India Pesticides Limited expects Rs 40-50 crore additional H2 revenue

India Pesticides Limited expects blocks capitalised at its subsidiary in September to add Rs 40 crore to Rs 50 crore of turnover in the second half of the current year. Management said about Rs 65 crore of blocks became operational and were capitalised, while the facilities remain in the stabilisation stage.

How much H2 revenue does India Pesticides expect from new blocks?

India Pesticides expects Rs 40 crore to Rs 50 crore of additional turnover from its subsidiary during the second half of the current year. S.P. Gupta said the main capitalisation occurred in September, when blocks that had become operational at the subsidiary were capitalised by about Rs 65 crore.

The estimate is specifically additional turnover from the subsidiary, rather than a company-wide revenue forecast. Management described the blocks as being in stabilisation and did not disclose the subsidiary's name, location, product mix, capacity or a production schedule for the newly operational blocks.

What supports India Pesticides' Rs 80 crore target next year?

India Pesticides is targeting at least Rs 80 crore of additional revenue next year from about Rs 40 crore of incremental capex, excluding infrastructure cost. Gupta said the September capitalisation of about Rs 65 crore also included infrastructure for a new facility, so management separated that cost from the incremental operating capex used for its target.

Management's target assumes asset turnover of 2 times on the approximately Rs 40 crore incremental capex next year. This differs from the Rs 40 crore to Rs 50 crore H2 outlook because the current-year estimate covers a partial period after September capitalisation, whereas the Rs 80 crore goal applies to next year.

India Pesticides did not disclose the subsidiary's revenue achieved so far, utilisation levels or product-wise sales from the blocks. It also did not provide a specific date for reaching the 2-times asset-turnover target beyond saying it was expected next year.

What could affect the subsidiary's revenue ramp-up?

India Pesticides said it is revisiting the subsidiary's planned product portfolio because geopolitical conditions have affected raw-material availability, prices and demand patterns. D.K. Jain said the expansion process remains in place, but the company may modify the products selected for the subsidiary.

The plant's multipurpose design allows India Pesticides to accommodate different products with minor changes, according to management. The company said it is selecting from its existing basket of approved products, rather than introducing completely new products requiring fresh approvals.

This flexibility is relevant to the Rs 40 crore to Rs 50 crore H2 turnover estimate because management has not confirmed a final product mix for every block. India Pesticides said a product initially planned for the facility could be replaced by another existing product with better demand prospects, and the original product could be accommodated later if demand improves.

How do export orders fit India Pesticides' H2 plan?

India Pesticides said it holds about Rs 100 crore of export orders from Europe and Australia, which have been partly executed and are partly due for execution in coming months. Management said these orders include technical-grade material and bulk formulations, including water-dispersible granules and emulsifiable concentrates.

Jain said reasonably good export orders should help make up for revenue lost earlier in the year. Management had said it aimed to achieve at least the revenue recorded last year, with second-half revenue similar to or slightly better than the corresponding period last year to partly offset the first-half gap.

India Pesticides also said certain export orders expected in the second quarter were deferred to the third quarter, contributing to higher inventory. Management expects inventory to normalise by the fourth quarter of the current year, citing received export orders and good inquiries for a rice herbicide whose sales were lower in the first quarter.

What are India Pesticides' other expansion plans?

India Pesticides said its own capex guidance of Rs 40 crore to Rs 45 crore for the year remained on track, while subsidiary capex was expected to be Rs 80 crore to Rs 90 crore. Gupta said the company was revisiting the subsidiary's second phase and would fund it as needs arise.

Management said subsidiary capex would be in the Rs 80 crore to Rs 90 crore range rather than the Rs 120 crore to Rs 130 crore range referred to by an analyst. Jain said capex should step up again next year, although the call did not quantify next year's spending.

India Pesticides also disclosed a registration pipeline of about eight products for regulated markets. Four products have already been submitted for registry equivalents in Europe, while data generation is under way for four more products that could be filed in markets including Australia, Europe, Brazil and Canada.

Conclusion

India Pesticides has quantified the initial contribution expected from subsidiary blocks capitalised in September: Rs 40 crore to Rs 50 crore of additional H2 turnover, followed by a target of at least Rs 80 crore next year. The difference reflects a stabilisation-period contribution in the current year and management's 2-times asset-turnover target on about Rs 40 crore of incremental capex next year.

The next milestones are execution of the roughly Rs 100 crore of export orders from Europe and Australia, inventory normalisation expected by the fourth quarter, and the subsidiary's product-portfolio review. Management has also said subsidiary capex should remain at Rs 80 crore to Rs 90 crore this year while it revisits the second phase of expansion.