Sharda Cropchem Ltd: Annual Report 2023-24 Analysis

Overview #

Comprehensive Analysis #

This analysis delves into Sharda Cropchem Limited’s annual report for the financial year ended March 31, 2024, examining its financial performance, business segments, identified risks, and ESG initiatives.

I. Financial Performance:

The report reveals a decline in overall financial performance compared to the previous year (2022-23). Key highlights:

• Revenue from Operations: A significant decrease of 21.81% YoY, dropping from ₹404.52 crore to ₹316.30 crore. This is attributed to lower price realization across all regions.
• Total Income: Decreased by 20.81% YoY from ₹408.54 crore to ₹322.28 crore.
• EBITDA: Showed a drastic reduction of 55% YoY, falling from ₹66.32 crore to ₹34.26 crore. This indicates significant pressure on profit margins.
• Profit Before Tax (PBT): Experienced a sharp decline of 57.37% YoY, from ₹43.07 crore to ₹7.19 crore.
• Profit After Tax (PAT): A dramatic decrease of 91% YoY, dropping from ₹34.20 crore to ₹3.19 crore. This highlights a substantial reduction in profitability.
• EBITDA Margin: Significantly decreased from 19% in 2022-23 to 10.1% in 2023-24, indicating pricing pressures outweighed cost reductions.

Key Financial Ratios (Consolidated): While specific numbers aren’t consistently provided across all ratios, the report highlights a decline in profitability ratios:

• Return on Capital Employed (ROCE): Shows a significant decrease.
• Return on Equity (ROE): Shows a significant decrease.

The Company’s liquidity position is strong, with ₹375 crore in cash and liquid investments as of March 31, 2024. The company remains debt-free.

II. Business Segments:

Sharda Cropchem operates in two primary segments:

• Agrochemicals: This is the core business, accounting for the majority of revenue (approximately 83% in 2023-24). The company focuses on marketing and distributing fungicides, herbicides, and insecticides globally. Their strategy involves identifying off-patent generic molecules, obtaining registrations, and leveraging an asset-light model (outsourcing manufacturing). Significant revenue is generated from Europe, North America, and Latin America.
• Non-Agrochemicals: This segment contributes a smaller portion of the revenue (approximately 17% in 2023-24), involving the marketing and distribution of conveyor belts, general chemicals, dyes, and dye intermediates. This segment experienced a revenue decline due to increased freight charges and disruptions in the Red Sea shipping routes.

III. Risks:

The report explicitly addresses several key risks:

• Regulatory Risk: The agrochemical industry is heavily regulated. Non-compliance can lead to significant penalties and reputational damage. The company mitigates this through robust compliance management processes and a dedicated legal team across key geographies.
• Biosafety and Environmental Risk: The handling, storage, and application of agrochemicals pose risks to human health and the environment. Mitigating strategies include stringent biosafety protocols, adherence to environmental regulations, and comprehensive training programs.
• Delay in Product Registration: Obtaining registrations in various countries is crucial for market access. Delays can impact revenue and competitiveness. The company attempts to mitigate this by pursuing registrations in multiple regions simultaneously.
• Downward Pricing Pressure: Competition and geopolitical factors can lead to price decreases, impacting profitability. The company focuses on operational efficiencies and cost management to counteract this.
• Customer Credit Risk: Non-payment by customers can cause financial losses. The company addresses this through customer due diligence and credit insurance.
• Currency Risk: Fluctuations in exchange rates impact profitability, particularly given international operations. The company uses natural hedging and forward contracts to manage this risk.

IV. ESG Initiatives:

Sharda Cropchem demonstrates a strong commitment to ESG (Environmental, Social, and Governance) principles. Key initiatives:

• Environmental:
  • Focus on eco-friendly product formulations.
  • Responsible waste disposal and recycling (plastics, e-waste, hazardous waste).
  • Paper reduction and use of recyclable materials.
  • Energy efficiency initiatives to reduce energy intensity.
  • Water conservation efforts (reducing water intensity).
• Social:
  • Inclusive workplace with a diverse workforce (over 54% women).
  • Emphasis on a safe and healthy work environment.
  • Open communication and grievance redressal mechanisms.
  • Robust human rights policies and procedures.
  • Various CSR initiatives supporting education, healthcare, hunger eradication, women empowerment, and animal welfare.
• Governance:
  • Strong corporate governance practices.
  • Robust internal controls and risk management systems.
  • Transparency and accountability in operations.
  • Independent audit committee overseeing financial reporting and internal controls.
  • Nomination and Remuneration Committee addressing director appointments and remuneration.
  • Stakeholders’ Relationship Committee handling investor relations and complaints.
  • Risk Management Committee focusing on various risks and their mitigation.

