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

Ladies and gentlemen, good day, and welcome to the Chambal Fertilisers and Chemicals Limited Q3 and 9-month FY '21 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Gavin Desa from CDR India.

Thank you, and over to you, sir. Thank you. Good day, everyone, and thank you for joining us on Chambal Fertilizers and Chemicals Q2 -- Q3 and 9 month FY '21 earnings call. We have with us today Mr. Anil Kapoor, who is the Managing Director; Mr. Gaurav Mathur, the Joint Managing Director; Mr. Abhay Baijal, the Chief Officer; Mr. VK Gupta, the Vice President, Marketing; Mr. Rajveer Singh, Vice President, Legal and Company Secretary; and Mr. Anuj Jain, Assistant Vice President, Finance. Before we get started, I would like to point out that some statements made or discussed on the conference call today may be forward-looking in nature and must be viewed in conjunction with the risk the company faces. Chambal Fertilizers 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. Kapoor. I would now like to invite Mr. Kapoor to share his views. Over to you, sir.

Thank you, Gavin. Good afternoon, and thank you for joining us on this call. I hope that all of you and your families are safe and healthy. Let me quickly brief you about the performance of the company. We are happy with our operating and financial performance during the period of the review. On stand-alone basis, EBITDA for the quarter increased by 14% to INR 787.25 crores against INR 690.11 crores during the corresponding quarter of previous year. Profit before tax, before exceptional items, stands at INR 663.03 crores INR as compared to INR 506.99 crores during the corresponding quarter of the previous year. That is a jump of around 31%. Profit after tax, without considering exceptional items and onetime deferred tax, was INR 430.09 crores against INR 329.84 crores during the corresponding quarter of the previous year. During 9 months ended December 31, 2020, on stand-alone basis, we have achieved total income of INR 11,171.57 crores against INR 10,387.24 crores during the corresponding period of previous year. EBITDA, before exceptional items, for 9 months period was at INR 2,225.59 crores against INR 1,835.52 crores during the corresponding 9 months of the previous year. Profit before tax, before exceptional items, stood at INR 1,780.81 crores as compared to INR 1,231.35 crores during the corresponding 9 months of previous year, a jump of around 45%. Profit after tax, without considering exceptional items and onetime deferred tax, was at INR 1,160.26 crores against INR 816.54 crores during the corresponding period of previous year. Our performance was backed by increased volume of non-urea fertilizers with better margins and better performance in urea and other agri inputs. The company sold 12.63 lakh metric tons of DAP against 8.73 lakh metric tons sold during the same period last year. MOP sales was 2.66 lakh metric tonnes against 1.83 lakh metric tonnes last year during the same period. We have also scaled up sales volume of NPK/NPK(S) fertilizer and sold 68,000 metric tons of this material against 18,000 metric tonnes sums sold during the corresponding period last year. Just hold on. The huge outstanding subsidy was always an area of concern for the fertilizer industry. You must be aware that the government of India has made additional allocations of INR 62,638 crores for fertilizer subsidy in the revised estimate in order to clear the backlog. As per our information, around 1/3 amount has already been dispersed by the government of India to fertilizer companies. With this additional allocation, the outstanding subsidy as on March 31, 2021, will be at negligible levels. The fertilizer subsidy allocation in the Union Budget 2021 is also likely to be adequate to meet the fertilizer subsidy outgo during the financial year 2021, '22. The outstanding subsidy of the company as on December 31, 2020, was INR 5,825 crores. Out of this, the company has received INR 3,165 crores in January 2021. We expect the balance amount to be released before end March 2021. The release of subsidy will substantially reduce the short-term debt of the company, which will result in saving of finance costs and substantial improvement in the financial ratios of the company. We are encouraged by our performance. We have a very strong quality product portfolio and our connect in the pharma is very good. We have also an expansive distribution reach, presence in well-integrated markets and a lean balance sheet, which will give us confidence going forward. I, along with Gaurav, will be happy to take your questions on the financial performance of the company. Thank you.

[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.

Yes. Good morning, Mr. Kapoor, and congrats on a strong set of numbers. The incremental started -- yes, my question is the incremental subsidy released this quarter to the industry. It is a proud moment for all of us, and we should significantly clean our balance sheet. A question, starting April, does the subsidy account begin to expand again? Not perhaps in a measured way, but expansionary for sure? And what is the quantum of monthly release [ expansion ] given the budgetary allocation as we have today? What do you make of it?

