DEEPAKNTR — earnings call

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Prepared remarks

Moderator · Conference Operator

MR. RANJIT CIRUMALLA – IIFL CAPITAL Deepak Nitrite Limited May 18, 2026

Ladies and gentlemen, good day, and welcome to the Deepak Nitrite Q4 & FY26 Earnings Conference Call.

At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in nature, and a disclaimer to this effect has been included in the investor communications shared with you earlier.

The results documents have been shared with you earlier and have also been posted on Company's website.

As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Please note that this call is being recorded.

I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Capital.

Thank you, and over to you, sir.

Ranjit Cirumalla

Thank you.

Good afternoon, everyone, and thank you for joining us on Deepak Nitrite Q4 and

Questions and answers

Moderator · Conference Operator

Thank you very much.

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

The first question is from the line of Sanjesh Jain with ICICI Securities.

Sanjesh Jain

First, on the nitric acid, can you just help us understand in this quarter, what was the utilization?

Did we achieve the margin profile we were looking at?

I know this is not the right quarter, but are we on track to get that INR90 crore, INR100 crore of EBITDA addition for the nitric acid, which we planned earlier?

That's my first question.

Maulik Mehta

Okay.

Sanjesh, thanks for the question.

So in Q4, while we did start the plant, we were unable to run it on a consistent basis because of some technical issues that took place during the quarter under review.

We're working along with the technology supplier and the equipment supplier to address these.

So once the plant is under stable operations, we do anticipate the kind of target that we're looking at.

But during this quarter under review, we were roughly at about 45% of utilization.

And hence, for the balance, we had to secure nitric acid from the market in order to ensure that our products continue to be manufactured and sold.

Sanjesh Jain

Got it.

That's clear.

My second question is on the Phenolics side.

I know it is a very volatile and a difficult quarter.

But just wanted to understand on the raw material availability that is propylene, how much of our capacity right now are we running?

And what's the scenario on the propylene availability?

Are we able to run the plant at full or we are still running suboptimal because of the availability of raw material?

And on the spread, again, some of the listed players did highlight that there is a significant difference in the price of Phenolics product in China market and Indian market.

Should it sustain for a few more quarters before we converge?

Or you think that conversion will happen much sooner than what we think?

So colour on that will be really helpful.

Maulik Mehta

So Sanjesh, just a clarifying question.

You're referring to Q1 or Q4?

Sanjesh Jain

I'm referring to Q1 and a little color on the Q2 also will be really helpful.

Maulik Mehta

Okay.

So first of all, I'll just highlight that in Q1, in the first part of April, when there was a concern about feedstock availability, we also preponed the annual maintenance.

So both of those were kind of addressed within that same period of time, I think it was about 10, 11 days.

And what we have done in any case, in the meanwhile is, we have enough of the intermediate product so that we were able to continue to supply to the market.

So our plant efficiencies, which are a factor of feedstock as well as operational capabilities continued relatively unhindered.

So we Deepak Nitrite Limited May 18, 2026 expect that Q1, our productivity and our efficiencies will continue to be in the same improving trend as they have been quarter-on-quarter.

Q4 to Q1 will also have some marginal benefit.

And I want to highlight that because this is also a product where there is global availability, I don't want to comment on this principle of ergodicity where we assume that the next month is going to be a factor of the last month.

So given that, I want to share that our profitability will continue to remain healthy, will continue to be on an improving trend as compared to Q4. And we have enough feedstock as well as finished product to be able to cater to India's growing requirement.

So I don't anticipate a challenge on that front because of propylene or anything like that.

Wherever possible, we have ensured that we have secured all our relevant raw material and wherever relevant, we have ensured that we are able to pass through our cost increases.

Nonetheless, we will see that during this quarter and the next quarter, we are remaining very close to our customers, engaging with them on a regular basis so that wallet share, and market share always remains something that we maintain.

Sanjesh Jain

Okay.

That's quite clear, Maulik bhai.

One last question from my side.

