Insecticides (India) Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Insecticides India Limited reported its highest-ever PAT of INR128 crores for 9M FY25, driven by a successful premiumization strategy with premium products contributing 62% to B2C sales. Q3 FY25 saw robust EBITDA and PAT growth despite being a lean quarter with some impact on B2B sales. The company is investing significantly in capex for new plants and R&D, targeting continued growth in premium products and exports, alongside improvements in working capital and organizational strength.

Highlights

  • 9M FY25 PAT of INR128 crores, marking a 36% year-on-year growth and the highest in company history.

  • Premium products now contribute 62% to B2C sales in 9M FY25, with a target to reach 65% in 1-2 years.

  • Q3 FY25 EBITDA increased significantly to INR61 crores from INR24 crores in Q3 FY24, with PAT growing 42% YoY to INR17.4 crores.

  • Overall B2C volume growth for 9M FY25 was 12%, with premium products volume growing 19%.

  • Working capital cycle improved by 18 days, demonstrating better operational efficiency.

Concerns

  • Q3 FY25 was a lean quarter, and the industry was impacted, particularly affecting B2B sales.

  • Q3 FY25 B2C value growth was not significant, though volume grew 7-8%.

Key financials

2 periods

Headline

  • Revenue from Operations
    ₹358 Cr
    YoY +18%
  • EBITDA
    ₹61 Cr
    YoY +154.2%
  • EBITDA Margin
    8.6%
  • PAT
    ₹17.4 Cr
    YoY +42%

9M

  • FY25 Revenue
    ₹1,641 Cr
  • FY25 EBITDA
    ₹193 Cr
  • FY25 EBITDA Margin
    11.7%
  • FY25 PAT
    ₹128 Cr
    YoY +36%

What they filed

Q1 FY27: revenue down 11.4%, net profit down 24.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue627 358 359 691 638 +2%385 +8%426 +19%612 −11%
EBITDA90 31 28 85 89 −1%27 −13%25 −11%68 −20%
Net profit61 17 14 58 59 −3%10 −41%12 −14%44 −24%
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.

Segment breakdown

  • Q3 FY25 Product Composition
    49% Insecticides37% Herbicides9% Fungicides
  • Q3 FY25 Sales Segment
    82% B2C Sales11% B2B Sales7% Exports
  • Premium Products Contribution to B2C Sales
    55% Q3 FY2562% 9M FY25

Capital allocation

high confidence
  • Capex ₹125 Cr
    • Expansion at Sotanala (Rajasthan) for formulation and technical manufacturing
    • Expansion at Dahej for technical manufacturing
    • Plant construction on land acquired via Kaeros acquisition
    • New plant for IIL Biologicals at Shamli site
    Capex is like we have not I can say about INR125 crores is going to go in the next 2 years. This year and next year, the majority of which is going to go in the next year from here, because now we are going to order some of the plant parts, but they will be coming in tranches. So the major expense is going to go into the next fiscal.
  • M&A Kaeros Acquisition · Closed · Consideration ₹6.3 Cr

    Acquired for land to build a plant, import licenses for technicals to improve profitability, and to transfer B2B products to reduce market competition.

    Expected to improve profitability by allowing import of technicals at better prices and serve as a revenue cow by transferring B2B products.

    So it was valued and on the basis of valuation it was purchased at INR6.3 crores which included the value of land and the value of business. Apart from this, we have also had about one dozen import licenses in Kaeros. The basic agenda is that Insecticides India, we don't import any ready-made technicals from China. Kaeros gives the opportunity to import these technicals, which we generally purchase from our competition at a little higher price. So it will improve the profitability of the company. That is one possibility. Second is that we do B2B products, packed products for some of the competitive partners or competition companies. So that business can be transferred to Kaeros, which will decrease the competition in the market. And this way Kaeros can be a good, I can say, revenue cow for Insecticide India.
  • Liquidity Liquidity disclosed Working capital days improved by 18 days for 31st December 24 as compared to March 24.
    The working capital day has come down by 18 days for 31st December 24 as compared to March 24.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · next 1 to 2 years · High confidence 12-13%
    target of the gross margin in next 1 to 2 years of time, you can say 30% to 35% with the EBITDA of about 12% to 13%.

    — Rajesh Aggarwal

  • Gross Margin Profitability · next 1 to 2 years · High confidence 30-35%

    — Rajesh Aggarwal

Market Share

  • Premium Products Contribution to B2C Sales Market Share · next 1 to 2 years · High confidence 65%

    From 62% today

    from 50-odd percent we have reached 62% and this we are going to continue in future also and the target for future will be to take it to 65% in next one to two years.

    — Rajesh Aggarwal

Volume

  • Premium Products Growth (B2C) Volume · every year · High confidence minimum 20%
    the strategy of premiumization is going to be our key strategy where we are going to make minimum 20% growth from the premium products, which means Maharatna products these are all value added products.

