CHAMBLFERT — earnings call

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Questions and answers

CHAMBAL FERTILISERS AND CHEMICALS LIMITED Chambal Fertilisers and Chemicals Limited

also · Research Analyst

placing a great amount of emphasis on communications and reaching out to all our stakeholders and partners.

Through social media we have now extended our reach to 30,000 people.

Besides, our Hello Uttam experts at four locations received more than 10,000 calls and queries from field asking for dosage of the products, weed control, insect pest management in Kharif crops.

As part of the Seed-to-Harvest program, a key focus area for Chambal, we undertook more than 3,800 farmer meetings, conducting over 3,000 demos and 4 soil sample days to collect over 2,000 soil samples.

We have now tested a total of 58,000 soils for macro and micro-nutrients.

Our technical ammonium nitrate project is progressing as per plan.

Statutory approvals are in place and we have spent around Rs.

388 crore till September end 2024.

The overall progress achieved is about 37% and things are on track.

Our joint venture, IMACID, is also performing well with higher production and better margins.

And we continue to look forward to create more and more value for our shareholders.

CHAMBAL FERTILISERS AND CHEMICALS LIMITED

Prashant Biyani

With that, we are now happy to take your questions.

Thank you.

Thank you very much.

We will now begin the question-and-answer session.

We will take our first question from the line of Prashant Biyani from Elara Capital (India) Pvt.

Ltd. Please go ahead.

How much is the additional EBITDA contribution from the 3% energy efficiency improvement? | would say that it is in healthy double figure.

Can you quantify the number?

When | say healthy double figure, it is about Rs.

35 crore to Rs.

40 crore.

And by when is the next leg of the energy efficiency initiative going to be implemented for urea plant?

Prashant, we have a roadmap stretching out to 2028, and there are various projects which are under consideration, some have been awarded to consultants for doing the necessary engineering work.

We shall be awaiting their replies.

Then there is a cycle of ordering the equipment, and then putting them in place during the turnaround.

So, this will stretch up to 2028, we have a plan going forward.

See, what | want to show you is that energy efficiency remains a very key focus for the Company; number one.

And number two, we are looking at good efficiency projects going forward.

And we have a plan in place, there will be at least three to four such plans that we will implement, which have been generated in-house, and they have to be vetted by the various engineering consultants.

How much was the additional subsidy on DAP pertaining to Q1 for sales? | think the government had announced a number of Rs.

3,500/MT, we have accounted a little less than that.

And your subsidy outstanding has reduced dramatically in the last few quarters and especially in Q2FY25 as well.

Sir, does it also include subsidy pending on fertiliser sold, but are yet to achieve POS sales?

We are accounting it in the books at the first point of sale, it becomes a book debt.

So, it will include both, what is billed to the government and unbilled to the govemment.

In that case, is it that your fertiliser sales at retail level happen within the first 70-75 days of the quarter itself?

And which is why you get subsidy before the quarter closes; is that the case?

No, it is not like that.

The sales of fertiliser is a continuous process.

Now it could be in higher intensity or lower intensity as time goes on.

So, the first 75 days and all that, | think is an artificial distinction.

There are some territories where it will be a little late, for instance, it may be due to climatic conditions, it may be due to sowing conditions.

So, those things keep happening and we are fortunate today that the government has got a substantial amount in terms of its budget to pay to the Company.

And if you efficiently raise your bills, they are getting paid on time.

Right.

Sir good efforts on that part for reducing the subsidy outstanding.

Coming to the domestic crop protection business, while the industry has seen subdued growth due to missing of sprays because of continuous rains, we have managed to outperform industry growth.

How have we been able to do that, some color on that.

And how is the liquidation also happening in your crop protection business, some highlight on that as well.

CHAMBAL FERTILISERS AND CHEMICALS LIMITED Page 3 0f 8 @

Moderator · Conference Operator

So, my understanding from my sales team is that between 60% to 65% sale is on cash, so that is instant liquidation.

