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

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call for Shree Pushkar Chemicals & Fertilisers Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Punit Makharia. Thank you, and over to you, sir.

Hello, and a very good afternoon to everyone. Today on call, I'm joined with Mr. Deepak Beriwala, our Chief Financial Officer; and Mr. Nitesh Pangle;, Company Secretary and Compliance Officer of -- and Orient Capital, our Investor Relations partners. Friends, we have uploaded our investor presentation and financial results on the stock exchange and on the company's website. I hope everybody had the opportunity to go through the same. Now I will take you through the industry updates followed by financials and operational performance for the Q1 FY '22. Q1 FY '22 was more or less a normalized quarter trends and the volumes have started picking up, and we have seen industry moving towards normalcy. We have seen some hiccups in Q1 FY '22 on the back of divesting Cyclone Tauktae, hitting the show of Maharashtra and Gujarat in May 2021, and impact of the second wave of COVID-19 disturbing supply chain situation and causing [indiscernible], and causing labor shortage and increment lockdowns in various parts of the state and country. Despite all the challenges faced, we have been able to grow on our volumes and revenue, not only on year-to-year basis, but also on a quarter-to-quarter basis also. Our volume growth on a consolidated basis in Chemicals segment was 37% from 4,628 metric tonnes to Q1 FY '21 to 6,345 metric tonnes in Q1 FY '22. Consolidated volumes in the Fertilizer segment for Q1 FY '22 grew by 19% from 44,511 metric tonnes tons in Q1 FY '21 to 52,719 metric tonnes in Q1 FY '22. Revenue for the quarter on consolidated basis level grew up by 86% as compared to the same period last year and compared to quarter back, it grew by 5% showing positive recovery signs. Our volumes and revenues growth would have been higher if we would not have faced challenges because of the partial lockdowns and production loss due to cyclone and the recent blips. However, as the situation is moving towards normalization, we are optimistic of growth movement in volumes, realizations and margins going forward. Our profitability front, our EBITDA stood at 15.6% and PAT margins were 11.3% higher volumes. Operational efficiencies and cost rationalization led to margin expansion. Friends, now let me give you an update on the CapEx plan, which company is going on. Our original CapEx plan of INR 75 crores now has gone up to INR 85 crores for expanding dye intermediates capacity from 22,000 tonnes per annum is slightly delayed due to the second wave of COVID-19. However, that has been resolved and now the work is back on the full track and into the full swing. We believe our capacity should be in a running situation in the next couple of months. Out of INR 85 crores, we have already incurred an amount of [ INR 80 crores ], and let me remind all through is from internal accruals. Company is also setting up a solar project under the open access scheme, for which we have planned a CapEx of INR 21 crores and will be funded internal accurals. After commissioning of these projects, we believe there will be significant savings in the power cost leading to the operational efficiencies and intense margin. Friends, [Audio Gap] which took in the Konkan region of Maharashtra in Chiplun, that was on 22nd of July. Because of the heavy rains and the floods, the bridges and the roads get closed and the whole access to the factory was closed, now is almost coming back to the normalcy. Further, in addition to the same, now the things are in a normal situation. Our Director, Mr. Dinesh Modi, who has already served 2 terms into the company has already resigned from the Board. And in place of Mr. Dinesh Modi, we have appointed a new Director called -- said Mr. Imitiaz Ali, who is a legal counselor named under Orbit Law, now as a new independent director into the company. With this, I would like to hand over the call to Mr. Deepak Beriwala for financial highlights for Q4 and FY '21. Over to Deepak.

