Coromandel International Ltd
NSE:COROMANDEL
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Coromandel International Ltd
Earnings Call Analysis
Q2-2025 Analysis
Coromandel International Ltd
Coromandel International has reported its financial results for the second quarter (Q2) of FY '25, showcasing a mixed performance amidst ongoing challenges in the fertilizer sector. The company achieved a consolidated total income of INR 7,498 crores, marking a 7% increase from INR 7,033 crores in the previous year. However, for the first half of the fiscal year, revenue declined by 4%, reflecting a drop in subsidies within the fertilizer business. The subsidy business continues to dominate revenue, contributing 84% during the quarter.
Despite the increase in revenue for Q2, profitability faced headwinds. The consolidated EBITDA for the quarter was INR 975 crores compared to INR 1,059 crores for the same period last year. This decline is attributed to rising raw material costs and fluctuating global commodity prices. However, the company’s strategic moves in backward integration and production efficiencies have helped sustain margins. For the first half of FY '25, the net profit after tax was INR 659 crores, down from INR 755 crores a year earlier.
The management has provided guidance that EBITDA per ton is expected to range between INR 4,500 and INR 5,000. This estimation takes into account improved value addition and intermediate capacity, which are vital in navigating price volatility in the markets. With decreased raw material prices expected to normalize, margins may see an uplift in subsequent quarters.
The operational capacity of the fertilizer plants exceeded 100%, with production reaching 8.8 lakh tons, reflecting a 13% growth over the previous year. Adoption of NPK fertilizers has gained momentum, moving away from traditional DAP due to strategic government initiatives encouraging balanced nutrition. The company's focus on specialty fertilizers and detailed product development continues to solidify its market position amidst changing consumer preferences.
Coromandel is proactively seeking growth avenues via strategic expansions, including a brownfield expansion for granulation capacity and a multipurpose plant aimed at enhancing crop protection offerings. The board approved an investment of INR 170 crores for a new plant that will facilitate fungicide production. This is anticipated to bolster the company’s revenue base in both domestic and international markets in the coming years.
The management emphasized the importance of sustainability in its operations. Significant cost savings are projected from the production of sulfuric acid at a lower cost than imported alternatives. This initiative could potentially save the company around INR 160-170 crores annually. Furthermore, Coromandel has introduced eco-friendly products such as nano fertilizers and expanded its supply chain to ensure competitive sourcing of key raw materials.
On the retail front, Coromandel is strategically increasing its presence with the opening of new stores, having launched 45 additional stores in Q2. The retail segment has performed exceptionally well and is expected to further enhance the business as customer footfalls increase. The focus on innovative products within this segment has helped scale up volumes and market penetration.
In summary, while Coromandel International faces challenges such as fluctuating raw material prices and subsidy issues, its strategic focus on expanding production capacity, enhancing retail operations, and fostering innovation presents a robust approach to navigating the current market landscape. Investors are encouraged to consider these factors in light of the company's commitment to both profitability and sustainable practices.
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Ladies and gentlemen, good day, and welcome to the Coromandel Q2 FY '25 Earnings Conference Call, hosted by DAM Capital Advisors Limited [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors. Thank you, and over to you, sir.
Thank you, Sidhant. Good afternoon, everyone, and a very, very warm welcome to Coromandel International's Q2 FY '25 Post Results Earnings Call hosted by DAM Capital Advisors Limited.
On the call today, we have representing Coromandel International Management; Mr. Sankarasubramanian S., Managing Director and Chief Executive Officer; Dr. Raghuram Devarakonda, Executive Director, CPC Bio and Retail Business; and Ms. Jayashree Satagopan, President, Corporate and CFO.
I'll hand over to the Coromandel management team to make the opening comments and then we'll open for questions. Please go ahead sir.
Good afternoon, everyone, and thanks, Nitin, for doing this Q2 call for Coromandel. First, I'll give you overall business environment, what we witnessed during this quarter, followed by our business performance. And Jayashree can take us through the financial updates, then we can have Q&A session.
As you all know that the monsoon has been good at [ 108% ] of the long-term grade average, and we have witnessed a strong kharif season. South markets received 114% of the normal range. Northeast monsoon, which is likely to bring rains to Rayalaseema and coastal Andhra has started in a strong note, and we do expect a very strong rabi season, IMD is peaking above normal monsoon. And as we speak, the reservoir levels are looking very healthy. The storage especially in the southern markets are much better than what it was in the last year. And also, the crop acreage is good in kharif, except for cotton, that's for the crop, we have witnessed a growth over the last year and better than the average of 4 years itself. So we do expect this positive trend to continue in the rabi season with improve reservoir levels and increased acreage.
Overall, food grain output is likely to be good. It is very good for the food inflation point of view. On the policy front, also the government has been increasing the MSP, and there's been a recent announcement on increasing MSP for the rabi season, been a 2% to 7% increase in number over the last year for various crops. Also the government has been beginning the PM Pranam Scheme and they release funds to farmers improve the liquidity in the market. As you all know, the NBS rates for the rabi has already been announced ahead of time. There's been increase in the marginal -- increase in the nutrient rate for [indiscernible], whereas [indiscernible] has been -- seen some reduction.
And government also, in order to focus on availability of DAP, has given special package of DAP and also encouraged industry to actively source DAP and agreed for compensation beyond certain cutoff rates. So overall there's been some challenges due to supply chain linkage and global geopolitical situation. There's been challenge in DAP availability, which is improving now.
On the industry trend, raw material prices started moving up in the recent past, after reaching the lows in June, July, we have seen a spike happening due to Middle East tariffs and also limited participation by China in exports. And so again, supplies of raw materials also has resulted in some production outages for certain industry players.
