Best Agrolife Limited — Q3 FY25 earnings call

Call held 17 Feb 2025

Management summary

Best Agrolife faced a challenging Q3 FY25 with revenue declining to ₹274 crores and reporting a loss of ₹24 crores, primarily due to adverse weather, falling chilli prices, and high sales returns. Despite these setbacks, gross margins improved to 32%, and the company generated positive cash flow from operations. Management is focusing on cost optimization, strengthening its branded business, and leveraging new patents and strategic partnerships for future growth, though previous ambitious targets for FY25 are now being revised downwards.

Highlights

  • Gross margins improved to 32% in Q3 FY25, up from 23% in Q3 FY24, driven by higher sales of branded products.

  • Cash flow from operations for the nine-month period ended December 31, 2024, was positive ₹175 crores, with ₹32 crores generated in Q3 FY25.

  • Formed a strategic partnership with Shanghai E-Tong Chemical Co. for joint research, manufacturing, and new product development for the global market.

  • Granted a 20-year patent by OAPI for Ronfen and a patent by the Indian Patent Office for a new manufacturing process for Phenoxymethyl Gly Oxylate.

Concerns

  • Revenue declined to ₹274 crores in Q3 FY25 from ₹315 crores in Q3 FY24.

  • Reported a loss of ₹24 crores in Q3 FY25, with EBITDA (excluding other income) at negative ₹6 crores.

  • Significant sales returns of ₹130 crores were recorded in Q3 FY25.

  • Incurred approximately ₹11 crores in foreign currency loss in Q3 FY25.

  • The previously targeted FY25 topline of 2000+ crores is now unlikely to be achieved.

Key financials

3 periods

Headline

  • Revenue
    ₹274 Cr
    YoY -13%
  • EBITDA (excl. other income)
    ₹-6 Cr
  • Loss
    ₹-24 Cr
  • Gross Margin
    32%

Q3 FY25

  • Sales Return
    ₹130 Cr

9M FY25

  • Cash Flow from Operations
    ₹175 Cr

What they filed

Q1 FY27: revenue up 3.9%, net profit up 105.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue747 274 274 381 517 −31%203 −26%156 −43%396 +4%
EBITDA147 -6 4 46 78 −47%4 +167%-27 −775%78 +70%
Net profit95 -24 -22 20 39 −59%-13 +46%-37 −68%41 +105%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

  • Debt Gross ₹500 Cr
    • Repayment Repaid loans during last 9 months.
    Our current borrowing is, the exact number we have about 500 crores. Mostly is working capital side. Yes All of that is working capital. So, we have close to 400 crores which are in foreign currency.
  • M&A Shanghai E-Tong Chemical Co. Joint venture · Announced

    Formation of a strategic partnership for joint research, manufacturing, and developing new products for the global market, exploring new opportunities for product registration and potential capital cooperation.

    During this quarter, we have announced the formation of a strategic partnership between Best Agrolife and Shanghai E-Tong Chemical Co, which is a publicly listed agrochemical manufacturer based in Shanghai, China. This partnership, formalized through an MoU, will focus on joint research, manufacturing and developing new products for the global market. This partnership will also explore new opportunities for product registration and potential capital cooperation through joint venture in leveraging best practices to expand market reach.

Guidance & targets

Revenue

  • FY25 Topline Revenue · FY25 · High confidence Not achieving 2000+ crores

    Previously 2000+ crores → Not achieving 2000+ crores

    So, 2000 plus looks may not be able to achieve that in this year because of the factor that the technical sales were little lower and also few of the important crops where we have very strong presence, especially in the south, did not pan out the way we thought because last year is just about November.

    — Management

Profitability

  • Q4 FY25 Loss Profitability · Q4 FY25 · High confidence Lower than Q4 FY24 loss

    Previously ₹72 crores (Q4 FY24 loss) → Lower than Q4 FY24 loss

    We will not have such high loss as what we had last year. So, this will be a better quarter than what we had last year. The loss will not be so high.

    — Management

Product Mix

  • Patented Products Share in Branded Business Product Mix · Next year (FY26) · High confidence 40-50%
    So, we are pretty confident that our, and we have a special stress on our patented products. So, we should be anywhere between 40 to 50% of our overall branded business coming from our patented products.

    — Management

Business Mix

  • Branded vs Institutional Business Mix Business Mix · Next year (FY26) · High confidence 65-70% Branded, 25-30% B2B
    Overall, we have been able to achieve the target sales to have around 65 to 70% of our business coming from branded. So, next year also, we will be in the same range. ... So, the optimum percentage output would be anywhere between 25 to 30% for the B2B.

