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

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Gujarat State Fertilizers & Chemicals Limited hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harmish Desai from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, and welcome to the fourth quarter and full year earnings call of Gujarat State Fertilizers & Chemicals Limited hosted by Batlivala & Karani Securities. From the management, we have Mr. V.D. Nanavaty, Executive Director, Finance and CFO; Mr. S.P. Yadav, Executive Director, Marketing; Mr. Vishvesh Vachhrajani, Deputy General Manager. I would like to thank the management for giving us the opportunity to host this call. We will begin the call with opening remarks from the management, post which we will have a Q&A session. Thank you, and over to you, sir.

Yes. Good afternoon, and welcome, all the participants, of this post-results conference call of GSFC. I would summarize the performance of the company, mainly I will highlight the full year performance. So I'm glad to announce that this was the record year for GSFC in terms of highest sales in revenue terms and highest PBT and PAT in the history of the company. So we thank all the investors for supporting GSFC in this time. The sales for the year grew by 20% on an overall basis. However, Industrial Products sales grew by 65% on the review chemical market. Caprolactam bend is -- were also improved to almost $1,050 from almost $700 last year. So there was a good growth there. Melamine-III plant also stabilized during the year, and we had the highest melamine sales during the year coupled with good price realization. The production and sales data are posted on our website, so you all can access the same to see the volume numbers there. As you know, since last year, company's financial performance has improved and working capital position is very comfortable. In fact, we had a deposit of INR 1,500 crores as of March '22. That brought down the interest cost substantially. And in fact, we had a good interest income reflected in other income line item in the profit and loss account. Production at Sikka Unit, where -- it is a custom DAP plant, it was affected because of the vagaries of input prices. So forced asset and ammonia prices rose substantially. And coupled with reasonable MRP to be maintained, which remains affordable to farmers. And subsidiary level not every time matching with input costs, that kept the economics at Sikka Unit, making it nonviable many times so their production and sales was affected. However, due to lower volume, our marketing costs went down substantially. So that was some positive. Subsidy release -- government has been very regular in releasing the subsidy. So far, the urea subsidy up to April '22 has been paid. And for phosphatic and potassic fertilizers, up to March 22, all the subsidies have been paid. From quarter 4 onwards, there is some softening of some major industrial product prices, particularly capro and melamine. So they have come down from the peak level observed during the earlier 9 months period. However, the spread and the gross margin remained good. With prices prevailing to such a hyper level and government has also increased the subsidy level for various fertilizers, so we see a good growth in terms of revenue numbers for the current financial year also, maybe some 25% growth is expected. We had spent around INR 400 crores on CapEx due -- I mean, we want to spend around INR 400 crores on CapEx during FY '23. And of course, our long-term growth based on new projects and new plants continue. So we'll be investing in new sulfuric acid plant, ammonium sulfate plant, HX crystal, then [ strong ] gypsum granulation, phosphoric acid, sulfuric acid at Sikka Unit. And we also want to take the lead in green ammonia and green hydrogen production, of course, on a small scale to start with. And management is also considering setting up additional Melamine-IV plant of 40,000 metric tonne capacity. And urea revamping to meet the energy norms prescribed by Government of India is also planned. So we have a pipeline of good projects on hand. And later on, we'll be developing more projects at Dahej land, where thrust will be on setting up more chemical plants to reduce dependence on the fertilizer segment. So this was the short summary of performance and the current year outlook. Now we can move to the question-and-answer session, please. Thank you.

Thank you very much. [Operator Instructions] The first question is from the line of Rohit Sinha from Sunidhi Securities.

Just wanted to know, as you have announced that a lot of projects are in the pipeline, so just wanted, if at all possible, to give the breakup of all these projects and their costs and ultimately the over -- total cost which would be involved in this, I mean total CapEx. And when we are expecting these projects to be commissioned?

