Gujarat State Fertilizers & Chemicals Limited (500690) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Gujarat State Fertilizers & Chemicals Limited 4Q FY '21 Earnings Conference Call hosted by Batlivala & Karani Securities India Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Kolhe from Batlivala & Karani Securities India Pvt. Ltd. Thank you, and over to you, sir.

Thanks, Faizan. Good afternoon, everyone. On the behalf of Batlivala & Karani Securities, I would like to welcome all the participants who have logged into this fourth quarter results con call of Gujarat State Fertilizers & Chemicals. From the management team, we have with us Mr. Nanavaty, Executive Director and CFO; and Mr. Vachhrajani, Company Secretary and Senior Vice President of Legal. Thank you, management, for giving us the opportunity to host this call. I would like to request Nanavaty, sir, to first begin with his opening remarks, and post which, we will have the Q&A session. Thank you, and over to you, sir.

Thank you, Deepak. Good afternoon to all the participants, and welcome to this post results quarter 4 con call. We have Mr. S P Yadav, Executive Director of Fertilizer Marketing; and Mr. Vachhrajani, Company Secretary and Senior VP Legal along with me, so hope you have all seen the results. First of all, we have been back to 110% dividend, which was lower last year due to the financial position during that time. Otherwise, the year was good, mainly marked by the good collection in subsidiary with the government initiative to give additional INR 65,000 crore subsidiary to fertilizer sector. All the backlog year after year has been cleared, and that is reflected in our financial position and the interest cost savings. So otherwise, on operational front, we had a higher production of Fertilizer. And in the Industrial Chemicals, we started the methanol plant, which was like added on last 5, 6 years. Melamine III plant also stabilized and was now running at 100% capacity. As far as the fair value of investment is concerned, as we are in the main market, you know the Sensex results, and that has been reflected in the investment that we hold. So last year, in March '20, due to COVID, the fair value was down to INR 195 crore, which has increased to INR 4,233 crores that is reflected in the other comprehensive income. Profit figures and other balance sheet figures are with you, so I'm not elaborating. But because of good financial position, we have paid back the only long-term loan we had of INR 93 crore, and also substantially returned the working capital borrowings that we had, so which is down from INR 1,400 crores to INR 35 crores. And we have a deposit of around INR 1,000 crores in March '21 due to this good subsidiary collection. Also, because of good rainfall, we had a good collection from the field also. So whatever outstanding was there of earlier years due to bad rains has all been collected. So that is how also the receivables are also showing a good improvement. And as a good corporate citizen, we were the first to start oxygen supply to the local municipal authorities. So thereafter, government realized that fertilizer companies can give oxygen, so others were also requested to join, everybody has welcomed wholeheartedly. As far as the projects are concerned, the Board has recently approved 3, 4 projects. One is ammonium sulfate, fourth plant of 400 metric tonne capacity, which is in line with our already 3 ammonium sulfate plants we have, which gives good margin input in the fertilizer sectors. Then we have a sulfuric acid fifth plant. We already have 4 plants, and this will be the fifth plant, 600 metric tonnes per day. Then we are commissioning nylon 6 compounding plant that is expected to be commissioned by December '21, that is a 48 metric tonne per day compounding line. That will be coming at a cost of around INR 35 crores. Then we are setting up 15-megawatt solar plants at around INR 85 crores investment. And Board has also approved urea [ result ] project for energy reduction in line with the Department of Fertilizers norms of energy consumption for urea. So we've been meeting those norms and in fact, exceeding and making some savings in urea part of production. So these were the major highlights from now onwards, from April onwards, [indiscernible] that this trade has gone beyond $1,000, which was stuck up below $1,000 for almost last 2, 3 years, so that is a good sign. And with the other income, there is a onetime item, as mentioned in our note to the statutory result, of some parcel of land was sold, which brought a profit of INR 42 crores. So that is a onetime item. Otherwise, going forward, there were some transition periods in April and May, when the raw material costs, in particular, rock phosphate, sulfur, ammonia, everything went up substantially, and companies were in dilemma, whether to increase MRP or government will support [indiscernible] subsidy. But in the interest of pharma, government decided to increase the subsidy, and now the MRP of all the P&K fertilizers are maintained at same level of last year by GSFC. So that will be a great relief to the farmers. Now as you know, a normal rainfall is predicted this year. So we hope to improve the fertilizer volumes going forward. And as you know, the commodity supercycle, all our industrial products are attracting good price. So we see an improved margin going forward in Industrial Products. So we are optimistic for this current year also in spite of -- as you know, in spite of COVID, agriculture sector, fertilizer sector has fared well. So we hope this will also be the same story this year in spite of COVID situation. Thank you. That was all from management side.

