Dhanuka agritech

@Hitesh: Would be great to get any kind of insight into the following:

a) What is the current capacity utilization? Are they bottlenecked by capacity (or) demand?

b) When does the company expect 90+% capacity utilizations on the new capacity that is coming up.


current capacity is 35900 tonnes of solids/granules and 11000 Kl of liquids.

after the capacity expansion this will expand to thrice the current capacity… expected cost is around 50 cr rs.

regarding ur queries I cant find the answer in the AR or any other research report… Maybe u can drop in a mail to the company guys or talk to them… Or else participate in concall post q2 fy 14 results which I think are on 14 Nov.

The Promoter holding in the company is distributed quite confusingly. Of the 75% promoter holding 58% is held by Promoter Institutions in the following manner. Can somebody pls enlighten on the very specifics of why promoters manage their investments in this manner??

M/s Golden Overseas Private Ltd. - 16.47%

M/s Exclusive Leasing & Finance Ltd. - 12.75%

M/s Zoom Leasing & Finance Co. Ltd. - 11.42%

M/s Hindon Mercantile Limited - 11.23%

Balance Sheet Item

Long Term Loans & Advances ‚Äď Capital Advance is more than 14 Cr for last 2 years. before that was 10Cr.

Any Idea what this is?

Hi Balkrishna,

Capital Advance might be related to the lands at keshwana and Dahej acquired by the company…if its not still transferred in company’s name (as was the case till April’2013) it might be shown under CA…however, it is better you confirm this with the management in the ensuing concall post 11th november…


Looks like hbj capital has recommended it. I’m pretty sure its Dhanuka (I’m not a hbj customer) -


Thanks Mahesh.

Whats your assesment of fair value for this stock now?

Hi Balkrishna,

Lets postpone discussion on fair value as Q2 results are due next week and its better to take call on such value after that…

Somepoints to note with rgds. toDhanuka are :

  1. Asset-light model which can generate relatively good amount of free cash in boom times…however, it is this only factor which will let it quote at discount to peers like Pi and Rallis as it makes it relatively more dependent on MNCs and other players for RM and product requirements…

  2. Dhanuka’s approach and positioningisin agri sector what traditional kirana stores’ approach and positioningis inretail sector…in other words, promoters are traditional, old-fashioned, with baniya-type business acumen…its the entry of young generation of promoters after which pe-fund was raised, expansions were planned, focus on exclusive, inlicensed products was designed and brand-building initiatives were taken…

  3. Have attended analyst meets and concalls of this company, and I must admit that they seem to be unorganised players wrapped in an organised package…but, this doesn’t take away the fact that their baniya-type focus on their business is without doubt and when you talk to rural ground players (who themselves are not that organised), Dhanuka’s brand is clearly visible and commands good respect…its afterall this is what matters and this might be the reason why they are now able to clinch good exclusive deals with MNCs for their products…however, its only in Indian Agri space that they will prosper and be able to clinch deals with innovator MNCs; if they had to diversify into CSM they might not be able to get more than few generic molecules…management very well knows this and thats the reason why its major expansion is focussed on expanding current capacities and not venturing into CSM…

  4. Business approach has been great…what I liked most is the appointment of Mr. Bachchan and subsequent ads released…Its after 11 years that company is targeting launch of one exclusively marketed and distributed 9(3) product each year for next 5 years and to focus on rural brand creation from the first year post launch of first 9(3) fungicide could reward the company handsomely in the time to come…its brand visibility on ground has been on an increase thanks to activations done and ongoing for lustre…

  5. First two exclusive 9(3) products after a gap of 11 years are also interesting ‚Äď one fungicide already launched and one herbicide to be launched in ensuing Rabi----as the rural labour availability is declining and cost is escalating, farmers are moving towards more use of herbicides and fungicides in addition to high yielding inscticides; such products will ensure good revenue with high margins‚Ķhowever, remember one thing that these products will take their own time to get absorbed and pick-up sales‚Ķin case these products do a yearly sales of close to 10-12 cr. each in their third main season post launch it will be great and an indication they are moving towards a yearly 50 cr. sales mark very soon‚Ķ

