Welcome everyone, and thank you for joining us on Deepak Nitrite 's Q1 FY 2026 Earnings Conference Call. Today we have with us Mr. Maulik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director of Finance and Group CFO, and Mr. Somsekhar Nanda, CFO of Deepak Nitrite Limited. We will begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin, Mr. Maulik Mehta will share views on the opening performance, operating performance, and the growth plans of the company, followed by Mr. Sanjay Upadhyay, who shall take us through the financial and segmental performance. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.
Hello, good afternoon everybody, and a warm welcome to you on Deepak Nitrite 's Q1 FY 2026 Earnings Conference Call. Our results document was shared with you earlier, and I hope you've had the opportunity to glance through them. I will initiate by briefly taking you through the financial and operational highlights for the first quarter, ended 30th June 2025. Mr. Upadhyay will then present you with a financial overview during the period under review. Following this, we'll open the forum for Q&A. As we begin FY 2026, Deepak Nitrite remains steadfast in navigating the complex global business environment. The past several months have been marked by a confluence of challenges that have significantly affected the industry. Slower than expected recovery in some agrochemical intermediates has stifled growth, while continued oversupply from China has impacted the pricing. These headwinds, coupled with fairly fast-evolving geopolitical complications, have compounded the complexities.
Our strong business fundamentals, underpinned by an import substitution strategy, expansion initiatives, both capacity augmentation as well as new projects, process optimization, and commitment to innovation and sustainability, have provided us some resilience in this dashboard. Despite these challenges, we foresee a pickup in demand trajectory, driven by improving market dynamics, the commissioning of new projects, and expanding product applications. Our focus on accelerated execution, enhanced project product mix, digital transformation, expansion into newer markets, and product variants positions us to capitalize on the evolving landscape. We remain confident that Deepak Nitrite will continue to deliver value while contributing to India's larger vision of self-reliance and sustainable industrial growth. Deepak Nitrite has solidified its position as one of India's leading chemical intermediate producers, recognized globally for responsible manufacturing and a supplier of choice.
Our diverse portfolio serves multiple industries, underpinned by a philosophy of responsible chemistry, emphasizing sustainability, transparency, and ethical business practice. Guided by an experienced leadership and deep technical expertise, we continue to strive towards driving operational excellence and long-term value attrition. Our performance this quarter was sustained by volume growth across our diverse product portfolio, supported by a notable recovery in demand from non-agrochemical applications and also the initial success from certain cost optimization initiatives. In the advanced intermediates segment, although agrochemical intermediates are experiencing subdued local demand, we project a recovery in the upcoming period. The phenolics segment witnessed steady demand with better realization, backed by deposit making and capacity augmentation initiatives. Our focus on cost management continues. We're excited with our pipeline of new products and upcoming projects that are set to contribute to growth in a meaningful way.
In addition, we're actively expanding into newer applications to broaden our market presence and diversify our customer base. For the quarter ended June 30th, 2025, Deepak Nitrite reported a revenue of INR 1,897 crore, mainly driven by steady volumes, improved product mix, and realization gains in phenolics. This came on the backdrop of a challenging external environment. Despite rising pressure in the advanced intermediates segment, consolidated EBITDA stood at INR 197 crore, marking an 11% sequential raise, with margins expanding by about 100 basis points to 10% quarter-on-quarter. This was a result of improved operating leverage from sustained volume and enhanced operational efficiencies from our optimization and process recalibration efforts. EBITDA was at INR 138 crore, up 17% sequentially, demonstrating resilient operational momentum.
These numbers are excluding government incentives that we've received of INR 17 crore in Q1 and INR 161 crore in Q4, which is a sum total of about two years, respectively. The standalone Deepak Nitrite revenue was INR 620 crore, lower by 7% quarter-on-quarter. EBITDA declined to INR 41 crore, primarily due to a delayed offtake of key products in the ag chem intermediate space. However, we anticipate a recovery in the ensuing period. In addition, we're driving targeted initiatives to enhance our competitiveness by adding new customers to our diversification effort and into new geographies. We've seen initial improvements in the market trends in the non-ag chem space. These trends, along with our strong customer relationships, position us well for a sustained recovery. Also, the benefits from backward integration will enhance supply security and cost optimization, even amidst global overcapacity and pricing challenges.
By implementing strategic initiatives, we have successfully expanded our product portfolio, which is expected to generate incremental annualized revenue. This growth will be driven by the commercialization of a new value stream integrated product for the diet and cosmetics segment and the launch of a new product through a long-term co-manufacturing agreement. Overall, these targeted efforts will enhance our market presence, including untapped geographies' opportunities, thereby creating new avenues of sustainable growth. This is, by the way, done with existing assets and negligible investment. While we may have launched these products in the middle of the year, they are going to be tested by customers for stability, and then we will be available to be able to supply commercial volume when the next contractual cycle begins. This is expected to be at the beginning of CY 2026, meaning January.