Sir, should we start the flow for Q&A?

Yes. Yes. Yes.

[Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Research.

I have two questions. Sir, could you please update on the production numbers for melamine for the month of 20 -- for the financial year FY '21? Because I think the new plant of 40,000 tonnes, what you mentioned, is like -- has been already operating at 100%. But I just want an update for the previous 2 plants, what we have of 5,000 tonnes. So if you can just update on the melamine production numbers for FY '21. And a related question to this would be, sir, in last 3, 4 months, we have seen a lot of ups and downs in the melamine prices. So price is moving all the way high up to INR 200, then coming back to INR 150, now at INR 160, INR 170. So how you foresee the melamine prices? And what is driving the prices of melamine higher in the international markets? So this is one -- first question, sir.

Yes. So melamine, now we have mainly Melamine III plant because that is a very energy-efficient plant. So when a lot of imports are coming at [indiscernible] price, so we can't afford to have higher energy plants. So the full year number for melamine was 38,732 metric tonnes, so mainly coming from the Melamine III plant. And looking to the price dynamics, we run Melamine II plant or we don't run Melamine II plant. But Melamine I plant, we always keep on hold because of higher energy consumption. So as far as melamine pricings are concerned, yes, it's going up substantially every month. And mainly because of the disruptions in the Europe and Japan arenas, there have been some downfall in the production world over, so melamine prices are going up. And as you know, the melamine is used in the laminates and all. Even in India, also in spite of COVID, more and more houses are registered. So today only in Gujarat, they've shown the 45% increase in the new house registrations. So all this drives the melamine demand. And we are the only producer in India, so we have that advantage of reaping this benefit. So -- but it will keep fluctuating, looking to meet international demand and supply scenario. And as you know, we already have this antidumping duty on melamine, we are protected from the Chinese aggression.

Got it. Got it. So sir, like how we produce melamine? So it is produced from ammonia, or do we produce it from urea?

No. It is produced from urea.

Okay. Okay. So ammonia to urea and then urea transferring to melamine plant. So this is the production process?

Yes. But ammonia is used -- made from natural gas. So there's a natural gas, ammonia, urea and melamine case.

Okay. Okay. And sir, you mentioned in your opening remarks about diverting of oxygen for the COVID purpose. So do we face any short -- so does it impact our production of ammonia, because I think of the critical raw materials oxygen also for the production of ammonia? So how do we see ammonia production and its impact on our downstream products?

No, this is not affecting our -- any production. So this -- what we are giving is 10 metric tonnes per day. We produce 1,400 metric tonnes per day ammonia. This is very miniscule.

Okay. Okay. Okay. And sir, a last question on melamine would be, sir, you mentioned that we are -- we have reduced the energy consumption for melamine and our cost dynamics have improved. So apart from gross margin, so sales minus RMC is not in our hand because then it depends upon raw material and finished product prices. But if you can give us some sense in terms of our operating cost, like what is our operating cost fixed plus variable for melamine, that would be helpful, sir?

So we don't comment on individual products. So -- but overall, this segment result EBIT is a -- overall gives picture of the earnings that we make. And particularly full year earnings, if you look at the fourth quarter, that will be better because prices are on up. So full year is still depressing. But -- and as I said, going forward, it is still more lucrative from April. So like [indiscernible] increase would be $1,000 first time from April, so it's still going up.

Got it. Got it. Got it. And sir, on -- any guidance on the caprolactam and melamine production for FY '22? Like what are our internal targets for production of both these products for FY '22, if you can guide, sir?

