Chambal Fertilisers and Chemicals Ltd
NSE:CHAMBLFERT
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Chambal Fertilisers and Chemicals Ltd
Earnings Call Analysis
Q1-2025 Analysis
Chambal Fertilisers and Chemicals Ltd
Chambal Fertilisers and Chemicals Limited has reported robust financial results for the first quarter of FY 25. Standalone EBITDA reached INR 942 crores, up 21% from INR 778 crores in the previous year, while profit after tax (PAT) grew by 18% to INR 552 crores, compared to INR 469 crores in the same period last year. At the consolidated level, PAT surged to INR 448 crores, reflecting a 32% increase from INR 339 crores last year. These figures highlight the company’s effective operational strategies and profitability amid favorable agricultural conditions, including improved monsoon forecasts and higher crop acreage.
The company’s crop protection chemical (CPC) and specialty nutrients divisions are performing well, achieving new product launches that comprise eight new offerings, mostly weedicides and fungicides. The segment continues to enhance its market margins, driven by a focus on high-value crops like fruits and vegetables. The introduction of innovative biological products, such as the Uttam Pranaam Bio Nano Phosphorus, produced through a unique biogenic process, demonstrates the company’s commitment to sustainability and efficiency.
Chambal Fertilisers is building strategic partnerships with innovators and focusing on enhancing its distribution channels. The company’s collaborations aim to deepen market penetration, enhance sales capabilities, and expand product offerings. During this quarter, the CPC segment experienced a 16% revenue growth, with contributions from new product volumes offset by a 2% to 4% price decline, indicating a balanced growth approach through volume-driven strategies.
Looking ahead, the company plans to diversify its pipeline by introducing more biological products, particularly fungicides and nematicides, which are expected to bolster revenues in the next 6 to 12 months. The ongoing trials and trials for eco-friendly biostimulants reinforce Chambal's commitment to innovation. The goals for product acceptance and market expansion are set to gain momentum, particularly with traditional methods receiving sustainability focus.
Chambal's urea business is operating at optimal production capacity, with the company achieving a production figure of 9.03 lakh metric tonnes in the quarter. Improved energy efficiencies in its Gadepan plants are yielding better-than-expected results. The emphasis on energy-saving projects aligns with its goals of becoming industry best in class, focusing on sustainability while maintaining operational competitiveness.
Financially, the company showcased strong cash flow, receiving subsidies amounting to about INR 2,300 crores in the first quarter, and has successfully eliminated long-term debt. This proactive debt management strategy positions the company favorably for future investments and expansion initiatives. The management's focus on maintaining strong relationships with dealers and farmers through digital communication further enhances its market position.
However, challenges lie ahead in the fertilizer sector, primarily regarding price variances due to fluctuating subsidies. For instance, there has been a decline in DAP and MOP subsidies, which impacted overall pricing strategies. Future pricing adjustments and government policy related to the subsidy structure remain critical components that could influence margins and growth in the remainder of FY 25.
In summary, Chambal Fertilisers and Chemicals Limited has navigated the complexities of the agri-input sector effectively, showcasing strong quarterly growth, commitment to innovation, and robust financial management. Investors should remain vigilant of market dynamics in the fertilizer and crop protection sectors while also considering the company’s proactive strategies in product development and market expansion.
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Ladies and gentlemen, good day, and welcome to Chambal Fertilisers and Chemicals Limited Q1 FY '25 Earnings Conference Call. [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, and thank you for joining us on the Chambal Fertilisers and Chemicals Q1 FY '25 Earnings Call. We have with us today Mr. Abhay Baijal, Managing Director; Mr. Anand Agarwal, CFO; Mr. Anuj Jain, Assistant Vice President, Finance; Mr. Tridib Barat, Vice President, Legal 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. The 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, Rishab. Good day to everybody, and a warm welcome to all of you participating in this call. During the quarter, on a standalone basis, the company has achieved an EBITDA of INR 942 crores as against INR 778 crores last year, which is a growth of 21% and a PAT of INR 552 crores as against INR 469 crores, showing a growth of about 18%.
At the consolidated level as well, the company has performed, registering PAT of INR 448 crores as against INR 339 crores last year, with a growth of 32%. As much are aware, the country has received good range, resulting in higher acreage till date. Agencies are forecasting a better precipitation for the balance period, which are good signs for the agri sector.
