Deepak Fertilisers And Petrochemicals Corporation Limited (500645) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Deepak Fertilisers And Petrochemicals Corporation Limited Q1 FY '21 Earnings Conference Call hosted by K.R. Choksey Research. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Parvati Rai. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone. On behalf of K.R. Choksey Research, we welcome you all for the Q1 FY '21 conference call of Deepak Fertilisers And Petrochemicals Corporation Limited. I take this opportunity to welcome the management of Deepak Fertilisers And Petrochemicals Corporation, represented by Mr. Sailesh C. Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President and Chief Financial Officer; Mr. Mahesh Girdhar, President Crop Nutrition Business; and Mr. Deepak Balwani, Head of Investor Relations. So we will begin the call with a brief overview by the management, followed by the Q&A. I now hand over the call to Mr. S.C. Mehta, Chairman and Managing Director, for his opening remarks. Thank you, and over to you, sir.

Thank you. Very good afternoon to all of you. I hope my voice is clear. Deepak, my voice is coming out clear?

Yes, sir, you are audible.

Okay. Okay. Good. So I hope that all of you and your families are all in good health. And that all of us are hanging on during this lockdown, lifting the lockdown and the uncertainty. And I'm sure all of us will come out stronger and better as we come out of this crisis. I trust that all the details of the Q1 results have already been received by each one of you. So what I'm going to do is share with you behind the figures and beyond the figures, how do we see the situation that emerged in Q1. And of course, then post that Amitabh will take you through all the details of the figures and then clarify any questions that you may have. So as far as the COVID safety measures goes, we went on a complete overdrive to make sure that we kick start temperature check, oxygen level check, face mask, social distancing, disinfecting tunnels as people enter at various places in the plant, hot saltwater gargle spaces. And also a very strong visibility through the CCTV cameras, particularly where there could be possible little congregation of people. Despite that we have had a few positive COVID cased, but they have all been asymptomatic. And with all the complex aspects with all the checks, what more can we do. And we had even 3 government committees visit us, and they were extremely happy with the COVID steps that we are taking at the plant. And they said, "well, this is the best we can do." Now as far as the business goes, basically, we were happy that we could convince the government that all our products do fall into the essential commodities and are required; fertilizers, of course, for the farmer; the technical ammonium nitrate for the coal sector; and also in terms of IPA, of course, for the hand sanitizer, and some of the assets also where our downstream customers have shared that these are essential commodities. So virtually, we were back in production, maybe within a few days of the COVID declaration. However, we did suffer ups and downs because of the supply chain disruption, somewhere truck drivers were not showing up. [Technical Difficulty] Should I continue?

Yes, sir, you can continue.

Okay. It's on and off. Having said that, if I were to share from each business prospective. As far as the industrial chemicals business goes, IPA, of course, was a great show, and I'll tell you more about it. But as far as the acid stores, while the [ CMB ] segment did well. On the weak metric, acid, there was a sufferance at the downstream, where a lot of our customers were suffering the lockdown conditions. And as far as technical ammonium nitrate goes, while Coal India, because of the overburden removal, that market segment is quite good. But on the other hand, cement limestone was very, very dull. And because cement sales have virtually come to a standstill. Of course, things are much better now. Similarly, in the infrastructure sector, we noticed that the percolation of the central government funds to the state government and the state government funding to the infra project somewhere was stuck. And again, things are better now, but the Q1 saw a period for that. Then in case of the fertilizer business, of course, the going was very good with the water levels right from last rabi and then the rains coming in, in good times, it has been brisk. So while IPA did bring the magic touch to the Q1, in a sense, just to see the perspective, it contributed roughly around 40% to the Q1 contribution; TAN was the other 40%; and fertilizer, which I feel is the real story there, moved from minus 8% to plus 16%. And all in all, and of course, even on the raw material side, gas prices were rather soft which -- and we are seeing for a long term also that gas prices will remain soft, which is a good story for us for our projects and other things. But all in all, the profits have shot up 11x in comparison to last year. Of course, last year, as you recall, was a very, very tough year. I mean, all kinds of challenges that were there. But indeed, it was the best quarter ever, including the highest collection, which could help us combat all our short-term loans and all that and bring in a real good time. Now from a fundamental perspective, as I look at it, and if I look at the fundamentals at a macro level, which are going to be impacting us. One aspect that we are noticing is that higher hygiene level certainly seems to be the new normal. And from that perspective, the consciousness on a lot of these aspects are going to stay with us for a much longer period. As far as on the fertilizer agriculture front, we were very pleased with our transformative announcement of new agricultural policy, where the government came up with a path-breaking kind of policy change. And we are seeing a very positive impact on fruits and vegetables [ SPOs ] contract farming. And that in a longer run will also have its very positive effects on fertilizers. At the macro level, the government came out with a very good, I would say, positive on commercial mining, opening up that sector. And that's also in the long run, we see a very positive effect as regards our TAN project and TAN business itself. At the fundamental level, at the micro level, that is for the company, what we see is this positive traction on IPA continuing. And for us, our move from IPA to hand sanitizers and to other B2C products is something which we feel should be in the right direction and should find not only a better traction, but a good value addition to IPA over a period. Fertilizer side, we are very clearly seeing that this shift that we made from commodity NPKs to high-tech crop-specific NPKs and the journey from customers to consumers, that is from the dealer segment to a very strong focus on the farmer segment, the farmer level. Those we are seeing as aspects, which will fundamentally impact centering strength and unique, I would say, competitive strength in the fertilizer business. And similarly, the change or the fundamental change we were trying to bring at the micro level in the TAN business, in the technical ammonium nitrate business, where we are bringing in a new trial to move from products to total mining solutions that also we see as taking us to a value-added area and somewhere where we could be climbing the value chain as well as looking at margin trend, somewhere creating entry barriers. So all in all, we are seeing this quarter in a sense, as I would say, opening up of somewhat good days to come. And somewhere each of the 3 sectors making a more of a strategic turn into what we had worked out as our long-term plan. So more details and the specific regards of Q1, I will allow Amitabh, our CFO, to share with you. Amitabh?

