Q3 23/24

Feb 7, 2024

Summary

Subsidy cuts and sticky input costs pressured fertilizer revenue and earnings, while fertilizer volumes grew 14% in 9M. Management expects volume growth and some Q4 input-cost relief, but significant margin recovery depends on subsidy changes.

Ladies and gentlemen, good day, and welcome to Gujarat State Fertilizers & Chemicals Limited Q3 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Halakhandi from Anurag Services LLP. Thank you, and over to you, sir. Thank you. Good afternoon. On behalf of Anurag Services LLP, I welcome the management of Gujarat State Fertilizers & Chemicals Limited for earnings conference call. From the management, we have Mr. V. D. Nanavaty, Executive Director of Finance and CFO, Mr. S. V. Varma, Executive Director Agribusiness, and other senior members from the management. We will begin the call with the opening remarks from the management, after which we will have a question and answer session. Thank you, and over to you, Nanavaty. Good afternoon to all of you, and welcome to the Q3 earnings call of Gujarat State Fertilizers & Chemicals. The results are out, and we have uploaded the presentations and other information, which I hope you must have gone through. As we discussed during the Q2 earnings call, we already had indicated that Q3 margin pressures will be there because of a reduction in subsidy. While the input cost has not reduced, but in fact it has increased. In line with that, and as you might have seen the results of most of the other fertilizer companies, the fertilizer margins were under pressure as well as the volumes were also a little less because of the scattered rainfall and delayed rainfall during the season. GSFC is no exception, and our results also indicate that. It was thought that the government will do something to mitigate the situation by increasing the subsidy. But right now, there is no visibility or clarity on that account. Whatever rates are prevailing, we have to be with that and manage our businesses accordingly. For nine months, the volume increase in fertilizer was about 14%. But overall, we are giving the, and tracking the 10% volume growth in the fertilizer business. So we are reaching around 20 lakh metric tons for the year. But looking to the new plant that has been set up, Ammonium Sulphate IV, recently commissioned in January, we hope that we will be able to sell more volumes next year. So we project a sales volume of 25 lakh tons for FY 2025, which is a 25% rise over the expected FY 2024 volumes. As you might have noted, we continue on the growth path. With the Government of India budget for FY 2025 remaining more or less in line with the FY 2024 budget, there are some reductions in the input cost. Phosphoric acid has come down by $17, and ammonia prices, which were more than $500, are now less than $400. Some relief in Q4 fertilizer operations may be there. Our subsidy, the government has already provided for the supplementary budget of INR 13,000 crores. So subsidy receipt is regular. For urea, we have received a subsidy up to the first week of January, and for phosphatic fertilizer, we received up to the first week of December. Most of you might have known about the recent notification on the reasonability of the P&K fertilizers. The government has clarified that a 12% margin over the cost of production will be taken as a reasonable margin, and beyond which it will be considered as unreasonable and may be marked out. Compared to the earlier notification of 2019, this is a better one, which clarifies that GST will not be part of the revenue of the company. That will be excluded while calculating the profitability. Similarly, they have broadened the scope and the whole fertilizer segment, either as an integrated manufacturer or as an importer or as a manufacturer. All the products will be clubbed together for ascertaining the profitability. That will be good, because earlier there was a kind of pick and choose approach, which was hurting the industry. On industrial products, sir, though we were expecting some reduction in benzene prices due to the crude oil prices going down, it has not stabilized that way and crude is again rising. So the Capro-Benzene spread has been around $700, and we expect it to be like that for the full year. As far as the last year's PAT, Q3 PAT is concerned, you might have noted that last year we adopted the new income tax regime, which helped to reduce the tax burden. So one time factor reduction in the tax rate was given in the Q3 tax. It is not exactly comparable to the current tax. So around say INR 312 PBT of Q3 last year. If we take the current tax rate, it will be around INR 60 crores as a tax impact and adjusted PAT can be said to be around INR 250 crores against the current INR 112. This is the gross scenario. We are expected to clock around INR 9,000 crore turnover this year, and next year revenue figures will be somewhat after our complete budget is finalized. Thank you. Now we can move to question and answer session. Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is on the line of Nirav Jimudia from Annual Research. Please go ahead. Yeah. Good afternoon, sir. Thanks for the opportunity. I have two questions. The first is on the Ammonium Sulphate business. So let us say if we see FY 2023 numbers of our fertilizer business, we did something around INR 1,500 crores of PBIT, which is derived from the segmental results. And our quarterly run rate last year used to be around INR 350 crores to INR 400 crores, which this quarter has fallen to INR 130 crores. Is it because of the fact that Ammonium Sulphate prices have fallen as compared to last year, because of which our profitability is impacted and with the ammonia cost of ours being linked to the gas prices here in India and gas prices being higher, the impact on profitability is mainly because of the fall in Ammonium Sulphate prices, sir? No. The prices are more or less same. Some discount is necessary to meet the competition, but main reason is the reduction in subsidy from October 2023 onwards by Government of India. Okay. We get revenue from two sources, MRP, which is paid by farmer and subsidy which is paid by Government of India. Correct. They substantially reduced all P&K subsidies from October onwards based on the formula they work for subsidy purpose. Correct. The subsidy reduction were anywhere from 30% to more than 50% in different products. That is why it is showing up like this. Otherwise, demand-wise and MRP-wise, there is no difference between last year and this year. MRP has been fairly stable for most of the time because government do not want farmers to suffer. So MRP of most of the fertilizers are kept at the same level. But subsidy has been reduced, so that is the whole problem. Sir, is it possible to quantify the hit which we have taken in Q3 because of the revision in the subsidy rates from October onwards? No. It is not comparable because what if the government decides something, then it is a fact. So subsidy from April is different. Subsidy from, say, October, April to January 2023 was different. October to December 2022 was different. So different period government decide different subsidy. Correct. There is no real comparison as such. Okay. And sir, with this new AS capacity started from January onwards, our capacity for Ammonium Sulphate is now 488,000 tons. Am I correct? One minute. Yes. Okay. Sir, some of the Ammonium Sulphate is also produced as a by-product of caprolactam. How much it would be out of our total production of Ammonium Sulphate? It is difficult to say because production keeps varying. We do not see it that way. We see Ammonium Sulphate as one product and focus on its production and sales. Got it. Sir, second question is on the requirement of Ammonia for both our fertilizer business and the chemical business. If you can just help us explain what is our total requirement of Ammonia, and how much of the Ammonia is made through our own production, and how much we have to buy it from outside. See, our Baroda complex is an integrated complex where we have all grassroots plants. We buy natural gas and then make Ammonia out of it. Almost all requirement of Baroda complex is made out of Ammonia produced by us. The Ammonia production is between 4 lakh to 4.5 lakh tons a year. Okay. At Visakhapatnam we import Ammonia, and sometimes we send it from here also if there is surplus. This is how it is mostly operated. Okay. So some portion of ammonia would also be used for our industrial products also, where I think Yes, definitely. So, sir, if you can just help us explain in terms of our cost of natural gas. Because for the fertilizer, I think we will be getting some allocation from the APM quota. But for the chemical business, I think we have to either have some contracts with GAIL or GSPL there for the purchase of the natural gas. So if you can just walk us through in terms of our total requirement of natural gas at the Baroda complex for ammonia production, and split it between the chemicals and the fertilizer business. You know, almost all ammonia is produced from gas, and so most of the natural gas is used for production of ammonia. Hardly something is used as a fuel. So, now there is nothing like APM gas or anything like that. There is a domestic gas and imported gas, that is RLNG. Correct. The domestic gas production, which is given for Urea, its quantity is very less now. All these wells are dried up. Domestic gas from other sources are used, which are commercially priced. There is no cheap price like what earlier it was there, APM. Okay. Broadly, we require around 16 lakh to 18 lakh tons of gas daily, effective of gas. 70%-75% is used for fertilizer, balance is used for chemicals. Correct. Sir, is it possible to confirm? Only Urea is passed through. For Ammonium Sulphate and APS, there is NBS scheme. What price gas you buy, government is not concerned. Okay. Correct. And sir, is it possible to tell us what was the average gas cost for GSFC in Q3, and what was it in Q2 of FY 2024? Yeah. So as far as, I mean, Q2, Q3, there is hardly any much difference between these prices. So broadly it is in the range of INR 45-INR 50 per SCM cube. That is the Q3 versus Q2 price difference. Got it. PCR gas prices are fairly stable. Yes, sir. Sir, I have a few more questions, but I will join back in the queue. Yeah. Thank you so much. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Shrenik Mehta from a self-independent investor. Please go ahead. Shrenik, may I request you to unmute your line and go with the question, please. Due to no response, we will move on to the next participant. The next question is from the line of Manohar, individual investor. Please go ahead. Hello. Yes, Manohar, go ahead. Yes, sir. Sir, I am having two questions. Regarding green ammonia, whether we are having any plan in near term, sir? Yeah, we are trying to produce some green ammonia. We have taken the 10 megawatt green ammonia project. But right now, the right technology and government clarifications are not available. There is a slow progress in this. Okay, sir. Sir, then whether any bonus or buyback expected, sir? Any expected timeline? The board will take a call on this. As you know, the government GR is there, it will be taken up someday anyway. Okay. Okay, sir. Thank you, sir. All the best. Thank you. Next follow-up is from the line of Shrenik Mehta, a self-investor. Please go ahead. Shrenik, can you hear us now? Yes, sir. Hello. Go ahead. Yes. Now I will be set. Myself Shrenik Mehta from Jamnagar. I am a minority shareholder. Yes. Revenue for this December quarter has reduced by 40%, and profitability has gone down by almost 75%. Can you please throw light why it has gone down so much low? My second question is, last, the government GR is regarding giving 30% by way of dividend of net profit. Last year, we were lucky to get INR 10. How much we can expect dividend for the year ended March 31, 2024, please, sir. As far as the dividend guidelines are concerned, they are still there. 30% profit or 5% of net worth, whichever is higher, that we have to declare. Even though the profit may go down this year, but our net worth because of the past accumulation, it will not go down. I think INR 10 or more dividend can be expected this year. How much is net worth per share of our company? Around INR 7,800 crore last year when we How much? INR 7,800 crore. Yes. Net worth last year when we studied it for the dividend purpose. Yes. It will change because we declare INR 400 crore dividend, so net worth will reduce to that extent. It will increase to the extent of PAT that we have this year. It will be decided by year-end, I mean, in the month of May 2024. Okay. When finalizing our accounts, so final figure will be decided. Roughly can you say how much will be per share? Roughly. No. Dividend, as I said, it will be more or less INR 10 or something more. Okay, fine. Why the revenue and profit has gone down for this quarter? Yeah. As you know, subsidy has been substantially reduced on fertilizer from October 2023 onwards. Yes. While the price of various raw material has not gone down. Government works out subsidy in their own way. Though there is a price rise of raw material, they thought that subsidy should be reduced. Yes. That impacted the profitability and the top line both. Overall, this is the thing that are in our hands, say, volume of fertilizer sale. In nine months period, there is overall 14% rise in fertilizer sales volume. Overall, for full year, we expect that minimum 10% rise in sales volume will be there. Yeah. Whatever is in our hand, we are doing it best. But how government will move on subsidy front, that we cannot predict. Yeah. Shrenik, do you have any follow-up? And sir, what about buyback, sir? That board of directors will take a call at suitable time. Right. Thank you, sir. Thank you very much, sir. Thank you. Thanks for giving me an opportunity to ask questions, sir. Thank you. The next question is from the line of M.S. Swaminathan, self-employed C.F. Please go ahead. Good evening, sir. Good evening. Yes. Please go ahead. I just have a couple of short questions. The first one is, further to whatever you have explained now quite lucidly, actually that as of 9 month end in the current year, our EPS per share is around INR 13.5. Right. Last year, for the 9 month ended 31st December, it was around INR 26. So we are currently at about half of what was our run rate in the previous year. Correct. I understand from you that, yes, because the subsidy has gone down, there is an overall impact in terms of profitability. Correct. My concern is, I also happen to be an investor in GSFC. Yes. My concern is, what would be the year-end impact in terms of EPS? Where can we possibly see our EPS for FY 2024 from 13 and a half now, because last year it was around 31 and a half annualized. Right. We have a short term about INR 18 nearly for the next coming 3 months, January, February, March. Yes. Where can we see this number heading towards? Last year was the highest profit year for GSFC in the history of GSFC. We have been telling the shareholders in this con call that the history will not be repeated every year. It will taper down, and it will normalize over a period of time. If you see all the fertilizer companies last year, they made good profits, but now they are also having difficult times, particularly Q3. Okay. There is no right now visibility about the fertilizer subsidy, whether government will take into consideration this input cost rise from January 2024. Do they give any subsidy division, or will they give it from April as per the usual trend? All those questions are there, but if they do not increase the subsidy then from January 2024 itself, then there are chances this will be also a normal quarter, Q4, and accordingly, this EPS will be there. Difficult to say, but this INR 36 and of course, the INR 31, INR 32 for full year, those levels are difficult to achieve. Fine. But based on the fact that if you, for example, say that it could be a normal year, assuming there will be no subsidy given, can