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Gujarat State Fertilizers & Chemicals Ltd
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Ladies and gentlemen, good day, and welcome to the GSFC conference call to discuss the Q1 FY '22-'23 financial performance. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [ Nitesh Vaghela ] from Anurag Services LLP. Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome to the first quarter earning conference call of Gujarat State Fertilizers & Chemicals Limited hosted by Anurag Services LLP. From the management, we have Mr. V.D. Nanavaty, Executive Director, Finance and CFO; and Mr. Vishvesh Vachhrajani, Company Secretary and Senior Vice President, Legal.
I would like to thank the management for giving us the opportunity to host this call. We will begin the call with opening remarks from the management, post which we will have a question-and-answer session. Thank you, and over to you, sir.
Yes, thank you. Good afternoon, and welcome to all the participants for the GSFC Q1 post-result con call. You must have all studied and seen the good results declared by the company, and the volume performance has been uploaded on our website, which you can see for the [ fuller ] price numbers.
As you know, the quarter was good financially, though there were some hiccups in the production of fertilizers basically due to rising price of all type of input costs, phos acid, ammonia, sulfur. And so the production were off and on [ basically ] during the quarter or [indiscernible] consistently and regular and normal production. In fact, we had shut down a few plants in the last Q1, which was not there. So you will see the higher production of broader products and fertilizer as well as in chemical segment.
But there, methanol price were very remunerative as compared to natural gas price. So we had some production and sale of methanol but thereafter, as you know, gas prices have gone up substantially high, but methanol prices are not rising commensurately. So our methanol plant was also stopped in the later part of '21, '22. Recently, we had -- you might have noticed some short shutdown in urea plant because of some equipment failure, which we are correcting; and shortly, it will be restarted.
As far as the revenue is concerned, due to high natural gas price, the urea subsidy went up substantially high based on the pass-through formula. So urea prices also went up. Immediately government declared good subsidy for P&K fertilizers also.
So on the back of rising subsidies, the realization in fertilizers went up substantially high. And government has tried to see that farmers are not impacted by the rising input costs and the fertilizer prices. So MRP is hardly increased compared to last year and most of the input costs have been absorbed by the higher subsidies supported by government of India.
Otherwise, all the raw materials were at considerably high level in Q1, [ methyl meth ], natural gas, sulfur, ammonia, rock phosphate, all were up compared to Q1 of last year. But of course, now prices have started to soften. So as you can see in the chemicals segment, the realizations are down compared to last year and some of the input costs are also coming down. Like sulfur, in particular, have come down substantially. And ammonia is also -- has reduced a little bit in line with the core prices.
Fertilizer performance, as you can see for the -- very, very good or abnormally high. There's some element of onetime income in that because when the subsidies are increased from 1 quarter to other, it will be cut off coming, so everything that is sold through POS gets higher subsidy. And onetime impact is immediately seen in such a situation.
So that is seen here in the fertilizer results. IP margins were down, but it has started increasing somewhat from August and for capro-benzene, we expect $1,000 spread to be maintained on an average, which is throughout the year. As you know, government has substantially provided for subsidy support of more than INR 2 trillion. And accordingly, government is releasing the subsidy. We have almost received full subsidy of urea for the month -- up to the month of June and for the [indiscernible] also almost third week of June has been covered by the subsidies payment.
So as promised by government and is supported by budgetary support. The subsidy cash flow has been maintained unlike recent past. As we said during the final and year ending con call, we see at least 25% rise in the revenue during the year mainly added by the -- for both the segments.
And with the different projects that we discussed last time on hand, GSFC will keep growing. So we request all of you to keep your interest in GSFC year-over-year. And that -- with this, I will conclude my short overview of the quarter. Thank you.
Should we open up for questions?
Yes, please.
[Operator Instructions] The first question is from the line of A.M. Lodha from Sanmati Consultants.
Am I audible?
Yes, yes. Please go ahead.
Sir, congratulations for a good set of numbers. Sir, I have 2 queries. First -- one is for fertilizer division. Another is for chemical division. And coming to the number around fertilizer division, sir. The sales in the year-on-year quarter 1 of the last year was INR 167 crores. And the quarter 1 of this year is a little bit INR 2,322 crores, whereas the EBITDA has gone up from [ INR 85 ] to INR 500 crores. Can you just put some light on this? So what will be the reason of this extraordinary jump in the EBITDA and can it will continue for -- on the rest of the 9 months?
