GNFCNSEFinancial Year 2024January 17, 2025

Gujarat Narmada Valley Fertilizers and Chemicals Limited

7,287words
144turns
6analyst exchanges
3executives
Management on call
D. V. Parikh
EXECUTIVE DIRECTOR AND CHIEF FINANCIAL OFFICER, GUJARAT NARMADA VALLEY FERTILIZERS & CHEMICALS LIMITED
Y. N. Patel
HEAD OF DEPARTMENT,
Chetna Dharajiya
COMPANY SECRETARY
Key numbers — 40 extracted
INR 2,300 crore
the quarter, both at Dahej as well as Bharuch. • In terms of the project, projects worth around INR 2,300 crores are already approved, are at various stages of implementation. My colleague, Mr. Y. N. Patel, wi
INR 211 crore
and both PAT have gone up on a sequential quarter as well as Y-o-Y basis. We ended up with around INR 211 crores of PBT and INR 158 crores of PAT. There are two important reasons because of this positive chang
INR 158 crore
on a sequential quarter as well as Y-o-Y basis. We ended up with around INR 211 crores of PBT and INR 158 crores of PAT. There are two important reasons because of this positive change in the PBT and PAT. One
INR 76 crore
have happened during the quarter. So, this all totals up to in that incremental figure of around INR 76 crores on a sequential quarter basis. Coming to the segment part of it, as you know, in chemicals, part
INR 50
ier conversations during the con call, you have mentioned that our fixed cost for TDI is close to INR 50 a kg or INR 50,000 a metric tonne. And at the contribution level, the TDI plant on an annual basis
INR 50,000
ns during the con call, you have mentioned that our fixed cost for TDI is close to INR 50 a kg or INR 50,000 a metric tonne. And at the contribution level, the TDI plant on an annual basis was making a loss
INR 150 crore
at the contribution level, the TDI plant on an annual basis was making a loss of close to around INR 150 crores to INR 200 crores, correct me if I am wrong here. So, 2 things here, sir. If you can share that
INR 200 crore
on level, the TDI plant on an annual basis was making a loss of close to around INR 150 crores to INR 200 crores, correct me if I am wrong here. So, 2 things here, sir. If you can share that with the shift to
INR 14,500
t foresee any further time overrun. Upon being operational, the current budgeted figure is around INR 14,500 saving per metric tonne of TDI, because of the differential between coal and gas price. On the HCL
INR 100
variable cost; it depends on the chlorine availability and caustic production. It varies from the INR 100 to almost INR 1,500. Fortunately, GNFC is giving around INR 500 minus. So, we are charging INR 10
INR 1,500
depends on the chlorine availability and caustic production. It varies from the INR 100 to almost INR 1,500. Fortunately, GNFC is giving around INR 500 minus. So, we are charging INR 10 at the cost, invo
INR 500
ic production. It varies from the INR 100 to almost INR 1,500. Fortunately, GNFC is giving around INR 500 minus. So, we are charging INR 10 at the cost, invoice value. And then we give discount of INR 500
Guidance — 20 items
Dilip Parikh
opening
“• In terms of the project, projects worth around INR 2,300 crores are already approved, are at various stages of implementation.”
Dilip Parikh
opening
“Patel, will cover questions on the project.On the strategy side, As you know, we have appointed Kearney for both growth as well as transformation.”
Dilip Parikh
qa
“Parikh, answering your first question on what will be the differential saving when we switch over to the coal-based power plant?”
Dilip Parikh
qa
“So, we will come to know finally what will be the number at the end of the year.”
Dilip Parikh
qa
“So, that is where we feel that whether there will be change or not is not clear.”
Manish Upadhyay
qa
“Indian demand is around 5 lakh tonne and around 2 lakh tonne is being produced by GNFC and 3 lakh tonne will be imported.”
Manish Upadhyay
qa
“It will be reduced since Quarter 2 normally when monsoon is there.”
Dilip Parikh
qa
“And in respect of CCPP project, the last completion schedule, we were behind by around 40%.”
Dilip Parikh
qa
“Out of INR 613 crores, INR 525 crores worth of project is already given on an LSTK basis.”
Neerav Jimodia
qa
“And the commissioning would be next year or...”
Risks & concerns — 8 flagged
So, very difficult to make a guess, not only for any unit, how much government will revise, what kind of position, although they exercise it at a very advanced level.