V. Overall Assessment:

Sharda Cropchem’s 2023-24 annual report reveals a year of challenges, particularly in revenue and profitability. The decrease in sales prices significantly impacted the bottom line. However, their robust liquidity position, asset-light business model, and commitment to ESG suggest a focus on long-term sustainability and resilience. The company’s significant investment in product registrations (₹420 crore) indicates a strategic focus on future growth. While the decrease in profitability is concerning, their proactive risk management and emphasis on ESG could position them favorably for future opportunities. Further analysis of individual subsidiary performances would provide a more granular understanding of the overall financial picture. The lack of detail in some key financial ratios warrants further clarification.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values for Sharda Cropchem Limited’s assets, as reported in the standalone financial statements, are as follows (in Indian Rupees, in Lakhs):

• Total Assets: ₹382,520.36
• Current Assets: ₹274,129.42
• Cash and Cash Equivalents: ₹3,282.17
• Accounts Receivable (Trade Receivables): ₹146,264.91
• Inventory: ₹89,422.68

These figures are from the Standalone Balance Sheet as at 31 March 2024. The consolidated financial statements show different figures due to the inclusion of subsidiary company information. The consolidated values are:

• Total Assets: ₹403,832.24
• Current Assets: ₹293,790.22
• Cash and Cash Equivalents: ₹8,734.28
• Accounts Receivable (Trade Receivables): ₹149,799.95
• Inventory: ₹99,164.22

Remember that these are approximate values rounded to the nearest Lakh (100,000). For precise figures, refer to the original annual report.

Liability Analysis #

Here are the liability figures for Sharda Cropchem Limited, taken from the standalone and consolidated financial statements (in Indian Rupees, in Lakhs):

Standalone Financial Statements (as at 31 March 2024):

• Total Liabilities: ₹171,337.92 (This is calculated as Total Assets - Total Equity)
• Current Liabilities: ₹149,330.98
• Long-Term Debt: ₹22,006.94 (This includes lease liabilities and other financial liabilities)
• Accounts Payable (Trade Payables): ₹86,975.63 (This includes amounts due to MSMEs and others)

Consolidated Financial Statements (as at 31 March 2024):

• Total Liabilities: ₹180,083.13 (This is calculated as Total Assets - Total Equity)
• Current Liabilities: ₹158,054.94
• Long-Term Debt: ₹22,028.19 (This includes lease liabilities and other financial liabilities)
• Accounts Payable (Trade Payables): ₹92,115.14 (This includes amounts due to MSMEs and others)

It’s crucial to note that these are rounded figures to the nearest Lakh. Always refer to the original annual report for precise values. Also, the differences between the standalone and consolidated figures result from the inclusion of subsidiary data in the consolidated statements.

Equity Analysis #

Here’s a breakdown of the shareholders’ equity components for Sharda Cropchem Limited, based on the standalone financial statements (in Indian Rupees, in Lakhs):

• Shareholders’ Equity (Total Equity): ₹211,182.44 (As at 31 March 2024)
• Retained Earnings: ₹197,862.58 (As at 31 March 2024). This represents accumulated profits less distributions (dividends).
• Share Capital: ₹9,022.05 (As at 31 March 2024). This represents the total value of issued and fully paid-up equity shares.

The consolidated financial statements provide a slightly different picture due to the inclusion of subsidiary information and non-controlling interests:

• Shareholders’ Equity (Total Equity attributable to owners of the Company): ₹223,711.50 (As at 31 March 2024)
• Retained Earnings: This figure isn’t explicitly stated separately in the consolidated statements but is included within the “Reserves & Surplus” which would contain retained earnings, security premium, capital reserve and other reserves.
• Share Capital: ₹9,022.05 (As at 31 March 2024). Share capital remains the same in both standalone and consolidated reports as it represents the parent company’s equity shares.

Remember that these values are rounded to the nearest Lakh. Refer to the original annual report for the precise figures.

Income Statement #

Operating Performance #

The income statement values for Sharda Cropchem Limited, from the standalone financial statements, are as follows (in Indian Rupees, in Lakhs):

• Revenue: ₹287,345.27 (This includes Revenue from Operations and Other Income)
• Revenue from Operations: ₹260,266.68 (This represents revenue directly from the sale of goods and services)
• Cost of Revenue: ₹269,840.38 (This includes cost of materials consumed, purchases, changes in inventories, and other direct costs.)
• Gross Profit: ₹17,504.89 (This is calculated as Revenue from Operations - Cost of Revenue)
• Operating Expenses: ₹252,333.49 (This is derived by subtracting Gross Profit from Total Expenses. Total expenses also include finance costs and depreciation and amortization).
• Operating Income: ₹17,504.89 (This is identical to the gross profit in the standalone statements because finance costs and depreciation/amortization are separated out and not included as part of operating expenses).

Consolidated Statement of Profit and Loss

The consolidated figures differ due to the inclusion of subsidiary company data:

• Revenue: ₹322,278.67 (Revenue from Operations + Other Income)
• Revenue from Operations: ₹316,302.45
• Cost of Revenue: ₹315,091.51
• Gross Profit: ₹7,187.16 (Revenue from Operations - Cost of Revenue)
• Operating Expenses: ₹307,804.35 (This is calculated as total expenses less finance costs and depreciation/amortization).
• Operating Income: ₹7,187.16 (Identical to Gross Profit in the consolidated statements. Finance costs and depreciation/amortization are separated out in the Consolidated Statement of Profit and Loss).

Note that these are approximate figures rounded to the nearest Lakh. Always consult the original annual report for exact values. The differences in reporting are due to the different formats and line-item descriptions used in the standalone vs. consolidated financial statements.

Bottom Line Metrics #

Here’s a summary of the key profitability metrics for Sharda Cropchem Limited, from both the standalone and consolidated financial statements (in Indian Rupees, in Lakhs, except for EPS which is per share):

Standalone Financial Statements:

• Net Income (Profit for the year): ₹136.76
• Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹210.26
• Basic EPS (Earnings Per Share): ₹15.16
• Diluted EPS: ₹15.16 (The report indicates that basic and diluted EPS are the same.)

