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Conference Call Overview • Date: May 9, 2024 • Participants: • Managing Director: Satish Kagliwal • CFO: Devinder Khurana • Moderator: Deepika Sharma (Go India Advisors)
Financial Performance • Revenue increased by 10.43% to Rs. 332 crores. • Profit after tax rose by 16.8% to Rs. 411 million. • Long-term debt-free position maintained with positive operational cash flow.
Key Highlights • Significant investments in R&D leading to innovative seed products, especially in cotton and paddy. • Strong performance in non-cotton and non-paddy segments (bajra, maize, wheat). • Anticipated conservative topline growth of 15-20% and slight increase in net profit.
Hybrid Paddy Variety Performance • Dhadak Gold hybrid paddy outperforms conventional varieties by 7-8% in yield. • Superior grain quality and commercial advantages noted. • Selective targeting of export markets based on product strengths.
Capital Expenditure and Working Capital • Preference for leasing facilities over CAPEX investments. • Improvements in working capital cycle with reduced debtor and stock days.
Industry Challenges • Facing a shortage of cotton seeds due to unpredictable monsoon patterns and labor shortages. • Anticipated overall shortage of cotton seeds but not expected to significantly impact performance.
Future Outlook • Pipeline of new products, including various vegetables, to launch after testing. • Focus on optimizing crop mix and addressing competition from illegal BT cotton. • Preparedness for upcoming quarter contingent on favorable monsoon conditions.
Market Dynamics • Industry-wide supply constraints affecting seed sales returns and operating margins. • Hybrid paddy contributes 41% of value, with a goal for a 50:50 split with basic paddy. • Emphasis on value growth over volume, particularly in cotton, with a target topline of Rs. 500 crores.
Company Overview • Nath Bio-Genes (India) Limited held a conference call to discuss unaudited financial results for H1 FY '24. • Key management members, including the Managing Director and CFO, participated.
Strategic Focus • Emphasis on becoming a strategic partner for farmers. • Addressing challenges such as low crop yields and climate change. • Non-cotton and non-paddy segments contributed 39% in Q2 FY '24.
Financial Highlights • Sales growth of 11.59%. • Stable gross margin over 52%. • EBITDA at INR 41.20 crores. • PAT increased by 8.7% to INR 35 crores. • Joint venture in Uzbekistan to promote BT cotton.
Q&A Session Insights • Vegetable Segment: Contributed INR 10 crores; expected 20% growth for the year. • Paddy Realization: Increased from 43,000 quintals to nearly 54,000 quintals, generating INR 74 crores. • Working Capital Cycle: Acknowledged challenges but assured improvements. • Kharif Crops: Concerns raised about weak monsoons affecting productivity and quality. • Growth Projections: Conservative 15% growth for FY '24; EBITDA at 16% and net profit margin at 14%. • Debtor Write-offs: No write-offs planned; provisions for non-recoverable debts made annually. • Hybrid Paddy: Current 50-50 split; goal to increase hybrid paddy's value share.
Investor Concerns • Investor Returns: Dissatisfaction expressed over low return on equity and minimal dividends. • Dividend Payments: Khurana defended consistent payments over the past three years. • Expansion: Discussion on growth in non-cotton and non-paddy segments and future export opportunities, particularly in the Philippines.
Regulatory and Research Insights • Inquiry about genetically engineered (GE) cotton lines deferred. • Investment in a mega food park confirmed to be less than 20% of total. • Growing emphasis on improving genetics through GE technology. • No involvement with regulatory bodies for gene-edited potato and banana crops.
Conclusion • Khurana expressed optimism for the company's future performance and thanked investors for their questions.
Nath Bio-Genes Conference Call Summary (April 24, 2023)
Financial Performance • Revenue: INR 301 crores, up from INR 278 crores (previous year). • Profit After Tax (PAT): Increased to INR 35 crores. • Gross Margin: Maintained above 50%. • Dividend: 20% recommended for shareholders, third consecutive year.
Product Portfolio • Non-Cotton, Non-Paddy Sales: Grew to 45% of total sales; target of 50%. • Key Segments: Strong performance in cotton, bajra, and wheat. • Joint Venture: Announced in Uzbekistan for cotton seed production.
Market Insights • El Niño Impact: Minimal expected effect on kharif cropping patterns; robust cotton demand anticipated. • Vegetable Sales: Previous quarter affected by unseasonal rains; specialty products performed well. • Illegal BT Cotton: Constitutes 18-19% of the market, mainly in Gujarat and Maharashtra.
Growth Expectations • Topline Growth Guidance: Conservative estimate of 10-15% for FY '24. • Dealer Network Expansion: Need-based approach rather than a specific target.
Strategic Initiatives • Millet Market Position: Strong focus on Super 27 hybrid and nutritious security through high-zinc and high-iron varieties. • Topline Vision: Aim to achieve INR 500 crores within three years.
Operational Insights • Advanced Bookings: Increased to INR 55-56 crores, driven by cotton demand. • Selling and Distribution Expenses: Increased to about 23% to enhance distributor relationships. • EBITDA Margin: Improved from 14% to around 16.5%.
Recovery Strategies • Provision Recovery: INR 9,000 lakhs provisioned; slow recovery approach with additional production for farmers. • Paddy Realizations: Improved but expected to stabilize; strategic shift towards hybrid paddy for better margins.
Conclusion • Optimism for Future Growth: Management remains confident in recovery and effective cost management.