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

Ladies and gentlemen, good day, and welcome to Shree Pushkar Chemicals & Fertilisers Q1 FY '25 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the Company Secretary, Mr. Nitesh Pangle. Thank you, and over to you, sir.

Good evening, everyone, and we welcome all the participants to Shree Pushkar Chemicals & Fertilisers Limited Q1 FY '25 Earnings Call. Joining us today from the management side, we have Mr. Punit Makharia, Chairman and Managing Director. We have Mr. Deepak Beriwala, Chief Financial Officer. Now I will hand over the call to Mr. Punit Makharia for his opening remarks. Over to you, sir.

Thank you, Nitesh. A very good evening and a very warm welcome to all my friends for the Q1 FY '25 earnings call of Shree Pushkar Chemicals & Fertilisers Limited. I hope you all had an opportunity to review the financial results and investor presentation, which have been uploaded on the stock exchange as well as on the company's website. Friends, now we'll take you through the financial and operational performance of our company for Q1 FY '25. We are pleased to begin FY 2025 with a strong performance [indiscernible] to our operations, reflecting the effectiveness of our strategic initiatives. In terms of sales volumes, our Chemical division achieved a significant increase, the sales rising from 11,381 tonnes in Q4 FY '24 to 15,943 tonnes in Q1 FY '25, representing a 40% quarter-on-quarter growth and a 17.8% year-on-year increase basis. Our Fertilizer division also performed well with sales growing from 57,085 metric tons in Q4 FY '24 to 69,722 metric tons in Q1 FY '25, reflecting a 22.1% of quarter-on-quarter increase and 23.5% on year-on-year growth. This overall growth in sales volume has led to 25.1% growth on quarter-on-quarter increase and a 22.4% on year-on-year improvement in total sales reaching 85,665 metric tons in Q1 FY '25. On the financial performance, there has been a strong input. The total revenue from operations increased by 1.8% quarter-on-quarter and 10.7% on a year-on-year basis, reaching INR 194.2 crores in Q1 FY '25. This growth was mainly driven by the Fertilizer division, which saw a 21.9% growth on quarter-on-quarter basis and 14% on year-to-year basis. Despite challenges in the Chemical segment, revenue in this division grew by 6.9% on year. Highlighting our reliance on a competitive market environment, a CapEx budget of INR 215 crores was allocated last year to enhance the capacity of our Chemical business through backward and forward integration, and our Fertilizer business through manufacturing of complementary products. We are also committed to sustainability and in line with the commitment we are investing in renewable energy also. During the quarter, we have incurred INR 1.90 crores towards the establishment of a 3.8 megawatt DC Solar Power Plant under the Open Access Scheme of Maharashtra State Electricity Distribution Limited. This investment, along with additional of INR 6.63 crores in CapEx invested in our chemical and fertilizer verticals, is a part of INR 125 crores allocated last year for these strategic initiatives. The total CapEx for these projects is being financed through internal accruals and a preferential issue to the promoter. The promoter has already brought in capital by exercising warrants. Total capital of INR 15.13 crores has been raised from the promoter by way of preferential allotment to promoters, ensuring that Shree Pushkar remains net cash positive through these investments. Additionally, we have a non-Lien deposit facility available at INR 107.52 crores, which provides us with financial flexibility to support our ongoing and future investments. Looking ahead, we remain focused on leveraging on strength of our Chemical and Fertilizer division, enhancing our operational efficiencies and sustaining the growth momentum we have achieved in this quarter. Our strategic priorities for the remainder of the year include further capacity expansion, advancing our sustainability initiatives and exploring new market opportunities, all while maintaining a strong financial position. We are optimistic about the macroeconomic environment, particularly with the contained focus on infrastructure development and increased construction activities. These factors are expected to sustain demand for our products in the coming quarters, providing us a solid foundation for the growth. Friends, now with this, I would like to hand over the phone to Mr. Deepak, our CFO, who will provide more detailed insight into our operational and financial performance for Q1 FY '25. Thank you.