So what we understand that our opening balance of subsidy outstanding on March -- on April 1, 2021, will be at absolutely negligible levels. Now subsidy release will depend on our sales from point-of-sale machines. And I think the way government will move forward if we will revert back to the original design of POS, where when we raise the bills on a weekly basis, the government will start clearing the bills as and when they are due. So I don't foresee a backlog taking place, definitely in the urea sector. The subsidy provision is very much adequate for the urea sector. We will need to wait and see how it -- what happens in the non-urea segment. How the price movements take place and what is our subsidies provision which the government makes.

In the same breath, are you surprised at the lack of noise around DBT, one would have assumed that this release was a precursor to DBT coming in. Your thoughts around that?

I am not privy to what the government is up to, but we are very happy at the turn of events which has taken place, Baidik. For a company of size of Chambal, to be literally approximately debt-free on working capital on April 1, will be a tremendous boost for the company. And you can all calculate the ratios at which we will be. We will have only long-term capital debt in our books and with very little working capital borrowing. Our performance ratios will be very good. Very happy to be at that stage. Now what has happened on DBT, I maybe -- I mean on a public forum, I am -- I will not be able to react on that what is my feeling, because you can't go by what I feel.

Sure. Sure. So the year ahead, there's nothing much to be done on urea. So how should we read your growth plans for the complex and agri inputs business? Some numbers will help, and we'd also like to hear Mr. Mathur's views on driving earnings in the coming quarters.

Okay. I will request Gaurav to make a statement on what are the plans which Chambal has moving forward. So it will be a -- and let me, for all the participants, this is a very forward-looking statement which we -- or which Gaurav will make, so please bear with us. Gaurav, would you like to talk on what the plans of Chambal would be going forward?

Yes. Thanks, Anil. So thanks for the question, Baidik. Let me start by, first of all, saying that now, Chambal is a very big player in the phosphatic sector. And we are actively looking for backward integration. As some of you may know, we are already present in Morocco with the joint venture, and we are exploring, investing in a phosphatic capacity in Morocco with the objective of further improving our sourcing in this area. The second point I'd like to mention is that we have initiated the process of geographic expansions, and have plans in place to start operations in Maharashtra, Gujarat, Andhra Pradesh, Telangana and West Bengal. We have already opened offices and started placing our sales team. We are already operational in Maharashtra and Gujarat, and expect to be operational in other states within March this year. So well positioned to participate next year. As was mentioned, we continue our focus on our non-urea product segment, both in the fertilizer and agri products area. We are reasonably strong players in the agri products area and will target to focus and grow further in this segment. Our existing geography is also seeing growth in the phosphatic and non-urea sector. We've seen the order of 5% to 7% growth over the past few years, and we will continue to drive for a better share of that growth. As you know from the recent budget announcements, et cetera, the government of India is looking at disinvestment, and we believe that opportunity may arise in that sphere. And as Anil has mentioned, with the strong balance sheet that Chambal has, we will be well positioned to participate in that. Of course, we will continue to drive operational efficiencies across the entire organization and our manufacturing facilities. And last but not the least, we continue to see how we can add more value to our farmers through soil health, advice on usage and whatever else they may need through our advisory services. So that, in a nutshell, is our plan going forward.

That's helpful. If I can just squeeze in one more question, our spread to the complex fertilizer business seems to have come off rather sharply. Could you gave us the range of what our gross profits per tonne in Q3 vis-à-vis H1? And importantly, how should we see this development over the next few quarters? Will the pressure continue? I ask that question because obviously, kharif acreage, which means a lot of importers are in the same space that you are. So is there a risk of earning contraction in the year ahead? I understand volumes might go up sharply, but if spreads come off -- I mean how are we looking at it?

