DEEPAKFERTNSEQ2 FY 202321 November 2022

Deepak Fertilizers and Petrochemicals Corporation Limited

5,660words

63turns

8analyst exchanges

5executives

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Management on call

Sailesh Mehta

Chairman & Managing Director

Amitabh Bhargava

President and Chief Financial Officer

Mahesh Girdhar

President, Crop Nutrition Business

Tarun Sinha

President, Technical Ammonium Nitrite

Deepak Balwani

Head Investor Relations

Key numbers — 40 extracted

52%

r website. At the outset I am quite happy to underscore the good news that our Q2 topline grew by 52% and bottomline by 195% and similarly the H1. Additionally our H1 bottomline surpassed the whole o

195%

et I am quite happy to underscore the good news that our Q2 topline grew by 52% and bottomline by 195% and similarly the H1. Additionally our H1 bottomline surpassed the whole of last year’s profit. A

rs,

that the strong alignment with the India growth story that all our three businesses, the fertilisers, the industrial chemicals and the mining chemicals, all the three businesses, the kind of strong al

Rs.3,719 Crore

cals Corporation Limited Earnings Conference Call Q2 FY2023 reported total operating revenue of Rs.3,719 Crores an increase of 51.7% Y-o-Y compared to same period last year. Our operating EBITDA increased to

51.7%

ngs Conference Call Q2 FY2023 reported total operating revenue of Rs.3,719 Crores an increase of 51.7% Y-o-Y compared to same period last year. Our operating EBITDA increased to Rs.495 Crores compared

Rs.495 Crore

s an increase of 51.7% Y-o-Y compared to same period last year. Our operating EBITDA increased to Rs.495 Crores compared to Rs.212 Crores in Q2 of FY2022. Operating EBITDA margins increased to 18.2% from 11.8

Rs.212 Crore

-Y compared to same period last year. Our operating EBITDA increased to Rs.495 Crores compared to Rs.212 Crores in Q2 of FY2022. Operating EBITDA margins increased to 18.2% from 11.8% during Q2 FY2022. Our ne

18.2%

to Rs.495 Crores compared to Rs.212 Crores in Q2 of FY2022. Operating EBITDA margins increased to 18.2% from 11.8% during Q2 FY2022. Our net profit for the quarter recorded a growth of over 195% Y-o-Y

11.8%

rores compared to Rs.212 Crores in Q2 of FY2022. Operating EBITDA margins increased to 18.2% from 11.8% during Q2 FY2022. Our net profit for the quarter recorded a growth of over 195% Y-o-Y to Rs.276 C

Rs.276 Crore

om 11.8% during Q2 FY2022. Our net profit for the quarter recorded a growth of over 195% Y-o-Y to Rs.276 Crores with margin of 10%. During the quarter, our manufactured chemical business recorded revenue of R

10%

r net profit for the quarter recorded a growth of over 195% Y-o-Y to Rs.276 Crores with margin of 10%. During the quarter, our manufactured chemical business recorded revenue of Rs.1,533 Crores an

Rs.1,533 Crore

es with margin of 10%. During the quarter, our manufactured chemical business recorded revenue of Rs.1,533 Crores an increase of 55% compared to Q2 FY2022, manufactured pharma chemicals recorded revenue of Rs.4

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Guidance — 19 items

S C Mehta

opening

“Last but not the least I am also very happy to share that the ammonia project, agriculture is going on full stream on very good fast track and it is now on to the final last five or six months of pre- commissioning and commissioning activity and very soon that should be available to give a very strong foundation to all the downstream by way of availability just across their complex, pipeline availability of ammonia for all the downstream that are there.”

Amitabh Bhargava

opening

“We have already spent capex of about Rs.3,163 Crores as on September end on Greenfield ammonia plant and Rs.422 Crores on the TAN project as on September end.”

Amitabh Bhargava

opening

“Out of this the company has already infused equity of about Rs.1,587 Crores for ammonia and the entire TAN project so far has been done through equity infusion or our internal accruals.”

Nishit Shah

“I have one follow-up on our debottlenecking plant, so how much of the capacity have we already added and going forward how much can we add from debottlenecking overall?”

Amitabh Bhargava

“We have added nearly 33,000 tons and the second phase is on and we would be able to come back in terms of the exact increase once we have completed that project.”

Mahesh Girdhar

“One nation one fertiliser circular have been received, we are also trying to understand how finally it will be implemented.”

