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

Ladies and gentlemen, good day, and welcome to the Shree Pushkar Chemicals & Fertilizers Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rasika Sawant from Orient Capital Investor Relations Partner. Thank you, and over to you.

Hello. Thank you, and welcome to the Q4 and FY '23 earnings conference call of Shree Pushkar Chemicals & Fertilizers Limited. Today on this call we have Mr. Punit Makharia, Chairman and Managing Director; along with Mr. Deepak Beriwala, CFO. This conference call may contain forward-looking statements about the company, which is based on beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page number 2 of company's Investor Presentation, which has been uploaded on the stock exchange and company's website as well. With this, I hand over the call to Mr. Punit Makharia for his opening remarks. Over to you, sir.

Thank you very much. A very good afternoon to all my dear friends, and welcome to the Q4 FY '23 earnings call of our company. Today on this call, I'm joined with Mr. Deepak Beriwala, our CFO; Mr. Nitesh Pangle, our Company Secretary and Compliance Officer; and Orient Capital, our Investor Relations partners. Friends, I hope you all have got an opportunity to go through the financial results and investor presentation, which we had uploaded on the stock exchange as well as on the company's website also. Friends, now I will take you through the financial and operational performance of our company for Q4 and FY '23. In spite of all the challenges, business environments, we have reported a revenue growth of 17% in FY '23 as compared to the last year. Also, there is a revenue growth of 17% subsequently in the Q4 FY '23 versus Q3 FY '23. Considering the financial performance delivered for the year, the Board of Directors have further recommended a payment of INR 1.50 per equity share as the final dividend of the financial year '22-'23. In the financial year '23, our main goal was to ensure the efficient operation of our manufacturing plants, while also focusing on maintaining a strong cash conversion cycle. Friends, we are very careful not to accumulate any kind of costly inventory or bad debt that could have a negative impact on our financial health of our company. Rather than pursuing a rapid top line growth without considering the long-term implications, we took a measured approach and prioritized sustainability over short-term mindset. Additionally, we made sure to stay aware of the commodity pricing and market trends so that we could avoid any unfavorable situation. By taking these precautions and making strategic decisions, we are able to successfully navigate the challenges for the year and maintain our financial stability. During the quarter, we have observed a slower growth in the demand of Dyes & Dyes Intermediates and the fertilizers leading to a lower than anticipated utilization for the current financial year. While the demand in both domestic and export markets have softened due to demand depression, energy crisis and cautious discriminatory spendings, which ultimately affected the capacity utilization in textile and garment industry. Despite these market conditions, our efforts and initiative allowed us to maintain stable with the new figures. The basic chemicals and intermediate pricing rose as the dye intermediate pricing up, forced to reduce the production drastically. However, there is a sign of recovery, and we expect production to improve gradually demand for dyes increasing again. And now the cotton prices have also started arriving at the market yards. Friends, with respect to the Madhya Bharat Phosphates Limited, our 100% owned subsidiary, we have achieved revenue of INR 132.60 crores for financial year '23 versus INR 100.9 crores for financial year '22, an increase of 31%. For Kisan Phosphates Private Limited, which is also our 100% owned subsidiary, the revenue generation for FY '23 is INR 132.40 crores versus INR 125.20 crores in financial year, which is an increase of 6%. We are pleased to announce that despite several obstacles, we have successfully commissioned the Deewanganj plant of Madhya Bharat Phosphates Private Limited in Q4 FY '23 with a rated production capacity of 12,000 metric tons of Single Super Phosphorous also. We have also completed the additional capacity of 32,000 metric tons in Kisan Phosphates Private Limited. These represents significant milestones for our company, and we anticipate experiencing higher volume growth in our SSP division as a result of this expansion. Friends, additionally, we are proud to be supporting the Atmanirbhar Bharat initiative by promoting the use of indigenous fertilizers like SSP. The government is also actively encouraging the convention of SSP, which we believe will further drive the demand for our products and positive impact on our business. Despite a strong growth in recent years, the average intensity of fertilizer usage in India remains much lower than most of the developed and emerging countries around the world. There are currently a number of states in which we still have a very low penetration of the fertilizers. This leaves a lot of room for the future growth. In recent budget also, the subsidy of the fertilizer and food for the financial year '23-'24 have been also reduced by 22% and 31%, respectively. While the present challenges, we are confident in our ability to adapt and navigate the evolving landscapes. Now update on capital expenditure. Unit 5 has started its commercial production and trials further in the amount of INR 120.48 crores has been capitalized as on March 31, 2023. When the demand is low, it presents an opportunity to prioritize repair and maintenance for our plants and equipments. Our company is taking advantage of this lean period to address any necessary repairs and perform regular maintenance [ passed ] to ensure that our facilities are running at the optimum efficiency. By doing so, we aim to reduce the risk of unexpected equipment failure or downtime when the demand increases. Our goal is to proactively maintain our facilities and equipment, which will ultimately position us for the long-term growth. Lastly, I'm delighted to report that our company has a robust balance sheet with no lien deposits for INR 94.91 crores on a consolidated basis. This strong cash position is a significant asset for the long-term stability and sustainability of our business models. Friends, as you are aware that, we have managed to achieve moderate growth despite the challenges, circumstances of geopolitical tensions, economic downturn and high influential pressures. We attribute this success to our unwavering commitment for our sustainable growth. Even in the face of adversity, looking ahead, we are optimistic about the future and expect to see significant improvements in both our profitability and revenue growth in the next few quarters. We remain steadfast in our dedication to achieve our goal as confident that our hard work and strategic planning will continue to pay off in the months and years to come. Friends, despite the challenges that lie ahead, we are excited to tackle them head on head and build our success as we have achieved thus so far. With this, I would like to hand over the call to Mr. Deepak Beriwala, who is our CFO, and now will take you through the financial operation highlights for the Q4 FY '23. Over to you, Deepak.

