DEEPAKFERT - Deepak Fertilizers &Petrochemicals Share Price

In the Q1 FY 2026 earnings call, management provided a positive outlook for Deepak Fertilisers, highlighting a 17% increase in operational revenue to Rs. 2,659 crores and a 22% rise in net profit to Rs. 244 crores for the quarter ended June 2025. The company achieved a net debt reduction of over Rs. 225 crores, improving its net debt-to-EBITDA ratio from 1.72x to 1.5x, despite ongoing capital expenditure (CAPEX).

Key forward-looking points include:

1. Ongoing Projects: The Gopalpur (Technical Ammonium Nitrate) project is nearing 90% completion, with 100% of tagged equipment ordered. The Dahej nitric acid project is 57% complete. Both projects are scheduled for commissioning in Q4 FY 2026, contributing significantly to future revenue.

2. Specialty Products: The company reported that 25% of revenue now derives from specialty products, providing price premiums of 15% to 40% compared to traditional commodities, and aims to enhance this percentage further as the strategy to shift toward specialty products continues.

3. Revenue Growth Expectation: With favorable monsoon conditions anticipated, the management expects strong momentum in the crop nutrition segment for the Kharif 2025 season, driven by high-value solutions such as Croptek.

4. CAPEX Investment: A total investment of Rs. 4,661 crores is planned across Dahej and Gopalpur projects, underscoring a commitment to expansion and capacity building.

5. Export Quota Increase: The TAN export quota was increased from 20,000 to 50,000 metric tonnes, positioning the company for stronger growth in H2 FY 2026.

Management emphasized the resilience and robustness of the business model, indicated by consistent operational efficiency improvements, with operational efficiency (OPE) rising from approximately 78% to 86%. The company is also focused on maintaining EBITDA margins within the 18% to 20% range while navigating potential pricing pressures in its product segments.

1. Question: How meaningful is the TAN value addition business for us? Where do we see ourselves in the next two to three years with this value addition services?

Answer: Currently, the B2C segment contributes 16% of our total revenue. We have been pursuing a total cost of operations model to optimize rock extraction for end consumers like mine owners. This model has proven successful across various mining conditions. As we scale up, we aim to enhance our capabilities and investments, continually moving in the right direction for our TAN value addition business.

2. Question: If we expect Gopalpur to achieve 75% capacity by FY '27, how are we ensuring this? Have we done any tie-ups?

Answer: We're looking at domestic demand, which exceeds current supply, making our new capacity essential. Annual ammonium nitrate imports are around 400,000 tons. With Gopalpur positioned on the East Coast, we can replace imports while meeting growing domestic demand efficiently. Strong logistics will help us optimize delivery and utilization, reinforcing our market position effectively.

3. Question: What was the earlier export quota of TAN before it was increased to 50,000 metric tonnes? Were we able to utilize the previous quota?

Answer: The earlier quota was 20,000 tonnes, which we fully exhausted. The new 50,000-tonne quota from the Government of India is per financial year. Once we meet the new quota, I anticipate the government may remove the export quota for ammonium nitrate altogether, which would further enhance our export capabilities.

4. Question: Can you share the CAPEX completed for both Gopalpur and Dahej projects? What is the outlook for ammonia demand globally?

Answer: We have completed approximately Rs.1,700 crores in CAPEX for both projects so far. Globally, we're not seeing ammonia shortages; current prices are low but expected to rise in H2 due to plant restarts in Europe. Overall, while there's ample supply, pricing dynamics are crucial and require close monitoring.

5. Question: With the new plants commencing, are we expecting any losses in the first quarter?

Answer: No, we do not expect losses at the launch of our new plants. Though initial capacity utilization may be low, the projects are designed to achieve positive margins quickly. The focus will be on ramping up output efficiently within the first few quarters following their commencement.

6. Question: Are we seeing any Tanner exports from Russia now that they have resumed?

Answer: Initially, the Ukraine conflict caused a temporary spike in imports from Russia due to market shifts. Presently, TAN imports in India have diversified, with various sources supplying the demand. Over the past quarters, the sourcing of TAN has become more balanced among multiple countries, lessening dependency on Russian imports.

This summary encapsulates the key questions and insightful responses from the earnings call while adhering to the character limit.