Ladies and gentlemen, good day and welcome to the Gujarat State Fertilizers & Chemicals Limited Q2 FY 2027 earnings conference call. This call is being hosted by Anurag Services LLP on behalf of GSFC Limited. Representing the management, we have Mr. S. K. Bajpai, Senior Vice President of Finance and Legal and CFO, alongside with other senior executives.
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 the call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. S. K. Bajpai, Senior Vice President of Finance and Legal and CFO of GSFC Limited. Thank you, and over to you, sir.
Okay, thank you. Good afternoon, everyone. Thank you for joining us for Q2 2027 earnings call for Gujarat State Fertilizers & Chemicals Limited. It is always great to connect with all of you and share the key updates that we have from the quarter. I hope you had a chance to review the financial results, media release, and investor presentation available on the stock exchanges and also on our company's website. If we see consolidated financial performance, sales is up by 49% in Q2, YoY basis.
Our PBT and PAT is reduced by 42% and 38% respectively. If we see consolidated H1 number, YoY basis, then we have 55% growth in the sales revenue to INR 8,324 crore. Our PBT and PAT again is down by 26% and 22% respectively. We see quarter-over-quarter, there is an increase of 32% in sales value to INR 4,741 crore.
Our PBT and PAT, it is INR 249 crore and INR 200 crore, that is up by 22% and 26% respectively. The company has delivered its ever highest Q2 and H1 top lines, achieving total sales of INR 4,711 on a standalone basis in quarter two 2026 to 2027, a YoY growth of 50% and INR 8,293 crore in H1 2027, a YoY growth of 56%. In quarter two 2027, the fertilizer segment recorded a 55% YoY growth in sales values, increasing by INR 1,387 crore despite 6% decline in sales volume from 6.08 lakh metric ton to 5.69 lakh metric ton.
The growth was primarily driven by the higher DAP realization, with DAP revenue increasing by INR 1,659 crore, supported by the government's DAP, a special package to compensate for international price variations. However, sharp increases in key raw material costs, particularly sulphur by 327%, natural gas by 62%, significantly impacted margins, compressing EBIT of the fertilizer segment to INR 17 crore only, compared with INR 224 crore in quarter two 2026.
Urea subsidy rates remain subject to revision following finalization of the actual pool gas rate by FICC and GAIL, which has been pending since April 2026. The industrial product segment continued its positive performance in quarter two 2027 also, with sales increased by INR 185 crore, registering a 30% growth over Q2 2026. EBIT improved from INR 54 crore to INR 66 crore. The improvement was supported by better realization across major products in line with the market trends.
Sales of caprolactam and nylons increased by INR 58 crore and INR 60 crore respectively, mainly due to higher realizations, while anone sales increased by INR 36 crore, driven by higher volumes. TGU sales also increased by INR 26 crore, partly offset by an INR 5 crore decline in Melamine sales. The Caprolactam-Benzene spread improved significantly from $512 per metric ton to $849 per metric ton.
Overall, against a backdrop of heightened geopolitical uncertainty and evolving global supply chain dynamics, the company sustained uninterrupted operations and ensured supply continuity during the quarter. While sharp movement in key raw material prices put pressure on profitability, agility in product mix, responsive production planning, and timely pricing actions enabled the company to mitigate the impact and defend core margins across business segments.
We continue to maintain a strong balance sheet with no long-term debt, healthy net worth, and adequate liquidity. As on September 30, 2026, the company had received subsidy dues for P&K fertilizers up to September, and in case of urea, up to October 3rd week, respectively.
The company continues to advance its CapEx plans aligned with its strategic growth roadmap. C-Train modification for 1,200 metric ton per day APS production in place of DAP, as per market requirement at Sikka unit, was commissioned on October 23, 2026. The country will enter the Rabi season with comfortable fertilizer inventory levels, the highest in the past three years, particularly for urea and PK grades, intensifying competitive pressures across the industry.
The subdued southwest monsoon and lower reservoir levels, especially in the southern India, are likely to constrain fertilizer demand. The prevailing price distortion between DAP and NPK fertilizers continues to influence farmers' purchase preferences, adversely affecting NPK offtake. The forthcoming NBS subsidy rates will play a vital role, in particularly mitigating elevated raw material cost and addressing price distortions.