Yes, so projects we got under commissioning are sulfuric acid, that when we assess the plant at Baroda unit. So that will be 600 metric tonnes per day and CapEx will be around INR 250 crores. This will be for supporting our sulfuric acid requirement at Baroda unit. And maybe it will be done in '24, 2024 commission. Similarly, the ammonium sulfate, that will be the fourth plant. That is 400 metric tonne capacity at a CapEx of INR 110 crores. So that will bring in the revenue of around INR 480 crores per year. And by next year-end, we plan to commission this plant. And we have a small hydroxylamine -- HX crystal plant that substitute the imports from China for pharma industry. So it's a 20 metric tonne per day plant with INR 125 crore CapEx. And that will bring turnover of around INR 100 crores from -- it will be commissioned by the end of next year. Then with the -- in line with the Government of India directive or policy to encourage organic fertilizer, we are going to produce [ strong ] fertilizer, which is based on rock phosphate and it contains phosphorous. So that will be 400 metric tonne per day plant with a small CapEx of INR 20 crores. It will be set up at our polymer unit, which is lying idle after our polymer unit was shut down in 2020. Then on the larger side, the projects which are under consideration or technology tie-up are phosphoric acid and sulfuric acid plants at Sikka, that is 600 metric tonnes per day phosphoric acid. That CapEx is around INR 1,500 crores. So that will support our phosphatic production at Sikka Unit. The technology tie-up is going on for this plant. Similarly, we are talking to OPaL for MMA project at Dahej. So that will be around INR 2,000 crores. So that talks about the input supply and pricing that's going on with OPaL. Similarly, melamine new plant will be around INR 1,300 crores. So for that also, technology tie-up is going on and it will take 3 years after hereon date. Urea revamp is around INR 400 crores. So that is a mandate from Government of India to meet the new energy norms, reduce energy norms. Otherwise, they deduct the subsidy or they provide subsidy at their lower norms, even if we don't achieve. So these are all the -- some details about the projects. We are also doing some solar 15-megawatt project for reducing our power cost. So that will be commissioning this by December '22 and it will reduce our power cost to some extent. And as I said, for a longer-term horizon, new projects at the Dahej will be set up, but it will take some 5 years to come up. So right now, we are just starting up on the longer horizon.

Okay. Okay, Sir. So I think we'd just round up CapEx for the next, I think, 3, 4 years. So basically, from current level, just wanted to understand what sort of revenue estimate we should see for next 2 years, what kind of additional revenue addition we will be seeing for FY '23, '24. Maybe if you can just add up on.

Yes. So '23, as I said, we'll be crossing INR 11,000 crores from INR 9,000 crores at present. And when the plants really come up by, say, December '23 or early '24, there will be some further addition to the revenue from HX crystal, ammonium sulfate for plant. And this could be to the tune of INR 500 crores to INR 600 crores minimum...

Okay, sir. And one...

Brought by inflation and all this will be further adapting, but minimum, this will be INR 500 crores to INR 600 crores be additional from these particularly 2 projects.

Okay. Okay. Good. And sir, I'm not talking about the fertilizer side, but just on the chemical side, how much confident we are in terms of maintaining the margin or maybe scaling the margin profile with all these backward integration things coming into play next maybe 2 years?

Yes. So we are the very large buyers of the various raw materials in this chemical space like benzene or sulfur or -- I mean, care, [ over time ]. So we get a very good competitive price for whatever procurement that we make, what tie-up that we make. So then we are able to maintain the -- broadly, the normal margins here in chemical sector. So say, capro-benzene spread of around $1,000 is maintainable. And similarly, melamine also gives a very good return. So these new plants are quite efficient plant in terms of reducing variable costs, so that helps in maintaining the margin.

Okay. Okay. And one last question, sir, on this Dahej project. I think that would be the biggest project going forward for us. So any guess we can get on this, what kind of chemicals we will be adding there?