Our crop protection chemicals and speciality nutrients business continues to grow strongly with better margins. We have launched 8 new CPC offerings primarily comprising weedicide and fungicides. We have added 4 products in the pipeline, all of which has introduced in the current financial year. Our focus is to cater to high-value crops like fruits, vegetables and niche crops.
We are also focusing on further harnessing our channel strength to increase the market, width and depth, our strategic partnership with innovators is ongoing and growing. We have introduced new products, 6 in the weedicide and 2 in the fungicide segments. Our focus on biologicals is also showing good results.
Then we have introduced Uttam Pranaam, Bio nano Phosphorus, a unique product produced through biogenic process having 10% P205 under the biological vertical.
We have developed this product in collaboration with TERI and the response till date has been very encouraging. We are also working on new biological products, especially for fungicides and nematicide to be launched over the next 6 to 12 months, for which trial are already on. We are also analyzing and testing some eco-friendly biostimulants, and we are very confident of launching a variant in the near future.
Our pipeline continues to diversify and grow in this segment. Our new focus area is to enter into hybrid and research variety seeds, which will complete the agri input products profile. Our urea business continues to progress well. All our units have been operating at optimal capacity in our production of urea. In the quarter, 9.03 lakhs metric tonnes. Energy saving projects that were implemented in the ATR in March '24 for our Gadepan 1 and 2 plants are giving better-than-expected results. And our focus continues to remain on improvement in plant corporations and implementation of various energy schemes to remain the best in class.
In P&K fertilisers, we continue to follow the portfolio approach. The product portfolio is being optimized based on geographical requirements and viability. Our cash flow have been good. We received about INR 2,300 crores of subsidy first quarter. And we have prepaid our long-term loans and we have 0 long-term debt in the company. Our emphasis on maintaining strong connect with both dealers and farmers continues. Communication via digital channels is delivering good results, we launch product display contest across territories, which has helped us to enhance visibility and connect with the farmers.
As part of the Seed to Harvest” program, a key focus area for Chambal, we undertook more than 1,200 farmer meetings, conducting over 700 demos and 124 soil sample base to collect over 43,000 soil samples in Seed to Harvest” territory. Our joint venture IMACID also performing well with higher production and better margins. Our TAN project is progressing as per plan, statutory approvals are in place, and we have spent about INR 342 crores during June 30, 2024.
Orders for all long-lead items have been placed, construction is progressing well. Several of the long lead items have also been inspected for various milestones, and there are no showstoppers there. We continue to look forward to create value for our stakeholders. And with that, we will be happy to take your questions. Thank you.
Sir, shall we open the floor for questions?
Yes, please.
[Operator Instructions] The first question is from the line of Prashant Biyani from Elara Securities.
Sir, referring to your Slide 4, the 100 metric tonne per day increase in production capacity for G1, G2 combined, would this mean that you can make more urea with same amount of ammonia?
No. There is a particular ratio to urea to ammonia that chemical proposition does not change. What it means is that the background ammonia itself has increased. To that extent, the throughput has increased.
And sir, with increased ammonia, you would like to make more urea or produce more of surplus ammonia?
No, we are producing both. And in fact, we continued both. So there is a production plan. We are going accordingly to that.
And sir, how much is the incremental surplus ammonia that will generate from this?
See, if we are producing 110 metric tonne per day increase, obviously, there is 60, 65 tonnes increase in ammonia by a bad calculation.
Okay. But that will get only if we don't generate -- don't make urea. If you make urea, then that ammonia will be used for urea only?
Yes. It is basically when we have said 110 tonnes per day increase in production capacity, this is basically for urea. Supposing we are -- there is also a balancing between the 2 plants, it could be that sometimes we are producing 75 tonnes. So 10 tonnes may become surplus, or 5 tonnes may become surplus. That is from time to time.
And sir, is it also on your discretion that, for example, if ammonia prices go up, you may rather want to produce more of ammonia rather than this extra 100 metric tonne per day?
So it's not normally like that, not normally like that. It is -- I'm not saying that there is no discussion. But in the production plan, we tend to also support the government in their requirements for urea.
Right. And secondly, sir, what has driven this 40% growth in contribution profit for CPC and SN?
For that, I will hand over back the mic to Mr. Ashish Srivastava.
Can you hear me?
Yes.
Okay. So this is an approach of an advanced placement scheme which is yielding results for Chambal so far.
Okay. So this is more than by advanced business?
Not only that. That is one part of the strategy. The other thing is that this year, because of our -- the way we have chosen our products, we had a good growth in our overall revenue also, and we have a good growth in our margins also. So both together, the 39%, 40% growth is coming.
