SUMITOMO CHEMICAL INDIA LIMITED — Call Transcript 2021

Jun 6, 2021

Corporate Office: 13/14. Aradana ICC, Near Virvveni Industrial Estate. Goregaon Mumbai - 400 063_ +91-22-4152 2200 / Fax +91-22-4252 2380 um. htto./Norvw sumichervindo co in

SCIL/SEC/2021 6th June, 2021

To, BSE Limited, Listing Department, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai-400001

The National Stock Exchange of India Listing Department, Exchange Plaza, Bandra Kurla Complex Bandra East, Mumbai - 400 051

Sub: Written Transcript of Earnings Call held on 1st June, 2021

Dear Sirs,

This has reference to our letter dated 29th May, 2021, intimating about the earnings call on 1st June, 2021 with Investors / Analysts to discuss financial performance of the Company for the quarter and year ended 31st March, 2021, and weblink for the audiorecording of the call submitted to you on 1st June, 2021.

Please find enclosed herewith written transcript of the aforesaid earnings call.

The said transcript will also be available on the Company's website: www.sumichem.co.in.

Kindly take the same on record.

Thanking you,

Yours faithfully, For Sumitomo Chemical India Limited

Pravin D. Desai Vice President and Company Secretary

Encl: a/a

"Sumitomo Chemical India Limited Q4 and FY '21 Earnings Conference Call"

June 1, 2021

Disclaimer:

This document is subject to errors and may or may not contain words which have been included / omitted due to human error while transcribing the conference call. Any and all information should be verified with the company by the reader.

MANAGEMENT: MR. CHETAN SHAH – MANAGING DIRECTOR, SUMITOMO CHEMICAL INDIA LIMITED MR. SUSHIL MARFATIA – EXECUTIVE DIRECTOR, SUMITOMO CHEMICAL INDIA LIMITED MR. MASANORI UZAWA – NON-EXECUTIVE DIRECTOR, SUMITOMO CHEMICAL INDIA LIMITED MR. KUNAL MITTAL – SENIOR VP (PLANNING & COORDINATION OFFICE), SUMITOMO CHEMICAL INDIA LIMITED MR. PRAVIN D. DESAI – COMPANY SECRETARY AND COMPLIANCE OFFICER, SUMITOMO CHEMICAL INDIA LIMITED MR. ANIL NAWAL – CHIEF FINANCIAL OFFICER, SUMITOMO CHEMICAL INDIA LIMITED DR. SURESH RAMACHANDRAN – CHIEF COMMERCIAL OFFICER, SUMITOMO CHEMICAL INDIA LIMITED

Moderator: Ladies and Gentlemen, Good Day and Welcome to Sumitomo Chemical India Limited Q4 and FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict.

As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing '*' and then '0' on your touchtone phone. Please note that this conference is being recorded.

From the Management, today we have on the call Mr. Chetan Shah – Managing Director; Mr. Sushil Marfatia, Executive Director; Mr. Masanori Uzawa – Non-Executive Director; Mr. Kunal Mittal – Senior VP (Planning & Coordination office); Mr. Pravin D. Desai – Company Secretary and Compliance Officer; Mr. Anil Nawal – Chief Financial Officer; and Dr. Suresh Ramachandran – Chief Commercial Officer; and colleagues from SGA, their Investor Relations Advisors. I now hand the conference over to Mr. Chetan Shah. Thank you and over to you, Mr. Shah.

Chetan Shah: Thank you, Ladies and Gentlemen, a very Good Afternoon to all of you. I hope you and your family members are staying healthy and safe in this unprecedented challenging times.

First of all, let me acknowledge the efforts of our people in midst of COVID-19 pandemic to put their best foot forward, the production team, the sales team, the procurement, IT, finance, each one of them to overcome all the challenges and for achieving a great performance for FY20-21. I sincerely thank each one of them from the bottom of my heart. In addition to all the members who had attended the last investor call in November 2020, we have a new member joining the call today from our side, Dr. Suresh Ramachandran, who has recently joined the company as Chief Commercial Officer leading various sales and marketing functions, and we look forward to a great performance by him, to have a new look at the marketing and to achieve what we have set ourselves out to achieve, so Welcome Suresh and looking forward to a great relationship.