Consolidated Financial Statements:

• Net Income (Profit for the year attributable to owners of the parent): ₹318.83
• EBITDA: ₹342.62
• Basic EPS: ₹3.53
• Diluted EPS: ₹3.53 (The report indicates that basic and diluted EPS are the same.)

Important Considerations:

• Rounding: These figures are rounded to the nearest Lakh (except EPS). Refer to the original report for precise numbers.
• Adjusted EBITDA: The standalone report provides an “adjusted” EBITDA figure, suggesting some adjustments were made to the standard EBITDA calculation. The specific adjustments aren’t detailed in the provided text.
• Consolidated vs. Standalone: The consolidated figures incorporate the financial performance of subsidiary companies, leading to differences from the standalone results.

Always consult the original annual report for the most accurate and detailed information.

Cash Flow #

Cash Flow Components #

Here’s a breakdown of the cash flow statement data for Sharda Cropchem Limited, based on the standalone financial statements (in Indian Rupees, in Lakhs):

• Operating Cash Flow: ₹16251.44 (Net cash flows from operating activities)
• Investing Cash Flow: ₹(17812.06) (Net cash flows used in investing activities. Note the negative sign indicating net cash outflow)
• Financing Cash Flow: ₹(3495.90) (Net cash flows used in financing activities. Note the negative sign indicating net cash outflow)

Consolidated Cash Flows

The consolidated statement of cash flows shows different figures due to the inclusion of subsidiary company information:

• Operating Cash Flow: ₹34,129.90
• Investing Cash Flow: ₹(39,348.76)
• Financing Cash Flow: ₹(3,690.96)

Key Points:

• Negative Investing and Financing Cash Flows: Both investing and financing activities resulted in net cash outflows in the standalone and consolidated statements. This is common when a company is investing in growth, such as capital expenditures or acquisitions (investing activities) and paying dividends or repaying liabilities (financing activities).
• Rounding: The numbers shown above are rounded to the nearest Lakh. The original report will contain more precise figures.
• Indirect Method: The cash flow statements are prepared using the indirect method, meaning that net income is adjusted to arrive at cash from operating activities.

Remember to refer to the original annual report for precise and complete details. The information above is extracted from the summarized data in the report.

Cash Flow Metrics #

The annual report doesn’t explicitly state “Free Cash Flow” as a separate line item. Free cash flow is typically calculated as operating cash flow less capital expenditures. Using the figures from the standalone statement of cash flows (in Indian Rupees, in Lakhs):

• Operating Cash Flow: ₹16,251.44
• Capital Expenditure (Purchase of property, plant, and equipment + Purchase of intangible assets): ₹27,178.09 (This is the sum of the two investing cash flow components related to capital purchases)
• Dividends Paid: ₹2,672.96

Therefore, a rough estimate of free cash flow would be: ₹16,251.44 - ₹27,178.09 = ₹(10,926.65). The negative value indicates that the company’s cash outflow from investments exceeded its operating cash inflow during the year.

Consolidated Statement Data:

Using the consolidated statement of cash flows (in Indian Rupees, in Lakhs):

• Operating Cash Flow: ₹34,129.90
• Capital Expenditure (Purchase of property, plant, and equipment + Purchase of intangible assets): ₹(27,161.24) + ₹(47.82) = ₹(27,209.06) (Again, this is the sum of the two investing cash flow items)
• Dividends Paid: ₹2,700.32

A rough estimate of free cash flow for the consolidated statements would then be: ₹34,129.90 - ₹(27,209.06) = ₹6920.84. This positive value, different than the standalone, suggests that the consolidated operating cash flow is greater than its capital expenditures.

Important Considerations:

• Free Cash Flow Calculation: The calculation of free cash flow can vary depending on what items are included or excluded. The calculations above are simplified based on the information available from the summaries of the cash flow statements. A more precise calculation might include other factors.
• Rounding: Values are approximate and rounded to the nearest Lakh.
• Consolidated vs. Standalone: Consolidated values include the cash flows of subsidiary companies, leading to different results than the standalone figures.

To get the precise figures, you should refer to the full, detailed annual report. The above is based on the summarized data provided.

Profitability Ratios #

The annual report doesn’t directly provide all these profitability ratios in a single table. We’ll calculate them using the data provided, bearing in mind the limitations of using rounded figures from the summary information:

Standalone Financial Statements:

• Revenue: ₹287,345.27 (Revenue from Operations + Other Income)
• Revenue from Operations: ₹260,266.68
• Cost of Revenue: ₹269,840.38
• Gross Profit: ₹17,504.89
• Operating Income: ₹17,504.89 (This is identical to the gross profit in the standalone statements because finance costs and depreciation/amortization are separated out and not included as part of operating expenses)
• Net Income: ₹13,676.29
• Average Total Equity: (₹200,224.02 + ₹211,182.44) / 2 = ₹205,703.23
• Average Total Assets: (₹400,786.99 + ₹382,520.36) /2 = ₹391,653.68

Profitability Ratios (Standalone):

• Gross Margin: (₹17,504.89 / ₹260,266.68) * 100% = 6.73%
• Operating Margin: (₹17,504.89 / ₹287,345.27) * 100% = 6.09%
• Net Profit Margin: (₹13,676.29 / ₹287,345.27) * 100% = 4.76%
• Return on Equity (ROE): (₹13,676.29 / ₹205,703.23) * 100% = 6.64%
• Return on Assets (ROA): (₹13,676.29 / ₹391,653.68) * 100% = 3.50%