    — Rajesh Aggarwal

Exports

  • Export Revenue Exports · this fiscal · Medium confidence INR100 crores plus

    Previously INR150 crores → INR100 crores plus

    this year, we will be crossing INR100-odd crores. So last year, we'll be beating, but I don't see a very big growth which will be coming into this fiscal. Though we had a target of crossing INR150 crores, but we'll be landing somewhere at INR100 crores plus level.

    — Rajesh Aggarwal

  • Export Growth Exports · next year · Low confidence decent manner
    I'm confident that next year, we should be able to grow our exports in decent manner.

    — Rajesh Aggarwal

New Business

  • Kaeros Net Business New Business · Medium confidence INR100 crores plus
    I can just give you the assurance that the net business is going to be INR100 crores plus with a margin with a double-digit margin.

    — Rajesh Aggarwal

Capex

  • Sotanala Plant Revenue Potential Capex · first full year of production · Medium confidence INR500 crores
    if it achieves even 65%, 70%, it will be crossing INR500 crores in the first year itself, first full year.

    — Rajesh Aggarwal

New Product Sales

  • Seaweed Product Sales Volume New Product Sales · next full year, '26 · High confidence 1 lakh liters
    in next fiscal, I believe that we should be able to cross at least 1 lakh liters of sales in the next full year, '26.

    — Rajesh Aggarwal

  • Seaweed Product Sales Value New Product Sales · 4-5 years' time · Medium confidence INR50-70 crores
    I can say it can generate a sale of about INR50 crores, INR60 crores, INR70 crores in the long term in 4 years to 5 years' time.

    — Rajesh Aggarwal

Working Capital

  • Working Capital Cycle Improvement Working Capital · next year · High confidence 20 to 25 days
    In next year, we are again working to improve our working capital cycle by at least 20 to 25 days.

    — Rajesh Aggarwal

Network Expansion

  • Distributor Network Increase Network Expansion · Medium confidence 4-5%
    in my total network, there might be about a 5% increase in the number of distributors, maybe 4%, 4% to 5%.

    — Rajesh Aggarwal

What to watch in Q4 FY25

Kaeros Business Details & Financials

next investor call
Current Plans being finalized, no specific revenue/profitability guidance yet.
Target Detailed plans and financial projections for Kaeros business.

Why it matters

To understand the contribution and strategic impact of the Kaeros acquisition on the company's financials and market strategy.

So once the plans are freeze, I think by the next investor call, we will be ready with the plans of Kaeros. We'll be presenting the numbers.

Risks & concerns

  • Lean Quarter Impact

    medium

    Q3 FY25 was a lean quarter, impacting overall industry and particularly B2B sales.

    Management acknowledged

  • Raw Material Price Volatility

    low

    Analyst raised concerns about raw material prices and currency depreciation, but management believes the market will absorb any changes as prices are already rising from bottom.

    Analyst downplayed

Q&A highlights

7 direct
Kaeros Acquisition Rationale and Future Plans Partial
The details we are going to provide later because there are going to be discussions. We are there are several plans with Kaeros. So the revenue guidelines are not planned, but it will be a good profitable business that much only I can say as of now. So once the plans are freeze, I think by the next investor call, we will be ready with the plans of Kaeros.

Analysts sought clarity on the financial specifics and future revenue/profitability of the recently acquired Kaeros, but management deferred detailed guidance to a future call, indicating plans are still being finalized.

Asked by Bhargav

Talent Reinforcement and Long-Term Incentives Direct
talent we are going to bring the people who are the senior people and have the experience of various multinational companies and large Indian companies. So definitely there will be the desired plans which will be set up because when you are bringing the talent, the retention is also going to be a target because when the people join the company, they come with their agenda also that, yes, they will be performing and showing the performance, but there will be decent incentive plans for them definitely to retain the talent.

Management confirmed plans to hire senior talent from multinational companies and implement incentive plans for retention, signaling a focus on strengthening the organizational structure.

Asked by Bhargav

Volume Growth and Sales Returns Impact in Q3 Direct
The sales return were not huge. The sales return was nominal in this quarter because we had already taken the sales return in Q2. So there was some party to party transfer which has to be routed through the process, which looks like the sales return. So that may be there. So it was not huge at all. Regarding the growth, I have the 9 months number where we have shown a growth of about - in terms of volume the growth is about 19% with the value the growth in terms of value is about 12%.

Management clarified that sales returns were nominal and not a major impact in Q3, emphasizing the 9-month performance (19% volume, 12% value growth) as more representative due to Q3 being a lean quarter.

Asked by Bharat Gupta

Raw Material Price Outlook and Currency Impact Direct
No, there won't be any negative impact. The prices have touched the bottom already and they have started going up. As the prices goes up, the market prices are also going to go up because it is going to increase for everyone. So this is the low season. In the low season, the things starts to discount particularly in the last quarter because it is just the finishing season. But already, we have started seeing increase in some of the prices over the Q3. So the market is going to easily accept the prices.

Management expressed confidence that rising raw material prices and currency changes would be absorbed by the market, indicating a positive outlook on pricing power and margin stability.