So broadly, we will be confining ourselves to our niche area, the core strength, and we don't want to enter into unknown areas. So those projects will be upstream or downstream of ammonia and sulfuric acid chain and melamine chain or capro chain. So those things we will be concentrating. So it will not be something very adventurous. And now with expanding market, there is a good scope of all these derivatives, it's of selling a commodity kind of a thing. With the derivatives made for specific application like, say, for melamine, it is used for making fire retardants, switchboard or MCB. So there we get more value add than selling just melamine for the commodity. So similarly, HX crystal is specialized for API in pharma industry, which right now is 100% imported. So with our NP domestic all -- everything will be there. So -- I mean pharma, those who are buying these things, they will have alternate source of India-based supplied line. So all these things help to the customer and also to us in selling the products on an international pricing basis, IPP. So these are all very remunerative things.

Okay. Okay. And funding would be from mix or better equity? Or it could be from internal, the program here?

So if required, we'll tell someone, long-term finance. Otherwise, at least we make some INR 500 crores cash profit every year. So by the time all this project comes, we will have internal generation sufficient to meet most of the requirements.

The next question is from the line of Rahul Sanwal from Edelweiss.

Congratulations to the management for giving stellar performance , best ever sales and profit. My question is, sir, in the last quarter, we had chemical sales of around INR 687 crores industrial product. And we had a product profit of INR 166 crores. That was around 25% margin. But at the current quarter, our sales was INR 782 crores and profit were INR 68 crores, around 9%. Why there is such a drastic fall in the margin of Industrial Products?

As I said, the very high prices that went up to, say, 9 months of last -- I mean, '21, '22, those prices started to cool down, particularly for capro and melamine from January, February '22 onwards. So those very high margins went down in this quarter 4. So otherwise, there is no abnormality. So we are generally earning between, say, 12% to 15% margin on the Industrial Products. So that will be maintained on an overall basis.

So, sir, in the future, we will be able to maintain this kind of margin, around 15% -- 12% to 15%?

Yes.

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

Sir, firstly, just in continuation to the earlier participant, we also found that for this quarter, even the fertilizer sales were lower but the profitability was significantly higher on a Q-on-Q basis. So if you could explain to us, sir, what was the key reason that actually were? And what are the consistent margins we can expect?

No. For government raised the subsidy per tonne from October '22 -- I mean '21. And so subsidies paid on the post-sale basis. So when actually pharma buys the fertilizer, we are entitled to raise the claim. So those differential claims were accounted in Q4 in fertilizer segment. So the profitability went up substantially high. But that is not a sustainable or -- thing. It's a onetime thing. So generally, we make a margin of between 5% to 10% in fertilizer that is sustainable. And the chemical products, as I said, between 10% to 15% is the normal margin.

So sir, as you mentioned that we are looking for our sales to go up from INR 9,000 crores to INR 11,000 crores for this year. So you are capturing in this increase, especially from the fertilizer segment, the improved turnover?

Yes, yes, yes. Because government -- the last time government increased the subsidiary, but it was confined to only mainly DAP or the phosphatic part, because DAP is the widely consumed fertilizer and government wanted to see that farmers don't support because of high MRP. So we should -- allowing companies to increase MRP, they compensated by increasing the subsidy. But this time, they rationalized the subsidy across all the nutrients. So subsidy in nitrogen, phosphorous, sulfur, potash all the nutrients have been raised for which our different products will get benefit because of this. So from -- and of course some MRP increase has also been allowed in all the phosphatic fertilizers. So this will increase our fertilizer revenue substantially in the current financial year.

And the margins will be in the vicinity of -- 5% would be the margins we should -- what...

5% to 10%.

Depending upon...

We are being very efficiently managing. As I said, we buy imports at a very competitive price, whether it is a sulfur or natural gas or ammonia. So that helps in a volatile market.

And sir, there is also an increase in inventory, change in inventory INR 319 crores. So which segment does it attribute to such?

Inventory is -- volume term has not really increased. It is just valuation has gone up. So it is showing more number. Otherwise, volume is not there. It is not really increased physically.

Okay. And that is, sir, also pertaining to both -- both the industrial chemical. Because Industrial Chemical, you say the prices have cooled off. So that is pertaining only to the fertilizer segment?

