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

Ladies and gentlemen, good day, and welcome to the Chambal Fertilisers and Chemicals Q2 and H1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and thank you for joining us on the Chambal Fertilisers and Chemicals Q2 and H1 FY '26 Earnings Call. We have with us today Mr. Abhay Baijal, Managing Director; Mr. Narinder Goyal, Business Head of Manufacturing Operations; Mr. Anuj Jain, CFO; Mr. Ashish K. Srivastava, Vice President, Sales and Marketing; 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, Rishab. Good day to everybody, and a warm welcome to all of you participating in this call. To quickly recap our numbers for the quarter or the review on a stand-alone basis, revenues amounted to INR 6,413 crores as against INR 4,346 crores of last year. And the company achieved an EBITDA of INR 882 crores against INR 834 crores last year. Profit after tax of INR 602 crores as against INR 500 crores last year, which is a growth of 20%. For half year FY '26 on a stand-alone basis, revenues amounted to INR 12,110 crores, as against INR 9,279 crores of last year. The company achieved an EBITDA of INR 1,612 crores as against INR 1,776 crores last year. Profit after tax of INR 1,240 crores as against INR 1,053 crores last year, which is a growth of 18%. For the quarter, production volumes were at 8.8 lakh metric tonnes compared to 9.09 lakh metric tonnes last year. Urea sales for the year amounted to 9.34 lakh metric tonnes against 9.65 lakh metric tonnes in the previous year. Urea volumes are lower mainly because of an unscheduled short stoppage of Gadepan-III plant. Subsidy receipts continue to be timely. As of September 30, 2025, our subsidy received was INR 6,347 crores in half year. Our P&K fertilizers revenue increased due to higher volumes and prices. This has been driven by prudent and strategic sourcing, strategy enabling subsidy framework. Traction in volume growth for our Crop Protection and Specialty Nutrient business continues to be strong at 28%. In quarter 2, the Crop Protection and Specialty Nutrient revenues stood at INR 374 crores as against INR 289 crores in the corresponding quarter, which is a growth of about 29% year-on-year. Contribution was at INR 114 crores in quarter 2 FY '26 compared to INR 83 crores in quarter 2 FY '25, which is a growth of 37%. During the quarter, we introduced 6 new products, which included 3 Crop Protection products and 3 new Specialty Nutrient products, including biological new variant of water-soluble formulation of flagship SUPERRHIZA. A total of 22 products were launched till half year FY '25, '26. Today, our CPC portfolio comprises of 76 products of distinct chemistries covering fungicide, weedicides and insecticides, are well accepted by farmers across India and our territory. On the biological side, we have achieved revenue growth of 80% as compared to last year. Half year FY '25, '26, total revenue stood at INR 73 crores as against INR 40 crores of last year. CFCL is now focusing increasingly on technologies, which bring benefits in terms of improving farm yields, improve soil health and provide products -- better product outcomes. UTTAM PRANAAM, a Bio Nano Phosphorus offering launched in June is showing promise. During the quarter under review, we introduced fibrate variety of mustard seeds. We also launched a research variety of wheat seeds now in quarter 3 FY '26, which now complements our agri input portfolio. C2 Harvest program continues to contribute towards improving farmer awareness and showcase product efficacy. During the quarter, Chambal conducted over 1,820 farmer meetings, 421 demos and has analyzed about 38,000 soil samples. We have also significantly expanded our use of social media to reach out to a large number of stakeholders. Our technical ammonium nitrate plant is progressing in line with stated timelines. All requisite statutory approvals are in place. We have spent about INR 1,052 crores till September '25, and we are likely to begin operations as planned in January '26. Our joint venture, IMACID is performing well with better margins. The increase in the phosphoric acid capacity from 5 lakh metric tonnes to 7 lakh metric tonnes is expected to be implemented by December '26, which will optimize its operations and increase profitability further. With that, we are happy to take your questions. Thank you.

