Coromandel International Ltd
NSE:COROMANDEL
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Coromandel International Ltd
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Ladies and gentlemen, good day, and welcome to the Coromandel International Limited Q1 FY '23 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harmish Desai from PhillipCapital India Private Limited. Thank you, and over to you, sir.
Thank you, Mishal, Good afternoon, and welcome to the First Quarter FY '23 Earnings Call of Coromandel International Limited hosted by Philip Capital.
From the management, we have Mr. Sameer Goel, Managing Director; Ms. Jayashree Satagopan, CFO; Mr. Mayur Gangwal, GM Finance. I would like to thank the management for giving us the opportunity to host this. We will begin the call with opening remarks from the management, post which we'll have a Q&A question. Thank you, and over to you, sir.
Yes. Good afternoon, everyone. Am I audible enough. Okay. Good afternoon, everyone, and thanks Harmish for organizing the conference call. I'll first give an overview of the business environment experienced during the quarter, followed by company's performance and then we'll have the Q&A.
Firstly, to touch upon the global economy. The global is economy, as all of us know is experiencing a slowdown the 2022 growth estimated lower to 2.9%. Last year, it was 5.7% EBITDA on top of our COVID season. One of the reasons has been the tightening of monetary policies, including interest rate hikes and the strengthening of dollars against major currencies have resulted in a rising inflationary pressure across economies. Further, there has been an impact of the protectionist policy by some of the countries, causing supply chain disruption. The agriculture continues to be the news. The food price index remains at healthy levels. [indiscernible] has been price softening in commodity prices from the deep levels.
Going forward, the geopolitical uncertainty also by the Ukraine war, partly COVID flare-ups and the steps taken by various governments, rising commodity prices, [ interest spread ] and monetary pricing can have an impact on the economic recovery. It is the [ Huka ] world out there.
I think Indian economy has still done better. It is progressing well through the growth rates which have been slightly revised downwards. Quarter 1 GST collection was buoyant at INR 4. lakhs crores , up 37% year-on-year. India started a transformation program from January 2021 and have now administered more than 2 billion COVID vaccinations. The vaccination program having covered the bulk of the population, the economic momentum is building up and India is likely to remain the fastest-growing large economy in the world.
Major headwinds are on rupee depreciation, inflation around 7%. And of course, the energy prices, which needs to be closely watched. Coming now to Indian agriculture. As all of us know, the southwest monsoon is progressing well and is currently at 111% of the long period averages. There was an initial shortfall and a rapid range in the month of June, which has actually impacted the sowing season and it got pushed outwards. However, there was a very strong recovery made in the month of July, especially in the markets in which we operate. The reservoir levels currently stand at 155% of long period headwinds. Last year, it was around 143%.
One good news on the agriculture front is and India is leading the world in the agriculture exports is up by 18%, signaling resilience of the Indian agriculture. The crop swing as of 15th of July remains more or less at the last year levels, the gains in pulses, oat cereals, oilseed and cotton. However, there is a shortfall or a delay in planting of rice, which is the main crop for Curries. During the quarter, NSP of Curries 2023 was announced which had an increase of 5%.
Currently, agriculture commodity prices across board remains favorable and are operating above the NSP levels partly also got to do with the demand even coming from the export markets. There has been an increased thrust on the [ exit ] side with industry and government working together to promote dissemination of technology in agriculture. These are areas like drones, mechanization, new tech for laser like Manon, slow and coated release fertilizer and organic fertilizer, including FSP is being promoted by the government. This -- the signs are we will have 4 consecutive years of good monsoons. And with that, agriculture continues to be a sweet spot in the Indian economy, especially in the markets in which we operate.
Coming to the fertilizer industry performance. Global supply shortage of key commodities continue in Q1 and have resulted in higher prices and delay in the Sbum shipments. The industry witnessed higher prices of key raw materials due to the supply disruption caused by Russian-Ukraine war and also emergence of COVID wave in China and the protectionist regulatory policy is being followed in China.
However, in the last few weeks, we have seen signs of pooling of some of the raw material prices. The government from its side has done well in terms of ensuring that raw material is made available, including having certain deals with Russia, to ensure at least some of the critical raw material is made available to the Coromandel here and also having some long-term tasks with other nations to use their diplomacy.
For the quarter, DAP complex fertilizer industry primary volumes were up by 23%. Currency rates at 53.8 lakh metric tons versus 43.7 lakh metric tons last year. This is largely due to the higher imports of DAP. While the government has increase in [indiscernible]. There was some delay in payments of NPK in quarter 1, which has impacted the cash flows of a number of companies. However, urea subsidy has been paid on time.
