Ladies and gentlemen, good day and welcome to Paradeep Phosphates Q2 FY25 Earnings Call, hosted by Antique Stock Broking. 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 conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.
Thank you. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Paradeep Phosphates. Today we have Mr. Suresh Krishnan, MD and CEO, Mr. Rajeev Nambiar, COO, Mr. Bijoy Kumar Biswal, CFO, Mr. Alok Saxena, Head Corporate Finance and IR, and Mr. Susnato Lahiri, AVP Strategy, IR and ESG. Without further ado, I would like to hand over the call to Mr. Krishnan for opening remarks, post which we will open the floor for Q&A. Thank you. Over to you, Mr. Krishnan.
Thank you, Manish, and good evening, everyone, and welcome to Paradeep Phosphates Limited's Q2 and H1 FY2025 earnings conference call. We have shared our earnings presentation and press release, both available on our website and stock exchanges, and I hope you've had a chance to review the same. Coming to our quarterly update, in Q2 of FY2025, we benefited from favorable conditions including good monsoons, healthy reservoir levels, and robust crop prices. This environment allowed us to achieve positive volume growth across our diverse NPK fertilizer portfolio, including with our climate and soil-friendly new products of nano-fertilizers and triple super phosphate. This performance is a result of our strategic sourcing, backward integration, soil and crop-specific product portfolio, and our robust sales and distribution capabilities across Pan- India.
Coming to the volumes that we've achieved during Q2, our production reached 693,311 metric tons, reflecting a 5% year-on-year increase, while our sales volume totaled 865,286 metric tons, up by 7% year-on-year. We also experienced positive growth in the production of both phosphoric acid and sulfuric acid, which are intermediate products for us. For the first half of 2025, our cumulative production was 1.232 million metric tons, with total sales volume exceeding the production at 1.419 million metric tons. We successfully produced and sold over 10 varieties of NPKs this quarter, showcasing our flexibility to meet diverse market demands. Notably, our newly launched nano-fertilizers and TSP have gained strong traction. The sales volume of Nano DAP and Nano Urea surpassing 600,000 bottles in H1, while the triple super phosphate sales reaching 63,000 metric tons.
Coming to our financials, for the quarter, our PAT, EBITDA, and EBITDA climbed year-on-year by 155%, 146%, and 65%, respectively. Revenue from operations grew by 4.4% year-on-year, reaching INR 3,843 crores. The EBITDA stood at INR 440 crores with a margin of 11.4%. Our profit after tax was INR 227 crores with a margin of 5.9%. For H1, the total income from operations stood at INR 6,221 crores, and the EBITDA was INR 606 crores, yielding a margin of 9.7%. This growth in our quality of earnings is driven by our strategic raw material sourcing, our backward integration play, and an effective operational management, resulting in a 25% reduction in our Net Debt- to-E quity. We ended the quarter with a robust cash generation from operations of INR 1,238 crores.
With the aim to further enhance the quality of earnings, I am pleased to announce that our board has approved a CapEx plan to augment our phosphoric acid capacity from 0.5 to 0.7 million metric tons per annum. This initiative aims to achieve 100% backward integration in our fertilizer production with regard to the phosphatic requirements, reducing our import dependency and boosting our operational capabilities. The expansion is expected to cost approximately INR 250 crores to be funded through a mix of internal accruals and external financing. Looking forward, I'm optimistic about the upcoming Rabi season, which we expect to reflect the strong demand we witnessed during Kharif. We will continue to invest in innovative soil and climate-friendly products like our nano and triple s uper phosphate. We shall continue to leverage our backward integration capabilities and supply relationship as we navigate the current landscape of rising raw material prices.
We will continue to model our growth on strong footings of our ESG journey. All in all, we are well equipped to serve the Indian farmer and soil effectively. I sincerely thank all our stakeholders for their continued support in our journey. I would like to open the floor for questions. Over to you.
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 touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Prashant Biyani from Elara Securities. Please go ahead.
