Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC) Q3 FY2026 Earnings Call Transcript & Summary

Good evening, ladies and gentlemen, and welcome to the Gujarat Narmada Valley Fertilizers & Chemicals Limited Q3 FY '26 Earnings Conference Call. This conference is being hosted by Anurag Services LLP on behalf of GNFC Limited. From the management, today we have on the call, Mr. D.V. Parikh, Executive Director and CFO; Mr. Nitin Patel, Executive Director; Mr. P.K. Purohit, Executive Director; Mr. Rajesh Pillai, Company Secretary and Compliance Officer; and other senior members from the management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. D.V. Parikh, Executive Director and CFO, GNFC Limited. Thank you, and over to you, sir.

Thank you. Thank you, Anurag Services, for holding the call, and good afternoon to everybody, all the participants on the call. I'm joined like it is already informed by my colleague, but there are 2 other colleagues from marketing. One is Mr. Tejas Shah, who is from marketing, industrial products; and second is Mr. Biradar -- V.B. Biradar who is from fertilizer marketing side. So any questions on the marketing side, they will take up the questions. I'll give you the broad overview of the business conditions during the quarter 3. As far as Fertilizer segment business is concerned, it has been stable. There is slight improvement in the NBS rates. So complex fertilizer did well. Urea also did well in terms of the volume. And on the chemical side, it did better on the volume front, which is offset by the pricing pressure in case of most products, except TDI during the quarter 3. As far as global and geopolitical issues are concerned, the uncertainty on methanol still continues, which is the main feed into acetic acid. And there are price uncertainties and volatilities, including the part of availability, which is there in case of methanol. Going on to the segment performance. The losses in case of fertilizer have come down. This is mainly because of the unfavorable subsidy freight rates, which were booked last quarter, which is not there during the current quarter, aside from the volume of urea. And chemical, more or less, barring for around INR 2 crore difference in terms of the segment is same. Others, there is a marginal change of INR 3 crores. So if we account for the kind of other income, which is normally received during quarter 2, which is showing up under the other income, the operational income has improved, mainly driven by the volumes in chemical as well as fertilizer. During the last Board meeting, there are certain capacity building CapEx also, which are approved. One is the capacity building for the fifth boiler, which is at Bharuch. Expected CapEx is roughly to the tune of INR 480 crores to INR 500 crores current is the estimate. Once we appoint the PMC and detailed exercise is done, we'll come to know about the final value of the CapEx on this. Another is to save on the power cost, there is another CapEx, which is done for the extra line from the -- from DGVCL, JETCO, which will enable to valorize green power as well as provide stability to the existing operations. On the balance sheet side, there are no major change and working capital has been quite under control because of the continuous subsidy flow. The subsidy outstanding as at the quarter is roughly INR 302 crores. In terms of other assets and liabilities, there are no other major changes. On the projects side, all the 4 projects are onstream, except that of CCPP, which is expected to commission sometime by end March or early April, which is expected to give a net inflow in terms of the contribution. At gross level, it is around INR 110 crores. At net level, it is going to generate around INR 82 crores, net of its relevant direct cost. The rest of the project like ammonium nitrate melt, additional capacity for ammonia as well as weak nitric acid are onstream. There is a slight delay in case of weak nitric acid, which is recoupable because the path -- critical path activities are not affected. So this is the update on all the projects taken together of INR 2,800 crores worth of CapEx. As far as projects under consideration are concerned, there are 2 projects which are there in the public domain and the examination of which is expected to get completed either in the next quarter or subsequent quarter, after which, we will decide about the further progress direction on those CapEx. So rest of the things we have already shared in the public domain in terms of investor presentation and results are already on the exchange, aside from the press release. So with this, I sum up my introductory remarks and now hand the call over back to the organizer. Thank you very much.

[Operator Instructions] We have the first question from the line of Nirav Jimudia from Anvil Wealth.

I have few questions to ask. So first is on the TDI. Like, when we see the global markets, I think we have seen price improvements in China, also in the European Union side, predominantly the Europe. Covestro, BASF, everyone have raised the prices. So just wanted to understand from you that when we see our quarterly presentation, our realization in Q3 was close to around INR 168. So if you can share your thoughts in terms of when can we align with the price increases taken by the global players here in India? And also, if you can help us explain, as there is an antidumping duty also in place, anywhere between $200 to $300, depending upon the country of origin, so are we getting any benefit of those antidumping duty in terms of the price realizations?

