Chambal Fertilizers & Chemicals Ltd

Okay. And what is the total CAPEX that we can expect in FY '26?

That is what I was telling you. See, the total CAPEX in '25-'26 will be of the order of Rs. 1,200 crore.

Got it. Can you help me with the urea volume numbers in Gadepan - I, II and III for Q4?

Yes, for Gadepan - I, we have 2.4 lakh tonne, for Gadepan - II, we have 2.57 lakh tonne, and for Gadepan - III, 2.11 lakh tonne.

Got it. That is helpful, sir. And what was the gas price for 4th Quarter?

Gas price for 4th Quarter is around $15.55 dollars/mmbtu on NCV basis.

Got that. And lastly, how much ammonia have we sold in 4th Quarter or in FY '25 as a whole? I think we sold over 1.03 lakh tonne.

This is FY '25, right? FY '25, that's right.

Yes, got it. Got it. That is all from my side. Thank you.

Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Institutional Equities. Please go ahead.

Good morning. If you look at your performance in crop protection, what is the driver for the improved margins? And you have given the gross margin, so what will be the EBITDA margin in percentage terms? And what will drive this 23% in revenue between FY '25 and FY '27, will it be predominantly the new products, how do you see that?

I think we have over the years established an efficient sales mechanism which continues to give us, so far, the margin. Our alliances also help with that. Our direct discussions with various companies who are providing us either the technical or the know-how, then we are getting it made from various formulators and all that. So that is one part, as far as the margin is concerned.

The second part on margin is the freshness of the products, how many new products that we introduce, whether it is in weedicides, herbicides, fungicides and so on. So there is a strategy working out there in terms of how we place and procure these materials. So far, in the last three years there are any indication, these have been steady and we are proposing to also repeat this performance in FY '26. So, this continues to work for us. And I think the last time when we had this discussion, we had made the point that being the bridge between the farmers' pain point and a solution which we actively pursue and do lot of research on, I think is the secret sauce that you are looking for.

Correct. So if you look at the 4th Quarter in terms of this crop protection revenue growth, how much of that will be volume growth versus other companies are talking about some pricing pressure. So, in your case, how much is driven by volume growth?

It is mostly driven by volume growth. And there are some fast catch-ups also in this.

Mr. Ashish can answer this question more fully.

Yes. Usually, the question is right, whatever crops consume crop protection chemicals in Q4, basically sugarcane, so this is basically volume growth, and not much of price issues in that.

Sir, if you look at your fertiliser trading portfolio, you have seen healthy growth in NPK and DAP. So, do you expect to continue this trend? What are the kind of growth you would expect in the trading portfolio in DAP and NPK next year?

See, we did about 5.5 lakh tons, plus or minus, in the whole year FY '25, primarily split between MOP, DAP, TSP and NPKs. My guesswork is that this year we will have much larger portfolio of NPK, possibly doubling it or growing 250% on that.

MOP could be the same or slightly subdued. And DAP will grow as I mentioned to the first participant, that given the Government's policy, we have no hesitation in stepping in and doing our part. Plus the fact that our channel would expect that kind of support from that. So, I would hazard a guess, but I think we are well covered in terms of kharif. And almost this amount that we did last year, we would do in kharif itself.

Just going back to crop protection, what is the on ground preplacement demand for kharif, given the summer crop acreage has shown healthy growth, how do you see that?

So, whatever forecast you are looking at, whether it's IMD or SkyMet, we are expecting a normal monsoon again. And whatever inventory pressures were there in the competition of past years, those have also gone out. So, we expect a robust growth in CPC segment overall.

Thank you very much and I shall join the queue. Thank you.

Thank you. The next question is from the line of Tarang Agrawal from Old Bridge Capital Management Pvt. Ltd. Please go ahead.

Good morning and congratulations on an extremely strong performance, especially in the crop protection business. I have a couple of questions pertaining to crop protection. One, sir you spoke about 64 products being active in the portfolio today.

These are 64 Stock Keeping Units (SKUs) or these are 64 unique products?

And second, I mean, just to get a better handle, I mean, if you could give us a sense on competitive intensity in your portfolio? I mean, are there alternates available for a large part of your portfolio, not available? Just wanted to get a sense on how unique the portfolio is. That's one.

Second, further to the earlier participant, how confident are you to be able to maintain the financial metrics of the trading business apart from growth, I mean, everything else going forward in FY '26?

I will take the second question first. As far as the financial metrics for trading are concerned, we are pretty confident that having procured strategically and tactically in the first quarter, we are sitting at competitive price levels, I would say, which creates the necessary margin for us, that is number one. And going forward, of course, the market is shifting, it has tightened in terms of prices. But as we said that we are more or less stocked for kharif. Going forward we would like to see how this plays out in the international market. There are geopolitical issues, but there could be entrants such as China into the market once again, that could soften up the general levels because there is the displacement of stock from one place in the globe to the other place of the globe, also has knock on effect.