Yes. Thank you very much. And let me take everyone through the broad numbers. Good afternoon, everyone, and thank you for joining the Deepak Fertilisers And Petrochemicals conference call to discuss the Q1 FY '21 results. During the quarter ending June 2020, despite COVID-19 pandemic being most of the products being essential commodities, the company continued its operation with some intermittent disruptions during the period of lockdown as the Chairman also stated a little earlier. During the Q1 FY '21, we reported total revenue growth of 23% Y-o-Y to INR 1,382 crores. Operating EBITDA increased by 128% Y-o-Y to INR 272.2 crores. Operating margin increased to 19.7% in Q1 FY '21 as compared to 10.7% in Q1 FY '20. Significant improvement in profitability growth driven by improved fertilizer business performance, increasing demand for IPA, along with lower cost of major raw materials. And net profit increased over 11x Y-o-Y, to INR 121 crores in Q1 FY '20. In Chemicals segment, manufactured chemicals -- chemical business reported revenue of INR 634 crores in Q1 FY '21. Our IPA revenues increased by 178% Y-o-Y to INR 196 crores in Q1 FY '21. IPA sales volumes increased by about 49% Y-o-Y, and improved margins were driven by, as you would know, unprecedented surge in IPA demand on the back of the increased awareness of use of IPA in hand sanitizers and disinfectant along with the increase in international IPA prices. However, our TAN revenues decreased by 23% Y-o-Y to INR 253 crores. The lockdown had severely impacted demand and consumption of ammonium nitrate in India. TAN solid volumes were lower by 11% and melt volumes was lower than for 48% Y-o-Y. LDAN sales volumes in Q1 FY '21 were lower by 52%, mainly due to liquidity issues and stalled large-scale infrastructure projects due to COVID lockdown. LDAN sales volumes also dropped due to certain stoppage of production in the cement plants across India. Acid revenues decreased by 33% Y-o-Y to INR 86 crores in Q1 FY '21. Nitric acid demand faced challenges grew to shutdown and low capacity utilization of our downstream customers due to, again, in the COVID-19 situation. Chemical trading business was at INR 150 crores in Q1 FY '21, up by 42.6% Y-o-Y. Strong demand for IPA resulted into the higher trading revenue in Q1. Though as far the volumes, we maintained our volumes at similar levels that we were posting earlier before Q1. Fertilizer segment delivered third consecutive stable quarter. Manufactured fertilizers reported revenue increased by 41% Y-o-Y to INR 479 crores in Q1 FY '21. Sales volumes of NP increased by 59% Y-o-Y and NPK volumes increased by 46% Y-o-Y. Fertilizer trading business increases by 114% to INR 117 crores in Q1 FY '21. Overall, margins improved significantly due to good kharif production by IMD and timely arrival at monsoon in core command area along with higher Smartek product mix with higher net sales price. During the quarter, the company continued its journey to move from commodity to specialty. And accordingly, moved almost the entire 100% volume is Smartek, and also launched differentiated bentonite sulfur variant that is Bensulf Super-fast. Bensulf Super-fast is being manufactured at our Taloja plant. With extensive farmer and channel connect through digital marketing initiatives, the company was able to connect with over 7,000 dealers and retailers through digital meeting during the quarter. While contribution of fertilizer segment in total revenue has been in the range of 35% to 45% in last few quarters, its contribution in the segment profit improved from minus 8% in Q1 FY '20 to now 15% in Q1 FY '21. With gradual improvement in profitability of fertilizer segment, the quality of profit mix is improving quarter-on-quarter. Counting on strong start of the year, we are confident of obtaining our business goals and maximizing shareholders here. And very, very optimistic about the coming quarters going forward. With this, we would be happy to take your questions. Thank you again for joining the call.