As far as how we have done better and why we have done better, well, it's a little involved subject. | would like to put it across to you when | made the point that we have about 61 products in the three segments, weedicide, fungicide, and insecticides.

And we have always tried to marry the requirement of the farmers to what is their emergent and current requirements.

And to that extent, we have a very strong and solid planning process, a sourcing process, a validation process for the value for money.

And | think that's the reason why we have a range of options for the farmers instead of being stuck in one or two verticals.

So, that makes the difference, that is one.

Secondly, our strong alliances and relationships that we are building up, some of them are Gen 1X and they are patented combination stuff which is now coming up.

So, | think those are creating the value drivers for our business.

Sir, one question on TAN.

We are also setting up a 2,10,000 MT nitric acid plant.

How much of nitric acid will be used in TAN? | do not think we are setting up 210,000 MT plant, we have not announced that.

We are setting up a 240,000 MT Technical Ammonium Nitrate plant, of which the precursor chemical is WNA, which is Weak Nitric Acid. | think you are referring to that part.

Weak Nitric Acid can be sold as weak nitric acid.

Weak nitric acid can be forward converted into technical ammonium nitrate also.

So, at the moment, the plan is to convert that nitric acid into technical ammonium nitrate.

But there is no separate TAN plant?

No, no. There are two plants within the TAN plant.

One is the weak nitric acid plant, which is then used alongwith further ammonia to convert it into technical ammonium nitrate.

It is a two-step process, so there are two plants in one.

And what is the update on CAPEX plans for IMACID?

My understanding is that the Board has approved 2,00,000 tons expansion of Phosphoric Acid capacity.

And this should come on stream by when?

My understanding is that engineering work has been awarded and normally this kind of project takes about two and a half to three years to come to fruition.

Subject to their achieving zero date, and in this case of course there is no problem in terms of finances, it is only a question of how quickly the technical parameters and other things are decided and closed.

Lastly sir, how much is the gas price for the quarter? | think for this quarter, people have been contracting DAP between $620/MT to $645/MT.

Okay.

In terms of dollar per MMBTU?

Did you say gas or DAP?

Gas.

Okay, gas has been around, | think it was $16.7 to $17.

Thank you.

Next question is from the line of Falguni Dutta from Mansarovar Financials.

Please go ahead.

CHAMBAL FERTILISERS AND CHEMICALS LIMITED

Ashok Jain

Good afternoon.

Very good numbers. | just had one question.

What led to the significant increase in own manufactured fertiliser profits other than this energy efficiency which you mentioned about Rs.

40-odd crore?

We have sold almost 1 lakh tons more of Urea.

Thank you.

We will take our next question from the line of Ashok Jain, an individual investor.

Please go ahead.

First of all, congratulations for wonderful results.

Now, | would like to ask on operations and then balance sheet items, and then, | mean, future projections.

The first question is that, if | see this complex fertiliser, revenue has come down drastically, it has come down to Rs.

261 crore as against the June quarter of Rs.

1,111 crore or Rs.

1,972 crore in previous year September quarter.

But if | see that as far as segment liabilities are concerned, that has gone to Rs.

772 crore, as against the Rs.

567 crore in the June quarter.

So, it looks something unusual.

First of all, why this revenue has come down?

And second, how the liabilities have gone up?

First of all, | think, if you refer to my opening remarks, | said that there were availability issues, therefore the sales were restricted.

Therefore, the revenue came down, we sold all our stock and whatever we had purchased.

Number two, we have also contracted some amount of fertilisers at six months credit terms which is showing in payables.

So, how it has gone to Rs.

770 crore, | mean, this is Rs.

205 crore increase in last one quarter, whereas the sale is not there.

So, does it mean that we have added inventory....

Some stock has been carried forward, and that stock will be sold in this quarter as well as the next quarter.

Yes, because the overall stock level is at a static level, so that means we are adding inventory by some of this complex fertiliser, | think that we will be able to sell it in due time.

