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

Ladies and gentlemen, good day, and welcome to Chambal Fertilisers and Chemicals Limited Q3 and 9 Months FY '24 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. Thank you for joining us on the Chambal Fertilisers and Chemicals Q3 and 9 Months FY '24 Earnings Call. We have with us today Mr. Abhay Baijal, Managing Director; Mr. Anand Agarwal, CFO; Mr. Anuj Jain, Assistant Vice President, Finance; Mr. Tridib Barat, Vice President, Legal and Company Secretary; and Mr. Ashish Srivastava, Vice President, Sales and Marketing. 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 this call with opening remarks from Mr. Baijal. I would now like to invite Mr. Baijal to share his views. Over to you, sir.

Welcome to you all to this conference call of our third quarter results. Good day to everybody, and a warm welcome. Since you would have had the chance to go through the presentation and financial performance shared with you, I will not spend time restating the numbers in my remarks. This was a steady quarter, and our urea business continues to perform well. All our [indiscernible] have been operating at optimal capacity. And our urea production stood at 9.1 lakhs metric tonnes and 27.15-lakh metric tonnes cumulatively for the 9 months. Energy efficiencies to continue at optimal levels. Subsidy receivables stood at INR 468 crores as of December 31, '23. A good subsidy inflow from the government is helping improving our working capital cycle. Our crop protection chemicals and nutrient business continues to grow strongly. Over the years, we have introduced a range of molecules, most of which have been very well received and has helped us to further drive growth. It has been achieved by a deep farmer connect and a large number of activities undertaken towards enhancing brand awareness. We have a strong pipeline of products to be launched next year to strengthen our position in the weedicide segment of soybean, maize, wheat and rice. We are also introducing innovative biological products in collaboration with R&D organizations to promote soil health and sustainability. Our biological product focus Uttam Superrhiza that has been named as the winner of the most prestigious Applied Microbiology International Product of the Year 2023. The above product addresses United Nations Sustainable Development Goals. To drive future growth of our CPC and SN, we have entered into specific alliances with global and local innovative R&D companies for the introduction of new chemistry as stable and effective biologicals. The marketing activities that form part of our Seed to Harvest program are largely focused around digital and social media, which has helped deepen and expand our farmer and dealer connect. Our TAN project progressing in line with indicated time lines. We have obtained all the necessary approvals. All the long-lead items have also been ordered, and we are well on track to conclude our project on time. Our balance sheet continues to show strength giving us the confidence to explore several inorganic growth opportunities, and we have been recognized with the Certificate of Merit at the National Energy Conservation Award 2023. This is the first time that we participated. And this is a prestigious award in the fertilizer sector acknowledging, our substantial contribution to energy efficiency and conservation. I look forward to continuing our strong performance. And with that, I will now be happy to take your questions.

[Operator Instructions] The first question is from the line of S. Ramesh from Nirmal Bang.

So if I were to understand the phosphatic fertilizer policy, giving a pitch markup for integrated producers, you have started the business as a trading organization. So what is your road map in terms of progressing towards manufacturer and integrated producer in phosphatic? And how do you read their quality? Does this match the current nutrient-based subsidy schemes? And how does it help in terms of the integration, especially when you look at backward integration where the benefit of the savings or input cost is actually sought to be netted out when they take the cost to give the market? You can share your thoughts on this, it will be great.

I think what you're referring to is the new reasonability guidelines...

Yes. Indeed.

