UPL Limited
Transcript of UPL Limited
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MARKET DATA
52-week range (INR) 864 / 399
Share in issue (mn) 764.0
Market cap (INR bn/USD bn) 550 / 7,418
Avg. Daily Vo. BSE/NSE (‘000) 7,899.5
Shareholding Pattern (%)
Promoters * 28.0
MFs,FIs &Banks 16.2
FIIs 37.9
Others 18.0
*Promoters pledged shares Nil (% of share in issue)
Auditors
BSR & Co. LLP
Explore:
Analysis Beyond Consensus (ABC) is an initiative to provide a differentiated perspective on various non-routine and intricate Accounting and Corporate Governance issues. This research unit works independent of sector research teams, and views expressed in this report may vary with that of respective sector/stock analyst.
Our FY21 annual report analysis (ARA) of UPL shows a marked
improvement in its balance sheet: above-industry growth enabled it
to deleverage more aggressively than in FY20. Adjusted net
debt/EBITDA was at 2.6x (reported 2.2x) and while adjusted net D/E
at 1.2x is lower than FY20, it is higher than pre-Arysta levels of ~0.5x.
PBT jumped 24% YoY, but OCF post-interest fell 22% compared to FY20
(FY20 WC had moved significantly more favourably versus FY19).
Reported net working capital (as % of sales) improved vis-a-vis FY20
and pre-Arysta levels, but adjusted for receivables’ sales, it is actually
higher than pre-Arysta level. Receivables sales have risen to 20% of
sales in FY21 (from 12% in FY18), potentially due to higher exposure
to LatAM post-Arysta. Exceptional costs continue to recur: 7.2% of
cumulative FY17–21 PBT (excluding Arysta acquisition-related costs).
Deleveraging gathers pace, but leverage still above pre-Arysta levels
An 8% uptick in UPL’s FY21 revenue outgrew industry. The resultant robust earnings
and cash flow enabled it to deleverage more aggressively than in FY20. Adjusted net
D/E thus fell to 1.2x, from 1.5x in FY20 (1.8x in FY19). Adjusted net debt/EBITDA
stood at 2.6x. Adjusted net debt/equity, though lower at 1.2x, remains higher than
pre-Arysta’s ~0.5x. Excluding forex losses, borrowing cost edged down 20bps to
4.4%, but adjusted for forex losses, borrowing cost shot up 90bps to 5%. In FY21,
UPL raised USD500mn of sustainability-linked debt at 30bps lower to pay down
acquisition debt.
WC improves led by payables; receivables’ cycle long due to LatAm
Despite PBT expanding 24% YoY, post-interest OCF fell 22% due to higher WC
deployment than in FY20. Even so, UPL generated post-interest OCF of INR55bn and
adjusted FCF of INR32bn. Reported net WC at ~26% (of sales) improved from 27%
in FY20 and 29–31% in FY17–18. Adjusted for receivables’ sales, which shot up after
the Arysta acquisition, net WC at 42% is better than FY20 but still higher than pre-
Arysta levels. Gross receivables stand higher at 54% of sales compared with pre-
Arysta level of 47–48%, potentially due to higher LatAm exposure.
Exceptional items recur; depreciation conservative
Exceptional costs have been recurring over the past five years; for instance, FY19
and FY20 marked high exceptional costs pertaining to the Arysta acquisition and
integration. Even excluding these, collective exceptional costs were 7.2% of
cumulative FY17–21 PBT for UPL. In FY21, as a proportion of PBT, it stood at 5.4%
(FY20: 18%). In FY21, it was INR3.16bn of restructuring cost (net impact 5.4% of PBT
after including a write-back). Separately, on the other hand, UPL’s depreciation
policy (7.4% D&A rate), as per our analysis, is reasonably conservative vis-a-vis
global agchem peers’ D&A rates of 3–6%.
India Equity Research August 24, 2021
ANNUAL REPORT ANALYSIS UPL Limited
Alok Deshpande Bhavin Rupani Rahul Ahuja +91 (22) 6620 3163 +91 (22) 4063 5544 +91 (22) 6620 3006 [email protected] [email protected] m [email protected]
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Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Capital allocation (FY16–21) acquisition-led; RoCE improves
During FY16–21, UPL generated INR463bn in cash/capital: ~35% from debt, ~25% in
equity and ~35% from cash profits. Of this, the company deployed about two–thirds
in acquisitions, 18% in capex and ~4% for dividends. Following the Arysta acquisition,
consolidated RoCE had plunged to 9.7% in FY20; however improved growth and
earnings lifted UPL’s consolidated RoCE to 12.4% in FY21.
Net worth analysis
UPL’s net worth has more than tripled to INR209bn during FY16–21. A major
contribution came from post-dividend profits (53%), followed by gains on equity
dilution/merger of subsidiary (37%; mainly stake sale in UPL Corporation to Abu
Dhabi Investment Authority (ADIA) and TPG). Furthermore, issue of USD-
denominated 5.25% perpetual subordinated capital securities was fully utilised to
repay existing debt, which contributed 20% towards net worth accretion.
Other key observations: Pertaining to FY21 and from annual report
UPL Corp’s auditor in Mauritius resigns: In Oct-20, KPMG, Mauritius, the auditor
to UPL Corp (material and major subsidiary of UPL Ltd) resigned. According to
UPL’s press release to stock exchanges, KPMG Mauritius resigned as Statutory
Auditors of UPL Corp Limited, Mauritius at the request of the company, in order
to reorganize the audit process to improve productivity.
Remuneration to KMP was flat in absolute terms and, as a result, was down to
4% of PBT from 6.6% of PBT in FY21.
Forex losses almost doubled in FY21 to INR3.5bn (8.8% of PBT; FY19: 6.2%). Net
unhedged forex exposure as % of net worth jumped to 5.5% from -11.3% in
FY20.
Related party revenue jumped during FY21 also, up 37% from INR8.5bn in FY20
(2.4% of sales) to INR11.9bn in FY21 (3.1% of sales). RPT revenue receivables
shot up 21% to INR3bn in FY21, while the net balance sheet exposure stood
1.3% to net worth in FY21 (FY20: 0.1%) due to decline in trade payables, which
jumped during FY20.
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ANNUAL REPORT ANALYSIS
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Deleveraging gathers pace
Strong earnings and control on working capital, which led to robust cash flow in
FY21, helped UPL pare reported net debt to INR188bn (INR218bn adjusted for
perpetual bonds). This brought down its adjusted net debt/equity to 1.2x in FY21,
from 1.5x in FY20 and 1.8x at peak following the Arysta acquisition in FY19.
Adjusted net debt/EBITDA for FY21 stood at 2.6x and should improve further as
deleveraging continues. Adjusted net debt/equity, though lower at 1.2x, remains
higher than pre-Arysta levels of ~0.5x.