Yes. So yes, these numbers are, as you know, they're eye-catching compared to the term it is showing. Yes, I will say that because of rising subsidies, the turnover as well as profitability has increased. And there is a, as I said, onetime effect also for some parts because, as you may be knowing, subsidies paid on the basis of point of sales terminal, sales that happen at the retail level when farmer actually buys the fertilizer. So the subsidy claim with government of India is lodged when the buyers -- farmer buys the fertilizer.
So whatever we have basically, it's a long chain, as you may be knowing that fertilizer companies will be selling to dealer. Dealer is reselling to retailer. Retailers are selling to farmer. So there is a time lag between when a company like a factory makes sales and then actually post-sale happens.
So in between, if there is a change in subsidy, then post-sale data taken as for the subsidy calculation and payment. So for something, I have sold it in March '22 but still farmer buys it in June '22 and between the subsidy rate changes like DAP last year, it was INR 33,000. This year, it is INR 50,000, so immediately anyone who sells DAP like this, like INR 17,000 per ton more, so like this, all the P&K fertilizers, subsidies have been increased substantially.
So when this type of situation arises, there is a higher collection of subsidy. And as I explained, supposed something is sold by the factory in March, the DAP, then DAP revenue is booked for INR 33,000 subsidies.
But when we are entitled to, say, INR 50,000 subsidies, immediately INR 17,000 extra is booked as a revenue as well as disclosed in the profit. So that is how the INR 85 crores goes up to INR 500 crores.
Can you put some light on the remaining 9 months? Can we expect good performance? Which is a peak quarter for us, second quarter?
Yes, second quarter is the rainy season, second and third because in third quarter also for Rabi go up, the farmer buys the fertilizer post-sale mid of December or end of November kind of thing. The second and third quarters are good.
You mean to say that second quarter, third quarter will be better there? So far sales are concerned, in quantity one, it is -- it will be better compared to first.
Yes, using the onetime effect, it will be like what you say. Barring onetime effect, it will be a good quarter.
Okay, sir. Regarding chemical division, sir, I guess, sales will bot -- quarter -- a year ago was 600 crores, 500 crores. And in this quarter, it is 738 crores. The sales have not decreased. Whereas the profit from 96 crores a year ago, in the June quarter last year, it came down to 31 crores only.
Right, right, right. And the input costs have gone up. Like crude prices, as you know, went up substantially above $100 and up to $115 or $120. With this crude price all the crude derivatives price don't increase, like we buy benzene, which is made out of crude, but benzene prices goes up, but the caprolactam price don't go up so high. So there is a pressure on the margin.
For natural gas, ammonia, crude, I mean, benzene, sulfur, these inputs have gone up substantially. It's not supporting rise in our finished good prices. So this pressure on margin is there. But as I said, some improvements, we see going forward in this.
Sir, my last question is the -- pertaining to the -- regarding investments. I am an investor. I'm a shareholder of the company. As the investor, I expect there is -- our company is INR 10,000 crore -- INR 9,000 crore to INR 10,000 crore company. [ Foreign Language ] after the payout last year, payout could reduce. Sir, we could have payout after 21%. That would go up millions or something millions [Foreign Language]
[indiscernible] we believe consistent dividend, so onetime profit [Foreign Language]. So debt policy, we don't believe. We want to maintain consistency in dividends so that even in lean years, we don't have to [ like borrow ] from shareholders for lower dividend. Then you will reap through new projects and I mean, good performance aided by good share price. So that is -- that will be the real, I mean, growth for the shareholders, monitoring...
But sir, my [indiscernible] INR 10 into March '21. And lately, it has gone to INR 22 in the March '22. And then your payout -- dividend payouts are 21%, which is reduced to 11%. Consequently, doesn't mean your -- our company is a debt-free company, sir. And we don't have that much of expansion that we have to borrow the money from the outsider, at least shareholders, number one.
Number two, sir, no presentation, no press release, nothing else. What type of company -- how does this INR 10,000 crore company [indiscernible] I think we fail to understand.
That's my point of view. You just present to your Chairman, the MD [indiscernible] shareholders are requesting for the consistent press release and the presentation. Without press release and without presentation, we are in dark. We cannot ask you any questions, sir.
Yes, yes. We will continue appealing to the Board about that, even the expected. And [ you know that ] we are a very conservative company, so we don't...