So we are producing at full capacity. So -- but there are, of course, shutdowns, regular shutdowns. So melamine is 40,000 tonnes. So that is mainly Melamine III. So I think that much we will definitely produce. But then if cost earnings permit us to restart Melamine II plant, then there will be some further -- more production, 5,000 to 7,000 tonnes. So maybe 45,000 to 50,000 tonnes we will make in this year, that is melamine. Caprolactam, for sales purpose, it is -- some 55,000 to 60,000 tonne is available, where it is goes to make in nylon 6. So around -- production may be around 80,000 to 85,000 tonnes, out of which some 20,000, 25,000 go to make nylon 6, and rest is available for sale.

[Operator Instructions] The next question is from the line of Bharath Subramanian from Sundaram Mutual Fund.

Yes. Sir, just I missed your initial comments, but if you can just give some color in terms of what are the current projects that we are undertaking at this point of time in terms of gross CapEx, and in terms of what is the outlook you've earmarked for that, that would be helpful?

So you are talking about 3 projects?

Yes.

Yes. So as I said, the Board of Directors have approved ammonium sulfate new plant of 400 metric tonnes that will cost around INR 80 crores and will add some INR 230 crore to turnover. Then we have sulfuric acid number 5 plant, we already have 4, that is 300 metric tonnes per day, which will cost around INR 180 crores. Then we have nylon 6 compounding line, that is a further value-added stream from the Capro Group. So Capro, nylon 6 and then nylon 6 compounding that is the change. So that is 48 metric tonnes per day that will bring around turnover of INR 260 crores, and it will -- CapEx is INR 35 crore, and we plan to commission it by December '21. Then we have solar plant of 15 megawatts at around INR 85 crores, we'll complete in June '22. That will reduce our power bills. And then we have urea revamp program of around INR 300 crores CapEx to match with the energy norms specified by Department of Fertilizers. Otherwise, they don't pay subsidy on higher energy consumption. But that will be done in the live urea plant. So it will take around 24 to 30 months to complete. So these are the Board-approved CapEx plans. Plus, there are a few others, which are under discussion. At the first stage, various detailed project reports are under discussion with the outside professional consultants. So once those are found to be viable, so it will be taken up for further evaluation and Board approval. So maybe by September -- and we will come with some more news on the CapEx.

So after the [indiscernible] so that we're not progressing. So in terms of complex, there's nothing at this point of time, right, sir, that we're planning?

No. That is also under consideration. Because of this large CapEx and COVID situation, that was under hold. So now it will be revised because the full year, we have seen that agri sector can survive or it can excel in COVID period also. So there is no anything unknown in this time for undertaking large projects. So it will be more than INR 1,500 crores. So now, that will also be reevaluated. And definitely, with this kind of processing price, that will definitely make the commercial sense to have processing for that in India.

Okay. Okay. And in your view, should it be reviewed now the CapEx, to what extent will that ballpark get revised, sir, for [indiscernible] projects be done now?

I could not understand your questions. Can you...

If the [indiscernible] project were to be revised now, what, in your view, would be your revised CapEx number compared to the original plan that we had earlier?

So we may go on a modular scale. If you are just going for, say, 1,000 or 1,200 metric tonnes per day phos acid plants, you may as well go for 600 into 2 kind of [indiscernible] projects so suddenly, we don't jump into a large CapEx commitment. So it will be 600 metric tonnes per day phos acid, coupled with 1,800 metric tonnes per day sulfuric acid plant. So numbers still are being checked, what could be the number. But as I said, it could be around INR 1,500 crore.

Okay. And one last question, sir. In terms of the balance sheet, the other financial assets of INR 868 crores that we have, are they largely the deposits, sir?

Yes, they are deposits because of the accounting standard classification. And if I don't put it in bank and all, then it is classified as other financial assets. So they are deposits.

The next question is from the line of Ahmed Madha from Unifi Capital.

Sir, what is the status on pending duty of caprolactam?

Yes, caprolactam is going on in the Department of Commerce, DTCG. So it is both ways. For Atmanirbhar, we want to give protection to the Indian industry as well as there are a lot of foreign pressures to resisting this kind of antidumping duty. And since of late, we are the only producer though facility is there, but we have not been producing caprolactam for many years. So with no comparative data available to the regulators in India, so they are taking some time to notify this antidumping duty. And as I said, the prices are rising. So when you make good profit, then there is a problem in not giving some other protection.