So indeed, the production more or less maintained well. And in fact, I would say there's been a growth in production by 4%. Of course, the imports were down due to supply-related challenges. And the consumption has moved up because of the good monsoon, especially on the NPK side. If I have to look into kharif consumption data. It's very heartening to note that NPK has witnessed a significant growth of 1 million tons increase of 18% over the corresponding period of last year, replacing DAP. And this is a good trend to be in because this encourages balanced nutrition, and that is what Coromandel has been advocating for many years now.
The consumption overall has been down basically due to drop in DAP consumption, made up adequately by NPK. And potash has marginally moved up due to improved availability and single super phosphate here again, there's been a margin reduction, but industry is moving more towards value-added products. Overall, I would say that the industry performance in a given situation of global commodities supply chain challenges has performed well. And the farmers have started using more of agri inputs to improve the productivity.
Coming to specifically company's performance in Q2. Fertilizer plants operated over 100% capacity. Production during the quarter was at 8.8 lakh tons, 13% growth over last year, being one of the record performance for the fertilizer operations. And also during this quarter, we restarted our phosphoric acid, sulfuric acid plant at Ennore. And also our project, what we announced in early part of the year in April for phosphoric acid and sulphuric acid facility at Kakinada is progressing as planned. We have released the major orders and been a good progress during this quarter. This project is likely to be commissioned by March '26. And hopefully, when this plant is ready, overall, 60% to 70% of our captive asset requirements will be met internally and also gives a lot of operational flexibility and raw material security.
Also some time back, we announced about acquiring the additional stake in BMCC, basically consolidating our position. Currently, we hold 45% and with this recent announcement of additional acquisition of 8.8%, we'll be crossing 50%. We'll be holding 53.8%. And we are also in the process of stabilizing our fixed processing plant at Senegal, which is just commissioned last week. And hopefully, we should streamline the production and see increased volumes coming into India. Of course, during the quarter, we have significantly increased the usage of Senegal [ rock adviser, ] and they ensured the output of acid is in line with our expectations.
And also as part of our expansion plan, having created raw material linkages for both acid and rock, as the next logical step, Board has approved yesterday the meeting for the company's plan to expand the granulation capacity by 7.5 lakh tons. This will be a brownfield expansion coming up within Kakinada, which will take the capacity of Kakinada currently with the consent capacity of 22.5 lakh tons and move to 30 lakh tons, making it one of the largest phosphate site in the country.
This is in line with the government trust on Atmanirbhar Bharat and phosphatics. With a lot of global challenges in availability. Government has been encouraging industry to go in for captive production. As a company, we have been consciously securing our raw materials and now [ phosphos ] facility is also coming up. it's the next logical stuff we have decided to move in for granulation train.
And as you all know that industry is still importing [ 65 million ] tons of DAP, NPK, especially major imports coming to north part of India. And that is where Coromandel is looking to fill this and substitute the imported DAP with NPKs. We have been a strong player in NP NPKs, in the southern part of India. And now we'll try and see how do we replicate this story in the north replace the imported DAP. This will also help in balance nutrition improving the yield of farming community.
Overall, on the operational side, the business has registered a very strong volume growth during this quarter. In fact, on a quarterly basis, we have done 13% volume growth over the last year and also 7% on an off-yearly basis. And on an off-yearly basis, we have reached 21.5 lakh tons, which is the record sales volume we have done in the recent past. On the consumption basis, also our market share has gone up for the quarter. In fact, during this quarter, there is a significant increase in our consumption from 15% of last year to 20%. In single super phosphate, we have improved our volumes, grown by 9%. And basically, we started focusing more on differentiated fertilizers like Groplus, which has got micronutrients in SSP. And also this quarter, we have launched a urea SSP, which is basically a combination of N and P in SSP. It has got the same ratio of N and P similar to what we have in DAP. It's been very well received in the market and can be a good substitute and alternate for the DAP.
And advantage what we have also we get right subsidy for this product. So as a business, SSP has turned out well this quarter with the focus on unique grades and also differentiated products and urea SSP. And also, as you know that we are into drone spraying services. We have created a separate vertical. We have been driving this business for the last 2 quarters, and we have done 40,000 acres. And we have this unique advantage of having drone supplied from our group company, Dhaksha. And we have also partnered with some of the institutional players in this segment to improve the drone spraying services.
Another business, which we started off last year in November, nano DAP, has received very well in the marketplace. And during this quarter, we have focused mainly on consumption part, whatever we placed in the earlier quarters. A lot of market development activities and awareness campaigns have been carried out. We have engaged with various research institutes in terms of improving and ensuring that this product brings in desired impact for the farmers in terms of replacing DAP.
Slowly, the awareness is coming in and they're getting good response, especially for the crops with higher foliage. And government has also been giving trust to this product as a good alternative to DAP. So we'll be scaling up these volumes, and we have created the state-of-the-art plant in Kakinada and hopefully, we should do better in the coming quarters.
On the specialty fertilizers, I think volumes have grown compared to last year, and we have done very well on the sulfur segment, especially states like Karnataka and Maharashtra, we have performed very well on the specialty nutrients category. And we are also in the process of establishing additional capacity for sulphur, which will be coming up by the end of Q3. Overall, the nutrients business has done very well in a given situation of volatile commodity prices we are able to focus on our own unique grades and give trust to the business.
On the Crop Protection, which had soft quarters in the last year has really played out well during this quarter. The business has improved on top line as well as on the profitability. The margins have moved up. And especially, in the formulation business segment, there has been a volume growth of more than 20% in the domestic formulation, thanks to the new formulations we have introduced during this half year.
They're all performing very well in the marketplace, and we continue to work with innovators to bring such new products to improve our formulation business in India and also trying to be positive response to Mancozeb demand in the global market. There's been a sensible uptick in volumes and exports have grown by 10%, being good revival in demand for Mancozeb. And anticipating this, we are also trying to see whether we can increase our capacity to meet the market requirements. This buoyancy in Mancozeb demand is likely to sustain for the coming quarters as well.
