Gujarat State Fertilizers & Chemicals Limited ($500690)

Ladies and gentlemen, good day, and welcome to Gujarat State Fertilizer and Chemicals Limited GSFC Q4 FY '26 Earnings Conference Call hosted by Anorak Service LLP Limited. From the management, we have Mr. S.K. Bajpai Senior VP, Finance and Legal and CFO 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. S. K. Bajpai, Senior VP, Finance and Legal and CFO, GSFC Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us today. On behalf of Gujarat State Fertilizers and Chemicals Limited. I welcome you to discuss our performance in quarter 4 and financial year '25, '26. I hope you had a chance to [indiscernible] your financial results, media release and investor presentation available on the stock exchanges and also on our company's website. If we see standalone financial digits. The financial year '25, '26. The sales were recorded at INR 10,827 crores, which is 15% higher than the last [indiscernible] periods and [indiscernible] is also increased by 13% and 14% to INR 838 crores to INR 652 crores. EPC consolidated financial performance, [indiscernible] by 15% to INR 10,945 crores. PBT and PAT has increased by 14% to INR 861 crores and INR 673 crores, respectively. Quarter 4 digital discussed achieved -- we achieved the highest quarter 4 sales of INR 2,622 crores. We also recorded highest ever quarter 4 fertilizer sales of INR 1,985 crores. Industrial Products segment reported highest quarter 4 EBIT in the last 10 quarters, maintained stable operations despite SAP volatility in global raw material prices arising from geopolitical disruptions. In case of financial year '25, '26, sales increased by 15% [indiscernible] from INR 9429 crores to INR [indiscernible] crores. Operating EBITDA grew by 24%, [indiscernible] to INR 781 crores. PBT increased by 13% [indiscernible] to INR 838 crores and PAT by 14% to INR 652 crores. Fertilizer sales volume increased by 12% from 19.88 lakh [indiscernible] INR 22.31 lakh [indiscernible], achieved highest fertilization production in last 5 years at INR 17.59 [indiscernible]. IP segment delivered highest annual profitability of INR 200 crores in the last 4 years. We also capitalized major growth projects aggregating over INR 670 crores. Strengthening operational efficiency and future growth readiness. The Fertilizer segment delivered a strong operational and market performance during both quarter 4 and financial year '25, '26. Supported by thw worst [indiscernible] conditions and higher subsidies. During the year, segment sales increased by INR 196 crores, while volume grew by 12% led by AS, APS and DAP. Quarter4 performance was particularly so with the company achieving its highest quarterly [indiscernible] still. Despite significant escalation in prices of key raw materials such as natural gas, ammonia, sulfur and sulphuric acid due to geopolitic development, the company maintained stable operations, optimized product liability and achieved highest fertilizer production in the last 5 years. The Industrial Products segment demonstrated a strong turnaround and profitability [indiscernible] during quarter 4 '25, '26 and financial year 25, 26. The segment achieved highest tender profitability in the last 4 years. and highest this quarter for EBIT in the last 10 quarters. Revenue growth and margin expenses were primarily supported by higher sales of site and traded ammonia along with improved export opportunities in [indiscernible] aligned with the government of India trade facilitation initiatives. While realizations in capita and nylon product demand under pressure due to lower global steps, the segment benefited from improved product mix of regional efficiencies and better market positioning across key products. We continue to maintain a strong balance sheet with no long-term debt, healthy net growth at an adequate liquidity. Government of India's outstanding support on release of [indiscernible] subsidy has capped the working capital levels at optimum level. As on date, the company has recited subsidy dues for urea upto 4 weeks of April'26 And [indiscernible] fertilizers up to third week of April 26. We provide the foundation for the company to advance its CapEx plan aligned with the strategic growth road map. The company capitalized the project... [Audio Gap]

Ladies and gentlemen, please -- the line for the management has been disconnected. [Operator Instructions] Ladies and gentlemen, thank you for patiently holding. We have the management line reconnected. Over to you, sir.

