Thank you. We will now begin the Question-and-Answer session.

Thank you. The first question comes from the line of Ankur Periwal with Axis Capital. Please go ahead.

First question on the exports market. How are you seeing the product -wise demand as well as the pricing scenario there, given that Chinese competition on pricing sort of still keeps depressing? So your thoughts there first.

Yes. So thank you, Ankur, for asking question. So I think export, I must say, it is challenging unless you have a branded business in the countries you operate. So as far as CSM is concerned, where you have a contract with the company. I think it is okay, still fine because you can discuss with the counterparty and negotiate terms and conditions. As far as catalogue products are concerned, I think we have to remain competitive. And one of the products where we face challenges is really acephate because raw material has to come from China and then we have to process back and sell it to countries like Brazil and U.S. A nd there also China is also competing directly in those markets. So , other than that, I think we are quite competitive. We can compete with China. And again, it only depends on the demand situation. On CSM, not a challenge. I mean, because we have a contract. It is only the catalogue product where challenge becomes significant.

Sure, sir. And on the other products, Pendimethalin and other products, are we seeing.

So Pendy, metribuzin, hexaconazole including Metalaxyl we are still competitive. I think we can compete. So, I think other than acephate, it's not a big challenge.

Okay. Great. On the CSM side, we were thinking of or we had talked earlier that to increase the share of CSM here. Any luck there in terms of the ramp up?

Yes. So we did start making a product for a customer in U.S. First shipments have gone this year, and subsequent volume. So first shipment is well received from a quality perspective and everything else. We are in the process of securing more customers. Bu t I mean, as I've been saying in the past, that's a slow burn. It takes time to keep cultivating. There are 3, 4 products we are working parallelly on CSM and one will be already with an existing customer from where we make and supply product. So we are going to be adding those products, but they're all slow rate. On catalogue category, we are going to launch, I would say,

3 to 4 products in the next 3 years. And we are at the different stages of either advanced registration or pilot production and trying to increase some commercial quantities.

Sure, sir. Just next bit on the domestic part. If I heard the initial commentary right, we are looking at a lower cotton acreage for this financial year, at least given the macro, the rainfall and the new risk. And since our portfolio is slightly heavy on the cotton side, what are your thoughts on the domestic growth overall for this year?

So cotton, I would say anybody operating in crop protection sector. So we have stakes as far as cotton is concerned, both in crop protection as well as seed. Now seed, we have already factored in that this year, it is unlikely that cotton business will gro w. Two things have happened. We were pretty heavy on northern side and North side, Punjab and Haryana cotton area significant decline. Even in South and Central, 2 factors are playing. A ) it's a rain-fed area. When it rains less, farmers plant anyway less cotton. B) On the top of that, there has been a lot of spread of illegal HTBT cotton, which is being sold. So cotton, I think we are looking at maybe as we year, the end, maybe flat year, but we are focusing quite a lot on rice and maize and millet where we had launched quite a few products in last few years. This year, again, we have launched product in paddy, maize and millet. So focus has shifted right now for the current season to be more aggressive on other crops. I mean, cotton will remain important. In my view, cotton will recover. I mean these kind of rainfall situation happen once in a while. They do not happen every year.

Sure, sir. And just on the domestic crop protection growth as well, related to cotton.

Yes. So cotton is one crop that takes a lot of sprays. Now last year, if anybody remembers commentary, we said, look, cotton area, while there was a lot of area, farmers did not get chance to spray the crop because it was raining too much, right? Now while cotton area may go down, but sometimes this intermittent rain, whatever crop has been planted, cotton prices remain, I think, quite supportive. So farmers, those who have planted, if they are able to do field operations, it may have only marginal impact at the end of the day. So I mean, this is something looking at a crystal ball and saying what will happen from a rain perspective in September, October, August. It's very difficult to say, but I wouldn't be very pessimistic at this point of time. I would say sometimes good distr ibution of rain even if it's marginally lower, even if 90%, 95% of the normal cotton acres get planted, might still lead to a similar situation as last year.

Next question comes from the line of Praneet with SJ Investments.

So I wanted to understand in terms of the El Nino effect that everyone has been really talking about. Has it transpired in the ground? Or how is the sentiment on the ground at this point of time?