As you all know in yesterday's Board meeting, the Board has also approved putting up a multipurpose plant at Ankleshwar. This is again a brownfield expansion. We are looking to put up for fungicide plants, recently off-patent molecules. We will be first one to get into this product. In terms of volume [indiscernible], but they are high value and generate a good amount of top line and we'll be focusing in Latin America markets as well as formulations for the domestic market. We'll be investing INR 170 crores in this plant, which will take 18 months to come in.
And parallelly, we are working on product registrations as well as scaling up volumes in the period to come. This will also help us to understand new chemistries and bring in new process technologies, which will help us to attract other CDMO players who are looking to tie up with us. So there can be a good start on the CDMO opportunity, which we have been talking about for a few quarters now.
So we'll continue to engage on these prospective discussions with innovators and we'll continue to focus on R&D trials to come up with a new set of modules. And this investment of multipurpose plant is the beginning, and we need to add some more in the days to come to see that we grow this Crop Protection business on a faster pace.
On bio-products, where we are one of the largest players and only player in the neem-based bio-pesticide. We are trying to diversify this segment. And we could improve our sourcing capabilities, we set up the new systems to handle the neem seeds. And we could source neem at the competitive price, which will help us to have some visibility on the margin structure in the coming quarters.
The retail where we have significant presence in the certain market, being one of the largest player in the agri-rural retail chain. We have done very well across the product categories. And in fact, the non-fertilizer segment has grown well, thanks to increased footfalls in our retail outlets. We also opened 45 new stores during this quarter. Retail is a way for us to expand and improve the business.
In fact, we have seen that with our new products we are introducing in various business segments, retail could scale up the volumes and go to market much better than the trade channel. In fact, we are also launching this nano DAP, and they -- we did very well. Good response. And the direct connect with customers is really helpful to understand the size of the customer and ensure that we position the products well.
So overall, across all the business verticals, the business has done well. And while in terms of the overall profitability may be marginally lower than last year, but in terms of the sequential performance over the previous quarters, we have grown both on top line and as well as bottom line. And the Q2 performance is also better than our street expectations. I would now request Jayashree to take us through the financial performance, and then we can have Q&A later.
Good afternoon, everyone, and thanks Sankar. The financial performance for the quarter and half year is as below.
As far as the turnover is concerned, the company recorded a consolidated total income of INR 7,498 crores during the quarter and INR 12,281 crores during the half year vis-a-vis the corresponding period of INR 7,033 crores and INR 12,771 crores, respectively. This marked a growth of 7% for the quarter and a degrowth of 4% for the half year. The decrease in revenue is mainly on account of drop in subsidy rate in the fertilizer business as compared to the last year. Subsidy business's share in revenue stands at 84% during the quarter and 83% for the half year. During the previous year, it was 84% for the quarter and 85% for the half year.
On profitability, the consolidated EBITDA for the quarter was INR 975 crores as against INR 1,059 crores in the previous year. For the half year, it was INR 1,481 crores vis-a-vis INR 1,768 crores during the previous year. Subsidy business's share in EBITDA stands at 73% during the quarter and 72% for the half year. Corresponding numbers of the previous was at 81% and 82%, respectively.
Net profit after tax for the quarter was INR 659 crores and compared to INR 755 crores for the corresponding quarter last year and INR 958 crores for the half year as against INR 1,249 crores in the previous year. As far as subsidy is concerned, during this quarter, the company had received INR 2,858 crores towards subsidy claims. In the previous year, this amount was INR 4,243 crores. For the half year ended, the company received INR 3,865 crores of subsidy. The previous year corresponding numbers were INR 6,312 crores. Subsidy outstanding as on 30 September, 2023 was INR 1,714 crores. In the previous year, this number was INR 1,497 crores.
The company has closed the quarter with a net cash, which is included in the deposits, mutual fund investments of INR 4,214 crores, and it is focused on improving the working capital levels to further enhance the net cash position. As far as the product is concerned, recently, we achieved the rupee depreciating, Coromandel will continue to maintain a conservative position and hedge its exposure accordingly.
We thank you all for your continued interest in Coromandel and joining our call today. We look forward to the interactions and the question and answers.
[Operator Instructions] Our first question is from the line of Prashant Biyani from Elara Securities.
What drove the profitability improvement in Crop Protection and especially the non-subsidy non-CP business?
Prashant, thanks for your question. The Crop Protection business, we have seen a good growth happening in the domestic formulation business. That's point number one. And during the first half, the company had introduced 10 new products, including one patented molecule of ISK. So all these products have received a very encouraging response and that has, to some extent, showed the profitability. Apart from that, some of the cost measures that have been taking up at the plant over the past couple of years have also led to a better cost position compared to the previous year, which is also helping shoring up the margin.
And ma'am, on the non-subsidy non-CP part?
The non-subsidy, non-CP part is mainly specialty nutrients. Some of it is also in the retail business. And we also had the recent launch of nano products. The specialities nutrients business has been doing pretty well. It's continuing its trend like in the past years. And there has been some good actions in terms of sourcing the materials at the right cost. And these have also contributed in improving the margins.
Okay. Then secondly, if Sankar, sir, can answer this. Rock prices have increased of late, I guess, from the lowest end. How are we stocked up on the inventory of rock phosphate? Till which month? And do you also expect phosphoric acid prices to increase from here? If yes, then what could be the immediate levels that we can look at?
See, phosphoric price for the Q3 is yet to be settled. So -- but there will be a definite increase compared to what it is right now. Because the DAP prices have moved up, and generally, these prices do move in tandem with the DAP. But other input prices have gone up, so industry is negotiating to get better rates, but there will be increase over the previous quarter. In terms of the rock prices, the advantage what Coromandel has got in terms of access to mines and understanding the cost structure and increasing the supply from Senegal is helping us to manage better in terms of rock sourcing.
