Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you, sir.
Thanks, Darwin. On behalf of ICICI Securities, we welcome you all to Q4 FY23 Results Conference Call of Paradeep Phosphates. We have with us Senior Management represented by Mr. Suresh Krishnan, Managing Director Mr. Alok Saxena, General Manager and Head of Corporate Finance, and Mr. Susnato Lahiri, DGM Strategy Investor Relations and ESG. Now I hand over the call to the management for the initial comments on the quarterly as well as FY23 performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir.
Thank you. Good afternoon, everyone. Thank you for joining us for the Q4 and FY23 Results Conference Call of Paradeep Phosphates. We have uploaded our earnings presentation and press release on our website and on stock exchanges. Hope you've had the chance to go through them. We would begin this call with a brief discussion on our performance and financial results of Q4 and full year FY23, and we would be happy to take any questions after that. Well, fiscal year 2023 has been a landmark year in the history of Paradeep Phosphates. We made a successful debut on the stock exchange in May 2022, and now we are closing our first fiscal year with a new set of operational benchmarks and accomplishments. Well, friends, just to remind you, May 19, 2022, last year was the day when our issue closed, and we were listed on May 27 of 2022.
Coming to the performance highlights, during the quarter, the company has delivered a quarterly revenue of INR 37,136 million, registering a year-on-year growth of 93% led by growth in volumes. Our EBITDA for the quarter stood at INR 1,603 million, registering a year-on-year growth of 36%. Profit after tax for the quarter was INR 100 million. The profitability was softened due to the reduction in the overall subsidy and one-time expense of INR 422 million towards our Goa site, which was paid towards registration of land and certain lease rentals during the quarter. Total fertilizer production during the quarter was 620,884 metric tons, registering a strong year-on-year growth of 124%. We have now fully integrated both our sites at Paradeep and Goa, and we have been able to operate both sites at optimal utilization in Q4 just as in Q3.
In Q4, our Goa site produced 249,000 tons of finished fertilizers, including 121,691 tons of urea and varied rates of NPKs. Our Paradeep site has produced a record 371,441 tons of finished fertilizer and increased a 34% compared to that of the same quarter in the previous year. On an annual basis, the company has delivered a strong top-line performance notwithstanding challenging geopolitical and macroeconomic environment and pressure on raw material prices. In FY23, the company has maintained a strong track record of financial performance, delivering highest-ever annual sales of INR 133,407 million, registering a year-on-year growth of 70%. EBITDA grew by 26% to INR 8,921 million with a profit after tax of INR 3,046 million. The Board of Directors has recommended a dividend of INR 5 per equity share or INR 10 per share for FY23, representing a payout of 5% on the face value and 13% on the EPS of FY23.
Coming to our business update, well, the total production in FY23 was 2.032 million metric tons, registering a year-on-year growth of 63%. Total sales in FY23 was 2.029 million metric tons, registering a 64% year-on-year growth. As you will see, the quantities that were manufactured by us, we had managed to convert them into sold products. During the year, we have strengthened our capacity by 150% to reach a run rate of 3 million tons of finished fertilizers effective December 2022. This includes 1.8 million tons per annum at the Paradeep plant and 1.2 million tons at Goa plant. The remainder of the ongoing captive projects of both captive phosphoric acid along with enhancing the capacity to 500,000 tons at Paradeep site and the installation of the fourth evaporator on track are expected to be completed by the end of Q1 FY24.
These projects will further aid our backward integration and capability leading to higher profitability. Throughout the year, we have successfully produced a wide variety of complex fertilizer grades across both our Paradeep and Goa sites, thereby improving our farmers' choices in their application of soil and crop-specific nutrition. In fact, our Goa site has produced a total of eight varieties of value-added NPKs during FY 2023. Well, during the year, we also embarked upon a sustainability journey by publishing our maiden sustainability report, mapped to global framewo rk, and we encourage you to read the report to gain a deeper understanding of our progress and commitment towards promoting sustainable solutions. Looking forward into FY 2024, we remain focused on our growth, our 1 million ton incremental capacity totaling to 3 million tons, our innovation-led superior manufacturing capabilities, our strong supply-side linkages, and our pan-India market reach across 15+ states in India.