Let me now give you a brief overview on the agri inputs industry in general:

The agrochemical market in India is being driven by rising demand for higher quantity and more importantly better quality of food and is expected to continue growing with the growth in the economy. However, the average per hectare consumption of agrochemicals in India is, as I have said this before as well, is about one-tenth of the USA and UK, further lower as compared to Japan and China. As per various estimates, adequate and proper use of agrochemicals can result in significant yield increase across major crops. Government and especially Honorable Prime Minister's thrust on increasing farmer's income is a very vital part of increasing spend on the inputs, including crop protection products. Shifting food

consumption patterns and focus towards PGR's, bio-pesticides, biological control agents, and bio-stimulants have resulted in higher than industry growth rate for this category in recent years and is expected to drive the future growth. Agrochemical industries capacity utilization also has seen improved performance on the back of greater domestic demand and growing export opportunities.

Let me now focus on current trends:

We started the Financial Year 2020-21 with lower inventories level and there were severe supply side disruptions in the months of April, May, and June of 2020. This resulted in disruptions in production, supply chain, and logistics. However, the demand for market was strong due to favorable weather conditions and higher agricultural activities across the country. Overall impact of COVID-19 pandemic on Company's operations was minimal on the full year basis in Financial Year '20-21. The second wave of COVID-19 in India has witnessed wider spread to rural and semi-rural areas and has impacted sales in current quarter, but fortunately not materially so far, as far as we are concerned. Weather conditions and demand factor appears to be favorable so far. We have built a much higher level of inventories in March 2021 as compared to March 2020 to handle any disruptions and remain cautiously optimistic for the upcoming monsoon season.

I would like to highlight that our business is seasonal in nature and we should be comparing the results accordingly. For example, the first quarter cannot be compared with the fourth quarter, the second quarter cannot be compared with the first quarter, and the third quarter cannot be compared with the second quarter and more so fourth quarter cannot be compared with the third quarter. The real comparison is from the current quarter to previous year quarter because it gives the same seasonal variations comparison. So I request everyone to take a note of this. This is my personal opinion and we should look at our sector as a quarter-to-quarter comparison of each year on a yoy basis

Thank you so much, I now request Mr. Anil Nawal – our CFO, to please take you through our consolidated financial performance.

Anil Nawal: Good Afternoon, Consolidated Q4 Financials.. We recorded a 20% year-on-year growth in our total revenue from Rs. 447 crore in Q4 FY '19-20 to Rs. 534 crore in Q4 FY '20-21. EBITDA came in at Rs. 71 crore in Q4 FY '20-21 which is up by 72% as compared to Rs. 41 crore in the same quarter last year. EBITDA margin in the current quarter widened by 407 basis points to 13.4% from 9.3% in Q4 FY '19-20. Profit after tax witnessed a growth of 136% at Rs. 54 crore in Q4 FY '20-21 as against 23 crore in the same quarter last year. PAT margin stood at 10.1% up by 500 basis points vis-à-vis 5.1% in Q4 FY '19-20.

Now, let us talk of consolidated performance for full year FY '20-21. Revenue from operations in FY '20-21 stood at Rs. 2,645 crore - up by 9% as compared to Rs. 2,425 crore in FY '19-20. EBITDA witnessed a growth of 46% from Rs. 333 crore in FY '19-20 to Rs. 487 crore in FY '20-21. Our EBITDA margin expanded by 467 basis points to 18.4% in FY '20-21 from 13.7%

in FY '19-20. PAT for Financial Year '20-21 witnessed a jump of 69% to Rs. 345 crore as against Rs. 205 crore in FY '19-20. Now, I request our Executive Director, Mr. Sushil Marfatia, to provide analysis of our performance.

Sushil Marfatia: Good Afternoon everyone. As mentioned by Shah san, due to favorable weather conditions, we witnessed an increase in volume demand across our all products portfolio, with improved price realization for some of the products.

If we look at segment wise breakup of our total revenues in Financial Year '20-21, insecticides product contributed 45%, herbicide product contributed 19%, PGR and fungicides contributed 11% each. Animal nutrition and environmental health division segment contributed about 7% of the revenue. Herbicides and PGR segments which are high growth and margin contributing segments witnessed higher growth as compared to other segments.

In Financial Year '20-21, we launched seven new products. We have similar robust pipeline of products to be launched during this year. Our team used digital marketing as a parallel and very effective support to traditional marketing system especially for new product launches.

Among export markets, growth in Latin America market was extraordinary due to sales to our affiliates in Latin America market and increased contribution from 2% share in the total revenue for Financial Year '19-20 to 4% share in total revenue in Financial Year '20-21.

Improvement in margin is due to multiple factors such as better price realizations in some of the products, better product and segment mix like higher growth in specialty product segment, improved operational efficiencies, cost optimization and merger synergies resulted in higher margins.