Now, as far as the first part of your question is concerned, the 64 SKUs are actually products. There are 64 products split between weedicides, fungicides and herbicides, etc. These exactly are the result of our cultivating various alliances and relationships whereby, we are getting superior products than what the market normally gets in this kind of a business. We have those alliances whereby people are giving us Generation-1 or Generation-1.5x so we get a competitive advantage.

And the sourcing strategy is very important part in this business. So, we do work over a period of at least eight, nine months prior to the business plan to understand what we will need, how do we source it, what alliances do we need. And we create those kind of contacts with people and get that material in time. So, this has been going on now for the last 3, 4 years. I am pretty confident this is a workable proposition in this business.

How unique is the portfolio like for instance, some of these products like NO GRASS and MANCONIL seem to be fairly generic and not so unique right, but if I look at something like a HIROI or THEO or a WheMo, so just wanted to get your sense on how unique are these? I mean are there alternatives available because then we probably get a better handle on what is actually driving the metrics of this business?

See, 70% of Indian Crop Protection Chemical business is through generics, so only 30% are patented or niche products. When you talked about the product uniqueness,as Mr. Baijal mentioned that because of our relationship, now we are getting some of the products in the year of launch. So we don't have to wait for 2 or 3 years for the product to be launched and then you are getting it. So that's the uniqueness. So we get some products in the year of launch. Secondly, depending on the crop stage and farmer spending behavior, you always have to keep a portfolio.

Just to put one small example, say for stem borer and leaf folder segment, I sell Cartap Hydrochloride and I sell Fipronil. So, they are in different price bands for different crop stage. So that is there with almost all companies. We also do similar working.

Got it. Mr. Baijal, just last question. I mean, from a capital allocation, you have laid out about Rs. 1,300 crore of outlay and there are capital projects under consideration. But purely from a size standpoint, what could be the ticket size of the projects that are under evaluation currently?

I would not hazard a guess, but they are not small projects. That's all I can say.

Sure, sir. Thank you and all the best and congratulations on a very strong FY'25.

Thank you. The next question is from the line of CA Ashok Jain, who is an individual investor. Please go ahead.

Yes, good morning, Mr. Baijal and the team. So, my questions are basically from if you refer page #18, that is consolidated segment wise revenue. So if I see there, I find that the complex fertiliser on the quarter 4, the revenue is Rs. 166 crore and profit is only Rs. 9 crore. And last quarter also the profit was very low in this segment.

And there is one item which is segment asset, which is complex fertiliser. It has gone from 31st December 2024 from Rs. 825 crore to Rs. 1,601 crore. So my question is that in this segment, we are not making profit and instead we are adding the asset.

So we must be incurring obviously opportunity financial costs. So this is what my question is, how to tackle this? One is this. And second, I want to know that if I see quarter 4, our revenue from our own manufactured fertiliser is Rs. 2,243 crore and profit is only Rs. 79 crore, which is 3.4% as against the last quarter where it is 17%.

So can you just clarify these two issues how to handle it? Especially complex fertiliser is becoming complex for me.

Okay, Mr. Jain, let me just make it clear. We had actually built up the stock. We have purchased tactically I think I've made this mention. So when you purchase tactically and you will report the segment asset, naturally the value of stock will get in. This is not a manufactured item, there is no plant and machinery in this. So from last year to this year, there has been an increase in stock. So that is, and that will flow in terms of benefits when we make the sales in the Kharif season. So that is one part. As far as Rs. 9 crore profit that you mentioned for complex fertiliser, that is dependent on the sales that must have been done. In this last quarter, we would have hardly sold less than half a lakh tonnes or something like that. So that kind of number is possible in small sales that are there. Now let's come to the sales of own manufactured fertilisers and the reduction in margin. This follows from the policy principle beyond reassessed capacity. When you actually produce beyond reassessed capacity in the policy, the profit metrics are quite different. And they also depend upon the debit of various types of expenses such as repair, maintenance which are more heavy in this particular quarter because as I told you, Gadepan - III plant had a shutdown as there was an annual turnaround. So there is a debit of large amount of repair maintenance that is one thing. And secondly, there was also a 14-day shutdown of Gadepan - I and this startup expense and shutdown expense also gets debited, so these are the reasons.

Can we make it more rational something like that? Is it possible in future going forward because it is quite low from 17% to 3.4% seems very low.

This is the nature of accounting in the last quarter. That is, if you recognize the cost and revenue as it is for the period, that is the way it's done in the past.

Okay. So one last question. The CAPEX plan, you are saying that 25-26, it will be around Rs. 1200 crore. So my question is this, how are we going to source it from the internal accruals?

