Chambal Fertilizers & Chemicals Limited (NSE: CHAMBLFERT) Q2 2025 Earnings Call dated Nov. 07, 2024
Corporate Participants:
Mr. Rishab Barar — CDR India
Mr. Abhay Baijal — Managing Director
Mr. Anand Agarwal — Chief Financial Officer
Analysts:
Prashant Biyani — Analyst
Falguni Dutta — Analyst
Ashok Jain — Analyst
Harmish Desai — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY ’25 Earnings Conference Call of Chambal Fertilisers and Chemicals Limited. [Operator Instructions]
I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you.
Mr. Rishab Barar — CDR India
Good day, everyone, and thank you for joining us on the Chambal Fertilisers and Chemicals Q2 and H1 FY ’25 Earnings Call. We have with us today Mr. Abhay Baijal, Managing Director; Mr. Anand Agarwal, CFO; Mr. Anuj Jain, Assistant Vice President, Finance; Mr. Tridib Barat, Vice President, Legal and Company Secretary; and Mr. Ashish Srivastava, Vice President, Sales and Marketing.
Before we get started, I would like to point out that some statements made or discussed in the conference call today, may be forward-looking in nature and must be viewed in conjunction with the risks the company faces. Chambal Fertilisers and Chemicals does not undertake to update them. The statement in this regard is available for reference in the presentation.
We will begin this call with opening remarks from Mr. Baijal. I would now like to invite Mr. Baijal to share his views. Over to you, sir.
Mr. Abhay Baijal — Managing Director
Thank you, Rishab. Good day to everybody, and a warm welcome to all of you participating in this call. During the quarter on a stand-alone basis, the company has achieved an EBITDA of INR834 crores as against INR697 crores last year, which is a growth of about 20%. Our profit after tax of INR500 crores as against INR372 crores last year, which is a growth of 34%. For the half year, the company achieved an EBITDA of INR1,776 crores as against INR1,475 crores last year, which a growth of about 20% and a PAT of INR1,053 crores as against INR842 crores, showing a growth of 25% Y-o-Y.
At consolidated levels also, the company has performed well during the quarter, registering a PAT of INR536 crores as against INR381 crores last year, which is a growth of 41%. For the half year, there was PAT of INR985 crores as against INR720 crores last year, which is showing a growth of 37%. All our urea manufacturing units operated at optimal capacity. Production stood at 9.34 lakh metric tons against 9.08 lakh metric tons last year Y-o-Y. Urea sale was 9.65 lakh metric ton against 8.38 lakh metric tons Y-o-Y. Subsidiary receipts too continue to be timely. We received INR4,713 crores in subsidy in quarter two FY ’25.
We have a pleasure to inform you that the quarter earnings growth was also led by volume and margin growth in the CPC, SN segments. During the quarter, CPC, SN revenue stood at INR289 crores as against INR245 crores last year, showing a growth of 18% Y-o-Y with contribution of INR83 crores against INR61 crores last year, showing a growth of 36% Y-o-Y. For the half year, the revenue was INR632 crores as against INR542 crores last year, showing a growth of 17% Y-o-Y with a contribution of INR164 crores as against INR119 crores last year, showing a growth of 38% Y-o-Y.
During the quarter, two new CPC products are introduced, primarily comprising of fungicides. We have added to our specialty nutrient portfolio with the introduction of the nano bio phosphorus, UTTAM PRANAAM.
We have sold till September cumulatively about two lakh bottles. And in the last quarter 1.2 lakh bottles. Some of the products are Generation 1 times that is products which are of the latest chemistries in collaboration with our esteemed partners. The performance in the quarter is notable despite late and unseasonal rains and swing deficit in some crops such as corn. Our strategy continues to focus on creating partnerships and alliances for introducing better chemistries and increasing the width of our offerings in our channels. Today, we have CPC product portfolio of almost 62 products of distinct chemistries covering fungicides, weedicides and insecticides.
Geographic diversification has also been a part of this strategy, has been successfully executed. Biologicals are increasingly gaining importance in the crop protection spaces. Biological nematicide will be introduced shortly to address the farmers’ pain point for nematodes control, for which internal field tests have been successful. The other product lines in biologics will gain importance as green sustainable technologies become increasingly important. We intend to be broad spectrum in this field from bioactives, biostimulants to bio crop protection. Alliances in this field are also being worked upon, including sponsoring research and activities.