Consolidated Financial Statements:

• Revenue: ₹322,278.67
• Revenue from Operations: ₹316,302.45
• Cost of Revenue: ₹315,091.51
• Gross Profit: ₹7,187.16
• Operating Income: ₹7,187.16 (This is identical to the gross profit in the consolidated statements because finance costs and depreciation/amortization are separated out and not included as part of operating expenses).
• Net Income (Attributable to owners of the parent): ₹3,188.31
• Average Total Equity (Attributable to owners of the parent): (₹223,202.18 + ₹223,711.50)/2 = ₹223,456.84
• Average Total Assets: (₹435,082.79 + ₹403,832.24) / 2 = ₹419,457.52

Profitability Ratios (Consolidated):

• Gross Margin: (₹7,187.16 / ₹316,302.45) * 100% = 2.27%
• Operating Margin: (₹7,187.16 / ₹322,278.67) * 100% = 2.23%
• Net Profit Margin: (₹3,188.31 / ₹322,278.67) * 100% = 0.99%
• Return on Equity (ROE): (₹3,188.31 / ₹223,456.84) * 100% = 1.43%
• Return on Assets (ROA): (₹3,188.31 / ₹419,457.52) * 100% = 0.76%

Important Notes:

• Rounding: These calculations are approximate due to rounding of figures presented in the summary data in the report.
• Differences: The significant differences between standalone and consolidated ratios highlight the impact of subsidiary performance.
• Consistency: The standalone report presents operating income differently than typical reporting, which would include depreciation and amortization. This can affect comparability to other companies.

Always refer to the original annual report for precise calculations and a complete picture. The above is an analysis based on the limited data available.

Liquidity Ratios #

The annual report provides the current ratio but not the quick ratio or cash ratio. We’ll calculate them using data from the standalone and consolidated balance sheets (in Indian Rupees, in Lakhs):

Standalone Financial Statements (as at 31 March 2024):

• Current Assets: ₹274,129.42

• Current Liabilities: ₹149,330.98

• Current Ratio: ₹274,129.42 / ₹149,330.98 = 1.84

To calculate the quick ratio and cash ratio, we need more detailed information about current assets that is not provided in the summarized information. The quick ratio excludes inventories from current assets, and the cash ratio only considers cash and cash equivalents.

Consolidated Financial Statements (as at 31 March 2024):

• Current Assets: ₹293,790.22

• Current Liabilities: ₹158,054.94

• Current Ratio: ₹293,790.22 / ₹158,054.94 = 1.86

Again, calculating the quick ratio and cash ratio requires more detailed data on current assets which isn’t provided in the supplied summary data.

Important Considerations:

• Rounding: These ratios are approximate due to rounding of the figures in the summary.
• Interpretation: A current ratio above 1 generally indicates the company has enough short-term assets to cover its short-term liabilities. However, the optimal current ratio varies by industry. The quick ratio and cash ratio provide a more stringent measure of short-term liquidity by excluding less liquid assets.

To obtain precise values for all three ratios and a more comprehensive liquidity analysis, it is necessary to consult the complete, detailed annual report of Sharda Cropchem Limited.

Efficiency Ratios #

The annual report provides some turnover ratios, but not all in a readily usable format. We will calculate the ratios using available data, keeping in mind the limitations of using rounded figures from the summary information provided. The calculations will be based on standalone figures.

Standalone Financial Statements:

• Revenue from Operations: ₹260,266.68 (Lakhs)
• Cost of Goods Sold (COGS): ₹148,373.50 + ₹39,667.93 + ₹7,236.73 = ₹195,278.16 (Lakhs) (Cost of materials consumed + Purchases + Changes in Inventories)
• Average Inventory: (₹106,002.14 + ₹89,422.68) / 2 = ₹97,712.41 (Lakhs)
• Average Accounts Receivable: (₹167,455.98 + ₹146,264.91) / 2 = ₹156,860.45 (Lakhs)
• Average Total Assets: (₹400,786.99 + ₹382,520.36) / 2 = ₹391,653.68 (Lakhs)

Efficiency Ratios (Standalone):

• Asset Turnover: ₹260,266.68 / ₹391,653.68 = 0.66
• Inventory Turnover: ₹195,278.16 / ₹97,712.41 = 2.00
• Receivables Turnover: ₹260,266.68 / ₹156,860.45 = 1.66

Consolidated Financial Statements:

Precise calculation of consolidated efficiency ratios requires detailed data from the consolidated statements, which is not directly provided in the summary. However, some data points are available:

• Revenue from Operations: ₹316,302.45 (Lakhs)
• Average Total Assets: (₹435,082.79 + ₹403,832.24) / 2 = ₹419,457.52 (Lakhs)

Consolidated Efficiency Ratio Estimates (using available data):

• Asset Turnover (Estimate): ₹316,302.45 / ₹419,457.52 = 0.75

Important Considerations:

• Rounding: These calculations use rounded figures and are therefore approximations.
• COGS Calculation: The calculation of COGS for the standalone figures involves adding the cost of materials consumed, purchases, and changes in inventories. This method might differ slightly from methods used in other reports.
• Data Limitations: The summary does not include all information needed to calculate all efficiency ratios for the consolidated financials.

To obtain precise calculations of all efficiency ratios for both standalone and consolidated statements, you must refer to the complete and detailed annual report.

