Shree Pushkar Chemicals & Fertilisers Limited (SHREEPUSHK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shree Pushkar Chemicals & Fertilisers Limited Q2 and H1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Punit Makharia, Chairman and Managing Director from Shree Pushkar Chemicals & Fertilisers Limited. Thank you, and over to you, sir.

Hello friends. A very good evening, and welcome to quarter 2 and H1 FY '21 earnings call of our company. I hope all of you and your families are keeping safe. Friends joining me on this call is Mr. Deepak Beriwala, our CFO; and Pareto Capital team, our Investor Relations adviser. Many of us learning today in the new normal. And on behalf of our entire team, I would like to wish you a very good health to all of you and your near and dear ones. I'm proud and delighted to share that momentum that we have generated over the last few months is continuing. Overall, demand trends are increasing and many of our business segments have started seeing growth compared to the last quarter. While we remain optimistic of robust economic potential over the mid to the long-term, opening economies and consumer sentiments should support demand in the months to come. I am like to report that the situation has improved from the last quarter and gradually operations are returning back to the normalcy. This is expected to continue going ahead into the second half of FY '21. All our units are up to the range of running at a capacity of around 70% to 80% efficiency levels. Norms of safety laid by the government of social distancing continue to be strictly followed in all our factories and premises. Our supply chain and labor availability are also reaching pre-COVID levels and should become normal in coming months. Currently, all our business segments have started and are functioning at their net pre-COVID levels. Now friends coming to the segmental performance of our company. Our Dyes & Dyes Intermediate segment performed well in this quarter on account of better capacity utilization and also better price realization during the period. The contribution has been 57% compared to 26% than the last quarter. The reduction in the sales of fertilizer has been in account on -- of end of the Kharif season. Fertilizer during H1 FY '21 has been satisfactory as compared to the corresponding period of the last year on account of better monsoon, and thus fertilizer has been treated as additional commodity during the lockdown. Further, Make In India mission and self-reliance initiative continues to be boost our fertilizer demand as the production is encouraged and import reliance on the fertilizer is reduced. Friends, now coming to the performance of Kisan Phosphates Q2 FY '21. We have reported INR 18 crores in revenue and INR 2.5 crores as EBITDA level, similar margin of 14.2% in H1 FY '21. We reported INR 37 crores of revenue and INR 5 crores of EBITDA level with a margin of 12.6%. On account of Madhya Bharat front, which we have already commenced production in a limited capacity despite the lockdown and supply chain restriction in the earlier quarter. For the first half of this year, Madhya Bharat has generated around INR 5.1 crores sales revenue. The same has not been factored into our consolidated results. We are expecting this division to start contributing more to our fertilizer sales in coming quarters. Finally, let us discuss the way forward. India is gaining major importance on the world stage. As people and companies continue to move away from China, this is an opportunity for India to emerge as a leading global chemical manufacturer and Shree Pushkar Chemicals & Fertilisers Limited is well positioned to tap this opportunity. We are uniquely placed as one of the few market players who are equipped in both forward and backward integration. Our process has strongly quality controlled, and we are probably a zero waste company. The strong quality control of our products in terms of accreditation of Blue Sign, a system partner, ZDHC contributor and GOTS, the Global Organization Textile Standard helps our company to enjoy the trust globally. We are working further to strengthen our brand, both in the dye as well as chemical and fertilizer segment. We are focusing on rationalizing our cost, improving our efficiencies and capture the growing opportunities. Friends, this is all from my side. Now I hand over the call to Mr. Deepak Beriwala for the financial highlights of our company. Thank you. Over to Mr. Deepak Beriwala.