So El Nino certainly is a reality. Country has seen deficit rainfall. But you have to understand roughly 50% plus of the area in the country is irrigated has some kind of source of water. It's

only the 50%, which is highly dependent upon on rainfall. So I mean, as we see because of the delayed rain, there has been delayed sowing, but there's also been catch -up, right? Farmers -- because most of our farmers, they are not 1,000 acre, 5,000-acre farmer, they're able to quickly plant their crop. The only thing that changes is crop shift. So, for example, this year, pulses area has gone up, but we know for sure that groundnut area in Saurashtra has gone down because of delayed rain. We know cotton will be planted less, but rice seems to be on track. So it varies from area to area. Maize, certainly, initially, it was thought that maize will not be planted, but maize is getting planted. Some of the coarse grain, Bajra and all in the marginal areas in Rajasthan might get impacted. So it's a mixed picture. I still think that even in the worst-case scenario, 90%, 95% of the crop will get planted. Clarity is yet to emerge what farmers would prefer. I mean, soybean has got planted. There was in between soybean seed -related challenges, but farmers did plant all those crops. So to me, if crop gets established, at least on those areas, I'm sure farmers will try to protect because commodity prices are also firming up in anticipation of lower yields this year.

Sir, but in terms of volumes, do you think it will be more a flattish or a marginal degrowth for the year? Because I understand that if the sowing will happen, but the volumes might still take a hit right for the year?

So for example, I mean, so it's a very difficult question to answer. Assuming including insecticide, fungicide, herbicide and on a national area basis, on an average, say, 3 sprays are happening, and I don't know whether it's 3 or 4 or 2. I'm just giving y ou an example. If on an average, 3 sprays are happening. And last year in 20%, 30% of the area because of the weather factor, one spray got missed. So maybe 3 became average of 2.7, right. Now 90% area, if that crop gets sprayed more for farmers to protect their crop, we might still come back to the same number. I think it will be very situational. There are years where rainfall has been low, crop protection has still done well. So too early to predict. I think if you ask me this question in the middle of August, I'll be able to give you a better picture. It's too early to predict.

Understood, sir. Coming to the pricing, I think this quarter, we took a large pricing increase and most of our growth was price. So do you think we're going to take more price increases going forward? Or have we completely passed on our price -- like raw material price increases to the farmer?

So I think now focus has to be primarily competitive in the market. I think price increase during the mid -season is generally very difficult. So whatever price increases have to happen have happened. And somewhere we have been able to pass on the full cost increase, somewhere partial, somewhere none. But on an overall basis, I would think there will be marginal positive impact from the price.

Majority of the growth has to come from volume, and that's where your market excellence, your ability to work with the dealers, distributors, farmers generate demand, be very agile on positioning stocks in the market, all of those factors will come to play. And as I've been talking in the past, we have been very active in that area, more active than probably would have been in the past.

Sir, I was actually referring to because we had -- in the last few months, we had a large price increase in the input commodities, right? Were we able to pass on, let's say, like 0.8% or 1 -- the entire part of it or only like 80% of it? Where are we in the overall passing on level so far?

So I mean, overall, we have tried to increase the pass. But if you remember, I talked about when I discussed the March result in the April, we said, look, we are the first one to increase -- announce the price increase, we did. Until April, I think there was hardly any realization in the market. But of late, the market has moved on and price increase is effective. It depends on the product. Having said that, will everything will translate to margin? Answer is probably no, because you also have to make sure that you don't become uncompetitive in the market. We have to, at the end of the day, sell what we have produced. So will there be a price increase on an overall basis? The answer is yes. Will there be more volume increase this year? Our emphasis will be to sell more and capture market share because I also believe this year might be challenging for quite a few small players where they might have working capital issues or money to promote and be aggressive in the market, and that's where players like organized players will try to take advantage.

Got it, sir. But in terms of, let's say, channel inventory, I think we have a little elevated compared to last year. But how is the overall situation -- like in terms of the market, how is the channel inventory so far?

So channel inventory, I would say, is normalized now. It was more worrisome a month ago. I think off late, we have seen even in crops like soybean, but there's a shift. For example, there's a lesser demand for pre -emergent herbicide in soybean, but there's more demand for post - emergent herbicide. So in these situations, what happens, farmers will wait. So if they have sown the soybean seed, they'll say, "Okay, let me ensure that my crop emerges first, then I'll put money on the input." So this year, post -emergent herbicide demand is much more stronger than the pre -emergent. So as I said, because of the situation, mix will change. How it will change, it will depend on the situation on the ground, but we have to be ready for all the eventualities.

Got it, sir. But do we expect any more returns compared to last year, this year extra because of the situation? Or like is the returns level going to come down next fiscal year?