Good afternoon and a very warm welcome to everyone. Our revenue for Q4 FY '23 was INR 180.3 crores and a decrease of 6% on year-on basis. EBITDA for Q4 FY '23 stood at INR 20.4 crores with an EBITDA margin of 11%. [ Therefore ] Q4 FY '23 stood at INR 12.8 crores with a PAT margin of 7.1%. For FY '23, the company has reported turnover of INR 684 crores versus INR 584 crores for FY '22 and an increase of 17%. EBITDA stood at INR 68.4 crores with an EBITDA margin of 10%. PAT stood at INR 37.2 crores with a PAT margin of 5.4%. With this we can now open the floor for question-and-answers.

[Operator Instructions] Our first question comes from the line of [ Manav Sabnis with Sabnis Financial ].

So I had a couple of questions. So firstly, on a broad-based outlook for the fertilizer division for the company going forward? And the second question is with respect to when do you anticipate to add -- have an increase in capacity utilization and there are any specific factors that will drive the increase in capacity in the future?

First of all, I will take your second question on the first priority. See, we are already in the process of adding over capacity in regards to the fertilizer business. For that, we are almost -- we have already started our Deewanganj plant -- and that Deewanganj plant we have just started in Q4 of the last financial year. And we are also in the process of doing some balancing equipment into that particular Deewanganj plant so that the proper capacities can be utilized. And I believe that the performance of Deewanganj plant will be visible in this particular financial year. And the main impact would be from Q3 because in the first 2 quarters, we need to overall do some balancing equipment act for the Deewanganj plant. But definitely, we've already started the production in Deewanganj plant. We have already started dispatches from the Deewanganj plant. So during this financial year, we'll build up the capacity on Deewanganj plant. Now as far as the outlook of the Fertilizers business in India is concerned, definitely, Government of India is giving much emphasize on the domestic fertilizers like SSP. SSP is basically Make in India concept by the Honorable Prime Minister. And government is giving a lot of this encouragement for improving the SSP. The government is just implementing few more qualities of SSP. Government is also considering very positively to add urea also into SSP, which is under the consideration with government so that the dependency on the import fertilizer, like DAP can be reduced. So we believe that in future times to come, there is good opportunity lying ahead in the SSP business.

And with respect to the -- so I think does this answer the outlook question also for the Fertilizer division?

Yes, I think we can consider this also in a similar manner.

Okay. Okay. And just last question, if I can [indiscernible]. So have you observed any increase in demand for Dyes & Dyes Intermediates from Bangladesh and Turkey in the current quarter?

