Kokuyo Japan is missing out the big opportunity in India. Single digit growth in Japan business is great, however a death warrant in Indian stationary and art space today. There are times when you really have to go full throttle, and the time is now. However Indian management has put the company on cruise control. Competitors are overtaking(Doms, Cello, Linc, HP, ITC, Pidilite etc) yet the parent company lacks proximity to Indian market. If focused well, Kokuyo can turn this India subsidiary into a $1B+ business in another 15 years. Tepid growth in Japanese market should not deter the parent to accelerate in a market like India. Art network is a good thing the current promoters have done, however there is more work needed in sales, channels, marketing and distribution.

Appointment of Mr. Masaharu Inoue may change the course. Demand pull is helping the company as of today, along with the softened raw material prices. The company has potential to double the sales in every 4 years, given the parent’s capabilities. Unfortunately, the company lacks the push as of today.

Key shareholder is missing from the action to fire up that ambition. Can Kokuyo and Mr.Masaharu Inoue correct it?

Disc: Invested.

Q2 Concall notes,

Financial Highlights (Q2):

• ₹1,000 crore revenue, 19% growth, 30% PAT growth.

ValueFirst Update:

• Strong Q2 performance, ₹100 crore contribution.
• Improved EBITDA to 20%, targeting 15% post-consolidation.
• Overseas acquisition in Q3, adding ₹60-70 crore quarterly.

Organic Growth:

• 7% YoY revenue growth.
• 7% volume drop in domestic business due to demand elasticity.

Wisely ATP Innovation:

• Recognized as a visionary in Gartner’s Magic Quadrant.
• Finalizing deals with banks, expected to go live in Q3.

Q3 Outlook:

• Expected growth quarter.
• Levers: domestic price increase, potential Phase 2 spends.
• Margins expected to remain stable.

Customer Reaction to Price Increase:

• Price hike initially impacted budgets.
• Expect promotional spend to rebound in Q3 during the festive season.

Margin Impact of Price Hike:

• Price increase won’t dilute margins, and it could enhance them in the long term.

VIL Contract Loss:

• Anticipated impact unlikely in Q3; seeking to compensate through other business.
• No significant margin pressure foreseen.

Wisely ATP Update:

• Successful POC with four major banks, reducing complaints by 90%.
• Progress slowed due to regulatory approvals; clarifications with RBI, TRAI, and DOT.
• Commercial agreements with banks in the works, with one major bank close to finalization.
• Plan to go live with Wisely ATP after agreements, enabling further enterprise deals.

Status of E-commerce Deal:

• International customer onboarding is complete.
• Revenues and traffic started flowing into platforms.
• Full capacity expected by the end of Q3.

NLD SMS Pricing:

• NLD pricing remains cheaper than RCS and WhatsApp.
• Other channels offer rich media, conversational features, and long messages.
• Customers have the flexibility to choose channels based on their needs.

E-commerce Deal Ramp-Up:

• Aim to handle about two-thirds of the e-commerce player’s traffic.
• Striving to achieve this goal by the end of Q3.

WhatsApp Market Share:

• 15% market share.
• Recent Growth Partner of the Year award from Meta.
• Market share boosted by ValueFirst acquisition.
• Rapid growth in WhatsApp business and other OTT channels.
• Expanding use cases and user journeys.

Future Market Share Expectations:

• Expect significant growth in market share over the next 2-3 years.

UPI Transactions:

• Present in the BFSI sector, with a 70-80% presence in originating banks.
• UPI transaction share linked to customer base.
• Presence in seven to eight of the top 10 banks, contributing to UPI transaction share.

Greater than ₹50 Crore Client Bucket:

• From 19 clients in the previous quarter, now at 17.
• Includes ValueFirst, which is an intercompany customer.
• Lower spends and the absence of IPL-related seasonal spends in Q2 contributed to the reduction.
• No significant customer loss, some clients shifted from ₹13 crore to ₹12.2 crore per quarter.

Volume Degrowth:

• Sequential domestic business volume declined by 7%.
• No detailed breakdown of volume impact provided, but it’s acknowledged that there may have been year-on-year benefits from ILD and NLD price increases.

Wisely ATP Deployment in Saudi Arabia:

• Pursuing ATP opportunity in Saudi Arabia.
• Delays due to Data Protection Bill approvals in both India and Saudi Arabia.
• Impact expected to be significant once deployed.
• Focus on tight integration with mobile carriers and data privacy considerations.