Yeah, thank you for the opportunity and congrats on good set of numbers. Mr. Krishnan, the additional benefit of INR 3,500 on DAP that is there right now, have you recognized INR 3,500 for entire H1?
No. We have only taken for the quantity sold up to INR 3,000 per metric ton, which is what has been disbursed by the government.
Up to INR 3,000?
Yes.
For H2, how do you see the profitability or overall margins on a YoY basis?
As you know, the fertilizer raw material scenario right now is quite volatile. We are seeing a significant price movement in ammonia, for sure. That is something that is being noticed. And the industry is yet to finalize the quarter three prices for phosphoric acid. So I think once we get to see that, we will have a clearer picture in terms of what kind of margins will evolve. But we are quite confident about the volume growth that we are getting to see in the market. I'm sure that the volumes which are coming in terms of our own production will get well absorbed. And we should be very clear that this is a bit of a peak season that we're talking about. So I think the prices will be consistent with what we saw in the last quarter.
If there is, based on the raw material prices, if a correction is required, I think we'll have to review it as they evolve.
Right. And sir, in the wake of rising RM prices, would the government be willing to continue with additional caps of beyond December?
There's no clarity on that right now. I think as the industry, we will try to get to have a dialogue with the government on this subject, for sure. But as you know, I mean, government has been very consistent in terms of how they've handled the subsidy and the NBS. We normally get to see them coming out with numbers twice in a year. That's what we normally see. So let's see how this evolves in terms of what is the kind of spike that we will get and what kind of an impact that it could finally have on the margins.
Sir, we were also hearing that the industry may be allowed to take price hike and gap January onwards. If that's the case, how much price increase would you like to take?
You see, it's important for us to get a decent margin. And as you know that as a trader, you're allowed an 8% PBT margin, as a manufacturer between 10%- 12%. So I'm sure when a price hike is really looked at, the INR 13.50 per bag will get corrected in that time. And just as a pointer for you, today government is offering between INR 150- INR 175 a metric ton as an additional cost for DAP. And if that's something which is withdrawn, at least that would be something that will be factored into the price.
Right.
Yeah, Krishnan, just to add there, I think the storyline has evolved from our traditional DAP. If you look at our product basket, the contribution of DAP actually has reduced quite a bit. It's now 25% of the total product basket. And I think we're looking at even more value-added products like TSP and all, which are variants of DAP, and more value-adding to the soil.
Yeah, certainly. And my question was, next question was on TSP only. So if there can be some guidance on how much are we planning to increase the trading in DAP in the next six months to a year, that will be quite helpful.
Primarily, we know our position is very clear that we are a manufacturer. So trading will only be to fulfill our overall portfolio if we see a demand spike in some of our key markets. Otherwise, as we speak today, we are not planning to really look at any contracting of any DAP between now and the rest of the year.
Sir, TSP I was talking about.
TSP also, whatever that we had to contract for the current season has already been contracted. So we would be doing up to 150,000 tons of TSP during the season.
Should that be the annual run rate next year onwards also, or we would look to increase given the?
TSP as a category is something that we have taken quite seriously, and we will look at the evolving situation, the performance of the product in a broader market, and we will take a call. We are focused on this product, for sure. There's a lot of marketing activity we have taken up, and we are quite clear that we will keep the focus on.
Sure. Lastly, how much is the subsidy received during the quarter, and how much is pending?
This is all our CFO will respond.
In Q2, we have received a subsidy of around INR 2,235 crores, and in H1, we have received around INR 3,172 crores. So that's the subsidy received.
Outstanding is INR 3,172.
That is for the subsidy received in H1. And for the Q2, we have received INR 2,234 crores subsidy received.
How much is the subsidy pending or outstanding?
Subsidy pending is INR 1,700 crores as of 30th September.
Okay. That is from my side. Best wishes and greetings to all.
Thank you. Before we move to the next question, a reminder to the participants to ask questions. You may press star and one. Next question is from the line of Varun Pinto, an individual investor. Please go ahead.
Hello. Am I audible?
