Reports of Outstanding Growth and Margin Expansion from Deepak

India’s Pune, Maharashtra
One of the top manufacturers of industrial and mining chemicals and fertilisers in India, Deepak Fertilisers and Petrochemicals Corporation Limited (“DFPCL” or the “Company”), released its financial results for the quarter that concluded on September 30, 2024. The company’s net earnings increased by an astounding 237% year over year.

Consolidated Financial Highlights

Consolidated(INR CR)	Q2FY25	Q2FY24*	YoY Change	Q1FY25	QoQ Change	H1FY25	H1FY24	YoYChange
Operating Revenue	2,747	2,424	13%	2,281	20%	5,028	4,737	6%
Operating EBITDA	494	286	73%	464	6%	959	567	69%
Margins (%)	18%	12%	619 bps	20%	(237) bps	19%	12%	710 bps
Net Profit	214	63	237%	200	7%	414	177	134%
Margin (%)	8%	3%	518 bps	9%	(96) bps	8%	4%	449 bps

*The impact of the NBS subsidy on channel inventories of Rs. 106 Cr and Rs. 87 Cr due to the stabilisation of the ammonia plant is included in Q2FY24.

Important Points for Q2FY25

EBITDA Margin Growth: Increased to 18% from 12% in the previous year.

Record Sales amount in Bulk Fertiliser: The amount of produced bulk fertiliser sales increased by 83% year over year, making it the biggest sales volume in a quarter.

Implementation of Anti-Dumping Duty: USD 217 per metric tonne for five years of Anti-Dumping Duty (ADD) on IPA.

Internal Record of Ammonia Price Increases: Internally, ammonia price increases are now properly recorded.

Debottlenecking the TAN plants will increase capacity by around 10%, delivering an extra 50 KTPA and raising the overall TAN capacity levels to 587 KTPA in order to meet the expanding demands of the mining industry in India.

Debt Reduction: The Net Debt to EBITDA ratio was improved from 2.66x to 1.64x by repaying Rs. 200 crores in debt.

Key RM change Q2FY25 prices: Gas: 9% YoY; MOP: 40% YoY; Ammonia: 11% YoY

In his remarks, Chairman and Managing Director Mr. Sailesh C. Mehta stated that DFPCL has demonstrated remarkable success in Q2 FY25, attaining a 13% increase in revenue. Despite a weak quarter for the chemical industry, the Crop Nutrition business, which had an 18% YoY gain in sales, was the main driver of this development. The Chemical business, on the other hand, grew by 8% YoY. The company’s chemical and fertiliser operations served as a natural hedge, allowing it to provide better and more reliable results.

The strategy shift from commodity to speciality has led to a steady growth in the share of income from speciality items as well as an overall increase in revenue.

The manufactured bulk fertiliser sales volume of Crop Nutrition Business (CNB) increased by an astounding 83% year over year, setting a new record for sales volume.

Mining Chemical: Because mining activity slows down during the monsoon, it is a lean time. As a result, we had decided to shut down the Technical Ammonium Nitrate (TAN) plant for maintenance and to increase its capacity by 50 KTPA, bringing it to 587 KTPA.

Despite a little decline in volume, the Industrial Chemicals division saw a robust 9% increase in revenue. Our strategic move from commodities to speciality chemicals has successfully reduced price volatility, as seen by this performance.

All of our companies have benefited greatly from backward integration thanks to the ammonia plant, which has successfully reduced supply chain risks and price volatility. We can now account for the rise in ammonia costs worldwide throughout the company as a result.

The chemical and fertiliser industries are expected to prosper as India’s population grows. Strong and encouraging tailwinds are provided by the demand prognosis for the mining chemicals, industrial chemicals, and crop nutrition industries, which is in line with India’s economic story. To take advantage of future expansion, we are now working on the implementation of the TAN Project in Gopalpur and the Nitric Acid Project in Dahej, respectively.