Thank you, sir. Good evening, everyone. I will now take you through the consolidated quarterly and half yearly performance of our company for the financial year ended September 30, 2020. Our efforts to convert these challenging times into an opportunity have delivered healthy results for us. Q2 FY '21 consolidated revenue stood at INR 77 crores, lower by 6% as compared to the corresponding period of last year. Contribution from all the business segments during this quarter has helped to deliver good numbers, and we expect this trend to continue going ahead. Our consolidated segment-wise revenue break up for Q2 financial year '21 is as follows: dye intermediates was 34%, dyestuffs has been 24%, fertilizers, including Kisan was at 40%. Acid complex, cattle feed and others are around 2%. For H1 financial year '21 is as follows: dye intermediates was 28%; dyestuffs has been 19%; fertilizers, including Kisan were at 51%; Acid complex, cattle feed and others are around 2%. EBITDA for the quarter stood at INR 11.5 crores as compared to INR 13.7 crores in Q2 financial year 2020. EBITDA margin of 14.9%. PAT for the quarter is INR 7.3 crores. PAT margin continues to remain stable at 9.5%. Let me now touch upon the half yearly performance. Total revenue in FY '21 stood at INR 141 crores compared to INR 174 crores in the same period last year. EBITDA stood at INR 14.6 crores with an EBITDA margin of 10.4%. PAT stood at INR 8.4 crores with the PAT margin of 6%. On the whole, it can be seen that the impact of COVID-19 has had a dent on the performance during the current year, which appears to improve over the quarters. If this trend continues, we could expect the result of FY '21 to be nearly that of the last year. This is all from my side. Now we will open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Forum Makim from Equitree Capital.

Sir, congratulations on a good set of numbers. Sir, I have a couple of questions. First of all, in your balance sheet in financial assets, in others, we see an increase of INR 26 crores. So could you please explain what is this related to?

Yes. In financial assets ,others?

Yes.

In March 2020 balance sheet, our accreditation for Madhya Bharat stood at chemical work in progress. But now this -- in this September quarter, we reclassified as well as amount given for the acquisition of Madhya Bharat in other financial assets. So that's the reason of this INR 26-point something crore is there in balance sheet.

So I think, basically, this is an investment what company has made into our 100% owned subsidiary called Madhya Bharat Phosphate Private Limited. As we have told before also that as of now, we have not taken any kind of acquisition funding on the part of the Madhya Bharat is concerned. And since we have not received the audited results of Madhya Bharat from earlier RP and earlier management, which we are in the process of receiving it very shortly, maybe -- or early next 2 days. And thereafter, we will be recasting the balance sheet of Madhya Bharat as per the order of NCLT, then accordingly, the proper classification of this INR 26 crores will be made by Shree Pushkar as well. But till now, we are announcing the -- having this con call, till this time, this amount has not been -- and the shares of Madhya Bharat has not been allotted to Shree Pushkar. That is why this amount has been kept in the discussion.

Okay. Okay. Sir, so by the next quarter, we can expect consolidated numbers to be visible?

When we will be doing this con call for Q3, somewhere in January, by that time, we should be having the -- this figure would have been properly classified.

And the numbers of Madhya Bharat would also be consolidated, right?

Yes.

Yes, 100%.

Yes. And sir, what is the potential revenue from Madhya Bharat?

See, if I talk about -- to give you some more numbers about it, we started Madhya Bharat production on 6th of June. And from 6th of June till date, we have dispatched and sold around 25,000 tonnes of SSP up till now, right? And whatever we have dispatched has not come into the revenue because the system is that majority we have got a tender from Markfed, which is a Madhya Pradesh government agency. And they are -- the billing is done after the sales, right? So if you see the capacity utilization of Madhya Bharat, it is around -- in 4 months, we have achieved around 25,000 tonnes of SSP, whereas the plant of Madhya Bharat is around 150,000 tonnes of SSP. Like that if you see, we have reached up to a level of around 55% to 60% capacity utilization in Madhya Bharat.

Right. So like in a normal year, like, in a non-COVID year, what would be the potential revenue that we can generate in 12 months' time?

I think if we take it around 70% utilization also, to be a very conservative basis, it would generate a minimum top line of around INR 85 crores to INR 90 crores a year. This is mainly from the Jhabua plant. Another plant we have at Bhopal also in Madhya Bharat. That also we would be starting that would generate additional business of around INR 25 crores, INR 30 crores. And altogether, Madhya Bharat total business revenue would be around INR 100 crores to INR 110 crores.