We always ensure that we cover for the 3 to 4 months ahead, considering the sailing time and also the challenges what we have in the geopolitical situation. We cover up ahead of time. And to that extent, always we have a positive query on strategic materials like rock phosphate.
Right, sir. Then going forward, if you see the ammonia prices, subsidy on N has reduced but prices have increased. So how would it change the complex portfolio mix for you going into H2? Will it be more towards NPK only? And if then, in which grade it will be?
See, this has been a temporary phenomena. There has been some production outages, very large player in the Middle East and, prices should soften. Probably 1 month spike is there, but we don't expect this to sustain for a long time. So ammonia prices can come down. Having said that the rabi subsidy is what has been already announced. So we need to see how we optimize the product mix. And also, there can be some flexibility in terms of the farm gate prices later December, in January -- going into January, which could help us to pass on this cost if this cost is likely to remain where it is now.
But I don't believe that this higher ammonia levels are likely to remain. There can be some temporary challenges in the margin sector, but it should get normalized. And we do keep optimizing the grades, and that is a flexibility what we have in switching over from one NPK to another NPK and where we have pricing flexibility and input cost advantage. And our own captive production of sulfuric acid process it also helps us to sustain the margin.
Sure. And then lastly, before I jump back into the queue, how much was the revenue from nano fertilizer as well as Dhaksha in Q2.
Nano fertilizer in terms of our focus, as I mentioned more on the consumption side. And we have done roughly, in terms of the volumes, I can tell you, 15 lakh bottles is what I think was sold during the first half. Where we can scale up the volumes, we'll be focusing on doing it in Q3. It's precisely 16.8 lakh bottles is what we have done, 1 litre bottles. And in terms of the Dhaksha probably, we'll address it separately. Jayashree can add that mainly orders are in terms of agri drones which government will purchase, and there are some balance orders executed with other fertilizer companies as well. Other defence orders are in pipeline, waiting for the execution to happen.
Our next question is from the line of Parth Mehta from Vallum Capital.
Just wanted to ask, so you mentioned that the new MPP in the Crop Protection side will help meet the growing demand for the identified products in domestic and export geographies. If you could just help me which are the products that you've identified? And in the domestic and the export geographies that will help also.
I think Raghu is on the call, Raghu probably can take you. But we don't want to get into specifics on which products for obvious reasons, but broadly, Raghu can talk through on what we are trying to focus .
Okay, okay.
Raghu, are you on the call?
Hello?
No, I'm -- my colleague -- Yes. Raghu if you can just...
I think at the moment, whatever Sankar mentioned, for the obvious reasons, we don't want to divulge the specific names. But as you are aware, dependence on Mancozeb is quite significant. So with this approach, it's going to broad base our portfolio in fungicide, and thereby derisking dependence of it. So -- and besides the CapEx will take a while to execute as well. So once we go live, I'm sure we can share more details on the specific products. Suffice to say that these are relatively younger products. I think, again, Sankar in his initial address mentioned that these were recently off-patent molecules. So there is a longevity.
And therefore, sustained demand for such molecules going forward. And these -- as you may be aware, in the more, what should I say, contemporary [ AIs, ] they also lend themselves to a good combination. So they combine very well with other molecules. So we plan to formulate some novel mixtures in the meantime which -- some of which are already in the pipeline for registration. So by the time the CapEx gets executed, we will also be receiving some of these registrations so that we can quickly leverage the capacities that are coming online. I hope that kind of addresses your question.
Yes, that was helpful. And just wanted to understand, are we coming up with any of the new molecules that are being developed in our R&D? Or are they more of from the tie ups that we have done?
So as you are aware, we are a generics player. For the new molecules, I mean, when you say new, it's off-patented. We are in the process of bringing such molecules from innovators. We are not innovators. We don't do discovery on our own. But...
[Technical Difficulty]
Hello? Raghu, sir?
So there are plans for bringing in patented molecules through our distribution channel globally.
Okay, okay. Just last one, if you can help me how is the Chinese molecules panning out right now in the export markets and how is the situation globally in terms of volumes or prices?
Yes, at the moment, the prices have bottomed out as the general sentiment globally. And the expectation is that they will start going up sometime middle of next year, that is the calendar year. So -- and I mean, these prices, we believe, are not sustainable for too long because the Chinese would also like to recover whatever they have invested in.
So because of the previous -- as you may be aware, there was a glut in the system, inventory in the pipeline as well as there was a drop in the commodity prices in Brazil for soybean, cotton and so on, which kind of reduced the growers' willingness to spend money on additional space. So all of those are easing up. Particularly the inventory is nearly gone. The excess capacities will continue to form. Maybe the smaller players, the marginal players would have been pushed out. So the total available capacity might have shrunk.
And thirdly, the commodity prices are also expected to go up. So all the factors, all the three factors that led to a significant price drop are now easing off. So that should eventually lead to improvement in prices. So this is what we understand of the scenario as far as the Chinese players are concerned in the market.
[Operator Instructions] Our next question is from the line of Vishnu Kumar from Avendus Spark.
In terms of the fertilizer business, the operational profitability is better than expected for most of us. So is there any thing that we have done differently? Or is the wall -- because we understand that pricing was relatively not that great for us the RM and the end market prices. So what has led to kind of slightly better, at least what we -- from what we were considering? Is there any operational costs or mix? Any help would be great.