Which has been very recently published. And there were 3 classes, which were indicated in terms of what the cap on MRP would be or the reasonable MRP would be for various producers. Whether 8% for importers, 10% for intermediate producers and 12% for integrated producers. So at the moment, we really do not have any plans getting into integrated manufacture of NPKs. If at all, even if you were to start today, it will be a 3- to 5-year affair, unless you do an inorganic purchase. Inorganic purchases are always possible given the strength of our balance sheet. But that is something that we keep evaluating, should a kind of an option come across and we find that the fit is there, we definitely do not have any hesitation in going through with that. That's what I can say. As far as the policy itself is concerned, it brings more clarity to what the government is trying to achieve. There are some issues with the Fertilizer Association of India has taken up with the ministry. My feeling is that this is a first cut, it will evolve over a period of time. Once it settles down, I think both the companies and the government at least, the only advantage with this is that we have a clear understanding of what the government wants from us, and the government also can transparently calculate and we can also calculate. So that is the only advantage of this policy. It has clarified some of the loose positions which were there prevalent in the previous reasonability guideline. Insofar as my view on the matter is concerned, well, it is a definite forward step from what where we were in terms of clarifying some issues and most notably that the GST is not form part of the revenue, which is a very welcome step that the government has taken. I do have issues in terms of whether it should be 8% or 10% or it should be equal for all. But this is not the forum to discuss that. And all our views have been encapsulated and are being discussed as we speak in FAI and would be raised with the government in a systematic manner going forward.

Okay. So in terms of...

Does it answer your question?

Yes, yes, that's very useful line of thinking. So in terms of your Crop Protection business, as a percentage of your capital allocation and your overall revenue, is there any aspirational targets you have over the next 2 years? And how do you see the business moving, say, over the next 4 quarters, given the kind of uncertainty on the destocking-related pressures and the pricing pressures?

Well, we have a view that the way the prices fell in the last 2 or 3 quarters, this phase of falling has started to decelerate. I'm not saying that we have reached the bottom. I'm no predictor of how these prices will be. But in these businesses that we do, we have to clearly catch on average, which works for us. So we will be making strategic purchases as far -- and whatever we are talking to our suppliers and our publishers is on the same line. And we have staggered for sales mechanisms. And we keep going through with that particular strategy, and that has paid us dividends in the past, including what we did last year, especially, was coming out from that particular strategy. You know that we are growing the business with a lot of efforts at Seed to Harvest, farmer connect and -- in a sense, explaining the advantage of certain types of molecules and new molecules, plus also developing a pipeline backwards into certain research organizations or research-based companies who can give us Gen 1 or Gen 1.5 molecules at least. So that effort of having backward linkages is also going to help. And given our track record, the way that we have been able to quickly get the products into the market and create usage, many of the companies are now getting -- contacting us in terms of how we can take this forward in a bigger way. As far as capital employed is concerned, you know that when you see the segment results, what is the kind of capital that is required. I don't think that is very much of a difficulty for Chambal to obtain given this balance sheet. And as we have already laid out a 3-year road map for the investors if you were to -- and we stick by that, that we will reach in about 3 years number, which I would like Mr. Ashish Srivastava to articulate what is the ambition in terms of the number that we want to achieve for CPC, SN. And over to you Ashish on that issue?

Okay. Okay. So Ramesh, your question regarding the CapEx and all, the capital employed has already been answered by Mr. Baijal. As regards your query on the inventories, so if you look at -- if you do a deep dive on the 9-month results of majors of -- in CPC segment, the major head has come from the export segment. The export has taken a beating. So we are not into that segment. That's one. Two is we are hardly having any inventory going forward into new season. And whatever molecules, which are required for the coming kharif crops, more or less the prices are stable. So we don't see any hits on inventory as far as Chambal is concerned. I hope I have answered you query on inventories.

And yes, can you give us that aspirational target for crop protection chemicals in your road map?

It's already -- the 3-year forecast is already there in our investor presentation.

I'll have look into that. So just last part. If you're looking at your overall annual growth, and you can expect in CPC over the next 1, 2 years and the margins, how do you see that moving?

See, we are -- see, if you look at the investor presentation, we have mentioned a top line of 17 -- approx INR 1,750 crores from this segment in year '26, '27, with the contribution of around INR 310 crores. It's already there in the investor presentation.

Yes. So are you also looking at the custom synthesis contract manufacturing of CDMO models when you look at crop protection?

Ramesh, this is never ruled out. When you do a trading model, these things are never ruled out. So in case a good opportunity comes our way of contract manufacturing for our brands, why not?

Next question is from the line of Prashant Biyani from Elara Securities.

Abhay sir, can we get some sense on trade business profitability for Q3? How much was the EBITDA or profit swing versus last year on the traded fertilizer business?