Any comment on MIBK/MIBC commissioning?

When can we expect that or do you think this is not the right time to start a new plant and probably you would wait for another quarter to see how the industry uncertainty settles and then we go for the new product?

Maulik Mehta

Basically, we're finishing with the mechanical completion of the plant and we will soon be getting into the pre-commissioning cycle as it may be.

And at some point, maybe perhaps at the tail end of Q1 or the early part of Q2 is when we will be looking at commissioning of the asset because the asset is commissioned along with a couple of other plant assets as well.

So we kind of remain on track with that.

Moderator · Conference Operator

The next question is from the line of Nirav Jimudia from Anvil Wealth.

Nirav Jimudia

First of all, congratulations on improved set of numbers this quarter.

First question is on the standalone business.

So given the kind of capexes what we have announced, the one for the fluorinated molecule of INR220 crore that was announced, which was supposed to start operations in Jan, plus some 6, 7 new products which you have told us that have already started production and they are at the various stages of customer approvals.

So how do we see FY27 specifically from the standalone business point of view, given these new products?

And (b), given the kind of raw materials what we use for the standalone business like ortho-xylene, ammonia, sulfuric acid, AHF, how have we secured it in terms of the availability of these key raw materials and demand for some of our products which are specifically custom-made for the export markets.

So if you can share your thoughts here, that would be very helpful.

Maulik Mehta

Sure.

So Nirav, I'll answer both your questions.

First question was with regards to new products.

So the 6, 7 new products as well as the fluorinated molecules, etc., we've already started the manufacturing for the commercial scale validation batches.

And those are already either supplied to customers, and we've received positive feedback or in the process of being transported to customers.

So in all of these, as we said earlier, we anticipate commercial production on a regularized basis from Q3 onwards because this will reach our export customers towards the end of Q3 in time for their CY 2026 requirements.

So we remain broadly on track.

We are constantly engaging with customers, updating them about the current possibilities, and they are also Deepak Nitrite Limited May 18, 2026 appreciating this transparency.

So far, I do not anticipate any concern on those, including the fluorinated molecule as well as the non-fluorinated molecules.

Now with regards to the volatility on the feedstocks, such as, as you mentioned, ortho-xylene or toluene and others.

So what happened was that in the beginning of Q4, I was tracking what was taking place in the Middle East.

And in the end of January, early February, what we noticed is that you are having multiple U.S. aircraft carriers kind of converging on a location, but in a pincer movement.

Now generally, this is a rare occurrence.

And generally, in the past, whether it is the first gulf war, second gulf war or in the case of 2008 or whatever, it has actually preceded a significant volatility in prices.

So from that perspective, we took the very unusual call of securing raw material.

We chose to buy it at every dip.

You can appreciate that this was a risky move in the beginning of quarter 4, which is a few months away from the end of the financial year.

So we targeted to buy in every dip.

So we actually entered the end of Feb and Q1 with a much higher stock of critical feedstock, whether it was on high seas or whether it was with local suppliers, products such as benzene, products such as xylene and toluene and all that.

We ended up with a much larger inventory than we would traditionally have had in Q4. So this was because we saw an unusual movement and we did not actually anticipate a hot war, but we did anticipate volatility.

And that position has held out quite well for us, whether it is in Q4 or in subsequent quarters.

Going with this perspective, we anticipate that the Company has a reasonable inventory of feedstock at enviable prices until we see a stabilizing, perhaps at the end, maybe Q2 or maybe halfway through Q2.

Nirav Jimudia

Perfect.

And so, can we assume that with this kind of raw materials, what we have secured in Q4, some benefit would have come in Q4, but most of this should come in Q1 impacting positively our standalone numbers?

Maulik Mehta

I can say that our Q1 looks on track for numbers, which are better than Q4, whether it is on standalone or on a consolidated basis.

So we anticipate Q1 to be better than Q4, which was, of course, better than Q3.

Nirav Jimudia

Got it.

