Chambal Fertilisers and Chemicals Limited (CHAMBLFERT.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Chambal Fertilisers and Chemicals Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Thank you, Sagar. Good day, everyone, and thank you for joining us on Chambal Fertilisers and Chemicals Q1 and FY '26 Earnings Call. We have with us today Mr. Abhay Baijal, the Managing Director; Mr. Narinder Goyal, Business Head Manufacturing Operations; Mr. Anuj Jain, CFO; Mr. Ashish Srivastava, Vice President, Sales and Marketing; and Mr. Tridib Kumar Barat, Vice President, Legal and Company Secretary. Before we get started, I would like to point out that some statements made or discussed in the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks the company faces. Chambal Fertilisers and Chemicals does not undertake to update them. The statement in this regard is available for reference in the presentation. We will begin the call with opening remarks from Mr. Baijal. I would now like to invite Mr. Baijal to share his views. Over to you, sir.

Thank you, Gavin. Thank you. Good day to everybody, and a warm welcome to all of you participating in this call. For the quarter under review, on a stand-alone basis, revenues amounted to INR 5,698 crores. The EBITDA was INR 929 crores. The profit after tax was INR 638 crores as against INR 552 crores on a year-on-year basis with a growth of 16%. At the consolidated levels also, the company has performed well during the quarter, registering a PAT of INR 549 crores as against INR 448 crores last year, which is about 23% growth. For the quarter, urea production volumes were 8.54 lakh metric tonnes as compared to 9.03 lakh metric tonnes. Urea sales for the quarter were 8.41 lakh metric tonnes against 8.87 lakh metric tonnes. Urea production was lower primarily because of some breakdown at our second plant that is Gadepan-II, but now that is normal. Subsidy receipts continue to be timely. The subsidy outstanding was INR 1,326 crores as at the end of Q1. During the quarter, our sales volume of P&K fertilizers consisting of DAP, MOP, NPK and triple superphosphate were strong at 4.21 lakh metric tonnes as against 2.41 lakh metric tonnes last year. This is a growth of almost 70%. This has been driven by prudent and strategic sourcing strategy and an enabling subsidy framework. Further, we have sourced adequate volumes of P&K fertilizer, ensuring preparedness for the rabi season. Volume and sales growth for our CPC & SN business continues to be strong at 32%. First quarter '26 as CPC & SN revenues stood at INR 452 crores as against INR 343 crores in the corresponding quarter, showing continuing momentum. Contribution for the quarter stood at INR 102 crores, which was higher by INR 21 crores as compared to last year. During the quarter, we introduced 13 new CPC products, primarily comprising of weedicides and insecticides. Today, our CPC portfolio comprises of 73 products distinct chemistries covering fungicides, weedicides and insecticides. And these products are well accepted by farmers across India in our territory. Our strategy continues to focus on creating partnership and alliances for introducing better chemistries and increasing the width of offerings in our channel. During the quarter, we have started the seeds business and introduced maize and bajra seed, which added INR 6 crores to the top line to the contribution of INR 2 crores. Biological side, we have achieved revenue growth -- by 80% as compared to last quarter. Total revenue stood at INR 29 crores against INR 16 crores in the previous quarter. And as planned, a biological fungicide and nematicide will be introduced in kharif '25 and rabi '25, respectively, to address the farmers' pain point for nematodes and disease control. In short, CFCL is now increasingly focused on technologies, which bring benefits in terms of improving farm yields, improve soil health and provide better product outcomes. During the quarter, we have inaugurated crop protection laboratory with our partner, TERI, the Energy Resources Institute, which will develop five new biological crop protection patented products over a period. TERI, as you may know, is a pioneer institution in the area, and we'll be doing this research under the center of excellence, which we have established to develop these new products. Our Seed to Harvest program, which is a pioneer program in meeting our -- synergizing our contracts with our farmers, playing a significant role towards strengthening and expanding our relationships with both the farmer and channel partner. During the quarter, Chambal conducted over 700 farmer meetings, 420 demos and have analyzed about 27,000 soil samples. We have also significantly expanded our use of social media to reach out to a large number of stakeholders and have launched Uttam Krishi Pathshala, which cover a webinar dedicated solely for educating farmers on various agricultural practices on social media platforms. Our technical ammonium product -- technical ammonium nitrate project is progressing in line with stated time lines. All requisite statutory approvals are in place, and we have spent around INR 918 crores till June end 2025. Our joint venture, IMACID is performing well. The increase in capacity of P205 from 5 lakh tonnes to 7 lakh tonnes is under implementation, which will optimize its operations and increase the profitability further. With that, we are now happy to take your questions. Thank you.

[Operator Instructions] Our first question comes from the line of Vishal Dudhwala from Trinetra Asset Managers.