The phenolic segment delivered a revenue of INR 1,287 crore, marking a sequential degrowth of 6%. Profitability was higher due to various cost optimizations, administered stable sales volume, and improving strength. This was further bolstered by operational efficiencies at the plant. The segment's resilience reinforces the strength of our integrated approach. We're progressing well on key projects that will enhance our backward and forward integration, strengthening our competitive advantage. Our concentrated nitric acid plant is in trial production phase. For the weak nitric acid, commissioning activities are ongoing with the technology partners at site and are expected to be commissioned within this quarter. Commissioning of both of these plants will significantly strengthen Deepak Group 's manufacturing capabilities for all nitration-based products. By scaling up production and enhancing backward integration, we will secure a more reliable and predictable supply chain for our key raw materials.
This will not only boost operational efficiency and reduce reliance on external suppliers, but will also solidify our market leadership as an ammonia to amine supplier and reinforce our commitment to import substitution, ensuring a more resilient foundation for long-term growth. Now, building on our extensive expertise in hydrogenated aromatics and non-aromatics, we have started trial production at our new hydrogenation facility, significantly expanding our group production capacity. This strategic move directly supports the expansion of our product portfolio and better positions us to meet with growing global demand for high-value specialty chemicals. This new facility will not only enhance our operational scale, but also our position as a key player in this critical segment, while integrating well with our already commissioned fluorination assets. Our advanced solvent MIBK, MIBC, and others, and nitration plants are expected to be commissioned in the next quarter.
This move will significantly strengthen our downstream integration, allowing us to capture more value from our existing product lines and reduce our reliance on external suppliers. We are prioritizing resilience by effectively managing resources and adapting our processes to meet with these demands. In the face of market challenges for our core agrochemical products, we've demonstrated operational agility by proactively repurposing our assets. This capture-efficient approach allows us to co-develop and produce alternative, higher-value products in close collaboration with our other customers. This strategy not only diversifies our portfolio, but drives new growth without requiring meaningful CapEx. Our transition to renewable energy is already delivering results. During Q1, we have seen short-term benefits through strategic tie-ups. In order to attain our long-term goal of sourcing 60%- 70% of energy from renewables by FY 2027, we have signed a PPA, which will lead to significant cost savings starting from May 2026.
Overall, this initiative is projected to reduce our CO2 emissions by an estimated 60%- 65%. India's first integrated polycarbonate project aims to produce 165,000 MT of polycarbonate annually. A key part of this strategy is backward and forward integration from propylene, which will be supplied from a feedstock of LPG. The chain of products will include from propylene to phenol and acetone, bisphenol A, and polycarbonate acid. In line with this, the company is also expanding its phenol and acetone capacity to serve as raw materials for bisphenol A, which will also in turn be an intermediate for polycarbonate. We have already entered into the polycarbonate compounding business with an invested asset in Vadodara.
This holistic approach, which leverages existing expertise and the technology license from Trinseo, positions Deepak Nitrite to be a highly integrated producer, reduce India's reliance on imports, and secure a predictable supply chain for its downstream products. Polycarbonates are a highly versatile product range that are used widely in various applications and industries due to very unique properties, including high impact resistance, transparency, heat resistance, and weight. They are used in sectors such as electrical, automobile, medical devices, and now increasingly also in defense and drone manufacturing. This integrated complex is expected to start commercial operations by December 27 . Deepak Nitrite Limited is committed to expanding its integrated product portfolio and deepening market penetration.
With investments of around INR 10,000 crore over the next three years and operations spanning seven manufacturing plants across India, serving more than 50 countries, we're well positioned to deliver long-term value and contribute also to India's self-reliance. To summarize, Q1 has demonstrated challenges and opportunities, which have tested our strategic ability amid global uncertainties. Our focus on import substitution, integration, innovation, and sustainability continues to drive operational performance. We profusely thank our employees, partners, and stakeholders for their continued trust and support as we work towards realizing a vision of creating a stronger, self-reliant, and prosperous India. Potential U.S. tariffs are expected to have a moderate impact on our business, given that our exposure to the U.S. is limited to 2.5% - 3% at a consolidated level. We are taking proactive steps to negate this by expanding into new markets.
Additionally, we're maintaining close communication with our customers and closely monitoring this unpredictable environment. More importantly, this will help increase our exposure to Bharat in line with the BRICS Bharat initiative. Overall, we remain committed to delivering long-term value to our stakeholders through responsible growth, operational excellence, and a sustainable future. Thank you. We look forward to building on the strong foundation in the coming years. With this, I would now like to hand the call over to Mr. Sanjay Upadhyay, who will address the forum and take you through the financial performance and key updates during the period under review.
Thank you, Maulik. Good afternoon, everyone, and thank you for joining this call today. I'll now walk you through the key highlights of the financial readings for the first quarter ended June 30th. In the first quarter of FY 2026, we achieved stable operational performance on a quarter-on-quarter basis. This was predominantly driven by sustained volume, better pricing, and phenolics, as well as core property management initiatives. Despite persistent pricing pressures and softer demand in agrochemical intermediates, our legacy portfolio, as well as phenolics, stayed resilient and maintained volume. As hinted by Maulik, we anticipate demand rebound in agro intermediates in the upcoming quarter. Meanwhile, demand in other end applications like dyes, pigments, detergents, glass, and home personal care, etc. remains steady. Our EBITDA showed marked improvements, benefiting from greater operating leverage due to steady volumes that are followed with ongoing cost control and efficiency measures.
