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

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '22 Earnings Conference Call of Chambal Fertilisers and Chemicals. [Operator Instructions] I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you.

Thank you. Good day, everyone, and thank you for joining us on the Chambal Fertilisers and Chemicals' Q3 and 9-month FY '22 earnings call. We have with us today Mr. Gaurav Mathur, Managing Director; Mr. Abhay Baijal, CFO; Mr. Rajveer Singh, Vice President, Legal and Company Secretary; Mr. Anuj Jain, Assistant Vice President, Finance; and Mr. Ashish Srivastava, Assistant Vice President, Marketing. 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 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. Mathur. I would now like to invite Mr. Mathur to share his views. Over to you, sir.

Thank you, Rishab. Good day, and a very warm welcome to all of you participating on this call. As we see the COVID scenario continues to improve, and we hope that you and your families are all safe, thankfully, this wave has been a much milder version compared to the past. The last quarter was challenging in terms of huge upswing in prices of fertilisers in the international market, which led to changes in trade flows and supply constraints. This has adversely impacted sales volumes of DAP and MOP fertilisers, and the margins on DAP were also impacted due to this reason. On the other hand, our new territories in West and South of India have enabled us to achieve better sales volumes in NPK fertilisers. The performance of crop protection chemicals, especially specialty nutrients have also been very encouraging as we have been focusing on it, like I've mentioned in our past calls. The Government of India have supported the industry by revising the subsidy during the last quarter, but overall imports remain low. The supply constraints have impacted the overall stocks of P&K fertilisers in the country, which were very low at the end of the last quarter. The overall demand of these fertilisers in other markets is seen to be tapering off a little leading to better availability of these fertilisers in the international market. As you know, we have announced implementation of technical ammonium nitrate project at an estimated cost of INR 1,170 crores. We have excess ammonia available at our Gadepan facility. This is a technical excess ammonia, which will be sufficient for manufacture of the full capacity of ammonium nitrate that we have planned to put in place. Considering the time taken mainly in statutory approvals, the project is estimated to be completed within 36 months. The project will enable to do value addition to the ammonia we are selling in the market, hence, better margins will be available. The gap between domestic supplies and demand and infrastructure limitations continues to pose a challenge to imports. And we are very excited about the potential of this project, even bearing in mind other proposed capacities by players in the market. The financial performance has already been explained in the presentation we have shared with the stock exchanges, hence, I'm not mentioning all the numbers. I'm sure you've had a look at those. Considering the 9 months performance, the Board of Directors declared an interim dividend of INR 4.50 per equity share of the company. With that, we would be happy to now take your questions. Thank you very much.

[Operator Instructions] The first question is from the line of Pratik Tholiya from Systematix.

Sir, just wanted to understand a little more on this project. Firstly, we have a very strong hold in the agri space. Just wanted to...

Your voice is not clear, I think, some noise in the background, if you can...

Okay. Sir, is it better now? Hello?

Some noise in the background, actually.

Sir, just a second. Yes, sir, is this better now?

Yes, yes, yes. Please go ahead.

Yes. Sir, just wanted to understand why have we chosen to get into chemicals in the first place since you already have a very strong hold in the agri space? So why did not we choose to get into, say, something like a DAP or a complex fertiliser or even in agrochemical's technical manufacturing versus chemicals? That's my first question.

Okay. Thanks, Pratik. So when we look at, we have -- we generate excess ammonia because of technical reasons in the plant. We have been selling this excess ammonia. However, we were evaluating, as I've mentioned in my previous investor calls also, we've been evaluating options to monetize this excess ammonia and looking for value-added products. Towards that, we had evaluated various opportunities and come to the conclusion that ammonium nitrate, technical ammonium nitrate would be the best option. As regards why not DAP and complex fertilisers? We keep evaluating that. And at this point in time, we believe that our import and trading model is most appropriate, that does not necessarily mean that we will not continue to evaluate that going forward.

Sure. Sir, and just on this ammonia bit, just wanted to understand how are we generating excess ammonia? And are we able to use this excess ammonia for chemical business because I think the gas that we get is the pooled gas, which is meant only for fertilisers. So how are we going to source ammonia for the plant?

