Sharda Cropchem Limited Q3 FY25 Earnings Call Summary

Summary

Sharda Cropchem Limited - Q3 FY 2025-26 Earnings Call Summary Friday, January 30, 2026, 1:00 P.M. IST

Event Participants

Executives 3 Jetkin Gudhka, R.V. Bubna, Shailesh Mehendale

Analysts 11 Ankur Kumar, Ansh Shah, Anubhav Mukherjee, Deepak Poddar, Dhruv Muchhal, Giriraj Daga, Hitaindra Pradhan, Nilabja Dey, Pratik Patel, Rushil Selarka, Sachin Kasera, Sonal Minhas, Vignesh Iyer, Vivek Rathi

Financials & KPIs

Geographic & Segment Commentary

• Europe: Revenue growth was exceptional, with gross margins reaching 43%. Management attributed performance to favorable climatic conditions, strong demand, and deeper penetration through new dealer networks.
• NAFTA: The region saw a year-on-year decline in Agrochemicals, primarily due to unusual and unpredictable weather conditions. Management noted that potential tariffs do not impact this segment as costs are passed to customers who lack alternative registered sources.
• Latin America (LATAM): Emerging as a major contributor with 29.2% gross margins. The region continues to see volume growth as inventory levels across distribution channels normalize.

Company-Specific & Strategic Commentary

• Registration Pipeline: Total registrations reached 3,004 with 1,076 applications pending. Europe remains the primary focus with 698 pending applications, representing the company’s largest intangible asset.
• Asset-Light Sourcing Strategy: Management reiterated reliance on Chinese manufacturing plants (3-4 per product) to maintain flexibility. Registration is plant-specific, making the sourcing relationship structural rather than discretionary.
• Pricing Recovery: Global prices are gradually recovering from post-COVID lows as excess channel inventory has dried up. Sourcing costs from China remain stable to slightly increasing, allowing for margin expansion.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Geographic Performance

• Question: What is driving the significant growth in Europe? (Anubhav Mukherjee)
• Answer: Growth is a mix of favorable climate, strong demand, timely delivery, and expansion into new geographies and dealer networks (R.V. Bubna).

Financial Guidance

• Question: Is the 18% to 20% EBITDA margin sustainable for FY27? (Nilabja Dey)
• Answer: Yes, we are confident in maintaining this range into the next fiscal year (R.V. Bubna).

Working Capital

• Question: What led to the sharp reduction in working capital days to 70? (Sonal Minhas)
• Answer: Increased supplier confidence leading to extended credits and high payment discipline in the European region (R.V. Bubna).

Sourcing & Tariffs

• Question: Will potential tariffs in NAFTA affect the business? (Anubhav Mukherjee)
• Answer: No, agrochemicals require specific registrations. Customers must buy from registered sources and gracefully accept passed-on tariff costs (R.V. Bubna).

Capital Allocation

• Question: With high cash levels, are you looking at acquisitions? (Sachin Kasera)
• Answer: We are not looking at acquisitions; instead, we are focusing on increasing dividend payouts, as seen with the ₹6 interim dividend (R.V. Bubna).

Key Takeaway

Sharda Cropchem delivered a robust Q3 FY26, characterized by 39% revenue growth and a 366% surge in PAT, reaching its highest-ever annual profit in just nine months. Performance was underpinned by strong volume growth of 14.4% and significant margin expansion in Europe, where gross margins hit 43%. Strategic focus remains on the asset-light model of securing intangible assets through a pipeline of 1,076 pending global registrations. Management raised EBITDA margin guidance to 18-20% for the full year and remains confident in achieving 15-20% revenue growth in FY27. While NAFTA saw seasonal weather-related softness, the normalization of global inventories and stabilization of sourcing costs from China position the company for a strong Q4. The company maintains a net debt-free balance sheet with ₹826 crores in cash, signaling a shift toward higher shareholder rewards over inorganic expansion.