Insecticides (India) Limited (INSECTICID) Q3 FY23 Earnings Concall Transcript

Insecticides (India) Limited (NSE:INSECTICID) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Rajesh Aggarwal — Managing Director

Analysts:

Jatin Padharia — Individual Investor — Analyst

Bharat Gupta — Fair Value Capital — Analyst

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Rohan Gupta — Nuvama — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Insecticides (India) Limited Conference Call for Q3 and Nine Months FY ’23. [Operator Instructions] Please note that this conference is being recorded.

From the management we have with us Mr. Rajesh Aggarwal, the Managing Director and Mr. Sandeep Aggarwal, the Chief Financial Officer of the company.

Before we begin, I would like to mention that some of the statements made in today’s discussions may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the earnings presentation shared on the exchange today. We shall start the call with the opening remarks and then we will move to the Q&A session.

I now hand the conference over to Mr. Rajesh Aggarwal for the opening remarks. Thank you and over to you, sir.

Rajesh Aggarwal — Managing Director

Thank you. And a very warm welcome to all the attendees of this conference call. On behalf of Insecticides India, I Rajesh Aggarwal, Managing Director, extend a heartiest welcome to all the attendees of today’s earnings call.

I’m extremely pleased to present before you the quarterly and nine-monthly financial results of the company ended on 31, December 2022. Let’s begin today’s discussion with a brief outlook of the agrochemical industry, followed by asset losses of the company’s financial performance for Q3 and nine months ’23. Looking at the current international trend post-COVID and the Russian attack on Ukraine, the international scenario looks in favor of our country, and I believe that it’s a huge opportunity for our country to produce and make it for the domestic market as well as the world, because I believe that with more than 70 crore people in the age of working — means, in the working age today. And if we look at from 2050, India will one of the economies where the number of workers are going to go up from 70 crores to 90 crores, which means that there is a huge opportunity of working in India, there will be lot of domestic demand and of course, a lot of stomachs to feed. So, if we look at the data, the broad data, it talks about that the agrochemical sector is going to grow from 2021 to 2026 to $7.4 billion. So, which means a huge scope and this sector has been recognized as one of the champion sectors in the industry, with 12 industries which are going to take global leadership by ’50 and 8% to 10% growth built through 2025 is projected by FICCI also.

If we look at the agrochemical region, India, yes, there is increase in the domestic consumption. And if we look at Asia-Pacific also, this zone is also the demand for agrochemical is going up for various reasons, because the food production is high, the food demand is high. And if we look at the modernization, which is heavily linked to agriculture, so somewhere it is going to go at par with the Western world, and hence, there’s increase in the demand for agrochemicals in this area in particular.

Today, as I was saying that India is the next exporter of pesticides in the world. So there are various advantages to our country, number one, like China plus One policy which is very-very important because India is one country, which can act as the natural supplier of petrochemicals and the chemicals at large, because it’s a low-cost manufacturing region, there is availability of technical manpower, with aggressive pricing. Seasonal domestic demand is one of the reasons, because there is overcapacity due to this cyclic nature of business and of course, the better international markets, sometimes you can pay at better prices. And since India is very-very strong into the generic products, so there’s a huge opportunity.

In the recent time in ’22, government has launched the Kisan Drones for the crop assessment and it has been eased out, which means that there is a good opportunity to spread the fungicides and insecticides with the government has allowed and the companies are starting driving better. And we are also working in a big way that how we can take these drones to the market, and we are working with various drone companies and we are working with our farmer and our network to take this technology and make it more commercial and practical for our farmers at large.

Today, the potential of agrochemical use because despite of whatever usage is happening in India, I believe that the usage is still very low, because if I look at the world market, India consumption of agrochemical is just about 5%. So, 5%, I can say of agrochemical is control — it’s a 1% population of the world, because our food production is not only good for our country, which is about the 18%, but we are also exporting many food products, which means that there is a huge scope of agrochemicals to go up. And even if we look today 15% to 25% of the potential crops are wastage due to the attack of paste weeds and dizziness, so that is available in all government data.

So, talking about the first half of this year, the monsoons were very-very erratic, so very challenging times because in certain areas it was excessive rainfall, whereas few areas normal but deficit in many areas. So, this erratic nature has led to the loss of spring [Phonetic] in many parts of the country. And then there was delayed monsoons, which again delayed some of the crop sowings, like rice this year got impacted by 4%, pulses by 6%, oil seeds by 3%, coarse cereals increased by 5%, cotton sowing increased by 6%, but then there was huge infestation with black thrips sometimes, something which is not getting the proper control.

So there are issues, but overall, it has been a decent year basically, because if we talk about the Rabi season, Rabi season showed a good recovery, and particularly Southern part of the country has shown a good recovery in the Rabi season, why because there had been good rains, this good rains has led to the good water levels in the reservoirs and the soils are wet, which means that there has been good opportunity and we look about — if I talk about the current Q4, even in Q3, we see that B2C — the maximum sales has come from South, more than 50% of our business in this B2C segment or brand segment has come from the Southern zone only, and rest of the zones have been just fillers actually of another 50%.

So, there is a good opportunity for the products, good demand. Like if I talk about the nine months of this year, we saw there’s products which we have launched recently in this year and the products which were launched in the previous year also, we have seen a good jump because we were the part of our focus product range and particularly If I mean, Shinwa, products like Hachiman, products like Izuki which was not — this year, Torry. So, all these products have shown a significant jump year-on year, and they have been responsible behind getting a better market share for Insecticides India into the market.

So, talking about the company performance in particular, this quarter was a modest quarter in terms of the financial performance as well the market acceptability of the new molecules, because the Kharif season was at the present and it was the beginning of the Rabi season which was delayed due to the impact of the monsoons. But I believe that it is going to make up in the fourth quarter though, this has been a positive quarter for us because if we talk about the top line, INR356 crores has been the total sales and EBITDA has been INR232 crores. If we talk about sales which is 13.6% higher than last year and EBITDA is 25% higher than the previous year. So, if we talk about Q3, it is 60 basis points of jump in the EBITDA and if I talk about nine months then roughly, in nine months, we have achieved around INR1,500 crores of sales and about INR150 crores of EBITDA margin, which is a 107 basis points increase in nine months.