Working capital position: We have improved collection to Rs. 3,139 crores in '20-21 as compared to Rs. 2,776 crores in the same period last year. Overall receivables level in March 2021 was lower by about 11 days as compared to March 2020. The increase in inventory days was partly offset by the higher payable days. So we achieved overall decrease in the working capital cycle to 103 days in Financial Year '20-21 from 115 days in Financial Year '19-20. We have a cash and cash equivalent of Rs. 532 crore as on March 31, 2021.

Now, I would request Mr. Kunal Mittal, our Senior Vice President, Planning and Coordination office, to give you more information on our CAPEX plans for coming years. Over to Kunal.

Kunal Mittal: Thank you Mr. Marfatia. Good afternoon everyone. As you can see in our investor presentation which is publicly available now, we have a very well diversified platform for growth across various segments and we are working on multiple strategies for future growth and margin improvements. This has been a continuous process for us in the past and we plan to carry forward that particular process. Today, we would also like to give you an overview of our CAPEX plans and the CAPEX cycle we plan to enter into for next few years. Historically, if we look at the past trends, we have been spending annual CAPEX budget of about 70 to 75

Sumitomo Chemical India Limited June 1, 2021

crore Indian Rupees towards various regular requirements. In addition to the regular CAPEX requirements, we plan to manufacture in India few of the products for our parent company, SCC, and our global affiliates. We have shortlisted and approved five proprietary products from SCC to be made in India in next two years. These five projects will require a CAPEX of about 100 to 110 crore Indian Rupees over next two years and as I said, we are targeting to commercialize these products within next two years. These projects will be set up at our existing facilities and the estimated margins and the financial returns of these products are in line with our current trend. As some of these products are growing globally, we have potential to further enhance capacities for some of these products in medium-to-long term once the initially approved CAPEX cycle is completed in next two to three years. In addition to these, we are also evaluating and discussing several additional molecules and products to be manufactured in India for our parent company, SCC, and our global affiliates, which also includes some of our affiliates in very high growth potential geography such as Latin America. Once any of these projects are shortlisted, these projects will require additional CAPEX from our side.

In addition to these Make in India projects for our global affiliates, our India R&D team is also working on manufacturing several additional off-patent products which will have demand both in Indian domestic market as well as from the exports market including some of the very high growth regions such as Latin America, African market, and Asia-Pacific wherein we have a very robust distribution network. Once shortlisted any of these off patent additional products, these products will also require additional CAPEX from our side to commercialize.

For future expansion, as you all know, land is a very important factor and we have recently signed and registered agreements to buy two additional land parcels. The first is a 20+ acre privately owned land parcel adjoining to our existing Bhavnagar site and the second is a 50+ acre privately owned land parcel at a very prime location at Dahej Industrial Estate within PCPIR zone, which is a specific zone for petroleum, chemicals, and petrochemicals investment companies.

As part of our company's digital transformation journey, we have also implemented advanced, fully-integrated SAP system - SAP SH4 HANA across the entity. This will enable greater integration, efficiencies, and synergies across the organization and is expected to provide longterm benefits to our Company. The system would also enable advanced data analytics, integrated business planning, timely system driven interfaces to our distribution chain in near future. With this, I would like to take a pause and I will request and invite Dr. Suresh Ramachandran, Chief Commercial Officer, to share his thoughts.

Suresh Ramachandran: Thank you Kunal, thanks everybody. Good afternoon everyone and thanks for joining the call today. As introduced by our Managing Director at the beginning of the call, I have recently joined Sumitomo Chemical team. I come from the same industry with an experience of more than 20 years in both multinational companies as well as domestic companies. I see our Company Sumitomo Chemical having significant growth opportunities. As you would have seen in the investor presentation, our wide and varied portfolio of generic and specialty

products, different teams managing different sets of products, a significant and robust channel and farmers reach through our sales team, marketing team on the ground, manufacturing footprint that is present in a robust manner, our R&D capabilities, our direct or indirect presence - either we ourselves operate or through our parent company's subsidiaries in many parts of the world, - and our ability to export from Indian manufacturing and support from our headquarters in Japan, puts us in a unique position in the Indian agrochemical industry.

With regard to the near-to-mid term focus for Indian business, I would like to point out couple of areas which we are working on heavily.

Number one - successful launch of the pipeline products. From a sales and marketing side in the domestic market, we are expected to launch about four to five products in different segments in the coming three to 12 months' time period subject to all regulatory approvals. These new launches will aid in our growth apart from the growth of the existing portfolio of products.

Second point - as legacy companies ex-ECCL and ex-Sumitomo Chemical had different systems and processes. We are spending quite a bit of time to integrate the systems and processes, which is expected to improve the efficiency and productivity of the overall organization across different levels. With implementation of SAP HANA 4 recently, this journey has already started.