Like I said, the India rates for 2023 were announced on 27m April, 2022. The subsidy approved by the cabinet for NBL current season 2022, which is the period up to 39 2022 will be around INR 60,939 crores, including the support given to SSP to trade subsidy and additional spot for ingenious manufacturing and imports of DAP. This is quite a unprecedented. As per the requirement of the industry, while the total year budget has been over INR 2 lakhs, the requirement could be INR 2.5 lakh crores.
Coming now to Coromandel performance. Despite all these uncertainties in the international market, Coromandel has displayed a strong performance during the quarter. registered good growth across the business segments. As mentioned, this is quite creditable given the uncertain business environment with geopolitical uncertainty, the supply team disruptions and firm raw material pricing scenario. We registered a revenue growth of 57% during the quarter, driven by both the accretion and Crop Protection business. This was due to also the higher subsidy, which was available, leading to the turnover growth are also in the nonsubsidized business, we were able to pass through the raw material prices cost.
Our main name of Coromandel was that agriculture inputs are made available to the farmers in its key operating markets and also continue to promote balanced accretion, including organic fertilizers, which helps to resonate the soil and improve farm productivity.
Coming to segmentation performance. Company Nutritional segment. The Nutrient and Allied business segment revenue increased by 16% during the quarter. company has to provide specialty fertilizer and greener solution to farmers has gained momentum in the market and have registered a very good growth in both our specialty nutrition and organic products. On the sales front, in quarter 1, DAP and complex volumes were at 7.3 lakh tons slightly lower than last year, which was at 7.8 lakh metric tons. Manufactured DAP and complex volumes were lower by 10% during the quarter. Since we had deferred some of the sales in quarter 2, mainly to be rethink that the delay in sowing season due to the delay in monsoon in the month of July -- June.
Imported product volumes was higher by 170% during the quarter. Company market share in quarter 1 for DAP and complexes was at 13.5% Previously, it was at 17.8%, mainly got to do with the fact that the season has got delayed in our market. The lower market share also was due to the industrial growth in DAP. In the peaking of complex segment, our market share improved from 27% to 28%. Our single superphosphate quarter 1 sales was 1.6 lakh metric tons versus 1.86 lakh metric tons last year. Our primary market share was slightly down at 11.9% from 14.3% last year for the same quarter. We had some availability and production issues of the [indiscernible] during the quarter 1.
And social team did very well to ensure timely availability of raw material to enable continuous production at our manufacturing plants. During the quarter, our [ BAT ] and complex fertilizer plants operated at 91% capacity and produced 13.9 lakh metric tons of fertilizer, up by [ 32% ]. This cures well for the coming quarter 2 [ current ] season.
Our phosphoric acid production continues to remain high during the quarter with a growth of 27% at 1.12 lakh tonnes. Our key CapEx projects are progressing as per plan. The work on the sulfuric acid plant is progressing well, and the commissioning of the plant is expected in quarter 1 FY '23. This is part of our after integration and to ensure that we have our own sources for raw materials.
Given the high demand for SSP, the company has enhanced SSP facilities, and we are very happy to say that we have restated the hospice plant in Karnataka and also the product which was mothballed in Pali in Western Maharastar. We have also taken up production of the [indiscernible] in -- or -- and 10,000 metric tons are produced during quarter 1.
The merger of [indiscernible] into Coromandel has been completed during this quarter. the business of CSQM has been fully integrated with our Specialty Nutrition business and we are looking forward to bringing up both capacity and also having a common warehousing. Our technology team is working on new [ ad ] products like customized fertilizer, Nano, to enhance the productivity of nutrients. We are expanding our network of [ muticlinics ], which are supporting the business in promoting balanced nutrition and market development initiatives. For our Specialized Nutrition business, we have conducted drone trials for spraying application, and the results have been very positive.
Coming now to the crop protection side. Our propagation business registered a modest growth of 5% in revenue for the quarter. with good growth coming in from the domestic market segment. There were some tightening we have faced in the export markets. The increase in raw material costs and a lag in cost and pricing has impacted slightly the margin during the quarter. We are very happy to announce that 4 new combination products have been launched in the quarter. Three of these are insecticides and 1 is a fungicide. This is entering the company's portfolio towards newer and safer chemistry. The initial response has been very encouraging. The business has built a rich product pipeline backed with strong R&D capabilities and is partnering with global innovators to further strengthen its product offering. On the manufacturing plant side, CPC plants particularly goes of -- operated at 60% during the quarter compared to 79% last year. We were repricing some of the products which were produced in quarter 1 of last year. Work has being set up for building a new multiproduct plant for manufacturing of fungicide at [ Maharashtra ] during this quarter. Like in our specialty nutrition, the company has successfully conducted growing string activities in the pharma fields with crop protection products and have finalized in products for regulatory times.
Our rural retailers network did extremely well during the quarter with focus on nontraditional crops, and providing all around agriculture solutions, including products from advisory and mechanization service. Business has improved its operational efficiency and has leveraged technology to reach out to the farmers. We are very happy that with the help of technology and better negotiations, our retail business has a negative working capital. Coromandel continues to invest strategically.