Concurrently, any easing of geopolitical tensions in the Middle East and Europe could soften international raw material prices and provide relief to industry margins. The Caprolactam-Benzene spread is expected to moderate in quarter three, 2027 as regional supply normalizes, potentially impacting margins across the Caprolactam Nylon value chain.
Demand for Melamine and Technical Grade Urea is expected to remain steady, while HX Crystal exports may improve. Amidst subdued domestic demand, other industrial products are projected to maintain steady demand, delivering reliable baseline stability to the segment. I now turn over the call for questions and answers.
Thank you very much. We will now begin with 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. The first question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Yeah. Namaskar. Hope I am audible.
Yeah, yeah. Please go ahead.
Sir, firstly, in terms of the CapEx program. My voice is echoing, sir?
No, I am good. I am good.
Okay.
So you might not hear anything.
Yeah, yeah. In terms of the CapEx program, which was alluded to us during the first con call, that we are contemplating some CapEx at Sikka also and some forward integration. So where are we, sir, in terms of the CapEx schedule, some large chemical complex? You were emphasizing. Yes, sir.
Yeah, as far as CapEx is to be put in the Sikka, we have finalized the PA/SA project at Sikka because phosphoric acid prices and sulphuric acid prices remains very volatile in international market. So, it is better to have our own phosphoric acid production capacity at Sikka so that DAP and other NPK grades of fertilizers can be produced at reasonable cost. So, we have finalized this project at around INR 3,000 crore and awarded the EPC contract very recently. And this will take around 33 months to complete the completion activity, and then the production will start.
And how will the metrics work in terms of the asset turnover, margin profile, and other aspects?
This depends upon at that particular point of time when the production starts, what are the prices in the international level of the PA and sulphur especially, and rock. For the rock, we are going to enter in a long-term contract. While entering into the contract, no contractor is ready to fix the pricing. So, it will prevail as on the particular date where the material is purchased. So, that price will prevail as per the market conditions. But presently, we see that it has a comfortable 20% margin if we go by the PA production route rather than the purchasing of phosphoric acid and sulphuric acid.
There will be margin addition, sir, and our dependence on the RM fluctuation will also go down.
Yeah, yeah. That's correct.
By what percentage, sir, we will be captively consuming it?
It is 50%, actually. Whatever the total requirement for DAP and NPK fertilizers, 50% of the requirement will be met from the captive consumption.
Sir, you mentioned the timeline of completion. Can you come again, sir? What is the timeline of completion?
30 to 33 months.
32, 33 months. Okay. Sir, lastly, in terms of the market conditions are different for market capitalization, but other than that, what kind of value creation exercise can the board envisage going ahead for your investors? What can the entity expect in terms of what will be the value creation exercise, if anything was undertook in terms of buyback or any other activities?
No, actually, whatever money in the project we are putting in, whatever the restrictions in the capacity utilization in Sikka. By putting this facility, we are sure that we will be optimizing the capacity utilization at our Sikka plant. However, as far as buyback and other measures are concerned, still there is no discussion in the board, and at appropriate levels, we will discuss and then come back to you.
Right, sir. Sir, only lastly, this subsidy repayment part, we see closing balance of INR 3,400, and you mentioned about subsidy amount for urea received for October. So, what is now the closing balance? Or how much you have received on account of urea?
No, urea we have received, I think, up to the last third week of October, all the subsidy.
Correct.
There is no much impact on the urea because in the total subsidy bill, if you see the DAP and NPK grade of fertilizers, it carries a lot of amount, no? Because of the high prices of sulphuric acid and ammonia. So, in case of urea, we are comfortable as far as the subsidy is concerned, and it may impact INR 100 crore-INR 200 crore only. But since the regular production is there and excess sales of urea is there, so again, we will create the bills, and it will be on same level.
Okay. You are mentioning that out of the closing balance of 3,400, only 200, 300 is what is attributable to urea. Others are the NPK and the DAP.
Yeah . Yes.
Sir, lastly, sir, on the H2, how do you think currently the H2 will shape up? I think this is very difficult to give any understanding on how the margins and all will shape up in such so much volatility. But taking into account what the metrics which we do our business plan, what should be the understanding for H2?
Yeah, Saket, it is very difficult question, as you rightly say. But yes, if you ask, I will give the optimistic answer. Because
Right.
the subsidy rate what is going to be announced by the government with effect from 1st October to 31st March 2027 for six months, these are the very vital information which will come from the government. Till now, there is no notification published in this regard. However, we have started the production, and we are hopeful that whatever information we are having, if that rate is increased and approved by the Government of India at top level, then there will not be any problem.