See, as you're well aware last year, we commissioned sulfuric acid plant, and that's been very timed and very helpful. When the global sulphuric acid prices went up, we could produce sulphuric acid at a much lower price. And also the power generation, what we envisaged, we could operate our turbines at full capacity, and that has significantly reduced the conversion cost. So our ability to scale up the project to 100% plus capacity, improve operational efficiencies, ensuring that the intermediates like phosphoric acid, that we capture the value addition, we operate at full capacity. And the timing of our raw material purchases and the type of rock what we use and the sources of rock that we use is completely different.
We have product flexibility in terms of optimizing the NPK mix, depending on the subsidy and the market price, ability to source and use different type of raw materials whether it is rock or acid. And our intermediate capacity is helping us to generate power and also alternate water source like our [ own ] plant which we put up last year, all this has been helpful to manage this sort of volatility in commodity prices and come back with the margins. Had the commodity prices have been stable, our numbers would have been much more healthier than what we are reporting now.
Got it. How much would probably be a structural cost savings for us? Like, as you sort of mentioned on the power IMD, RO and water, others, I understand can move up and down. So how much could be a structural cost savings that we are going forward we should see?
See, sulphuric acid alone can potentially give us close to INR 160 crores, INR 170 crores per annum, both in terms of the delta between the imported sulphuric acid price and the cost of production and the power generation. So half year will be somewhere between INR 40 crores, INR 45 crores, then that can get doubled. It's not only helping us in bringing down the cost, but also in terms of eminent norms, we are on the world-class facility with the norms much less than the global standards.
Understood, sir. Sir, also on the -- you mentioned that this year -- this quarter rather we have seen on the kharif that the DAP consumption has been markedly lower and NPK has probably come up well. Is it -- this is because of the profitability for traders was very low? Or since from import replacement angle, government would probably want us to probably import lesser DAP. So should we see -- structurally this is going to be a theme for -- so DAP will go down. Is this more of a short-term issue? Or like we will bounce back and DAP?
No, absolutely. In fact it looks to be a structural shift which is happening especially in the north markets which are predominantly using DAP for many years. To some extent, the shortfall in the availability has also helped the people to try out the NP grades like 2020 as well as NPK rates. Government also encourages balanced nutrition. And it's a combination of multiple things. lack of availability, making people to look for alternates, and that has helped in improving the volume of NPK fertilizers by 1 million ton. And there has been a general increase over the last 4 years in terms of the share of NPKs versus DAP in the overall phosphatics.
This augurs well and it helps in multiple nutrients. In fact, as a company, like Coromandel, we are not only focusing on primary nutrients NPK, but also trying to see whether we can add secondary nutrients like boron, zinc and come up with unique traits. So more and more, I think the industry should move towards customized fertilizers. That's what our approach would be to ensure balanced nutrition, improve productivity for the farmers. And government is supporting such efforts.
This 0.75 million ton of capacity, when are we likely to have it -- I mean, in terms of commercial sales, when should we begin? And in the interim to capture the market before we launch the product, are we going to do additional marketing? And how should we see the approach from now to when the plant comes in?
A good question. The plant will take 2 years to come in. And rightfully, we can't be waiting for the capacity to come in and start selling. In fact, currently, our volumes could have been much better had we have additional production. We are operating at 100% capacity. We are supplementing it with imports. Our imports are predominantly on DAP. In fact, currently, our sales volumes are much higher than what we produce. Our overall production is in the range of 31 lakh to 32 lakh tons, whereas we are inching towards 40 lakh tons. So we will try to grow this volume for the next 2 years as well until we have our own capacity.
So we'll be also focusing on newer adjacencies, northern markets, where our efforts will start now in terms of seeding the market with NP NPK fertilizers and develop market for these grades. It may take a while before the switch happens from DAP to NPK. That's what we'll be exactly doing during this project implementation time. So that as and when the plants are ready, we'll be able to supply those materials from our own manufacturing facility. Until such time, we'll be meeting it with imports.
So this area that we'll target will still be within the zone where our tight subsidies there? Or we'll stretch it outside also?
See, in phosphatics subsidies operate across India up to [ 1,400 ] kilometers. So I don't see any challenges.
Our next question is from the line of Resham Jain from DSP Asset Managers.
Yes. So just two, three questions. The first one is you mentioned in your opening remarks that you have opened 45 new stores in this quarter. Is that correct?
Yes.
This will be possibly the highest number of stores you have opened, it seems. So what is the strategy on the retail front, let's say, over the next 2, 3 years?
No. We are very keen to increase the footprint, and we have enough space to operate even in our key markets like Andhra, Telangana, where we may look to increase the numbers from what we are in. I think, currently, we are around 750, 800 stores. Our aim would be to increase it by another 20% at least in the coming 2, 3 quarters. But we are very, very cautious in terms of where we are opening. So we ensure that we breakeven at the earliest opportunity. Based on our learning curve, we don't take a longer period nowadays to reach the breakeven level. So our choice of location and the product segments and categories will play an important role .
Our aim is to scale up the volumes, not only to certain markets, but also look at pan-India. So we may be looking at the Western markets as well, where we can target certain geographies and crop segments. So our aim would be to increase our retail footprint. And we got our model right, our ability to connect with farmers have been far better than what it was a few years before. So we'll try and expand and exploit this opportunity.
So is that from a number perspective, the 750, 800 stores can go to what number, let's say, next 3 years?
We are in the discussion stage. We can let you know once we form up our strategy. I don't see where can we double it in the next 2, 3 years' time. But still in the drawing board. And as I mentioned, that we are not in a hurry to increase the centers. But we'll do it in a systematic and cautious way.
Okay. Understood. Sir, the second question is the incremental or higher subsidy for DAP versus NPK. So does that mean that our overall production will be higher of DAP versus NPK, at least in the near term?
As a company, we have been focusing on NPK production, and we import DAP. We'll continue this strategy.
Okay. Despite higher subsidy for DAP. That doesn't change anything from your overall production mix perspective?
