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 Q2 FY '22 Post Results Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Himanshu Binani from AnticStock Broking Limited. Thank you, and over to you, sir.
Good day, everyone. And on behalf of Antique Stockbroking, I would like to welcome all the participants on the 2Q FY '22 Post Results Conference Call of Coromandel International. From the management, we have Mr. Sameer Goel, the Managing Director of the company; and Jayashree Satagopan, the Chief Financial Officer of the company. Without any further delay, I would like to hand over the call to Mr. Goel for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, Mr. Goel.
Good afternoon, everyone, and thanks, Manshu for organizing the conference call. I will first give an overview of business environment experienced during the quarter and followed by Jayashree will take through the company's performance. And also, we will then pick up the Q&A. After contraction in economy last year, India is expected to grow by 9.5% during the current fiscal year as per the IMF's latest forecast. In fact, some of the experts are even debunking just saying it will be even higher. This growth is expected to be based on increased demand, higher infrastructure investments, containment of COVID after the second wave prior because of the vaccination and a good monsoon for the third consecutive year. India is likely to be the fastest-growing large economy as per the estimates of IMF. Agri was a sweet spot. Agri GDP grew by 4.5% in quarter 1, vis-a-vis 3.5% last year quarter 1. The Southeast monsoons was near normal despite the rains being rapid especially in July and August, especially in parts of North and Central India. The reservoir levels in the country remains at 107% at long period averages. In the southern and western markets where we operate, reservoir levels are well above the long period averages. The crop acreages have marginally been higher than last year, with a good increase seen across in rice and pulse acreages. There was a short decline in cotton as the first advanced estimates are showing that both rice, cotton and other crops have grown up. So this is the third consecutive year of good monsoons. And as I said, agriculture will continue to be a sweet spot. Economic revival post-COVID in this year has induced a surge in demand across all commodities, which has caused a global supply in balance across. Further, the reduced investments done on conventional fossil fuel have resulted in higher energy prices like it has been witnessed in Europe. Shortages of containers continue through the quarter with rising prices and uncertainty in containers availability. A lot of them actually have been in China. However, on the agri input side, there has been an increase in demand with record production and higher price realization. Reduced price of imported finished goods and raw materials have led to a very high spike in raw material prices. Coming to the industry, fertilizer industry performance for the quarter. DAP and complex fertilizer industry, primary sales volume was down by 22%. This year was 56.5 lakh metric ton vis-a-vis 72.9 lakh metric tons last year. Industry, which is the real sales, point of sales was down by only 12% over last year, 61.6 lakh metric tons versus 69.8% at metric tons same period last year. Major raw material prices continue to remain high. Force asset prices for quarter 3 is yet to be finalized. The raw material prices rolling high, the government has rolled over the subsidy under the NBS scheme for rabi season. Government further announced a special package for DAP and 3 generic grades of NPK, which are mainly sold in the DAP market and account for almost 80% of the the generic NPK sales.For H1, DAP and complex industry primary sales volumes are down by 19%. This was almost 1 lakh metric tons versus 1,24,000 lakh metric tons last year. Industry POS sale has been down by 12% over last year, 101 lakh metric tons versus 150 lakh metric tons the same period previous year. Coming now to Coromandel performance. Coromandel registered a healthy revenue growth of 34% during the quarter, driven both by Nutrient and Crop Protection business. Coromandel ensure that every inputs was made available to the farmers in its key operating -- in its major operating markets and promoted the use of balance nutrition, including organic fertilizer to help to regulate the soil and also help in farm productivity. Coming now to our segment price performance on the nutrient side. The nutrient and early business segment revenue grew by 38% over the same period last year. The business has launched a new product, GroShakti Plus, a fortified NPK with enforced technology, combining trust towards providing specialized fertilizer and a greener solution to farmers has gained further momentum in the market. Company registered a good growth in both our specialized nutrition fertilizer and organic products. On the sales front, in Q2, DAP and complex volumes were at 11.2 lakh tons, same as last year. Manufactured DAP and complex volumes were slightly lower by 3%. However, this was made up by some imports, which was up by 18%. However, when you look at H1, the value of our import was 160,000 metric tons as compared to 204 metric tons last year on DAP. And as far as NPK is concerned, it was nearly the same, NPK and DAP put together, last year was INR 2.28 lakh metric tons and this year has been 2.05. Company market share in Q2 increased to 19.5% versus 15.2% in quarter 2 last year. The gain in market share demonstrates the company's commitment to the farming committee, ensuring timely availability of balanced nutrition. Company maintained its previous market share at 20% for the quarter. The SSP business did very well. SSP, quarter 2 sales was 2.26 lakh metric tons with a growth of 11% over last year. Market share improved to 18% from 16% last year for the same quarter. The POS share of SSP during this quarter was up by 44% to 2.42 lakh metric tons vis-a-vis 1.67 lakh metric tons last year. Our main product, Grow Plus, has gained further traction in the market and is now nearly -- almost 1/3 of the sales. In H1, DAP and complex volumes are at 19 lakh metric tons versus 19.5 lakh metric tons last year. Market share in H1 has improved from -- to 18.9% from 15.8% in H1 last year. SSP H1 sales was 4.1 lakh metric tons with a growth of 24% over last year. Market share has improved