Okay. Okay. Understood. And sir, in DAP, key raw materials are phos acid and the ammonia, and we are integrated in ammonia. And government has addressed the rising positive price by increasing the subsidy. Now on the NPK side, is there any -- in the foreseeable future, is there any hike in subsidy for NPK fertilizers?

No. They have increased the subsidy in all fertilizers. So only the DAP being well-known fertilizer and NPK having so many grades, so of what grades they will talk. So they are not talking of NPK, but they are increasing basically subsidy in the phosphatic key components of the P&K fertilizers. So wherever we viewed, the subsidy stands increased. So all kind of NPK 12-32-16, 10-26-10 ammonium phosphate sulfate that we make that is 20-20-0, 13-16-20. So many grades where key component is there, the subsidy stands increased depending upon the weightage of the fee in that fertilizer.

Okay, sir, understood. And sir, are we planning any VRS in the near term?

Which one?

VRS, voluntary retirement?

No, no, no. See, we are good pay masters. So why anybody will go home, nobody will. In fact, we have reduced our employee costs from last year. So that is always there in our mind. But no, we are not.

Okay. That's fine. And sir, what margins can we expect for Fertilizer segment in FY '22? Can you give some guidance?

In maybe this 5%, 6%.

[Operator Instructions] The next question is from the line of [indiscernible] Patel from [indiscernible] Capital.

Sir, I wanted to ask about the company's plant under Atmanirbhar Bharat. How many products do you want to launch in near future under these projects?

Yes. So when this COVID situation occurred, we thought that a lot of pharma intermediates are coming from China and that needs to be improved, we need to make it in India. So we examined the synergy of our products, our raw material, our market with pharma intermediates that is required and to make India Atmanirbhar. So we have identified some 11 products, which GSFC can make and provide to the pharma industries locally. So a few of them have already been put in the market. Their quantities are not so big. And others are in development stage. So we are working on that once we have taken up that subject. So some of them are made in India by other manufacturers, some are not at all made, 100% imported. So these 11 products that we are talking is something that will be useful to the India. It's not that we will be one more producer and we want to get into this in any way. So we have selected only those products which India is importing in large way. There are no local or few local manufacturers. And GSFC has synergy with their own operations. So we are not jumping into totally unknown area or where we don't have any expertise. So looking to all these things, we have selected those products, and they are at the different stages of product life cycle, so to say, before they come into the market.

Good. And the company is now debt free and has a huge cash in terms of investment or the -- some bank holding. So do you have any big expansion plans?

Yes. So as I -- we said about this project, as you see that we have been doing small or big projects for many years, and we hardly take any term loan from outside and the one term loan that we had taken for Melamine III that we also prepaid before due date. So generally, when we have the cash on hand on deposit like this, we don't go for outside borrowings. So the project that we talked recently, they will all be mostly done from the in-house funding and plus the large phosphoric acid plant at Skhira and MMA plant, all those kinds of investments are more than INR 1,500 crores. So all this cash will be used up in the project coming.

Sir, this investment only in invested '21-'22 or take some longer times?

No. They will take some longer time. But as we said before, there is some project advance and some equipment advance and all the thing is coming. So -- plus subsidy also government is not going to give some hefty subsidiary, like INR 65,000 crore additional. So once government fund also dries up, there will be a subsidy blockage also going forward, where they will -- then our internal fund will be used for production purpose.

Sir, last question...

We don't want to put it in FD and enjoy interest on FD. We want to do business.

Yes, so if company want to do business then why company has invested such huge amount in Gujarat Gas, Gujarat GNFC? Is there any plan to monetize this investment and ramp up our production or expansion something in a big way?

No. That government controls all these things, but they will only decide to monetize it. Right now, there is no plan.

But sir, this is the investment just like FD, which you can expand.

Yes. But if we had sold, say, GSFC Gas or Gujarat Gas 2 years before, we would not have got this kind of value, sir. By holding 2 years, it has multiplied a number of times.

But, sir, any plans for new investors?