During the quarter, we invested in a rock mine in clinical, which is Baba Mining BNCP. This will help to diversify our rock sourcing and strengthen our backward linkages. These mines can meet 1/3 of Coromandel [ Phosphate ] Rock requirements. We have also started investing in active startups. The first one was Ecozen, which provides renewable energy-based technological solutions for agriculture. They have installed more than 50,000 irrigation comps at 350 [indiscernible] cold rooms till date in India and abroad. We have also invested in our biotechnology staff called [ Kitbio ]. It basically uses ammonia methane [ format ] based products targeting at agriculture, animal and human nutrition. And they have developed and ready to market several [ bio ] products.
As we had mentioned last time, our digital platform, the journey continues. We have made significant steps in the last 1 year with the adoption of business intelligent dashboards sales force productivity tools and robotic process automation in our manufacturing and our supply chain, which will help to improve processes, efficiency and forecasting capability within the organization. We are witnessing adequate monsoon coverage and higher reserve levels, which will achive well for not just Curry but also for rabi in our key operating markets. We're ensuring tally availability of agri inputs to the former community through our vast dealer network and our retail network. For Coromandel's diversified presence in agriculture [indiscernible] will continue to provide balanced nutrition and integrated pest management solution to maximize farm productivity.
I'll now hand over to Jayashree to talk about company financials. Over to you, Jayashree. Thank you.
Thank you, Sameer. I will now proceed to provide an update on the company financials. As far as the turnover is concerned, the company recorded a consolidated total income of INR 5,783 crores during the quarter vis-a-vis INR 3,686 crores in the same quarter prior year. This is a growth of 57% for this quarter. New pins and allied businesses contributed to 89% share. The remaining 11% comes from the crop protection business for the quarter. Subsidies or nonsubsidy share of business times at 83% and 17% during the quarter. Previous year, it was 76% and 34%. The consolidated EBITDA for the quarter was INR 687 crores against INR 486 crores of last year.
Ma'am, I would request you to again repeat what you said just now aligned as your voice was breaking in the middle.
Okay. On the profitability front, the consolidated EBITDA for the quarter was INR 687 crores against INR 486 crores in the last year. In terms of property nonsubsidy, the [ shared ] 78% and 22% during the quarter. During the previous year, it was 75% and 25%, respectively. The net profit after tax in the quarter was INR 499 crores. This is in comparison to INR 338 crores for the corresponding quarter last year. As regard subsidy, during the first quarter, the company recieved [ INR 146 crores ] towards [indiscernible].
The comparative figures of last year was INR 493 crores. Subsidy outstanding as on 30 June, 2022, was at INR 2,731 crores versus INR 1,149 crores during the previous year. During the quarter, the company [indiscernible] net interest income. This income excludes the Ind AS adjustment of INR 22 crores vis-a-vis the interest income of INR 12 crores in the same quarter last year. The company has maintained its surplus funds in board-approved securities, and these have been remarked for specific growth-related investments both organic and inorganic. The sharp company for being to travel fund the working capital requirements. On the foreign exchange front, as we have all seen, the rupee remained volatile and was in a very broad range of [ 75.95 ] to [ 78.96 ] to a dollar. Coromandel continued to follow a conservative approach in line with the hedging policy that has been approved by the Board, and the ForEX exposure has been covered and the portfolio managed well. The company has got a reaffirmation of the credit rating from CRISIL [indiscernible] during the quarter. We thank you all for your interest in Coromandel and joining us on our call today. We can now open the session for question and answer.
[Operator Instructions] The first question is from the line of Tarang Agrawal from Old Bridge Capital.
Congratulations for a strong set of results. Three questions from me. One, would it be fair to presume that a material amount of your profitability this quarter could be attributed to your phos acid integration and your sourcing of rock phosphate?
Continue your questions.
Okay. The second is if I can get a broad split of the inventory as on 30th June 2022 between finished goods and rock? And the last. What would be the inventory that may have been dispatched before the year-end and which was probably in channel at the end of April?
Thanks for 1 further questions. The margins for the quarter, obviously, has being contributed by the backward integration strategy of Coromandel, the PA plant 1 and 2 advisers have been fully operational. And currently, the team is also working on additional [ quarter '19 ], if possible.
While PA integration or the [ Basel ] integration has given us the fill and the margins, it is also to be noted that there are other areas where the company continues its focus like smart sourcing where the sourcing -- the commercial team have looked into various sources of raw materials and ensure family availability. I think the flexibility that the manufacturing teams have exhibited in processing different grades of drops and assets have also purposely contributed to the market. This is as far as fertilizer is concerned. While we covered a portion of the manufacturing and the commercial capabilities of the company. Equally, we are seeing with the logistics and the supply chain team over the last couple of years on reducing the trade related costs, you will see that despite the increase in the freight rates that we have seen globally, we've been able to sort of manage it quite well. It's a combination of all the including tightening of fixed costs, all of those has sort of helped in quarter 1.