We are optimistic, and we look forward to a transformative next year. Thank you very much. Now I would like to open the floor for Q&A.
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 their touch-tone telephones. 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. Ladies and gentlemen, to ask a question, you may press star and one. The first question is from the line of Aditya Sen from Robo Capital. Please go ahead.
Yeah. Hi. So I'm quite new to this industry. I would like to understand the seasonality impact of the diammonium phosphate and also SSP, if you can give that.
Well, Aditya, as far as the Indian farm sector is concerned, we primarily have two seasons, which is basically the Kharif and Rabi season. Kharif season is the crop that commences during the summertime and which gets over by technically in the month of August. The winter season commences in the month of October and goes on till well into the January, February of the next year. When it comes to seasonality of DAP that you're asking, DAP is a crop which is very, very strong when it comes to a Rabi time, which is in northern India. In northern and central India, we see a large uptake of DAP during this phase. As far as the Kharif is concerned, DAP certainly gets consumed in the central part of India and also in the western parts of the country, including Maharashtra and Karnataka.
This is the main trend as far as DAP is concerned. As for SSP is concerned, it is again a product which is very place-specific, and it has a market which is reasonably round the clock but around the year. But you will obviously see those five to six months of consumption period which is there in the main fertilizer where you would see an uptake on the farmer side.
Which are those five to six months for SSP? From August to December?
Well, exactly. I think when we look at the overall time, the peak consumption in India, the window is actually July to December. I mean, if you look at that as a consumption period right across all fertilizer grades, you would see good uptake happening in the non-urea space.
Okay. Yeah. Understood, sir. Thanks a lot.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one on your touch-tone phones at this time. The next question is from the line of Deepak from R M Shares and Stocks. Please go ahead.
Good evening, sir. Are you? Am I audible?
Yeah. Very much. Very much.
Okay. So recently, there has been a reduction of subsidy. So is there going to be an impact of this on the bottom line for a company? And the second question is, when can we see shareholders' value increase on the bottom line?
Well, the first point is as far as the industry is concerned, looking forward today, I think there has been a reasonably good correction in the raw material prices, which is leading to expansion in margins. So we believe that this margin expansion will come and play out in a positive way. And as you know, these current subsidy announcements which have been made, they are valid till September 30th, 2023. And we are expecting that in the event of any major changes in the raw material prices, that is, if it goes upwards or otherwise, there could well be a further support from the government coming in or a withdrawal which could also happen.
At the same time, there's also a clear indication that there's also a possibility that in the second season, which is the Rabi season, you could even see if the price increase happens in the global market, we could also see a price increase in India. So when it comes to margin expansion, I think this is a year where we are seeing stability. I think for the benefit of everyone, it's very important for us to understand two very clear parameters. One is when you have a cycle where all prices are going up, obviously, that volatility affects the overall performance of the sector in general. What we are seeing now is a trend over the last six, seven months, a reduction in the prices. Over the last year, if you look at it, the marker which is DAP, which is $1,000, has already come below $600.
Whereas the ideal situation that we all look at from the industry perspective is DAP coming down to a level around $450. So there is still a $150 correction which is there in the sector, which one expects that one would get to see during the next six to nine months' time. And once that kind of a scenario builds in, then you have a phase of stability, and the stability both in terms of prices and also profitability. At this juncture, I would like to just highlight that the Government of India has ensured that there is no farm-level inflation, which means that the farmers have been getting the same price for a much longer period, and they have taken quite a bit of the increases to their own books. And that has been the trend so far.
So with the decrease which is happening, we believe that there will be correction from the government of subsidy as and when there is a steep correction in the prices. But the stability will be there, and the profitability will certainly be there in the industry. So you can see that this year looks positive and interesting. Yeah.
Thank you, sir. But what about the bottom line, sir? Bottom line, this year, we can see a better bottom line?
Well, the trends are as for the industry is concerned, given that the raw material prices are going down, there is a positive trend which is emerging, and this trend is going to get consolidated from the month of June onwards because you always have a lag between the global prices and by the time you buy the raw material at those prices. So you're going to be seeing that going forward, certainly from some part of the Q1 but a good bit of Q2 onwards.