to 16.1% versus 12.7% last year for the same period. Sourcing teams ensured timely availability of raw material despite the turbulence in the international markets to enable continuous production at the manufacturing plants. During the quarter, our DAP and complex plants operated at more than 100% capacity and produced 9.12 lakh metric tons of fertilizer. Our phosphoric acid production also reached a new high during the quarter. We have a liquid fertilizer plant, the 10th evaporator was successfully completed and commissioned during the quarter. To further improve the sourcing security of key raw materials and commitment to AatmaNirbhar Bharat, the company has envisaged of setting up a new sulfuric acid plant at Vizag as part of backward integration. Project for SSP granulation capacity at 2 of our plants, in Udaypur in Rajhastan and Nimrani in MP are progressing well. We're also looking at revising some of the old SSP plans given the demand in the market. The technology team is working on liquid and fortified fertilizers to enhance productivity of the nutrients. On the Crop Protection side, Crop Protection business registered a growth of 9% revenue during the quarter, supported by good performance in export and B2B segments. Decrease in raw material prices resulted in low margins during the quarter. The new products launched by the company in the first quarter this year has found good attraction in the market. The strategy of introducing new generation products is helping our farmers connect initiatives and improving farm productivity. The business has built a rich product pipeline backed by strong R&D and is partnering with global innovators to further strengthen its product offering. On the manufacturing side, DBT plants operated with the increased capacity utilization of 77% during the quarter, up from 73% in the same quarter last year. The business is setting up a new plant for manufacturing of herbicide at Sarigam. The bio business has increased its biostruction capacity by 50% at Satyavani plant in Tamil Nadu. The retail stores continued to operate well during the quarter. The store focus on providing all round agri solution, including product, farm advisory and mechanization services. Business has improved its operational efficiency and leverage technology to reach out to the farmers. The company has embarked on a digitalization transformation journey and is working on several digital initiatives across the organization, including digital marketing and customer connect. With healthy reservoir levels and soil moisture conditions, we expect good traction in the upcoming Rabi season. Farm productivity and farmer interest being in triple part of our model, our agronomist team is working closely with the farmers, and we have set up nutri clinics in our major markets to give advisory service to the farmers. Coromandel will continue to strive to ensure timely availability of agri inputs, supporting the needs for the farming community, including giving balanced nutrition to the markets of North and Central. Now I will ask Jayashree about our company's financials, which will be followed by Q&A. Over to you.
Thank you, Sameer. Good afternoon, all. I will now provide updates on the company financials. For the second quarter, the turnover of the company was INR 6,166 crores. This is the consolidated total income vis-a-vis the same quarter prior year, where the total income was INR 4,620 crores. This marks a growth of 33% overall. UTMs and allied businesses contributed to 89% share, and the remaining 11% coming from the Crop Protection business. Subsidy and nonsubsidy share of business stands at 84% and 16% during the quarter. In the previous year, it was 79% and 21%, respectively. On the profitability front, EBITDA for the quarter was INR 743 crores as against INR 843 crores last year. In terms of subsidy, nonsubsidy share, it stands at 74% and 26% during the quarter. Net profit after tax for the quarter was INR 519 crores in comparison to INR 589 crores for the corresponding quarter last year. For the first half of the year, company recorded a consolidated total income of INR 9,852 crores vis-a-vis INR 7,843 crores in the last year. The net profit after tax was at INR 857 crores versus INR 839 crores in the prior year. As far as subsidy is concerned, during the quarter, the company received INR 1,671 crores towards subsidies. Comparative figures last year was INR 792 crores. Subsidy outstanding as on 30th September 2021 was at INR 1,698 crores versus INR 2,862 crores during the previous year. Subsidy outstanding includes INR 1,251 crores, which has been cleaned and pending with the government for disbursing. As far as interest is concerned, during the quarter, company earned a net interest income. This is excluding the NDF adjustment of INR 11 crores vis-a-vis interest cost of INR 8 crores during last year in the same quarter. Company's balance sheet continues to remain strong. Company has maintained its surplus funds in Board approved securities, and these are earmarked for specific growth-related investments and initiatives. During the quarter, rupee remains in a broad range of INR 72.92 to INR 74.96 vis-a-vis dollar. Coromandel will continue to follow a very conservative approach of hedging the ForEx exposure, thereby well managing the foreign exchange portfolio. Thank you all for your interest in Coromandel and joining us in the call today. We will now open the session for question and answers.
[Operator Instructions] The first question is from the line of Varshit Shah from Metro Capital.
So first of all, I'd like to congrats the management for pulling off a very decent quarter on -- both on an absolute EBITDA basis. Because given the external environment I mean, I thought it would be tough to achieve these numbers, but to deliver on volumes and largely sort of negate the impact of the raw material cost. So congratulations to the management on that. Sir, my first question is on backward integration. I think Sameer alluded his remarks regarding sulfuric acid. And given the external environment, I think from a short-term perspective, I think, backward integration or any focus on the cost side is sort of low-hanging fruit given that, historically, over the last 4, 5 years also, we have been continuously doing some form of backward integration, improve our margins. Can you elaborate on that initiative that Sameer was alluding to in his opening remarks?