[Operator Instructions] The first question is from the line of [ Subrata Sarkar ] from Mount Intra Finance.

So my question is regarding IPA. So what is the current price, if you throw some light on that? And in this time after COVID, what is the total estimated market? And how much has it grown -- gone up? And what is the current import situation? And right now, there are 2 players in the market. So if you can highlight whether there is any other player or entirely imported? And whether there is any restriction on Chinese import?

So as such, the price currently is in the range of $1,200, $1,300 CFR India. As you know, pre-COVID, we were at around $800. And during Q1 and post-COVID essentially the price shot up to as high as $1,500. But it is now somewhere between $1,200 to $1,300. So that also is typically the trend that we have seen in our realization in terms of direction of prices going up and then now settling at slightly lower level. As far as the overall demand is concerned, your question, I think, essentially, we saw farmer demand, by and large, continues the way it was pre-COVID. It is the hand sanitizer segment, that short of from what pre-COVID, we were seeing a demand of, let's say, 100 tonnes per month kind of a demand. It shot up to as high as 2,000 tonnes per month. And that's, in a sense, whatever demand was there from hand sanitizer segment, we met that demand, though the prices were restricted by the government. Now as we are seeing the price -- the hand sanitizer, let's say, demand is somewhere in the range of 700 to 800 tonnes per month, and we believe that as the economy opens up again, where a lot of the commercial establishments, whether it is hotels and schools and organizations, you would see that demand going up. But already, I would say, it's gone up from pre-COVID 100 tonnes per month to nearly 700 tonnes per month. Rest of the demand, of course, has also been getting met by ethanol. In most of the hand sanitizers we have seen ethanol as the ingredient. But ethanol, we would see, depending on what happens -- ethanol -- for ethanol, as such, we believe that there are other better sort of hand usage in terms of fuel blending and portable liquor. So to that extent, once the ethanol demand from the other segments picks up, we see more demand again coming in favor of IPA on the hand sanitizer segment. Overall, from China, I mean, we are seeing nearly 7,000 tonnes every month roughly is the import that comes in India where anywhere between 2,000 to 3,000 tonnes comes from China and then rest of it is coming from the other regions. Overall, other than us, as we understand, Deepak nitrate is the other producer of IPA currently with 30,000 tonnes per annum capacity. So overall, even at 2 lakh tonnes of demand, which was pre-COVID, country would still require a 1 lakh tonne per annum of import. So that's the overall situation.

This is the operator, Mr. Sarkar, may I request that you return to the question queue for follow-up questions.

Sir, this is just regarding that only. Just one small follow-up. Like, sir, in our case, we have seen a very steep rise in IPA demand. So has it come down, has it normalized right now? Or so we are seeing somewhere related to that level only regarding Q1?

So that's what I clarified that as far as the pharma segment is concerned, the demand, by and large, continues at the same level, and it has not changed that much. It is from hand sanitizer segment that we saw a huge increase from pre-COVID 100 tonnes per month to as high as 2,000 tonnes per month in certain period during the quarter, which is now at about 700 to 800 tonnes per month. So in a sense, the hand sanitizer segment after peaking is -- has settled. Even there, pre-COVID, it was 100, now it is about 700 tonnes. And like I said, depending on the opening of the economy, the pace at which it opens up, and the fact that ethanol as an ingredient for hand sanitizer segment, if it starts finding the other better use in terms of fuel blending and portable liquors, we could see the 700 tonnes going up again. But we'll have to wait and see what happens to this demand. Like I said, pharma remains stable.

[Operator Instructions] The next question is from the line of Manish Bhandari from Vallum Capital.

