Dhanuka Agritech Limited — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Dhanuka Agritech delivered a robust Q3 FY25 performance with double-digit revenue and profit growth, driven by new product introductions and strong market execution. The company also made a significant strategic acquisition of international rights for two agrochemical molecules from Bayer, signaling its intent for global expansion. Despite challenges from adverse weather and commodity price pressures, particularly affecting generic products, Dhanuka maintained strong margins and outlined plans for future growth through product innovation and market diversification.

Highlights

  • Double-digit growth in both top-line (10.42%) and bottom-line (PAT 21.33%) despite challenging environment.

  • EBITDA margin expanded significantly by 21.55% YoY to ₹75.56 crores.

  • Successful introduction and acceptance of new products (LaNevo, MYCORE Super, Roxa) driving volume growth (around 11.67%).

  • Strategic acquisition of international rights for two key molecules (iprovalicarb and triadimenol) from Bayer AG for ₹160 crores, enabling global expansion.

  • Gross margins remained strong and sustainable, with current levels exceptionally high around 40%.

Concerns

  • Low pest attack and low rainfall in the Rabi season impacted sales of some key fungicides.

  • Carryover inventory of chili from last season and low commodity prices resulted in fewer crop spaces.

  • Dahej manufacturing facility continues to operate at a loss (₹4.25 crores in Q3 FY25 and ₹12 crores for 9M FY25).

  • Generic products in the portfolio experienced a 'beating' in terms of price and volume due to unfavorable market conditions.

Key financials

  1. Revenue ₹445.27 Cr +10.4%YoY
  2. EBITDA ₹75.56 Cr +21.6%YoY
  3. PAT ₹55.04 Cr +21.3%YoY
  4. Volume Growth 11.7%
  5. Dahej Revenue ₹4 Cr
  6. Dahej EBITDA Loss ₹4.25 Cr

What they filed

Q1 FY27: revenue down 12.5%, net profit down 35.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue654 445 442 528 598 −9%410 −8%483 +9%462 −12%
EBITDA160 76 110 83 137 −14%59 −22%125 +14%55 −34%
Net profit118 55 76 56 94 −20%40 −27%98 +29%36 −36%
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

high confidence
  • Capex Capex disclosed
    So, we have not gone ahead for any new fresh CAPEX in Dahej plant. But yes, we are working on some more new products development in the R&D, and we will be coming out with some more products in the next 2 to 3 years.
  • Debt Debt disclosed
    • New borrowing Loan taken in December for acquisition funding. ₹50 Cr
    • Repayment Loan for acquisition to be repaid before December 2025. ₹50 Cr
    And there is a provision for this acquisition, we have taken a loan of INR 50 crores in the month of December for buy acquisition.
  • M&A International rights to active ingredients iprovalicarb and triadimenol from Bayer AG Acquisition · Closed · Consideration ₹[object Object] (mixed)

    Expand footprint in more than 20 countries including Latin America, Europe, Middle East and Africa as well as Asia, including India. Enable global market expansion.

    Overall cost around INR 160 crores, capitalized in Q4. Revenue potential up to INR 250 crores combined. EBITDA margin expected to be in line with existing margins. Funding mix: INR 50 crores loan, rest from internal accruals.

    the company has acquired international rights to the active ingredients, iprovalicarb and triadimenol invented by Bayer AG, Germany. With this acquisition, Dhanuka plans to expand its footprint in more than 20 countries including the regions of Latin America, Europe, Middle East and Africa as well as Asia, including India. This acquisition will enable Dhanuka to embark on a journey of global market expansion. ... You see the overall cost would be around INR 160 crores, which will be capitalized in Q4. ... In terms of value, both the products combined can go up to INR 250 crores. ... Yes. The EBITDA margin will be in line with our existing EBITDA margins. ... And there is a provision for this acquisition, we have taken a loan of INR 50 crores in the month of December for buy acquisition. And the rest INR 115 crores basically is met with the internal accruals.
  • Liquidity Liquidity disclosed Internal accruals of INR 115 crores were used to fund part of the acquisition cost.
    And the rest INR 115 crores basically is met with the internal accruals

Guidance & targets

Revenue

  • Dahej Facility Revenue Revenue · FY26 · Medium confidence ₹60-70 crores
    Yes. For FY '26, we are looking at revenue in the range of INR 60 crores to INR 70 crores.

