Deepak Fertilisers and Petrochemicals Corp Ltd
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Deepak Fertilisers and Petrochemicals Corp Ltd
Earnings Call Analysis
Q1-2025 Analysis
Deepak Fertilisers and Petrochemicals Corp Ltd
Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL) demonstrated impressive financial growth in Q1 FY '25, with EBITDA margins rising significantly from 12% to 20.4%. The company reported a net profit increase of 76% year-on-year, reaching INR 200 crores. Operating revenue surged to INR 2,281 crores, indicating a solid year-on-year revenue growth, which is bolstered by positive demand trends and improved pricing, especially in the Mining Chemicals business.
The Mining Chemicals sector reported a remarkable 23% increase in sales volumes year-over-year, fueled by heightened demand in sectors like coal mining and steel production. This resulted in a 19% revenue growth for this segment. However, the Industrial Chemicals segment faced challenges, with nitric acid volumes declining by 12% due to extended maintenance of the Taloja plant and lower demand from a temporary shutdown of a customer plant. In the Crop Nutrition segment, despite a delayed monsoon, sales volumes of bulk fertilizers grew by 11% year-on-year.
The company recently completed a strategic restructuring, resulting in a formalized demerger of its business segments into three separate entities. This includes one for chemicals, another for crop nutrition and fertilizers, and the third for technical ammonium nitrate mining chemicals. This move aligns with DFPCL's goal of transitioning from a commodity player to a provider of specialized holistic solutions, enhancing strategic focus and operational efficiency, while fostering potential investments from global players.
In terms of capital expenditures, DFPCL plans to invest approximately INR 1,500 crores across its projects this year, specifically in the Gopalpur and Dahej facilities. The Gopalpur plant is expected to start production in H2 FY '26, targeting initial capacity utilization of 70% to 80%. The company has also expressed optimism about the ongoing expansion of its Technical Ammonium Nitrate capacity, which should further enhance revenue streams as demand keeps rising.
Looking forward, the company anticipates strong growth driven by supportive economic indicators linked to the Indian government's expansion efforts in agriculture and infrastructure. Moreover, the partnership with the Israeli-based Haifa Group for high-performance specialty fertilizers is expected to bolster DFPCL's market position. The company remains well aligned with the overall Indian growth story and expects its holistic solutions model will deliver higher margins in the long run.
Despite the overall positive outlook, DFPCL is facing challenges, particularly concerning the volatility in ammonia prices. The management highlighted that prices have seen fluctuations, which could impact profitability in the near future. However, they expect improvements based on market trends. The company aims for long-term stability, projecting that normalized ammonia prices would enable a healthy EBIT margin for the chemicals and fertilizer segments.
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Ladies and gentlemen, good day, and welcome to Deepak Fertilisers And Petrochemicals Corporation Limited Q1 FY '25 Earnings Conference Call hosted by IIFL Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you, Lea. Good afternoon, everyone, and thank you for joining us on Deepak Fertilisers and Petrochemicals Q1 FY '25 Earnings Conference Call. From the company we have with us Mr. Sailesh Mehta, Chairman and Managing Director; Mr. DeepaK Rastogi, President and Chief Financial Officer; Mr. Tarun Sinha, President, Technical Ammonium Nitrate; [ Mr. Saran ], vice President, Corporate Finance; and Mr. Pallavi Bhalla, Head, Investor Relations.
We would like to begin the call with a brief opening remarks from the management, following which we will have the forum -- open forum, an interactive Q&A session.
I would now like to invite Mr. Sailesh Mehta to make the initial remarks. Thank you, and over to you, sir.
Thank you, Ranjit. Is my voice clear?
Yes sir, it is. All good.
So a very warm welcome to all of you for this earnings call. Our earnings presentation and press release have been updated on the company's website as well as the stock exchange. And I do hope you've had a chance to review it.
So at the outset, I'm very happy to share that DFPCL has delivered a good performance in Q1 FY '25. Our EBITDA margins climbed from around 12% to an impressive 20.4%. And the net profit increased by 76% year-on-year and have now notched up to 200 crores. I'm also happy to share the positive impacts emerging from the recently announced Union budget. From a larger perspective, the finance industries continued strong support on the fertilizer subsidies. The growing outlay for the agriculture sector, the strong support to infrastructure. All of them will go to provide a strong and positive tailwinds to all our business segments.
At the micro level, the duty hike on ammonium nitrate and the duty reductions on the precious metals that go for fabricating the catalyst for all our nitric acid plants, both will being small but direct benefits. Further, I'm also pleased to share that NCLT Mumbai has now formally approved the demerger plans, now paving the way of unwinding each business into a separate corporate entity. So the chemical business will be housed in one entity, the Crop Nutrition Fertilizer business in another one and the Technical Ammonium Nitrate Mining Chemicals in the third.