UPL also refinanced part of its debt in FY21. It prepaid 3.25% INR38bn bonds (due
for redemption in 2021) and raised USD500mn (INR36bn) in a sustainability-linked
foreign currency loan. This loan comes at 30bps lower borrowing cost (as per
management) and was used to pay down acquisition debt. In Apr-21, UPL raised
another USD250mn via sustainability loans to repay the acquisition debt. For both
these tranches, if UPL meets certain sustainability KRAs, it stands to benefit from
another 5bps incentive (lower borrowing cost) from lending banks (as per
management commentary on earnings concall).
Exhibit 1: Debt, cash and borrowing cost analysis (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Note: Equity adjusted down for perpetual subordinated securities
Exhibit 2: UPL’s debt is largely foreign currency-denominated (INR bn)
Source: Annual reports, company filings, Edelweiss Research
INR bn FY17 FY18 FY19 FY20 FY21
Gross Debt 64 66 291 287 237
Cash and investments 29 29 29 68 49
Net debt 35 37 263 219 188
Add: Perpetual Subordinated Capital Securities - - - 30 30
Adjusted net debt 35 37 263 249 218
Interest expense 5.0 4.8 7.7 13.6 12.5
Interest capitalized 0.2 0.1 0.5 0.5 0.4
Total interest 5.3 4.9 8.2 14.0 12.9
Add: Forex and derivative losses 0.6 1.4 0.1 (1.6) 1.6
Adjusted interest 5.9 6.2 8.3 12.5 14.5
Forex loans (including bonds) 14 52 259 269 217
% share of forex loans within total debt 21.8 78.2 89.1 93.8 91.9
Average borrowing cost (incl forex, including perpetual equity) (%) 10.1 9.6 4.6 4.1 5.0
Average borrowing cost (ex - forex, including perpetual equity)(%) 9.0 7.5 4.6 4.6 4.4
Average yield on cash (%) 7.6 4.3 5.1 1.9 3.3
Reported Net D/E (x) 0.5 0.4 1.8 1.1 0.9
Adjusted Net D/E (x) 0.5 0.4 1.8 1.5 1.2
Reported Net Debt/EBITDA (x) 1.2 1.1 6.9 3.2 2.2
Adjusted Net Debt/EBITDA (x) 1.2 1.1 6.9 3.7 2.6
INR bn FY17 FY18 FY19 FY20 FY21
Non-Current
Redeemable NCDs 8 7 5 5 4
3.25% Senior bonds 32 32 34 38 -
4.50% Senior bonds - 19 20 22 21
4.625% Senior bonds - - - - 34
Foreign currency bank loans 14 0 204 209 127
Others (FY21 = Sustainability l inked Foreign currency loan) - 0 0 0 36
Total Non-current borrowings (A) 54 59 264 274 221
Current
Redeemable NCD's 1 1 3 0 1
Bank Loan 2 1 2 3 3
Working capital loan 6 6 16 7 7
Commercial papers - - 4 - 2
Receivable discounting 0 0 3 3 3
Others 1 - - - -
Total current borrowings (B) 10 8 27 13 15
Total Borrowings C = (A+B) 64 66 291 287 236
Add: Perpetual subordinated capital security (D) - - - 30 30
Total adjusted Borrowings (C+D) 64 66 291 317 266
Including forex losses, UPL’s borrowing
costs shot up 90bps to 5% (from 4.1%)
Excluding these forex losses, borrowing
costs dipped to 4.4%
UPL has continued to rein in borrowing
costs since FY19; however debt (and
interest costs) remains exposed to
currency risk considering 92% of total
debt is denominated in foreign currency
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ANNUAL REPORT ANALYSIS
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Cash flows robust, but weaker than FY20
Despite a 24% jump in consolidated PBT, OCF post-interest slid 22% YoY due to
higher working capital deployment than in FY20. In FY20, working capital and cash
flow had benefitted from a plunge in other current liabilities. Nonetheless, UPL
generated FY21 post-interest OCF of INR55bn and adjusted FCF of INR32bn, which
proved useful in reducing leverage.
Exhibit 3: Cash flow analysis – Overall robust, but weaker than in FY20 (INR bn)
Source: Annual reports, company filings, Edelweiss Research
FY21
Profit before tax 5.5 4.3 28.4 37.5 33.8 41.8
Non-operating expense (2.1) 2.3 16.5 15.9 14.3 18.2
Non-cash adjustments 9.9 9.3 10.9 12.7 20.8 22.0
Direct taxes paid (0.9) 0.1 (7.3) (7.3) (8.2) (7.3)
Exceptional items and prior period items (0.1) - (3.8) (0.5) (3.9) (0.5)
Cash profit after tax 12.2 16.0 44.7 58.3 56.9 74.3
(Increase)/Decrease in trade/ other receivables (4.0) (8.7) 0.8 (3.1) (6.3)
(Increase)/Decrease in inventories 5.5 (6.4) 8.1 (8.8) 13.6 (15.2)
(Increase)/Decrease in loans and advance - - - - - -
(Increase)/Decrease in other assets 4.6 2.4 (5.1) (3.6) (0.5) (1.2)
Increase/(Decrease) in trade payables 2.5 8.8 (1.3) 11.6 1.2 20.4
Increase/(Decrease) in other l iabilities/ provisions (3.1) 5.5 22.5 (5.4) 19.3 0.1
(Increase)/Decrease in working capital 5.5 1.6 25.0 (3.7) 30.5 (2.1)
Net cash from operating activities 6.4 17.6 69.8 54.6 87.4 72.1
Interest expenses/ finance costs (1.8) (1.2) (14.6) (15.4) (16.5) (16.6)
OCF, post interest 15.9 16.4 55.0 39.2 70.9 55.6
Less: Capex (Including CWIP & IWIP*) (10.2) (11.9) (9.2) (9.2) (19.4) (21.2)
Free cash flow (FCF) 5.7 4.5 45.9 29.9 51.6 34.4
Acquisitions/ investments in associates/JVs, others - - (8.0) (2.1) (8.0) (2.1)
Adjusted Free cash flow (FCF) 5.7 4.5 37.8 27.9 43.6 32.3
ConsolidatedStandalone Subsidiary (calculated)
FY20 FY21FY21 FY20 FY20INR bn
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ANNUAL REPORT ANALYSIS
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Working capital analysis
Exhibit 4: Adjusted working capital (as % of sales) back to pre-Arysta acquisition
levels
Source: Annual reports, company filings, Edelweiss Research
* Full-year pro forma financials taken for Arysta for FY19
Exhibit 5 Net working capital trends (as a % of sales)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 6 Cash conversion cycle (number of days)
Source: Annual reports, company filings, Edelweiss Research
INR bn FY17 FY18 FY19* FY20 FY21
Inventories 41.6 45.4 91.3 78.5 94.2
Trade receivables 56.6 60.6 116.8 120.6 130.3
Trade payables 48.8 56.8 98.5 102.3 125.3
Net core working capital 49.4 49.2 109.7 96.7 99.2
Less: Advance against orders 2.8 2.1 3.4 14.2 15.7
Net working capital 46.5 47.1 106.3 82.6 83.5
Sale of receivables (non recourse) 20.4 20.5 49.3 70.2 76.2
Net working capital (adj. for sale receivables) 67.0 67.6 155.6 152.8 159.7
Net core working capital as % of sales 30.8 28.7 50.8 27.3 25.9
