Chambal Fertilisers and Chemicals Ltd
NSE:CHAMBLFERT
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
308.65
558
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Chambal Fertilisers and Chemicals Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Chambal Fertilisers and Chemicals Q1 FY '23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India.
Thank you, and over to you, sir. Good day, everyone. Thank you for joining us on the Chambal Fertilisers & Chemicals Q1 FY '21 Earnings Call. We have with us today Mr. Abhay Baijal, Managing Director; Mr. Anand Agarwal, CFO; Mr. Anuj Jain, Assistant Vice President, Finance and Company Secretary and Mr. Ashish Srivastava, Vice President, Sales and Marketing. Before we get started, I would like to point out that some statements made or discussed in the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks the company faces. Chambal Fertilisers and Chemicals does not undertake to update them. A statement in this regard is available for reference in the presentation. We will begin this call with opening remarks from Mr. Baijal. I would now like to invite Mr. Baijal to share his views. Over to you, sir.
Thank you so much, Rishab. Good day, everybody, and a warm welcome to all of you participating in this call. It is indeed a pleasure to reconnect with you on this call. We are happy to share our performance over the just concluded quarter, which is... [Technical Difficulty]
Ladies and gentlemen, the line for the management seems to have disconnected. Please stay with us while we reconnect the management. Ladies and gentlemen, we thank you for your patience. We have reconnected with the management. Over to you, sir.
Sorry for the inconvenience. I restart my statement. Good afternoon, everybody, and a warm welcome to all of you participating in this call. It is indeed a pleasure to reconnect with you on this call once again. We are happy to share our performance over the just concluded quarter, that is Quarter 1, '23 '24. Since we have already shared the presentation on financial performance, I shall not spend time repeating the numbers in my opening remarks. Our urea business continues to do well. All our units have been operating at optimal capacity, and our production of urea stood at 8.89 lakh metric tons. Subsidy collections during the quarter were timely and they have lately accelerated. The budgetary allocation for the current space is adequate to cover up for the subsidy pain during the year, which is a very heartening feature this year. Due to the delayed monsoon disturbances due to [ Cyclone Bipar ] and the [ Balasore ] drain accident, the movement of material was restricted and affected our P&K sales by about 30%, which is expected to be made up in the next quarter. At the same time, the prices of DAP and NPK phosphatic fertilizers have declined during the quarter, but of late has started moving up. Our technical ammonium nitrate project is on track. The project, as you know, was awarded to Larsen and Toubro and the technology license [indiscernible]. Our crop protection chemicals and Specialty Nutrients business continues to grow strongly. The business has grown by about 25% in volume Y-o-Y and 17% in value Y-o-Y. We are seeing very encouraging progress in our new products, which were primarily for sugarcane, rice, soybean and cotton crops. Our Seed to Harvest program continues to make very good progress. In the first quarter, Chambal Fertilisers reached out to 2.3 lakh farmers retraining programs and tested 39,000 oil samples. This has encouraged very good relationships with our farmers and is creating [ ready ] opportunities. With that, I will now take your questions.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. [Operator Instructions] We have the first question from the line of Vidit Shah from IIFL Securities.
My first one was just some data points around the sales of the Gadepan unit and the average gas cost that we had in the first quarter.
I'll request Anand to go through that.
Yes. So Gadepan 3 production was 3.7 lakh tonnes, and the average gas cost was $16.87 on an MCV basis.
Okay. How much is it right now?
Is around $16.61. Yes, provisional. So generally, we get monthly in provisional. And then after the completion of the month, they give us the final number.
Okay. And on the P&K fertilizer volume degrowth that we have seen, you expect this just to be covered up in 2Q. So would it be fair to assume that we covered it up fully? Or do you still see some volume loss because of all the movement restrictions that we had in the previous quarter?
So as for the stocks are concerned, whatever we have in hand, which we are going to sell in this year, we will largely make it up, but that also depends on further imports, which are subject to viability liability calculation. I would say that more than half of what we have lost to [indiscernible].
Okay. Got that. And have we been deliberating on further CapEx plans and expansion plans and use of free cash flow. Any update on that, that you could share or where we are?
Yes, we are very clear as of now, efficiency initiatives in Gadepan I and II pursuing asset-light growth in the crop protection and specialty nutrients. And looking for value-added initiatives in the nitric acid or migrate chain, these are the trust areas for the time being, of course, when we are looking for another big one, these are some of the things that we are already going through or getting to some closure on. And the pipeline of this actually is around INR 1,900 crores to INR 2,000 crores. So that is total -- that CapEx is going to take it up to about 25, 26-time frame, and then we'll take it on from there.
Okay. So you're talking of INR 2,000 crores over the next 3 years. Is that right?
Yes. Okay. We are continuously evaluating all efficiency initiatives in Gadepan I and II, which put whatever has been frozen till now and plus what we will do more. And anything more that we might do on the nitric gasses chiang, the nitrate chain. That is another possibility. But we are at the [indiscernible], embryonic in the sense that we are going through some calculations or discussions. And we will keep rolling these things forward at the moment. And as I told you, the asset-light structure on CPC asset is a very, very key focus area.
Okay. Got it. And just if you could share an update from the ground of [ Nano Urea ]? Are you seeing any market share of traditional fertilizers being eaten up or right it still remains largely muted across all devices?