The calculated ratios suggest that for every rupee of assets used, the company generates ₹0.66 of revenue (standalone). The inventory turnover rate shows the company sells and replaces its inventory approximately 2 times per year (standalone). The receivables turnover rate indicates that the company collects its receivables roughly 1.66 times per year (standalone). The estimates for the consolidated ratios are similarly interpretable but may vary given that they include subsidiary performance and are based on limited data from the annual report summary.

Leverage Ratios #

The annual report provides some components needed for leverage ratio calculations but not a complete picture, especially for the consolidated statements. We will calculate the ratios using the available data, understanding the limitations of using rounded figures from the report summary. Note that these calculations will be based on standalone data unless otherwise noted:

Standalone Financial Statements (as at 31 March 2024):

• Total Debt: ₹1,492.47 (Lakhs) (Lease Liabilities: current and non-current)
• Total Equity: ₹211,182.44 (Lakhs)
• Total Assets: ₹382,520.36 (Lakhs)
• Profit Before Interest and Tax (PBIT): ₹17,504.89 (Lakhs)
• Interest Expense: ₹169.58 (Lakhs)

Leverage Ratios (Standalone):

• Debt-to-Equity Ratio: ₹1,492.47 / ₹211,182.44 = 0.007 (or 0.7%)
• Debt-to-Assets Ratio: ₹1,492.47 / ₹382,520.36 = 0.004 (or 0.4%)
• Interest Coverage Ratio: ₹17,504.89 / ₹169.58 = 103.23

Consolidated Financial Statements (as at 31 March 2024):

The consolidated balance sheet includes more debt, primarily from borrowings and other financial liabilities in the subsidiaries:

• Total Debt: ₹1,829.98 Lakhs (Borrowings + Lease Liabilities)
• Total Equity: ₹223,749.11 Lakhs
• Total Assets: ₹403,832.24 Lakhs
• Profit Before Interest and Tax (PBIT): This figure is not explicitly stated in the summary. However, we can approximate it using the consolidated profit before tax and interest expense: PBIT = Profit Before Tax + Interest Expense = ₹7,187.16 + ₹361.89 = ₹7,549.05 Lakhs
• Interest Expense: ₹361.89 Lakhs

Leverage Ratios (Consolidated - estimates):

• Debt-to-Equity Ratio: ₹1,829.98 / ₹223,749.11 = 0.008 (or 0.8%)
• Debt-to-Assets Ratio: ₹1,829.98 / ₹403,832.24 = 0.005 (or 0.5%)
• Interest Coverage Ratio: ₹7,549.05 / ₹361.89 = 20.86

Important Considerations:

• Rounding: These ratios are approximations due to rounding of figures from the report summary.
• Lease Liabilities: The calculations include lease liabilities as a component of debt. Some analyses exclude leases from debt calculations.
• Data limitations: The calculation of consolidated PBIT is an approximation due to the way the data is presented in the consolidated financial statements and it might vary if it is recalculated from the detailed consolidated income statement.
• Interpretation: Low debt-to-equity and debt-to-assets ratios generally suggest lower financial risk. A high interest coverage ratio indicates the company’s ability to easily meet its interest obligations.

For precise calculations and a more thorough leverage analysis, refer to the complete annual report. The values given above are only estimates based on the summarized information.

Market Analysis #

Market Metrics #

The annual report provides some of the necessary data, but not all, to calculate these market-based ratios. We’ll calculate what we can using the given information, acknowledging the limitations of relying on rounded figures and the fact that some data is missing.

• Market Capitalization: ₹2,895 crore (as of 31 March 2024)
• Net Income (Standalone): ₹136.76 Lakhs = ₹13.68 Crores
• Net Income (Consolidated - attributable to owners of the parent): ₹318.83 Lakhs = ₹31.88 Crores
• Number of Outstanding Shares: 9,02,20,495 (this is constant in both standalone and consolidated)
• Dividends Paid (Standalone): ₹267.29 Lakhs = ₹2.67 Crores
• Dividends Paid (Consolidated): ₹270.03 Lakhs = ₹2.70 Crores

Calculations (with limitations):

The calculations below will be done using standalone and consolidated data separately where possible. Remember that these are estimates due to data limitations.

• Price-to-Earnings Ratio (PE Ratio): This requires the share price, which isn’t given. We can’t calculate this ratio.
• Price-to-Book Ratio (PB Ratio): This also requires the share price, which is not provided, and cannot be calculated.
• Dividend Yield: This requires the share price and dividend per share. The report states a dividend of ₹3.00 per share was declared for 2023-24, but the share price is missing, therefore this cannot be calculated.
• Dividend Payout Ratio (Standalone): (₹2.67 Crores / ₹13.68 Crores) * 100% = 19.5% (approximate)
• Dividend Payout Ratio (Consolidated): (₹2.70 Crores / ₹31.88 Crores) * 100% = 8.5% (approximate)

Important Notes:

• Missing Data: The key missing information is the share price. Without the share price, many market-based ratios (PE, PB, Dividend Yield) cannot be accurately determined.
• Approximations: The calculations above utilize rounded numbers from the report summaries, resulting in approximations of the ratios.
• Standalone vs. Consolidated: Use of standalone or consolidated data impacts the calculations; the results given reflect that distinction.

To calculate these market-based ratios precisely, you must refer to the complete annual report, which includes the share price at the reporting date as well as any other information necessary for precise calculation of these market based ratios. Only then can a full and accurate financial analysis be performed.