Net working capital as % of sales 29.0 27.5 33.6 23.3 21.8
Adjusted net working capital as % of sales 41.7 39.5 49.2 43.1 41.6
As % of sales FY17 FY18 FY19 FY20 FY21
Inventories 25.9 26.5 28.9 22.1 24.6
Trade receivables (reported) 35.2 35.4 37.0 34.0 34.0
Trade payables (30.4) (33.2) (31.1) (28.9) (32.7)
Net core working capital 30.8 28.7 34.7 27.3 25.9
Advance against orders (1.8) (1.3) (1.1) (4.0) (4.1)
Sale of receivables (non recourse) 12.7 12.0 15.6 19.8 19.9
Adjusted net working capital 41.7 39.5 49.2 43.1 41.6
(number of days) FY17 FY18 FY19* FY20 FY21
Trade receivable days 129 101 135 124 124
Inventory days 94 76 105 81 90
Trade payable days (111) (95) (114) (105) (119)
Core cash conversion cycle 112 82 127 100 94
Less: Advance against orders 6 4 4 15 15
Cash conversion cycle 106 79 123 85 79
Add: Sale of receivables (non recourse) 46 34 57 72 73
Cash conversion cycle (adj for sale receivables) 152 113 180 157 152
UPL’s cash conversion cycle
contracted by six days in FY21 to 94
Inventory days went up, but that was
more than offset by higher payable
days; sale of receivables (by number
of days) stayed flat YoY at 72–73 days
UPL’s reported net working capital at
~26% (as % of sales), a slight
improvement from 27% in FY20 and
29–31% in FY17–18
Adjusted for sale of receivables, which
shot up after the Arysta acquisition,
net working capital improved vis-à-vis
FY20 levels to 42%, but it is still higher
than pre-Arysta acquisition level in
FY18
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Exhibit 7: Revenue exposure and cash conversion cycle comparison with global
peers
Source: Annual reports, company filings, Edelweiss Research
Sales of receivables up, but flat YoY as proportion of sales
UPL’s sale of receivables at INR76bn in FY21 is higher than INR70bn in FY20, but is
flat at ~20% of sales. Building in these, gross receivables (reported + sold), the trend
is identical to FY20, i.e. 54% of sales. Receivables’ sales jumped from ~12% in FY18
to 20% of sales in FY21. This can be largely due to the higher exposure to the Latin
American region post-Arysta acquisition. UPL’s share of revenue from LatAM has
grown from 33% in FY18 to 38% in FY21. LatAm receivables tend to be longer cycle
(200+ days); hence it is likely UPL would sell these receivables on a non-recourse
basis to banks.
While we have a neutral view on sale of receivables as a practice, we believe it has
to be seen in the context of whether sales growth that UPL achieves compared with
peers, especially in LatAM. UPL clocked 8% sales in LatAM in FY21, versus 5% for
Adama and 1% for FMC.
Exhibit 8: Receivables, bill discounting and allowance on receivables (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Revenue share by region UPL Adama FMC Nufarm
Latin America 38% 26% 31%
North America 15% 19% 22% 40%
Europe 17% 25% 30%
EMEA 23%
India, APAC, ME, Africa 30%
Aus & NZ 24%
India 12%
Asia 24% 6%
RoW 18%
Total 100% 100% 100% 100%
Consolidated working capital related days
YE Mar YE Dec YE Dec YE Jul UPL Q3FY21
Trade receivable days 124 115 183 126 120
Add: Inventory days 90 133 86 120 119
Less: Trade payable days (119) (63) (74) (120) (122)
Core cash conversion cycle 94 185 195 126 117
Less: Advance against orders 15 14 27 na
Cash conversion cycle 79 171 168 126
Add: Sale of receivables (non recourse) 73 37 na na 73
Cash conversion cycle (adj for sale receivables) 152 207 168 126 190
Particulars FY17 FY18 FY19 FY20 FY21
Reported receivables (INR bn) 56.6 60.6 116.8 120.6 130.3
Reported receivables as a % of revenue (%) 35.2 35.4 37.0 34.0 34.0
Sale of receivables (INR bn) 20.4 20.5 49.3 70.2 76.2
Sale receivables as a % of revenue (%) 12.7 12.0 15.6 19.8 19.9
Total receivables incl. sale receivables (INR bn) 77.0 81.1 166.1 190.8 206.5
Total receivables as a % of revenue (%) 48.0 47.4 52.5 53.8 53.8
Allowance for doubtful receivables (INR bn) 3.6 3.7 12.0 10.3 9.6 Allowance as % of reported receivables (%) 6.0 5.7 9.3 7.9 6.8
Region-wise revenue share (%)
Latin America 33.1 32.8 35.0 38.5 38.4
North America 17.7 17.7 15.7 15.8 14.7
Europe 13.2 13.3 18.2 16.0 16.6
RoW 17.9 17.9 20.1 19.1 18.2
India 18.2 18.4 10.9 10.7 12.1
Total 100.0 100.0 100.0 100.0 100.0
A direct annual comparison of UPL’s
working capital with other global
agchem peers is not feasible given
different year-ends. Generally,
agchem companies with higher LatAM
presence tend to build up working
capital around December. Hence,
UPL’s Q3FY21 working capital must be
compared to global peers.
This shows that December-end
working capital is within a small range
for all players (i.e. 175–210 days)
From a stock valuation perspective,
we believe if the sale of receivables is
reasonably high, then RoCE
calculations may slightly over-
estimate the actual operational
capital efficiency—since EBIT tends to
be higher (as bill discounting charges
paid to banks come below EBIT) and
capital employed tends to be lower (as
capital employed has only reported
receivables)
In such instances, therefore, we
believe a PE valuation potentially
better captures value rather than
EV/EBITDA.
Total receivables (incl. sale of
receivables) remain higher at 54% of
sales, compared with pre-Arysta
acquisition levels of 47–48%, possibly
due to higher exposure to LatAM, in
our view
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Exhibit 9: RoCE analysis for group level and UPL Corp
Source: Annual reports, company filings, Edelweiss Research
Exceptional costs lower, but recurring nonetheless
The past two years (FY19 and FY20) saw high exceptional items due to the
acquisition-related costs involved for UPL when it acquired Arysta. However, even
excluding these, UPL continues have exceptional costs quite consistently. In FY21, as
a proportion of PBT, it stood at 5.4% (FY20: 18%). Exceptional costs were offset by a
write-back of INR0.9bn on account of reduction in litigation cost. UPL received a final
court order reducing the damages (which was earlier provided during FY20) from
INR2.3bn to INR0.9bn.