Yes. But the additional compensation DAP is helping to manage the cap between the subsidy and MRP versus the cost. It doesn't add really to the margin. So our strategy would be to optimize our production towards the future and import [indiscernible] supply commitments..
Understood. And sir, just your guidance on the overall non-subsidy fees, which has been doing quite well, both from revenue as well as profitability perspective. Over the next 2, 3 years, given there are multiple projects which are going on, how should one look at the overall loan subsidy piece?
One area where, as Raghu mentioned, that we missed out in terms of the market growth because of the time -- registration period involved in terms of putting up a facility and product registration. So a lot of efforts have gone in the last 2, 3 years, in identifying the new molecules and a lot of R&D trials have happened. So hopefully, we'll be releasing every year some new products. As you have seen this year, we have done some formulation products which have increased the domestic formulation sales. We are also looking to introduce new generation molecules to reduce our dependency on [indiscernible] and increase of our presence in Latin American markets.
So we'll be driving our focus on CPC to capture as much as possible, both in the domestic and global markets. And specialty nutrients has been growing steadily. We have been improving our top line by 10% and the EBITDA has been consistently growing. And that is one category we will try and see how best we can improve. And single super prospect which we don't talk much, but we have been consistently growing on volumes and bringing value-added products and capacities have been going up. So while it is also part of the subsidy business, but we have changed the overall approach to this business, and that is panning out very well for us in terms of lead rates, volumes and improved margins and profitability.
The rest is retail. We have seen increased footfalls in all our retail outlets, and that is helping us to scale up the non-fertilizer category where we make margins. So our focus would be to increase the volumes of non-fertilizer category in the retail footprint. And bio business, very niche segment. Currently, we are focusing on export markets. We are trying to diversify other product categories. We are looking at new product segments in Bio. So that is also likely to see traction in the coming periods. Our aim would be to -- we have reached some size and scale in fertilizer business.
We have been adequately and backward integrated. And we'll continue to grow that piece in terms of our mining, improving the value chain. But in terms of the volume with this announcement of capacity, we are there as being the largest player in the phosphates segments. So our focus on coming quarters will be on driving the other non-fertilizer segments to grow on the top line. And also look out for step-out opportunities which are available. As and when it materializes, we'll be able to articulate. So our aim would be to go more on the non-subsidy piece in the coming quarter.
Our next question is from the line of Bharat Sheth from Quest Investment.
Sankar sir, my question is of, say, 3 years' perspective, what would be our capacity for this Nutrient business, including SSP? And how do we see -- what kind of a backward integration at that point of time we'll have in terms of whether sulphuric acid or rock or rock phos acid and how that will play out?
And second thing, when you are talking of this replacement of DAP with NPK, so how much scope is also there for replacing DAP with phosphate SSP? So if you can give some -- share more color on how that thing will really play out? And last question is on the nano DAP. So how much that will also, over a 3-year period, if you can give some color.
The fertilizers, I think with the current capacity [ 3.2 ] and debottlecking, which are happening right now, we'll -- and with the new capacity of granulation 7.5 lakh tons volume we have announced, I think our overall capacity will go up to 45 lakh tons in the next 2 years' time. And with import of 5 lakh tons, at least, we can be a 5 million ton player on base phosphatic fertilizers, plus we have SSP of 1 million tons. Plus we do DAP and urea -- sorry, we do MOP and urea, 1 million ton.
So effectively, if you look at fertilizer segment, it's 6 million tons of phosphatics, plus 1 million ton of urea, plus 0.5 million tons of MOP. That's the size we are looking at as far as the fertilizer business is concerned.
And in terms of nano, as I mentioned that we are not in a hurry. We are actually ensuring that the farmers understand the product, and they come back and they use it as a replacement not as an add on. And we are doing the brand promotion and channel engagement and we are doing it on large-scale pan-India. Definitely, we see the promising future for nano, not only in India, but we are looking at export opportunities, a lot of inquiries have come from Latin American markets. And we can scale up our volumes and that's a good business segment to be in, supplementing our specialty fertilizers, which we have grown more in a period of time.
I don't remember what is your third question next, the one is on the fourth...
What kind of backward integration that we will have? I mean, once we reach this NPK capacity or this DAP capacity of say -- with this expansion, how much of the core integration we will have?
I think we will be close to 60% of the total intermediate capacity requirement. And we keep some import to trade off because there are always opportunities available to buy at low price and specific products like sulphuric acid. So we may not go in g for 100% and phosphoric acid at least we can say that to be 60% of the total requirement will be backward integrating.
In terms of rock, we will see how it goes with the current mining which is happening. If there are other opportunities comes in is always because we are largest consumer of rock. And with the expansion of phosphoric acid plant at Kakinada, requirement will be in the range of 2 million to 2.1 million tons. And I have to see how best we can increase our mining operations. Once we are successful with the current mines what we are in, we may also look at increasing our mining presence also. So that will be our overall game plan. But as of now, we are quite comfortable with the capacities what we have for intermediates. .
And would you like to give some more color on this Dhaksha, how that played out, how much order do we have and how do we expect over a couple of years?
Okay. Yes. Thanks, Mr. Bharat, for this question. On Dhaksha, currently, the focus is on two areas. One is the defence orders that have been procured for about INR 240 crores. The deal is in the process of executing order. So we are awaiting the [ SMGI ] from the government authority. Once it is through, over the next 2 quarters, the defence drones should be completed and shipped. So that's the main focus. Apart from this, there is a lot of activities going on in terms of the agricultural growth.
Currently, the large players with whom Dhaksha has been engaged are the fertilizer companies. The new team members have been recruited both for sales and service so that they can work along with the other major agrochemical companies as well to see how we can get some agriculture-related orders. There's also word going on with the government in this respect because drone scheme also will come into play as we expect during the later part of this year.
