PI Industries - Superior Business Model

[anil]

As per the 2013 annual report, the company expects a revenue CAGR of 25% for next 3 years and ever better performance in operating profits.

This sounds very encouraging. Seniors and Mahesh, who have been tracking it from much earlier levels- has the company delivered (walk the talk) as per guidance given before? may be what they said 2-3-4 years before? can we count on this revenue CAGR guidance?

Also, can PI be considered a good story to play around India’s agri/agro chemicals space? reading the annual report, it gives me an idea that the penetration level of such products in India is very low and there is huge scope. PI is in this industry for the last 50 years and has good recognition/acceptance among farmers (which I feel is a great thing).

PI accounts for close to 4% of my portfolio and I plan to increase it further.

Thanks

[hitesh2710]

anil

PI inds seems to be living up to its promise of very strong growth… If first quarter results are any indications esp the custom synthesis revenues, the fy 14 numbers should be very very encouraging… According to the interview in previous post they are targetting 1500 cr revenues for fy 14 and at the expected 10-10.5 percent net margins, it could do net profits of around 150 crores which seem to be ahead of all analyst expectation.

To me PI looks to be on the cusp of another strong growth spurt for next 2-3 yrs as promised by management.

Plus their talk of generating free cash is encouraging… It means this is not a run of the mill company believing in expansion just for the sake of expansion.

Looks like a good risk reward at cmp of around 135. As mahesh mentions, stock could reach 160-180 soon if market sentiments improve.

[Mahesh]

Edelweiss Q1FY14 Result Update on PI Ind. :

**

PI Industries (PI) Q1FY14 reported robust sales, EBITDA and PAT growth of 69.8%, 60.0% and 56.7% (our estimates 28.9%, 18.8%, 16.6%) YoY, respectively, led by strong domestic as well as custom synthesis (CSM) businesses. Domestic agri input and CSM businesses surged 38% and 116% YoY, respectively, during the quarter. Post a healthy Q1FY14, the management revised its FY14 domestic and CSM revenue growth guidance up to 20-25% and over 30%, respectively (earlier 20% and 25%).

However, it maintained its EBITDA margin guidance at 100-150bps YoY improvement. We believe CSM will continue to post strong growth on the back of a robust order book and commissioning of the Jambusar plant. Maintain âBUYâ.

Q1FY14 numbers, a positive surprise

**

PIâs sales grew 69.8% YoY primarily driven by volumes. The newly commissioned Jambusar plant contributed ~INR300mn to top line. EBITDA margin fell 120bps YoY to 19.4% due to lower margin in domestic business, which was impacted by INR depreciation and change in product mix. Adjusted PAT stood at INR0.44bn versus estimated INR0.33bn. PIâs forex gain was INR67mn (net of tax: INR43mn). Hence, reported PAT stood at INR0.49bn.

**

Key highlights

**

ï* CSM order book stood at USD307mn as on June 30, 2013.

CSM order book stood at USD307mn as on June 30, 2013.

ï* PI is expected to launch two products in the domestic agri business in FY14.

PI is expected to launch two products in the domestic agri business in FY14.

ï* Jambusar plant expected sales at INR1.0-1.5bn in FY14/FY15E (FY13: INR0.2bn).

Jambusar plant expected sales at INR1.0-1.5bn in FY14/FY15E (FY13: INR0.2bn).**

Outlook and valuations: Positive; maintain âBUYâ

**

We are positive on PIâs long-term outlook due to strong visibility in CSM order book and a robust pipeline of in-licensed products. We are revising up our FY14 and FY15 EPS estimates by ~7% each to factor in higher growth for domestic as well as CSM.

Maintain **âBUYâ **with a target price of INR170 (earlier INR160) based on 12x FY15E EPS (factoring in discount to Rallis India, which we are valuing at 18x FY15E EPS (trading at 13x FY15E EPS).