That's it? These are the 2 questions?

No, no, sir, there are plenty, but I thought I should first start with the TDI part.

Okay. So on the pricing part, you are talking about catching up with the pricing, which is elsewhere outside India. So all the pricing is done on an import parity basis based on the indexes available to us because that's the way to keep transparency in the pricing, and that's the way to fend question from any customer. So this is how GNFC operates. It takes its price, calculates the import parity price and prices its products. At times, it is at premium. At times it is at discount. For exit premium and discount during the quarter, our colleague, Mr. Tejas Shah, will respond on that. The second question is on the antidumping duty. Antidumping duty, just yesterday, we came to know is extended for another 5 years on the TDI. So antidumping duty is also taken into consideration for the purpose of arriving at an import parity. More, I will request Tejas Bhai to respond on this.

I'm Tejas Shah. You are right. You have seen the data that from January onwards, the prices are in improving trend in a global level. Yes, you are right. We have also improved our prices in the -- from January onwards. For Q3 is concerned, the prices were suppressed just because of the big demand -- global big demand. And as Mr. D.V. Parikh said, we are keeping our prices based on the import parity and whatever the TDI receives at Indian ports.

Got it. Sir, if you can help us understand like what would be the market of TDI here in India? And like we have capacity of close to around 66,000, 67,000 tonnes put together in both the plants. So if you can share the imports which are coming to India?

TDI, our market share is around 60% and the rest is import. If you see the total TDI consumption in foam, it is around 1 lakh tonnes. 10,000 to 15,000 is going into the system houses and 1 lakh is flexible foam that is produced. 60,000, we are selling in the Indian market. As far as the last year '24-'25 is concerned, we have Dahej plant shutdown for the 4 months. So in '24-'25, we sold the TDI around 50,500 metric tonnes in whole year. At present, we are going ahead and at present, our sales up to Q3 is 30,000.

Got it. Sir, also, if you can share your thoughts, like, with respect to this trade deal, which has happened with FDA with EU and with [indiscernible]. Is it possible for us to do some exports of TDI into those markets where now we can become competitive because now we have seen even Chinese currency appreciated by 8%, 9%. So that could enable us to have some pricing advantage into those geographies?

First, we have to see what are the advantage we are getting because, as I mentioned, Indian market is growing at the 10% CAGR. So -- and our sales is around -- our total production is 65,000 to 70,000 tonnes. So our production -- it will be very easily absorbed in the Indian market. Yes, we have to see the geographical changes because, in the international market, we have to compete on a global level for the pricing front.

Got it. Sir, also, if you can share like are there any of our products which were in the export tax rebate where China has removed close to around -- export tax rebate on around 200, 250 products. So are there any products of ours which qualifies under that list?

Our acetic acid is falling under that. So we hope the acetic acid prices will be improved in Indian market.

Got it. And even methanol is removed from that list, right, if I'm not wrong?

Yes. But we are not manufacturing methanol at present.

Got it. Got it. Got it. Sir, second question is on -- if you can share the production of ammonia in Q3, both through gas and oil route?

I'm Nitin Patel. The production of ammonia in Q3 was 1,75,000 roughly. And the breakup is -- around 60% is gas and rest oil-based.

Okay. And sir, also, if you can share the production numbers for WNA and CNA in melt and formic acid?

WNA is around -- WNA in both plant put together is 77,000 and 41,000, I and II respectively.

CNA was?

Sorry, WNA, 77,00 and 33,000 respectively. And CNA is around 8,400, I; 8,500, II; 9,600, III; and 12,000.

Total 39,000.

Total around 38,000 to 39,000.

Got it. And for AN melt and formic acid, if you can help?

Yes. Formic acid is 9,300 and AN melt is 1,16,000.

Sorry, how much, sir?

1,16,000.

For 9 months, right?

For 9 months.

I just want to correct the TDI sales figure up to December, it is 47,610.

Okay. So possibly in Q2, we would have -- Q3, we would have produced close to around 32,000 tonnes, if I'm not wrong.

Q3, we produced 16,000 metric tonnes of TDI.