My request is time has changed and we should be also changing over time, sir. For that, when we are earning the INR 22, you had distributed only [ INR 2 ]. We should have given the INR 5 dividend plus you will be getting the dividend on [indiscernible] Gujarat government. Then you will be getting your handsome dividend this year also. Sir, that is our viewpoint, that [indiscernible]
The next question is from the line of [ Ankur Sanwal ], an Investor.
I would like to know the time frame of execution of various expansion projects, which we are undertaking.
Yes. So right now, as we discussed last time, sulfuric acid fifth plant is under implementation. So that is likely to be completed in '24, early '24. And then we have ammonium sulfate fourth plant that is expected by December '23 and then the HX crystal plant, that is also expected by December '23.
Then we have this -- we are setting up solar power plant, 15 megawatt. That is also expected by middle of June '23 next year. And then we have various project proposal on hand, which are under different stages of discussion and deliberation. So right now, time lines for that is difficult to give, but these are all, what I said is under implementation. So already work is going on.
Sir, what kind of sales realization can we have from sulfuric acid and ammonium sulfate after they are executed? And will the production will be used in-house or will also sell outside?
Sulfuric acid will be for our in-house consumption that is to support ammonium sulfate. So as the word says ammonium sulfate, so sulfuric acid is a part of ammonium sulfate, so that will be in-house.
And ammonium sulfate, that will be sold. We already have 3 plants working. That will bring around turnover of around INR 400 crore to INR 500 crore. HX crystal will bring turnover of around INR 125 crores. And of course, solar is for saving the power cost. So right now these are the numbers for turnover.
The next question is from the line of Saket Kapoor from Kapoor & Co.
Sir, firstly, about the industrial products margins part. So currently, sir, what is the outlook for the current month? And how are the price trends being? If you could give some more color on how IP margins will fare for the coming months?
Capro-benzene spread, on an average, we expect to be $1,000. Sometimes it may go up. Sometimes it may go down. But on an average, we should -- I mean we expect it to be in that range. And melamine, as we saw the prices have reduced in the domestic market, we are trying to sell more melamine in European market to export so that way we are trying to increase the realization.
Nylon 6 is being sold locally, I mean in India only. So price keeps fluctuating. So regarding major industrial products, which form part of the majority of the margin. But on overall basis, it will be considering the crude prices and the natural gas prices, which are unprecedented and I mean, they are driven by something else like the huge European demand because of the Russian embargo on their gas and all these things.
So this input price keeps increasing, but then there is no corresponding rise in our industrial product prices. So I think this year will be the year for fertilizer support to the profit in a large way, we can say overall like this.
Sir, do we have any seasonality factors for IP sales also? Just to -- if you look at the volume data, are the volume data for the preceding quarter, quarter 4 of '21, '22, comparable with what we did for quarter 1?
Therein, sir, we find that volume for, I think, sir, melamine and nylon 6 have gone down considerably from 8,400 tonnes to 6,700.
No, there is nothing like seasonality, but the world economy, not only Indian economy, the whole world economies are affected by the high inflation and the -- all the central banks are increasing the interest rates, so growth and doing new business with borrowing is becoming unexpected. So it is impacting the economies world over.
So India is also impacted. So sometimes the volumes come down. But there is no long-term effect or like this. It will pick up. And as I said, when we don't -- I mean when like melamine, Europe is facing the highest gas price recently. So with those kind of gas price, melamine is not viable, so 2 plants are shutting down in Europe.
So there, we will be selling our melamine because China is dumping a lot of melamine in India. So we'll be selling out of India. But this kind of changing takes year -- sometimes take time to show the effect. So it will pick up. There is no volume problem in IP.
And sir, about the backward integration part, where are we in midst of the CapEx, which we were emphasizing earlier for backward integration, I think, sir, for the rock -- on rock phosphate to the forward integration? And also about the right issues, that application we have done for a company, I think, sir, some 31 crores. So if -- on that point, you could explain what are the benefits that we have derived as of now? I think we heard a considerable stake in the company. So is there any offtake agreement, benefits there? Or are the CapEx baked in?
Right. So that's what we are talking, is about the potash. So you have been knowing that India is 100% dependent on imports for potash. There is no local source of potash. And potash is a primary nutrient, NPK. So this is a basic nutrient required for fertilizers.