    — Harsh Dhanuka

  • Acquired Bayer Products Revenue Revenue · FY27 · Medium confidence ₹175-200 crores
    Top line contribution from these 2 products in FY '27 when the full revenue will come from the books of Dhanuka will be in the range of INR 175 crores to INR 200 crores.

    — Harsh Dhanuka

Volume Growth

  • Volume Growth (ex-Bayer molecules) Volume Growth · FY26 · Medium confidence 15%
    I think other than Bayer molecules, it should be around 15%.

    — Vinod Kumar Bansal

Gross Margin

  • Gross Margin Sustainability Gross Margin · Long run · High confidence 38-39%
    You see, gross margin in the range of 38% to 39%, I feel is sustainable, right? And beyond that, in this year, exceptionally is in the range of around 40%. So, that is basically because of decline in trade and prices and all. But in the long run, I think between 38% to 39% gross margin is absolutely sustainable.

    — Vinod Kumar Bansal

New Product Launches

  • Number of New Product Launches New Product Launches · Next 2 years · High confidence 8
    So, we have mentioned that we will be having multiple set of products over the next 2 years, almost 8 new product launches are planned.

    — Rohit Nagraj

Growth

  • Acquired Bayer Products Growth Growth · Year-on-year for first 5 years (after FY27) · Medium confidence 15%
    For FY '27 onwards, yes, we are looking at 15% growth in the product revenues year-on-year for first 5 years.

    — Harsh Dhanuka

Debt Repayment

  • Acquisition Loan Repayment Debt Repayment · Before December 2025 · High confidence ₹50 crores
    Yes. Okay. INR 50 crores. And this will be repaid by when? Like maybe by next year or next to next year? Before December '25.

    — Vinod Kumar Bansal

What to watch in Q4 FY25

Dahej Facility Profitability

Next quarter
Current EBITDA loss of ₹4.25 crores in Q3 FY25
Target Reduced loss or break-even

Why it matters

Continued losses at Dahej impact overall profitability; improvement is key for operational efficiency.

You see in Q3, the revenue is around INR 4 crores. And in 9 months, the revenue is around INR 26 crores. And in terms of EBITDA loss in Q3 is around INR 4.25 crores, and in 9 months is around INR 12 crores.

Risks & concerns

  • Red rot disease in sugarcane

    high

    The disease is widespread in North India's highest-yielding sugarcane variety (60238), covering over 75% of acreage, posing a disaster risk.

    Analyst acknowledged

  • Low pest attack and low rainfall in Rabi season

    medium

    Disease appearance in potato, grapes, and chili was less, leading to lower sales of some key fungicides.

    Management acknowledged

  • Carryover inventory of chili and low commodity prices

    medium

    Resulted in fewer spaces in the crop for new products.

    Management acknowledged

  • Dahej manufacturing facility operating at a loss

    medium

    EBITDA loss of ₹4.25 crores in Q3 FY25 and ₹12 crores for 9M FY25.

    Analyst acknowledged

  • Generic products in the portfolio taking a beating

    medium

    Generic products across the industry have taken a sharp beating in terms of price and volume.

    Management acknowledged

  • Potential impact of Chinese dumping if US tariffs reduce their exports

    medium

    If China cannot export to the US, Chinese prices for other countries might come down further, impacting market dynamics.

