Excel Crop

Excel Crop Care had hit a high on the back of its bountiful numbers for Q4FY14. The company ended the quarter with a net sales of Rs.211 crore, up 19% (YoY) and net profit was up 5.5 times at Rs.11 crore.

Three factors helped post this higher net profit given the fact that its operating profit had in fact gone flat at Rs.5 crore. First and foremost was the 61% drop in interest outgo at Rs.1.27 crore. Secondly, it had an exceptional gain of Rs.6.59 crore – this includes write back on the Endosulfan related inventory and the provision for penalty of Rs.2.92 crore. Last fiscal, the Competition Appellate Tribunal (CAT) pronounced an order on the company's appeal challenging the penalty of Rs 63.90 crore imposed by the Competition Commission of India on it and it had reduced the amount of the penalty to Rs 2.91 crore, which was a reduction of 90%. The company has appealed against this too but has nevertheless provided for the same. And thirdly, tax out for the quarter was down 50%.

The company ended FY14 with a consolidated net sales at Rs.956 crore, up 26% and net profit for the year came in at Rs.66 crore, up more than 3 times. Its equity stands small at Rs.5.50 crore and reserves is at Rs.295 crore. EPS of Rs.60 for FY14 discounts the current price by around 10 times.

Excel Crop Care is India's largest maker of endosulfan, controlling 60% of the total production. It is a controversial pest killer and the ban on the product continues. A hazardous product, it is the mainfray of the company and beginning May 2011, the production and sale of endosulfan in the country was banned as it was blamed for causing ailments in humans following a petition filed by by Democratic Youth Federation of India -- the youth wing of the Communist Party of India-Marxist. After a long drawn legal battle, the pesticide is being phased out while it has already been prohibited in Kerala and Karnataka. The company has stopped production of endosulfan and is awaiting hearing and final disposal. The company has made a provision of Rs.16.30 crore with respect to endosulfan and this, the company says is enough to take care of the arising contingencies. The company is shifting its portfolio from dependence on the insecticides to weedicide, fungicides and we could see improvement once this entire transition is complete.