So since we don't have any source in India, in the rest of the whole of the country, we invested in that Canada, which is the -- having the highest potash reserves in the world. And they are a democratic country. And they are much higher in the ease-of-doing business all over the world. They're in the first 5 countries in the ease of doing. So like Russia, even if you have a mine, you cannot do anything if you have stake in Russia.
So considering all this, we invested in Karnalyte Resources for potash, and we have offtake agreement for 350,000 tonnes of potash from the first phase with some discount. And these are the potash mines. So mines last for many, many years, maybe, say, 70 years to 100 years. So initially, some problems do come before start of the mine.
But when it starts, then your long-term benefit is available. So we expect that with good potash prices prevailing that viability of that mine will improve. And we'll have some partners joining us there but not starting the project. So we expect some results in, say, around 6 months, maybe by March '23, so progressing this matter should occur.
Currently, these are nonoperational?
Yes, these are...
That is completely nonoperational.
Right. Right. Right now it is nonoperational. On the -- whatever environment clearance, production clearance, [indiscernible] test, all the permits and everything is in place, so with good potash prices, we are awaiting for finance tie-up.
Okay. Sir, because -- just drilling more and then 2 more questions. Sir, in 2013, as per your release, we have -- have made the first tranche of investment. So from 2013 to 2022 [ at North Alkali ], it has not [ hindered ] anything for us. And now it is the time when we will -- they will start with the rights issue. They would be able to do the mining activities and then the offtake will come. Is this the story, Sir?
Yes, yes. Some more fund will be required because if you see from 2013 to 2021, where gas prices were highly subdued. So right now, it is [ $5 90 ] in India, but last year, it was [ $2 80 ]. So before that, it was [ $2 21 ]. So with this kind of price, no mine can work. It is a very low price.
Right. Even in the mix for the fertilizer part, we find that the DAP sales were the highest for this part, the 700, I think so.
[ 300 ] crores [indiscernible]
So for the raw material there, sir, for the DAP?
[indiscernible]
So what I was saying that, for this quarter -- let me say DAP sales increased on like current gas. It has gone up from a quarter-on-quarter basis [Foreign Language] Please correct me here.
[Foreign Language] from DAP, which was produced last year, in this year. So DAP sales is more. [indiscernible] plant for the rock phosphate related debt, discussion is going on. That work is going on. When we will award the contract, we will announce it. So that will make a huge difference in overall turnover and profitability.
Sir, 2 small points and then return the queue. First point is about the capital allocation policy for the company. As you have told that about the dividend part, we are believing more on the absolute numbers rather than the profitability metrics.
We have just one of the earlier participant has mentioned and I second his view. But anyway, that is a Board call and investor points would also be put on plate. Coming to your -- the raw material basket [indiscernible] kindly throw some more light on the same.
And then coming to the volume data part, sir, this volume data, which have been uploaded on the website, was uploaded today, but I think so 2, 3 days post the numbers. So we'd request that volume data to be a part of our numbers so that we get -- all investors get the benefit of reading it rather than looking at the website when the same are uploaded.
And also I request not to remove the previous data, so that we can compare the sale on how the last quarter numbers have been. These are 2 requests. And sir, lastly, on the investor presentation and press release. Sir, kindly look into the assets, sir, companies like, I'm just naming them GNFC, Gujarat Alkalies, everybody is coming up with the presentation. None of them are nonconservative or aggressive companies. [Foreign Language] Sir, rather my short point is. We should get a proper answer. Conservative or aggressive should not be the barometer to decide whether investor presentation and press release should be apart. [Foreign Language]
[Foreign Language] Otherwise, for Q1, Q2, phos acid price has been increased from $1,530 to $1,715. [Foreign Language]
The next question is from the line of Falguni Dutta from Jet Age Securities.
Sir, I just had 2 questions. One is on this fertilizer profit that you said that they are higher because they contain that higher subsidy due to later on POS sales. So sir, will you be able to quantify that amount broadly? What would be the impact of that?
Yes, I mean, say INR 150 crores.
INR 150 crores.
Correct.
And sir, secondly, on this, I just missed your answer. Phos acid price in Q1 you said was $1,530?
Yes, yes -- I mean, not Q1, Q4, sorry.
Q4. Okay. And Q1, how much was it?
$1,715.
Okay. And Q2, has it been finalized?
Yes, it is same for Q2 also.
Okay. And ammonia price, if you can tell me the current one?