In public sector unit, it is difficult to dispose of this investment because valuation, nobody can say how the valuation will move. So if you, say, sell it at a lesser price, then there will be allegation that who decided and why it was sold and so on best price and somebody should be brought to charge and all these things. So...

Sir, last question, how you predict '21-'22?

We are very optimistic organization and a predict good future and that has happened so far. So we expect some growth in both Industrial Products and Fertilizers. We see growth in this '21-'22 also.

Sir, any contribution from Atmanirbhar Bharat product in '21-'22?

Yes. They have been gearing. Though their turnover is small, but they are very good in profitability. But these are some secret things where we cannot talk in public.

[Operator Instructions] The next question is from the line of Nishith Shah from Aequitas Investments.

Congratulations on good set of numbers.

Yes. Thank you. Thank you.

Sir, I wanted to understand, how has the Fertilizer sales been in last 2 months, April and May?

There has not been much sale. As I said, the raw material prices for ammonia, sulfur went up substantially high. So no, there are only 2 alternatives before the companies, either increase the MRP or wait for subsidy support from government, higher subsidy support. So government was founding that, okay, to take care of farmer's interest, they will be increasing the subsidy. So companies are holding back their sales. So there has not been much sale in this last 2 months. But of course, it was also a lull period for Fertilizer because season will start. Now Kerala will receive the monsoon in 2, 3 days' time. With that, the monsoon is sat in India. So now the real buying will start. So even if we make some point sale, real consumption is going to happen in June -- from June only.

Yes, sir. And sir, I wanted to understand, for an Industrial product, any significant price changes in last 2 months?

Yes. Prices have increased substantially in that from January onwards, and they are still increasing. So it is bringing newer highs to the sales as well as profitability in the industrial chemicals. So till this crude remains around $65, we are going to see a sustained good price in Industrial Products.

The next question is from the line of [ Saket Kapoor ] from Kapoor & Company.

Sir, what is our current working capital requirement for the Fertilizer segment, sir?

Right now, INR 35 crore has been used for working capital borrowings. So it is right now negligible in view of the subsidy...

No, sir. I want to understand on an annual basis -- sir, on an annual basis, what is our working capital requirement for running the Fertilizer business?

You see, on an average barring subsidy, we have some 60 days outstanding from the fertilizer. So from the field. Suppose we have INR 6,000 crores of sales, we get some INR 2,500 crores as subsidy and INR 3,500 crores that we collect from the field. So from the field, we have some 60 days collection. So maybe INR 600 crores. And Fertilizer subsidy, we have 90 days outstanding. So that is some -- so around INR 1,000 crores is needed for working capital, INR 1,000 crore to INR 1,200 crore.

Right, sir. And sir, how does the math work for our Industrial chemical there?

In some areas, [indiscernible], melamines, even ammonia is also not freely available. So we sell most of the things on cash or credit basis. And even if we extend credit, we charge interest, working capital interest to some buyers, open LC and ask for some credit period, what that is. There is only interest cost. It is not a free credit. So there, we have the credit requirement is very, very less. So we can see that even March end are going steep INR 1,700 crores, INR 1,800 crores in the product sales. Our overview was that the INR 45 lakhs, that is also from more [indiscernible]. They are not current overdue outstanding of [indiscernible] or it's just nothing.

Correct, sir. Sir, is it at the Fertilizer products keep the PBT levels, I mean, the segmented results? It was the INR 358.56 crores. Sir, I thought this portion, how much is on account of any subsidy, or are these totally be our -- the profits margin getting converted into PBT?

No. This is a profit margin that is converted into PBT. There is nothing, I mean, onetime thing or anything if not more or nothing like this. This is all the Fertilizer profit.

Right, sir. And sir, these margins are sustainable for the Fertilizer 's products for this year also, sir, or due to these changes in the business environment, we don't foresee them?

No. This is 6% of our sales. So it will vary between 5% to 6%.

5% to 6%. Right. Sir, in the methanol sales part, sir, the -- in your volume data, where is that methanol trade, sir, and the ...

[indiscernible] industrial products, they have taken our website base volumes, production volumes.

Yes, sir. I have seen that, but under the Industrial products, sir, we have only caprolactam, melamine, nylon 6 and [indiscernible].