    — Management

Working Capital

  • Working Capital Days (B2B) Working Capital · Ongoing · High confidence 90-120 days
    In B2B, working capital days would be close to 90 to 120 days.

    — Management

  • Working Capital Days (B2C) Working Capital · Ongoing · High confidence ~120 days
    B2C also we are falling in that range itself, close to 120 days.

    — Management

New Product Launch

  • Shot Down Traction New Product Launch · Next quarter (Kharif season) · Medium confidence Traction from Kharif season
    Shot Down will see some sort of a traction from the kharif season. So we may be able to see the effects of Shot Down somewhere in the next quarter coming.

    — Management

What to watch in Q4 FY25

Q4 FY25 Sales Returns

Next quarter (Q4 FY25 results)
Current ₹130 crores in Q3 FY25
Target Significantly lower than Q4 FY24's ₹70 crores, or at least lower than Q3 FY25

Why it matters

High sales returns indicate demand issues and impact profitability; lower returns would signal improved market conditions and better inventory management.

So, liquidation that's still going on will not give the number because still the season is going on. So, this will be clear to us only by the end of March. So, by that time we will be able to have a clear picture.

Risks & concerns

  • Adverse Weather Conditions & Crop Cycle Disruption

    high

    Recent cyclones and extended rainfall in South India caused delays in monsoon, impacting crop cycles (Andhra Pradesh, Telangana, Tamil Nadu) and disrupting critical herbicide applications.

    Management acknowledged

  • Falling Commodity Prices & Farmer Financial Pressure

    high

    Chilli prices dropped by ~35% (from ₹19,000 to ₹10,000-₹12,000 per quintal), leading to farmer cash crunch, reduced spending on crop products, and delayed payments.

    Management acknowledged

  • Investor Trust & Missed Guidance

    high

    Analysts repeatedly questioned management's consistent failure to meet previously stated guidance and targets, leading to concerns about investor confidence.

    Analyst acknowledged

  • High Sales Returns & Inventory Management

    medium

    Q3 FY25 saw ₹130 crores in sales returns, impacting topline and bottom line. Management took provisions in Q3 to avoid a repeat of Q4 FY24's higher losses.

    Management acknowledged

  • Increased Competition & Price War

    medium

    Aggressive sales push and increased competition drove down prices across the sector, tightening margins.

    Management acknowledged

  • High Operating Expenses (OPEX) & Profitability Pressure

    medium

    Investments in building the sales team (especially in South India) and B2C push led to higher costs and short-term pressure on profit margins.

    Management acknowledged

  • Foreign Currency Loss

    medium

    Approximately ₹11 crores foreign currency loss in Q3 FY25 due to a sudden spike in USD-INR rates.

    Management acknowledged

Q&A highlights

3 direct
Discrepancy between previous optimism and Q3 performance Partial
As I mentioned, the first thing is with respect to branded business, we are improving as we have been since the last few quarters, and that also can be seen in the improvement in the top line as well as in the gross margin. However, this quarter's reduction is mostly because of the reduction in the institutional business, and also that we have taken good provision for future expected sales returns.

Analyst challenges management's prior positive outlook for Q3 and seeks explanation for the significant miss.

Asked by Ram Tawa

Achievability of FY25 topline target (2000+ crores) Direct
So, 2000 plus looks may not be able to achieve that in this year because of the factor that the technical sales were little lower and also few of the important crops where we have very strong presence, especially in the south, did not pan out the way we thought because last year is just about November.

Management explicitly confirms a significant downward revision of the previously stated full-year revenue target.

Asked by Ram Tawa

Consistent failure to meet guidance and underlying reasons Partial
So, where it went wrong was because if you remember that this year, the rainfall had extended by 1 more month. So, this additional rainfall what we had, that created an issue with respect to various crops, especially the crops where we are a little stronger in chilies and tomatoes and cotton.

Analyst highlights a pattern of missed guidance, questioning the company's forecasting ability and execution.

Asked by Deepak Poddar

Lack of prior disclosure regarding price reduction Partial
So, in the previous call also, when you see in June and September, we had indicated that there was a huge China dumping which has happened, and in our previous quarter also this 20 percent was there, and we had guided accordingly that there was a price reduction of 20 percent in the earlier calls as well and with respect to sales return, generally the trend is that in case you want to grow, you need to place the material well in advance because almost all the players are having good amount of inventory with them and would be ready to place at any point earlier than the season, and which we also did, considering we have pretty good products, but now, once we are in the season, we see that various crops, which are pretty strong, does not work out as per our expectation, then there are little higher sales return.

Analyst questions transparency regarding significant market changes impacting financials, specifically a 20% price reduction.