So return is another challenge, but I think every company, including ours, there's a method by which we account for returns. This year, we would be more cautious in accounting for returns. Probably we'll be accounting more rather than less, right? Because you don't know the situation, how situation evolve. And so there's always a formula and -- which is also -- there's AI-driven

model, customer feedback, dealer distributor feedback. We try to factor everything. Am I provisioning enough? Answer is yes. How much enough that is going to be enough, I don't know.

Got it, sir. So is it a fair understanding, sir, because it's so uncertain, you just want to put as much product as possible, whatever offtakes is going to offtake.

Yes. So I mean, we are cautious about that situation certainly.

Got it, sir. But you also mentioned this line of unorganized probably consolidating. So do you think how -- like what kind of impact can this have for the organized players? Because you mentioned the working capital issues this year is going to affect them badly. So do you think the organized share -- how much do you think it will grow?

So this sector suffers from oversupply, right? So there's a slightly less supply in the market. It helps companies improve their return metrics and everything else. There's always more supply than the market can take. That's the reality of this market. I mean, be it seed, be it crop protection. So -- I think the larger challenge, which we are not talking here is money getting stuck because of the fertilizer, right? Because when fertilizer deficit because of this war situation happened, everybody st ocked fertilizers. So money went to fertilizer and then fertilizer liquidation got delayed because of the delayed rain. As a result, obviously, every company will have a delayed offtake of crop protection product and subsequent impact on the cash flows.

Got it, sir. So -- but in terms of the raw material spiking, do you think -- do you see it stabilizing and going down? Or do you expect these levels to continue because crude and everything has been stabilizing?

So about a month ago, when this MOU was signed between 2 countries, I think things have started looking as things have cooled down and prices have started trending towards normal. But last 5, 7 days of development, I mean, at this point of time, there's enough inventory for kharif. So nobody is panicking. As a result, it is not seen. But I think as fresh buying starts, we would see that. And I have to -- because we are not buying a lot now, we have stocked enough for the kharif season. It's only when rabi procurement will start now in the month of August, we will see how situation is. But I'm sure things which are directly correlated, for example, people buy cyclohexanone C9 as a solvent. That is actually linked to crude prices. People increase up and down as soon as crude prices go up and down. So is it a general trend? I think most of the people have stocked for the kharif. So there's no panic at this point of time. Will it -- this situation persists, will people have to pay higher price than the rabi input? The answer is yes.

Okay. So you expect still price to go up from here?

Okay. But have you seen any tapering down, let's say, from the peak? Like what percentage have you seen from the peak?

They've significantly tapered down. Right now because demand-supply situation is normalized. So you don't see that spike. It's only when people go for a stocking for next season, things start beginning there.

Got it, sir. I understand competitiveness, you mentioned that we want to remain competitive, and we don't want to raise the prices too much. Have you seen any new players or like the existing players getting more aggressive in the market now that they're b ecoming more competitive and they're being more aggressive in the market?

I mean not noticed. I think everybody has the same challenge. Everybody would like to optimize their income and profit. So I haven't seen that kind of panic movement. Can that happen? We will see at this point of time. Generally, everybody is holding on. E verybody seems to be very optimistic.

Next question comes from the line of Sonika Padulia, Millenium Mams. Please go ahead.

My question is about long-term value creation. Like the agrochemical industry remaining quite competitive. So I wanted to know like a few years from now, what do you believe will be Rallis India's strongest competitive advantage?

So I think our -- so I mean, 2 things. One thing is our brand, I think, is our biggest strength, I must say. The other thing, we are actually working on the portfolio because brand alone will not be enough. We are not able to supply product which farmer wi ll need at the competitive price. So our focus on R&D is much more sharper than in the past, and we continue to put more effort on increasing our R&D output, our collaboration efforts. I think a combination of these 3 things and really our customer outreach now more trackable with a lot of digital investment. These 3 core areas, as we have articulated and being a little bit more aggressive on seed as well as soil and plant health, which are a high-margin business. I think a combination of these things and being on the top of fixed cost. I think these 4, 5 factors should ensure that we remain competitive in the marketplace and a formidable player. And as I said, look, these businesses margins cannot be tracked on a quarter-on-quarter basis. Two years ago, we said we want to deliver 500 basis points over a period of 5 years EBITDA margin, where I think we're on the track. That's how people should see that.