we possibly, based on management estimates, I am sure you will have your own estimates, can we possibly expect it may at least touch INR 20 probably? I am not saying certainly. Will there be chances additional subsidies are granted? Difficult to say. It may not hit INR 20. Okay. Okay, fine. My next question actually is just as a parallel between the other competitors that we have. I just have done some working. These days, I find generally with GNFC or Chambal Fertilizers, FACT, Deepak Fertilizers, the book value and the market price, when we compare, it is generally higher than one. The market price is much higher than the book value. Except in the case of GSFC, where I find that the market price is discounted compared to the book value. The book value, I think as of September, not December, as of September, was around close to 310. Today's market price is around 268. Any comments with respect to this? Can we hope to see our market value also, price will also shoot up over the book value like our competitors by March 30? Any idea? Let us hope that, but because the investors see whatever perceived risk of, say, government control and all these things in the PSU and particularly fertilizer sector, they tend to discount, or they tend to feel that whether this will be maintainable or not going forward. Full push to the share price is not coming. But I would say that we are a 60-year-old company, and how long one can keep putting those doubts and these things will be common. Exactly. This has been there consistently year-over-year, and we a number of times, we are saying that there is hardly any government interference in our working. Those doubts are unfounded. But let us hope with this recent price, share price increase, the earlier gap has reduced to some extent. With the company doing what these other shareholders are asking about the implementation of government GR on buyback and split and bonus. Yes. Those kind of steps being taken, I think this gap will be narrowed and may come in line with what other fertilizer companies are having, book value of their share price. Fine. My last question is, did we participate in the GNFC buyback proposal? I am not aware of it. Yes. We participated because we are promoter, and before any filing is done with stock exchanges, the company has to declare whether promoters are participating or not. We participated to the extent of our shareholding. Okay. But as you know, there are some quotas for retail shareholders and all these things. Yeah. Some 5% of the shares were offered for buyback. Okay. Sorry, is it 5% or 25%? Sorry, I did not get you. No, 5% of our holding. Okay. Fine. Thank you. Thank you. Thank you very much. Thanks for the opportunity. Thank you. Thank you. Next follow-up question is from the line of Nirav Jimudia from Annual Research. Please go ahead. Thanks for the opportunity again. One question on the urea. I think what we have been undergoing is an energy consumption drive for our urea plant, which we have shared in the presentation. If you can just walk us through in terms of what is our current energy consumption in Gcal per metric ton, and how much it is now currently being compensated by the government. With this energy saving exercise, how much cost savings could happen to us on an annual basis which could improve our profitability? Government is doing this cost and energy reduction on the overall national interest. It will reduce the carbon content in the atmosphere and then it will make our Urea plant more efficient in terms of cost of production. These broader objectives are being followed by government because as you know, Urea is a complete cost pass-through mechanism for subsidy. Yes. Even when the companies are reducing the Gcal per Gcal consumption of energy, that saving is taken over by the government. It is not kept with the company. As far as if we are meeting these old norms, new norms, that will be to the benefit of government. Correct. Only if we do something more than what the government requires, only saving is kept with the company. But if you just meet the norms, then there is no saving left with you. The H2 conduction, the energy will be paid in form of subsidy. Right. You don't keep anything with you. What is our current consumption of Gcal and how much it is now compensated by the government? Right now it is around 6.5 Gcal per ton. Okay. Government is now insisting for 6.2 Gcal per ton. Okay. So we are already above what is being actually to be- But they provide some relief because this energy consumption is a huge exercise. We will be spending around INR 450 crores for meeting the government norms. Correct. So, sir, is it safe to understand that currently some of the fixed cost absorption, which we need to be aware because of our energy consumption being higher, that is a cost on us and that is actually driving or keeping our profitability down. With this exercise, we will be actually coming below 6.2. So that extra money which is not getting absorbed through the fixed cost would be an additional cost saving for us. There is not much loss because of some slight non-meeting of the consumption norms because they allow companies to complete the CapEx plans to meet those norms. Because as I said, it is a huge. Neither government gives any CapEx support, nor do they want to allow company to keep the saving with them. Correct. So