[Mahesh]

Nirmal Bang Q1FY14 Result Update :

Stellar Performance PI Industries has posted exceptionally good results with 70% yoy growth in sales. On back of good monsoon, agri business has performed well by registering a 38% yoy growth at Rs 197 cr. EBITDA margins have improved by ~690 bps but posted a decline of ~120 bps yoy at 19.4%. Management cited the product mix and rupee depreciation in agri business as the reason for the decline in margins. The company has repaid part of debt with the money raised though QIP in last quarter which has helped it in saving the interest cost which has reduced by ~30% yoy. Key Highlights ï CSM: Companyâs Custom Synthesis Business has grown by 118% to Rs 208 cr. The management expects the same run rate of Rs 200 cr to continue in coming quarters as well. Management expects the segment to report growth of 30% in FY14. The company expects to launch 2-3 more products under the segment in FY14. Current Order book of CSM stands at $307 mn v/s $305 mn at the end of Q4FY13 despite recording healthy sales during the quarter. CSM: Companyâs Custom Synthesis Business has grown by 118% to Rs 208 cr. The management expects the same run rate of Rs 200 cr to continue in coming quarters as well. Management expects the segment to report growth of 30% in FY14. The company expects to launch 2-3 more products under the segment in FY14. Current Order book of CSM stands at $307 mn v/s $305 mn at the end of Q4FY13 despite recording healthy sales during the quarter. ï Agri: Owing to good monsoon season this year, PI industriesâ Agri segment has reported healthy sales growth. The performance is attributed to mainly to volume growth. The company expects to launch 1-2 products in Rabi season this year and expects a good traction in the season. Though the company has started witnessing competition in its exclusive product â Nominee Gold, the management is confident of able to replace and compensate the sales from other products. Agri: Owing to good monsoon season this year, PI industriesâ Agri segment has reported healthy sales growth. The performance is attributed to mainly to volume growth. The company expects to launch 1-2 products in Rabi season this year and expects a good traction in the season. Though the company has started witnessing competition in its exclusive product â Nominee Gold, the management is confident of able to replace and compensate the sales from other products. ï Full FY14 and FY15, the company expects to spend Rs 100 cr on capex. Overall the company is expected to grow at 20-25% with 125-150 bps improvement in margins. Full FY14 and FY15, the company expects to spend Rs 100 cr on capex. Overall the company is expected to grow at 20-25% with 125-150 bps improvement in margins. Valuation & Recommendation We believe that with macro factors like low per-capita pesticides consumption in the country, increasing MSPs and increasing acceptance for the need of crop protection products, make PI Industries a good long term bet while healthy order book of CSM, strong balance sheet and new product launches in Agri Input segment will drive near to medium term growth. At CMP, the stock trades at 13.3.x FY14E and 9.5x FY15E. We maintain our BUY rating on the stock with price target of Rs 172 (12x on FY15E EPS)

[Mahesh]

Hi Anil,

Please find my replies in bold below :

has the company delivered (walk the talk) as per guidance given before? may be what they said 2-3-4 years before? can we count on this revenue CAGR guidance?

Yes…management of PI is exceptional and has so far delivered more than they have promised…although 25 % CAGR over next 3 years seems ahievable, but, it also depends on monsoons…hence, rather than putting numbers, I will say one can expect consistent above industry average growth from PI over next many years as Jambusar facility alone will make this happen…

Also, can PI be considered a good story to play around India’s agri/agro chemicals space? reading the annual report, it gives me an idea that the penetration level of such products in India is very low and there is huge scope. PI is in this industry for the last 50 years and has good recognition/acceptance among farmers (which I feel is a great thing).

My analysis makes me believe that PI is one of the best exposures to consider on Indian Agri-Input space…this is because, so far, co. has delivered entire growth organically, and, in case, some inorganic moves happen, which are long overdue, the company can outperform all peers as well as industry quite handsomely overy next many years…this ability itself will make the company command much higher valuations on the bourses…

Rgds.

