Dhanuka Agritech Ltd:Annual Report 2023-24 Analysis

Dhanuka Agritech Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Dhanuka Agritech Ltd. was established in 1985 by Mr. R.G. Agarwal.

Headquarters Location: The company is headquartered in Gurugram, Haryana, India.

Company Vision and Mission: Their vision is to be a leading Indian agri-input company by providing quality products and services to enhance farm productivity and profitability. Their mission is to empower farmers by providing innovative and sustainable agricultural solutions.

Key Milestones in Their Growth Journey:

• 1985: Incorporation of Dhanuka Agritech Ltd.
• Expansion of product portfolio through strategic collaborations and in-house R&D.
• Establishment of a strong distribution network across India.
• Focus on farmer education and extension activities.
• Continuous investment in research and development for new and improved crop protection solutions.

Stock Exchange Listing Details and Market Capitalization: Dhanuka Agritech Ltd. is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Check current market data for real-time market capitalization.

Recent Financial Performance Highlights: Check financial news sources for the latest financial performance reports.

Management Team and Leadership Structure:

• Chairman: R.G. Agarwal
• Managing Director: M.K. Dhanuka
• The company has a well-defined leadership structure with experienced professionals in various key roles such as finance, marketing, operations, and research & development.

Notable Awards or Recognitions:

• Awards related to business performance, innovation, and sustainability. Search for news related to dhanuka awards.

Their Products #

Complete Product Portfolio with Categories: Dhanuka Agritech offers a wide range of crop protection products, including:

• Herbicides: Weed control solutions.
• Insecticides: Insect pest management.
• Fungicides: Disease control in crops.
• Plant Growth Regulators (PGRs): Enhance plant growth and yield.
• Bio-Pesticides: Environmentally friendly pest control.

Flagship or Signature Product Lines:

• Lustre: Broad-spectrum insecticide
• Targa Super: Herbicide
• Grasia: Herbicide

Key Technological Innovations or Patents:

• Focus on developing formulations with improved efficacy and reduced environmental impact.
• Continuous research on new active ingredients and application technologies.

Manufacturing Facilities and Production Capacity: The company has multiple manufacturing facilities in India.

Quality Certifications and Standards: Dhanuka Agritech adheres to international quality standards such as ISO certifications.

Unique Selling Propositions or Technological Advantages:

• Strong brand reputation and farmer trust.
• Extensive distribution network and market reach.
• Focus on innovation and product development.

Recent Product Launches or R&D Initiatives: Information on latest press releases for updates on new products and R&D developments.

Primary Customers #

Target Industries and Sectors: Primarily the agricultural sector.

Geographic Markets (Domestic vs. International): Primarily focused on the Indian domestic market, with some exports to select international markets.

Major Client Segments: Farmers, agricultural cooperatives, and institutional buyers.

Distribution Network and Sales Channels: Extensive distribution network comprising distributors, dealers, and retailers across India.

Major Competitors #

Direct Competitors in India and Globally:

• Indian Competitors: UPL, Bayer CropScience, Syngenta India, Rallis India, PI Industries.
• Global Competitors: Bayer, Syngenta, BASF, Corteva Agriscience.

Comparative Market Share Analysis: Check industry reports and financial analysis for market share data.

How They Differentiate from Competitors:

• Focus on value-added products and services.
• Strong relationships with farmers and channel partners.
• Commitment to sustainability and responsible agriculture.

Future Outlook #

Expansion Plans or Growth Strategy: Information on expansion plans and strategies.

Sustainability Initiatives or ESG Commitments: Commitment to sustainable agricultural practices and environmental stewardship.

Dhanuka Agritech Limited - Financial Analysis Report (FY 2023-24) #

Company Overview #

Dhanuka Agritech Limited (DAL) is a prominent agrochemical company in India. It focuses on manufacturing and marketing formulated agrochemical products, including herbicides, insecticides, fungicides, plant growth regulators, bio-pesticides, and bio-stimulants. The company has a pan-India distribution network of approximately 6,500 distributors/dealers and 80,000 retailers, reaching an estimated 10 million farmer touchpoints. DAL emphasizes introducing novel chemistries and product development through international collaborations with leading global agrochemical companies. The company commenced operations at its Dahej chemical synthesis plant in FY 2023-24 and operates a NABL-accredited Dhanuka Agriculture Research and Technology Center (DART) at Palwal.

