Chambal Fertilisers and Chemicals Ltd
NSE:CHAMBLFERT
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Chambal Fertilisers and Chemicals Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Chambal Fertilisers and Chemicals. [Operator Instructions] I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.
Thank you. Good day, everyone, and thank you for joining us on the Chambal Fertilisers and Chemicals Q4 and FY '22 earnings call. We have with us today Mr. Gaurav Mathur, Managing Director; Mr. Abhay Baijal, CFO; Mr. Rajveer Singh, Vice President, Legal and Company Secretary; and Mr. Anuj Jain, Assistant Vice President, Finance.
Before we get started, I would like to point out that some statements made or discussed on 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 the call with opening remarks from Mr. Mathur. I would now like to invite Mr. Mathur to share his views. Over to you, sir.
Thank you, Rishab. Good day to everybody, and a warm welcome to all of you participating on this call. As we have shared the numbers, and I'm sure all of you have had a chance to go through the presentation. I will not spend time on restating the numbers in my opening remarks. What I want to state is that given the overall macro environment, we are very encouraged by our performance and believe it is reflective of Chambal's scale, experience and capabilities across the agri sector.
For our urea business, we continue to operate at optimal levels. And I'm happy to state that after receiving government approval for extra production of Gadepan III, we continue to operate Gadepan III and given the very high prices of urea in the international market, this was of considerable benefit to the country as such.
For the non-urea portfolio availability of phosphatic fertiliser has improved in this quarter, though prices remained elevated as a consequence of the volatile macro environment impacted by the Russia-Ukraine conflict in this quarter. We have built up inventories, which will keep us in good stead for the forthcoming Kharif season.
A higher input prices have led to increase in working capital. However, the government's endeavor to make timely subsidy payments has been very supportive. And the total subsidy for the full year ending March 31, 2022, amounted to INR 10,434 crores.
The Board of Directors of the company declared a final dividend of INR 3, that is 30% per equity share of INR 10 each of the company. For the full year, this then translates into INR 7.5 per share, which is same as last year and in line with our dividend policy of around 25%.
Our crop protection chemicals and specialty nutrients businesses continue to grow strongly. We are pleased with the success of our seed to harvest initiative and propose to expand this further in the current financial year, which in turn will drive strong growth for these 2 businesses. The seed to harvest initiative enables us to bring to the farmer all agri inputs and agrochemicals he may require from sowing until the final crop is harvested. Given our strong close relationship with the farmer, we believe the potential for this initiative could be significant.
We have also introduced and piloted drones in our area of operation to help the farmers see the benefits of automation and equitable distribution of crop protection chemicals and specialty nutrients, and we hope to take this forward in the coming year.
We have commenced the process of setting up of our technical ammonium nitrate facility at Gadepan. The bidding process is on and discussions are being held with some of the leading global technology licenses. As we have mentioned previously, this facility is supposed to have a capacity of approximately 2.20 lakh metric tonnes of technical ammonium nitrate per annum and estimated cost of approximately INR 1,170 crores. The project, which also -- which will also include a plan to manufacture approximately 1.80 lakh metric tonnes per annum of weak nitric acid is expected to be completed during the financial year '24, '25. As such, we remain on track on the plans we had made for ourselves.
The overall environment while challenging, also had positive light. As per India Metrological Department, the probability for a normal monsoon is 40% and climate -- and we expect that the normal monsoon will then help the agriculture activity. The government has also announced a food grade output target of approximately 328 million metric tonnes for '22, '23 from last year's 316 million metric tonnes. All this translates to increased demand and consumption for fertilisers, crop protection chemicals and agri inputs.
High cotton prices have also resulted in increasing acreages. The trade sees cotton area increasing by 10% to 15% in the north. And the sowing area in the summer crops is higher by around 7.2% as compared to last year. As per the Union Agriculture Ministry data, area under pulses has increased by 40% to 19.15 lakh hectares. These crops require a larger volume of crop protection chemicals as compared to other, which bodes well for the industry.
Chambal Fertilisers continues to create value and explore opportunities across the agri sector. We are very excited about the opportunities going forward and believe we possess our understanding, capability and reach to create significant value for the farmer, the country and thereby for Chambal.
With that, we would be very happy to now take your questions. Thank you very much.
[Operator Instructions] The first question is from the line of Surya Patra from PhillipCapital.
Sir, just one question on the divi income, sequentially we have seen a kind of almost 50% decline. What led to this direction? Is there any specific reason why because the prices have not -- the last period [indiscernible]
Surya, sorry to interrupt you, your voice is not very clear. Could you please speak a bit louder. And there's some background noise.
