Rallis India: Q1 spreads cheer, capex points to a turnaround

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26 Aug, 2025 12:21

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Ruchi Agrawal

Moneycontrol Research

Highlights

• International segment drives revenue growth
• Domestic business remains under pressure
• High raw material costs impact gross margin, operating and net margins improve
• Monsoon impacts sales in June
• New capex to drive long-term growth

Key positives

-Revenue for the quarter was up 8.7 percent year-on-year (YoY), driven by an improved performance in the international segment, which was up almost 12 percent YoY. Exports growth was mainly driven by Europe, followed by South America, North America and Africa.

-Earnings before interest, tax, depreciation and amortisation (EBITDA) margin rose 70 basis points (bps) to 15.2 percent on lower selling costs following the delay in promotion spend of new products.

-Profit before tax (PBT) from operations jumped 15 percent YoY. Profit after tax (PAT) saw a 23.8 percent YoY uptick, aided by a lower tax rate. The tax rate was down to 22.3 percent, from 27.8 percent in Q1 last year, on account of reclassification of some income as agricultural by Metahelix.

Rallis has acquired a majority stake in Metahelix Life Sciences, a Bengaluru-based seeds research company.

Key negatives

-Revenue from the domestic business saw a YoY decline. Delayed monsoon impacted the sowing in June due to which the Metahelix growth was lower at 2.8 percent YoY.

-Higher price of technical grade raw materials imported from China led to a 152 bps YoY contraction in gross margin. The sequential improvement in gross margin came in due to moderation in technical prices during the quarter. However, the management indicated that the uncertainties in technical prices will continue for the current quarter.

Other comments

The new management has announced growth capex of Rs 800 crore in the next 5-6 years and is keen to expand the export segment rapidly.

The company is also working on backward integration of key intermediates and raw materials which would help stabilise the input cost in future.

Outlook

Rallis’ renewed strategy and announcement of capex, which had been missing for the past 3-4 years, might result in a turnaround in the long term. However, the company is impacted by external operating environment, and we believe that the overhang would continue in the near term.Follow @Ruchiagrawal

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