Now with this strategic restructuring, this aligns very well with our vision of evolving from a commodity player to one that provides specialized holistic solutions. This restructuring will also help the businesses to focus on the specific business strategy, specific market leadership, technology and operational excellence right from the board level, to the junior most office levels.Each business will now be sharply positioned in advancement of the respective transformational journey. The restructuring will also open doors for strategic global investors. Focus on specific businesses to join us. And besides that, it will also further improve the specific business visibility for the investors in general.
Now turning to our business performance. In case of Mining Chemicals, Technical Ammonium Nitrate, the Mining Chemicals business showed a robust growth, resulting in a 23% increase in the Technical Ammonium Nitrate sales volume year-on-year. This growth is supported by improved prices and increased demand in key end sectors such as coal mining, steel production. And about showed around 11% growth.
Also, in our journey to provide holistic mining solutions. It is continuing, and there we have now established some segment-specific case studies with very impactful results. So we are getting more and more confident that we will be able to provide a very strong value proposition. The robust performance of the [ TAN ] business once again validates the beautiful alignment of our mining chemicals with the India growth story.
As far as the industrial chemicals goal, the business delivered lower volumes in nitric acid due to an extended repair job at our Taloja Nitric Acid plant and also partly due to reduced demand from the downstream industry following a temporary shutdown of the [ GNC's ] TDI plant, leading to an oversupply of their asset in the market. But as you would have guessed, both are short-lived negatives.
IPA volumes were a little lower due to a plant shutdown. So that was as per plants. Having said that, our specialty products in the chemical segment, Industrial Chemicals segment, including the [ pharma grid IP ] and the [ stranded steel ] grid nitric acid continue to grow based on the positive customer feedback as regards their value propositions.
When it comes to the Crop Nutrition Fertilizer business, the business delivered 11% year-on-year increase in sales of manufactured bulk fertilizers, whereas sales of specialty products like [ Ben cells ] have surged by 51% over last year. During the quarter, the business launch [ crop tech ] grade for soybean and [ smarter grid ] for [ Paddy and pulses ], taking us forward in our crop-specific nutrient journey.
Further, the positive outlook is bolstered by a very good monsoon as you can all see. And so also our new partnership strategic alliance that we have with the Israel-based Global Leaders, [ Haifa ] Group for high-performance specialty fertilizers. Besides the 3 businesses, our ammonia plant, is also now running fine. It's running at around 98% capacity. And this inclusion of this raw material in our fold has truly inducted a great risk mitigator in our total basket. So when I look at it from a broader perspective, at the fundamental level, there are 3 things that we are seeing now getting more and more validated.
Number one is we continue to benefit in all our business segments due to the excellent alignment with the India growth studies, which are providing very strong tailwinds as the country's GDP also grows. So it's a very natural color of positivity.
The second thing at the fundamental level that we see is that the solid foundation that now is laid, right, from LNG gas to now a world-scale ammonia plant to the building block, nitrate acids, two finished products and strong market shares in each. This gives us a very solid value accretion and risk mitigation basket. So this is a second.
And the third is our relentless pursuit from a commodity product player to a specialty holistic solution play, riding on the foundation is also expected to deliver towards higher margins, particularly in view of the customized branded and volatility, insulated business profile that is gradually emerging in the next few years.
So in a nutshell, three things. Beautifully aligned India growth story. Number two, solid value chain; and number three, move from commodity to holistic solution. All the three promises to change the very face of Deepak Fertilisers in the years to come.
So with this broad overview, I will now hand you over to Mr. Deepak Rastogi, our CFO, who will provide you with more detailed insights on the financials and should be able to also address questions and clarifications. Deepak?
Yes. Thank you, Mr. Mehta. Can you hear me clearly loud and clear?
Yes, sir.
Very good. Good afternoon. Ladies and gentlemen, I thank you for joining Deepak Fertilisers and Petrochemicals Corporation Limited Conference Call to discuss the quarter [indiscernible] financial results. During Q1, we reported total operating revenue of INR 2,281 crores with an operating EBITDA of INR 464 crores, which actually saw an improvement of almost 66% from [ INR 281 ] crores on year-on-year basis.
Our operating EBITDA margins were at 20.4%, which actually grew by approximately 8%, 8.23% on a year-on-year basis. The net profit for the quarter is INR 200 crores, which grew by almost 76% versus last year quarter 1. Revenue and operating EBITDA, as you would see, has actually shown consistent increase.
Coming to the performance of our businesses. Mining Chemicals business performed very well, both in terms of revenue as well as volumes. Sales volumes first by almost 23% Y-o-Y due to the improved demand and revenue grew by almost 19% on account of improved realization and obviously, the demand has [indiscernible]. The capacity utilization of our [ TAN ] business was closer to 104% for the quarter.
From an outage perspective, as Mr. Mehta said, the post demerger and the [ PAM ] business would get into a separate entity now. And it will establish itself as a fully integrated technology solution provider for all our customers. As you are aware that the export ban was lifted last financial year. We have already started exports from March 24 onwards, and we will talk about how much exports we did during this quarter as well.