it is a win-win for government in both ways. They allow some time. So there is not much loss that we are incurring for not meeting the norms. Post implementation in February 2025, we will be lower than government mandated norms of 6.2. There will be some savings post, say April 2025. Correct. And sir, out of our total urea production, I think we sell some Technical Grade Urea also which is I think not coming under the purview of the subsidy regime. So if you can walk us through like out of our 450,000 tons of urea production, how much we would be producing Technical Grade Urea? No Technical Grade Urea is not produced from urea plant. Okay. All urea plants are meant for agriculture purpose only. Okay. Government don't allow to use it for Technical Grade Urea. Okay. We have our melamine plant where urea is produced for making it as a Technical Grade Urea. So that flexibility is there which we are using to produce TGU. Right. Sir, is it possible to quantify some numbers and if you can just share the dynamics of that business like is that business profitable or are they meaningfully contributing us in terms of the profitability or some understanding on the same? Yeah. So Technical Grade Urea is used largely in the chemical industries particularly dyes and intermediates. So they were not getting because they cannot import urea because import of urea is to canalizing agency of Government of India. So neither they can import urea for their production, neither they can use any agriculture urea because that is a subsidized urea. Correct. They were finding it very difficult to get urea for dyes and intermediates production. So government understood their issue and allowed some, like GNFC they were already making TGU from many years. So they allowed it that GNFC can sell some quantity as a TGU. And the melamine plant is a chemical plant, so we are not under Department of Fertilizers for making TGU. Okay. They allowed these chemical industries to buy TGU if it is authentically available within India. Okay. That is why now they are able to procure from us, they are able to source from Deepak Fertilizers, and there may be some one or two small like this. Okay. It is sold like a chemical. Technical grade urea is just a name, but it is sold like a chemical to these chemical units. Okay. The sales of that technical grade urea would be categorized under our industrial product business? Yes, definitely. Is it possible to share the turnover of that business, sir? Yeah. Some indication. We sell some 30,000-35,000 tons of TGU every year. Okay. Just like a normal chemical, it is sold at full cost, so between INR 35,000 to INR 40,000 per ton. Last year it was very high because gas prices were very high. Correct. These are the broad quantity and broad price range. Correct. It is profitable at the PBIT level? Yeah. Very much profitable. Correct. Sir, second question is on our Phosphoric Acid and Sulphuric Acid requirement, because I think we have been undergoing a CapEx also for both these capacities. If you can just help us explain what is our current requirement of both Phosphoric Acid and Sulphuric Acid, and post this expansion, how much we would be more integrated in terms of our fertilizer requirement? You see, we are the largest manufacturer of fertilizer having sulfur content. Correct. We are the largest sulfur users in the country in fertilizer segment. Nobody has so much variety of fertilizer which are having sulfur content, like GSFC has. We have sulfur in APS, we have sulfur in Ammonium Sulphate, like that. Correct. In Baroda, as I said, as a grassroots plant, we buy sulfur and make Sulphuric Acid to be used as a fertilizer. Yearly, around 4 lakh-5 lakh tons of Sulphuric Acid is produced by us. Okay. At Sikka, it is a coastal DAP plant, so we buy Sulphuric Acid from outside the market. Now, as you mentioned, we have projects to produce our own Sulphuric Acid at Sikka also. Correct. We will be having a Sulphuric Acid plant of 1,800 metric ton per day at Sikka. Correct. That Sulphuric Acid will be used as a- Okay NPK and this APS fertilizer. This is the raw Sulphuric Acid spectrum of our company. Total, 594,000 tons of Sulphuric Acid would be used for our Sikka plant and nothing would be sold outside, right? Yes. It will be in-house consumption only. Right. And sir, for phosphoric, if you can just walk us through. It is a 600 metric ton per day, 2 lakh metric ton per year phosphoric acid plant. That will help in making DAP and NPK fertilizer in Sikka. For which we will be procuring rock phosphate from India and abroad, and using the Sulphuric Acid from that captive plant being set up along with PA plant. Still, that will not meet our full requirements of phosphoric acid at Sikka, but it will partly help in the regular production there. With 2 lakh ton of phosphoric acid, we can produce more than 4 lakh ton of DAP, and more tons for NPK, if you use it for NPK. That will ensure the supply of phosphoric acid for Sikka unit. It will be much cost-effective as compared to imported phosphoric acid, what we get in India. Right. What is your total requirement currently for our Sikka plant, for phosphoric? Now, we can go up to 10 lakh ton of DAP at Sikka. Okay. If resources, I mean, raw materials are available. Got it. We need around 4.5 to 5 lakh tons of PA there. Correct. This will be only 2 lakh. Correct. Sir, just