Yes. So I guess you've got -- so essentially, the generation of this ammonia happens because of the inherent design of the plant, and that is why it's called technical ammonia. In terms of the gas and pooled gas, et cetera, those are all part of the government's policy, and we have taken that into consideration while we have decided to put up this ammonium nitrate plant. We believe that whatever be shall still -- this still makes a lot of sense.

Okay. So sir, what sort of IRRs are you looking at from this plant? And on the cost basis also because if you see, we are at the west part of the country and most of the mining activities happens in the central and east. So most of the end users prefer buying from China because imports are much cheaper. So -- because logistically speaking, it is more -- it might just end up being a little more costly to transport from Rajasthan to the East Coast. So what is the cost dynamics? And how is the IRR going to be in this project?

So Pratik, I can't share with you the specific IRR number. But suffice it to say that when we look at new projects, we keep in mind the investment that we made in Gadepan-III and that our IRR and returns are commensurate and benchmarked to that. So it's a decent number, which is why we decided to go ahead with it. As regards your question about the market and its availability and imports from China, there are 2 points I would like to make. We have looked at the markets and done an extensive exercise to understand where the market is, where the higher growth will happen. And we believe that we will have a very competitive cost to serve to serve the market that we would like to access. I think we must bear in mind that this ammonium nitrate demand is growing at a very healthy CAGR, which we've mentioned in our investor presentation also of 5% to 6%. So that is definitely creating a lot of demand, and we believe that we will be able to service that in the markets. And if you will look at the geography and I'm sure you can see where other plants are located, you will see that our Gadepan location is by no means adverse. It is a very good location. As regards imports, imports is a very, very challenging situation. After the ammonium nitrate rules of 2012 and then recently, the blast which happened at Beirut port, it's a very challenging situation on imports. And we've referred it too in our investor presentation also. There are very strict safety requirements. Permission is only available to users and not to any traders and there are port limitations. So as of now, only Vizag port is authorized to import ammonium nitrate. So all of these put together, gave us good confidence that we will be competitive suppliers as well as we will also be able to do import substitution to a good extent.

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

I had 2 questions. The first one was on the technical ammonium nitrate project. So given that there are a couple of new capacities coming up in India in the next 2 or 3 years, would it be possible for the new capacities to successfully replace the very large import which happens because of the reason that you already stated. So do you think there's a reasonably good chance that imports probably go close to 0 once India has enough domestic production per plant?

Yes, Madhav, as I mentioned in response to the earlier question. There is -- imports is not very high, even now with lower capacity. The imports is not very high. That's one. Second, there's a huge challenge on imports. Third, as I mentioned, that this ammonium nitrate growth seemed to be in the 5% to 6% range. So the current market size is approximately 1 million tonnes. So with a 6% growth, you can say every 3 years, about 200,000 tonnes of demand is coming into play. So I think that probably gives you a good sense of demand, supply imports situation and why we feel confident that this is a good project to go ahead with.

Understood. And the second question was for DAP volumes and not just for us, for the industry as a whole, has been quite weak this year because of -- and then there's been a big inventory destocking also which has played out. So as we head into FY '23, is it only just logical to expect that volume growth should be really strong if the global sort of supply constraints ease, just led by inventory sort of getting replenished in the time?

Yes. So Madhav, this year, like you rightly said, the DAP volumes for the entire country have been substantially lower. And even as we had begun this year, the opening inventories at April '21 were also quite low compared to previous years. So right now, the channel in India is almost empty. That's one. Second is, as I mentioned in my opening remarks, we see a slight tapering of demand already starting to happen in other key markets outside India. And therefore, we expect that the DAP requirement and availability, both will be better in the coming year.

[Operator Instructions] The next question is from the line of Trilok from ABSLI.

Just want to check, beyond this project that you've already announced, what sort of investments are we in envisaging, and how much time do we expect? Will you guys share with us?

See, like I mentioned in our previous calls, we are looking at various opportunities. And this is the first one that we have zeroed into. As we see more opportunities coming to a fruition, we will then make those announcements. We, as you see, have a very strong balance sheet. And therefore, as we go ahead, we will bring in more projects. At this point in time, I think it would be inappropriate for me to share things which are work in progress.