Yes. It's between $900 to $1,000. Imported ammonia price.
Imported ammonia. And sir, how much of imported ammonia do we use?
That is mainly used as Sikka unit. Here we get natural gas and from the gas, we have ammonia plant, so we make our own ammonia. But our product costing is not revealed except on segment basis.
No, like broadly, of your total ammonia requirement, how much would be imported?
Baroda is totally active production, and Sikka is totally imported. So Sikka, maybe 1 to 2 lakh metric tonne we bring depending upon the cost economics of running Sikka plant.
Okay. And sir, can you just tell me about the current -- this is the last question -- the current realization and current subsidy.
Current subsidy is INR 50,000, and realization is INR 26,000.
Realization is INR 26,000 a tonne?
Correct. And subsidy is INR 50,000.
And sir, broadly, how are you seeing the demand?
With good rainfall all over, demand is going to be there. So good demand will be there like any year.
So we see broadly, the fertilizer volumes will be same or higher?
I think with Sikka unit economics changing with input cost prices, I think volumes will be compared to almost like last year.
The next question is from the line of [ Guneet Singh from CCIPL. ]
So my question is regarding the margins. If we look at the margins for the last 2 quarters, they have been around 21% and 18%, but for the previous quarters before them, margins have been hovering between 10% to 15%. And also, if we look at the yearly margins, the margins have suddenly improved from around 9% to 10% before 2021. And after 2021, for the year FY '22 and for the trailing 12 months, the margins are around 15% to 16%. So I would like to know whether we can continue the margins that we are seeing right now around 18% to 20% for the coming quarters and the coming years? And what can be the steady-state margin that we can expect? And I also wanted to know the main reason for this increase in margins that we saw in FY '22.
Yes. So margin, because there are broad 2 segments, fertilizers and industrial products. So as I clearly said, we can say that fertilizer will fetch around 5% and chemicals between 10% to 15%, that is a normal margin. For fertilizer, it's showing abnormal margin this time, but this is not a steady state margin we can say. So this is mainly because of higher subsidy declared by government and GSFC being efficient unit, while subsidies are fixed now considering all the players in the field.
So those who are efficient, they get disproportionate benefit. So that is what we've seen in this quarter fertilizer margin. So this is probably the thing. And mainly the chemicals are, they are international parity price linked products. So we don't have our own pricing policy, because imports are free and the custom duties are down in line with WTO requirements.
So if you price your products higher, then people will import and you will have used inventory. So you have to be a real global player even though you are selling within India. So that is how the prices of chemicals are decided. And with China having large volume of every chemical that we produce, maybe it is caprolactam or melamine or nylon.
So they dominate the pricing in the international market. So with large economies of scale and other benefits they have in their country, they build it in the price. So there is hardly any windfall in the chemicals, barring maybe some occurrence like COVID that happened last year, it pent up the price substantially.
Otherwise, it is quite a kind of commodity kind of cycle. So there is a steady state, sometimes you go up, sometimes you go down, but chemicals bring 10% to 15% margin. And fertilizers, as you know, are highly controlled by government. So how do they look at protecting the farmers in this, that decides the MRP and subsidy. So on an average 5% normal margin there.
All right. So for the coming quarters -- right now we are looking at 20% or 18% margins. So for the coming quarters or for the coming years, a steady state of around 12% to 15% is a good number? Or do you think that is bad?
No, no, that is a good number.
The next question is from the line of Vipul Shah from Sumangal Investments.
So what is our annual requirement of phos acid, and phos acid is mainly we are using for production of which products?
So phos acid that we import is used at our Sikka unit, where DAP and PK products are made. So if we run the plant at normal capacity, we produce 7 to 8 lakh tonnes of DAP and NPK fertilizers and that requires 3 to 4 lakh tonne of phos acid per year.
So previously, I think we had a joint venture with Coromandel for procurement of phosphoric acid.
Yes, that is there at Tunisia, TIFERT. It provides some support for phos acid supply, but their production is...
So from that venture, how much quantity we get?
That plant is for 4 lakh -- I mean, 360,000 metric tonnes. So we are supposed to get 50%, that is 180,000 metric tonnes. But that plant is having some social unrest in the country. So it is running at some 30%, 40% only right now. So we are trying to revive and bring it to 70%, 80% but it will take some time.
