MK Dhanuka, MD, Dhanuka Agritech, talks about his company's performance, growth drivers, new products and expectations from budget among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

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Q: What is your expectation from 2020 in the context of your sector as well as the company?

A: The third quarter has been very good for Dhanuka Agritech. I think the quarter's achievement is best in the past 20 quarters and we hope that the same will be repeated in the fourth quarter as well. Interestingly, the second half (H2) of the year will be quite good for us and we are expecting more than 20% growth in the third and fourth quarter. We are expecting double-digit growth for the entire year.

Q: What are the growth drivers for this expectation and what is your view on margins in coming quarters?

A: Good moisture content in soil due to rain and availability of water in the reservoir will act as a trigger for us because there is a certainty that the farmer will get water for irrigation purposes. The crop sewing process has been good this time and we hope that Rabi crop will do well. Such a situation will lead to a good consumption of pesticides in Rabi crops. Besides, the farmers are getting good returns for the crops and he is ready to spend money to safeguard his crop from pests and diseases.

Q: How is the generic portfolio doing?

A: Generic business has done good and the three products, namely Chempa, Largo and Apply, introduced by the company has performed well in volume terms. Farmers have accepted these products.

Q: What is your plan for new product launches in FY21?

A: We have launched a new product, Zapak, in recent past and it is an insecticide. Apart from this, the company has plans to launch three-four molecules in FY2020-21. And, we are aiming for double-digit growth in next year as well and hope that the sector, which hasn't done well for quite some time, will be able to perform as the government has its focus on agriculture and increasing the earnings of the farmers. This is why I feel that the sector will do well in times to come and Dhanuka will achieve double-digit growth.

Q: Do you have any special CapEx plan and what is the cash position of the company?

A: More than Rs250 crore cash is available with the company and we will reward our shareholders via dividends.

Q: A loan of Rs25 crore was allocated to an associated Company, Dhanuka Labs, in FY19. Is there any proposal of further extending this facility?

A: Dhanuka Laboratories limited has placed its bid for Orchid Pharma and which went to NCLAT and has now reached to the Supreme Court. So, the facility will be extended if we acquire it, Orchid Pharma. Otherwise, as on today, there is zero balance of Dhanuka Agritech with Dhanuka Laboratories.

 Q: Any expected deadline by which the court will pronounce its verdict on it?

A: It depends on the court and that's why you never know when it will happen, maybe in a week or in a month.

Q: Update us on raw material prices amid depreciation of the rupee, pollution issue in China. How are you hedging on it?

A: Raw material prices, except 2-3 molecules, has come down this year. This is a reason that pesticides are available at low prices. And, we don't think that the prices will move up in the recent future as several facilities in China, which was shut down due to pollution concerns, have revived and started working. Thus, there is no situation of shortage in the market, rather, the raw materials are easily available in the market. So, the principle of economy says supply and demand rule the prices. But there is a condition in which supply is more, which means the seller's market has turned into a buyers' market. And I don't think that raw material prices will go up in time to come.

However, the dollar has strengthened itself due to US-Iraq issue but I don't think that it will continue for a long period of time and rupee will retain its recent levels soon.

Q: What are your expectations from the budget and what the government do to boost the agriculture sector? 

A: GST rate of 18% is slapped on pesticides, however, 5% rate is slapped on other products like seeds, fertilizers, agri-equipment among others. So, the government should bring down the GST rate on pesticides from 18% to 5% to make it more friendly. Besides, the dividend distribution tax that is slapped on corporates should be ended.