As we advance with giving the strategic steps we have undertaken, we'll accelerate our recovery and enhance profitability in the coming period. A financial overview on the revenue front, our domestic sales totaled INR 1,623 crores in Q1, complemented by export revenue of INR 267 crores. This resulted in a consolidated domestic to export revenue ratio of 86/ 14 for the quarter. In alignment with our import substitution strategy, our team focused on the domestic market, where the stable buffer against geopolitical shocks. This not only insulates us from the external volatility, but also ensures a more consistent demand trajectory and revenue stream, forming a predictable and resilient foundation for our long-term business stability. Consumer revenue declined by 7% quarter- on- quarter to INR 1,897 crores. EBITDA grew by 11% to INR 197 crores compared to INR 178 crores in Q4 FY25, with margin expansion at 10%.
Profit before tax improved by 17%, reaching INR 138 crores. With a positive outlook ahead, we expect performance to improve as demand stabilizes, key projects come online, and cost efficiency initiatives gain further momentum, positioning us for consistent profitability in the period ahead. Total income, EBITDA, and PBT, excluding government incentive amount, is INR 17 crores in Q1 FY and INR 161 crores in Q4 FY 2025, respectively. Segmental performance highlights the advanced intermediate segment delivered revenue of INR 605 crores in Q1 FY 2026, lower by 7% from INR 654 crores in Q4 FY 2025. EBIT stood at INR 35 crore, yielding a margin of 6%. In addition to ongoing recurring sales, these funds impacted due to certain preoperative expenses for projects nearing commissioning as disappeared. Our phenolics business showed a resilience posted at an operational revenue of INR 1,287 crore from INR 1,371 crore in the prior quarter.
In Q4, a decline of EBIT was 6% in the turnover, and EBIT was INR 101 crore, reflecting an operational margin of 8%. Favorable demand situation ensured volume stability as well as better pricing simultaneously. We achieved cost optimization by effectively managing our variable expense. EBIT grew by 29% during the period. Strategic growth and innovation on that front, we continue to advance our long-term growth strategy, which includes launching our new specialty chemical manufacturing facility each year, leveraging our strong R&D capabilities. We are focused on developing differentiated products that will expand our specialty chemical portfolio. The new capacity will enhance our self-reliance on critical raw materials, contribute to margin improvements, and scale up. Our state-of-the-art R&D center near Vadodara, which is expected to commission soon, will play a pivotal role driving innovation-led growth.
Although the quarter presented external headwinds, we remain optimistic about our future progress with a healthy project pipeline, a steadfast commitment to operational excellence, and improving market conditions. Deepak Nitrite is well positioned to achieve sustainable growth and deliver lasting value to our stock shareholders. With that, I will now request Maulik to open forum for questions after the session, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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'll wait for a moment while the question queue is assembled. First question is from the line of Sanjay Srin from IKSA Securities. Please go ahead.
Good afternoon. Thanks for taking my question. First question, agricultural sector is going to help us understand what really, I think, it is lower demand because this sort of thing appears to be largely demand from the communities of the innovators. Part of it is China oversupplies because China still continues to add a lot of capacity. That issue doesn't look like going away very soon. What gives us confidence that we should see a much better recovery going forward?
Okay. Did you have another question also? I can answer them together.
Okay. I'll ask all the questions together. Thanks. Thanks for that. The question on the, you said that volume was steady. That means we did, we had a standalone business, particularly in advanced intermediates. Was the volume sluggish? That means if agrochemical declined, what should be the growth rate for the non-agrochemical segment? Particularly some of our key products like toluene, nitrate, OBA, CHA. How is that growth still evolving? That's number two. Number three, on the value creation and the agrochemical value chain, which was talked about last quarter, is the intent to move up in the value chain. Where are we in the sector and when should we see the benefit of that growing? On the last one, on the new product commission, we will look into that.
Okay. Thank you for the question. I'll answer the first one first. Yes, China has had, you know, it has ramped up its capacity significantly, but most of that capacity that has been ramped up is for the final product, which goes into formulation. We are an intermediate manufacturer. What's important is that we focus on seeing what we can do to optimize our cost structure as well as our escrow and footprint. On both of these, along with our quality, I think we stand out as the best in the world. This has also been given as feedback by customers. The Chinese market is also open to us to supply, albeit at perhaps lower realization if we choose to take it. That choice remains ours, and we will engage with all potential customers, both in India, in Europe, as well as in China, to optimize our customer mix.
That way, we will ensure that we are de-risked from a geographical perspective. These products continue to remain extremely desired in terms of their effectiveness and efficacy at the farm level. That said, we have also worked to see how we can engage with partners and see where we can go downstream to further optimize our value offering. In a couple of the plants, we have made sure that we are able to run multiple products in discrete streams. In these discrete streams, these products, because we're literally in the middle of the year at the moment, what we have worked with the strategic customers for is plant oil and batches, which are roughly about 20 tons or 30 tons in terms of volume, in order to be able to qualify for contractual agreements, which would start with meaningful volume from January onwards.