Increasing emphasis on water-soluble fertilizers is also a part of the strategy. Water-soluble fertilizers are currently low penetration suppliers that we see that with the growth of precision farming via polyhouses, drip irrigation and increasing crop diversification from cereals, oilseeds and cash crops into the fruit and vegetable segment, this is poised to grow faster and create a pathway for quicker growth. In short, CFCL is now focusing increasingly on the sustainable technologies, which bring benefits in terms of improving farm yields, improve soil health, provide better product output. They are also value for money. And moreover, these products are also the fruit of high quality research.
Our new focus area in the coming quarters will be to enter the hybrid and research variety seeds, which will substantially complete our agri-input products profile. We expect to start sales and marketing of these products from Kharif ’25 onwards. This growth shall be followed with increased rigor. And P&K fertilizers, the volumes were low due to variability constraints, and we continue to follow the portfolio approach.
Our Farmer Connect Seed to Harvest program is now gaining momentum. We are also placing a great amount of emphasis on communication and reaching out to all our stakeholders and partners. Through social media, we have now extended our reach to 30,000 people besides our Hello Uttam experts at four locations received more than 10,000 calls and queries from field asking for dosage of the products, weed control, insect management in kharif crops.
As part of the Seed to Harvest program, a key focus area for Chambal, we undertook more than 3,800 farmer meetings, conducting over 3,000 demos and four sample — four soil sample days to collect over 2,000 soil samples. We have now tested a total of 58,000 soils for macro and micronutrients. Our technical ammonium nitrate project is progressing as per plan. Statutory approvals are in place, and we have spent around INR388 crores till September end 2024. The overall progress achieved is about 37%. And things are on track. Our joint venture, IMACID is also performing well with higher production and better margins. And we continue to look forward to create more and more value for our shareholders.
With that, we are now happy to take your questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We’ll take our first question from the line of Prashant Biyani from Elara Securities. Please go ahead.
Prashant Biyani
Yeah. Thank you for the opportunity. Sir, how much is the additional EBITDA contribution from the 3% energy efficiency improvement?
Mr. Abhay Baijal
I would say that the contribution is healthy double figures.
Prashant Biyani
Sir, can you quantify the number?
Mr. Abhay Baijal
When I say healthy double figures, it is about INR35 crores to INR40 crores.
Prashant Biyani
And sir, by when is the next leg of energy efficiency initiative going to be implemented for urea plants?
Mr. Abhay Baijal
Prashant, we have a road map stretching out to 2028. And there are various projects which are under consideration, some have been awarded to consultants for doing the necessary engineering work. We shall do awaiting their replies, and then there is a cycle of ordering the equipment and then putting them in place during the turnaround. So this will stretch up to 2028. We have a plan going forward.
And is it being developed even as we — see what I want to assure you is that energy efficiency remains a very few focus for the company, number one. And number two, this is — we are looking at good efficiency projects going forward. And we have a plan in place. There will be at least three to four such plants that we will implement, which have been generated in-house, and they have to be vetted by the various engineering consultants.
Prashant Biyani
Okay. Sir, how much was the additional subsidy on DAP pertaining to Q1 POS sales?
Mr. Abhay Baijal
I think the government has announced a number of INR3,500. We have accounted a little less than that.
Prashant Biyani
Okay. And sir, your subsidy outstanding has reduced dramatically in the last few quarters and especially in Q2 as well. Sir, does it also include subsidy pending on fertilizers sold, but are yet to achieve POS sales?
Mr. Abhay Baijal
When we are accounting it in the books, then it becomes at the point of — at the first point of sale, it becomes a kind of book debt. So it will include both what is billed to the government and unbilled to the government.
Prashant Biyani
Sir, in that case, is it that your fertilizer sales at retail level happen within the first 70, 75 days of the quarter itself? And which is why you get subsidy before the quarter closes? Is that the case?
Mr. Abhay Baijal
No, it is not like that. The sales for fertilizer is a continuous process. Now it could be in higher intensity or lower intensity as time goes on. So first 75 days and all that, I think, is an artificial distinction. It is going on. There are some territories where it will be a little late. For instance, it may be due to climatic conditions, it may be due to sowing conditions. So those things keep happening. And we are fortunate today that the government has got a substantial amount in terms of its budgets to pay to the company. And if we efficiently raise your bills, they are getting paid on time.
