New launches will boost profitability: Insecticides India

Rajesh Aggarwal, Managing Director and Chief Executive of Insecticides India, sees business recovering from June. New product launches in FY17 will help put up a good show in the year, he told CNBC-TV18.Aggarwal said the crop protection industry has gone through a very tough period, especially in the months of April and May. He expects a good monsoon to help the industry get back on track. The period between June and September will be crucial and the company's profitability will be visible in the first two quarters of FY17, he said.In FY16, the company reduced its debt to about Rs 40-50 crore from Rs 70-80 crore in FY15, he said.Below is the verbatim transcript of Rajesh Aggarwal’s interview with CNBC-TV18's Nigel D'Souza.Q: The quarter on the whole hasn't been very encouraging. We have seen that margins have contracted, profitability as well has taken a hit. Let us get in some forward looking statements then. Margins are at around 4.5 percent. To which level can they improve from here and also could you give us a broad outlook of how will your topline look come FY17?A: This has been a very tough period for agriculture because India has seen continuously two years of drought and hence we have also suffered. In the last fiscal we tried to make the effort to increase the topline but somehow we were forced to give more margins to the trade which ultimately pressed lower the incomes in this year. But I believe in this current fiscal we should be able to make a good recovery because we will be launching certain new products and the recent rainfalls which have started and the announcements whatever are done by the MET department. So they are very positive. So, I believe that the recovery should start from the month of June itself because April-May has been very tough period. So, if I talk about my sales so far I have not touched last year figures as yet. But I believe from June onwards we should be able to make our recovery and certain launches and announcements are going to be there. So, 15 percent growth I believe should be easy this year actually and it should be visible from the second quarter itself. First quarter maybe a little flattish but we may improve in the margins in the first quarter.Q: So, FY17 you will see a topline growth of at least 15 percent?A: Yes.Q: You were talking of some new products coming in. Then margins can improve from some 4.5 percent to what levels can we see the 8-9 percent that you have been doing in the past. You have already indicated the first couple of months haven't been great. So, let us assume that we have a favourable monsoon at least then you see margins moving back towards that nine percent odd mark?A: Yes, definitely.Q: We have been seeing that your gross margins have been expanding. So, could you throw some colour on that and also could you tell us your other expenditure on a year-on-year (Y-o-Y) basis that has spiked up by about 50 percent. Why has this come about?A: It is just the margins which has gone through the trade. The trade margins have increased a little. So, that pressure was there actually because the movement in the market was pretty slow and not only the brand business because in terms of brands business we have grown by almost 10 percent in the last 6 months but my institutional business took a hit. So, which means our market share has gone up in brands but institutional business because the overall sentiment of the trade was very bad. So, we are not able to make it in the last fiscal. So, that has impacted but you will see the recovery from this quarter itself.Q: Could you tell us how does your balance sheet look. It appears that you have paid off some debt. Could you confirm what was the number last year. What is it currently sitting at and also how soon can we hear about those launches that you are talking about that is going to aid your financials going ahead?A: The balance sheet has shown improvement actually. Like if you will see our long term and short term both debts have come down. I would say that the total number was roughly about Rs 70-80 crore last fiscal which has come below Rs 50 crore in this current fiscal, nearly Rs 40 crore odd. So, we had paid off our debts actually and talking about the launching, there will be certain launching in the months of June itself and the other launches are going to come in July. So, June-July-August all these three months are going to be very happening for us. That is why I was saying in the second quarter it will be very much visible and the profitability part should be visible in the first part itself.Q: Any chance of becoming completely debt free in FY17?A: Debt free means long term debts, definitely will be almost clear because we are long term. I cannot pre-pay them. There is a penalty if I pre-pay. But yes we will be making good profitability.