No. We appreciate, sir, that. But I just wanted to get some -- so last time also you guys alluded to by the end of -- so any timeline would be appreciable because I agree that at any given point in time you'll be obviously evaluating multiple opportunities. But we thought if you can get some timeline, that will be helpful because -- yes, that's the only request. And also in -- with regards to the first question, one of the participants asked about the IRR, what sort of pricing are you guys considering for ammonium nitrate, that will be helpful -- if you can just share some figure on that, that will be helpful.

Yes. Trilok, I think to share the pricing that we have considered is probably not appropriate on an investor call. These are all competitive aspects. One second, we are still 3 years out. But what we have done is, we've done a thorough due diligence to understand the dynamics of this market. And what would be the cost to serve for us, what would be the potential cost to serve for competition. The fact that we have one of the lowest-cost ammonia, which is the primary raw material available. So therefore, we are -- pricing is in the context of margin. So we are quite confidence that -- we're confident that we will be able to make at least the same, if not better margins than the industry as a whole.

Sure. Got it. Lastly, if you could just comment on the timeline, that will be helpful. That's the last question.

Thank you.

The next question is from the line of Deepak Chitroda from PhillipCapital.

My first question is about on the TAN difference itself. So first of all, sir, just want to understand, as you highlighted in the previous participant answer, what would be the market size for TAN share in India? Because as I understand, one of the competitors they claim almost about kind of a 40%, 45% kind of a market share. So if I understand correctly, the domestic market side could be around 1.5 million tonnes or so. So I think the expansion which we have announced of around 0.2 million tonne, do you think that can be easily absorbed and can we -- we can have a good kind of a market share going forward?

Yes. Thank you, Deepak. So the market size of TAN currently is approximately 1 million tonnes. It's growing at 5% to 6% per annum. So every 3 years, you add approximately 200,000 tonnes. We are putting up a plant of 220,000 tonnes. So you can estimate that, and it takes 3 years for a plant to come up. So by that time, the market would have grown by another 200,000 tonnes, right? We believe that in spite of the strong player having your market share, there is sufficient opportunity for us. And as I mentioned, we would have a cost competitive product because of the ammonia available and our locations.

Okay. And just in addition to the same question, last time, you mentioned that we had additional or excess ammonia of roughly around 60,000, 70,000 tonnes per year. But as I understand, I think, 0.2 million tonne of capacity for TAN probably we might need around 90,000 tonnes. So do you think the technical ammonia, which we'll be having could be reached to that level probably once our TAN plant is ready?

That's right. We have -- that's a very good technical question, Deepak. And you've spotted the number we said last time and this time. So kudos to you. And we have looked at it. So we have certain small modifications that can be done, which -- by which we will be able to easily meet the total requirement of ammonia going forward.

Okay. And just to add to that, like, as you said, we need almost 0.9 million tonne of -- sorry, 90,000 tonnes of ammonia. So are we planning to add any further capacity after that? Because after that, probably we need to have additional ammonia probably then we used to buy it from the market, just like one of the competitor's history?

I think let's first put up this plant and then we will keep assessing it. We will keep assessing it. But I mean at the first let's -- we will consume what we have and then we will see what's the situation at that point in time. There are so many moving parts, and we will reassess the situation as we move along.

Okay. So just to add on that as well. I mean in terms of the pricing side, sir, so I understand there is a wide gap between international prices and the domestic prices. So how the pricing mechanisms work in the TAN business? Is it basically based on the individual customer-to-customer pieces?

Yes. See the pricing mechanism will work on the landed cost to the customer, right? So whether it's import, whether it is from us, whether it is from competition, ultimately, it will depend on who can supply it at the best possible price. And that's why I come back. We've looked at international prices. We've looked at what kind of cost to serve exists for various players. And we believe we can price and get the margin, which is the top rate to give us a decent return.

Sure, sir. And my second question is on the fertiliser business. So first of all, if you can give the breakup for the urea for Gadepan-I and II and for III the urea sales volume.

Anuj, can you break up of Gadepan-I and II and III sales volume, 1 second. Maybe I'll ask Anuj to take that number out.

Sure. So in the meanwhile, if I can ask about, as you mentioned about the incremental cost, which has increased since October, since the subsidy has been given by the government. But what is your sense is government is planning to give additional subsidy, probably they might announce tomorrow or so? So what is your sense on that side?