So, in Maharatna also we have got a good contribution actually, though, in this quarter, it was INR133 crores. And if you look at the year as a whole, it is INR596 crores roughly, 55% was the contribution from the Maharatnas. And I was saying Shinwa and Torry also Hachiman, were the ingredients for the main products, which lead to the jump.

If we look at the insecticides, herbicides, fungicides distribution. Insecticides are the highest with almost 44%, herbicides 41.6% and 10% of fungicides in nine months. If I talk about the three months also more or less figures are similar, just fungicides are lower at 8% in the premium segment. And our selling if I talk about the distribution area wise, more than 50% has come from South and East, West and North zone has I mean a little bit I would say slow, and they have contributed another 50% only. And Hachiman and Shinwa in particular had contributed in a big way year-on-year, in turn, they have contributed about INR100 crores jump in the turnover, these two products in particular.

As I was discussing on Torry and Izuki, these products have also given a good jump to the company, about INR60 crores have come out of Torry and Izuki, put together the jump year-on-year, if I talk about the nine-month sales, roughly INR70 crores have come from Torry and Izuki, we got a very small window to market in this product about INR12 crores has come out of it and we are expecting further little more sales, but all these products are going to rise in the near future in a big way.

So, this year, company has given the bonus, for the ratio of 1:2 and we have a very stable credit rating. The credit rating has remained same and, in this quarter, Q3, we had launched a product called Stunner, a decent beginning and I would say that this product is again going to multiply in the next year. We have recently sold some quantities, small sales, roughly about INR4 crores-odd, but we made our beginning into this grapes segment with this product and it is going to contribute in a big way for us in the near future in FY ’24.

Talking about the capex. So first of all, I’ll discuss about Dahej, the L&T project. So here the capex was planned at about INR110 crores, it has — I guess the budgeted figures, it has gone up to INR160 crores, various reasons, number one is delay and number two is increase in the cost of steel and some other materials, actually which has led to the increase in the project cost. And we have also planned to introduce two more boilers actually to have a solid tool, so which has also led to the increase in the project cost for the Dahej site. So, this project is expected to commence by March ’23. So, which means that all our capital expenses or the projects will be completed by March ’23, the running projects.

So, for the cost-saving, we have put out 1-megawatt solar panels at the Dahej site and also 200-kilowatt solar panels are put at the SEZ site. And also, as I was discussing the solid fuel we’ll be using instead of gas, which means we’ll have big saving, because with the increased plant, the consumption of gas or the consumption of steam for the company will double, so the only way out to keep the expenses under control is solid fuel, which runs at almost half or less than — less than half cost of gas actually, so that’s the vision actually. We should be able to introduce this new boiler by the end of March. So, the project will complete at this time and the new boilers will launch and start. So, which means that keeping the same expense ratio we’ll be able to maintain the more production, which will lead to savings for the company.

I would like to talk about Rajasthan. In Rajasthan, we have completed our project and now we are coming up with the new site in Rajasthan. We have got one plant in Rajasthan again because we believe that proximity to Delhi and on the highway, it is going to help us in a big way in consolidating our formulation facilities and not only the formulation, there will be scope of setting up the new R&D centers because we have started, [Indecipherable] of the IIL Biological.

So, the R&D center for the IIL Biological will be mid-year — the plant for IIL Biological will be mid-year and also the plant for Insecticides India will be made at the same site. It’s a large site of more than 15 acres of land and this will come into the position of the company in the month of March, and we propose to start the Phase 1 of the site — because it’s a constructed site and we are going to start with the formulations and some biological activity and later on in half two or Phase 2 we will come up with the technical synthesis plant here, which will be a two-year project again, but that will start after some time, actually in the latter half of 2023.

So first we’ll complete our both the projects and start taking the advantages out of the Dahej site and Chopanki site, then we’ll start this [Indecipherable] site, which is a new site for the company.

Talking about the Maharatnas and Focus Maharatnas. So, as you know that we have 11 products into Focus Maharatna segment and these products have contributed well and if we put together Focus Maharatnas and Maharatnas more than 50% of the business so far has come out of this segment. And I believe in the last quarter, we are going to put more emphasis on Maharatna products, particularly both on B2C segment as well as B2B also, and I expect a good jump into the sales of Maharatna segment and also a good bottom line due to the I would say increased sales in the B2B segment out of these products. So, we are getting very good response and very good order books for some of these products and this is going to support our quarter four.

Talking about the future outlook. So overall if I’d sum up the year FY ’23, I would like to say that the top line will be double-digit growth and similar will be the bottom line. We should see a better result in Q4. The EBITDA growth, which we have achieved in Q3, we will try to maintain that EBITDA growth and there will be some decline in the export target, because export, I was keeping always at INR150 crores, but there have been various reasons which are seen in the export markets. Number one is the depreciation in the various currencies and non-availability of dollars, which has impacted many countries who are our customers in Africa, Middle-East and LATAM countries and also CIS we’re finding paucity of dollar and due to non-availability of dollars we are not able to supply to them.

Some people are maintaining the balances in their banks, but the banks are not able to own allow the LC after the payments in advance what they’re supposed to do. So we have suffered a little on the export front, but I believe that we should be able to make it up soon and this year we may closely export sales around INR100 and INR150 crores, given the hit of about 30%, but I can assure you that next year we should cross INR200 crores plus in the international market because of various reasons actually, not only the registrations of some of the products which we are getting into these markets, but we will have some registrations of technicals also in the advanced markets of LATAM, Europe, American, some countries. So, this is also going to give the push to our export sales, and we’re also looking at the opportunity of CRAMs coming into us in the export market, which will again strengthen our business into the international market and give us a good boost to the export business also.

