer economics playing out, specifically given that lot of crop prices have been moving up? And obviously, Indian farmers got benefit because of lower fertilizer prices compared to a lot of other places globally. Export also has been quite good, some of the key crops. So generally on farmer economics, over last two,-three years, how are you seeing the overall situation?

Rahul Dhanuka — Joint Managing Director

Farmer economics actually is really in terms of macro has been positive and curable, like you said, yet crop to crop it keeps varying and sometimes within the crop, it varies for geography. So, for example, the onion farmers economics this year has not been because of the onion prices being significantly lower with exports– with imports being open and exports being restricted. Our toor crop, were in for a setback in Maharashtra, so which again took the farmer economics to a lower end. You would have seen recently of hearing news of edible oil prices going down, again because of free imports.

Now these things, put a challenge on the Indian farmers’ economics, while on the other side. While we see various other horticulture crops being in demand and being favored by the farmer, sugarcane farmer is doing pretty well because of faster turnaround from sugar mill and also because of ethanol mixing in petrol being driven very strongly both by the government, petrol companies and the private players.

Then, wheat is certainly showing bright signs of — from the farmer economics. So it would certainly vary from crop to crop and geography to geography. Overall, the commitment of the central government and the state government who was supporting the farmer in the time of distress and protecting farmer is favorable for almost all agri input player. Yet our right balance is short in terms of how to support the inflation-dependent countries versus how to support the farmer in getting the right remuneration for his produce, which is a tricky balance yet achieved by the central or the state governments — yet to be achieved by the central or the state governments.

Resham Jain — DSP Investment Managers — Analyst

Okay. Sir, my second question is on — this is a broader question, from the product perspective. I think, few years back, we had few products which we grew very fast and were quite large. But I think last two years, the scale up of the products from, let’s say, 10 crores to 50 crores to 100 crores to maybe higher than that. That number of product scaling up seems to be lower. There were quite a few promising products which we have launched, but somehow. I think those have not done well after a point. So, as an assessment, how do you see some of the successes which we have seen in the past versus what we have done in the last few years? How will you assess it and any comments on that front?

Rahul Dhanuka — Joint Managing Director

So, I would take certain examples here. For example, we launched a total grass killer, terminal weedicide this year. And it was ramped-up pretty fast within the launch in the current financial year. Last year, we launched our soybean herbicide, Tornado, which really moved fast in soybean geographies of Madhya Pradesh and Maharashtra. Our earlier launch, Conika, which is a Japanese product, has done really well. Sempra, a sugarcane and maize herbicide, which had a slow start after launching in 2014, has done extremely well over last four years. And Largo and Apply, our two insecticides Largo for thrips in chili and cotton and Apply for BPH in paddy has also done extremely well.

This year, we launched a Japanese insecticide — combination insecticide by the name DECIDE, which is very good for cotton and chili, whitefly and green gesade [Phonetic] and sucking pest control, it has moved almost like a lightning speed beyond our imagination, and we are looking at ramping-up its volume in coming two years very fast. So, yes, there would have been some misses, like our CORMEX launch last year, but most of our products are really moving well and moving fast. So, whereas [Speech Overlap]

Resham Jain — DSP Investment Managers — Analyst

No, no. I appreciate whatever launch — no, no, sir, what you’re seeing is absolutely perfect. What I was hinting towards is that, are there any products which can scale up to a significantly — because when we look at some of the other companies, the one or two products has a very large contribution to the overall revenue. In your case, we have — I don’t know the top product or top five product is what — how large because then you can get an operating leverage out of it. That was something which I was talking about earlier. I think, TARGA SUPER was one many years back, but after that, we have not seen such a large product, that is what I was hinting towards.

Rahul Dhanuka — Joint Managing Director

Right. I think so, beyond TARGA SUPER [Indecipherable] which are pretty big with us and would be almost as large as TARGA, yet I think so — yeah, the match up to one single product being that large. I think, you’ll be seeing some coming up in next two years indeed.

Resham Jain — DSP Investment Managers — Analyst

Okay, sir. All the best for that and thank you.

Rahul Dhanuka — Joint Managing Director

We have a good pipeline lined-up for such growth over next two years.

Resham Jain — DSP Investment Managers — Analyst

Okay. Thank you, sir. All the best.

Operator

Thank you. Our next question is from the line of Himanshu Binani with Prabhudas Lilladher. Please go ahead.

Himanshu Binani — Prabhudas Lilladher — Analyst

Hi sir. Thank you for taking my question. So my first question was largely on the inventory side again. So, sir, we have been like reading that in the global as well as into the domestic companies commentaries in terms of higher inventory. So, may be like, if we can like comment and we can like deep bigger into this, so just wanted to have a sense in terms of like the molecule wise, if you can give us some sense that how are the molecules seeing the inventory basically. So, any sense on that would be like quite good.