[Operator Instructions] The first question is from Prashant Biyani from Elara Capital.

Congrats on a good set of results. Sir, out of INR 953 crores of recovery on de-escalation of urea subsidies, is there any element of it in P&L also?

Could you repeat that? I guess didn't get. What did you say, CN and...

Out of INR 953 crores of recovery on de-escalation on urea subsidy, which you have shared in your presentation. Is there any element of it in P&L or everything is in balance sheet only?

No, no, no. Let me tell you, this is -- we account for subsidy on the basis of what is the income accrued to us. This is the gas prices and all that. In case we have received extra or we have received less, income remains the same. This is only a cash flow event.

Right. And sir based on the current NBS policy, what would be your outlook on your traded volume for H2?

Well, we have placed quite a bit of material already. We have contracted post -- you know that the announcement of the policy was pretty late. It was more or less at the fag end of the mild -- end of the season because for us in Chambal, working in the northern part of the country, mostly, our sales are done by mid of December. Therefore, that means that our kind of purchase and placement has to happen at least a month earlier than what it should have been. Nevertheless, we had some stocks of both NPK, DAP, and we have contracted some more DAP, almost a lakh of tonnes. So I think that we are well covered for our position in that situation.

Right. Sir, when are we commencing the trial run for the TAN plant?

As I said that's somewhere in December or so, we will start trialing out the first part that is nitric acid and then proceed over to the next part, which is January. So more or less, we would meet the timelines.

So revenue recognition or sales should start from Q4 itself?

Yes. To some extent, we are hopeful that by mid-February or so, our products should start hitting the market.

And sir, lastly, before I jump back to the queue, how much is the current cash on books?

I will ask Anuj to give an answer to that.

It's about INR 700 crores.

Next question is from Rehan Saiyyed from Trinetra Asset Managers.

My first question around then your P&K fertilizers have done well in this quarter, with strong volumes and margins I have seen here. So how sustainable in this performance in the second half? And do you see any potential policy or pricing that would impact our momentum on the industry or on the competitive edge side?

I couldn't get your question, it was little garbled. If you would speak a little slowly and clearly, I would get to.

Yes. Sure, sure. I wanted to understand regarding the P&K fertilizers side, so your P&K has done well in the quarter with strong volumes and margins. So how sustainable you are seeing to support it in the second half? And do you see any potential policy or pricing changes that would impact our momentum going forward?

Okay. So as I said in the second half or half basically is the third quarter only. The sales in the fourth quarter are not to that extent because it is off-season for the agricultural production. Now as far as the third quarter is concerned, we will carry forward the momentum going forward. But as far as the policy is concerned, it is more a continuation of what it was in the past. There are no new initiatives. The advantage, disadvantage policy for DAP and DSP, carries forth. And the numbers that are there in terms of the per kg subsidy, they are more or less in line. They could have been better, but definitely what the government has to also look at its fiscal position. So to that extent, we will have to see how we can market it better places in the channel and so on. So to that extent, I think we have more or less covered for the third quarter. That is -- but beyond that, it is -- we'll have to see how to stock now for the next season. The real activity in quarter 4 is to plan for the season beginning quarter 1 '26.

Okay. And that is the reason that our receivable have increased in this quarter because of higher P&K, is that right, sir?

This higher P&K -- could you please repeat? I couldn't get exactly what you are trying to ask.

Yes. Yes. I am saying that that's a reason that the receivables have increased in this quarter because of higher P&K receivables.

I still can't...

Your voice is not...

Your voices here coming very garbled. I think, if you could re-join after re-dial in, maybe it will be better.

Now it is clear, sir?

Mr. Saiyyed, if you are not using the handsfree, request you to use the handset.

Yes, I'm using handset only. Now it's clear?

Yes, somewhat better.

Yes. I'm asking that's the reason that our receivables have increased in this quarter because of higher P&K [indiscernible] receivables increased.