[anil]

Thanks for the response Hitesh & Mahesh. Few more questions -

As Mahesh rightly said, a (lot) depends on monsoons as well for PI to perform. This year I believe we have had best ever monsoons in past 8-10 years (may be even longer time period).

So considering, we dont have such a year again. What can we expect? Pardon me if my question is silly, but I want to think of a bear/lower than expected monsoon scenario and gauge the potential then. Regarding PI commanding higher multiples, I really want (and think it will eventually) it to command high multiple but as Mahesh said, Monsoon also plays its part. In such business the PE commanded by co’s is not high. Market rewards consistency.

Thanks

[Mahesh]

Hi Anil,

As CSM contribution rises to company’s overall revenues, its growth delivery dependency on monsoons will reduce proportionately…there is no reason why in such a scenario, it should not command higher valuations on the bourses…however, the valuation revision will be in spikes…when both the businesses meet with favourable scenario in a particular year, it will rerate and start trading at such valuations which could otherwise optically look rich…post that there will be consolidation for some years and then again a spike…

FY14 is such year which has all the ingredients for this company to rerate significantly and I strongly believe that the rerating should start post declartion of Q2 numbers in case results come reasonable as also market sentiment is reasonable…till then i think the co. should settle around 170 and if all goes well FY14 could see the company’s share closing much above double century…

having said this I must say that market sentiments are pathetic at present and if this situation persists for long the confidence level of investors should be at decades low…also, I am invested into Pi so my views have to be taken in that regard.

Rgds.

[anil]

Thank you Mahesh for your replies, really appreciate your knowledge and dedication.

Regarding what you said in your last para- these are times I feel investors should be bold and invest in good companies where there is very good visibility of growth. (I find PI as one such company) if the market sentiments were not so bearish, PI would have been most probably above 150 by now…so in a way its good for us…to accumulate the stock slowly

[Donald]

Adding back from my comments in the ValuePickr Scorecard thread. (Sorry I don't participate much in PI thread as PI has been a deep conviction, like to stay away from Noise, and more importantly my energies are required elsewhere:). here just Mahesh is enough).

PI Industries - CSM:Agri Inputs has turned decisively in favour of CSM with a likely 55:45 share for the current year. This is happening in a year where Agri-inputs had a bumper 1Q and more is expected in the Rabi crop season, due to very good monsoon. Which means in weaker Agri-Inputs years CSM (growing easily at 30% a year) will start playing the stabilising hand (which was missing so far). Management has walked the talk on most fronts. Company appears under-valued at current levels.

Discl: Post 2011, when I first got in bulk, thanks to Mahesh's excellent pointers and a Management Q&A establishing PI's superior business planks, I have been holding patiently waiting for CSM to overtake Agri-Inputs decisively for more than 2 years. I have again started adding significantly post 1Q results. My views are likely to be biased.

Management Q&A in Sep 2013.

Some data points from my side. Mahesh are your calculations very different for FY14?

2012 2013 2014 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Agri-Inputs 145 152 101 105 503 57% 143 194 110 105 552 48% 196 200 150 150 690 46% CSM 62 92 88 131 373 43% 95 105 172 225 597 52% 208 806 54% 207 244 189 236 876 238 299 282 330 1149 404 1496

[hitesh2710]

Thanks donald for the updates…

Putting in some earnings estimates from 3 brokerage reports I have seen post q1 fy 14…

Brokerage house fy 14 sales fy 14 NP fy 14 eps fy 15 sales fy 15 NP fy 15 eps

edelweiss 1473 142.6 10.5 1775 192 14

quant 1462 142.7 10.5 1766 189 13.9

hdfc sec 1471 134 9.9 1851 176 13

There seems to be almost consensus about there being eps estimates around 10 for fy 14 and 13-14 for fy 15.

I agree with donald about the stock again being undervalued… Historically it commands valuations of 15 plus due to its business model and at cmp of around 130 odd looks attractive. Plus as donald mentioned previously, with CSM business gaining upper hand, it lends more stability to the business going forward. In fact during fy 15 with a fully operational Jambusar SEZ for full year, there can be improvement in margins as well.