Whatever the deficit in the profits we have incurred during the last quarter, this will be compensated in the next quarter. So that I can say. For the next six months, I think it is very good H2 for the company. There is no doubt about it. We are taking certain measures based on the growth strategy suggested by BCG. There is some cost-cutting measures we are already applying at our Sikka plant. That will be fruitful for the H2, I think.
Yeah. What kind of margins or efficiency are you working on, sir? Barring this subsidy aspect also, what kind of incremental margin can we expect because of just of the efficiency which you have just spoken?
No, the subsidy is very important because whatever margins are coming, it is from subsidy. If the subsidy goes out, then there is no margin in any of the fertilizer.
Correct.
Subsidy rates are very important for us, even whatever the current level or whatever the infused level. Until unless we come to know what is the levels of the NPK grades they are giving us, it is very difficult what percentage of margin we will be having. As far as DAP is concerned, you know that it is fully compensated by Government of India by way of advantage-disadvantage regulations.
In DAP, we are getting 4% margin. In urea, hardly there is any margin of around 3%, 4%. NPK grade of fertilizer, only the margins can be determined after receiving the NPK and S grade of subsidy rates effective from 1st of October. Based on that, we will calculate the margin.
No, sir. I was just looking at the efficiency part which you are mentioning that will come into play for H2. Have you quantified the thing? I got your point. The major is the subsidy rate only. Other than that, the operational efficiency, anything to take home or?
Yeah, operational efficiency, whatever, because of the solar power arrangement by the company in place of the costly power purchased from the electricity boards. That will increase as a unit as a whole, not as a particular product. Because whatever DAP, NPK grades or Ammonium Phosphate Sulphate, whatever we are producing at Sikka, it will be distributed among the all products. So it will be difficult how percentage will be impacted. But we can quantify as the amount terms that around INR 20 crore-INR 25 crore per quarter we can gain out of it.
Right, sir. Theek hai, tab. All the best and good luck to the team. I am just listening to other parties.
Thank you, sir. Thank you, Saket. And wish you happy Diwali.
Ji, sir. Namaskar. And namaskar to Nidhi madam also.
Namaskar.
Namaskar, Saket ji.
Yeah.
Thank you. The next question is from the line of Burhanuddin Solanki, an individual investor. Please go ahead.
Hello, am I audible now?
Yeah.
Yes, sir.
This is on device. Yeah, please.
Yes, sir. My first question was on the distribution strategy. What will be our distribution strategy over long term pan-India?
So as far as distribution of fertilizer is concerned, this is decided by the government, urea and other fertilizers. We have hardly any role to play in the distribution thing. Wherever the requirement of the fertilizer is there and it is instructed by Government of India, Movement Division of the Department of Fertilizers, accordingly, we have to supply the materials to the pan-India level.
Okay, sir. About industrial segment?
Industrial segment, whosoever wants to purchase, we sell. But it depends from where the market demand is there. So, we have the regular customers, whoever comes, we sell to pan-India level.
Okay, sir. My second question is on, can you tell your views on the sustainability of the industrial segment growth at 20%?
Industrial segment performed very well this quarter. Around 30% sales growth is there, and EBITDA is also increased. Now the chemical sector, as far as the input of fertilizer is there, whatever increase is there, the chemical sector has also the pain due to this geopolitical situation. And the pricing of the chemical is also increased.
Wherever we have the margin by using our own captive consumption of the raw materials and the product mix, then we have a better margin, in fact, in the chemical side, because there is no control in the MRP or something like that, as in case of the fertilizers. We certainly have a better prospect in the IP segment henceforth also.
Okay, sir. That's it from my side. Thank you.
Sure.
Anyone who wishes to ask a question, press star and one on your touch-tone phone. Anyone who wishes to ask a question, kindly press star and one on your touch-tone telephone. As there are no further questions from the participants, I now hand the conference over to Mr. S.K. Bajpai from GSFC Limited for closing comments.
Yeah, thank you for all participants joining and asking the questions. Happy Diwali to all of our customers and investors. I hope that the next quarter and the H1 of the next financial year will be good for not only for the company, but for all the investors. Thank you for the patient hearing. Thank you.
Thank you. On behalf of GSFC Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.