I have a question regarding the fertilizer business. There is a lot of change what has been done in the fertilizer business over the last 2 years. And I wanted to know what kind of EBITDA we should look forward for this fertilizer business with the change in the phosphoric acid supply changes, what you have done, and now with the composition on the product side, so if you could tell us that -- and if the last quarter, last 2 quarters was driven by the lower input cost, so do we see that this is an abnormal number or we should see the improvement in the numbers? And kindly also give us some guidance on your CapEx plan on the TAN and IPA, the expansion you have spoken about in longtime back, where are we sitting on that?

So as far as the fertilizer segment is concerned, we essentially, of course, the factor of -- if you look at Y-o-Y, the factor of lower raw material prices played a role but there was a much bigger role that was played in terms of the product composition. I mean, earlier, we were -- if I say that Smartek, which is our value of its product, that was, if I'm not wrong, up to 40,000 tonnes per in that particular quarter, we sold, we have sold nearly 96,000-odd tonnes in this quarter. So there is significantly on the NPK side, most of the volumes and 100% of the volume now has actually moved to Smartek. Smartek, as you know, that given the marginal cost-benefit ratio that we are able to demonstrate to the farmers. We are able to price it better in comparison to competition or in comparison to a similar grade which is -- which is the same grade. So to that extent, in our overall portfolio, Smartek volumes have gone up and therefore, even the price premium that we are able to get on that has gone up. The second thing that we've also done there is we made certain changes or, I would say, certain corrections on -- both on the organization side. So we've done some bit of a consolidation of our regional and zonal offices. So we've managed to cut down some organizational costs, which is basically marketing kind of costs that are there. Also, we've done some improvements in terms of the usage of raw material in terms of -- in manufacturing these grades. So there is a level of saving that has gone in even in terms of factory variable costs as well as an overhead -- factory overhead. So it's a combination of all of this as -- is reflecting in the numbers. So I would say, we believe that this -- and this is at -- our capacity utilization was still has been in Q1, has been about 59%, 60-odd percent. So there is an operating leverage that is there in our plant in terms of our capacity for which we've already done the CapEx, but we are not utilizing that capacity from a production standpoint to the fullest because the Smartek as a product is -- has taken a little bit of time. We have done some market work in terms of farm trials. And as that volume gets -- or the product gets acceptability in the market, our ability to run our plants and produce that volume for higher capacity utilization would progressively improve in coming quarters. So we see that there is still operating leverage sitting there. And to that extent, a combination of what we've already achieved and what we can achieve from an operations standpoint, the numbers we believe are sustainable in the coming quarters. So we should see and we hope to repeat and even better our performance in fertilizer segment in the coming quarters. Your second question was on the CapEx. As far as the ammonia project is concerned, and we spoke about it just a month back in the investor conference -- Analyst Investors call that the ammonia project is currently under implementation. We are, of course, seeing some challenges because of COVID situation where certain regulatory approval and even from the contractors standpoint, a visibility of when the work can start, given the labor and logistics issues is something that we are trying to get better grip on. But the project is under implementation. We are yet to start the construction. Most of -- almost 85% of the equipment that we had ordered are already with us. We have acquired the land completely. And it's just a matter of starting the construction as soon as we get some approvals that are at an advanced stage with government of Maharashtra. As far as TAN project is concerned, TAN is where we need to do some bit of a groundwork in terms of land acquisition and environmental approval. So that is going to take its own course in terms of -- because there is -- unlike ammonia, where we are at fairly advanced stage on land acquisition and environmental approval, here we are in the initial stages. And sir, for this CapEx, it is early days in terms of starting the CapEx there. We have some critical equipment with us already as we mentioned that in our earlier calls. So we are awaiting or rather doing the groundwork that is required for us to reach a level where we could potentially look to start the construction in TAN project.

The next question is from the line of Rohit Nagraj from Sunidhi Securities.

And congrats on good set of numbers. Sir, in your presentation, you have said that the other expenses have been lower by about INR 47 crores due to fixed cost optimization. So is this a onetime benefit? Or is it going to be a quarterly run rate for the subsequent quarters?

So I would say some of it could well be onetime because, as you know, a lot of travel-related expenses, practically, we don't incur much. But equally, and I would say a majority of this would -- we should be in a position to repeat that or it's more sustainable. We are also continuing to work on other cost-reduction measures. Because a lot of the things that work from home and the other things have given us an opportunity to look at some cost completely with fresh eyes. And with -- we're confident that even if post-COVID, some of those expenses come back because there'll be staff and the other infrastructure costs, we should be able to cut down elsewhere and be able to continue to show this kind of efficiency in our other costs.

And sir, just small clarification on the fertilizer demand. So we are seeing that the sales have been significantly higher during Q1. So is it some prepayment of sales? Or you have given market share? And will the sales be normalized for the next 2 quarters?