While all of these is happening on the execution front, the team continues to participate in some of the other newer drone development through the R&D scene. So that was also parallelly happening. So in the next 2 to 3 years, depending upon the execution of these orders, Dhaksha should be able to garner more orders to come from the defense. The R&D work that is happening on the newer drones as well as improvements in the agricultural drones should also help it to consolidate and get better.
And last question on since we are hitting INR 4,000-plus crores kind of net cash, so what will be our capital allocation, including for Dhaksha additional investment, then other facilities? So if you can give here more color.
Yes. I think the cash that we have, like in the past we've indicated, it will be mainly for the business growth within Coromandel, right? So each of the businesses come with their own proposal for the growth. You would have also seen that in this Board meeting, there has been a sizable capital that has been approved by the Board for both Nutrients as well as Crop Protection business.
If there are further opportunities that are there either in the core or adjacencies or any step-out, some of these class that has been built up will be appropriately used. All of it depends upon how strategic is it, what are going to be some of the financial parameters that it needs of them. So that has been the norm with which we've been looking into allocating the capital.
On the same front, if there are interesting opportunities like we had Dhaksha coming up in the past or BMCC related investments that had happened in last 2 years, those also could be funded through this pool of surplus that has been accumulated.
So how much revised CapEx for this year, next year and for '27 do we have in plan?
So this year, we are more or less in line with what has been estimated and indicated to you all. The main CapEx for this year has been this sulphuric acid and the phosphoric acid plant of INR 1,000-plus crores, which has been announced at Kakinada. So that spans over a period a couple of years until March 2026.
Similarly, the two major CapEx programs that are currently been announced will also go over the next 2-year period. And Sankar was also mentioning there are a lot of projects that the teams are looking into to see how we can accelerate some of the growth initiatives within the company. And as we roll out the business plan for the year, I'm sure that we will come up with some more interesting proposals and, subsequently, taking the management and the Board approvals, we will be happy to share it with all of you.
Our next question is from the line of Prashant Biyani from Elara Securities.
Sankar, the point that you outlined regarding capacity of, say, 4.5 million ton and import of 5 lakh tons, where would we be seeding or selling these volumes? Would it be in our core and periphery markets? And how much volume do we do right now, say, in North and -- regions around North? And where could that volumes be in the next 5 years?
See, the primary market, AP, Telangana, Karnataka and specialty markets, both Maharashtra and Bengal, we have been entirely supplying now. We don't have any presence in some of the key places like MP, UP and Rajasthan. In fact, if you look at the next 2, 3 years, a lot of irrigation projects are likely to come up in UP and Maharashtra also is adding additional crop acreages. So we have done a detailed amount of strategic approach for additional volume. What I can say is we'll be looking for Northern markets where we don't have significant presence in terms of NPKs, while we are supplying SSP and also specialty specifications. We have not supplied NP NPK.
Our aim would be to create those seed markets where, first -- and of course, our existing core markets, primary markets, our aim would be to capture the additional volume through our retail outlets. As I mentioned earlier, we'll be increasing our footprint in the key markets. Our additional volumes can come here. And we don't see a challenge of selling something like 50,000 tons between these markets. As India continued to import 6 million 8 million tons and there can be a potential increase in volumes of the overall industry size, likely to go up in the next 3 years. Observing this additional volume would not be a challenge, and we have a blueprint...
And sir, do we have a fertilizer business presence right now in UP or Rajasthan site to make the market ready for our large volumes in 2, 3 years?
We have a significant presence in SSP. We are promoting value-added products there. We have presence through specialty purchases. Of course, Crop Protection, we have separate teams in India. And nano being a pan-India operation, and we have presence in Northern markets. So I think as a company, we'll be moving towards more of as pan-India player for the nutrients. Rather than looking at the key sales markets, we look at pan-India operations with a complete range of product portfolio right from SSP to DAP and nano and specialty fertilizers. The whole market is available for us. So that's the way we will look at and try to expand the volume.
All right. And where do we stand in terms of latest business developments in spec chem or CDMOs, if anyone can answer that.
CDMO, we have been evaluating some opportunities. And our initiative on multipurpose plant is also a step in the direction to see how we can focus our capability which can help in attracting the innovators. And spectrum, we are again the drawing board in terms of looking at the key segments that we want to go in. And probably once that [indiscernible] emerges in the next 2 quarters, we should be able to articulate our strategy much more sharper.
Our next question is from the line of Ranjit from IIFL Securities.
The first question is on the NPP CapEx. So I believe this -- since you commented this is recently offered products, I believe it will be [ SDHIs ]. The question is how far would we be backward integrated into this? Or we are only going to target the manufacturing of technicals and won't be importing by intermediates?
Raghu do you want to address that?
As an approach to the manufacturing, obviously, cost efficiencies are something that we need to keep in mind. So the backward integration is still a point where we have significantly many suppliers for the key starting material. So that is how far we go, and that depends on the molecules that we are planning to manufacture or the set of molecules in the multi-product plant. So depending on the molecule, we have figured out to which point we need to backwardly integrate. We can't go right up till the end. There is no need also because that's going to inflate the CapEx significantly.
So we have planned it in such a way that we will be able to source in a effective manner and then process the material to make the technical AIs. As far as the downstream products are concerned, as I mentioned, -- we are not stopping with just making the AIs, but in parallel, we are -- for some of them, we have already received the registration, for some we are going to receive the registration for some of these formulations that we can produce using the AIs that we plan to manufacture with this multiproduct plant. Both backward and forward, we are putting in the effort to extract maximum value out of it.
Second question is to Sankar sir. In the last call, you had kind of mentioned a couple of plans. One is what we have seen the Board approving on the CapEx front. You would also had mentioned branching out of fertilizers and poring into related chemistries. So is there any progress on that front? And by when can we expect an announcement on that front?
