India's direct income support of Rs 6,000 for farmers is a welcome step: MK Dhanuka

MK Dhanuka, Managing Director, Dhanuka Agritech Ltd, spoke about how the budget will help the farmers and benefit the agri companies during an interview:

Q: The year’s budget has an important focus on the agri-sector. Do you think that the announcements will bring some relief to farmers? Can we see better growth prospects in agri-companies?

A: See, we can’t say that the support of Rs6,000 to farmers with land holding up to two hectares (about 5 acres) will benefit them. But, 12 crore farmers will be benefitted from it and that is a reason that the industry and Dhanuka welcome the step. However, the decision will increase the purchasing power of the farmer, which may benefit the agri input companies, who are into the business of seeds, fertilizers or pesticides. Its benefits can be seen from the 2019 Kharif season onwards as the farmers will try to increase the yield of their crops and invest more on seeds, fertilizers and pesticides.

Q: Any outlook on the expected increase in demand in the forthcoming quarter or the next financial year (FY20)?

A: Demand is like to go up by 10 per cent.

Q: Do you think there can be a price hike of certain products, if yes, name a few of them?

A: No, it will not go up as prices were hiked last year only. In fact, prices of certain molecules have softened in past 2-3months. Thus, the prices may come down instead of going up.

Q: What is your expectation on the volume growth of different products like fertilizer and pesticide? Which of the two will see the maximum growth?

A: There will be growth in seed and pesticide when compared to fertilizer.

Q: Let us know about the Kohinoor scheme launched by Dhanuka Agritech? How it will benefit you in FY20?

A: Dhanuka has launched Kohinoor scheme to nominate and provide better services to about 25 per cent of its distributors who generate 75 per cent of its revenues. Under the scheme, our sales team visits the dealer, twice in a week, and provide suggestion on products that he should order, and a mobile application has been created for the purpose. Such distributors, whose supplies matches to our system, are provided with an advantage under which we guarantee them to take back the unsold products. In fact, the scheme has benefitted several distributors. And, there is an increase in the number of Kohinoor’s.

Q: Can we see any change in guidance for FY20 in terms of profit growth and margins amid the MSP hike and budgetary support that has been announced?

A: See, the farmers' distress will end only if they are provided with the right price for their crops, but this is not going to benefit them on a large scale. Benefits of the hiked MSPs will reach the farmers only if their products are purchased. This will help in lowering/ending the distress and increase their purchasing power.
I don’t expect that there will be a considerable improvement in profitability under the scenario but will try our best to maintain it and EBITDA margins in FY2019-20.

Q: What is your take on the interim budget?

A: I will welcome the governments stand of providing support of Rs6,000 to marginal farmers and I think every farmer is positive about that.