So considering the broader macro environment, like where global fertilizer price remain elevated, currency volatility persists and the Department of Fertilizer policy shift. So how do you expect this factor to influence your urea and P&K fertilizer margins and volumes for the rest of the year?

So let me take this question in two parts. The urea is a kind of formula-related pricing. And the margins are not expected to vary very much in the remaining part of the year. As far as NPK is concerned, there is, of course, you have to strategically purchase position basis the subsidy and the MRP that you can get in the market. But you're right that the prices have shown a degree of upward mobility -- rapid upward mobility rather in the last one quarter. Some signs of abatement are there, but we will have to see how it goes forward. However, our stocks are well covered for that.

Okay. And on the second side, like your crop protection chemicals, specialty nutrients and biologicals and seeds segment delivered a standout 32% Y-o-Y in revenue growth. And like you have launched 13 new CPC launches and enter into hybrid seeds. So could you unpack the respective contribution of CPC & SN versus biology versus seed segment?

No, all of them are more or less in the same contribution range, give or take, 2 or 3 percentage.

Okay. And what is your go-to-market plan like across distribution, digital engagement with your Chambal Uttam Connect and the field demonstration to scale these new products?

So, I will ask Mr. Ashish to speak about how we go about marketing this. So over to you, Ashish.

Okay. Thank you, Vishal. So your question precisely is on the digital interventions or on the Seed to Harvest program? Can you hear me, Vishal?

Yes, I can hear you.

So your question precisely is on the digital interventions in marketing or on the Seed to Harvest program?

Like across the distribution channels, how are you -- new products are achieving...

So new products, to start with, there is a -- since the chemistries come from some other research partners, so we do an elaborative product launch. And then we have digital connectivity through some WhatsApp chatbot and Uttam Farmer Connect. So it is -- all these things are digitally spread to various stakeholders in the ecosystem.

And as you achieve the revised FY '26 target of INR 1,500 crores revenue in CPC & SN, so are we good in the run rate?

Yes, we are.

Our next question comes from the line of Prashant Biyani from Elara Capital.

Congrats on a decent set of results. Abhay sir, what is your expectation from NBS subsidy in H2? And in that backdrop, what kind of traded fertilizer volumes can we see this year?

I would say that after the DAP and TSP side have been largely moderated by the government's new approach to keep the companies insulated from price shocks, we are trending back to our original numbers of 1 billion tonne plus.

Sir, but in -- is the price control for TSP there as well? Or I mean, not price control, but...

DAP, TSP are under price control. Other NPKs are not.

And government is reimbursing INR 1,000 over and above the cost on both?

Yes, more or less.

Okay. And sir, what is our trade inventory of credit fertilizer at the end of Q1?

Trade inventory, I would ask Mr. Anuj Jain to speak about how much sales we have made. What we are talking, I think, is the POS.

You're talking about...

POS inventory? Or are you talking about what we have in stock actually?

No, POS inventory only, I mean, which is lying with the channel.

Okay. POS inventory, please, Anuj, can you please enlighten us as at the end of June 30?

Which product exactly is Prashant is referring on?

All in total...

So we had 160,000-odd tonnes of NPK, including potash inventories as of end of 30th June.

Right. And sir, in TAN, by when are we planning the trial production for it? And since we are nearing the...

TAN production will commence early December, late November, and we should be starting production by middle January.

And sir, some color on EBITDA per tonne on -- for TAN based on current realization, what kind of EBITDA per tonne we can achieve?

The current prices, if I'm not wrong, are between INR 35,000 to INR 37,000 a tonne netback. And I would assume that they would be in the region of 5-digit plus at the moment.

So Prashant, just one clarification. The POS inventory 160,000 of NPKs. Total is around 260,000.

Okay. Then sir, on urea norms, government was about to revise it either in CY or FY '25. When is that happening? And what kind of changes would you be expecting?

Which one are you talking about? There are two parts. One is energy norm and one is in fixed cost. What is it that you...

Energy norms.

Energy norm, I think the government have informally told us the effect of that is already encapsulated in current results.

And can you elaborate what is the change in norm?

There is some reduction. There is some reduction. And to that effect, the negative impact has been factored in.

Okay. This would be a public document, sir, because this is relating to industry.

No, not yet. It will be a public document as and when they publish.

Our next question comes from the line of Viraj from SiMPL.

Just a couple of questions. First is on the -- earlier question pertaining to what the earlier participant was asking. Sir, if you see for our unit 1.

Yes, Viraj.

Yes. So if you see what the earlier norms were for, say, for Gadepan-I and Gadepan-II, we were around in FY '25, somewhere around 5.2 G-V per tonne. And the group which we were under group 3, I think the unit norms are somewhere around 5.5, correct me. So the change which you're talking about is even below 5.2 or...

No, no. There are marginal variations from the current norms.