And sir, in terms of the products, what we have in the domestic market, like DASDA, which was under pressure for, I think we have also filed antidumping duties and on the sodium nitrate, which also you have updated last quarter regarding the U.S. tariffs, plus the anti-chain, I think, which is also now looking better in terms of its application in the agrochemicals.

So, apart from the stuff what we have mentioned, is there any green shoots in any of the products, what I just mentioned, on where we can see some improved performance also coming in FY27 for us?

Maulik Mehta

There are some green shoots, and I will resort to once again mentioning safe harbor here.

But what has happened also, which was actually announced in December 2025 is that China will administer significant constraints on certain key chemistries, including production, storage and transportation.

So there, we find that there will be some uptick in the demand as well as the profitability for nitration products.

Some of the products that you've mentioned are linked to the nitration chain, where Deepak continues to have a significant global market share.

So we anticipate that these will have a bit of a tailwind.

Now meanwhile, there is also some degree of a headwind, but it is a global headwind, not limited to India or Deepak, which is in the sulfur downstream.

So whether it is the availability of sulfur, the cost and the price of sulfuric acid, SO2, Oleum, etc., those are places where there will be a heightened cost.

But like I said, the Deepak Nitrite Limited May 18, 2026 important thing is to check what the delta between international prices and Indian prices are.

And there, if we are able buy to maintain par for the course, we anticipate no significant net impact to the Company and the benefit as it comes from nitration chemistries, which Deepak has a considerable market position as well as a technological strength.

Nirav Jimudia

Perfect.

Sir, last question from my side.

In terms of the Phenolics business, like we have already alluded the confidence in terms of the improved performance in Q1. So is it because our IPA business should do well in Q1 given the kind of the competitor who produces IPA through propylene route and we through an acetone route, where propylene availability currently is a challenge for most of the players in India.

So if you can share your thoughts here with respect to IPA and also if you can share the production numbers for phenol for FY26, that would be very helpful.

Maulik Mehta

Thanks, Nirav.

I appreciate the questions, but I continue with my position of not going into details on production numbers.

What I can say is that whatever is the Indian requirement for IPA, Isopropyl, Deepak Nitrite and Deepak Phenolics in that continues to remain the largest capacity, which is able to service the market for all the specifications, including pharmacological grade.

So from the perspective of our ability to supply, that remains unconstrained.

From the perspective of saying what are the margins, frankly, we look at it only on the perspective of an integrated margin approach because our assets are cost competitive.

Our product quality is of the best nature.

And finally, how much we make will be a balance of what the margins are in terms of the intermediates as well as the FGs.

As I also mentioned, we will also be looking in the next couple of months at producing MIBK and MIBC.

So we expect to have a good healthy mix of downstream as well as upstream.

Moderator · Conference Operator

The next question comes from the line of Arun Prasath with Avendus Spark.

Arun Prasath

My first question is on the Phenol spreads.

Typically, Phenol is a very well traded commodity across the high seas.

So when we are seeing this preferred differential spread between, say, China and India, this could be either because of the local players in China stocking and restocking or say, a Phenol is not able to or not in a position be transported because of the say container issues.

So that is the reason we are seeing an issue or should we expect this to get back to the normalcy post the crisis?

Or are you seeing this triggering some kind of a chain reaction where, this could put the Phenol in the path of cyclical recovery?

Maulik Mehta

Okay.

So Arun, it's not possible for me to comment on the spreads of other companies and other countries.

What I can say is that Deepak continues to operate with a high degree of productivity efficiency and is able to ensure that it is able to create the margin that you are seeing.

And I've also already qualified that we anticipate Q1 will be somewhat better than Q4, and also be better than last year's Q1. So keeping that in mind, let me put it this way, there's a lot of factors at play.

Even though we're seeing that plant capacities all over the world are being constrained because of their own operating costs.

We are also, at the same time, seeing volatility in currency, in freight times, freight costs and material movement from port to customers' plant.