  6. Expansions are well managed with internal accruals and debt is reduced (although major part of it was from the promoters themselves)…Externally funded CAPEX requirement doesn’t seem to be so great even for next 3-4 years and once its Rajasthan plant (first phase) becomes operational next year and starts generating asset turns of 3 + in FY16, cash generation could be robust provided margins are maintained…

  7. Having said this, because of unorganised nature of the promoters, even finances are managed in an unorganised way and therefore in case of shocks co. will be more vulnerable than its counterparts…a case in point will be recent currency movements which could make it register good forex loss if not managed in the right way…only Q2 and subsequent results post that could tell us how well such shocks are managed…

  8. To sum up, this co.'s strength is its brand and connect with the farmers (second to Rallis ‚Äď ahead of PI), its reach to remote pockets which is second to none, its business plan of launch of one exclusive innovative product each year (to be tested), its low external cash requirment for expansion and a conservative approach to expansion while its main weaknessis unorganised nature of the management.

Co. is underowned since hardly 11% holding is with the public and no major institutional ownership is there‚Ķin case PE player (which has taken 8 % + stake at around Rs. 80 three years before) holding changes hands and a more professional PE player comes in with larger stake then the rerating of this co. could be sharp and significant‚Ķin market circles, not many are talking rgdg. this co. which is a good sign ‚Äď but unless both these things happen it mightascend steadily or descend depending on its performance on both revenues and margins‚Ķ

Q2FY14 results will be interesting to watch as also the launch of its herbicide by Jan’2014 ( in case registration formalities are approved)


Discl.- have recently started accumulating this co.

Mahesh, it was a nice detailed post. I have a very naive question that how and when a business is termed asset-light model? I am not sure whether this is the right thread to ask this question.

Hi Neerav,

Asset-light business model is the one in which investment into capital-consuming fixed assets are kept at the lowest by exploring outsourcing opportunity to the maximum…Because of this, one will find relatively high asset turns in a company following asset light model…If we talk specific for Dhanuka, what it has done is it has focussed only on distribution aspect by having only formulation plants, whereas high capital-consuming RM/technical manufacture is outsourced or rather purchased from external sources. What this does is it gives relatively high asset turns for the co. but also makes it dependent on RM suppliers for its requirements.

Feel free to ask any further query you have.



Thanks for the timely writeup and reco!! Was able to get in around the 200 dma.



Thanks Mahesh. It was helpful.

Concall Today, 11th November, 2013at 4.00 pm…

Dial-in Nos. - 66290048 // 30650020

Members please take note of the same.


Q2FY14 Results Announced…

Revenue at 253.44 cr. a YoY growth of 23.07 %

EBITDA margins at 17.24 % ‚Äď need to check in the concall commentry what has contributed to this‚Ķ

Topline has missed all covering Brokerages’ forecast by just 4.8 % but EBITDA & PAT are ahead of forecast.

Today’s concall commentry will be interesting to watch…


Excellent numbers from dhanuka… EPS figures of 15 plus seems on the cards…for fy 14.

What is interesting is that around 130-135 this kind of growth was not expected in the price…

There could be some re rating as well looking at strong growth shown by the company… Still looks a good buy on declines.

Stock posted a new all time high today… I think there could be more fireworks going ahead once the selling near the earlier highs of 160-62 is absorbed.

The concall transcripts have been put up on researchbytes.

Broadly management sounds confident about the rabi season prospects in view of good monsoon and higher water levels. Company has a vast product portfolio and it addresses most of the crops and company is confident of giving much better results as compared to fy 13 for fy 14.

Working capital management has improved if compared to the quantum of sales growth.

Long term debt is nil…

A new innovative first of its kind product is to be launched probably in q3 fy 14 or latest by q4.