Baidik, as you are aware, the asset prices have also gone up. So when the asset prices go up, we definitely make more money in our Moroccan venture. So in the past, also, we have received much higher dividend than what we have received in the recent past, that is one. Two, the DAP prices will definitely go up. We can see that happening in the marketplace. The MRP will go up. The MRP was 28,000 earlier. It gradually came down to 24,000 as the DAP prices fell. This is nothing new. This is commodity. This will happen. Prices will go up, prices will come down. It happens in every segment of commodity business. We will make sure that our margins are protected. There may be some swings in margin here and there. So that is part of the business. We should not get -- we have got a -- see, out of about approximately INR 2,400 crore EBITDA business, INR 1,700 crores to INR 1,800 crores is non-phosphatic business, where the returns are literally assured.

Though that is on urea. In urea.

That's in the urea business. It's a non-phosphatic business where the returns are literally assured. And as Gaurav has mentioned rightly, our focus will be on nonfertilizer business, which will drive profits for us. Be it pesticide sales, be it -- we have number of products which are nonfertilizers which we sell in the marketplace. We are a very large player in sales of ammonia. I don't know how many of you are aware that ammonia prices have gone through in the -- gone up in the international market. We will definitely focus on that also now. So we -- Chambal has number of avenues in which we can grow our profits and recover our margins. We may lose in one segment, we will recover in 3 others. We are large players in every segment of the market which work in.

Yes, that's helpful. The expansion in the Maharashtra, Gujarat, A.P. and West Bengal is very good to know. So given the acreage expansion that's staring at us in the fiscal, is it conservative to assume a 20% kind of volume growth in the year ahead?

We have just entered that market, okay? So those are difficult markets. And they are not easy, there are big established players in that market. To break and take market share from others in that market is not going to be easy. But we have a very strong network, and Gujarat and Maharashtra are adjacent states to us, okay? So we will also take our urea into those states, establish our brand through urea. We have a very strong dealer network in our segment, which we expect to grow in this segment. We used to be in Gujarat in -- way back. And then we moved out of Gujarat. We are reentering Gujarat. So we know the dealer networks fairly well there. I hope I've answered your question, Baidik.

And with it Y-o-Y as well as sequentially, I still have to understand what's helping us in this runoff? And is this sustainable?

Sorry, I didn't understand the...

Sir, my question was, there was a sharp rundown in our other expenditure this quarter on a sequential basis as well as a Y-o-Y basis. What's driving these runoffs and other expenditure? And given the environment coming back, should we expect these costs coming back in the fiscal? And also, I would like to understand what has led to this runoff in cost and other expenses?

Baidik, can I answer that? Just to give you some...

No, no. Just stay -- I will -- before that, our interest cost will substantially reduce going forward. With the government releasing subsidy, our interest costs will be literally be only on the long-term capital and a little bit of short -- a little bit on the working capital for the -- for next year. So we have a substantial tailwind as far as interest cost is concerned -- reduction in interest cost is concerned. Now Abhay, what is this cost which Baidik is talking about?

Yes, that's what I'll say, too, in other expenses, power and fuel are included, which is part of our direct margin to that direct fuel cost and material cost. So there is a little bit of confusion on how other expenses are treated. So what we have seen in reduction is basically the impact of the reduction in gas price. So it's going up and down, and that is part of the urea business where this is a pass-through cost. Now apart from that, the other costs that are included in that, they include freight and forwarding expenses, packaging expenses, insurance, and other stuff like insurance, as I said, repairs and maintenance and also some element of foreign exchange and movements, which can be plus or minus, depending on how the things come. So what has happened in this sequentially as well as from last quarter is there is substantial reduction in power and fuel cost, and some offset by some extent of increase in terms of freights and packaging costs because our volumes in DAP, NPK, MOP, et cetera, went down. So these are variable, to that extent that there is a power and fuel element in that. But if you strip that out, apart from that, they are fairly steady. And they will remain steadily -- relatively steady related to the volume of business that is being done. That's how I would like to answer, Baidik. If you get what I'm telling.

[Operator Instructions] We take the next question from the line of Pratik Tholiya from Elara Capital.

Yes. And sir, congratulations on a very good set of numbers. So firstly, just one, firstly, on the subsidy side. Until last quarter, you were giving the subsidy a sheet -- a table in the presentation which will give us the subsidy outstanding and the subsidy received during the quarter. That sheet is not there in this presentation. So it would very helpful if you continue to maintain that. In the meantime, if Abhay, sir, can just help us with what is the subsidy received during Q3? And outstanding, I think you said it is INR 5,800 crores.

