UPL Ltd (NSE:UPL) Q3 FY23 Earnings Concall dated Jan. 31, 2023.
Corporate Participants:
Radhika Arora — Head of Investor Relations
Jai Shroff — Chairman and Group Chief Executive Officer
Mike Frank — Chief Executive Officer of Global Crop Protection
Anand Vora — Global Chief Financial Officer
Analysts:
Jiten Doshi — Enam Asset Management — Analyst
S Ramesh — Nirmal Bang Equities — Analyst
Vishnu Kumar — Spark Capital — Analyst
Raj Tiwari — Global Chief Supply Chain Officer
Sonali Salgaonkar — Jefferies — Analyst
Rohan Gupta — Nuvama — Analyst
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the UPL Limited Q3 FY 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Radhika Arora. Thank you, and over to you ma’am.
Radhika Arora — Head of Investor Relations
Thanks, Vikram. Good morning and good evening to everyone. Thanks for joining us today for the results for the quarter and nine months ended 31st December 2022. On this call, we will be referring to a presentation that is available on our website, and we take as having read the Safe Harbor statement.
From the management team, we have with us today Group CEO, Jai Shroff; CEO of Global Crop Protection Business, Mike Frank; Group CFO, Rajendra Darak; Global CFO, Anand Vora; Supply Chain Officer, Raj Tiwari; CEO of Advanta Business, Bhupen Dubey; and the Head of India Region, Ashish Dobhal. We will start with an overview from Jai and Mike, and a financial update from Anand.
With that, let me now hand it over to Jai. Over to you, Jai.
Jai Shroff — Chairman and Group Chief Executive Officer
Thank you. Thank you, Radhika. Good morning to everyone. UPL continues to deliver strong quarter three numbers, all within 21% of growth. The Global Crop Protection platform grew 22%, Advanta Seed business grew 31%, while the Indian hi-tech platform UPL SAS remain flat despite unfavorable market dynamics in India. The rabi season, however, looks promising for India.
All over the three regions, the Global Crop Protection business except for Europe reported double-digit growth with America particularly witnessing strong traction growing by almost 30%. In fact, in Europe as well, we grew the business 10% in euro terms. The growth in Advanta Seed was supported by both volume and price realization, primarily in Sorghum, Sunflower and Field corn.
I’m pleased to share that the minority stake sale in the Advanta Enterprise has been successfully completed. For the stake sales in UPL SAS, we received all approvals and the entire process has been completed. We expect to receive investment from investors in UPL SAS in the fourth quarter. And lastly, one of the platforms, the Specialty Chemical business is scaling rapidly. Over the last four years, we have grown this business revenue from INR600 crores to INR1,500 crores in 2022.
So far during the last nine months of 2023, as well as our Specialty Chemical business grew by 22% to over INR1,250 crores. We believe that this platform will continue to grow at 25% CAGR over the next three to five years to scale rapidly. We are entering into new chemistry platform expanding capacity for existing molecules and operationalizing recently acquired Kudos manufacturing plant among other initiatives.
UPL is building a unique platform of capabilities to create — a cater to the growing Indian specialty chemical market demand, as this market continues to grow in all sectors in India. On sustainability front, as most of you are aware, one of our key focus area has been to rise sustainable farming practices globally. So it’s heartening to see as UPL continues to be ranked number one agrochemical company in sustainable performance by Sustainalytics for the third year running.
Finally, looking ahead to the fourth quarter, we are continue — confident of continuing our growth momentum and ending the year on a strong footing. As we said earlier, we are confident of achieving reduction in net debt to $2 billion by March ’23.
On that note, I’ll now hand over the floor to Mike, who will take you through the detailed overview of the global business performance. Over to you, Mike.
Mike Frank — Chief Executive Officer of Global Crop Protection
Thank you, Jai, and hello, everyone. I’m now pleased to share some highlights for our third quarter of fiscal year ’23. As you can see from our numbers the team at UPL have once again delivered strong performance, despite a number of challenges across the agricultural landscape. At the core of our strategy, we are serving farmers and growers across the globe, bringing new technologies and services that help them improve productivity, reduce risk and to grow the food and crops we produce more sustainably.
To activate this strategy is our customer-centric and agile organization, our unique backward integration and supply chain excellence, all of which have constantly helped us deliver impressive performance quarter-after-quarter. I’m very proud of the overall efforts and focus across our organization this past quarter.