Thank you, sir. Good evening, ladies and gentlemen. I would like to provide an overview of our operational and financial performance for Q1 FY '25. During the Q1 FY '25, we achieved significant growth across both our Chemical and Fertilizer divisions. In the Chemical division, sales volume increased by 40% on a quarter-on-quarter basis, reaching 15,943 metric tons and demonstrated a 17.8% year-on-year growth. Our Fertilizer division also saw a robust performance with sales volume raising by 22.1% quarter-on-quarter to 69,722 metric tons, representing a 23.5% year-on-year increase. Overall, consolidated sales volume grew by 25.1% on a quarter-on-quarter basis and 22.4% on year-on-year basis totaling 85,665 metric tons for the quarter. In Q1 FY '25, our Chemical division generated INR 91.6 crores in revenue, reflecting a 6.9% increase year-on-year. Our Fertilizer division demonstrated a strong performance with revenue reaching INR 102.6 crores at 21.8% quarter-on-quarter increase and 14% growth on a year-on-year basis. Our total revenue grew by 1.8% quarter-on-quarter and 10.7% on year-on-year amounting to INR 194.2 crores. On the profitability side, gross profit rose to INR 66.8 crores, marking a 5.7% quarter-on-quarter increase and 11.5% on year-on-year increase. EBITDA came in at INR 17.7 crores, showing a strong year-on-year increase of 26%. Profit after tax was INR 12.8 crores, representing a 62% increase year-on-year. With this, I would like to open the floor for any questions or discussion. Thank you so much.

[Operator Instructions] The first question is from the line of Harshil Solanki from Equitree Capital.

Sir, I have two questions. First is on the Bangladesh situation, can you throw some light on how much this will impact our business? And on similar lines, Turkey also is a big market for us. So if you can highlight the potential risk from both the two markets for us.

See, Mr. Solanki, Bangladesh is definitely -- both Bangladesh as well as Turkey is a big market. And we sell substantial products -- volumes in Bangladesh, and we have a substantial business in Bangladesh as well as in Turkey. First of all, let me tell you, whatever the business we do in Bangladesh, this is against the confirmed LCs. Without LCs, there is no business. Secondly, looking at, as of now, the political instability in Bangladesh, what we are looking at, and once we faced these kind of challenges in Bangladesh, definitely it was a matter of great concern for us. A few shipments were on the way, a few shipments were at the port. So at that time, we held the entire operations in Bangladesh. We closely evaluated the situation in Bangladesh, spoke to multiple people there and took their opinion. And based upon our inputs, what we get from our office in Bangladesh, because we have got a country head based in Dhaka, and he is stationed there. And whatever the inputs we understood from the industrial sources, market intelligence, from our people, from the other existing customers; in my personal opinion presently, we definitely see a problem, but this is not going to be a long-term issue. I think this will either continue for 15, 20 days or maybe maximum within a month or so, I believe that this should be over. Definitely, this would be disturbance for coming 15, 20 days, 30 days till it doesn't stabilize. But overall view of the government in Bangladesh and the president, Mr. Yunus Muhammad, who is definitely a very learned person, and his main focus is on the economic and financial stability of Bangladesh. One of the customers who have asked us to hold the shipments. Rather, they have said don't hold back the shipments, you can dispatch the goods. So I don't think that in long term, this is going to make any major impact. But yes, for a few more days, we can see these disturbances. And based upon the media reports, what we see from the media, it's a bit disturbing. But what I see in Bangladesh, what I get inputs from there is not as worse as we saw in the media. All the units in Bangladesh have started -- majority of them have started. People have resumed to their offices. And let me tell you one more thing also that Bangladesh cannot afford to ignore India because 80% economy of the Bangladesh is on the textiles and garments. And in that, majority of the cotton is being exported from India. Majority of the dyes and chemicals are being exported from India. So I don't think that in the long term, it will be a major issue. As far as Turkey is concerned, particularly Turkey, we don't see any problem. We don't see any hiccups as of now. And there are no issues in Turkey as of now. Yes, about the currency, it is always there. We always play safely into this currency issues with Turkey. But I don't see any major issue in Turkey also. So this may be a matter of 15, 20 days more for Bangladesh. It will be stabilized.

Okay. Got it. And sir, other players are saying that there is more people are trying to shift to India, the textile players which are there in Bangladesh. So are we hearing something from customers? And are we positioned to benefit if there is a shift towards India?

About the textile industry in India?

Yes. The other garment manufacturers which are there?

Mr. Solanki, my personal opinion is that Bangladesh is a huge market and there, the cost of production is extremely low in spite of they import cotton, they import technology, they import chemicals. Apart from that also, it's a huge market. And the globe cannot afford to lose Bangladesh because of their duty structures, because of this import duty structure if it is done from Bangladesh. So it has to be Bangladesh. Maybe because of this political instability, people are thinking for various other options. But let me tell you, once it gets stabilized, everybody will move back to Bangladesh.