Rahul Dhanuka — Joint Managing Director

I’ll take broadly two examples, and then some buildup will have to be done from there. So, in East India particularly, for example, Uttar Pradesh, Bengal and Bihar has seen significantly lower consumption of fungicide like Mancozeb. For Mancozeb inventories are significantly lined up in the market. That is on the Eastern side.

On the Western side, with non-consumption in toor and Bengal gram, products like MMX-10 which is a insecticide, has got stuck. So, MMX-10 and related insecticides are probably lined in large volumes in the market or within company warehouses. So these two are like the examples both from the Eastern and Western side and portfolios similar to that would be stuck up in inventories. Dhanuka as a portfolio has a relatively higher percentage of herbicides. Overall herbicides in Kharif as well as in Rabi has performed really well. So, our herbicide portfolio has been really moving well.

Himanshu Binani — Prabhudas Lilladher — Analyst

Got it, sir. And sir, secondly, we have commented in our presentation towards the launch of this six bio products. So, any sense on the targeted revenue potential basically of these products going forward?

Rahul Dhanuka — Joint Managing Director

Right. So, this is what we have introduced as early-stage venturing into the bio space, which you see is growing at a higher CAGR. So we’re just trying to understand this market, and we will have a small single-digit plan for the next year to explore and understand the market as we try and bring in better and beautiful products in this portfolio over the next few years. So, the market size is as of now pretty small in this space, but it will be growing at a higher rate, I believe.

Himanshu Binani — Prabhudas Lilladher — Analyst

So any sort of like revenue target basically from these products?

Rahul Dhanuka — Joint Managing Director

INR10 crores in next financial year.

Himanshu Binani — Prabhudas Lilladher — Analyst

Okay. And sir, any sense on the margin profile for this bio product? What is the margin differentiation between the traditional products under bio products like on a general?

Rahul Dhanuka — Joint Managing Director

Margin is much higher as compared to the traditional products. Margin profile is much higher, CAGR is much higher, but the market size and the absolute value is much lower.

Himanshu Binani — Prabhudas Lilladher — Analyst

Got it, sir. Thank you. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Ms. Niharika with Equitas Investment. Please go ahead.

Niharika Jain — Equitas Investment — Analyst

Hello. Hi, thank you for the opportunity. So I have just started [Technical Issues] one or two basic questions on it. So, if I take only top five brands for Dhanuka, so how much will it be concentrating our revenue like from them?

V.K. Bansal — Chief Financial Officer

It’s around 21%.

Niharika Jain — Equitas Investment — Analyst

And these would be catering to what crop? Like top five products of Dhanuka.

Rahul Dhanuka — Joint Managing Director

This is a really wide portfolio. These would be catering to soya bean, onion, black gram, jute, Bengal gram, cotton, sugarcane, horticulture, grapes, onion, paddy, wheat, something like that.

Niharika Jain — Equitas Investment — Analyst

Okay. And other product ratio, what is the product ration for Rabi versus Kharif like how is our product Q2 was?

V.K. Bansal — Chief Financial Officer

Rabi versus Kharif, you see normally our Kharif ranges between 44% — 54% to 58% and Rabi is around 56%.

Niharika Jain — Equitas Investment — Analyst

Okay. And as of December, how much of cash and investments will we have in our book?

V.K. Bansal — Chief Financial Officer

How much?

Niharika Jain — Equitas Investment — Analyst

How much of cash and investments, do we have in our books as of December?

V.K. Bansal — Chief Financial Officer

Our inventory is in line with the previous year it is around INR352 crores versus INR303 crores last year December.

Niharika Jain — Equitas Investment — Analyst

No, no, I’m talking about cash and investments.

V.K. Bansal — Chief Financial Officer

I don’t get? Cash and investments.

M.K. Dhanuka — Managing Director

Your question is not clear.

Niharika Jain — Equitas Investment — Analyst

Hello.

Harsh Dhanuka — Director

Yeah, your question is no clear.

Niharika Jain — Equitas Investment — Analyst

I’m asking about cash and investments in the book.

V.K. Bansal — Chief Financial Officer

Cash investment you are saying?

Niharika Jain — Equitas Investment — Analyst

Yes, yes.

V.K. Bansal — Chief Financial Officer

It’s around INR200 crores.

Niharika Jain — Equitas Investment — Analyst

Okay. Okay. And so, this is my last question. So how much of the revenue comes from specialty and how much is from generic in our revenue?

V.K. Bansal — Chief Financial Officer

How much from specialty and how much from generic, is that the question?

Niharika Jain — Equitas Investment — Analyst

Yes, yes.

V.K. Bansal — Chief Financial Officer

Yeah, it is around 50/50.

Niharika Jain — Equitas Investment — Analyst

Okay, okay. Thank you so much, sir. That was it from me.