See the government -- as we've also indicated in our presentation, the government in the last -- till now from April to now has twice increase the subsidy. The entire industry in its interaction with the Department of Fertiliser believes that the government is seized of the fact that they will need to manage the subsidy and manage. And therefore, a subsequent impact on the MRP of the product to the farmers, right? So like they have shown, we believe the government is flexible to look at the international procurement price and accordingly provide the subsidies, so the industry is making a reasonable margin.

Okay. So do you think that it can be possible? I mean it depends on how the cost has been calculated by then?

That's right. Because I think the government is fully cognizant of the fact that no industry will either produce or import. No company will either produce or import if it's not going to make some reasonable profit, right? So the government, like they've shown this year, will probably act accordingly.

Sure, sir. Sure. And lastly, just if you can share that volume?

[indiscernible] once the subsidy announcement happens only then we will come to know.

Sure, sir. Sure. If you can, please, lastly, share the volume of urea?

Yes. So Anuj, just share the volume.

G1, G2 this quarter, we have 5.6 lakh tonnes and G3 it is 3.39 lakh tonnes.

The next question is from the line of Rohan Gupta from Edelweiss.

Congratulations on such a strong set of numbers. Sir, sorry, but on TAN only that just wanted to get some more sense. As the entire advantage is more on the ammonia cost of production and the manufacturing of that with the efficient costing, which we have, why not we have contemplated on only selling at ammonia in open market, and we are increasing use of ammonia, which is coming in the country because not any players is putting ammonia plant and rather than getting into TAN. And also second, that we don't have any expertise in manufacturing of acids like nitric acid and all. And even a TAN itself in terms of customers' profile and it's a quite regulatory product, as you already mentioned, even the customer acceptance may take some more time apart from putting a plant. So we are probably getting into that business where the customer acceptance and all those things will be pretty -- may have a long gestation period. So just wanted to understand, sir, I mean, the logic of almost INR 1,100 crore being put in a TAN plant? And if we wanted to get only in the some chemicals, are we -- have we evaluated any more chemicals? Or it is just only because of the ammonia where we're just putting a TAN plant?

Okay. Thanks, Rohan. You've asked 3 questions. So first of all, we currently sell ammonia, right? We currently already generate excess ammonia due to technical reasons, and we sell it. When we convert it to ammonium nitrate, we are adding value. Therefore, the margin that we will get is far more than selling ammonia, okay? So that's the rationale. We evaluated various other options where this ammonia could be used and ammonium nitrate is the best option [Technical Difficulty]

Excuse me, this is the operator. Sir, we can't hear you. Ladies and gentlemen, we request you all to please stay connected while we check the management's line. [Operator Instructions] The line is reconnected. Sir, you may go ahead.

Yes. So I'll just restart from Rohan's first question. So we do sell technical ammonia -- technical access ammonia currently and the rationale for converting it into ammonium nitrate is that, that will give value addition and therefore better margins. We did look at other chemicals starting from ammonia, and this was the one that made the most sense. In terms of manufacturing expertise, et cetera, look, we operate very, very complex ammonia and urea plants. And compared to that, a weak nitric acid plant and an ammonium nitrate plant is very, very simple, and we do not -- we have full confidence that there is no issue. Also, we will be putting up plants with the latest technology, automation, et cetera. So these are all sort of computer-controlled, highly automated plants, and we are very confident of being able to operate them. In terms of customer profile, look, it's a -- we are, as I said, going for the best global technology available. So the product that we will get is very, very sure. I'm very sure that it will be a great product. And I must add that I began my career with the explosive business of ICI which is now called Akzo Nobel quite 3 decades ago. So I personally have a fair understanding of ammonium nitrate, its usages, et cetera. And I'm confident that we will be able to access the customers for this.

Okay. So that's helpful. Sir, second question is that definitely, we were also contemplating other investment opportunities within fertilisers also with the putting even a backward plant for probably phos acid. Just some more light on that, that this is only INR 1,100 crore kind of CapEx, which we have announced while our cash flows generation still remains very solid with -- so on those plans and you are still on and over next 2 years, do we see that we are going to see some more investment in the backward integration as far as the phos acid and all are concerned? Or we are contemplating more investments toward non-fertiliser business like chemicals?