Mr. Surya, can you please check your line. We cannot hear you properly.
Yes. Is it fine? Sorry, for the delay.
Yes, sir, we can.
Sir, on the IMACID contribution this quarter, that is just first question. So what has led to a kind of sequential sharp decline without seeing any kind of major change in the overall product prices? And what outlook that one should have relating to that?
The IMACID is the run rate that you see and the -- actually at the year-end, they make certain adjustments for rock which is supplied on an overall global basis. So when the supplies have been made, the year-end adjustments have been done, they have fallen in the first quarter of their financial year. So that is a certain adjustment on the rock, which has been made, which is part of the global strategy of the company and the parents, which is OCP and so on. So it is, I believe part of that the prices that IMACID have sold is [ 15/30 ] which is global. But the input prices of sulfur also went up, as you know, during this period. It could have [indiscernible].
Okay. Okay. So then obviously, we may not have a tap on this run rate as the historical trend that used to be right now?
We can't really say because the whole situation is very dynamic. Going forward, we know that the product prices are controlled globally. There are low -- there are demand issues, there are supply issues. We do not know how this will pan out exactly. This is unpredictable.
Okay. Sir, just if you can talk something on the kind of your extended reach or pan-India presence or your performance beyond your core areas. So how is that really done during last year? And what is the kind of expectations around those regions and the initiatives that you are taking to enhance your overall growth in the noncore regions?
So as we mentioned last year, we started off in 5 more states: Maharashtra, Gujarat, Telangana, Andhra and West Bengal. So a few points on that. One is that we have managed and created the network that we had targeted. So we -- the dealers that we wanted to appoint. So we've created a network. And I think with Chambal's brand name and strength, we did not face any significant issues on that. So that is one.
Second is last year, there has been a continued this year has been unprecedented in terms of the overall global demand supply situation. So we have made good traction. We have managed to sell the material that we could bring in, one. That's the second part. We have also got all our registrations done now on the crop protection side, and that is expected, and we have begun on that front also. So overall, we are positive about what is happening in the new regions and markets that we have entered, and we expect to see better numbers going forward, given the demand supply situation and the overall scenario.
Okay. Sir, about the urea, can you share the split up of -- in terms of volume, can you share the split between Gadepan III and the other 2.
I'll ask Anuj to share that with you. Anuj?
Gadepan I and II put together is -- production is 19.59 lakh tonnes and Gadepan III was 13.454 lakh tonnes.
Okay. Okay. And sir, just wanted to have some sense on the seed to harvest initiatives. And hence, the kind of a qualitative growth going ahead. I think this is -- how different is this initiative verticals? Almost all meaningful players or leading players in the -- either in the crop side or the fertiliser side, even following some other kind of initiatives like this. So how differentiated these initiatives would be for you? And do you think that with this, you can penetrate better even in the noncore areas?
Yes. So that's a very good question, Surya. So the seed to harvest is essentially the company engaging with the farmer, right, from the start until he harvest the product as the name states, right? Now in terms of the differentiation that Chambal provides, we are one of the few players who have the entire range of products, whether it is bulk fertilisers, whether it is crop protection chemicals, specialty nutrients, one. We are -- we have a strong network and a very strong brand name, and therefore, our credibility with the farmers is high. That's the second point.
The third is that we have not -- we have linked this along this also with our network. So it is not just that the farmers. We obviously want the farmers to benefit, but there is also a linkage with our dealer and retailer network. So it's a combination of all of these things put together, which -- and we've piloted it, and we've seen the traction that it received last year. So therefore, on that basis and the points that I've mentioned, we believe that we have a competitive advantage.
Sir, just last one question, sir. Can you provide given the kind of heightened pricing levels of the P&K Fertiliser and all and the better monsoon as well as Kharif expected to be better. So concluding at what volume growth that you're anticipating for P&K and what is the competition level there that you are witnessing?
See, under the circumstances -- I mean if you look at the overall macro picture right now, right? Last year, we saw a huge demand supply, which was favorable towards the demand side, right? And the expectation for the industry was that this year, it would start to ease. However, the Russia-Ukraine conflict that started put pressure on that again. So when we talk of volume growth for this year for the industry as a whole or for any specific company, we need to be mindful that the whole demand-supply situation, availability, prices, all of that comes into play, right? So we have clearly targeted to have higher volumes compared to last year. And I don't want to share precise numbers with -- on this call, but we have targeted for significant growth compared to last year.