Despite the write-back of litigation costs it provided for in FY20, UPL continued to
report some exceptional charges even in FY21. In FY21, it was INR3.16bn of
restructuring cost. UPL decided to stop production at its Netherlands plant (one of
its oldest manufacturing unit), which required significant repairs and maintenance.
About INR2.6bn was related to this restructuring and severance cost provisions for
the plant shutdown. The remainder pertained to litigation charges in other regions.
Exhibit 10: Exceptional and prior-period items (INR mn)
Source: Annual reports, company filings, Edelweiss Research
INR bn FY20 FY21 FY19 FY20 FY21 FY20 FY21
Total Assets 622 617 72 79 88 701 704
Current Liabilities (138) (160) (29) (29) (37) (167) (196)
Capital Employed 484 457 43 50 51 534 508
EBIT 41 52 7 7 12 49 64
ROCE % 9.1 11.1 15.2 16.1 23.6 9.7 12.4
UPL Corp (INR bn) Other (Derived) UPL Consol (INR bn)
Particulars FY17 FY18 FY19 FY20 FY21 FY17-21
Exceptional expenses:
Restructuring/ reorganisation expenditure 370 290 - 2,090 3,160 5,910
Acquisition Cost of Arysta Group - - 3,320 640 - 3,960
Product contamination and counterfeiting 70 130 - - - 200
Inventory provision 180 - - - - 180
Stamp duty on merger with Advanta 320 - - - - 320
Integration Cost on Arysta Group acquisition - - 410 - - 410
Litigation & other exception cost - - 760 3,500 (930) 3,330
Others - - 20 - 150 170
Towards Competition Commission of India - 70 - - - 70
Others 140 140 - - - 280
Total 1,080 630 4,510 6,230 2,380 14,830
As % of PBT (before exceptional item) 5.3 2.6 21.3 18.4 5.4 13.0
Exceptional gain on sale of associates (270) - - - - (270)
Net exceptional and prior period items 810 630 4,510 6,230 2,380 14,560
As % of PBT (before exceptional item) 4.0 2.6 21.3 18.4 5.4 12.8
Exceptional items (costs) continue on
UPL’s P&L quite consistently
FY19 and FY20 had high exceptional
costs due to Arysta acquisition and
integration-related costs; however,
excluding these, FY17–21 collective
exceptional items were 7.2% of the
cumulative FY17–21 PBT for UPL
UPL Corp, which holds majority of the
main businesses for UPL, has a slightly
lower RoCE than consolidated RoCE
UPL’s RoCE improved in FY21 due to
higher earnings
Edelweiss Securities Limited
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Intangibles and depreciation trends
In FY21, intangible assets down slightly by 4% YoY to INR288bn (still ~161% of net
worth), largely due to decline in product registrations.
Furthermore, in standalone financials, the auditors highlighted the accounting
treatment of goodwill worth INR37bn on amalgamation of Advanta in FY17,
specifying that its amortisation treatment differs from the treatment prescribed
under Ind AS.
Under Ind AS, the company should not amortise intangibles and test them for
impairment at year-end. However, the company amortises the goodwill at 10% p.a.
Hence, there is a P&L charge of INR3.7bn. Had it followed Ind AS, PAT would be
higher by INR3.7bn and the goodwill/net worth would be higher by INR18.4bn.
However, there is no impact on consolidated financials.
Exhibit 11: Goodwill and intangible analysis (INR bn)
Product registration and acquisition useful life remains in mid-range
UPL’s useful life assumption of product registration and acquisition cost stood in the
mid-range compared with international peers. While it remained higher than all of
domestic peers, UPL’s 15-year useful life assumption is higher than FMC and Adama,
but lower than Nufarm (high end is 30 years).
Exhibit 12: Useful life of product registration versus peers Exhibit 13: Sensitivity analysis (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY17 FY18 FY19 FY20 FY21
Goodwill 4 4 166 182 177
Product registrations/ acquisitions 10 11 86 86 78
Other intangibles 1 1 22 22 21
Intangibles under development 2 2 7 10 12
Total intangible assets 17 18 282 301 288
% of net worth 24 20 191 185 161
Company Useful life (Years)
Domestic peers
UPL 15 years
Astec 5 years
PI Industries 5 years
Rallis 4years
International peers
NuFarm 5-30 years
FMC 6 -10 years
Adama 8 years
Particulars @5 years @8 years @10 years
Gross Block - Product registration
and acquisition
126 126 126
Current amortisation (A) 8 8 8
Current useful l ife 15 15 15
Assuming lower useful l ife 5 8 10
Revised amortisation (B) 25 16 13
Additional amortisation (B-A) 17 7 4 As % of PBT 49.6 21.7 12.4
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Exhibit 14: UPL’s depreciation policies are conservative relative to global peers (INR mn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 15: UPL depreciation, amortisation rates versus global agchem peers
Source: Annual reports, company filings, Edelweiss Research
Particulars
FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21
Depreciation *
Tangible (A) 2,840 4,530 5,000 1,670 4,750 6,400 4,510 9,280 11,400
Depreciation rate (%) 7.5 9.5 8.5 4.7 8.8 9.0 6.1 9.1 8.8
Intangible (B) 700 680 580 4,480 10,160 9,930 5,180 10,840 10,510
Depreciation rate (%) 6.8 6.5 5.4 3.8 5.8 6.5 4.0 5.8 6.4
Total (A+B) 3,540 5,210 5,580 6,150 14,910 16,330 9,690 20,120 21,910
Depreciation rate (%) 7.3 8.9 8.0 4.0 6.5 7.3 4.8 7.0 7.4
Gross block: #
Tangible 41,930 53,550 64,460 48,180 59,210 82,750 90,110 112,760 147,210
Intangible 10,420 10,580 10,990 198,090 154,240 153,300 208,510 164,820 164,290
Total 52,350 64,130 75,450 246,270 213,450 236,050 298,620 277,580 311,500
Net block #
Tangible 24,550 31,450 37,460 21,990 24,510 27,060 46,540 55,960 64,520
Intangible 3,010 2,490 2,320 118,960 105,940 96,970 121,970 108,430 99,290
Total 27,560 33,940 39,780 140,950 130,450 124,030 168,510 164,390 163,810
CWIP
Tangible 8,210 8,040 6,380 3,450 2,550 2,610 11,660 10,590 8,990
Intangible 680 820 840 6,210 9,320 11,340 6,890 10,140 12,180
Total 8,890 8,860 7,220 9,660 11,870 13,950 18,550 20,730 21,170
Capex 10,270 10,160 11,930 5,260 9,190 9,233 15,530 19,350 21,163
Standalone Subsidiary (Derived) Consolidated
8.8
6.47.4
4.2
5.95.4
6.6
2.1
3.4
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4
6
8
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FMC
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Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 10
Net worth analysis UPL’s net worth more than tripled to INR209bn during FY16–21. The major contribution
to net worth came from post-dividend profit (53%), followed by gains on equity dilution/
merger of subsidiary (37%; mainly stake sale in UPL Corporation to Abu Dhabi Investment
Authority (ADIA) and TPG). Furthermore, issue of USD-denominated 5.25% perpetual
subordinated capital securities fully utilised to repay existing debt contributed 20%
towards net worth accretion.