All the expenses have been met out, sir, for the different like the one-time expense you were telling about in the earlier time?
Yeah. As far as our acquisition-related BTA is concerned, we have completely closed out. We now have all the approvals. The last quarter, the one-time expenditure that we saw was primarily the final payment of stamp duty for various fixed assets and both mobile and immobile assets that we had acquired and which had to be paid to the government. This was post-valuation done by the local government in Goa.
Thank you, sir.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.
Yeah, sir. Thank you so much. A few related numbers. The other income seems very high this quarter. If you can explain, please, sir.
Yeah. The other income was only certain provisions that we are keeping, which has been taken back, which we have been building over the year itself. That's all. So it was just a provision that we had in our books that we had to get back. Yeah.
Okay. So the provision is related to the previous year or for the current year?
No, current year.
Okay. So part of that amount is in the expenses, and then there's a reversal in the other income?
Yes. Absolutely. Absolutely. Yeah. Yeah.
Okay. Got it. And sir, the overall EBITDA, I mean, looking at this quarter, I'm not including the other income because probably part of that other income is related to the earlier years, earlier quarters. The EBITDA seems a bit low. I believe you have taken the provision for the subsidy cut for the January to March period. Is it possible to share what that number is? And also, does it account for the actual subsidy announcement that the government has done, or there could be further some amount to this or something?
Well, Dhruv, to be frank, you've already seen a reduction in EBITDA which has happened and which is because of the fact that we have provided for it. I would say that we have made an adequate provision as far as the subsidy amounts are concerned.
Okay. So the reduction, kindly adjusting for that INR 40 crores, INR 44 crores of Goa, is all to do with the QQ reduction in EBITDA despite probably almost similar values?
Yeah. On top of that, what happens is under the accounting standards, whenever you buy movable and immovable assets under the business transfer agreement, you can't capitalize those expenses. Normally, when you create an asset as an ongoing project, you could capitalize. But through a BTA under the accounting standard, you had to write it off. So during this year, we had to do provisioning of over INR 80-odd crore. Yeah. INR 50-odd crore in the case of INR 59 crore is the exact amount when it comes to the stamp duties and other related payments.
Sure, sir. So the other thing is you have given this adjusted EBITDA of about INR 3,300 per ton. Now, I believe this is adjusted for the subsidy revisions which the government has done for January to March period and also for the subsequent periods. Now, I'm not trying to extrapolate from this quarter levels, but the volumes are reasonable. You're running at full utilizations. So how do you look at sustainable EBITDA per ton now going ahead?
Well, if you look at the future for us, the first and foremost thing that's happening to us is that we today clearly have 1 million ton of additional volumes available. This is an incremental volume which is available. So that's going to directly play up and support towards increasing our EBITDA. That's the first one. The second important thing for us is the value-added NPKs beyond DAP that is going to be made by us. And this is also going to happen in our Goa site. In fact, the Goa project, the Goa site for us today, from a traditional perspective, what they used to produce and what we're going to be producing right now, the product schemes are very good. We have a number of and the potash is back, which is the other major thing that we're getting to see that this year.
Last year, we could not make a lot of potash-based grades. So that is also back. That is going to make a difference. And the biggest thing is that our fixed cost is not increasing. So given that we are going to be ramping up our capacities to the fullest extent, there is going to be more than a 33% per ton reduction in the fixed cost. So all this is going to look at getting us back into sustainable numbers. And I've always felt this is a cyclical industry where you really get to see margins going up and down based on raw material prices. That's true for anything. But a good guidance here is about I maintain at INR 5,000 as far as a weighted average for the portfolio that we have.
You could certainly have certain products which are much higher than that, but this is the kind of weighted average that you have. This year has been an aberration today because of the way some of the changes have taken place by the government.
Sure, sir. Sure. And the phosphoric acid plant probably is commissioning, you mentioned, in 1QFY 2024. And then you speak this a little bit. Sir, any update on the sulfuric acid plant? I believe we were looking for sulfuric.