The quarter also witnessed positive trends across key market indicators compared to the high base of Q1 of '24, which is last year. [indiscernible] data published by the Ministry of Commerce and Industry, coal and in steel production actually increased at 11% Y-o-Y. And we expect the demand to remain strong, which is again driven by the coal power and infrastructure sector going forward.
Coming to the Industrial [ Canal ] business, the nitric acid actually grew or rather, it was lower by 12% on account of extended repair job at our [ Calogrand ]. Further, various trials at customers, especially for the steel grade nitric acid have been under, obviously, they are being connected right now. And we expect expansion of volumes from [indiscernible] going forward from here.
IPA volumes are down Y-o-Y based on the planned shutdown, our specialty chemicals, which is [indiscernible] continue to grow and receive positive customer response in this regard. The capacity utilization of our nitric acid plant was closer to 90%. And for the quarter and for the [ IP ] plant, it was closer to almost 78%. The prices of nitric acid continues to be stable [indiscernible] imports have steadily -- has become steady and they have come down. And we expect the pricing improvement in pricing gradually over a period of few quarters. The [ propylene-based IPA ] would continue to perform better as it has performed last year, as the demand and obviously the price perspective, things remain stable or better.
For our Crop Nutrition business during the quarter despite delayed monsoon, [indiscernible] last quarter, which is Q4 of last year had been not so great. The water tables have actually come down. In spite of the delayed monsoon this year as well because we are 2 months, there was hardly any rain. Higher inventory of prospective fertilizers the sales of [ bulk ] fertilizers sales volume, I think grew 11% on Y-o-Y basis. Sales of specialty fertilizers saw an increase of [ 51% ] and specialty traded fertilizers actually grew by almost 30% Y-o-Y.
[ Bulk ] fertilized manufacturing capacity utilization was closer to 67% during the quarter. We have also launched [indiscernible] as well as smarter grade [indiscernible] plant. As the rains are predicted above normal this year, we are expecting a good [indiscernible] season as well as growth volume -- growth in volumes in the coming quarters. The partnership with [ Haifa ] will help us to promote the high-performance specialty fertilizers, which we have been talking about.
Performance Chemicals Limited, which actually houses of ammonia plant. Ammonia plant has -- as you know, we basically started this plant last year in Q2 has capital capacity utilization at around 98%. And out of the total production, around 86% was for captive consumption and around 14% for the merchant sales. As we have been telling all our investor communities that the backward integration is actually helping us and will help us to reduce. To enable us to retain the margins within the group.
So this year, at least this quarter we saw [indiscernible] prices coming down for which [indiscernible] what actually got to the other businesses within the [indiscernible] downstream industry. The same we have done it in the past, we have seen it, and we have seen it again.
The outlook is that [indiscernible] pricing. The FOB ammonia pricing is expected to improve and actually started all be improving. With the available capacity across all the plants, we are well positioned to navigate through challenges and capitalize on the group of opportunities. With this, I would like to open the floor for questions and answers. Over to you, [indiscernible].
We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Jainam Ghelani from [ Swan ] Investments. Please go ahead, sir.
Good evening, sir, and thank you for the opportunity and congrats on great sort of numbers if you look on the year-on-year basis. But sir, I just want to understand on the [ TAN ] business, now since we are already operating at the rated capacity about 104%. So can you help us understand the demand supply dynamics in the TAN business and what will be general operating performance in terms of the EBITDA that we will be making only from the...
So are you suggesting how would you be improving our [ PLO ] growth for TAN business? Is what your question is?
Yes.
So we currently have a capacity of around [ 540,000 tonnes ] right now, we are actually expanding additionally 50,000 tonnes, which will come upstream by the end of September. So obviously, the capacity would go up. We are seeking for getting our new plant study in Gopalpur with a capacity up to [ 76,000 ] tonnes. You can see around 400,000 tonnes, which would cope upstream sometimes to next year.
So we actually are looking for [indiscernible] going forward. I would also say that we generally are we generally fleet close to almost 50% to 60% of the marketplace, and we will continue to do that.
[indiscernible] operating performance, how much will be contributed from [indiscernible] EBITDA that we reported in the current quarter, what would be the contribution from the [indiscernible].
So we would basically and I will have to see the numbers effectively. But purely from a TAM perspective, I would say close to almost 50%, 55% or predominantly come from, but I will just confirm those numbers to you.
When we take 50% is try to assume that the EBITDA [indiscernible] per tonne, right?
That is your up to you, but you are very close for sure.
Sir, secondly, in the nitrogen in the IP, we have seen the lower volume because of the [indiscernible] and maintenance shutdown. Is the facility back in operation or probably lower volumes or [indiscernible] in Q2 as well.
So your question is for IP [indiscernible]
IP and Nitrate. In terms of [indiscernible] there was a certain -- there was a lower volume.
So IP, I can tell you that the reason why we have good obviously, runway on IP is that there are 2 things. First of all, obviously, we continue to supply the pharma [indiscernible] grade of IP, that's number one, which goes into the pharma category, and we have continuously been seeking CDSO approval to make sure that our chemicals are actually are IP use. That is number one.