Okay. So I will start from the outlook quarter 1 '26, '27 the fertilizer segment has [indiscernible] Quarter 1 '26, '27 [indiscernible] market is still unsettled. Geopolitical pressures in Middle East continue to drive input cost variability. On the [indiscernible] side, development of India's revision of NBS rates for H1, '26, '27 be a 10% uplift [indiscernible] sulphur nutrients signals a deliberate intent to protect [indiscernible] supply. We will manage our position accordingly, balancing uptake timing, inventory placement and margins while [indiscernible] the Department of Fertilizer Directors. Process of the Southwest [indiscernible] emergence of the [indiscernible] will remain key factors influencing demand outlook during the quarter. In the Industrial Products segment, the demand picture for quarter 1 '26, '27, is mixed product specific. Caprolactam [indiscernible] specs are expected to [indiscernible] during the quarter. However, the elevated [indiscernible] nylon prices levels seen in the quarter 4 '25, '26 are unlikely to hold [indiscernible] realizations under some pressure. Now mining technical grade urea faced a softer demand environment with downstream industries running at reduced rates against the [indiscernible] of higher input costs. [indiscernible] demand remains constant, [indiscernible] related sectors continue to absorb the knock-on effects of the geopolitical situation. Though export volumes are expected to hold across the remaining industrial products portfolio demand is expected to track broadly at current levels in the quarter. I now turn over the call for questions and answers.

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions]. First question is from the line of Saket Kapoor from Kapoor [indiscernible] Please go ahead.

Yes. Does the [indiscernible] the question for investing committee and from my side, in particular, is only we want to understand that today's the current environment. How is our organization app? And what should investors expect in terms of the demand where we are in for a consistent set of numbers going ahead. North of very play are getting paid out in the segment, I hope, especially the fertilizer segment. So if you just ride through us how the management team for the current financial year on top of the type of geopolitical circumstances, the supply chain issues, we depending a lot on the import part also. So how are things shaping up? And how is GSFC preparing itself to guide through this current financial year.

Okay. Thank you, Saket. It is a very obvious question. The current situation is very abnormal. As I have mentioned, that the prices of raw materials like ammonia, sulphur, sulphuric acid and other raw material inputs have increased many fold. So it is a difficult solution for the company as well as for the country. But partially, we are having the ammonia plant and sulphuric acid plant in our fertilizer [indiscernible] complex. So we are getting ammonia manufactured through natural gas. And there is no much increase in the natural gas prices. It is [indiscernible] by government of India. And we are [indiscernible] fertilizer and other priority sectors for supply of natural gas and LNG. So if there is any price increase in the natural gas, it is absorbed by the government of India by of the subsidiary. As far as sulphuric acid is concerned, the sulfur [indiscernible] are presenting at $850 in the international market. But we are having sulphuric acid quantity available in our store, which is manufactured at the old long-term contracts with the suppliers. So partly, immediately, there is no problem for the quarter 1 that we will be having any sort of sulphuric acid. But considering the overall situation of the raw material prices, we can only hope that the situation normalizes very soon. and we will be getting the raw material inputs for the fertilizer production at the competitive rates.

So sir, can you give us the color on the number of days of inventory we are carrying and what is there in the pipeline currently in terms of we [indiscernible] the inventory that is getting consumed. for the [indiscernible] part, how is the pipeline currently shaping up?

Actually, ammonia, there is no problem. We are having 100% production at ammonia 4 and ammonia 3 plants. So natural gas is supplied by the government constantly. So ammonia, we are having the stock of around 16,000 metric tons at our Baroda complex, and there is no price rise expected in the natural gas price in the near future. For sulphuric acid, we have also the inventory up to the full level of the sulphuric acid tanks. So whatever sulphur we are having [indiscernible] a long-term contract from the -- sorry, the Reliance Naira, BPCL, IOCL,we are getting the sulfur hour. It is also to say that we are not getting 100% supply, and it is a very high rate. So we are also trying to import sulfur from the international market at a competitive rate. so that we can continue our sulphuric acid production for meeting the requirement of ammonium sulphate and ammonium [indiscernible] sulphate in the fertilizer complex.