So our focus remains the fertiliser business, right? And as regards specific questions on phosphoric acid, et cetera, we are evaluating it, though I must say that putting up a phosphoric acid plant in India is a very challenging, difficult situation because of various reasons, both in terms of the financials as well as the environmental aspects of phosphoric acid, right? So that's not necessarily something which is on the top of our priority, but there could be other things in the fertilizer business that we could be looking to invest into.

So probably that we are also contemplating more chemicals and more projects towards that if probably fertiliser is -- and putting a phos acid plant in India is not working in a current scenario. So can we expect that the internal -- I mean, the cash flow generation over next couple of years can go more towards the chemicals?

At this point of time, we have no -- we are not looking at any other chemicals.

The next question is from the line of Prashant Biyani from Elara Capital.

Sir, how much of the TAN market is currently served by imports?

Approximately 25%. That's the average over the last 3 years. Sorry, yes, that's right. The average over the last 3 years is approximately 25%.

Okay. And how much could be the realization per unit for TAN and weak nitric acid currently for the domestic market?

Look, Prashant, that's -- current number is not necessarily the right index because currently, as you know, the price of gas, the price of ammonia. So for example, the price of ammonia internationally and what is imported into India is about 2.5x to 3x what it has been in the past, right? So when we have looked at our financials, we have not based it on just this year's current number. We have looked at it over the last 3 years and understood and then taken a margin, which is more sensible. They might -- the margins may be very high currently, may, I don't know, right, because of the high price and high selling price, right? So that's not what we've taken. And I can't share with you the exact number, the margin that we have taken into consideration. But what I can share is that we have benchmarked it. We have looked at the cost to serve, what we expect from other players in the market and taken that into consideration.

Sir, if I can put it the other way? How much could be the asset turns, if you can share some color on that?

Sorry, can you repeat your question?

The asset turns from the investment that we are putting in?

The asset turns...

Asset turns, are you saying revenue to asset wins?

Yes.

2,30,000 tonnes...

So we expect it in the range of maybe 50% to 60% of the investment.

Okay. And sir, the returns should be in line with the existing business margin for us or should be better than that?

Like I mentioned at the start, when we look at the returns, we are sort of benchmarking it to the kind of returns we are getting on the Gadepan-III plant. So it's in the good teens, let us say.

And lastly, sir, what is the gas price for Q3?

Gas price for Q3. One second.

Gas price for Q3 is $16.47.

About $16.5 per MMBtu at NCV basis.

The next question is from the line of Abhijit Akella from IIFL Securities.

First of all, just to clarify on the gas question that you just answered, this $16.5 is only on the imported gas is it or this is the blended pooled gas cost for us?

This is pooled gas price.

Okay. And so this is what is going into our urea production and then it's being subsidized by the government? That's how it is?

Yes. Yes.

That's right. Go ahead, please.

Yes. And so I just wanted to ask 1 about the non-urea business, sir. Any outlook we could share for the upcoming years of fiscal '23? So I know you mentioned that availability should gradually improve as prices correct worldwide. But can we expect fiscal '23 to be a more normal year in terms of volumes and margins for the non-urea business related to what we have -- the pressure that we've seen so far this year?

Abhijit, this is a very difficult question to answer because what has happened is this year has proven everybody in the fertiliser industry to be wrong. Nobody expected the international market to climb the way and -- the demand to climb the way it has climbed and the prices to climb the way they have climbed. This has happened after almost 10,000 years. Now coming back to your question, there is, like I said, a slight reduction in demand that we see in the international market, one. And therefore, that should start to impact the prices at some point of time in the coming months. Now a lot of it also depends on how soon China enters the market again. In the last -- in this last quarter, as you all probably know, China had stopped exports all over, not just to India. And therefore, -- but they have restarted now to some extent. And we -- normally, China comes back into the market around April, May time. As of now, the indications are that by the time we come to those months, probably China will be back into the market. So if that happens, international demand slightly tapers off, we wouldn't expect the prices also to slightly come -- start coming down. And then on the demand side, the demand, as we know, remains off the order of 10 million tonnes. The Government of India is very keen to ensure that there is sufficient stock of DAP, NPK available at the start of the Kharif season. So if we put all of these things together, we should expect that in terms of volume, '22-'23 should be closer to normal than what has happened this year.