I mean we also aided by good performance by nonsubsidy business, speciality nutrition continues to do very well organic and also crop protection. So all this is adding to the profitability of the company.
Yes. Thanks, sameer. And I do not have immediately a hand of the inventory value between [ HG ] and rock. The channel inventory -- [indiscernible]. The channel inventory numbers, I think we can...
We can give to you
We can give it to you off-line, yes?
So the tradition is much more better than...
The past year.
In the past year and the [indiscernible] we are waiting for the season to start and that's going in the past year.
Got it. Just...
[indiscernible] to recall in end of March.
Got it. And just last follow-up. I mean, in Crop Protection, did we see volume growth in Q1 FY '23 versus Q1 FY '22?
Yes, the among different molecules that we had in a few of them, we have seen a volume growth.
And businesses like domestic and the B2B business, India business volume growth. There were some pricing pressure on the export market.
[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited.
Congratulation Sameer and Jayashree on good set of number. Sameer, my first question is related to the change in the mix of the business in FY '21, our DAP and normally in Q1, DAP used to remain very high vis-a-vis complex. Then last year and this year, we have seen that DAP volume has been substantial, almost 50%, what was 2 years back. So what is the -- I mean, can you give a little more color? And is that also because it's helping us in improving our EBITDA per tonne? And all the benefit of this decor integration that you spoke about, sulfuric, then phosphate mine and when that will start really playing out? And some color how much -- what additional contribution per tonne we can have?
I'll just answer the first part of the thing on the complex. As you know, we are a direction which we go [ in ] DAP is mainly are on phosphate and also on nitrogen, which is in a way not required for the crop and mainly it's our product for the north and the central market where the demand even there as part of our foreign and also as part of government for it to reduce the dependence on foreign imported DAP we are promoting our single super prospect, which used to be the fertilizer of choice. So the government is also promoting the continue to [indiscernible] most of the raw materials or we give in the country. And that's the reason we have seen a store in the demand of single support, including promotion. As far as we are concerned, we just [indiscernible]. We have single-support phosphate trucks, which also have other beneficial materials for the crop and so far. So that's been a foray that we will continue to focus, which is what our market demand is on the NPK. The one thing for a slight surge in demand for DAP has been the pricing cap on DAP, which the government wants to do to ensure affordability to the farmers, particularly in [indiscernible] market.
And that's the reason why you see the quarter 1 sales of DAP going up when for us, our season will be in May, in quarter 2. And NPK, our market share has also improved.
The second question, you want to answer?
Yes. The second question is in terms of what could be the EBITDA per ton margin in terms of guidance that you wanted to understand from us. I think in the same range of INR 4,000 to INR 4,500 per metric ton at least the current year, right, because there are several headwinds where the industry is facing that the company is facing. We have seen the raw material prices have been very high. And Off-led, we are seeing from sort of softening happening which is primarily for urea as well as sulfur for phosphate still high ammonia is going even higher.
There are quite a bit of segment at this point in time. our backward integration will help to offset some of these. Having said that, INR 4,000 to 4,500 is something that we can definitely look at this year. And as far as any opportunity in the company, we try to see how we can maximize and improve it further.
Sorry, Jayashree, my question was, I mean, the [indiscernible], other process that sulfuric acid and acquiring a rock phosphate mine and when that will start playing out and how much additional contribution can come from this?
Okay, sorry. Now on the sulfuric acid, it is going to be commissioned in next year, around the second quarter. The plant has been progressing well going on full steam.
As we indicated earlier, the main purpose of setting on the sulphuric acid plant is to ensure submit security because today, we are importing. We can't have that high level of import of sulfuric acid into the country, Coromandel is the larger importer of sulfuric acid. Therefore, it is more of a supply chain to [ parity ]. And once we have part of the asset coming from our own plant, it will also help us better in negotiation. So that's the way I would look at sulphuric acid, plant that is coming up in [ it well ].
On the [ BMPC ]mine, as I was mentioning in the last conference, it take about 3 years for us to get the maximum throughput from the mine. We have started commercial production. We have received them. There is a good amount of work that is required to ensure the scale is happening so that we can get the maximum out of it. The cost of mining also will be determined during the period. So based on that, definitely, we will get a benefit. But more importantly, having our own for or [ cutting rock ] will also help us to negotiate better with the other suppliers.
The next question is from the line of Vidit from IIFL Securities.