Exhibit 16: Net worth accretion (FY16–21) (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 17: Net worth movement (INR bn)
Source: Annual Reports, Company filings, Edelweiss research
59
81
14 3 56
30
209
Net
wo
rth
(FY
16
end
)
Cu
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FCTR
(tr
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dilu
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Per
pe
tual
Sub
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iate
dC
apit
al S
ecu
riti
es
Net
wo
rth
(FY
21
)
Networth movement (FY16-21)
Particulars FY17 FY18 FY19 FY20 FY21 FY16-21 % of total
Opening shareholders' fund 58.9 74.0 91.7 147.2 192.4 58.9 28.2
Profit for the year (net of dividend) 15.0 16.5 10.4 14.5 24.1 80.5 38.6
FV of shares issues on Advanta Merger - - - - - - -
Advanta merger w/off - NCI reserve - - - - - - -
Ind AS transition and other adjustments - - - - - - -
Foreign currency translation reserve - 0.7 (7.4) 0.4 (7.8) (14.0) (6.7)
Gain on equity dilution / merger of subsidiary 53.4 3.2 (0.2) 56.3 27.0
Others 90.0 0.5 (0.9) (2.7) 0.3 (2.7) (1.3)
Adjusted closing shareholders' fund 74.0 91.7 147.2 162.5 208.9 179.0 85.7
Add: Perpetual subordinated capital securities - - - 29.9 - 29.9 14.3
Closing shareholders' fund 74.0 91.7 147.2 192.4 208.9 208.9 100.0
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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UPL Corporation performance
Exhibit 18: Profitability analysis (USD mn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 19: Cash flow analysis (USD mn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21
Sales 2,140 2,603 4,487 4,594 100.0 100.0 100.0 100.0
Direct cost 1,382 1,722 2,918 2,962 64.6 66.2 65.0 64.5
Operating and Administrative exp 365 464 402 339 17.1 17.8 9.0 7.4
Personnel cost - - 388 400 - - 8.6 8.7
EBITDA 393 417 779 893 18.3 16.0 17.4 19.4
Depreciation 56 73 208 207 2.6 2.8 4.6 4.5
EBIT 337 344 571 685 15.7 13.2 12.7 14.9
Less: Financial Charges 94 142 172 236 4.4 5.5 3.8 5.1
Add: Other income 15 17 9 23 0.7 0.6 0.2 0.5
PBT before exceptional items 258 218 408 472 12.0 8.4 9.1 10.3
Exceptional Items 7 66 93 26 0.3 2.5 2.1 0.6
Share of loss of associates/JVs (15) 2 (1) 6 (0.7) 0.1 (0.0) 0.1
PBT 236 154 315 451 11.0 5.9 7.0 9.8
Tax 29 12 73 58 1.4 0.5 1.6 1.3
PAT 207 142 242 394 9.7 5.4 5.4 8.6
%
Particulars FY18 FY19 FY20 FY21
Profit before tax 235.9 141.2 315.4 451.5
Non-operating expenses/ (income) 54.4 87.8 215.0 202.3
Non-cash adjustments 95.6 114.6 165.6 257.1
Direct taxes paid (16.7) (38.7) (92.8) (105.6)
Cash profit after tax 369.2 304.9 603.2 805.2
(Increase)/Decrease in inventories (20.3) (12.4) 190.0 (147.3)
(Increase)/Decrease in trade and other receivables (24.7) 78.8 83.3 (156.3)
(Increase)/Decrease in other current assets 3.1 6.3 - -
(Increase)/Decrease in loans and advances (0.7) 22.2 80.0 (88.7)
Increase/(Decrease) in trade and other payables 48.5 84.8 (118.5) 284.5
Increase/(Decrease) in long term and short term provision 1.2 (1.4) 11.4 (19.1)
Increase/(Decrease) in other l iabilities (19.7) (59.0) 212.9 20.3
(Increase)/Decrease in working capital (12.5) 119.2 459.1 (106.6)
Net OCF 356.7 424.1 1,062.2 698.6
Interest expenses paid (100.8) (131.2) (211.0) (212.2)
Adj. OCF 255.9 292.9 851.2 486.5
Capex (95.7) (68.1) (93.5) (123.9)
FCF 160.1 224.7 757.7 362.5
Acquisitions (48.4) (4,293.1) (109.4) (19.8)
Adj. FCF 111.8 (4,068.4) 648.3 342.7
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 12
Exhibit 20: UPL Corp capital allocation (USD mn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY18 FY19 FY20 FY21
Sales 2,140 2,603 4,487 4,594
EBITDA 393 417 779 893
Adjusted PBIT 352 360 580 708
Gross margin (%) 44.2 41.5 35.0 35.5
EBITDA margin (%) 18.3 16.0 17.4 19.4
ROCE (%) 21.2 9.3 9.6 11.9
Net fixed assets (Ex CWIP) 410 4,332 4,203 4,179
CWIP 71 50 34 31
Devlopment expenditure (inc under development) 29 89 123 155
Fixed asset turnover 5.4 1.1 1.1 1.1
Net current assets 462 737 639 679
Equity shareholders' funds (A) 743 2,057 2,415 2,744
Loan funds (B) 985 3,990 3,660 3,075
Reported capital employed (A+B) 1,728 6,046 6,074 5,819
D/E (x) 1.3 1.9 1.5 1.1
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 13
Forex losses
Exhibit 21: Forex losses / (gain) (INR mn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 22: Forex losses / (gain)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 23: Unhedged forex exposure (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY17 FY18 FY19 FY20 FY21
Forex loss/ (gain) charged under:
Finance cost & other exps 3,470 1,560 2,630 2,430 3,230
Finance cost (on Derivatives) (470) (80) 400 (710) 420
Total (A) 3,000 1,480 3,030 1,720 3,650
As % of PBT 15.5 6.2 18.1 6.2 8.8
Forex loss/ (gain) charged to reserves:
Capital reserve (10) - (170) 140 (130)
Movement in FCTR - 670 (7,630) 410 (7,750)
As % of PBT (0) 3 (47) 2 (19)
41%
12%
-13%
6%
19%24%
16%
4% 6%
-2%
1%6%
7%
-2%-3%-8%
2%
-2%
3%
-2% -3%
1%2.0
3.03.0
1.5
3.0
1.7
0.0
0.7
1.4
2.1
2.8
3.5
-30%
-15%
0%
15%
30%
45%
FY15 FY16 FY17 FY18 FY19 FY20 FY21 YTD
FX lo
ss/
(gai
n)
-IN
R b
n
(%)
BRL/USD YoY % INR/USD YoY %
FX impact on sales Net FX loss/ (gain) - RHS
Particulars FY17 FY18 FY19 FY20 FY21
Payables
USD 18.0 22.9 146.4 80.4 65.9
EUR 1.9 0.3 13.8 32.7 18.6
JPY - - 27.5 0.6 0.2
Others 0.5 0.9 3.4 1.8 4.5
Total 20.4 24.0 191.1 115.4 89.2
Receivables
USD 8.7 24.7 85.8 58.5 61.0
EUR 0.2 0.6 13.8 17.5 7.1
JPY - 0.1 27.5 45.2 0.6
Others 0.7 1.2 12.4 16.0 9.1
Total 9.6 26.5 139.4 137.2 77.8
Net unhedged (receivables) / payables 10.8 (2.5) 51.7 (21.8) 11.5