— Dilip Parikh
See, in case of controlled businesses, it is difficult because we are not expanding into the fertilizer.
— Dilip Parikh
So, in terms of the weak nitric acid, that's where the largest part of the CAPEX is growing, INR 14 crores, INR 20 crores.
— S. Ramesh
So, if you're expecting that to be commissioned by '28, maybe by FY '29, '30, we will be able to achieve that full impact of the 14% ROCE, right?
— S. Ramesh
See, these are difficult guesses to make, but our internal perception, including what is available in the public domain by expert is that the downturn in Chemical cycle has lasted longer than expected.
— Dilip Parikh
Difficult to make such guesses and tell you that whether it will be 12%, 20% or 5%, because the way we operate, we normally have a visibility of a few months down the line apart from the overall visibility of how the direction is taking shape.
— Dilip Parikh
And inefficiency or not meeting the standards of fixed costs, which are difficult to meet for most players in the industry.
— Dilip Parikh
When it comes to the other part, which is a complex fertilizer, yes, this is going to help if there is a reduction in the input cost, because the base is again oil- based ammonia predominantly, rock phosphate and weak nitric acid.
— Dilip Parikh
Q&A — 6 exchanges
Q
Yes. So, thanks for the opportunity, and good afternoon to the team. Sir, I have few questions. So, first, on the TDI side, sir, in some of our earlier conversations during the con call, you have mentioned that our fixed cost for TDI is close to INR 50 a kg or INR 50,000 a metric tonne. And at the contribution level, the TDI plant on an annual basis was making a loss of close to around INR 150 crores to INR 200 crores, correct me if I am wrong here. So, 2 things here, sir. If you can share that with the shift to the coal-based plant and its current differential to the natural gas prices, how m
Dilip Parikh
Okay. I am D. V. Parikh, answering your first question on what will be the differential saving when we switch over to the coal-based power plant? The coal-based power plant is likely to schedule the commencement around 1st of August as per the current plan. There is some delay of around 4 months in that, after which we don't foresee any further time overrun. Upon being operational, the current budgeted figure is around INR 14,500 saving per metric tonne of TDI, because of the differential between coal and gas price. On the HCL negative contribution, I am requesting my colleague, Shri Manish Up
Q
Thank you very much for the insight. So, the first part, if you look at your Chemical segment, the margins have improved substantially Y-o-Y and even on a quarter-on-quarter basis. So, apart from the savings input cost, which are the products on the Chemicals, where you're seeing this improvement in margins, because we are not able to make that out in the spreads you have shown in the presentation. So, which are the products where you've seen this sort of margin improvement? And how do you see the outlook, say, over FY '26, '27 in these products where you're seeing this margin improvement?
Dilip Parikh
Okay. I am D. V. Parikh, if you look at the chemicals segment, basically, the profits are coming from there. And their AN Melt, technical grade urea are contributing positively, okay, on both Y-o-Y basis and a sequential quarter basis, and mainly it is driven through the higher volume. Okay. So, that means you're getting a lot of operating leverage, below gross contribution. So, in terms of headroom for volume in these 2 products, what is the kind of additional sales growth, you can expect in FY '26, '27? In AN Melt and technical grade urea, you mean? Yes. The debottleneck capacity for urea is
Q
Thanks for the opportunity, and congratulations to GNFC, entire team for good set of numbers in this tough environment and guiding for better 4th Quarter going forward. I got two questions, sir. So, currently our margins are in last 8 quarters between operating margins are around 5% to 8% range. And earlier, we have done on the higher side, I think 25%, 30% margin also, it is 2, 3 years back. So, shall we assume that this is the tough environment, and this is the bottom margin reflected? And what should be, okay 28%, 30% as the best case. Shall we presume this is the worst margin? I think almo
Dilip Parikh
Okay. Probably you have taken this percentage from the public domain we are publishing, where we are also publishing the EBITDA data. So, that is showing the figures which you spoke about. Yes, I have taken from screener, sir. Okay. Screener. Okay, fine. Now screener will also reflect more or less the same thing which we have given. In fact, our data will be more accurate than screener, because we know the individual line items at P&L level. As far as your question on what is the maintainability of margin, whether it has bottomed out or not. See, these are difficult guesses to make, but our in
Q
Yes. Hi. Thank you for taking my questions. My question is, sir, you mentioned we are a lot dependent on imports. So, just wanted to understand the contracts for ammonia and natural gas, are these long-term contracts? And how are they indexed? What is the structure of these contracts? If you can just throw some light on that, that will be helpful. Is the index or benchmarks that they are based on? Thank you.