My first question was on the EBITDA margins of the Nutrient and Allied business. So there have been companies that have reported numbers who've made onetime benefits from inventory that is sold post March and higher subsidy realization on that inventory. Would you be able to quantify what the number for Coromandel would be in this quarter? And has that driven such a high performance in the business?
So in terms of the additional subsidy that comes in from the government on the opening inventory, this primarily happens when there is a point of sale or the final liquidation that open the retailers to the farmers. Moreover, during the quarter, as we read out, the subsidy disbursement from the government has been very low. We received somewhere close to about [ INR 136 crores ] of subsidy only during first quarter. And revenue recognition principles is primarily based on when the sale happens, right?
So the sales for all of this to happen last year, the subsidy recognized based on last year's rate. As and when the part acknowledgment happens and, more importantly, the subsidy receipts or received from the government, then there could be a benefit that will come on account of the channel inventory. Partly it has come -- partly it will come in Q2. If I were to respond to you.
Okay. Understood. And just in this new MPP plant, which -- for which work is bigger [indiscernible], what is the expected CapEx? So -- and can you just shed some light on over what page and what the revenue potential could possibly be.
So what we are doing in unclear is we're also refocusing some of our existing plans. And this multipurpose plant for 3 fungicides would be operational from the fourth quarter of this financial year. And for this year, we are expecting between INR 20 crores to INR 40 crores of technical sales from this multi-purpose plant. The CapEx is around INR 25 crores on this point in time.
Okay. And this is for this year itself and are you expanding further in '24 as well, FY '24.[indiscernible]
Yes. I'm giving you the revenue numbers for this year. As we go along a full year basis, the numbers are expected to be higher, and there is also opportunity to formulate and sell in the domestic market. So this was clearly for the current financial year.
The next question is from the line of Vishnu Kumar from Spark Capital.
Wanted to understand, firstly, on the pricing that you mentioned on DAP and other NPKs, which is causing a distortion and the demand structure between DAP and NPK. Given this backdrop for the rest of crucks, let's say, even for the rabi season, would we start switching more towards our production towards these products? Or we will continue to only be on NPK side? Because enroll, we have only 2%, 3% of DAP, which we manufacture.
So our focus will be on NPK. And there will be -- because that's the demand which is there in the market. One of the things which we'll be doing is to promote the low peak rates which the farmer wants. So that's something which will continue, which are also attractive. Some of the grades which are high tea, as and when the demand improves will be reducing that. The strategy will be towards NPK.
Got it. And my second question is, in the past, you mentioned that if you want to or rather see if you want to consider further capacity expansion in the fertilizer business, we would probably keep looking for more sources internationally and probably backward integrate. In terms of where you want to be, have we almost reached there in terms of what we want to achieve? And can we expect some kind of further capacity expansion in the fertilizer. And also if there is any large program that you have in the agrochemical if you could help us understand essentially because we have a substantial cash that we have built in. Just trying to understand that in the next couple of years, should we expect a large deployment in both the businesses.
Yes. Vishnu, the focus currently is in terms of 3 things. one, completing the backward integration at [ Visa ], we have completed the PA. Now we have to get also completed [indiscernible]. Second, we are looking at the investment in BNCC, which is our mine in Senegal and getting the mine fully operationalized because that is going to take some time. We are now into the mining business. We have a strong partner there. we'll see how the mines are fully used up and be able to get the rock supply as we have contemplated.
First, we have 2 JVs to frame for core. There is enough to be done at these 2 entities to ensure that they are fully operations. For some reason or the other, they have been taking control in this, either do have availability of raw material or consortia under tissue, say, for instance, in Tunisia. The focus is to have our people there for these JV turnaround. So these are the top 3 priorities at this point in time for the fertilizer business.
Having said that, there is some big opportunities that have been identified, which could definitely add to our capacity at both Kakinada and [ Bejar ]. I believe this can come all the way up to 2 lakh to 4 lakh tons of finished groups. And more important on the Singapore, we have seen an additional demand that has been coming in. And there, we have expanded our capacity, move more into granulation. The new lead facility at Inox is fully operational now.
Finally, we have revived the plant, which was shut down for almost 5 years. Production has commenced last month. We are also contemplating what needs to be done at our planted [indicernible]. So the strategy is to see how we can provide more of single superphosphate, which was as enhanced nutrition in it. Very recently, our R&D teams have also come up with a new variety of SMP where it can combine. The days with, say, for instance, nitrogen, which can be very helpful for the soil -- so that is also being contemplated. So that's the plan as far as fertilizer is concerned.
On the crop protection front, CP has been initiated as per our earlier plan. And it should get completed in the fourth quarter of this year and usually operational. The business is also looking into another entity which would be [indiscernible]. They are currently working on this proposal. There the investment could be INR 200 crores to INR 300 crores. So that's something that we are working on.