These are certain steps that we have taken to not only de-risk from X particular product, but also from X particular customer. I think we will see a meaningful improvement because the orders delayed are not orders declined. Meanwhile, we will see what we have to do in order to make our assets multipurpose in campaigns to be able to run along with customer requirements. With your second question, which I'm answering last regarding the volume. Frankly, on the other products which are going more into the dyes and intermediate space, I think there, our volumes are largely intact with, you know, a marginal growth. It's only that, and also, by the way, in our PP, our optical brightness and intermediates. There also, we have seen a growth in line with our deposit making efforts. The agrochemical products have had a temporary blip, as I mentioned.
Some of them, which would be higher margin, have had a deferment of supply from our customers, which we're working to see how to address. All in all, I would say is that the net impact on volume is not substantial, but there has been, of course, a net impact in terms of profitability. We're seeing what we can do to cover that for the rest of the year.
That's perfectly clear and very well put. Thanks very much. I'll prepare for the coming quarter.
Thank you.
Thank you. The next question is from the line of Niravaris Chimudia from Anvil Beltz. Please go ahead.
Yes, thank you for the opportunity and thanks for the detailed presentation. I have two questions. The first is on an investment of close to around INR 220 crore, which we're mentioning in the annual report, to manufacture a key agrochemical intermediate for us, foreign to specialty polymer chemical. If you can share your views here, like is this for a novel agrochemical or is this for the off-breaking product? Some estimates on the market potential and when can we see the full benefit of two increment accruing to us?
Okay. First of all, Nira, thanks for the question. Just to clarify, the investment of INR 220 crore is in its construction phase and expected to be commissioned at some point between the end of January and the middle of March. We're engaging with customers. Just also to highlight that while the primary customer for this would be an agrochemical major for a product which is under patent and our process also would be under, just saying, intellectual property control. The plant is designed in such a way that it doesn't necessarily only have to make that. It will also be able to supply to the cosmetics industry as well as the polymer industry, both of which appreciate the higher quality as well as the considerably reduced carbon footprint that this process will allow us to put on the table.
This technology, as well as this plant, is probably the first and only of its kind, and it leverages two key strengths of the company. The moat is significant.
Got it. Are there any timelines of the launch of this product by the winner innovator? Because probably or possibly in the earlier phase, we'll be displaying some of the samples to them. Once that is launched, the samples could have been dumped from them. Any tentative schedule has been given by the innovator to you in terms of the launch by them?
This product will be supplied as, quote-unquote, "a plant-relevant batch" in quarter three in time for us to be able to engage with them meaningfully for, you know, long-term contracts moving forward. As I also mentioned, the asset will be fungible for us to use in other applications. There also, we are engaging with the customers. There also, we are ensuring that we are using this opportunity to supply small plant-relevant batches for them to test. In some of these applications, there is also, you know, things like stability testing and all of those things. In all of the cases, whether it is for cosmetics, whether it is for advanced polymers, whether it is for agrochemical intermediates, in all the three spaces, the customers have definitely reverted back very, very positively with regards to our industry-leading specifications and purity. On that front, our product is a benchmark.
Now we have to make sure that we are able to supply the products and run them in campaigns as efficiently as possible.
Correct. Just a last verification on how it was given by you. This product which we are going to supply, do you presume that it would be backwardly integrated into the plans, that it would use most of the bouquet of products which we are currently manufacturing? This is a kind of forward integration going to the customers through the bouquet of products we are already having.
You are partially correct. I'll highlight that this plant, the protected IP is the process, not the product. The same plant will be able to make multiple products using a process which will be intellectually protected by Deepak using a common set of strengths. If you change the raw materials from A to B, you're able to make a product which goes into a different application. In most of these cases, there is significant synergy with our core competencies. In two cases, there's significant synergy also with Deepak manufacturing the upstream product. I hope this helps.
Got it. The second question is on the CGM. The Chairman mentioned about projects worth INR 14,000 crore in the pipeline. If I'm not wrong, some turnover figure of INR 14,000 crore was also mentioned on this investment. If I record it correctly, you are undergoing INR 8,500 crore of CapEx plus INR 2,000 crore of CapEx because it's under various stages of commissioning. For the rest of the projects, are the products finalized? What sort of integration would it help with the existing line of products we already have? Thanks so much.
Okay. A couple of points just to highlight. Many of the products that are being, you know, which are in the process of commissioning, whether it is products like MIBC, MIBC, whether it is nitric acid, those are already part of this and they're in various stages of commissioning. There was something that was commissioned a year and a half ago, which is a fluorination asset. There is something which is in the process of being commissioned in this particular quarter that we are referring to, and some more which is being commissioned in Q3, which is in the mechanical completion and pre-commissioning stage. Right. All of these put together, then, over and above this, what we're talking about with regard to INR 8,000 crore of revenue is to keep in mind that when we make phenol, acetone, bisphenol A, these will be largely fed into the manufacturing of polycarbonate.
They will be able to accrue a higher growth rate and an EBITDA percentage. It should be looked at in line with that, that all the investment, when you look at a backward integration, does not result in a top line as high as, you know, if it was just a downstream investment. This builds a significant amount of resilience. You know, we are able to leverage that to create, you know, long-term agreements with our customers. One of those customers, incidentally, also being the company that we are acquiring the license as well as the plant and assets from.
Thank you so much, sir, and wish you all the best.