Sorry to interrupt, may I request Mr. Patra to please rejoin the queue. [Operator Instructions] The next question is from the line of S. Ramesh from Nirmal Bang.
Can you hear me?
Can you please speak a bit louder?
Yes, we can. Go ahead.
Sir, if you look at your fourth quarter performance, can you shed some light on how you achieve this growth in EBITDA? Was it primarily on the urea business? Or is there a contribution from your phosphatics trading business as well where there is a core increase in EBITDA. If you can explain that will be useful.
So actually, there are 2 moving parts to the EBITDA increase. One is a small part coming from Gadepan III production as compared to last year. That is one. The second part is that we had some amount of excess ammonia to sell because of technical reasons. And that also gave us some uplift in the margins given the high international prices that were available. So these were 2 issues.
Secondly, because we did not go in for a shutdown of Gadepan III, there was a part of a reduction in our maintenance expenses. So all of these 3 things contributes largely.
Okay. And on the phosphatic business, how are you doing in terms of the commercial returns? Is it breakeven? You're making some contribution? You're getting some EBITDA out of that?
Yes. So far, yes.
Yes. How do you see that going forward, given the high cost of imports because you are dependent on trading, right? So to that extent -- does it make commercial sense at these prices? Or are you building the market even if you're just able to break even? What is your thought process on that?
Ramesh, what we have seen in the year that has gone by, that the government not only wants to provide fertiliser to the farmers at a low and reasonable cost. At the same time, the stance of the government is also that they want the industry not to suffer, right? So -- and that is borne out by the fact of what they did on the subsidy front in the past as well as not only the subsidy amount but as well as allocation of the actual quantities and the revised estimates of the budget and disbursement of the subsidy. So considering that in whatever indications we get as an industry, we are working closely with the government as an industry because we do want to make sure that there is adequate quantity of fertiliser available in the country, which is essential. And at the same time, the industry is remunerated. So we work closely with the government along with other members of the industry. And we are positive that at some stage, the government will take appropriate action.
The next question is from the line of Pratik Tholiya from Systematics.
Congratulations on a good set of numbers. Sir, I have just a couple of questions. Firstly, on the subsidy front. We have a slightly higher subsidiary outstanding this quarter as of March. So this is largely attributable to the higher natural gas prices or there has been some delay from the government side because you were under the impression that government payments were happening pretty much on time. So if you could just explain on that.
Yes. It is majorly on account of the increased gas prices. So escalation normally, government takes some timing hearing the escalation bill. So that is the main reason.
Okay. So sir, in last 45 days, how has this shaped up as in we have been starting to receive the pending dues or it is still stuck up?
The pending new movement in the last 45 days, I think he's asking.
You see in April, pay till third quarter of April. As for the [indiscernible] largely debt are being paid in time as a urea is concerned. In PMT, because of the new rates, it's still to be uploaded in the system, we are spending in April, but otherwise, urea other than escalation, it is in time.
And we also have indications from the government that the extra amount that they have announced on the subsidy front, and therefore, the subsidy that is required. The allocations are expected to be made.
Okay. That's helpful. And sir, secondly, also the inventory as of 31st of March was substantially higher. So if you could just explain a little bit on how the market has been in the last 45 days in terms of demand and whether this inventory has now worked normalized, which you were carrying higher inventory that you're carrying? And how do you see the demand going forward for -- especially for the P&K Fertiliser?
So there are a few points on this. The first is that actually during this period of March, April, the actual utilization of fertiliser going into the soil is very, very low, right? It actually starts to go into the soil from around mid-May, one.
Second is that, again, as I mentioned earlier, the government and the industry were working together. And the entire industry was asked to build up inventory for the Kharif season. So all producers, all importers were set certain targets for bringing or producing DAP, and we were also given our target. So our inventory build is actually very much in line with that. And as soon as the new quarter has started, we have started to sell that, and there is absolutely no issues on selling that. And we are also selling it on cash. So it's not being sold on credit because there is a good demand.
So we have absolutely -- it was a very -- it was a decision to bring that inventory in, in conjunction with the government and we are selling it on cash.
The next question is from the line of Vidit Shah from IIFL.
I had -- my first question on the CapEx plan. So this INR 1,170 crores of TAN investment, what is the time horizon across what it's going to be made? So what CapEx can I assume for FY '23 and '24 for Chambal?
