New plant to help double sales in 4-5 years: Dhanuka

Dhanuka Agritech targets doubling its revenue in the next 4-5 years, once its new Keshwana plant reaches full capacity utilisation, says MK Dhanuka, the company’s MD.

The company, which manufactures a range of agro-chemicals like herbicides, insecticides, fungicides, miticides, plant growth regulators among others, has received the license to start manufacturing at its newly set-up Keshwana plant in Rajasthan.

Dhanuka is hopeful that the new plant will add Rs 1000 crore in revenues and targets 17.5-18.5 percent earnings before interest, tax, depreciation and amortisation (EBITDA) margin from the insecticides business.Below is the transcript of MK Dhanuka’s interview with Reema Tendulkar and Nigel D’souza on CNBC-TV18.Nigel: The company has received licence to manufacture insecticides for your Keshwana plant in Rajasthan. Could you tell us what does this mean? When exactly could we see revenues coming out of this particular plant and are there any more procedural issues before you start generating some revenues from here?A: The licence to manufacture from director of agriculture, Rajasthan was received in last week and we have taken production of first batch on March 16. The last requirement is the visit by the pollution department and we hope that within next week, we will be able to get that registration also. And from first quarter onwards, the production will full-fledged start at our Keshwana unit.Reema: What is the total production that you are targeting on an annualised basis and what does this mean in terms of revenues for the company?A: The capacity is three times than Gurgaon unit, 25,000 kilolitres is the liquid and 7,500 metric tonnes is the powder capacity and this unit can generate value wise around Rs 1,000 crore at its full capacity. Reema: What is the targeted capacity considering the concentration and the demand?A: I hope for the next four to five years, this capacity will be quite enough for our plans. Nigel: What will be the capacity utilisation in the first half of this financial year? Then the Rs 1,000 crore, when exactly does that come onto your books? Will it be FY18 where we see 100 percent capacity utilisation, Rs 1,000 crore bump up is what we could see in your revenues. And also, could you give us some rough margins on this kind of a product?A: The products will be mixed – insecticides, fungicides, weedicides and the full capacity we hope will be able to run at full capacity in four years time. And we will be able to generate volume of Rs 1,000 crore after four years from this unit.Reema: Are you saying that four years later, the incremental revenue addition will be Rs 1,000 crore because currently your revenues are close to about Rs 1,000 crore. So, that would help you almost double your revenues.A: In the next five years, our target is to double the revenues of the company.Reema: What would be the margins on insecticides at the Keshwana plant?A: Insecticide earnings before interest, taxes, depreciation and amortisation (EBITDA) margin, we are targeting around 17.5-18 percent and we hope that we will be able to sustain these kind of EBITDA margins. The total investment at Keshwana unit at presently is Rs 70 crore and we will need further plant and machinery of approximately Rs 10 crore. Nigel: So, majority of your capital expenditure is already in the price. Could you tell us, give us a rough idea of how the pricing scenario has been in the past quarter? Have you taken any price increases? Could you give us some details on that front?A: In Dhanuka, we have two third shares of speciality and one third share is of generics. So, because of the crude oil prices coming down, there was 25-30 percent reduction in generic price, but the prices of the speciality molecules were stable. There was no decrease in the prices of these speciality molecules.More to follow...