Net worth 74.0 91.7 147.2 192.4 208.9
% of net worth 14.6 (2.7) 35.1 (11.3) 5.5
Currency depreciation affected revenue
negatively by 3% driven by depreciation
of the Brazilian real
In FY21, payables’ unhedged exposure
stood higher than receivables’ unhedged
exposure
As % of net worth, it jumped to 5.5%
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Exhibit 24: Derivatives contract trend (INR bn)
Source: Annual reports, company filings, Edelweiss research
Related-party transactions
Exhibit 25: Major related-party transactions surged due to increase in sale to associates (INR mn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 26: Effective tax rate – Consolidated and standalone (INR mn)
CurrencyForward
Contract
Cross
Currency
Interest rate
swap
Forward
Contract
Cross
Currency
Interest rate
swap
Forward
Contract
Cross
Currency
Interest rate
swap
USD 27.6 - 24.3 - 94.4 43.2
EUR (0.5) 103.2 (0.4) 110.1 2.5 114.1
JPY 0.3 27.7 (0.4) 30.9 1.4 29.3
Other (1) - (1) - (1) -
Total 26.7 130.9 22.1 141.0 97.5 186.6
FY19 FY20 FY21
Particulars FY20 FY21 FY20 FY21 FY20 FY21 Particulars FY20 FY21 FY20 FY21 FY20 FY21
Revenue 8,500 11,610 10 10 8,510 11,620 Receivables 2,270 2,950 180 10 2,450 2,960
Other income 50 100 - 140 50 240 Loans/ advances 540 850 340 (90) 880 760
Total (A) 8,550 11,710 10 150 8,560 11,860 Total (A) 2,810 3,800 520 (80) 3,330 3,720
% to Sales 2.4 3.0 0.0 0.0 2.4 3.1 Payables 2,450 610 90 150 2,540 760
Purchases 260 160 570 1,260 830 1,420 Sale/Redemption Of
Shares/Ncd
- - 610 260 610 260
Other expenses,
reimbursements
310 110 1,110 1,100 1,420 1,210 Total (B) 2,450 610 700 410 3,150 1,020
Total (B) 570 270 1,680 2,360 2,250 2,630 Net exposure (A-B) 360 3,190 (180) (490) 180 2,700
Purchase as % to Cost
of material consumed
0.1 0.1 0.3 0.7 0.4 0.7 Net exposure as %
to net worth
0.2 1.7 -0.1 -0.2 0.1 1.3
TotalOther PartiesJV & Associates JV & Associates Other PartiesBalance sheet exposure
Total
P&L transactions
Particulars FY19 FY20 FY21 FY19 FY20 FY21
Tax expense 1,980 5,860 6,860 810 770 2,140
Profits before tax 17,590 27,610 41,390 4,860 5,380 4,340
Effective tax rate (%) 11 21 17 17 14 49
Cash Tax 3,540 8,190 7,250 620 880 (700)
Effective cash tax rate (%) 20 30 18 13 16 (16)
StandaloneConsolidatedEffective cash tax rate at consolidated
level declined to 18%; during FY20, UPL
received a cash refund on standalone
level
In FY21, outstanding forward contracts
shot up to INR97bn
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Subsidiary performance
Exhibit 27: Revenue and profitability analysis for select subsidiaries (mn)
Source: Annual reports, company filings, Edelweiss Research
Currency % holding Country Networth Turnover PAT Tax (%) Networth Turnover PAT Tax (%)
UPL NA Inc.(United Phosphorus Inc.) USD 78 USA 23,500 61,290 4,760 3 23,640 55,900 930 56
UPL Limited, Gibraltar USD 78 Gibraltar 35,540 38,360 3,340 - 140 70 160 -
UPL Corporation Limited (formerly Bio-win Corporation Limited) USD 78 Mauritius 152,180 25,360 3,900 3 155,440 37,910 8,770 3
UPL Limited Mauritius USD 78 Mauritius 11,140 49,230 5,860 - 15,630 59,230 4,820 -
Decco US Post harvest INC USD 78 USA (1,720) 3,090 (2,220) -ve (560) 3,150 1,100 16
Advanta Seeds International USD 78 Mauritius 9,780 3,210 1,480 5 10,870 3,500 1,410 3
UPL Argentina S A USD 78 Argentina (660) 3,060 1,690 - 490 6,680 (600) -2
Others USD 202,050 51,830 6,030 102,220 81,230 (59,410)
Total - USD 431,810 235,430 24,840 307,870 247,670 (42,820)
Cerexagri S.A.S. EUR 78 France 3,820 5,230 260 4 4,650 6,300 690 26
UPL France EUR 78 France 1,210 8,110 320 6 1,380 3,740 460 -
Cerexagri B.V. EUR 78 Netherlands 4,770 8,320 270 25 2,720 2,460 (2,220) 25
UPL Italia S.R.L. EUR 78 Italy 1,390 6,020 (70) -ve 1,430 7,110 - -
UPL Deutschland GmbH EUR 78 Germany 140 240 30 - 600 5,180 40 64
UPL Europe Limited EUR 78 UK 55,930 10,460 70 90 163,070 10,160 70,600 0
Arysta LifeScience Benelux SPRL EUR 78 Belgium 4,630 15,750 2,280 26 7,900 15,580 3,110 23
Arysta LifeScience S.A.S. EUR 78 France 9,080 10,360 850 28 4,430 11,140 660 36
Others EUR 267,870 49,650 21,750 247,060 31,650 35,580
Total - EUR 348,840 114,140 25,760 433,240 93,320 108,920
UPL do Brasil Industria e Comércio de Insumos Agropecuários S.A. BRL 78 Brazil 9,230 73,000 (6,900) -ve 5,740 83,840 (7,710) 2
Advanta Comercio De Sementes LTDA. BRL 78 Brazil 830 1,060 (700) - (60) 1,160 (930) -
Other BRL 5,630 - (3,670) - 2,880 - (3,560) -
Total - BRL 15,690 74,060 (11,270) - 8,560 85,000 (12,200) -
SWAL Corporation Limited INR 100 India 1,220 7,100 130 35 1,490 9,020 280 26
UPL Australia Limited AUD 78 Australia 1,390 3,020 (60) -ve 1,750 4,030 70 13
UPL Costa Rica S.A CRC 78 Costa Rica (30) 5,260 120 37 40 5,800 70 -
UPL Agro S.A. de C.V MXN 78 Mexico (220) 11,890 (320) -ve 1,980 16,500 (1,060) 26
United Phosphorus (India) LLP INR 100 India 700 15,090 340 32 1,060 19,840 350 36
Arysta Lifescience Corporation JPY 78 Japan 21,520 11,010 10,910 1 19,740 6,630 7,120 -2
UPL Limited, Japan JPY 78 Japan 42,920 3,440 (2,010) - 40,710 3,260 (1,900) -
Others 85,686 87,220 2,990 128,570 103,590 5,470
Total - others 153,186 144,030 12,100 195,340 168,670 10,400
Grand total 949,526 567,660 51,430 945,010 594,660 64,300
Name of the subsidiaryFY20 FY21
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Gains decline OCI losses
Net loss on derivative contracts outstanding as on FY21 declined 37% YoY to INR1.1bn after booking a gain during the year. This will be re-classified to P&L on expiry of the derivatives contract. Net carrying value of FVTOCI losses as on FY21 stood at INR1.5bn.