Thank you, sir. Good afternoon, and a very warm welcome to everyone. Our revenue for QY (sic) [ Q1 ] FY '22 stood at today INR 118 crores as compared to INR 63.8 crores in Q1 FY '21 on consolidate basis. A growth of 86% on year-on-year basis, revenue growth on Q-on-Q basis stood at 5% from INR 113.5 crores, showing sign of recovery. As Punit sir mentioned, revenue growth would have been higher if we had not faced the challenges from the cyclone affecting distribution in our Ratnagiri plant and second wave of COVID-19. However, that business is resuming normalcy, and we see robust volume and revenue uptick for the remaining of FY '22. Our consolidated EBITDA for the quarter stood at INR 18.4 crores as compared to INR 3.1 crores in Q1 FY '21, a growth of 480% on the annual basis. EBITDA on Q-on-Q basis grew by 32% from INR 41 (sic) [ 14 ] crores in Q4 FY '21. EBITDA margin for Q1 FY '22 stood at 15.6% as compared to 4.9% in Q1 FY '21, and 12.3% for QY -- Q4 FY '21. PAT for Q1 FY '22 stood at INR 13.4 crores as compared to INR 1 crore in Q1 FY '21. On Q-on-Q basis, PAT grew by 30% from INR 10.3 crores. PAT margin for the quarter stood at 11.3% as compared to 1.6% and 9.1% for Q1 FY '21 and Q4 FY '21. With this, I open the floor for discussion. Thank you so much.

[Operator Instructions] we have the first question from the line of Shubham Agarwal from Aequitas India.

Sir, firstly, my question is related to Fertilizer division. I wanted to know about the Deewanganj unit, which was expected to start this quarter. So what's the current status of that? And did it contribute to revenue this quarter?

Shubham, Deewanganj unit is almost ready to start a production. And as mentioned in our earlier discussions, we've always -- initially, we had said that we will not be starting the Deewanganj because that was a bit smaller unit. But since almost 3 quarters -- almost 2 quarters back, we decided that we will start the Deewanganj plant also. And accordingly, Deewanganj plant has been completely revamped. And now it is ready for the production. We have also received its pollution concern, which was a [indiscernible] certain issues of electricity and regulatory approvals were pending for Deewanganj. Everything now is in place. And now recently, this inspection by PDIL, that is Product Development India Limited, has been carried away. This has been done at Deewanganj unit. And we are awaiting their approval and they have to give the report to the ministry. And accordingly, ministry gives them FM approval, which a basically mandatory guideline. Being it's a subsidized product, so it has to be approved by the ministry through PDIL. So once it is approved, we will be starting the production. In this season of Kharif, Deewanganj unit has not contributed anything. But in the Kharif season, Deewanganj unit will be contributing a substantial amount of business.

All right. So after this unit expansion, our total capacity will reach close to 450,000. And so my question is, by when can we expect a quarterly run rate of more than 80,000, 90,000 fertilizer units?

See, at this time, if I take you individually, let us start with Kisan Phosphates. We are targeting INR 100 crores plus sales in Kisan. And we are targeting around 80,000 to 85,000 tonnes of the sales in Kisan Phosphates in this particular financial year, including both the seasons of Kharif and Rabi. Now come to Madhya Bharat, our Meghnagar plant is already operating. And in this season, Meghnagar should be around 80,000. In addition to that, the Deewanganj would be around additional 20,000 in the Rabi season. So all put together, it would be around 100,000 tonnes. And Pushkar should be around 65,000 tonnes. So all put together, we should be able to achieve 250,000 tonnes plus sales volume in this financial year.

Okay. All right. And after the subsidy increase, what is now the average realization in the fertilizer business?

It is around INR 12,000 a tonne.

INR 12,000.

Approximately on average. Depends on site to site.

Got it. And coming to Dye division. So what was our total revenue contribution from dyestuffs and dye intermediates in Q1? And what was the growth Q-on-Q?

In Q1, dye and dye intermediates all put together is around INR 55 crores of sales. And fertilizer is around INR 23 crores. And other business like animal health and asset and other is the remaining amount of figure out of INR 78.42 crores of the total business of Pushkar standalone business.

All right. And given the headwinds in Q1 and the current status, if you can probably take us to the outlook of this division, specifically dyestuffs and dye intermediates, that would be helpful.

See, coming to the further view of the remaining 3 quarters, we personally believe that this business is going to increase because if you see the history of over the last 5 years, Q1 is always a bit depressed business and Q4 is always the highest business compared to all the 4 quarters. Now in this year, Q1 has this cross even the Q4 of the last financial year. So we personally believe that this financial year, all put together, including the starting of the new capacity at Unit 5, we should be touching close to INR 550 crores of the business annualized.

Okay. This is including fertilizer?

Obviously, definitely. Yes. And plus in the next year, there would be further addition because for the next year for Unit 5, we will be getting a full year of operation.

And this year, we are expected to have 6 months of operating of Unit 5, right?