The third and most important thing is digitalization. We are evaluating, and also some of it has already been implemented, of various digital technologies in all possible areas. For example, reaching out to the distributors, reaching out to the farmers, inventory management. So all of these things we are looking at, wherever it is possible to deploy digital technologies, we are evaluating it and some of the processes we have already started.

Overall, we aim to focus more on high growth, stable and high profitable segments such as herbicides, PGRs, and bio-rational products and have increased the product offerings for both Kharif as well as Rabi crops to reduce the seasonality in the business. Overall, we are on growth path and plan to capitalize on our opportunities based on our strengths to deliver the growth. So, with that I turn it back to Kunal and the organizers. Thank you very much.

Moderator: Thank you very much. We will now begin the question and answer session. The first question is from the line of Rohit Nagraj from Sunidhi Securities. Please go ahead.

Rohit Nagraj: Thanks for the opportunity and congrats on good set of numbers, Sir my first question is in terms of the growth strategy for five new products, so could you give a little more information, are these patented products, how has been the current sourcing for these and who else was competing with us for getting the outsourcing opportunity from our parent?

Chetan Shah: All these products are proprietary products of Sumitomo Chemical, Japan. Nobody else was manufacturing them, the source is being changed from Japan manufacturing to India

manufacturing, and also these products can go globally. Suppose if product X out of these five was being exported from Japan to other countries, now it will be manufactured in India and exported. So to what extent we can fulfill the demand of the entire globe, that has to be seen, but I know one product which we are going to manufacture will not meet the demand of the entire globe, so that is where Kunal had said that in this type of products we have opportunity to even further grow by enhancing the capacities and certain products will be limited to what capacities we are planning and that will be manufactured from India and exported to various countries.

• Rohit Nagraj: Got that, understood, Sir just a concurrent question to this, in terms of margins you have indicated that margins will be similar and is there any definitive growth plan in terms of product introductions over the next three to five years, so from our parent we have got a mandate that okay we will be doing say two-three products every single year and accordingly, we are also envisaging the growth and we are making the investment in land as well as the infrastructure and are these facilities dedicated for these five products or these can be fungible depending on how the growth of these products pans out over next three-five years?
• Chetan Shah: These five products which we have planned now currently, they all will be manufactured at two of our existing sites, so this new land acquisitions are not part of this five products but with this five products getting into our two existing facilities, I think, we would have exhausted our land parcel on these sites and that is the reason why we have acquired new land parcels for the future growth. So for example if we talk about our own R&D products or proprietary products to be manufactured, that is being planned out in the new sites. Similarly, if we want to manufacture some intermediates or we want to backward integrate some of our processes, they all will happen on these new sites, so that is the planning, but five existing products we have fitted it in our existing sites.
• Rohit Nagraj: Sir the second question is in terms of R&D, you just touched base upon it, so how are we placed in terms of our current R&D activities, so is it predominantly to introduce your formulations or probably the process improvement for the new products that are going to come from our parent or anything else and in terms of strength, in terms of the infrastructure, how is it currently?
• Chetan Shah: Our R&D facilities are one of the best for formulation development without any doubt. We have created many new formulations including one which we will be launching in the month of July this year and also for technical as you very correctly said the efficiencies improvement, the off-patent material to be manufactured economically in our plants, these are the activities which our R&D is very good at and out of this off-patent products, three of the products are already cleared for pilot plants all very, very successfully and we are looking forward to those products going into commercial production.
• Moderator: Thank you. The next question is from the line of Manish Gupta from Solidarity. Please go ahead.

• Manish Gupta: Thank you for the opportunity. I had three questions Sir, the first question is that these five new products that you are launching and the exciting vision you have laid out for new products that will come in, is there a thumb rule one can use roughly or what revenue one can earn on such products say over every three year period once the product scales, that is the first question? The second question is that given these products are coming on the back of your global R&D investments, would the gross margin on these be higher than what the gross margin on the portfolio is at present, and the third and final question is that last year because of COVID, did we actually see a decline in our marketing expenses over the previous year?
• Chetan Shah: These products which are being manufactured or which we have decided to go and set up the plants and manufacture, these are all very good products, we know the chemistry, we have worked very hard to improve the processes and efficiencies and this main product which we are going to manufacture – clothianidin - we have achieved 99%+ purity. All these products, the revenue in any chemical industry as you would know if it is 1 to 1.5 it is very good, 1 to 2 is very, very good, and anything above 2 is excellent, so our aim is that we would like to have the revenue out of this products in excess of two times the investment. As far as the margins are concerned we will endeavor, there are many things that go in, many thing and please understand that at the end of the day when we sell that product, we have to be competitive and we have to give the product to the customer at a competitive price, so our view is that we will definitely endeavor to maintain our gross margins in all these products to the current levels and of course our aim will be to increase this margin.