I will tell Abhay to give it. But see, as of March 31, 2021, there'll be any -- hardly any subsidy outstanding.

I know. I know, sir. I know. I...

It may be a forward-looking statement. With that, one should not be bothered about subsidy outstanding of Chambal Fertilisers.

I totally agree, right? I totally agree. That's I think a big positive from the government side. But just to understand what -- how the movement has been during the quarter.

Yes, I understand that was posted on our site. So can you explain what happened during the quarter? Abhay? Abhay, are you there, please? Yes. Now please say what was the subsidy received in December quarter?

Yes, I'm here.

Thank you. Say what was the subsidy received in December quarter.

[indiscernible]

We will include -- Mr. Baijal, next time, we'll include it. We will include it -- Abhay, we will include it in our numbers. And anyway, what I request is you please post it in your site. We can post it after the meeting today.

Sure, sir. Absolutely. It will not be possible. We are not going to share another presentation, Mr. Kapoor, but sure, sir, we can include. If we don't -- you have number? Okay.

We keep record of the outstanding and whatever we have received in January. That much breakout we can give right now.

No, no. He is asking last quarter, so last quarter.

Yes, I have already mentioned INR 5,825 crores was outstanding subsidy as of December.

That is there in the presentation also.

Sure, sir. I'll maybe take it off-line. Sir secondly, on the EBITDA margin, there has been a steady improvement this quarter. We understand that the urea volumes are flat and even the margins, we know it's fixed. So obviously, it is driven by the non-urea segment. Sir, if you could just help us understand how are these margins? How should we look at it going forward from here on, considering that the prices, like you also mentioned, is going up. So from an operational-wise, you did mention that IMACID will make some more money. But on the operational perspective, how should one look at the traded margins going forward?

It's very difficult to tell, Pratik, what is going to happen going forward. How is the price increase will be -- what -- how will the price increase be taken in the market. But what I can share with the participants is that we have got some amount of DAP, MOP, NPK, NPK(S), with us at lower cost, so which will be used to average it and improve the margins in the first quarter, at least. By then, things will stabilize.

So the subsidy received in the last quarter is INR 1,085 crore.

Sorry to interrupt, but we can't really hear you very clearly.

Is it INR 1,085 crores?

Anuj, we will [indiscernible]...

We will post it or -- take them off-line and tell that to you.

Yes. Sir, that would be better. Sir, lastly, you mentioned about CapEx in the phosphatic segment, especially you are looking at something in Morocco. So any amount that you'll have frozen? And what sort of time line should we look at in terms of by when? Because you already have the raw material supply with us so our integration is what we would be looking at over there. So what sort of time lines are we working at?

We will look at both forward integration and a greenfield site. We are -- we have -- there's a committee which has been appointed which is looking at all these options. And I think in the next few months, we should finalize our plans of investment. So as soon as the plans are finalized, we will come back to the stock market and keep them informed.

Sir, but IMACID is a JV, right? We have the 3 others -- 2 other partners with us. So it will be -- the new clients are also on a JV basis? Or it will only through pure investment from Chambal side?

We have not decided on that, whether it will be on IMACID or it could be a separate joint venture between Chambal and OCP. So we have not finalized that plan yet. But investment will make -- will definitely take place going forward. Hello?

[Operator Instructions] The next question is from Deepak Chitroda from PhillipCapital.

Congratulation on good set of numbers, sir. So my first question is about the CapEx which you talk about backward integration. So if I'm -- if my understanding is correct, so are we going to replace our existing import arrangement which we do from the open market and basically, ultimately, we'll have a lower import cost. And basically, indirectly, this will improve our trading margin substantially?

Deepak, as soon as our plans are finalized, we will come back to the stock market. Right now, we are all evolving stage at this moment. And for us to share anything which is not finalized yet is not fair. Right now, we are working the modalities.

No problem. Sure. So sir, my -- the second question is about what would be our long-term sustainable working capital requirement? I understand, obviously, the onetime payment of the allocation -- extra allocation which we have got, that is going to wipe off our working capital requirement by March. But going forward, I am saying because we will have at least 4 or 5 months kind of a lean period or off-season demand, right? So during that time, we are not going to have a POS sales, basically. So definitely, we'll need to have some sort of working capital. So how do you think about that?