Mahesh, do you want to take that? So my colleague was also there on the call, but -- there is definitely a case where you would have to say...

Amitabh, can you hear me?

Yes, please. Please, go ahead.

Okay. So -- sorry, I was muted. So thank you, Mr. Nagraj. Your question is related to overall there is a surge in the demand, what is happening to our market position. So what I can tell you is that, yes, it's correct that since the rabi last year, there is a good positive momentum on agriculture side. With a good rainfall in kharif, the overall area has gone up by about 18.5% in terms of sowing. Because sowing has been early this year, this has resulted into consumption of fertilizer higher. If you see that in the first quarter, in our commerce market, there is an increase of about 42% of the sales over last year in the NPK segment we operate. And however, our growth is 59%. So we have also gained slightly the market share. I mean, that -- from that perspective, our market position has been also been enhancing. A year ago, as we are operating as Amitabh earlier said and our Chairman explained about our portfolio strategy, we are also operating into a uniquely value price based product, which is we are developing through active farmer contact program. So this is much more, I must say that sustainable kind of growth with definitely better external environment helps developing any further technology and has been as you've seen, but we also grew our market position in this quarter.

The next question is from the line of Ritika Gupta from Aequitas Investment.

Sir, I wanted to know what is the status of the second tranche coming from IFC?

So we are expecting that we should be able to get that through in this quarter, Q2.

Okay. And sir, so we have -- so this quarter, because of IPA, we have additional cash flows. So what are we planning to do with that? Are we going to go ahead and do debt reduction? Or are we planning more CapEx?

The CapEx, I've already explained our CapEx plan. As you suggested that as we get funded through internal accruals and the external equity season and the funds that we are even operating from. So it's, in that sense, it is not just this quarter, but over a period of implementation, the cash transition would partly get utilized for CapEx plan. As far as this quarter is concerned, since we had generated good cash, not just from IPA, but like Chairman had mentioned, the collection in the CMB segment was also very healthy. We have obviously reduced our working capital loans. And to that extent, the average short-term debt at the end of the quarter versus in the beginning of the quarter is obviously lower because of the cash inflow now has gone in the short term.

Sir, can you give the net debt position?

Given that these are not to be even limited audited numbers, limited reviewed numbers, I don't feel it's correct for me to give any numbers. But I would say that on an average, the debt has come down by another INR 350- to 400-odd crores.

Okay. And sir, there was this note #2 in our results, which said that recovery of undue profits from the fertilizer company has been settled finally by Department of Fertilizer and nothing is recoverable. So can you just explain what is it exactly? What -- how will it impact us?

So as you would recall, we had a few years back, Department of Fertilizer has made a certain claims on recovery. So in terms of, let's say, under the ligation that if the subsidized gas was used for, let's say, the fertilizer business and there were undue gains made. Now ever since then, and at that point when we made the gain, they also did the benchmark or in terms of what constitutes undue gains was also not very clear to our understanding within the Fertilizer Ministry. Since then, they have defined those parameters. And when they evaluated us on the bases of those parameters, they have come to a conclusion that there was no undue gains made as such and therefore, there is no recovery that is due any longer. And to that extent, the indicting has basically -- we received the copy through official channels where they have -- they are concerned that as per the Ministry of Fertilizer is concerned, there is no recovery claims any longer.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Most of the questions have been answered. Just one small question. We did around INR 230 crores of EBIT in chemical segment. Can you just give us a breakup in terms of IPA, TAN and nitric acid?

Normally, we don't report EBIT on a segment or a business basis. But if you look at, I would say, broadly from a contribution margin perspective, what our Chairman had also briefly mentioned that about 40% of contribution, that is before we start sort of allocating the overheads to various businesses. And roughly 40% of the gross margin or contribution has come from IPA. The rest has come from the other segments.

40% each from IPA and TAN?

No. Not 40% each. 40% from IPA. 40% is the broad gross margins that exist in TAN business is the point that we made. So I think based on that, we could be could estimate that gross margin sort of. So needless to say that today also, out of our overall gross margins, TAN and IPA are the big contributors. And this quarter, IPA was about 40%. Rest of it some TAN and fertilizer.

The next question is from the line of Anurag Patil from Roha Asset Managers.

So I have 2 questions. First, there is a 22% Q-o-Q drop in the IPA volumes. So despite the good demand, if you can explain what led to this drop? And the second is, whenever this ammonia project is completed in the future, what kind of savings we can expect from this project?