And Prashant, you must remember that when we have said that good results are coming from biologicals, so to that extent, some of the uptick is also from the biologicals.
[Operator Instructions] Next question is from the line of Harmish Desai from PhilipCapital.
Sir, can you please provide an update on IMACID? How is IMACID doing right now?
So Harmish, Anand here. I think IMACID is doing well. And what has helped us in IMACID to improve our realization is that the input prices have softened a bit there and our production has also been more compared to last year in Q1. And therefore, our margins are higher.
Understood, sir. And do you expect this situation to continue for the rest of the financial year?
I would say that you have to benchmark it against the global DAP situation or the global retentions of phosphoric acid as such. And since most of the production in the market is directed towards the Indian market and given the fact that the DAP prices are firming up, we feel that the price at which they will sell phosphoric acid because that is their basic output, that would remain stable.
So unless they could repeat the performance in this quarter. And maybe again, subject to the fact that they don't have any blackouts in production or problems in production. I would say that they would be able to repeat the performance in this quarter at least.
And sir, can you please provide some update on this Uttam Pranaam product? I know that there's a mention on the slide, but how do you see this product going ahead and contribution? Because nano Phosphorous, I think this is our first product. So if you can just please provide some update on that.
Okay. So the differentiation comes from its sourcing. This is the only product in the ecosystem, which is coming from a bio process. It is bacteria is taking out phosphorus from rock phosphate and at the same time, eliminating the trace elements. So this is the only product which is coming through a biogenic process. That makes the product differentiation. And since the application is initially with the seed, so the initial results are good. We have already treated around 76,000 acres of land with this product.
So any target on how much do you want it to grow? Have we placed any target for FY '25 to FY '26?
So Harmish, the fact is that this product has to be handled -- we are doing marketing, and we are doing trial demonstrations and so on. As the acceptance of the product growth, I would say next year onwards, the growth will be much, much steeper than what we are seeing. For your information, we have sold, how many bottles?
So Harmish, for the first quarter, we have sold around 23,000 liters, that is around 78,000 liters, so divided by 4. So that is -- that translates into around 19,000 liters of material in quarter 1.
8,000 bottles.
Yes.
How is it priced?
So almost 1 lakh bottles, which generated a turnover of about INR 2.5 crores. So we see this growth going more exponential next year as the core 2 or 3 applications in the various seasons and the farmer conviction grows.
Understood, sir. That is helpful. Sir, lastly, on the Seeds question. I'd like to ask is, you have mentioned that you would like to focus on seeds going ahead. So have we devised any plan? What kind of seeds or which crop are we targeting? Any such kind?
Let me keep that a secret for the moment. We have just said that we are quite advanced in our planning to -- for entry into this business. And the requisite man, material resources are being gathered up to start this process. So I think I would be able to give more color on this in the next few quarters.
[Operator Instructions] Next question is from the line of Viraj from SiMPL.
A couple of questions. First is on the crop protection. You said that only product placement grown better contribution growth, vis-a-vis, the sales performance you've seen in CPC SN. Just can you explain how does the early placement drive better contribution margin?
See, what happens in the CPC market is there are some products which are incident-based and some products which are prophylactic in nature. Like for example, we decided in quarter 1.
So the more early you place them, you occupy the shelf. So you take care of the competition to an extent that at times results in good margin at times, you don't lose anything. So this time, it has clicked. It might not click next time. So this keeps changing.
To put a long story short, the fact is this is -- tactics do not only dictate. There is product value. There is value on the table in terms of what the product actually delivers. This is only one tactic. The tactic, as you rightly said, can -- is not -- may not be completely repeatable. But at the same time, what it does is that it means that your product, which is a good product has been used by the market. And once the use of the product is established in the market, then it's repeat buy is what makes the difference.
And once the repeat buy comes, that is when the volume and margin growth happens. So let us not only put it down to early placement is a kind of a tactical maneuver. But strategically, what happens is that your product has been used by the market. And when it has been used by the market and seeing is believing because our products are really very well thought of, chosen, directed and with all the ingredients which work for various crops. So the farmer tends to create repeat buy. And once the repeat buy starts happening, then automatically volume growth and margin growth happens. That is really the essence of what this is.
So there's few questions on this only. If you look at the portfolio, it's largely generic. There are no specialty molecules right now. And as such, we don't have any strong combination molecules unlike, say, other companies. Where they had a success rate, for example, [indiscernible], they had 2, 3 combination molecules, primarily based on generics.