Yes, we will be able to sell it, not a problem.

Yes.

And now, coming to crop protection chemicals, here | see that the revenue has come down from June 24 quarter from Rs.

342 crore to Rs.

289 crore.

So, no doubt, profitability is good. | just want to know why revenue has come down this quarter?

And this is the area where | think we should give more focus, obviously, you must be doing it.

Mr. Jain, the point is, | made a mention of the fact that there were late rains, unseasonal rains.

The fact is that some of our territories had a problem in terms of absorbing these chemicals, in terms of the sales.

So, this will be made up as we go forward.

This is a good profitability business so, obviously, you are giving focus to it.

So, do you see a good chance of good growth in this? | would say that if you look at half year to half year, that would be a more correct analysis of the matter.

And | see the numbers that you have said, it should not be seen Q-0-Q, but you should see Kharif to Kharif and Rabi to Rabi.

And typically, one should see half year to half year.

And from half year to half year if you see, it was from Rs.

540 crore to Rs.

632 crore, which is almost 17% growth Y-o-Y.

And the profits are from Rs.

119 crore to Rs.

164 crore.

Yes, that's good.

Yes.

Coming to this joint venture which we are having with Indo Maroc, that one.

So, here our profitability has gone up, it's quite good.

So, do you feel that the same growth can continue there?

CHAMBAL FERTILISERS AND CHEMICALS LIMITED

Abhay Baijal

See, the Company has a production capacity running to about 40,000 tons per month.

And so, the two things that profitability depends upon are the contribution levels and the sales that are achieved. | think they should be able to continue this performance.

Now, coming to the balance sheet item, here if you see on Page Number 5, trade payables, you will find that the total outstanding dues of creditors other than micro enterprises and small enterprises, it has shot up to Rs.

2,012 crore.

And secondly, the other financial liabilities have also gone up to Rs.

690 crore as against Rs.

406 crore and Rs.

761 crore.

So, huge liability has gone up.

So, | am unable to understand why it is like this? | can tell you in very short term, this is the money that we owe to the government.

Because there is a process called escalation and de-escalation.

Fortunately or unfortunately, we were receiving a little bit more subsidy from the government than was eligible, to that extent this is payable.

Over a period of time, maybe in the next month, two months, three months, we will be paying that off.

So, this will normalize.

And now coming to the investment part, obviously, it has gone up to Rs.

2,783 crore.

So, if | see revenue coming out of it, that obviously seems quite low.

First of all, | could not make out where it has been shown in the P&L, but still | feel if it is part of other income, then it is low. | mean, this is what | feel.

Mr. Jain, it is like this, that the part which we owe to the government is actually converted into cash and placed as mutual fund investments.

To that extent, there will be interest income on that.

That will be part of other income.

If | see the annual report of last year March, here it says that MTPA of TAN plant is 240,000 per annum and 210,000 MTPA of WNA plant.

So, my question is how much do you feel that approximately cost of it and how much we have already spent?

And when do you think it can be completed?

Okay.

So, you want to know what the project cost is. | think the Board-approved project cost is about Rs.

1,600 crore.

It's Rs.

1,600 crore for both the plants, am | right?

Yes.

And we have spent about Rs.

400 crore till now And when do you feel that this will be completed?

We will be completing it by October '25.

But this Rs.

400 crore is not showing in capital work in progress because capital work in progress is around Rs.

200 crore or so.

So, but you feel that by October 25, it can be completed?

Yes, not a problem.

See, what is happening is that these are milestone payments, this is an EPC contract to Larsen & Toubro.

They draw on the basis of whatever work they have done.

And that is as per the milestone payments, and it is according to schedule.

The major payment will start happening once the equipment is shipped.

At the moment, it is on account of advances given for the major equipment, and construction activities.

So, that means we can expect balance on the new equipment after one year, we can expect that?

No. Mr. Jain, the payment is no indicator of progress, because the equipment orders are already placed.

So, as per milestone payments, the payment to the vendor will be made, they will draw the payment from us.

