Why Rallis India Share Price is Falling

Rallis India, a Tata Group company, experienced a significant decline in its share price earlier this week, with the stock plummeting 4%. This was its steepest fall in as many as 13 weeks.

The agrochemical company's shares have declined by more than 15% in the past six months, indicating a consistent decline in the company's financial performance.

Interestingly this is not the first instance where this Tata Group company has failed to generate profitable outcomes. Rallis India delivered a negative return of 19.9% in 2022 too, making it among the 5 worst-performing stocks in the Tata Group.

The company's weak financial performance can be attributed to material costs and inventory build-up in the market, which have impacted revenue growth and margins.

Let's find out why Rallis India shares are under pressure.

Weak financial performance

The subsidiary of Tata Chemical reported a 2.9% YoY rise in revenue to Rs 5.2 billion (bn) for the March 2023 quarter. This was against revenue of Rs 5.1 bn in the same quarter last year.

The company reported a net loss of Rs 691.3 million (m) during the March 2023 quarter against a net loss of Rs 141.3 m a year ago due to elevated material costs.

For the financial year 2023, Rallis India reported a 13.9% YoY rise in revenue to Rs 26 bn.

Net profit witnessed a 45.7% YoY drop to Rs 919.4 m compared to Rs 1.6 bn a year back.

The company reported a significant loss in their seeds business primarily due to provisions of inventory of Rs 400 m and impairment of intangible assets of Rs 240 m. These factors led to a substantial decrease in the company's profits for the period under review.

The domestic crop protection segment remained flat YoY, primarily driven by erratic monsoons resulting in lower pest infestation. This in turn, had led to a higher piling up of inventories, particularly in insecticides grades.

Furthermore, the company's operating expenses increased by 3% YoY, largely due to higher advertising and promotional spending before the Kharif season. This increase in operational coasts added to the company's financial woes.

Moreover, the company's provision for slow-moving/non-moving inventory of Rs 528 m during the year. This significantly impacted on the company's EBITDA, which resulted in a widening of their losses for the period under review.

What next?

The company is expected to complete its multi-purpose plant for commercial production by June 2023.

The company's management has highlighted the upcoming kharif season and how it could impact crop yields and output.

This is owing to the forecast of an El-Nino event in the second half of the monsoon season.

In addition, a considerably higher channel inventory is likely to result in lower volume growth, which is a cause for concern.

Despite these concerns, Rallis India could bounce back even stronger once it adds new products and undertakes any significant capex plan.

How Rallis India shares have performed recently

Rallis India shares have declined by more than 20% in 2023. Over the past one week, the company's shares have fallen 5%.

Rallis India touched its 52-week high of Rs 270.9 on 15 December 2022 while it touched a 52-week low of Rs 182.5 on 20 June 2022.

About Rallis India

Rallis India is a subsidiary of Tata Chemicals and a part of the Tata Group.

It is one of India's leading agro sciences companies, with more than 160 years of experience servicing Rural Markets, with the most comprehensive portfolio of products/solutions for Indian farmers.

Rallis is known for its deep understanding of Indian agriculture, sustained contact with farmers, quality agrochemicals, branding & marketing expertise along with its strong product portfolio.

It is also present across the agricultural input value chain and manufactures seeds and organic plant growth nutrients.

The company has partnered with global corporations in the crop protection segment. It does contract manufacturing for them in its four state-of-the-art manufacturing facilities located across India.

It also has a strong distribution network of more than 2,000 dealers and 40,000 retailers. This has helped it establish a pan India presence covering 80% of districts in India. The company also exports its products to more than 70 locations.

For more details, see the Rallis India company fact sheet and quarterly results.

You can also compare Rallis India with its peers:

Rallis India vs Bayer Cropscience

Rallis India vs Sumitomo Chemical India

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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