So if I look at the portfolio per se, when you say there's a repeat buying, there's a good amount of traction. Of the products which we have sold in, or launch in last 3 years, 5 years. When I look at the top 5, top 10, would it be the same product? Or do you still see a lot of churn in the portfolio compared to that? So that is one.
And then secondly, if there is a churn in the portfolio, then how are you looking at, say, 3 years or 5 years, when you're looking to build a INR 700 crores, INR 750 crores kind of a scale, how are you looking at that? So these 2 questions only.
Okay. So see, looking at the -- first, to answer your question of the combinations. Let's look at the products which have been launched now, especially in the soybean weedicide category. There is a molecule which is a combination product. So it's not that there are no combination products being launched. So it is -- what is the market requiring.
Secondly, your next question was about the generics versus this. If you look at our portfolio today, it's around 66 CPC molecules, which we are marketing in the entire year. Out of the 66 in the last 5 years, we have launched 38 new molecules. Today, we are contributing to 25% to 30% of sales.
So this is a continuous process. We'll keep adding, keep deleting product portfolio, including combinations. So it's not that we are not launching combination products.
No, my question was specifically that when the portfolio is largely generic, sir, talked about having a product value proposition and having a high repeat purchases. So I'm just trying to understand when the portfolio is largely generic and keeping aside the tactics of early placement or late placement. There are similar competitors in need of the molecules who will be launching or already launched.
So when I look at the sales base of current year, say, close to 900 or 1000 crores, the molecules, which you already launched, say, 3 or 5 years, would this still be the top molecules for you? It will give some sense whether the value proposition, which we are seeing, that's reflected in the sales profile or not when I compared the top 5, top 10 margins?
Yes, I got your question. See, if you look at the -- first question and the answer on generics. Still this country, the 75% of sales is through generics, CPC business. Now amongst the balance, I'll give you in a specific example. We were marketing 1 chemistry by name imazethapyr for soybean. We were also marketing another VD site in soybean by name quizalofop-ethyl. I'm talking of technical. Now this year, we have launched a combination of that, which has come from the house of Nissan, and we are the only third company who is allowed that.
So because of our relationship in the ecosystem, whether it is a Nichino or it's Nissan or it's Syngenta. So we're getting those products early now in our portfolio that is also making a difference for us.
Just 2 questions. I think somewhere we were evaluating whether we wanted to go into manufacturing piece on technical, or you'll be looking at collaborations with foreign companies. So I think you talked about Nissan and Syngenta, but if you can just broadly give more color, how are we looking at the CPC SN space, do we still want to have an asset-light approach? Or you think that with now traction in generics and some positive indications for MNC, we would also have to have a back-end manufacturing. So that is one.
The point is that if you see that we are approaching a certain critical mass in this system. And we are now beginning to create enough attraction with some of the innovator companies. And when these innovator companies are approaching us and we have talked with them, our credibility in order to be able to market these products has now risen to a level in which the more research based, the GenX type of molecules, start getting available. And that will also come at some point of time, the responsibility of creating volumes and manufacturing and so on.
And when that stage arise, once the -- I think I believe with these type of products, my understanding is that you need a 3- to 5-year kind of comfort creation between the parties whereby then you come to a situation where you can actively start looking. And I think we have just climbed the first few steps of that ladder.
And as we grow up in this situation, and we reach a certain size and they get comfort because they would be partnering with more intellectually property heavy material as they talk to us and go with us then is that the time when we will start creating structures by which we could manufacture. And that's exactly the strategic direction we are taking.
Okay. Just last question...
Viraj, just to add what Mr. Baijal said, we have some dedicated tollers who have come up in India who are not into B2C business. So their business is B2B and just formulation. So the question of the manufacturing till time this model is available. We are not looking at it as of now. But we always keep evaluating with various options.
Just last question on CPC again. Somewhere in the presentation, you talked about a certain percentage in terms of the width and the depth. Can you elaborate more in terms of coverage when it comes to core territories of Chambal, what is the coverage of CPC SN? And even the tie-ups, which you're getting from, say, the MNC is now, would that be only for those core territories? Are you getting more of a pan-India kind of a portfolio access in other distribution, agreement you would have and then -- so yes.
Okay. So the last question first. The whatever agreements are in place with all the partner is for pan-India. They are not geography-specific. So whenever we have access to a molecule, it is for pan-India market. Your first question was...
The coverage compared to the core territories of Chambal and Urea, where would we be right now?