Prashant Biyani
All right. And sir, I mean, good efforts on that part for reducing the subsidy outstanding. Sir, coming to the domestic crop protection business, while even the industry has seen subdued growth due to missing of sprays because of continuous rain, we have managed to outperform industry growth. How have we been able to do that? Some color on that. And how is the liquidation also happening in your crop protection business, some highlight on that as well?
Mr. Abhay Baijal
So my understanding from my sales team is that between 60% to 65% sale is on cash. So that is instant liquidation. As far as how we have done better and why we have done better, well, it’s a little involved subject. I would like to put it to across you when I made the point that we have about 61 products in the three segments, weedicide, fungicides and insecticides. And we have always tried to marry the requirement of the farmers to what is the emergent and current requirements. And to that extent, we have a very strong and solid planning process, a sourcing process, a validation process for the value for money. And I think that’s the reason why we are able to — we have a range of options for the farmers instead of being stuck in one or two verticals. So that makes the difference. That is one.
Secondly, our strong alliances and relationships that we are building up. Some of them are Gen 1 times. And they are patented generic — patented combination stuff, which is now coming up. So I think those are creating the value drivers for our business.
Prashant Biyani
Okay. Sir, one question on TAN. We are also setting up 210,000 tonnes nitric acid plant. How much of nitric acid will be used in TAN?
Mr. Abhay Baijal
I don’t think we are setting up a 210,000, we have not announced. We are setting up a 240,000 tonne technical ammonium nitrate plant, of which the precursor chemical is WNA, which is weak nitric acid. I think you’re referring to that part. Weak nitric acids can be sold as weak nitric acid. Weak nitric acid can be forward converted into technical ammonium nitrate also. As for now, the plan is to convert that nitric acid into technical ammonium nitrate.
Prashant Biyani
But there is a separate TAN plant for that?
Mr. Abhay Baijal
No, no. There are two plants within the TAN plant. One is the weak nitric acid plant, which then is used to use further ammonia to convert it into technical ammonium nitrate. It’s a two-step process. There are two plants in one.
Prashant Biyani
Right. And sir, what is the update on capex plans for N-acid?
Mr. Abhay Baijal
My understanding is that the Board has closed or more or less approved subject to one condition of the 200,000 tonnes expansion of acid.
Prashant Biyani
And this should come on stream by when?
Mr. Abhay Baijal
My understanding is that the engineering work has been awarded and normally, these kind of projects take about 2.5, three years to come to fruition, subject to their achieving zero days. And in this case, of course, there is no problem in terms of finances. It’s only a question of how quickly the technical parameters and other things are decided and closed.
Prashant Biyani
Lastly, sir, how much is the gas price for the quarter?
Mr. Abhay Baijal
I think for this quarter, people have been contracting DAP between INR620 to INR645.
Prashant Biyani
Okay. In terms of dollar per MMbtu?
Mr. Abhay Baijal
You said gas or DAP?
Prashant Biyani
Gas, gas.
Mr. Abhay Baijal
Okay. Okay. Gas has been around I think about $16.7 to $17.
Prashant Biyani
Okay. Okay, sir. That’s it from my side. Thank you for the questions and congrats on good set of numbers.
Mr. Abhay Baijal
Thank you, Prashant.
Operator
Thank you. [Operator Instructions] Next question is from the line of Falguni Dutta from Mansarovar Financials. Please go ahead.
Falguni Dutta
Good afternoon, sir. Very good numbers. I just had one question. I joined a bit late, so maybe I would have missed. What led to the significant increase in own manufactured fertilizer profits other than this energy efficiency, which you mentioned about INR40-odd crores?
Mr. Abhay Baijal
Notice, we have sold almost one lakh tonnes more.
Falguni Dutta
Okay, sir. Thank you.
Operator
Thank you. We’ll take our next question from the line of Ashok Jain, an individual investor. Please go ahead.
Ashok Jain
Yeah. I’m Ashok Jain from Mumbai. First of all, congratulations for wonderful results. Now I would like to ask one operations and then a balance sheet item and then, I mean, future projections.
So one first question is that, if I see this complex fertilizer, revenue has come down drastically. It has come down to INR261 crores against the June quarter of INR1,111 crores or INR1,972 crores previous year June quarter — I mean September quarter. But if I see that as far as segment liabilities are concerned, that has gone to INR772 crores as against the INR567 crores in the June quarter. So it looks something unusual. First of all, why, I mean, this revenue has come down? And second, how the liabilities has gone up?