Mainly fertilizer, because we brought sulfuric acid and ammonia in the quarter 4, we've brought now at the peak of the price during whole of '21, '22. For sulfur and ammonia, prices were at peak in quarter 4. Whatever we bought, it increased the inventory value substantially.

Sir, when we look at the volume data, sir, for Q4 and also for Q3, so we have found that in caprolactam, there is an increase in inventory. When we look at the Q3 data, it was 19,970 metric tonne production and the sales were 12,709. And for Q4, again, on the similar terms, the production was 22,795 and the sales is 15,813. So what are the reasons for -- why we are maintaining inventory in caprolactam for the last 2 quarters?

No, there is nothing specific reasons. But depends on the demand. So initially, we would not like to sell off when the prices are not competitive. So not just dump whatever we have in the market. We look to the profitability aspect also.

Correct, sir, because on a 2-quarter basis, on 2 trailing quarter basis, we are holding inventories. So there must be something in the market, because of which we are unable to liquidate it as we are the sole player, I think, in the caprolactam.

Right. Right. Right. Yes.

If you could explain what would be the reason. Is it the lower realizations or the lesser demand from the end user industry? Or what could be the best key reason?

No, one reason, major reason, is that our nylon 6 production has increased. So whatever production you see there on the gross basis, but if you're up selling caprolactam, we've sell more -- this converts into nylon 6 and then sell more nylon 6. So that is why the sales of caprolactam seems on a lower side. If you see the nylon 6 against production of 7,106 tonnes, we have sold 8,541 tonnes. So that is how the capro has taken further on the value chain basis. So really, there is no caprolactam demand on a consistent basis, any problem.

Right. So sir, just to sum up, sir, for the current business environment in the industrial chemicals segment post the March exit as you have told that the realizations are trending downward, how are we today when we are 2/3 into this first quarter? Are the realization trending lower only? Or we should be more concerned about the margin profile, the delta? If you could...

Yes. So better to look at the margin profile only as far as we maintain $1,000 spread. This is okay and outlet prices are also -- caprolactam prices are also rising in line with the crude and benzene price. So -- but margin, as I said, on an overall basis will be minimum $1,000.

If spreads are maintained?

Spread is maintained, yes.

Okay, sir. And last point is about the raw material basket. And then I have a small question about this dividend payout also, sir. Sir, I think so this year, firstly, there's seen to be -- congratulations on very good set of numbers, but the dividend payout has been at 11%. So the thought process of the management behind the dividend payout of 11%, if you could throw some more light onto it. And also about the raw material basket. Sir, how is the raw material basket currently shaping up post the March exit? How are the price -- what are the price trends in terms of the key raw materials?

Right. So as you know, GSFC is a conservative company. So we will not jump suddenly on a higher dividend because of good numbers. And as any one would expect, that dividend should be consistent. So paying something more suddenly and then bringing it down when it is not supported by numbers, so we don't follow that policy. So we look to the consistency kind of a thing. And thus, as I said, for new projects, also some funds are kept so that we don't buy expensive term loans. So that is the thought process behind the dividend. Otherwise, the raw material basket, we -- as you know, with very small variety of raw materials, we produce a large number of finished products. So at Baroda, say, we use only 4 to 5 raw materials, but we produce around 50, 60 products. So -- of course, raw material is -- prices are rising. Like told, it's at INR 119 today. So it will affect benzene price going forward. And raw prospects, prices are also rising. So the ammonia started coming down. And processes, we expect it to be steady for April, June in line with January, March prices. Otherwise, natural gas prices are also rising in line with -- I mean, benchmark with the crude. So they're also summarized as seen. But as I said, we are able to maintain the normal margin with good combination of various products and competitive procurement policy.

So we can sum up the normalization of margins in the industrial capital, would be there in the first quarter itself, the dip which we have seen, particularly for the last quarter? Is this the normal or the one which you have 12% to 15% is the number we should work out?

Yes, yes. That will be seen in the first quarter itself because...

12% to 15%. Yes. And the utilization levels are, sir, up to the optimum level?