Now talking about R&D, like Rallis has been consistently investing in R&D, product registration and the capabilities, manufacturing capabilities. Like you have taken a difficult decision of impairing certain development assets. Then how do you ensure that whatever has been invested, like that gives -- like how do you go with the project evaluation so that every rupee invested today generates superior returns?

So I think 2 things fundamentally I've talked about in the past: a, focusing on R&D. So a few things we stopped doing and we'll not research vegetable seeds because we are not competitive. We will not invest money on GM crops. We stopped that. So we got very focused on only doing R&D on when it comes to seed 5 crops. Soil and plant health business primarily was dependent on third-party products. So we took a conscious choice to build capabilities in that area. To that extent, we have started taking steps. So while we will continue to in -source products from other R&D and provide them market access, but we would build our capabilities on soil and plant health segment as well because I believe that's very critical, not only for Indian agriculture, but also br inging robustness to our portfolio and offering more comprehensive solution to the farmer. And even in soil and crop protection, we actually have focused on 2 areas more. One is really being very sharp, laser-focused. And we have portfolio department, which has been strengthened. We have added a layer of product development team between marketing, R&D and sales so that we have more rigor in what we do, how we do. And then w e also have put a strong B2B team, which is focusing and reaching out to global collaborators to access new products. So a combination of things will ensure that we remain competitive.

Sir, my last question, like as a shareholder, if I meet you again after 3 years, so what are the measurable outcomes that you would want me to see in Rallis India that would conclude that there has been some structural transformation that has happened and like -- that it has been transferred into a higher quality business, delivering sustainable growth and superior shareholders.

Let me ask your question. What would be your expectation 3 years down the line from us?

3 years down the line, I want to see Rallis as the only company that is coming to everyone's mind when we think about investing in this sector or segment.

Okay. So Rallis should be top of mind is that's what I see, right? I mean, obviously, I mean, all what I said I'm doing, that's a single aim that we should be seen as a significant player in transformation of agriculture at the same time, delivering superior return to shareholders. I mean that's all we are working for. And that will not come unless we manage our back-end process as well, be it R&D, product advancement, be it cost competitiveness, collaborations, manufacturing operations. So I think those are the component, how part of it. Our goals are very aligned with our aspirations. And ultimately, shareholders look for delivery of margins, right? So we want to be a consistent company, which delivers 15% plus EBITDA margin even in a bad year. So that kind of consistency and stability we want to bring in.

Thank you. The next question comes from the line of Raja kumar Vaidyanathan with RK Investments.

Yes, I can hear you.

Sir, just 2 questions. So the first question is this rupee depreciation, how much it has improved the competitiveness of Rallis with respect to the B2B business?

Yes. I think it's a double -edged sword because when you buy raw material in dollar, you also end up paying more rupees. But I think because we are a net exporter, net -net, it is positive for us.

No. I know it's positive, but I'm asking because you're still saying that you're facing competition from Chinese. So just want to know, has it not helped you improve your competitiveness?

I mean it does on an overall basis. And that's the reason in spite of delivering lower volume on export, our profitability contribution to the business has grown. So it has added to the profitability.

Okay. So -- but do you see yourself bettering the competition go forward with the current rupee levels?

See, I think, look, so we are competing with Chinese players as well as Indian players in overseas market. So obviously, when it comes to Indian players, I don't think our situation gets any worse, right? With Chinese players, it is product specific. So fo r example, I keep saying acephate is a problem because acephate have to buy raw material from the same supplier who also produces acephate produces and sells to customers in Brazil and U.S. So I think there are 1 or 2 products that there is a specific issue. But otherwise, by and large, in other products, we are competitive. Okay.

Okay. Got it, sir. Sir, the second question is, I want to know what is your outlook on the sugarcane and the chilli crop. And I also want to know how much contribution you get from these 2 crops?

So chilli is an important contributor to us, not only to us, but in general for crop protection industry. One of our products was badly impacted last year. Cluster we sell because of chilli and because commodity prices were very low. This year, chilli planting intentions are positive, even commodity prices are high. So I think this year, Chilli should see recovery. Now sugarcane, I think as of now, it's a crop which takes a lot of water, right? While planting is there, how water situation will evolve, I think it will. But as of now, I would say sugarcane is also broadly positive.

Okay. And this improvement in chilli, will it improve your top line and sales, I mean, significantly?

It should, yes. I mean, the products which are specific to chilli have suffered last year, it should lead to positive sentiment. Now it is all going to happen in quarter 2. So I can't really say how things will evolve. But by and large, quarter 2 and 3 whe re chilli products go. I mean, at this point of time, I have no reason not to be optimistic.