    Analyst acknowledged

Q&A highlights

7 direct
Strategy for acquired Bayer products (iprovalicarb & triadimenol) and international expansion model. Direct
So, these 2 products, iprovalicarb and triadimenol, they both contribute about 55%-45% to the revenue. Iprovalicarb is the larger revenue contributor out of these 2 products. With respect to the brand name around triadimenol, so these were tried brand names in series of other products also with Bayer, and had Bayer's initial B-A-Y in some of these products attached. So, they cannot transfer these brands to Dhanuka. So, that was the reason not to acquire those brand names.

Clarifies the specific products acquired, the reason for not acquiring brand names, and the initial revenue split, which is crucial for understanding the acquisition's scope.

Asked by Himanshu Upadhyay

Challenges and capabilities needed for building an international business model. Direct
Yes. I think 1 of the biggest challenges is around registrations. Global registrations are time-taking process. And to understand the registration process across different countries and their rules and regulations, and doing the entire documentation work, that is the challenging work and of course, building the customer base. So, with these two products, we will get the customer base and the existing registration for increasing the new products, adding new products within this customer basket, and acquiring more customers that is going to be the path forward.

Highlights the primary hurdles for international expansion (registrations, customer base) and how the current acquisition helps build foundational capabilities.

Asked by Himanshu Upadhyay

Growth strategy for the acquired Bayer products, given their past underperformance. Direct
Yes. Thank you, and very really interesting questions from your side. And yes, to revive the volumes of these products, we are working on a marketing campaign. Last 2, 3 years, due to portfolio clashes within Bayer's internal portfolio, their attention to this product has been reduced, and there has been no marketing spend on this product. Now we will be doing marketing spends further to enhance the volumes of these products over the next few years.

Explains the reason for the products' past stagnation (Bayer's internal portfolio issues) and outlines Dhanuka's plan to revive growth through marketing, indicating a clear strategy for value creation from the acquisition.

Asked by Himanshu Upadhyay

Performance and profitability of the Dahej manufacturing facility. Direct
You see in Q3, the revenue is around INR 4 crores. And in 9 months, the revenue is around INR 26 crores. And in terms of EBITDA loss in Q3 is around INR 4.25 crores, and in 9 months is around INR 12 crores.

Provides specific financial figures for the Dahej plant, revealing its current loss-making status and low revenue contribution, which is a key operational concern.

Asked by Rohit Nagraj

Sustainability of gross margins given raw material price trends. Direct
You see, gross margin in the range of 38% to 39%, I feel is sustainable, right? And beyond that, in this year, exceptionally is in the range of around 40%. So, that is basically because of decline in trade and prices and all. But in the long run, I think between 38% to 39% gross margin is absolutely sustainable.

Addresses investor concerns about margin sustainability, with management providing a clear range for long-term gross margins and attributing current higher margins to specific factors.

Asked by Dhruv Muchhal

Drivers of volume growth, particularly the split between generic and specialty products. Direct
In addition to that, the volume growth has been aided, supported by the new products that we have introduced. LaNevo, a powerful insecticide; MYCORe Super, a soil health rejuvenator; Purge, a very wonderful Japanese herbicide; Miyako, again, a Japanese miticide; and a couple of other products. So, they have done a good job, and we have done a good job of introducing them and quickly commercializing them, ramping up the volumes. So, I think, that's what's behind our volume growth overall. Generic products in our portfolio have taken a beating.

Clarifies that recent volume growth is primarily driven by new specialty product introductions, while generic products have faced challenges, indicating a positive shift in product mix.

Asked by Dhruv Muchhal

Impact of red rot disease on sugarcane and the industry's response. Direct
Right. So, thanks for that question. That gives me an opportunity to highlight the portfolio that we have. But let me try and address the second part first, which is why we have not been able to capitalize. So, that's not really true. Industry has really worked hard to deal with the red rot opportunity or, let's say, red rot crisis that the North Indian sugarcane faces. This brings to forefront the challenge of working in agriculture, which is the education of the farmer.

Addresses a significant agricultural challenge (red rot) and highlights the need for farmer education, indicating a potential area for Dhanuka's product and service offerings.