So in all of these cases, all I can say is that having a domestic supplier of high-quality products is a game changer for domestic consumers who don't need to be blocking in the kind of working capital that they would need to if they were importing with the kind of geopolitical risks that they are Deepak Nitrite Limited May 18, 2026 seeing.

So at this time, I can confidently say that Deepak being a domestic supplier is something that our customers depend on to be able to aggressively work on their downstream expansion activities.

Arun Prasath

Understood.

One follow-up to that question is that do we see domestic buyers, especially in the Phenol market, back to ordering at the regular intervals or they are still resorting to the need- based buying?

Maulik Mehta

So answer to this question, to be honest, Arun, is mixed.

In a lot of cases, it has kind of resorted back to a normalized buying pattern.

In some cases, they have not, and by and large, this is because of other factors such as availability of products or availability of gas and other inputs.

So it is not just about the demand supply of their own products, but it is their manufacturing environment.

So what is important for them is to know that Deepak is always there, always ready and always able to supply at a moment’s notice.

So this is one thing that they just never need to worry about.

That gives them a lot of support and that allows them to park their working capital where it is needed most.

Arun Prasath

Understood.

My second question is on the status of where we are in terms of nitration and the second hydrogenation plant.

Is the plant ramping up well and running as per the level of utilization that we thought of initially?

And second, on your answer to the nitric acid utilization of 45%, is this the average one or this is the exit utilization at which we are currently operating?

Maulik Mehta

So on your first question on nitration and hydrogenation, those plants are already commissioned and they are operating with the right productivity and efficiency as expected.

With regards to nitric acid, what we had as a situation is when we were operating, we were operating at full utilization.

But as I mentioned, we did encounter technical challenges due to which the plant has been under repair and maintenance in line with our technology there and equipment present.

So, this is primarily our CNA plant, our concentrated nitric acid plant is operating normally.

Arun Prasath

Understood.

On the nitration and hydrogenation, any way you can quantify where we are in terms of utilization?

Maulik Mehta

No, those plants are fully operational.

They've been commissioned, I think, at the end of Q2 or early Q3. So those are okay.

There is a positive contribution and if there is a constraint, it has been with regards to the availability of nitric acid where the prices have been substantially higher, where we've been constrained to buy from the market because of technical challenges, other than that all our plants are in line and operational.

Arun Prasath

Understood.

One question on polycarbonate.

We have mentioned that the commissioning target of 2028, this is only pertaining to PC resin or to the entire Phenol and BPA production blocks as well?

Maulik Mehta

So what I've mentioned, which Mr. Upadhyay has also clarified, is that the answer is at this moment, the same for the integrated.

However, we've clarified that the PC resin plant will happen independently.

It may happen alongside.

It may happen with a mismatch of a few months.

And the Phenol expansion will happen in line with the commissioning of the propylene supply.

So Deepak Nitrite Limited May 18, 2026 our capex includes the ability to have this in a slightly disjointed manner.

So what we are anticipating is that perhaps they will all happen on track.

Perhaps there will be maybe a quarter or so of mismatch, but all of the assets that we put in place as they are operationalized, they should be able to run at a high degree of plant productivity.

In line with that, we've already been working to see how we can start compounding and supplying our polycarbonate compounds to customers in India as well as outside of India.

So we anticipate that to also reach its capacity in line with our resin plant.

Moderator · Conference Operator

The next question is from the line of Tushar Raghatate with Omega Portfolio Advisors.

Tushar Raghatate

The receivable days has increased.

Just wanted to know a specific reason to that.

Secondly, in the Advanced Intermediate business, do you see a major growth in that for FY27 going forward because the business seems to be very underutilized compared to the historical numbers?

Sanjay Upadhyay

So what you are seeing as underutilized is actually the realization which has gone down, not that the capacity had gone down.

Capacity, we are running full, but it was the realization which was lower as compared to earlier years.

With regards to the outstanding number of days, in some cases, we have changed the model, because today we are passing through a very volatile situation, and we do not want to risk our outstanding.

So, instead we have gone into a dealership and CSA model.

That is helping us in at least securing our outstanding.