Moving to the financial results, our growth was driven by improved price realization across regions and strong overall demand, which was supported by constructive grain commodity prices. The key regions that drove the growth in this quarter were Latin America, North America and India, each of which has strong growth versus last year in the same quarter. In fact, Latin America alone accounted for 54% of our total growth in revenue this quarter.
Overall, our revenue has grown by 21% compared with the same quarter last year, contribution margins are up by 20% and percent margins are about the same, which is at 43%. Our EBITDA grew by 14% on a year-on-year basis, this was achieved despite significant and very specific investments we made in enhancing our customer relationships and farmer connections. These investments will provide us with the teams and capabilities we need to drive our differentiated and sustainable portfolio. Overall, we delivered strong EBITDA and net profit.
Now let me talk about the performance of our regions in the quarter. In Latin America, we achieved 28% revenue growth. Brazil growth was especially impressive, driven primarily by insecticides and fungicides. Key insecticides products among those were [Indecipherable] with higher volumes and price realization. Also in Brazil, our growth was supported by the ramp up of fungicides such as Evolution, a new product for us and a fantastic fungicide and a key product in our differentiated offerings.
On Mexico, growth was driven by fungicides and our Natural Plant Protection biosolutions business. And growth in Argentina, despite challenging weather was very good to our herbicide products.
In North America, revenue grew by 30% in this quarter, driven by equal mix of improved pricing and growth in volumes being further supported by favorable exchange rate. Herbicides and our NPP sustainable solutions were key drivers for this growth.
In Europe, our revenue grew by around 3% versus last year impacted primarily by the euro devaluation, product bans, unfavorable weather and ongoing conflict in the region. However, despite such external challenges, we grew by an impressive 10% in the region in euro terms. Differentiated products with this overall growth in that region primarily through our insecticides and fungicides portfolios.
In India, our strong Q3 growth of around 19% versus last year was largely driven by our seeds business, Advanta. However, on crop protection, we were flat versus previous year due to unfavorable weather and overall high channel inventory leading to lower volumes. However, this impact was compensated through improved price realization. Going forward, Q4 in India is expected to be a strong quarter for us, driven by our sugarcane portfolio and fast growing seed treatment segment. We also expect to see strong traction in volumes in our newly launched multi-crop fungicides and insecticides.
In the rest of the world, our business was up around 12% driven primarily by improved pricing, despite high channel inventories in parts of Southeast Asia, and also unfavorable and specifically wet weather in several parts. Growth was primarily driven by insecticides in Southeast Asia, which was partly aided by the acquisition of PT Excel in Indonesia last year, as well as our herbicide business in Australia and New Zealand.
We remain committed, as Jai mentioned, to reimagining sustainability and also to mention and reiterate as Jai mentioned, UPL was ranked number one in our industry for sustainability performance by Sustainalytics for the third year running, which is a fantastic recognition of the hard work and great work our teams are doing across the board.
Before I hand over to Anand, our Global CFO, I would like to highlight that we are well placed to deliver strong growth for the full year on the back of our very strong order book. We are therefore confident of delivering at the higher end of our FY ’23 guidance of 12% to 15% revenue growth and 15% to 18% EBITDA growth.
Q3, as you can see has been a successful quarter for us, wherein we continued to deliver growth, following our strong first half performance. Consequently in the first nine months of FY ’23, we are focused on achieving overall quality growth with improved product mix and major pricing actions, which has enabled us to improve our margins and deliver robust 24% year-on-year growth in EBITDA. Going forward, as we look ahead to the fourth quarter, the demand for agrochemicals continues to be strong, especially in the Americas.
Our pipeline for volume growth — [Technical Issues] Our pipeline for volume growth in Q4 is supported by our new differentiated launches such as Evolution in Brazil, and Preview in North America, plus several launches in India. Although, while concerns related to crop protection product bans in Europe remain, we are well poised with our NPP biosolutions offerings there. Overall, we will continue to be diligent with SG&A spend despite being in an inflationary environment across various expense items. Finally, I’d like to congratulate our team for their resilience, dedication and unified focus in delivering such a strong performance this quarter.
I’ll now turn it over to Anand to take a deeper dive into the financial performance.
Anand Vora — Global Chief Financial Officer
Thank you, Mike. A warm welcome to all of you who have joined us today. I’ll begin by discussing the key financial highlights for the third quarter and the first nine months of the year, followed by an update on working capital and debt. We continue to deliver a strong performance in quarter three, with revenues growing by 21% year-on-year to INR13,679 crores. This is in spite of the challenging environment we face marked by price, pricing pressure on few molecules, the unfavorable weather and high channel inventory in some regions, including India and the continuing geopolitical uncertainty in Europe.
