DEEPAKFERT — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to Deepak Fertilisers and Petrochemicals Corporation
Thank you.
The next question is from the line of Lokesh Manik from Vallum Capital.
Please go ahead.
Lokesh Manik
Amitabh, just continuing on the previous question, so just a clarification that cost of production for ammonia with the new plant would be around USD 160 to USD 200 and then you add about USD 90 logistics cost when you add conversion margin, so you reach about USD 400 - USD 450 is that understanding correct, broadly?
Amitabh Bhargava
See the ammonia landed price if you assume anywhere between USD 350 to USD 380 of FOB Middle East.
Today, at that price, the landed price of ammonia, you add about USD 80 to USD 90 to it.
If FOB Middle East prices, you are assuming that that is the price that at which you will transfer ammonia from our new plant to our downstream products then that is the kind of top line that we would have.
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Moderator · Conference Operator
Thank you.
The next question is from the line of Pratik Tholiya from Elara Capital.
Please go ahead.
Pratik Tholiya
Firstly, a couple of clarifications in the opening remarks Mr. Mehta has admitted that we are already at 80% capacity utilization and the demand looks very strong.
So, just wanted to understand, how much more can our capacity utilization go up from here?
He also talked about some debottlenecking that we can do.
But broadly if we talk about say three years to four years down the line, we would be already in next one to two years consider a strong demand that he is talking about.
You should be at you know 90% - 95% utilization.
So, what after that?
Because if we have to cater to this rising demand then some planning has to be done from now onwards, so that the next two years we already have that plants up and running.
So, we wanted to understand on the broader thought process on the capacities going forward.
Amitabh Bhargava
So, I think if you look at segment-by-segment, starting with NPK.
NPK, we are currently at about 70 odd percent or 72 odd percent.
Now, this of course, last year was as low as 46%.
We are up to 73%.
This is on a 6,00,000-tonne capacity.
So, within 6,00,000 we have headroom available of almost 20% - 25% of almost 27%, for that matter.
Now, in NPK with a little bit of a debottlenecking particularly on the raw material storage and on the evacuation side 6,00,000 tonne capacity can be increased to 8,00,000 tonnes because the process plant itself is capable of handling 8,00,000 tonne it is the raw material and evacuation that needs to be upgraded.
So, that is the kind of scope that is there in NPK.
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Moderator · Conference Operator
Thank you.
The next question is from the line of Kumar from Systematix Group.
Please go ahead.
Kumar
Sir, just a couple of basic clarification.
You mentioned that Bensulf revenue contribution was Rs.
20 crores in the crop protection segment.
So, the remaining Rs.
2,100 crores would be composed of like what is the breakup across NPA and NPK?
Amitabh Bhargava
I think overall, break up, I think some of these break ups you will be able to see it on our website.
But overall, if you look at, let me very briefly try to give you a breakup.
Your question is about Bensulf and an NP and NPK.
Kumar
Bensulf Rs.
20 crores.
Amitabh Bhargava
You are talking about the quarter or the full year number?
Kumar
Full year number, sir.
Amitabh Bhargava
Deepak, would you have the full year number breakup in terms of the Bensulf and NP and NPK?
Deepak Balwani
I will share shortly.
Amitabh Bhargava
Okay. if you move to the next question, I will come back to you.
Kumar
Sir, would it be fair to assume that this Rs.
2,100 crores that NPA NPK is there, so that is totally subsidy- based revenue for us?
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Moderator · Conference Operator
Thank you.
The next question is from the line of Naresh from Samiksha Capital.
Please go ahead.
Naresh
Sir, first question is in the fertilizer segment, if we see the blended realization of NPA and NPK then from a FY 2020 and FY 2021 end it has been around Rs.
30 per kg.
And this is despite your smartek product growing in the three years.
So, why has our realizations stayed at the same level despite you mentioned that it is a premium product and realizations also helped you grow your top line and margins as well?
So, that was the first.
And second, what was your requirement for ammonia for FY 2020 and FY 2021 in terms of quantity I wanted to know.
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Moderator · Conference Operator
Thank you.
The next question is from the line of Sachin Kasera from Svan Investment.
Please go ahead.
Sachin Kasera
I had two - three questions, regarding the CAPEX, so your presentation has given the number of CAPEX for the ammonia, could you share just other than ammonia, the CAPEX for the TAN as well as the other divisions, what is the CAPEX you are planning to incur for 2022 and 2023?
Amitabh Bhargava
As far as TAN is concerned, you are still in the process of getting our statutory approvals, land acquisition and the other basic on the ground project development that is progressing.
At this stage, we do not have a definite plan, it also depends on when we would start these CAPEX.
Other than that, we do not have any other CAPEX plans.
Of course, the regular maintenance CAPEX that happens in the plant, we only have a CAPEX that we have……
Sachin Kasera
What is the total spend approximately going to be for the TAN plant as and when we will do it?
Amitabh Bhargava
One is we have the land to be acquired, so the construction costs would depend on the site also we have detailed engineering etc., that we would do with the help of our engineering consultant.
Once they do the tendering from various contractors, then we would have a sense of what the broad numbers are going to be like?