So these are the reasons for this.

Maulik Mehta

I'll also share that the new products that we have talked about, whether it is in Chem Tech or in Deepak Nitrite, the new downstream products which are in the ag chem space and outside of the ag chem space also.

They are all significantly margin accretive.

Therefore, in FY27, we expect a stronger margin profile, even for the standalone business, compared with FY26. We are also working towards a return to what we consider normalcy a couple of years ago.

So FY27 will be this period where you will see an improving trend.

Tushar Raghatate

Fair enough.

And sir, due to the anti-involution stand of China, do you see any realization improvement in standalone businesses?

Maulik Mehta

Like I said whether it is because of the anti-involution stand or critical hazardous chemistries, etc., or the global demand improvement, whatever you want to call it, we do anticipate an improvement in the margins as well as the gross numbers as we progress into FY27. That is on the base of existing product portfolio as well as new products.

Tushar Raghatate

Fair enough.

Sir, one of the player in India, providing intermediate to the global plant, they said that in the agrochemicals, the volumes are increasing, but the prices are not in favor.

Do you see the same happening in your agrochemical part of the business?

Maulik Mehta

This is, again, very nuanced, and it depends on the chemicals, it depends on the feedstock availability, it depends on the margin profiles.

So generally, what we are witnessing is that the benefit will be unevenly distributed between integrated players and non-integrated players.

So players who have occupied a larger number of positions on the supply chain will be able to Deepak Nitrite Limited May 18, 2026 benefit from this improvement in the volumes and with a general degree of de-risking in the margin portfolio.

Moderator · Conference Operator

The next question comes from the line of Rohit Nagraj with 360 ONE Capital.

Rohit Nagraj

First question is on the Phenolics part of the business.

So after the maintenance over the last one month or so, are we operating at optimal utilization of the plant?

Maulik Mehta

Just to clarify, the maintenance was only in the beginning of April, maybe for about 10 days or so, not for the month of April.

And we are operating at this moment, at high efficiencies.

So we do not anticipate a constraint from plant or from feedstock availability.

Rohit Nagraj

Sure.

And the second question is, we have said that we have certain low-cost raw material.

Have we passed on the entire pricing increase which has been witnessed in the market?

Whether the prices have been adjusted to the current RM prices?

And an allied question to that, given that the final product prices for our Advanced Intermediates as well as Phenolics business, both have increased, so have we witnessed any demand side contraction in the domestic or exports market?

Maulik Mehta

Okay.

Thanks, Rohit.

So just to clarify, we were able to secure feedstocks on dips, which we did very judiciously.

So going into the end of Q4 and into Q1, we are in a good position.

In terms of passing on the same price increases equivalent to the market conditions, that is an ongoing exercise.

What we do is we balance out that as well as market participation and wallet share.

So what we are seeing is that, by and large, that has been a good work done by the business teams, keeping on constant engagement with customers as well as ensuring that plant productivity is at a high degree.

Now with regards to demand volume, as you can anticipate, demand volume for our products fluctuates based on availability of other co-products as well as their own production cycles.

Keeping that in mind, what I can say is that we continue to have a significant wallet share across the board.

I don't think that there has been any significant disruption in terms of wallet share and ensuring that we are engaging with customers.

What we're giving them is a good degree of certainty, that Deepak stands there.

Even if it is at market prices or whatever, they don't need to work hard to use up their foreign exchange to block import parcels because Deepak is there.

Moderator · Conference Operator

The next question comes from the line of Archit Joshi with Nuvama IE.

Archit Joshi

First question on the Phenolics bit, knowing that there's a lot of fluidity, the dynamics are evolving in the global trade.

But have we assessed a scenario wherein some of the European capacities or maybe Taiwanese or South Korean capacities are overshooting their cost curve in a scenario where energy costs are rising, feedstock prices are rising and let's say, if the situation persists for a fairly bit longer, and knowing that we are in a cost competitive scenario, should we see a position wherein some of these capacities might be ousted from the system?

