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 Q3 FY '22 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Himanshu Binani from Prabhudas Lilladher. Thank you, and over to you.
Thank you. Thank you, Shanpur. Good day, everyone. And on behalf of Prabhudas Lilladher, I would like to welcome all the participants on the 3Q FY '22 Post Results Conference Call of Coromandel International. From the management, we have Mr. Sameer Goel, Managing Director of the company; and Ms. Jayashree Satagopan, the CFO of the company. Without any further delay, I would like to hand over the call to Mr. Goel for his opening remarks and post which we can take the Q&A session.Thank you, and over to you, sir. .
Okay. Good afternoon, everyone. I hope everyone is keeping safe and healthy. Thanks, Himanshu, for organizing this conference call. As it is, I'll give an overview of the business environment experienced during the quarter, followed by the company's performance and the Q&A. The world, as you know, has witnessed the emergence of the third wave of coronavirus, this time, the Omicron variant, at the end of the third quarter of this fiscal year. Comprehensive vaccination drive, proactive action by the government of India, and preparedness of the various agencies resulted in minimum impact on economic activities and there was little disturbance on normal life. So I would like to congratulate all the frontline workers, especially the doctors community and the scientists who discovered the vaccines. As per economic survey, India is expected to grow by 9.2% during the current fiscal year. The growth is expected based on the sharp economic revival after the negative growth last year due to the COVID. India is likely to remain the fastest-growing large economy in the world. On the agriculture front, agri [ DBX ] is expected to grow by 3.9% in the full year '21, '22 versus 3.6% last year. The Northeast monsoons which basically impacts the south part of India ended with 44% higher than normal for the full season. It is the highest rainfall in the last hundred years ever since IMD started recording this from 1901. This has resulted that the reservoir levels in the country remains at 119% of the long-term average. In the Southern and Western India, reservoir levels are well above the long-term average. The crop acreage was marginally higher than last year, but the big increase was in oil seeds. Agri saw a decline over the last year due to crop diversification. And quite frankly, the country has excess stocks available, and therefore, there were procurement issues also I think with the third consecutive years of good monsoons, agriculture continues to be the sweet spot in the Indian economy. Global supply shortages of key commodity continues in quarter 3 and have resulted in higher prices. And also, there have been some delays in receiving shipments. There was a shortage of containers, which continued throughout the quarter with rising prices and uncertainty in containers' availability. This is both for imports and exports. On the agri input side, there has been an increased demand with -- of fertilizer and agri inputs, especially due to record production and also higher price realization. Coming now specifically to the fertilizer industry performance. For the quarter, DAP and complex industry primary sales value was marginally higher 58.3 lakh metric tons versus 57.1 lakh metric tons last year. The industrial consumption sales recorded by point-of-sale machines was, however, down by 3% over last year. 73.3 lakh metric tons versus 75.4 lakh metric tons during the same quarter. Major raw material prices continue to remain high. The price of forced asset for quarter 4 is yet to be finalized. Government had announced a special package for DAP and the 3 generic grades for the rabi season just to ensure that availability is made to the companies, and they relied a lot more on the manufacturing industry as importers were not able to get consignment at the desired prices. For year-to-date, DAP and complex fertilizers primary sales volumes was down by 12%, currently at 158 lakh metric tons versus 181 lakh metric tons previous year. Industry point of sale was also down by 8% over last year. 174 lakh metric tons versus 190 lakh metric tons previous year same quarter. Coming now to Coromandel's performance. Coromandel registered a revenue growth of 34% during the quarter, driven by both the nutrient and the crop protection business. Coromandel ensured that agri inputs are made available to the farmers in its operating markets and promoted the use of balanced nutrition, including organic fertilizer, to help to rejuvenate the soil and improve farm productivity. Am I still well and audible?
Yes, sir, you are.
Yes.
So company's nutritional segment performance, the Nutritional and Allied businesses segment revenue increased by 48% over the same period last year. Company trust to provide specialized fertilizer and greener solutions to farmers has gained further momentum in the market. Company registered a very good growth in our specialized nutrition and organic products. In fact, in the first 9 months, we have already exceeded what we had done in the full year last year. And we have been able, in this business, to even be able to push the price because there's no cap to the farming community, given the novelty of our products. On the sales front. In quarter 3, DAP and complex volumes was at 8.3 lakh tons, slightly higher than last year. Manufactured DAP and complex value was higher by 6% over last year. Import volumes were lower by 33%. Company market share in quarter 3 remains the same at 14%, same as last year. Company increased its consumption market share, which is the true measure to 13% from 10% during last year. The gain in consumption market demonstrates the company's commitment to the farming community, ensuring timely availability of balanced nutrition and ability of our supply chain to get the products at the right place at the right time. Single Super Phosphate quarter 3 sales was 1.9 lakh metric tons, with a growth of 18% over last year. Our market share has improved to 14%, up from 12% last year for the same quarter. Point-of-sale market consumption share of SSP increased by 60% to 3.1 lakh metric tons last year. There was a very good traction in terms of our new product launches, which is Gro Plus and the fact that in Single Super Phosphate, not just us an and our agronomist team, but even the universities are talking about using locally made Single Super Phosphate instead of imported DAP, especially in the northern and western markets. On YTD, DAP and complex volume were at 27.3 lakh metric tons, around the same figure of 27.6 lakh metric tons last year. The company's market share, because overall market decline improved to 17% from 15% last year. Single Super Phosphate YTD day sales was 6 lakh metric tons with a growth of 22% over last year. Our market share improved to 15% versus 13% last year for the same period. Our sourcing team ensured timely availability of raw materials to enable continuous production at our manufacturing plants. During the quarter, our DAP and complex fertilizer plants operated at more than 87% capacity to produce 7.4 lakh metric tons. We had also taken a shutdown for a number of our lines, basically at our Kakinada plant to ensure safety and our overall annual maintenance. Phosphoric acid production continues to remain high during the quarter. To improve the sourcing security of key raw materials and commitment to AatmaNirbhar Bharat, the company has announced setting up of a sulfuric acid plant during the last quarter. This will cost the company roughly INR 400 crores. The work on the project has started and is progressing well. We're also enhancing our SSP capacity. Company has taken a plant on lease in Chennai. And we have also -- ensuring that a plant which we had mothballed in Pali in Maharashtra, we are going to start operations. And we hope to get product in this quarter from both these plants. I was very glad to see that the technology team has worked and we have set up a liquid fertilizer plant at our plant in Vizag, and it's working towards liquid and fortified fertilizer to enhance the availability of nutrients to the farmers, which will be as per our strategy of more crop per gram or per drop of fertilizer. On the crop protection side -- am I still audible?
Yes, sir.
Yes, sir.
On the Crop Protection side, Crop Protection business registered a growth of 23% in revenue for the quarter, supported by good performance in our export markets and our B2C segment. The increase in raw material cost and the lag cost and pricing lag resulted in a bit of margin stretch during the quarter. The new product launched by the company in the first quarter of this year has found good traction in the market. The strategy of introducing new generation products is helping our -- in -- by our farm connect initiatives and improve farm productivity. Overall, the business has built a rich product pipeline backed by strong R&D capabilities and is partnering with global innovators to further strengthen its product offering. On the manufacturing side, our crop protection plants operated at an increased capacity utilization of 77% during the quarter versus 73% same period last year. Work on setting up new plants for manufacturer of herbicide and at Sarigam, our unit in Gujarat, is progressing well.Our retail stores continue to operate well during the quarter despite taking all the precautions due to COVID. The store focus in providing all around agriculture solution, including product, farm advisory and mechanization service. Business has improved its operational efficiency and leverage technology to reach out to the farmers. The company has progressed well on its digitalization transformation journey and has rolled out several digital initiatives across the organization, including digital marketing, sales force engagement, data analytics and customer connect. We are also looking at ad tech, including use of drones, for spraying and other activities. I think the healthy reservoir of water and good soil moisture conditions are doing well for the upcoming summer and curry season. Coromandel will continue to work to fulfill the needs of the farming community through its innovative products and farming solutions. I'll now hand over to Jayashree to take you through about the company's financial, and then we can follow it with Q&A. Over to you, Jayashree.
Thank you, Sameer, and good afternoon all. I will now provide updates on the company financials. For Q3, as far as the turnover is concerned, the company recorded a consolidated total income of INR 5,100 crores. During the quarter, vis-a-vis the same quarter prior year where the revenue was INR 3,542 crores.On a quarter-to-quarter basis, this represents a growth of 44 percentage. Nutrients and Allied business contributed to 88 percentage share of total income, and the remaining 12% comes from the Crop Protection business. Company nonsubsidy share of business stands at 82% and 18% during the quarter. In the previous year, it was 78% and 22%. On the profitability front, the consolidated EBITDA for the quarter was INR 546 crores against INR 500 crores during the same quarter last year. In terms of subsidy and nonsubsidy share the subsidy share was 70% and the nonsubsidy 30% during the quarter. Net profit after tax for the quarter was INR 382 crores in comparison to INR 334 crores during the corresponding quarter last year. For the 9 months ended 31st December, company recorded a consolidated total income of INR 14,952 crores. This is against INR 11,385 crores during the last year. The net profit after tax was at INR 1,239 crores vis-a-vis INR 1,173 crores in the prior year. As far as the subsidy is concerned, during the quarter, the company received INR 2,295 crores towards subsidy received. The comparative figures of last year were INR 785 crores. Subsidy outstanding on 31st of December 2021 was at INR 1,336 crores vis-a-vis INR 2,854 crores during the previous year. On the interest front, during the quarter, the company earned a net interest income. This is excluding NDF's interest of INR 14 crores vis-a-vis an interest cost of INR 4 crores in the same quarter last year. The balance sheet continues to remain strong. The company has maintained its surplus funds in Board-approved securities and these are earmarked for specific growth-related activities. The Board has approved payment of an interim dividend for the financial year '21, '22, at INR 6 per equity share, representing 600% on the face value of the share. On the ForEx front, during quarter 2, rupee remained in a broad range of INR 73.85 to INR 76.32 and rupee also witnessed a high level of volatility. Coromandel continued to follow a conservative approach of hedging the ForEx exposures and managing its portfolio well. Thank you all for your interest in Coromandel and joining us on the call today. We will now open the session for questions and answers.
[Operator Instructions] The first question is from the line of Varshit Shah from Veto Capital.
Congratulations on a great set of numbers given the challenges. My first question is largely on the raw material pricing front because lot of efficiencies are already coming in and you're mitigating the RM pressure to cost efficiencies. But the day the RM starts moderating, I think the pickup in volumes might be much better than we are doing today. So my question is that ammonia prices seems to be at least taking a breather, in fact, they have fallen off their peak. With the Indian deal with Russia and Belarus in potash, will that at least stabilize going into the next immediate quarters? That's my first question. .
Yes. Firstly, Jayashree, I'll take that?
Sure, Sameer.
Okay. Thanks, Varshit. Thanks for your commendation. I think it's all team effort. So as far as raw material prices are concerned, Obviously, firstly, you talked about 2 things. One is ammonia. We need to wait and watch the situation, particularly what's happening in Ukraine and in Europe. I think the good news seems to be that the winter so far has been less harsh. And therefore, the natural gas prices may cool off a bit, but we need to wait and watch. So we don't really have a clear vision on what is going to happen in Europe. The good thing is we have our long-term contracts with our suppliers and with reliable suppliers in Middle East. So -- we availability won't be up. [ Certain material ] looking at whether the prices can get moderated. One thing which you are pushing the Indian government for is also to get Iran back on steam because they then tend to add volumes and also then tend to mitigate some of the Middle East prices. So that's where we are. And we are diversifying our source. As far as Potash is concerned. Again, obviously, there are a number of big suppliers -- mid-market suppliers in the country. I mean -- well, globally. And of course, Canada is one of them, a number of their mines are getting revived. It was unfortunate that Belarus and Russia had come into fourth. So the ministry, again, is taking options, they have talked about -- and especially with the sanctions against Belarus that has happened. So we have to wait and watch this space. We are covered for this quarter 4. So we'll wait and watch to see what happens on that pricing front. And obviously, the government regulatory said this is the time to strike deals directly with the Russia and just to mitigate some of this problem. But on a very different note, we have organic product called -- which is k-ash which is basically derived from molasses. And that product has done very well as a substitute to potash. It's more organic form than the mineral form. A little bit with the volumes being low, but there's some substitute, we have seen very good traction, and we are expanding that capacity. So I hope that answers your first question.
Definitely. Yes. And my second question is on what are the -- I mean, in terms of our chemical business, I mean, agrochemical business, your absolute EBIT growth in the segment is just 3%. So is this -- there is a margin pressure or because of the raw material pressure or the volumes are largely flattish Y-o-Y basis on the business as a whole?
Jayashree, you will take that?
Yes. So Varshit, good question. On the agrochemicals front, we have seen a growth in terms of overall revenues, as you have seen, both on a quarter-on-quarter basis as well as on a year-to-date basis. However, like in the Nutrient business, we have seen that there has been an increase in the raw material prices and also availability. Added to it, there has also been a rise in the transportation costs, especially due to container availability and the oil prices going up. The business has taken actions in terms of rising [indiscernible]. However, there has been a lag between the cost that has been incurred and the pricing that is being passed on to the market. Therefore, you would see that the margins are, to some extent, depressed during the quarter, but we expect the situation to ease out very soon.
So we have affected the price hikes, but it will get reflected with the lag or you're yet to effect some of these price hikes, to fully cover the inflation so far?
We have covered the inflation so far. But then one also needs to see how the raw material prices are going to be in the coming quarter.
[Operator Instructions] The next question is from the line of Sumant Kumar from Motilal Oswal.
So overall, my question regarding the pricing scenario for fertilizer and government has restricted the price increase. And despite of that, can you -- we have seen a decent margin in this quarter. And so can you talk about the -- overall the price increase, what we have taken? Because we are unable to understand overall, the kind of margin we have shown. And we were expecting a lower margin, whatever expectation we have. So what price increase you have taken over the -- when the significant increase in price started for phosphoric acid and ammonia. And what are the gaps and what price increase we require to take from here if the government is going to allow?
Should I take this question?
Yes. So firstly, I hope you are happy with the margin.
Yes, sir.
Okay yes. Jayashree, you want to go -- or I'll just explain firstly, and you can just add on to it. So firstly, Sumant, the first thing for us is to deal with the raw material availability. And also, we have driven efficiencies and we talked about our backward integration also. So we had talked about this. And like I said, we've already now announced even going further backwards for the raw materials like sulfuric acid and you'll see more of it coming out. So our whole idea is that as much as possible, as part of like Jayashree said, AatmaNirbhar Bharat we can capture the values here. So that's something which we are looking at. So that's on one front. The other thing is, of course, we have sourcing efficiencies, and also, we have reliable suppliers. So that is something which our commercial team does well. And at the same time, we have been able to also ensure consumption happens with the help -- in the market, with the help of our agronomist team and our sales team. No. The government has asked us to cap and like all companies, we have capped the prices. But in balance nutritional products, we have been able to take that differential better. So that's something which is there. And hence, we have been able to drive this efficiency. You talked about going forward, we'll have to wait and watch what the NBS rates are and also this balance between NPKs sorted out, which we have represented to the government. And we have seen -- one good thing the government has done is to clear all the subsidies. So that we are very -- as an industry, it's been great for the government. And because we sell to consumption, we don't have so much of a pipeline in the trade channel. So that also helps our working capital. But the main thing is that we have to wait and watch what the government policy is going to be. And how do the international pricing form up for next year. A couple of things which have to be done at a country level is if China comes back, which is a big producer currently, there are [ certainly ] in port restriction, also partly got to do with the Beijing Olympics, which is happening now. Because they are big suppliers, both of raw materials and of finished goods. And then the tension in Europe eases out, which we hope it will. And of course, we are also looking at newer markets like or markets to come back, like Iran. And also, government is looking at the fertilizer being a [ pertinent ] subject. Chapter, they are looking at government-to-government arrangements for supply. Firstly, availability and supply of raw materials, right. So we are hoping that this imbalance which we had faced this year, does correct from next year onwards. So that's where we are currently. Jayashree, do you want to add anything? .
So couple of things that I also wanted to touch upon is, apart from the efficiencies at the plant I think the multiple sources of raw material that the plants are currently able to produce, bringing in the flexibility is also very important. That has helped us a lot during this quarter because if we can source from different places, and we are able to get the efficiency of cost that can be harnessed. The next one, which is also important is the logistical and supply chain costs that have been managed quite well. So as much as possible, we have been doing the direct deliveries, which has also reduced the cost on that front. The third one I would also want to sort of bring up is the containment or the control on the fixed cost front, especially the [ supply chain ] part of the business, given the challenges, are roughly looking to every aspect of cost, to see how this can be managed well. So all of this has sort of worked out quite well. But as Sameer was saying, we are seeing some sort of silver lining. The urea prices, for instance, has cooled down from its peak of $900 to around $338 or so. With China opening up hopefully soon, you should see that the prices will be also coming down. And this should sort of help as we move into the curry season.
Okay. What is the contracted phosphoric asset price for the coming quarter?
That, that currently has not been announced on phos acid they're still negotiating. I think they are giving provisional shipments based on last quarter prices. But we do expect them to increase because DAP prices are still high. So -- but the negotiation is still on. But quarter 4 is a lower quarter basically because, at least for us, we'll be taking a shutdown annual turnaround so that we gear up for our curry season next year.
The next question is from the line of Bharat Sheth from Quest Investments.
Congratulation on trying [ time ]. Sir, I just want to understand on the strategy for SSP. Since we have grown 9 months 22%, and which we were evaluating as a part of the -- some kind of a replacement in some of the geography to the NPK and the prices of SSP is also relatively lower. So to increase -- and we are also taking a plant on the lease and reviving to facility which we had shutdown. So how do we really look at in a medium term this to play out? And second thing, how are we seeing the EBITDA per ton in the SSP?
Thanks, Bharat. I'll take the first question and second, Jayashree can answer that, right? So first, thanks for the thing. I think see SSP, we -- like we always say, we have the oldest fertilizer plant in -- not just in India, but probably in Asia and [indiscernible] way back in '18 so we have been the first fertilizer which was manufactured was in [ 2016 ]. We had the Liberty acquisition. We've got a number of plants. But we obviously saw that there were costing inefficiencies there. Now one good thing which happened this year, but it's not an overnight thing. We definitely didn't want to be just an SSP player. So our technology team have developed what we call SSP Plus. Already, we have a product called Gro Plus in the market, which actually is -- farmers are now not talking about the SSP -- there's talk about SSP, they call it Gro Plus and basically, it gives wonderful results, and I'm a practicing farmer myself, in our field. In fact, my own people when I grew the potato crop said why aren't we using DAP, I said nothing, please use SSP. For them, it was a first even for my farm. And we got excellent results to a neighboring field, which had used DAP. So I'm just [ sharing ] the impact as a farmer. So SSP is definitely something which we will continue to grow. And we had a strategy -- we had mothballs a couple of our plants. But now we are expanding. And so as we speak, we have a plant in Pali in Maharashtra, and we are renovating it. It was mothballed because of the fact that we are not making enough money there. But the government also, when it launched the [ P ] thing and they wanted -- and now they are encouraging SSP because DAP a lot of it is imported. And [ P ], most of the raw materials are locally sourced. So there is value addition within the country only. And it is also fertilizer, which is actually, in a way, I can call it a magic fertilizer because it just doesn't supply P but it's rich in calcium, magnesium and other things which actually benefits the field and the farmer. Plus this whole issue towards oilseeds. Oilseeds require sulfur and therefore, SSP has sulfur also in it. And therefore, it's a grade which is used by farmers. The only thing is because of the quality, which was being provided by SSP, some of the -- what is called local manufacturers didn't stress on quality. Therefore, the farmers had, had a bad experience and therefore, they switched to DAP, which was imported. But I think now with players like us entering and even our competition say that we are giving great emphasis on quality. We are given great emphasis on value addition. There's a huge market to it, and we have combined our fertilizer and Single Super Phosphate teams to leverage the strength in the market and also not only that, also in the manufacturing side. So we are expanding capacity as we speak. We're also increasing from powder to granulation because again, when the farmers have granulation, it is not just a basal application, you end up also applying it to the crop number of times. So that's our whole strategy, and it's paying dividend. And that's the reason while -- next to our plant, which is an NPK plant in Ennore in Chennai, Godavari plant is also available. So we have taken in [indiscernible]. We are putting money there. And basically, we want more capacity, including granulation capacity. So this is something which will grow and being quality players, because there are a lot of unorganized players in the market, we do expect with the help of our quality and our innovations that we'll continue to gain market share. So our strategy of acquiring Liberty Phosphate company is now really paying off, but it...
Sir, sorry, to interfere. So what will be our capacity post this before your...
Currently we have a capacity of -- we can do 1 million, but we need certain upgradations to happen. Currently, we are at 7.16 lakhs, but we'll get to 1 million in the short future. 1 million tons. Jayashree, you want to answer the margin question?And we can take it separately on a discussion on SSP because I think other people also on the call.
Okay. so Jayashree, if we just give some -- I mean, directionally margin front?
Yes. See, on SSP, the way we look into the margin is at a plant level. We don't do it unlike in NPKs at a company level because SSP is to be distributed very close to the plant, approximate we are and the type of products that we are doing. Normally brings us to, say, for instance, the profitability. The Gro Plus products will have a slightly higher profitability compared to the powder SSP. So I think we will have to take this on a separate call to sort of explain the dynamics in the SSP market and how we look at the profitability.
And again, Sameer, I mean, coming back to our -- so this is a second question...
Sir may we request you to come back in the queue for a follow-up, please. Next question is from the line of Ankur Periwal from Axis Capital.
Congratulations for superb performance in the challenging times. On the fertilizer margin side, given we had the backward integration that benefits as well as the RM supply surety, which you mentioned, and the pricing-led restrictions by the government on the end product pricing. Do we expect these margins, 4,500 plus on the manufactured EBITDA side or fertilizer side, are these numbers sustainable? Presuming the macro stays what it is, the phos acid prices remain where they are with an improving trajectory?
So I think Jayashree you can yes -- go ahead, please.
Yes. So Ankur, the way one needs to look at this is, currently, the RM prices are at its record high, yet only the peak of a commodity cycle, right? And over a period, these prices will come down. If you ask us at the current prices, 4,500 would be difficult. But at the same time, are these prices going to remain at these elevated levels? Possibly no. We are seeing that additional capacity is coming in for ammonia for instance. Same is the case for sulfuric acid. So in a period in time, these costs will come on. And with the import from China, with -- opening up, it will also ensure that the urea and DAP prices come down. So in my view -- in our view, possibly the next couple of quarters may see higher RM prices slowly coming down. And as it normalizes you will see the margins also in the range of 4,000, 4,500 as [ we instated earlier ]. For us, what is important is to see how we can continue to get the benefits of a backward integration. Therefore, running our processing plant actual capacity is extremely important. As the raw material prices are higher, the more we do, the better is the value capture at that plant. And that is what's actually helped us to sort of work through the last quarter and this quarter. So the Vizag and NU plants, which are totally dependent on our own processes, has actually helped in our profitability. We're also exporting our phos acid from Vizag to Kakinada [ forest ] operations. So some of these are helping. We believe that strongly in the next 2, 3 quarters, the prices of raw materials will cool down. Which one goes first, how much, it's obviously something that we have to wait and watch. Having said that, if you look into the last 10 years' trend, probably this is a year where we have seen [ Vizag has ] increased. And the government has also been supportive in terms of giving a higher subsidy to sort of compensate for the raw material prices. Last year, they have done mostly on fees. And as the new NBS rates are likely to get announced, the rate would get across NPK, which is what we have also been representing with the government. So in a medium, longer term, definitely, these margins are there. In the short term, if you were to look into it, if the prices continue, there could be a bit of a stretch.
Just to add one more thing. Ankur, firstly, thanks for the compliment and the good question. We will be -- firstly, the cap is only on certain raw -- or what is called products. We have been able to pass on higher prices for some of, what is called, a unique rates and our branding strategy has helped. So that's one. The second thing is, and our diversified portfolio does sell, and you've seen a strong growth even in now what is called our Specialty Nutrient organic business even on the nutrient side, where there's no cap as such. But the price -- raw material prices are rising. The other thing is the government will -- currently, there is a certain compulsion, but the government will ease some of the price restrictions which are there as we go forward. So definitely, next year, there will be some amount of this thing -- because the whole idea of NPK was based on the NBS policy, which is the market base has to be more. So -- and government only steps in to provide a few subsidies. So that change will happen.
Sure, sir. That's helpful. And the second question on the crop protection side while we have seen some bit of RM inflation impacting our margins here, but your thoughts in terms of when should you -- when are you seeing more or less full pass-through of this RM inflation? And the contribution of the newer product launches, how has that been panning out in the crop protection?
I think Ankur, Jayashree answered that question before. One is there was a lag in the price increase which you have already done. So that's one thing. Provided, of course, the raw material prices don't go up more. And we are again expecting some of the raw material prices to come down after the Beijing Olympics because China is one of the major sources, and we are seeing the softening also on the container part of it. So we do expect things to really get stabilized. At the same time, like in any other operations, we are looking at efficiencies at our plant and also a certain amount of backward integration. And the new product is working well, although a bit slow, especially in the domestic market. But of course, export markets have been the old products and led by Mancozeb, but there has been quite a lot of demand for Mancozeb across the markets. And now we are having the pass-through with the customers on the raw material front, pricing front.