Varshit, Thanks, and I'll get -- but I'll fully thanks for the compliments. I think it is a very turbulent market. Like we said, you have seen the fact even economist calling about we are getting into a shortage situation globally. We talk about not just us, but when you look at whether it's steel, gas, everything is getting into short supply. And of course, there are reasons for that. But definitely, we had embarked upon backward integration quite some time back. Plant -- whole PAP project in Vizag was towards backward integration. Recently, even in Ranipet, we actually introduced sulfuric acid, which we are first getting either imported or earlier from [indiscernible]. So that is, again, a step which really helps us. And I'll get Jayashree to answer other things on. Go ahead, Jayashree.
Thank you, Varshit. As a philosophy, Coromandel has been looking into every opportunity where we can backward integrate and improve our self-sufficiency as far as raw materials are concerned. Our PAP2, which draw commission a couple of years back, has been running very successfully. Typically, when we set up a potash plant, we also look into putting up a sulfur burner. We had received approval from the environmental standpoint, and we've been evaluating it for few months now. We also discussed about it in the last call. So currently, we have sort of internally approved setting up sulfuric acid plant. We already have 2 plants in [indiscernible]. This will be the third plant that will come up. And the team is currently working on getting the basic and detailed engineering study done as well as working with the vendors for ordering the necessary equipment. The project would take approximately about 24 months to complete. And this should help us in becoming a little more self-sufficient as well as our key raw materials are concerned.
Sure. That's very helpful. And my second question is that given that the current environment on the cost side, I mean, particularly your key imports be it be phosphatic rocks or gas, et cetera, and they remain elevated and at least -- they should remain elevated at least a quarter or 2, if not more. So given this kind of scenario and you have a very strong balance sheet. And the question is slightly lower around a 1-year horizon or beyond. Will this help actually to sort of read out the weaker players out of the market at least and have higher market share, all in the short-term your capital end might get squeezed in the entering, but eventually, you will come out stronger out of this cycle? Do you anticipate -- because it's always resale in the market share on if I were to receive. So do you see this kind of sustaining, like, over the next 2 quarters as well?
Look, the raw material prices appears to be on an upward trend, and we believe that it could remain for the next quarter or so. Having said that, as a company, our philosophy has always been to look into all opportunities that are available to run our plants very efficiently, ensure material is available for running the plant on a continuous basis. And also work closely with the farmers and our channel partners to ensure timely availability of fertilizer and agri inputs to the market. We believe competition is good because it will also help us to continuously look into areas for introspection and improvement. Having said that, with a strong balance sheet and the right focus on all elements, not just limited to cost, but also looking into the real requirements, ensuring that there is balanced nutrition needs are met, not only in our market but also looking into markets beyond. I think there is enough scope for Coromandel in the future years to come.
Just to add to what Jayashree has said. Definitely, one of the acquisitions, which was from Liberty was on single super phosphate. The good news is that the government is really promoting, especially in markets which are dominated with DAP and SSP is the -- used to be the older fertilizer and a bit of fertilizer and especially for sulfur-loving and other crops. So we have enhanced the capacity. We are revising certain plants. Quota was revised, we are looking at Pali. And we believe that we can consolidate it. And particularly players when, I say, who are not giving good quality to the farmers will be the loss. And here also, like I said, we have launched products, which are value plus. So our Grow Plus product has been well accepted by the farmers. And now they are not calling it SSP, they are actually calling it Grow Plus. Two of our plants because it requires granulation is already producing. And as I speak, the third plant has actually started their dispatches now. So we do expect consolidation to happen in a industry, which was very much unorganized on that count. Similarly, it gives us opportunity to spend money, and we are growing those markets into other businesses like specialty nutrition. We have set up our liquid fertilizer plant. We are looking at other new products in that and also organic to expand business. So we'll continue to look at these opportunities apart from Crop Protection.
[Operator Instructions] The next question is from the line of Sumant Kumar from Motilal Oswal.
My question is regarding the Rabi season. How is the demand outlook? And number two, how is the -- we know this is a very challenging scenario. So overall, raw material prices is very volatile. So how are we passing on what is the price increase across product segment?
So again, Sumant, thanks for that question, and thanks listening. Like I said, Rabi is with the good monsoons, which has happened, which initially were erratic and the fact that the Northeast monsoon also has started on time and the reservoir level will be good. At least in our markets, which we cater to, Rabi should be a good season, and therefore, the sowing will start now. So we're hoping and the moisture level is good. So that's one part of it. One issue which has happened is, and that's what government is asking for is the diversification. Because unlike the past, some of the procurement has to be done so that the farmers get their money, including through FCI and other things. But otherwise, the diversifications and now government is promoting, you saw in the latest existing also on oil -- because they want to do import subsidiary of edible oil, they have also started on pulses. And therefore, money has been given for growing the number of oil seeds. A number of oil seed companies have started growing that. And that will again help us because, again, APTG are major segments where out of the 7 lakh hectares, most of this is going to come here. So that's one thing. So Rabi will be good. The demand will continue to be good. There will be pressure on raw material prices. And in our other businesses, we have been able to pass on. Here, of course -- and we do have a premium. Here, of course, the government has also, in fertilizer, has given us the subsidy and has rolled it over, including a package. So that's where it is. Anything else to add Jayashree?
So from here, what margin contracts we have seen in both segments, can we see the improvement and -- or maybe a similar level of the previous year?