So, when the equipment arrives, majority of the payment will happen.

So, suddenly we will see an increase in capital work in progress.

CHAMBAL FERTILISERS AND CHEMICALS LIMITED

Harmish Desai

So overall, | can say that the Company has done extremely well.

And we are very happy.

And | would like to remain in touch.

Thank you very much.

Thank you.

We will take the next question from the line of Harmish Desai from Phillip Capital (India) Pvt.

Ltd. Please go ahead.

First question on the TAN plant, you have given the update in the presentation that the amount spent up till September, can you give an update of what is expected amount to be spentin FY 25 on the TAN project, by the end of FY '25?

Cumulatively, about Rs.

600 crore.

Coming to the crop production segment that you guys have been reporting, the performance has been consistently good in the first half.

Can you, in brief, give an update of what could this be attributed to?

So, we are actually a Company which is creating value in the product through matching the expectations of the farmers, timely placement, good communication in terms of usage, and giving quality to the farmer, that is one part.

Secondly, we have a range of products, | think | mentioned in my opening remarks, we have 62 products across all the three categories.

So, there is a range of crops, there is a range of insecticides or insects or the weed or the fungus which needs to be addressed.

So, all of that goes through a process of testing in our fields, understanding the value proposition, placing the value proposition properly to the farmer, and then convincing him to buy our products in comparison to others.

Plus, our price points are very reasonable.

We always want to be value for money, and that approach has helped us, that's why the growth is there.

Some of your peers have reported some amount of product returns because of inconsistent monsoon season in the second quarter, did we face anything like that?

No. And sir, we have been consistentin terms of our product placement, that is the reason why we did not face such problems?

No, | think, first of all, we assess the market, more accurately.

We understand what the farmer is needing.

We do not pump-up the channel just because we want to achieve these numbers.

And as | said, the range of products that we have creates that flexibility with us.

We have a continuous discussion with our supply chain, backward and forward.

We take only that quantity which we want to do.

So, those are the things, the management of the whole process of serving and providing product to the farmer.

That is the most important issue.

And any update on IMACID performance, the performance in the first half has been really good.

So, do you expect this to continue in the second half?

The Company is on an even keel.

We are producing about 40,000 tons per month.

And given the situation and contribution which it is in, | do not see any negatives coming up in terms of repeating the performance.

Got it.

So, can you give us the volume of Gadepan-I and Il and Gadepan Ill for the quarter? | would ask Mr. Anand Agarwal to give you the numbers.

For G-1 and G-Il, our numbers have been 5.71 Lakh MT compared to 5.51 Lakh MT last year and G-lll, 3.62 Lakh MT compared to 3.57 Lakh MT in the last year.

Are there any plant shutdowns to be taken this year?

CHAMBAL FERTILISERS AND CHEMICALS LIMITED

; Fax No · Research Analyst

Yes, Gadepan Il plant will be taken for turnaround in the month of March 2025.

Thank you.

We will take our next question from the line of Falguni Dutta from Mansarovar Financials.

Please go ahead. | had one more question on nano DAP.

So, what was the value of the sales for that inH1?

We have sold about 2 lakh bottles.

And that is not nano DAP, that is bio-phosphorus.

Please understand that it is not derived from a chemical process, it is derived from a biological process.

That makes it a unique product.

And this is a part of which of our segment?

This is part of our speciality nutrients segment in the CPC-SN segment overall.

And obviously this is outside subsidy, right?

Yes, itis.

Thank you.

As there are no further questions, | now hand over the conference to the management team for closing comments.

Over to you, sir.

So, thank you very much for a brief and sharp exchange of views, | would say.

Thank you very much for listening to us and we hope to continue to create value to you going forward.

Thank you so much.

Thank you, sir.

On behalf of Chambal Fertilisers and Chemicals Limited, that concludes the conference call.

Thank you for joining us.

Wherever appropriate, we have edited the text to incorporate grammatical corrections therein, for clarity.

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