Got it, sir. Got it. Sir, your thoughts on, a, the benefits on the operating cost. Like, last time you mentioned that A.T. Kearney was appointed and they were about to guide us in terms of the savings in the operating cost. So when can we start seeing the benefits of those measures being told by them to implement?

Okay. A.T. Kearney has initiated its engagement since last October. And so far, they have worked on few proposals where there are savings, but the savings are going to happen once the negotiation part mainly is completed. There are part savings which have already happened. But unless we sign off those contracts with the supplier, this saving is going to get reflected only thereafter. Out of the total value which we spoke, which A.T. Kearney has represented at Board level as well as to us, the total is between INR 260 crores to INR 300 crores. Certain part of that has been locked. The clear locking in is in respect of the renewable power purchase agreement, which is to the tune of roughly INR 5 crores to INR 7 crores, and the rest is under -- the majority of other savings are under contracting, which are yet to be signed off. So we will be in a position to definitively say about annual savings once this contracting is signed off.

Got it. But safe to assume that whenever everything is in place, we could save close to around INR 250 crores to INR 300 crores, what you mentioned?

No, that is the claim they are making. We are yet to sign off as it progresses. Any management consultant will make a claim of a certain amount. But then some of the initiatives do materialize and some do not. And finally, management will certify how much is the actual saving which is flowing into the books of account.

Got it. Sir, last 2 questions before I join back. So one on the fixed cost revision that is -- you mentioned that it should be expected by June 2026. So has the exercise completed and it's now only upon the ministry to give the final decision on the same? Or are further rounds of meetings to be held up to decide on the same?

As far as industry and company is concerned, there are no further rounds of meeting, which is -- which are happening. And this is a decision which is within the government and the respective departments have to take appropriate positions on that.

Got it. Got it. Sir, last question is on any shutdowns we have planned for quarter 4 or, let's say, for FY '27? Anything -- any of our products, which should -- or which may be going for a maintenance shutdown in Q4 or, let's say, anything which is coming up in next financial year?

So far as -- I'm Nitin Patel. So far as Q4 is concerned, no shutdown is planned. Next major annual shutdown is being planned in '27, that would be in Q2, somewhere around April or May.

You are talking about financial year 2027, right?

April '27.

So it should be in the next year itself.

[Operator Instructions] We have the next follow-up question from the line of Nirav Jimudia from Anvil Wealth.

Sir, one question on the downstreams of nitric acid. So, like, we have seen that many of the players have put up their nitric acid plants like Deepak Nitrite, even Deepak Fertilizer is also expanding. Chambal is also coming up with their own WNA, CNA plant. So your thoughts on, a, with the ammonia prices going up, has there been a commensurate increase in the prices of nitric acid and whether we are thinking in going into the further downstream of nitric acid, like calcium nitrate or, let's say, potassium nitrate?

Okay. Our nitric acid III, which is the investment which is expected to come up by June '27 has a clear downstream under AN melt. So substantial portion of that is going to be consumed under melt. And there would be some portion available for merchant sale to the tune of roughly 70,000 out of 2,03,000 metric tonnes per annum. So that will be sold in the market. And we have planned for the commercial sale of that and not the further downstream of weak nitric acid, for the 70,000 metric tonnes as of now.

Got it. Sir, second question is on the CapEx part. Like last year -- last quarter, you explained that out of INR 2,800 crores of CapEx split between all the 4 CapExes, which are currently undergoing, if you can help us understand like how much we have spent till December 2025 among each of them, that would be very helpful.

Project-wise detail, I will -- we will provide to the Company Secretary. And he will share with you offline, if it is okay?

Fine, fine. No worries, sir. No worries. But sir, totally, if you can share how much we have spent till December, that also would help, sir?

Around INR 1,000 crores.

INR 1,000 crores we spent. Okay. Okay. Sir, last question is on the boiler part. You mentioned that, that has now been taken up as a project with INR 480 crores to INR 500 crores of capital investment. So would it -- so is this a coal-based boiler, which would be replacing some of our existing feeds? Or would it help for further the downstream projects, which we are currently undergoing, or any sort of annual savings, which it could accrue to us?