Financial Performance Analysis #

Key Financial Metrics (Standalone - Audited) #

Detailed Analysis #

Financial Performance Overview #

Revenue and Profitability #

The company reported a revenue from operations of Rs. 1757.61 Crores for FY 2023-24, a 3.4% increase from Rs. 1700.00 Crores in FY 2022-23. Profit After Tax (PAT) stood at Rs. 239.09 Crores in FY 2023-24, up 2.39% from Rs. 233.51 Crores in the previous fiscal year. EBITDA increased by 17.5% to Rs. 327.44 Crores from Rs. 278.70 Crores. Net Worth improved to Rs. 1251.08 Crores as of March 31, 2024, from Rs. 1061.49 Crores as of March 31, 2023. Earnings Per Share (EPS) for FY 2023-24 was Rs. 52.46, compared to Rs. 50.35 in FY 2022-23.

The Directors’ Report highlights that while volume grew by 9.07%, value growth was only 3.43%, indicating an overall value reduction of 5.64% on the entire portfolio due to a continuous decline in prices of generic products (ranging from 5% to 40%).

Key Financial Metrics #

The “Annual Report” table provided in the input document for a 5-year trend was blank. Analysis is based on figures from FY 2022-23 and FY 2023-24.

Comparative Financial Analysis #

Detailed 3-year comparative analysis is not feasible as comprehensive data for FY 2021-22 is not available in the provided document excerpts. Analysis is limited to FY 2023-24 and FY 2022-23.

Assets #

Non-Current Assets #

Current Assets #

Total Assets #

Equity and Liabilities #

Equity #

Non-Current Liabilities #

Current Liabilities #

Total Equity and Liabilities #

Operating Performance #

Income Statement #

Cash Management #

Cash Flow and Liquidity Analysis #

Key Performance Indicators #

Dhanuka Agritech Limited - Financial Analysis Report #

Segment Performance Analysis #

Date of Report Generation: July 10, 2024

Source Document Date: July 10, 202

Risk Analysis: Dhanuka Agritech Limited (July 10, 2024) #

Strategic Risks #

Dependence on Strategic Collaborations with MNCs #

• Risk Description: Reliance on MNC partnerships for innovation. Disruption or failure to secure collaborations could impact the product pipeline.
• Severity: High
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Diversifying collaborators, strengthening in-house R&D, developing own molecules, and commencing CRAMS operations.
• Control Effectiveness: Moderate to High
• Potential Financial Impact: Moderate
• Quantitative Risk Metrics: Success of new product launches and Dahej plant performance.

Development of Pest Resistance #

• Risk Description: Pests developing resistance to existing products.
• Severity: Moderate
• Likelihood: Moderate
• Trend: Stable to Increasing
• Mitigation Strategies: Continuous R&D for new molecules, introducing effective pesticides from collaborators, promoting Integrated Pest Management (IPM), and farmer education.
• Control Effectiveness: Moderate
• Potential Financial Impact: Moderate
• Quantitative Risk Metrics: Market share of older vs. newer generation products.

Operational Risks #

Dependence on Monsoons and Climatic Conditions #

• Risk Description: Reliance on favorable weather patterns for agricultural output and agrochemical demand.
• Severity: High
• Likelihood: High
• Trend: Increasing volatility
• Mitigation Strategies: Diversified product portfolio, pan-India distribution network, close monitoring of weather patterns, and adaptive business strategies.
• Control Effectiveness: Moderate
• Potential Financial Impact: High
• Quantitative Risk Metrics: Revenue growth and volume growth.

Supply Chain Disruptions #

• Risk Description: Raw material price volatility and availability impacting the supply chain.
• Severity: Moderate to High
• Likelihood: Moderate
• Trend: Fluctuating
• Mitigation Strategies: Prudent inventory management, backward integration, strategic sourcing, long-term contracts, and passing on price changes to customers.
• Control Effectiveness: Moderate
• Potential Financial Impact: Moderate to High
• Quantitative Risk Metrics: EBITDA Margin and Inventory turnover.