But most significantly, we also saw a strong year-on-year growth of 20% in contribution profits on the back of an improved product mix and rationalization of sales of low-margin products. The contribution margin for the quarter stood at around 43%. EBITDA at INR3,035 crores, showed a growth of 14% over that of the previous year. The EBITDA margins for the quarter stood at 22.2% as we continue to invest in SG&A. However, the theme is in line with our expectation of the guidance provided for the full year EBITDA growth.
Net finance costs increased by 49% to INR493 crores — from INR493 crores to INR732 crores with almost entire increase coming primarily due to significant rise in benchmark rates globally. We saw on a ballmark 400 basis point increase in benchmark rates in line with the increase in U.S. treasury.
Further, the FX impact for the quarter was in line with that of the same quarter previous year, despite the increase in cost of hedging during the quarter largely driven by increase in benchmark interest rates. Overall, the net profit for the quarter stood at INR1,087 crores, showing a healthy 16% growth.
Coming now to our first nine months performance. Revenue crossed the INR37,000 crore mark recording the growth of 22% while the contribution profit grew by 24%. Contribution margin at 43%, showed an improvement of 90 basis points over that of the previous year. Since the beginning of this fiscal, our emphasis has been on delivering quality growth with a better product mix and rationalization of sales of low margin products. Besides the cost pressures also led to higher pricing as is reflected in significant positive price variance of that of the previous year.
We expect to see healthy volume growth in Q4, the prices now stabilizing around current levels further supported by new product launches and strong demand in Americas and India as alluded by Mike earlier. On the operating profit front, EBITDA rose sharply by 24% to INR8,145 crores with margins improving by 40 basis points to 22%. This is in line with the guidance provided for the full year.
Net profit costs increased by 60% — sorry, net finance costs increased by 60% from INR1,231 crores to INR1,980 crores, of which almost INR432 crores or about 58% increase coming primarily due to a significant rise in benchmark interest rates. We saw a ballmark 400 basis points increase in benchmark rates, throughout the nine months or that of the U.S. treasury linked.
Effective tax rates for the first nine months stood at 11%, and should be around the guided figure of 15% for the full financial year. Finally, we saw a robust expansion in our net profit, which was 24% higher at INR2,777 crores for the first nine months. Moreover, our earnings per share for the same period grew by 26% at INR35.1.
Coming now to the working capital, given the seasonality of our business, as most of you are aware, the working capital increases through the year, peaked in Q3 and decreases substantially in Q3 [Phonetic]. In addition to this, our inventory levels are higher primarily on account of — our inventory levels are higher primarily on account of our current decision to sell closer to the season and thereby offering lower credit terms to improve the receivable days, and also because of the strong demand in Q4 along with uncertainties in supply chain.
As a result of these factors, working capital days increased to 121 days at the end of December ’22, an increase of 13 days for that of the previous year. Considering the strong demand and push for low credit terms, we expect to end the year in line with the guidance of 70 to 80 days of net working capital. But what is important to call out here is that the first nine months of the current fiscal, the business generated cash flow of USD636 million, with the help of cash generated by business additional net cash inflow of USD59 million coming from the corporate realignment.
As a result, we reduced our debt by USD173 million sequentially to USD3.3 billion as compared to September 2022 levels of USD3.5 billion. On a year-on-year basis, this gives us confidence that we will — we’re on close to reduce our net debt by USD500 million and bring it down to USD2 billion as guided as of 31st March 2023. With this expected reduction in debt, the net debt-to-EBITDA ratio would stand below 1.4 times by the end of financial year.
As regards to corporate realignment, which briefly Jai updated, the update is that as far as the realignment is concerened, we have closed the seeds business by transferring it to Advanta Enterprises Limited, effective 1st of December, 2022. Further, we also have bought out 22% of ADIA, TPG in the International Seeds business and our other non-crop section business for USD241 million. So post both these transactions, we have received a net inflow of USD59 million.
