UPL board to meet on November 20 to determine rights issue price, entitlement, dates

Amid a tough landscape marked by pricing challenges and industry volatility, UPL is looking to a stronger second half, although analysts recommend a careful approach regarding near-term profitability.

The board of agrochemical giant UPL Ltd. will meet on November 20 to finalize specifics for its planned rights issue. The meeting will address the issue price, payment terms, entitlement ratio, record date, and overall timing of the offering.

UPL's board initially approved raising Rs 4,200 crore through a rights issue in December last year. During its recent earnings release, the company noted it had reduced the rights issue size to $400 million from the previously proposed $500 million. However, regulatory feedback on this change is still pending.

SEBI recently introduced regulations to expedite the rights issue process, enabling completion within 23 days of board approval—significantly faster than the prior average of 317 days.

In Q2FY25, UPL reported a net loss of Rs 443 crore, more than double the Rs 189 crore loss in the same quarter the previous year. Revenue grew 9% year-on-year to Rs 11,090 crore, driven by a 16% increase in volumes, while pricing decreased by 7% and currency impacts remained flat.

Despite higher revenues, profitability was affected, with contribution margins down 220 basis points to 37.7%, largely due to pricing pressures in crop protection. EBITDA was stable at Rs 1,576 crore, though EBITDA margin fell by 130 basis points to 14.2%, reflecting intensified competition and cost-related pressures.

After a post-earnings dip, UPL's stock regained ground as management reaffirmed its full-year guidance despite existing challenges. The company expressed optimism about improving margins and cash flow through inventory management and price stability in the coming quarters.

Phillip Capital acknowledged UPL's robust volume growth but highlighted ongoing hurdles, including high inventory, pricing challenges, and weaker demand in key markets. They project a demand recovery in FY25 as global agrochemical markets stabilize.

Kotak Institutional Equities, however, remains cautious. Despite raising UPL's target price to Rs 430, they maintained a "Sell" rating, noting that any market recovery will likely be slow and that earnings forecasts may be overly optimistic. Kotak also pointed out heightened balance sheet pressures, suggesting that significant margin improvement is necessary to meet FY25 goals.

Amid a tough landscape marked by pricing challenges and industry volatility, UPL is looking to a stronger second half, although analysts recommend a careful approach regarding near-term profitability. The company expects volume growth of about 5% and expansion across all segments in FY26, while acknowledging continued pricing pressures due to overcapacity in China.

As of 10:40 am, Hindalco shares were trading around a percent higher at Rs 660.75 on the National Stock Exchange (NSE). The stock has rallied around 8 percent this year, underperfoming Nifty's 10% gain. Over the past 12 months, the stock has risen 35%, while Nifty rose 23% during the same period

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