Thank you so much.
Thank you. The next question is from the line of Abhijit Akiola from Protech Institutional Equities. Please go ahead.
Hi, good afternoon. Thank you so much for taking my question. Just a few updates on some of the sweet projects, if it's possible to share. Based on the nitrate assets, should we expect a benefit to start from the second quarter of this financial year, or will it really start from the third quarter? Could it add something like 200 bps, 300 bps to the advanced intermediates segment margin? Is that a fair estimate to have?
Yes, I think in terms of the margin expectation, you're right. Just to clarify, since we are in the middle of the second quarter, we've already begun trial production and we've already started the commissioning activities for the WNA asset integrated. Both of these will be commissioned and online on stream for the desired capacity by the end of Q2. If we're able to take advantage of some volume as the trial production commences, of course, there will be that benefit which is accrued. Meaningful and consistent benefits will be accrued from the beginning of Q3 onwards at infinitum.
And. On the quote. Sure.
Yes, it will add to EBITDA, maybe about 2%-3 % of what you mentioned. That's right.
Of course, this highlights that while we have been constructing this, we have also invested in expansion of our nitration capabilities across multiple locations. We will be able to consume more of what we make as compared to what we had originally anticipated. Fortunately or unfortunately, whatever you want to call it, our nitration and reduction capacities have been able to come on stream with trial production in one place and commissioned in other places a little bit earlier than the nitric acid plant. The good thing is that a market presence is already established, and we should be able to hit the ground running once these assets are fully commissioned.
Thank you. That is helpful. On the MIBK, MIBC project, you've mentioned 2/8 of typical 20 stakes of the commissioning timeline. Realistically, what sort of capacity utilization percentages could we work with for this financial year and then maybe next financial year?
I think there will be a ramp-up. It's going to be an accelerated ramp-up to assess because not only will we be making MIBK, but we'll be making the downstream of that, MIBC, and a couple of other solvents and mining chemicals as well. The capacity ramp-up will be, you know, for, I think, three or four products all together in line with the MIBK. The answer to that is a little bit challenging. It is going to be an accelerated ramp-up. It is not going to be something that takes a year to do. It's going to be months. We will do it in line with customer approvals because two out of these products also have significant consumption in the cosmetic space where there is a higher price and higher margin expectation. For that, you have a longer lead time for validation.
We've already started production of some of these, or we're starting production within the month to seed market it from another location. We are ensuring that we are able to move forward with this validation before the much larger plant comes into production. Hopefully, this will allow us to accelerate our meaningful supplies to these segments as well. If not, then there will be a couple of months of lag where their validation cycles and stability studies are in the terminal stages of approval.
Understood. Thank you so much. On the polycarbonate compounding facility, which is up and running at present, are there uniform contributions expected for this year in terms of revenues or maybe profits as well?
I think, frankly, what you should look at is not so much for this year. It's more about what we are able to accelerate on over the next year or two years. I mentioned much earlier, this asset, while it will have contribution and revenue, is not expected to be, I mean, it's a strategic investment to fast track our approval cycle. It is to be looked at as if it is a very large-scale pilot project, and it allows us to move forward to a validation cycle. Many of these end applications have validation cycles which are more than 18 months long. We've just started that a few months ago. If you look at 18 months, then you should not look at a meaningful contribution if and when that happens during the year. Certainly, it will be, you simply appreciate it.
It will, you know, allow us to run the polycarbonate resin plant when it is commissioned all the way to 100 without at that time waiting for 18 months of qualification.
Got it. Just to round up on the advanced intermediates segment, obviously, profitability has been weak for the last couple of quarters, but with all these, with the backward integration now coming up, nitric acid plus some new products under contract manufacturing initiatives, is there a, can we expect to sort of get back into double-digit EBIT margins maybe sometime next year or so? Is that sort of how we are, can we imagine it?
In fact, if the orders from our strategic customers had not been delayed or deferred, we would have been able to see that even in Q1. The unfortunate truth is that this is a situation that's revealed, despite our best efforts. Yes, I will just highlight that many of these products that we're talking about, like nitric acid, happen to be in Deepak Chem Tech. The droplets as they are will be booked in the company where they're manufactured, and as a group, we will be able to take advantage of that. Deepak Nitrite 's standalone EBITDA percentage should be able to improve steadily over a period of time. From that perspective, I would rather focus on the EBITDA of the group rather than the standalone.
Abhijit, to answer your question, this is a part of AI segment only. AI segment will certainly, certainly show the improved, at a control level.
Sure. I understood that. Thank you. Just last two quick things from me, and I'll get back in the queue. One is on the CapEx budget for this year. Last time, we had mentioned INR 1,500 crores for fiscal 2026. Is that still on track? I guess we need to incur pretty much the entire INR 10,000 crores over by fiscal 2028. The next two years, should we expect the remaining amounts to be spent?
This year it would be in the range of INR 800 -INR 1,000 crore roughly.
That would be fair.
500 crore is already spent. Next year will be a significant amount out of whatever new CapEx is what we have announced. Around INR 2,000 , INR 3,000 . Yeah, around INR 1,000 we already spent. This will be around INR 3,000 and around INR 5,000 and the balance. That's how it will be.