So as far as IPA is concerned, we have taken the planned shutdown in quarter 1. As a result, while Q4 had almost 100% capacity utilization in IPA manufacturing in our Taloja plant. But Q1 manufacturing overall production was lower because of that plant shutdown. And that is broadly reflecting in the numbers. Also, as such, by the end of Q4, most of -- we were sitting on very small inventory. So while we could meet all the demand in Q4, in Q1, we started with very low inventory and because of our plant shutdown and lower production, the volumes were lower than that. I could address your second question?

Yes. So for this ammonia project, whenever in future, it is completed, what kind of savings we can anticipate?

What kind of savings, that's actually a function of what is it that happens to ammonia prices. And what I would tell you is that, in last several years, if you look at on an average, we've purchased ammonia at an average of, let's say, $400-odd [indiscernible]. And ammonia goes through this cycle so you will see lower prices and prices on the higher end, but on an average, $400. $400 on FOB Middle East, we typically add another $80 to $90 because of the freight, incurred duty, storage and handling charges and then, of course, there's transportation from there to our plant. So one is very clearly that $80 to $90, we would specifically save that $80 to $90. Also, the gas prices, as we are seeing in the market today, both on the LNG front and the gas that we are seeing coming from high pressure, high temperature in India are now -- it will be on an average today, if we were to take from these sources. The landed price of gas for us should be around $7. So at 7 -- around $7, if you convert that into ammonia, you should be in a position to convert that at, let's say, roughly about $250 to $260 a tonne. That would be our conversion of our production costs. So now you can do a calculation say that, if the prices on an average were to be -- if history were to repeat itself in the next 10 years and ammonia per tonne were to be $400, add to it about $80, $90 of charges to bring the ammonia to our plant, that's the kind of possible saving. But all of this, like I said, depends on both if -- what happens to year-on-year to ammonia price. This is more of a picture I'm trying to use on a 10-year horizon, how we should look at it. But on year-on-year, lots depends on what happens to ammonia prices in the market.

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

Just a comment regarding your nitric acid business. You mentioned that you were experiencing weak offtake from downstream customers. So if you could please comment on how the environment is looking like now in July and getting into August, whether we are seeing any kind of pickup in demand from end users?

Yes. So in Q1, we saw those 2 challenges on the concentrated nitric acid as well as on the dilute nitric acid. Concentrated nitric acid is consumed by some of our large customers on sort of long-term basis. And many of those plants are running at lower capacity or were completely shut down. As far as that segment is concerned, largely that demand has come back because most of these plants are also now in operational mode. As far as the dilute nitric acid is concerned, which goes to smaller and larger widespread segment, we are still seeing the weakness in the diluted nitric acid side. So part of the demand, long-term concentrated nitric acid has come back. But the other one, I think, perhaps it's going to take a little longer before it comes back because it's very widespread covering a number of TAN consuming sector.

And just one other one, if I may just squeeze in. Just on the time line for your ammonia project and IPA expansion, if you could share any kind of broad time line that seems feasible at this point in time? And a related one also is that there was this announcement about -- in Reliance Industries' AGM, topic of a very large petrochemical and downstream project of which one of the contemplated products was IPA as well. So I mean, any kind of thoughts you might have on the feasibility of that going forward?

So if you would have noticed that when we spoke about our CapEx plan, I did mention ammonia and TAN. But as far as IPA is concerned, we are currently not -- I would say it differently that it is -- we need to assess the whole situation of IPA because IPA can either be made through propylene route or through the acetone route. And both of these today are looking good in terms of just the feasibility and attractive profitability may be. But we would like to wait and see how IPA prices and IPA demand globally settle and what happens to the acetone and RGP prices. We are conducting with the help of external consultants, conducting a certain study and any plan on IPA would depend on our assessment of what is going to happen to IPA going forward. That said, we are also watching the domestic new capacity that have either come up or likely to come up, mainly as far as Deepak nitrate is concerned. They have to come up with additional capacity. And all the announcement, other announcements, one of them you alluded to. We are also watching that and depending on our overall assessment of demand/supply in Indian context, we'll take the call. But it is, I would say, right now, not going to be right.

And ammonia, sorry, the time line on ammonia?

Yes. Ammonia, we are -- we can -- we would be starting the construction anytime. And from construction, start of construction, it could take anywhere between 24 to 26 months. That's the estimate.

The next question is from the line of Milind Karmarkar from Dalal & Broacha Portfolio Managers.

Congratulations on a great set of numbers. So I had basically a couple of questions on IPA. One was that how much sale -- how much of our IPA sales goes to the pharmaceutical industry? And is there still a price control on IPA used for home sanitizer?