Yes. Receivables increased, yes, because naturally, we have put in more sales, as you see from last year. Sales are higher by about INR 2,100 crores. Most of it is due to the P&K fertilizers. So that will take its time to play out. We have to liquidate it through the channel, liquidate it through the POS. And then only we get eligible for subsidy. And you will be aware that under the advantage, disadvantage mechanism, the per tonne subsidy of DAP has been pretty high. It is close to almost if I'm not wrong, INR 58,000 or INR 59,000 a tonne, which is why there is a little accumulation as you can see.

Next question is from Keshav Garg from Counter Cyclical PMS.

Sir, actually, I'm new to the company, so please pardon my ignorance. Sir, I'm trying to understand that our purchase of credit good has increased to almost INR 3,000 crores in this quarter versus less than INR 700 crores a year before, same quarter, sir. So are we some trading business? And sir, is this pertaining to the complex fertilizer segment? And sir, are we manufacturing or are we trading? And sir, I can see the capital employed in this business has also jumped approximately 10x in the year-on-year. So if you could just explain what exactly is happening over there.

Yes. We have internationally sourced these fertilizers. We don't manufacture them and then we market them through our channels. So because of the increased volume that we wanted to do, we purchase and then we sell. So this is the stock that we will be carrying or rather the purchasing that we have done. And then we are selling this. So there is a cycle -- the working capital cycle. So which is why you would see the capital employed also has gone up.

So is this increase in capital employed to INR 3,000 crores, sir, is it temporary? And it will again come down to roughly INR 1,000 crores or sir, it is here to stay at these levels?

No, no, it will come down because once we liquidate, it will first transfer from stock to book debt and book debt to then convert back into cash. So this is the cash-to-cash cycle. And we will be liquidating most of our stocks by the end of December. And thereafter, there is maybe some outstanding on account of subsidy. That's all. But that will get trued up by the fourth quarter.

Sir, and in our urea business, sir, are there plans to expand capacity or we will use this division as a cash cow to increase our rest of the business?

No. We are always looking to expand our offerings in all segments, subject to the fact that the government has a very clear-cut policy or different policy for urea as compared to what is within the NP, NBS policy for NPKs. So here, we have to go through a process in which there is either a selection by the government for units who are applied for expansion or there is a general policy wherein everybody has to qualify on certain parameters. As of now, there is talk that we know of in terms of the government thinking in terms of doing a policy but nothing on paper to suggest that, that policy is there. The fundamentals in terms of demand and supply do point to an increasing requirement for production at least 3 to 4 plants in the country, but that is for the government to decide in its decision as to when they would bring the policy. For our part, would the opportunity present itself, we shall be quite honestly evaluating it for doing this project.

Right, sir. And sir, regarding our TAN foray, sir, is this plant expected to breakeven since the beginning or for the initial few quarters, some initial losses are expected until the capacity utilization reaches some decent level?

No, I hope not. We have competent people who are running the plant. So that is production, I don't think is an issue. Marketing, you know that this product in balance is there is a lot of imported material that also comes in. So actually, the market is a little short at the moment. We should be able to sell subject to our quality and consistency of performance. So I would suggest -- I would rather be quite optimistic and think that, yes, we should be able to start breaking even quickly enough. I won't hazard a guess, how many quarters but we should be able to break even quickly on it.

So for FY '27, sir, at what utilization, can we reach full capacity utilization at least for the second half of FY'27?

I would hope so. I don't think -- I'm not pessimistic on that.

Sir, so at current realizations of TAN, what kind of revenue can we generate if we operate at full capacity utilization approximately? And sir, what kind of EBITDA margins can shareholders expect from this TAN?

I will not name a number but I can make or give you two points that you can calculate yourself. One is that the plant has a capacity of about 240,000 tonnes per year, which is a run rate of almost 20,000 tonnes per month. On top of that, if we do production and sales are equal and that we are able to sell what we produce. Then you see the current numbers and the cost of ammonia that we have, it's a healthy 4-digit, 5-digit margin is there in this business.