Second thing is on the other side, the IP is manufactured as a [indiscernible] which is like from Mexico. And given that the prices [indiscernible] has been quite low and healthy with the pricing. It doesn't make sense for them to really sell it a pricing which is not conducive. And the reason is that the actually go into a predominantly into automotive as well as construction industry, and most of the consumption happens in China. [indiscernible] local industry has not been doing well and hence see those pricing continues to be [indiscernible] right now.
On a long-term basis, rather [indiscernible] also on a short to midterm basis, this trend will continue to go the way it is right now. So we continue to be quite -- we are expecting that demand would continue for the next at least a couple of quarters maybe a couple of years as well.
So our capital in IP will continue to remain the range of [ 80%, 85% ]. It won't go beyond above that, right?
I think last quarter, we did more than 100%. We will basically reach 100% given that we had a plant shutdown and hence, we have this situation. But we will be able clock out almost 90% and 100% only going forward.
Sir, in terms of nitrate, extended refer out [indiscernible] in the Taloja. The facility up and running in month of June or the repair is still going on?
So that was a short time operation. It was -- it got repaired within the quarter only, but it had an impact.
Because this quarter, I think we'll see capacity ramping up for nitrate as well.
Yes, right.
Contribution in the overall revenue from the ammonia. And then the current realization, what would be the EBITDA per tonne that we will be making on the ammonia line?
So from an EBITDA perspective, given that the ammonia prices have been quite subdued the end of this quarter. Obviously, I will have to get the numbers exactly how much per tonne will be. But predominantly, it was quite less achieved for this quarter. Because overall ammonia prices have been different quite far. But from an external sales perspective, whatever we sell to third party, those have been quite encouraging because it actually fell over on premium of the ammonia pricing, which generally -- is we generally have a benchmark at [ FBM ] pricing. And it was trading at several sales are from a premium perspective. So we gain something out of that.
And just help us understand what will be our cost of product in ammonia [indiscernible] pricing will depend. But at what level we will be breakeven in the ammonia?
So we have been answering this question. We will basically provide you offline [indiscernible]
Sure, sir. That's all from my side. I'll come back in the queue to come further questions. Thank you and all the best.
The next question is from the line of [ Patt Kutak ] from [ Plus 91 ] Asset Management.
Firstly, I would like to congratulate you and your team for a decent set of numbers. Sir, my first question is on the expansion project and capacity utilization. So just want to take an update with the ongoing expansion at Gopalpur, for TAN and Dahej for nitrate acid. Can you provide an update on the expected time lines for these projects? Are we in line on what we committed before? And additionally, what are the anticipated capacity utilization from the new facilities upon completion? Can they be ramped up once they are commissioned straight away? Or how would the capacity ramp-up happen?
So thank you so much for your compliment. First [indiscernible] to answer you. We are looking to start the production sometimes in H2 for financial year '26. That is number one.
Regarding your question on the capacity utilization, it takes -- because these are very big plans, it takes a few months to ramp up fully, but we expect to start ramping up between 70% to 80%. In initial, which will eventually ramp up to around 90% to 100%. Like even if you were to see our ammonia plant we basically started. We started with maybe 70% or 80%, and now we are running at 98% [indiscernible] would actually further improve from where we are right now.
Sir. That is helpful. Secondly, I would like to understand the impact of ammonia price volatility. As you have rightly mentioned, probably the additional EBIT that we make for ammonia would be negligent.
And if like we have been guiding if ammonia continues to trade at about $400 or $450, which is the long-term average of ammonia. And again, from more of an accounting perspective, the way we are reporting our numbers, would it be fair to assume then we would be showing an EBIT margin of about 40% on our chemicals business and about 15% plus on our fertilizer business, especially when we are not showing an habit for ammonia separately?
No. So currently, if I were to see, you are talking about the margins? or are we are talking about the volumes?
Margins, sir. Margins.
So we will have to do that math overall. But we don't do the math how much including Ammonia excluding ammonia because business as a business. But I can only tell you that like last year also, we saw when we started the plant ammonia rises were close to around $250 [indiscernible]. This quarter, we -- the average was close to around 290 [ BME ]. So but it actually ramped quickly ramped up to almost 430, 440 in the last quarter. And we expect that to happen anytime soon in this as well. So overall, I don't think so that a quarter is [indiscernible] a click of how the year is going to pan out. So I just wanted to put that to rest.
Perfect, sir. No, probably just for my better understanding, we've posted an EBITDA of about INR 450 crores which would translate, again, we are not talking about numbers per se, just from an understanding of how the business would pan out after ammonia prices normalize. So INR 430 crores, so INR 1,800 crores to INR 2,000 crores of EBITDA. And on top of that, there is a potential to probably due a [ 1,000 ] crores of EBITDA savings coming from ammonia price normalization. Is that the right way to look at it?
I think you are double, I think some of the things some of the benefits which the businesses have got, they may not be able to thrive similar benefits [indiscernible] than the ammonia prices goes up, right?