So for the next coming year we see the strength in our B2B business, because of the introduction of new plants and with these new plants, we are also going to introduce new molecules. So these molecules will also going to B2B segment, further into B2C. So I see the growth coming from B2B, B2C and export front, all the sectors in the next year and we like again with the expansions coming in I would like to keep the target of 25% growth for the next year also.

So, here the new products which are introduced in the recent two years and the new introductions, which are going to come now, because still we have declined to introduce four more products into this month itself — in the month of March, which is Mission, Sargent Xpress, Tornado, BOUNCER not Sargent Xpress it may be read as Suprimo SP. So, these are the four major launches with Mission as granule come with the liquid formulation of this product Mission, which is the number one insecticide in the country, selling to today. So, we are coming up with the technical manufacture of this product and will be formulation to the market, it is going to be part of our top-six products, and we expect a good jump with this product sales also.

So, at present Shinwa in ’23 will be our largest product, which is a Japanese-patented molecule and we are expecting to close with good numbers in this product in the next year. Again, it is expected to multiply along with some other products like Torry, Hachiman and some other like we have selected six products, which are going to go good in future. So I have very good expectation from Q1 itself of next year ’24 and I’m very-very confident that with our focus on the Maharatna products and Focus Maharatna products, we shall be able to deliver the good numbers as per the expectation of the state.

So IIL Biological will be doing and we’ll be introducing various products under this segment, and along with this and the Rabi season also with some of the products like Shinwa, Torry, we will be getting some sales and some good products also we’ll be doing into this season and there will be launches as I was discussing with these four products, so some quantities of these particularly Mission and Tornado, BOUNCER, some quantities of these also move to the market and will help us building up the sales of quarter four.

So, we are also working for import substitution. If I talk about the Dahej expansion there we are backward integrating, particularly for our two technicals mainly lambda-cyhalothrin and thiamethoxam. So, we are going to make the intermediates for this project, which will strengthen our technicals in the international market. We have already increased our capacity, almost doubled our capacity of manufacturing these technicals at Chopanki plant and now we — once we start marketing the raw materials for this product, which will strengthen our capacities and capabilities into the market and will give the confidence to the international market of our consistent supply, quality supplies, and this is going to help the company in a big way, because we generated a lot of data for the molecules and this is being registered in all the advanced markets for the world.

So, our export gets boosted when the new technicals, like we are investing a lot on registrations, not only into Africa and Middle-East, but also in Europe, Brazil, NAFTA countries and the LATAM countries, Canada, et cetera. So, a lot of these markets are going to become our new markets actually and we are going to go further away from Africa and Middle-East, like Europe, Brazil, LATAM countries, all these countries are going to support us in the business. So, the export revenue for this year, yes, from $1,500 million it has some down to $115 million, the projections, but we are going to make up in a big way for future.

Meanwhile, we are going to continue our focus around the R&D because in the R&D we are doing various types of things, one is the biological R&D and then the chemical R&D. In the biological R&D we are going to introduce some more products which are going to come in the IIL Biologicals. So, there will be three, four expectations, we can — products launch expectations, we can do in the biological segment. And similarly in the chemical segment, there are certain mixtures which are getting the registration and all these new mixtures and our new products will be coming soon, where we are going to make certain new technicals, AIs and where we are going to launch certain formulations.

So, all these are going to give a good edge into the market and these launches are expected in next three to four months actually. So, this is going to happen. And in drones, in drones also we are going to enter into this Kharif season for using our insecticides, fungicides and also the fertilizers and these new products also are going to support in a big way.

So, with this, I thank all the participants and we are open for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We have the first question is from the line of Jatin Padharia [Phonetic] an individual investor. Please, go ahead.

Jatin Padharia — Individual Investor — Analyst

Hello.

Rajesh Aggarwal — Managing Director

Yeah, Padharia.

Jatin Padharia — Individual Investor — Analyst

Sir, I’m an investor and I got sales from my relatives as they have a lot of questions to understand their company. So, if I ask a lot, so you may just tell me. So, firstly, as a percentage of balances, our receivables are very high. So, what is the reason behind that? Is that because of our business nature or if you can throw some light on that?

Rajesh Aggarwal — Managing Director

The little ones are very much under control as it happens in regular years. And even with the increase in the sales, our collections are quite good. And by the March end, the things will look very good actually. I don’t see any big threat over there. So, our collections so far is — are doing very well.

Jatin Padharia — Individual Investor — Analyst

Okay. And what kind of market share we are having currently in this amongst our various competitors?

Rajesh Aggarwal — Managing Director

Actually, it’s a difficult number to tell, but we believe somewhere between 4% to 5% of the market share.

Jatin Padharia — Individual Investor — Analyst

Okay. So, I see that you’re launching new products every year. So, is — are they just extension of your old products or they’re giving something new? You can explain that by some example. I heard the call that you tried to explain by using the [Indecipherable] I would like to understand on some [Speech Overlap]

Rajesh Aggarwal — Managing Director

We as Tractor Brand Pesticides, we will provide you the complete solution to the farmer. In the beginning when this company was launched in 2001, so at that time, I picked up everything whatever was there in the market and we launched everything into the market and we kept on increasing our range. Then I realized that we have a bundle of generic products and which are losing their charm and the new-generation solutions are coming. Then we started adopting new-generation solutions a decade back. So, almost, since then, we are trying that how we can balance our range because the number of products are growing added up and we are — it’s become very difficult to reduce the molecules. So, now, we pointed out that all the molecules which are below a certain size, we pointed out the molecules and we are trying to tail-cut about 30, 40, more than 40 formulations, or 40 brands out of our total range. The idea is the generics which are not getting this share, they should go. But our strength is that we provide the complete solution to the farmer. So, we are working regularly to provide the new-generation of solutions.