We did not do very much volume. In fact, our volumes are down almost 60%, 70% from last year. And whatever volume we did was more or less flat, very little margin both in MOP and DAP. The effect of any negatives was already taken in terms of stock valuation in the second quarter. So this was done more as a strategic move in order that our channels are supplied and our other overall business strategy goes forth from there. As of now, the situation with the NBS is that it is not viable to do DAP at all. And therefore, in terms of our strategy going forward, we have contracted 1 lakh tonnes of various grades of NPK, which is in our estimate, something which we can do in terms of profitability and which helps us to sustain the channel in these kind of product line. And as we await the new NBS subsidy results, which the government assured us, it's just around the corner, the further strategy from there we'll figure out.

Sir, when you say flat margins, do you mean flat vis-a-vis last year or no profit, no loss?

No, it was more or less no profit, no loss situation.

Right. And sir, on the NBS policy, is it -- would it be applicable from Q4 or Q1 only?

That's a million-dollar question. We ourselves have been asking this question, whether it is applicable from 1st of January or whether it is applicable from 1st of April. The answer lies in the files of the government, we are not privy to that.

Okay. Sir, can we get some sense on how much was the swing in profit for traded business versus last year?

It would be negative. It would be negative. In fact -- or rather it's not -- I don't think it is more than double digit -- small double-digit numbers.

Okay. Sir, some sense on outlook for IMACID for Q4 given that phosphatic prices have been more or less at the same level vis-a-vis Q3. I don't know how much is the rock phosphate prices fallen or where they are?

No, we expect barring unforeseen circumstances that IMACID should continue its good run. I do not know -- they have not yet frozen their numbers for India supply, but one marker comes from Jordan. Jordan has been contacted by Coromandel at $968 CFR. So being that $968 maybe $5 plus, $5 minus kind of number would be there for OCP or IMACID as well. So looking back from there as to the rock purchase and their adjustment, I think the price at which rock was [ attached ] to -- IMACID will continue. And basis the above, we take the run rate in terms -- unless the plant does not perform and the sales are not absorbed inside the Indian market. I think the provision will become clearer by 14th or 15th of April once the NBS is announced. So my view is that these factors being what it is on provisional basis, some material is being supplied. We will come to know in another 5, 7 days' time how this will play out. But I think at the moment, they are on a good wicket.

Okay. Sir, on -- in the PPT on the fifth page, under second point on channel model, channel capabilities that point I'm speaking about, can you explain what that point mentioned?

I would ask Ashish, explanation on this.

Yes, okay. Good observation, Prashant, because this is the first time we are talking of the channel thing. We were generally a bulk fertilizer company. So if you look at the channel, the Bulk Fertilizer segment and Crop Protection Chemical segments are very different. But now a synergy is developing in that, and we are looking to expand our market depth as well as width for this and which is giving us dividends. So we are looking at retail outlets as our future dealers who are primarily CPC and SN selling dealers. So that's what we are building on.

So I mean, do you mean that -- I mean what is the significance of this 25% and INR 10,500 crores and then INR 750 crores, any significance on that?

Yes. I'll answer that. Our present markets which are where -- when we started the CPC, SN business, the width and the depth were in the range of 10% to 12%. So as we started building up the channels in retail segment, those width and depth accrue to us. That is the reason we are into doing exceedingly well in the CPC, SN segment. Does that answer your question?

Prashant, I think, to make it simple was that there are 2 channels. One is the fertilizer channel and there is other than fertilizer channel to distribute this. What I think is being indicated is that not only we will now -- we have onboarded to some extent and created wallet share in the fertilizers channel, which is what we have done, we are also now jumping the channel into pure pesticide of CPC channel. That's what I think is meant. So we are widening the scope.

Okay. And sir, has the state government finalized the incentive that they will give us for TAN?

Yes. I think that has been organized. That was done some time back. I will not reveal the numbers, but it is a healthy figure, and this has been closed with the government of Rajasthan.

But sir, it would be a public thing only? So what is the hesitation in revealing it?

I think -- we will disclose it. Don't worry.

Maybe as per the guidelines issued on...