So there will be definitely some portion of EBITDA would get enhanced or expanded, but not 100% of that. It will be a jackpot if we do it. But I don't think so that is anyway, that is not we are expecting at all.
Perfect, sir, that is absolutely helpful. Now I understand clearly to squeeze in a last question [indiscernible].
[indiscernible] May we request you that you return to the question queue for a follow-up question as there are several participants waiting for their turn.
Okay, sure. I'll join back the question queue.
Thank you very much. The next question is from the line of [ Deepak Mandan ] from [ Avina ] Investments.
Am I audible?
Yes, sir, your audible.
I have two sets of questions. One is pertaining to the TAN business. So we are doing CapEx for the Gopalpur plant, but I believe 6 months back, can you just give me what is the export percentage of our TAN business antidomestic?
So Gopalpur exports, there was 0 export 6 months back because the TAN only got lifted sometimes in October. By the time the ordinance actually came, it took some time for us to receive and things like that. So actual exports started only last quarter. [indiscernible] the last quarter of the last financial year, which is [ '23, '24 ].
And so we started that now from this quarter actually the business is start looking at very, very aggressively all the exports to be done.
The reason why I'm asking this is because coal and [indiscernible] have signed [ JV ] for setting up 2,000 tonnes per day ammonia nitrate plant. So obviously, there will also be, by the time ready be somewhere around the time we commission Gopalpur plant.
So would that not lead us with an excess supply in the market? And wouldn't it be -- wouldn't it impact on our revenue and also on our profits?
So we are not expecting the plant which you are referring would be ready by then for sure. Obviously, they have a plan, but the -- they have not suggested when they will start how much would be the case. So both things are there. As part of the declaration, we are aware of it, but there are no time lines that when they will do it.
Now coming to your question whether we will have an excess capacity going forward. So I can tell you that currently, almost 25% to 30% of the demand actually is fed by imports today as we speak, every year-on-year basis. And we have to see how much of the new capacity is coming in. But on the contrary, given the emphasis on mining as well as infrastucture activities, these sectors are going to grow at a CAGR, if not more 10% at least -- at least 8%. So that would, again, maybe 5, 6 years, it will actually improve dramatically.
So we are not expecting long-term any capacities which are basically idle, but there would be a few quarters when the business is not doing well maybe there could be some surprise capacity. But what would happen is that we would expect lower imports compared to what we see today. If at all older plants are cost competitive because one of the things which you should also understand is that under the plants are cost competitive, it doesn't make sense for anybody to actually even consume because if they can get similar materials from outside at a much more cost-effective price. And we don't know how the cost input pan out to be for them.
Okay. And the second question was on Mahadhan. So you had filed and earlier and circular with the exchange stating that the demand for the commission appeal has been discussed by them. Can you provide an update on that? Is there any new set of things that has happened post that?
So we basically feel that we have a very strong place and whatever PRO demands which the commissioner of income tax has actually -- we continue to obviously [indiscernible] that at the various levels. And we will go to the highest level because we think we have a very strong case to the [indiscernible].
So is currently the case at the [ ITT ] level or is that leased to high court?
That is correct. It is by [indiscernible].
[Operator Instructions] The next question is from the line of [ Vivek Chiraria ] an Individual Investor. Please go ahead.
You've given all the details in [indiscernible]. I just wanted to get a broad to 3-year outlook. I'm not asking for a guidance. I mean Q1 FY '25, we've done an EBITDA of close to INR 450 crores. So they had an annual net of close to [indiscernible] [ INR 800 ] crores. Is it possible for the group as well to aspire for so up to [ INR 3,000 ] crores [indiscernible] in the next 3 years? I'm not asking for any near-term guidance sir or anything. Just wanted to understand what the vision for the next 2 to 3 years.
So you are asking me to answer the question. So unfortunately, I cannot really answer you exactly. But obviously, the year looks good. That's all I can tell you.
The next question is from the line of [ Adarsh Jain ] an Individual Investor.
Can you hear me? Hello?
Yes, sir, we can hear you.
So my question is related to demerger. So basically, we have got the demerger approval and we wanted to know the people who are already holding shares of Deepak Fertilisers they get the shares of the new entity, which is a Deepak Mining Solution and by when it can be completed?
So the demerger happened, which is the subsidiary of Deepak fertilizers, and it is called the [ Matlare ] Tech Limited, which is an unlisted company currently. It used to house the CMB business, which is our fertilizer business and also the technical ammonium which is the Mining Chemicals business. Now the Mining Chemicals business is getting carved out into a new legal entity and its many Deepak Mining Solutions limited. So that is the impact. And hence, there is no impact on the existing share of the fertilizers.
Okay. So what you said is -- I mean, the Chairman in his opening remarks, he said that any investor who was to invest in particularly in one business can come and invest in the business they want to invest, right? So basically, what I want to understand is, i.e., bought shares of Deepak Fertilisers because of [ 10 ] business, because of the ammonia plant. Now if somebody else comes and give the share then -- I mean will it be getting the value and looking to my shares?