So the idea is to put a channel in place, which can take care of around 30% of depth and width that takes care of our future projections.
So to put it differently, of the sales which you have right now, would there be any sales which will be outside the core territory of Chambal and urea, or crop protection? Or all the sales will still be primarily from the core?
No, no. The seed sales are also coming from non-urea states also.
What will be the contribution, roughly?
It's around, say, should be around 8% to 10%.
[Operator Instructions] Next question is from the line of S. Ramesh from Nirmal Bang.
So if you look at your segment numbers, there is a sharp increase in your trade complex for rate margins, so we can get understanding of how you have achieved this. And secondly, if you look at your segment asset, there's a significant movement, the segment assets for complex fertilizers declined sharply whether you see it quarter-on-quarter, Y-o-Y, similarly for crop protection is 12%, your conversation into the improvement in performance of complex and this movement in the segment assets as the managing director?
Yes. So I think your voice was not very audible. Could you slowly repeat? I think some of your questions with respect with the margins in the bulk traded fertilizers, India's fertilizers, is that right?
Let me repeat it. The improvement in the trade per segment numbers have gone up from INR 30 crores last year to INR 120 crores this year. So that is one. Secondly, if you look at the segment assets, there's a steep decline in the segment assets, whether you see it on Y-o-Y, quarter-on-quarter in complex fertilizers in the crop protection business.
So the answer is very simple. So the first one, if you see there is a prior period income item, which I think we have disclosed in the note. That is one reason why it shows a higher number. And if you see, otherwise, the comparable quarter-to-quarter, the numbers I looked more or less the same, I think, 8% to 10% here or there, although the volumes this year were a little lower. That is one thing. So that should explain the first part of your question. As far as segment assets are concerned, I will let Anand handle this.
So Ramesh, what happens is that there's a seasonality involved. Last year, we had higher stock going forward in Q2 from Q1. This year, because of a little bit of lower volumes on DAP side, our stocks are lower. And hence, the result is that we have lower segmental assets for complex fertilizers.
If you look at CPC SN, this is more because I think we don't want to increase our stocks with us, and we have been efficient in our collections and our sales, to that extent. So -- and the reduction is not that great in CPC SN. Otherwise, I think we are fairly at -- compared to last year Q1.
So how much will be the prior period income Mr. Baijal referred to in the traded margins?
So see, this keeps on happening with DAP, they're in the note. It is there in the note, that is INR 92 crores for this quarter. But there'll be something on the other every quarter, which keeps on happening with DAP. Some subsidies will come in later, some compensation for the prior period, some compensation also get deducted, which we get next year.
So this is part and parcel of the game, yes.
Okay. And I see the note now. So in terms of the subsidy, you've given in the percentage, there's a decline in the subsidy. So what is that due to, is it because of the shutdown in the Gadepan, 2 units?
Which subsidiary decline are you talking about?
So if you see the presentation, you have given a slide where you have given the subsidies received.
Okay. Yes.
Slide 15 by 23. So subsidies received is declined from...
Compared to last year -- commodity prices have come down compared to last year, especially on the bulk fertilizer side. And hence, the subsidy levels have come down. Otherwise...
I'll explain this, what has happened is, the DAP subsidy was down. We did by about INR 10,000 per tonne. And we have done far less volumes in DAP, number one.
Number two, in even MOP volumes, the subsidy went down quite a bit, which was, so almost INR 7,000, INR 8,000. So this is the impact of the price variance, in that sense, which has happened in this case. And secondly, the quantum of traded fertilizers have been less this year as compared to last year. So both have impacted. As far as the urea subsidy is concerned, it is still because gas prices both periods corresponding more or less the same.
Okay. That helps. So in terms of the outlook for your traded margins, urea is going to remain steady, but for the volume growth. We are given to understand that either you have to see the retail prices or MRP maybe increase for DAP in complex fertilizers or the government would have to increase the NBS rates because of the recent increase in ammonia and the phosphoric acid.
And is there an increase in the phosphoric acid contract wise? And do you see the industry being able to raise retail prices in case the government doesn't change the NBS orders, what is the outlook for second half in terms of the NBS rate and the potential for retail price being increased for complex fertilizers in DAP?
Well, I can't say what the government stance on retail prices will be, given that there are political compulsions of various elections. But as far as our approach is concerned, if you notice, we have been consistently stating that we have a portfolio of growth we match the geographic requirements with the kind of NPKs or various suppliers that we want, whether MOP or whether NPK or various create and see the viability and then we go about doing that.