Manish Gupta: Sir, it was about expenses, whether the marketing expenses were lower?

• Chetan Shah: Yes, your COVID question was related to marketing expenses, of course the marketing and traveling expense were lower in the last year, however, if you see there are some COVID related expenses which have gone up. Now having just to give you few examples, you know our philosophy that we rate safety to our people and to our plant as a very, very important thing and in order to maintain the safety of our people, we had to incur many additional expenditure which we normally would not incur - like transportation of each and every worker from the place of residence to factory, maintaining the social distancing in the vehicle etc. etc., to avoid the crowd or people at one point of time at the lunch hour or dinner hour, we had to create many additional dining facilities in our plants. So we have taken care of our people, COVID medicines, COVID related if somebody gets hospitalized, we have taken care of each and every person. So having said that, yes fundamentally marketing expenditures were at a lower side, however, our digital expenditure or digital marketing expenditure were more as compared to the previous year.
• Moderator: Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.
• Ankur Periwal: Sir, congrats for a good set of number and thanks for the opportunity, so couple of questions, one on the CAPEX side, now you did mention the normal CAPEX of Rs. 70-75 crore and this the additional CAPEX for the exports opportunity, given that these products are already there

Sumitomo Chemical India Limited June 1, 2021

operational, will be fair to assume that whenever the plant gets commissioned let us say over two years, the ramp up here will be much faster and accordingly alluding to your explanation wherein probably one product there could be even further growth potential, we will be ramping up capacities accordingly, will that be a fair assumption?

Chetan Shah: Yes, it would be.

Ankur Periwal: Great, and Sir this CAPEX of Rs. 70-75 crore is largely for the generic portfolio that we have for the domestic market, that run rate remains as it is?

Chetan Shah: That remains as it is because there is a constant improvement on efficiencies and expanding capacities of certain molecules where we see demand higher or some export opportunities of those products etc., so that CAPEX will remain.

Ankur Periwal: Where I was coming from was your commentary of adding let us say four to five products more or less on an annual run rate, so this incremental CAPEX will be suffice to address the existing portfolio as well as these newer products which come up?

Chetan Shah: So Rs. 70-75 crores we are keeping for existing products and around Rs. 110 crores is for these new five products. The total CAPEX will be Rs. 175 crores, it will be in that range.

• Kunal Mittal: On this question basically, what Shah san just now explained is about the products wherein we are required to create manufacturing capacities wherein these investments are going. In addition to this, these four or five products which we plan to launch in the domestic market which Dr. Suresh explained - generally for these products we do not require large CAPEX because we have the capacities within the groups across the globe, so these are products wherein formulation capacities are already there and this part of the business does not require large amount of CAPEX from our side to ramp up the volumes and grow in the Indian domestic market.
• Chetan Shah: I am sorry I thought that you are asking for a CAPEX for these five new technical products which we are going to manufacture for exports. If your question was related to the formulation or the new products introduction of formulation in Indian market, then we have got enough capacities to handle those products. And even the existing products which go up, we only have to have a very small balancing CAPEX, which comes out of that Rs. 70-75 crores in any case.
• Ankur Periwal: Thanks for the clarification Sir, just last thing in the commentary we did mention share from LATAM increasing and given that the global parent entity expansion there in LATAM through a Nufarm, will it be fair to say that those global synergies which we were expecting to play out are now sort of scaling up and there is let us say arguably a shift from China to India happening there or is the current portfolio which is gaining penetration into the international market?

• Chetan Shah: No, I think the shift from China to India is a different subject and different topic altogether, but yes I think what Japan is seeing, in my opinion, is our capability to manufacture, to manufacture in a good manner quality products and our capability even enhancing the efficiency in those products. So as I gave an example that clothianidin we have created or we have worked a process and efficiencies to such a great extent that it is working out very well and from our 350 tons of capacity which we are putting up probably in the second phase we can go to 700 tons.
• Kunal Mittal: Just to add here to what the comment Shah san mentioned. I think as you rightly mentioned that the growth in Latin America is playing out for us and this is a factor of multiple strategies and last year in Financial Year '19-20, our revenue from Latin America was 2% of our total revenue of the Company and in Financial Year '20-21 that has become almost like 4%, so it has increased significantly and as a trend yes, we see significant growth coming from the Latin America geography on back of some of the existing products and some more registration which are under pipeline and we are expecting to receive regulatory approvals in next few months or years and with that I think that kind of a trend in the growth for Latin America as a focus market is likely to continue in future.
• Moderator: Thank you. The next question is from the line of Swati Hiroo from Ratnabali Investments. Please go ahead.
• Swati Hiroo: My first question is that do we pay any royalties to Sumitomo Japan right now?