Abhay, would you like to answer that question?

Yes. Deepak, I'll put it this way, the operating cycle for urea for at least 9 months from April to December, is just about 70 to -- 60 to 70 days. As far as the DAP is concerned and MOP is concerned, we are a little longer, 120, 130 days. They stretch a little bit by 30-odd days between April and -- between let's say, February and April and May. But then it comes back to normal. So it is only a 2-month to 3-month situation between -- and it crosses the balance sheet date, that's why it looks like this. So looking at what I'm saying, in a normalized situation, 70 to 80 days in urea. What is going to happen is that with the cash generation of the company by October, November, since I think the amount of subsidy given is adequate for urea. I don't foresee any amount that will be required for borrowing to keep the working capital sustained, that is one. As far as the DAP and MOP is concerned, there will be some small borrowings that may be necessary or that will be strategic that you take some kind of credit or something like that. But I would not expect that there will be a large amount of it. Certainly, around INR 700 crores, INR 800 crores, but not more than that. Nothing more than that.

And also, Deepak, Chambal generates approximately INR 1,400 to INR 1,500 cash, which is -- which till we go for a major expansion, is plowed into the business.

So if we are -- if the CapEx happens post '22, then at least by October, November, we would have generated that kind of cash or 50% of that even after paying the loan installment in September. So that's why I'm saying, it's not more than INR 600 crores, INR 700 crores stretching up to October, November. So that is the kind of level you can think in terms of borrowing side. Of course, on the asset side, it will always be there. Hello?

The next question is from the line of Pritesh Chheda from Lucky Investment.

Sir, what is -- what will be your year-end debt? And what should be the next year's interest cost, assuming that the next year, the payouts by the government are a fairly normal payout cycle which they follow?

Abhay, would you like to answer that question?

Yes. See, our 1 installment of repayment of loan will happen. So we are expecting around INR 3,800 crores, INR 3,900 crores of long term, which will be there in the books. I'm not anticipating very much in terms of short-term borrowings. And Mr. Kapoor has been emphasizing with the receipt of almost INR 5,800 crore, which we are -- which is planned by the end of the quarter. I don't think there would be anything that -- if anything, it would be about INR 100 crores, INR 200 crores max. So we are looking at INR 4,000 crores kind of indebtedness by the end of -- total indebtedness by the end of the year. And going forward, as you can see, you can make the calculation, we were at INR 9,000 crores -- hello? Hello?

Yes, sir, you may go ahead.

Yes. So we have started with INR 9,000 crore, and we will end up with something like INR 3,900 crores differential, you can see what kind of difference will happen in the borrowings, in the rate of interest or the interest reduction. On an average, I mean I don't want to put it, but since you are all intelligent, I think you can calculate. Hello?

Hello?

Hello?

Hello?

Hello? Can you hear me, please?

I can hear you, sir.

So did you get what I say?

Yes, I heard the answer. The interest cost for us should be about 8.5% now?

No, I'll just share with you, we are -- our cost of capital is -- now will be only long-term where we have borrowed on ECB, and that is a very competitive -- we never borrowed 8% ever in our life. Earlier also, we were borrowing at between 3% to 4%.

Okay. Okay. And sir, my second question is, you were answering to one of the participant on the profitability part next year where we have certain costs on the manufacturing, which will go up. So sum total, you believe that you will still be able to show the profitability growth, why are the volume growths in the non-urea side? And my other question was when you were referring to urea as fixed, that fixed is basically between 12% and 20% ROE, is the formula. So considering that formula also, we think that the profitability for us, which is the EBITDA profitability for us should be growing next year?

Too early to tell how the non-urea business evolves next year? We will be only...

I'm asking sum. Sir, actually, I was asking sum total at the company level.

At the company level, see, interest at PAT level, the interest cost is coming down.

No, at EBITDA level, sir. I was...

At EBITDA level, in urea business, EBITDA is more or less -- there will be some improvement in energy. So to that extent, there will be an increase in EBITDA.

The EBITDA growth in Chambal will take place, as Gaurav has rightly mentioned, through expansion in geographical areas and expansion in non-urea business.

Okay. Okay. So directionally, sum total, the EBITDA will grow next year, a function of better profitability in urea, plus volume growth in the non-urea side.

