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

Ladies and gentlemen, good day, and welcome to Deepak Fertilisers and Petrochemicals Corporation Limited Q4 FY '21 Earnings Conference Call, hosted by Ashika Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashtosh Mishra from Ashika Stock Broking. Thank you, and over to you, sir.

Thank you, Nirav. Good evening, everyone, and welcome to Deepak Fertilisers and Petrochemicals Corporation's 4Q FY '21 Earnings Conference Call. Today, we have with us Mr. S. C. Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President and Chief Financial Officer; Mr. Debasish Banerjee, President, Strategy Project; Mr. Mahesh Girdhar, President, Corporate Nutrition Business -- Crop Nutrition Business; Mr. Suparas Jain, VP, Corporate Finance; Mr. Debasish Kedia, GM, Corporate Finance; and Mr. Deepak Balwani, Head, Investor Relations. Thanks a lot, gentlemen, for giving us this opportunity. Without further ado, I would like to hand over to the floor to Mr. Sailesh Mehta for his opening remarks, post which we can have a floor open for Q&A round. Thank you, and over to you, sir.

Thank you, Ashtosh. Very warm good afternoon, good evening to all of you. I hope you and your families are staying safe and healthy, all my prayers for your safety. I would like to welcome you also to the Q4 and full-year earnings conference call of Deepak Fertilisers. I hope you have all had a chance to look at the financial statements and earnings presentation uploaded on the exchanges and our website. Ashtosh, my voice is okay?

Yes, sir. Your voice is okay.

Okay. I will continue. Thank you. So our performance during the year has indeed been heartening. And in fact, this has indeed been [Technical Difficulty] our financial performance. During the year, we recorded revenue growth of over 24% over the previous year, and our EBITDA doubled, and net profit grew by over 4.5x compared to FY '20. This robust performance was driven by profitable growth in both the chemicals as well as fertilizer business verticals, with chemicals contribution about 80% of our profitability. So in a sense, Deepak Fertilisers is a little bit of a misnomer with 80% contributing -- contribution coming from chemicals. Better working capital management and better profitability generated almost INR 1,248 crore of cash flows. And the net debt, we could also carry it down, reduce it by almost INR 840 crores during the year. So now as I was looking at while the details -- our CFO, President, Finance, Amitabh would be sharing with you, I thought I could touch upon at a, I would say, strategy level, what I think worked and touch upon those aspects, which would be giving you a broader picture. So if I ask myself what worked, and I further ask myself, will it sustain? And here are the thoughts I was wanting to share. One is last year, last 2 years, but last year in particular, we have had a huge focus on cost optimization and also building some very, very robust system. We have invested time and energy onto creating a raw material prognosis systems to hugely improve the logistics management, a lot of focus on energy and raw material efficiency improvements. We have, as a team, invested a lot of time, energy on an end-to-end S&OP system, which is the sales and operations planning, where right from demand generation to raw material planning is all integrated on an IT platform. We also invested into getting and analyzing the big data from farmers as a part of our fertilizer improvement system and lots of other work. So this is one area, which I feel helped. And over the years, it will continue to help in terms of a backbone. Second aspect that I -- we saw was a certain shift from China to India. And in particular, we saw that for our customers of nitric acid, this came out to be a positive trend, and that, in turn, has given us a positive current in the nitric acid business, which also I see as a trend likely to sustain and continue. The third aspect that we saw was that the key investments that we had made in the last 3, 4 years, initially, if you recall, the tripling of our fertilizer capacities, a couple of years back what we are invested into, the Dahej Acid Complex. These investments have begun bearing fruits, and these have validated what we had visualized in terms of benefits. The fourth aspect is that we saw IPA demand in pharmaceuticals and hygiene, hand sanitizer needs continue. Of course, we did have some unplanned downtime because of catalyst change and that got delayed because of COVID shipment. But otherwise, IPA remains in now a good stable phase. But the most important thing that I feel as an undercurrent that we saw getting validated, and we also see its positive current sustaining is that we saw all our 3 businesses; the industrial chemicals, the mining chemicals and fertilizers; all of them have been beautifully aligned with the country's growth story. And as we see India grow, whether in terms of its power needs derived from coal or its cement needs derived from limestone or the other infrastructure needs or the requirements of the pharmaceutical sector, where India continues to play a good role in the global pharma sector, mining chemicals, industrial chemicals will have some excellent tailwind for further growth. So also, as India's middle income group grows, the need for quality fruits and vegetables horticulture and the other food security requirements are only going to grow. So all the 3 sectors that we are into are gaining positive traction from their beautiful alignment with the country's growth story, and that is something that panned out last year, and I believe it will sustain over the years to come. The other aspect and other question that could come to anyone's mind is, will the margin sustain, particularly because of the large raw material hike that has happened? And we have seen, I would say, in this early part of the quarter, fourth quarter. So there, what we see is that certainly, the cost optimization efforts and initiatives that we have made are going to continue and are going to further make inroads in the current year, which will help us to contain and insulate the margins. Second, more important that we see is that we still have capacities as potentials, which we still need to tap. In some of the plants, we have reached maybe 80%, 85%, and we have another 10%, 15% available capacities for upsize, plus with a little bit of, I would say, margin investment by way of debottlenecking, we could further enhance capacity and that, of course, would help lowering the fixed costs. The third aspect that we are seeing is that demand for our finished products are all good. And with that positive current in the demand, a certain degree of pass-through of the cost is also something that we see quite workable, quite palatable. The fourth aspect that we are looking at when it comes to sustaining the margin, we are seeing that the product differentiation and the segment-based strategy that we have now implemented, not just in fertilizers, but in even TAN and other businesses, is certainly allowing us to somewhere have a good elbowroom for premiums, and that is also something that is going to help insulate and sustain the margins. Above all, we also see that 1 large impact of cost increase came in, in the fertilizer sector as the global players increased the prices of phosphoric acid, DAP, hugely. Now that part of it was sitting heavy on us as everyone else in the industry. But we are happy to share that the government has taken quick and effective steps where they announced a huge hike in the DAP phosphoric acid P subsidy, almost 200% kind of addition, and that is going to somewhere mitigate a large chunk of the cost increase that emerged because of the raw material increase to the fertilizer business. What it also does is, it will allow us in the industry to continue to provide fertilizers at a reasonable price to the farmers and the worry that there could be any demand destruction because of price hikes is also something that is behind us now. As you are also aware, a number of weather apps, Skymet and others have predicted normal standard monsoon. So that is also going to be something that is going to help brisk movement in the fertilizer business. So with that, I do feel that what had worked for us in the last year has strong grounds to continue and sustain in the current year. The margins that we saw somewhere along despite the hike in raw material prices, we are seeing a decent mechanism to deal with that. Now going forward, and this I'm stretching beyond the next 12 months from a larger-picture perspective, so how do I see things panning out? So number one is that certainly the available capacity headroom will further help us to bring the upside in the years ahead. Second aspect that is there is that a balanced profitable CapEx plan that we have in mind is going to be hugely leveraging 40 years of our industry knowledge. It will risk mitigate, thanks to the backward integration. And standalone itself, we are seeing very good 18% to 20% IRR. So that is going to be going forward, also another thing that is going to have a very positive impact as we go forward. But above all, one aspect that we are seeing, which is going to transform and change the very face of the company's and our businesses is our strategic drive to move from commodity to specialty or to change our business model and refocus from products to total solution. I will give you one example of the success story, as we see it emerging, and we got a very good taste of it, a very good validation of it in the fertilizer business. In the fertilizer business, Smartek, the unique NPK that we make, we could raise a sale from around 2,20,000 tonnes to 4,38,000 tonnes. As you are aware, and Amitabh will explain more, the top line and bottom line, both have had a very heartening upliftment in the fertilizer business. Now over the last year, with this kind of a Smartek product going in the market, we are very happy to share that we've now garnered almost 2.5 million farmers as our customers -- repeat customers, and that is giving me the satisfaction and validation that pricing, value proposition, yield, focus on quality, focus on service levels at the fee level, all of it as a business model is getting validated. Now even during the COVID period, the team had almost 18,000 webinar touch points with farmers. We touched almost 10 lakh farmers through social media. Additionally, we are looking at now a pipeline of crop-specific unique products. We have invested heavily now in creating an IP knowledge base, not just on the basis of the applied R&D for the products, but intensively looked at a new organization structure, training, IT tools, big data analytics, and creating a marketplace that appreciates value rather than just focusing on price. Now this aspect of moving from commodity to specialty or from product to holistic services is going to be something that in the next few years will deepen and widen in all the 3 segments, and it promises to somewhere change the very face and transform the company from what it is today to what we see emerging in the next few years. So with that positive note and a broad strategy outlined, I will now hand over to Amitabh to take you through the details, and then, of course, be available for any questions and any clarifications that you may seek. Thank you and take care. Be healthy, be safe. Amitabh?