Business Analysis #

Segment Analysis #

Sharda Cropchem’s annual report doesn’t provide precise figures for market share or fully detailed geographic presence for each segment. The information provided is limited, and we’ll construct an analysis based on that limited information. Growth rates are calculated using the provided numbers and may not match precisely with calculations based on unrounded data from the full report.

I. Business Segments:

Sharda Cropchem operates in two main segments:

A. Agrochemicals:

• Name: Agrochemicals
• Revenue (2023-24): ₹263,942.96 Lakhs (₹263.94 Crores) (Standalone) ; ₹316,036.86 Lakhs (₹316.04 Crores) (Consolidated)
• Revenue (2022-23): ₹334,797.88 Lakhs (₹334.80 Crores) (Standalone) ; ₹403,979.87 Lakhs (₹403.98 Crores) (Consolidated)
• Growth Rate (2023-24 vs 2022-23): -21.1% (Standalone); -21.7% (Consolidated) (This is a decline)
• Operating Margin (Estimate): The annual report does not provide operating margin broken out by segment, this will need to be calculated using additional data not provided in the summary.
• Market Share: Not provided in the report.
• Key Products: Fungicides, Herbicides, Insecticides, Biocides. Specific product names aren’t detailed.
• Geographic Presence: The report mentions operations in over 80 countries. Specific country breakdowns aren’t available, but major revenue contributions are highlighted as being from Europe, North America, and Latin America.

B. Non-Agrochemicals:

• Name: Non-Agrochemicals
• Revenue (2023-24): ₹52,359.49 Lakhs (₹52.36 Crores) (Standalone); ₹52,359.51 Lakhs (₹52.36 Crores) (Consolidated)
• Revenue (2022-23): ₹69,717.78 Lakhs (₹69.72 Crores) (Standalone); ₹69,717.80 Lakhs (₹69.72 Crores) (Consolidated)
• Growth Rate (2023-24 vs 2022-23): -24.9% (Standalone and Consolidated) (This is a decline)
• Operating Margin (Estimate): The annual report does not provide operating margin broken out by segment, this will need to be calculated using additional data not provided in the summary.
• Market Share: Not provided in the report.
• Key Products: Conveyor belts, V-belts, Timing belts, Dyes, Dye intermediates, General chemicals.
• Geographic Presence: The report is limited on details; however, it does mention sales in Europe, NAFTA, LATAM, and ROW.

II. Limitations of the Analysis:

This analysis is limited by the information provided in the summary of the report:

• Missing Data: Precise market share figures are not given, nor are detailed geographic sales breakdowns for each segment. Operating margins are also not provided for the business segments.
• Rounded Numbers: Calculations use rounded figures, potentially affecting the accuracy of growth rate calculations.
• Consolidated vs. Standalone: There is a difference between standalone and consolidated figures because the consolidated statement includes the data from subsidiary companies.
• Product Specificity: Key product details are not specified (e.g., specific brand names or active ingredients within the fungicide, herbicide, and insecticide categories).

To conduct a truly comprehensive analysis, access to the complete, un-summarized annual report is needed. This response offers only a high-level summary based on limited information.

Risk Assessment #

Sharda Cropchem’s annual report identifies several key risk factors. We’ll categorize and analyze them based on the information provided, keeping in mind the limitations of the summary data:

I. Categorization and Description of Key Risk Factors:

The provided text identifies the following risk factors. For simplicity, we categorize them below, although some risks may overlap categories:

A. Market Risks:

• Downward Pricing Pressure: Intense competition and geopolitical instability can lead to lower product prices, impacting margins and profitability.
• Currency Fluctuations: International operations expose the company to exchange rate risks, affecting revenue and profitability.

B. Operational Risks:

• Delay in Product Registration and Licensing: Delays in securing necessary approvals in different countries hinder market entry and revenue generation.

C. Financial Risks:

• Customer Credit Risk: The risk of customers defaulting on payments, leading to financial losses.

D. Compliance & Regulatory Risks:

• Regulatory Risk: Non-compliance with various regulations (agrochemical, environmental, etc.) can lead to penalties, legal issues, and reputational damage.
• Biosafety and Environmental Risk: Improper handling or use of agrochemicals can harm human health or the environment, causing legal and reputational problems.

II. Impact Severity, Likelihood, and Mitigation Strategies:

Assessing the precise impact severity and likelihood of these risks requires more detailed information than what’s available in the annual report summary. The descriptions below are based on general industry knowledge and the mitigation strategies explicitly stated in the report.

III. Trends:

The trends column in the table above provides a summary of the general industry and economic forces impacting each risk. More specific trends would require access to the complete annual report and a deeper dive into the company’s industry analysis.

Limitations:

This analysis is based on a summary of the annual report, and therefore, lacks granular detail on the risk assessment methodology used by the company. The qualitative assessments of impact severity and likelihood are also general observations and would require specific details from the full report for accurate assessment.

