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00:00Ms. Jayashree Sattagopan, she's President Corporate and CFO of the company Johnson,
00:05right now to talk about what's happening within the bucket and with Coromandel itself.
00:08Ms. Sattagopan, good having you. Thanks so much for taking the time out. Good morning.
00:12This is Neeraj here. How are you assessing what's happening currently within that landscape of
00:19agri slash fertilizers? Because a lot of talk happening around the bucket, what the government
00:26could do as well, you know, alleviate the agrarian stress, if you will. Just give us
00:32a broad brush view on how do you see the landscape? Morning, Neeraj. Thanks for having me in the
00:38morning show. The government has been pretty proactive when it comes to agriculture
00:44and looking at farmers' welfare over the past few years. And we expect this new government
00:49that's recently formed will continue its reforms and pro-farmer, pro-agriculture
00:58related measures. What we see is more adoption of nutrients, which is where Coromandel has a
01:07role to play, which is more of NPK and also looking into novel technologies like
01:14nanotechnologies. A year and a half back, we had nano-urea that was introduced.
01:20Coromandel recently has commissioned a nano-DAP plant and has also got two technology research
01:26centers, which is focused on nano-related products. So I think organic fertilizers,
01:34novel fertilizers, like we've also very recently introduced a urea SSP and fertilizers with
01:42micronutrients, which are unique, which addresses the needs of the soil and obviously,
01:47nano-fertilizers. All of these are going to be helping the farmers and also enrich the soil
01:54in terms of looking at the necessary nutrients, which will help in productivity.
02:01So, Ms. Satgopan, put this into perspective, I believe with the latest nano-fertilizer plant
02:06has come on stream as well. I mean, is this a big deal in terms of what it does
02:11for the business and for the numbers?
02:15This is a relatively smaller size plant that we have. It is about 1 crore bottles of
02:24nano-DAP that can be produced. These are modular plants. So depending on the demand,
02:30we can set up multiple plants in different locations. The first plant has been commissioned
02:35at Kakinada and based on all the field trials that have been conducted so far with the help
02:40of an agronomist, we find that the product efficacy has been very good and therefore,
02:46in a period of say about a year or so, we want to replicate, set up newer plants. It can be
02:52done in a period of six to eight months. So that's the beauty of these nano plants that we have set
02:58up. Ms. Satgopan, very good morning. Tamanna here and great to speak with you.
03:05Just wanted your perspective on I think what is the key expectation from the industry and
03:11the GST Council recently discussed it, has referred a rate rationalization for fertilizers
03:17to the GST, to the GOM, the Group of Ministers on Agri and Chemicals. How crucial is this?
03:26How crucial is this and how does it impact, say, a company like yours?
03:30See, currently the GST rates for fertilizers, Tamanna is about, output rate is about 5%,
03:37which is on the lower end. There are a couple of inputs where we have about 18%, which is like
03:43ammonia or a sulfuric acid and therefore, fertilizer companies who do the manufacture
03:48will have an inverted duty structure. Therefore, we all claim for GST refund and the government
03:56and the GST authorities have been very proactive processing the refund applications and giving us
04:02the GST refunds. Now, what we understand that the GST Council is considering, it is a reduction
04:07further in the output rates. So, we just need to see what rates have been recommended, whether it
04:13is going to come down from a 5% to a 2%, 3% or it's going to be nil. And therefore, the implications
04:20in terms of refund for the fertilizer companies from an inverted duty structure,
04:26that's something we'll have to wait and watch. So, in your particular case, what are the
04:31implications? And if the GST rate does come down, it most likely will be coming down to zero,
04:38but you still are paying a higher GST rate for your input. So, what are the implications for you?
04:44So, we will continue to claim the GST refunds so that there is no credit accumulation that
04:50happens to the balance sheet. But at the same time, when you look at it from a farmer perspective,
04:55what we would look at is about a 50 to 65 rupees of impact per bag, when they are going to buy,
05:02for instance, a BAP 50 kg bag. So, the farmers will get some benefit from the corporate standpoint,
05:10we will continue to claim the GST refunds and it comes with a two to three months lag
05:15in terms of refund processing by the GST authorities. If it's a benefit of 56 to 60
05:21rupees per bag for the farmer, what's the benefit for you if you possibly pay 0% GST?