Apart from this, there is also plans to see how we can expand our biopesticide where we are currently getting in and processing them for [indiscernible] content. So we are looking at not just fruits and also fruits and also sourcing from different markets. So there is likely to be capacity expansion and also some footprint expansion. So these are the current areas that we are working on.
But also to add to what Jayashree said on our specialty nutrition and also organic. The whole aim is to strategically insert them on trading, which mainly comes from and importing the products from China and the other thing at how we can get the full value [indiscernible] so both plans are already placed. We have also put up lethal fertilizer [indiscernible] results are very good. And we'll be setting up some new technology products on as many the trials are completed. So [indiscernible] this pace.
Got it. And 1 final, if I may squeeze. So if you could just give us the inventory gain, if any, this quarter?
Inventory gain [foreign language]
I think you answered the question.
I -- yes.
We can take it off-line, but not really clear.
The next question is from the line of Resham Jain from DSP Investment Managers.
Just 2 data points. One -- to give these 2 numbers claim pending to be acknowledged and acknowledge that pending claims, just these 2 data points.
Acknowledge and pending claims.
I couldn't get the [indiscernible] so my hope you are very...
Sorry, sorry. Yes. So just 2 data points. One is claim spending to be acknowledged and another is acknowledge but pending to be received.
This is on the subsidy side?
Yes, subsidy side.
Okay. channel stock as of the [ indiscernible] channel stock end of June was around INR 2,000 crores because this is yet to be acknowledged, okay? And then on the claims that we have made and pending with the government is about, I would say, close to INR 5,600 crores.
Okay. And also, ma'am, on the CapEx side, what is the total planned CapEx for this year, FY '23?
FY '23, we are expecting close about INR 800 crores to INR 900 crores.
Okay. And is it possible to give a breakup between fertilizer and others?
The leasing of about...
Could you please repeat? Your voice was breaking.
Fertilizer would be in the region of about INR 600 crores to INR 650 crores. This includes the sulphuric acid plant, include the work that's happening in all the SSP plants and then the normal [indiscernible] happens on a year-on-year basis. And then there is a CapEx that has been planned for Crop Protection chemicals. It [indiscernible].
Okay. And as the other participant also was asking on the new capacity addition on the fertilizer space itself because what we are seeing since last 2, 3 years, maybe 4 years, is the amount of cash generation versus the amount being deployed in the business, and there has been a continuous cash generation, which is, in a way, impacting our return ratios. So if you can just highlight because this year also the cash generation versus your CapEx seems to be -- you will still generate free cash flow, and you already have a large amount of cash sitting on book. So -- if you can just explain what is the thought process on the capital allocation side?
Yes, Resham, as I was responding to Vishnu Kumar, this current [indiscernible] strengthen what we have. And until we have further solves for our fertilizer bulk business. I don't think it would make with economic sense to add capacity. At the same time, we bottlenecking efforts are going on. It is not only for the brand-related project, but it is also for sulphuric acid plant. As I mentioned, that would release about a ton of additional capacity that is what is on the [ anvil ] at this point in time.
Having said that, the future for fertilizer is also going to be in more normal products. It could be liquid fertilizer, for instance, or nanofertilizers or coated fertilizers. That is where our R&D team is currently focusing on. Last year, we had set a liquid fertilizer plant, a small scale. And we have had a couple of products that have been introduced offsite. We are currently undergoing testing for few other products. And as they did approve through we should be in a position to how we can scale up some of these liquid fertilizer plants because these are going to be [indiscernible] drugs as well as we can see it going.
Having said that, on the Crop Protection, there are plans to set up a couple more entities and as we alluded in the past, we are also actively looking for any inorganic opportunities. which would be complement to our business. We evaluated a couple of times. It doesn't look very interesting. We are looking for opportunities in the bio space, not necessarily in biopesticides. But overall as a bioproduct portfolio. So these are some areas where we are looking at deployment of our capital. As we mentioned in the past, from a capital allocation, there will be a bias for our growth engines, which would be the non-capibility business, mainly Crop Protection, bio speciality nutrients
The next question is from the line of Abhijit Akella from Kotak Securities.
Just a couple. One was, I was hoping to hear your thoughts on the prospects of these nano products that are now hitting the markets? You alluded to it a brief while ago. The government seems to have very big plans for Nano urea. They're talking about potentially using it is 20 million tons of manufactured urea in India. Do you see these products getting a very large year of adoption from the farming community, not just in urea, but possibly even in that? And is this an opportunity? Or could it also be a threat for established large companies?
So I think that's a very good question, Abhijit, [indiscernible] for nano and particularly what has been introduced in the market. Obviously, the times are [indiscernible] also the price concept into the farmers.
On our side, we have [indiscernible] through our R&D network research and have developed our own nano DAP. And this is as part of the registration process, we have given to the government now is getting evaluated for. The results which you have done in the universities are now looking particularly in areas where there's extensive news and rates of both urea and phosphate as such. We do not see this as an effect. This is not just nano or [indiscernible] leading to.