The pro forma numbers of Advanta Enterprises for the third quarter and nine months have been provided in the presentation on Slide 14. And for the next quarter onwards, we shall be providing audited numbers. Some key financials of Advanta Seeds for the third quarter are revenue stood at INR912 crores, reporting a robust growth of 31%, with that of the previous year. While growth in EBITDA was much faster at 54% to reach INR275 crores. EBITDA margins improved significantly by 460 basis points to 30 plus. On a year-on-year basis, Advanta delivered a strong performance with revenue increasing by 31% to INR2,736 crores with EBITDA growth of 41% to INR772 crores.
Finally, to now give you an update on the realignment of UPL sustainable agri solutions business, the stake sale in UPL SAS is expected to be completed very soon, and we have already received the requisite approvals. As stated earlier, the net inflow of USD200 million on stakes — on the sale of stake in UPL SAS will be used to retire the debt in Q4.
With this, now I ask the operator to open up the floor for question and answers.
Questions and Answers:
Operator
[Operator Instructions] We have a first question from the line of Jiten Doshi from Enam Asset Management. Please go ahead.
Jiten Doshi — Enam Asset Management — Analyst
Yeah. Good evening, Anand. My simple question is that are we expecting this $500 million debt reduction at the gross level or at the net level?
Anand Vora — Global Chief Financial Officer
We’ll be doing at the gross level, Jiten
Jiten Doshi — Enam Asset Management — Analyst
Okay. So we would say about INR4,000 crore plus gross debt gets reduced.
Anand Vora — Global Chief Financial Officer
Yeah. Of course, that will reflect in the net debt also.
Jiten Doshi — Enam Asset Management — Analyst
Right. So what would that translate into interest cost saving for the next year?
Anand Vora — Global Chief Financial Officer
Roughly, our average interest cost is about 7.5% in dollar terms.
Jiten Doshi — Enam Asset Management — Analyst
So it’s very high?
Anand Vora — Global Chief Financial Officer
You can say about — yeah. No, that’s — I think that’s the best with LIBOR at almost 5%, we have the finance in the cost of borrowing as compared to pretty much anybody in the industry.
Jiten Doshi — Enam Asset Management — Analyst
Now do you believe that our working capital cycle, you’ve got a good grip in. So this will now be an annual feature in terms of debt reduction?
Anand Vora — Global Chief Financial Officer
We expect to — as we are internally started several initiatives to bring down our working capital. As you are aware that we announced the joint venture with Bunge in Brazil. That’s one way go to the market, it should help us to bring down our working capital. In Latin America, there are several other initiatives, which we are taking internally to bring down the working capital. So it’s work in progress and we will continue to use the cash generated from business to reduce the debt.
Jiten Doshi — Enam Asset Management — Analyst
Sure. So going forward, this is kind of going to be a recurring feature in terms of debt reduction?
Anand Vora — Global Chief Financial Officer
Yeah. I mean, as you’ve seen, you have been a long investor with us. Whenever we have surplus cash, we have used to reduce the debt. It’s happened in 2013 to 2015. And for sure, we will use whatever surplus cash, Jiten, we’ll use to reduce the debt.
Jiten Doshi — Enam Asset Management — Analyst
Okay. So this means your balance sheet shrinks in terms of the ROC, we are not able to see the reflection. So if there is a shrinkage in the balance sheet, then the real ROC of the business comes out?
Anand Vora — Global Chief Financial Officer
It will, for sure, it will just — it will definitely that’s how it will happen, right.
Jai Shroff — Chairman and Group Chief Executive Officer
So Jiten bhai, the incentive to manage working capital tighter when interest it’s a higher for the whole industry and as such is the much, much stronger incentive. When interest rates were near zero, there was no incentive for the industry to really tighten up credit, because it was a much easier way for smaller companies also to give credit. So we believe that generally as interest rates become stronger, the industry will get much more disciplined because there is a real cost to giving longer credit terms. So in general, we believe that the cash flows and working capital for the whole industry will get tighter, because the cost of capital is now real capital, before it was nothing. So you will see the whole industry tightening up and we will benefit from that and obviously working capital cycles will reduce.
Jiten Doshi — Enam Asset Management — Analyst
Sure, sure. So this now becomes a trend and on the contrary it’s very good, because cash flow keeps on getting released.
Jai Shroff — Chairman and Group Chief Executive Officer
That’s right.
Jiten Doshi — Enam Asset Management — Analyst
Okay. Wishing you all the best. Thank you.
Anand Vora — Global Chief Financial Officer
Thank you.
Jai Shroff — Chairman and Group Chief Executive Officer
Thank you, Jiten bhai.