So that would be my first one, Maulik.

Maulik Mehta

Thanks, Archit.

So, Phenol, it's like an ocean.

So water just flows wherever it can.

So while there is a disruption, you will have some capacities going offline, some capacities being idled temporarily, some capacities being taken down for maintenance, sometimes in Europe, Deepak Nitrite Limited May 18, 2026 sometimes in the Far East, some places like China, you will have commissioning of some capacities, whatever it is.

One thing is fact that India, in all of this, remains a positive dynamic in terms of growth, in terms of consumption.

And ensuring that there is availability of products such as Phenol is key for our customers.

Whether they import it and deal with the kind of volatility that they would face, in terms of the amount of time that it takes, the exchange gain or loss and the working capital blockage, what we are focused on seeing right now is our ear to the ground and focusing on optimal plant utilization efficiencies there and ensuring that we are as close to JIT as possible.

So our customers are able to focus on their own expansion activities.

So I see that there is consolidation also on one side, geopolitical volatility also on the other side.

Our job is to be able to exude a sense of stability.

Archit Joshi

Sure.

Understood, Maulik.

The second one is on the proposed overhauls in China on these nitration plants.

I believe it was supposed to get triggered on 1st of April or 1st of May.

But I think this was more specific to the region of Shandong, where I think there is almost 30%, 35% of nitration capacities.

And we had seen in the past that products like DASDA and thus by far our OBA portfolio had benefited back in 2019 when there was an explosion or a ripple in the supply chain because of these issues.

Are we referring to that when you made this comment about certain tailwinds that we might foresee in the nitration portfolio?

And as such an action already taken place where some of these Chinese plants who are asked to automate using DCS and all have not done so and the tailwind is already seen or is prevailing?

Maulik Mehta

Okay.

Thanks, Archit.

To clarify, my comment was not linked to one or the other province because this is a general CCP guideline with regards to the chemistries as well as the safe material movement as well as the transport, which includes, of course, also product at port and transport over oceans.

So it is an all-encompassing audit, and it is an all-encompassing compulsion, which is not also limited to only things like DCS.

Now like I said, this is something which can be considered as a tailwind, not specifically linked to A product or B product like DASDA.

And again, it is not just nitration, but nitration has been a problem child in China again and again because a lot of plants operate without safety standards, whether it is at storage or production.

Given that this is a structural tailwind for companies like Deepak who do it in a responsible manner.

Archit Joshi

Maulik, my only point being is that have we started seeing these developments on ground in China, irrespective of which province is it?

I just wanted to know how are we backing our comment on this tailwind part?

Has it already started happening is what I wanted to know?

Maulik Mehta

It has already started happening.

Moderator · Conference Operator

The next question comes from the line of Vidhi Shah from C.

R.

Kothari & Sons.

Vidhi Shah

Regarding the Polycarbonate project, by when do we expect to commission this?

And how will this be funded?

Maulik Mehta

So we've clarified earlier, and we are, by and large, remaining kind of in line with that, and we are expecting it to be commissioned by June 2028.

Deepak Nitrite Limited May 18, 2026

Vidhi Shah

Okay.

And what will be the funding source for this INR5,000 crore or something?

Sanjay Upadhyay

So, the total project, what we have announced is around INR11,000 crore.

The funding is for all the projects together.

We have tied up with the banks for debt.

It will be in the ratio of 60-40.

We have already started putting in equities here.

Bank funding is already in line.

And once we put in 25% of equity as per the bank condition of 40%, we'll start drawing from the debt.

So funding is not an issue.

We are generating enough cash and bank loans are also tied up.

So as and when required, if at all required, we'll approach the market.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Sanjay Upadhyay

Thank you so much.

Thank you all for joining us on this call.

In case of any further clarifications are required, you can get in touch with our investor relationship team, Mr. Somsekhar Nanda or Mr. Gopal Thakkar.

Thank you once again.

Disclaimer

This is a transcription and may contain transcription errors.

The Company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy.