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 Q4 FY '19 Earnings Conference Call hosted by Motilal Oswal Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal Financial Services. Thank you, and over to you, Mr. Kumar.
Good afternoon, everyone. Welcome to 4Q FY '19 year conference call of Coromandel International. Today, we have with us Mr. Sameer Goel, Managing Director; and Ms. Jayashree Satagopan, CFO, representing the company. I hand over the call to Mr. Goel for the opening remarks. After that, we'll have a Q&A session. Thank you, and over to you, sir.
Yes. Good afternoon, everyone, and thank you, Sumant, for organizing this conference call. I'll first give the overview of the business environment experienced during the year followed by the company performance. Jayashree will take you through the financials and then we can have the Q&A.In India, the blur of normal Southwest monsoons and the deficit Northeast monsoons impacted the sowing of Kharif and Rabi season, respectively. Overall acreage was down by 2.6% with a major drop coming in from under pulses, paddy and coarse cereals.As for the second advances to make our production, full grain output is expected to come down marginally by 1% to 281 million tons. CSO estimates the agriculture and the life segment GVA for '18, '19 to be moderated to 2.7% after recording 5% growth in 2017-'18.What we also see is the major drop coming in the Rabi season, especially on our markets where rice has been around 25% under sowing area. And also a similar drop has been seen in pulses and oilseeds.For 2019, IMD has forecasted near-normal monsoons with well-distributed rainfall at 96% of the long period averages. We will get further clarity on region-wide rainfall distribution in June when the IMD will come up with the second stage forecast.On the reform sites, direct income support schemes introduced by various state governments and the central government is expected to improve the cash supplies in the market. Further, minimum support price announced during the years had been fixed with an objective to provide minimum 50% returns over the cost of production, though the procurement mechanisms are yet to be firmed up.Major irrigation projects like Kaleshwaram in Telangana and Polavaram in Andhra in the Coromandel key markets are progressing well and months completed will likely to improve the agriculture prospects of the region.On the subsidy side, the nutritional rates of NBS are provisionally maintained at the same level of 2019, '20 as that in the previous years. The overall allocation of subsidy in the union budget has moved up by 7% to INR 74,096 crores, with the major increase coming from Urea segment. The industry has received INR 10,000 crores under the special banking arrangement in March 2019 though there's a significant subsidy backlog of around INR 30,000 crores for the industry.On the fertilizer industry performance, for the quarter, phosphatic fertilizer industry sales have improved by 6% to 40 lakh tons. Complex fertilizer sales are down by 11% while DAP sales, mainly because of imports, increased by 37%. Raw material prices have stabilized over the last quarter due to moderation in global demand. Phosphoric acid prices for quarter 1 2019/'20 have been finalized at USD 728 per ton. In quarter 4 2019, the prices were -- was USD 750 per metric ton. For the full year '18/'19, overall industry has grown by 6% to 186 lakh tons from 175 lakh tons last year with 6% and 7% growth coming in from DAP and NPK segment, respectively. DAP demand is met mostly through imports, which have gone up by 57% to 66 lakh tons.Coromandel Q4 and full year performance. For the year 2018/'19, Coromandel has made an all-around progress by improving its customer engagement, branding capabilities and furthering its operational efficiencies. The company has strengthened its R&D, product development and registration function. During the year, the company has introduced 10 new products in nutrition and crop protection businesses and has established key partnerships in the area of research technology, sourcing and marketing to meet its growth aspiration.Coming now to Coromandel fertilizer's performance for quarter 4. On the sales side, our phosphatic volumes were marginally down by 1% to [ 5.8 ] lakh tons as the overall slowdown in fertilizer offtake going to the weak seasonal conditions in Southern India. The same number of 5.9 lakh tons comprise of [ 5.6 ] lakh tons of manufactured products and 0.3 lakh tons of imported DAP. The share of unique grade stands at 34%. During the quarter, our phosphatic fertilizer plants operated at 79% capacity utilization, recording production of 6.9 lakh tons. Last year, it was 6 lakh metric tons at 70%, the best utilization.Captive asset production from Visak and Ennore has went up by 27%. The phosphoric acid capacity enhancement project at Visak is going on track and will be fully operational by October 2019. For the full year period, our phosphatic sales volumes are up by 10% to 30.3 lakh tons with unique products growing by 10%. Its share in overall sales stands at 38%, similar to last year. Overall, the market share has gone up by -- from 15.8% to 16.3% with increase coming across all the operating states.The sale number of 30.3 lakh tons comprised of 24.2 lakh tons of NPK and -- of which -- and 6.1 lakh tons of DAP, of which imported is 2.7 lakh tons.We have introduced our zinc-fortified NPK product during the year and it has been well received in the market. During the year, our phosphatic fertilizer plants operated at 85% capacity utilization, recording a production of 29.4 lakh tons. Captive asset production from Visak and Ennore has gone up by 11%.During the year, the business transition into DBT regime effectively connecting with the channel partners and the government to ensure timely POS machine-based recording for the farm purchases.On the crop protection side, during the quarter, Crop Protection business turnover was close to last year levels at INR 358 crores. Last year, it was INR 362 crores last. On a full year basis, Coromandel Crop Protection business registered a growth of 8% with the increase coming both from domestic and international operations. The business has taken progressive steps towards updating its portfolio from all generate to patented combinations or recently post-patented molecules. The business introduced 5 new products including 2 in-house patented combination molecules, which have received encouraging response from the market. The business received 75 new registration in international markets, taking its overall count to around 1,000. Coromandel opened a subsidy in Africa, Nigeria during the year to improve its customer access and product registration capability.The domestic formulation business had a good year driven by its channel initiatives and new product performance. The market development structure has been strengthened over the last few years and is supporting the business in establishing customer connect. Recently acquired biopesticide business has enabled access to developed markets like U.S.A., Canada and Europe and provided presence in complementary products segments. The bio business has performed well during the year, improving its product offering, sourcing capability and extraction efficiencies.On the manufacturing side, Coromandel is in the process of completing its Mancozeb WDG facility at Dahej. New plants are being added in Ankleshwar and Sarigam for manufacturing recently of patented technical products. During the year, business further strengthened its product development structure with scaling up of technology transfer, business development, regulatory and R&D function.In the month of January, an unfortunate fire incident occurred at the Coromandel Sarigam plant in the warehouse section due to an electric short circuit. There was no injuries or casualty. And adequate control measures were taken to safeguard the fire from spreading to other sections. The plant is expected to restart its operations soon.Retail business had a soft quarter and year impacted by Northeast monsoon failure. Business had witnessed a flattish top line, mainly driven by fertilizer sales. On the agri-tech side, the business has tested out new delivery models, direct plant delivery e-kiosk and from advisory services. The business has pilot-tested drone-based crop monitoring and spraying services and the initial results had been encouraging. We expect our farm mechanization services by launching the paddy harvesters through our customer hiring centers.During the year, the Specialty Nutrition business continues to perform well through its focused product approach. It has introduced 2 new crop-specific products targeting crops like sugarcane and banana. The business has collaborated with multiple agri players across the value chain to improve its customer connect initiatives.Single Super Phosphate business registered a 9% volume growth, improving its sales to 5.7 lakh tons. It continues its leadership position with a market share of 14%. Two new products launched during the year have been received very well by the farming community.Overall, Coromandel has significantly progressed during the year in a tough business environment, improving its customer connect market development and branding initiatives, product offering and people's capability. With the stable business environment, government agrarian reforms and forecast for a near-normal monsoon, we expect a healthy growth in farm sectors during 2019-'20. Coromandel will continue to focus on improving its customer connect and develop its research and agri-tech intervention to improve its farmer's value proposition.And now I hand it over to Jayashree to talk about the financial updates.
Thank you, Sameer, and good afternoon all for joining the conference today. Let me first take you through the Q4 results followed by the full year financial results.In Q4 FY '18/'19, company recorded a consolidated turnover of INR 2,638 crores, growing by 9% with nutrients and allied businesses contributing to 86% share and the remaining 14% coming from Crop Protection business.Q4 last year figures. Nutrient was 85%; CPC, 15%. In terms of subsidy/nonsubsidy breakup, Q4 revenue share is around 80/20. Last year was 79/21.Overall, EBITDA for the quarter is INR 259 crores against INR 185 crores last year, which is a 40% increase year-on-year. The margins were supported by stable exchange rates and lower rental cost during this year.In terms of subsidy/nonsubsidy breakup, Q4 EBITDA share was 73/27. Last year, it was 65/35. Consolidated net profit after tax for the quarter is INR 110 crores as against INR 90 crores in Q4 fiscal year '18.Let me cover the full year financials now. In the period April to March 2019, company recorded a consolidated turnover of INR 13,225 crores, growing by 19%. Nutrient and allied businesses contributed to 86% share. 14% was from Crop Protection business. Last year, nutrient was 85% and CPC, 15%.In terms of subsidy/nonsubsidy breakup. Year-to-date revenue share is around 80/20 compared to last year of 77/23. Despite tough extent environment, the company has recorded year-to-date EBITDA of INR 1,443 crores against INR 1,257 crores last year, which is a 15% growth on a year-on-year basis. In terms of subsidy/nonsubsidy breakup, year-to-date EBITDA share was 68/32 vis-à-vis last year 66/34. Consolidated net profit after tax for the year is INR 720 crores against INR 691 crores in FY '18.Subsidy outstanding as of 31st March 2019 is INR 2,393 crores versus last year's number of INR 2,627 crores. The subsidy value of INR 2,393 crores outstanding includes approximately INR 1,100 crores of subsidy cleaned and pending with DoF for disbursement. This number is before the special banking arrangement of INR 204 crores received in March. Last year, the company received INR 617 crores under the special banking arrangement.During the quarter, the subsidy payout from the government was low and Coromandel has received INR 432 crores subsidy vis-à-vis last quarter -- last year which was INR 861 crores.The company has filed DBT claims up to end of February. We are working with the government on some software-related issues to submit the balance claims of March.As regards to GST during the quarter, company received GST refund of INR 275 crores. Refunds have been filed up to February 19 for the year. Coromandel has received overall GST refunds of INR 608 crores for the year.Foreign exchange management. During Q4, as we know, rupee remained ranged from -- between 68.36 to 71.83 levels, closed at 69.16. Coromandel has been following the Board-approved hedging strategy and is dynamically covering its exposure for optimizing the premier cost and minimizing any adverse impact due to currency depreciation.Financing costs. Interest cost for the quarter was at INR 65 crores, up from INR 51 crores last year. Increase in interest cost is primarily on account of higher level of borrowings due to high inventory as well as subsidy receivables.Thank you once again for joining us on the call, and we'll open the session for question and answers.
[Operator Instructions] The first question is from the line of Viraj Parekh from KRChoksey.
Actually, I'll start on your commentary on phosphoric acid prices. I just wanted to confirm whether the prices are -- what you mentioned is at $728 per metric ton. Am I correct on that, sir?
That's right, for the quarter 1.
The next question is from the line of Sudarsha Padmanabhan from Sundaram Mutual Fund.
Sir, my question is on the P&L side. One is looking at the 3 items. Given that rupee-dollar on a quarter-on-quarter basis has rupee strengthened, is there any ForEx gain that we have? And second is if you can comment a bit on the depreciation charges, which has slightly been on the higher side. I mean in terms of -- because if I'm correct, we do not have specific plant that we have kind of commissioned in this quarter. And third is, sir, on the balance sheet side, if you can also talk a bit more on their inventory. Where has the inventory been on the higher side? Is it primarily on the finished goods? And what is the reason behind it to build this kind of inventory ahead of the season?
Thanks, Sudarshan, for the questions. With the rupee appreciation during the quarter, we did see a ForEx gain to the extent of about INR 28 crores, INR 30 crores on a mark-to-market basis that's been factored in the financial. We did have an accelerated depreciation of one of our assets that amounted to close to INR 8 crores, which has been included in the depreciation.Thirdly, on the inventory front, the inventory increase is primarily on account of finished goods and to some extent on raw materials. The finished goods inventory, especially on fertilizer, we had taken a strategic call to produce and hold it for the season. Compared to last year to this year, our finished goods inventory has gone up by 2.4 lakh tons. The raw material inventory is also slightly on a higher side, primarily driven by higher raw material prices and a higher ForEx rate compared to the figures of previous year. So quarter-on-quarter, it is not high but compared to last year, the raw material prices have gone up and rupee was also averaging around 65. Now it's around 69. So both these impacts is impacting the inventory.
Sure. And ma'am, with respect to the outlook for phos acid prices and even the prices of ammonia, what we are seeing is that the prices have come up on a quarter-on-quarter business. Give some color on -- because I think the first half of the previous year, we've been seeing a rising trend, and of late, we are seeing a declining trend. How do we see the strength probably for the next few quarters, 2 or 3 quarters?
See, where we get visibility is primarily for a quarter, especially on the phos acid prices. We do believe that we should have the prices around this range. Again, it depends upon the demand-supply situation globally. Ammonia prices have been coming down from the peak of 391. In April, it was about 299. We expect ammonia to continue around this range of 300 to -- I mean 320 to 280. We are not seeing any big spikes coming there.
Ma'am, I mean, you ended on a q-on-q basis the landed cost given that rupee appreciated would be lower. And since we had already by not having inventory there in the system, would we also be having some inventory loss which will be there, a part of the raw material, which explains why the gross margins kind of fell? Because I think the first half you might have also benefited from the raw material, benefiting on gains when the pipe was continuously moving up.
Well, it actually goes into your cost of goods sold. We didn't have a loss in terms of inventory. But given the fact that you see raw material prices are softening and the MRPs are being held at the current level, which were -- which had gone up during the year, there have been some amount of discounting that's happening in the market. And that is one of the reasons that you would see that margins were normalized. It's a price protection that has been taken into consideration.
The next question is from the line of Abhijit Akella from IIFL.
Just first on the fertilizer business, the outlook going ahead into the June quarter. So do we need to -- I mean, is there an expectation that the MRPs will need to be reduced heading into the season to pass on these lower raw material costs? And also, now that we're looking ahead to our phosphoric acid commissioning around October, how much of a benefit to the margins can it have in the fertilizer business and partially in FY '20 and then more fully in FY '21?
Okay. So we are seeing softness in the raw material prices as well as ForEx has been more or less stable in the last couple of months. While the industry players are looking at what could be the MRP, we do believe that there could be a correction that could happen.The second one is in terms of phos acid. The plant is expected to be commissioned in October 2019 and get fully operational from then onwards. There will be a value gap of approximately $120 to $150, again depending upon the prices of phos acid compared to the raw conversion that we do in our integrated facility. That would be the flow-through that will come into your margins. The additional capacity that will come in for the full year is going to be about a lakh tons of phos acid. For this year, we're expecting 50,000 tons.
Metric ton.
Got it. That's helpful, ma'am. And also just wanted to check on the working capital front now. You're now with the new financial year having begun. Have you seen signs that the government has started to release some of the backlog? So what's the outlook for subsidies going ahead into the June quarter?
Yes, good question, Abhijit. Currently, in the last 24 days, we have received just about INR 30 crores of subsidy from the government. While we have submitted close to INR 1,000-odd crores of subsidy claims that are pending with them, money flow has not been very forthcoming. We'll have to wait when the new government comes in place. That's what we are hearing from the circles. So subsidy money should start coming, especially on the DBT. Hopefully, by end of May, June is what we're expecting a good inflow to come in.
The current position, the government has a lot of people on election duty. So hopefully, once that settled down, they will start to come in.
So we will have some amount of [ externally ] working capital in the first quarter until we get the subsidy received from government.
Right. Also, just to clarify on that point, is there some element of the software-related problems also that you spoke about? That's the reason for this or is it more the election-related assumptions?
I think it's mostly the election one. The software-related issue is primarily in terms of submitting the monthly claims. Typically, companies submit claims either weekly, fortnightly or monthly. With the bug in the system, March claims are yet to be submitted. Having said that, these months are off season, so we may not have a huge amount of POS acknowledgment. We are working with the Department of Fertilizer as well as the NIC to have this sorted out. And we are hoping in the next couple of weeks, the system-related issues must be set all right. We do not see that as a constraint going forward because most part of last year, after the initial hiccup, the system was more or less stable.
Okay. And one last thing and I'll just get back in the queue. Your accelerated depreciation of INR 8 crores you spoke about, is that something that's going to continue in coming quarters? And also, your CapEx plans for FY '20, if you could just give us some thought.
Yes. The accelerated depreciation is a onetime. It's not likely to continue. So that's about INR 8 crores as I was mentioning. In terms of the capital expenditure for the next year, we are looking close to INR 450 crores to INR 500 crores of CapEx. Our phos acid plant at Visak will get completed. That will be close to about INR 150-odd crores. We're also looking at putting up a new pilot and a multipurpose plant for CPC business. Apart from that, we are looking into our normal maintenance CapEx as well as some strengthening of the infrastructure across all the plants. All these 3 things put together should be around INR 450 crores to INR 500 crores in '19, '20.
And how much was the CapEx this year, ma'am, year gone back?
Around INR 300 crores.
Right. And I'm assuming that of the INR 500 crores you're talking about next year, a significant portion will be towards the infrastructure centering. Is that correct?
No, I would say it is 1/3, INR 152-odd crores will go for the phos acid project. CPC between pilot plant and the new plant that we're putting up for the recently off-patented molecules would be about INR 100 crores to INR 120 crores. And then we have an infrastructure improvement, which could be about INR 30 crores, INR 40 crores. Apart from that, you have normal maintenance CapEx across the plants.
The next question is from the line of Vishnu Kumar from Spark Capital.
Just wanted to understand the behavior of the fertilizer offtake in the market. There seems to be a very high offtake of urea this quarter. Even if I go back 2 years fourth quarter, the offtake seems to be substantially high. This is -- our phos acid number -- I mean, phos -- I mean, NPKs have come off. So is there any trend change in the behavior of the farmers probably because of lack of price inflation, which is reflecting? Just wanted your thoughts.
I think on urea, there was a guidance in the market going to the fact that certain amount of production capacity wasn't available. But clearly, some of the plants went down, that's one. And secondly, because the Rabi season has been good and not [ the big ] cultivation happening, so that filled up the trendy market. So that's related with the urea thing. So that's been one of the reasons for that growth. While if you look at our own listing, VAT has also grown by 37%, again with the factors which are similar, particularly in the north side and all. NPK, there was cutdown in sales, mainly because of the seasonality factor.
Okay. So this has nothing to do with price inflation for farmers not being there and the input costs being substantially high. Nothing to do on that side.
Nothing to do on that side.
Got it, sir. And secondly, just wanted to understand the drop in the unique grade share versus last year. Is there any specific reason or because of just the crop mix?
No, there is no specific reason. With the higher MRP overall, some of the generic rates have gained traction. That's the reason why you would see generic rates percentage being higher in the quarter.
But overall on the year, we have grown by 10% on the unique grades.
Got it. And just one last question here. Ma'am, if you could repeat the subsidy/nonsubsidy share for their top line and the -- I mean, the fertilizer and Crop Protection and on the EBITDA side for this quarter?
For this quarter? Okay. Subsidy/nonsubsidy for Q4 this quarter is 80/20. Last year, it was 79/21. On EBITDA, 73/27. Last year, it was 65/35.
65/35. And one last question on the ForEx gain of INR 30 crores, INR 40 crores, you mentioned this is adjusted against other expenses. Is it right? Or...
No, ForEx gain is about INR 30-odd crores and this was going to other expenses, part of your cost.
Which is directly with cost adjusted. So it will be about gross profit?