Yes, please go ahead.
Yes. Hi, sir. Congratulations on our Q2 results. So one question that I had was the INR 250 crore CapEx that we are going to do. When is that expected to commence production? And would that increase our margins from here?
Yeah. The production is expected in the year 2026, and we should be partially doing the last quarter of the next financial year and fully from the first half of the next financial year, which is 2026-2027. And obviously, the margins will increase because phosphoric acid production, on an average, we have seen about INR 10,000 of increase per ton. And so a INR 200,000 facility would mean that we'll have a higher contribution of INR 200 crores.
Okay. Understood. And sir, I just wanted to know, were there any one-offs in this quarter that are not expected in the further quarters?
Not really. I think it's been a normal quarter, and there are no one-offs either from any side, either from the government or from us. Yeah.
So sir, we expect similar margins to continue even in Q3?
Margins will depend upon the raw material prices that we will have and the kind of production volume that we will get. We are quite confident that we will be able to produce the kind of numbers that we have been producing now on a consistent basis, quarter on quarter. The margin will depend upon the raw material prices. Yeah.
Understood. So you have visibility on the volume side in terms of the margins?
Yes. Yes.
Understood. And sir, the last question from me was, what is the status on the merger? I believe there were some observations from the exchange. So could you give me a rough timeline on when you expect the merger to close?
We are in.
You're in Q4 of FY25?
Yeah. No, primarily, we had some references coming in from BSE, which have been resolved. I primarily think that in the month of November, December, we will have a full clarity in terms of what the timelines will be.
Understood. Okay. That's it from my side. Thank you so much, sir.
Thank you. Next question is from the line of Vishal Darji from RoboCapital. Please go ahead.
Hello, sir. I just wanted to ask that what is the current level of EBITDA per ton? And how do you see that trend going forward?
We have always maintained that an EBITDA, a blended EBITDA for us is about, it'll be in the range of INR 4,500 to INR 5,000 per metric ton. We have achieved a INR 5,000 per metric ton levels during the first half year that we looked at.
Okay. And can you shed some light on the current capacity?
We have basically two locations where we manufacture. At Paradeep, we have a 1.8 million ton capacity based on the product mix that we will have. And at Goa, we have a 0.7 million ton capacity for phosphatic and a 0.4 million ton capacity for urea. So totally, if you look at it, we are based on a product mix that we can look at, we can go up to 3 million tons of fertilizer production.
Okay. Okay. Thank you, sir. That's it from me.
Thank you. Participants, to join the question queue, you may press star and one. Next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead. Mr. Vignesh, your line is unmuted. Please go ahead. Yes, Mr. Vignesh, please go ahead with your question.
Yeah, so yeah, my question is, I want to have more of a micro understanding of what has panned out in this quarter, so basically, I understand all the linkages that we had, the backward integration. All these things were in place for the longest of time. Okay, and then even for backward integration of our phosphoric acid or linkages from our co-promoter for the raw materials, but what has changed in this quarter? Is it because of the newly launched products without mixing our core product or anything? Strategic gains that have occurred that have resulted in striking that EBITDA quarter of INR 5,000 per ton, which we have been targeting for the longest of time.
It's important for you to realize that there were two major initiatives that we are driving. The first initiative was to get our phosphoric acid capacity up from 300,000 tons - 500,000 tons. This capacity fully matured, and we have been able to get the full benefit of manufacturing this over the last three, four months. That benefit is something that is flowing into our system. We today have the entire requirement of phosphoric acid as far as our site in Paradeep is concerned. That's the first one. Second one is we have been stating this all the time that we have been a DAP-heavy company. We continue to be focused on DAP because that's one of our key products.
But we have been diversifying our manufacturing to get more NPKs and NP products coming in outside of DAP and also placing that in the market right across India. And we have been able to get that strategy going well for us today. That is the second important thing that we need to realize. And third is that we have been trying to get a unique product mix for our granulation trains, which are located in West Coast in Goa. And here again, we have been able to get our strategy right. And one thing you must realize is that DAP margins improved because of an additional, even though we did not have a price hike, an additional subsidy was provided by government of INR 3,000 per metric ton, which kind of helped us very clearly.