Dilip Parikh
Okay. I am Dilip Parikh answering your question. See, if you talk about our key inputs, gas, oil, coal, rock phosphate, benzene and toluene, these are the key inputs for the company. Now whether there is a long-term contract or not, we have a long-term contract for the gases of urea. We don't have the long-term contract for the Chemical part of it. We do have short-term contract and the spot purchases of gas. We have a mid-term and long-term contract for oil, which is worked out based on the mutual understanding about what are the global benchmarks, okay? For example, in case of oil, there are
Q
Hello, thank you for the follow up. So, on this transformation exercise you're doing with Kearney, I know you said you will share it once you are in a position to discuss it after the 4th Quarter. But in terms of your broad thought process on the avenues of cost savings and incremental growth, what are the key areas you would have possibly identified for this study, just to get your thought process?
Dilip Parikh
Okay. I am Dilip Parikh answering your question. See, there are various items at variable cost level, majorly and only some at fixed cost level. Fixed cost level addressing has a structural issue to be addressed. So, that's a matter which is yet to be debated. On the variable cost level, there are items like power, fuel, etc., sourcing of oil, etc., which is being firmed up And then we will come to know exactly how much benefit we can expect as against what is being advised to us. Okay. So, basically, it's your attempt to reduce the variable cost and improve the contribution. Got it. So, this
Q
I would request the company secretary to place a vote of thanks, please.
Chetna Dharajiya
Yes. Good evening, everyone. I am Chetna here. My sincere thanks to all the participants for active participation. I am thankful to the moderator and Anurag Services LLP. I am also thankful to all the members from Management team. Thank you, everyone.
Speaking time
Dilip Parikh
51
Neerav Jimodia
28
S. Ramesh
18
Govindlal Gilada
13
Moderator
8
Chetna Dharajiya
8
Manish Upadhyay
6
Yogesh Patel
6
Ankur
3
Coming now to the financials
1
Opening remarks
Dilip Parikh
Thank you, ma'am, and thank you, Anurag Services for holding the call, and good afternoon, and welcome to all the participants for the Quarter 3 Conference Call of GNFC. First, I will cover the business aspects and thereafter, I will touch the financial part of it. As you know, the company is mainly into the 2 segments, Fertilizers and Chemicals. On the Fertilizer side, by and large, it's a controlled business in terms of mainly the subsidy part of it. There are 3 positive developments which are there from the Fertilizer business point of view: • One is the regular receipt of the subsidy, which is not holding up the funds. Pipeline inventories are also at its lowest, as at the quarter end. When we talk about pipeline inventory, we mean inventory pending the DBT sales. • The second other positive aspects is government is working on revising the energy norms, which are scheduled to expire by 31st of March 2025. And exercise is also on at Central Government level for revising the fixed co
Coming now to the financials
As you know, the PBT and both PAT have gone up on a sequential quarter as well as Y-o-Y basis. We ended up with around INR 211 crores of PBT and INR 158 crores of PAT. There are two important reasons because of this positive change in the PBT and PAT. One is the certain operational improvement because of the higher Chemical volume. And second is there are a few write-backs, which have happened during the quarter. So, this all totals up to in that incremental figure of around INR 76 crores on a sequential quarter basis. Coming to the segment part of it, as you know, in chemicals, particularly few chemicals like TDI and Technical Grade Urea have done relatively better on a sequential quarter basis and Technical Grade Urea as well as a few other chemicals like Acetic and AN Melt have done far better in terms of volume on a Y-o-Y basis. So, when we go to the segment results part of it, the Fertilizer losses have reduced mainly because the input costs have come down into the Complex Fertili
In terms of balance sheet
There is no major change, except that the receivable of subsidy have come down, mainly because of receipt as well as the receipt based on the reference point of earlier concession rate, which is higher. So, these are the broad things on the balance sheet part. Therefore, in terms of cash flow, there is a positive in terms of operating cash flow. So, these are the aspects with which I am closing my opening remarks and leave the floor open for the questions-and-answer session. Thank you.
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