a last clarification in terms of the Ammonium Sulphate business, which we talked about. What I understood is, let's say, if somebody is importing Ammonium Sulphate, that is not entitled for a subsidy. If, let's say we are producing Ammonium Sulphate, and let's say N rate is being fixed by the government and gas prices go up, that burden falls on us and that can't be recovered through the higher subsidies by the government. Is it correct understanding, sir? If you can just repeat your question. Yes. Subsidy, I mean, for imported, yes, it is not available. Correct. What you explained, just again say. Yeah, I can explain. I can again say that. Let's say, sir, Ammonium Sulphate subsidy rates have been fixed by the government based on the N, because it contains N and sulfur both, nitrogen and sulfur. Right. N is derived from our natural gas through ammonia. Let's say if your natural gas prices goes up, N rates will also go up. There won't be a case where we won't be able to recoup the subsidy element on the Ammonium Sulphate business, and we have to incur the losses just because we have to purchase natural gas at a higher rate. Is it a safe assumption, sir? No. Government don't take into account natural gas price for N. They look at imported urea cost coming to the country, and from there they derive N. The N, that is nitrogen in Ammonium Sulphate and nitrogen in urea, both are different kind of nitrogen. They decide N subsidy based on imported urea, so it has no relation to the gas. It's something natural gas price increases, but imported urea comes cheaper, then we may have impact on Ammonium Sulphate business. Thank you. Neeraj, I'll request you to come back for a follow-up question. Thank you. Next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Yes. Namaskar sir. Namaskar Nidhi ma'am. Namaskar. Yes. Thank you for the opportunity, sir. Nidhi ma'am, we have to honor. Namaskar, Kapoor sir. Yes. Thank you, ma'am. When we look at the other income component of 81 crore, that takes into account the buyback income also that had been excluded? No, buyback is going to the other comprehensive income, OCI. Okay. Because every quarter we provide for fair value of this quoted investment. So whatever price change has happened quarter-over-quarter, everything is captured in OCI. Okay. When we do actual sales, then only OCI gets impacted, not the upper portion. Okay. Sir, what explains this other income component of INR 81 crore? What are the The one what we have put about some INR 34 crore old interest penalties return back. That is the main thing, and other is because of good cash balance, we now earn regular interest income. That is the other major part. Coming to our industrial product segment, sir, I think so there, the negative margins are continuing now on QoQ basis. Taking into account the current market dynamics, what should one sentiment in and what steps are taken to reduce its impact, or is it only the market-driven exercise and we are at the mercy of the market? Yeah, it is a market driven because industrial products are priced at import price parity, and if we don't maintain IPP, then people will import, it's actually available. Then we will have impact on our plants production. Definitely it is market driven. But we are trying to change the customer base. We sell to the small timers who don't have access to the import route easily. They're ready to pay some more price for caprolactam, melamine, et cetera. Then nylon 6, we are trying to tie with OEM, automotive manufacturers, who are ready to pay more price given the right kind of product. We are in touch with them and through our ADC, that is Application Development Center, we are developing the grade that they want in their cars and other vehicles so that we have a continuous order book as well as better profit margin. We also try to source imported chips which are a little bit less costly, particularly from China, and mix it with our nylon 6 chips so that the ultimate products compounding nylon chips, they have less cost impact and we are able to sell more volume. We don't have to depend only on our FTO manufacturing. These are the ways we are trying to get better realization and remain in the market so that cheap imports don't throw us out. Some of the raw materials also, which we are making in-house. We are trying that if we can get it at cheaper rate from imports, then our costing will come down and we need not run those sections of the plant. These efforts we are making to tide over this market uncertainty. And sir, for industrial products, do we have inventories also in our hand and we have to take mark-to-mark revision there? No, we don't have much inventory, but unlike fertilizer, this price changes every month. So you have gain and losses, depending upon the inventory cost you are carrying. Okay. And sir, the exit prices for December for our major chemicals, what have been our trends for January and the current month? How are the price trending for the specific industrial product that we sell, our basket? Ethyl alcohol prices increased, but again, benzene price also rises, so the trade does not improve substantially. In melamine and all, the prices are quite stable. Nylon price, because of the Chinese New Year vacation, there are less imports, so we are able to increase the price in the nylon product. We have to just see the market and