Chetan Shah: No, we do not and we do not see even for the future products.

• Swati Hiroo: My second question is regarding this continuing conversation on Latin America, so Sumitomo Japan in their presentation mentions this opportunity to be northwards of Rs. 10,000 crores and by the numbers that you just mentioned, our current contribution is roughly Rs. 100 crores, so I just wanted to understand - so few years down the line where can we see this number reaching to?
• Chetan Shah: What figure you are talking about is of Sumitomo's acquisition of Nufarm in Latin America and what is the upside over there. Now, that upside is basically because of a new launch by Sumitomo of a brand new patented product, that is likely to be marketed during this financial year and they see a very big opportunity of that product. Now, if you say that what is the benefit that we can derive out of that product, directly none but indirectly because we are manufacturing a fungicide which goes as a combination to this new molecule, we will have a huge opportunity of exporting our tebuconazole to Latin America. If this product becomes very big, our current capacity will not be good enough. So we are planning to increase our capacity to double of existing capacity in our new land parcel in coming time.
• Moderator: Thank you. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead.

S. Ramesh: Good Evening and thank you very much, Sir if you go back to the five proprietary products to be supplied to SCC. If we have to export to other markets, we will need registration, so what is the status of the requirement of registration of these proprietary products? Chetan Shah: For export registrations, there is no long time-line, we can get the registrations of these products within a period of four to six months and also two or three of these products which we are talking about, we already have the registration in place. S. Ramesh: Okay, and second thing is can you give us some sense in terms of what is the kind of market opportunities you see for these five proprietary products and outside of the supply to SCC and what is the kind of number you are working with to supply to other markets? Chetan Shah: No, I think these are all proprietary products of Sumitomo, so we will supply to the customers of SCC Japan or under their wings or under their room only we can seek the new customers, so our basic role will be to manufacture and supply to various Sumitomo companies. Moderator: Thank you. The next question is from the line of Saurabh Kapadia from AMSEC. Please go ahead. Saurabh Kapadia: Thank you for the opportunity, Sir the first question is on this five products, what is the timeline by which these products will start contributing to the revenue and will it be in a phased manner or by when we can reach that 2X kind of asset turnover? Chetan Shah: So one of the products I think we are planning to launch by early '22 may be by second quarter '22 or first quarter '22 and remaining products will be also in say by end of '22 or beginning of '23. Saurabh Kapadia: Sir, second question is on glyphosate so what is your take on overall global demand right now and are you facing any supply situation in terms of raw material issues for glyphosate? Chetan Shah: No, we are not facing any issue on procuring the raw materials. Yes, you are very right that glyphosate situation has gone absolutely berserk in China and the world, and the prices are constantly rising, so are the raw material prices on an upswing, however, we are quite well covered. At least till the month of September, we do not see any problem and we have not faced any problems in getting our raw materials even for fresh orders. Moderator: Thank you. The next question is from the line of Jayesh Shah from OHM Portfolio Equity Research. Please go ahead. Jayesh Shah: Thank you for the opportunity, I had a basic question on your exports to Sumitomo, are these exports at some kind of a contractual fixed pricing margin and secondly when I look at your domestic business which is essentially B2C, is it right to think that the domestic business because it is B2C and retail would have more gross margins and perhaps EBITDA margins than the export business which is B2B?