And the other thing is we have very clearly a good amount of storage facility which is available, which also helps us to manage the rising prices of raw material by procuring in the right manner, both in terms of what we get from North Africa and also the ammonia that we buy from other places. And trading, which we have introduced in terms of working with MOP as a category, getting into nanos, these have started contributing now.
Okay. What would this proportion be for DAP to NPK like a year back? And what is it now? I mean, just to understand how this product mix has resulted in a higher EBITDA. Because there are multiple factors, but a more constant factor would be a change in product mix because if I take INR 3,000 EBITDA per, sorry, INR 3,000 per ton that subsidy has come from government, that might get extended or not get extended, but the product mix is here to stay. So just to get a more better understanding of.
Just to give you a feel, in FY24 Q2, our product mix had 31% of DAP. Whereas when we came to Q2 of FY25, our DAP percentage came down to 25%. So we have been decreasing the DAP intensity of our product mix. And then the reduction in intensity is going more towards 20, which has become our main flagship product, and that has been increasing over a period of time which we have been manufacturing both at the East Coast and West Coast of India.
Okay. Got it. Got it. That's all from my side, and all the best.
Thank you.
Thank you. Before we move to the next question, a reminder to the participants to ask a question. You may press star and one. Next question is from the line of Darshita from Antique Stock Broking. Please go ahead.
Yeah. Hi. Thank you for the opportunity and congratulations on the good set of numbers. I wanted to understand if we have got any benefit during the second quarter from the NPK price hikes that we probably would have taken in the last one to two quarters?
When it comes to price hike, we have made some marginal changes in our pricing in N20. And otherwise, the rest of the products have been priced the same way. So N20 is we have taken some advantage. Yeah.
Okay. And what would your expectation be for the price hikes for the third quarter?
I think it will be known in a week's time. I don't want to speculate on this at this point of time.
Okay. Okay. Got it. My next question is regarding if we, I mean, given that we have announced to expand our phosphoric acid capacity, can we expect an announcement to come in in the next three to six months to expand the granulation capacity as well as the current facility?
Currently, we are only looking at ensuring that the expansion that we're looking at the acid capacity will make sure that we have enough acid available for our West Coast facility, so as a company, we become fully integrated, so we are not looking at increasing our capacity right now.
Okay. But with the implemented two lakh ton, wouldn't we be having more than enough capacity for our Paradeep unit?
We will certainly have surplus in Paradeep, which will go to Goa.
Which will go to Goa. And in your press release, there was a statement with respect to phosphoric plant commercialization happening in early FY26. I think we were expecting that to happen in the second half of FY25, right?
Yeah. We have always maintained that this will be happening in 26, and we are well in course for that. Yeah.
Okay. Okay. Got it. What would our expectation be by FY25 end?
If you look at it today, the way we have progressed, there has been a substantial reduction in our debt. I think the reduction that we have reached as of September, our Net Debt to Equity is 0.82, 0.82. I think we are expecting that these levels should get maintained as we close the year.
Okay.
It will be around INR 3,000 crore, yes.
Nice. And do we expect to close the year with INR 3,000 crore or did we expect to increase?
I think the expectation would be that we kind of maintain these levels or improve these levels, but given that the markets are quite volatile thanks to all the geopolitical situation that we're seeing, I think we'll have to wait and watch. I think we'll have to just take it quarter to quarter. I think we had a substantial amount of cash generation during the quarter two where we generated more than INR 1,200 crores of cash, and we got surplus in terms of money available, and we expect that this surplus money should take us through for quite some time, but I think I would wait both for the formal conclusion of the raw material prices and the way the rest of the season progresses.
Okay. My next question was regarding our volumes that we were looking to sell in the UP market or probably enter the North market. Have you done that in the second quarter? And if you could just give us some number as to how much you've sold in the UP market?