Okay. Sorry to labor on the same question. So I just wonder whether this chilli improvement in chilli will it help you in terms of showing the growth on the domestic Crop Care segment?

Yes, it should. I mean, if everything goes from here on as expected. It matter in every crop. And it's a general answer that crop, whether crop is there or not, whether farmers have enough resources in terms of water to raise the crop or not and then pet pressure and commodity prices. So farmers, if commodity prices are strong and they do not have any risk of not able to grow the crop, they tend to invest in the inputs.

Next question comes from the line of Rohit Nagraj with 360 ONE Capital.

Sir, first question is due to the shift in cotton and short duration crops, will there be any impact on the agrochemical consumption for us and generally for the industry?

So I think it depends. As I said, it's as a thumb rule. So last year, a lot of cotton was planted, I mean, certainly significantly higher than current year and rainfalls were also very good. But then what happened, it rained a lot in the month of August an d September as a result, in spite of a standing crop, farmers did not get time to spray. And then we said, okay, insecticide business in many crops has suffered because there was a low commodity prices that farmers did not get time to conduct the operation. Now -- so 5%, 10% less crop with an open window to farmers, those who have already planted the crop on 90% of the acre actually can nullify the impact of lower crop. I think what is important is a decent moisture environment for farmers to continue to grow crop actually might turn out to be more positive than what we think it could be in reality.

Sure Sir, second is on the biologicals or bio-fertilizers. So last year, it was impacted because of the ban. So prior to that, what could be the percentage of sales from biological bio -fertilizer in the total revenues? And will we see a material traction during the ongoing quarter and in Q1 from the biologicals perspective?

I think overall, I would say biologicals should do better than -- significantly better than last year.

Right. And any understanding in terms of the overall sales, what could be the contribution?

So it's a smaller segment relatively, but obviously, it's more profitable. I mean, for example, in quarter 1, it has grown by 10% -- now this was also a quarter where crop sowing was slow. So as crop sowing picks up and farmers come back to apply various m icronutrients and bio - stimulant, bio-fertilizers, water-soluble fertilizer, I think I expect this to certainly pick up faster than what it has done in the past because there has been a lot of positive regulatory development. As of now, we do not have any c hallenges from our portfolio perspective from not able to sell. So it should become even more positive in my view.

So I mean -- and this is a very interesting question because I can tell you in my more than 3 decades of career, nobody has been able to predict the future in this. So if you remember, in '24 and '25, we said we could have sold more because we were getting less seed from production, and it was happening because there was too much rain in the month of October and November and seed harvesting getting -- seed planting getting delayed as a result, harvesting or industry's ability to supply on time. Last year -- so majority of the seed other than cotton gets planted in the month of October, okay? Cotton production is already in the field. And in fact, we have taken a proactive step to reduce the production acre this year because each company will carr y forward cotton seed inventory, which is good enough to meet if not all, at least 30%, 40%, 50% of the next year requirement, right? So from a seed production perspective, cotton companies will not have a challenge. Now if there's a significant failure of cotton seed production in the current season, this could become a challenge, but nobody can predict. We'll only know in October, November and December. Now all maize, rice, Bajra and other crop production season begins in October and crop comes from harvest in the month of March and April, processed packed and sold and some stored in the cold storage for future. Last year, monsoon ended in the month of September. As a result, there was a significant planting because the industry has suffered for the last 2, 3 years because of the shortage of the seed. There was a lot of planting of seed crop and rains also coopera ted. As a result, this year, actually, industry has excess production of everything. So there's enough corn, rice, everything is available. But again, it is not enough to cover the next year. Again, seed companies will go for next planting season in the month of September. So if it continues to rain in the month of October, November, planting will get delayed and you get into a challenging situation. In normal course, I would say, seed industry is sitting on the surplus this year, which should help us in better managing next season.

Next question comes from the line of Gunjan Sharma with Guruji Associates.

So my question would be for the seed segment. So first of all, what is the position of our inventory in comparison to the last year? In addition to cotton, which crops are majorly responsible for this variance? And what would be the reason for the same?

So as I said, inventory situation is comfortable. I would say last year, our hero was cotton. This year, our hero is going to be rice, maize and millet and hopefully, mustard because oilseed prices are also up, but mustard season will come in the month of September. This year, because of the factors I explained earlier to the question, cotton is going to be subdued because North cotton did not get planted whe re we had very high stake with Diggaz. South and Cen tral also cotton area is lower.