Okay. So given that we were -- we have been pushing this energy efficiency projects, in the last 2 years, we have seen a good amount of gains flowing in, and we were looking at further efficiency projects. So the impact of this in terms of per tonne EBITDA for us, will that largely negate the efficiency gains? Or we should still see gains flowing for us even in '26?

Let me put this way that the government does review the norms from time to time. And there is -- we need to continuously keep improving our norms, which we do. As you know, that we continue to do that norm -- not the norm, but efficiency itself through various efficiency projects. We have a pipeline of such projects stretching at least up to 2027, '26, '27. And those will come into position. And as they come into position, the -- our consumption will actually come down again. So the delta, which is there, that can keep varying a little bit here and there, but it will be constantly more or less maintained. That's what it is. We are well...

And there is norm, sorry?

We are well below the norms, being an efficient producer. And we will continue to maintain that gap between the norm and our operating parameters.

And the percentage sharing between -- of the gains between us and the government, that is -- there's no change to that, right? It's just a tightening of the energy efficiency.

No, there's no change in the percentage sharing. What happens is as the norm shift downwards, if you have not made adjustments to your own consumption by efficiency project, you will tend to lose out.

Got it. So just a few more questions on the manufacturing urea business. One is the Gadepan-III benefits, is there now any communication in terms of what kind of a plan or a structure we would be post 2026 December?

So as of now, no discussion on that has taken place.

So assuming that you were kind of to see the benefit similar to Gadepan-I and Gadepan-III for the unit 3 as well, what kind of impact one would see in terms of the EBITDA from this. Rough ballpark, not exact.

We -- see, the point is, as of now, they have not stated anything, all of it is speculative. And we don't believe in discussing speculative numbers out in the open. We have had no discussion absolutely with the government as to what line of action it will follow as far as the new plants is concerned. There could well be a different policy than what it is today. So let's wait until we get some clarity. As and when we get clarity, we'll definitely communicate.

Okay. And just one small question on the urea business. Sir, if you see the market per se, you are -- industry consumption is much higher than the production, and we are now back in deficit. And given the natural rate of growth in the consumption, fuels on the line that would still be a much higher number than what we are today. But if you look from an investment point of view in terms of any new greenfield at current prices and the structure, it doesn't seem to be remunerative. So from your interactions with the government, do you see any new policy being laid out for any new greenfield investment? Or what is that reading or communication you're getting from them?

So I can only tell you that the government is seized of the problem. And they can see the trajectory of growth in terms of consumption. We have seen sharp fall this year itself in terms of the inventories because of the accelerated demand due to slightly early rains, widespread rains, change in cropping patterns, growth of maize cultivation and all that. All of that is being factored into their thought process. Should they feel the need? They will definitely invite new participants because you see setting up the urea plants is a very capital-intensive, time-consuming business. And it is best carried out by those proponents of projects who have got prior experience in doing so. So in that sense, I think the government are quite seized of the matter as far as my understanding goes. How and what will happen in a short period or in a medium period, I can't say. But my understanding is that they are quite seized of the matter.

The discussions on new investment, if at all with the government, are they more -- so that the driver of that would be a new policy similar to NIP '12 or it will be more driven by reregulating the price?

I can't speculate. See, the point is the government has, for your information, and I think everybody knows that, in the budget extended the policy for Namrup fertilizer. I mean, one can speculate. One could always think that, look, the same policy would be extended again if I knew, because they have done it just about 3 months back, 4 months back.

[Operator Instructions] Our next question comes from the line of Sandeep Mukherjee from SKP Securities Limited.

Sir, can you please share the plant-wise production volumes and total ammonia sales figure for this quarter?

I will ask Mr. Anuj Jain to explain the plant-wise production and ammonia sales. If I'm not wrong, you can take down ammonia sale as about 23,000 tonnes. Plant-wise, he will explain.

We had production of Gadepan-I about 2.9 lakh tonne, Gadepan-II 2.15 lakh tonne and Gadepan-III about 3.5 lakh tonnes.

Okay, sir. And sir, what would be the volume in IMACID for this quarter?

Yes, IMACID -- IMACID volume, we had about 1.26 lakh tonnes we have produced.

And sir, last quarter, previous year -- previous year, last quarter, what was it, sir?

This year, same quarter was 1.3 lakh tonnes. Last quarter, I don't have the information right now. Y-o-Y it was 1.3 lakh tonnes.

Okay. Okay, sir. And sir, my last question is like, sir, please throw some light on the recently ventured seed business. Like what is the market size and sourcing or collaboration, if any, and the growth ambitions over there?