Yes, yes. So the new products, we have not separately categorized. I think, they are part of Industrial products. Next quarter, we'll show it exactly.

Great, sir. What was the sales trigger for this year, sir?

It was INR 181 crores.

INR 181 crores?

Yes, yes, yes.

Okay. Sir, just a short understanding request. When we do a peer comparison, in the Industrial segment, we are the pioneer in many of the products where only GSFC is the manufacturer. There is no peer comparisons for us in that segment. But in the Fertilizer part, sir, if we take our side and the geographies which we cover, what is our market share? And if you can cover this over a peer comparison?

Yes. So Yadav, our VP Marketing will reflect to this. One minute.

Yes, good afternoon. In case of DAP, we are enjoying a market share of 5.43%. And overall, we are enjoying healthy position in the country, and we are enjoying 4.2% market share.

4.2%?

Yes.

That is all P&K, Fertilizer together.

Right, right. And from the urea part, sir?

Urea part, 2.5%.

2.5%. Sir, I have 2 suggestions, sir. We find that the reach between the company and the investors, so the company should look forward for the press release and investor presentation also before the conference calls are held, so that more information can be decimated prior to what the conference calls are held, and that will give a fair idea of how the quarter has performed. If it warrants any merit, it should be looked into, and that should be contemplated going forward, if that could be made. And then for the volume data also, sir, we find that the volume data figure only shows the comparative figure for the last quarter, I mean, Q4 of '19, '20 versus Q4 of 2021. But the cumulative number for the 9 months or for the period ending for that -- up to that period is not mentioned. So there should be -- [Foreign Language] So give us for this June and last year numbers also. So we'll get the understanding how the trajectory is panning out. So these small tinkerings would be really helpful, and we look for the continuity of interactions with investors. So for the employees' part, sir, you have informed that -- if you mentioned it has seen that from the employee cost has gone down from INR 729 crores to INR 359 crores. But there is an ad hoc increase in quarter-on-quarter, sir from INR 172 crores to INR 221 crores. So what kind of employee benefit expense should be considering in for the year as a whole? And is there any division or -- that is spending some ad hoc payment that may happen for the next year?

No. So INR 700 crores is a reasonable FT estimate. And there is nothing pending. We do [ vision ] every per year. So until 4 years, nothing is going to tail substantially. What can we say in the quarter-on-quarter is this fair valuation of this long-term liabilities that is actual valuation of pension, gratuity leaves, all these things? So on this, actually, we will make some current changes in the assumption, like they said that now India's people will leave 3 years more. Then they were leaving earlier. So they increased in liability. [Foreign Language] But there is no go, we cannot argue all these things. [Foreign Language] So government bond [ decreases ] and your liability increases because of discounting factors. [Foreign Language]

Mr. Kapoor may we request that you return to the questions queue for follow-up questions. The next question is from the line of Deepak Chitroda from PhillipCapital.

So my first question is about our -- the CapEx plan, which Nanavaty sir was talking about. Sir, if you can just repeat that about what has been -- earlier, we were planning what the new Board has approved in terms of sulfuric acid and all, I previously missed that part initially.

Yes. So we will have new ammonium sulfate plant of 400 metric tonnes. That means around INR 80 crores and will bring turnover of INR 230 crores. And we will have a consolidated C plant of 600 metric tonnes per day. The CapEx was around INR 180 crores, that will be kept in conjunction. So there is no sale. Then we have nylon 6 compounding plant of 48 metric tonnes per day that, on a full year basis, it will bring INR 260 crores turnover and the CapEx of INR 35 crores. And that is expected to start in December '21. Then we have solar, some 15 megahertz solar plant, and that will commission in June '22 at a cost of INR 85 crores. Then to meet the urea energy norms, we are revamping our urea plant at a cost of INR 300 crores that will bring down the energy consumption and it will meet the DOS norms of energy norm. So it will take some 24 to 28 months to complete because all this [ cane ] done in the live plants. We are not stopping the plant and doing the CapEx. Thirdly, some plans for CapEx going ahead. And the 2 -- while we had earlier decided of sulfuric acid, phosphoric acid at [indiscernible] and that was on hold because of COVID situation last year, we may review this and take them forward. So that is a 600 metric tonnes per day for phos acid and 1,800 metric tonnes per day for the sulfuric acid, at a cost of around INR 1,500 crore. And then there's an MMA chemical 164,000 metric tonnes. That is also around INR 1,500 crore to INR 2,000 crore plant. So this -- review on these 2 will be coming this year, and will be decided whether we are going ahead or we are [indiscernible] those plants. Various project reports are for other 5, 6 products are also going on. So if we found something viable, we will come back at the time of September result.