So the answer is yes because we would continue to look for technology partners as well as strategic investors to grow those businesses. Whether it is the Fertilizer business or whether it is Technical Ammonia Nitrate business. So whatever growth which we see automatically will show up in the holding company. So that is how [indiscernible] benefit all the shareholders indirectly, but not the way that any shares would get allocated [indiscernible].
So the person who will come new we'll be able to get the shares. And the existing shareholders will get the benefit only of being a holding company, not the individual company?
No. But I don't think so that we may give a shareholding. It depends upon what kind of -- we would get it -- if it is a technology one, obviously, it is -- because it is the risk and rewards which carry for any investment [indiscernible] that perspective. And hence, those are the discussions would happen [indiscernible] comes in and [indiscernible]. I don't think so that we are able to comment anything at this point in time.
Okay. But I think you say, I mean, as a shareholder, I can make you request that you should keep in mind people who have been investing in your company for the past few years because of the [ 10 ] business or the ammonia business. They should also get something out of it. I mean being a holding company, I mean, if I had known this before that not getting any shares of after demerger, I mean we should do something for them who are existing shareholders, and they should also get the shares of the when you plan to, I mean, divest the stake or maybe if you give the shares to any investor based on technology value investment or whatever investment you are seeing or are there any company [indiscernible].
We hear you, and we will see what can be done. But we -- I don't think so that we can discuss this right now [indiscernible] has been taken so far.
I can make you request that please keep this point in line. Thank you very much.
Sure.
The next question is from line of [ Sanjana ] from [ SWC ].
I have a question about ammonia plant, the new ammonia plant, what is the capacity utilization right now for the ammonia production?
It is closer to 98%.
98. And we expect it to remain at like is this the optimum level? Or what is the maximum synergy?
So we can actually go even more than 100%. But definitely, it will go to 100%, but we are looking to even utilize it more than 100%.
Okay. Okay. And sir, how much [indiscernible] ammonia requirements for all our lines together? How much do we require today?
So we have a capacity of closely around 500,000 tonnes. Almost, as I said, [ 86% ] is actually captive consumption with 85%, 86% will be mostly capital consumption, balance will be tough for outside. So we would still have some capacity left for us to use it for captive.
Okay. So we still are using almost 85% growth into captive and we have around [ 55% ] that we can sell outside? Is that it?
Yes, that is correct.
Okay. Okay. Okay. And so the expansions are done after the channel expansion and the nitrate expansion, how much of our ammonia requirement we win, will we be fully sufficient then? Or you still deploy something from outside?
No. So in that case, we will have to really buy from outside given that the locational [indiscernible] we may have some capacity [indiscernible]. But the logistic costs would not rather prohibit to transfer the material from here to [indiscernible] hence we would prefer possibly, and we will have to see the cost benefit. But the way it stands today is that we may have to buy locally at Gopalpur.
Okay. Okay. Sir, one last question on the mining possibilities. So we had a plan for filing of the service part of the mining subsidiary that we were helping us company and providing end-to-end services to reduce costs on mining of anything. So is there any scale-up happening on that front?
So as you -- as we speak, there are a huge amount of projects which are currently undertaken by the group. And we would continue to scale up. And you would also realize is that these are the services which do not exist today. We are actually creating the market for it. So have been telling our investors is that we will -- definitely, we are very aggressive expanding it, but it is -- it will take some time before we get there. And this will become a material until the time it becomes a material part of the business. So we are still a few quarters or a few years away from where we should be right now.
Okay. Okay. So that's full time for that. Okay. So that's [indiscernible].
Next question is from the line of [ Sam Dangi ] from [ Unify ] Investment Management.
Thanks and congratulations for the good set of numbers. Mr. Mehta, I just want to check on the [ 10 ]. Last year, we have seen a lot of import of the rationale [indiscernible]. Can you throw some light, what's happening over there today? Is there any antidumping due to be imposed or that's an import has been reduced? How do we see that going forward?
So last year, we got a lot of -- it is not [ 10 ] actually, it is again, we set [indiscernible] got imported. And as I said, that almost 25% of that requirements, domestic requirements, 25%, 30%, sometimes it may be lower also. It is actually imported. Last year, what has happened is that all the imports scale direct in restaurant Russia only. That is number one.
Second thing is that generally, we are seeing around [ 325,000 ] to 375,000 tonnes per annum. Last year, what happened is that almost 400,000 tonnes actually came in a span of 2 quarters or maybe 2.5 quarters. And hence, it created an aberration short-term operation. Currently, obviously, the imports continue, but obviously, it is slightly more restricted. We are not seeing that kind of that kind of volumes coming together. And obviously, all the companies have represented for the antidumping, but obviously, the government has to take its own call.
But so far, there are no antidumping duties. But in the new budget, as you would have read is that the beauty has actually been increased for importing ammonium nitrate. So 2.5% of the beauty has gone up, which could actually be part of -- it would create some kind of a different for the importer, but we'll have to see. And similarly, I'm sure that the government should take some more steps to be able to at least give some competitive advantage to the domestic manufacturers as well.