Yes. Vidit, that's right. So like we mentioned, we are in the technical bid stage right now, and we would expect certain cash flows to start happening within this financial year. And a large part of it would be in the financial year '23, '24.
Okay. And any other CapEx other than this, which has been planned for, for FY '23 and...
As of now, other than the standard CapEx, which we have in the plan, which is on an ongoing basis in the range of INR 100 crores, INR 150 crores, other than that, and this TAN project, there is nothing else that we have currently have firm plans for.
Okay. Understood. And just one clarification on the cost of natural gas for the quarter and currently, you could just quantify that amount.
Yes. Anuj Jain can answer that cost of natural gas for the quarter.
Cost for the natural -- cost of natural gas for the quarter was $21.32 per MMBtu on an NCD basis.
Ended market.
Yes. That is for the January to March quarter.
Okay. And what is it currently at?
Currently, it is going at our NCD basis $25 per MMBtu. I mean in the last -- yes, it is probably the price which is declared by the government following a price.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.
Just a clarification. In terms of the cash flows for CapEx, you're saying it's going to be back in FY '24, that is starting April 24, and there's not going to be that much of cash flow in the current year. Would that be correct?
Yes, that's largely right.
Okay. Excellent. And the second question...
Typically, Vivek, as you know, what happens is that when we place the contracts, then you usually have 20% to 30% advance when you place the contract. So that's largely what we expect. So my sense is we would have maybe about 30% to 40% cash flow in this financial year. And maybe 50% of the total in the next financial year. And then 24%, 25% will be the balance, which is the last 10% to 20%.
So your overall CapEx comes up to around INR 500 crores this year, including our INR 200 crores which we spend every year anyway. Is that the right ballpark number?
It would be slightly less than that. I would say it would be more in the INR 400 crore range.
Okay. Excellent. Sir, the second question is on the inventories and there is no price risk on inventories, right? Everything is in coordination with the government and everything is passed on to the end user, correct?
Yes, yes. There is no issue on the price, and there is no impairment or anything on the inventory on the stock that we carried.
The next question is from the line of Nikhil Rungta from Nippon India Mutual Fund.
Sir, just 2 questions from my side. First is on this CPC and SN crop production business, this year, we did revenues of around INR 472 odd crores. What type of targets are we building in for, let's say, next couple of years?
So you have seen the previous year and this year kind of growth target, the growth that was achieved. There's some disturbance coming. May I request everybody to put on mute please.
So you've seen the -- in the investor presentation, the numbers and we remain aggressive on our growth targets. So we expect to see along the similar lines strong double-digit growth, let's put it that way.
Yes. Mr. Rungta, [indiscernible].
Is it fine now?
Yes. Please go ahead.
Yes. Sir, second question is on this additional production in Gadepan III, which you have received approval from the government. What type of impact or additional production we can do over and above the capacity which we have?
So if you see, we are -- as per the policy the 12.7 lakh tonnes was the limit as per the policy, and we have made [ 13.5 ]. So it's on the order of 80,000 tonnes per annum, which is the additional production from Gadepan III on account of the government allowing this.
Okay, okay. And in this FY '23, which plant will go for maintenance for us?
So we have taken the already completed the biannual maintenance of our Gadepan I plant. And at the end of this year, we will probably take the shutdown for Gadepan III, which would have completed 2 years of operation. And we will then see what is the situation at that point in time and take a final call.
Okay. Okay. And sir, just last question from my side. Just to clarify on IMACID, basically, you mentioned that there have been some pass-on of cost in this first quarter basically for -- from the global perspective. So the run rate, which we can assume is this was a onetime impact in -- which happened in Q4 and from this quarter onwards, if things are on track, then we can assume similar INR 110-odd crores of our share of profit or it would be a normal -- INR 50 crores will be the normalized level of profits?
Nikhil, we are a minority shareholder in IMACID and the entire marketing as per our agreement is managed and run independently by OCP. Therefore, we cannot comment on what would happen to the run rate because OCP decides that. One, second is that it will depend, again a lot on the global demand supply scenario. So for example, if China, which is currently out of the market on the phosphatics and is not exporting anywhere, but or in fact, all exporting with strong restrictions in very small quantities continues in that way, then the market dynamics could be very different.
On the other hand, if China starts to open up from the June, July period and starts to come into the market in its normal supply internationally, it could be a very different dynamic. So there are a number of factors. It's difficult to say, and obviously, the decision lies with OCP.
The next question is from the line of Tarang Agrawal from Old Bridge Capital.