Review of Chemicals

Technical Ammonium Nitrate, a mining chemical:

Our flagship product, LDAN, saw a 16% YoY increase in sales volume in Q2 FY25 and a remarkable 20% increase in H1 FY25 over H1 FY24.

Due to a scheduled downtime and monsoon-related lean seasons, overall sales volume decreased by 21% year over year in Q2. In comparison to H1 FY24, the volumes decreased by 1% in H1 FY25.

Business Outlook: As demand for power (coal), cement, and steel is predicted to rise after the monsoon, mining and infrastructure are anticipated to pick up, giving strong support for TAN demand.

Chemicals used in industry:

Nitric acid volumes were up 13% on a QoQ basis and slightly down 1% on a YoY basis.

Customers have given the speciality stainless steel grade nitric acid favourable reviews.

Process limitations and a plant stoppage caused a 10% YoY drop in IPA quantities. Nonetheless, it is expected that the recent imposition of an ADD at USD 217 per metric tonne for a five-year term would improve demand and pricing in the future.

Business Outlook: Over the upcoming quarters, Nitric Acid’s demand and profitability should remain steady. Demand and margins for propylene-based IPA are anticipated to remain steady and grow over the next several quarters after the ADD was imposed on Chinese producers.

Review of the Crop Nutrition Industry (Fertilisers)

The highest-ever sales volume of manufactured bulk fertiliser in Q2 FY25 was 268 KMT, an 83% YoY increase. This was due to higher demand from above-average rainfall, which resulted in 102% Kharif crop planting and favourable market mood in all areas.

With a sustained emphasis on offering crop-specific solutions for selected crops, such as cotton, soybean, sugarcane, corn, grapes, pomegranates and bananas, Croptek’s sales volume jumped to 37 KMT, representing a 70% YoY rise.

The business just introduced high-end water-soluble fertiliser grades.

Bensulf, a speciality fertiliser, sold 9 KMT, a 7% YoY increase.

Business Outlook: Our key states’ above-normal monsoon rainfall has greatly improved the groundwater level and water reservoirs for irrigation, which will contribute to a favourable rabi season in the future.

We anticipate that more land will be planted to rabi cash crops, including sugarcane, onions, potatoes, and so on.

Overview of the Company

One of the top producers of industrial chemicals and fertilisers in India is Deepak Fertilisers and Petrochemicals Corporation Ltd. (DFPCL). The company services important economic sectors including infrastructure, mining, chemicals, pharmaceuticals, and agriculture with its stronghold in Technical Ammonium Nitrate (mine chemicals), Industrial Chemicals, and Crop Nutrition (fertilisers). With facilities spread across four states—Maharashtra (Taloja), Gujarat (Daher), Andhra Pradesh (Srikakulam), and Haryana (Panipat)—DFPCL is a publicly traded, multi-product Indian corporation.

DFPCL is the biggest producer of nitric acid in Southeast Asia and the top producer and distributor of isopropyl alcohol (IPA) in India. To suit the demands of the business and consumers, the company is creating specialist grades of IPA and nitric acid.

As the sole manufacturer of pilled Technical Grade Ammonium Nitrate solids and Medical Grade Ammonium Nitrate in India, DFPCL is one of the top producers of Technical Ammonium Nitrate worldwide. In order to increase downstream productivity gains for mining end users, the company has started offering the best technical services available.

To meet the nutritional needs of every crop, the CNB Segment (fertilisers) provides a basket of 48 items, including bulk fertilisers, crop nutrient solutions, speciality fertilisers, water-soluble fertilisers, biostimulants, micronutrients, and secondary nutrients. Speciality fertilisers with increased efficiency are created via extensive research and development as well as product testing at more than 50,000 farmer demonstration plots. Significant productivity and quality gains have been demonstrated by R&D initiatives for crops in a variety of areas, including cotton, sugarcane, onions, fruits, and vegetables. Six million farmers have benefited from value-added nutrition products in the past three years.