With respect to the trading for ammonia, are we in the process currently with the type of setup. Are we continuing with the trading aspect of...

Yes. We are importing actually ammonia at a Sika Jati, we are having our own JP and the storage facility at Sika. So we are importing ammonia. And whatever ammonia quality is required by the industry is down billing, we are importing that particular portion in the whole segment for the saving business, and we trade accordingly the ammonia from the Jamnagar plant.

Sir, if I correct me, we were also looking for some retrofitting or some changes in specification for our fertilizer plant so that we could have alternatively changed the mix of prior correct me there, where are we said in terms of -- I think there were 2varieties of for fertilizer, which you will be able to produce from the same unit by some changes. So if you could just give us some understanding and the -- and also for the current quarter and same quarter, what is the outlook for both the segments?

Actually, there is one trend of DAP. [indiscernible] It, which is having the production capacity of 1,300 or 1,400 metric tonnes per day. So that for the fungible production facilities for average of NPKs like ammonium food salad. So we are -- this work is going on nicely as for the due time, and we are expecting this to be completed in July, somewhere in July, August this year only. So after completing of this technical change over, we will be able to produce either APS or DAP from the DFPs.

Right. And to the second part of the question, sir?

What was this, please repeat?

Yes, sir. My question was how is the entering quarter proceeding with respect to both these segments were both at a well as the segment? And are we running at optimum level?

Yes. As far as for [indiscernible] concerned, we are running at optimal level. There are some hiccups in the sulfur supplies some time. And we are maintaining our plant roads of ammonia sulphate to the next possible capacity. But whatever the assurity we are producing, we are arranging from the international market. So we are getting the shipment of ammonium sulfate very soon in the shipment is under load. And we will get the manufactured ammonium sulfate in general farm very soon. So there will not be any production deficiency in the current quarter. As far as IP product is concerned, industrial product segment is having a very positive tone in the quarter 4, it is set up -- and if you see the capital being spread, it is running more than $800 per titan today, which was around 670 metric 60 per metric ton in the quarter 4. So it is lightly stepped up and Industrial Products segment will continue to perform in a better way in the coming quarter.

And my last question is I joined the queue. Sir, then for the [indiscernible] margin, what should be tensioning in in terms of the volume that we are factoring for the current year? And also the quarter margin that we should -- on a blended basis, what would be a modern [indiscernible]?

Saket, it is very difficult to spend all the particular [indiscernible] margin because things are changing very fast. Raw material price volatility is very high in the internal market. However, I can say that DAP and urea to the fertilizer products, there is no margin fast because it is fully protected by the government of India. Whatever it as in the gas or whatever production additional costs we are incurring in the GAP manufacturing. That is invest by the government of India by itself. So we are expecting to get the circular issued by the government of India very soon. Yes, it will be protected. So margin will remain the same as indeed the past or in case of NPK grades, there will be slight here and there because we have increased the price of APS and other LPG. So that -- in that, we may see plus/minus 5% to 10% here and there in the margins. But whatever margin loss we will be having in the fertilizer will be compensated by the IP product segment. I have told that it is shaping up very naturally the prices of the [indiscernible].

[Operator Instructions] Ther eare no further questions from the participants, I now hand the conference over to Mr. S.K. Bajpai from GSFC for his closing remarks. Over to you, sir.

Yes. Thank you participating. I hope that I have given the satisfactory answers whatever is posed to me for the performance of this quarter, financial year and the next quarter -- coming quarter. And I thank you for associating with us in this call [indiscernible].

Thank you, sir. On behalf of GSF Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.