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Latha Venkatraman

Mumbai , Oct. 20

OVER time Rallis India Ltd has been getting out of several businesses. Increasingly, the company is focussing on agrochemicals, said Dr V.S. Sohoni, Managing Director, Rallis India Ltd.

"The revenue stream in the domestic market this fiscal will be predominantly from pesticide sales and we will become a more pesticide dominant company than before,'' he said, responding to queries mailed from Business Line. The company which reported a loss of Rs 77.27 crore in 2002-03, is expected to improve its topline growth during the current fiscal mainly on account of widespread monsoon rains driving sales of agrochemicals.

Having received widespread monsoon rains, India's agricultural sector seems poised for a good harvest. How does it augur for Rallis India?

The season is very favourable and we hope to get better sales than last year. After a number of seasons of poor monsoons, this year's monsoons have brought good cheer to the country's farming community and it augurs well for the sector overall.

How is the company expected to do in terms of revenue as well as profits this year?

We can confidently say that Rallis' bottomline will be significantly better than last year. I do not wish to say more than this at present.

Overall how is the agrochemical sector expected to fare this year? Which segments showed good growth - herbicide, fungicide or weedicide?

The industry is doing very much better this year. The good monsoons of 2003 have a direct correlation to the demand for herbicides, fungicides and weedicides. All sectors are expected to show improvement. The pipeline stocks have decreased and fresh sales are promising. New products have been introduced in several areas.

Looking back at your previous financial performance, what would you say went wrong?

The domestic pesticide industry has been going through a turbulent and inconsistent phase over the last few years. The industry declined by seven per cent during the drought in 1997-98, but rebounded and exhibited strong growth during the next two years. 2002-03 was the worst year for the industry in two decades, as the crippling drought accompanied by abnormally low pest infestation levels took its toll on the domestic pesticides industry, which shrunk by a massive 22 per cent. This drop was primarily precipitated by an unusual combination of drought in key pesticide consumption areas and low pest pressure in cotton which accounts for 40 per cent of total pesticide consumption in the country and rabi paddy crop.

On an internal level, there was not enough attention paid to the collection of receivables. Production was also in excess of demand and together with unsold stocks and large outstandings from the market, working capital was very high. Higher interest costs and continuing expenses were very detrimental to the profit and loss account. Our focus areas are clearly going to be on these factors. We have also successfully managed to reduce our pipeline stocks and have added new products in several areas, insecticides and weedicides.

During the current kharif season did you expand your geographical reach as well as the crops? Which were these expanded areas?

There was greater effort in emerging markets in east and central India. Both cotton and rice growers were good customers. Vegetable prices were also supportive of increased agro inputs.

In terms of revenue mix, how is the company poised to perform this year?

This year Rallis will not be selling the range of fertilisers that were transferred to Tata Chemicals. What this means is that the size of the topline will shrink but this may not affect the bottomline adversely. The revenue stream in the domestic market will be predominantly from pesticide sales and we will become a more pesticide dominant company than before.

What are your plans for fine chemicals and how is this sector doing?

The gelatin business is doing well. There are no plans to make any significant investments in new fine chemicals.

Could you also provide an update on your seeds business?

We are not developing new varieties. This is mainly a trading activity for us at present.

How is your debt restructuring plan working? What is your target for reducing debt this fiscal?

We brought down debt substantially over the last two years, but we still have a debt-equity ratio that is not acceptable. Several methods for improving the debt-equity ratio are under consideration.

The sale of unutilised assets is being given priority - and the sale of Ralli House has been confirmed earlier this week for Rs 56 crore. These cash receipts will be used to pay down some of the expensive debts. Working capital reduction is also being given high priority. After quite some time, collections have been higher than sales. We hope to reduce working capital significantly.

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