Operator

Thank you. Our next question is from the line of Dhruv Muchhal with HDFC Mutual Funds. Please go ahead.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Yes, sir. Thank you so much. Sir, probably a bit early into the next season. But if you can give us some indication, now that we’re seeing technical prices from China declining significantly. Do you think given the price corrections that we will have to take and the pricing benefit that was probably visible in the last six months or probably more than one year, there could be muted sales growth over the next one or two years or do you think there can be significant volume levers that you can drive through?

M.K. Dhanuka — Managing Director

Muted sales growth and volume levers, is that what you’re saying?

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Yes. I mean, we are seeing the technical prices are falling, So, probably, one has to pass on this to the market and which will influence our sales growth is one concern. So just wanted to understand, can that be a thing for us or we will have some offsets with that?

V.K. Bansal — Chief Financial Officer

Right. So, the reducing sizes of generics, obviously we’ll try and pass on to the farmer that advantage if the prices are reducing. That is one. And there would be volume growth, which should be coming in, so the right balance would emerge between value and volume growth over the year. Yet, the elasticity in chemical supplies from China and the overall pipeline instability — overall supply chain instability is expected to continue. So, over the entire portfolio, it will have a beavering impact which we’re still trying to ascertain.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. So broadly saying, there are still levers for revenue growth next year, even if the generic prices decline?

V.K. Bansal — Chief Financial Officer

Yes, absolutely. There are.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Sure. And sir, secondly is, we also hearing from the markets that the collections have become a bit sticky or become a bit difficult from dealers, distributors. And also, the inventory levels are high. just wanted to understand your situation and the broader market situation, how can that influence us?

V.K. Bansal — Chief Financial Officer

Right. So collections have kind of stood over last few months, yet it is a short-term challenge, I believe, for us, it is really in control, couple of weeks.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. Not much of a worry there?

V.K. Bansal — Chief Financial Officer

Not much of a worry, indeed.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Perfect, sir. Thank you so much, and all the best. Thanks.

Operator

Thank you. Our next question is from the line of Resham Jain with DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Thanks for taking my question again. So, sir, my question is on just the organizational structure. Given that we have focused approach on multiple crops, now we have biologic. I think few — a couple of years back, we had very high focus on horticulture, so from an organizational standpoint, over the last few years, has there been any major change which has happened just to focus on various kind of divisions and segments, because each segments needs a different way of marketing approach towards market and all?

Rahul Dhanuka — Joint Managing Director

Absolutely. So happy you have asked that question. So, we have completely restructured our marketing organization. This approach of crop and farmer-centric structure. So we have created crop business managers who are responsible for one entire crop and farmers practice, both in terms of the technicality of the crop as well as the technicality of the product segment and products communication to the farmer. Within the marketing team, we have portfolio managers of insecticides, herbicides, fungicides and bio products. At the same time, we have bio-product either added to the organization who have a wide and deep experience of bio products and agri input industry over the last 20 years. So we’ve added this kind of a resource to generate knowledge base and create a futuristic approach.

In addition to that. we have setup Dhanuka Agriculture Research and Technology Center, which was inaugurated by Chief Minister of Haryana. Mr. Manohar Lal Khattar on November 4, 2022, where we are going to do research around last two farm practical application of agrochemicals. agri technology and bio products. So, these two wings put together, especially the marketing wing and the R&D wing, would be working closely to move lab research to farm and commercialize it faster.

Resham Jain — DSP Investment Managers — Analyst

Okay. Understood. So, the related question is, if we look at some of your expenses line item, specifically employee cost and other expenses, it has seen a good control and it has come down by almost like 200, 300 basis point over the last four, five years, which has helped us in terms of margins. So, I was just thinking from that perspective that, just from a margin perspective, isn’t it like the company is investing less on marketing, or is there anything else which we are not able to read from numbers? Because your employee cost as a percentage of revenue has seen a very good improvement. So that was another question related to this only.

V.K. Bansal — Chief Financial Officer

You see, in terms of investment, we are quite aggressive. That’s not the case. But yes, in the last two years, the expenses were lower on account of the — because of COVID. And this year, you have seen the increase in expenses as compared to the increase in revenue is more. But for, say, employee perspective, yes, we have made some restructure change two years ago because obviously there is significant impact on the revenue and we are more focused on the [Indecipherable]. Therefore, there is an improvement in the employee cost.

Resham Jain — DSP Investment Managers — Analyst

So, does this mean that without sacrificing on investment, this number is not sustainable?

V.K. Bansal — Chief Financial Officer

Of course, we can not compromise in the part [Phonetic]. And this year, the impact is because of less profitability, so director remuneration has significantly lowerer compared to previous year, that is one of the reason in the improvement in the employee cost this year. Other than that, the Commission — employee cost will increase actually in line with the increase in the turnover almost.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. Okay. Thank you, sir.