No, I think it is in other expenses. It's in other expenses.
It's in other expenses?
Yes.
The next question is from the line of Girish Raj from Quest Investments.
And so if you can just throw some color on the decline in MRP and the discounting intensity over third quarter -- or fourth quarter to first quarter FY '19.
We've not seen much of a change in the MRP during the quarter. Most of the companies are holding to the earlier MRPs. However, there has been discounting that's been happening.
Sure. So there must be some discount...
Particularly on DAP.
On DAP, not on the...
Yes. Yes, there was also but more this year on the DAP.
Can I share some intensity as to 500...
Most imported prices have been relatively lower compared to manufactured DAP.
Okay. So in that case, we had some DAP consignment that came at end of third quarter FY '19. And what is the DAP prices now? So what would be the impact on inventory-related gain or losses on that?
See, the DAP prices have been coming down and [ currencies hereabout ] $396 CFR. Beginning of January, there was about 404. Not much of a difference between January to April.
So just to confirm this, despite the decline in DAP prices and raw material prices, we should not see any inventory-related losses going forward?
We should not see inventory-related losses. It also depends upon how each company is holding their inventories, right?
And discount related, what is the intensity?
So I think some of the grades, there have been discounts in the market. As I mentioned, the DAP has been having a slightly higher discount compared to some of the other generic grades.
Okay. Okay. I'll go to the working capital excluding the subsidy. We have gone through one full cycle of DBT. Now assuming raw material prices remains at 79.28 or whatever levels you have mentioned for others also, how should the net working capital trend in FY '20 versus FY '19?
If you look at FY '19, especially for Coromandel, there have been 2 areas which was impacting the working capital, which was inventory and subsidy. So this is despite an increase of both 19% in our turnover and the reason for being fairly managed well. Inventory also, quarter 4 was a strategic call taken both in terms of producing and holding inventory for the Kharif season because monsoons being near normal, you have to keep your products ready and available for sale during the peak season. And phos acid supply, given some of the global demand-supply situation, we've also taken a call to hold enough phos acid with us. So between the quarters, you will see in some quarters that will be strategic [ calls ] in terms of holding inventory. Otherwise, working capital will get [ automated ] to your business levels.
Okay. Let me put it this way. Interest expenses in FY '19 and so FY '20 should come down?
If we get the subsidy receivable sometime, it should come down.
Yes, it should come down.
It should come down. Okay. And on the Crop Protection side, our Mancozeb capacity would have increased. The capacity available for FY '20 would be 30% higher and then there are other capacity addition. All this should translate into revenue growth. Is the understanding fair?
Yes. We would expect revenue growth definitely on the Crop Protection business. And in terms of these products, which are Mancozeb as well as the new products that are being planned. We have -- we are looking into introduction of close to 7 molecules in the coming year. Three of them would be our own patented molecules. The rest of them are being worked out, both in terms of combinations and co-marketed products.
And should we look at high teen numbers?
I think we should look at a double-digit number. Let's see where this...
The quarter 1 could be subdued because, like you said, we had a fire in the warehouse. We are looking for revocation at Sarigam. So that is something which we are working towards.
Okay. And so INR 30 crore OCI loss in fourth quarter, what was it related to?
The OCI loss was -- we had taken impairment of our investment in Foskor.
The next question is from the line of [ H.R. Gala ] from Finvest Advisors.
Yes. Most of my questions are answered. And by the way, congratulations for really good set of numbers.
Thank you very much.
Now in Crop Protection and the biopesticide, what is going to be our future strategy for growth?
See, Crop Protection continues to be something which we'll continue to invest in. And that is something that Jayashree has also said. We are looking at having multipurpose plants which are patented molecules and we'll continue to do value addition. We are very happy to see, like I mentioned in my report in terms of what we are doing with biopesticide, that has given us access particularly in the international markets to developed countries like U.S., Canada and also Europe. And there, we -- significantly, it comes at a higher margin, also seemingly to increase our sales. So we continue to build that capacity and grow the market, both in the international markets. And also, there's a huge opportunity in the domestic market.
Okay. Okay. And as far as the biopesticides are concerned, how much was revenue this year?
We have a revenue of INR 167 crores on biopesticides.
Okay. And how much margin are we getting in there? Is it comparable to the normal crop protection?
Better than crop protection.
Better than?
Yes.
Okay. And just to get the breakup of subsidy/nonsubsidy, which you gave in your initial remarks, interestingly, you said something 80/20 and 77/23. What was that?
80/20 is the revenue share of subsidy/nonsubsidy. 79/21 is for the previous year.
No, I think at full year sales, you said 86/14. Hello?
Full year’s sales was...
86/14?
80/20. Subsidy/nonsubsidy is 80/20. 86/14 is nutrient and life businesses is 86%. Crop Protection is 14%.
Okay. So 80/20 and 77/23?
Correct. That is subsidy/nonsubsidy.
We also do quite well in our specialized nutrients, which is basically nonsubsidized, and that's a good thing.
Okay. Okay. I follow. And 68/32 and 66/34 was the EBITDA breakdown?