INR 1,000 crore this year and then INR 3,000 crore in 2027 and the balance in 2028. Is that correct?
Yeah, yeah. Some portion goes to the next year also because he won't pay. If you're talking of cash out, I'm mentioning our cash out, not the actual CapEx in the balance sheet. I think there's some, see, cash outflow happens subsequently also post-project completion.
Okay. Got it. I appreciate that.
Projects will be completed by dates what we have given, which is 2028. Cash outflows can happen in the next year also. It will happen because there are some guarantees and warranties and whatever, you know, the creditors and LCs.
Right. Okay. Just one last thing for me on the topic of tariff. I guess we do have a significant exposure to some industries like, say, textiles, for example, or I don't know, maybe even, you know, autos or auto ancillary or something else which are export-oriented and which are believed to possibly face some headwinds from the tariffs from the U.S. Maulik, would appreciate your assessment of, you know, how you're seeing the scenario and what possibly the repercussions could be and how we could mitigate these challenges.
I think, honestly, anything that I say right now, I would look back at it within the next month, month and a half, and probably wish I hadn't said it. One thing is for sure, as a company, as an intermediate manufacturer, we must not only look at first-order impact, but second-order impact as well because our customers and their demand pickup is also dependent on what is going to happen with this. More than that, it is also dependent on how other companies, other countries are dealing with the same geopolitical uncertainty. Generally, what happens during times of uncertainty is, one, most companies will try to see how to de-risk their supply base. Two, they will try to see how to mitigate their costs by conversing with their suppliers to see if some of these can be shared.
Three, there is also an impact which we don't consider of the rupee dollar devaluation. Along with that also is the fact that supply chains are not built overnight. They take a lot of investment and time. Hence, any impact, both positive as well as negative, would be bleeding out over multiple quarters. Just because there is a position and a threat of tariff and an increased tariff at one time does not mean that the sum total of the impact is fixed within the next month or two months. I will definitely say it's a wait-and-watch approach. I will also say that we're not without options. I will also add that our greatest investment is into the country of India itself. As I mentioned in the AGM also, India is the world's largest economy that has a fair balance of supply-led as well as demand-led growth.
That is something that we should harvest and cultivate because that is our true strength and potential. Meanwhile, we are working with our customers also in the U.S. to see how we can ensure that they are de-risked. We will do it without allowing for any significant bleeds from our margins as well as volume. Sorry, I'm not able to give you a much clearer answer. Frankly, you deserve a better answer, but this is not a time when anyone would be able to give you.
Sure. I completely understand that. Thank you so much. I appreciate the responses and wish you all the best.
Thank you so much.
Thank you. The next question is from the line of Prashanth from Omega Portfolio Advisors. Please go ahead.
Yeah, good afternoon. Thank you for the opportunity. My question was more on the BCPL and DPL. Considering the INR 9,000 crore of your CapEx in the polycarbonate and phenol, considering the imports of near to INR 5,000 crore and the adjoining imports like the coffee raisins and other products, what kind of, what's the type of markets you are looking at to fill the gap? Also, the end-user applications are so diverse. Just as a, from the Deepak management, how in terms of market size, what type of market size you are seeing to cater?
Sorry, your voice was not clear. Couldn't hear clearly.
Oh, it is a speaker on somewhere. Hello? Hello.
Yes, Mr. Prashant, please go ahead.
I just wanted to know, like, you are doing INR 9,000 crore CapEx in BCPLs. So considering the polycarbonate resin import, and the end-user markets in the polycarbonate, what sort of market size are you seeing now in order to cater from this PC compounding facility going forward? You are after polycarbonate market size? India?
Yes, sir.
The Indian market size which you are trying to cater going forward?
Four lakh metric tons.
Four lakh metric tons. Okay, sir. And sir, considering the type of the CapEx, what sort of higher IRR and in how many years are you seeing that, you know, the cash flow is contributing positively going forward, like, regarding the whole? See, the payback is around five years, five and a half years.
Within five and a half years, when you face the entire integrated value chain, you know, you cannot be doing it in different phases. It is from ferro to bisphenol F to ferrol. It is the entire CapEx, five and a half years payback.
Around 15% - 18% higher IRR.
And sir, in the phenol business, like, one of the major animals Chem Tech in Germany, it is at about 30% of their capacity is getting shut due to European carbon policy. Any benefit you are seeing from that in the phenol business?
See, ferrol, as your Chairman today morning, we have expanded our capacity even this month. Also, we have reached another peak. We are able to sell the entire volume. That is because of these reasons only. Because India is, we are one of the integrated players. That is one thing.
Secondly, India is consuming this and intermediates in a significant way. The world demands are increasing. We are able to sell the world. That is why we are increasing the capacity when we are supporting the polycarbonate also because we can't let go of the market, you know. You can see the numbers and results that is demonstrating our ability to produce and sell both.
Thank you, sir. One of the players is putting up phenol and acetone capacity in India and also having a plan to enter into BPA. Do you have BPA any competition going forward due to that? Second, sir, considering your capacity of phenol and acetone to cater to the polycarbonate, do you have plans for the merchant sale in phenol, acetone, and BPA going forward?