Okay. And secondly, on the -- since our capacity is coming on stream next year, next financial year, additional capacity on the [ 10 ]. How the overall industry scenario looks like any other guys are doing any expansion? And how we are any of the largest player in India. So how the competitive scene looks like after 1, 1.5 years down the line?
So we know that RCF and -- sorry, [ Chambal ] is actually coming up with some kind of new capacity. As I have been telling that they have actually announced that it is an ammonium nitrate capacity which we are bringing in. But they are also manufacturing fertilizers. So we'll have to really see where their facilities will get utilized. Assuming it is for ammonium nitrate only the current capacity, as I said that there are import to obviously new capacities would still would come in and still there would be some -- obviously, room for imports. So we don't see much of a mismatch, but at a few quarters here and there, it could be [indiscernible] the demand goes down obviously, there could be some volumes here and there. But on a long-term basis, we are not looking for any kind of a supply gap for this nitrate.
Okay. And lastly, if I may...
Hello?
The next question is from the line of [ Bhavesh Shah ] an Individual Investor.
I wanted to ask that what was there any [ GST ] benefit in the ammonia project recorded in this quarter?
Yes. We have actually -- so we have the core -- do you mean to say the incentive.
Correct.
Incentives for the ammonia plant. So last year, as you know, that we have actually got in Q4 around INR 89 crores. For this quarter, we have done closer to almost [ INR 35 ] crores. We have booked it which is prorated for the year. We expect similar -- if the volume, obviously, if the prices goes up, it may be even higher in the future quarters.
So the accounting will be consistent, right, for this quarter-over-quarter?
Yes, yes.
Thank you very much. The next question is from the line of from [ Shabash ] from [ Value ] Investments. Please go ahead.
The next question is from the line of Jainam Ghelani from [ Swan ] Investments.
I just had two questions. The first one was how -- is there any planning for debt reduction this year? And how would you be dividing our debt post the demerger within the 3 companies?
So continuously say, we always continue to reduce debt. But there are projects which are there, which would again require new for funding those projects. So whether it is Gopalpur, whether it is Dahej. So overall, even though we may be reducing it, but overall, the debt portion may go up because the new debts are coming in for the new projects. And it should peak out sometime next year. And then we would start at least because there will be no new that we would come in for the project for now. And hence, we would start seeing some reductions there on.
So what would be the peak debt level?
So it depends how we see it. But more or less, it should be between INR 5,000, INR 5,500 to 6,000 is what we think right now, but it can be lower than that as well. Given that if everything comes together, but that's the way we are looking at it. But net, this is a ground that which I'm talking about the net debt will be definitely be lower than that.
When do we expect the demerger process to be completed? And how would we bifurcate the debt within those 3 entities?
So we basically have certain plants which are already there, which are already there in. So let's say, the Gopalpur that will go to the [ TAM ] business. The Dahej project that would go automatically to [ TSTC ]. That's how things are. And the existing that which is there, but based on the projects which it has funded. So it is very, very clear. So why should we start you would file that we would start obviously once we will start if financials now, business-wise, it would actually show up how much that each business or each entity would happen.
Is it fair to assume that at the end of last financial year, we had a debt of [ INR 4,150 ] crores which is a [indiscernible], and this was largely used for our funding of our ammonia plants. So this plus the Gopalpur project, once has completed, is it fair to assume that the majority of the 70 to 80 of the total time will be on the 10, I mean, the chemical business and the remaining will be on the industrial chemical?
So there are existing there for you know past projects because these are long-term debt. And the [indiscernible] tenure is 10 to 12 years. So some of the debt would also come from the previous projects. And hence, it is not -- even though it may be lower, but you rightly say majority of the debt -- new debt would be from -- obviously from the ammonium plant, the Gopalpur plant and obviously then the nitrate acid, which is the Dahej plant.
[indiscernible] how much CapEx you are going to do it this year and next year because both of the facility is going to come on stream in second [indiscernible].
I cannot hear you properly. Please repeat it.
So CapEx spend for FY '25 and '26.
'25 and '26, meaning for the projects you mean to say?
Yes, total CapEx for the project.
So we have said that the Gopalpur project, we are going to incur close to [ INR 3,200 ] crores. As far as Dahej is concerned, we have said we will do around [ INR 32, 000 ] crores.
And I ask them how much we'll be spending in this year and next year?
So we are going to spend close to around INR 700 crores for our Gopalpur project because we have also incurred last year. So overall, we are talking about close to 750 for each of the plants between -- so close to maybe INR 1,500 crores if were put together which we will spend this year.
INR 1,500 crores will be equally divided between Gopalpur and the Dahej?
More or less, yes.
And next year also, it will be [indiscernible] at the same amount?
We'll have to see how much is actually retained, but could be similar here.
Thank you. That's all from my side.