Correct.
The next question is from the line of Bharat Gupta (sic) [ Rohan Gupta ] from Edelweiss.
Rohan here. First question on this agrochemical or Crop Protection business for the full year, can you give us some breakup of how much was exports out of this INR 1,800 crores from Crop Protection?
It's focused around 55 percentage, around 55%.
Okay. And you also mentioned in your opening remarks that the global business was under pressure but you have done pretty well in domestic markets. So despite that, in the current quarter, we have seen a muted growth. So do you see that any -- the growth in export business in the current quarter are equally distributed in both segments?
The current quarter, we had -- just give me a minute, Rohan. We'll just see the export numbers for the quarter. We have the overall year. Can we come back to you on this?
Okay. Ma'am, second question on this fertilizer. Do you maintain that with the falling phos acid prices, that now the new inventory coming in the market will be having a markdown and the price -- and the retail prices will come down? But -- and we are significantly holding inventory of, you already said, the 2.5 lakh ton of almost higher inventory we are holding. But keeping all this in mind, do you still want to maintain that there won't be any significant inventory-led losses? So generally, we have seen that with the competition also, we will probably when phos acid prices will fall, the price correction in the market will be much sharper and that's where probably we have to offer the higher discounts to the dealer, to mitigate that fall in phos acid prices. So in that current scenario, any particular strategy you have that why we won't be expecting any inventory-led losses going forward, mainly in Q1 and Q2?
We have found about is the price protection, which is primarily for the inventory that you are currently holding. When the MRP comes down and you're holding inventory, which is at a slightly higher cost, that will get discounted.
Right.
Yes, we have already provided everything in our Q4 numbers.
Okay. So we have already -- so any -- that number, can you suggest at how much we have provided for that?
We will not able to share the exact numbers with you.
Okay. And when is the prices keeps on falling -- I mean, phos acid prices falls further, then we may see that further inventory-led losses. So that probably is a scenario looking forward. I mean, that maybe in Q1 and Q2, we may continue with this kind of scenario or do you see that phos acid prices are now stabilized here and won't fall any further?
So Rohan, what we see is the near-normal monsoons. We expect a very good Kharif season to happen. So we do expect consumption to go up quite dramatically and which requires more of production. We have strategically built up inventory so that we don't lose out on any market share and all during the Kharif season, so that's why we've done this. And as far as phos acid prices are concerned, like Jayashree says, it's a question of demand and supply. We don't -- so we'll take it as and when the negotiations happen.
And just to add on to it. If you see quarter-on-quarter, even with the past years, there are going to be some quarters where you'll see a fall in prices; in other quarters, rising prices. Typically, as a policy, we do not keep much of finished goods inventory. However, for Kharif season, this is a bigger season in the country. We would like to hold inventory so that we do not miss the dealer shelf space as well as serving to the farmers. So it has been a strategic call to build and hold inventory. So if you do not do this on a quarter-on-quarter basis, you don't have such high levels of inventory, we're not likely to get this impact. So it's just another way to look at the whole situation.
Fair enough. Just last question and I'll come back in queue. So out of the total subsidy pending, you mentioned INR 2,393 crores, roughly INR 2,400 crores. Roughly INR 1,000 crores, you have already processed the bill and that is still Feb. So a balance, INR 1,400 crores, is the pending subsidies all or what is related to that?
So we have -- out of the INR 1,000-odd crores that we already been submitted to the government, we have another close to INR 1,000 crores, which is relating to the DBT, right? Out of that, we have INR 300 crores where we have not been able to still generate and submit. That's because of the issues with Southwest. Apart from this, we have our old balance, 10% claims, on account payment, freight and urea, which accounts to INR 550 crores.
Is this INR 550 crores still pending and which includes all pending subsidies as well? And do you expect that, that can be cleared in the next 3 to 4 months?
So we are looking at getting results in the quarter. As we were mentioning in the earlier calls, the challenges with this freight subsidy is relating to the original invoices for freight. So tracking this out, this is for the past few years. Tracking it out, getting it certified and then submitting to the government is taking little bit of time. That's the only challenge we are seeing. Hopefully, in the next 3 to 6 months, the old claim should be [ culminated ] in our books. Then onward, it should only be the DBT claims as we get the POS acknowledgment the same month or the subsequent month that we'll be submitting to the government.
The next question is from the line of Bharat Sheth from Quest Investment.
Sameer, on this unique grade, you said strategy to take it, I mean, 50% of fertilizer or a couple of FY '21, whereas this year we have almost remained same level of, I mean, 38% full year last year. So can you give some more color? So what exactly -- where do we stand in -- all in our strategy?
So what we are continuing to do is to build on the unique grades. This year, partly the issue was in terms of some of the supplies on phos acid. So we cannot produce some of the things, particularly on the DAP, plus rates will be imported. So this year, we continue to ensure full supplies will happen. And that's why we build up the inventory so that we can accelerate this growth. We're also looking at launching new products, which our new R&D team has done and which will be -- we already have tested one product out. We are going to test out other products, which are going to get listing. So we hope to continue to make the trajectory. Let's not forget at one time, we were down at around 24%, 25%. So the objective is to keep increasing our unique grade share.