Of Unit 5?

Yes.

Yes, maybe 6 months, maybe 5 months. But we are quite hopeful that it should be started immediately, but I don't know what is happening. Like earlier, it was a cyclone, now it is a flood, and we are getting a bit delayed because of some unforeseen circumstances and which are out of our control. But then, too, also, we are putting our best efforts into that and trying to start it as early as possible.

Got it. And lastly, on the cost side in the dye and dyestuffs business, are you facing any [indiscernible] there also? And what is the current status?

Are we facing any?

Have we -- is there an increase in raw material prices Q-on-Q?

Yes, it is not that great impact of the raw material prices. But to be very honestly, in Q1, the prices of intermediates are on a bit depressed scenario, right? And we believe that this depression into the pricing of intermediate is going on since March 2021, and it's almost 4.5 to 5 months have passed with this kind of a pricing. I see personally that somewhere from September onwards, the intermediate price should be picking it up.

From September?

Yes.

[Operator Instructions] We have the next question from the line of Forum Makim, Equity Capital.

Congratulations on a great set of numbers and for a detailed presentation. Sir, my first question is, sir, our tax rate seems to be low for this quarter. So what is the reason for the same?

Would you reply to her on the subject. She is saying your tax rate is on a lower percentage in this quarter. What is the reason of things there?

Tax rate on lower percentage?

No, sir, the tax rate is around 18% for this quarter. So what is the reason for the same? And what is the full year number that we can expect?

In Shree Pushkar stand-alone, we put under MAT provision. So under MAT provision, you are into 18.5% tax rate.

See I'll tell you, I'll give you a bit more detailed -- light on the subject. Pushkar falls under the MAT category. So therefore, the maximum tax rate applicable is 18-point-some-odd percentage, right? And Madhya Bharat, we don't provide any money for the taxation because Madhya Bharat -- since we bought it from this through NCLT route, and it has got a carryforward losses of around INR 58 crores to INR 60 crores. So till that we absorb our losses, we are not supposed to provide any provision for the taxation. And Kisan falls under 25% bracket of the taxation. So all put together, whatever the actual -- and the fact presentation is there that we have given into our details.

Okay. So sir, for the full year, what is the tax rate that we can expect?

I think you should calculate 18.5% in the...

Yes, 18.5%.

For this in future. Because all put together, it amounts to around that amount only.

Okay. Okay. And sir, what is the advance tax that we have paid for this quarter?

How much we have paid advance tax in this quarter?

INR 1.5 crores.

INR 1.5 crores.

Okay. Okay, sir. And sir, my next question is, sir, what is the status on the preferential warrant that we had issued at INR 190?

[ That's followed by ] Nitesh Pangle as a Company Secretary. So we have applied for in-principle approvals with the stock exchanges. So the in-principle approval is still pending. The stock exchange has asked a few queries, which -- substantially the queries, have been resolved. There are minor certifications, which they required on behalf of [ our team ]. So we are waiting for in-principle approval and once that is received, we'll proceed with the allotment of warrants and all.

So we are going ahead with it, right?

Yes. Once -- as per law, once we receive the in-principle approval within 15 days, we have to allot the warrants. So conversion point can take -- have to be taken within 18 months. But the issue part -- the allotment part has to be done within 15 days from the in-principle approval. So to conclude, the in-principle approval from the stock exchanges is still pending.

Okay. Okay. So what is the impact that we have on the numbers because of the delay in the -- because of the delay of the commercialization of the new unit?

That unit has not yet been started. So there are no results or no performance in the Q2 for the new unit. And we are expected to start in -- very shortly in coming few times. Then I think from the quarter 3, that results would reflect in our financials.

Okay. So sir, we stick to our guidance of INR 550 crores for FY '22 to around INR 650 crores to INR 700 crores for FY '23?

We hope for so. And best, it depends on so many things, which are not in our control. But yes, we are trying our level best, and we are trying to maintain utmost transparency and clarity along with the all the respected investors, and we are trying our level best in that sense to do it as early as possible.

Sir, what is the plant utilization level for Q1?

I think it was 65% to 75%?

65% to 75%. You are right.

It's around 65% to 70%.

And what is the max that you can go up to?