See, Banyan Labs is in the captive. There is room for one more player also because the way demand is growing, yes. Our additional capacity comes for a captive consumption largely.
Because of phenol BPA, which is also sold in the market, it would be a much smaller share of the total capacity.
Got it. Sir, considering the thumb roll of polypropylene and other things like the 165 KTPA, I think the capacity can be much higher, you know, going forward considering the applications you're working on.
I'm not sure what thumb roll this is.
Yeah, this is today whatever plan we have, this is the capacity we are setting up. I mean, beyond that, today we can't say anything further.
Got it. My question is basically the quantity of polypropylene and the BPA is used and the phenol is used to make polycarbonate. On that front, there is a huge room of expansion in the polycarbonate. On that front, I'm asking post-Calendar year 2027. What sort of markets are you seeing post that?
That's kind of your question. The point is that as growth 2027/2028 works, then we can discuss. There is a time for that; we can't jump to these kinds of discussions now because we are in the process of setting up such a large CapEx project. Beyond that, today we will not be able to answer further expansion on future beyond 2027. That will be.
Yeah. One thing that I can say is that when there is an established plant, which is integrated, with room to grow further, it does not take as tight as a greenfield plant. Also, the investment required to expand is, you know, very, very small compared to, again, a greenfield asset.
Thank you. Sir, my last question is, like, Bayer has a subsidiary in India to cater the polycarbonate, the import resins. After you post out CapEx getting commercialized, do you see yourself as the lowest cost producer in India for polycarbonate?
Bayer is not into polycarbonate. You may be referring to Covestro.
Xovac Pharma, yes, yes.
Because Bayer several years ago, you know, we're going to be working with a lot of different partners in the downstream. You can look at us as co-producers because we will also be getting into compounding. We will also be partnering on compounding with various players, including with SPE.
Okay.
Yes, Bayer, ex-Bayer Covestro does not have manufacturing for polycarbonate in India. It will be the first.
Got it. Sir, you also mentioned in your research advanced intermediate, advanced product subsidiaries that you're working up with the ABS plus polycarbonate blends. I just wanted to understand, are you planning to manufacture ABS or do you have some collaboration with others who are already manufacturing ABS in India?
The second. No, not within India. Not in India. We're talking to everybody right now. ABS is massively oversupplied globally, so there's plenty of options. We have no idea of getting into ABS manufacturing.
For the. Are you planning to manufacture epoxy resins, because it's a INR 3,000 crore market of imports in India?
I won't respond to that. This is something that is being internally evaluated. At the moment, I have no comment for epoxy.
Fair enough, sir. That was really helpful. Thank you. Let's get back in the queue.
Thank you.
Thank you. The next question is from the line of Aditi Loharuka from CD Equi search Limited. Please go ahead.
Sir, I would like to know how are you adapting to rising risks of trade wars?
Whatever adaptation we do, then the trade war looks different in the next week. I think honestly, the best thing that we're able to do to adapt for a trade war is look within, look at our partners, our business partners, suppliers, and customers all over the world. As I mentioned earlier, we are not without options. We're not without relationships. Frankly speaking, as I mentioned, the direct impact that it has on Deepak 's consolidated business is not substantial, but the second-order impact is something that is to be asserted. No clear answer to give you right now, which is worth your time. We are evaluating options and we're engaging with everybody, including the U.S. companies. Let's be clear. Companies, our customers, our suppliers, nobody benefits from a trade war. If someone benefits, it may be a government or someone else.
Customers, which are companies, prefer stability of supply and strategic partnership. We're navigating into this, together, not alone.
Yeah, the situation is unpredictable. I agree. Given the current scenario, what are the options that you have to deal with this?
The options that we are working on are investments for, because these options allow us to cater to investments which are already being planned by the consuming industry within India. When we are investing in something which is going to be made in India using feedstock that is made in India and consumed by customers in India, this is one way that we're working to see how to protect the future of Deepak Nitrite growth trajectory.
How will this impact your CapEx plans?
There's no direct impact to the CapEx plans. The CapEx plans are, as we've already delineated them.
Okay.
It's with regards to cost of material of construction and some such, I don't know. When we are relocating a polycarbonate plant, let's keep in mind that significant assets are already constructed and being packed and brought to India. You don't have to invest in, you know, brand new assets. These are very high-quality assets, extraordinarily well-maintained. Frankly, they were assets that were put up at an expense which today would have been prohibitive in the kind of metallurgy that they have. Let's say that we have assets which we are able to put up, which would have cost considerably more if we were to invest everything all over again in a brand new plant.
What I want to understand is, like, when we're making a CapEx plant, we have in mind that this plant will generate a certain sum of revenue. The major exports are in the U.S. also. I want to know how will this impact your CapEx? As in, do you have any plans of slowing down CapEx if the tariffs are high or anything as such?
We do not have plans to slow down our CapEx because of the tariff war that is ensuing all over the world. Our CapEx plans are very clearly targeted towards supplying our products to Indian customers, with some amount being supplied to our technology partner who will compound it into their applications in Europe.
Okay, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Rohit Nagrath from B&K Securities. Please go ahead.
Thanks for the opportunity. Sir, on MIBC, MIBC, we said that the ramp-up will be relatively faster. In terms of current pricing, what is the optimum level of revenue that we are expecting? What are the EBITDA margins that we are expecting on the downstream products? Thank you.