[sharemarketgen_]

Also,the interest cost has come down sharply.Maheshji said that management plans to bring down the debt substantially(to 100 cr. if I remember correctly) More free cash can certainly lead to re-rating from 15-16X.The estimates too,seem conservative so there is a good chance of positive surprise(s).

Strange to see the stock still languishing around Rs.130.Certainly an opportunity.

[Mahesh]

Hi Donald,

My expectations for FY14 post Q1FY14 results were detailed in key takeaways post concall and are summarised again below :

	FY14e
Revenue Agri-Inputs CSM	1460 630 830
EBITDA	251
PAT	138
EPS	10.13

Whereas I have revised my CSM segment estimates for FY14 upwards ; have preferred to wait for Q2FY14 numbers before revising Agri-Input segment numbers as it has many influencing variables.....However, in your estimates you have factored in a 300 cr. revenue from Rabi season i.e. 2HFY14 for PI's agri-input segment which seems highly impossible as traditionally Rabi has been a weaker season for PI as also this time two products will be launched during this season....

Quarterly gyrations aside, PI can surely reach 690 cr. Agri-Input revenues mark this fiscal as monsoons have been very good......Key monitorable for FY14 performance of PI's agri-input segment will be Q2FY14 as it will have Osheen sales also kicking in.....Company has gone very aggressive on ground and after initial bundling of osheen with nominee for combined sales push, it has launched many ground activation camps for this product even in remote districts thats what my ground sources indicate.....results of all these efforts will be visible in Q2FY14 and more in FY15 as new innovative products like osheen take atleast two years to gather sales momentum and real growth will start to happen only in FY15....

What I am waiting for is some major order-win which could initialise second phase of Jambusar facility or some inorganic moves which are long overdue....it is either of this which is going to rerate the stock significantly upwards.....To capitalise on the tax holiday for Jambusar, company can't wait for long and so is likely to initiate work on second phase soon, probably before FY14-end....

What I liked most about PI post Q1 numbers is the likely robust free cash flow generation, which if managed well, could translate into robust net profitability going forward...this is because interest costs will gradually reduce (as management's intent is to gradullay reduce debt) and tax concessions of Jambusar will gradually reduce effective tax rate which will significantly improve PAT margins....combined with this there is possibility of company commanding much higher valuation multiples on the bourses than historical ones and that is where real opportunity of PI is there which is so far ignored (I am surprised !!) by the markets.....

I am invested into PI so my views have to be taken in that regard.

Feel free to get back to me in case of any further query.

Rgds.

[Donald]

>>To capitalise on the tax holiday for Jambusar, company can’t wait for long

This is a key insight from you Mahesh, Thanks. Will be good to quiz management whether they feel the same way about fast-tracking Jambusar to take advantage of tax holidays as best/fast as they can

>>you have factored in a 300 cr. revenue from Rabi season for PI’s agri-input segment which seems highly impossible as traditionally Rabi has been a weaker season for PI

Thanks, will be checking my calculations again and may need to adjust slightly between Q2 and rest. I think **Rabi **season is far inferior to Kharif season for PI - only if monsoon aren’t that good or delayed. In 2011 when (like this year) Monsoon was really good - Rabi results were lower by only 30% than Kharif.

>>Key monitorable for FY14 performance of PI’s agri-input segment will be Q2FY14 as it will have Osheen sales also kicking in

Agree Q2FY14 is something to watch out for. However don’t think it will be as bumper a Qtr as evidenced last year. My reasons as below.

>>Q1 contribution mostly led by Herbicide. Q2 contribution mostly led by Insecticide

This is not your quote - but I remember from some concall I think. So yes Osheen will contribute for Q2. I don’t have very high hopes of a significantly higher Q2 than Q1 for PI this year - as all the sowing is completed this year (implies Herbicide use is mostly over). All depends on the traction from Osheen this year. Last year Q2 was much better than Q1 more becasue of delayed monsoon and delayed sowing (more use of Herbicide later).