Exhibit 28: Other comprehensive income movement (INR mn)
Source: Annual reports, company filings, Edelweiss Research
During FY20, loan given & repayment received declined significantly; net repayment
given during FY21 rose to INR230mn.
Exhibit 29: Loan given / taken analysis (INR mn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY18 FY19 FY20 FY21
Cash flow hedge reserve movement
Opening balance - - (620) (1,780)
(Addition) / reduction - (620) (1,160) 660
Closing balance - (620) (1,780) (1,120)
Addition as % of PBT (before exceptional item) - (2.8) (3.4) 1.5
FVTOCI movement
Opening balance (540) (440) (1,040) (1,830)
(Addition) / reduction 100 (600) (790) 360
Closing balance (440) (1,040) (1,830) (1,470)
Addition as % of PBT (before exceptional item) 0.4 (2.7) (2.3) 0.8
Particulars FY17 FY18 FY19 FY20 FY21Total
(FY17-21)
Sundry loans given (1,340) (140) 4,240 (120) (230) 2,410
Sundry loans repayment received 2,470 850 (3,170) 170 - 320
Net Sundry loans (given)/repayment received 1,130 710 1,070 50 (230) 2,730
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Capital allocation trends
During FY16–21, UPL generated and utilised funds of INR463bn. Majority of the
funds were generated through borrowings (35%), followed by operating profits
(35%) and equity-fund raising (25%). The company utilised the funds for investment
in associates / JVs (66%), other investment/cash (12%), capex (18%) and payment of
dividend (4%).
Exhibit 30: Capital generation – Source and deployment of capital during FY17–21 (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Exhibit 31: Sources of funds (FY16–21) (%) Exhibit 32: Application of funds (FY16–21) (%)
Source: Annual reports, company filings, Edelweiss Research
Sources of Funds (FY16-21) INR bn % Application of Funds (FY16-21) INR bn %
Borrowings 162 35% Acquisitions / Investment in subs 304 66%
Cash PAT (post int, taxes) 160 35% Investments/ cash 54 12%
Equity (including subordinate securities) 113 25% Capex 82 18%
Working capital 20 4% Dividends 19 4%
Investment income 7 1% Miscellaneous 4 1%
Total 463 100% 463 100%
Borrowings35%
Cash PAT (post int,
taxes)35%
Equity (including
subordinate securities)
25%
Working capital
4%
Investment income
1%
Acquisitions /
Investment in subs
66%
Investments/ cash
11%
Capex18%
Dividends4% Miscellaneo
us1%
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Profitability analysis
UPL’s top line/EBITDA increased 8%/23% during FY21 led by strong growth in Latam,
Europe, India and RoW. While India business grew by 22%, Europe grew by 19% and
Latam by 8%. Finance charges jumped 39% due to financing element on amounts of
trade payables, up from INR1.4bn to INR2.6bn, while other finance charges moved
from INR1bn to INR3.4bn.
Exhibit 33: Standalone, subsidiary and consolidated profitability (INR bn)
Source: Annual reports, company filings, Edelweiss Research
Total discount/ rebate/ incentive given was down 85% and sales returns declined
55%. In fact, total incentive/rebates/discounts/sales return to sales ratio has been
declining over the past four years and stood at merely ~4% of gross sales in FY21.
Exhibit 34: Incentives and discounts
Source: Annual reports, company filings, Edelweiss Research
Total other expenses % to sales increased marginally to 19.6%. The major reasons for
the overall jump are power & fuel expenses (up 21bps to 3.8% of sales),
transportation cost (up 60bps to 3.4% of sales) and subcontracting charges (down
74bps to 3.8% of sales).