Mis-handling of Hazardous Chemicals #

• Risk Description: Accidents due to improper handling of hazardous chemicals.
• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Adherence to safety protocols, employee training, investment in safety equipment, and regular safety audits.
• Control Effectiveness: High
• Potential Financial Impact: High
• Quantitative Risk Metrics: Lost Time Injury Frequency Rate (LTIFR).

Financial Risks #

Foreign Exchange (Forex) Rate Fluctuations #

• Risk Description: Impact of Forex fluctuations on import liabilities and export earnings.
• Severity: Low
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Frequent internal reviews and controls implemented; managed foreign exchange risk and hedged to the extent considered necessary; net open exposures reviewed regularly.
• Control Effectiveness: Moderate
• Potential Financial Impact: Low to Moderate
• Quantitative Risk Metrics: Forex impact on PBT.

Credit Risk Associated with Trade Receivables #

• Risk Description: Potential losses from customers failing to pay trade receivables.
• Severity: Moderate
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Credit policy, customer creditworthiness analysis, establishing credit limits, continuous monitoring, and Expected Credit Loss (ECL) provisioning.
• Control Effectiveness: Moderate to High
• Potential Financial Impact: Moderate
• Quantitative Risk Metrics: Debtor Turnover ratio and Gross trade receivables >360 days.

Dhanuka Agritech Limited - Financial Analysis (FY 2023-24) #

Long-term Strategic Goals and Progress #

Dhanuka Agritech Limited (DAL) aims to “Transform India through Agriculture” by enhancing R&D, introducing advanced agricultural technologies, expanding its product portfolio, and strengthening farmer engagement. In FY 2023-24, progress includes:

• Operationalization of the Dahej chemical synthesis plant (producing Bifenthrin Tech, slated for Lambda Cyhalothrin).
• Expansion of research to include eco-friendly formulations, application technology, and shelf-life improvement, supported by the Dhanuka Agritech Research & Technology Centre (DART).
• New product introductions, such as Tizom and the BiologiQ range (six biological products).
• Strategic collaborations with ICAR and State Agricultural Universities (SAUs) for farmer training and adoption of precision tools like drones.
• Promotion of Integrated Crop Management through “Dhanuka Kheti Ki NAI Takneek (DKKNT).”

DAL advanced its strategic objectives of bringing global technologies to Indian farmers and fostering sustainable agricultural practices through new molecule launches and a focus on bio-stimulants.

Competitive Advantages and Market Positioning #

DAL leverages these competitive advantages:

• Extensive pan-India distribution network (approximately 6,500 distributors and dealers, 80,000 retailers, 10 million farmer touchpoints).
• Techno-commercial team of over 1,000 personnel.
• Focus on manufacturing and marketing formulated products, with backward integration into chemical synthesis at the Dahej plant.
• International collaborations with ten global agrochemical companies, providing access to novel chemistries.
• NABL-accredited laboratories and the DART R&D center.
• Diverse product portfolio (insecticides, herbicides, fungicides, bio-pesticides, and bio-stimulants).
• Brand building, including the “India Ka Pranam Har Kisan Ke Naam” campaign and digital marketing.
• Strong financial position (ICRA AA (Stable) credit rating, Net Worth of Rs. 1251.29 Crores as of March 31, 2024).

Innovation Initiatives and R&D Effectiveness #

Innovation and R&D are central to DAL’s strategy, driven by the Dhanuka Agritech Research & Technology Centre (DART) in Palwal, Haryana, which houses:

• 11 R&D laboratories.
• A farmer training center.
• A research farm.

Focus areas include crop-protection chemicals, bio-fertilizers, biological formulations, biostimulants, and precision technologies including drone applications. A new chemical R&D lab with 30 chemists has been established at Sanand, Gujarat.

