Despite a stronger-than-expected first-quarter performance, Nuvama Institutional Equities has reiterated its 'Reduce' rating on Tata Group-backed Rallis India Ltd. The brokerage firm acknowledged the agro-sciences company's healthy Q1 FY27 results but cited ongoing concerns that temper its long-term outlook.
Q1 Performance Highlights
Rallis India's revenue for the June quarter rose 6.8 percent year-on-year (YoY) to Rs 1,020 crore. This growth was primarily driven by higher realization and a surprising 15 percent volume growth in domestic formulations, even amid a subdued sowing season marked by lower rainfall. Nuvama noted that this performance surpassed its expectations, particularly the robust domestic volume expansion.
However, Nuvama also highlighted that the reported EBITDA was overstated due to a one-time Rs 35 crore reversal in employee costs. Adjusting for this, the EBITDA aligns with Street estimates.
Nuvama's 'Reduce' Rating Rationale
Despite the positive Q1 figures, Nuvama stated that significant growth triggers for Rallis India are still lacking. The brokerage expressed caution regarding the healthy domestic volume growth, suggesting it could lead to ramifications for sales returns in Q2 FY27, especially given the weak progress in sowing. Additionally, unfavorable pricing of exported active ingredients (AIs) is expected to remain a near-term headwind for the company.
Consequently, Nuvama has maintained its 'Reduce' rating on Rallis India, setting an unchanged target price of Rs 216. This valuation is based on 15 times its estimated FY28 earnings per share (EPS). At the time of the report, Rallis India shares were trading around Rs 227.50, slightly lower by 0.37 percent.
"Our rating, TP and target multiples stay unchanged, valuing Rallis at 15x FY28E EPS with a TP of Rs 216; retain 'REDUCE'. At CMP, the stock trades at 17.3x FY28E EPS," Nuvama stated in its report.
Company Background
Rallis India, a prominent subsidiary of Tata Chemicals and part of the extensive Tata Group conglomerate, operates within the agro-sciences sector. The company boasts an extensive portfolio of products and solutions tailored for farmers and maintains strategic marketing alliances with multiple global agrochemical firms. As of June 2026, Tata Chemicals held a controlling stake of 55.04 percent in Rallis India.