Sanjay Shah

“My second question was regarding ammonia plant, Deepak Sir can you highlight upon the project as you said it is on schedule, so how about the cost, is there any over run in the cost and to next year we will be able to start the production of the same?”

Deepak Balwani

“I think now consistently for the last couple of quarters we have been giving the details even in our investor presentation on the total project cost and how much has been spent during the quarter.”

Deepak Balwani

“At the end of September, so while total project cost has remained the same in terms of what we have been sort of announcing for the last couple of quarters that is Rs.4,350 Crores, by end of September we have already incurred Rs.3,163 Crores and balance Rs.1,576 Crores is to be incurred.”

Deepak Balwani

“That project is nearly about Rs.2,200 Crores capex project and we have already incurred Rs.420 odd Crores by the end of H1 this year.”

Q&A — 8 exchanges

Good afternoon Sir. I wanted to understand how are the imports in technical ammonium nitrates now in terms of volume and pricing? 4 | P a g e Earnings Conference Call Q2 FY2023 • www.dfpcl.com Deepak Fertilisers And Petrochemicals Corporation Limited Earnings Conference Call Q2 FY2023

Amitabh Bhargava

Is that your question; are there any other questions you have? Yes, I have other two questions also. So the second question is I want an update on the debottlenecking of TAN facility and the third question is how are the key input prices trending now like natural gas ammonia polypropylene? That’s it. On the first question, my colleague Mr. Tarun is also on the call. Tarun if you can just take the first two questions and then I will come in for the third one. Absolutely. Thanks Amitabh. Thanks for the questions first of all. On the imports of ammonium nitrate so far this year has not been any u

Good afternoon gentlemen. Thanks for opportunity. Congrats on good set of numbers. Sir my question was on the fertilizer side, a new government ruled out new fertilizer policy, one nation one fertilizer, so can you highlight upon how that can impact us as a company on our margin side and can you even help us to know the modalities of this policy?

Amitabh Bhargava

My colleague Mahesh, he is also on line, I will request him to take this question. Good afternoon. One nation one fertiliser circular have been received, we are also trying to understand how finally it will be implemented. In terms of policy provision it says that there is some part of the fertiliser that would help to contain certain government communication which is related to subsidy and certain part of that can be used by the company to bring about their grant so this policy was announced recently and certain products have been started with that and we are trying to understand implications

Good evening Sir. the question is on the TAN business from a more medium to long term perspective how should we view the profitability per tonne for TAN business?

Deepak Balwani

As I was mentioning that as far as Q2 is concerned it is a lean period in not just in India because of monsoon effects but even in other large geography which consumes TAN and as you know TAN or the substitute of TAN which is fertilizer grade ammonium nitrate is essentially a fertilizer and therefore it is relative I would say consumption vis-à-vis other nitrogenous fertilizer it is kind of besides the prices of fertilizer grade ammonium nitrate and therefore the import substitute that we see in TAN in India also in a sense gets governed by that price at least partially. There is also obviousl

Good evening. I wanted to know what is the total input of ammonia we do in the financial year? 8 | P a g e Earnings Conference Call Q2 FY2023 • www.dfpcl.com Deepak Fertilisers And Petrochemicals Corporation Limited Earnings Conference Call Q2 FY2023

Amitabh Bhargava

I will just give you the numbers, any other questions you have? How you are going to supply ammonia to our Gopalpur project? In Gopalpur project, we have as part of the project we have a tie up with Gopalpur port where there would be an import terminal for ammonia and then we would have ammonia tank at our project site, so it will be essentially imported what the Taloja ammonia project would essentially do cater to the requirement on our western part of India that is Taloja and Dahej.

I was waiting for the capacity of import of ammonia?

Amitabh Bhargava

So roughly about 300,000 Kt and then of course we have our own old capacity. So, when there is some surplus ammonia for this plant? Like I said we have our own ammonia that we produce which has a capacity of 128,000 tons, so we produce some ammonia from our own plant and we have import which I did mention earlier, we also procure partly from other domestic players and as you know that our fertilizer capacity is on a ramp up, our capacity utilization and fertilizer are currently at about 67%, 68% as that would ramp up, basically the Taloja production would largely get consumed in our West Coast

Thanks for taking my question. My first question was on the ammonia plant, when the plant had initially been planned and announced you were expecting about $230 or $240 per ton of benefits versus import costs back then on the plant, so just in terms of numbers and given that the plant is four to five months away from commissioning and given the current industry scenario are we still expecting similar benefits or these going to be significantly higher than before and if so then how much and my second question was on the solar grade nitric acid capacities how much of overall volumes would these