Asked by Prashant Biyani

Impact of US tariffs on China and its implications for the Indian chemical industry. Partial
Yet China plus 1 story has more grounds to play out as we see that this tariff regime as of now appears to be favoring Indian growth story, and Indian chemical industry growth story and Indian partnership with U.S. and other countries story. So, that appears to be more favourable. Now impact of tariffs from U.S. will have another side of it, which is if China will not be able to export to U.S., then Chinese prices will come down further for other countries. Now will that happen or not, we are yet to see and a few more months before we can really understand and break through or see through the impact.

Discusses a macro-economic factor (tariffs) that could benefit India's chemical sector but also poses a risk of increased Chinese dumping, showing management's awareness of complex market dynamics.

Asked by Bharat Gupta

3 min read 7 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Dhanuka Agritech reported a strong Q3 FY25, with revenue from operations increasing by 10.42% YoY to ₹445.27 crores, compared to ₹403.24 crores in Q3 FY24. EBITDA saw a significant rise of 21.55% to ₹75.56 crores, up from ₹62.16 crores. Profit after tax also grew by 21.33% to ₹55.04 crores, against ₹45.37 crores in the prior year. Volume growth was approximately 11.67%, indicating a slight negative impact from pricing.

Strategic International Acquisition from Bayer AG

The company acquired international rights for iprovalicarb and triadimenol from Bayer AG for approximately ₹160 crores, to be capitalized in Q4 FY25. This acquisition aims to expand Dhanuka's footprint across more than 20 countries, including Latin America, Europe, Middle East, Africa, and Asia. Management expects these products to contribute ₹175-200 crores in revenue by FY27 and grow at 15% year-on-year for the subsequent five years, with manufacturing of at least one product shifting to the Dahej plant.

New Product Introductions Drive Volume Growth

Volume growth in Q3 FY25 was primarily driven by the successful introduction and market acceptance of new specialty products such as LaNevo (insecticide), MYCORE Super (soil health rejuvenator), Purge (Japanese herbicide), and Miyako (Japanese miticide). These products, along with a new 9(4) product Roxa for wheat weed control, have been well-received by farmers. In contrast, generic products in the portfolio experienced a 'beating' in terms of both price and volume due to unfavorable market conditions.

Dahej Manufacturing Facility Performance

The Dahej manufacturing facility recorded a revenue of ₹4 crores in Q3 FY25 and ₹26 crores for the nine-month period. However, it continued to incur an EBITDA loss of ₹4.25 crores in Q3 FY25 and ₹12 crores for the nine-month period. While no new CAPEX is planned for Dahej currently, the company is focusing on developing new products in R&D and pursuing international registrations for existing products like bifenthrin to improve its utilization and profitability, targeting ₹60-70 crores revenue in FY26.

Gross Margin Stability and Raw Material Outlook

Dhanuka's gross margins remained strong, with management stating that a range of 38-39% is sustainable in the long run. Current margins were exceptionally around 40% due to a decline in trade and raw material prices. While overall raw material prices are stable, some specific products like Cartap, Mancozeb, Chlorpyrifos, and Cypermethrin have seen price increases. Management anticipates no major changes in raw material prices in the near future.

Strategic Crop Focus and Portfolio Alignment

The government's renewed focus on increasing acreage for cotton, pulses, and oilseeds presents a significant opportunity for Dhanuka. The company has a strong portfolio to service pulses for weed and insect management and expects its products like Targa Super and MYCORE Super to benefit from increased attention on cotton. Additionally, the correction in ethanol prices is expected to boost the sugarcane economy, where Dhanuka is also well-positioned.

Challenges in Rabi Season and Market Conditions

The Rabi season faced challenges from low pest attacks and insufficient rainfall, leading to reduced sales of certain fungicides. Carryover inventory of chili and low commodity prices also limited crop space. December and January saw subdued offtakes due to low pest and disease pressure, particularly in North and West India. The company maintains a clean channel inventory policy, avoiding front-loading, unlike many industry players.

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