Yes. Thank you, Mr. Mehta. Good afternoon, ladies and gentlemen, and thank you for joining the Deepak Fertilisers and Petrochemicals' conference call to discuss the Q4 and full year FY '21 results. I was planning to cover some ground, but I think Mr. Mehta has covered a lot of ground in his opening remarks. So let me very quickly -- I think I'll skip some of my speech, and I'll just come back to the fact that during the year our Manufactured Chemical business recorded a revenue of INR 2,657 crores in FY '21. And this was an increase of 17.4% compared to FY '20. Manufactured IPA recorded growth of 50% to INR 586 crores. Manufactured acids for the year recorded a revenue of INR 530 crores, which is an increase of 13.25% compared to last year. And the strong growth in nitric acid business was -- it was mainly driven by a substantial increase in demand and resulted in better realization. In addition, Dahej plant operated at the full capacity during Q4 FY '21, which resulted in an increase of CNA sales volume up by almost 51% compared to last year. Manufactured TAN recorded an outstanding quarter, supported by strong demand for low-density ammonium nitrate and AN Melt. These are the 2 TAN products. We achieved highest ever quarterly AN Melt volumes during the quarter. The revenue of TAN business was INR 1,138 crores during the year. In line with the improvement in cement and steel-related sectors in the domestic market in Q4, demand for LDAN also improved. The improved domestic demand resulted in a better price realization for AN Melt and HDAN, and the same helped us to record robust profits in TAN business this year despite lower volumes, which were largely impacted in H1 due to lockdown. I think fertilizer aspect, Mr. Mehta covered. The other small part that I might mention is that other than our NP and NPK Smartek product, Bensulf, which is another product that we have, the sales increased by 27.13% to about INR 70 crores in FY '21, primarily driven by differentiated Super-fast Bensulf we had launched in Q1 of FY '21. So during the year, our IPA plant operated at a capacity utilization of 79%. And both acids and TAN operated at 74%. In the Fertilizer segment, NP, NPK plants operated and utilization levels were 73%. Bensulf operated at 51% utilization. And I think that's the point Mr. Mehta was mentioning earlier that we have sufficient headroom in terms of capacity utilization to help us meet the demand that we are seeing very strong in each one of our segments. So I think we remain confident of continuing our growth trajectory, while extending full support to our customers, suppliers and other valued stakeholders in these testing times. With this, I'm happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Priyank Gupta from Guardian Advisors.