Amitabh Bhargava

As far as ammonia margins are concerned based on current prices of ammonia and the lightly gas prices that we are looking to tie up the margins are likely to be significantly better, but I think it will be fair to say that a much better estimate or more accurate estimate can be fixed in our end and we can inform to the stakeholders once you have clarity on our gas prices. As we speak the gas prices are at current prices of ammonia to get let us say $230, $250 of delta we can afford significantly higher prices of gas, 9 | P a g e Earnings Conference Call Q2 FY2023 • www.dfpcl.com Deepak Fertili

Good evening Sir. Thanks for the opportunity for me to ask the question. Recently I heard some protest in the Odisha project which is near to Ganjam district, so still the protest is going on or the work is resumed and it is going to continue?

Amitabh Bhargava

We have also reported and we have given some photographs also as part of our investor presentation the piling work has started, with local traders there were certain issues which were more linked with the overall SEZ and earlier compensation issues which were there. I think those government has sorted out, the protest that you would have picked up was not specific to our project but are to a larger SEZ there and as far as our project is concerned we are getting support from local administration and our work has commenced and we have already in fact shown some progress through photographs in ou

Thank you everyone for your participation. For any further queries or clarifications please do get in touch with our Investor Relationship Team. Have a good day and thank you so much.

Management

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Speaking time

Amitabh Bhargava

Moderator

Deepak Balwani

Chetan Thacker

Sanjay Shah

Amarjeet Gupta

Nishit Shah

Hardik Shah

Tarun Sinha

Mahesh Girdhar

Opening remarks

Ranjit Cirumalla

Thank you Neerav. Good afternoon everyone and thank you for joining us on Deepak Fertilisers and Petrochemicals Q2 FY2023 earnings conference call. Today we have with us Mr. S C Mehta, Chairman & Managing Director, Mr. Amitabh Bhargava, President & Chief Financial Officer, Mr. Tarun Sinha, President, Technical Ammonium Nitrate, Mr. Mahesh Girdhar, President, Crop Nutrition Business and Mr. Deepak Balwani, Head, Investor Relations. We will begin the call with opening remarks from Mr. Mehta followed by comments on financial performance by Mr. Amitabh post which we will open the floor for an interactive Q&A session. I now invite Mr. Mehta to share his opening comments. Thank you and over to you Sir!

S C Mehta

Very good afternoon to all of you and I take once again lot of pleasure in welcoming all of you for this Q2 FY2023 earnings call of Deepak Fertilisers. I hope all of you have had a chance to look at the financial statements and earnings presentation uploaded on the exchanges in our website. At the outset I am quite happy to underscore the good news that our Q2 topline grew by 52% and bottomline by 195% and similarly the H1. Additionally our H1 bottomline surpassed the whole of last year’s profit. As you were thinking and as I was looking at it to try and see what do we believe as a root cause or that delivered this positive play and somewhere to look it at a distance that what other fundamentals that have been now indicated to these results, so I was wanting to share two from the outside in perspective and two from the inside out perspective. So from the outside in perspective what we see is that despite the huge raw material price hikes that we have seen over the last now year, year a

Amitabh Bhargava

Thank you Mr. Mehta. Good afternoon ladies and gentlemen and thank you for joining the Deepak Fertilisers and Petrochemicals conference call to discuss the Q2 FY2023 results. During Q2 FY2023 we 3 | P a g e Earnings Conference Call Q2 FY2023 • www.dfpcl.com Deepak Fertilisers And Petrochemicals Corporation Limited Earnings Conference Call Q2 FY2023 reported total operating revenue of Rs.3,719 Crores an increase of 51.7% Y-o-Y compared to same period last year. Our operating EBITDA increased to Rs.495 Crores compared to Rs.212 Crores in Q2 of FY2022. Operating EBITDA margins increased to 18.2% from 11.8% during Q2 FY2022. Our net profit for the quarter recorded a growth of over 195% Y-o-Y to Rs.276 Crores with margin of 10%. During the quarter, our manufactured chemical business recorded revenue of Rs.1,533 Crores an increase of 55% compared to Q2 FY2022, manufactured pharma chemicals recorded revenue of Rs.454 Crores an increase of 22% Y-o-Y, manufactured mining chemicals that is our T

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