Got it. Sir, in terms of our realization for this quarter, it is dropped by 39%. Any particular -- dropped by 39% Q-o-Q from INR 93,000 to INR 57,000. So any particular reason for dyes -- chemicals I'm referring.

What you're saying, please, can you repeat your questions?

Yes. So our realization for the Chemical segment has dropped by 39% Q-o-Q basis. So can you highlight the reason behind this? Because the volumes have grown on a lower base, but ideally, realization should have also been similar. Sir, if you divide a INR 91 crores revenue by 15,000 tonnes of chemical sales.

Okay. So what you are saying is that it has dropped, just a second. Rather I can see there is an increase of 7% from year-to-year, quarter-on-quarter basis. How come you are saying it is 39% drop? I don't see where you saw this figure 39% drop? Because, see, in Q1 FY '24, we did INR 85.7 crores and Q1 FY '25 we did INR 91.6 crores, which is 7% increase, Mr. Solanki.

Maybe, I'll take this question offline. That's not an issue.

[indiscernible] quarter, 11,000 tonnes total sales. And during Q1, 15,000 tonnes.

So it is increased, it is not a decrease. Yes. But Mr. Solanki is saying it has decreased. Sir, rather, it is 40% increase, Mr. Solanki in Q4 FY '24 to Q1 FY '25.

Sir, I'm referring to Q-on-Q, but no issues. We can take this off-line, separately.

[Operator Instructions] The next question is from the line of Nitya Shah from KamayaKya Wealth Management.

Sir, congratulations on a good set of numbers. The first part I wanted to understand was that the solar plant that you have put up, were there any benefits or cost reduction due to that in this quarter visible?

See, about this new plant of 3.8 megawatts, we are yet to get the connectivity, which we are hopeful to get it by the end of this month. So probably half of this quarter, you can see -- about this Q1, you will see in next con call.

So just for my understanding, FY '25...

Plant is completely established, we are just waiting for the connectivity approval from the MSEB.

Right, sir, I understood that. I'm asking that according to you, what would be the cost savings in -- if you could quantify the cost saving for this entire year due to this, which would improve the margins?

See, generally, what we have seen in the past -- because we already are having 2 plants of solar, which is of 2.6 megawatt on DC basis each. Generally, from one plant, we usually get around 32 lakhs to 35 lakhs of units per year as a generation, which can be around close to 3 lakh units per month. And you can calculate the benefit in terms of at least INR 6 to INR 7 per unit because we have been charged by around INR 3, including the losses, charges and the billing charges and other charges also. So on an average, around INR 6.5 to INR 7 is a benefit on the basis of per unit.

So I think this would substantially improve your margins?

Definitely, sir. Because if you see, in 3.8 megawatt DC, we should get close to 48 lakhs of units annually.

Got it. Got it. And sir, in your quarter 1 result, which I saw, at the moment, there was an inventory gain of INR 3 crores. So going forward, do you see any high-cost inventory impacting the margins a little bit in terms of cost of goods sold, not on the EBITDA...

This is an ongoing process. It is difficult to say what we get in the next quarter. Sometimes we are beneficial, sometimes we are looser because once you are in business 24x7, 12 months a year, these kind of gains or losses keep on happening every quarter-on-quarter. So it is difficult to comment on that.

[Operator Instructions] The next question is from the line of Pradeep Rawat from Yogya Capital.

So my question is related to the CapEx that we are doing of INR 215 crores. So out of this CapEx, you have explained in the last question that the savings from Solar Power Plant. So my question was regarding the other CapEx that we are doing. So how much of the benefit can we expect from these CapEx in terms of EBITDA?

See, the total CapEx of INR 215 crores is in various verticals, right, which is Chemical, Fertilizers, Solar as well as in our -- the 100% loan subsidiary also at Madhya Bharat also. So overall, if you see whatever the CapEx we plan and out of our experience, we have seen that generally the repay back of the entire CapEx is within INR 3 crores to INR 4 crores -- sorry, within 3 to 4 years. So whatever we are putting -- anyhow let me tell you, these CapEx are coming and will be coming in, in a phase-wise manner, right? So what you will see this -- our capital -- this invested capital will go high and return on the invested capital, you will see a bit lesser on the basis of that because this is an ongoing CapEx. We believe that the entire CapEx should be completed -- majority of the CapEx should be completed by first quarter of '25-'26. And post that, we will be able to see a very good performance of the company because this entire CapEx, we are trying to get it through internal accrual. I think in March 2024, we have invested INR 50 crores totally towards this CapEx from the internal accruals. Apart from investing INR 50 crores still company maintains 3-digit investment portfolio with it.

