Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA margins increased significantly from 12% to 20.4%.
- Net profit surged by 76% year-on-year, reaching INR 200 crores.
- Mining Chemicals business showed robust growth with a 23% increase in technical ammonium nitrate sales volume.
- Crop Nutrition Fertilizer business saw an 11% year-on-year increase in sales of manufactured bulk fertilizers and a 51% surge in specialty products like Bensulf.
- The ammonia plant is running at 98% capacity, providing a strong risk mitigator for the company.
Negative Points
- Lower volumes in nitric acid due to an extended repair job at the Taloja Nitric Acid plant.
- Reduced demand from the downstream industry following a temporary shutdown of the GNFC TDI plant.
- IPA volumes were lower due to a planned plant shutdown.
- The company faces potential competition from new entrants in the TAN market, such as the Coal and BHEL JV.
- Uncertainty around the impact of the demerger on existing shareholders, with concerns about how value will be distributed.
Q & A Highlights
Q: Can you help us understand the demand-supply dynamics in the TAN business and what will be the general operating performance in terms of EBITDA?
A: Currently, we have a capacity of around 540,000 tonnes and are expanding by an additional 50,000 tonnes by the end of September. We are also planning a new plant in Gopalpur with a capacity of around 400,000 tonnes, expected to come online next year. The TAN business contributes approximately 50-55% of our EBITDA, with EBITDA per tonne estimated between INR 18,000 to INR 20,000.
Q: Is the facility back in operation after the repair and maintenance shutdowns for nitric acid and IPA?
A: The IPA plant is back in operation and we expect to achieve 98-100% capacity utilization going forward. The nitric acid plant repair was completed within the quarter, and we expect capacity ramp-up in the current quarter.
Q: Can you provide an update on the expected timelines for the Gopalpur and Dahej expansion projects?
A: We expect to start production in H2 FY '26. Initial ramp-up will be around 70-80%, eventually reaching 90-100%. The ammonia plant, for example, started at 70-80% and is now running at 98%.
Q: What is the impact of ammonia price volatility on your margins?
A: Ammonia prices have been subdued, impacting EBITDA. However, external sales of ammonia have been encouraging, trading at a premium. We expect ammonia prices to improve, which will benefit our margins, but not all benefits will be retained within the group.
Q: What is the current export percentage of your TAN business, and how do you see the impact of new capacities coming online?
A: We started exports in the last quarter of FY '23-'24. Currently, 25-30% of domestic demand is met by imports. We expect new capacities to reduce imports, and given the growth in mining and infrastructure, we do not foresee long-term surplus capacity issues.
Q: Can you provide an update on the demerger process and how it will impact existing shareholders?
A: The demerger involves creating separate entities for different business segments. Existing shareholders will benefit indirectly through the holding company. Specific details on share allocation will be decided when the new entities are listed.
Q: What is the capacity utilization of the new ammonia plant, and how much of it is used for captive consumption?
A: The ammonia plant is running at 98% capacity, with 85-86% used for captive consumption and the remaining 14-15% for merchant sales.
Q: What are the plans for scaling up the Mining Solutions business?
A: We are working on several pilot projects and building internal capabilities. The business model is unique in India, and we aim to scale it up gradually over the next few years.
Q: How do you plan to manage debt reduction and allocation post-demerger?
A: We continuously aim to reduce debt, but new projects will require additional funding. Debt will be allocated based on the projects they fund, and we expect peak debt levels to be between INR 5,500 crores to INR 6,000 crores.
Q: What is the status of the antidumping duty on imported ammonium nitrate, and how does it affect your business?
A: Currently, there are no antidumping duties, but the import duty has been increased by 2.5%, which may deter imports. We expect the government to take further steps to support domestic manufacturers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