Yes, yes, yes. There is no question of any demand problem, demand because most of the things we are monopoly supplier. So demand is always there. So that is why we are doing more projects because we are not able to meet the domestic demand also. So demand is not a problem.

Okay. And on the employee cost front, sir, this INR 658 crores is the number, annual number. Should we look at this number for the next year with some increase pertaining to inflation? What should be the number that we are able -- we can work out?

Yes, some increase compared to the current year for yearly numbers. Some increase of inflation will be there. Otherwise it will be -- it's going down and down once the wage reason is there. From that year itself, it is going down every year. So this time, some inflation impact will be there in the March '23 result.

And by 1 small point and to conclude, and then I'll come in the queue, sir. Firstly, sir, what the investor or the investing community and for, surely, myself and I'm speaking for myself, it feels that, sir, there's a lot of lagging on the part, if I may use the word, on the management in approaching the investor in the right way, sir. We have requested for the investor presentation, we have requested for competitive volume data on a Q-on-Q basis, the cumulative number, sir, but somehow these messages are not being accepted from the team. So we would be -- I, being an investor, would also like to understand the reason why -- what are the -- why is it -- why is that the metrics are not looked into for investor presentation? And also, sir, on your point that -- just to conclude, also on the point of dividend part, sir. Whenever, sir -- what my basic understanding is when the dividend is declared, it is based on the performance and also on the basis on a conservative basis on which on how the CapEx will happen. When the CapEx is going to happen 3 years down the line, and in 3 years, a lot of things can change, business environment can change. So we are withholding today's earnings for the coming 3 years where the scenario can change totally. So somehow, sir, this message is also not going good with investors, particularly with -- my understanding is that, that we should look at some stable dividend payout ratio and 11% looks, at normally, no, sir. So sir, look into the aspects of this. There are reasons why the -- why our market capitalization is low, sir. So one must try to take the feedback and messages from the investing community. And what's now the reason why things are not getting corrected, even after having the best of the management and reporting best of numbers? The things are in front of -- everybody is there to see what is the state -- how the market behaves. So there must be reasons why the market is not rewarding its investors. So please, I request the management to look into the aspects of it and deliberate on the things. That's the humble request from my side.

[Foreign Language] Vachhrajani, here. So far as your point regarding the investor presentations and getting more connected with the investors, you will appreciate that we have lost a good time on the account of corona and all. So you know, and I think many of the investors -- investing community friends know, we have been very regular in meeting the investor. At least once in a year, regularly, we have been meeting for years together with -- and those are meets with major investors, including mutual funds, et cetera. That process with the corona having gone, we are expecting that we will start that process again. And I'm sure we should be able to -- we will be able to come to -- come back with the details of the date, et cetera, for these things soon. One. Two, so far as dividend is concerned, of course, our CEO touched -- I only touch upon the precedent. Mr. Nanavaty can further throw a light on it. 110% to 125% is definitely an increase. And probably, in a way, your point has already been addressed by the management.

Right. It's absolutely -- yes, it's up to the management to understand. Investor presentation was my point, and if it can be drilled into...

Perfect.

You can take the example from the other companies in the same sector, sir. What kind of deliberations are done at the investor level in terms of presentations and the volume data. It will suffice our -- the needs of the investor. That was my only point to make.

Thank you. The next question is from the line of [ Vignesh Iyer ] from [ Sequent ] Investment.

Yes. I just wanted to know, as of March 2022, what is the capacity of the chemicals that we produce like ammonia, phosphate, sulfate, caprolactam? And can you give us the number in terms of capacity utilization as well if possible?