So like I said that, during this quarter, Q1, which was an exceptional situation, I would say, roughly a little less than 1/4 of our sales have been through hand sanitizer segment and 3/4 from pharma. But if you look at overall demand in Indian context, it is just about 2 lakh to 10,000 tonnes. Like I mentioned, the IPA demand from sanitizer segment today, we are seeing at about 700 tonnes per month. This is about 8,000 to 10,000 tonnes. So it's only roughly 5% of the overall demand of IPA. Now what happens to this because we saw a peak of 2,000 tonnes per month also. And so therefore, whether it goes all the way there from 8,000 to 10,000 to around 20,000, 24,000 or so is somewhere in between is where we would have to see as the economy will come back. And roughly, in that, the portion of -- we should also be selling to the end segment. To your second question, right now, there is no price control -- to control on IPA, the hand sanitizer segment that has been lifted.

The next question is from the line of [indiscernible] from [ Ivans Management ].

Sir, congratulations on a very good set of numbers. Sir, most of my questions have been answered. Just a brief follow-up on the earlier participant's question as on the chemical side. Sir, incrementally from Q1 we've added around INR 150 crores of -- to segment in profit in the chemical segment. Sir, is it to understand out of that, how much will be because of the raw material benefit? And how much would be from these incremental site utilization. And where do you -- and when do you think -- is it sustainable going forward? [indiscernible]

I don't have readily have the -- split of fourth quarter of this. What I can mention is that as far as the IPA segment is concerned, we mentioned that the prices went up from somewhere at $800-odd to -- Should I continue?

Yes, yes.

Yes. So $800-odd to about $1,400-odd CFR price. Equally, on the propylene side, which is the raw material for IPA, we saw on an average Y-o-Y, roughly about 17-odd percent of price -- the cost -- on the cost side, we saw that impact, raw material prices down by about 17%. As far as the TAN segment is concerned, by and large, we have maintained -- the prices have remained in similar range, while the impact of ammonia coming down to about 15%, 17% Y-o-Y is showing that by volumes, we were able to maintain margins or rather -- the margin is as not as much as the price -- actually sort of the price or the volume, because of volumes, we didn't sustain or we didn't incur as much loss because we could maintain both the price and the raw material prices were also lower. Now if you see overall, again, while you are looking at both TAN and IPA. TAN, if you see, fundamentally, the volumes were down by 17%. So even if the raw material prices were to go back, if they can, abnormality we saw in Q1 because cement plants were down and on the infrastructure segment also volumes were low. If that were to go back to its normal scenario, then with that reduction in raw material prices, we could perhaps do better or if the raw material price were to go back to previous Q1 FY '20, we should still be in a position. On a long-term basis, TAN remains a total business. What I'm saying is that in a particular quarter, a lower raw material may have helped. But equally, we lost volume. So if things were to go back, they might go back on both hands. So TAN remains a total business. On the IPA side, obviously, this was one of the best quarters that we've seen. And we do see -- but again, outlook perspective, lot depends on what happens to IPA demand globally, particularly on the hand sanitizer segment, because that's going to make a difference to overall prices. The raw material prices, which is RGP, because of oil prices being low, we expect that those prices should -- so long as we don't see a spike in oil prices should remain at the current level. So I think the combined impact of that is what we are going to see in the coming quarters.

We'll take the next question from the line of [ Saket Kapoor ] from Kapoor & Company.

Sir, firstly, you have mentioned about lower the sales to the cement segment. So what total percentage of our ammonium nitrate sales is catered to the cement on an annual basis?

So within ammonium nitrate, the low-density ammonium nitrate LDAN product goes into cement and infrastructure. And as you know, by and large, we have LDAN margins are better than HDAN margins. So it is a combination of -- or rather an impact of cement demand being lower has directly on LDAN segment. So per se, volume-wise, it may not be significant because we still have a majority of it going into coal, but from a margin perspective, cement is an important segment.

Right, sir. Sir, what is the security nature of our business and all the verticals are -- how much is cushioned towards a cyclical nature?