R&D effectiveness in FY 2023-24 includes:

• Multiple new product launches, including Mesotrax, Defend, Semacia, Implode, Tizom, LaNevo, MyCore Super, and Purge.
• Reintroduction of the BiologiQ range (six biological products).
• Registrations for Halosulfuron methyl 6% + Metribuzin 50% WG (FIM), Lanevo (Fluxametamide 5.81% + Bifenthrin 5.81% EC), and Purge (Fomesafen 12.5% + Quizalofop ethyl 4.68% EC) under section 9(3).
• Several export registrations and TIM registrations under section 9(4) for technicals like Metribuzin and Bifenthrin.
• R&D expenditure at 0.47% of total turnover.
• Collaborations with ICAR and SAUs.

Financial Performance Analysis of Dhanuka Agritech Limited (FY 2023-24) #

Key Financial Highlights (Standalone) #

Revenue from Operations #

• Increased by 3.4% to Rs. 1757.09 Crores from Rs. 1700.07 Crores.
  • Sales volume grew by 9.07%, but value growth was only 3.43%, indicating an overall value reduction of 5.64% due to declining prices of generic products (5% to 40%).

EBITDA #

• Increased by 17.5% to Rs. 327.44 Crores from Rs. 278.7 Crores.

EBITDA Margin #

• Improved to 18.62% in FY24 from 16.39% in FY23, suggesting effective cost management or favorable raw material prices.

Profit Before Tax (PBT) #

• Increased by 5.29% to Rs. 318.79 Crores from Rs. 302.73 Crores.

Profit After Tax (PAT) #

• Increased by 2.39% to Rs. 239.09 Crores from Rs. 233.51 Crores.

PAT Margin #

• Marginally declined to 13.60% in FY24 from 13.73% in FY23.

Earnings Per Share (EPS) #

• Increased to Rs. 52.46 from Rs. 50.35.

Net Worth #

• Stood at Rs. 1252.19 Crores as of March 31, 2024 (up from Rs. 1061.34 Crores).

Dhanuka Agritech Limited: FY 2023-24 Financial Analysis #

Executive Summary #

Dhanuka Agritech Limited (DAL) reported a 3.4% increase in standalone revenue from operations to Rs. 1757.99 Crores and a 2.39% rise in Profit After Tax (PAT) to Rs. 239.09 Crores in FY 2023-24. EBITDA grew by 17.5% to Rs. 327.44 Crores, with EBITDA margins improving to 18.62%. Volume growth stood at 9.07%. Key strategic developments include the operationalization of the Dahej chemical synthesis plant and a new R&D lab at Sanand. The company anticipates strong growth driven by favorable monsoon forecasts (La Niña), price stabilization, and a robust product pipeline.

Company Overview and Strategy #

Dhanuka Agritech Limited specializes in the manufacturing and marketing of formulations including insecticides, herbicides, fungicides, bio-pesticides, and bio-stimulants. Its distribution network includes 6,500 distributors/dealers and 80,000 retailers, reaching 10 million farmers.

The company’s strategy revolves around:

• Innovation and New Product Development: Focus on R&D.
• Strategic Collaborations: Partnering with global agrochemical companies.
• Backward Integration: Operations at its Dahej chemical synthesis plant and CRAMS.
• Market Penetration: Leveraging its distribution network and innovative sales processes.
• Sustainability: Promoting Integrated Crop Management and farmer education.
• Farmer Centricity: Initiatives aimed at doubling farmers’ income.

Economic and Industry Analysis #

Indian Economic Overview & Agricultural Sector #

India’s GDP grew by an estimated 8.2% in FY24. The outlook for FY25 projects GDP growth at 7%. The agricultural sector contributes 18% to GDP. Agri GDP growth decelerated to 0.7% in FY24 from 4.7% in FY23. Agricultural exports declined by 8.8% in Apr-Feb FY24

Audit and Regulatory Analysis: Dhanuka Agritech Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements: #