We are looking at coated fertilizers. We are looking at slow-release fertilizers, which you've already done successfully in our speciality business. The whole idea is to have more crop per gram or more crop per crop. And this is what our lead purchases possibly.
Now by [indiscernible], and we have a full agronomy team, which works with the farmers. The way it looks like is the farmers think it's only above fertilizer mainly given to and are come to the attribution centrally, but mainly given through the rules, which helps the plant we have seen with our products and especially with the new products that you're launching, that when you do a foliar spend nano practicing in pharma myself, the absorption is almost as compared to in the routes as much as 70% to 80%.
For example, just a case of point is in zinc. We used to get what is called being some trait to the soil as a [ micro nutrient ] and there the absorption and this is widely used in the industry, probation but our overtime and our products the absorption when we give a [ 4-year ] on applications almost to 70 to 80. And that's what Jayashree was alluding to it's the new generation products, which will help us to get the next level of lean evolution. And this includes, of course, integrated pharma practice. But what it requires is to change the concept of how the farmers look at things. And here, we're also working on application technology. And that's why we mentioned in our thing that we are looking at how we can use down for stream.
Both our crop protection and also our specialty nutrition and the trials have been quite successful. We are going to scale it up and get into looking at investments on that count. -- with our [ Yanmar ] products will be used like transplanters. We are developing coated fertilizers which are [indiscernible] so that they can be -- they can go into the right transplanter, which is the application we need to drive to the. And again, the absorption is very, very high. So that is something which the Indian agriculture fertilizer has to do. And like I said, is that we have the largest range of grades. We have now bought grades, which we top points. It's like [indiscernible] nutrition. You don't each person doesn't require the same type of yes, the basic needs are there, but then it is the secondary and the micro nutrients will make all the difference. And that is something which we are working towards with [ agents ]. I mean, recently, we now won't even get into [indiscernible] specialized grades have been well into that -- and we have raised or which apropos to help to get better productivity from crops. So I hope that answers your question. We can not something it offline.
Sure. No, that's very helpful. And the other.
[indiscernible].
Sorry, can I just finish? Yes. The other one was just with regard to the investments in the couple of start-ups that we have made. I was just hoping to hear your thoughts on the opportunities you see for these fledging companies? And what excites you about their prospects?
So the way we have done it is we have set up our investment to called [ air ] investment to basically look at start-ups because it requires a totally different valuation. We are very pleased to invest in 2 such startup companies with [indiscernible]. One of the companies which are [indiscernible] into energy, better at providing in the use of what is called alternate or because they basically use solar energy. And they have what is called -- which is actually venting the market here, [indiscernible] called solar power cooling systems, which are highly cable, and they are both in India and can be exported also very low-cost solution for the farmer, but taking logically superior.
This will definitely help in post harvest, which you are seeing, and we are already looking at putting draft and our retail network to help the farmers, especially those who have initial crops or to power and other things. At the same time, there's an opportunity for these to be most in our new collection, which we did do from the ForEx so that the centralized of the product by the time it reaches the plant is retained.
So at this pace, these are technologically peer products is existing with String Bio which into permutation technology, which is what we do with the bioproducts. And the good thing is they use ammonia and also methane to produce products for agriculture, but also for human and annual consumption. And some of these products submitters, have international -- so definitely, on the agri space, we are looking at how we can partner with them to help them to market their products.
What's the space, there will be few more which should be doing.
The next question is from the line of Ankur Periwal from Axis Capital.
So first question on the crop protection side. So you did mention that slightly lower realization on the export front, pulling down the overall revenue growth here. if you can broadly highlight what could be the domestic growth? Where I'm coming from is we had done a good amount of new product launches, both contribution as well as in license as well expanded the distribution network. So is it just a quarterly phenomenon and probably because of the delayed rate or how should one [indiscernible]?
As far as the exports is concerned, there were some pricing pressures on [ Mancos ]. So what we have done is 2 things. We said we will not be reducing our margins on selling in some markets. So that led to a reduction in our volume in export markets. Having said that, the domestic B2B has been robust and now importantly, the formulation. The new products that we have been introducing the last couple of years has actually helped gain a good amount of momentum in the domestic market. This year also 4 new products have been launched. And that is actually helping us in achieving the volumes in the domestic market. The first quarter, the new product introductions have happened only in June. We expect a good traction for it in the coming peak season, [casual] plan volume growth for emetic formulation.
Sure. So from a full year perspective, our earlier thoughts of maybe a high teens sort of growth here. Is that thought intact despite this slightly slower?