Well, Dhruv, it's like this. We have a 1.3 million ton sulfuric capacity already. We are ramping that up by adding another capacity for 0.45 million tons. And this 0.45 million tons is an incremental support to the new phosphoric acid plant that we are commissioning. So this phosphoric acid plant will get commissioned now. And some of the engineering and the key equipment have already been ordered, and this is financially closed out. And in the financial year, we will not be commissioned by the year FY 2024. It'll be done in the year after that, FY 2025.
FY2025. Okay. Sir, if you can also please guide for FY 2024, two questions, 2024 and 2025 CAPEX, if you can guide for, please.
Well, as far as 2024, 2025 CAPEX is concerned, it's purely the completion of the phosphoric acid plant and the converter, which is only about INR 150 crores of expenditure which is pending and which is already tied up. The loans are tied up for this. And the only other expenditure that we are doing and we're quite excited about this is finally the completion of the energy improvement project in Goa where the overall expenditure is around INR 73 crores. And there is a balance of about 50-odd crores that's going to get spent during this year. These are the main CAPEX which we have, which will directly start also adding profitability to the company. With regard to the CAPEX that we're doing on the sulfuric acid plant, our estimate is that during the year, we will end up spending about INR 80 crores.
If you look at it on the whole, we are looking at about INR 280 crore of long-term CAPEX which are going to be incurred during this financial year.
Perfect. Got it. And sir, one last thing is we have seen the subsidy amount increase again. Is there a change in how the government is thinking again about the subsidy disbursements, or is that probably last month thing, and it gets sort of?
It was the last month thing. To be frank, the March 31st payment, we all fully paid out in the month of April. So they're not really come back and reduce any or held back any subsidy. But in general, what has happened for us is that per ton subsidy has increased. So given that the per ton subsidy has increased, you would always see that the gross amount is going to be larger. That's number one. And number two is our volumes are increasing. So that's again adding up to the entire thing. So I think normalization of subsidy, it's basically, in our view, one year away. I think we will see that the Government of India would not like the prices to go down any further, if at all any.
I would think that the prices could only go up, and the subsidy elements will come down. Just for an, I mean, in case somebody has this question in mind, the most important thing for our industry is the pricing hierarchy. When you look at the phosphatic industry, you need to have higher the grade, the higher the price. Unfortunately, the way the prices have panned out over the last couple of years, we are seeing a trend wherein the DAP prices are lower, which is INR 1,350 a bag, whereas you've got phosphatic prices, other NPKs, certainly higher than what this is, and potash being the highest. This has to be reversed. I think that reversal is very important to ensure that the farmers' behavior at the marketplace is intact and the soil nutrient management gets to be done in the proper way.
So we are expecting that during the course of this year, this correction should happen. And that is finally going to aid us in terms of the industry doing much, much better.
Got it, sir. That's helpful. And just to clarify again, the subsidy amount has largely cleared. The outstanding as of March is largely cleared in April.
Yeah. Yeah. Yeah. Yeah.
Okay. Perfect, sir. Thank you, and all the best now.
Thanks.
Thank you. To ask a question, ladies and gentlemen, you may please press star and one. The next question is from the line of Rohan Gupta from Nuvama. Please go ahead.
Yeah. Hi, sir. Good afternoon and congratulations on a good set of numbers. Sir, one first clarification that though the government has reduced the subsidy effectively from 1st of January to March, sir, what is the effective DAP subsidy now? If you can just give that number.
The DAP subsidy is close to about INR 33,000 per metric ton.
It was INR 42,000 per ton, have you said?
Yeah. It was previously about 48,000. They've reduced one time for the Kharif season to 40,000. For the coming period, which is April onwards, they've reduced it to 32,000, 641.
Right now, it's INR 38,000. Then we'll further go down from next month. I mean, already from April, it's INR 32,000.
From 40,000, it'll go down to 32,641. Yeah.
Sir, the provisioning amount which you have made, can you quantify that how much provision we have made in the past?
Well, let's be very clear. I think, in our view, the provisioning has been adequate. We did this even before the circulars were issued by the Government of India. So we've taken care of a good part of this year.
Okay. Sir, what is the DAP prices for us in the market right now?
Market price is pretty uniform right across the country at INR 1,350 per bag, which is about INR 27,000 per metric ton.