Just adding on to Sameer's point. As you know, the MRP has gone up substantially, which is like last year '18, '19. The demand for DAP and generic products have also been very good. And to some extent, our generic products also give a very healthy margin. So it's a question of how you balance your overall portfolio and maximizing your margins. At the same time, continue to focus on the unique grade, which provides a solution to the farmers.
Okay. Sameer, on this, a couple of times, you mentioned that patented on crop protection, patented technical products. So is it our own or third party? Or exactly can you give some more color on patented and how much currently we are doing? And how do we see -- I mean -- or is it a CRM business?
Okay. Can I take this question?
Yes, sure. Of course.
Look, so on the Crop Protection side, as Sameer was mentioning earlier, our strategy is to look into recently off-patented molecules, which will be manufactured -- where we will be manufacturing the technicals in our plants and also come up with formulations for the branded traded products. So we are looking into 3 products for the year, which are going to be technical. These are off-patented molecules. And we are looking at unique formulations for these. These are going to be patented combination molecules as far as Coromandel is concerned. Last year, that means '18, '19, we have introduced 2 in-house combination molecules which were patented. One is Prospell, the other one is Lancia. Both of them are combinations of Mancozeb and one is Mancozeb and Azoxy, which is Prospell. The other one, Lancia, is a combination of Propineb and Tricyclazole. Both these products have been received well. And in the coming year or 2, we have a couple of combination products that we are looking into for introduction.
Can you give some more color on 3-year strategy? How much revenue do we expect out of crop products from this kind of a product and which I believe has better margin than the other product?
Bharat, if you look at Coromandel's portfolio over a period of time, we were having a lot of generic molecules and some of these generics were also really old. So consciously, it's a part of shifting the product portfolio. Company has been looking into acquiring and developing technical expertise for the off-patented, relatively newer molecules. So this, we believe, should become a good share in our overall product portfolio. This year, for instance, all our new products that were introduced have given us a revenue of about INR 70 crores or -- INR 70 crores, INR 80 crores. So the intent is to continuously focus on new-generation combination molecules to add substantially into the portfolio. If you ask me a number, it might be difficult to share. But directionally, this is what we are looking at as a strategy.
And this is mainly for domestic market, I believe, correct?
Yes. This is a -- formulation is primarily for domestic market. We do export formulation in a very limited manner. For exports, we do mostly technical, and we do have technical sales in the country on a B2B basis.
Okay. And this is last question, if you permit. I mean, do you have any strategy on SSP, I mean, to grow the volume because...
Yes. Even on SSP, the focus is on providing unique grades and solution to the farmers. In '18, '19, we had introduced 2 unique SSP products, which have also been received very well in the market. We sold about 30,000 tons of this product. Excellent response from the farmers. And we will continue to look into SSP not being a commodity, but working with the research and development team and coming up with value-added products for the farmers.
For SSP, we continue to be market leaders, where we beat our share by 1 percentage point.
Sir, in the initial remarks, you gave, I mean, some color on the irrigation projects. So when do we expect, I mean, some of that will expect to start, I mean, those irrigation projects?
So first is Kaleshwaram, which is basically in Telangana. This is first to get Godavari water. The current expectation by the government is around July, August, it should come. We'll have to wait and watch how it comes. The Polavaram project is already there. This again connects Godavari to Krishna and basically gets what -- into what is called Krishna barrage. The government has to build up what is called a canal system, secondary canal systems. We'll have to wait and watch. As you know, there's election on. So depending on government and how that happens after the elections, we'll have to see that. But the collation on project is going full steam.
And Polavaram?
Polavaram, the main canal is ready. They had some initial letups in the main canal, which is connecting to [ rivers ] there the secondary canals, which have to be build up.
The next question is from the line of Ranjit Cirumalla from B&K Securities.
A couple of questions. On the fertilizer front, we have been guiding and attaining the EBITDA per ton and we have been able to put at that and grow that in this particular financial year. First, as it kept to increasing, are we guiding for any number for the next couple of years?
So we are looking around 3,000, 3,200 tons.
So that would be higher than this particular year?
Yes.
And secondly, on the Core Protection side, any particular reason why the plant has been not restarted for it's been almost 3 months now, in the Sarigam unit?
Sorry, down with the...
Sarigam.
Sarigam, the fire which happened was on 25th of Jan. And there was material which is [ line ], so being a hazardous waste, both the liquid and the solid that had to be collected very carefully and disposed of. So to do utmost safety, we actually did that. Now the whole disposal is up and we have now requested a permission to restart the plant. So the government will come and government still will come and have to look at the plant and see what measures have been taken to restart it.
Which will be done by the local pollution board authorities?
Yes. It's [indiscernible] with our pollution board authorities.
And that we expect it to be -- come soon?
As soon as possible. I mean, again, the elections are running so people have been busy with that.
