Rajesh Agarwal, chairman, Insecticides India says FY14 was a tough year for the company, but greener pastures lie ahead.
Agarwal expects FY15 to be an advantageous year with the new government focusing on irrigation.
Also read: Weak monsoon may push food prices further: India Inc
"We expect to grow 35 percent on the topline and touch Rs 1200 crore. We also expect to grow Rs 70-75 crore on the bottomline," he adds.
Agarwal, however, is at ease with the threat of El Nino affecting monsoon. If according to forecasts, the rainfall is 90 percent of the long period, then there won't be any issue.
"Besides, farmers are choosing their crops intelligently now," adds Agarwal.
Below is the verbatim transcript of Rajesh Agarwal\'s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: Would FY15 be better for companies like yours because of the kind of focus that we have on agriculture now?
A: There should be an advantage to the agriculture in totality because the government which has come has already always focused on more irrigation facilities and canals. If it takes place, of course it gives the benefit to the farmers.
Ekta: Just wanted to start by focusing on one of the key points that the likes of Gujarat have seen a strong agricultural growth in the past decade, does Insecticides India contribute a part of their business towards Gujarat or do you generate a part of your business from Gujarat and can you give us a sense in terms of the model that you currently work with?
A: There is a huge scope in that part of the market and Gujarat has shown a good increase in last few years and few decades as you are saying rightly because a lot of irrigation facilities has increased in Gujarat and further the way we see the irrigation is going to increase, I believe there will be more progressive cultivation because Gujarat is dependent more on canal irrigation, the most part of the state.
If you particularly look at last year, Saurashtra has suffered very badly because there were no rains in that part of the state but now there are more canals which will ensure the cultivation of crop. Generally Gujarat has one crop in most part of the state and other parts have two crops but still it has been growing well basically because I believe that canals are supported the state a lot and the further extension of canals is going to help them again.
We have grown at a good rate in Gujarat, in last decade because the market has also grown. If you look at the market of Gujarat in terms of value of the agrochemicals, it is about Rs 650 crore market and we have touched about Rs 30 crore in last year and we target to touch about Rs 40 crore in this year.
So we are also growing slowly and I believe that we will participate in the growth of Gujarat. So we have our distributed network through which we reach the farmers through the retailers. So we are working a lot for the development of certain products and development of the farmers.
Anuj: Why is this delay in ramp up in capacity utilisation at Dahej? I believe you are working at sub-70 percent capacity utilisation?
A: Yes, last year was very difficult year for us while setting up this unit because we changed the product mix in the technical plant and we have set it up as a multipurpose unit but now the lines are all set and we have all the 7-8 lines functional. So they are in production and this year I believe the average utilisation will be more than 75 percent, which will be matching almost the best in the industry and I believe that in the next year we will be exploiting it further.
Ekta: You did have some pressure on your margins where they dipped around 100 bps on a year-on-year (Y-o-Y) basis in the previous quarter, is there any input cost pressure that the company is facing and what is your trajectory in terms of the margins going forward?
A: Ours is a business model, which is cyclic. So we cannot quote on terms of quarter-to-quarter basically because yes, Q2 is the best quarter for us always, Q3 follows it and then it is Q4. So it varies. We have launched certain new products and since now the unit at Dahej is functional and it will be performing more than 75 percent, so we will get economy of scale and we are targeting a growth of about 35 percent in this year that will also support and I believe that our topline will grow by 35 percent and that will also add up into our bottomline by 100-200 bps. So I see a lot of improvement in our bottomline too in this year and that will be evident in the half year itself.
Ekta: I just wanted to come back with regards to the discussion in terms of the Gross domestic product (GDP) part or the Agri GDP that we are seeing in some states which are better than the other states. Just wanted to understand from an Insecticides India point of view where do you get maximum of your growth from within the domestic market. Is it across the board or which are the states which contribute maximum to your growth, can you just break that up for us in terms of some statistics?
A: Generally it is across the board but of course it varies from state to state because if we look at India, South India is a very big market followed North India, then the Central India and if you look at the eastern part of the country that is a developing market.
I see scope in all the areas for the development and we are growing in a big way all the areas are supporting us a lot because we follow a strategy where we try to provide the farmer with the full basket but at the same time we have certain power brands which we call navratnas or nine big brands followed by super eleven. So these 20 brands are going to contribute about 75 percent of our total business.
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