So we get some support in the 40,000, 50,000 tonnes that we get from there. But there is no price advantage there. It is only supply assurance.
So we get only at market price?
Yes, we pay market price only for that phos acid.
Okay. Okay. Okay, and sir, when I search our website, we don't have any transcripts of our previous calls or any volume data which you have put for this quarter. So for previous quarters, I don't find any data.
So why don't we keep the transcripts of all calls, which were previously done, on our website, and this volume data, plus we should also have a presentation with the result every quarter like all good companies are doing. So these are a few suggestions, if you can act upon it.
Yes, yes. Definitely.
[Operator Instructions] The next question is from the line of Anurag Patil from Roha Asset Managers.
Sir, how is the demand scenario for the caprolactam currently?
No, it is good. There is no problem in demand. Sometimes, as I said, it fluctuates between quarter to quarter due to [indiscernible] not be aware. Otherwise, all our plants are having capacities which are much smaller compared to Indian requirement. So apart from what we produce, a lot of imports take place in India, with good quality materials provided by us. So all our customers prefer to buy from us at the first instance, and balance quantity, they try to import. So there is no question of any demand destruction or demand falling suddenly and we have a lot of inventory. Those situations hardly arise.
Okay. And sir, what was the caprolactum-benzene spread in Q1? And what is it currently?
This is around some $950, and as I said, it is improving from, say, August. It will go above $1,000, I think, in August.
Sir, what was the Q1 average, Q1 FY '23?
Yes, I said, Q1 is around $950, and it is likely to increase. July was not so high, but August it will improve.
The next question is from the line of Jatin Damania from Kotak Securities.
Sir, initially, you said that you have taken a shutdown in the urea plant due to the equipment failure. So when can we expect this plan to be operational?
Yes, it was from some 12, 15 days. So maybe in this week or maybe in early August it will be operational. It's not a major thing.
And sir, you said a few other plants were also shut in the last quarter. Sir, can you spread, I mean, which were the plants which were shut other than the methanol?
No, that I said was last year quarter 1. So there some fertilizer and chemical plants had a normal shutdown. So because of that production last year was less. So you can see the volume data uploaded by us. Some like urea and our production are higher in this quarter as compared to last year. So last year they were having shut down, normal shut down.
So sir, in terms of methanol, now because of the increase in gas prices, the unit is not an [indiscernible] for us. But at what level we will be able to think that we can start the plant again, at what breakeven point?
No, right now gas prices are prohibitive. So it is unthinkable to add methanol. In the first quarter, gas prices are above INR 120 per [indiscernible] or INR 130 per [indiscernible] -- I mean, Kg, or INR 35,000, INR 40,000 per tonne. There's a huge difference of maybe INR 1 lakh [indiscernible] negative gap between revenue and the cost, we can say, negative trade of INR 1 lakh per tonne.
All right. Sir, in terms of the expansion that you mentioned about sulfuric acid plant, ammonium sulfate, solar power plant of 15 megawatts. What is the CapEx that we are incurring for that?
Solar is about INR 85 crores. And sulfuric acid plant is about INR 250 crores. And ammonium sulfate is INR 110 crores. And HX crystal is INR 100 crores.
Okay. So we are almost spending INR 500-odd crores for the expansion. And the incremental revenue that we will be generating will be in the range of INR 400 crore to INR 500 crore, that's mainly through ammonium sulfate, right?
Mainly through ammonium sulfate, yes, yes.
So on the asset turnover, it would be one-on-one. But sir, what additional incremental benefit that we can get from sulfuric acid? Can you basically highlight what will be the improvement in the operating efficiency in margin once the sulfuric acid gets commissioned?
Yes. So we are the largest buyer of sulfur in the country in fertilizers industry. So we have the most fertilizers based on sulfur. No company is having sulfur-based so much variety of fertilizers. So with this kind of sense, we get the sulfur at the cheapest cost in the country. We take sulfuric acid out of [indiscernible] sulfur, and that sulfuric acid goes in ammonium sulfate, so it improves our profitability [indiscernible] over there. And ammonium sulfate is made by FACT and GSFC only in India.
So there are not much suppliers and there is no fertilizer subsidy on the imported ammonium sulfate. So we are the 2 suppliers who service now all India basis. So with this kind of good costing, ammonium sulfate gives us a good margin.
Okay. One last question. As you said that we would see better volumes in terms of second quarter and third quarter. So that will be driven by the chemical segment, or do we have some room to increase the production in fertilizer also?