Now there are three, four ways in which we provide the new-generation solutions to the farmer. Number one, we work with the Japanese partners and we bring the patented technologies through the Japanese, particularly Nissan. So, number two, we in our R&D center and we backward-integrate for the new-generation generic. When I say new-generation generic, they are the off-patented molecules which are a monopoly in the country. So, we make the AI and we bring them at competitive price for the farmer and establish the brand there. Number three, we make new-generation formulations. When I say formulations, which means a mixture of two or more products or a new formulation, which is different than the past, which gives better results to a consumer. Simple example is Crocin versus — what do you call that? Combiflam, which is a mixture of two medicines. So, we try to bring a ready mixture for the consumer so that one medicine can give better results, his is spray costs come down, the medicine is our scientific mixture, we can bear the IP on this and this would be edge into the market. So, it’s a win-win situation for all. So, we bring these type of products also. And apart from that, we are bringing the biological solutions also to the pharma. So, these are the four ways with which we are bringing new molecules.

So, when I bring the molecules, for some of the molecules, I have to make technical ALs also. So, we backward-integrate and we make the new AIs also. And in some of the AIs, we are doing the backward integration so that we can reduce the dependence on China. So, these are various ways by which we are trying to build the new solutions to the farmer and we are continuously working on bringing the new solutions because we want to change the product mix, because now I believe that we have come to a point where there is no use of cellular — only generic products or only smaller products. So, generics which are losing their charm, we are trying to cut them by ourselves and bring the new solutions which have more value additions. Thank you.

Jatin Padharia — Individual Investor — Analyst

Excellent. Now the question is regarding capex. So, whatever capex we are doing, that is, I think, some capex we are doing to have us on that backward integration. And some is for capacity expansion like that. So, well, I mean just on [Speech Overlap] margins we will be getting — I mean, incremental margins and incremental revenue?

Rajesh Aggarwal — Managing Director

There will be, like we have given a projection of 25% growth in this year. We are already 20% plus. We have given the projection for 25% growth in the next year also. And I believe for a few years, I would be able to maintain this. So, we are trying that whereby continuous expanding by launching new products and by doing the backward integration and making the new AI, we continue this type of growth. So, I don’t want to give a very big number, but we should continue to grow by 25% for next two to three years by the virtue of investments we have made and we’ll continuously keep on introducing the new technologies which we have developed over a period of time. And definitely, since this will be value-added technologies, so they will support us in increasing our bottom-line more than the top-line. So, that will be the result.

Jatin Padharia — Individual Investor — Analyst

Okay. And the patents that we have are valid only in India, right?

Rajesh Aggarwal — Managing Director

I would suggest like patents are majorly in India, but some of the patents are also internationally valid. But yes, at the moment, we are focusing majorly on Indian patents. We have also have a JV which discovers the molecules for the world. So, in that case, we are looking for international patents also. So, major contribution is done by the Japan and then managed with us. So, I would suggest that a lot of questions I have to reply to, you can come back again in the queue, please.

Jatin Padharia — Individual Investor — Analyst

Okay. Thank you.

Rajesh Aggarwal — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Bharat Gupta from Fair Value Capital. Please, go ahead.

Bharat Gupta — Fair Value Capital — Analyst

Hi, Rajesh ji and Sandeep ji.

Rajesh Aggarwal — Managing Director

Yeah. Hi, Bharat.

Bharat Gupta — Fair Value Capital — Analyst

A couple of questions from my side. So, when we look at the overall revenue contribution coming out on from the B2C space, margins in this quarter is also remain on a muted side. So, just want to understand more on this. I mean, can you throw some light like what has been the primary reason for muted margins in this quarter?

Rajesh Aggarwal — Managing Director

There has been a very like a big impact on the prices in the market because of the market fluctuations. The prices in the beginning were very, very high. Then they became digital modest and there’s still the currency, lot of issues are there prevailing already. The currencies have gone up. The crude was high, then crude is reasonable at the moment. So, international markets are highly fluctuating. So, due to these fluctuations, we have to get the impact of those fluctuations actually on the inventories and everything. So, it has impacted. And otherwise also, like if you look at the second half of the year, it is a small business for us and it becomes very difficult to make good margins into this business. But still I believe that Q4 is going to outperform Q3 for us because we are expecting a lot of good sales of the new-generation molecules which is going to support. And this trend is going to continue throughout the next year, which will support us in building up the bottom-line. At the moment, yes, it has got impacted. So, I’ve already explained the international market trend, the pricing pressure, the currency pressure, both have impacted.

Bharat Gupta — Fair Value Capital — Analyst

Rajesh ji, just on the numbers side. So, what would be the rough impact on the currency side, like currency fluctuation? Have we taken any forex hit?

Rajesh Aggarwal — Managing Director

Forex hit is a regular thing basically because the way the like the process in India is that if you do the hedging also, you have to put it in the cost of this — the currency hit. So, our currency hit for the [indecipherable] about INR13 crores is the currency hit of this year actually. We have already made up import of more than INR500 crores. So, where we have got a hit of about INR13 crores, or the total cost of hedging you can say, plus including the loss in currency is INR13 crores. We are already hedged till March end.

Bharat Gupta — Fair Value Capital — Analyst

Any colors on the volume growth for this quarter?

Rajesh Aggarwal — Managing Director

Volume, yes, for some products we’ll be increasing the volumes. For some other products, there will may be the fall in the volume actually. So, volume is not very important because it is the value which is very, very important. When it comes to new generation, in the new generation, the volume is continuously coming down and the volume is coming — going up actually. So, I think that in times to come, or if I look at the 20 years of agrochemical industry, continuously, the volumes are coming down, but the value year-on-year is going up. To give you a small comparison, by 2005, this industry was about just INR2 billion, which has — not even INR2 billion, about INR2,500 crores. Today, it is — Indian market is more than INR3 billion and the quantity over this period has declined actually. So, continuously, the volumes of the generic products were very, very high, the prices were low. The new-generation products, our value is high and the volume is low actually. So, slowly, we are moving to be low-volume products. And as we keep on tail-cutting the generic molecules, the volume will continuously keep on falling.