And also there has been a spread of illegal HT cotton in the northern area. So cotton, I do not expect much growth as we mean, when I look at the year-end forecast, but other crops, we should grow significantly over last year. And I mean that's an advantage of diversification in seeds while in plant health and crop protection, one of the other things works. So last year, cotton took us where we reached. This year, probably we'll have to rely on other crops.

Right, I ask which crops are leading to the higher inventory versus last year.

Cotton, I mean everybody had planned for the production and planting got delayed. I mean not only delayed, also reduced. And then illegal HTBt cotton came in the market.

Other crops are on similar lines of inventory?

So sometimes, I mean, in rice and corn, some extra inventory is a good problem to have.

Alright Sir. And sir, second question would be that EBITDA margin in seed business has gone up from 26% to 30%. So what are the key factors that drove this improvement?

So I think the key factor really is the mix change. So what happens? Cotton because of the government price control, margins are always lower, whereas margins on rice, maize and millet are higher. So when proportion of these products go up relative to cott on, margins improve. So those are the -- it's basically product mix.

Product mix, right. And sir, how do we compare the yield of this year as compared to the earlier years?

So productivity-wise, we can get you the details. But I think this year, the challenge at the time of harvest happened was that because of gas -- so all seed which gets harvested has to be gas dried, and majority of the drying capacity is located in and around in Hyderabad and seed intake starts coming in from the month of March. When war began in the month of end of February, there was a suddenly gas crisis, if some of you remember, right, including domestic and industrial. As a result, gas was not available in farmers or harvesting crop and saying take away your crop. So we had to actually do what we call pad drying, what we call open field drying of the seed, not only us, many companies because enough seed capacity was not available. And the harvest was much bigger than the previous year to the extent of 50% in some crops. So while yield was higher, but that may not translate to cost benefit because when you dry the seed in open field, your recovery is less. So whatever gains came from the yield improvement, probably for neutralized by the cost of extra drying in the field as well as lesser recovery. So we haven't done that math. I think that seasonal work is still in progress. We would be probably able to give you more clarity maybe later. Maybe you can send an e -mail to Chirjeev, we can provide a greater clarity, but we are still working out those numbers. I mean as soon as harvest comes, our primary focus becomes on

whatever is recovered, please process back and sell it then to the market. So what has happened, we do post mart analysis is done later on.

Sure. Just one last question, sir. Your seed business has grown well this quarter. I believe earlier you mentioned this was led by price improvement.

So cotton, there's a volume drop, but there's a price, price, price as well as some marginal -- I mean, some improvement in the volumes of rice, maize, millet.

Okay. And what about the price improvement, sir?

So if you look at the mix, I think we have about 6% overall improvement. I would say a lot of it is actually driven by price.

Next question comes from the line of Abhijit Akella with Kotak Securities.

Sir, there's a INR35 crores provision reversal within employee cost, I believe, this quarter, which is shown in footnote 6. Adjusted for that, the employee cost would be INR87 crores, which is up quite sharply both year -on-year and sequentially. So if you could please just help us understand what the reason for that is as well as the sharp increase in other expenses as well that we see this quarter.

Yes. I'll ask Bhaskar to give you the details.

Yes. As far as the INR35 crores number is concerned, INR10 crores of that would be more only Q4 of last year versus Q1 difference. But like -to-like quarter, June last year versus this, it's not a difference, okay? So that leaves us only with INR24 crores, which is more a onetime correction only of this year. This is not likely to repeat at all.

Sorry, just to clarify, you said the year -on-year difference is INR34 crores because of the provision reversal.

INR35 crores is the number, right? Out of that, around INR10 crores to INR11 crores is a difference, which was there in like-to-like quarter last quarter as well as last June as well as this June. So we do not need to take that for comparison because it happens every year. But INR24 crores is a onetime thing, which is specific for this year, you can say, but this is not likely to repeat in any other quarter. This is a onetime thing which is happening. That's it. Yes, exactly. So the increase in the cost would be around 12%, which i s normal in inflation, which always happens year-on-year.

Okay. So 1Q of every year tends to have some of these items which don't recur in the other quarters?

Yes, exactly.

See, in certain cases, we have had certain onetime costs, which also may not be repetitive. But then yes, these costs are there.

Okay. And this INR35 crores provision reversal, if you could please just help us understand what exactly this item is related to?