It is not a figure that is available on a website. It has to be derived basis certain numbers to be achieve milestones. So we will -- in fullness of time, we will reveal it.

Okay. Sir, some bookkeeping questions. What would be the gas price for Q3?

Gas price for Q3 is around $118, NCV basis.

And current price?

$118.

Correct. Currently, it is about [ 17.35 ]...

Okay. And sir, what will be the breakup of power, freight and packing expenses?

Could you repeat that, we didn't get it?

Breakup of power...

Breakup of other expenses into power, freight and packing.

Okay. Okay. Let Anand answer that question.

So I don't know how you relate because it all depends on the gas prices. So out of our other expenses, I think power and fuel is almost INR 1,000 crores and freight is around INR 155 crores.

Okay. And sir, surplus ammonia volume for the quarter?

25,000...

I think about 25,000 tonnes was sold.

And lastly, how much will be the contribution of G-III for urea sales?

That is one question nobody wants to answer. But it is there. You know that in the formula, there is -- we get paid $285 based on $6.5 gas price. And for every dollar increase in the gas, we get another $20. So basically, the multiple is about 5 times, 5 Gcal per metric tonne is what is embedded into the formula. So you can make a calculation.

No, I meant, volume contribution from G-III this quarter?

Volume contribution is about -- can you please check.

Yes. I have that. Yes, just give us a minute. G-III, I think the overall sales have been 3.37 lakh tonnes in this quarter.

Next question is from the line of Harmish Desai from PhillipCapital.

Sir, my first question is on this PBT margin cap. So as a trader, you have a margin of 8%. So is it fair to assume that there is this -- we did not consider this as a limit or cap on us. And how do we see the margins because the margins for -- in the con call with the manufacturer, they mentioned that they have a lot of legroom. So what is the case for us?

See, I will also say that there is a lot of headroom because at the moment, if you take DAP as a part of this whole thing and exclude all other products, you start with negative margins, okay? So -- but what this current formulation is, it does not take only 1 single grade. It takes a combination of all the grades that you do. Let us say, for instance, if I'm doing in a quarter or in a year, 12-32-16, 10-26-26, 20-20-0-13 DAP and MOP. All of them will be clubbed together. And the combined sales and its cost will be determined. And on that basis, it will be determined whether the 8% is there or not. In my opinion, what somebody told you that there is a healthy headroom. I would second that. That's not an issue.

Understood, sir. And sir, on the CapEx side, so how much CapEx have we incurred in the crop protection side in the 9 months?

See, there are 2 parts to it. One is the TAN. In TAN, I think we have INR 200 crores. And as far as other projects are concerned another further INR 210 crores.

Okay. So it's close to -- in the first 9 months, it's INR 410 crores. Is that right?

Yes.

And sir, the total CapEx that we have on TAN project is INR 1,645 crores, out of that INR 200, we're already spending them in first 9 months. Sir, how do we have spread it out in FY '24 and the commissioning in FY '25, have we spread the CapEx?

I can give you percentages. I think about 60% will be spent this year, between 50% to 60% will spend this year. Up to -- let us say, if you take up to March '25 and the balance thereafter, some part is the lingering tail because there are -- it is subject to retention and so on, basis the contract, so 10-odd percent always is kept retained for some time for achieving certain milestones and performance parameters. So I would say about 50% to 60% will go out by March '25.

Understood, sir. Sir, in the second quarter call, you mentioned that you guys are planning for INR 350 crores to INR 380 crores investment in the next 3 years in energy-saving schemes in Gadepan-I and II. And you expect to derive INR 100 crores per year cost savings. Sir, can we expect this cost savings to kick in from FY '24 onwards? Or have we already have some cost savings from -- or sorry, from FY '25? Or do you already have some amounts of cost savings in FY '24, already, itself?

I think subject to a successful conclusion of our turnaround, this is all, as we say, ongoing -- one of our plants is already undergoing a turnaround. So both Gadepan-I and II, we would start reaping the benefit, if all goes well from middle of April or so, once the plant stabilizes. So very much baked in for '24, '25 numbers.

Got it.

So for your question, I think around 40% to 50% will be spent in this ATR which we are doing now. And the balance over a period of next 2 years.

