Deepak Fertilisers And Petrochemicals : DFPCL Q3 FY 2023 Earnings Call Transcript

9th February, 2023
The Secretary	Listing Department
BSE Limited	National Stock Exchange of India Ltd.
Phiroze Jeejeebhoy Towers,	Exchange Plaza,
Dalal Street, Fort,	Bandra - Kurla Complex, Bandra (E)
Mumbai - 400 001	Mumbai - 400 051
BSE Code: 500645	NSE Code: DEEPAKFERT

Subject: Management Transcript of Q3 FY 2023 Earnings Conference Call

Dear Sir / Madam,

Pursuant to the Regulation 30(6) read with Part A of Schedule III of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015, please find enclosed the Management Transcript of the Earnings Conference Call held on 3rd February, 2023 to discuss the financial results of the Company for the quarter and nine months ended 31st December, 2022.

The transcript of the Q3 FY 2023 Earnings Conference Call will also be made available on the website of the Company i.e. https://www.dfpcl.com/.

We request you to take the same on your record.

Thanking you,

Yours faithfully,

For Deepak Fertilisers

And Petrochemicals Corporation Limited

RITESH CHAUDHRY

Digitally signed by RITESH CHAUDHRY Date: 2023.02.09 16:55:34 +05'30'

Ritesh Chaudhry

Company Secretary

Encl: as above

Deepak Fertilisers And Petrochemicals Corporation Limited

Earnings Conference Call

Q3 FY2023

Earnings Conference Call

Q3 FY2023

February 3rd, 2023

Management:

Mr. Sailesh Mehta - Chairman & Managing Director

Mr. Amitabh Bhargava - President and Chief Financial Officer Mr. Mahesh Girdhar - President, Crop Nutrition Business Mr. Tarun Sinha - President, Technical Ammonium Nitrite Mr. Deepak Balwani -Head Investor Relations

Hosted by Dolat Capital

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Deepak Fertilisers And Petrochemicals Corporation Limited

Earnings Conference Call

Q3 FY2023

Moderator:Ladies and gentlemen, good day, and welcome to the Deepak Fertilisers and Petrochemicals Corporation Limited Q3 and 9M FY '23 Conference Call hosted by Dolat Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tejas Sonawane from Dolat Capital. Thank you, and over to you, sir.

Tejas Sonawane: Thank you, Seema. Good afternoon, everyone. On behalf of Dolat Capital, I would like to thank the management of Deepak Fertilisers and Petrochemicals Corporation Limited for giving us the opportunity to host their Q3 FY '23 Earnings Call. From the management team, we have with us today, Mr. S C Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President, and Chief Financial Officer; Mr. Tarun Sinha, President, Technical Ammonium Nitrate; Mr. Suparas Jain, Vice President, Corporate Finance.

Without further ado, I would like to hand over the call to the management for their opening remarks, post which we will open the forum for a Q&A session. Thank you. And over to you, sir.

Sailesh Mehta:Thank you. So thank you, Tejas. A very good afternoon to everyone. I'm pleased to welcome you to the Q3 FY '23 earnings call of DFPCL. I hope you've had the opportunity to review the financial statements, press release and earnings presentation available on the exchange and our website. So at the outset, let me share that I'm once again very happy to share that for Q3, again, our top line grew by 40% over last year, and the bottom line also grew by 40% over last year. On the 9 month front, we have seen a top line growth of around 50%, but the bottom line growth has been 138%.

Now, this has been in the face of headwinds coming from raw material, I would say, jumps. In ammonia, we saw 84%, phos acid 80%, gas around 96%, potash 103%. So, I mean, virtually every raw material, we saw a massive hike. And this is something that we have been able to pass through and more. So at the undercurrent level, what we saw that has been validated and validated quite strongly that all our three product lines, meaning the industrial chemicals, mining chemicals and fertilisers.

Now it is beyond doubt that they are very strongly aligned with the India growth story and which is why despite the finished product pricing also going up to accommodate for this raw material price hike, we have not seen any demand reduction, and in fact, to the contrary. So that is one aspect that, that undercurrent level, very strongly, this has been established. The second, of course, has been internally our operations, supply chain, management competency, So, all of that also has been very strongly validated, and that has helped to, in somewhere, right through some of these headwinds. The third and the most important thing is that we are finding increasingly a very positive traction in our journey from commodity to specialty. And if

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Earnings Conference Call

Q3 FY2023

I might just share that one were to take, let us say, our technical ammonium nitrate business, that this journey moving from product to holistic services, what we call as TCOD, the total cost of operations and also moving from this selling a product to our customer, the industrial explosives companies to our consumers, which is mine, that is something that more and more we are finding a very strong, I would say, positive validation that, that is the right strategy. Similarly, in the fertiliser business, the shift from, again, commodity NPKs to crops-specific NPKs and also our very strong focus from just focusing on the channel that is our customer to a very strong focus on our farmers, the consumers.