Give me a minute. Let me just open up that part. When you take current pricing, you know, MIBC and at least MIBK, more than MIBC, the pricing is highly dynamic and volatile. If I look at the last six months and now, it's been extremely, extremely volatile. If I'm just to look at MIBK as a standalone product, I'm looking at a merchant revenue of just about INR 550 crore. Let's see, because like I mentioned, this is very, very dynamic.
Right. In terms of EBITDA margins, any number you want to put to?
Difficult to say right now because it is integrated with the upstream. Just putting it on a standalone basis would not be the right answer. It has to be balanced with CREX from all the way from propylene to acetone to MIBK and MIBC and the other solvents.
Got it. Got it. On the phenolic strength, this quarter, we have been able to increase the volumes. However, the margins have declined materially both on acetone as well as phenol. Was there any element of inventory losses on our raw materials?
I would.
The second part?
Sorry, just to correct you there, I would actually say that it is quite the reverse of that. The margins have improved from what was actually a multi-year low in quarter four.
It's to 11%.
Yeah. It's been a substantial drop. However, in quarter one, I would also highlight that two things have happened. One is we've had our highest ever production, but also our production has been constrained in the same quarter because of the heat wave. Our last highest production was in the coldest month of the year. It is heartening to know that we're capable of making a new high in the hottest month of the year. The kind of heat wave that took place in Gujarat, especially in the H, was unprecedented for the last, I think, 50 years or 70 years. Hopefully, with this learning and this experience as we move through the rest of the year, now hopefully to colder months, we will be able to maintain this high production.
Just to quote correctly, in quarter one, volumes were lower than they could have been despite having such a high peak. The CREX were higher than they were in Q4. As I mentioned, multi-year lows in Q4, and there has been at least some level of an improvement in Q1.
Q1 is better than Q4, Rohit. I don't know how you are saying it is lower because the incentive of INR 161 crore, which we had mentioned, you need to remove from the last quarter. You will know the real EBITDA between Q4 and Q1.
As well as 17 in Q1.
17 in Q1.
Right. Got it. Thanks a lot. Thank you so much.
Okay.
Thank you. The next question is from the line of Tegus Anavade from Asian Market Securities. Please go ahead.
Hi. Good afternoon. Thank you for the opportunity. Three questions from my side. First, you have the CapEx plan, the second MOU, which we had announced of INR 9,000 crore. We also had mentioned about plans of expanding into MMA, PMMA. And Anil, first, you can provide some updates about these products. Secondly, I just wanted to know if you can give us some color on these peak debt levels, which we could see by FY 2028. Thirdly, on the quarterly numbers, adjusting for the government incentive scheme from the segment and revenue of phenolic, you know, removing the government income from the quarter four numbers as well as quarter one. We see there is a sequential decline of 6%.
While in the initial remarks, you did allude to the fact that, you know, on the realization strength, we have seen some improvement as well as the volumes were steady during Q1. What could have led to this 6% decline sequentially adjusting for the government incentive income? That's it from my side. Thank you.
For the MOU of MMTs, whatever we have announced, INR 8,500 crore, that is what the announcement is. We very soon will be coming up with the BPO announcement. Also, prior to our board approves that, of course, they will approve, but the approval is pending today. MMA, we'll come back to you when we decide on that. Today, we have not yet decided. On today, the CapEx plan is around INR 11,000 crore. It's to include BPO also into that, plus whatever we have spent earlier. Okay? That is the plan on that, on CapEx. Second question, peak level and all these things, we will not cross the threshold peak level of 1.5, around peak when we reach the top. That will be left to the project runs and if the price will come back to the normal level of date.
If it can be in the range of, say, INR 7,000, INR 7,500 crore, we have worked out, but it depends on the CapEx, how we are phasing out, what kind of, 30,000 LCs and everything. Roughly, it can be in the range of INR 6,000, INR 7,000, INR 7,500 crore considering INR 11,000 CapEx. What was your third question?
It was on the quarterly segmental performance. If you remove the government incentive income from the Q4 segmental phenolic revenues and the Q1 revenues, there is also a sequential decline of 6%. In the initial remarks, you did highlight that realizations have improved sequentially while the volumes also have been steady. What led to this 6% decline which we are seeing sequentially, excluding the government incentive income?
Yeah. We're talking about revenue?
I'll answer that. I think you may have misunderstood when we said realization. What we were referring to was the bottom line EBITDA. However, when we spoke about revenue, you're correct that there is a 6% sequential degrowth after adjusting for the SUSC benefit. The improvement in the realizations, aka the EBITDA, is because of somewhat of an improvement in the spread as compared to Q4. I hope this clarifies.
Yeah, okay. Thank you so much. That was very helpful.
Sure.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you.
Thank you. Have a great day. Thank you for attending the comment call.
Thank you.
Happy Independence Day. Please, whatever worries there are about global geopolitics, I think this is a good time to remember that this is a young democracy. We've come far, we have a long way to go, and the future is actually within us. Thank you.
Thank you. On behalf of Deepak Nitrite Limited, that concludes this conference. Thank you for joining us, and we will now disconnect the line.