So depending on what metric fix we will do, we have stocks for this quarter, albeit not that much. Going forward, we will see what happens in the October subsidy mechanism that comes, and we'll take our call according to that.
So if you look at the last year segment results for complex fertilizers, based on the current certain margin and the kind of volumes you can play, do you think you're able to match it or slower growth on that in terms of segment results?
This is very dynamic. I can't give you any guidance on this actually because there are 2 factors in play. One is the government own policy decision on MRP. Second is the international prices. Third is the subsidy that they decide.
When everything is open, you have to be exceedingly tactical on this. There is no strategic play here and we have to work according to what the best information we have. I won't be able to give you any guidance on this, say, when except that we will definitely match our numbers of last year.
Okay. So on the consolidated numbers, I understand that there is an adjustment on the other income, which explains some of the decline in the consolidated results compared to the standalone results, and it's there in the last year also. But is there anything else which has led to the difference between the standalone consolidated numbers?
Dividends gets knocked off. As part of consolidation, dividend gets knocked off. That is INR 140 crores. Balance, then you add back the performance of the joint venture itself.
From the current quarter.
Everything else matters.
[Operator Instructions] next question is from the line of Falguni Dutta from Mansarovar Financials.
Sir, I just have a basic question on this INR 92 crores. So has it affected any part of the numbers being reported, this INR 92 crores north that you have given?
Falguni, this was on account of losses we took on complex fertilizers 2 years back, which was approved. So at that point of time, we recorded lower subsidy. Now the balance subsidy has been given by the government, so we are recording it.
So this would have come in, in our profits in the complex fertilizer?
Yes.
For this quarter?
Yes. So minus tax and whatever, we have to pay. That gets deducted from here.
Okay. So in short, I should see the complex segment number excluding this, generally, I think?
Yes.
But you will still see that it has improved from last year.
Next question is from the line of Ranjit from IIFL Securities.
The question is on the CPC and SN front. So on the slide, we have kind of guided for FY '27. And that contribution margin was to be around 18-odd percent. So for the last few quarters, we have been consistently delivering about 20%, and now we are at almost 23%. So is there any change in that guidance of 18% from the contribution level in CPC & SN segment?
So see, this volatility will keep on happening from 18% to 23%. But however, what we will say that we will be somewhere near the kind of margins they're earning and we'll be able to deliver consistently over a period.
This should be largely be taken as an EBITDA or there is something else to it?
No. These are basically your net margins, which you said net gross margin. So below this, there will be expenses and the EBITDA will be a little less than what is there.
Although, Ranjit, we'll run a very tight ship on that.
If you see the segment, you will be able to see the EBITDA levels.
So second question is on the urea front, the expansion or the increase in 100 metric tonne per day. So we'll be able to increase or reassess capacity so that we're also getting the benefit of IPP?
Yes. But that depends on how the IPP base, as of now, it's too early to say where it is headed. Bigger or sharper analysis will be possible by the third quarter, I think.
Right. And this has already happened? Or there is a time line to this?
What is the time line?
Increase in capacity is already through?
No, no, this throughput increase already happened.
And we are also undertaking the energy savings programs?
Yes, we have a road map, which I think discussion on that took place. One part of that has been executed. 3 other projects, carbon dioxide compressor, this, that, they are being progressed as we speak. So these are to catch the 2026 time lines, when we will have the ATR for these 2 plants once again. So it is going according to schedule.
And then there are future further energy sales schemes, which are continuously under evaluation. So this is a kind of a continuous process. We don't stop at one point. We keep improving. So that as we have said in our statement, we aim to be the best-in-class.
And lastly, from my side, on the Gadepan-III benefits, any update on that?
Too early to talk about this. I think we have not had any conversation on this with the government. My own sense is that this discussion will start late '25.
We still have 2.5 years from now. So it's early to start discussing with them.
And that all the steps that we are taking so that best will be able to kind of fulfill the gap, if at all, those benefits are going to expire?
Exactly the point is that we continue to grow not only to fill the gaps, but also to grow, grow as in grow and grow. And so lines of businesses have to be developed, whatever we can sort of multiply, used force multipliers we can use, we are using. And there will be -- going forward, if there are some breakthroughs here and there, we will learn about it.
Like TAN, one of the things that we have done, we can do product line extensions on that, the other issues, I mean the other items that could be produced out of that. So we keep, as we said, a continuous process, first, creating a foundation and then building upon it.