Yes. Sir, my question was regarding that our current ROC is less than -- like it's around 10%, and you have done CapEx that could yield a payback period of 3 to 4 years. So would it be a good assumption that in future, our ROC could go up to 20% to 25%?

Sorry, sir, [Foreign Language] But one thing I can tell you, whatever the CapEx you see, whatever the capital employed you see as of now in the financials, right, most of that capital is the CWIP basis. It has not started the production. So therefore, you might be calculating that the returns on the capital employed is less. But once the entire investment gets completed and it comes in a proper streamline, then you will see a different amount of results into this thing. If I'm able to address your question or not yet?

Yes, sir. Sir, just [Foreign Language].

That we can share through our IR. [Foreign Language] we will try to address your questions.

Yes. Okay, sure. And my other question, one basic question. So can you highlight on the growth of the Fertilizer segment that we achieved this quarter? And how we witnessed such good growth? And how do you see future for this segment?

At least about this year, the first season is almost over. And as far as the second season is concerned, what we see as of now in the market, that there is a huge shortage in terms of the DAP, right? And the present import price of the DAP is not workable towards the subsidy provided by the government, though government has given an additional subsidy in terms of DAP for INR 3,500 per tonne. But I don't think that is also be going to be any kind of beneficial to government. Looking at these aspects, DAP will be in short supply. Apart from that, presently, some kind of supply chain disturbances also because of the global -- these geopolitical issues. I particularly see that this season is going to be very good for the Fertilizer business. And we -- hopefully, we are trying to at least get a 20% growth, 20%, 25% growth in terms of fertilizer business compared to the last year.

Yes, understood. And my last question, another basic question. So one clarification, is our Chemical division only majorly serves textile and dye segment, is the understanding correct?

Majorly.

The next question is from the line of Darshil Pandya from Finterest Capital.

Sir, just one follow-up question regarding your guidance that you have given for the full year. Are we maintaining that?

We have given a guidance to at least 15% growth in terms of top line. And because generally, if you see that our quarter 1 is always the most lean period during the whole year. And generally, it keeps on improving Q1 -- Q2 is better, then Q3 is more better and Q4 is the best period amongst what we have seen based upon our experience. And whatever the guidance we have given that there will be minimum 15% growth -- hopefully, to achieve minimum 15% growth in the top line and the profitability will be greatly improved.

Okay. And sir, on the EBITDA margin front, because we've heard you saying 16, 17 kind of percent of margins that would be -- could be doing for this fiscal?

This year, we believe that we should be able to achieve 12% to 13% of EBITDA margin, at least in this financial year. Because after 2 years of the lie down, we are seeing this stabilizing year in this particular year. So I think this will slowly and gradually improve. And in this financial year, we hopefully -- we are quite confident. Not hopeful, we are quite confident that at least we will achieve 12% to 13% of EBITDA margin. And substantially for the next year, '25-'26, we should be back to our earlier margins, which -- major of the distance we will cover in this financial year.

Okay. All right. Got it. Sir, so you said the CapEx would be live by Q1 FY '26. So we are confident on achieving that because...

We're achieving what?

Pardon, sir?

[Foreign Language] confident, sir. Achievement of what? Confident of what?

This CapEx will be live by Q1 FY '26?

Hopefully, we should be able to do that. And I don't see any particular hiccups for not doing so. Because, see, the company has got finances ready with them. We are not banking on any kind of borrowing. The company has got a decent and a very excellent team in the industry. You've got all technical expertise. So I don't see any particular -- any specific hiccups for not achieving it. At the most, this could be just 1 or 2 months here and there, that's all. Nothing else could be there. I hope that's the answer.

Okay. And looking at the fertilizer volume for this quarter, we are confident on achieving 3 lakh tonnes for this year?

Sir, I fail to understand why you are saying confident of achieving the CapEx. Why you are saying confident of achieving sales targets. Sir -- please don't ask me about my confidence. I got better confidence than what you have on your questions. I'm sorry.

Really sorry, sir, if you're upset because -- just asking because the revenue guidance -- the EBITDA guidance at the last meet we got was 16% to 17%, so asking for the confident answer, nothing else.

We always said that the company has got a potential of achieving EBITDA margins to 15% to 17%. I have always said that, still I maintain on the same. But my humble submission to you is that since we have been seeing a depression here for the last 2 to 2.5 years. This year, we see a good business stability and sustainability. In this particular year, we see easy growth of at least 12% to 13% EBITDA margin. Subsequently in the next financial year, that is '25-'26, we are quite hopeful to achieving our early EBITDA margins of 15% to 17%.