Bharat Gupta — Fair Value Capital — Analyst

So, in the current quarter like, the pricing hikes across the Maharatna, so what would be the figure [Speech Overlap]

Rajesh Aggarwal — Managing Director

There was no price hike in this quarter. There was an impact, I told you already that the international market was highly fluctuating. So, there was some decline. There was no increase in the prices actually. A little decline in certain products as per the international adjustments.

Bharat Gupta — Fair Value Capital — Analyst

Also, sir, in terms of the inventory situation which is there, so like how is the situation in regard to the challenging [Indecipherable]

Rajesh Aggarwal — Managing Director

I don’t see a challenge actually, because some projects, yes, the inventory prices have fallen. But that impact has already happened actually and we are expecting a good season, good start for the new year because lot of new molecules. So, we have to again rebuild the inventory. So, for the new year, we’ll have to rebuild the inventory and that process is on.

Bharat Gupta — Fair Value Capital — Analyst

Okay. Also, Rajesh ji, in terms of the guidance, like you’ve given a strong — more than 20% kind of a growth for the consecutive year. But in terms of like if I look at the margins, so any particular internal target which we have in mind like in order to maintain a particular level of margin?

Rajesh Aggarwal — Managing Director

Like, I don’t want to give any exaggerated figure, but I will tell you that if I had grown by 20%, the margins will be growing better than that. And that will be evident from the first quarter performance itself.

Bharat Gupta — Fair Value Capital — Analyst

Right.

Rajesh Aggarwal — Managing Director

And this is Q4 also we should be positive actually. Year-on-year, we should be positive in terms of percentage. Let’s see.

Bharat Gupta — Fair Value Capital — Analyst

Right. So, our focus is towards improving on the margin, tail-cutting the lower-margin products, right?

Rajesh Aggarwal — Managing Director

We are tail-cutting the lower margin products and whatever we are introducing are new-generation solutions with better margins.

Bharat Gupta — Fair Value Capital — Analyst

Right. Also in the presentation, there has been a reference regarding a 19 registration for I think glyphosate potassium salt. And so, just wanted to understand the market size for these products and the applications across the crops [Speech Overlap]

Rajesh Aggarwal — Managing Director

Like these are all new products actually for the country. So, glyphosate potassium salt will be a new formulation for India. Internationally, it is very, very popular. But yes, we have recently got it. We got the registration in hand just yesterday. So, we are going to introduce this product. This will be one of the four molecules which are going to come in. Again, there is another product called Thiocyclam which we are going to manufacture in the month of March. So, we are going to introduce Supremo SP, which is again manufactured in the country for the first time. So, glyphosate potassium salt is called Bouncer. Then again, there is Tornado which is a mixture of two formulations where technicals we make already, so it will be launched at Tornado. And then the Mission. Mission is CTPR which is the largest-selling insecticide in the country. So, we are — we have already made the technical and now we are on the verge of making the formulation. This also will be launched in the month of March. So, there will be various launches in March. And even after March, there will be a few launches actually for the [Indecipherable] season.

Bharat Gupta — Fair Value Capital — Analyst

So, we are looking to target more than five products in the coming year?

Rajesh Aggarwal — Managing Director

Yes, there may be about four including the biologicals, another four, five products, maybe launch further. And these four products are the launches which are going to happen in the month of March itself.

Bharat Gupta — Fair Value Capital — Analyst

Right, sir. And just last question from my side in regard to the backward integration. So, you have specified that the work has been progressing like it has been completed by March ’23, right?

Rajesh Aggarwal — Managing Director

Yes.

Bharat Gupta — Fair Value Capital — Analyst

So, like what kind of a capital consumption we’ll be incurring from it? And in terms of margins, so will there be a good amount of impact for it, like in terms of our overall margins for it?

Rajesh Aggarwal — Managing Director

When I talk about the consumption, like we should be able to make the 100% usage of the backward-integrated tools by ourselves. And then there will be — some products will be sold also. So, I’ll not be able to declare the names of all the things. But yes, the idea is like some products, we consume 100% by ourselves. Some quantities we sell into the market. Number two, is your question about the [Indecipherable] market. So, that is very, very subjective because it depends on the market conditions. When the pricing goes up, at that time the contribution is more. When the prices are dipping, at that time the contribution is lower. But still that will be positive and it will be very, very helpful in building up a stable supply at a stable price. So, it will be very helpful.

Bharat Gupta — Fair Value Capital — Analyst

Sir, it will be curtailing the exposure which we’ll be having towards China, I think.

Rajesh Aggarwal — Managing Director

Definitely, it will be a big help. But at the same time, the imports of China is growing because of the introduction of new molecules. A lot of things have to come from China. So, I don’t see the total overall imports coming down. But yes, this will be helpful, quite helpful.

Bharat Gupta — Fair Value Capital — Analyst

Right, Rajesh ji. Thank you so much, sir. Wish you all the best for the coming quarters. That’s it from my side. Thanks, sir.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Dhruv Muchhal from HDFC Mutual Fund. Please, go ahead.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Yes, sir. Thank you so much. Sir, my question is that some of our new products have done reasonably well, if I look at the presentation that you’ve uploaded. The two products which were launched in FY ’22 — I mean, the products which were launched in FY ’22 and ’23 are driving a significant part of your growth. But, sir, coming back to the earlier point that the margins have not improved. So, sir, just wanted to — and probably that’s the reason is because of the high technical prices in the generic as we mentioned earlier. So, if I probably have to dissect into your new products that you’ve launched and the legacy products, is there a trend that your new products are delivering significantly better on contribution margin versus your legacy products? Can that be a reference? And why [Speech Overlap] high prices situation normalizes, you can see that reflecting in your overall numbers also then? Anything that you can give [Speech Overlap]