Thank you. The next question is from the line of [ Shabash ] from [ Value ] Investments.
Sir, could you please explain in simple words about your demerger of TAN business? Because the earlier question which was asked by some of the investors I got confused because you said the demerger has happened and the wholly owned subsidiary that is this after split a new company name is Mahadhan, right? And what is the other business that you mentioned? And if this is a wholly owned subsidiary of deeper fertilizers, if at all, this Mahadhan gets listed right in the future, why wouldn't the existing shareholders get shares in Mahadhan. I mean, could you explain [indiscernible] demerger, please?
So first of all, you should go to our corporate presentation or the earnings presentation. We have actually added a flight on the demerger exactly to the question which you are asking. It talks about what is the existing structure and what could -- what will be the new structure, the [indiscernible] one. So once you should look at it, otherwise it may be difficult for me to explain and you would make for further confused. It's better to look at that.
And then if you still have follow-up questions, we will be able to answer to you off-line. As far as -- so as far as your listing of the entities are concerned, we have two unlisted entities, which is one is for Mahadhan, which is an unlisted entity. The other is Deepak Mining Solutions Limited, that is other unlisted entities. There are plans future, but no difficult has been taken so far on the listing part. So whenever that comes in, we will talk at that point in time. And we will also talk about what could be the deal for the existing shareholders. It is difficult for us to comment right now because there are no plans indd.
I completely understand that you cannot explain the complete structure. I am looking at your presentation. So to be more specific, If at all, right? I'm not asking about any deal or the ratio or anything. If at all, this Mahadhan gets lifted in the public space, would Deepak Fertilisers shareholders get the shares of Mahadhan?
So that will be whatever the scheme would be we will basically come out at that point in time. That's what I said. I cannot basically comment today because there is more [indiscernible] which we have taken so far.
But you mentioned that Deepak Fertilisers shareholders are not eligible to get Mahadhan.
Also we levered that there are -- we never said that we will get what shareholder. We possibly said that these companies can grow, which is model as well as Deepak Mining can grow on its own. If they need it, technology support, they needed funding and all they can do their own [indiscernible]. That's the only comment which we have made. Obviously, there are expectations from shareholders, which we cannot answer right now because no decisions have been taken so far.
Okay. I understand that these companies are still under Deepak and they're wholly owned subsidiaries. That's the end right?
Next question is from the line of [ Sam Dangi ] from [ UNFI ] Investment Management.
[indiscernible] my question was answered.
The next question is from the line of [ Adarsh ] an Individual Investor.
My question is already answered. I already have the question.
The next question is from the line of [ Niraj ] an Individual Investor.
I just wanted to know what are the plans? And what is the current situation on mining solution business? And what are the prospects? Who are the current competitors? How is that business shaping up?
This is [ Tarun ] here. I will take your question. Thanks for your question. So as Mr. Deepak Rastogi was mentioning earlier, newly created entity by the name Deepak Mining Solutions Limited, essentially has a very unique value chain for regulatory consumer, which starts from its own ammonia and then goes on to ammonium nitrate. And then we use all of that together with busting technology and different kinds of operational machines to provide mining solutions in the form of productivity improvement in the mines and infrastructure projects of the country. So that's the uniqueness of this model. Self-contained lasting solutions business. And I call it, the Mining Solutions business.
Who is doing it in India today is that the other part of your question, the answer is no one has this kind of a value chain from ammonia to mining solutions as an integrated chain under one umbrella. So that's a uniqueness. And there was a question [indiscernible] In the call in case you heard that, how long will it take to scale it up? We just started this whole thing about 1.5 years ago, solutions model. And now we've created a new profit entity to give it the [indiscernible] that it needs and slowly-slowly, we'll be looking forward to scaling it up by building all those required capabilities.
Do we see this Mining Solutions business 2, 3 years down the line? What kind of a growth percentage tentatively if you can share the -- we can expect in this business?
So there was not -- this was a similar question in one of the previous, I would say, quarterly calls, I'm not sure whether you were there. The answer here is the sky is the limit, to be honest, because the [indiscernible] Indian mining industry and the infrastructure industry. There are 2 main factors which will determine how fast or how slow this can be done in terms of scaling up. One is because it's a new type of business model. Our consumers are actually watching us, how do we bring model in the market. We are working on a number of pilot projects as we speak. So that is factor which will determine what it will look like in the next 2, 3 years, which is from an acceptability point of view.
Second is the speed at which we will be building our own internal capability to convert the market.
Okay. So at the international level, is this kind of a business operational or it's globally, it's a unique one?
So there are very few handful of global companies who actually have this kind of a model operating, not in India, in different -- in other parts of the world, but no one does it in India today.
Right. Thank you. Thank you so much.
Thank you very much. Ladies and gentlemen, that was the last question for today's call. I now hand the conference over to the management for closing comments.
Thank you all for attending quarter 1 financial year '25 Conference Call of Deepak Fertilisers and Petrochemicals Corporation Limited. Thank you again, and good evening to all of you.
On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.