Sure, sir. So on the urea side, if you can tell me what is our present energy norms at Baroda, which we produce?

Government has mandated 6.2 giga-calorie per tonne. So we are a little higher than that. And after we will be lower than this norm. So these norms are applicable till March '25.

Sure. So we'll be bringing it down to around 5.5 group 1 level?

5.5 to 6.

Okay. Okay. Sure. Sure. So now my second question is, I think when you -- when we were talking about backward integration at the [indiscernible] by setting the additional capacity, so I mean, I'm hearing this over past, in fact, 3 years. So I think this will definitely going to improve our margin if we try and do a backward integration because I think as of now, if we look at versus other competitors, our margins are much lower because we are highly dependent on the imported acid and ammonia. So I mean, is there any particular priority, which we might see towards next September or so for this particular project?

Yes. So -- yes, definitely, we are going to look at it, I mean, as soon as possible. So if there is a clear vision, then yes, definitely, we will announce it.

Yes. So why I'm saying this because, see, I mean, as I understand, as of now, I mean, it's not viable for at least imported phosphate and ammonia players to basically produce DAP and maybe some high mutant gates NPKs. So I mean -- yes -- so I mean, probably, what might be the GSFC strategy, at least for the Kharif season, probably we might be selling the ammonium phosphate sulfate only or will be catering to some DAP, otherwise, we might lose some market share?

No. Definitely, we are -- we'll be selling what we sold in this current year, about some 25 lakh tonne, and there's no going back on that number. So we hope to only increase it. Maybe some product mix, as you correctly said, may change. So instead of making so much of DAP, which is not viable, we may focus more on NPKs, ammonium sulfate and APS and all those categories. But we will definitely not like to lose the market share.

Sure. Sure. So basically, trying to do some reshuffling in terms of the product-wise, specific like sector unit, I guess? Yes.

Correct. Correct. Correct. Yes, yes.

The next question is from the line of Sreemant Dudhoria from Unifi Capital.

Sir, firstly, on the volumes in our Industrial segment in the current quarter, there was a sequential decline across the 3 product categories that we show in Q4 as compared to Q3 of '21. So what has led to that decline?

So we are talking on a quarter 1 to in industrial products?

Quarter 4 '21 versus quarter 3 '21, Q-on-Q decline.

Q-on-Q, okay. Let me see, yes, so as far as turnover is concerned, there is no -- there is -- in fact, there is a increase in turnover by INR 43 crores. So...

On volume basis, sir.

Volume basis. Yes, so some product mix maybe here and there, but we brought mainly the methanol into the line. So methanol was sold more in quarter 3 as compared to quarter 4. So there, the volume difference has come up. Otherwise, -- yes, all volumes are more in quarter 4.

So for example, melamine volumes was down, right, from about 15,387 to about 10,672.

Melamine volume -- I mean, volume data of quarter 3 is not immediately available to me for Industrial products. Yes, something here and there happens, but there is nothing structurally, I mean, hindrance or damaging thing. So it's just marketing from here or there. There's nothing special or long-term adverse thing there.

Right, right. Sure. And how has the COVID 2 impacted our business in the Industrial segment? Has the volume been impacted? How much has that been impacted?

No, no, it has not impacted. Initially, from April to September, there were some impact because downstream industries were closed because of this lockdown. So at that time, we -- the export to the other countries for melamine, caprolactam, et cetera. But since October, slowly things are opening up. So now we don't do much export. And whatever is produced is domestically sold. So there is no hinderance to demand or there is no impact on the demand. In fact, as you know, when the prices are rising, everybody wants more and more materials because there is a doubt that further rise will happen, so better to buy it right now. So that kind of feeling drives them to buy more and more.