So my question is the proposed -- the ongoing expansion in both the businesses, the ammonia and TAN, T-A-N, what kind of top line and bottom line can we expect to be added in FY '23 and '24 when they start operations, as I see in investment -- investor presentation, that they shall be onstream in FY '23 and '24, respectively?

So in ammonia, it's 0.5 million tonne capacity. And by and large, we are confident of utilizing these capacities fairly close to 100% right from the beginning because that's pretty much our own captive requirement is there. Now ammonia, we have seen that in last 10 years, 15 years, we bought ammonia anywhere between $370 to $390 of FOB Middle East and added to that it roughly adds about $80 to $90 by the time it lands at our battery limit plants. So if those prices remain -- in fact today's prices are even stronger than those prices. But we are going by what we've seen in the last 10, 15 years in terms of the average price of ammonia. So as the prices of ammonia -- let's say, the history repeats, then we are looking at anywhere between, I would say, $450 to $470, $480 per tonne of ammonia price for 0.5 million tonne. I think you can do that calculation. As such, again, from EBITDA margin perspective after considering gas costs and also the cost of, let's say, conversion, we are again anywhere between $160 to $200 of per tonne kind of margins can materialize from an EBITDA margin perspective. So that's the broad range in which the top line and the EBITDA levels will -- should vary for an ammonia plant. As far as the TAN business is concerned, I guess, one can extrapolate our current capacities. We've done this year about 4,27,000 tonnes. And this new capacity is about 3,76,000 tonnes, so you could maybe apply a ratio in terms of what kind of top line this business would generate.

For ammonia, we can assume sales of $450 per tonne and $150 tonne of EBITDA ballpark as a thumb rule?

Yes. I mean, see, ammonia -- see, as you know that ammonia prices being the commodity that is sort of susceptible to volatility. So to that extent, it -- the prices, we can -- we'll have to make certain assumptions based in the last 10 years or a 15-year kind of. The only aspect, maybe I just wanted to clarify that ammonia as such, given that it is going to be used for our own consumption, per se, it would not add top line to the -- at a consol level. But margins are pretty much what you would then as opposed to sort of buying ammonia from outside since we are producing our own ammonia, so the margins should add to our bottom line. I was talking about the top line of our ammonia plant as such. At consol level, it will get merged so it won't add top line as much.

Congratulations on a spectacular result.

The next question is from the line of Lokesh Manik from Vallum Capital.

Amitabh, just continuing on the previous question. So just a clarification that our cost of production for ammonia with the new plant would be around $160 to $200, and then you add about $90 logistics cost and then you add conversion margins, so you reach about $400, $450 today. Is that understanding correct, broadly?

No, see, the ammonia landed price if you assume anywhere between $350, $360 to $380 of FOB Middle East, today, at that price, the landed price of ammonia, you add about $80 to $90 to it because [indiscernible]. So that's the -- if FOB Middle East prices and if you were assuming that that's a price that at which you would transfer ammonia from our new plant to our downstream products, then that's the kind of top line that we would have. As far as the cost is concerned, cost, of course, is a function of gas prices. Now gas prices -- and to that extent, we see -- so as against $450, $460 of top -- of the ammonia prices, landed prices from this plant, we see the gas cost of anywhere between $220 to $240 per tonne of ammonia. Added to it about, let's say, about another $40, $45 in terms of conversion cost. So you're looking at $260, $280 thereabout in terms of the cost of production. And that's the number that I was saying that anywhere between $160 to $200 is margins, EBITDA margins that we would have.

Right. Because your cost gets fixed at $260. So relatively, you have $160 to add to your EBITDA -- I mean...

Yes. That's right.

Okay. Okay. Understood. And the second question was just 1 more clarification. We've read -- I've read in the news that the increase by the government in subsidy has been announced on the DAP front, and DAP is essentially a competing product in non-urea segment. So is there a clarification from the government that they're also increasing for NPK as well?

Yes, yes. So they have, in NPK, N and P component government has kept at the same level. The P component, which is in sync with the way the DAP prices have gone up. They have also increased P component, which is roughly by 200% increase in P components. So for NPK also, the same fee component then applies depending on your -- in the product that you have, whatever is the N, P and K component, the P component would have that higher fee subsidy.

The next question is from the line of Pratik from Elara Capital.