Revenue Impact and TAM for Wisely ATP:

• SaaS-based product with subscription pricing.
• TAM mentioned is for the revenue the company aims to retain, not total TAM.
• Ongoing work to determine revenue share with ecosystem players.
• Intent to minimize the impact of Vodafone’s exit from the firewall business in the fourth quarter.
• Levers include domestic price increase, new solutions on OTT channels, and a focus on innovation.

Expansion Strategy and Focus on India:

• History of operating in multiple countries.
• Current strategy is to focus on India, the largest opportunity.
• Understanding of the local market and tariffs.
• Aim to become market leaders in each geography before expanding to other countries.

Customer Loss and Competition:

• No customer loss to Route Mobile.
• Emphasis on superior technical capabilities and features.

Market Dynamics:

• Pricing pressures in the Indian market due to price sensitivity.
• Customer demand for the best solutions at competitive prices.

Strategies and Innovations:

• Focus on innovation in platforms, solutions, and offerings.
• Approach to customers: Reducing overall costs and increasing ROI.
• Largest OTT network for differentiated communication options.
• Offering alternatives like RCS, Truecaller, and WhatsApp for improved engagement and ROI.
• Efforts to provide value-added services and cost reduction solutions.

Partnership with Kore.ai:

• Kore.ai partnership for over a year.
• Realized Kore.ai platform better suited for European and American customers, not Asian.
• Decision to work with other similar platforms to expand business in India.

Co-sell Arrangement with Microsoft:

• Long-term agreement with Microsoft.
• Technology changes in cloud space and AI/ML in the last year and a half.
• Watching the situation closely in light of DPDP bill and evolving regulations.

Impact of Vodafone India Deal on International Traffic:

• The termination of the Vodafone India deal has no impact on the company’s International Long Distance (ILD) business.
• The ILD business can continue independently, without relying on a specific telecom operator.
• The company’s role in the Vodafone deal primarily involves managing their Firewall, which distinguishes between international and domestic messages for revenue protection.
• Other ILD businesses conducted by entities like Karix Mobile and ValueFirst remain unaffected by this termination.
• Pricing and services provided to other telecom operators are not impacted by the conclusion of the Vodafone India deal.

In a recent development, Niti Aayog member Ramesh Chand has expressed optimism about the growth potential of India’s agro-chemical industry, even in the face of stiff competition from China. This positive outlook for the sector has significant implications for companies operating in the agrochemical space, such as Dharmaj Crop Guard Limited, a leading player in the Indian market.

Dharmaj Crop Guard Limited (NSE:DHARMAJ), based in Ahmedabad, India, is actively involved in the manufacturing, distribution, and marketing of a wide range of agrochemical formulations. Their product portfolio includes insecticides, fungicides, herbicides, plant growth regulators, micro-fertilizers, and antibiotics, catering to both B2C and B2B customers.

Dharmaj Crop Guard Ltd (DCGL) is correctly positioned to capture growth in both domestic and international demand for agrochemicals.

Domestic demand

• India is one of the largest consumers of agrochemicals in the world, and the demand is expected to grow at a CAGR of 7-8% in the coming years. This growth is being driven by factors such as increasing agricultural productivity, rising incomes, and growing awareness of the benefits of agrochemicals.
• DCGL has a strong presence in the domestic market, with a wide range of products and a well-established distribution network. The company is also expanding its manufacturing capacity to meet the growing demand.

International demand

• The global agrochemicals market is also expected to grow in the coming years.
• DCGL is already exporting its products to over 20 countries, and the company is planning to expand its global reach further. The company has a strong focus on research and development, which is helping it develop new and innovative products that meet the needs of international customers.

Financials

The financials are strong with sustained revenue and profit growth. However, the cash flow in recent reports has been on the lower side.

References
Indian agro-chemical industry can grow over 9 pc notwithstanding Chinese competition: Niti Aayog

Disc: Invested

Disclaimer: The article is not a recommendation or advice as to whether any investment is suitable for a particular investor.

I too am invested and based on the comments above, I’ve decided to hold till at least Q2 results and con call.

The guy putting the data in Screener portal should add investors to correct category from the start. This reclassification happens in 100s of companies each quarter (from my personal experience). Try comparing the shareholder structure of a random company from different sources eg. Screener, Trendlyne, Finology, Brokerage reports etc and you would observe some differences!