Jiten Doshi — Enam Asset Management — Analyst
Thank you.
Operator
Thank you. We have next question from the line of S Ramesh with Nirmal Bang Equities. Please go ahead.
S Ramesh — Nirmal Bang Equities — Analyst
Thank you. Good evening, and congratulations on the good numbers. So my first thought is when you look at the margin decline in the EBITDA margin, while you talked about increase in the revenue from sustainable and differentiated products. If you can throw some light in terms of how this has happened, because we are looking at increase in the contribution from the higher margin products. The margin pressure shouldn’t have been so much, 140 basis points. So if you can shed some light on that would be useful.
The second thought is, what is the kind of sense you have in terms of the sense for commodity prices and the excess inventory carryover and potential slowdown in the growth in volume, because the volume growth has been at a premium, although global companies are talking about sustained sense in commodity prices. Is there any risk to your volume growth aspiration, say, in the next couple of quarters given the volatility and whether how do you read that over the next two quarters?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah. So Mike here, maybe I’ll just take a first pass at this and Anand, you can make some comments as well. So as you can see from a contribution margin standpoint, our margins are relatively flat at close to 43%. So I think based on the mix of our sales, we’re seeing very similar margins. Obviously, last year this time, feedstocks were going up. We were pricing into that marketplace, but we were also liquidating inventory a year ago that was at a lower average cost of goods. And so, at this point in time, I mean, that was a benefit that we got last year that we weren’t able to enjoy this year. So overall, we’re quite pleased with our contribution margins at 43%.
If you go down to EBITDA, as I mentioned, we made some significant investments in our customer relations, specifically in Q3. And these were customer events, farmer promotions, and we did that specifically to really benefit our business over the next several years. And so, we made that investment. We think it was the right thing to do. But obviously, it did have an impact on our EBITDA margins.
Now with respect to your second question, from an inventory carryover standpoint, obviously, we’re going to continue to deinventory as we go through Q4. We’re expecting strong volume growth in Q4. As we commented a quarter ago, across the year, we’re expecting mid-single-digit volume increase. And so, we still have that expectation. So we are expecting a really strong volume growth in Q4. And that will put us really in a position where most of our inventory is fresh at the right cost of goods based on the durability of our supply chain. And so, I think that that’s a growth going into FY ’24.
Anand, could you please?
Anand Vora — Global Chief Financial Officer
Yeah. And maybe just on commodity prices. I mean the good news in our business is the grain commodity prices whether the wheat or corn, soybeans for a lot of the major commodities the commodity prices are remaining very strong, and that’s having a solid impact on the demand side of the equation. So we expect overall demand to stay strong. We’re seeing it right now play out with soybeans in Brazil. And in the near future, we’re going to be moving to some premium corn, where we would also expect to see higher premium corn acres. And again, that will create opportunities for us from an overall volume perspective. And so at this point, we see this setting up well.
S Ramesh — Nirmal Bang Equities — Analyst
So as a follow-up to that, Jai made some comments on your plants and specialty chemicals. So where is that reflected in your numbers? And is that something which you expect to contribute to our EBITDA and net profit in a meaningful manner, say in the next two years? Where do you see that?
Jai Shroff — Chairman and Group Chief Executive Officer
Yeah. That’s a profitable business segment, and it’s growing. As we said, we expect it to continue to grow, it will contribute to this EBITDA. And as we start giving more — sharing more details, we will start disclosing segment wise, while we report it. So you will see that.
S Ramesh — Nirmal Bang Equities — Analyst
Yeah. Is it something like [Indecipherable] business? Or is it more of a merchant sales with your key customers across the world? And what is the kind of growth one can expect in the next five years and what are the investments we need to make? That will give us a good perspective on that.
Jai Shroff — Chairman and Group Chief Executive Officer
So that business is, as we said, are going to grow about 25%, 25% a year. And we are constantly making investments. So we expect to not disclose the numbers of exact investment, but it’s going to be substantial.
S Ramesh — Nirmal Bang Equities — Analyst
Okay. Thank you very much. I’ll join the queue.
Operator
Thank you.
Jai Shroff — Chairman and Group Chief Executive Officer
Thank you.
Operator
Thank you, sir. We have next question from the line of Vishnu Kumar from Spark Capital. Please go ahead.