Rajesh Aggarwal — Managing Director

I’ll respond it one by one. It’s not easy to establish a new product into the market, because it cannot go by price, you have to work with the farmer and establish it. So, whatever is happening, it is happening by the strategy. Number one. Number two is, we talk about our classic products actually, which are hit in the market, they are always a hit and their number is also going up. Their sales is not coming down. In terms of number, if we talk about the volumes, the volumes of all the classic products which are more than a dozen, it is going up year-on-year, it’s not coming down actually. And it’s only us that we are not increasing the sale of certain things, then it is under control. Otherwise, there is tremendous [Technical Issues] we’re not killing those products. We’re killing the other range of products which are, number one, not delivering quantity; number two, not delivering margins; number three, they are not buying lifted from the market. So, only those products are being cut. So, this change in market has already started coming for last three, four months actually, and the change in inventory because M2M adjustments you have to make is already happening into the market and that impact has already happened, mostly I believe, in our inventories. So, due to this, the overall margins look a little impacted. So, there is low risk which I see because already the low-cost inventory has started entering into my system. And since it is there, so the prices have rationalized and we believe that the new season has to be able to see them. So, it is by strategy and by choice. It’s not automatic actually. The new product alone cannot go till you put a full pressure. So, since you have worked so hard, you have spent five years to 10 years on bringing a molecule and after investing so much money and if it is a good molecule, if we don’t work for that, then you are not doing justice with that. So, this comes with very hard work and very big efforts actually of years of scientists, the teams, and marketing team, development team, sales team, all the teams have to work hard. Then only the molecule gets established into the market. So, nobody can say that you had the product, your products are gone, now what is the situation. Now a new molecule is coming in, the new molecule is taking the shape. So, these are sheer something which competitors talk about actually and nothing more than that.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Sure. Sir, what I was also trying to just understand, sir, your new products probably will be delivering better on margins because they are [Speech Overlap]

Rajesh Aggarwal — Managing Director

Definitely. But you cannot cut down the small products.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Yeah. [Speech Overlap]

Rajesh Aggarwal — Managing Director

So, if you are maintaining a ration shop, you can’t say that I’ll stop selling sugar, I’ll not sell salt. You have to sell it. So, the large selling items, you have to like specialized in the large selling items, like Lethal. Lethal is my key brand actually. So, I’ll continue selling Lethal and keeping making the variants of Lethal and I’ll continue to do it even at a smaller market. But the new-generation things which comes, which comes as a margin actually. So, I’ll do with molecules also. So, we’ll work at generics — with the generics at one range and specialty at another range and we’ll keep on increasing both. Yes, please, your question.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Sir, I think my question got a bit misunderstood. Sir, what I’m trying to say is that you’re launching a lot of new products and some of these products are patented also, so they will deliver higher on margins. But the benefit is not probably reflected in the current quarter or the last nine months number is because of the impact of higher technical prices in some of the generic products which was there because of the inventory issues and all those things. I’m just trying to understand — a better way to understand this will be probably, if I can probably get some sense on what your contribution margin will be on some of the newly-launched products and the newly-launched products, because next year when the technical prices or everything normal from China, technical prices are normal [Speech Overlap]

Rajesh Aggarwal — Managing Director

You talk about — generally when it is focused Maharatna products, the margins are to the tune of like — gross margin I’m talking about, 35% plus. In the generic sometimes, we sell at 5% margins. So, these are the gross margins actually. So, that difference is very much there.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Got it. Okay. Sure, sir. That’s helpful. Thank you so much and all the best, sir. Thanks.

Rajesh Aggarwal — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Rohan Gupta from Nuvama. Please, go ahead.

Rohan Gupta — Nuvama — Analyst

Rajesh ji, have a good evening and thanks for the opportunity. Sir, [Technical Issues] the line of margin and margin profile, I think that your presentations says roughly nine months almost INR400 crores kind of turnover on and INR1,500 crores turnover would have come from the new products launched. That’s roughly a good 30% kind of numbers are. I think that this probably will be the best mix in the industry in terms of the revenue contributed from the new products. Despite that, sir — once again, I’m harping on the same issue, despite that, this is not getting reflected on the EBITDA margins. So, just wanted to understand that do our strategies are like in terms of even the launching the new products, they’re in a generic and compete with the many other products already in the market and where the pricing is not higher or significantly higher than the existing products in the market, or we have to just only compete in the market and keeping the prices low that, that’s where even the new products also, the margins are more or less in line what we get in our existing product basket, is it something, sir?

Rajesh Aggarwal — Managing Director

Last year, what has happened is like the new-generation molecules, they’re too early for a lot of products that are very expensive priced, because that was the situation. We were in registration at last moment, very small market, very small window, and we were forced to do that actually, which kept on like which led to a very high cost of some of the products. Some other generic products also, the prices in the market were very, very high and we were forced to buy at those prices. So, last year, my purchase cost was relatively higher, and this year, we are trying to keep it under control and this is going to help us in building up the margins for the new year actually. So, this year buying had been at much better prices than the previous year. So, this is going to support the building up the margins.

Rohan Gupta — Nuvama — Analyst

Okay. So, basically you’re saying that the raw material cost has been pretty high and that’s has helped [Speech Overlap]

Rajesh Aggarwal — Managing Director

In January last year, December, January, February, the cost of raw materials was very, very high and we were forced to purchase at higher price. And now this year, purchases whatever happened after Diwali, they are at very aggressive prices. So, this is going to help us.