behave, but we don't have any demand issue, so that is a good part. Whatever we are producing is being sold off. Just to get the sense, for the month of January, the average selling prices or the losses which we have incurred, in the December quarter, have they narrowed down? Or are you profitable at least for the industrial segment for the first month? Or if you could give some color, because we- There is some improvement in realization and profitability, but we are not out of woods. There will be some losses on overall basis in January. Lastly, sir, on the inventory part, this 92 crore change in inventory that has increased, is attributable to the fertilizer segment only then? Yeah, because this is off-season. Yeah We don't do any advance billing. We do whatever is required by the field. So there will be some inventory during this quarter. But immediately from April onwards, the demand will start and we'll be stocking those things with the dealers and retailers. How should Q4 be shaped up, sir, for the fertilizer segment? Some improvement may be seen because of phosphoric acid price have reduced by $17 and ammonia prices have also reduced from more than $500 to around $400 or less than $400. Some relief may be there in the costing and some improvement in margin, but not any significant improvement is seen unless subsidy is changed. Okay. But as of now, there has been no negative impact. Earlier, the change in subsidy, everything has been passed as on. Yeah. So October onwards, whatever was to be done, government has done. So there is no further negative impact. We are waiting for some positive, if really it happens. Otherwise, it will come from April only. Because, sir, the country will now move into the election mode, maybe a week from now. Right. In that case, sir, do we expect any revision in the subsidy or tinkering with the same? Or what has been historically done, sir? No. Government is quick in reducing the subsidy, but increasing it is difficult. Right. More or less, it will be from April onwards only. Okay. So then we will have a negative impact on the same this quarter also. Because- Yeah. No negative, but whatever has been done from October, that will continue to impact, means reduction in rates. But prices of raw material are trending lower only. That is what- It will be lower compared to October, December quarter. Right. Last point on the power and fuel mix and the employee benefit expense, how are these two line items going to behave? Firstly, for the power and fuel, sir, that has gone up Q1, Q also. Employee cost, what should we- Some increase, some minor difference is there on Q to Q3. But fairly, it is fairly stable. As you know, rupee, dollar exchange rate is also fairly stable, so that impact is also not there much. On the employee and the other expenses, any particular color you would like to- Yeah. As we saw last time, wage revision had been done from 1/1/2023. So that provision has been incorporated in the employee numbers. So, till March 2024, that will keep showing, then it will stabilize. This run rate of INR 175 crore will be there going ahead. Yeah. Overall impact of, you see. Hello? No, it will not be so much. It will be little less. Okay. On the other expenses, what explains this reduction of INR 50 crore? Not exactly 50, 31 and 17. Yes. INR 48 crore reduction QoQ? That is because a lot of employees are retiring also. So we are rationalizing the manpower and reducing the duty points. We do not fill up the post person retired. So all those savings are also coming. So we are aware of the rising employee costs, but trying to compensate less number of employees managing the company. So it will pay over a period of time. Just to get it clear, sir, for other expense going down, it is because of the employees getting retired from the- No. Other expense is definitely not in employee cost. One is, packing expenses lower because of lesser production and lesser dispatch. That was the case. Last year, we had made some provisions for some litigation, so those provisions are not repeated in this quarter. That is the major difference of reduction in other costs. Okay, sir. All the best, sir. Thank you. Thanks. Thank you. Next question is from the line of Shrenik Mehta, Self Investor. Please go ahead. Shrenik, may I request to unmute your line, please. Shrenik, if you can hear us, please unmute your line. Shrenik, if you can hear us, may I request you to unmute your line and go ahead with the question, please. Ladies and gentlemen, we will take that as the last question. I will now hand the conference over to the management for closing comments. Yeah, thank you for the patient hearing and your cooperation during this difficult time. As we assured you in part also, the growth story of GSFC is intact and barring the market forces, whatever best we can do, we are doing it to increase the top line and bottom line. That will be a continuous focus for us. On a medium and long-term basis, we will keep on adding new projects and new product lines so that we march ahead on the, again, top line, bottom line, and no stagnation ever comes in our way. Thank you once again, and we will meet after Q4 results somewhere in May. Thank you. Bye-bye. Thank you very much. On behalf of Gujarat State Fertilizers & Chemicals Limited and Anurag Services LLP, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.