Look, Sumant, we will have to look at it on an annualized basis. There are going to be some quarters where you will see raw material prices are soft, raw material prices are higher. Overall, on an annualized basis, is what we normally look into. The last quarter, we have seen RM prices being higher. Current quarter also, given some of the global trends, we are seeing the crisis being soft, but we expect this to sort of soften in the fourth quarter. So if you look at it on an annualized basis, I think we should be more or less okay. Again, it also depends upon which grade, right? There have been changes in the mix compared to last year, primarily to meet with some of the requirements that have come in, in specific states. So the mix also plays a room. I would think that it's not going to be too far off. But we should also recognize last year was very different. Because, last year, there was a syndrome that raw material prices were almost at its raw bottom, right? Sulfuric acid was trading even in negative, whereas it's different this year. So I would look at it on a number period average. And Coromandel would be in a comfortable position to sort of maintain its margins, I would say, given some of the backward integration that we have taken and the cost levers that we are pulling in. Of course, one needs to wait and watch how the RM prices are going to trend. So we'll take it by the quarter for the next 1 or 2 quarters. And once we are in right positive, I think it will give a much more clear visibility.
[Operator Instructions] We'll take the next question from the line of Vishnu Kumar from Spark Capital.
My first question is on the price increase -- I mean the additional subsidy the government has given on 3 key NPK grades. Does it consider the current phos acid? Or some cushion is built for some anticipated increase in phos acid that is likely to come?
Vishnu, this has been given almost a couple of weeks back. I think it considers the last quarter phos acid prices and also to some extent, what could be the PA prices for the quarter because the PA prices for this quarter is still not yet settled. So it's anybody's guess how it's going to actually get firmed up. If there is going to be a higher increase in the PA prices, accordingly, there will be discussions, I guess, with the DOF and the government. But at this point in time, there is some factoring of price for quarter 3, but mostly covering the increases that have already happened.
And the rest of the grades which we sell, which is not part of this, have we taken any price increases or any thoughts on that?
Yes. We have taken some amount of price increases as much as is possible. At the same time, we also recognize that we are in an industry where we have to make our agricultural products available to the farmers. So in the years, when it is going to be tough, we will take a call to appropriately price it and not look at maximizing it. So Coromandel takes a very, very balanced view so that every inputs are available to the farmers. We don't want to create too much of a spike. And it is a very measured call that has been taken.
I think one good thing which will happen in this is that a lot of people are promoting -- right from the university to the agriculture scientist and to the government promoting what is called balanced nutrition, which is required for particularly markets like North and West, which you now focus on what is called strong bids like urea and all and DAP. So that is something which is there, and we'll see more and more of balance nutrition, which is the strength of Coromandel. And we are seeing a major traction on our single super phosphate business plus the Grow Plus business, which is there, and that's why which can easily replace DAP. And that, again, is being supported by the farmers and all the agriculture community.
Got it, sir. And the next question is on where do we see the capacity of our backward integration, let's say, phos acid, sulfuric acid or even additionally SSP, you could give us where are the capacities today? And what is it likely to change over the next 2 years? And if CapEx is positive for those?
So you're talking about the capacities for backward integration, Vishnu?
Correct. So let's say, our understanding is about 50%, you are backward integrators on phos acid, what is it likely to go over the next 2 years? And what is it for sulfuric acid until now? What would it change to next 2 years? And also for SSP, if you could just tell us what is the capacity and where does we go to the next couple of years?
Okay. So phos acid, we've already undertaken our capacity expansion, which got completed a couple of years back. There is some scope for operational efficiencies to kick in, which we saw happening in the last quarter, right? So that can help us, say, getting another 100 tons per day type of an additional capacity, but that's on the PA side. What is important on PA is to see how our JVs, which are TIFERT and Foskor, actually get more efficient so that we can reap the benefits of it. There is a team which has been diputed for Foskor to help them on the technical front as well as in TIFERT, where not only our engineers, but also engineers from DSSC are there. Currently, they have also got a good set of people from GCT, who also has ownership in TIFERT to further support them in their technical expertise and running the plant more efficiently. So apart from our own backward integration, our JV's turnaround also is equally important for us on the PA front. We do not envisage any further major investments at this point in time in our facilities for PA, right? If there are any strategic possibilities that come in future? Obviously, Coromandel would be looking into it. Having said that, on the sulfuric acid front, we are setting up a facility, which will be producing closely 2,500 tons per day. That's the new facility we are talking about that would entail a capital expenditure of close to INR 400 crores, which will be spread over a period of 18 to 24 months. That's going to be a major CapEx for backward integration. This facility is also going to be coming up at Vizag. We already have our SAP1 and SAP2 there. So those 2 would be fully operational, along with the new plant that could come in. For our SSP plants, Ranipet had a very old sulfuric acid plant, which was not being used for many years. That got revived 1.5 year back and is fully functioning. We do not see a requirement for putting up additional sulfuric acid plants for any of our SSP plants at this point in time. There is an asset that is available that is being used. They're not...
High consumption.