Next question is from the line of Tarang from Old Bridge Capital Management.
Congratulations on a very strong set of numbers. Fantastic execution on crop protection side and the transformation of balance sheet, I think it's worthy. So just a couple of questions directed at crop protection. Sir, how are the credit terms in this business? And how different are they from your other business?
And second, the trajectory that we've seen for this business in FY '22, '23, '24, and I know that you have a longer-term target of about INR 70 crores, INR 50 crores. How should we see this business for the full year FY '25? Should the Q1 trends continue? So yes, these are the 2 questions.
Okay. I'll answer the question first. With regards to credit. Usually, the fertilizer and the CPC and SN market are different in terms of the credit you play in the market. But if you compare it to the industry, we are doing reasonably good in the CPC segment. Our quarter 1, 66% sales have come from cash and 34% from credit sales.
But if you look at the SN segment, it's a different segment. It only 36% comes from cash and 64% from credit. So it's a product positioning depending on the market. So our credit cycles, credit listing is lower than the industry, that much I can say.
And now with regards to the extrapolating the quarter 1 numbers to financial year. We have the product portfolio in place. The Kharif crop looks good. So if we intend to keep the growth level, but what number exactly? Difficult to predict as of today. But there would be growth in this business for sure.
But Tarang, we want to maintain the momentum. How much we are able to, that is dependent on, of course, seasonal factors as well, what will happen in Rabi. But we have the wherewithal, we have the product, we have the partnerships. So I think the marketing team has been tasked, and I think they're executing that.
All right. So just a couple of follow-ups. One thing that you spoke about where you said that 66% is in cash and 1/3 is on credit. And then you gave a reverse analogy of some other business where 1/3 is on credit and -- sorry, 1/3 is on cash and 66% is on credit. What was that, sir?
That is crop protection chemicals, we are doing cash 66%. Specialty nutrient segment, we are doing 36% cash between the 2.
Got it. And second, sir, how is the fixed cost base of this business moved over the last 3 years?
Well, I'll put it this way, that the allocation of the costs is between -- in marketing is in 3 segments: 1 is Urea. The other is bulk fertilizers, other than urea and the third is the CPC SN. So what happens is that depending on the effort analysis from year-to-year, we have a certain allocation mechanism agreed with our auditors, they audit that. And then I'm not saying we have time sheets to that extent and all that.
But we have a template to organize and analyze. I would say, that remained stable because the number of people who work in marketing have not increased. That should give you some indication. Of course, salary levels go up, but the numbers have not increased. So to that extent, there is a tight control on the way we do things.
Would it be fair to presume that the trend from fixed cost base for this business is broadly in line with the trend that we see for the overall business?
Yes, yes. That's absolutely correct.
You're absolutely correct.
All right. So -- and my sense is last 3 years, this business continues to be -- I mean, you see the contribution numbers, it continues to be EBITDA neutral or EBITDA positive, correct?
I don't understand the -- what is EBITDA neutral and positive. But easing year-on-year, depending upon the business and the allocation, and there's a fair allocation being done nowadays because we are also now reporting the segmental accounting. So it's a fair and which is...
EBITDA positive -- in neutral or...
Achieving the economies of scale, obviously, it will be EBITDA positive.
[Operator Instructions] The next follow-up question is from the line of Viraj from SiMPL.
I have just 2 questions. I think quarter over [Technical Difficulty].
You're not sounding very clear. I think you are talking from the speaker phone. I'd say that you please speak directly.
No, I'm talking on normal phone. Am I audible?
No, you are not very -- you're audible, but you are not clear. Distinction in the -- we can't get what you're saying.
Is this better now?
Yes, better.
Yes. My query on a quarter or 2 what we talked about actually evaluating capital investments in the nitric acid value chain in addition to the time project. So any update you can give?
So we have got -- received certain estimates. Those estimates on that particular plant are a little off what we thought. So that is being relooked into with another candidate. We should -- we know what it is costing with other parties, but the quote we received was a little higher than what our expectation was. So we are relooking at the numbers and with another party. So we'll -- once we have a satisfactory number, we'll get back to you.
Okay. And second is on the seed business side, you talked about the process of acquiring another resources. So is the approach to be -- is the approach to seed business more organic? Or initially, you would have more of a distributor kind of arrangement, but may be some of that eventually then.
No, it will be to begin with organic. And at some point of time, inorganic options will also be evaluated.