As we told last time, we have now committed our granulation project. We need to keep something for next quarter as well. We are working on it. As you know, it materializes, definitely we'll come back. It's very much in our radar. We will get to it.
[Operator Instructions] Our next question is from the line of Rohan Gupta from Nuvama Value.
Congratulations on a good set of number. Sankar, sir, you mentioned that almost in next 2 years, you plan to definitely overall [ complex ] fertilizer to 4.5 million tons, another trading and even further in SSP and urea, MOP trading and all that. I think that you have always been mentioning that the fertilizer margins you have always been targeting with close to INR 5,000 to INR 6,000 per ton. That gives you a clear picture about the fertilizer business over the next 2 years.
Sir, on non-fertilizer business, you have stopped giving and sharing them in slightly more detail that how you think that in next 2 to 3 years, whether the fertilizer business contribution to EBITDA will be 50% or less than that and also where you see that the other business -- I mean, non-fertilizer business piece will be contributing to the profitability or EBITDA in the next 3 years?
See, I've always maintained, we don't want to grow one business at the cost of others. Fertilizer will have a small growth traction and non-fertilizer cannot catch up the speed with which fertilizers can grow. Obviously, a significant share comes from fertilizers. But a lot of efforts have been taken in the last year and also going on now that we have been driving the new products, being engaging with various innovators. So I think the real growth in CPC had to play out. And our decision to invest in the Chinese prices are the lowest you can see our interest in growing this Crop Protection business.
Definitely, you will continue to see the volume growth happening in Crop Protection. Many of the actions, what we have initiated last year will start yielding itself and we have a pipeline of new products coming in. See, with the current range of molecules, what we have -- whatever we are doing, we are doing the best, both in terms of top line and the bottom line. If we have to do it, it can be through inorganic or it has to be through be organic. Organic takes its own time, and that's what we are focusing on now. And as and when any opportunity comes to grow inorganically, we may even look at that.
So it's very difficult for me to put the timeline and the time frame by which we will increase the share to 50%. All our efforts in investments and strategies would be to increase the balance towards non-subsidy business. As and when we get clarity and then we may do investments, we'll definitely share that at the appropriate time.
Also with the government focus on some non-supportive policies on policy front on fertilizers, so you see that there is a need in future that you have to demerge this business because of the working capital-related challenges and the interest cost portion where the government wanted to cap the profitability. So you see that to benefit from that, I mean, you need to leverage the balance sheet while the company sales generating solid cash flows. So do you see that you have to demerge the fertilizer business to be the part of the -- I mean, to benefit from the government policies in the future?
Restructuring will be to only create shareholder value. It can't be based on any policies or any current regulations. We need to see as we go long. And government always encourages integrated play, and they have been encouraging industry to go in for backward-integration. So I think they also support in terms of ensuring that the incremental margins are retained in the business and reinvested the business and grow the capacity. So we'll be continuously engaging with government. That will not be the reason for why we need to restructure. If there is a valuation opportunity for the shareholders, then we will look at this but not to the policy point of view.
[Operator Instructions] Our next question is from the line of Sumant Kumar from Motilal Oswal.
Last year, we talked about the INR 1,000 crores CapEx in Crop Protection. So can you talk about the time line of the capitalization of the asset and the commencement?
I think I don't know what you are referring to, probably maybe our CapEx plans of specialty chemicals and CDMO. I think I answered earlier in terms of work in progress, we are going back to the drawing board in terms of identifying the segments in which we want to operate in specialty chemicals. And in terms of CDMO, it's a long-term process. We are engaging with various potential innovators and partners. It will take some time. So [indiscernible] we do. But our intent based on coming up and right partners. We will not do upfront investment.
So the technical plant also will take time?
See, we made in a beginning now. This multipurpose plant, what we are doing has got potential to add another line in the same civil structure. So right there, we may be as and when we get some visibility. They are in discussion stage at the various stages for [indiscernible] engagement. We will not be able to disclose at this point of time. Once -- as and when they also do give us time to come up with the facility and the product registration. We may do it and take up the investment as and when we sign up the commercials with the potential partners.
Our next question is from the line of Himanshu Binani of Anand Rathi.
Happy festive season to the management. So sir, I have two questions. One is on the share of the [indiscernible] to the overall volume. So what has been the share basically for the second quarter?
And the second question was largely around that since we have been like backward integrating for quite some time and that has been like able to reap benefits, and going forward also with the kind of like cost savings, which we have outlined, particularly from the sulphuric acid as well as from the phos acid plant and energy savings also.
So I do understand that the RM prices globally has been like volatile as well as the subsidies from the government. So the question was like how do we see the EBITDA per ton moving sir? So our guidance has been somewhere around INR 4,500 to INR 5,000 per ton. So do we see that it should like increase going forward? So how should one actually look into this?
[indiscernible] EBITDA, the range what we are indicating, we are quite comfortable with that. And the reason being that improved value addition and increased the intermediate capacity is helping us to sustain its margin in spite of huge volatility in the global commodity prices. We are able to absorb the price shock and the challenges on subsidies and be able to come up with this number is because of our increased share of captive manufacturing of both phos acid and sulfuric acid.
If the environment improves, definitely the margins will also go up. But as I mentioned earlier, but for this challenges in commodity prices, our margins would have been much higher than what it is now. In terms of share of grade. I think my colleagues says it's 36% on the overall phosphatics volume, which represents the grade, which we alone manufacture.
36% for this quarter?
Yes.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. .
So thank you very much. Thank you for your insightful questions, very helpful. And definitely, we look forward to such interaction which helps us to sharpen our thinking as we grow to build this business. Thank you very much for your interest in Coromandel.
Thank you all. And wish you a very happy Diwali.
Happy Diwali to everyone, thank you.
On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you. .