High consumption areas for us to look into a total backward integration. What would help the SSP plant is mainly in terms of strategic tie-ups for sulfuric acid as well as rock, which we source from locally from RSM as well as we selectively import either out of Egypt or Jordan depending upon the greater rock that we can process. So that's as far as the backward integration is concerned. The major one for you to look into would be our SAP3, which will help us to become, I would not say fully self-sufficient. We will still have to import. That's why when I started earlier, I said the context is any time when we put a PA plant, you always have a sulfur burner along with it. It had taken some time for us to get enroll and clearances, and we are now going ahead with it. We will still need to import, and we do have strategic contracts globally for import of sulfuric acids.
On SSP manufacturing, like you know, we have said in the past, we have snowballed a couple of plants. We revised quota of last year and continued its production. Now we are looking at our plant in Maharashtra, which will be there. And we have another plant as soon as economic works out in UP, which we look at. But the main thing, which you are doing also is upgrading the granulation capacity. One of the things in SSP is it used to be a basal dose application. But granulation does 2 things. It also then allows it to go at different stages of the crop. And most of our new products, which we have developed are more on granulation. So that is something which we are doing right away, and we will be increasing all the capacity as far as SSP is concerned, including looking at efficiency.
The next question is from the line of Ankur Periwal from Axis Capital.
Congratulations for a good performance. So first question on the crop protection side. I hope I'm audible?
Yes.
Mr. Periwal there is an echo coming from your line. Please check.
We are okay. Ankur, we can hear you. Go ahead.
Sure, sir. Okay. So on the Cross Protection first -- side first, you mentioned exports and B2B sales picking up in this quarter versus probably the domestic one. So one, your comment on how the domestic market is shaping up, especially the new products that we have launched in the earlier year? And secondly, on the distribution expansion side, if I heard you right, you mentioned digital marketing initiatives, wherein we are trying to expand our presence in North and West of India. So how should one look at it from a medium-term perspective?
So you had 2 different questions here. One is on the Crop Protection and on the domestic business. Do you want to answer that? Then I take the distribution.
So Ankur, our new product introduction in the last 2, 3 years has actually helped gain more traction, and we're also seeing a change in the overall portfolio for the domestic formulation business. In fact, this year, in the first half, we had introduced about 6 new products, and we have a couple of them lined up for the Rabi season as well. Now with these new products, we are seeing that 25% of the total formulation sales in India is coming out of the new products, 25% approximately, right? In the last 30 months, we have introduced close to about 14 products overall in domestic formulation. This helps in changing the flavor of the business. Earlier, it used to be very old generics. Today, we have some combination, some co-marketing products as well as a couple of nine-three products. So that's actually helping us to better position ourselves in the domestic market. That's your first question on...
So your other thing was on 2 questions was on digital marketing and also North and West. When I made the comment for North and West, basically, it was on the nutrition side, where North, West and Central are mainly more of DAP markets, unlike the South and East where, thanks to Coromandel...[Technical Difficulty]
[Operator Instructions] The line for the management is reconnected. Thank you, and over to you.
Sorry for that. I don't know where we stopped, Ankur? That was...
Yes, just on the distribution network expansion, you were explaining on that part, the North and West.
North and West are mainly DAP markets. We have done well with our single scophosphate markets. And now the government is wanting to promote and even the farmers having a more balanced nutrition. So -- and therefore, both are SSP, including the new products which we have launched and also what is called NPK fertilizers. We are actually promoting it more in the North and Central, both through the institutional sales channels and also through -- directly through the dealers. And you'll see more and more traction towards that. It's more to get balanced nutrition, which will benefit the farmers community out there, crop-specific wise. And digital marketing we did was more in terms of when COVID happened. We have Wonderland function, which is the world's largest digital marketing company. And we had -- we have learned very quickly on digital. And a lot of our campaigns even to farmers and -- is through the digital media, including having virtual conferences with the farmers. And we have scientist at one end, including our agronomist team. And we find that to be a very, very successful way of actually reaching out to the farming community. In fact, when you -- because what happens in the digital marketing like we launched in SMB specialized nutrition a product to sugarcane farmers. It's a fits-all range for sugarcane. We are able to get say in a state like Maharashtra just 200 sugar in farmers, and we could have a 2-ways interaction including a new launch. Similarly, we wanted to launch our products towards polyhouses and especially people who are growing flowers. So we're able to get those farmers and have a very good exchange. And we have seen that this leads to a very early adoption. So we are using digital media in a big way. Given the fact, with COVID, rural penetration has really increased. Internet penetration in rural has now overtaken the urban market. And not only that, we also find farmers and all it's again a myth, using smartphones and also we are able to convey this very easily. In fact, I manage my farms in Hariana sitting in Hyderabad through digital marketing.
If I were to add on to Sameer, one is on the digital side, reaching out to our customers through the digital marketing. The other one, which is also happening is to look within the company in terms of a digital transformation journey, which means with the touch of a button, can we have the information accessible to all the stakeholders for them to look into and take decisions on a real-time basis instead of a lag. So that is the digital transformation journey that we have currently embarked on. And as a Phase 2 of this, it will also get into predictive analytics using machine learning and artificial intelligent tools. So this is going to be a couple of years journey, but very well begun in the last 3, 4 months. We have been spending quite a lot of time in terms of getting all the information from our main ERP system as a single source of truth and enabling information to be available in the right mode on a real-time basis to all stakeholders, be it manufacturing, be it sales, be it marketing, be the functions. So that's something which is being worked upon.
