Growth in Q1 on seeds push; Q2 to be more robust: Rallis

Rallis India’s sales in Q1 shot up by 20 percent to an all time high of Rs 409 crore aided by its seeds business. “Our profit from operations has risen by 36 percent and one of the good things is we have continued our focus on working capital and cash management, which has reduced our interest cost by almost 35 percent,” MD and CEO Veeramani Shankar said in an interview to CNBC-TV18.

Also Read: Analysts raise Infosys earnings estimates after strong Q1 He further added that the company has not slotted any major expenditure for this year. Its subsidiary, Metahelix grew by over 80 percent with sales touching Rs 150 crore. Rallis India is eyeing robust growth going ahead. “As far as Q2 is concerned, crop protection is more buoyant. Q2 is where the actual consumption and takeoff happens after placement in Q1,” Shankar said. Below is the edited transcript of his interview with CNBC-TV18: Q: First let us start with the earnings because last quarter witnessed improvement on back of increase in product prices and growth in export. How was the scenario on Q1 on these fronts? A: Firstly, let me very quickly summarize our performance in the Q1. Our overall sales have gone up by 20 percent and we have touched a new high of Rs 409 crore and a lot of growth has been registered in our seeds portfolio and Metahelix, our subsidiary has grown by over 80 percent to touch a new high of close to Rs 150 crore. Our profit from operations has risen by 36 percent and one of the good things is we have continued our focus on working capital and cash management, which has reduced our interest cost by almost 35 percent. Overall our net has increased by 14 percent. In terms of overall profit after tax (PAT), we have touched Rs 27 crore and this sums up the broad numbers for our Q. On the domestic front we have performed well. I mentioned about the good performance of the seeds. Our crop protection has also begun well for us. In terms of the overall Kharif season, Q1 is very important and makes a substantial part of the year for seeds. For crop protection Q2 is the more buoyant quarter which is where the actual consumption and takeoff happens after placement in Q1. Overall in domestic, yes, our placements have been good, but we will see more action because we place more towards consumption and therefore Q2 will be the robust quarter. Q: Let us talk about various businesses starting with the seed business because there you have seen quite a bit of growth. So, if you could tell us which crop actually did the best? A: In seeds we have registered very good growth in the hybrid paddy where we have already come to a leading position and our business in corn has also done quite well. We also have a fair play in millets. We have a very small position in cotton and therefore it is not really driven by cotton and in any case this year the cotton sentiments have been quite mixed. So, in a way our portfolio is slightly broader based. We have some vegetables as well. So, broadly, it is hybrid paddy, corn, and millets. Q: You have an FX loss in this quarter. How much of it is mark-to-market (MTM)? A: All of it is kind of MTM in the sense that as you know with the sharp depreciation of the rupee and towards the end of the quarter, we have to mark all our receivables and payables to that and as the business is structured there are more payables around this time and then the receivables catch on. Overall, the Rallis structure is that we have more revenues from international than the payouts on forex on imports. Overall, we are quite well balanced as far as foreign exchange is concerned. At an economic level, we don’t have any particular negatives. But it is more the accounting and the marked position at the end of the quarter, which actually has translated to a Rs 8 crore forex related exchange losses, which is reflected in the accounts and that is one of the factors which is worse off from the last quarter and that is purely because of the rupee-dollar movement. Q: Finally, a couple of points, one is the capex situation. What is that looking like for the next quarter and infact for the whole year as well and what is your current debt situation? A: In terms of capex plans we have not slotted any major expenditure this year and it is of the order of about Rs 50-60 crore. But of course as you know in Dahej we are in discussion for new business and if it does come out and play out we will be budgeting for more expenditure as more business develops over a period of time. So, at this point in time I am not able to confirm any big spends and that will depend on how our discussions actually shape up in the future. Right now, it is about Rs 50-60 crore where we have got some investment, some de-bottlenecking planned in the plants for the year. In terms of working capital, we continue to do well and this quarter also we have focused and our cash generation has been good and you will see that as we declare that in September end, that our focus on working capital and cash generation continues and one reflection you see in the results this time itself is because of much lower utilisation of the short-term debt. Our interest costs are down by 35 percent.