Yes, that is important. I should also tell you that as we have seen pressures in mantling, will also happen because there is a cost increase happening for the raw material, especially [indiscernible], and we have seen those prices cooling. The team has proactively worked with the customers globally. And we've taken some pricing actions in the market. So all of this should help as we go along. The new technical plants that are going to come up in [indiscernible] also contribute additional revenue during the year and have estimated in terms of high teen growth to hold good pet. I don't see the challenge there.
One of the things our leveraging is also is to leverage our distribution network in fertilizer and specialty reps to get -- gain further traction for the crop protection business, especially in the positive.
Sure, sure. And which is where we are sort of guiding a strong growth there aided by the distribution.
Absolutely. At the same time, we have placed people in the markets in export markets. they are working customers and also profile solutions for this market so that we reduce our dependence on the credit and on the bank using it takes some time, but that's something which is there. So that you are not dependent on customers who intense that create own brands in the export markets.
Sure, sir. Second, a bit on the fertilizer side. I'm sorry, sorry, harping again on the same bit. Where I'm coming from is your guidance of around INR 4,000 to INR 4,500 EBITDA on a per ton basis. So 2 questions there. One, as I understand in the initial comments, we did highlight the first and second plant full benefit coming in this quarter on the phosphate side as well as some sourcing led benefits, which were in this quarter. So were these benefits, especially on the sourcing side, onetime in nature. And hence, we are still maintaining our earlier guidance of 4 to 4.5. Because if I do my back of the never workings, our margins, even if I adjust for the inventory gains, is still much higher versus what we do last year on a year-on-year basis. So just wanted your thoughts there.
Yes. Ankur, you're right in a way. given a lot of uncertainties in the JV alum prices are [indiscernible], right? We're not sure how the second quarter -- how the second half of the year is going to be. Added to it, the NBS rate that has been announced with the government is only for the current season. If there's any cooling in raw materializes, we will also see corresponding production in the NBS rates and in subsidy realization. So factoring in all of the products in the year, I think to INR 4,000 or INR 4,500 would be a good estimate. But as I mentioned earlier, the intent is to see how to grow it. And that's where all these measures in terms of backward integration, cost optimization, digitization, automation, everything comes into play. So there could be definitely upside at this point in time, it is a cautious approach because we are female unknown.
We never expected raw material prices to go with closely last year. And it continues to be high, except for a couple of commodities where we are seeing that heating will happen. Still with the Russia, Ukraine prices going up, we don't know how the ammonia prices are going to be for the next year. And therefore, I think it is pudent to use at this point in time with the [indicscernible] opportunities that could be there for further margin expansion.
Sure. That's helpful. And just 1 clarification, if I may. Sameer sir did highlighted towards the Nano fertilizers as well as the pilot that we are doing on the liquid fertilizer front. Just trying to understand from a time line perspective, is it something that one should look forward to maybe in the next 1, 2 years? Or it is more medium-term or longer-term thought or investment opportunity there?
So the liquid fertilizer plant is already over. We have introduced its product in the market and traction is good. And it's a multipurpose can. So even Nano [indiscernible]. The whole idea is that as we find a traction, these are then scale it up on that count. So when we talk about it is acting [indiscernible] as far as the nano is concerned, we have filed the application and making further approvals for that. But it's a different way of Nano compared to [indiscernible].
Sure, sir. That's helpful. What -- how much time does it take to set up a liquid fertilizer. So theoretically, if you want to scale this up to a bigger plant.
[indiscernible] we did the finances and [indiscernible] but the technology team did very well in certain parts within a 9-month period. I think that there is a question of how much scaleup we want to do. We'll obviously do increase. So it's not something which is very difficult. Now that we know technology and we have proven that we can produce very good product [indiscernible] .
Yes, the first pilot plant as the setup [indiscernible] fertilizer it took us less than a year.
Less than 9 months.
About 9 months or so. And on a modular basis. So as we get the new projects approved, we don't see there's a challenge.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
So firstly, thanks everyone for joining. Appreciate your interest. It is a [ Huka ] world. But I think what is very helpful is that the monsoons have so far, we still have to meet for the August month, but so far has been very good impact with anything that excess. This also helps the reservoir and also of water through the chemical and also will help for [ BP ].
I think Coromandel, also with the government is meeting the current forestry of the country to make fertilizer and we put products available to the farmers the prices, which is happening got to do with the war which is there. And there our procurement and our manufacturing team have done exceeding the to make availability, which is the key to the commerce. The good thing is with our diverse portfolio and also the crop specific products, we are able to then manage on how to meet the need for the farmers to promote management. And the investment that we have done in backward integration like we see us paying dividends to that extent. So that will not depend.
And overall, I would like to compliment everyone in prices like we are globally. I think India and the government across, whether it's the center of the states and then exceeding the well not to have the type of food crisis which are [indiscernible]. So that complement to reman. I think as Indians, you should feel very proud of it, is [indiscernible]. all the very best. Thank you.
On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.