Yes. So we generally operate all our plants beyond 100% capacity. Sometimes it is 125% or sometimes more than that. So -- because as you may be knowing, our plants are old and we have done a lot of debottlenecking over a period of time. So compared to yearly installed capacity, really we operate on a much higher capacity. So like caprolactam operated at 105% -- 124% rather. And ammonium sulfate operated at 153%. And overall fertilizer, Baroda unit plants were 115% of their installed capacity. Melamine, as I said, recently Melamine-III started -- I mean, stabilized. It operated at 104%. And nylon 6 plant operated at 116%. So most of our plants operate beyond 100%. And you will appreciate that some of the plants are 50 years old and nowhere in the world, this kind of old plants work. But in case of GSFC, they not only work smoothly, but they run beyond their capacity. So it shows the management expertise in technical area and the collective repair maintenance that is done by the company for maintaining a consistent production.

Absolutely, sir. Absolutely. It's always been operating at a higher level and I think that's something for so long. Coming to another part, sir, you earlier mentioned that we are expecting around INR 11,000 crores of sales in FY '23 and after certain CapEx fix in FY '24. How much additional do you -- do we expect? And I thought you said 5 to 6 something. I missed on that part.

INR 500 to INR 600 crores.

type="E" /> Okay. INR 500 crores to INR 600 crores. Okay. Right, sir. Sir, just one more thing. As an investor, I just -- I wanted to bring it to the management's attention. So we used to, earlier, like, in FY '18 or something, we used to, in our annual report, disclose all the realization part, right? For chemical what the realization were. I guess we have stopped it in the last 2, 3 years. So can we expect that going ahead in this financial year we might disclose, like, for chemical, what the realization is, so it helps us analyze the company and understand it better.

Yes. So with the change in accounting standard and disclosure requirements when that is not -- which is not required, we don't disclose. But as I said, we uploaded these details on our website where you can -- with the sales figure in crores and quantity sold, you can derive easily the part on realization. And we upload this data every quarter. So you can have whatever period comparison you want to have. You can have it on your own, along with the previous-year figures, of course. So some analytical work will need to be done by you with changing accounting standards.

The next question is from the line of Smita Mohta from Kredent InfoEdge.

Am I audible?

Yes. Yes. Yes.

Okay. So I wanted to know, sir, that with your CapEx of around INR 500 crores to INR 600 crores, how much would your interest cost increase?

As I said, with cases of INR 500 crores every year. Most of the CapEx will be funded, resources only.

I'm sorry to interrupt, Mr. Smita, can you please mute yourself when management is answering the question?

Yes. So with the internal accruals of INR 500 crores every year and projects taking time in setting up, so most of the CapEx will be funded through internal sources only. Hardly, we will need some term loan or kind of thing. If needed, then only we will be going for those things. Otherwise, we generally don't need any external funding for the projects. So as you might say, in last 10 years also, hardly we have taken any project loan. So most of our CapEx has been funded in-house only.

Okay. So one more thing, what I wanted to ask that with this CapEx, where -- your -- will your market share be in the fertilizer industry?

Repeat the question please?

Yes. I wanted to ask that with this CapEx, where will your market share be in the fertilizer industry?

Yes. So like as I said, one is our ammonium sulfate fourth plant we are going to set up. So there, our market share is already more than 60% because we and FACT, only 2 companies have produced ammonium sulfate in the country? So we -- and most of the market share. And with this higher production, it will further go up from 60% that we have at present. And another thing is HX crystal project. As I said, it is an import substitute, and there is no domestic manufacturing. So everything is imported. So maybe we will have a market share of around 20% with this new CapEx coming in. So we have, fairly on overall basis, on all India basis, all kind of fertilizers, I think we are eighth in the country in terms of market share. And of course, in Gujarat, we enter more market because all the facilities are setting up in Gujarat. So in Gujarat, we have a larger share. But on all-India basis, we are eighth in the volume numbers basis. Total volumes sold in the country is more than 6 crore tons of various fertilizers. So there, we stand on the eighth.

Okay. Another thing which I wanted to ask, sir, was that with this CapEx of your fertilizer, which fertilizer of yours will have margin?

These are all, as I said, ammonium sulfate, only 2 suppliers are there. So we have a good margin in this field. And in general, we generally don't talk about the individual product-wise margin. So as I said, fertilizer segment creates a margin of 5% to 10%.