The next question is from the line of S Ramesh from Nirmal Bang.
Congratulations on a good performance. So what I would like to understand is in terms of the EBIT performance in the Nutrient business, can you give us the volume of the share of the nonsubsidized fertilizers or nonsubsidized products, which represents 30% of the nonsubsidized EBITDA? .
Jayashree, you want to answer that? And thanks, Ramesh, for the compliment.
Thank you, Ramesh. The Nutrient business, we have fertilizer, SSP, SND and organic, right? So the major portion I would say, a substantial portion of the revenue and the margin comes from fertilizer and SSP, which is a subsidy business. And I would say almost -- the 80%, 85 percentage constitute comes from the fertilizer and SSP, the balance is coming from Specialty Nutrient, organic and the others.
So this is -- you're talking about the volume? Because I understand the product mix. I'm saying your margins seem to have gone up and 30% of your EBITDA is from non-subsidized products, including CPC and non-subsidized fertilizer. I'm just trying to get a sense in terms of the volumes you're talking about and how we can expect the trend in the non-subsidized products going forward in terms of volume growth?
So the question is this, right? We have given a segmental report. The segmental report is Nutrients and Crop Protection. The Crop Protection performance, the growth has already been [indiscernible]. Within the Nutrient business also, there is a small portion of business which is not under the subsidy, which is especially the Specialty Nutrient business as well as the organic which is what I articulated now.As far as the future is concerned, as we've always maintained, our growth engines are going to in the nonsubsidy business. So there is a lot of focus and trust on seeing how we have to grow the specialty nutrient business, the liquid fertilizers and so on and so forth because there is ample scope for growth there. Similarly, there is a trust on increasing the organic growth and you would have also seen in the government even the budget is laying emphasis on this. Apart from that, crop protection as well as the bio products that we are having is another area of focus for the company. While we focus on all these nonsubsidy businesses, clearly, we do not want to ignore the larger part of the business, which is stable. Though it is under subsidy, there is opportunities for us to grow. There will be some amount of growth and impetus given to them as well. So if I were to summarize, there is emphasis and identification of growth engines, which are primarily the nonsubsidy business. We did our strategic plan 3 years back, and that has been clearly laid out. As we speak, we are going to be revisiting our strategic plan for the next 3 years and what exercise will get completed in the next 3 to 6 months' time. Here again, the focus is to see how we can accelerate the growth on some of the nonsubsidy business. So the focus and the trust of the company is definitely there to see that these businesses get far more attention, capital allocation so that we can accelerate the growth.
Just to -- Ramesh, to your question, one of the things is you're talking about the [ initial ] part of the nonsubsidy. Normally, we are seeing the CAGR in the growth of a range of 20% upwards. Even this year, it's going to be like that. So it's a -- while it's small, but it's a very fast-growing business. And when you look at the nonsubsidy part of it, given our strength in fertilizers, this business, especially on the nutritional side, and given the innovations which we have, Jayashree talked about, we expect that to continue to grow and get bigger. And in fact, one of the things we are also looking at is whether we can even look at -- looking at inorganic growth in those business because that's going to be the future. We have launched -- we have set up a liquid fertilizer plant in Vizag to look at a lot of new products which are going to come out. And this is going to expand. When I went to U.S. 25 -- and this was way back in 2017, 20% to 25% of the sale of fertilizer was actually in the -- in liquid fertilizers, so it was add on to it then the powder. And that is something which we are looking at. We've just launched a product, which is basically a foliar spray liquid fertilizer. And the main reason for that is the nutritional uptake, for zinc there is around 70% to 80%. When you get products of zinc, particularly zinc sulfate, the uptake by the plant is only 5% to 10%. So we also talk about nutrition efficiency here. So you'll see more and more of this coming up as we go forward, and this will become bigger and bigger. And that's the reason we have got it under the same umbrella of the Nutrition so that we can leverage these trends. And there also, what we are doing this is earlier, it was a trading, we are doing more of trading. We are now upgrading our plants and getting more manufacturing done locally so that we can do the value capture. I hope that answers your question. We can take it offline if you have more questions here.
Yes, understood. That's really helpful. So just to understand the trend in the subsidized fertilizer. The one thing that has been eluding understanding is, there's certain amount of under-recovery or not adequate commentation being given to all the nutrients. So in this quarter, based on the NBS rates for the third quarter, was there any under-recovery in the subsidized fertilizers? And has that been covered by the non-subsidized fertilizers in depth of the EBIT reporting? And where do you see the entire under-recovery being completely passed on?
Jayashree, you want to answer that?
So there has not been any under-recovery assets. [indiscernible] we have a certain disturbance here outside, so I was not able to get your question completely.
He is saying -- we can take it offline, he is saying under recovery as far as the Nutrients are concerned?
There's not been any under-recovery as such.
Okay. So basically, the NBS is -- based on the NBS and your price increases you were able to cover all your costs?