Company has tie ups with 4-5 US and Japanese companies each for marketing their products.

Two new products launched in September … maxyield and media super… first is plant growth regulator and second is insecticide.

Company stresses it is mainly a marketing company but its edge is its distribution network and Pan India reach.

There has been good margin improvement in this quarter and company is likely to surpass fy 13 overall margin comfortably. Margins are mainly dependent on the kind of products that move strongly.

Expansions are on track and fy 15 should show meaningful contribution from expansions.

% imported raw material for first half was 43%.

Price hikes of 5-6% taken before kharif season. this took care of impact of adverse currency movements.

Dividend policy… management has decided to give 25% payout…minimum.

Effective tax rate for full yr is 26%.

Company was very reticent about giving individual product revenues…

KJMC and Prabhudas Liladhar have their EPS targets for fy 14 around 15.5 per share… I think these are likely to be revised upwards.

I wont be surprised if company manages to notch up figures of close to 17-18 per share in terms of EPS figures for fy 14.

What has been really impressive about dhanuka is the sheer consistency in its sales and net profit figures… since 2004 data is available on screener… There is not a single year of negative growth… in all these years… and there have been some bad monsoons during this phase…

Peer Growth Table is provided below for ref. :










PI Ind.

( Agri-Input segment )

YoY Growth

( Actual Revenue )

22.48 %

( 414 cr. )

11.79 %

( 218 cr. )

37.06 %

( 196 cr. )

9.94 %

( 553 cr. )

22.98 %

( 503 cr. )

36.78 %

( 409 cr. )

7.94 %

( 299 cr. )

6.94 %

( 277 cr.)

15.11 %

( 259 cr.)


YoY Growth

( Actual Revenue )

14.46 %

( 841.45 cr. )

22.65 %

( 571.26 cr. )

0.31 %

( 270.19 cr. )

12.06 %

( 1323.78 cr. )

10.68 %

( 1181.25 cr. )

21.44 %

( 1067.26 cr. )

5.14 %

( 900.52 cr.)

23.06 %

( 856.16 cr.)

(-1.01) %

( 695.68 cr.)


YoY Growth

( Actual Revenue )

33.73 %

( 419.62 cr. )

23.07 %

( 253.44 cr. )

54.07 %

( 166.18 cr. )

10.88 %

( 586.92 cr. )

7.38 %

( 529.3 cr. )

20.76 %

( 493.58 cr.)

21.13 %

( 408.72 cr. )

35.26 %

( 337.42 cr.)

23.91 %

( 249.46 cr.)


YoY Growth

( Actual Revenue )

41.99 %

( 537.96 cr. )

47.95 %

( 340.32 cr. )

32.78 %

( 197.63 cr. )

18.19 %

( 616.68 cr. )

15.91 %

( 521.75 cr. )

19.27 %

( 450.1 cr. )

43.25 %

( 377.36 cr. )

33.43 %

( 263.42 cr.)

17.49 %

( 197.42 cr.)


Kharif & Rabi contribution to Dhanuka Sales over last few years :








53.68 %

54.64 %

50.81 %

48.77 %

49.22 %

51.79 %


46.32 %

45.36 %

49.19 %

51.23 %

50.78 %

48.21 %

Sources indicate the impending launch of 9 (3) herbicide in Rabi by Dhanuka is Halosulfuron Methyl in exclusive tie-up with Nissan Chemical (second 9-3 product post Targa Super with Nissan) which is likely to be marketed under the brand name Sempra.

It will pitch for market commanded by Atrataf (Rallis), Solaro (PI), Metri (Rallis), Glypho (PI), Sencor (Bayer), Glyfos (Cheminova), Roundup (Monsanto), etc. and will complement use of 2,4-D and Paraquat in Sugarcane crop. It has by far proved to be the most effective and safe herbicide for sedges (particularly purple) which account for 60-80 % of total weed flora in Indian sugarcane fields.