The next question is from the line of Pratik Tholiya from Elara Capital.
Ma'am, you said INR 30 crores of ForEx will be for Q4, right?
Yes, on a mark-to-market. Yes.
Yes. And what will be the ForEx number for full year?
About INR 20-odd crores, if I remember.
INR 20 crores of ForEx gain?
No, on mark-to-market. There will be a forward premium cost, which will be a cost and then mark-to-market is primarily the -- your truing up your exposures to the closing rate.
Okay. And what was the number last year?
I'd like to come back to you on this, Pratik. I don't have the last year number. I think if it's being annual, I can come back to you.
The next question is from the line of [ Ezra Mej ] from Nirmal Bang.
I just had a couple of questions. One is on the capital expenditure details. You've mentioned INR 300 crores for FY '19. So can we have a breakup in terms of how much was spent on phosphoric acid? How much was spent on the crop protection chemicals?
So we have close to INR 100 crores on -- INR 80 crores to INR 100 crores for phos acid plant and about INR 50 crores on crop protection. The balance is maintenance CapEx across the plants including crop protection and fertilizers, fertilizer SSP.
Yes. And what is the total project cost for phosphoric acid?
INR 280 crores.
INR 280 crores. So you're going to spend another INR 150 crores. So all get capitalized next year?
Yes.
And whatever CapEx are indicated for the non-phosphoric acid projects next year, that will also get capitalized by March 2020?
Most of it should get. There could be a couple of projects, which can have spillover.
Just one last question. You had mentioned that the Mancozeb capacity expansion was completed in the third quarter. So when do you expect that additional capacity to start contributing to revenues?
The diesel capacity has been created at Dahej. As soon as we have the Sarigam plant up and running, both the plants together will bring in the total capacity. We can start it from the day when we start Sarigam.
WDG has been set.
Yes. In addition to that, we also put a WDG formulation plant at Dahej.
Sir, right now, only the 35,000 capacity is in operation for Mancozeb. Is that correct?
Correct. The Dahej facility is in operation.
Okay. Okay. And just final -- one final thought. In terms of your longer-term target for the CPC business, can we expect the share of formulations to go up to that extent where we possibly see higher margins? So is that assessment correct?
Yes. We are looking at more growing the formulation business.
The next question is from the line of [ Ayesh Bateria ] from Equitas.
Sir, on new plant, on your bilevel multipurpose plan for CPC, so that will also commission this year, next year itself or will it take time?
I think that will be in 2021. We will start the work in '19, '20. Some part of the facility will get completed. Our multipurpose plant, hopefully, will be early part of 2021.
Okay. And sir, I wanted to talk about the biopesticides division. So this contributed INR 167 crores this year, right?
Yes.
So what are our plans and how do we -- what kind of growth do we see in the biopesticides division going ahead?
We are looking at double-digit growth on the biopesticide business as well. So the focus is to see how we could maximize our reach in the export market and also use our distribution network and the retail channels for the domestic market.
Okay. So currently, we don't need any additional CapEx on the biopesticides division to scale up?
We have actually spent some CapEx in the year '18, '19 for the extraction capabilities, extraction capacity.
Okay. So at current capacity, what kind of maximum revenues can we achieve?
I think we can look into another 20%, 30%. And we have to look into additional extraction capacity after that.
Okay. Right. And last thing, so ammonia prices, you mentioned currently at around 299, right?
Yes.
We will take the last question from the line of Resham Jain from DSP Mutual Fund.
Resham Jain here from DSP. So I just wanted to understand what has happened this year. Do that -- whatever execution has happened, substantial account [ actually ] has gone into inventory. So just wanted to understand, on FY '20 basis, how does the cash flow situation will look like because your inventory will get -- I assume they get normalized. And in addition to that, you may have this old subsidy claim also will proceed. So just how are you looking at the cash flow situation for FY '20?
Cash flow situation should improve based on the working capital improvements. As you rightly said, inventory normalizing, and hopefully, we get the subsidy claims on time from the government. It should be positive in the coming year.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Yes, thanks. I think, overall, given the situation and the market, I think it has been a very resilient performance from across the businesses. And we hope this thing to continue in '19/'20, the expectation firstly of a near-normal monsoon. And also all the initiatives that the company has taken towards brand building to increase our customer connect. So we -- and that's how we look forward to growing the business with the phosphoric acid plant also coming up. That will also help us in terms of increasing our supply of phos acid so that we are less dependent on acid from getting imported. And overall, the focus on crop protections will also be to continue to grow the new generation and the combination molecules, which our scientists are advancing and continue to grow that business also. We're also very happy to see some of the changes, which have happened in our other businesses like what is called specialized nutrition, which is growing at a very fast pace. And we continue to do well on that, given the fact that the country, the [indiscernible] irrigation is increasing and you will [indiscernible] and there we have unique grades. Same thing applies for our organic business. One strategic move which we have done is to combine our Single Super Phosphate business with our fertilizer business so that we can have greater access to the markets, both in South of -- east of India but also to tap in north and west of India. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.