Right, sir. Sir, if I look at the history of our Industrial products over the last decade, FY '11, '12 was kind of a golden period in the Industrial products. And I think our margins at that point in time was north of 30%. Now the mix -- product mix has been changed because we have introduced new products over the years. But do you see, at the prevailing trend in the caprolactam spread and also the realizations of other products, we should near to the earlier highs in terms of margin that we achieved in the segment?

No, no, no. Those days are permanently gone. So when China enters into any particular product, the whole scenario changes in 5 years' time. So earlier, they were importing caprolactam, but now they have huge plants, maybe some 20 lakh metric tonnes and that has changed the whole worldwide scenario. So they are flooding the markets with their products. So there's those kinds of margins are never going to return. Those were very, very abnormal. Like caprolactam price, which is $2,000 right now, it was around $3,500 at that time. And then we said, those $1,000 or $2,000 spread was there. So those days are gone, never going to return.

Right, sir. Right, sir. So globally, are there more capacities getting added, sir, especially in channel for caprolactam? And do you see the spread kind of compressing in the near term? Or do you think that it should continue at least for the next, say, 12, 18 months?

Yes, yes. No, it will continue around the $1,000. So -- but all chemical business is cyclical in nature. So it will go up and then come down. And so average you can expect $1,000 at least. And we will be then specializing in the nylon field, if persistent downward trend in caprolactam is seen, and we'll move in the next value chain where though it is a niche product with variety like NPK fertilizers. So many varieties in nylon 6 grade with the different applications. So -- then we will move to that area by selling less caprolactam. By the way, we are the only producer of basic nylon chips in India. So nobody is producing nylon chips in India.

Mr. Chitroda, may we request that you return to the question queue for follow-up questions. The next question is from the line of Priya Mehta from [indiscernible].

So my question -- I have 3 -- I wanted to know 3 things related to caprolactam. So what is the expected price for the -- for FY '22 versus FY '21 trend or the ballpark figures? I missed on the antidumping duty status, which was asked by the previous participant. It would be great if you could repeat that? And the third one was that the custom duty was reduced on caprolactam in the budget, so will that have any impact for us?

Yes. So if we take the duty part, they have reduced the custom duty on caprolactam to help the textile sector. But as you know, the prices have gone up substantially. So that 2.5% duty reduction has not made any impact on us. On the contrary, the caprolactam spread has improved and prices have also improved, and that has got more profit to the company. Antidumping duty, as we said, it is going on in the Ministry of Commerce and since we are the only producer regulators don't have any comparable data, so they are evaluating the things. So it is a call between Atmanirbhar Bharat and resistance from the foreign exporters to give undue advantage to a single company. So that is the choice, ultimately, they will have to make. So since last 2 years, the caprolactam prices are remaining in the range of, say, $1,200 to $2,000. Only it has gone above $2,000 from April. And with the crude oil also remaining between $65 to $70, we feel that this price will be maintained at least in this year and we will have a good margin on caprolactam.

Ladies and gentlemen, we will take the last question from the line of Falguni Dutta from Jet Age Securities.

So you are in the most difficult state?

Yes, it's true, most difficult state. Everybody is fine there?

Yes, we are fine. and we were running all these throughout the whole 2021 from March till date, our plants are running at full capacity, all the 4,000 people come daily, and we managed the show.

That is very great. Sir, I just wanted to know, in Q4 FY '21, this Q4, the capro-benzene spread was exactly how much?

Q4 was around some $800.

Okay. And for this coming 3 months, let's say, 3-month view, your outlook on caprolactam prices?

So it would be about $2,000, with a spread of around $1,000.

Okay. And lastly, on this DAP, now the entire increase, the government will be bearing in terms of subsidy, so we don't have to hike any DAP MRP?

Yes, correct. So it was INR 1,200 per bag before change. So it will be equal and that would be from now also. There is a making subsidy of INR 1,200 by government.

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

Yes. Thank you, everybody. So as we discuss, we see positive income this year or coming year. And [ as Jay ] is keen to hold a conference, so physically in Mumbai once this COVID settles down. So there, we will have a more detailed discussion and we'll have more clarity on the CapEx also by that time. So it will be a joyful discussion. Until then, thank you.

Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.