Got it, sir. Sir, the subsidy INR 32,000, you see that have indicatively taken all the cost reduction, or there you see that the ammonia prices are still falling, and maybe sulfur processes may see further fall, and phosphorus are still weakening. Do you see that there is a room for reduction in DAP prices in the market, or the benefit with any further fall in raw material prices will be kept by the company?
Rohan, my take is like this as far as the subsidy is concerned. If you look at a normal period pre-COVID, which is pre-COVID, and by the year 2019, April 1, the subsidy per ton of DAP was INR 10,000. The INR 10,000 per ton subsidy has gone to INR 48,000. In our view, is that at some point of time in the near future, maybe in the next couple of years, we have to come down to those levels. And at that point of time, the price of DAP in the market had gone up to INR 38,000. So I think this reversal between prices increasing and subsidy coming down is a mechanism that has to be efficiently managed to ensure that the farmers are not put to pain, the food security challenges are not aggravated. And this will happen. It's a matter of time.
So that is when you can say that everything is in good shape. And at that point of time, we were seeing DAP prices just getting closer to about $400 a metric ton. We are coming somewhere there. So now the question is that how this whole thing will get moderated is something time will only say. But that's the kind of conceptual idea that you all can keep.
That's great, sir. Sir, if we look back to history, almost three to four years back, the fertilizer margin for the industry used to be roughly INR 2,500-INR 3,500 per ton. Definitely, in the last two years, a lot of toxic crazy things have happened in the sector with the prices going up to almost INR 60,000-INR 70,000 realization. So sure, it's coming down. Do you see that even if the subsidies or DAP prices normalize to the previous year level, maybe INR 35,000 realization, at that level also, the INR 5,000 per ton margins are going to sustain? Because if that is so, then on INR 5,000 per ton margin or even INR 35,000 realization, we are talking about almost 14%-15% in terms of margin percentage. And maybe ROC profile will be much higher, above 30%.
Will the government allow companies in the longer term sustainable margins of 30 or INR 5,000 per ton?
Rohan, very good question. I will just clarify this to you. three to four years back, when the subsidy was about INR 10,000, as I said, we had reached a price of about INR 1,900 a bag. Even if you want to be a little conservative and say that it was about INR 1,600 a bag, it was about INR 32,000. INR 32,000 + INR 10,000, the total realization was INR 42,000. What the government is very clearly signaling today is that they want the industry to get 12% margin on a PBT basis. This is the guidance that the government itself is giving. So which means that as things stabilize going forward, that kind of margin will be there. If a 12% margin on a PBT basis is to be there, you will certainly get to see a INR 5,000 a-bag margin for sure.
This is the guidance which even our government in the press conference a few days back very clearly indicated that they are looking at a 12% pre-tax return for the phosphatic industry under the NBS scheme.
So you are saying, sir, even if you take a realization of INR 40,000, they are allowing the industry to make 12%. That is roughly INR 4,800 per ton PBT margin.
Yes. That is what they believe we should finally be at. That is what in a normal situation of marketplace, they expect the industry they believe that that is a reasonable profit. The government is very clear that only if you're able to make beyond that, they will consider this an unreasonable profit for them to tinker with the subsidy system. So the industry has a lot of good numbers which it can come by. But it's a question of the global market stabilizing. And I think if anyone is taking a long-term view, I'm sure you will get to see it pretty soon.
So, sir, if I add back to it, interest and depreciation on a PBT margin of 12%, it means that industry very well can make 16%-17% margin or probably per ton at a 40,000 INR realization. We are talking about almost 6,000 INR per ton + margin sustaining. That's what even government is allowing. Is that understanding right?
Absolutely. Government is very clearly saying that on the total price, you should be able to make 12% return on a PBT basis. You're absolutely right. So this could mean that your EBITDA margins could be INR 5,000, even could be better than that.
Sir, 12% return or 12% PBT margin, both are different.
12% return on revenue.
12%.
12% return on revenue on a PBT basis is what government considers as reasonable.
That means a 12% return on revenue. I mean, that at least gives us almost 18%-20% + ROC. For the efficient player like phosphatic and all, probably.
