Dhanuka Agritech Q1 FY27 earnings call

Dhanuka Agritech reported a challenging Q1 FY27 with revenue from operations declining by 12.56% YoY to Rs. 461.93 crores. EBITDA stood at Rs. 55.01 crores and PAT at Rs. 36.30 crores. This subdued performance was primarily attributed to a delayed monsoon onset, with a 40% rainfall shortfall in June, which reduced to 15% by the end of July. This deficit significantly impacted sowing activities and overall product demand, particularly for herbicide-heavy crops like soybean and cotton in key regions.

The company announced the acquisition of land in Nagpur, Maharashtra, for a new manufacturing plant. This facility, located in the Butibori industrial area, will be a formulation unit with a proposed capacity of 23,000 metric tons per annum. The estimated outlay for this project is up to Rs. 200 crores, with operations expected to commence by April 2028. Management highlighted that this plant will be highly automated and of global standard, aiming to cut labor dependencies and enhance efficiency.

Dhanuka continues its focus on innovation, planning to launch five new products in the upcoming months, including one liquid fertilizer, three fungicides, and one herbicide. The company maintains a healthy Innovation Turnover Index, which was about 13.89% last year. New biological bio-nutrition products like MYCORE SUPER and Verdor have shown good traction, with Verdor seeing significant movement in Q1 FY27. The company benchmarks a minimum 20% margin for new product introductions, with 9(3) and nutrition products often yielding more than double that.

Dhanuka Agritech remains a debt-free company with a strong balance sheet. For FY26, the company declared a final dividend of 100%, equivalent to Rs. 2 per equity share. Additionally, it completed a buyback of 5 lakh equity shares at Rs. 1,400 per share, absorbing Rs. 70 crores. The company is also scouting for inorganic growth opportunities, including product portfolio acquisitions, to leverage its capabilities and market access.

The Dahej plant, a technical manufacturing unit, reported revenue of Rs. 26 crores in Q1 FY27, an increase from Rs. 16 crores in Q1 FY26. However, its EBITDA for Q1 FY27 was less than Rs. 1 crore, compared to a negative Rs. 3 crores in the prior year. For the full FY27, the Dahej plant's revenue is guided to be around Rs. 65 crores, but EBITDA is expected to remain negative at Rs. 4-5 crores. The acquired Bayer products (Iprovalicarb and Triadimenol variants) did not contribute to revenue in Q1, with royalty at Rs. 4 crores, but major turnover from Iprovalicarb is anticipated in September (Q2).

The agrochemical industry faced pricing pressures and weak demand due to elevated raw material and logistics costs. Management noted that weak market demand limited the sustainability of price hikes attempted earlier in the season. In the bio-stimulant segment, new regulations are expected to favor organized players, as state governments are taking a stringent view on product approvals, which management believes will lead to market share gains for companies like Dhanuka.