Three questions from my side. One, if you could give us a sense of your closing inventory on 31st March 2022 for your trading business.
So the inventory was around 3.1 odd lakhs for DAP and maybe a few tens of thousands for MOP and NPK. So maybe about 3.5 lakhs, Tarang. If you're looking at the exact numbers, we can give it to you later. But it's around that 3.5 lakh mark.
And what value would that be?
What value?
It's coming in the last quarter purchase -- it's coming in the result, that is 268 times.
So it's about INR 2,700 crores, roughly.
Okay. The second question is, is this crop protection business now at INR 300 crores? Is it cash flow positive from your perspective?
Absolutely. It is cash flow positive. Absolutely.
Okay. And the third question, just -- I mean, just some sense on -- how are we progressing in terms of broader capital allocation for the company. Some sense of direction as to where we could see deployment happening going forward? Would it be restricted to sort and crop production? Or is there -- are there other areas that you're evaluating?
So essentially, like we've said in our past calls also we are looking at largely growing in the agriculture sector. Within that, we have -- and wherever we have the opportunity as was available in the technical ammonium nitrate business. We have the verticals of -- we are looking at the phosphatics evaluation evaluating that. Crop protection and specialty nutrients, as you know, we are seeing the organic growth that we have -- the focus has brought in, the seed to harvest campaign to sustain that. And of course, we have started our business in 5 new states, right? So those are the areas that we are working on. And as and when something comes up further, we shall definitely keep you informed.
The next question is from the line of Trilok Agarwal from Dymon Asia.
I just wanted to check on the CapEx part only. So obviously, apart from the TAN project that you had announced a couple of quarters ago, is there any meaningful project that [indiscernible] more at the advantage of closing?
So we continue to evaluate various possibilities, right, at any point in time, like any company would do. And within that, those various possibilities are both organic and inorganic opportunities. As long as we are, as I said, focusing and staying within the broader agriculture domain, okay? So -- and that's where it is, but like I said, if there is something that is -- that we reach a stage where we need to inform the market, then we shall do it at that appropriate time.
Sure, sir. The only context was because we are having generating large cash and what has happened last year also, there is significant strong balance listings. So you are trying to understand more from a growth perspective, how can we accelerate growth. We wish you good luck.
Thank you.
The next question is from the line of Resham Jain from DSP Investment Managers.
Yes. I think I had a similar question like similar to the last 2 participants. As an investor, all of us have the similar kind of question because you're generating quite a large amount of cash. And I think last year itself are -- like came to a very comfortable position. And now obviously, current inventory position is higher, which will normalize. But I think the clarity on growth is still, I think, because whatever you will be deciding it will take another 2, 3 years' time to commission it. So directionally, at least, if you can help us with the growth direction, like next 4, 5 years, how are you going directionally? I think that would be very helpful as an investor, all of us are struggling to understand that part. Since you are generating a large amount of cash, that's the only thing which we are looking at.
So I understand your point Resham. So I would like to put it in 2 ways. One is that the nature of our business or where we operate is that the investments come over here in large, relatively large chunks, right? So it's not a business where you continuously keep growing a little bit every year and investing, that's one. And second is what I mentioned earlier that we continue to look at not only organic, but inorganic opportunities also. So I would not be able to say anything more than that, but that's where it is. And hopefully, over the next few years, you would start to see the work that we are doing in the background come to light.
The next question is from the line of Vignesh Iyer from Sequent Investment.
Yes. I just wanted to know on a consolidated basis, you have posted around 27 -- can you -- if you could give me a split of your EBITDA between your urea business and non-urea business on percentage basis maybe?
Anuj, did you have that? The EBITDA split between urea and non-urea?
I'll just put it this way, of the total EBITDA, I can say, almost 70% to 80% comes from urea.
Okay. Okay. And one more thing in my mind is like just -- if you could give me the utilization rate for the P&K Fertiliser production capacity? What would be the utilization for the FY '22?
Actually, we don't produce P&K Fertiliser. We only produce urea. We import P&K Fertiliser and sell it.
Okay. Okay. And the urea [indiscernible] is almost -- sorry.
To give you perspective on the P&K Fertilisers, you can split it into 3 broad categories, right? One is what is DAP, right? Which is about on average 10 million tonnes. The second is the NPKs, what I call NPK fertiliser, which is another 10 million tonnes. And the third is MOP in itself, new rate of potash, which is 4 odd million tonnes in the country for direct. This is I'm talking of the country approximate usages.