• Chetan Shah: As far as margins are concerned, I think our export margins and domestic margins are not at variance, yes certain brands which we sell B2C in domestic market specialty products etc. could have higher margins, but the average margins or exports are also as good because our export portfolio also includes the brand sales, it is not only active ingredients, but we have very robust brands in many of the markets where we sell our formulated branded products, so the margins are quite equitable as far as exports and the generic margins in domestic market are concerned.
• Jayesh Shah: On pricing, whether is there a contractual agreement?
• Chetan Shah: This is actually not on the basis of the model of contract manufacturing. What we do is, we prove our capability of production of quality product acceptable to SCC Japan and then the pricing has to be on arm's length and on the basis of global demand and supply and global prices, so that is why I said earlier that we have to be competitive.
• Jayesh Shah: Okay and when we talk about margins on exports and domestic you are referring to gross margins or EBITDA margins?
• Chetan Shah: I am talking about gross margins.
• Moderator: Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa and Company. Please go ahead.
• Faisal Hawa: My question to the Management is how do we see this opportunity shaping up for local supplies and another question is that is there any target of volume growth for us for the next five to six years from the Japanese Management?
• Chetan Shah: I would not be able to quantify that answer but I think I mean if you look at our overall strategy of new introduction of products in domestic market, expanding our reach in the global market, manufacturing products for SCC and their affiliates, manufacturing products of offpatent products, introducing new combination products etc. I think we are looking at a very good, we feel we are on a very good wicket to bat on for sustainable period of time and keep on growing our business.
• Faisal Hawa: Are the key resource areas of the top Management fixed by the Japanese Management and if at all if you could share what would be a large percentage of those key resource areas?
• Kunal Mittal: I think what we understand from your question is about you are saying what kind of involvement our parent company, SCC, has in our resource planning and the Company planning, so yes as a parent company they are distributing several of their proprietary molecules in India through us, so to that part of the business, we have a much larger integration in terms of sharing the global knowledge and the technical knowhow of that products and also lot of other sectors and it is a more in-depth relationship. As far as our other businesses are concerned which are off-patent segments, so that is the business which are

largely independently run from the Indian Management side. If we talk about our overall resources from SCC side, there is a lot of guidance, support, and the global knowhow which is available to us to access but at the same time it is on an advisory basis and in a manner which is I think in the best interest of the Indian company - being an independent listed company run and managed by its independent Board.

Chetan Shah: Also I may add over here to be very honest, I think the parent company has given us enough freedom to grow and they do not interfere in our day-to-day management decisions etc., but we are very happy that if we need any advice or guidance they are always available and without a blink of an eyelid, we get immediate response from them to support us, so it is a very good situation to be in where we have our freedom to manage, at the same time we have this comfort at the back of our mind that if we need any help, we can always go and check back with them.

Moderator: Thank you. The next question is from the line of Rohan Gupta from Edelweiss. Please go ahead.

• Rohan Gupta: Sir, Good Afternoon and congratulations for a very strong set of numbers in the current scenario, two questions from my side. First is on these five products which you have got on that itself, you are talking about roughly Rs. 100-110 crores kind of investment for this in the next couple of years and a revenue potential of Rs. 200-250 crores, I assume that given the five products which I believe that given the SCC parentage and their global presence, it will be large size opportunity but it seems right now that each product is hardly Rs. 30 to 40 crore kind of revenue potential, as compared to Rs.200 to 250 crore kind of revenue. So just want to understand is it just initial opportunities from SCC, where they want to test our execution capabilities and there is lot more to be unearthed in next three to four years period of time? Or you see that the opportunities are limited and SCC have a multiple suppliers and there are many chemical manufacturers, opportunities can go to anywhere?
• Chetan Shah: Thank you, I think you have questioned and answered both at the same time, yes, you are right I think there are lot of opportunities and if we produce these five products and supply to Japan in a satisfactory manner, I think the opportunities are many. As I said even the opportunities of expanding our existing Tebuconazole capacity etc., is very huge, as I said it is double, we are thinking of putting up a 1500 tons additional plant capacity for Tebuconazole and this all will go if we have the successful launch which I am sure we will have of this new proprietary product of SCC Japan, which is called Indiflin and we are also banking very, very high on that. So I think there are many opportunities, this is just a startup, this is just a kickoff and I think we will see many more products coming in.
• Rohan Gupta: Second question, in the same line itself that we had roughly Rs. 500 crore kind of cash and investment in pockets right now, next year we are going to have once again strong cash flows generation and the CAPEX will be hardly less than Rs. 200 crore, so are you seeing that there is a huge investment opportunities are there in this manufacturing of the chemicals and intermediate for the global player or global parent and can you give some broad idea if you

have worked on or your internal team has worked on that in next four to five years where you see that the investment in this outsourcing opportunities can be made, if any ballpark number on that if you can give not for next year I am talking about, next four to five years?

Chetan Shah: Next four to five years we have many ideas to invest this money and I hope that in next four to five years, we also have an opportunity to buy some company where we can fill up the gap of our portfolio or which can enhance our performance, that opportunity also will be there. There are many opportunities in even digital marketing or new startups or new technologies, we will also be looking at that and I think in next four to five years if you are talking about then there will be many opportunities in terms of not only the capital expenditure capability, but also that is a good enough a time period for registration, gestation all over the globe, so yes we are looking at it.

Moderator: Thank you. The next question is from the line of Aakash Manghani from BOI AXA Mutual Fund. Please go ahead.

