Is Rallis India expected to face Margin pressure??

Near term Margin pressure for Rallis

Market Outlook
by Shreya Anaokar Last Updated: 2022-07-04T12:58:37+05:30

Rallis India anticipates a respectable growth in the domestic market during the first quarter of FY23, driven by solid commodity prices and the expected arrival of a good monsoon. Furthermore, on the strength of ongoing demand momentum, the export business is anticipated to stay strong. Additionally, Rallis expects enhanced off-take of Metribuzin and Pendimethalin to fuel volume growth in the export market.

As of right now, inventory placement for both seeds and crop protection has gone according to schedule. Inventory liquidation at the dealer level has been less effective than anticipated as a result of the delayed southwest monsoon, which was 36 percent behind schedule as of June 26. The lack of water availability in Punjab and Haryana, the delayed monsoon in Maharashtra, and the increased use of illegal seeds have an impact on the demand for cotton seeds. During the current Kharif season, there has been a high demand for paddy seeds. The company has observed certain crop changes from cotton to soybean in areas where Rallis is not present, which could have some effect on the expansion of the seeds industry.

Despite some difficulties with the manufacture of two maize hybrids, Rallis is making good progress in the maize seed market as a result of high maize prices. The crop protection industry is still experiencing strong sentiment, as seen by the company's products' respectable inventory disposal in North India.

Rallis increased prices on average by 4-5 percent in the first quarter of FY23 due to rising raw material costs. However, the corporation could only partially transfer the same. The business emphasized that the softening of raw material prices, which will result in margin pressure in 1QFY23, has already begun. Furthermore, it is anticipated that the high-cost inventory of a few chosen products would continue to put pressure on 2QY23's margin.

Rallis has forecasted a Capex of Rs. 2.5 billion for FY23E. In the Dahej formulation plant, commercial production has begun, and it is anticipated that capacity utilization will increase starting in 2HFY23.

As the surplus inventory problem in the US has started to wind down and the company has started getting orders for the same, the demand for Metribuzin is anticipated to pick up in FY23, and the facility is anticipated to function at full capacity utilization by 3QFY23. Rallis will produce Difenoconazole at its multipurpose facility in Dahej; the registration process has already started, and volume expansion is anticipated to begin in two years. Additionally, the company intends to begin internally producing one important raw material starting in 3QFY23.

 

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About the Author

Shreya Anaokar is a Content Writer at 5paisa. She has completed her Master’s in Finance and Graduation in Statistics from the University of Mumbai. 

Disclaimer

Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.

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