Strategic Overview #

Management Assessment #

Sharda Cropchem’s management highlights several key aspects in their discussion and analysis:

I. Key Strategies:

• Global Expansion: The company focuses on expanding its presence in both existing and new geographies, particularly in developed markets (Europe, North America, Latin America) and high-growth agricultural economies. This strategy aims to diversify revenue streams and reduce dependence on any single market.
• Product Registrations: A major strategy is investing heavily in obtaining product registrations in various countries. This creates a significant barrier to entry for competitors and secures long-term market access. Significant capital expenditure is allocated to this.
• Asset-Light Model: The company employs an asset-light business model, outsourcing manufacturing of active ingredients and formulations. This strategy enhances operational flexibility, reduces capital expenditure, and improves cost competitiveness.
• Forward Integration: The company is actively building its internal sales force in key regions to strengthen its direct reach to customers and enhance its control over the value chain.
• Diversified Product Portfolio: Expanding beyond agrochemicals into non-agrochemical products like conveyor belts and general chemicals diversifies revenue streams and reduces reliance on the agricultural sector’s fluctuations.

II. Competitive Advantages:

• Intellectual Property (IP) and Dossiers: The company possesses a vast library of dossiers and intellectual property rights (IPRs). This provides a significant competitive edge in obtaining product registrations, especially in regulated markets.
• Asset-Light Business Model: Outsourcing manufacturing provides cost advantages and flexibility compared to competitors with higher capital investment in manufacturing facilities.
• Global Reach and Distribution Network: A widespread network of distributors and a growing sales force enables effective market penetration and product distribution across various geographies.
• Domain Expertise: Deep knowledge and experience in the agrochemical industry allow the company to identify and capitalize on emerging market opportunities.
• Strong Supplier Relationships: Established relationships with manufacturers and formulators in various countries ensure access to quality products at competitive prices.

III. Market Conditions and Challenges:

• Global Economic Slowdown: Overall global economic conditions, including high interest rates and subdued consumer demand in certain regions, present challenges to sales growth and pricing power.
• Geopolitical Uncertainty: International conflicts and political instability affect supply chains, transportation costs, and market access.
• Price Competition: The agrochemical market is competitive, with pressure on pricing for generic products.
• Regulatory Complexity: Increasing regulatory hurdles and stringent approval processes in many countries present challenges for new product registrations.
• Climate Change: Unpredictable weather patterns and climate change impacts agricultural yields and demand for crop protection products.
• Food Price Inflation: High food prices can impact consumer purchasing power which would affect the demand for the products traded by Sharda Cropchem.

IV. Opportunities:

• Growing Global Population: The increasing global population drives the need for greater agricultural productivity, increasing demand for crop protection products.
• Government Support for Agriculture: Many governments are investing in agricultural development, creating opportunities for agrochemical companies.
• Technological Advancements: Innovations in precision agriculture and sustainable farming practices can lead to increased efficiency and demand for tailored solutions.
• Market Penetration in Emerging Economies: Significant growth potential exists in expanding into under-served markets in emerging economies.
• Product Diversification: Further expanding product portfolio into new sectors can provide growth opportunities and reduced vulnerability to market fluctuations.

V. Management’s Outlook:

Management expresses cautious optimism, acknowledging the challenges faced but highlighting their strategic focus on product registrations, expanding their global reach and strengthening operational efficiency. They emphasize their long-term vision and the resilience of their business model in navigating the complexities of the market.

VI. Limitations:

This analysis is based on the summarized management commentary in the annual report. A more comprehensive understanding would require a detailed examination of the complete annual report and potentially additional research on industry trends and competitor analysis. The descriptions provided here are qualitative and lack detailed data points supporting them.

ESG Ratings #

The provided annual report does not include ESG ratings from any external rating agencies. The report details Sharda Cropchem’s own ESG initiatives and commitments, but it does not mention any scores or assessments from organizations such as MSCI, Sustainalytics, Refinitiv, or others that provide independent ESG ratings.

ESG Initiatives #

Sharda Cropchem’s annual report details various ESG initiatives, but doesn’t quantify some aspects (e.g., precise carbon footprint reduction targets). Here’s a summary based on the provided text:

I. Environmental Initiatives:

• Waste Management: The company focuses on responsible waste disposal and recycling, including plastics, e-waste, and hazardous waste. This involves selling waste to local vendors for proper recycling or disposal. They also aim to minimize paper usage and utilize recyclable materials. The report states that waste generation is minimal given their trading business model.
• Energy Efficiency: The company strives to optimize energy use across operations, employing energy-saving technologies and practices. They report an energy intensity of 0.29 GJ/Cr (Gigajoules per crore of revenue). Specific details of implemented measures are not described.
• Water Conservation: The company implements water-saving measures, aiming to minimize water intensity. They report a water intensity of 1.38 KL/Cr (kiloliters per crore of revenue). Again, specifics are missing.
• Reduction of Hazardous Chemicals: The company highlights that its trading business model minimizes the need for hazardous chemicals. E-waste management processes are externally validated.

II. Carbon Footprint:

The annual report does not explicitly state the company’s overall carbon footprint or specific targets for reduction. While energy efficiency and water conservation initiatives indirectly contribute to a lower carbon footprint, no quantifiable data is provided on GHG emissions.

III. Social Initiatives:

These initiatives are largely conducted through their Corporate Social Responsibility (CSR) program:

• Education: Supporting education programs for students, particularly focusing on underprivileged communities.
• Healthcare: Providing medical assistance and support to needy individuals.
• Poverty Eradication: Initiatives aimed at reducing hunger and poverty.
• Women Empowerment: Programs to empower women and provide livelihood opportunities.
• Animal Welfare: Initiatives involving animal care and protection.
• Rural Development: Projects focused on the betterment of rural communities.