Understood. Understood. And sir, on the crop protection side again. According to the presentation, we have seen that in the first 9 months, revenue share of insecticides have been the highest and followed by weedicides and the last is fungicides. [Foreign Language] can we understand that we have highest amount of portfolio on the insecticide side and the rest follows. Or how is the number of products between these 3 segments?

Ashish will answer this question.

Okay. So if you look at the breakup of insecticide, herbicide and fungicide segment in Chambal's portfolio. So our Chambal's portfolio is around 44% of insecticide, 41% of herbicides and 15% of fungicides. And if you look at the quarter -- this quarter results, it's primarily -- we decide this thing and all can be -- so insecticide majorly are consumed in paddy crop, which was in the first half of the year.

Understood, sir. Sir, and lastly, can you throw some light on the specialty nutrient segment? What kind of products we have? And what kind of margins are we making in this particular segment?

Okay. So I -- the product portfolio consists of 2 variants of sulfur, which is water dispersible granule as well as bentonite sulfur. Then we have water-soluble fertilizers, primarily the calcium nitrate this thing. The other major thing is the mycorrhiza for which we have seen it in this thing, that thing which has got the award. The products which came from the research of TERI, that's a major segment. And then we have certain micro nutrients and zinc that's the total portfolio of specialty nutrients.

And sir, the kinds of margins in this segment?

I think we report CPC, SN as together segment, so it will not be proper for me to put...

That's a healthy double digit.

The next question is from the line of Himanshu Binani from Anand Rathi.

Sir, my first question was largely on the gross margin side. So we have seen a very decent improvement margins during this quarter. So maybe if you can like throw some light in terms of the increase the reason -- in the increase in the gross margin and the segmental contribution basically. So which segment has like contributed to more to the gross margin revenue?

No, I think in terms of segments, you would have understood what the CPC, SN has done and what the urea and especially the traded products have done. So because this traded products sales were so less as compared to -- it is that -- just the 1 lakh tonnes of NPK that is DAP plus MOP. And mostly, all our sales were urea. And as I mentioned in my opening remarks that we are running -- this is winter season, we have good efficiencies and energy was saved because the plant ran very steadily. And we also had ammonia sales. So all concluded, we have got that lift in the margin. And in the CPC, SN it is anyways, you can see about 22% to 23% type of number which is there. So these are the 2 reasons why the margin looks healthy. We did not have any inventory-related issues either in the CPC, SN business or in the NPK business, Whatever was there was already accounted for, as we have explained to you, in the last quarter. So there was no carryforward issue as far as the third quarter was concerned.

And sir, just wanted to -- since on this the new...

Himanshu, your audio is not clear.

Am I audible?

Yes. Go ahead.

Yes. So just wanted to have a sense on this, the capping, the new capping policy, basically. So in the current scheme of things, if you look -- so looking at the global prices also and the trading business, particularly into the fertilizer segment, that is like not at all remunerative. However, the government is suggesting is that, if it all the industry is making any sort of profits over and above the capital limit so they need to like return that to the government. So in the current scheme of things, we are like not able to make any sort of like profits in the trading side. So can we expect any sort of like reversal as and when this gets implemented from the government be 1st January or 1st April. So can we expect some sort of like reversal in terms of the current losses which we are making?