Yes. To the extent possible, we have been able to cover the cost. As I was mentioning earlier, there is also been a subsidy [ increase ] that has been given by the government. Having said that, post the subsidy increase that has been given, the raw material prices have gone up, for which we are also in the dialogue with the government to see how they can support with a further increase in the subsidy rate.So the margins, compared to last year, has come down, as you could see. So there has been a bit of a compression primarily because of some of the restrictions in MRP, especially on DAP and [indiscernible] and the subsidy being restricted to P rather than to N, C and G. As I mentioned earlier, we expect this to get corrected as the government is going to announce new NBS rates for the coming year.
The next question is from the line of Deepak Chitroda from PhillipCapital.
Congratulations on great set of numbers despite the RM pressure, which we have seen not only for Coro but I think for the entire industry. So my first question is about -- hello? Am I audible?
Yes, we can hear you. Please, go ahead.
Yes. So my first question is about the subsidy allocation, which we have during the budget, the revised amount which we have now is around INR 64,000 crores or so. So do you think that particular allocation which we have is probably cover whatever the RM spike which we have seen since October? And also there is some amount left, which probably government can compensate for the further subsidy probably in the coming months?
So one thing here. Firstly, thanks for your compliments, Deepak. Just on the subsidy front, to be fair to this comment, last year, they played for the industry's entire backlog, [ Leave out ] claims, which they had to process or not settled. So that really helped the entire industry, number one. This year also, while they had budgeted say, around INR 80,000 crores, they have ended up having now additional allocation of around INR 60,000 crores. I'm talking about both urea and NPK together. And so it's coming to INR 140,000 crores. And they have been very prompt in paying at least especially on the DBT and the freight bills. So we have to complement that. We are very -- I mean, as we submit, they are quite good at it. We have some few old claims which will obviously get again corrected as they get the time. But overall, they have been doing well. To your question, whether we see any gap, so far, we have not seen the gaps. But if there's something depending on how the sales and the consumption happens for the industry, we'll have to take it as it comes. But even in January, we've got some very good collections. So we have nothing to complain about.
Okay. So basically, the INR 64,000 crores allocation that we have now basically covers the -- if we take the current cost of RM. So basically, that covers the entire allocation?
No. So again, I can't talk on behalf of the industry. But overall, they would have taken that into account. And that also depends what gets made and imported in February, March, yes?
Sure. And my second question is about the margin, just to, I think, to extend from the Ps participants. In fact, if you look at our volumes, the complex volume have been on a Y-o-Y basis kind of similar. But in fact, cover -- new trade share has declined from 43% to 24%. And in fact, the growth which we have witnessed on the SSP side of around 190 lakh per tons per SSP. So it can basically explain how we have sustained or improved to some extent margin? And if you can quantify in terms of price increase, which we have taken for some of the trades for the quarter?
So firstly, I don't think we have lost market share, I mean, just a correction. And Saurabh can give you the exact figures, including nonconsumption even on NPK per se. So in fact, the...
Unique grade share I'm talking about, sir.
So again, when we talk about unique rates, again, it depends on what the NPK agreements are and purposely also what the government wants. The reason for not manufacturing some of the unique grades was because the government wanted us -- the manufacturers started at the beginning of -- saying because there were import issues and availability. They have requested all manufacturers, including us, to supply DAP for some of the markets where especially in the North and West and which we and other companies obliged. So it was more of a marketing thrust and to meet the demand of North and West. So that's the reason for the change as such. So I don't think we have lost anything, it's more of a temporary thing to satisfy a need which the government had requested for. So that's where it is.
[Operator Instructions] We take the next question from the line of Vishnu Kumar from Spark Capital.
So wanted to understand the entire import of DAP and phosphatic fertilizers. I mean, from urea side, I think government has substantially reduced it to import dependence to less than 10% post the new plant. And given that what the problem that we have faced this year, do you think that any proposal from the government in terms of any incentives or any PLI schemes or something that will come up given that we should not continuously face the DAP shortages globally? And connected question is that what do we see as a growth in our fertilizer segment over the next 2, 3 years, either of capacity additions or anything that you give -- could give us some color as to where this segment as investors should look for over the next 2, 3 years from a volume perspective?
So I think, again, Vishnu, it's a good question you have asked. So just to break it up into 2, you talked about DAP and you talked about NPK. The NPK CAGR for the industry is close to 10% over the years. And obviously, it's led by companies like us who want to follow a balanced nutritional strategy right? DAP has been actually marginal. This year, it will show a decline is -- again, it's been 1% to 2%. And I do call DAP a very generic fertilizer, right? And these are high concentrated fertilizer. I think what the Indian soil now requires, like urea also. They require fertilizer which are more balanced and even crops require that, and therefore, there's less of leaching and other things, right? So that's one part of it, right? Now your next question was just there's a gap between currently, even the domestic manufacturers. When you look at overall capacity, I think their number is around 70% to 80%, and it's a poorer in SSP where it's close to 40%, right? Now part of the reason is that -- and this the government saw this year, the importers can import products during the season and then sell off and go out of it. But like -- and this is not just the first time it has happened in the past also where we had quality issues on imports, and the market saw it. So the government is seized with this situation. And more and more, the suppliers are wanting -- when I say the suppliers -- the suppliers want to convert into finished products in their country to get the value addition, right? So the government is definitely looking at this. One is they are looking at backward integration to secure and somebody even mentioned in the beginning call taking about government-to-government deals like with Russia and other places as to secure the raw materials and have long-term contracts with that. Number two, we have pleaded to the government also is to support as part of AatmaNirbhar Bharat to support domestic manufacturer. Firstly is to ensure that we operate at full capacity, but that's our marketing ability and our efficiency. But to ensure that companies which are able to import at full either to get the raw materials or to convert efficiently. And there, we have talked about whether we can have advantage both in terms of customs duties in favor to this thing. And also earlier on, the subsidy was given first to the domestic manufacturers only then given to importers. So that's something which you've asked for. But definitely, what I see for and it's been talked in that circle also, like in urea, the fertilizer being such an essential commodity, government is definitely going to look at how we expand our capacity, at least in the medium to long term. So you're absolutely right. And to reduce the dependence on imports. I hope that answers your question.