Rohan Gupta — Nuvama — Analyst

Okay. So, that is one. And second is in terms of in general trend also, we have seen that the revenue contribution from the new products. So, when — just clarifying your presentation, so there should a ring like the INR400 crore revenue, which has been coming in nine — which has come in nine months. It is all the products which we have launched since FY ’13 or it is only like in the last five years? How you would track it, like the — what we see that the products are in the blue shade that FY ’19, the revenues from the [Speech Overlap]

Rajesh Aggarwal — Managing Director

I don’t have the collection, like this shade [Indecipherable] leap year, we are very, very clear in the year. So, this shows the product from FY ’19. If we look at the FY ’19 products, there is hardly an increase year-to-year. It is a decline. If we look at FY ’20 products, again, last year it was INR55 crores, this year it is INR48 crores. The increase comes from FY ’21, ’22, and ’23 products only. So, these colors are very, very evident actually, so…

Rohan Gupta — Nuvama — Analyst

Right. So, what we should see that the blue color, I mean, that the probability of product launch in FY ’19 that they have plateaued now and there is no incremental growth coming from those products?

Rajesh Aggarwal — Managing Director

Yeah. This shows the — denotes the color actually. So, the major increase in green and orange color, which are on the top. So, orange is it this year launches, INR103 crores has come from this year launches, INR117 crores has come from last year launches. Last year, the sale from these products was INR24 crores. This year, it INR117 crores so far.

Rohan Gupta — Nuvama — Analyst

Sir, what I want to understand that when in, say, in FY ’20, when we have launched a product with FY ’20 revenue was INR30 crores. The growth in the next year should have been exponential growth or should go on at least next three to four years. But it just plateaus at INR30 crores and INR43 crores and INR55 crores and INR47 crores. So…

Rajesh Aggarwal — Managing Director

We — Rohan, we cannot generalize anything. It depends on the product. What is the product, what is the response, how it is doing. So, I don’t have the product NIM handy. We can discuss about it specifically. But now, like if I talk about this year, so last year, we had launched two products. Both are big products actually and they are going to increase further into the next fiscal again. They’re going to go up. Thereafter, they might stabilize. And two products which are launched in this year, they are going to go up for at least two years again and then they might stabilize. [Indecipherable] Because now we [Speech Overlap]

Rohan Gupta — Nuvama — Analyst

Like, sir, this year has been fantastic in terms of the ramp-up of the revenues, like in both in green and orange. There has been significant ramp-up of almost INR220 crores kind of revenue has come from this new product itself.

Rajesh Aggarwal — Managing Director

I see — if I talk about — because these products are new, so I see the increase in the revenue coming in the next fiscal also for both these colors.

Rohan Gupta — Nuvama — Analyst

Okay. And even the raw material costs have now normalized, so we should be [Speech Overlap]

Rajesh Aggarwal — Managing Director

…the normalization of what it has ked to because I had to mark M2Ms, because when I’m purchasing the cheaper raw material and if I have stocks of higher price, then I have to make that adjustment. So, that adjustment has already happened. And it gives the opportunity for making money in future, yes, because it is all M2M losses, they are not real losses.

Rohan Gupta — Nuvama — Analyst

Correct. So, one is that higher raw material cost and and second, you mentioned INR19 crores is a forex loss, right?

Rajesh Aggarwal — Managing Director

Forex loss is INR14 crores, not INR19 crores.

Rohan Gupta — Nuvama — Analyst

INR14 crores, sorry. So, INR14 crores is the forex loss and high raw-material costs that has also impacted our current year profitability, which shouldn’t be the case going forward in FY ’24. Am I right, sir?

Rajesh Aggarwal — Managing Director

Yes.

Rohan Gupta — Nuvama — Analyst

Okay. And, sir, the 25% revenue growth which you are targeting, I believe that is coming from the — for the new product launches or we are still seeing that on the existing product itself, there is with those available level? And also in the export market, so all these…

Rajesh Aggarwal — Managing Director

So, all products which were launched in the last year and the products which are launched in this new year, there are certain hero products. We have selected six products for the next year. So, out of the six products, there will be a few — one launch only, which is going to come, five products are already launched into the market in the two years actually. So, all these six products will be the focus products for us in the next year. And these are going to contribute in a big way for us in future. So, at least for the next year, we have very high targets from these six products. So, sixth we take as a champion product.

Rohan Gupta — Nuvama — Analyst

Right, sir. Sir, a broad idea in terms of the margin difference in the new products like the six products or the newer product in FY ’23, what could have been a gross margin difference?

Rajesh Aggarwal — Managing Director

When it’s a focused Maharatna product, the gross margin are 35% plus. And when it is a generic product, the margins are 10% minus or 10% plus/minus I can say, because in every product and at every stage, it can’t be the same. It keeps on varying.

Rohan Gupta — Nuvama — Analyst

So, you’re saying that, I mean, beyond these products, the top products, top Navratna, our gross margins are roughly 10% below, below 10% on a generic product?

Rajesh Aggarwal — Managing Director

Maharatna — focused Maharatnas and Maharatnas are on 35% range. And the gold range and below are 10% plus/minus range.

Rohan Gupta — Nuvama — Analyst

What could have been the contribution of the revenues on the product which contribute below 10% gross margin, sir?

Rajesh Aggarwal — Managing Director

About 40% odd, 45%.

Rohan Gupta — Nuvama — Analyst

So, we have a 45% revenue which actually probably isn’t pulling our margins down, so…

Rajesh Aggarwal — Managing Director

[Speech Overlap] tail-cutting actually, we are trying to bring it down to 35% in the next fiscal.

Rohan Gupta — Nuvama — Analyst

Okay. So, the reason for doing the business of this product is basically to keep to SKUs alive, or basically at a bottom-line, it does add something at an absolute EBITDA? I understand a little bit lower, but, yeah.

Rajesh Aggarwal — Managing Director

There is a continuity in the market. It is not easy to cut down a product upfront because there are inventories, there are inventories in trade, there are inventories in factories, there are inventories of packaging material. So, you have to plan the things we’ll do it in next two years or one and a half years. So, we are on the verge, we are looking at about 40 products to — I wish to take it more than 40 actually at this moment. So, I had started that last year. So, I think I should be successful in cutting down 40 products this year.

Rohan Gupta — Nuvama — Analyst

So, what can be our target over the next two to three years on these products, sir, the revenue contribution?

Rajesh Aggarwal — Managing Director

Which products?