The next question is from the line of Dhaval Jain from Sequent Investments.

Sir, I just wanted to know that you told that the Bangladesh issue and whatever the unrest is happening over there. So it might hamper your teams over there at least for 1 month or 20 days. I just wanted to know out of this INR 91 crores of dyes that we have done this year, how much contributes to Bangladesh and how much contributes to Turkey, if you have a number?

Sir, approximately 35% would be contributing to Bangladesh and Turkey.

Out of INR 91 crores, cumulatively? 35% cumulatively of Bangladesh and Turkey together?

Approximately, I'm saying. Out Of total volume -- if you see out of INR 91 crores -- generally, we do annual business of around INR 35 crores also to Bangladesh and Turkey. And the total volume, if you'll see, this is around 5%.

Okay, sir. Perfect. I just have one more question. I think the first part is we mentioned that the realization has decreased instead of the chemical volumes increasing Q-o-Q. Y-o-Y, we see a growth of 7% in revenue as well as volumes of 17%. But I see a dip in the realization Q-o-Q. So I just needed to know the reason for that.

Sir, basically, the prices have depressed in Q1 in comparison with the Q4, and that's a bit dip into this realization. Wherein the volumes we have grown because the raw material prices have come to a stability. Earlier, the prices were a bit on a higher side. So that is mainly affecting that. That is mainly because of the acid business also, that has gone -- increased in Q4 to Q1.

Right. And going forward, like the prices or the realization is going to improve or this is like the bottom down...

Prices have come to a stability. I don't see any major changes into the pricing sector as of now. So this will keep on maintaining in a similar trend.

The next question is from the line of Aditya Sen from RoboCapital.

Sir, can you please throw some light on the demand of dyes and dyes intermediates. Is it increasing Q-o-Q? How is it trending from last 2, 3 quarters?

Sir, basically, business is coming to stability in comparison with over earlier period. And we see that there is a decent amount of demand. And in my personal opinion, the first improvement is visible through the demand, then the second improvement is visible through the pricing. So I see a good demand as of now. And let me tell you, the company is already having at least 35 to 40 days of the order book presently in our hand in spite of our increased capacity in Unit 5 also. We are running our plants up to a decent capacity, and we have a good amount of orders for that.

Okay. All right, sir. And if you can share the utilization of both segments, Fertilizer and Chemicals?

Sir, it is around 70% to 75% of the utilization in Chemicals as well as in Fertilizers, on consolidated.

The next question is from the line of Harshil Solanki from Equitree Capital.

My question has been answered.

[Operator Instructions] The next question is from the line of Pradeep Rawat from Yogya Capital.

Sir, you just said that you have an order in hand of 40 to 45 days. So usually do we have a similar kind of order book? Or is it usually lesser and we have currently more orders in hand given the demand...

Generally, we always have 15 to 20 days order book in terms of fertilizer. In dyes, we have generally 35 to -- almost 1 month order book as well as same with intermediates also, around 15 to 20 days. So now -- on this overall basis, if you will see that we have got good volumes and demand in fertilizers also and in dyes intermediates also. So totally, if you see that we have a good order book for at least 35 to 40 days. But there's [indiscernible] your experience, if you see that the order position has improved. There's a lot of inquiries, a lot of demand also. So overall, the situation has improved, much better in comparison with the last quarters.

Yes, understood. And my next question is a basic question. So our margins have dropped to 8% from a historic margin of 15% to 17%. So can you explain the reason behind it?

Sir, I've already addressed this question in my earlier replies. I said for the last 2 to 2.5 years, the entire industry was in a bit of depression. Now the situation has started improving. And in this particular year, I'm quite confident that the company would be achieving close to 7% to 8% of PAT margin and around 12% to 13% of EBITDA margin.

Yes. And this is particularly to the chemical side, right?

Sir, we always talk about on a consol basis, which includes of our 100% owned subsidiaries as well as our Fertilizer and Chemical division jointly together. Because looking at our business model, we don't calculate segment-wise profitability.

As there are no further questions, I would now like to hand the conference over to Mr. Punit Makharia for closing comments.

Thank you very much. Thank you very much, everyone, for joining our Q1 FY '25 earnings call. We believe that if you have any further questions, please feel free to connect with our Investor Relations Advisor, Churchgate Partners, and we'll be happy to address all your queries. Thanks, once again. Take care.

Thank you. On behalf of Shree Pushkar Chemicals & Fertilisers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.