Yeah. Harshdeep Singh here. We'll respond. He's our Chief Commercial Officer.
Yeah. Ma'am, just to share with you, the focus has been to basically serve from the Goa N20 product into the UP market. We have consistently supplied volumes in the Q2 also and Q3 also, which is a big quarter for the UP market. The supplies have been made from Goa. Even Punjab is being stocked from the Goa plant apart from the Paradeep plant. And the interesting thing is the category is growing. The 20-20-0-13 category is growing in the Northern market. So that's what we're driving.
But do we think it's a structural in nature or is it just a cap in availability issue currently?
Both things are important. The DAP, there has been a constraint of availability, but if you look at the overall focus of TPL as an organization, we have been driving the category growth for NPKs, and just to give you a perspective, while industry growth for the NPKs has been in the range of 18%. I'm talking the farmer sales. For Paradeep Phosphates, the farmer sales have grown by almost 35%. That's double the growth in the industry, so that's a conscious thing that we're driving by communicating the benefits of the NPKs or granular nutrition to the farmers, so that's what we're trying to do as a strategy.
Okay. Got it. I just had one last question regarding those sales volume. If you could give us a breakup of Paradeep unit sales and the Goa unit sales thing.
We'll give you the total number of whatever manufactured sales that we've had. That's not an issue. Yeah.
So I'll give you the primary sales. What we have done for H1 is 14.2 lakh metric tons. Out of that, Goa has contributed to 6.6 lakh metric tons and Paradeep is 7.6 lakh metric tons. That includes also part of the traded volumes for both the units.
Excellent from my side. Thank you so much.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Shubro. An individual investor, please go ahead.
Thank you for the opportunity. Sir, so the question regarding the subsidy additional INR 3,500 which the government had announced, had it been revised down to around INR 3,000?
No, they haven't revised anything. They have been paying INR 3,000. Currently, the balance will be paid at the end of December 2024.
Okay. And regarding the part of subsidy for the Q1, so that has been factored in for Q2 financial sales?
Which part? I didn't get your question.
The DAP which had been sold in Q1.
Just 3,000 is available for DAP which was sold to the farmers from 1st of April 2024. So bulk of the sale happened in the second quarter.
Okay, and last year, a lot of the players have been announcing additional capacity as well as backward integration, so is it to do with the reasonable profitability margins of the government, or is there any other discussion as well which you are having with the government?
See, if you look at the phosphatic industry, we haven't seen too much of CapEx in India in general, and at this point of time, out of a total basket of 21 million, which is a market size, close to about 7 million gets imported into India, and we have a substantial amount of import of even phosphoric acids or raw material which gets into India. And so the idea would be that we become self-sufficient in terms of raw material and also the final product, so the whole strategy is to ensure that we do all the intermediate products right, and availability of rock is much easier than availability of phosphoric acid, so given that scenario, we believe that a backward integration to produce phosphoric acid will always be beneficial.
That is from my side. Thank you.
Thank you. Next follow-up question is from the line of Prashant Biyani from Elara Securities. Please go ahead.
Sir, just a question continuing with that of Darshita's regarding the incremental two lakh ton of acid from which you will ship some of the acids to Goa. Based on your production plans, how much of the incremental acid can we ship to Goa plant?
We can ship to the entire country. We are good with five lakh tons as far as Paradeep is concerned.
And these will go through ships?
Yes.
How much would be the freight cost for this?
We are seeing the freight cost, I mean, as you know, is varying from time to time. We see a number which is under $20 per metric ton.
Okay. Thank you, sir. Thank you. That's it from my side.
Thank you. Participants, to answer question, you may press star and one. Ladies and gentlemen, to ask a question, you may press star and one on your touch-tone telephone. As there are no further questions from the participants, I would now like to hand the conference to the management for the closing comments.
Thank you all for joining today. And if you have any further questions, please do connect with our investor relations team, and we'll be happy to assist you. Thank you.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you all for joining us, and you may now disconnect to your.