Kindly comment.

>> Upcoming PI Management Q&A

We are meeting PI in first week Sep. So will look forward to collate more incisive questions this time - on product specifics, changing product mix with CSM dominating, commercial scale molecule build-ups, strategic focus and ramp-up plans - to focus on the big picture. Look forward to help from your side as always.

>>it is either of this which is going to re-rate the stock significantly upwards

Frankly I find this rather extreme focus on “re-rating” by you and many others(almost every other post has to contain this much abused word “re-rating”), disconcerting! Much rather prefer to focus on business performance - sustained 30%+ for 2-3 years usually is good enough. PI would have been in a different orbit - had it not been for the monsoon-dependent Agri-Inputs section causing unpredictability in business performance.

When CSM starts consistently contributing say 65:35 (from say this years 55:45), PI will be a different company and richer valuations will automatically follow. Till then lets focus on basics:)

[Mahesh]

>>Q1 contribution mostly led by Herbicide. Q2 contribution mostly led by Insecticide

Yes donald…last year because of delayed monsoons, herbecides sales got uoto Q2…thts why this time Q2 will be important as its on a higher base and in Q1 concall management has said there will be positive growth on that higher base YoY in Q2…Its not only Osheen, but overall sales of other brands of PI will also be good this year as last year the overall sales of insecticides & fungicides were severly impacted…Even I don’t expect a bumper Q2 in agri-input space from PI and thats why waited for the numbers to check whether management guided 25 % growth (690 cr.) could be actually achievd or not in FY14…

will get back with questions, if any, for the management, by next week, so that if you find them proper you can include them in Q&A…BTW. did last year’s Q&A actually happened ?? Unable to find the link to the Q&A of July’2012…if it has please provide the link it will be useful…

Rgds.

[Donald]

Thanks Mahesh. Look forward to your set of questions for this Q&A.

Last year Q&A did happen but delayed…and among some 7-8 companies in an extended trip that included gujarat and delhi based companies i think…there wasnt much action likely in PI…unlike this year:) a…and i was just plain lazy to capture back some 6-7 pages of back to back notes written all over

its my fault…but i allocate my b/w based on urgency …and astral, atul auto, grp, poly medicure, oriental carbon deserved more attention that time./…and PI Q&A never got captured…sorry:(. The handwritten notes flow is such that I cant even delegate this to anyone…a scanned copy will be mostly useless to others …as they are alll -over notes made while talkinmg and discussing intensely. What I can do is if you have any big questions from the list …where u are still looking for answers…we can do a call.

Better still we are in MUmbai 22-24 Aug, so we can meet up. I can refer to those notes and answer pointed questions if any from your side.

[nazeemarg]

Hi Friends

Surprised to know that no one is talking about the potential of R&D activities going on at PI Sony Research Centre!! It may hold huge potential to surprise on the positive side!!! Nothing as of now is available in public domain about this facility. Isnât it an important point to question management?

Am based in Udaipur and planning to attain AGM on 29th (unless something more important pops up). Thisâd be my first AGM, had learned important of attending AGMs here at ValuePikr. Donât know how to question mgmt. anyone form here planning to visit can call me at 9829165915

[dkirand]

Before I start, I’d like to say that I had invested in PI in 2011 but got out at a no-profit-no-loss trade. Re-researched and re-studied the entire story again this week. I currently have no positions. Having said that,

I am unsure where we are getting the notion of ‘Management has walked the talk so far’. On the contrary, I have always seen a messup between the walk and the talk. Points of evidence below -

a) In Dec 30, 2011, MD Mayank Singhal indicated that they would cross 1000 cr turnover and > 130 cr PAT by FY13. Didn’t materialize.

b) In Q2 FY12 concall, the management guided for a robust growth in CSM in that year. Funnily enough, there was hardly any growth in Q3FY13, the immediate next quarter.