Now the MOP is 100% imported and DAP approximately 50% varying from 45 to 55 -- closer to 55% is imported, right? So we import DAP, NPK and MOP and sell that.
Yes. Just one more thing. So your -- if you could tell me Gadepan III is -- can you give me the utilization number for Gadepan III? I don't how much its utilization...
It's more than 100%. So our 100% utilization for Gadepan III was at 12.7 lakh tonnes and made [ 13.5 ]. So actually, it comes to 207-odd-percent. So we -- and as you would appreciate that it's a function of both the days of operation as well as the efficiency of operation of the plant.
[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment Advisors.
I mean -- so just to reconfirm, you said that urea contributed 60% to 70% of EBITDA of our fertiliser business. Is that correct understanding?
Approximately 70%.
Okay. Sir, last year, I mean, in Q1 '22 our import declined substantially. And now again, the price is increasing. So how do we see this trend, I mean, playing out on the volume term for this traded business?
So we believe that we should grow in volume in this year. Last year, while there was increase of price, there was a significant availability challenge also because there was very huge demand growth coming in from Brazil and U.S.A. right? This year, as I mentioned in one of the earlier questions, we had already imported or contracted 3.5 lakh tonnes, which showed up as part of our stock of DAP at the year-end of last year. And that -- all of that will get sold this year. And we believe that looking at the rest of the year, we should be able to import more. So in total, we should end up with a reasonable growth over last year.
Okay. Sir. And now you have seen that internationally, the DAP prices are declining month-on-month. So how do we see this trend business?
Bharat, if anybody in the entire industry, country or world could predict that, they would become billionaire. Because right now, there are multiple things at play, right? There is the whole demand supply equation at play because of the demand from U.S., Brazil, India, some of the big users. Then there is a Russia situation, which has come into the equation right now. So there are -- like I mentioned in an earlier answer, the whole China situation as to what stance the Chinese government will take on allowing free imports of DAP or imports with restrictions or not at all. So there are so many dimensions at play. It is very difficult for anybody. And as an industry and along with the government, we are all working together to try and minimize the impact of the prices for the country. And at the same time, get adequate fertiliser so that the Kharif and Rabi requirements are met.
So sir, in this whole global DAP and NPK price how much India plays the role. What is the importance of India in the whole business?
Well, India is important in the sense that it is one of the biggest importers of phosphatics, right? So therefore, it has a role and the suppliers also understand that India is a large market. At the same time, if there is significant requirement. And as you know, in Brazil or in the U.S., the crop is also at free market pricing. So if they see that they can get value for the crop, they use more fertiliser, the demand goes up and then it becomes a challenge, right? So there are significant dynamics at play, but India is a large importer suppliers are aware of that. And many of them are also clear that they want to supply a certain quantity into India and maintain that relationship with the country and with the companies.
So which are the major countries from where our company is importing, sir?
We import from China. We import from Saudi. Arabia. We import from Russia. We import from Morocco. These are our major suppliers. And on MOP, we have imported also from Canada.
Okay. And is that understanding that month-on-month DAP prices declined?
Well, that's not necessarily the way we see it. And we will see it evolve in the coming months, how it goes forward and a lot will depend on China.
The next question is from the line of Manish Mahawar from Antique Stockbroking Limited.
Am I audible, sir?
If you could be slightly louder, Manish.
Yes, sir. In terms of your CPC business, I wanted to understand the strategy over the next maybe 2 to 3 years because I think in the opening comments, you highlighted you are also filing for the registration for the products, which means our intent towards imports and more of a manufacturing as well, right? And what I understand, I think more of right now we are into the more of a co-marketing as a company, right? So just if you can highlight the strategy for the next 2 to 3 years.
Okay. So first of all, we have, as a conscious decision stopped all co-marketing from this year onwards. We believe the very strong Chambal brand that we carry is -- has a significant connect with the farmers. In terms of the strategy, we have actually looked at it from each element. From a product portfolio element, we have thoroughly reviewed our product portfolio, as we mentioned in one of our previous calls, we have launched certain new products. And even very recently, we also launched a new product. So product crop portfolio, we have reviewed and we are very clear and we have a very comprehensive product portfolio that's in place now. That's one.
The second is in terms of the network where we have really gone and examined our network. Now please remember that we have an advantage in a little sense that the farmer necessarily comes to buy bulk fertiliser from our network. And therefore, we are trying to leverage that aspect to grow our crop protection and specialty nutrients business also. So that's the network part of it, and we are focused strongly on enhancing our network in this area.