See my view on Nano is said and what I get the brief from my market and people is that it is too early still to make an accurate prediction as to what is the substitution that it will do. What I understand is that farmers do try it in the full year application rather than the base application which means that its use is limited only once the crop has grown to a particular height. And there too, our own experience in various places is that it is [indiscernible]. Sometimes it works, sometimes don't work. We do not really know what is the 3 or 4 conditions that are necessary and sufficient to make it. So it is an evolving process. As of now, we have not seen any substitution of now.
The next question is from the line of Darshita from Antique Stockbroking.
So my first question is regarding the retrospective subsidy cut, if you saw any impact during the first quarter?
The subsidy that was announced by the government was not -- I mean there were 1 to 2 issues there. One was a catch-up on the September to December quarter, which was there, which was already taken into the previous quarter. And then there was the new which was applicable from April onwards. We haven't seen any effect of that on our profitability. Going forward, it's still too early to say any.
All right. And as you mentioned in your opening remarks that your [ DAP prices ], whose ideally have started to go up, they were going down during the quarter and now they started to show some signs of revival. So your view on how do we see the MBS rates going for the second half of the year? What is your view on it?
Darshita, can you repeat your question, we have not got a very clear input of what you really are in the first part is completely…
Sorry. What I was saying was that you mentioned in your opening remarks that DAP prices were going down during the quarter, but now they have started showing some signs of revival. So I wanted to understand your view on how NBS rates would pan out for the second half of the year.
That's a very tough question. That's a very tough question. See, the point is we are still in just closed in July. These things are normally announced in the middle of the rabi season, which is we are talking in the time frame of 31st October or around that point of time. It is extremely difficult to relet the government's mind as to what their thinking is. Governments always work with precedent. They will always wait to see some data. And only when they see the data, then they start forming an opinion. Definitely, the numbers that we are seeing at the moment show a form upfront. This is [indiscernible] there as far as ammonia is concerned, it is there in urea as well. So it's a general uptrend. And there are for that. But the government is waiting and watching. That's all I can say. So very difficult for me to make a comment on what the government will do on or around 15th of October or so.
Right. And just again, a speculative question, like a follow-up on that. And I just want to understand your view on this. After the government announced NBS rates for the first half of FY '24, now for the second quarter, we have further seen your first asset prices coming down. So is there a possibility of government coming in again and announcing something like a retrospective subsidy cut sometime in the second half of the year as well, something similar to what we saw recently?
I don't think there is a retrospective cut in the offing personal because what we had to do a catch-up on in terms of the January to March number or rather, which was basically a September to December number, which we should have done in January, but if that was their intention we did a catch-up on only in April. I don't think that kind of an issue is going to happen again. That was more or less because of a certain commitment made, et cetera, a very long story. But I don't want to get into that, but I don't think the government are looking at that retrospective.
Okay. All right. And just one last question. I wanted to outstanding subsidy split between the subsidy for POS sales and the subsidy outstanding with the dealers.
I'll let Anand to answer that.
So the overall subsidy outstanding for the company is around INR 2,600 crores as of June end.
And I just wanted to understand the split between the ones – I mean for the POS sales like the inventory for which the sales has already been done and outstanding with the dealers, if you have the state for the scene.
Darshita, my understanding is that subsidies payable only on postpaid so that is a final number. And beyond that, there is nothing in between. So we accrue subsidy amount of the accrued subsidy. But we actually received the cash only when the post-sale is completed.
Okay. So the outstanding number, the INR 2,600 crore number includes just the port sale [indiscernible].
Right. It includes a group and bid, but not [ bill ].
Right. So I just wanted to split between that increase. Okay. So you're saying you've already received the money for the costs.
Most of this -- see, I would just like to go this year that July, we saw a very good flow, very good growth. And most of our borrowings have been squared off except for the long term. That's all.
[Operator Instructions] The next question is from the line of [ Dewang Saraogi ] an Individual Investor.
My question is, what would be the expansion plan in crop protection and specialty nutrients business? How big can this business be for us in next 3 to 5 years?
See, as I said, the CPC that is crop protection in specialty [indiscernible] asset-light subset. The growth that we have seen is definitely sustainable. We are working with some experts to see what further areas to make into and what geographies, what crops, what specific molecules to look into and work on that basis to see that we at least grow this business were another 40%, 50% decreased, and that is on turnover as well as profit and in the 2-year, 2.5-year time frame. Now for that, various strategies and thinking as we put into place, we are extensively working with our people, our own team as well as some exports to come back on that. So at the moment, that is a vision, and we are working on that to how to achieve that. And we think with our rates in almost 7,810 stakes that is West Southeast, not South but rest is not. We have enough coverage in order to work on the market depth and reach to do what we think is possible.
And one more question. Are we going to look for an opportunity for merger or acquisition in this space?
I made the point about asset light. Should there be any good asset available? We are not averse to that. But we have to find the right metrics of pricing as well as profitability and are fit with us. Sometimes it happens that you get 1 or 2 options. But then they are either too highly-priced or there are issues in terms of the fit with us. So all of that, we have to consider before we get into this.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
So thank you very much for all those who questioned us. I hope we have been able to give adequate information till we meet next time [indiscernible]. Thank you.
Thank you. On behalf of Chambal Fertilisers and Chemicals that concludes this conference. Thank you for joining us. You may now disconnect your lines.