That's really helpful. Yes, just 1 last question on the TAN business itself. So can we expect full capacity utilization within the first year of commissioning, that was one? Also, just to ask about the nitric acid capacity has been set up there. If I'm not mistaken, it's 1.8 lakh tonnes per year. Is that entirely intended for captive use for TAN or will anything be sold outside? And 1 last thing is the pooled gas cost that you just mentioned, the $16.5, will it be the same kind of costing that you will use for the business and also for the ammonia that's been produced there?

Yes. So in terms of the capacity utilization, we strongly believe that the plants will be able to operate at full capacity very soon after startup. Like I said, these are not very complicated plants compared to the ammonia and urea plants that we operate. So we have a strong technical base. So in terms of plant operations, we will be able to operate them fully. For our -- for the purpose of our financials, we have and sort of to be prudent, we've not considered that we will sell 100% of our capacity in our first year. So I'm sure like you guys would well understand like any other prudent management team. We've also taken that we'll be less than 100%, and then we'll ramp it up in a couple of years to 100%. That's the, I think, the first question. In terms of nitric acid, out of the 1.8 lakh tonnes, the majority would be used in ammonium nitrate process, but we will have some surplus available. And we will look at what other options are available to utilize that surplus. The third part is the gas cost. So the gas cost we have currently considered the policy that exists. And under that policy, there are certain different ways of the government considering in what -- how you use that ammonia. So we have taken that into consideration and built it into our financial calculations.

The next question is from the line of Tarang from Old Bridge Capital.

A couple of questions from my side. One is, what's happening on getting an approval for extra urea production from your GP capacity?

So we are yet to receive the formal approval. However, given the very high price of urea in the international market, we are hopeful that the government will look at the much lower cost that we will produce the extra urea at from Gadepan-III and give us the approval. Those are the indications we have received, but we await the formal approval.

Okay. And what kind of utilizations can you probably run your plant once you get these approvals?

Full utilization.

Okay. But I guess you were already 13.3 lakh tonnes, right? That's how much the GP plant is at. And currently, it's being run at 12.70. So about 60,000 tonnes of extra urea, would that be accurate?

Yes. So Tarang, we don't necessarily run the plant at a lower rate. We run the plant at the right rate so that we get the best efficiency of operation. And then till the time -- so for example, last year, since we did not have approval for extra production, once we reached 12.7 lakh tonnes, which is what was allowed as per the policy, we stopped the plant. And so this year, we will -- once we reach that, we will continue to operate as we get the permission from the government.

Okay. Got it. And the second question on the TAN project, how do we see funding this project? I mean can we see you taking a decent amount of debt on your books for this one?

I'll let Abhay answer this question.

No, we have, Tarang, not really decided. It is just an option to either have it 1:1 or whatever. But you know that our cash flows are quite adequate to cover such an investment in the time frame that we are talking about. But this is a call we will take because there are -- if there are other investment options opening out, as Mr. Mathur has said, we will balance the needs according to what we need for this and for others and so on and then decide.

The next question is from the line of Falguni Dutta from Jet Age Securities.

Sir, I have just 2 questions. One is on the DAP margins. How much percentage were they lower in Q3 compared to the best that we achieved?

That's a very difficult question, and not something which we can answer on the investor call. But yes, it was considerably lower because of the overall situation. So it's considerably lower, yes.

Okay. And sir, what's the subsidy per tonne currently in DAP?

The current subsidy per tonne is INR 33,000 a tonne.

And the way the current imported prices are, do you think there is a need for a further upward revision in subsidy?

Absolutely. So the current prices are upwards of $900 a tonne. And I think all the calculations are available, these are transparent issue -- ways. So the government has all the calculations. So they understand the situation. And as I mentioned earlier, they have indicated to the fertiliser industry that they will definitely take into consideration the existing international prices when they are formulating the subsidies for next year.

The next question is from the line of Faisal Hawa from HG Hawa & Company.

Can you -- would you envisage some situation in which there is actually a shortage of fertilisers in India, and there is some kind of farmer agitation or some kind of unrest, which actually makes the government show its hand and have some kind of liberalization in this whole subsidy kind of a situation? And which can actually make people raise products in India because apart from yourselves, nobody has actually raised fertiliser production significantly over the last almost 2 decades.