Yes. And congratulations on a very strong set of numbers. I had firstly a couple of clarifications. On the opening remarks, Mr. Mehta has alluded that we are already at 80% capacity utilization and the demand looks very strong. So just wanted to understand how much more can our capacity utilizations go up from here? He also talked about some debottlenecking that we can do. But broadly, if we talk about, say, 3 to 4 years down the line, you would be already -- in the next 1 to 2 years, considering strong demand that he has been talking about, you should be at 90%, 95% utilization. So what after that? Because if we have to cater to this rising demand then some capacity has to be -- some planning has to be done from now onwards, so that in the next 2 years we'll already have that plants up and running. So just wanted to understand on the broader thought process on the capacities going forward.

So I think if you look at segment by segment, starting with NPK. NPK, we are currently at about 70% or 72-odd percent. Now this, of course, last year was as low as 46%. We are up to 70%, 73%. This is on a 6-lakh-tonne capacity. So within 6 lakh, we have headroom available of almost 20%, 25% -- of almost 27% for that matter. Now in NPK, with a little bit of a debottlenecking, particularly on the raw material storage and on the evacuation side, 6-lakh-tonne capacity can be increased to 8 lakh tonne because the process plant itself is capable of handling 8 lakh tonne, if the raw material and evacuation that needs to be upgraded. So that's the kind of scope that is there in NPK. In NP, our capacity utilization was about 78%. In the past, we have been ballpark in the range of 70% to 80%, but we've done some work on the plant side. So that would allow us to improve the capacity utilization. So 78%, I would say that over a period of time, we could obviously take it closer to 100%, but that could be a few quarters it might take to do that. TAN capacity this year, we've done 88%, roughly. And TAN in the past in '18-'19, if you see our capacity utilization was 105%. So we have done 105%. But this year, a, because the cement plants in Q1 were, by and large, shut. There were also challenges on the infrastructure side, and we ourselves faced certain challenges from a maintenance perspective. So the overall capacity utilization this year was low, but it can definitely be taken to what we've already achieved in '18-'19. And TAN also has certain potential for debottlenecking. We're studying technical studies that are currently on the progress to see how much can we do and what would it take to do that. But TAN does have that debottlenecking capacity. Acids, we were -- we -- the Taloja acids, again, we faced challenges in terms of maintenance. Our capacity utilization was low, about 74%. While in the past, not in the immediate past, but earlier we've touched capacities upwards of 85% or 90% thereabout. So that does have the headroom there. And IPA, again, because of maintenance challenges because of COVID situation, our capacity utilization was 79%, while in the past we've done, last year itself was 86%, previous years was upwards of 90%, closer to 100% so there is a headroom sitting in the current capacity. And after that, I guess, once these capacities are exhausted, our TAN expansion on East Coast is the only one that we currently have in terms of Board-approved projects. If there is a case for expanding our capacities in acids or IPA, that's something that would be taken up at the right time, but there is no such decision as yet.

Sure, sir. Sir, secondly, on the margins front, in the chemicals, you've probably reported one of the best-ever margins and sort of big, big jump from what we have seen in the past. So broadly, I mean, you definitely said that you can sustain on this margins. But considering that the raw material prices are going up, how should one look at these margins from a near-term perspective, maybe next 6 to 8 months? Do we have that much ability to pass on the pricing to the customers or there will be some sort of hit on the margins?

Actually, as far as asset is concerned, we are seeing strong demand, largely coming from -- as Mr. Mehta was also mentioning that a lot of the intermediate product supply chains are looking at India. And we are seeing that demand or expansion sort of coming up in our downstream customers as well as some new players have come in, in terms of requiring nitration for their downstream chemical production. So that's -- as far as acid is concerned, there is that demand, and so long as the demand is strong, it -- one would expect that any increase in the cost, raw material cost would have a lot more ability in terms of -- to pass it on to the customers. Some of our acids, of course, also with long-term customers, we do have arrangements of our raw material proxy. So to that extent, even that plays a role in passing our raw material prices. Your point was on the chemicals, so other than -- in IPA -- well, in IPA as much as the -- I think the RGP, that is your refinery-grade propylene, prices have gone up. We've seen to an extent IPA prices have also come up from the bottom that we saw in the last year itself. But IPA prices, it will be fair to assume that IPA margins will not remain to the levels that we saw the full -- last full year because Q1 was very, very strong, and that's reflected in our full-year margin. But IPA long-term average margin should sustain. What we saw a destruction of margins in '19-'20 that is certainly behind us because IPA is seeing some new segments coming in, in terms of its demand. So I would say that -- but IPA, again, you need to look at that overall from our consolidated profit perspective at a gross margin level or at a contribution margin level, IPA contributed only 15%, 16%. So it's an important segment, but we have other engines of growth as far as our consol margins are concerned.

Sure sir. Even, sir, in IPA, can we expect the demand to sort of taper down? Because I think there are other players who have also entered, plus ethanol companies, I mean the sugar companies are also making ethanol and catering to the hand sanitizer demand. So to that extent, can there be some impact on the demand as well as on the pricing?