Yes, we will do it from internal accruals. Thank you sir. Thank you.

Thank you. The next question is from the line of Deekshant from DB Wealth. Please go ahead.

Hello sir, congratulations on a strong set for this financial year. So you have alluded how China can become a risk factor for us in the short to medium term. Could you give us a little bit of more color and explain us how this risk can be seen?

I am just saying that China, from being a very steady supplier of P&K fertilisers and even urea to some extent has now become an off and on kind of party for the last 3 years. For whatever reasons, they are internal, they may be diverting some part of their phosphoric acid capacity into battery manufacturers for electric vehicles. They could be doing it for geopolitical reasons, whatever it is. But the fact is the global supply from China is now fluctuating to some extent as against being a steady player in the last 3 to 4 years. So that means that for certain types of P&K products, we have to shift in terms of sourcing to other geographies, which is let us say Morocco, Saudi Arabia, Jordan, or Russia, or even US for instance. So the dynamics keep changing, but I am confident that overall the supply situation in the world is steady, although because of the geographical intensity of where the rock or the raw material is found, there are kind of monopolies that get created. So that creates problems in terms of how the trade plays out as compared to for instance, urea or ammonia which is much, much more kind of open and many suppliers being there so it evens out the competitive situation and you get better negotiation capabilities. So that is what it is.

That is what I meant in terms of how this will play out. Nevertheless, I think the Government and the trade and industry in India have been working assiduously to create backward linkages or to create long-term MoUs with various other countries.

So overall the supply in the world is more or less the same. From somewhere or the other you will get the material.

It is pretty reassurance to know that we have more sources to get this, but does this come at an operating margin cost to us or even part level cost to us because I am assuming that China would be more competitive than others and since we are on a trajectory of improving margins right now, what kind of margin guidance can you give us or just any ballpark number of improving margins that we see?

I won't hazard a guess on margins. Margins are dependent on how you have strategically bought it. It is a kind of position taking sometimes in this business. And if you have taken a correct position for a particular margin, it will be looking very healthy. Next year, you could have made the mistake of having bought early in a falling market or having bought late in a rising market. So those things are your judgmental call 60% to 70%, and how good your judgment is makes the difference.

Obviously, Chambal has a very strong balance sheet. Its carrying cost is low. It can take positions if it wants. But that is also dependent on a less turbulent policy regime.

If you know that in the P&K sector, in the past there has been a lot of turbulence in

the policy and discontinuities which have prevented people or companies like us, instance in Chambal, not to take long bets in the market. So that's the reason why you have seen volumes having shrunk to some extent. But as the policy now starts to open and get rationalized, the volumes will spring back.

That is pretty much clear sir. So out of the Rs. 1600 crore of CAPEX that we are doing, what kind of revenues can we see this adding up on our topline in FY'26?

Even let's say full calendar year because we are starting from January. So how could the 4 quarters be if Rs. 1,600 crore of CAPEX has been done?

So first of all, our Financial Year starts from April, not January. What I talked about was from April to March 26, which is about Rs. 1,250 odd crore. Most of it is getting into the TAN project, almost Rs. 900 crore if I am not wrong. And Rs. 300 odd crore is routine capital expenditure, which is for replacement and for renewal and reliability.

So those types of projects also have some knock-on benefits here and there in terms of either small margin expansions or an increase in capacity. Because reliability increases, you are able to run the number of days increases. So those kinds of things also happen. But from the point of view of certain changes, these plants are highly complex and require equipment changes over a period of 15-20 years. So that is factored into this type of capital expenditure that we are doing. The benefits that will flow, as I said, are first of all in the TAN project. Obviously once the project gets commissioned, we will try and achieve capacity utilization and EBITDA, etc. will flow from that, that is first of all. Secondly, in terms of those replacement capital expenditures or where small margin improvements or I think liability will improve the capacity or something to that effect. Those are the things that you can expect in '25, '26 and '26, '27.

Just trying to get a number on what kind of revenues and EBITDAs can we see once this TAN project is getting commissioned and is being utilized to be appropriate utilization?

You see, TAN project is given as 2,40,000 tons of capacity. And you can do the math that currently I think the product sells at between Rs. 35,000 to Rs. 40,000 a ton given various types of scenarios that you can paste. So you can do the multiple of that, that is on full capacity, what is the number and what is at 70%, 80%, you can take a guess being the first year of operations.

What could be our operating margins on this? Any ballpark number?

That you can benchmark with the industry.

Sure. Thank you so much, sir. This is very reassuring to know.

Thank you. The next question is from the line of Sophiya Masta from Elara Capital (India) Pvt. Ltd. Please go ahead.