The next question is from the line of Deepak Chitroda from PhilipCapital.
My first question is about the RM cost pressure, which we have seen over the past few months. So as I understand, especially phos acid, ammonia. But interestingly, we haven't seen price increase in case of potash so far because it is basically, as I understand the annual contract. So considering all this, how do you think the MRPs going forward will play out for us? Is there any restriction which has been kept by the government so far for NPKs to increase MRPs for the -- like for DAP going forward?
Well, Deepak, the prices for MOP, as you said, is also going to be set on an annual basis. We do expect that the prices would be on the higher end compared to what it had got settle last year. So that's number one. Second, as far as the raw material prices going up, mainly for DAP and certain grades of fertilizers, which account for close to about 60%, 70% overall along with DAP, right? The government has given special subsidy package just to compensate for the additional increase that has happened in the raw material cost. And for the other grades, selectively, depending upon the cost increases, the companies have been taking some pricing actions. Again, as I mentioned earlier, we just need to be sensitive about the requirements of the farmers and be mindful of what type of price increases can actually be taken in a circumstance when the monsoons have been good. We are looking into another excellent Rabi season. The requirement for fertilizer and the demand is going to be higher. So we'll have to be sure that the fertilizers and the nutrients are made available to the farmers. This is not a time to look at making additional profit. This is the time when companies will also stand up to see how we can support the needs of the country and our farmers. So that's where I leave this at this point in time.
Just to add to what Jayashree has said, in our organic business, and we are the pioneers, we have 2 products, which is potash derived from molasses. These are organic products and what we call Kash. And this is available in abundance, especially with sugar mills. A lot of them are not currently producing this. It's also a waste disposal problem for that. So we have worked with the sugar mills. And the good thing about the potash here is, while the quantity of K is less, but it is a very slow release potash, which is more helpful for the crops. And that we are actively promoting. It requires some sort of concept growth with the farmers. And that business is growing very well. In fact, we are going to expand that beyond AP Telangana, where we are currently 2 other markets so that we are working on. And government is also looking at promoting that so -- to reduce the dependence on MOP because -- which is, again, like you said, it's an important product.
Yes. So Ma'am, I was actually asking from an availability point of view, especially for MOP because that will restrict our production for NPKs going forward and basically impact sales volume going forward. So is there any challenge?
We have various rates. We have almost 14 rates. Some of them are K dependent, some of them are not K dependent. So it's not really an issue there. And government is going to compensate for any raw material price increases like they have done. So we don't see that to be a challenge. I think the biggest issue, which is there is to ensure that we end up also looking at alternate uses. And that's why we talked about -- and we put up a proposal with the government, which they are supporting and they brought it under the FCO is to look at how to promote organic potash, which is phosphates from molasses -- potash from molasses. So that's something which you are looking at.
Sure, sir. That is quite helpful. My second question is about slightly on a longer-term perspective, maybe about 3 to 5 years down the line. How do you see the market share going forward considering all the competition in India? We have a very strong prices in the South India. So how do you see -- what will be our strategy to increase the market share if you look at from a slightly longer point -- time point of view?
So firstly, when you look at the fertilizer usage in India, and I presume you're talking about fertilizer not Crop Protection or specialized fertilizer and organic. The usage is still very low. There are certain products, especially when you talk about in derive from urea because they are low priced, which are actually used in excess than the requirement, and it's counterproductive for the farmers especially in markets of North, West and Central. And same thing like I was saying, happen when you use excessive of DAP because this was done at the time when there was no fertilizer being used at the time of the first green revolution. So there's plenty of scope to grow. We are also looking across companies. We are looking across companies. We are looking at -- early on, all the fertilizer was meant for cereals. And now cereals actually, there's excess production. Therefore, the government and even us, we are looking at diverse application. Now when you look at it, fruits and vegetables, it's a silent revolution, but -- and already in our markets there are areas which are being converted into fruits and vegetables. Fruits and vegetable tonnage is more than cereals put together, right? And that is something which has happened in the country for the benefit because, again, it's all about even providing a balanced nutrition to the human body. And again, there's a lot of scope and more scope for going on organic and specialized nutrition apart from even use of basic fertilizer. And there, that's where micronutrients and macronutrients, along with the base NPK comes in. So whether it is -- and in our products, which are sulfur, we have zinc, which is required, which are more the secondary nutrients, and then you need micronutrients like magnesium and other things. Again, we have products on that. And applications also will play a major role. So there's enough scope for us to grow. Similarly, early on, pulses because it was a poor mans' crop was not much of fertilizer was being used on that. Now with the increase in MRP and the guarantee and to do import subscription, farmers have started using fertilizer, even the base fertilizers on pulses. And with the support now given to the government on import sub-position on edible oil, again, fertilizer will be used. So there's plenty of scope of every fertilizer to grow apart from Crop Protection. And therefore, India will require more and more capacity to come. So that's way it is. And obviously, we are strong in our markets. Here, the farmers are much more into crop diversification and all and which is for advantage. At the same time, the irrigation facilities and all are getting improved, infrastructure is getting improved, which allows farmers not to grow just one crop, but 2 and 3 crops. So that is there. And applicators will become a major thing. So we are looking at drones to spray our fertilizers because it just enhances the usage. And foliar spray, when you do foliar spray instead of basal dose, which is through the roots, the absorption is almost 70%. So again, it benefits the farmers. And that's why we launched liquid fertilizer also.