Asked by Deepak Poddar

Delay in results and perceived lack of corporate governance Partial
The results are delayed just because of our internal meetings with the brand business, with the reviews, with the next year planning. Because generally, year plan we do in January and February only. Even now, even our budget meetings are going on for the next financial year. That is the main reason which we are busy in this. That is the only reason for delay.

A direct challenge on the company's operational efficiency and commitment to timely disclosures, raising concerns about corporate governance.

Asked by Preet

Balance sheet management, high receivables/inventory, and fundraising Direct
So, with respect to working capital, compared to last year's cash flow, we have been able to generate close to 170 crores in 9 months positive cash flow and 32 crores for this quarter. For inventory, yes, last year it was higher because of various reason and failure of Rabi completely. So, inventory has been going down. So, presently it's only 700 crores.

Addresses concerns about working capital and inventory levels, which are critical for capital-intensive businesses, and clarifies debt repayment.

Asked by Komal

Status of new insecticide releases and income tax department issue Direct
So with respect to income tax, whatever we had issue last year, later on there was no notices and no responses, anything from the income tax side and what we believe is and what we understand from the department as well that the issue is closed from there end, even though we do not have a formal, formal letter from them to say that it is closed.

Provides an update on a potential regulatory/financial overhang and the pipeline for new product launches.

Asked by Sanjay

Deviation in fund utilization (CRISIL report) and regaining FII/DII trust Partial
So there is no deviation in the fund utilization. So whatever for 150 crores, the committed amount from the investors, we have got 25% from them. So there is no deviation in the utilization because the balance 75% we are yet to get.

Addresses a serious allegation regarding fund misuse and the broader issue of investor confidence following repeated missed guidance.

Asked by Participant

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Detailed narrative

Q3 FY25 Performance and Market Headwinds

Best Agrolife reported a challenging Q3 FY25 with revenue declining to ₹274 crores from ₹315 crores in Q3 FY24. The company posted a loss of ₹24 crores, with EBITDA (excluding other income) at negative ₹6 crores. This performance was significantly impacted by adverse weather conditions in South India, including cyclones and extended rainfall, which disrupted crop cycles and herbicide applications. Additionally, a sharp 35% drop in chilli prices (from ₹19,000 to ₹10,000-₹12,000 per quintal) created financial pressure on farmers, leading to reduced spending on crop products and delayed payments. The quarter also saw ₹130 crores in sales returns and an approximately ₹11 crores foreign currency loss.

Strategic Shift to B2C and Cost Optimization

Despite the revenue decline, gross margins improved to 32% in Q3 FY25 from 23% in Q3 FY24, primarily due to a higher contribution from branded products. The company is actively pursuing a B2C model with an expanded branded product portfolio and dealer network, which has led to increased sales team investments and higher operating expenses in the short term. Management acknowledges the need for corrective actions, focusing on cost optimization to reduce expenses as a percentage of sales and improve overall efficiency. They aim to consolidate regions and enhance per-employee performance in FY26.

New Product Development and Patents

Best Agrolife continues to focus on R&D and intellectual property generation. The company announced a strategic partnership (MoU) with Shanghai E-Tong Chemical Co. for joint research, manufacturing, and new product development for global markets. This partnership also explores opportunities for product registration and capital cooperation. Furthermore, Best Agrolife was granted a 20-year patent by OAPI for Ronfen and another patent by the Indian Patent Office for a new manufacturing process for Phenoxymethyl Gly Oxylate, a precursor for Strobilurin fungicides. New products like 'Shot Down' are expected to gain traction in the upcoming Kharif season.

Financial Management and Outlook

Cash flow from operations for the nine-month period of FY25 was positive ₹175 crores, with ₹32 crores generated in Q3 FY25. The company's current borrowing stands at approximately ₹500 crores, primarily working capital loans, and it has repaid loans in the last nine months. Management stated that the FY25 topline target of 2000+ crores is unlikely to be achieved, but they expect Q4 FY25 losses to be lower than Q4 FY24's ₹72 crores. For FY26, the company targets 40-50% of its branded business from patented products and a 65-70% branded to 25-30% B2B mix, with working capital days for both B2B and B2C expected around 90-120 days.

Investor Confidence and Transparency Concerns

Analysts raised significant concerns regarding management's consistent failure to meet previously stated guidance and the discrepancy between optimistic projections and actual financial performance. Questions were also posed about the lack of prior disclosure on price reductions and delays in result announcements, leading to queries about corporate governance and investor trust. Management attributed delays to internal planning meetings and price reductions to 'China dumping' and market dynamics, while denying any deviation in fund utilization as per a CRISIL report.

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