So this will be visible from FY '21?

Yes.

Okay. And my next question is, sir, what is the status of the Unit 1? And what are the contributions from the same?

See, Unit 1 is already completed. We are about to start the production of our revamped facilities what we have taken last year. And now we are just looking at some more few clarifications to be done. We hope that by quarter 3, we should be able to start -- by the end of this calendar year, we should be able to start with Unit 1 also.

Okay. Okay. And sir, could you just give me -- like, how is the demand in -- for a dye business shaping up?

See, as far as the business is concerned, it is almost, I would say, back to normalcy. And we are -- I am, not -- we are -- I'm a bit bullish on the business. I see that now it has come to normalcy, it has started getting a momentum from South to North. If I talk about the dye business, your, company is already having the orders around till January also as far as the dyes is concerned. And the other part of the globe is already open. If you talk about Europe, it's almost open. Bangladesh is open, Turkey is also open. So we're having quite a good amount of business as far as the dyestuffs is concerned.

Is it possible to share your order book number, sir?

As far as I see, almost 10 days back I had taken a review on the order book of the dyestuffs. It was around 700 odd-tonnes of some quantities of the orders we had. If you convert this into the revenue wise, it comes to be around 300 and -- sorry, around INR 30 crores to INR 35 crores.

And sir, what would be the execution period?

By December or January, we have to comply for those orders.

Okay. Great, sir. Sir, so considering you've already reached the pre-COVID level, so for FY '21 we will try to achieve the FY '20 numbers, right?

Around last year, we did around INR 350 crores. Yes, yes, on a consol basis, we are strongly positive about it. We should be able to do INR 350 crores plus/minus INR 5 crores. And I'm not surprised if it is plus 5% also.

Okay. Okay. Great. And on these numbers, we'll be able to do better margins, like, more than 60%, 70%?

On EBITDA level you're talking about?

Yes.

Yes, yes. Yes, I think we did almost 14%, 15% EBITDA in this quarter also.

15%.

We did around 15% EBITDA level in this quarter also. And we are quite hopeful to maintain the same practice or we'll do something better than this.

Okay. Sir, just one last question. So we do maintain a guidance of INR 650 plus cores by FY '23, right?

Obviously, it has to be there. Because see all the expansion, whatever the company is doing, of around INR 108 crores or so, will almost be in pipeline by the end of this financial year, or at the worst, if we talk about some kind of delays, which could be not in our control, it could be somewhere in April or May. We are planning to start the trial production by quarter 4 end, right? Suppose in a worst-case scenario or if one of the plant gets delayed by another 30 days, 15 days, 25 days, which we can't foresee at this point of time, but we are targeting it to start by quarter 4 end so that by the next complete year, we get full year for the operations. And I want, we can discount another 1 or 2 months also on the conservative side. But otherwise, we don't see any kind of hiccups in this.

Next question is from the line of [ Shanti Patel ] from SP Investments.

Sir, as far as I understand the whole about [indiscernible] year ending March 31, 2021, will be INR 353 crores, is it correct?

Yes. Hopefully we are targeting to achieve the same number what we did in the last year.

Last year. Fine, no problem, little bit here and there can happen. And what will be our PAT margin?

As far as the PAT margin is concerned, honestly speaking, since we've already lost the operation of this 6 months in this financial year, right? And in this financial year, if you see that we have lost a good amount of numbers into the first quarter. Company did hardly less than INR 1 crore of the PAT. So practically, that period is gone. So it is difficult for me to give you the numbers, but what I can tell you is that -- and looking at the present trend, as we did around INR 7 crores to INR 8 crores of PAT in this quarter, quarter 2, we hopefully were able to maintain the same kind of a trend or show something better results in coming next 2 quarters. On the basis of these calculations, we believe that the company should be able to close PAT margins somewhere between INR 25 crores to INR 30 crores of the PAT margin in this financial year. This is taken into mainly on account that the 6 months of this financial year gone almost to the doldrums.

Fine. So now just go to the next year [indiscernible]...