No. This good quarter, good volume mainly will be in the fertilizer. But overall, for the year, we don't see much volume growth, because of the Sikka production fluctuations. So water is good from rainy season itself.
Okay. So for the full year FY '23, our volume will be flat as compared to FY '22. But because of the higher subsidy and higher realization, our revenue will be about 25%.
Yes. Correct, correct.
The next question is from the line of Pratham Shah from Sanctum Wealth.
Sir, I had a question that last quarter you had given a guidance of revenue top line growth of around 20% to 25% and margins to be 5% to 10% in the fertilizer segment, is that yet on track?
Yes. But growth, as you saw in the first quarter, turnover is much more than 25%. But of course, on yearly basis, we believe that 25% on overall basis in turnover will be definitely there and with margin percentage what you repeated, yes, we believe that, that will be maintained.
So you think you will maintain it. You are not increasing the guidance or anything?
No, right now, because it is too early, and government has declared a subsidy up to September end. So maybe 1 or 2 months they will take up the review of whether to continue this kind of subsidy from 1st October or to reduce. So that will affect our revenue and margins.
So for next quarter, the subsidy will yet be there, no?
Yes, this will be there. There is a subsidy notification that mentioned the period up to 30th September '22. So until then there is no change.
Okay. Also, how do you plan to counter the increase in gas prices? Or you have to take the market price?
No, we have long-term tie-up for gas. So we are not so much affected. But spot prices are very high. So those who don't have long-term tie-ups, they are badly impacted. But fortunately, as I said about sulfur, so for natural gas, we are the first user of natural gas in the country in the fertilizer sector. So we understand methane gas from 1966. So nobody has so much knowledge in this field that GSFC has.
So we have that advantage, and taking that long experience, we have some good tie-ups for gas supplies, and that helps in keeping the gas cost flow compared to others.
Okay. That's great. So basically, you all have fixed prices for gas price and for some amount of phos?
No, prices are not fixed, but we have good formula for pricing, which are not available now. So early mover advantage, along with a good volume of natural gas that we buy, that helps us in better negotiation and better contracts.
Okay. Also the urea compliance by the government for the urea plant. For one plant last time you had said there is some debottlenecking compliance from the government. Is that done?
Yes. So we are requesting government to help us, because that urea plant revamping to meet new energy norms, that CapEx is more than INR 400 crores. So we are requesting that some support should be there, because government is taking away the advantage of lower energy in form of lower subsidy. And then asking us to incur CapEx, for which we will not have any advantage. So we are requesting that government should not take away both the things, at least one part should be kept with us, either they provide CapEx support and then they take away the energy savings.
Or we spend on CapEx, but allow us to keep the energy saving with us. At least one should be done. The government will do something. They are thinking over on this.
So you think this request will be taken?
Yes. I think government is sensitive because we are saying that in '21, '22, government spent highest price of imported urea to the tune of $1,000, while our urea hardly costs $400. So instead of foreign suppliers enjoying all the benefits of rising urea prices, but local manufacturers are given all these challenges of reducing energy and spending INR 400 crores CapEx. So this is not fair. So to encourage local urea manufacturers, some support should be there, instead of giving the new subsidy to the urea exporter to India. Some cushion for Indian manufacturers should be there, which government believes that yes, something should be done. So let us for some support comes.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Nanavaty for his closing comments.
Yes. Thanks, everybody, for analyzing our results in detail and suggesting some good steps for investor communication and enlightenment. So we'll request company secretary to preserve those archives in the investor section, so that data about past years are readily available.
And as we said, we will convey your feelings about higher dividend to the Board next time. So that is well taken. Otherwise, as we discussed, GSFC's story remains intact and this company will keep on growing and all the more under the Atmanirbhar initiative of Government of India.
We will be doing all the support that we can do, of course, subject to viability of new projects that you can take for sure. No compulsions from any sector about undertaking any unviable project. So that is for sure.
So we have a good pipeline of projects that will unfold as and when the time matures. And as I said earlier, we have a good set of land at Dahej. So the next phase of development will come in Dahej as well as in Sikka, and it will be almost like Baroda unit with application over a period of time.
So company will keep growing. Thank you. Thank you for all the efforts and looking forward to see you after the Q2 results. Thank you.
Thank you. Ladies and gentlemen, on behalf of GSFC, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.