Ladies and gentlemen, we take the last question from the line of Prashant Biyani from Elara Capital.
Sir, congrats on good set of numbers. On what factors our decision to expand capacity in complex fertilizer space hinged upon?
So again, I mean, like Jayashree was saying, we are looking at it strategically. Our first thing is to ensure that we get -- one is we are doing debottling of the plants which anyway is adding to the capacity. We also look at efficiencies during the -- as we speak, because of DAP and various other disruptions. We are at 86% of our capacity, 87%. We can easily reach taking a 1 year's ATA to 93%, 94%, 1 month ATA %. So that is something which we are looking at, apart from debottling. I think our first big thing is to look at backward integration and secure the raw materials. And once that happens is we'll definitely -- and to grow the market. The market is growing, like I said, in the [indiscernible] and to go for more and more specialized grades. So we have a full plan, not just for our base fertilizers, but we are looking at liquid fertilizer, we talked about nano. we are talking about slow release fertilizers. All that is in the pipeline. We've already launched liquid fertilizer, but you will see slow release, quoted fertilizers and also nano and some other fertilizers which are going to come which will add-on to it. So that is something which will happen.
Sir, on the primary fertilizer front, is the creation of market primary deterrent as of now? Or is it the securing of raw materials?
Not really. We obviously service our own market, but like I said, NPK is growing in on volume and our balanced nutritional approach is growing And this time, the government told us to sell even to markets like UP and MP where we had the thing we were able to sell because we are selling SSP in that market. So I don't think market is an issue, and we have very strong brands. We are getting into the branding strategy. So that is one. So we are not into selling commodities or grades that way. So that's not the thing. The main thing is for us is to ensure that we have always a secured source of raw material coming in. And to backward integrate and get the value capture also, when someone is capturing it.
Sir, actually, on the raw material front, our sense was that rock is primarily available in abundant quantity globally even right now when there is some sort of a shortfall in supplies. So is it that we are -- there is some shortfall in phosphoric acid availability that is here acting as a deterrent to finalize that CapEx or if you can...
So no, there are 2 things here. Firstly, phos acid is also available. But the main thing is for the manufacturers, then to convert it into their own finished products, and they are meeting the global demand. So you've got higher demand in Brazil for NAP for Africa as a continent is growing. So you will then tend to even focus there. Obviously, they can't ignore India because India is a big market. So that's one. But obviously, the prices when there's a huge demand, the prices obviously go up. So that's one part of it. As far as the rock is concerned, yes, rock is available. But again, the raw quality has to be different, and each rock has got its own challenges. The good thing is when we are setting up our new plants, particularly on forced asset, we have designed our plans to take a new type of rocks. And even our old plants, we are actually working towards seeing that we can use any. And therefore, the alternate talk and asset strategy is also helping us so that we can source from various countries where we are.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
I don't know whether Jayashree is still there.
I'm here.
Yes. So [indiscernible], thanks for all the content. Quarter 3, obviously, is a good quarter for rabi. We are happy to see how the agriculture is continuing to do well, how the rains have played out, although a bit -- there were some crop damages and some procurement issues which happened during rabi. But overall, India is in a good state as far as agriculture is concerned. And definitely, this crop diversification, whether it is to oilseeds or fruits and vegetables also helped agri input companies because you can keep focusing and not depend just on serials on that count. But we do expect -- quarter 4 anyway is not a consumption quarter for us, and we'll be taking it -- so that we gear up where we are expecting again a very good curry to come. Given the current moisture levels, given the current dam levels and even though -- now we watch further forecast. But I think we are now getting more and more out of this month independent because we have a large market to service. And given our strength of our brands, we are quite confident of making that work. And the ability -- the company has the money and the ability to invest, whether both in organic or inorganic growth. [indiscernible] towards this space. Jayashree, if there's anything else you want to add?
You have summarized it well, Sameer. I think with good monsoon conditions, we expect the upcoming rabi, curry season also to be encouraging. We have to wait and see how the raw material prices come down, as Coromandel will continue to focus on any action that will help us to stay competitive and serve the needs of the farming community. Thank you all for your interest in the company, and look forward to future interactions.
Thank you, And you can always reach out to us, if there's any question to Saurabh, and we are more than happy to answer that. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of Prabhudas Lilladher Private Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.
Thank you.