• Aakash Manghani: My question is on similar lines as the ones that Rohan asked on the engagement side of Sumitomo Japan, I think you answered that. The second one is in the opening remarks you talked about margins drivers and we have seen better margins over the last one year, so I saw that you have achieved 18% EBITDA margin in FY '21, could you talk qualitatively as well as if you can give some numbers around over the medium term say over the next two to three years, what initiatives is the Management taking to increase the EBITDA margin trajectory from here and where could this numbers stabilize at, could it be in the range of 20%-21% or lower- higher over the next two to three years ?
• Chetan Shah: Once you achieve a particular landmark, it is very difficult to go down from that landmark figure, so yes our endeavor will be to maintain or increase this margins and again as a very general statement of whatever I have been saying - that all that we are doing is going to help towards that goal of maintaining or increasing the margins.

Aakash Manghani: What initiatives is the Management taking to, is it going to be more of the product mix change?

Chetan Shah: Product mix change is a very important aspect of this, we are concentrating on high growth, high margin products like plant growth regulators etc., even herbicides we are concentrating quite a bit and our unique way of marketing as I have said maybe before that is to have a very specific use of our products for a particular crop, so we develop our products and go to the farmer, go to the market for a very specific problem solution to the farmer and once the farmer uses that product for that particular problem solving, they are convinced about the efficacy as they continue to buy our products, so that is a very unique SOP that we have and our ability to reach the farmer and to demonstrate a particular crop protection in a particular crop against particular pest or disease or weed, is a very unique SOP for us and this is what is helping us to continuously grow our volumes, margins and the overall performance of the company.

Moderator: Thank you. Ladies and Gentlemen, we will take the last question from the line of Amar Mourya from AlfAccurate Advisors. Please go ahead.

Amar Mourya: Thanks a lot for the opportunity, Sir first question is like you know the capacity expansion of the Chlorpyrifos and the Tebuconazole, is it ready and was there any contribution in FY21 as the overall FY21 revenue has degrown in terms of the export? Number two what would be the size of these five molecules at the parent level in terms of the formulation and technical? Number three what kind of the export and domestic revenue mix we target in next three to four years?

• Chetan Shah: We do not look at the target for export versus domestic or what should be that ratio, we want to grow both, so depending on the registration, circumstances, maybe one year export will grow more than the domestic, another year domestic can grow more than the export because it depends on the dynamics of registrations in various geographies, so it is very difficult to say that whether we are aiming at - whether we want instead of 20%, we want to have 30% export, no. But we want to grow overall, that is for sure. And the growth pattern or the growth plan has been setup in such a way that at a particular given point of time exports can grow because we have got new registrations in global market like we are planning to have eight registrations in various geographies for this year. We have got some four or five in the end of last financial year, so that will come. And to your question about whether in FY21 we have got any revenues from this increased capacities or anything, the answer is no. We have increased our existing Tebuconazole plant which was historically 700 tons to around 1,350 tons now. So in the current year we plan to manufacture up to 1350 tons, and then as a second step, we are planning to double it at one of our new sites.
• Amar Mourya: Thanks Sir, one last what is the size of this five molecules which we are going to manufacture the formulation or the technical overall size at the parent level and all these five molecules are going to come in a phased manner or they are going to come all at once?
• Chetan Shah: No, one of them will come earlier than the rest and rest of them will come all at one time because that is a common plant that we are building. So those molecules will come at one time, one molecule out of those five will come at an earlier stage. I would not know the size of formulation market or in terms of Dollars or something, but yes we have the tonnage information that what sort of tonnage is consumed by them, so say this 350 tons which we are putting up the plant will only meet maybe around one-third of the requirement of Sumitomo in that molecule, so that is why I said that we have an opportunity to double it very easily in the second phase.

Amar Mourya: 350 tons per month right Sir?

Chetan Shah: No, it is 350 tons per annum. The rest of the four products I think that is as far as my understanding goes that will be almost the entire requirement of Sumitomo Chemical Japan will be manufactured or we will be putting up the capacities for the entire requirement.

Moderator: Thank you. Ladies and Gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to Masanori Uzawa san for closing comments.

Masanori Uzawa: Thank you very much for joining this conference call. As a promoter of this company, Sumitomo Chemical, India, we are happy to see the results of fiscal year year 2020-21 and like Shah san mentioned, we are maintaining a very good relationship between Sumitomo Chemical India, and Sumitomo Chemical Tokyo - by exchanging the views and then sharing the values, also exchanging very open ideas and then opinions and that will continue on, so we expect that we are going to make a very good growth in the future. So again thank you very much for joining this meeting.

Moderator: Thank you. Ladies and Gentlemen, on behalf of Sumitomo Chemical India Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.