05:28No, there will not be any special benefits for corporates. As he was mentioning,
05:32there is an inverted duty structure and the credit accumulation has to be claimed back
05:38as a refund from the GST authorities. So, there is a cash flow implication,
05:44which could take about two to three months. So, it's a working capital impact.
05:48Okay. I want to come to another point, which I think is important for your company specifically
05:53is subsidies for fertilizers and in the interim budget, as was expected,
05:59subsidy for fertilizers was lower than what was penciled in. Do you expect that to be increased
06:06significantly in the July budget? What are you looking out for?
06:12So, typically the government announces subsidies a couple of times in a year,
06:17one is for the Kharif season, the other one is for the Rabi season.
06:22The subsidies for the Kharif season has already been announced and is being practiced the last
06:28three months, April, May, June, and we expect the next revision to happen in October, which
06:34would be for the next six months of the year. At this point in time, we're not very sure that
06:39there is going to be an increase in the subsidy rates when the July budget is being taken up.
06:47Yeah, I mean, we can't preempt it, but it is widely expected that there may be an increase
06:52in the subsidy rates. If there is, I'm trying to understand what is the impact for you on margins?
06:59No, if the subsidy rates goes up, it's not just for Kuruvandal, I think it will augur very well
07:03for the fertilizer companies overall, especially in the case of DAP, the subsidy rates have been
07:10very subdued. So, that will be a good relief for the companies.
07:15Mr. Gopal, anything else that you would want to see, not necessarily as a part of the budget or
07:24otherwise, but as a move being done to fix, let's say, an anomaly to your mind within the pocket?
07:35One thing which definitely we have been advocating and working closely with the government,
07:41as well as through our influencing the farmers, is to have balanced nutrition,
07:48because various parts of the country, we see that there is deficiency in terms of
07:53certain nutrients. Today, urea is very heavily subsidized, and therefore, farmers tend to buy
07:58urea and use it more than required for their feeds. So, a bit of balanced nutrition uptake
08:05will actually help improve the soil richness, as well as the productivity for the farmers.
08:11This is something that we would be very keen and eager to see if the government could take this up,
08:18because it will definitely help to improve the overall productivity from an agricultural
08:24standpoint. Got it. Mr. Gopal, just now moving on from there to how is business, because when
08:32anyone looks at your Q4 as well, for CPC, because of, I mean, there was a revenue decline, there was
08:37an EBIT decline, global pricing pressures, I believe, were there at that point of time,
08:43have they existed, and therefore, is the near term looking a bit skittish, or has there been a change
08:49out there? The CPC business had multiple external headwinds. It's not just for our company,
08:59it has been across various companies in the country, because of the situation that was
09:05faced in Brazil, very high level of inventory, and then there was a price which had come down
09:10dramatically because of China. These two situations seem to be coming slowly in control,
09:17as we understand the stock in Brazil in the channel has come down. The China prices are still
09:22lower, but we expect it to stabilize at some point in time. And towards Q3 of this calendar year,
09:31and Q4 of this calendar year, we expect much more normalcy to come in the crop protection business.
09:37Having said that, even last year, our CPC business grew in absolute volume terms.
09:44We clocked more than a 20% increase in volume terms, and we also grew in markets like Brazil,
09:50where most of the other companies had faced huge challenges. Our focus also has been on
09:57domestic formulation business, where we have a very large opportunity to grow. So,
10:05these two areas are going to be very critical. And you would have also recently seen
10:10that the company has launched 10 new products in the crop protection side,
10:15out of which four of them are 9-3 products. One has a collaboration with a Japanese innovator,
10:22and we are also strengthening our portfolio on the herbicide front.
10:26Therefore, domestic formulation business, we believe, will clock a good growth. And also,
10:32looking into niche markets in the export segment, where we have presence in more than 60 countries,
10:38we believe that crop protection business should grow well during the year.
10:44All right, Ms. Satgopan, we'll leave it at that. Thanks so much for taking the time out
10:47and being with us, and all the best for the quarter ahead. Thank you.