How much if it is cyclical you are saying? [indiscernible] Practically speaking, raw materials that is phos acid and ammonia, do go through the cycle. These are cyclical commodities. But equally, as far as TAN IPA is concerned, these 2 segments also our prices are linked with -- not the entire portfolio. In IPA, by and large, yes, we get linked with the import parity. In the farm segment, the high-density ammonium nitrate again gets linked with the [ SCM ] import and the import parity of that. While LDAN will price more from the utility perspective and efficiency that it brings in the operation. So it is less prone to import parity fluctuation. Fertilizer segment, while it does get exposed to the raw material prices that is ammonia and phos acid which are typical, but like as Chairman mentioned, we are moving to higher -- more and more in the specialty segment in terms of the nature of our fertilizer. And there, it would give us an opportunity or it gives us a possibility of pricing out or rather cushioning us against any adverse price movement on the raw material side. Acids are, by and large, again, depend on ammonia, which is cyclical, but we operate through a combination of spot and long-term contracts, where a part of our portfolio gets protected from raw material pricing.

Sir, on the rights issue front, sir, are we amortizing anything going forward in order to -- and what is our debt-to-equity ratio?

A rights issue, given that we are in the midst of the rights issue, we are advised by our lawyer to not have any specific sort of discussions around a rights issue as and when the Board decides at such time if it would come back to the stock exchange and to investors. On the -- what is your other question?

Debt-to-equity ratio, sir? Currently, what is the debt-to-equity ratio?

Yes. So we have nearly INR 2,100 odd crores of equity on our consolidated balance sheet. And our debt at the end of March was more like -- net debt was about INR 2,600 crores. Like I mentioned earlier, we have brought it down in Q1 by about INR 350 crores to INR 400 crores. So by -- and that's just marginally over this year.

The next question is from the line of Levin Shah from ValueQuest Investment Advisors.

So one is on this IPA, what is our current capacity? And how much can we produce in a year, so that even if you can just give a broad sense in the kind of volumes that we see during this year, FY '21, that is on IPA? And secondly, what is the CapEx, total CapEx that we are going to spend on this ammonia plant that we are going to go ahead? Yes. So these are the 2 questions that I have.

So on IPA, our production capacity is about 74,000 tonnes. And we -- like you would have seen in the Q4, we were running at nearly 100% capacity. So on an average, in a quarter where we don't take any either a plant shutdown or a breakdown, it is typically producing in a quarter about 17,000 to 18,000 tonnes of IPA.

Okay. And what is the kind of volumes that we are looking at for this year in terms of sales volume on IPA?

Well, if we continue to produce and we don't have any challenges related to COVID, our attempt would be to run it to 100% capacity utilization. But it's very difficult to predict what kind of challenges do you have coming from the pandemic situation.

We'll take the next question from the line of Paras Bothra from Ashika Group.

Congratulations for good set of numbers. So it was a stellar number. And now the thing is, with regards to IPA, you have launched your product in the brand name of CORORID. So I just wanted to understand how this is shaping up? And how do you see this scaling up over a period of time? Say maybe in a year's time? And what are the kind of margins you see if this CORORID brand becomes successful? And what are the distribution network we are setting up to make it scalable?

So it is really very, very early days for CORORID in terms of its contribution in terms of volume or contribution in our overall IPA segment. Q1, for example, it was even less than 0.5% overall in terms of the overall IPA that got used up in CORORID. So very, very small volumes at this stage. But what I would say is depending on what kind of market volumes that it picks up in coming quarters, it would give us a sense as to what kind of overall revenue or contribution that come from this? Because at this stage, honestly, even the cost structure is not very clear. Though in Q1, I would say we have -- if you look at from a margin perspective, it certainly gives us better margin than the bulk segment. But it's too early to even predict what overall cost per share, dealer margin, retailer margins are for us to any place. Moreover, at this stage, start point. It's only after we complete a couple of quarters that we will have a better sense on these numbers. At this stage, we are using only -- well, we are trying to use some of the online platform also, but it's right now getting sold through our to -- let's say, some of the wholesalers in -- on the pharma side. We are using some of the wholesalers and through them, it's going to dealer and the retailer segment in cities like Mumbai and another.

Okay. And the second question, last, all are answered otherwise. With regard to IPA prices, domestic prices, what it is at present, if you can give some idea about it?

Domestic prices would typically be -- with CFR prices, and like I mentioned, that they are only between $1,200 to $1,300 CFR India prices. It typically gets linked with CFR India price.

Ladies and gentlemen, due to time constraint, we'll take that as a last question. I would now like to hand the conference over to Mr. Amitabh Bhargava for closing comments.

Well, first of all, thank you very much. And during the call, I'll reciprocate the compliments that many of you have given for those reasons. So thank you so much for that. And I thank all of you for your participation. For any further queries or clarifications, please do get in touch with our investor relationship team. And we wish all of you to be safe and healthy going ahead. Thank you so much.

Thank you. On behalf of Deepak Fertilisers And Petrochemicals Corporation Limited and K.R. Choksey Research, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.