Yes. The potential is there, Rohan, for sure. And that you will get to see when you get into a more normal situation where this particular margin will not be earned from the Government of India. You will earn it from the marketplace, which means the subsidy per ton has come down, the market price for DAP, and the pricing hierarchy for various phosphatic fertilizer, non-urea fertilizer gets corrected. Because government's intent is very clear. The 2010 NBS policy, which was supposed to encourage investment in the sector, growth in the sector, stands there. But the last two, three years have been you had a pandemic, you had a Ukraine war, you had a crisis in Europe in terms of various prices. So it was very difficult to kind of moderate what it is.
Now, we are coming to a point where a lot of it is behind us, and the prices are getting into some more normal levels. I would think that if you look at a two-year scenario, between this year and next financial year, you'll start getting to see these numbers.
That's fantastic, sir. I think that will definitely change the profile of the Indian fertilizer industry completely and will also lead to significant re-rating. That's fantastic.
Because they're looking at investments, Rohan, coming into the industry. And industry will have to make this kind of money to be able to reinvest.
Got it, sir. Sir, second question is on our CAPEX. You mentioned roughly INR 280 crore to be spent in phosphatic and sulfuric acid for the current year. I just want to understand a CAPEX plan over next two to three years, slightly in the medium term, which are the areas we are going to spend the money? Can there be any inorganic growth or any sick unit acquisition potentially there, or you are going to invest in increasing capacity in DAP and PK? It's a two to three years guideline.
Rohan, it's like this. I think the day we are able to complete this current phase of growth, which is not only the completion of the project and finally getting our market share of 30 lakh tons of fertilizer, we will be ready for the next phase of growth. So I'm very clear that there is nothing further which is planned between 2023-2024. And 2024-2025, again, will be a year. And I've been consistently saying this right through our phase of meeting investors during the IPO. So we are actually following that pattern well. We have consolidated with capacity right now. We're going to consolidate this year with actual sales and the profitability coming to us. When it comes to what will be our priorities, I personally believe that backward integration continues to be a strong priority for us. And we'll continue to look at that.
As far as the marketplace is concerned, for some time at least, for a medium term, if there is an opportunity, we will certainly look at getting more volumes in terms of trade for value-added products. That's one thing which is there. We have been open about expanding our portfolio beyond the bulk. That is where the opportunities will be seen.
Sir, just last question, and I'll come back to you. What is the current phosphatic prices we are contracting?
Last quarter was $1,050. This quarter is hovering between $970-$980 per metric ton.
This quarter mean April to June?
April onwards. April onwards. Yeah.
Okay. Finally, sir, thank you so much.
Thank you. Participants, to ask a question, you may please press star and one. The next question is from the line of Ashika Mehta from Equitree Capital. Please go ahead.
Hello, sir. I just have a few questions. Sir, could you help me understand how the reduction in raw material pricing and the reduction in subsidy will help our working capital, or how our working capital will look like, basically?
Well, any reduction in the raw material prices will certainly mean that your overall cost of production comes down. So to that extent, our working capital comes down quite seriously. If you look at it today, when you have a product which is closer to about 60,000 INR per metric ton and every 10,000 INR per metric ton reduction that comes in directly adds to the reduction in working capital, and we do about 2.6 million tons. So when you look at a 2.6 million ton and 10,000, you're looking at an INR 2,600 crore reduction that could happen. So the way to look at it is that every 1,000 INR reduction in the overall raw material cost for us will add to INR 260 crore of reduction in working capital.
Understood. Got it. Got it. And sir, can you also help me understand the percentage of reduction in the subsidy versus the reduction in cost? Is it in line, or is there still some gap?
Well, see, Ashika, when I explained in the previous question, the way to look at this is that how does your we may be at a margin level of, say, a 5% or 6% on a PBT level. The PBT level margins could go up to 12%. So one would expect that every time you have a reduction which comes up in the raw material, not that everything is mopped up equally to reduce your subsidy. Some part is mopped up, and some is left behind for us to get a better margin because government itself is guiding that we should go up to 10%-12% profitability, which the industry has not been there. So that's the way to look at it.
This could come even by a further price increase because let it be very clear that DAP prices are very attractive today, and nobody wants it to be at that particular level. Globally, if you look at it, farmers across the world are still paying cash down at $550 for DAP, whereas in India, we are still only paying about $350. There is a good scope for us to kind of increase that also, if need be, in the coming months.