FY20 % FY21 % FY20 % FY21 % FY20 % FY21 %
Sales 96.4 100.0 113.5 100.0 261.1 100.0 273.5 100.0 357.6 100.0 386.9 100.0
Raw Materials Consumed 55.6 57.7 62.6 55.1 131.8 50.5 128.4 47.0 187.4 52.4 191.0 49.4
Operating and Administrative exp 22.3 23.1 27.9 24.6 46.2 17.7 47.4 17.3 68.5 19.2 75.3 19.5
Personnel cost 6.5 6.7 6.9 6.0 27.5 10.5 30.3 11.1 33.9 9.5 37.1 9.6
EBITDA 12.1 12.5 16.1 14.2 55.7 21.3 67.4 24.6 67.7 18.9 83.5 21.6
Depreciation 8.9 9.2 9.8 8.6 11.2 4.3 12.0 4.4 20.1 5.6 21.7 5.6
EBIT 3.1 3.3 6.4 5.6 44.5 17.0 55.4 20.3 47.6 13.3 61.8 16.0
Less: Financial Charges 2.7 2.8 3.1 2.7 12.1 4.6 17.5 6.4 14.8 4.1 20.6 5.3
Add: Other income (ex-Dividend income) 1.0 1.0 (3.5) (3.0) 0.1 0.0 6.0 2.2 1.0 0.3 2.6 0.7
PBT (ex-dividend income) 1.4 1.5 (0.2) (0.1) 32.4 12.4 43.9 16.1 33.8 9.5 43.8 11.3
Add: Dividend from subsidiaries 4.1 4.2 4.6 4.0 (4.1) (1.6) (4.6) (1.7) - - - - PBT before exceptional items 5.5 5.7 4.4 3.9 28.4 10.9 39.4 14.4 33.8 9.5 43.8 11.3
Exceptional Items and Prior Period items 0.1 0.1 - - 6.1 2.3 2.4 0.9 6.2 1.7 2.4 0.6
Share of loss of associates/JVs - - - - (0.0) (0.0) (0.4) (0.2) (0.0) (0.0) (0.4) (0.1)
PBT 5.4 5.6 4.4 3.9 22.3 8.5 37.4 13.7 27.6 7.7 41.8 10.8
ParticularsConsolidatedSubsidiary (Derived)Standalone
Particulars FY19 FY20 FY21
Discounts/Rebates/Incentives 25.0 43.0 6.6
As % of gross sales 9.8 10.3 1.6
Sales Return 14.4 18.9 8.4
As % of gross sales 5.7 4.5 2.1
Total 39.4 61.9 15.0
As % of gross sales 15.4 14.9 3.6
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Exhibit 35: Consolidated other expense trend analysis (INR bn)
Source: Annual reports, company filings, Edelweiss Research
FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21
Power and fuel 3.4 2.9 4.0 4.6 5.8 2.1 1.7 1.9 1.3 1.5
Transport charges 6.4 6.6 6.8 9.8 12.9 4.0 3.9 3.2 2.8 3.4
Sub-contracting expenses 5.3 7.4 9.0 10.7 14.4 3.3 4.3 4.2 3.0 3.8
Travelling and conveyance 2.5 2.6 3.3 4.5 2.4 1.6 1.5 1.5 1.3 0.6
Advertising and sales promotion 2.8 2.3 3.4 5.4 4.8 1.7 1.3 1.6 1.5 1.2
Legal and professional fees 2.4 2.7 3.1 5.0 4.9 1.5 1.6 1.5 1.4 1.3
Sales commission 1.3 2.1 1.3 1.5 1.4 0.8 1.2 0.6 0.4 0.4
Rent 1.4 1.5 2.0 1.1 0.9 0.9 0.9 0.9 0.3 0.2
Labour charges 1.2 1.4 1.7 2.1 2.6 0.8 0.8 0.8 0.6 0.7
Repairs and maintenance 1.8 2.0 2.4 3.2 2.9 1.1 1.2 1.1 0.9 0.8
Warehousing costs 0.9 1.2 1.1 2.0 2.2 0.6 0.7 0.5 0.6 0.6
Exchange (gain)/ loss 2.4 0.1 3.0 3.3 2.1 1.5 0.1 1.4 0.9 0.5
Other expenses 7.0 7.7 9.1 14.9 18.2 4.4 4.5 4.2 4.2 4.7
Total 38.8 40.5 50.3 68.0 75.3 24.2 23.7 23.3 19.2 19.6
Revenue 163.1 173.8 218.4 357.6 386.9 16.1 6.5 25.6 63.8 8.2
ParticularsINR bn
Sales growth %
% of Sales
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Governance
Exhibit 36: Board structure
Source: Annual reports, company filings, Edelweiss Research
Exhibit 37: KMP and directors’ remuneration (INR mn)
Source: Annual reports, company filings, Edelweiss Research
UPL in its letter dated 16 October 2020 informed the stock exchange that KPMG
Mauritius, the auditor of UPL Corporation Limited, had resigned w.e.f. 8 October
2020. The auditors in their resignation mentioned, “There are no circumstances
connected to our resignation which we consider should be brought to the notice of
the members.” In the same letter, UPL informed “in order to re-organise the audit
process to improve the productivity, at the request of the company, KMPG Mauritius
has resigned as the auditors of UPL Corporation.”
Exhibit 38: Auditor history
Source: Annual reports, company filings, Edelweiss Research
Exhibit 39: Auditor remuneration (standalone) (INR mn)
Source: Annual reports, company filings, Edelweiss Research
Particulars FY18 FY19 FY20 FY21
Total directors 12 12 10 9
No. of Independent directors 6 6 5 5
Ratio 0.50 0.50 0.50 0.56
Regulatory norms 0.33 0.33 0.33 0.33
No. of women director 2 2 3 2
Regulatory norms 1 1 1 1
Name Designation FY19 FY20 FY21 YoY %
Rajnikant Devidas Shroff MD & Chairman 130 137 143 4.2
Kalyan Mohan Banerjee WTD (til l Jul-18) 30 - - n.a.
Arun Chandrasen Ashar Executive Director 10 31 34 8.7
Jaidev R. Shroff NED Global-CEO 380 570 608 6.6
Sandra R. Shroff NED 80 90 0 n.a.
Anand K. Vora CFO 38 60 70 16.0
Vikram R. Shroff NED 120 280 304 8.5
Total 788 1,168 1,158 (0.9)
As % of PBT 5.2 6.6 4.0
Non Executive Independent Director 8 6 2 (68.5)
Total 795 1,174 1,160 (1.2)
As % of PBT 5.3 6.6 4.0
Year Auditor
FY19-21 BSR & Co. LLP
FY16-18 SRBC & Co. LLP
Particulars FY17 FY18 FY19 FY20 FY21 YoY %
Payment to Auditors 30 20 30 40 80 100.0
Independent directors’ representation
on the board is above regulatory
norms
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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Exhibit 40: Credit ratings
Source: Annual reports, company filings, Edelweiss Research
NA: Not available
Exhibit 41: Promoter holdings, pledge details and history
Source: BSE, company filings, Edelweiss Research
Facilities/Instruments Rating Agency FY19 FY20 FY21
CRISIL A1+ A1+ A1+
CARE A1+ A1+ A1+
CRISIL AA+(Negative) AA+(Negative) AA+(Negative)
CARE AA+(Negative) AA+(Negative) AA+(Negative)
CRISIL A1+ A1+ A1+
CARE A1+ A1+ A1+
CARE AA+ (Negative) AA+ (Negative) AA+ (Negative)
Brickwork AA+(Stable) AA+(Stable) AA+(Stable)
S&P BBB- (Stable) n.a n.a
Moody’s Baa3 (Positive) n.a n.a
Fitch BBB-(Negative) n.a n.a
Long Term
Commercial Paper
NCDs
International Bonds
issued by UPL
Corporation Ltd.
Short Term
Pledge shares history
Shareholding (June 21) % holding % of pledged shares Year
Promoter's
Shareholding % Pledge ratio (%)
Promoters 27.96 - FY21 27.95 -
Non-promoters 72.04 FY20 27.88 -
Total 100.00 FY19 27.89 2.32
FY18 27.72 1.63
FY17 30.27 -
Promoter pledge remains at nil
Credit rating remains unchanged in FY21
from FY20 and FY19
In FY19, long-term instruments and NCDs’
credit rating changed from AA+ (stable) to
AA+ (negative)
In addition, international bonds’ credit
rating had changed from BBB- (stable) to
BBB- (negative) in FY19
Edelweiss Securities Limited
ANNUAL REPORT ANALYSIS
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