So the effects of ethanol being one of the ingredients for hand sanitizer has -- in some sense has already come into the demand side. So demand from sanitizer segment has, by and large, stabilized or whatever ethanol prices were to -- or rather ethanol as a component of or one of the ingredient of hand sanitizer is concerned that part has already matured. But if you see more than 75%, almost 80% of demand for IPA comes from pharma segment. And pharma segment continues to remain strong. Overall, earlier, we were the only producer -- until Deepak Nitrite capacity came in, we were the only producer. But even with the capacities that they have brought into the market, we are still looking a huge gap between the demand -- our demand and the domestic production. So the import will continue. And to that extent, domestic manufacturers, ourselves and the others would not face any demand challenge as such. Prices are not just a function of, I would say, sanitizer segment, like I said, most of the demand comes from pharma segment. And so long as that continues, if prices would have a little bit of a different dynamic in terms of whether IPA -- so IPA is produced from 2 different sources that is propylene and acetone and depending on what the commodity prices of acetone, IPA and propylene are in terms -- relative terms, you may see some, obviously, volatility in IPA prices. But we are seeing that the long term -- and this is a point I was making that margins -- last year's margins may not sustain, but long-term average margins that we've seen in this business are definitely something that are here to stay as we see.

Sure, sir. That's very helpful. Sir, any thoughts on a fertilizer margin? Because you've done some 7.5% in FY '21, despite a healthy volume growth. But this, again, please consider that we are in our branded product like Smartek, and we had definitely a good market share in Maharashtra. But our other competitors in the industry are doing much better than that in terms of the margin. So what is the driver for margins in fertilizer space? What could be the other, I mean, over the next 2 years?

So fertilizer segment, our strategy -- as Mr. Mehta was also mentioning, our strategy is more in terms of differentiation, which is what we've -- what is reflected in our volumes that we have seen in NPK. Now the way margins -- for us, per tonne margins would have 2 components. One is as the capacity utilizations would improve from current 73% to closer to 100% and even from 6 lakh tonne to 8 lakh tonne, we would be able to spread our fixed cost over a larger volume. And to that extent, we believe that the capacity utilization, our margins should also improve. Also, what we are seeing is a differentiation that we have brought about in the market. We are also bringing in more products, which are crop-specific. We are also into nonsubsidized segment that is Bensulf and water-soluble fertilizer. We are looking at bringing in products in those segments also. And a combination of all of that should reflect in our margins. So it's not fair for us to compare ourselves with our competition in a sense because they have a different strategy in the market, maybe volume strategy or whatever is their strategy. But for us, the differentiation is what we are trying to bring and trying to bring the new products, some are stable to our in-house R&D. And that's the basis on which we believe our margins going forward would -- should be better.

Sure, sir. Sir, just lastly, in the opening remarks, Mr. Mehta mentioned that we want to move away from the commodity sort of business and towards speciality and rather than just providing products move more on the solution sort of a business model. So you spoke about the fertilizer space, can you help us understand on chemical, especially in something like acids, there a lot of companies who are using our alkaline base value addition and getting more margins. So is that kind of thing that we are also planning to enter into or maybe in some other chemicals? Maybe since we're putting up a big ammonia plant, so can we think of some value-added products from ammonia as well going forward?

So as of now, there is no such plan has been announced by us. So I wouldn't go in that zone. As far as acids are concerned, what we have tried doing over a period of time is to segment the market because acids also, depending on the concentration of acids, finds application and different end-user segment. What we've tried to cover through differentiation is to cater to each one of these segments rather than giving only 1 or 2 types of only a concentrated or a dilute nitric asset, we've looked at different concentrations understanding the requirement of certain segments in terms of their concentration, in terms of their any other feature that they require in acids. So that's the way acid we have done the differentiation. As far as TAN is concerned, within TAN, as you are aware that there are 3 different products that is ammonium nitrate and low-density ammonium nitrate and high-density ammonium nitrate. Here, the low-density ammonium nitrate is something that largely the public sector coal had so far not used LDAN. It was restricted to limestone, infrastructure and private coal. But through a lot of that work that we have done with public sector coal mines, we are establishing the value that our LDAN-based explosives or LDAN brings it to their overall mining cost. And we are, to that extent, trying to expand our LDAN segment, also LDAN-based explosive segment and also trying to bring the not just the product, but to provide certain services right at the mine mouth to our customers so that we can give them a better experience of -- the blasting experience. And that is what he meant when he said that we are -- on one hand, in chemicals, we are trying to differentiate or segmentize our products, but also trying to moving away from just products to maybe products plus services. Likewise, in IPA also, we've tried bringing in differentiation to pharma-grade IPA and the IPF or other end usage. That's what we are trying to do in each of our products, which allows us to cater to different segments and also be able to give them better product and services and accordingly price those products.

[Operator Instructions] The next question is from the line of Kumar from Systematix Group.

Sir, just a couple of basic clarification. You mentioned that Bensulf revenue contribution is INR 20 crores in the crop protection segment. So the remaining INR 2,100 crore would be composed of like -- what is the breakup across NPA and NPK?

So I think overall breakup -- I think some of these breakups you'll be able to see it on our website. But overall, if you look at -- I mean, let me very briefly try to give you a breakup, I think in CNB -- your question is about Bensulf and NP and NPK, so...

Bensulf is INR 20 crores.

You're talking about the quarter or full-year number?

Full-year number, sir.

Deepak, would you have the full-year number breakup in terms of the Bensulf and NP and NPK?

We will share shortly.

Okay. If you move to the next question, I'll come back to you.

Sir, would it be fair to assume that this INR 2,100 crores that NP, NPK is there that is totally subsidy-based revenue for us?