So what kind of IRR do you expect from this TAN investment that we have made approximately...

Chambal always invests in businesses with the payback, I don't know very much about IRR that you would be able to understand, but it's something like between 6 to 7 years, we want payback.

Next question is from Viraj Kacharia from SIMPL.

Just continuing on the TAN part. Correct me, what you said is we should be able to see a scale up to full utilization in the year 1 itself, given how the current market conditions are playing on. Did I understand that correctly?

Yes.

And just an extension to this. If you see there are a few other players also looking to add their capacity into the market. So -- and then there are some players like Deepak who are focusing more on value-added solutions to differentiate and capture a larger part of the order share. How are we approaching in terms of the go-to-market for TAN and what gives us the confidence that we will be able to scale yourself much quicker?

No, our initial discussions with potential buyers and is encouraging. That is number one. Number two, in terms of -- we have 3 actually product lines in this. One is nitric acid, WNA. Second is AN melt and third is H-TAN. That is the high-density ammonium nitrate. In addition, the company is always exploring other opportunities, let's say, like low-density ammonium nitrate, which is L-TAN which has -- it is more kind of a premium product. So we are continuously looking at doing the engineering work for that. It's just of the same main plant. And we are in discussions with technology suppliers to look at the other product lines or other value-added lines in the TAN project. So that work is ongoing.

In terms of the -- will price be a place for us to scale up materially so given that we have the advantage of in-house captive ammonia feed. So the 10,000 plus...

That is -- since we have an ammonia backed plant, definitely, that is a major strategic advantage that we have. Second part is that the way this product is moving at the moment and the requirement and demand, the way it is linked to infrastructure and production of power, coal production and so on, we are quite hopeful that we can look at expanding this activity further in the future. Of course, we have to establish our credentials in the first round that we are now at the moment executing. And should we be able to do that successfully, I'm sure the Board will get the confidence to do expansion activities in this, whether in this location or some other.

Okay. Just one extension on this and I move to other segments. See, you talked about L-TAN and other value-added products, which we are evaluating. So once if we decide to go with the project, then typically, the timeline would be similar to what we underwent with TAN, the existing 3 product spaces or the timeline will be much shorter? Can you give some more perspective?

My impression by talking to the technology suppliers is that if we choose to do it at the same location, co-located, then definitely it has a much shorter timeframe than what the initial project took too. And in fact, we have provisions made in terms of foundations, et cetera, for the establishment of the second line in terms of L-TAN. That was planned during the project itself.

Okay. Got it. Now on the urea business, you talked about unscheduled stoppages from G3. But was that the only reason for the drop in spreads and volumes or is there any other element in, say, in the energy norms for G1, G2 or anything on G3?

No, G3 at the moment is running its course. The policy is not yet run its course. So there is no question of energy norms, et cetera, in that. The incident that you have referred to and we have referred to is basically at the fag end of the production, there is a billing activity that happens. And that has to be taken -- there is more a kind of a material handling issue, which has to be then swept into a conveyer and then taken out. That -- it's a large kind of structure about 24, 25 meters in which this arm moved and got broken. So it had to be -- we had to stop the plant for some time and to repair it. Now that is one part of the story. The second part of the story is that you would have noticed unseasonal rains happening during the September quarter. And that had some disruptions in distribution and supply. So sales were a little bit affected but that we have made up in the first month of October itself.

Okay. Any update on the energy norms for G1, G2? What kind of impact we see? And in urea...

Energy norms, well, we have -- I think last time, we have told you it is low double-digit number per quarter, and I think that continues.

[Operator Instructions] The next question is from Rijju from Antique Stockbroking.