See, we are not making any losses. Let me explain. As I just explained that we have calibrated our portfolio to a strategy where you cannot make any losses. Whatever we have bought in the first quarter in January -- I mean fourth quarter in January, that is at profitable numbers. Now coming back to what is the government's stance, I think the government's stance is to make the fertilizers available at reasonable MRP to the farmer. Now what is reasonable MRP, what is a mandated MRP, I think the nuance is there. A reasonable MRP is something which is what the farmers normally expect in terms of what he should be paying, it is more a function of what is derived from his perception of what the past prices have been. And that is also suggested in terms by the Department of Agriculture and Welfare, et cetera, that this is a price at which the application will be suitable for the farmers, given the [ NSC ] and so on, so forth. That is one sort of calculation. Now given the international prices and the commodity prices, obviously, if the government wants the MRP to be affordable from the point of view of the farmer, it has to make an adjustment to the subsidy. Unfortunately, in the last 5 or 6, 7 quarters, for the industry, that adjustment in subsidy is not visible, especially in the case of DAP. So the reason for that is that, I don't know from where -- whether they are benchmarking the product cost that is coming from import or they're benchmarking the product from an integrated producer, what is their calculation or what is their thought process is not very well revealed to us. Now going forward, assuming that they have given a reasonability guideline, it stands to reason logically that when you have got a reasonability guideline, then people cannot raise the MRP arbitrarily or they will fall foul on the cap, which means that, inherently, there is a signal, although very faint and not very obvious, that the government are thinking in some way to go back to the earlier NBS policy where the subsidy was fixed and MRP was floating according to surplus. So if it is around the corner, it is possible that this may happen after the election, I can only speculate, and nobody can speculate on this issue. What the government will do, that only the government. And we have to respond to what the position evolves in terms of policy and prices and take our positions accordingly.

Got it. Sir, the question, the reason behind asking this question was that as we have been like making a breakeven sort of number and assuming this to be at the gross level or at the EBITDA level. But then this 8% margin cap is applicable at the PBT level. So maybe at the PBT level, we would be incurring some sort of like losses in the current?

Yes, I agree. But you are absolutely, correct. If we are at EBITDA [indiscernible], thereafter counting interest definitely will go down. But in our situation, what we are doing is that, see, first of all, the quantity that we did falls first in the third quarter was adjusted according to the need of the channel, and we did not take over exposure and whatever exposure that we took, if there were any losses on stock -- that was number one. Number two, going forward, we calibrate our portfolio strategy for such markets and where we have got stake in such a manner that we continue to remain slightly positive or above. And if -- or chancily if we can make the profit, why not. And now that this policy is applicable from April of 2023 and it provides us with that particular possibility, we will definitely calibrate it to that extent that we make good EBITDA numbers.

Got it, sir. And my second question is largely on fertilizer equation as on 31st December. So both into the urea side, the non-urea side, inventory position for our company as well as any sense on the industry and the outlook going forward for the kharif season, sir?

I think Ashish is qualified to answer that question.

So Himanshu, we don't have access to the inventory of competitors as well as country, but our market intelligence and data analytics suggest that the urea inventories year-on-year basis as on 31st January is up by 51%. For DAP and NPK, it is around -- so that is not -- so and on DAP and NPK -- and tentatively, the urea inventory should be around 7 million tonnes, roughly. That's what's our calculation. We don't have access to that. DAP inventories should be around 2 million tonnes. NPK should be around 3.9 million tonnes and MOP should be around 1 million tonnes. That's a ballpark number we can share because we don't have access to that data. This our own internal calculations.

Okay. So sir, just one follow-up question regarding this only. So sir, last year, if I understand even like inventory position for the industry, we were at neck to neck in terms of the inventory and the demand basically. So how would you actually term this number as, a moderate inventory, a normal or a higher size...

See if you look at the -- our estimation is that by the end of this financial year, DAP would be an adequate inventory what has been in there in the past. Same is with NPKs and potash. So I don't see much changes in those in the adequate inventory levels what the country envisage on 1st of April.

Okay, sir. And sir, if you can repeat the MOP inventory level number, please?

Around 1 million tonnes?

The next follow-up question is from the line of S. Ramesh from Nirmal Bang.

So if you're looking at FY '25 and '26, until you start the ammonium nitrate project. So based on your modernization and turnaround in the urea plant, is there any potential for additional volumes and additional contribution to your EBITDA and profits from the urea business over FY '25?