Vishnu Kumar — Spark Capital — Analyst
Good evening, and thanks for your time, sir. In the press release, you highlighted that there is channel deinventory taking place in certain markets. Any thoughts if you could just give on this particular point?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah, sure. If you think back over the last 24 months, starting with COVID and Omicron affect in Europe —
Vishnu Kumar — Spark Capital — Analyst
Sorry. There is — we are not able to hear your voice clearly, if you could probably come closer to the mic.
Mike Frank — Chief Executive Officer of Global Crop Protection
Okay. Yeah, so on channel deinventory, if you just go back in time over the last 24-plus months, there was supply chain concerns and so we did see manufacturers also build up inventories, but also at the distribution and retail level. And so if we look at this, it’s really a probably a pretty much a global reality that distribution levels for ag chemical products are a little bit higher than normal. In addition to that, obviously, as we talked about interest rates, those companies are also trying to manage their working capital. And so, we do expect over the next two to three quarters some level of deinventorying back to normalized inventory levels.
When we look at our businesses and our products specifically, we’ve been very disciplined. And so — and you can see that in our volume growth on a year-to-date basis. We haven’t been oversupplying the channel with our products. And so we believe that while we will have some headwinds because this will be an industry-wide impact in our portfolio, we’ll be well positioned, I think, versus some of the rest of the industry.
Vishnu Kumar — Spark Capital — Analyst
Okay. So you expect the pace of this to further increase or we’re just start off the deinventory situation, the inventory destocking, it is starting or we expect it to quicken pace in the next couple of quarters?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah. I think we can balance out within two to three quarters. And so, we probably saw a little bit of it happening already in our Q3 as we came through December. We would expect it again to be a feature in Q4. Again, we have guided to a strong Q4. But this will be an industry impact that we do expect to play out over the next several quarters.
Vishnu Kumar — Spark Capital — Analyst
Understood. In terms of our growth, most of it has been pricing and obviously FX. And I mean, we have taken commodities, have gone up a lot in the first half and our pricing has kind of caught up. Now, over the next couple of quarters, if the commodity — if the crude and other related commodities soften, should we see a price reversal next six, nine months? Do you see that as a trend or just your thoughts again on this?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah. I mean, at this point in time, maybe I’ll have Raj from the supply chain perspective and make a few comments. We are seeing that overall, feedstock costs have come down a little bit, but I would say they’re generally stabilized at this point. And so unless we see further decline in feedstocks, I wouldn’t expect to see much further pricing erosion. Raj, do you want to make some comments?
Raj Tiwari — Global Chief Supply Chain Officer
No, I think you said that. So basically, the prices are actually at a cost plus level today. Unless that there is some significant development happening on the geopolitical scenarios, the price is going to be at this level. And then from the quarter one onwards, when the demand starts picking up, then we feel that the prices may start going north wards. But at the current level, they have bottomed out.
Vishnu Kumar — Spark Capital — Analyst
Okay. So should we expect a double-digit pricing even in the fourth quarter?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah, I would say expectations, we’re going to continue to see some price growth. It may not be in the double digits, but it will be solid. I think what we’ll see versus the first three quarters more growth through volume. And so that’s based on our order book and our sales plan, that’s what we would expect to happen in Q4.
Vishnu Kumar — Spark Capital — Analyst
Understood, sir. And one last question on the debt. Heartening to see the $500 million reduction target. What would be the factoring or the receivables, I mean, which we have factored by end of March, rough understanding of what the number would be? Last year, I think March was INR12,000 odd crores. How much would the number probably be by end of ’23, March ’23?
Anand Vora — Global Chief Financial Officer
Yeah, we — Vishnu, Anand here. As we have guided earlier, we have tried to peg it at about $1.6 billion, but we could see some increase, although the increase will be lower than the growth in sales. So increase in our non-recourse factoring around over last year would be lower than that of the increase in sales growth.
Vishnu Kumar — Spark Capital — Analyst
Okay, sir. Got it. Thank you.
Operator
Thank you. We have next question from the line of Sonali Salgaonkar with Jefferies. Please go ahead.
Sonali Salgaonkar — Jefferies — Analyst
Thank you for the opportunity. Sir, my first question is just a bit on the clarification on the debt levels. As per your press release, currently, as of December ’22, we have INR275 billion of debt, that’s about $3.3 billion. And we’re expecting to get that down to $2 billion by the end of March quarter. So how much reduction are we expecting in Q4, please?
Anand Vora — Global Chief Financial Officer
So that’s the delta, that’s close to $1.3 billion.