See, seeds is a very important part of the agri input segment. It's a very big market. In terms of the total size, we will have to go through various sections of this. There is hybrid, there is open pollinated varieties and so on. But our focus at the moment is on hybrid and research. So the products that we are talking about are maize, mustard, millets, research variety of wheat. These are basically our focus areas because North-based company like we are, these are some of the things that will have traction in the market. We have started with something like the mustard and maize -- bajra and maize and we have done about, I think, INR 6 crores in sales, which is a very -- we just made a small beginning. Of course, our rabi ambitions are much higher. There will be an order of magnitude higher than what we have done in the pre -- yes. As far as the total market size is concerned, which includes open pollinated variety and research and hybrid, marketing informs me is of the order of about INR 50,000 crores.

And sir, for this, we are sourcing or we have a collaboration with someone?

We have got alliances, and I would ask Mr. Ashish to speak about.

Sandeep, presently, we have embarked on the seed journey through the white label business. That means we are buying a very popular product from top manufacturers. We have tie-ups with the top manufacturers in all crop segments. It will not be okay for me to reveal the names, but we are in tie-ups with the best in business.

Best in class.

Our next question comes from the line of Amit Agicha from H. G. Hawa.

Sir, my question was connected to the TAN project. Like you said like by Jan, I think, you'll start the commercial production. And you said like INR 918 crores already spent. I think so i.e. what total CapEx that we are planning is INR 1,645 crores, correct?

Yes.

And so the balance whatever will be from the internal sources or you will be raising funds?

No, no. Please understand that the total project cost includes contingency, it includes tax, includes interest during construction and all that, correct? So you take it out from there, then the balance quantity that we have still to spend is of the order of INR 300 crores, INR 400 crores. And there are some other items in terms of housing and so on or what you call as owner's scope. That will get completed over time, but that has no connection with the production as such.

And sir, what will be the peak possibility of revenue from this plant once it is commercialized?

See, we have -- normally, you do not expect 100% production state from day 1, basically operating quarter that is middle of Jan to March. So assuming that we do about even 60%, 70% rate of production, then we are talking about 55,000, 56,000 tonnes of product. It sells at today around INR 40,000 -- INR 35,000 to INR 40,000 a tonne. You can do the math.

Our next question comes from the line of Prashant Kumar Agarwal an investor.

Congratulations for good set of numbers. So my question is like how long this Gadepan-II was break down?

If my memory is not wrong, it is about in two instances, a total of about 24 or 25 days.

Exactly what time it was down for first time in May or like when it was down?

It was down in the month of May.

Right. So my request to you guys because -- I think because of this Gadepan-II, we have lost almost 20% of our revenue in urea, right?

You are right, 92 days -- 20 days, around 92 days will be close to 20%. There is no linearity. Overall materiality is decided in terms of reportage to the stock exchanges.

Sorry to interrupt. Prashant, sir, your audio is not very consistent. Your line is breaking.

Yes. So it was not reported into the stock exchanges, right?

We are talking about materiality here, Mr. [ Adhoiwala ], it is not material enough.

20% is materialized and it's a concern to the investor...

If you see the total EBITDA for the quarter from that angle, we are talking about.

You see total...

No, I'm talking about turnover point of view, right? Because our turnover was down like 20% because of this problem and investor doesn't know about it. And maybe some informal guys from somewhere, I don't know, but since May 6, 7 -- 6th or 7th like that was the peak our stock has made and then it has came down to this level. So that is where my concern is maybe some guys know about it or what I don't understand.

No, [ Mr. Adhoiwala ], let me let me explain to you. Most of the segment revenue reduction in this particular quarter as compared to last quarter is due to reduction in the prices of gas, which is of the order of 10%. And beyond that, the reduction, which is there on account of this is of the order of, if I'm not wrong, just 3% to 4% of that. So that is what...

20% volume doesn't make sense like in the turnover, right? That is what you are trying to tell me, right?

No, no. When we are looking at contribution, definitely not to that extent. But even in the terms of the turnover of the total company, if you see on INR 5,000 crores or whatever we have reported, it is not even -- it is about of the order of 2% to 3%.

For urea last year we have done something like INR 3,600 crores kind of thing. This year, we have done INR 3,100 crores...

Please understand that the turnover depends on gas prices. This time, gas prices are...

Okay. 10% you can consider from the gas price, right? So another 10% will be from Gadepan-I, right -- Gadepan-II, right?

No, no. I'm saying it is of the order of 2% to 3%.

My concern is like 20 -- 20 days, 24 days, like at least you can have one intimation about it. That will be good for investors...

We will discuss this internally and get back.

Our next question comes from the line of Falguni Dutta from Mansarovar Financials.

Yes, I have just two questions. One is on that energy change norm in urea. So how frequently does it change? Is there a duration that it changes after so many years, each time they change it?

The government can be inconsistent on this and sometimes consistent on this. So this norm has been changed after almost 7 years.

After 7 years.

Yes.

Okay. But normally, is it supposed to change after 5 years or there is nothing such thing, no such thing.

We have no such -- they are always in the policy will give a sunset clause in that. So...

Sorry, I missed you.