Okay. Sir, the reason why I asked is even when you talk about organic, it's a process where from the R&D to commercialization takes somewhere between 4, 5 years or 10 years, right, so what we visualize right now, and we will be having to make an investment on an annual basis, depending on the segments we choose. We will have to kind of make those investments, kind of P&L, CapEx to kind of achieve a sale 5 years, 7 years. So is that understanding correct? Is this how you're looking at it?
We know that there is a cycle of 3 to 5 years for research and hybrid seeds, and we are prepared for it. In the meantime, there are in licensing options and many other options to also generate products, which can be brought to the market. So as I said that we have created a certain framework internally. And that will be, as I said, in the fullness of time in the next 1, 2 quarters, the things will be clear to you exactly what will happen. I'm not at liberty at the moment to disclose every subset of what we are going to do, except that it is a serious entry into the space.
Next follow-up question is from the line of S. Ramesh from Nirmal Bang.
So if you look at your cash surplus and the increase in receivables, and I guess for the CapEx, there is possibly some certainly you are getting on the working capital side. Has the inventory gone down by about INR 1,500 crores? Or if you see there are slides on receivables and the net cash position and your CapEx number you shared, that's the number I get. So has the inventory declined to that extent of around INR 1,400 crores, INR 1,500 crores?
Yes, some bit of inventory has declined. But overall, I think we are generating good cash now and government is also supporting us by giving us our subsidiaries in time. And therefore, we hope that this will continue and we'll keep on generating cash surplus.
Okay. So on the crop protection side, you have improved margins by about 500 basis points. And if you see your volume out of that 16%, the volume growth to adjust for the weighted average impact is shown on the slide, it's about 18%. So how much would be the decline in pricing in that revenue growth of 16%? And on this 24% margin, is that margin sustainable for the remaining 9 months? And would you be able to improve on that in FY '26?
See, Ramesh, as I said, this is a dynamic situation, and we don't, as a rule, give you guidance on what is going to happen. We, as a company, have never given forward guidance. But what I told Tarang, when he asked us this question more or less in similar fashion, is that the marketing department has ambitious targets and they are going to execute towards it. And that requires the correct combination of products and placement and everything, the strategies that have been discussed.
So it is, of course, my hope and my task or ask from the marketing department. So let us see how it plays out. The first part has gone well. The second and third parts, we'll have to see, up to December is the crucial time. So we'll have to see how this progresses. We have the wherewithal. We have the channels. We have the product partnerships. So let's see how it goes.
Yes. So on this breakup between volume and pricing, can you confirm these numbers? Because you have given the product-wise volume growth and the revenue share. So by multiply that IRR with the volume growth of around 18%. So is that 18%, 20% volume growth? And then do you have a price decline of around 3%, 4% on your 16% revenue growth. Is that number correct?
Decline in revenue growth or what you are saying, is there a price variance, is that what you are saying?
Yes, in the crop protection business, out of the revenue growth of 16%, I get the sense that there is a price decline of around 2% to 4%. Is that number correct?
First of all, it is a combination of crop protection and speciality nutrients. Secondly, when we have shown that the first quarter has grown from INR 296 Crores to INR 343 crores. This is the net revenue.
When you do net revenue, you are deducting all discounts and other such things from this.
That's fine. So all we're trying to arrive at is in terms of the overall equation between volume and price, most companies have talked about volume growth and then around price decline. So I just want to understand, in your portfolio, crop protection and specialty nutrients taken together. On the 16% revenue growth, what would be the split between volume growth and price variance?
Yes, yes. Ashish can tell you, what is in terms of kilo liters or tonnes...
Okay. Ramesh, I'll break this thing into crop protection and specialty nutrients. So whatever I'm going to answer now about crop protection is about the gross invoice number. I don't have a net number.
So if you look at the gross numbers in crop protection chemicals, our sales have gone up by roughly 27%. I'm talking about gross numbers. Out of that, that will answer your question, 17% growth has come from the new molecules, 17% has come the increase in volumes of the existing portfolio and 7% reduction is because of price decline. And volumes have gone up, but the price has gone down. So this is a net impact. Does that answer your question now?
As there are no further questions, I will now hand the conference to the management for closing comments.
So thank you very much, gentlemen, for patient hearing to our conference call. I hope we have been able to answer the question, and we look forward to welcoming you for our next call at some time in November this year. Thank you.
Thank you very much. On behalf of Chambal Fertilisers and Chemicals Limited, that concludes this conference. Thank you for joining the call, and you may now disconnect your lines. Thank you.