IV. Governance Practices:

The report highlights the following aspects:

• Board Composition: A diverse board of directors with a mix of executive, non-executive, and independent directors, including women directors.
• Board Committees: Established committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, and Risk Management) provide oversight and guidance on various aspects of the business.
• Risk Management: A robust risk management framework is in place to identify, assess, and mitigate various risks (financial, operational, regulatory, and environmental).
• Compliance: Adherence to relevant laws, regulations, and corporate governance guidelines. The report acknowledges some minor non-compliances and corrective measures.
• Transparency: The company aims for transparency in its operations and financial reporting.
• Whistleblower Policy: A mechanism is in place for reporting unethical behavior or suspected fraud.
• Equal Opportunity Policy: The company states a commitment to equal opportunities for all employees regardless of background.

V. Sustainability Goals:

The annual report does not explicitly define specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals. While the company’s commitment to ESG is clear, their long-term aspirations in this area are not explicitly articulated with quantifiable targets.

VI. Limitations:

This analysis is based on the summary information provided in the annual report. A more comprehensive overview would require access to the full annual report for precise data on their carbon footprint, energy and water consumption, waste generation, and more detailed information on their sustainability targets.

Additional Information #

Operational Metrics #

The annual report states that Sharda Cropchem does not have its own manufacturing facilities or R&D department. Their business model is asset-light, outsourcing manufacturing. Therefore, there is no R&D expenditure reported.

The total employee count as of March 31, 2024, is reported as 186. This includes 85 men and 101 women. The report also notes that there is one differently-abled employee.

Key Events #

Based on the provided annual report summary, the significant events during the year (FY 2023-24) for Sharda Cropchem Limited include:

• Resignation and Appointment of CFO: Mr. Ashok Vashisht resigned as CFO, and Mr. Shailesh Anant Mehendale was appointed to the position.
• Re-appointments of Directors: Several directors, including the Chairman and Managing Director, were re-appointed for a five-year term. Ms. Sonal Desai was also re-appointed as an Independent Director via postal ballot.
• Appointment of Additional Independent Directors: The board appointed three additional independent directors, subject to shareholder approval at the AGM.
• Significant Investment in Product Registrations: The company invested ₹420 crore in product registrations. This is a key strategic initiative for future growth.
• Decline in Revenue and Profitability: A significant decline in revenue and profitability was reported, primarily due to lower price realizations across all regions, increased freight charges, and disturbances affecting travel times.

The report does not offer detailed information on other significant events; however, the above are the key events explicitly identified in the summary provided. A comprehensive list of events would necessitate consulting the complete annual report.

Audit Information #

Auditor’s Opinion:

The independent auditor, B S R & Co LLP, issued an unmodified (clean) opinion on both the standalone and consolidated financial statements. This means that the auditors found the financial statements to be presented fairly in accordance with generally accepted accounting principles in India and that they did not contain any material misstatements. However, the audit report did highlight key audit matters related to revenue recognition and impairment testing of intangible assets.

Key Accounting Policies:

The annual report outlines several key accounting policies followed by Sharda Cropchem Limited, consistent with Indian Accounting Standards (Ind AS):

• Basis of Preparation: Historical cost, except for certain assets and liabilities measured at fair value (e.g., derivative financial instruments).
• Functional and Presentation Currency: Indian Rupees.
• Current and Non-Current Classification: A 12-month operating cycle is used to classify assets and liabilities.
• Trade Receivables: Measured at amortized cost using the effective interest method, less allowance for credit losses (using the expected credit loss model).
• Foreign Currency Translation: Transactions are recorded at the transaction date exchange rate; monetary items are translated at closing rates; non-monetary items are translated at the transaction date rate; exchange differences are recognized in profit or loss.
• Derivative Financial Instruments: Measured at fair value; changes in fair value are recognized in profit or loss.
• Revenue Recognition: Revenue is recognized upon transfer of control of goods to customers, using a five-step model as per Ind AS 115.
• Taxation: Current and deferred tax assets and liabilities are recognized. The company adopted the new income tax regime from April 1, 2022.
• Property, Plant, and Equipment (PPE): Initially recognized at cost, subsequently carried at cost less accumulated depreciation and impairment losses; depreciation is calculated using the straight-line method.
• Intangible Assets: Acquired separately are measured at cost, less accumulated amortization and impairment losses; amortization is on a straight-line basis. Development costs are capitalized under specific conditions.
• Impairment of Non-Financial Assets: Assets are tested for impairment annually and when indicators suggest impairment; recoverable amount is the higher of fair value less costs of disposal and value in use.
• Leases: The company applies Ind AS 116, recognizing right-of-use assets and lease liabilities, with certain exemptions for short-term and low-value leases.
• Inventories: Valued at the lower of cost and net realizable value.
• Provisions: Recognized when a present obligation is probable, the outflow of resources is likely, and the amount can be reliably estimated.
• Financial Instruments: Classified and measured according to Ind AS 109, considering business model and contractual cash flow characteristics (amortized cost, fair value through other comprehensive income, fair value through profit or loss).
• Cash and Cash Equivalents: Highly liquid instruments readily convertible into cash with original maturities of three months or less.
• Earnings Per Share (EPS): Calculated using the weighted average number of equity shares outstanding.
• Segment Reporting: Follows the management approach of Ind AS 108.

This is not an exhaustive list but covers the significant accounting policies. For a complete understanding, refer to the full annual report. Note that some policies involve significant judgements and estimations (e.g., impairment testing, provisions), introducing uncertainty into the reported figures.