So the TAN business is forward integration of the ammonia surpluses that we have, technical ammonia surpluses that we have. With the further debottlenecking, et cetera, definitely, there are small possibilities to the extent of 4%, 5% further expansion in ammonia availability. That ammonia availability could feed into other products in the nitric acid chain or nitric acid production itself from weak nitric acid to concentrated nitric acid and so on. We are working on those possibilities. I think last time also I had made a mention of this issue. Going forward, '25, '26, once the full modernization or, should we say, the debottlenecking of the energy saving schemes that are put in, there are possibilities which we are examining further than what we are -- already there. There are schemes which have been proposed by both Haldor Topsoe and by KBR, both our licensors, which are under study. And they could lead further ammonia during the -- by debottlenecking, et cetera. So that could lead to further possibilities in the nitric acid or the chemicals business, which we are -- unless it is properly evaluated in terms of the cost benefit, et cetera, and the schemes that have are being proposed, we'll have to then take it to the Board, get it approved. So that is an ongoing study. It was -- it should be available in the May to June time frame. And as and when they are approved, we'll definitely come back to you.

So FY '25, is it fair to understand it would be more or less flat compared to FY '24?

No. There are 2 things. You must understand that this year, we have had shutdowns of Gadepan-I and II in March '24. Going forward, these 2 plants will continue for 1 year and second year of operation, so '24-'25 is full year of operation. '25-'26, again, there will be a major turnaround. And in that point of time, Gadepan-III will be in annual turnaround in '24-'25 and '25-'26 will be basically a replica of '23-'24.

Okay. Sir, just one last thought. So if you're looking at the growth from the ammonium nitrate project. What are the kind of average price you're expecting for ammonium nitrate in terms of your current discussion with customers? And how do you see the lumping of projects from other competitors, like say, GNFC, Deepak Nitrite and your own project coming online kind of creating a surplus, although the long-term picture seems...

When we did the study for ammonium nitrate, we have taken these capacity expansions into account. One variable in this is Russian imports, which keeps fluctuating. Further in this current year, there have been a lot of Russian imports for ammonium nitrate. But on the other side, the government's continued emphasis on infrastructure and power and so on, and I've heard the Minister of Power saying that we will have to invest in some 80 gigawatt or whatever of electrical energy -- 80,000 megawatts and so on, which will require huge amounts of coal, and that coal has to come from coal mines and those coal mines have to have TAN. So my view is that on the one side, there is production. On the other side, the demand is supposedly going to accelerate. We have seen -- or we had planned for a 6% CAGR, but I think this will accelerate by at least 1.5% to 2%.

With Coal India and all going for gasification, I think the demand will increase much more exponentially than we have estimated.

Next question is from the line of Rucheeta from iWealth Management.

Sir, my question was on P&K fertilizer side. So could you help me what is fixed and the variable costs in this business. Like in terms of absolute value maybe for this quarter or maybe by FY '23, if you could help me with?

Madam, there is no fixed cost. This is trading business. So basically, we have all the variable costs. The fixed cost is a very small component. It is required to run the administration services and the sales and operating processes in this. But as of now, as we have been saying this, the cost and the values of the revenue are more or less matching, which is why there is no margin.

Okay, sir. Understood. And sir, a little basic, if you could help me with this EBITDA per tonne for Gadepan-I and II and Gadepan-III. I remember in one of the calls, you mentioned that Gadepan-III is around $130 per tonne. So is there any variability to it, like if the gas prices go above a certain level, how much incremental do we get?

See, this is a formula-driven business where a percentage of the gas feeds back as efficiency gains. Difficult to say without first tagging the dollar number on gas. That is one thing. The other thing is the dollar value itself, whether it is 83 or whether it is 65 that will also make a difference. So there's a little bit of an involved calculation. So I would suggest that if you were to divide the number of tonnes, it will be kind of EBITDA we have reported because the fact that I mentioned was that it was hardly any profit or loss from the trading business, we will get the number. It's a very simple calculation.

Next follow-up question is from the line of Prashant Biyani from Elara Securities.

Sir, how much headroom do we have to sell urea from G-III in fourth quarter?

We have -- what you mean by headroom? There is a certain stock that we have to sell.

Yes. So sir, I mean, how much have we achieved already? And how much can we sell more?

See, I think what we will produce is...

Hello?

Have you got what I'm trying to say?

No sir.

That means that the opening stock and closing stock will remain more or less there. And whatever we produce, it will get sold.

No, I meant, sir, the mix between G-I, G-II and G-III varies...

Naturally, G-III will increase, no, because if G-I and G-II will not produce this quarter, G-III mix will increase.