Okay. So sir, just last question. Your working capital cycle and your return ratios, can we expect any [indiscernible] the same?

There can -- fertilizer, being a low margin and high volume business, so those ratios or percentage don't improve much. It's a volume game. So absolute numbers like you're on INR 500 crores or you're on INR 1,000 crores, those numbers matter more.

[Operator Instructions] The next question is from the line of [ Jaideep M. ] from [indiscernible] Merchant.

Is there any business case for reviving the Carnallite project, sir?

Yes. So as you know, the potash price had a substantial increase, officially contract price within the $590 for '22, which was $280 for '21. And first all market, it is much higher. So there is a business case for reviving the potash project and the local Canadian management is undertaking some technical studies to update the CapEx and OpEx and the viability of the project. And then once those things are done, maybe, say, in July, some announcement about how the project will be moving, those kind of things will be announced.

In the past, you have mentioned that if price has to be consistent, you have $250 to have a wide project. Is that still valid, sir, that -- 3 years back that...

New CapEx, they -- like, steel price and everything has gone up. So the new CapEx could be more. So the minimum benchmark size may go up. But as I said, it is a much, much higher different circumstances. And it seems it will be a viable price for say next some at least 10 years or so. So hopefully, let us wait till the financial model is reworked and actual numbers are out.

The next question is from the line of Harmish Desai from B&K Securities.

Sir, any update on the contracted for force asset prices for 1Q?

No. No, there is some fragmentation because OCP has not declared price and the Government of India wants the March prices should be rolled over, because subsidy has been calculated on those March prices. So those prices should remain valid at least from April to June. So there is some discussion going on, on the price. So -- but formally, there is no declaration as on today.

Okay. So sir, according to you, the price should be below $15, $30 per metric tonne?

No, no, no. Minimum $15, $30.

Okay. And sir, can you give an update on what is our annual force asset/requirement?

So that depends on the economics of the production, if I produce, say, 7 to 8 lakh tonnes of DAP and other NPK product, I will require some 3 to 4 lakh tonnes of processing.

Okay. And sir, to what extent are we backwardly integrated in our force asset/requirement percentage?

So ideally, the entire port should give me 1 lakh 80,000 tonne, almost 50% of my requirement. But there, they are not able to produce consistently. So hardly 20%, 30% is backward integrated.

Okay. And sir, this is for both -- for all our plants or any one particular plant this backward indicated?

This is about the Sikka Unit. In Baroda unit, we have a grassroot plants, so we buy rock phosphate. Then we have phosphoric acid plant, sulfuric acid plant. So in Baroda, we are fully integrated. There is no dependence on processing for our side. So what do I mean, we are able to consistently maintain production of 10 to 11 lakh metric tonnes.

Okay. And sir, any plans for debottlenecking?

No, urea revamp, we'll undertake to make the energy norms of Government of India. So that will be there. And recently, we did debottlenecking in APS plant and processing plant of Baroda. We improved the infrastructure and the supporting things.

How much did you spend on that particular project?

So that was around some, I think, INR 40 crores, INR 45 crores we spent in debottlenecking.

And sir, that increased the capacity by how much?

So it is not really increasing capacity, but coal plants requires, over a period, of time good debottlenecking requirement and that kind of thing. So that's they continue...

Mostly maintenance kind of?

Yes.

Okay. Okay. Sir, any number on how much subsidy we have received till FY '22? And how much is pending? If there is any?

Pending as a balance sheet, so it is around INR 750 crores which we have received, as I said, till date. And the government has been very regular in releasing the subsidy. So as I said, up to March, all the prospective fertilizer subsidies issued. And for urea, it is received up to April. But of course, government gives subsidy only for the claim that we make to post machines. So what we account for in the books can be ahead of time. So it may not qualify for subsidy claim reimbursement with government. But whatever is logged with the government, this is the status that to market, they have paid in subsidy claims.

The next question is from the line of Smita Mohta from Kredent InfoEdge.