The third is in terms of capability building. We have taken strong measures over the last year to build the capability of our teams not only in terms of further enhancing their skills on these. But also increasing our feet on the ground in terms of the support that we provide through what we call the Uttam Krishi Sewaks, right? And again, as part of the seed to harvest that I talked about earlier, we will be engaging more than Uttam Krishi Sewaks who can go to the villages, meet the farmers on a regular basis and help them improve their usage as well as their output.
So product, channel, capability, and when I talk of channels, we are also looking at what is the right way of incentivizing the channel which gives them also a benefit to participate. So it's about creating that entire ecosystem. And like I mentioned earlier, the advantage we carry is that we have a whole range of products from bulk fertiliser, urea, bulk fertiliser, non-urea, crop protection, specialty nutrients. The crop protection companies don't have bulk fertiliser, and that channel can be separate, but we bring that strength in our channel. A lot of bulk fertiliser companies don't necessarily have the crop protection business, the way we are driving it now.
So I hope that gives you a sense of the strategy that we have. And that registration are for sales. We also continue to evaluate possibilities of manufacturing and other possibilities, but that will evolve over a period of time.
Okay. That is my question actually. And again, in terms of the CPC, are you planning to export as well going forward or rebates on the domestic market?
No. As we don't currently manufacture, we cannot export. So that is something we will look at only once we have any manufacturing base because that involves registrations if we have a manufacturing days, then you have to go through the registration in the countries and so on and so forth. So that would be a later stage.
Okay. Once a manufacturing will come, then it will -- maybe we can think about it. Okay. And the second question, in terms of your phosphatic fertiliser business, right? And I think we have expanded to 5 geographies or states in the last year. So do you think what market share we have into the -- our key geographies or states right now, we can replicate a sustained share in the next -- 5 states over the next 3 years or a 4-year perspective?
Yes. You see, last year, like I mentioned earlier, it was a very unique year. I mean I would request all of you to understand that what we've seen in '21, '22 in terms of the fertiliser business, not only in India, but all across the world, has not been seen in decades. So it was a very unique year. And therefore, while we had planned for much larger volumes in the new market, we could not do so solely because of availability challenges. And if you see in an overall sense, the overall usage of fertiliser last year was a little bit lower, given the availability challenges. Going forward, we see that building up, and we would expect to at least in those markets reach a market share of around 5% or so to start within the next few years.
Okay. 5% in this 5 states, right, which we have started last year?
Yes.
And can I ask one more question if possible?
Yes, please.
Yes. In terms of IMACID, can you share what's the capacity and the movement for phosphatic and what was the production number for FY '22?
I don't recall it right at the moment, we can take it offline.
The next question is from the line of Deepak from ATG.
This is Deepak. So just one more question on the margin side for next year on the non-urea side. How do you see our trading business will evolve in FY '23 in terms of margin?
So Deepak, like I mentioned in response to a previous question, the government's stance has been that they want reasonable margins for the companies. So we expect margins to be reasonable. Now we also understand that given the very high input price, it would be probably a little bit unfair to expect the same kind of percentage margins, but possibly at an absolute level we would expect the margins to be along similar lines. Now that will depend also on when the government takes action because we also have to be very careful about the signaling to the international markets and so on.
Okay. And then what about the ability of the products considering the Russia-Ukraine crisis, which we have witnessed. And also, so far, China has not been that much aggressive in terms of supplying the material. So what is your feeling on that side? I know that we have some inventories, which is available to absorb at least in the Kharif season, but what do you think on that side?
So when we looked at our volume numbers and especially as we were making the next year's numbers, and we had already procured the contracted the 3.5 lakh tonnes that I've mentioned earlier. The number that we have taken, we believe, is reasonably possible. And overall for the country, we should be able to meet on an average what's been the consumption over the last 3 to 5 years, and therefore, we expect our volume also to be met.
While there is the Russia-Ukraine conflict, Russia is still able to supply fertiliser is not on any sanctions list and Russia is continuing to supply all over the world, including India, and we are also buying from them. So we are reasonably confident that the volume we have considered, we should be able to meet that.
Okay. Lastly, just on inorganic growth side, as you mentioned earlier, also if I recollect in the previous calls, that probably one of the options that we might be looking at is to basically have a non-urea facility itself in asset or maybe in the Morocco side. So that can be one of the options which we are exploring.
