" India is still predominantlyan agricultural economy, and hence, thefuture of the crop·protedion sedor isvery bright. The company expeds thatthis industry has huge growth potentialand will flourish in India at least forthe next 10 years. ~

M K DhanukaManaging DirectorDhanuka Agritech

Dhanuka Agritech

Building Strong RootsDhanuka Agritech has been listed in the prestigious Forbes list of the 200fastest growing companies in the Asia Pacific region for two consecutiveyears. M K Dhanuka, Managing Director, Dhanuka Agritech, tells usabout the company's product lineup and its expansion plans.

D hanuka Agritech is a leading agrochemicalscompany engaged in the manufacturing andmarketing of pesticides formulations, with a wide

range of branded insecticides, herbicides, fungicides andplant growth nutrients. The company has a basket of over83 branded molecules that come in various forms such asliquid, dust, powder and granules. It is known for havingthe most diversified product portfolio which protectsalmost all crops produced in India from various pests,weeds and diseases. Dhanuka's manufacturing plants arelocated at Gurgaon in Haryana, Sanand in Gujarat andUdhampur in J&K. The company is listed on the BSEand NSE, and its market capital isation is to the tune of Rs650 crore.

Dhanuka has an asset-light model and oneof the highest return on equity (ROE) and return oncapital employed (ROCE) in the sector. The company

is almost debt-free and its debt-to-equity ratio is 0.2.Finance costs account for just 0.31 per cent of its netsales.

During the last quarter, the shortfall in rain was amajor concern as monsoon remains a critical factor forthe company's business. The kharif crop did not meetexpectations due to scanty rainfall in many parts of India,sowing was less, the acreages fell and thus, there was somemoderation in revenue growth. Despite a challengingenvironment due to a weak rupee and erratic monsoon,the company has posted a growth of 12.4 per cent in PATfor the first half year of the company. However, therewas a turnaround in the monsoon and the deficiency wasmade up towards the end of the season. In most cultivableareas, the ground water level is sufficient to ensure a goodrabi crop. The company expects the benefits of the sameto come in during Q3 and Q4 of FY13.

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48 OJIJI Srreer lnvcsrmenr Journal 0 Dec 17 - 30, 2012

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1. How was the company's performanceduring the half-year ended September 30,2012?For the half-year, net sales were Rs 311.56 crore

against Rs 288.79 crore in the last year, a growth of7.89 per cent. The EBITDA margins were at 15.19 percent against 15.29 per cent for the comparable period.A PAT of Rs 34.9 crore was posted during the first halfof FY13, a growth of 12.14 per cent over the half yearFY12. EPSfor the first half of the year is Rs6.98 per shareand return on net worth is 28 per cent. Segment-wise,herbicides accounted for 31 per cent of the sales,insecticides for 49 per cent, fungicides for 10 per cent and10 per cent came from other categories. Geographicallyspeaking, the South zone accounted for 26 per cent,North for 27 per cent, Eastfor 13 per cent and West for34 per cent.

2. What are your capex plans?The company has purchased 10 acres of land in

Rajasthan for our next expansion, and the majority ofthis expansion will happen in FY14. The total cost of thisproject is estimated at Rs45 crore, which will be fundedout of internal accruals. This new plant will triple ourexisting production capacity.

3. What are your plans towards the expansionof your distribution network?The company has one of the strongest and most

deeply penetrated rural marketing networks in India,and reachesout to more than 10 million farmers throughour network of 30 branch offices, 1200 + techno-commercial staff, 7500+ dealers and 75000+ retailers.The company is continuously expanding its distributionchannel. Dhanuka is working hard and putting in extramarketing effort to ensure that it is able to achieve ahealthy growth rate for FY13 in spite of a challengingkharif crop.

4. Dhanuka has tie-ups with three US andfour Japanese companies. Do you plan tolaunch any new products in this fiscal?What is the current product pipelinelike?

The company has technical tie-ups with threeAmerican innovators, viz. DuPont, FMC andChemtura and four Japanese innovators, viz. Nissan,Sumitomo, Hokko Chemical and Mitsui Chemicals forbringing specialty molecules into India. Dhanukapresently has 83 brands in its portfolio. The company haslaunched three new products in this fiscal - Fuzi Super,Fluid and Lustre.

India loses approximately 15 million tonnes ofpaddy crops annually due to weeds. The company's newintroduction, Fuzi Super, is a broad-spectrum systemicand selective herbicide for rice that controls losses inyield resulting from weeds. It is one of the world's bestpost-emergence rice herbicide, which was inventedby Kumiai, Japan and is registered and sold in over 51countries.

Its other new product, Flubendiamide, sold underthe brand name Fluid, has outstanding larvicidalaction and the results are excellent against a broadspectrum of lepidopterous insect pests. This wasdeveloped by researchers from Nihon Nohyaku andBayer. It has a novel, unique mode of action, actingon the nervous system and disrupting muscle functionin insects. It is used for insect pests in paddy, pulsesand vegetables. The product is also a growthenhancer for plant height and yield. Flubendiamide is thehottest rice insecticide product and is also widely usedin China. It is expected to see a growing consumption inthe future.

Recently, Dhanuka received ClB registration u/s 9(3)for Lustre, which was launched on 9th December, 2012at Guntur, Andhra Pradesh. Lustre is a very powerfulbroad-spectrum and systemic fungicide introduced byDhanuka. This is a first-time introduction in India and willbenefit Indian farmers immensely because of its specialfeatures. It is highly effective and controls disease for alonger duration. It results in lush green disease-freecrop,faster emergence of new leavesand flowers and increasesplant vigour and strength. It also decreases flower andfruit drop.

The company foresees a very bright future for thesethree new molecules in the Indian market.

5. What are your views on the performanceof the sector and its short-term outlook?India is still predominantly an agricultural economy,

and hence, the future of the crop-protection sector is verybright. There are many growth drivers like the diminishingarea of overall agricultural land and small land-holdings,increasing population, increasing demand of good qualityfood by a thriving middle class, increasing awarenessamongst farmers about scientific advancements in agri-inputs, rising disposable incomes of farmers due to therise in the MSP and better price realisation for their cropsand their increased willingness to use advanced andbetter efficacy crop protection chemicals, low currentconsumption of pesticides in India, low yield per hectare,etc. Also, with rising farm labour prices, there is a visibleshift from manual weeding to the useof herbicides in Indialike in developed nations. The company expects that thisindustry has huge growth potential and will flourish inIndia at least for the next 10 years.

Qwww.DSlj.in Dec 17 - 30, 2012. Dalal Street Investment Journal

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250 49

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NOTE: All data sourced from Dion Insight. The operating income and PAT is on a consolidated basis and the dividend is as apercentage of the face value. Market cap is as on December 7, 2012.

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56 Dalal Street Investment Journal _ Dec 17 - 30. 2012

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