Sonali Salgaonkar — Jefferies — Analyst
$1.3 billion. Okay. And on a year-on-year basis at March ’22 to ’23, we’re expecting $500 million of debt reduction. Is my understanding, correct?
Anand Vora — Global Chief Financial Officer
That’s right.
Sonali Salgaonkar — Jefferies — Analyst
Understand.
Anand Vora — Global Chief Financial Officer
That’s correct understanding.
Sonali Salgaonkar — Jefferies — Analyst
Yeah. So what is the net debt-to-EBITDA target that you are targeting?
Anand Vora — Global Chief Financial Officer
As I said in my commentary is going to be around 1.4 times if we deliver $2 billion of net debt. It should be in the range of 1.4 times net debt to EBITDA.
Sonali Salgaonkar — Jefferies — Analyst
Understand. Sir, and you also did mention in the initial comments that you are expanding capacities. So in light of that, what is our capex guidance?
Anand Vora — Global Chief Financial Officer
We guided for about INR3,300 crores of capex, both tangible and intangible. And we may end up with a little bit of less, but we are close to that level.
Sonali Salgaonkar — Jefferies — Analyst
Got it. Sir, and lastly, you did mention that there is some amount of high SG&A as per your press release. So where should we expect the SG&A to settle down at? Or do you expect it to keep on increasing in the coming quarters, if you are wanting to increase your brand visibility?
Anand Vora — Global Chief Financial Officer
Sonali, we generally don’t guide for SG&A. We guide for the EBITDA, and that’s something which we focus on. And we will deliver, as Mike alluded, we will deliver — we’ll be on the higher side of our guidance for both revenue as well as EBITDA.
Sonali Salgaonkar — Jefferies — Analyst
Got it. Sir, and just one last question from my side. On the volume growth this quarter has been almost flattish. That’s 1% volume growth. With the channel destocking happening in Q4, do you — how do you foresee the volumes?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah. So as I mentioned, we are expecting a strong volume growth in Q4. Again, the way we work with our channel partners, we haven’t loaded prematurely. In fact, if anything, we’re trying to place the product closer to the sales window to help the entire [Technical Issues] Yeah. So as I said earlier, we do expect strong volume growth. And I think based on — again, our order book and our relationships with our channel partners, we have a path to achieve that.
Sonali Salgaonkar — Jefferies — Analyst
Got it, sir. Thank you very much, and all the best.
Mike Frank — Chief Executive Officer of Global Crop Protection
Thank you.
Operator
Thank you. We’ll take last question from the line of Rohan Gupta from Nuvama. Please go ahead.
Rohan Gupta — Nuvama — Analyst
Yeah, sir. Thanks for the fortunately. Sir, just continuation from the previous question on the volume growth. So generally, when we guide in the start of the year, we only factor primarily volume-led growth. And thankfully, that this year, a price-led growth has been very solid, that has helped. But otherwise, even on an adjusted basis, also we had roughly just flattish or on a nine-month just 2% kind of volume growth. So in terms of this inventory destocking, which you’re talking about, do you see that it is across? And — or we have lost market share or the market itself has been just flattish in this year?
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah. I would say from an overall POG product that’s sold on ground and put on ground by farmers, the market is probably slightly up this year in the low single digits. And again, as we think about our volume that we’re placing, where we’re expecting on our year to be up about mid single digits. We will maintain our share or maybe grow it a little bit with respect to a product that’s sold all the way through to farmers that put on the ground.
Again, we’re being very disciplined in terms of the timing of our product to our distributors and then working with them closely so that we can all manage our working capital. So yeah, so I would say we’re very focused on not losing market share, but at the same time, managing working capital and being very smart in terms of where we have opportunities to take price and margin. We are doing that as well.
Rohan Gupta — Nuvama — Analyst
So sir, to maintain our target or in guidance of a single-digit volume growth, if that all has to come from Q4, it means that we are looking a very solid or maybe high double-digit volume growth for Q4, then only probably single-digit volume growth should be possible for the entire year. So is it that understanding right? That is one. And if that’s so, even if you’re looking at double-digit volume growth, and we are on the other hand, we are also looking at the working capital or the overall debt reduction to come down by almost $1.3 billion. In the Q4, the volume growth so strong that is going to drive the revenue growth significantly. On back of that, we are still looking at $1.3 billion debt reduction, slightly contradictory in terms of understanding. So if you can just give some explanation on this will be very helpful, sir.