We'll take the next question from the line of Rohan Gupta from Edelweiss.
Sir, a couple of clarifications. Sir, one is that what are the likely phosphate prices for Q3 negotiations?
It's still being worked out, Rohan. Prices are not settled for the quarter. So we're expecting it to be completed very soon. But at this point in time, it's based on last quarter prices that imports are happening. Once the new prices are settled, then the differences will get adjusted for the current quarter shipment.
Okay. And sir, ma'am, can you give me some clarity on what is the rock phosphate prices you're importing right now?
See, it all depends upon different sources, right? And also the P2O5 content in each of these. So we have multiple sources for importing the rock. And it depends.
If you can share average pricing something if you can just share?
Again, it depends on the type of rock. What we have done is we have made our plants to use all types of rocks. So then we look at the rock mix and able to do it. Technical team works very hard to ensure that we are able to use all sort of rocks, and that's the advantage of our plant. So we won't be able to because it depends on the type of grade which we make or the product which we make.
And Sameer sir, have heard that -- we are seeing that there is quite a lot of shortage of DAP in the market. And I think that companies are staying away from importing DAP in the current scenario. In that case, we should have seen a significant pickup in a complex fertilizers consumption. How do you see the situation because the Rabi is just near the -- I mean, the season is just near the way now? So how do you see that? Whether the farmers will be shifting from DAP to complex in the current scenario? Or there will be overall decrease in consumption of DAP and complex fertilizer put together? How do you see the scenario?
So we've already seen that even in the Kharif season, while DAP, you have the figures industry-wise. DAP figures actually came down and decline was much more, but the complex figures did better. So already, we are seeing a shift. We already told you the single super phosphate has done very well. And these are more in markets, which are DAP consumers. So the government is very clear in fact, is also encouraging all companies who are into NPK manufacturing is to promote NPKs and SSP so that it reduces the dependence on DAP. So that's what we are doing. And we have -- we are aiding the government in their efforts. And our agronomists are working closely with the farmers in those areas to show them the benefits of NPK versus DAP. And especially DAP is very, very -- all these NPK, including SSP is very beneficial for certain type of crops and including the fact that it is much more easy on the soil as compared to DAP.
And SSP, we were always looking at the outsourcing. So I think you mentioned that company is planning to put some SSP plant and planning to...
We are not outsource. Sorry, but from other company, we already -- we bought Liberty phosphate, so we don't outsource. In fact, one of the...
Earlier, our thought process was that, that SSP is always available on outsourcing. Almost from last 2 to 3 years, we have seen that SSP demand has been coming down. But this year, we have once again pick up in SSP demand. So SSP is always available on outsourcing and whenever and wherever available. So I just wanted to understand that are we going to increase the SSP capacity? That is a well thought decision? Or do you see that there is a long-term growth for the SSP? Or is it just on the even...
We'll give you the figures, but quite frankly, for one, we can have a discussion. It is not an outsourcing model. Maybe it was there a couple of years back. In fact, thanks to also us and the government, in fact, they actually said marketing -- manufacturing company should be there to market these companies from a product prominently. And therefore, even major companies who had a good brand name, but for outsourcing actually went out of the market, like BCM shutted down. So this has been the model as such. And now the government is actually encouraging players who can give quality like us to actually expand their capacity to ensure that the farmers get the true benefit so that the unorganized sector is taken care of. And like we mentioned in earlier part of the call, we had snowballed certain plants because they were uneconomical. But now given the fact that we have value-added products like Grow Plus, which is a SSD plus zinc and boron and plus other enhancer products, which has been very well accepted by the farmers. We are unbottling those plant and expanding those. And also, we are expanding what is called the granulated capacity.
Just to add to Sameer, Rohan, the SSP, as far as Coromandel is concerned, we've always been manufacturing. We have 6 plants where we've been doing our SSP. This is powder granulation, and we also have a specialized products, which is value-added SSP and our Grow Plus. Our annual tonnages, if you look at it in the last 3, 4 years, it's been in the range of 5.7 lakha to last year, we did almost close to 6.7 lakh metric tons of SSP. Of course, the industry has been having the practice of using external manufacturing sites to get their products branded and sell it. Those practices have also now reduced to a very great extent thanks to the government also encouraging manufacturers to set up their own facilities and brand accordingly. So especially this year, with the DAP becoming more dearer and also the granulated SSP and Grow Plus has been doing extremely well. From our standpoint, if you look at it, in the first half of the year, we have done close to about 4 lakh tons of SSP sales. So that's the context which Sameer was mentioning. And we have a couple of our plants which have been mothballed. We are looking into possibly reviving those given the additional demand that we are seeing. We are also looking into putting up more granulation plans, as we mentioned in the past, right? The powder SSP, there is a certain demand, but granulation is the future and more of value added and Grow Plus is where we are seeing as differentiators. So we are also moving up the value chain as far as SSP is concerned. And this will actually help meet the requirements of some of the western and northern markets, whereas, our NPK, we continue to focus on our key markets in South, some parts of Maharashtra, MP, [indiscernible] Orissa . So I think that's been our overall strategy as far as the nutrients business is concerned.