I have not mentioned directionally. See, this is a commodity business. It will have to -- we will have to see how the rainfall is, whether it's El Niño, La Niña year. There are a number of factors which play in agriculture sector. So for us to be on a definitive statement that this will -- we grow by this much, this much, in agriculture, it's very difficult to forecast.

The next question is from Amar Mourya from Alf Accurate Advisors.

Basically, you have answered. Sir, you had indicated that you already received INR 3,000 crore of subsidy in January, right?

That's right, INR 3,165 crores is what -- the number I mentioned.

Okay. In total, you will receive INR 5,800 crore by the end of March?

See, what I mentioned was, approximately INR 5,800 crores is the outstanding subsidy on 31st December 2021. I made 2 statements, Amar. One is that substantial portion of this INR 5,800 crores, approximately the entire portion, barring from very small amount of bills here and there, but the entire amount will be received by March 31. And also, I made a statement that subsidy amount -- there will be a very negligible subsidy outstanding on the entire industry as on March 31. I hope that's clear.

The next question is from the line of Dhaval Shah from Girik Capital.

Congratulations to the team. Sir, my question is for Mr. Mathur. Yes. Sir, given your background from AksoNobel and the API company just previous to this -- to joining here, now you are joining our company in the fertilizer business, where the -- like a lot of things have changed and things are very good. What sort of newness or valuation will you get to the already set platform in terms of your B2C experience at Akzo and Chambal being a great, very strong brand with a very high market share. So as is from a strategic perspective, where do we see this company, say, 3 to 4 years down the line? So one, you mentioned you're getting into -- getting -- converting company to more chemical, getting into phosphatic acid expansion, as you mentioned, which is in the planning stage. But how do we see this company?

Thanks. But just to clarify, when I mentioned about phosphatic, it wasn't about getting into the chemical business of phosphatic acid necessarily, but it was more about having a source of di-ammonium phosphate, right? So that's what we are looking at. In terms of what we see 3, 4 years, I think what we see overall that is happening in the industry plus the growth that we see in the market as well as the disinvestment plans that the government has, and the growth plans that I mentioned early on, so we really look to harness all of those together. We are in a position where, if I look at it, Chambal has significant strength, first of all, starting with people. We have an experienced team, which I would say is one of the best in the industry. We have strong, well-entrenched brands. The Uttam brand that we have is a good product portfolio. Our distribution has scale and a very strong dealer base. We have strong market discipline. Financials has been mentioned a few times, scale of operational, cost leadership, a number of strengths, and we are now one of the biggest companies in the private sector in the fertilizer industry. So we -- the play really is to leverage all of that and along the lines that I mentioned earlier, essentially.

Sure. Correct, sir. Yes. And sir, my second question would be in terms of our allocation of capital, which is now INR 4,000 is the peak debt. So should I assume INR 4,000 crore is the peak debt for Chambal, at least for the next 3 to 4 years, considering our all CapEx plans or working capital plans? How should we look at this?

I think that's a question which is rather difficult to answer because it will depend on a number of other factors. But like Anil has repeatedly mentioned, based on the government policy on the subsidy and what we've seen actually happening, we would expect that our working capital would be -- funding would not be required. And thereafter, the peak debt depends really on the kind of investments that we make and the opportunities that we see. So to put a number on that, I would say, is a little bit premature.

But given our cash flow size, I -- our CapEx should be within that. I mean like so whatever CapEx we do, we're for sure not putting up another Gadepan-III kind of large asset. So the kind of cash flow we generate should be very much enough for any sort of CapEx you plan. Should we understand it that way?

Dhaval, we will be generating approximately INR 1,400 to INR 1,500 cash profit per year, okay? So in next 3 years, we'll be generating approximately INR 4,000 crores of cash. While there may not be an opportunity like Gadepan-III again, but were it to come, Chambal is well prepared to take that because there's INR 4,000 crore in cash coming in. We have -- we are -- the armory is full. We can make a substantial investment.

Yes, Yes. That's what my assumption was that the debt should not go up, like is it peak that number...

No, no. Debt will not. I do not think the government now intends to increase the subsidy. The way they have been very transparent in the budget and what they have done with FCI and fertilizer is remarkable.

Yes, yes. That's a structural change. Correct.