Yes. So I wanted to ask, sir, again, that with your backward integration, how much percentage of expense can be reduced in your books, if you can give any percentage?

It is difficult to give any percentage. But as I said, at Baroda unit, we are mandated there, like what Baroda's [ intention ] that helps in moving ahead and ahead in the value chain. So instead of selling our product as a commodity, we are able to cater to niche markets where margins are more. So that is the -- really, the advantage. So we look forward to more revenue and more margin than only focusing on reduced expenses. Of course, a broad basis, we can say with common plants, our manpower expenses reduces substantially. And with many, say, like DCS machine being common, we can do away with separate manpower, separate -- sparse inventory. So all these things help in reducing the expenditure.

Numbers which you have given for 2022 for your EBITDA and your profitability, so will you be able to replicate or put in a better performance for FY '22? What can we understand from here?

FY '22, because of the COVID effect, it was kind of an abnormal year, abnormally good for the company. So as I said, we look forward to a normal margin, between 5% to 10% in fertilizer and between 10% to 15% in chemicals. So that would be the kind of performance in current financial year.

So can you give a figure, sir, for the revenue and the profitability? Any figure or any percentage growth?

No, it is very difficult to give. But as I say, more turnover would be coming from fertilizer because of the rationalization of subsidy and MRP. So it will -- on top line that, will be driving financially. Bottom line will also be reflected in that away.

Okay. So that means that right now, your revenue from fertilizer that we understand is near around 77% rate and 23% is from chemical.

Correct, correct.

So is that going to increase going ahead with the CapEx of yours? Some difference?

Yes, maybe from 75-25 or maybe between 70-30. It's a range between 70-30 to 75-25 generally over a period of time if you see, with these 2 segments. So that will be the probability spend.

Okay, sir. So just the final question that from the fertilizer segment and from the chemical segment, which is that one fertilizer or one chemical which gives you a better margin compared to any other product of yours? And what are you doing to increase that so that you can have a better margin for FY '23?

No, as I said, this -- all the projects are undertaken. They are driven by the same philosophy as you are telling. That is -- I mean, common sense that one should enter into those projects where margins are more. So from whatever I said about CapEx, you can get ahead our -- which are -- we were better products. And in chemicals, things on international movement to international development basis, particularly the price is not in our hands. They're all ICP prices. So sometimes caprolactam becomes a champion product and sometimes melamine becomes a star product. So it is difficult to say that permanently x product is good and nobody can take its place. It's not like that. It is cyclical and so both -- China has absolute capacity. So it will definitely affect the margin of all other players. So those kind of things keep on happening.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you for listening to us and for your questions. We'll be taking it in the right spirit. And as I mentioned in all the con call that the subsidy growth story is intact and we are not going to get back in neglect. There are the new plant projects coming and with the existing plants. And for us also, GSFC is always trying to improve the margin. And with this volume, particularly in fertilizer, large volume have seen achieving the cost economy in all areas. So That we will continue to do. And of course, plant maintenance, proactive maintenance and plant health and safety is our priority. And going forward, as and when this GSFC becomes more focused or it comes in the forefront, you will see much more value in GSFC compared to today, because today we are only talking of top line, bottom line, but at what cost to the society and to the human being this growth and this sustenance is coming. And so when those parameters become important, GSFC will be far, far ahead of other companies. Just to touch upon 1 or 2 aspects. Like almost 40% to 45% of the energy that we use comes from green energy. Our government is pressuring large corporates to go for 5% green energy. We are already more than 40%. So this is the way we work. Similarly for carbon footprint, we have eradicated carbon footprint to be more than 75% and with new projects and all coming, when they will be 100% carbon neutral or carbon 0 company. And mind well, this is fertilizer and chemicals are huge energy users of the energy. So achieving such a high level of green power of carbon neutrality is a very, very difficult task, but GSFC has been doing as a part of its duty without any mandate from law or any investor community. So we will keep on pursuing those important societal goals also along with the value addition in the top line and bottom line. So thank you all. We'll again meet with even better performance in -- after Q1 results. Thank you.

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