As I mentioned, about INR11 crores is more about the performance incentive, right, at the year- end when we see what is to be given. So we understand what is to be given and then what is not given is reversed in the first quarter because the payouts happen during the first quarter. So any provision difference is settled in the first quarter. And this is more a recurring thing, you can say. This would be happening in every Q1 of every year. However, the balance INR24 crores, what is there as a reversal, that's more to do with the certain restructuring and retiral stuff, which doesn't happen in every year actually.

All right. And sir. For Mr. Shukla, just one question here. Sir, if I heard you correctly in your opening remarks, I think you mentioned that for the crop protection domestic market, you're expecting -- rather the industry is expected to grow at, say, 6% t o 8% this year and seeds somewhere in the mid- to high single digits. Are those really a reasonable estimate for the year?

Mid to high minus cotton.

Sorry, mid to high minus cotton.

Yes, cotton, you have to exclude from the conversation and cotton is a challenging year.

Right, right. But agrochemicals, you still think 6%, 8% is possible for the year despite the...

Because I think -- I mean p rice increase will be a reality, right? So it's quite fair to assume because that's the average cost -- input cost increase unless really it becomes so competitive, so much of inventory in the market that people resort to unnecessary discounting. At this point of time, I haven't seen any panic in the market. That means demand supply is probably fairly balanced. So the price has increase alone should take care of that 6% to 8% growth.

Understood, sir. And just one last thing. Is there a spillover of sales for either of our businesses, crop protection or seeds from 1Q to 2Q?

Actually, we are very careful because, I mean, the way we close our years, we try to -- I mean, the only thing happens is sometimes return provisions, right? Because that is very, very difficult to estimate what we have sold in the month of, say, March. Now when you relook at -- so other than, I mean, some here and there adjustment, we are very calibrated and careful about what we say and what we deliver. I mean there will always be some but it will be part of the normal course of business.

You mentioned in the opening remarks that the working capital, it has increased on the industry- wide. So just wanted to understand what is the working capital that we have at Rallis this year in the June versus last year in number of days?

Yes. So working capital, net to net, it has kind of increased by around 15 to 20 days. So yes, so if you ask me the reason, the reason is more like the fertilizer availability, the shortage which was there, people flock to buy that and book that actually. So farmers had blocked their cash first into the fertilizer. So that's when they have rationing issues for the other agri inputs, which they need to spend on. It is pretty much the same situation for most of the people in this industry.

Okay. Sir, the next question that I wanted to understand was, so sir mentioned on the sales return side that it is difficult to predict what could be the sales return or it is an industry -wide phenomenon because while we have placed into the channel, it is not very clear as to we can have 100% liquidation of the thing. So until 21st of July, as we are sitting today, have you seen any sales return until now?

So yes, I mean, we do. For example, cotton seed for North India would have taken back in the quarter 1 itself, right? So it's crop specific, product specific. Now for crop protection, I think majority of the returns will not happen by June. But whatever was may be supplied for rabi season before December quarter, and that does not get sold and there's no opportunity or in the March quarter, there's no opportunity to sell in Kharif wil l obviously be taken back. So it's product crop specific. All the pre -emergence herbicide business for rice, soybean, ground nut, sugarcane everything will be taken back in this quarter. So it changes from crop to crop and product category to category. But it's again, it's a very normal thing because there's no point in leaving product, which is not going to be consumed and unnecessarily having receivables on the book.

Right. Also, sir, one last thing. You also mentioned on the capacity utilization that it has slightly increased from the last year. So could you just help us with what is the levels current year versus last year? And also the kind of capex that we have had in the past, what is the incremental sales that we are getting from that?

So I think this is not a detailed question. I would ask Chirjeev to get back to you with the detail because there are multiple plants we have. It's plant specific, product specific, he can provide the detailed version of it.

Next question comes from the line of Riju with Antique Stock Broking.

First question regarding the -- some of the media reports suggest that in North India, especially for the paddy crops, farmers are doing sowing. So what can impact in terms of demand in herbicides consumption? And if we have any portfolio, like if we have any strong product there, like how do you see that the opportunity in this season?

So as a thumb rule, when farmers move from transplanted rice to direct seeded rice, consumption of both pre -emergence, early post and post -emergence increases. So your question is, do we

have a portfolio, yes, and we are launching new products. Even this year, we have launched a new rice herbicide, including we have started participating by in -licensing a direct seeded rice technology, and we have already sold on a pilot basis some quantity particularly in Chhattisgarh region. So yes, we are participating in that segment. We are adding product.