c) The well known fact of the Jambusar plant getting delayed multiple times, inspite of management promises in multiple concalls.

d) Management had scaled down (I don’t remember the exact quarter-year here) revenue guidance for the year in one quarter, while they had guided for much higher growth in the immediate preceding quarter.

e) There was de-growth in CSM in Q1 FY13, inspite of the management assuring us that the business model of CSM is recurring and there is very little chance of no growth scenario.

f) Management continuing to guide on increase in in-licensed molecule increase vis-a-vis generics (in their agri business), but except for Nominee Gold, nothing much has fructified to that extent (the extent of ‘Osheen’ impact will be seen in Q2 last year (which was not seen) and now the hope is this year it will be seen).

g) Management complaining about heavy rain, intermittent rain, cloudy skies etc. as if that is a new phenomenon in the Indian market.

Don’t mis-read me. I am not saying PI is not a good business. And running a business obviously has its ups and downs and everything cannot be predicted to perfection. With CSM gaining increasing share in PI’s revenue numbers, it would definitely bring about some kind of stability than the monsoon-dependent agri business.

All I am saying is, management has not walked the talk on multiple occasions and there is no reason why we should believe when they say 1500 cr revenue and 10-10.5 net margins (and take it as gospel). In fact, I would argue that PI in all its years has hardly had 7-9% net margins. Just because CSM’s share is increasing (and it is increasing only marginally compared to FY13) and some tax benefits, should I take 10-10.5 as net margins?

A more realistic estimate is a 200 cr *4 CSM revenue + 600 cr agri revenue (given good monsoon) = 1400 cr and net margins of about 9% (max), which would give us a PAT of 126 cr. Predicting any upside beyond 130 cr would be an optimistic exercise, instead of conservative in my opinion. 130 cr would be about Rs.9.5/- EPS and * 15 PE = Rs.142.5/- for FY14 (we are almost priced around that level right now). All the Sony-PI upside and Phase II of Jambusar upside are positive black swans and should not be considered right now in my opinion. (For all you know, the Phase 2 Jambusar might start 1 year late given the mgmt’s track record). ‘Visibility with Flexibility’ is a statement I would discount heavily. That is typical management gobbledygood that I have seen too much in the consulting industry.

All said and done, this might be a great story in the making and may very well create long term wealth. Just that we need to temper whatever the management says (like Q2 FY12 ‘we are expecting robust growth - followed up with our costs included marketing which went up more than expected’).

Long rant done Now, just one question for Donald/Mahesh:

Is there any way we can corroborate whatever the management says on the CSM order book? The reason I ask is, in almost every super valuepickr story, we have confirmed whatever the management said with dealers/distributors/customers etc. Even with something like Accelya Kale, investors have sought out employees, new deals on the BSE announcements etc. So, in this story, due to the confidential nature of stuff, are we handicapped by whatever the management says on the CSM order book and delivery?

[basumallick]

I have had PI Ind for a while now, and I would agree with Kiran. Management tends to be “over optimistic” in its projections, so it is better to take their views and guidances with a huge tablespoon full of salt

On the other hand, the company seems to be in a sweet spot in terms of business opportunity, so we will have to watch and wait.

[Mahesh]

Hi Kiran & Abhishek,

Whether its PI’s management or any other company’s management, we always need totake their projections with a pich of salt.

However, I contradict the statement that management has not walked the talk…This I am saying based on the experience I have had with the company since 2009 – the time since when I am tracking this company… there may be some isolated events which could make one belive non attainance of projections in specific but overall, the direction which the company has provided, it has always been able to live upto the expectations.

Agri-input is majorly dependent on monsoons and ocuurence of pest incidence while CSm segment is prone to quarterly fluctuations based on the time of delivery of assignments…however, what we need to see is whether the company has underperformed its peers – a clear NO – it has either performed in line with peers or has outperformed them…

Rgdg. your specific query Kiran, weneed to rely on company data as far as CSM is concerned as these are most confidential assignments…However, what we can do is check the profile of key personnel, directors and others associated with the company to check their reliability ----Mr. Sohoni, Mr. Divekar and other Ind. directors association with this company is exceptional vindication of strength of PI in CSm segment.