No. The Bensulf would not be. To an extent we have some water-soluble fertilizers that would also not be. But a big part of it, which is our NP and NPK is the subsidy-based fertilizer.

Okay. And sir, in the INR 450 crores traded product that we have, so what are the products that we are trading in?

In fertilizer, you mean?

Yes, sir.

So fertilizer, we are -- typically, when we trade, we look at our customers' requirements. Sometimes our dealers and retailers do look for a wider basket of products from us. So to that extent, DAP could be one of the product that we may opportunistically -- to meet our customers' requirements, we may trade. Sometimes certain NPK products, which we ourselves don't manufacture or if there is a -- in a certain period, there is a higher demand that we are not able to cater to that we also produce that -- or rather trade that. And then, of course, we also trade into water-soluble fertilizers and certain specialty fertilizers, which are different micronutrients. So those are the other fertilizers that we trade into.

Okay. And sir, in the Chemical segment, so we have around INR 1,140 crores of TAN, INR 530 crores of Acid and INR 586 crores IPA. So the remaining about INR 400 crores is coming from which product, sir?

See, some of it would be -- this year, it would be -- we have carbon dioxide, we have -- of course, this year, methanol was -- perhaps there was no methanol this year. But we sell propane, we sell dice, we sell -- and then there are -- we also have our subsidiary, I think this is also consolidation of our subsidiary, which is Platinum Glass, which is an Australian subsidiary where we had 65% stake. So a combination of all of these.

Okay. And sir, we have a trading revenue in the Chemical segment as well. So we have been dealing in the same products or different products?

We trade in -- mainly trade in IPA. And to an extent, we have certain surplus ammonia. It can also be opportunistic trading of ammonia, but that's only to the extent that there are surplus.

The next question is from the line of Naresh from Sameeksha Capital.

Sir, first question is in the Fertilizer segment, if we see the blended realization of NP and NPK then from FY '19, FY '20 and FY '21, it has been around INR 30 per kg. And this is despite your Smartek product growing in the 3 years. So why has our realization stayed at the same level despite you mentioned that it is a premium product and the realizations have helped -- also helped you grow your top line and margins as well. So that was the first. And second, what was your requirement for ammonia for FY '20 and FY '21 in terms of quantity, I wanted to know?

So your first question is that why was our realization low in terms of the white fertilizer?

Not low. Just -- question was that it has remained at around INR 30 despite your Smartek product growing from FY '19 to FY '20 and then in FY '21. So why the realization has not increased in line with the premium product which we sold?

So the premium product -- first of all, when we say premium products, the -- our prices are better than the prices -- to an extent better than the prices of same-grade NPK product by competition. But between NP and NPK prices, the prices can -- first of all, can vary depending on the raw material prices and the subsidy on NPK that is given by the government. So as such, by certain component or certain product, the share of NPK going up into our overall product basket, it is not necessary that the prices also have to -- or the realization has to commensurately go up. Also, what is the source of your -- I mean, where have you picked up the INR 30 per tonne number? I'm not clear.

No. So I'm just adding the revenues of NP and NPK and dividing it by the volumes of NP and NPK, which you have reported. So that is how I have calculated.

So my colleague, Mahesh, is there. He is President, Fertilizers. Mahesh, would you like to take this question?

Yes. Sure, sure. So thank you, Amitabh, and thanks for your question. So I think if you are looking into only simply by dividing value by -- not by the quantity, rupee per tonne or per KG, I think there is a -- in the data, you will find that the prices keep changing. So raw material prices keep changing. If the raw material price changed, the base price also will change. So you will not be able to get the right reflection based on that on the -- let's say, apple-to-apple comparison can't happen because as you know that last year, in the Q1, the first acid price was $607 per tonne, now it is $998 per tonne. So with respect to same volume, the price -- the amount will significantly change. However, coming back to your main question of what's happening to our margins? I think that is reflected in our improvement of segment results, which is moving up to 7.1% now from previous quite significantly low. So that is coming from both, a, improvement in the margin that is coming because of the launching of the value-based products, where we have certainly been able to charge, let's say, premium based on the value under the reasonableness clauses and as well as increase in the volume. So both has driven the segment profit of this level.

Okay. And on the ammonia quantity, how much was the requirement for FY '20 and FY '21?

Deepak, would you like to take that question?

So basically, for quarter 4, the ammonia production recently was roughly about 21,000, whereas the consumption was 1,10,000. Similarly, if we look for the full year for FY '21, then the ammonia production internally, we did roughly about 86,000, although the consumption was roughly about 3,87,000.

The next question is from the line of Sachin Kasera from Svan Investments.

I have 2, 3 questions. First, regarding the CapEx. So your presentation has given the number of CapEx for the ammonia. Could you share with us other than ammonia the CapEx how we stand as well as the other divisions, what is the CapEx you're planning to incur for '22 and '23?

So we have -- as far as TAN is concerned, we're still in the process of getting our statutory approval, planned acquisition and the other basic on the ground project development that is progressing. But at this stage, we don't have a definitive plan. It also depends on when we would start these CapEx. As far as -- other than that, we don't have any other CapEx planned. We -- of course, there's the regular maintenance CapEx that happens in the plant. It is the only other CapEx that we have planned each.