Basically Bangladesh and Turkey both these countries are facing acute problem in terms of the currency fluctuations. These 3 countries are on the globe are majorly like Pakistan, Bangladesh and Turkey. Pakistan we all know what is the situation of their internal financial situation. And regarding the dollar pricing in terms of the Pakistani Rupee, which I heard is almost PKR 300 to $1 almost. And like Bangladesh also, they recently got some package from the World Bank in terms of the foreign exchange in terms of dollars. But yes, there are certain hiccups in terms of the demand pressure, demand in terms of the energy pricing and some foreign exchange. But we -- I personally think that in coming few months, things should be stabilized, and there would be a good demand in the same sector.

Our next question comes from Harshil Solanki with Equitree Capital Advisors.

Sir, I had 3 questions. First is, can you help us with the revenue of both the segments, Chemicals and Fertilizers separately?

Sir, can you be a bit louder? We are not able to hear and understand your question properly. Can you be a bit louder, please?

Yes, sure. Can you help us with the revenue of both the segments that is Chemicals and Fertilizers for Q4?

For Q4, the total revenue of chemical is -- you are talking only about the Q4 or the whole year?

If you can give both, that would be very helpful, sir.

Okay. For Q4, the Chemical business is INR 85.42 crores. And Fertilizer business is INR 94.90 crores. If you take on a complete year basis, Chemical business is INR 305.88 crores, and Fertilizer business is INR 378.15 crores.

Okay. Sir, our realizations have dropped quarter-on-quarter. So how are the realizations right now? And what is the trend that we are seeing on realization?

Sir, I would like to put this answer of this question in another phase. And I would like to address this question as follows. Definitely, our bottom line has dropped significantly, almost from 9% to 10% in the earlier period to almost 5.5% to 6%. Rather, I would say, in this present circumstances, the last year, looking at all the geopolitical situation and the demand situation and overall looking at the industry, not only our company, but other also companies available in the same sector or another sector also, you will see that most of the company's business is almost flat. When we have achieved a better realization -- we have achieved a better -- volumes and the values definitely, we have compromised a bit on the profitability. The whole idea for sacrificing of the profitability is to mainly maintain our cash mainly to maintain our inventories so that it doesn't fall into any such kind of a track whereas we regret our decision -- we regretted our decision at a future later date. We are behaving very conservatively in this period, and we are trying to retain our customers and as well as trying to protect our inventory as well as cash. As far as the profitability in future times to concern, I think that can be rendered when the market permits us when there is a bit of a demand into the market. I foresee that should be by the end of the quarter 2, we should be able to recover out of this issue.

Got it, sir. Sir, last question, you have INR 94 crores of deposit line with you. So what's the plan of deploying it?

Sir, definitely, those plans would be there. But as of now, we are not going very aggressively on any kind of new CapExes. Recently, we completed a CapEx of almost INR 175 crores, including Unit 5 Madhya Bharat and some balancing equipment including the solar also. So this particular financial year, we are behaving and we are planning to go on a consolidation phase, mainly to establish all these activities of the company as well as to achieve the maximum productivity for the new capacities of what we are building. Looking at the current situation of the demand and other issues which are connected to the business, we want to, first of all, look at how it impacts when it gets stabilized. So before doing any further major this CapEx step, we are going for the consolidation phase. So therefore, as of now, with immediate effect, there are no such any plans for any major CapEx. Whenever it comes definitely it will be informed to all the shareholders when the announcement is there.

Got it, sir. And sir, last thing, if you can give any guidance for FY '24, then that would be useful.

Sir, FY '24, definitely, there would be a growth in terms of the revenues of the company because last year, we did INR 684 crores. Before that, it was INR 584 crores. So there is a jump of almost this is close to 20%. We believe that in the similar year, we would maintain the growth trajectory of 20% to 25% in '23-'24 also.

And margins would be back to the normal levels or is there still?

To comment on that because there are many factors which are impacting the margins but yes, we are trying our level best to improve the margins as much as possible, but it is not fair on my part to say something blanket or blindly on that part of the margin. But I personally believe that the margin should improve -- should not go below than what we achieved in the last financial year.

Our next question comes from Samarth Singh with TPF Capital.

Could you please mean total capacity for our 4 fertilizer units?

Sir, can you can you please repeat? Your voice was cracking.

Sir, for our 4 fertilizer units can you please give me the capacity individually for each unit?

And you are seeing the capacity utilization?

Just the capacity.

Sir, installed capacity for all the units in terms of SSP is around 5 lakh tons a year. That is only covered in the PPT.