So Faisal I mean, I can't answer about the overall how the government will respond. What we can see is that -- look at it this -- I'll answer your question in 2 parts. If you look at it this year also where it was a very, very significant challenge for the country as a whole, given what's happening in the international market, right? The demand of DAP, NPKs, et cetera, in Brazil and U.S. just shot through the roof in an unprecedented manner in a very short span of time. And the government and the industry worked together very closely. There were maybe 2 meetings a month happening to tide over the situation. So both the government and the industry is very much aligned that we cannot have a shortage of fertiliser in the country, right? It's a matter of food security for India. It's a matter for the farmers, making sure it's available for them. So that, I think, is very clear on that front. As regards capacity, we were definitely the first by a long shot and especially in the private sector. After that, as you know, there is 1 more private sector plant that has come up already started. There is another public sector unit that has started. There are 3 more public sector units, which are expected to start between now and the next 6 months. So a total of our plant plus 5 more are already there. And then the government has also announced another plant [Technical Difficulty]

Excuse me, this is the operator, participants we request you all to please stay connected while we check the management's line. [Operator Instructions] The line is reconnected. You may go ahead, sir.

Yes. So as I said, we've not just had our plant, but 5 other plants, out of which 2 have come online, 3 are further expected to come online in the next 6 months or so and another 1 which might take a bit longer. So substantial capacity on urea has been added.

So I mean, even in your meetings, there is no chance of this getting liberalized or anything? So because what if the trajectory of the government has been clear, moving mobile manufacturing to India and they are wanting to attack import substitutions first things first in manufacturing?

Yes. I mean, Faisal, I really can't comment about how -- what the government is thinking. And this is an area also which is a bit different from mobiles. Mobiles is a very consumer product, free market, et cetera. Whereas the fertiliser industry is closely linked to the food security, the availability of fertiliser to farmers at an affordable price. So the dynamics are very different. And therefore, it's very difficult to comment on government policy.

The next question is from the line of Rushabh Shah from Anubhuti Advisors.

Yes. Just wanted to know what is the capacity utilization of Gadepan-I, II and III for the current quarter and 9 months of this year?

Which -- can you repeat which plant you're looking at?

Gadepan-I, II and III.

Gadepan-I, II and III capacity utilization. In this quarter, the capacity utilization was for Gadepan-III was 100% and -- on I and II was also more than 100% for both of those based on the reassessed capacity. So I mean, if we've roughly produced, if I remember, 9 lakh tonnes -- so we've totally produced 9 lakh tonnes in this last quarter and that is 3 lakh tonnes per month, which is roughly the full capacity.

[indiscernible] 9 months this year?

For 9 months, we produced 25 lakh tonnes, and our capacity utilization would be order of about 99%.

Okay. This INR 25 lakh is for all the 3 plants combined?

That's right. That's right.

See, we must also see from availability. See, from availability plants also go for maintenance. So if we were to see from availability side, we are 100%.

[Operator Instructions] The next question is from the line of Rohan Gupta from Edelweiss.

Sir, a couple of questions with the current rate on fertilisers and current DAP prices, how they are prevailing. Do you see that the government will be in position to meet this deficit? I think that they must provide close to INR 1.8 crore to INR 2 lakh crore for the fertiliser subsidy, which is almost 80% increase than the last year. Though, I mean, we are just 1 day away from the budget, but do you see that there are chances that the delays from the government payment can be there and which can affect our working capital in the current scenario?

So we will come to know tomorrow as the budget announcement happens on the fertiliser subsidy. And I guess that's the best thing for us to do is to wait because any other -- you also read all the reports that come out in the newspapers. We also read that, but we can't hazard a guess. And therefore, I suggest whether before we start to answer any questions on shortage of fertiliser subsidy and impact on us, et cetera, like at till tomorrow. All I can say is what we have seen this year that the government added almost INR 58,000 crores additional subsidy to their original budget estimate of INR 79,000 crores roughly, right? So that's a huge amount, and they have been pretty quick in disbursing that, so making it available. They have cleared the debt, the old subsidy dues in the previous financial year, as you all know, INR 65,000 or close to that crores was allocated. So it appears to us that the stance of the government is to not have a subsidy to the fertiliser industry pending. That's all I can say right now from what we've seen in the last 2 years.

Sir, if you can just provide what is the fertiliser subsidy pending by December?