And what is the total spend approximately going to be for the TAN plant as and when we do it?

That's what I said, unless we have a clear understanding of -- one is, we have plant to be acquired, so the construction cost would depend on the site. Also, we are -- we need to obviously -- we have detailed engineering, et cetera, that we would do with the help of our engineering consultant. And once they do the tendering from various contractors that's when we would have a sense of what the broad numbers are going to be like.

Sure. My second question was on the leverage. So this year, we have done a great job of repaying almost INR 800 crores of debt and bringing down the net debt to below INR 2,000 crores. But as we spend close to around INR 2,700 crores, INR 2,800 crores on the ammonia facility in the next 2 years, how do you see your balance sheet and net equity end? And how -- do you have any plans in terms of raising some other resources so that you can keep the debt equity or the leverage under control? Or you would be comfortable in terms of it going up further?

See, one is as much as we would take debt for ammonia, we have roughly INR 240 crores to INR 250 crores of debt repayment that happens every year. So simultaneously, we would also have the debt, which is the current debt, which would need to get amortized. That's number one. Number two, a part of the debt or what you see in the debt numbers is also the foreign currency convertible bond that we have from IFC and they have a compulsorily convertible debenture at the Smartchem level. Accounting terms, these are also clubbed with the debt. So -- but CCD obviously, it being a compulsorily convertible debenture after 6 to 7 years that will convert it into equity. Likewise, FCCB depending on the conversion price and the option exercised by IFC may also -- there is a strong possibility of it getting converted into equity. So that's as far as the way debt itself could move even if nothing changes. But on top of it, obviously, with the CapEx ammonia, we would add debt. The second aspect is that if you see this year we've done almost INR 1,250-odd crores of net cash accruals. Now while I'm not going into the area of making any sort of future prognosis, but all the discussions we had in terms of sustainability of our business and the capacity utilizations that are sitting with us, it does give one a sense of what kind of internal cash generation is possible. So even after incurring those costs or adding that debt, we have the ability to generate cash internally, that's one. Number two, we have noncore assets, a, in form of a land in the heart of Pune. Also, we have a subsidiary in Australia, where we have 65% stake. These are -- in some sense these are noncore to our core business of industrial chemicals, mining chemicals and fertilizers. And these have the value, which is based on different estimates upwards of INR 700 crores to INR 800 crores. So at the right time, we also have the ability to unlock this capital and use it for these projects or for repayment of debt. And so those are the other means of generating internal cash. But we are obviously mindful that we don't want the leverage ratios to go out of approving loans, and that's what we will try to attain.

Sir, the INR 700 crores to INR 800 crores that you mentioned ballpark, will 2 to 2.5 years be fair timeframe estimate in terms of unlocking this INR 700 crores to INR 800 crores of noncore assets or it could take even much longer?

It could take, it could be even earlier.

Okay. Because I was thinking that since we have almost INR 2,800 crores of CapEx lying in the next 2 years in ammonia, you may try and do it before that.

It could be even earlier. Yes.

Okay. Okay. And so no plans as of now of raising any QIP or equity or x issue, nothing like that...

Board hasn't taken any call. As and when they do, we will inform the investors.

Okay. Just coming on this TAN thing, sir, since this heavy CapEx of ammonia, say, in the next 2 years, will we also look in terms of maybe differing by 12 to 18 months in the time the ammonia CapEx...

We are -- no, there is no such plan. We would be completing this in the next 24 months [indiscernible].

The next question is from the line of Nishith Shah from Aequitas Capital.

Congratulation on super set of numbers. Sir, most of my questions are answered. One thing I wanted to understand is what is the impact of the second wave for us in terms of demand and in terms of pricing for our Industrial Chemical segment?

Well, as of now, as far as our own plant operations are concerned, we are much better prepared in the second wave. As far as our customers are concerned, there could definitely be disruptions at their end. But so far, we are seeing IPA, acids and TAN, and as you would see in the last quarter's numbers, we're seeing those -- the demand from each of these 3 segments remaining strong. In fact, what I had mentioned earlier, and Mr. Mehta also alluded to that, is that with a lot of the intermediate chemical supply chain showing interest in Indian manufacturing facilities, we are seeing not just the potential expansion from our key customers, but some of the new customers have come up in the nitric acid segment. So we do see that there is, in fact, going to be a shortage of nitric acid in foreseeable future and the prices should also reflect that demand as far as the situation.

Okay. Sir, my second question is I wanted to understand the current prices of phos acid and ammonia? And what is our take? Will we be able to achieve our 8% to 9% margins back this year?

So for us acid prices are $998 to a tonne. Ammonia prices are hovering between $450 to $480 per tonne FOB Middle East, and you can add to that the other components as far as our LDAN price is concerned. So these are the prices. Now as we discussed earlier that as far as the phosphoric acid prices are concerned, government has almost tripled the subsidy, the 2% increase in fee subsidy, which, in a way, provides relief to the industry as much as to us in terms of taking over a substantial part of increase in fee. And the other raw material prices, ammonia would have some implication as far as the fertilizer is concerned. But fertilizer, we mentioned earlier that if it did a lag, the raw material prices do get, they passed on to in the finished good prices. But that lead-lag effect can always be possible in fertilizer segment. In other segments, there are -- we are seeing also the counter forces in a sense the whole demand-supply situation in acids, for example, would -- we believe, that it would have the ability to take or absorb the increase in ammonia costs. Likewise, a part of our segment in acid has cost-plus kind of pricing mechanism. And TAN -- as much as the ammonia prices have gone up, the TAN prices have also gone up to reflect that. So I guess, in each one of these, the strong demand on the finished good product side seems to have the ability to absorb these raw material prices. The lead and lag effects could always be there in certain quarters.