In the industrial chemicals, the group also, in terms of moving from commodity IPA to focus on somewhere the pharma grade IPA and segmenting the market, delivering to those segments what is specifically required for them, including solar grade nitric acid or the like. So from a strategy perspective, if I look at the common underlining strategic shifts that we're bringing in all the three businesses are somewhere bearing fruit, which is number one, moving from commodity to specialty, which is a combination of product and technical services, which, of course, in the long run, will create also a very good brand.

The second is this very tough, but very strong drive on moving from customer to consumer, and finally, of course, moving from competition pricing to value pricing. So, these are things which are, I would say, transformative shifts which are bearing fruit in terms of also the financial result, but it is also something which will provide a long-term, I would say, strong foundation and trust for us going forward.

As far as the project goes, the ammonia project as last time also I had mentioned, it continues to be on a real fast track, and we are almost 93.5% completed, and we are now in the peak of the pre-commissioning activities, and we do expect to commission the plant by the first quarter of FY '24. There I would want to also share that we have succeeded in tying up almost 40% of our gas requirements and these are basically brent-linked, so that, in case tomorrow, as the crude changes, we also get the positive benefits out of it. And of course, it's at a very attractive discount over the current spot.

Going forward, we are looking forward to, now, there will be the large Reliance auction and it's going to come in, I would say, 2 or 3 slots. There is a fair degree of domestic gas that's going to emerge, Reliance and ONGC. And we are in very, very close touch with other global LNG giants and with good intense discussions happening. So very shortly, we should be able to look at a long-termtie-up on our gas needs.

The other at a larger dimension that you may be aware of that, we've taken up the demerger exercise for value creation. And since we saw now all the 3 businesses from a top line, bottom line and capital allocation in terms of assets, reaching a size where it would be something where on their own steam, each one of them could be something that could be placed in different corporate entities.

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Deepak Fertilisers And Petrochemicals Corporation Limited

Earnings Conference Call

Q3 FY2023

	So that end-to-end, right from Board members to the lowest level, the focus remains on that
	specific business. And that would bring a much stronger alignment of strategy and people to
	the business requirements. And so we have kick-started that where Deepak Fertiliser continues
	to have the industrial chemicals business, and a 100% subsidiary of Deepak Fertiliser was STL,
	where we had housed the fertiliser business and the technical ammonium nitrate business.
	And now what we are looking at is putting those also into separate corporate entities as we go
	forward. So, we are in the thick of the NCLT process, and we are looking forward to that
	unwinding to then have focus businesses into focus corporate entities. And that will bring in a
	lot of value creation. So with these thoughts, I now hand you over to Amitabh, our CFO and
	President, Finance, to take you through the detailed financial overview and the operational
	performance highlights. And then, of course, he and the team are there to provide any further
	clarifications that you may need. Thank you. Amitabh?
Amitabh Bhargava;	Yes. Thank you, Mr. Mehta. Good afternoon, ladies and gentlemen, and thank you for joining
	the Deepak Fertilisers and Petrochemicals conference call to discuss the quarter 3 FY '23
	results.
	During Q3 FY '23, we reported a total operating revenue of INR 2,755 crores, an increase of
	40.9% Y-o-Y compared to same period last year. Our operating EBITDA increased to INR 461
	crores compared to INR 352 crores in Q3 FY '22. Operating EBITDA margins were at 16.7%
	during Q3 FY '23. Our net profit for the quarter recorded a growth of over 39.7% Y-o-Y to INR
	252 crores with margin of 9.1%.
	During the quarter, our chemical business recorded a revenue of INR 1,615 crores, an increase
	of 37% compared to Q3 FY '22, with segment margins of 28%. Manufactured pharma chemicals
	recorded sales of INR 454 crores, an increase of 19% Y-o-Y. Manufactured mining chemicals
	business recorded a sale of INR 994 crores, an increase of 50.4% Y-o-Y during the quarter. Coal
	India overburden removal, overall production grew by 21% Y-o-Y and by 53% quarter-on-
	quarter.
	Its coal production grew by 10% Y-o-Y and 29% quarter-on-quarter. In sales volume, volumes
	declined by approximately 10% year-on-year in TAN segment, mainly because of the delayed
	demand as far as the infra-segment is concerned or non-coal segment also, and also there were
	imports, resumption of imports from Russia. Project funding for TAN greenfield was secured
	with a total debt of INR 1,541 crores, with a 14-yeardoor-to-door tenure.
	Quarter 3 fertilisers segment revenue grew by 47% Y-o-Y to INR 1,134 crores with segment
	margins of 5%. Reservoir levels in key operating geographies are well above the normal level,
	and we are expecting good rabi sowing. We received the sanction of Industrial Promotion
	Subsidy claim for FY '20, FY '21 and FY '22 of approximately INR 25 crores from Directorate of
	Industries, Government of Maharashtra. Also, ADB Blue Loan first tranche of $15 million was
	disbursed in November 2022.

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