My question regarding the agrochemical business. So during the quarter, there was unseasonal rainfall and due to which most of the companies have registered a negative kind of growth. And in that context, we have seen a strong Y-o-Y growth for the agrochemical. So how like we have been able to generate that kind of a double -- strong double-digit growth in the agrochemical portfolio. If you could explain, sir?

I will leave that question to Mr. Ashish Srivastava, our Vice President Marketing.

Okay. Rijju, we have a different strategy or placement in sales. So we can't reveal much on that but we are aligned to taking stock of the inventory or competition as well as ours while placing the product. So might be that gives us a little bit edge. I can't go beyond that.

Yes, sir, correct, that I can understand. But as per our understanding, as per the others, like tonnage, think there was limited window in terms of paying off agrochemical by the farmers due to heavy to very heavy rainfall. And in that context, we have some significant growth. So just want to understand like it was driven by the geographic expansion or like new geographies where we have inroads our products, so how big the growth was?

Yes. So basically, during the extended monsoon season, both paddy as well as cotton crops, farmer had to skip some sprays because they were not able to go to the field. But there were pockets where the rains were slightly earlier or were slightly late. So it was not pan geography where the sprays didn't happen. So we were able to catch on the opportunities in the locations by shifting stocks. So that's the reason.

And sir, a second question in terms of the biological portfolio. So did the biological portfolio, is it 100% biological or there is biostimulant as well?

No, it's 100% biological portfolio. We have still not started -- we have still not include biostimulants in our portfolio. We're in the process of doing that. But that, again, it would be through a biological route. So it would be -- when we say biological, it would be biological.

Understood, sir. And in terms of the DAP supply for the rabbi season in India. So if you could indicate like how much DAP imports or how much DAP availability for the rabbi season vis-a-vis last year rabi season?

So if you look at, Rijju, the imports during the first half in Kharif, the DAP imports were 106% higher than the last Kharif and NPKs imports were higher by 5% over the last period.

Next question is from Meet Mehta from Prasun Exponentials.

Am I audible?

You you are but would appreciate if you spoke a little bit more clearly.

Okay. So just one question. So I just wanted to ask how the gross margin has changed for DAP business from any sense on that from quarter-on-quarter or year-on-year?

For the NPK business, the margins depend upon purchases and of course, the sales pricing that happens. Now we have seen a situation where the prices have generally risen on account of sympathy with DAP, you recall the DAP was at around $650 levels to begin with, at the beginning of the year, I'm talking calendar year. And it has gone up to a level of $850, that means almost a $200 price swing. In sympathy, even the NPKs and other grades also went up. So naturally, the extent of what we can pass on to the farmer is limited. So going forward, the -- for those who import and provide companies as Chambal itself, there will be a compression in margin. But as far as the volume is concerned, I'm happy to tell you that so far, the tonnages that we have done, we would be touching almost 1.1 million tonnes or so of this -- which is quite a growth from last year, which is almost from 5.5 lakh tonnes to almost 11 lakh tonnes. That means that Chambal is back in the format that it used to be being enabled by a policy, which we have appreciated on the government side. So that's been the case, of course, these kind of pluses and minuses will continue but as a business, this is back to its volume levels.

Next question is from Sandeep Mukherjee from SKP Securities. There seems to be no response from the line of Mr. Sandeep. We move to the next question. Next question is from Dhruv Muchhal from HDFC Asset Management.

Sir, you mentioned the urea volumes were lower because of some maintenance issues. Can we make good these volumes in 2H because you anyway have some buffer capacity that you can use or that would not be possible?

No, we would largely make it up between the 3 plants, except for the Gadepan-II plant, which will go into turnaround by February. Between I and III, we would make up what we lost in the past.

Okay. So particularly on 3, what you lost for example, because of maintenance that you can offset it by the production in 2, so the overall number at least from Gadepan remains broadly the same, on annual basis?

Broadly yes. It will be minus, say, 7,000, 8,000 tonnes negative kind of number.