Thank you so much for the opportunity. I just wanted to know where does our net debt stand as of 31st March net debt of cash? If I am not wrong, net debt is negative.

Okay. Thank you so much.

Thank you. The next question is from the line of Sandeep Mukherjee from SKP Securities Limited. Please go ahead.

Hi. Thanks for taking my question. What is the ammonia sales number in the total sales?

I think I have mentioned 1.03 lakh metric tons and average, I would say we would have sold between Rs. 40,000 to Rs. 45,000 a ton.

Okay sir, thank you.

Thank you. The next question is from the line of Chandra Gupta who is an individual investor. Please go ahead.

Thanks for this opportunity. So I just have one question. Recently there was a news report about India, the Government giving rights for potash mining in Rajasthan. So would we be interested in these kind of projects, your thoughts on this?

Mr. Chandra Gupta, first of all, well, if the mine is adequately priced, the seam is rich, I would say, what my understanding is, there are small pockets of potash and it may require beneficiation to get it to the right quantity because when you sell potash in the market as straight potash, it has to be almost 60% KCI (potassium chloride). And my understanding is that this is not of that grade. How low it is or how high it is, we will have to check. My initial inquiries showed me that it is a lower grade material which will require quite a bit of beneficiation. And one has to also examine the economics, whether we import or other suppliers. Traditionally, you have got potash in the region of $220 to $350 per ton. One has to do the math to understand from a mining point of view what will be the cost of making this potash available from these sort of low-grade seams or quality or whatever the quality of the mine is.

Okay, so we haven't shown any interest in this. I understand. Thanks a lot. That is it from my side.

Thank you. The next question is from the line of Manish Mahawar from Antique Stock Broking. Please go ahead.

Yes, sir. In terms of, I believe Government is thinking to, I think, increase the fixed cost reimbursement to the urea players, right? I just wanted to know your thoughts and how are the discussions?

This is a work in progress, I can't say what's going to happen.

Okay, but historically, when this fixed cost has been increased for the urea industry?

The last time this exercise was done, whether increase or decrease, I don't know, was done in 2002 and 2003. And there was, in 2014, roughly Rs. 350 per ton kind of ad hoc increase given to all units in the industry. So I don’t know where they are on this matter, but there are discussions happening and there are lot of differing points of view on this issue. That's the work in progress. As and when we come to know, we will keep you informed.

Yes, sure, and secondly, sir, in terms of your crop protection business, what we did was Rs. 900 crore for topline. Is it possible to share the number geography-wise, maybe North, South, East, West, to understand how our penetration or distribution is strong?

We are selling in all parts of the country.

Okay. But any bifurcation in terms of which part is stronger or is still?

You see, wherever we have our presence by way of a fertiliser sale or wherever our locations are and you know that we have got almost 28, 29 locations. We are in UP, we are in Rajasthan, we are in Punjab, we are in Gujarat, we are in Maharashtra, we are in Bihar, we are in West Bengal, we are in Telangana, Andhra Pradesh, Chhattisgarh, everywhere little or more, this is a product which is a priority for us and it's doing well as you see. And then various areas, various crops, various types of molecules, they also have to be product market fit. So it's a little involved subject to just tell you on this.

And secondly, on the crop protection business, any intent to go ahead with the export as a market? As I know, right, export needs plant or manufacturing to go ahead with. So any intent in the future?

See, I will tell you what. This is a perennial question which people keep asking me, whether export production or formulation by ourselves. We have looked at various opportunities in the past. I would not say that we have not. But most of the time, when you do the math in terms of acquisition cost versus the return that you will expect, the returns come out to be lower than what we would be doing in this mode itself. So there is a big dichotomy or dissonance in a mind as to how to do this. That does not mean that we do not look at opportunities. Sometimes you might find a very reasonable asset and an offer could be made and accepted. So I am never ruling out that possibility.

Okay, understood. And last one, in terms of your JV partner, basically the profitability has significantly improved this year. Is it possible to share the production number of your JV or maybe this profitability improved on account of spread, better spread?

I think they did about 4,90,000 tons close to that. And I would suggest Mr. Jain to give you a brief ballpark number on that.

They did about 5.25 lakhs tons of production and about 4.35 lakh ton of sale.

Okay, is it possible to share the last year number please?

Last year, it was about 4.35 lakh tons of production and about 3.8 lakh tons of sales.

Okay, understood. That's from my side and all the best. Thank you so much.

Thank you. Ladies and gentlemen. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

So, thank you very much, ladies and gentlemen, for your participation in this call. We hope that we have been able to satisfy your queries. In case there is any further requirement of any further information, you can reach out to us. Thank you so much.

Thank you. On behalf of Chambal Fertilisers and Chemicals Limited, that concludes this conference. Thank you for joining us. -----------------------------------------------------------------------------------------------------------------------------------------------

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