Asked by Bharat Gupta

Sotanala Plant Capex, Timeline, and Revenue Potential Direct
Sotanala we are making in 2 parts. One is the formulation second is the technical. In the technical, we are going to construct one building and we will start the manufacturing with one building. Second building we are going to put in part two... if it achieves even 65%, 70%, it will be crossing INR500 crores in the first year itself, first full year.

Details on the Sotanala plant's phased commissioning (technical first, then formulation) and its significant revenue potential of INR500 crores in its first full year of operation were provided, highlighting future capacity and growth drivers.

Asked by Narendra

Biologicals Segment Strategy and R&D Direct
It is a very futuristic business actually. So we are applying for a lot of patents, and we are working on R&D of biological products in many new ways. So these are secret things. I cannot declare too much. But I can say that we are working on Nanos, we are working on Consortia. We are working on many new Insecticides, fungicides in the biological segment.

Management outlined its strategic focus on the biologicals segment, emphasizing R&D in areas like Nanos and Consortia, and plans for a new plant at Shamli, indicating a long-term growth area.

Asked by Kunal Tokas

B2C Premium Growth Target Clarification Direct
This is growth. B2C, this is the growth of B2C. The other growth will be different. So from the B2C business, particularly from the premium products, we are targeting 20% growth, rest is all incidental.

Management clarified that the 20% year-on-year growth target is specifically for the premium products within the B2C segment, with other B2C sales being incidental, reinforcing the premiumization strategy.

Asked by Narendra

Dealer and Distributor Network Expansion Direct
in my total network, there might be about a 5% increase in the number of distributors, maybe 4%, 4% to 5%. In the number of retailers, there may be a little higher increase because, at the moment, the retailers are not covered by our ERP system. So now we'll have the CRM.

Management detailed plans for network expansion, including a 4-5% increase in distributors and higher growth in retailers through CRM implementation, alongside efforts to engage farmers and crop advisers.

Asked by Sahil Vora

3 min read 6 chapters

Detailed narrative

Strong Financial Performance in 9M FY25 Driven by Premiumization

Insecticides India Limited achieved its highest-ever PAT of INR128 crores for the nine months ended December 31, 2024, representing a 36% year-on-year growth. The company's premiumization strategy has been highly successful, with premium products contributing 62% to B2C sales in 9M FY25, up from approximately 50% in previous years. The target is to further increase this contribution to 65% within the next one to two years, aiming for a minimum 20% year-on-year growth from premium products. Overall B2C volume grew 12% in 9M FY25, with premium products volume growing 19%.

Q3 FY25 Performance Amidst Lean Quarter

Despite Q3 FY25 being a lean quarter and the industry experiencing some impact, particularly on B2B sales, the company delivered strong results. Revenue from operations for Q3 FY25 stood at INR358 crores. EBITDA reached INR61 crores, a significant increase compared to INR24 crores in Q3 FY24, while PAT grew 42% year-on-year to INR17.4 crores. The EBITDA margin for the quarter was 8.6%. The company's product mix in Q3 FY25 comprised 49% insecticides, 37% herbicides, and 9% fungicides, with B2C sales accounting for 82% of total sales.

Strategic Capex and Capacity Expansion Plans

The company has significant capex plans, with approximately INR125 crores allocated over the next two years, primarily in the upcoming fiscal year. This investment will fund expansions at Sotanala (Rajasthan) for both formulation and technical manufacturing, with the formulation unit expected by mid-season and the technical unit by 2026. The Dahej plant for technical manufacturing is set to commence operations very soon in the current quarter. Additionally, land acquired through the Kaeros acquisition will be used for plant development, and a new plant for IIL Biologicals is planned at Shamli.

Kaeros Acquisition to Enhance Profitability and Market Position

The acquisition of Kaeros for INR6.3 crores (including land and business value) is a strategic move aimed at improving profitability and reducing competition. Kaeros holds import licenses for technicals, allowing the company to procure these at better prices than from competitors. Furthermore, B2B products can be transferred to Kaeros, which is expected to decrease market competition. Management anticipates Kaeros to generate over INR100 crores in net business with a double-digit margin, though detailed financial plans will be shared in future investor calls.

Focus on New Product Development and Biologicals

Insecticides India Limited launched approximately 10 new products in the current fiscal year and plans for over half a dozen more in the next fiscal. These new products, such as Shinwa, Izuki, Nissan SP, and Sofia, are performing well and are being integrated into the Focused Maharatna range. The company is also heavily investing in R&D for the biologicals segment, exploring new technologies like Nanos and Consortia to address efficacy and shelf-life challenges. A dedicated plant for IIL Biologicals is planned at Shamli to support this futuristic business.

Optimistic Industry Outlook and Working Capital Management

Management expressed an optimistic outlook for the industry, noting stability and northward movement in international raw material prices. They believe the market will readily absorb any price increases, mitigating the impact of currency depreciation. The company expects positive growth across international, B2B, and B2C businesses in Q4 FY25. Furthermore, significant improvements in working capital management were achieved, with working capital days reduced by 18 days as of December 31, 2024, and a target to further improve by 20-25 days in the next year.

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