Dhanuka Agritech targets 20% revenue growth in FY17

In an interview with CNBC-TV18, Dhanuka said the company expects most (about 16 percent) of the growth will be led by volume increases while the rest will be through price increases. 

 

At present, the company's ad spend is around 1 percent of total revenue, and expects it to double by this year-end. 

 

Dhanuka foresees an overall increase by few basis points in revenue by FY17-end. 

 

Below is the verbatim transcript of MK Dhanuka's interview with Reema Tendulkar and Nigel D'Souza on CNBC-TV18. 

 

Q: Earlier you have indicated that if we get a normal monsoon you can assure us of may be around 15-20 percent growth for FY17. We have had very bleak just a taste of what we are to see in terms of rainfall and predictions are that we are going to see good monsoon, so 15-20 percent on the cards? 

 

A: Yes, the forecast has come of above normal monsoon by IMD, Skymet and global. This has brought cheers on the faces of the farmers of the country, the agri input companies and overall for Indian agriculture. Dhanuka hopes that we will be able to deliver 20 percent plus growth if the monsoon remains normal with equal distribution all over India. 

 

Q: If the monsoon is above normal than Dhanuka should see a 20 percent plus revenue growth in FY17. If you could break that up in terms of volumes as well as realisation in the prior quarter your full top line growth was volume led. Do you believe there is scope for Dhanuka Agritech to push through price increases and therefore can a part of this 20 percent revenue growth come in on account of pricing? 

 

A: We expect that as the monsoon will progress the prices of the agri inputs will be increasing, but since Dhanuka is having a tie up with four Japanese and four American companies where the price remains stable and there is no impact of price increase or decrease on those molecules and two-third share of the molecules are from this tie ups products. We foresee that around 16 percent growth will be because of volume and 4 percent may be because of the price increase. 

 

Q: Your margins steady at around 17.3 percent, are you going to be expecting a growth of 20 percent on the top line. Could we see some kind of operating leverage flow into the margins as well can we up that margin from around 17.5 percent or thereabouts? 

 

A: First and foremost Dhanuka’s philosophy is to continue and sustain these margins, but we do hope that with this kind of rainfall, there is every possibility of increasing the margin by few bps. 

 

Q: We understand that you were looking to increase your spent in the market development activities. Could tell us how much will it be in FY17 because that in a way might pressure your margin? 

 

A: Recently Dhanuka has done shooting with Mr Amitabh Bachchan for a series of ads for a new molecules like Max Soy, cover and Sempra and Dhanuka will like to play these ads on regional channels on TV, because our ultimate customer is farmer who doesn’t see the urban TVs, basically like Ananda channel on Bengali, Annadata in Marathi, ETV Gujarati such channels Dhanuka play its ads. The spent we hope that it will be overall 2 percent of the total revenue on such publicity. 

 

Q: Currently what it was if it is going to 2 percent, currently what it is at because you are talking about the Big B etc., so currently what is the ad spends in comparison to your revenues? 

 

A: It is around 1 percent presently. 

 

Q: So it’s going to go to 2 percent? 

 

A: Right. 

 

Q: That should have some kind of pressure than because you are talking about 16 percent volume growth is what you are talking about. You are saying that we will see price increases of maybe 4 percent or thereabouts and its nearly doubling of your advertising expenditure. You don’t see any pressure on your margins? 

 

A: I don’t foresee because as the volumes increases our other overheads does not increase especially the fixed expenditure remain same, so I foresee that ultimately by March 17 end Dhanuka will be able to deliver few bps increase in the overall margins. 

 

Q: If you could just help us with what are the new molecules and products that the company is looking to launch in FY17? 

 

A: As shared earlier, Dhanuka always introduces 293 molecules every year. This month itself we are launching Max Soy which is a combination of three products packed in one combo pack. This is the first time registration granted to Dhanuka by Central Insecticide Board in which one pack three combi products will be packed, which will control soybean narrow weed as well as the broadly weeds in the fields of the farmers. Apart from this Konica was we were not able to launch earlier because of non-availability of raw material, but Konica which is a fungicides from Hokko Chemical Japan that will be also launched and 2394 molecules we will be launching in this year.