Operator

Thank you. Our next question is from the line of Mr. Manish Mahawar with Antique Broking. Please go ahead.

Manish Mahawar — Antique Broking — Analyst

Yes sir. Good evening, sir. Just in terms of a question, product basket perspective portfolio, how do you see the gaps in our product portfolio, maybe herbiside, insecticide, fungicide perspective or maybe crop perspective?

Rahul Dhanuka — Joint Managing Director

So we see our portfolio to be really rich and powerful and also our pipeline to be very strong, thanks to our Japanese partners like Nissan, Nippon Soda, Hokko with whose support we launched VENET, a fungicide last year, DECIDE a versatile insecticide and CORMEX a herbicide last year. Yet, what we see is two gaps in our portfolio which could be covered up are phalaris minor in wheat and BPH in paddy rice. These two portfolio gaps. I think, is what we are focusing on to fill our gaps. Although we do have generic offerings in both the categories, APPLY in BPH, and dinocap and [Indecipherable] in wheat phalaris minor. Yet these products are relatedly generic or older in nature. We are looking for modern and newer chemistries in these segments.

Manish Mahawar — Antique Broking — Analyst

Okay. And in terms of this wheat, when you said wheat crop this across, basically in the wheat in the subsegment in terms of maybe the fungicide or maybe it’s herbicide across, because BPH is very specific [Indecipherable] BPH. But wheat crop, can you highlight beside we are weaker?

Rahul Dhanuka — Joint Managing Director

It’s a weedicide in wheat.

Manish Mahawar — Antique Broking — Analyst

Weedicide on wheat. Okay, understood. And second question, in terms of…

Rahul Dhanuka — Joint Managing Director

Insecticide in paddy

Manish Mahawar — Antique Broking — Analyst

Okay, understood. And second, in terms of export, because we are just now focusing, we started that export department separately right from September onwards. How do you see going forward maybe next two, three years our size of business and our thought process in terms of registration and process going forward?

V.K. Bansal — Chief Financial Officer

Right. So we hired a export manager late this year — this financial year. And we are looking at ramping-up our exports both in regulated global markets, as well as unregulated global markets. We are going to invest in registrations in the regulated markets and we are going to leverage our formulation capacities and capabilities to enter the unregulated markets. So that is one area for which we are going to leverage our formulation facility. And then Dahej plant, which is coming up would add to our extent in terms of playing in the regulated as well as unregulated formulation markets with our own technical production.

Manish Mahawar — Antique Broking — Analyst

Okay. Number possible for our next three years, we see in terms of export. I can understand it will be a smaller number also, but any number you wanted to put up?

V.K. Bansal — Chief Financial Officer

Well, yse, so I think so we’ll be able to share plan in the next con-call next quarter that could be a good thing to share.

Manish Mahawar — Antique Broking — Analyst

Okay, understood. And some bookkeeping question for Bansal ji, from you, what is the volume and price growth in this quarter?

V.K. Bansal — Chief Financial Officer

In this quarter, the volume growth is around 2.5% and the remaining is value growth because it is around 7.5% to 8%.

Manish Mahawar — Antique Broking — Analyst

Okay. And tax rate is a bit lower for the quarter. So any specific reason and can you highlight for FY ’23?

V.K. Bansal — Chief Financial Officer

Because of the — reversal of the excess provision of previous year, because of that tax impact is here, otherwise tax liability is similar to the previous year.

Manish Mahawar — Antique Broking — Analyst

Okay. And what could be the full tax rate for the full year — for this year perspective?

V.K. Bansal — Chief Financial Officer

Full tax rate, it is around 24%, but because of reversal it would be around 22% to 22.5% this year.

Manish Mahawar — Antique Broking — Analyst

22.5%, okay, sure. Thanks and all the best, sir.

Operator

Thank you. Due to time constraint, that was the last question for our question-and-answer session. I would now like to hand the conference over to the management for closing comments.

M.K. Dhanuka — Managing Director

Thank you very much. To summarize, Dhanuka continues to demonstrate its ability to overcome challenges and emerge the stronger despite uncertain business environment. Dhanuka will aggressively rollout new formulations in the upcoming quarters and would ensure that it reaches to the consumer. We hope to introduce two new 93 molecules in the next financial year, along with three 94 molecules. So, overall, we hope that we will — Dhanuka will be able to introduce five new molecules in FY ’23-’24.

I reassure our shareholders that we are committed to the task of transforming the landscape of agriculture in India and will play an integral role in rewriting the future of a better and New India. Wishing you all health and safety. Thank you very much.

Operator

[Operator Closing Remarks]

M.K. Dhanuka — Managing Director

Thank you Manish Ji, thank you all the participants. Thank you.