Sir, that is 1 lakh tons of Pushkar, 1,32,000 tons out of Kisan, 1,32,000 tons out of Deewanganj, and 1,65,000 out of Meghnagar. Is that right?

Right, sir. That's right, sir.

And for the year, what was the total sales from each of these units?

Sir, out of this 5 lakh tons of capacity, you can just straightaway take out Deewanganj capacity of 132,000 tons, which is a rated capacity. But very honestly speaking, the Deewanganj plant is a rated capacity of 132,000 tons. But this plant needs some balancing equipment addition. After that only because as you're aware that we just purchased this company for an NCLT -- so the way we got it is accepted -- was accepted by us. On a rating capacity, this is 132,000 tons plant. But actually, this is not 132,000 tons of plant. This needs some balancing addition. So if out of 5 lakh tons, if you remove 132,000 tons, which we started in the Q4 last financial year. So it works out to be around 360-odd-thousand tons of the plant. Out of that, we have achieved some 207,000 tons, how much fertilizer we have done? Okay. 222,000 tons we have achieved.

Right. Sir, I'm asking for, I think our…

Sorry. Sorry. Sorry, my mistake. We have achieved 206,000 tons of the Fertilizer business in last financial year.

206,000 tons. So the reason I'm asking is because I think our Kisan Phosphate plant run that like almost 80%, 85% utilization, but the Pushkar and Meghnagar plants run at a much lower utilization. And I'm not understanding why they're not able to ramp up with the same utilization as Kisan Phosphates?

[Foreign Language] And see, there is no issue in the plant. There is no problem in the plant, but it depends on many other sectors [Foreign Language]. If you see last to last year, Kisan did close to 80,000 tons, if I'm not wrong. Last year, Kisan did some 67,000 tons, 68,000 tons. So there is a dip in the Kisan also. If you talk about '21-'22, Kisan did 81,241 tons. If you talk about '22-'23 last financial year, Kisan did 66,238 tons. Whereas if you talk about Madhya Bharat, Madhya Bharat did in '21-'22, 66,000 tons, Madhya Bharat did 73,000 tons in the last financial. So there is an increase in that. If you talk about Shree Pushkar, Shree Pushkar did 64,000 tons in '21-'22 and last financial year, it did close to 60,000 tons. So Madhya Bharat performed better. And now in this financial year, we'll add up Deewanganj also. We believe that there should be at least 20%, 25% growth in fertilizer volumes in this financial year.

Okay, sir. And sir, this is individually area-wise you're talking in terms of demand and supply or is it also just some time taking in getting our marketing and distribution?

[Foreign Language] I'll tell you, we cannot push the product of Kisan into Madhya Pradesh. At the same time, we cannot push the production of Madhya Bharat into Haryana, Punjab because transport plays a major role into the whole business. So it is not viable for us to move the material from one area to -- we have one plant where it is situated it needs to cater the area of that nearby particular of that plant. At the maximum -- this area we try to capture is around 300 kilometers in the circumference of our various plants. So whatever area it gets covered into that because we have to take care about the transportation cost also. But I'm sure that after addition of Deewanganj in this particular financial year, we should be able to build better volumes in terms of the fertilizers.

[Operator Instructions] Our next question comes from Ankur Agarwal with RC Wealth Solutions Private Limited.

Sir, [Foreign Language]?

Sir, [Foreign Language] that is mainly because of the Chemical business. Fertilizer business has fairly performed well. [Foreign Language] But because of our business model, which is completely integrated and the [Foreign Language] backward integrated, zero-waste business model because of that, we have been able to survive ourselves at a much better position than others. Then too also, we have done almost EBITDA levels of [Foreign Language]. On a consol basis, we have been able to achieve EBITDA levels to close to 10% levels. That is mainly because of the Fertilizer business we've been able to do so.

Sir, [Foreign Language]?

[Foreign Language] we have to be completely positive minded. We have to believe in our business. [Foreign Language] We have to see one basic point is that we have to be in business, we have to retain the volumes, we have to build the volumes and we have to see that we manage our cash flows and inventory at a optimum best possible level. [Foreign Language]

Our next question comes from [ Pawan with Compound 26 Capital ].

I missed the part -- one participant previous question that you might have answered. What is the capacity utilization right now for our Chemicals business and the Fertilizer business right now?