Okay. And G-I, G-II are going from maintenance shutdown in March only.

Yes, 32 and 36 days, respectively. So you can assume that on an average, 32 days or 33 days multiplied by 6,000 tonnes, about 3 lakh tonnes is of the...

Sure. And sir, you alluded to this NBS policy in your opening remarks. Is it likely to come in February? I mean, I know there is no accountability.

It is in the files of the government and what they think when they should reveal this. My understanding is that discussions are ongoing, the Department of Expenditure and their -- and Department of Agriculture and so on. And one or two ministries have given their feedback. One or two are awaited, and then it has to be presented...

And what would be your plan for traded fertilizer business for next year? Any targets in terms of volume or...

So it is fluid. As I said that this is a business that we are doing for 2 reasons at the moment, at the moment given the kind of situation, which is with respect to frozen MRPs and kind of negative contribution, is to do only to the extent that is significantly necessary for our channel, so -- and secondly, to focus on certain grades, which will give us more benefit in terms of the markets that we are addressing. And thirdly, in terms of understanding or keeping a certain portfolio approach that we have, in fact, on other markets, which are our core markets. So these 3 considerations are driving what we will do. The moment the NBS is restored back, I'm very sure that our volumes will bounce back.

And sir, for this portfolio approach and to keep your -- to maintain your channel relation, typically 1 lakh tonne of volume is enough, if the subsidy is adverse like in current times?

No, we are not saying that it will work. But the fact of the matter is, the grades that we sell have to fit to the markets, right? And we have to also see the stock of the alternate product, which is available. There are people who are still bringing in DAP, which -- this means that the market has that stock in the system. So we'll have to see, there is a substitution effect and there is then main product is available, the substitute will not sell, unless that substitute is the preferred product.

I meant to ask how much...

The markets where we can address that. There are pockets, which is not a widespread requirement. So if there's not a widespread requirement, that volume will not go up.

Sir, I meant to ask in a year, how much is the minimum volume that you will do for sure in [ treatment ]?

I don't think we can make a number of a minimum volume or whatever. We have to play it by the year. We went up to 1 million tonnes. We came down this year to something [ 0.5 million ]. We came down. And so next year, how much we will do, it's still been cooking inside our system. We can't really at the moment reveal what we will do. But maybe I can answer that question post the publication of the NBS rate.

[Operator Instructions] Next question is from the line of Himanshu Binani from Anand Rathi.

So sir, my question was largely on the CapEx side. We have been like evaluating for any sort of like organic or inorganic growth, particularly into the complex fertilizer side. And we have been like on the drawing stages or the discussion stages. So maybe if you can like throw any light on the status of that and when or when can we like expect any sort of like announcement from your end?

No, I'll just put it this way. When you said we are evaluating, we are also seeing the developments on the -- how the government is treating the NBS policy. We can see some clouds moving away on the NBS side, with the first is the publication of the new reasonability guidelines. I think we will need a little bit more color on where the government is going with its policies, integrated, non-integrated, et cetera, what is happening on that and whether organic or inorganic. That also depends on whether we can size up some alliances or do something on that in particular basically because you will know that or you will understand that the de novo investment could bring into the market, is a 4-, 5-year affair in terms of how it is work in particularly India. So our first thought process would be to see if there are alliances, inorganic possibility, et cetera, which are there. And that again depends back on how the policy or what is the thinking of the government. We're really are not very clear as to where it is going, although we see some silver lining in the cloud, and when we said that last 2, 3 times when I kept on saying that we are looking at that, basically, our pointer was to that we do not really know where this business is going in terms of the NBS policy because if it continues like this, as it is today, it will be very difficult to -- for a non-integrated player to make money. And it will be an off and on affair with an investment on the books. It's not something that is expected for Chambal.

[Operator Instructions] As there are no further questions, I will now hand the conference over to the management for closing comments.

So thank you, gentlemen and ladies for patiently listening to our answers. And I hope we have enlightened you with extent that you felt necessary. We hope to have a good quarter, as I said, going forward and welcoming you in May quarterly result. Thank you very much.

Thank you very much. On behalf of Chambal Fertilisers and Chemicals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.