What's the fertiliser subsidy pending for us till December? I think it's there in the presentation, Rohan. It's about INR 3,000 crores, which we have received from them. Yes, out of that INR 3,000-odd crores, INR 1,500 crores-plus has been received in January.

Okay. INR 1,500 crore has come in Jan. Okay. And sir, second, just a clarification in your TAN plant, if you can give some sense of what is the gas pricing you have assumed for putting this plant for the IRR calculation for your internal purpose?

Yes. Let me answer that question to you in 2 parts. One is that we have looked at the gas price as an average over the past years. The reason for that, Rohan, is that it's unfair and incorrect to take the current very high gas prices because this is an aberration year, right, where there were huge challenges on demand and supply in Europe, Russia, et cetera, which led to this kind of a situation on gas prices going up. So it's not right to base your business decisions on 1 year. So we have taken the average of the last 3 years. The second aspect that would be good for all of you to know is that with -- by the time we put up our plant every supplier of ammonium nitrate in the country, a producer of ammonium nitrate in the country would be backward integrated to manufacturing of ammonia and therefore, backward integrated to gas, right? So it becomes a very sort of a level-playing field in terms of gas input cost of cash, right? And therefore, if gas prices increase, that will be applicable to almost everybody.

Let me add, Rohan here, that we have also -- we have reduced the price of gas, we've also taken lower realization. So at the end of the day, we have also normalized realization and also normalized the gas prices.

Okay. Sir, because our pooled gas price is primarily applicable for the urea production. So just because of the main element which you have taken, like the 3 months -- the 3 last year's average when you're talking about, are you referring to hammering of gas prices or all the imported gas prices average in the country? Because the pooled gas prices, I believe, won't be the right benchmark for the production of ammonia for the purpose of TAN, right?

Yes, you're very knowledgeable, Rohan. That's right. We do take the pooled gas price.

No, the point is that this is as we have mentioned earlier that this is arising out of the technical process to manufacture urea because there is a shortfall of carbon dioxide backside if the plants are designed in a particular manner, we cannot but help produce this ammonia. So there is a certain policy around that pooled gas price. The costing has been done according to that policy.

Okay. And all the ammonia surplus will be available only from our Gadepan-III plant, right?

Yes. Gadepan-I, II, III, all of them produce excess technical ammonia, right? That is an inherent design of not only our plants, but most ammonia-urea complex plants. It's not specific to Chambal only.

The next question is from the line of Falguni Dutta from Jet Age Securities.

Yes. Sir, just I missed on asking on the current MRP for DAP?

The current MRP for DAP is INR 24,000 a tonne or INR 2,000 -- sorry, INR 1,200 a bag.

Sir, then in that case, we are not importing anything now? I mean then we would not have any sales for the coming quarter till this subsidy hike is given?

Yes. I mean this kind of MRP, as we know, while there was no formal letter, but the government had sort of informally put a cap on the MRP of DAP.

Okay. And sir, what are the current ammonia prices internationally. Hello? [Technical Difficulty]

Excuse me, this is the operator. Sir, we can't hear you.

What are the current ammonia prices internationally? Hello?

[Operator Instructions] Sorry, Falguni, just give me a minute, let me just check with the management. Can't hear them. Yes, we've reconnected the line. Sir, you may go ahead.

Yes. So Falguni are you there?

Yes, sir.

Yes. So basically, yes, we are not going to sell what we import at the MRP of INR 24,000. And it's the -- government [Technical Difficulty].

Hello? Hello?

[Operator Instructions] Ladies and gentlemen, we apologize for the technical issue. We have the management reconnected. Sir, you may go ahead.

Sorry, apologies, there seems to be some challenges with our line today. So what I was mentioning is that once the government announces the subsidies, then the MRPs will be reexamined and it is not that the MRPs will necessarily continue at the current MRP.

Yes. I understand, sir. And sir, what are the current international prices for ammonia? That's all from my side.

So ammonia international prices are currently in the range of $800 to $900 per tonne. It's just every week, it sort of goes up and down, but let's say, $900 plus/minus.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you very much for everybody who has joined in and for all your questions and your keen interest. And I wish you all the very best. Hopefully, we will now see the last of the COVID situation and look forward to interacting with you in the near future again. Thank you very much.

Thank you very much, sir. Ladies and gentlemen, on behalf of Chambal Fertilisers and Chemicals, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.