The next question is from the line of Nikhil Gada from Abakkus Asset Managers.

Sir, my first question is sort of relating to the nitric acid market. If you could give some qualitative aspect as to how the market is? How is the market size? And since we are seeing such strong demand, is there any element of imports that also can -- we can see in the market?

So a lot of these numbers -- and I'm mindful of the time shortage, a lot of these numbers you would find in our corporate presentation in terms of the demand-supply situation. As such, to your last part of your question, nitric acid generally is not amenable to huge import because of it being corrosive and it requires different specialized metallurgy to transport through tankers. So generally speaking, the domestic demand is met by domestic production. There is a very little import that takes place.

And sir, just on the competitive aspect in nitric acid, apart from us, is there any larger domestic player who operates in this market?

Yes, there are 2 or 3 public sector fertilizer companies, they also produce nitric acid.

Okay. Okay. And sir, just on -- continuing on this margin aspect and the pricing aspect in nitric acid, so this increase in ammonia prices, is it also -- as in is reflective in the Q4 prices of nitric acid or this is purely based on demand aspect and the improved sentiment?

So I think there was -- in Q4, the prices of ammonia had not gone up as much as they have gone up in Q1 this year.

Yes, sir, exactly, that's the reason...

So 11%, 12%. Now that, to a limited extent, some of our contracts which have raw material pass-through kind of a mechanism, it would reflect. But a good part of the realization in nitric acid in Q4 reflects the demand-supply situation.

So sir -- and so then do we see this realizations improving even further so that we have as we pass on this price hike and everything in nitric acid, specifically?

Realization may, yes, certainly, because of raw material pass-through. I won't comment on the margin as such.

Okay. And sir, just 2 more questions, if I may?

Sir, sorry, I request you to come back in the question queue.

It's just 1 question, specifically regarding fertilizers? Hello?

Sir, go ahead.

Sir, just once -- when we had seen this increase in the prices for phosphoric acid, we had seen some slump, especially in April in the fertilizer sales. Now with this subsidy coming through, do we believe that this should sort of solve the issue, at least on a demand aspect? And how do you really see the demand now from here onwards?

Mahesh, would you like to take that question?

Yes, I can answer, Amitabh. Thank you very much for the question. See, I think the current season picks up from, let's say, May onwards, and it's a timely action by Government of India. And it is right. And till May middle, actually, most of the company has been supplying up to -- let's say the old pricing because of the [indiscernible]. So at that time, there was -- demand was same. And then as the prices started going up from middle of May, already [indiscernible] has been announced so we are not expecting any demand destruction. We are seeing a solid Kharif season forward. It's already started, actually. With the good forecast for rainfall, demand would rather go up now this quarter.

Ladies and gentlemen, we'll take 1 last question from the line of Nihil Parekh from Tamohara Investment Managers.

I had 1 question on the IPA front. So as you mentioned that even realizations are sort of -- are stable right now. But initially, we had a plan of an expansion of about, I think, 1 lakh metric tonne. So I think we are not going ahead with the CapEx plan there?

No, we are not.

Okay. Okay. Okay. And sir, just -- actually, I missed the opening commentary, if you can just share the value numbers, the revenue numbers from the IPA front are -- IPA and acid, the Q4 revenue?

Deepak, would you like to take that question, please?

Deepak, sir, may I request you to unmute your line from your side, and go ahead with the answer. Deepak, sir, we are unable to hear you. May I request you to unmute your line from your side? Sir, there is no response from Deepak sir's line.

Your question is on IPA revenues in Q4.

Yes, sir.

Sir, one moment, I'm reconnecting Deepak sir back to the call.

Sir, it's INR 110 crore.

INR 110 crore. And for acids and TAN, sir?

Sir, sorry to interrupt you, you have line for Deepak sir reconnected back to the call. Sir, you may go ahead.

Hello?

Deepak sir?

Yes. What is the question?

IPA is INR 110 crores, acid is INR 186 crores.

TAN was INR 395 crores, sir.

All right. And just 1 last question, sir, on stand-alone, sir, the employee expenses for the quarter look a little lower, sir, so any one-off there?

Yes. I think that what had happened is in -- up to Q3, we had made certain assumptions on management remuneration, post which we got shareholders approval. So that was trued up in Q3. But by Q4, we've -- actually management remuneration has been lower than what we had anticipated. So Q4 numbers of what you see in Q4 stand-alone is in a way lower and it doesn't sort of -- it's not an apple-to-apple comparison to the previous quarter.

Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Amitabh, sir, for closing comments.

Well, gentlemen, thank you so much for joining the call. It was a record year for us, and we hope to be able to continue our performance going forward. So I wish all of you safe and healthy period going ahead. Please take, and thank you very much for joining.

Thank you very much. On behalf of Ashika Stock Broking Limited, that concludes this conference.