Okay. Yes, this is going to be a coal-fired boiler. And there will be varying kind of calorific value of coals that can be used. These specifications will be designed by the PMC who is going to be appointed. And obviously, because currently, we have a boiler called pulverized boiler, and we are going with a boiler called CFBC boiler, which has more efficiency, if our current boiler are operating between 71% to 75%, this boiler is expected to have an efficiency of around 83%. So obviously, there is a business case for it, but we are installing this boiler for the purpose of primarily reliability, aside from the financial saving, which is coming as a bonus part to it.

Got it. So when this would be coming to the operations? Like, when it would be installed and the benefit should start accruing to us?

Okay. That is something we will let you know once the PMC is appointed and detailed engineering exercise is done.

Perfect. Perfect. Sir, last, in terms of our ammonia requirement. So, like, we require ammonia for most of our...

May I give your answer to your question. The payments part, which you asked on the existing CapEx is INR 1,000 crores. But the actual commitment is already done up to INR 2,600 crores. It is like in the nature of giving contracts. Contracts are done, the payments are to the tune of INR 1,000 crores. Like, we have, let's say, LSTK contract, out of INR 1,420 crores, INR 1,100 crores, an odd amount is already with an LSTK contractor. INR 357 crores is with -- for AN melt with Toyo. Around INR 30 crores worth of CapEx is for AMUGL, which is new ammonia loop. And for the coal-based, we are going to end a little below INR 600 crores of CapEx. The approved CapEx is INR 613 crores.

Got it. Got it. Got it. And sir, on the ammonia part, like, the ammonia is required in various products of our product basket. So is the production through oil route sufficient enough currently to meet the requirement? Or do we need to purchase some ammonia also from the outside market?

See, we are expanding the ammonia production by ammonia make-up loop, which would be to the tune of 50,000 tonnes per annum. There would be requirement of ammonia for downstream new projects. So with capacity increase, around 35,000 to 40,000, we will have to buy from the market. And with this, both buying from the market, 35,000 to 40,000, and ammonia capacity expansion, our ammonia requirement for all downstream projects would be fulfilled.

Got it. Got it. So currently also, we may be buying some ammonia from the market.

Currently, depending upon the need. I will say the volume is very less.

Got it. Got it. Got it. And sir, just a last clarification. For ethyl acetate, we also require ethanol as one of the raw material?

Yes. Ethanol is one of the raw material.

[Operator Instructions] We have the next question from the line of [indiscernible] from ICICI Prudential Mutual Fund.

Sir, just 2 questions. One on volumes. One, you explained that, of course, TDI, we can operate at full capacity. So that volume will be there. At an aggregate level, how much kind of volume growth we should expect in the coming year? That is question number one. And secondly, as the previous participant also mentioned and you also mentioned, on 2 of our key products, TDI and acetic acid, there is some kind of positive movement on global prices. So on domestic prices, have they shown similar movement already? One, you mentioned, since January, it has been, but on acetic acid, has that flown through or it is not yet visible in the domestic market? That is number two.

I will brief you about the pricing part of the acetic acid and TDI. Yes, you are right. From January onwards, in both the products, there is a positive movement as far as the pricing is concerned, along with the global market.

And on the volume part, there is expected volume increase from TDI because the kind of hiccup which we have seen this year, it is expected to improve the reliability going forward. So the focus of management is not only to realize the 50,000 capacity there, but even the enhanced one for which the slack is already built up. And from '27 onwards, the volume increase is already in the public domain for both weak nitric acid and ammonium nitrate melt. There are going to be cost advantages to improve the profitability because of 2 things. One is the capacity-building CapEx other than the growth CapEx, which we briefed about. And second is the exercise which is being undertaken for the existing operations transformation. Now how much of that is realized, we will keep on briefing during quarterly calls.

[Operator Instructions] As there are no further questions from the participants, that concludes the question-and-answer session. I now hand the conference over to Mr. D.V. Parikh, Executive Director and CFO, GNFC Limited, for the closing comments. Thank you, and over to you, sir.

I'll request our Company Secretary, Rajesh Pillai, to conclude the session.

Thank you, sir. I would like to thank all the participants and the senior executives of the company for joining this call today. I would also express my sincere gratitude to the moderator as well as Anurag Services LLP for coordinating this con call. Thank you.

Thank you, management members. On behalf of GNFC Limited, that concludes this conference. Thank you for joining with us today, and you may now disconnect your lines. Thank you.