Sachin Kasera
Sure.
My second question was on the leverage.
So, this year we had done a great job of repaying almost Rs.
800 crores of debt and bringing on the net below Rs.
2,000 crores.
But as we spend close to around Rs.
2,700 crores - Rs.
2,800 crores on the ammonia, preferably in next two years.
How do you see your balance sheet and debt equity?
And do you have any plans in terms of raising some other resources so that you can keep the debt equity or the leverage under control or you will be comfortable in terms of it going up further?
Amitabh Bhargava
See, one is as much as we would take debt for ammonia, we have roughly Rs.
240 crores to Rs.
250 crores of debt repayment that happens every year.
So, simultaneously we would also have the debt which is the current debt which would get amortized.
That is number one.
Number two part of the debt or what you see in the debt numbers is also the foreign currency convertible bond that we have from IFC and they have a compulsorily convertible debenture at STL level accounting terms, these are also clubbed with the debt.
So, but CCD obviously, being a compulsively convertible debenture after six years to seven years that will convert it into equity.
Likewise, FCCB depending on the conversion price and the option exercise, by IFC may also there is a strong possibility of it getting converted into equity.
So, that is as far as the way debt if it could move even if nothing changes.
But on top of it, obviously, with the CAPEX ammonia, we would add that.
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Moderator · Conference Operator
Thank you.
The next question is from the line of Nishit Shah from Aequitas Capital.
Please go ahead.
Nishit Shah
Sir, most of my questions are answered.
One thing I wanted to understand is what is the impact of the second wave for us in terms of demand and in terms of pricing for our industrial chemical segment?
Amitabh Bhargava
Well, as of now, as far as our own plant operations are concerned, we are much better prepared in the second wave.
As far as our customers are concerned, there could definitely be disruptions at their 17 | P a g e Deepak Fertilisers And Petrochemicals Corporation Limited
Moderator · Conference Operator
Thank you.
The next question is from the line of Nikhil Gada from Abakkus Asset Manager.
Please go ahead.
Nikhil Gada
Sir, my first question is sort of relating to the nitric acid market, if you could give some qualitative aspects as to how the market is?
How is the market size?
And since we are seeing such strong demand is there any element of imports that also we can see in the market?
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Moderator · Conference Operator
Thank you.
Ladies and gentlemen, we will take one last question from the line of Nihil Parekh from Tamohara Investment Managers.
Please go ahead.
Nihil Parekh
I had one question on the IPA front.
Sir, as you mentioned that even realizations are sort are right now.
But initially, we had a plan of an expansion of about 1 lakh metric time.
So, I think we are not going ahead with the CAPEX plan there?
Amitabh Bhargava
No, we are not.
Nihil Parekh
Okay.
Actually, I miss the opening comment, if you can just share the value number the revenue numbers from the IPA front?
IPA and acid the Q4 revenue?
Amitabh Bhargava
Deepak, would you like to take that question please?
Your question is on IPA revenues in Q4?
Nihil Parekh
Yes, sir.
Debasish Kedia
Sir, it is Rs.
110 crores.
Nihil Parekh
Rs.
110 crores and for acids and TAN, sir?
Debasish Kedia IPA is Rs.
110 crores; acid is Rs.
186 crores.
Debasish Kedia
And TAN was Rs.
395 crores, sir.
Nihil Parekh
All right, and just one last question, sir, on standalone, the employee expenses for the quarter look little lower, sir, any one-off there?
Amitabh Bhargava
I think what had happened is up to we had made certain assumptions on management remuneration post, which we got shareholders’ approval.
So, that was trued up in Q3. But by Q4, management remuneration has been lower than what we had anticipated.
So, Q4 numbers of what you see in Q4 standalone is in a way lower.
And it is not an apples-to-apples comparison with previous quarters.
Moderator · Conference Operator
Thank you very much.
Ladies and gentlemen, that will be the last question for today.
I will now hand the conference over to Mr. Amitabh sir for closing comments.
Amitabh Bhargava
Well, gentlemen, thank you so much for joining the call.
It was a record year for us.
And we hope to be able to continue our performance going forward.
So, I wish all of you a safe and healthy period ahead.
Please take care.
And thank you very much for joining.
Moderator · Conference Operator
Thank you very much.
On behalf of Ashika Stock Broking Limited, that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.
Thank you.
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Questions and answers
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
The first question is from the line of Priyank Gupta from Guardian Advisors.
Please go ahead.
Priyank Gupta
So, my question is the ongoing expansion in both the businesses the ammonia and TAN, what kind of top line and bottom line can we expect to be added in FY 2023 and FY 2024 when they start operations as I see investment in investor presentation that they shall be on stream in FY 2023 and FY 2024, respectively?
Amitabh Bhargava
So, in ammonia, it is a half a million-tonne capacity.
And by in large we are confident of utilizing these capacities fairly close to 100% right from the beginning, because that is pretty much our own captive requirement is there.
Now ammonia, we have seen that in last 10 years - 15 years, we bought 7 | P a g e Deepak Fertilisers And Petrochemicals Corporation Limited