But do we have any kind of existing product or a strong brand that can take the opportunity or like grow in the herbicide segment since until now herbicide revenue was not that much strong this year?

Yes. So 2 years ago, I said that, look, our herbicide is our weakness, and we have started adding products. But as we speak this year, if you say this quarter, just this quarter, actually, herbicide is our largest contributor followed by insecticide and fungicide. And our herbicide business has grown by 12%.

Understood. And sir, in terms of second question, I think in 4Q, you have mentioned that we are -- like we have done some prebuying for the inputs or input material in the month of Feb or early March anticipation of price hike. So was there any kind of a p ositive impact that we have recorded this quarter? And if you could quantify the same?

So I mean, you're right that we did say and we did procure and started procuring inventory because when war started, nobody had a clarity where it is heading and prices were going up every day. So we had to secure inventory for kharif season. So we did that. And as a result, at the end of the day, how season will end, I must say, at the end of the season, I'll be able to give you a clear answer what was our weighted average because something you would have bought lower and again at a higher price and all and then prices have stabilized. And I think now prices might again start firming up again given the war situation. But yes, I think we do track what is my weighted price increase. And at that point of time, because we had a cash, we were also able to negotiate better discount. I think overall, it should have positive impact.

And also, one last thing I would like to clarify with you that we have seen some of the price hike in the month of March to May, maybe 15%, 20% kind of price hike that we have seen in the channel. So how that scenario if you look at prices in the month of March or May and in the month of June, how much will be that price hike already there in the system? And how much we have to take it back in terms of -- like due to the lower consumption? And also, how was the generic product import during this period because of increasing prices?

So I would say price and volume is always seen in combination depending on how much you want to sell and what you want to sell. So when we started buying product at a higher price, we also were probably one of the first few to go and increase the price. Price increase was not accepted by the market till really May end. It is really in the June when a lot of material already stocked maybe prior to March quarter got liquidated. Price acceptance reality of price increase became a reality. But I think for us, what I believe is that it's a combination of -- when we report the number is a combination of volume as well as price, which is helping us. So just to give you a sense that --

so whatever you sold in quarter 1, probably it also had a carry forward from the previous low season. Price is very, very difficult to estimate. But given the challenges in the season, our priority will remain to strike a fine balance between volume and price, but give a precedence to volume if you have to make it after season.

Understood. And sir, in terms of the imports of generic products by the trader and what about the inventory by the importers of generics?

So I think it's normal. Initially, it looked like they may not be very active, but a delayed monsoon also gave them opportunity, some extra time. So at this point of time, I wouldn't say industry is sitting with very high inventory. Industry is sitting wit h the normal inventory. And if things go as per the plan, I think we'll be -- I mean, if season cooperates, I think we might be in a decent situation. we might end up in a very decent situation as well.

Understood. And sir, I think you have clarified in terms of crop shape and all. So if I look at in terms of maize price and cotton price, so over the last 1 -year period, I think maize price is continuing to trade at a lower level compared to MSP and still getting at a lower level across the Mandi, while the cotton prices have seen roughly around 40%, 50% jump over last year period. So how do you -- how do you see in terms of profit in this season or maybe in next season? And if there is no -- there is not enough crop visible from maize to other crops. So what is the reason that farmers are still sticking towards the maize crops? And if cotton acres are going up in that scenario, how do you see the consumption of agrochemical products?

So as a thumb rule, farmers -- so if you are, say, sitting in Vidarbha region, right, you have only 2 choices. Either you can grow cotton or you can grow soybean in Vidarbha, they will not grow normally corn, right? It is either cotton or soybean. Now depending on the rainfall situation, they can switch, right? Now the switch can also be a combination of rainfall and commodities. But if they end up planting more of soybean, there's going to be increased consumption of herbicide and less consumption of insecticide and fungicide. Now if they end up planting cotton, there may be reduced use of herbicide, but insecticide and insecticides will be sitting on the top, maybe 60%, 70%, even fungicide might be low also. I think situation is evolving. What we know that cotton has gone down, soybean and maize has gone up, pulses have gone up. But again, in pulse, if they end up planting urad or moong which is a short duration crop, they require lesser sprays. If they end up planting toor which is a long duration crop, more sprays. So I think I can give you a general principle how farmer operates. And even if there's a long duration crop but pest pressure is lower, like last year, too much of rain, farmers couldn’t spray. So how things evolve is very, very difficult to say.

Ladies and gentlemen, we take that as a last question and conclude the question -and-answer session. On behalf of Rallis India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.