Sorry to interrupt sir, but if your phone is on speaker, can you please take it off speaker because your voice is...

Yes, it is off speaker. Are you getting now? Are you getting my voice?

It's not -- yes, it's better now, sir.

[indiscernible] situation here. Okay. How should [indiscernible] my voice?

Mr. Shanti, you're on the line, your voice is breaking.

Okay. Okay. Fine. [indiscernible].

No sir, your voice is constantly breaking.

[indiscernible]

Not coming. It is coming but it is breaking.

One minute, because now I've changed my [indiscernible].

Okay, you can continue with your question. Please continue with the question. Let's see...

Next question is, we'll go 1 year further, that is March '22. What will be our turnover in next year? And what will [indiscernible]?

See, if we take in account what expansions we are doing from internal accruals, that is around INR 108 crores to INR 110 crores. All these operations and expansions would be operational in next financial year, right? If we talk on the worst case scenario basis, whereas we delay it by an additional 1 or 2 months. Let's create a hypothetical situation whereas we delay around 1 or 2 months by coming into the production of that expansion capacity. In that situation, also, company should be able to do somewhere close to INR 650 crores of the top line in next financial year. Plus/minus 5% could be here and there, depending on the timeframe.

Correct. That can come...

Now coming to your second question, what would be the profitability. I would suggest, [ Mr. Patel ], that you should go on historical data of the company, what your company has been doing since 2015 onwards. Company has been already always in the range of 9% to 11% of the PAT levels, right? And...

Yes. Yes. Go ahead.

Yes. I believe and we trust into our business. And we believe that at least we would be able to show the same kind of results what we have been doing before.

Okay. Got you. So approximately 10% will be the PAT margin.

Mr. Patel, please don't ask any confirm promises. Sir, you are an investor, you must look at the most conservative figures when the -- like that way. So I think -- I would suggest you that you can -- you should take it as a 9%. For me, it's [ 9% ] to 11%. But for you, it is better to take 9%.

Sir, it can be 1% or 2% here and there. Nobody can [indiscernible]. There is no problem. Approximately, so this [indiscernible] 9% approximately, right? And what about our debts? Debts will go down. Our long-term loans.

Sir, this is what [indiscernible] loans.

So interest -- there is no question of interest as such, right?

Sir, you must know -- sir, you must see that the company is debt-free company, whatever the expansion we are doing that we are doing out of the internal accruals. We are not taking any terms of a debt. We are not doing any [indiscernible] dilution. It's a completely debt-free company. Rather, the company is maintaining this extremely -- the handsome amount of FDs, as a cash surplus.

Next question is from the line of Ritika Gupta from Aequitas Investment.

Sir, I wanted to know, could you give me the volume number for dyestuffs and dye intermediates for the September quarter and for the half year?

Just a second, Deepak would give that number because [indiscernible]. You have with you, right?

Yes, for H1 2021 [indiscernible] quarter.

She just wants [indiscernible].

I want for Q2 and for H1.

Okay. For Q2 2021, our [indiscernible] production [indiscernible] is 49%.

I'm not able to hear you actually.

Okay. Ritika, [indiscernible].

Mr. Makharia, your voice is not clear, sir.

It is around [indiscernible] of dye intermediates. [indiscernible] tonnes.

Sir, I missed the number. What is it?

Dye intermediates is 1,092 metric tonnes. Dye is 664 metric tons. Fertilizer is 11,882 metric tonnes. Cattle feed supplement is 191 metric tonnes. Sales Acid, acid delivered, it is 1,762 metric tonnes.

Okay. This is for Q2?

Yes.

Yes, for 3 months.

Okay. And for half year?

Just a second. For half year, dye intermediates was 1,653. Dyes was 983. Fertilizer was 34,803 [indiscernible].

Sir, your voice was not audible, unfortunately. Just a moment, sir. Ma'am, request you to please stay connected. We'll reconnect the management line again.

Can you hear me?

Sir, please reconnect, we would disconnect your line, and reconnect you again, sir.

Okay. No problem. So let's take another [indiscernible] question.