For agri-input segment, I always do checks with my trusted ground sources to check whether what management is saying for particular products is happening on ground or not…For ex., for osheen, management is pushing hard by first bundling it with nominee and now educating farmers of their use by going into their lands in Punjab and other places.

Rgds.

[Mahesh]

Posting below the queries for PI Management from my side – whichever Donald you and your team finds proper can include in your questionnaire :

Jambusar :

(1) Roadmap for subsequent phases to capitalise on the 10 year tax concession window available.

(2) ~Time Required for commercialisation of subsequent phases ; as, common infrastructure (which takes maximum time) is already inplace. So, can subsequent phases be implemented within 6-8 months as opposed to 2-2.5 years it took for start of first phase.

(3) Till May’2013, there was only PI Industries unit which was operational in the said Sterling SEZ (ref. News report in TOI) ; the SEZ itself is involved in many controversies in addtion to protests it faces from nearby villagers ; So, in the event of any disruptions, what derisking measures are inplace, as Jambusar is projected to be the next key growth driver for PI.

(4) ~Annual Revenue first phase can generate at peak utilisation ; before, it was stated to be 220-250 cr. but in Q1FY14 concall (hope , I have heard correctly), at 90 % utilisation, the facility was projected to generate only 120 cr. of annual revenue (this was surprise to me as normally, asset turnover in this business is minimum 1.8-2 times) ; so, is it that the facility demands more time for stabilisation, post which the projected 220-250 cr. annual revenue can be attained or is it otherwise.

[ Even in company’s internal magazine, Jambusar facility with all the five phases operational, was said to house five times the existing CSM capacity which takes us to annual revenue from Jambusar facility with all the phases operational at minimum 1300-1500 cr. ]

CSM :

(5) How many products are under commercial scale production right now. What was the scenario year before.

(6) Profile of products under commercial scale â do they comprise of 100 % agri-segment or some other segments have made inroads.

(7) Out of the products which are at R&D scale, are they majorly from agri-segment or pharma and other segment for which company was trying hard since many years have also made inroads. This is particularly important for us because, patented pharma assignments come at much higher margins (minium 27-29 %) than patented agri assigments (which come at 19-22 % margins)

(8) Historical overview of Profile of top 5-10 clients in CSM space (commercial scale level â not R&D). Have they remained more or less the same or have we seen change in that. This is important point for us because if its the same clients which are giving the company the scale it has reached today then its healthy but if we have seen new clients getting added gradually at commercial scale then its even healthier. Also, we can pinch here the question (if one finds it proper) asto whether the company has lost any of its top 5 customer in CSM space since last 5 years.

(9) Sony-PI venture â we are almost 2.5 years into formation of this R&D venture ; so by when can we see the results and is the opportunity large enough which can merit allocating of dedicated facility for the produce of the venture.

Strategic :

(10) Goal on Debt â For the first time in FY14 we will see the company’s gross debt position almost halve in one particular fiscal (ref. - post Q1FY14 interview by Mr. Sarna to ETNOW). So, can we take it as the direction of management’s intention of reducing debt and make it a debt-free company within few years â or â are we going to see fluctuating debt position with 100 cr. gross debt as the bare minimum. This is particularly important for us because debt-free companies (like Divis) are valued much higher by the markets.

(11) Focus on Seeds segment â this segment is touted to be the fastest growing segment of Indian agriculture. Company had intended to focus on this and even make acquisitions in this segment before but no progess has been made so far. With Rallis and other key agri-input players are carving out a strong presence in this segment, what are the management’s plan for this.

(12) Inorganic Moves â its long pending and with now free cash flow generation as also strong balance sheet, are we near to such inorganic moves.