I think we can easily go up to 85%, subject to all the issues are no hurdles like this COVID situation and the flood situation. These kind of situations makes a lot of hurdles, whereas we also can't do anything. Like if you talk about recent developments on 22nd of July, that flood happened in Chiplun right? We were almost closed by 10 days or so. And the situation was such kind of a grave situation that the plant didn't even had a water -- this drinking water for at least 10 days. So in that situation, the entire activity of the plants were closed. So we are trying to level best and let's see how the best God permits us to do.

And sir, how much turnover you would have lost because of the cyclone?

As a very layman, if I talk about out of 90 days performance, if you have lost a business of around 7 to 8 days. So as a layman, it's around 10%. Close to 10% of the business has been lost. No dispatches, no raw material invert, no production, no movement of activities.

Okay. So sir, will that be carried forward to Q2 or it's just loss?

No, no, no, see, it's the industry, right? Once it's gone, it's gone. If the plant is closed, you cannot ramp up that production in coming times.

Right. And sir, how is your raw material scenario in the fertilizer segment?

Raw material scenario in the fertilizer segment is increasing. And like if I talk about rock phosphate in January, the rock phosphate, it was around $62 to $65. Now it is touching almost double the price of $65. It's around $130, and there is a scarcity into the availability of the rock phosphate also. Like earlier there was an origin of Egypt region, which has completely stopped now. Now another origin is Jordan, which we are importing from Jordan. So basically, raw material prices has also gone up, like the government has increased the subsidy by almost 3x from INR 2,530 to INR 7,513. Now it's subsidy has almost increased by close to 3x. But at the same time, the raw material prices have also gone up tremendously high. Like the rock phosphate is double. Acid has also gone up. For diesel and transportation cost, fuel cost, coal cost, the cost has gone up significantly.

So sir, did we have any impact of low-cost inventory for this quarter?

I think that is a bit reflected into financials also like the Kisan Phosphate, which did almost 9-some-odd-percentage of the profitability. And Madhya Bharat is from the 0-day operation, Madhya Bharat is also making money. So I think this all is reflected into the balance sheets also or the -- our financial results also. Definitely, it is there, and the same is reflected also.

So would we be able to maintain the gross margin going forward?

Yes. Yes. I don't think there is any issues into that. We should be easily maintaining these levels.

Okay. Sir, just one last question. Our employee costs have decreased Q-on-Q. What is the reason for that?

This is mainly because of the labor charges due to the lockdown situation. Certain labors -- certain contracted labor had gone out of the site. So mainly, it is because of that.

Okay. Okay. But there was labor availability issue?

Yes, at that particular time, there was some issues into the labors because of COVID and other situation, but now all the issues have come back to normalcy.

[Operator Instructions] The next question is from the line of Anshuman Mohata from -- whose an Individual Investor.

Congratulations for a wonderful set of numbers. We were waiting for this kind of performance since quite a while, which we are showing now, and a wonderful presentation done. Everything was very clear. I had 2 questions that what product line is -- we have seen that they're going to increase the Chemical division production by 3x it seems from the -- this thing. So are we making -- are we going more into the chemicals part and the unit side? Like how -- what is the product line we are thinking of?

[Foreign Language] that is almost our existing business line -- product lines, right? But different products, what we are not manufacturing as of that time. And on a full year of production, Unit 5 is close to give you around INR 200 crores to INR 225 crores of the total sales. And if you summarize all the results put together, on an annualized basis, on a 100 -- on a full utilization basis, chemicals would remain around 70% of your total revenue sector and balance 30% would remain into the fertilizers or the animal and health nutrition feed business.

And dyestuffs? Dyestuffs is part of chemical only? Okay.

Yes. Yes. Dyestuffs, intermediates is a part of the same segment.

No, as of the thinking, which I -- I take from [Foreign Language] We are trying to build that again [Foreign Language] correct?

[Foreign Language]

[Foreign Language]

[Foreign Language] and it was losing its market share because that intermediate portion was going into the consumption of the dyestuff. So again, come back after the Unit 5 comes under commercial operation.

Perfect. [Foreign Language] we started...

[Foreign Language] but that we are not announcing at this point of a time, we will come at a later on stage when it comes the right time.

[Foreign Language] around INR 90 crores?

[Foreign Language]