Yes. Deepak, like any company, all options remain on the table, right? Which one becomes feasible, which one is in the best interest of the company in the country. So there are 3, 4, 5 options, which are always being looked at. And to be honest, because of these very unprecedented situations, we need to continuously keep evaluating those options, right? So that's really it. So it's not that there is only one option or the other on the table, which is [indiscernible]
The next question is from the line of Prashant Jariwala from -- an Individual Investor.
So my only question is like we are running almost full capacity on the Gadepan, right? So how do you get approved? We have totally depend on the non-urea side for the growth?
Yes. That's a fair comment, Prashant. The urea plants are, by and large, operated at the full rates, right? And the output that we get from them is dependent on the shutdowns that we have. So that's fairly true. At the same time, on the urea front, also, we constantly look at how do we improve our cost on the urea side, which is related to our energy efficiency, right? About 85% of our cost of urea manufacture is essentially gas. That means energy. So we keep looking at that, and we are -- we've just implemented an energy saving project, which will give us benefit in the coming years, including this financial year. So that's one.
And we, therefore, to the second part of your point, absolutely focus on the growth in the non-urea sector, which is both bulk fertilisers, crop protection, specialty nutrients.
All right. So are you confident like if you can get 30% kind of growth from non-urea on the total consolidated company base, we can get 10% to 15% kind of growth on non-urea?
So on the non-urea side, we are confident of strong growth whether it's going to be 20%, 10%, 15%, it also depends on a year-on-year basis. All things have remained steady then it is a different matter. But like we've seen in the last 1.5 years, there is so much that happens because of global trade flows and global demand and supply that I reckon for any company in this industry to say that they can have a 20% growth in the non-urea sector would be a very brave statement, I would say. But we are strongly focused. We have the strength, we have the brand, we have the financial capability. We have the dealer network. And now we with the new geographies that we've opened, we cover approximately 90% of the market in India. So we are positive about the future for sure. And in the crop protection and specialty nutrients, as you've seen from the numbers in the investor presentation, we have seen very strong double-digit growth, and we would like to continue that.
The next question is from the line of Chandra Gupta, an Individual Investor.
Am I audible?
Yes, you are. Please go ahead.
Yes. Okay, okay. I just have one question. In your presentation, you have mentioned about experimenting with application of drones and some other new technology initiatives. So I just wanted to know if you can elaborate on that, what exactly we are doing and what is the potential that we see in this?
Yes, sure. So as you might be aware from a broader perspective, there is a lot of focus on the usage of drones for a variety of purposes. Now in the agriculture sector, broadly, you can say drones are -- can be used in 2 areas. One is for the spraying of crop protection chemicals and specialty nutrients and second is for mapping of farm to understand where there is a problem or even analyzing using analysis for that. So we have tried out both. The advantage that the drones offer in spraying of crop protection chemicals and specialty nutrients is that it is obviously much faster. It is much more homogeneous across the area that is being sprayed, and it reduces the exposure of manually spraying at that is currently being done as a practice 99.9% across India, right? So there are many advantages. So this is one aspect.
The second is that the Government of India, the Department of Fertilizers is very focused on encouraging this. And their plan is to also provide maybe some kind of an incentive going forward to initiate this in a big way across the country, right? And we therefore believe that this is very good for the farmer. And through this process, we will be able to get a better connect with the farmer where we will be able to better explain the value proposition that we bring with regard to the products that we have and so on, and therefore, get higher growth also. Does that answer your question?
Yes. So would that allow us to open a new sort of some kind of a service which can become another revenue stream for us. Will that raise such a potential?
When we look at the financials of this, this is a service which wouldn't really add any value directly as such. And -- but there would be indirect benefit through, like I mentioned, product flow and increase in our growth on our product sale. Because this is something where we'll be replacing what a human being was doing on the farm by the drone, right? So overall, it is kind of cost neutral for the farmer and for us, but we would expect a better growth on our products.
Okay. Okay. Okay. And just one last question. So there's a lot of talk about nano urea business, it would sort of replace the conventional urea. So any thoughts on that? And are we doing anything on that?
So we do not have any nano urea with us. And therefore, we don't want to make any statements on that. It would be best addressed to those companies who make and sell nano urea, we would leave it at that. As of now, we have no intentions to get into nano urea.
Ladies and gentlemen, this was the last question. I now hand the conference over to the management for closing comments.
Thank you very much, all of you who joined this conference and also all of you who asked us the questions. And I hope that -- I wish you all very well and take special care in this scorching heat. All the best. Take care.
Thank you. On behalf of Chambal Fertilisers and Chemicals, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.