Rohan Gupta — Nuvama — Analyst

I mean, the products which are contributing below 10% which you are targeting 35% next year, I’m asking over the next two to three years, what is the target?

Rajesh Aggarwal — Managing Director

We’ll go slow actually. For next year, we’ll be 35%, then we’d target 30%. Hello?

Rohan Gupta — Nuvama — Analyst

Yes, sir. I’m there. Okay.

Rajesh Aggarwal — Managing Director

Yeah. ’24 we’ll target 35%, ’25 we’ll target 30%.

Rohan Gupta — Nuvama — Analyst

Okay. Sir, secondly is on our new product launches like CTPR and all which are the completely new products and have — are seeing a huge demand growth in the market. So, we have already got the registrations and we will be launching this product and we’ll also this being the — doing the B2B sales for this product, sir?

Rajesh Aggarwal — Managing Director

Yeah. We are planning to do that actually. So, in February, we’ll launch our brand, and of course, we are working with some partners. So, we’ll decide and close the partners also soon.

Rohan Gupta — Nuvama — Analyst

So we have got the registration, sir?

Rajesh Aggarwal — Managing Director

The launch is going to happen in February.

Rohan Gupta — Nuvama — Analyst

So I’m saying the total product — CTPR product registration is..

Rajesh Aggarwal — Managing Director

Prior the registration, I cannot do launch, I got the registration six months back. I was sitting on it, I was working with the company, I was trying to decide that how we have to proceed. So now we have decided we are going to make the technical by ourselves.

Rohan Gupta — Nuvama — Analyst

So sir, if I understand rightly, as of now, there are only three to four players like Natco and Best Agro and GSP Crop, who has got the product registration. Who have also got the product registration almost six months back. So there are already four to five players who have got this products registration, and maybe the market is going to be pretty crowded. Do you see that in next year? And what kind of market share you think that or revenues we can garner on the CTPR in next couple of years sir?

Rajesh Aggarwal — Managing Director

We have — difficult to talk about a couple of years. But this year, I would like to establish it as one of the key products. I kept this in the top six products of our list. So definitely, we’ll be targeting a big number out of this product.

Rohan Gupta — Nuvama — Analyst

Where we will be in our competitive intensity on this CTPR, so we are completely fully backward integrated or we are still buying some raw material from outside for CTPR?

Rajesh Aggarwal — Managing Director

Raw material definitely are going to come from China for everybody. So it hardly matters. So we are competitive with everybody and anybody. So it should be a good contributor to us because we are making our own Als and our own formulations. So we should be aggressive in prices.

Rohan Gupta — Nuvama — Analyst

Okay. Sir, in our business of B2B, what is the revenue share right now? If you can just give that number?

Rajesh Aggarwal — Managing Director

In B2B, exact number, I’ll just share.

Rohan Gupta — Nuvama — Analyst

Not number, I am not looking at all.

Rajesh Aggarwal — Managing Director

Roughly about INR400 crores is something we have achieved so far, so net of GST. So another roughly INR70 crores, INR80 crores — we’ll be roughly INR500 crores minus in totality this year.

Rohan Gupta — Nuvama — Analyst

Okay. So for now, INR400 crores is B2B and roughly INR100 crores is from the exports. So roughly INR500 crores is…

Rajesh Aggarwal — Managing Director

I’m not talking about nine months, I’m talking about 10 and half months now, almost 12 months. It’s not a nine-month figure.

Rohan Gupta — Nuvama — Analyst

So roughly, on a annual basis, it will be roughly — we can safely say that 35% revenue from B2B and exports and two-third is B2C.

Rajesh Aggarwal — Managing Director

Yes, yes.

Rohan Gupta — Nuvama — Analyst

Yes. We are also on the verge of commissioning the new facility, and you have remarks mentioned that a strong opportunity and import replacement in B2B market. Sir where we see that our B2B business panning out and with this INR110 crores investment? Where do you see that our B2B business can go? What kind of molecule can pick up? And…

Rajesh Aggarwal — Managing Director

If I talk about this year, current year, we are targeting roughly about INR500 crores B2B. This year, we can see a INR200 crores jump in B2B segment actually. So B2B and B2C, both are target INR200 crores, INR200 crores jump actually. And there will be a small jump in the export segment, which will be INR100 crores-odd this year. Next year, we’ll be targeting INR200 crores. So the target will be of roughly about INR500 crores, then, INR200 crores, INR200 crores and INR100 crores roughly. So in totality, how it turns out INR400 crores or whatever, I’ll declare in total. But roughly, the broad target will be like that.

Rohan Gupta — Nuvama — Analyst

And sir, margin profile will be similar in B2B, what we see in B2C or I mean, at EBITDA level?

Rajesh Aggarwal — Managing Director

At EBITDA Level, this is more or less similar because when you start selling the new generational molecules, the margins in the new generation molecules are better than the older generic products, actually. So since the sales is going to grow from the specialty side only. So I believe that it will be more or less similar.

Rohan Gupta — Nuvama — Analyst

Fine sir. Rajeshji, thank you very much for answering all the questions.

Rajesh Aggarwal — Managing Director

Than you.

Operator

[Operator Instructions] As there are no further questions from participants, I would like to hand the floor back to the management for closing comments. Please go ahead, sir.

Rajesh Aggarwal — Managing Director

Yes. So I would like to thank all the attendees for attending this virtual session. We believe that we have satisfactory run you through our company and business model and addressed every arriving questions thereon put upon the floor by the participants. We continue to see growth in our broad product portfolio and witness strong momentum across our business supported by R&D and backward integration initiatives. We remain focused on bringing new products, exploring new markets and creating value for all our stakeholders.

Please follow up with Investor Relations team, Vinayak and Naman from Captive IR, if you have any questions, which weren’t covered up in the session, and hope you have a great day ahead. Thank you once again. Thank you very much.

Operator

Thank you, members of the management. Ladies and gentlemen, on behalf of Insecticides India Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.