Okay. Currently, there is still gap, right? That's the right way to look at it.
Yes. Yes. Yes.
Sir, we're almost midway through Q1. How is the demand looking?
Well, the demand actually picks up right now. This is still a placement time where you do get primary sales. The actual demand for the season comes only by the end of the year, I mean, end of the quarter. If you're expecting good monsoon, the good thing is, as per the forecast and monsoon that we have, we are going to have 96% on a long-term average. The reservoir levels are looking good, and the moisture levels are looking good. The field study that we have done through our sales team, the farmers are looking optimistic as of now. Given that there is good support coming from government on all ends, I personally believe that the optic is going to be strong.
Okay. Great, sir. Thanks so much. I'll come back in the Q1.
Thank you. Ladies and gentlemen, please press star one to ask a question. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah. Sir, what you just clarified about the monsoon, we see very differing views on the monsoon basis. So just going a bit more granular, which are the states do you see that there can be issue in terms of monsoon, and which are the states which are expected to be relatively immune or safer? And secondly, what are the steps that the government has done, additional steps to, in a way, counter whenever it may happen? Also, last question, do you also see any working capital stroke trade margins, or has it been seen historically where the trade takes advantage of such difficult macro conditions to, in a way?
Sir, sorry to interrupt, but there seems to be a disturbance on your line.
That's my question. Yeah. Thanks.
Yeah. I think there is a disturbance which is coming in. Aniruddha, if you want to put yourself on mute, I can respond. Yeah. Okay. Thank you. I think, Aniruddha, from what I'm understanding, that your concern is that which of the states you believe could be safe and which of the states which will not be safe? Let's be very clear that there are states where agriculture is done based on irrigated water. There are states where agriculture is done based on the rain coming in time. That's the first point. So when it comes to larger states, like when you look at Karnataka, Telangana, Andhra Pradesh, even good parts of Maharashtra, you have reservoir levels which are looking good. Technically, whenever you see a strain in rains, there are regions like Marathwada, sorry, Marathwada would do okay.
But when it comes to the Hyderabad region of Maharashtra, you sometimes get to see a stress. And I personally believe, at this point of time, given what kind of reservoir levels are there, I think farmers are looking to be quite optimistic. That is the first point. And we are present in 15+ states. We have a Pan-India presence. So we have an ability to reach out to certain other states where the water conditions could be far better. So I am not really so for us, on the overall basis, we are looking okay. And the crop prices have been good, higher than MSP in most of these states. And this will also be giving a lot of support to the farmers in terms of what they need to do. So this is a good year.
They were at some interesting situations when it comes to cash crops. I think most of the states where the cash crops are there, where they irrigated, I think they will take their they will go ahead and look at consuming fertilizer. Over the year, we've also noticed that the monsoon gets delayed, but it also gets spread over the year. You finally end up getting a good amount of rainfall in the country. So it is important to realize that sometimes the season do get extended. It may be that what we look at between June, July, August could well get into end of August or early September. But that kind of an adjustment is something that we are seeing, that farmers are adapting themselves quite well.
Okay. Understood, sir. Very helpful. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Tanmay from Mirae Asset. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Sir, just one question on the EBITDA that we have reported. If I add back the one-off provision, we have reported almost INR 140 crore EBITDA in Q4. So the difference on QOQ basis, would it be fair to assume that the entire thing relates to the provision that we might have made for the subsidy?
Yeah. I think there's a large amount of impact that's basically coming from the fact that there have been provisions which have been made. Yeah.
So, sir, roughly INR 200-odd crore would be the provision if I calculated that way. And based on I'm not sure of the blended amount of reduction on the subsidy that has happened. But as you indicated, that's around INR 8,000 has been cut on DAP. If I just calculate that, around 300,000 tons of inventory in the channel on which we would have taken a provision. So is that a correct sort of working that we can do so?
Yeah. We have the channel for about 250,000 tons. You're right. I mean, we have done that. Yeah.
That is a normalized level of inventory that we maintain, or do you think that?