Mike Frank — Chief Executive Officer of Global Crop Protection
Sure. As we come through Q4, there are a lot of moving parts. We will be inventory at the UPL level. We will have solid volume growth in our sales. We also have, by far, our strongest month of collections. And as Anand just mentioned earlier, we have some headroom from a factoring standpoint. So all of those things will come together, help us manage working capital, help us reduce our debt and again, I think, finish the year strong from a performance standpoint, but also set up our FY ’24.
Rohan Gupta — Nuvama — Analyst
Fine. Sir, just last question from my side. Sir, on a factoring, you mentioned that looking at the target of close to $1.6 billion, slightly maintaining. I get to a point that it will not be in line with the increasing sales increase. So it will be slightly less than that, but it’s still probably will be slightly higher than $1.6 billion. What is the factoring number, sir, right now when we end this quarter?
Mike Frank — Chief Executive Officer of Global Crop Protection
$1.1 billion.
Rohan Gupta — Nuvama — Analyst
$1.1 billion?
Mike Frank — Chief Executive Officer of Global Crop Protection
That’s right.
Rohan Gupta — Nuvama — Analyst
Okay. So we are looking close to the $500 million kind of increase in factoring that to support — release some cash on the balance sheet. That is helpful, sir. And sir, if you can just give some further breakup of this factoring number because we have been focusing on reducing the factoring from Brazil and moving to other markets, some broad number in terms of share that out of this 1.5 — $1 billion right now, how much share is from Brazil market and how much is from other world markets?
Anand Vora — Global Chief Financial Officer
Brazil is about $450 million, the rest is global markets. And we will peg it at around that level and that’s $500 million in Brazil. The rest will be all in the global markets.
Rohan Gupta — Nuvama — Analyst
Okay. Thank you, sir. Thanks a lot for answering the questions. Thank you.
Operator
Thank you. We take the last question from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Yeah, sir. Thank you so much. Sir, you mentioned about the excess inventory across the industry. At the same time, we are seeing that the technical prices from the Chinese market or from even Indian markets have started to come down. So the combination of two, do you think this could be a cause of concern for the industry as a whole? And also, how is the UPL positioned? This probably could be a near-term thing or very short-term thing, but just wanted to understand the situation.
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah, very good question. And again, the way we managed our business and work with our channel partners, I think we’re well positioned coming into Q4 and setting up for FY ’24. I think if you look at — you have to look at it company by company. But at the industry level, I would not expect to see as strong growth across the industry coming into this next year. I think it’s going to be a tighter market. There will be some of the inventory, as you said, there will be some price pressure coming out of the Chinese manufacturers. And so, that will have some impacts industry-wide. But I think, again, from our perspective, we’re focused on delivering a strong Q4 and getting set up for next year.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Sure. And probably the second question was on the interest cost. Should we believe the Q3 interest number, about INR890 crores, ex of the FX, I’m not sure what the FX amount here is, should be the peak number from — given the interest increase — I mean, I’m trying to understand, is the interest cost increase largely factored in the Q3 number? Or can there be a further upside to this?
Mike Frank — Chief Executive Officer of Global Crop Protection
With the debt reduction plan for Q4, I think this will be peak that we saw on a quarterly basis, so we should see a reduction in the interest cost as we move forward, purely because we are reducing the debt.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
But from an interest rate perspective, is largely everything factored in Q3 numbers or there’s still some lag effect still remaining?
Mike Frank — Chief Executive Officer of Global Crop Protection
No, no, everything is factored in.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Okay, perfect.
Mike Frank — Chief Executive Officer of Global Crop Protection
Yeah, I mean, LIBOR and so far we don’t control.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Yeah. That I understand.
Mike Frank — Chief Executive Officer of Global Crop Protection
So we will see guidance from you on that.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Yeah, we’re as [Indecipherable] as you, sir. Thank you so much, sir, and all the best. Thanks.
Mike Frank — Chief Executive Officer of Global Crop Protection
Thank you very much.
Operator
Thank you.
Mike Frank — Chief Executive Officer of Global Crop Protection
Thank you everybody.
Operator
Thank you, sir. I would now like to hand the conference over to Mr. Anand Vora for closing comments. Over to you, sir.
Anand Vora — Global Chief Financial Officer
Thank you. Thank you, everybody, for joining us on this call today. If you have any follow-up questions, you can reach out to Radhika Arora or you can reach out to me and —
Operator
[Operator Closing Remarks]