Dhanuka Agritech

Dhanuka Agritech reported a challenging Q3 FY26, with revenue from operations declining by 7.93% YoY to Rs. 409.92 crores from Rs. 445.27 crores in Q3 FY25. This was accompanied by a significant drop in profitability, with EBITDA falling 22.37% YoY to Rs. 58.66 crores and Profit After Tax decreasing 27.33% YoY to Rs. 40 crores. The company attributed this performance to weak agrochemical demand, lower crop prices, and regulatory impacts on biostimulants.

Regulatory changes significantly impacted the biostimulant segment, which previously contributed around 19% of sales. The company experienced a sales impact of Rs. 15 crores in Q3 FY26 and Rs. 49 crores for the nine-month period due to biostimulant stock sales. Management is optimistic about receiving approvals for new biological and biostimulant offerings by the end of the current quarter, expecting 3 out of 4 key molecules to normalize and contribute to sales from Q1 FY27.

The Dahej plant commercialized its second product in Q3 FY26, with a target to achieve EBITDA positivity and 80% capacity utilization by FY27. Despite Q3 being an off-season for these products and facing production delays for difenoconazole, the company is planning a CAPEX of Rs. 60-70 crores for MPP-2 to add a third product, Iprovalicarb, further enhancing utilization. Discussions are also ongoing with two multinational companies for potential contracts at Dahej.

Dhanuka launched three new products (Dinkar, Melody, and Verdour) in the nine-month period of FY26 and plans to introduce three more in FY27, including two fungicides and one specialty spray enhancer. These new fungicides will target high-value crops like grapes, potato, tomato, and chilli, while the spray enhancer will focus on tomato markets. The company maintains a pan-India presence and aims for continuous extension in rural market penetration and international market expansion.

The company's gross margins expanded from 34.4% to 40.2% between FY23 and FY25. Management expects sustainable gross margins of 38% in the long term, noting that the softness in technical raw material prices is largely over. A net economic benefit of Rs. 19.5 crores in 9M FY26, which has no COGS, contributed to the higher gross margin, with a 2% impact attributed to this rather than raw material prices. Direct raw material sourcing from China accounts for 10-15% of procurement.

Dhanuka anticipates a flattish growth for the full year FY26, despite expecting growth in Q4. For the long term (3-5 years), the company is confident of achieving double-digit CAGR, supported by favorable macroeconomic factors, increasing agricultural investments, and low agrochemical consumption in India compared to global averages. The revenue from Bayer products for FY26 is now expected to be around Rs. 30 crores, revised down from an earlier guidance of Rs. 40 crores due to the grape season.

Management views the Draft Pesticide Management Bill (PMB) as highly beneficial for organized players like Dhanuka. The bill is expected to introduce stringent rules against misbranding and spurious products, along with punitive measures for fly-by-night operators. This regulatory framework is anticipated to create more market space for compliant companies and contribute to the growth of Indian agriculture, although its success will depend on effective execution by central and state governments.