Well, Tanmay, the normalized level for Paradeep Phosphates will get established as we go forward because we have stepped up from a 15-lakh player to a 30-lakh player. So when it comes to that, I mean, we will look at an off-season where about 2-2.5 months of subsidies of material will be there with us. So the question that really comes up is what kind of material, what product mix, and all that. But during the coming year, the next four quarters, you will get to see that we will be establishing for ourselves new levels of inventory that we will have to carry given our capacities are having gone up. But at the same time, I'm happy to report that we have done all our primary sale for what we produce, which has been a good thing for us.
Sure. Thanks.
Thank you. Participants, to ask a question, you may press star one. The next question is from the line of Rohan Gupta from Nuvama. Please go ahead.
Hi, sir. Thank you for the follow-up. There is a lot of buzz about the Nano DAP and all. You also mentioned that you may have planned a non-bulk fertilizer. Just wanted to understand, do we have any thought process on this Nano Urea or Nano DAP, or what non-bulk fertilizer you are referring to?
Well, Rohan, as far as nano is concerned, please keep an eye on our website. I'm sure you will see some announcements soon.
Apart from, sir, Nano DAP, do you see that there are opportunities in other non-fertilizer businesses for us to grow investment opportunities?
We believe that both Nano DAP, Nano urea, and a few other products which are non-subsidized are likely to be offered by us going forward.
Sir, if you can just give some more light on nano. It's a slightly new product, and we have understood from the market that there is high acceptance from the farmers, but different markets, different feedback. Where do you see that these markets will be growing, and what can be the opportunity? We understand it cannot completely replace the chemical fertilizer but cannot be used as a substitute but also will be used along with the chemical fertilizer. So not only from the company perspective but for the country level, where do you see that the market size can be created, 4%, 5% of the chemical fertilizer right now? If you can, sir, share some number on there.
Well, Rohan, when it comes to nano fertilizer, the product that we are looking at is slightly different from the products which have come up in the market so far. So I think as and when we are ready to launch, we will certainly share all the details. And all that I would like to say is that our field work has been completed, and our reviews by the government is also complete. So we are expecting that we will be in a position to come out with it in the near future. Normally, government takes a few months to clear these kind of proposals. But the basic thing that we, as a company, are focused I mean, we believe very seriously that soil is something which is very, very important and central to our entire strategy.
I mean, soil in a way, we even believe that soil is our customer. And when it comes to soil, the basic thing that we need to look at is the nutrient use efficiency. I think that is where the entire focus should be. And I think some of these products with our organic or nano, all this goes a long way to kind of support the nutrient use efficiency when it comes to the soil itself. And the important so that's the way we would like to look at it. When it comes to replacement, I can give you only a global average. Specialties consist of about 10% of the bulk. So if you put all these categories as specialties, then you could well imagine that these specialty categories would kind of replace 10% of the bulk.
So if you want to look at urea as a product, urea is today about 38-40 million tons of sales in India on the whole. So the potential of a nano could be 4-5 million tons. And the way government has been also looking at this is that if you have a manufacturing capacity of 30 million and you're importing about 8 million tons of urea, it is good to reduce the imported component by shifting that into nano. So nano's potential in India, if you want to define, it's an 8 million tons potential of replacement of a traditional product.
That's very helpful, sir. Thank you once again.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Aditya Sen from Robo Capital. Please go ahead.
Sir, this is just a confirmation. The 12% margins that you wre earlier talking about, which the government has suggested, is this only specific to phosphoric or for DAP and SSP also?
This is not for SSP for sure. This is basically looking at all non-urea-grade NPKs.
For non-urea. Any idea on SSP?
Not really. I think SSP also kind of it's an evolving situation, I believe. I wouldn't want to comment on it because I don't have a capacity on that to really comment on that.
Okay. Okay. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, everyone, for participating in the earnings conference call. I'm sure we tried to answer all your questions. If you have any further queries, please connect with our investor relations team, and we will be happy to address the same. I would only like to summarize our position looking forward. As I had mentioned in the call, we are very optimistic about the way things are shaping up in future, primarily given the fact that the fertilizer raw material prices have been correcting. We also believe that our incremental volume that we have in hand, once they convert into a market share, we, as Paradeep, will be a very interesting company from the perspective of all stakeholders. We look forward to continuing to be engaged with you all. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.