• Opinion: Unqualified, stating a true and fair view in conformity with Ind AS and the Companies Act, 2013.
• Key Audit Matter (KAM): Estimation of provision for sales returns, discounts, rebates, schemes, and incentives on sales.
• Internal Financial Controls (IFC) over Financial Reporting: Adequate and operating effectively, except “audit logs at database level and for certain tables were not enabled.”
• Companies (Auditor’s Report) Order, 2020 (CARO):
  • Clause (iii)(c): Loans granted, repayment of principal, and receipts of interest have been regular except for Rs. 623.76 lakhs (including interest) for four parties, which has been fully provided for.
  • Clause (iii)(d): No amounts overdue for more than 90 days for loans, except for the Rs. 623.76 lakhs mentioned above, for which reasonable recovery steps have been taken.
  • Clause (vii)(a): Generally regular with statutory dues. No undisputed statutory dues were payable for more than six months as of March 31, 2024, except for Provident Fund amounting to Rs. 1.82 Lakhs.

Consolidated Financial Statements: #

• Opinion: Unqualified, stating a true and fair view in conformity with Ind AS and the Companies Act, 2013.
• Key Audit Matter (KAM): Same as standalone (Estimation of provision for sales returns, discounts, rebates, etc.).
• Other Matters:
  • One subsidiary (Dhanuka Chemicals Pvt. Ltd.) had immaterial financial statements and is under the process of strike-off.
  • One foreign subsidiary (Dhanuka Agri-Solutions Pvt. Limited, Bangladesh) was liquidated on August 10, 2023, and had no operations for FY 2023-24 and is considered immaterial.
• Internal Financial Controls (IFC) over Financial Reporting: Adequate and operating effectively. The exception regarding audit logs for the Holding Company is also applicable here.
• CARO Report (Consolidated): Refers to qualifications/adverse remarks from CARO reports of constituent companies:
  • Dhanuka Agritech Limited (Holding): Remarks on clause (iii)(c), (iii)(d), and vii(a) as noted in standalone.
  • Dhanuka Chemicals Pvt Ltd. (Subsidiary): Remark on clause xvii (cash losses – this subsidiary had a loss of Rs. 0.02 Lakhs and is being struck off).

Key Accounting Policies and Changes #

• Basis of Preparation: Prepared in accordance with Ind AS on an accrual basis and under the historical cost convention, except for certain financial assets and liabilities measured at fair value and defined benefit plan assets at fair value. The operating cycle is 12 months.

Key Policies: #

• Revenue Recognition (Ind AS 115): Recognized upon transfer of control to the customer, net of returns, discounts, rebates, schemes, and incentives.
• Property, Plant and Equipment (PPE) (Ind AS 16): Measured at cost less accumulated depreciation and impairment. Depreciation is on a Written Down Value (WDV) basis. Solar Plant: 25 years.
• Intangible Assets (Ind AS 38): Measured at cost less accumulated amortization and impairment. Computer software amortized over 3-6 years (SLM).
• Investment Property (Ind AS 40): Stated at cost less accumulated depreciation and impairment. Fair value is disclosed.
• Inventories (Ind AS 2): Valued at the lower of cost (FIFO basis) and net realizable value.
• Financial Instruments (Ind AS 109): Recognized initially at fair value. Subsequent measurement depends on classification. Expected Credit Loss (ECL) model applied for impairment of financial assets.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and lease liabilities recognized for leases, except short-term leases. ROU assets depreciated over the shorter of lease term and useful life.
• Employee Benefits (Ind AS 19): Defined contribution plans expensed as incurred. Defined benefit plans (Gratuity) accounted for using actuarial valuations, with remeasurements via OCI.
• Income Tax (Ind AS 12): Current tax and deferred tax recognized. Deferred tax based on temporary differences using the balance sheet liability method.

Changes in Accounting Policies: #

• No new standards or amendments to existing standards applicable to the Company/Group had a significant impact for the year ended March 31, 2024.

Internal Control Effectiveness #

Auditor’s Opinion on IFC: #

• Standalone: Adequate in all material respects and operating effectively, with the exception that “audit logs at database level and for certain tables were not enabled.”
• Consolidated: Adequate in all material respects and operating effectively for the Holding Company and its Indian subsidiary. The same exception for audit logs applies to the Holding Company.