That's a structural change. And I don't think so government would like to go back to the old status.

The next question is from the line of Amit Doshi from Care PMS.

Sir, with reference to this non-urea business growth, would it -- on one of your slides mentions about market share in various states that we have. So urea, ranging from 10% to 20% market share we have, except Rajasthan, where we have 30%. Now would it be fair to assume that non-urea business, it will be easy for us to capture the market share that we have for urea? For example, if we have 20% in Madhya Pradesh, then to achieve non-urea, 20% market share would be fair and then probably over -- getting over that would be a challenging task. Can you -- basically, I'm just trying to judge the growth potential of market share in the non-urea business.

See, I think you have answered the question yourself, and I agree with your conclusion.

Okay. So in that case, I think majority of the places where -- I mean where DAP, MOP, we have kind of reached that kind of market share. Then so how confident...

There are certain opportunities which will be there in -- which we have not explored. As Gaurav had mentioned, there's a 5% to 7% growth taking place in phosphatic fertilizer. So that definitely we will capture. We will definitely like to capture a little bit more than that when -- in -- of the business by taking some merchant share from -- trying to take some share from some other people. And geographical expansion is taking place and that will open some avenues for us.

Okay. Okay. So on the urea front, like geographical expansion is one thing, but on the production side, of course, we are operating at the optimal capacity. So then how do we plan to achieve that additional geographical expansion?

Some of the areas where we want to expand, we don't -- not necessarily will go through urea route. We'll just expand on the phosphatic and nonfertilizer route.

Okay. Okay. Okay. And I saw...

And as far as your fertilizer plant is concerned, we are working out on schemes at this moment, and some of them are being implemented, which is on energy saving schemes in the existing plants, which will improve the energy efficiency of the plant and thereby improve the profitability. So some of the schemes have been approved and some of the schemes we are working on right now.

Okay. Okay. No, but that would be -- improve the profitability, I'm more on the production because we are operating at almost full capacity.

But actually, we are working out -- we are running right now approximate at full capacity.

Hello?

Yes. Production, we are working at full capacity.

Hello? Can you hear me? Yes.

We take the next question from the line of Viraj Kacharia from Securities Investment Management.

Congratulations for a good set of numbers. I had a couple of questions, they are more strategic in nature. So if we look at our own history in the past, whenever we had a good balance sheet position, we were kind of into other non-agri ventures as well. And we kind of corrected and exited those and seen an improvement in our return profile as well. Now going forward, if we were to understand Chambal Fertilisers, would it be purely a play on agri-related ventures in the future as well? Is that how one should look at the entity in -- going forward? That's one. Second, just to add to that, post this government onetime clearance of past subsidies dues, as you said, our overall balance sheet position will be in a significantly better position. So with the urea, already -- we already have 3 plants up and running and at its full capacity. Incrementally, how should we understand use of that cash? Would it be largely in non-urea business only? Or will be still be open to bid for any of those divestment opportunities of urea plans of government? So that is the second.

Can I answer that question, Anil?

Sure.

So Viraj fine, the 2 questions you've asked. So on the first one, yes, you're right. We've learned from some of the things that we have tried in the past, and that's always part of business as you do things and you learn from them. So our focus going forward is mainly on the agri sector. At the same time, if some significant opportunity emerges and it makes the right sense, at this point in time, I don't think we can absolutely rule it out. But our focus will continue to be on the agri sector. In terms of your second question, the investments, I think I did mention it that we are looking at an investment in phosphatic capacity in Morocco. And the -- with the disinvestment that we expect that government of India will do, as we have the wherewithal, therefore, to participate in that. And we have a strong balance sheet for that.

I would like to just mention to all the audiences, the investment which we are planning in Morocco is not even on the drawing board. It is on a discussion stage right now. And as and when anything materializes, we will come back and keep you people informed. So it's just on a discussion stage at this moment.

The next question is from the line of Madhav Marda from FlL.

I think the execution of the company, in the last 3 years, 4 years that I've been tracking it, has been absolutely rock solid. So congratulations on that as well. I think I just wanted to understand a bit on the disinvestment side. Basically, what would that mean? Like would we buy like a sort of inefficient fertilizer business like a urea or non-urea type of service around? Is that what we mean by disinvestment?