Ladies and gentlemen, we will take one last question from the line of Bharat Sheth from Quest Investment.
Congratulations Sameer and Jayashree on difficult time. Sameer, I mean, yes, I mean taking to this SSP post revival of this 2 facility, what will be our capacity? And second thing, as you rightly said that this is -- so whether in high DAP price, the SSP consumption is improving. So is that a structural change that are we seeing or it will be a one time kind of?
So I'll answer the second question firstly. SSP was the oldest fertilizer phosphate. In fact, our plant in Ranipet, which is in Vellore district was the oldest fertilizer plant on the EID Parry in Asia, I not say India, way back in 1910. Unfortunately when the expansion happened and they are local mines because, again, it's a great import substitute because most of the raw material for SSP is available in the country, and we have mines in Udaipur and all. Unfortunately, this became a very unorganized sector and a lot of unscrupulous players got into it who are not giving the farmers the right quantity of P. So when Coromandel bought Liberty Phosphate, and we expanded, especially in North and West, we found this to be a major challenge. In fact, what we did was, we actually had what is called to the farmers and the dealers technical team this -- had what is called a quick test kit. They could actually go to the farmers field or at the dealer shop to show what quantity of P is available in the SSP product. And obviously, when P is not available, then the farmers, when they apply what's called this fertilizer to their field, they don't get the results, and therefore, they shifted to DAP, right? We have now shown that SSP is not just giving P, but it also has other nutrients like magnesium and sulfur, which is actually very useful -- calcium and sulfur, which is very useful to the soil. On top of that, what we said, we don't want to be in a generic business. So we added zinc and boron, which is required for certain type of crops like potato and other things in this market, too. And zinc is also required in paddy and all because India is zinc deficit. We added that as a value added. And finally, we launched a product called Grow Plus, which is also an answer, which actually has been very helpful to the farmers. In fact, I've used it in my own fields. So it's a fantastic product, which actually aids the crop formation. So we do see, as long as the government can ensure that quality is maintained by all the SSP units. SSP is a very easy substitute for DAP. And also, it is one of the things that SSP does, it's a much more better for soil applications to do that. So that's where it is. Now you wanted to know about the capacity you wanted...
Yes.
So currently, we are looking at revising 1 of the 2 facilities, which we had mothballed that is Huspali Raebareli, right? Huspali, we are looking at a revival this year. that will add approximately 10% to the current capacity of [indiscernible] ton . So we should be in a portion to do about another 30,000 tons of SSP with this unit coming into operation. And then, next year, we are considering looking at Raebareli as well. Raebareli has about 90,000 tons of capacity, but we also need to see what is the development work that will require in the nearby markets for it to sustain on a continual basis.
And just last question pertained to the SSP. So if one has to look at our manufacture EBITDA margin for phosphatic vis-a-vis SSP, so how do really we can look into it?
These are not comparable, right?
I know, but some kind of, I mean, difference here, I mean, say, for SSP is INR 1 and the complex is, let's say, 3x or...?
No, I would not look into it in terms of absolute margin in terms of rupees. But I would look at it in terms of percentages, I would say, with the operational efficiency that has been brought up to that SSP units.
And the value add.
And the value add that has been worked upon. The margin percentages for both complex as well as SSP, I would say, is very similar.
Okay. And last question on balance sheet. Jayashree, have you received any subsidy during the October? And with this rising price, again, do we see that there would be some kind of a stress in our balance sheet, which we are in case positive year-end, I mean...
To year -- actually, just to comment, I think government has been very good to the industry. Last year, they -- which was long pending, and this is across urea, NPK and all. They cleared most of the backlog about INR 65,000 crores as extra grant. They have been very prompt -- especially after the DBT system has been implemented, they've been very prompt in paying all the subsidy also on [indiscernible] and other things. We have some old claims, which we are talking with the government, and hopefully, that will also get cleared. So the government has been very prompt in paying payments. The delay is hardly once we submit. The main thing here is, again, the product because early on, it was on dispatch from the factory. Now it is on consumption by the farmers. And therefore, if your brands have a pull, you don't end up stuffing the inventory in the trade, you will be able to get your subsidy quickly.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thanks, on this. I think thanks everyone for this. These are turbulent times, especially, I mean, across all industries. You can see that, especially given the high commodity prices, which we have entered. But I think given the strength of Coromandel, both in terms of backward integration, grades to brands, our diverse portfolio and that we are a green input company, not dependent on 1 or 2 products, I think we have the resilience to continue to work. And with the outreach program, which we have with the with agronomic teams, which work with the farmers, we are able to work with them to ensure that their productivity and sustainability is sustained, and they are very quick to adopt also new products. So we are quite hopeful for that. Given this raw material unbalance which is there, we see this as an opportunity of actually ensuring that balanced nutrition is promoted in the country. And also as part of Atmanirbhar Bharat, we're also quite hopeful that the government will see that if they can give the subsidy directly to the farmers so that he can have a choice to go for. So that's where we are from. Anything else, Jayashree?
I think thank you all for your continued interest in Coromandel. If there are any specific questions or clarification, please see to reach out to us. Thank you.
Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Antique Stockbroking Limited. That concludes this conference. Thank you for joining us, and you may now disconnect your lines.