Mr. Abhay Baijal
I’ll give you in two parts. First of all, I think if you refer to my opening remarks, I said that there were availability issues. Therefore, the sales were restricted. Therefore, the revenue came down. We sold out of stock and whatever we purchase. But you asked about — we had also contracted some amount of fertilizers at six-month kind of tenure terms, what is coming out in terms of the accounts payable side.
Ashok Jain
So how it has gone to INR770 crores? I mean this is INR205 crores increase in last one quarter, whereas the second is not there. So does it mean that we have added inventory out of proportion?
Mr. Abhay Baijal
Some stock has been carried forward, and that stock will be sold in this quarter as well as the next quarter.
Ashok Jain
Yes, because the overall stock level is at a static level, I mean, so that means we are having this inventory item, huge item of this complex fertilizers. I feel that we will be able to sell it in due time.
Mr. Abhay Baijal
Yes. We’ll be able to sell it, not hold.
Ashok Jain
And now coming to crop protection chemicals, here, I see that the revenue has come down from June ’24 quarter from INR342 crores to INR289 crores. So no doubt, I mean profitability is good. So I just want to know why revenue has come down this quarter? And this is an area where I think we should give more focus. Obviously, you must be doing.
Mr. Abhay Baijal
Mr. Jain, the point is, I made mention of the fact that there were late rains, unseasonal rains. And the fact that some of our territories had problem in terms of absorbing these chemicals in terms of the sales part. So this will be made up as we go forward.
Ashok Jain
But you feel that there is a good — I mean, because this is a good profitability business. So obviously, you are doing — giving focus to it. So do you see a good chance of — I mean, good growth in this?
Mr. Abhay Baijal
I would say that if you looked at the quarter two — first half year to half year, that could be a more correct analysis of the matter. See the numbers that we have said should not be seen quarter-on-quarter, but you should see kharif to kharif and rabi to rabi. And technically, one should see it half year to half year. And from half year to half year, you’ll see, it was from INR542 crores to INR632 crores, which is almost 17% Y-o-Y. And our profits are from INR119 crores to INR164 crores.
Ashok Jain
Yes, that’s good. Now coming to this joint venture, which we are having with Indo Maroc, so here, our profitability has gone up, it’s quite good. So do you feel that the same growth can continue there?
Mr. Abhay Baijal
See, this company has a production capacity running to about 40,000 tons per month. And so the two things that profitability depends upon are the contribution levels and the sales that are achieved. So as of that, if you were to look at the current situation and possibly looking a little bit into the future, things are on even key. I think they should be able to continue this performance.
Ashok Jain
Okay. Now coming to the balance sheet item. Here, if you see on the Page number five trade tables.
Mr. Abhay Baijal
Yes.
Ashok Jain
If you see the Page number five trade table, you will find that the total outstanding dues of creditors other than micro enterprise and small enterprises, it has shot up to INR2,012 crores. And secondly, the other financial liabilities has also gone up to INR690 crores as against INR406 crores and INR761 crores. So this is a huge liability has gone up. So I’m unable to understand why it is like this?
Mr. Abhay Baijal
I can tell you very in short terms, this is money that we owe to the government. There is a process called escalation and deescalation. Fortunately or unfortunately, we were receiving a little bit more subsidy from the government than was eligible. To that extent, this is payable.
Ashok Jain
That’s wonderful. Okay.
Mr. Abhay Baijal
But over a period of time, maybe in the next month, two months, three months, we will be paying that off, so this will normalize.
Ashok Jain
And now coming to the investment part, obviously, it has gone up, I mean INR2,783 crores. So if I see revenue coming out of it, that obviously seems quite low. I mean, first of all, I could not make out where it has been shown in the P&L. But still I feel, if it is suppose part in other income, then it is low. I mean, this is what I feel.
Mr. Abhay Baijal
Mr. Jain, it is like this that this part, which we owe to the government is actually converted into cash and placed as mutual fund investments. So to that extent, there will be interest income on that. That will be part of other income.
Ashok Jain
Okay. Now coming to the future, this expansion plan. If I see the balance sheet of last year, annual report, we are saying 240,000 MTPA technical ammonium nitrate plant and 210,000 MTPA at WNA plant. So here, I just wanted to know, how much approximately cost we are anticipating in it? And how much we have spent? And when do you think it can be completed?
Mr. Abhay Baijal
Could you repeat that? I couldn’t get it. You said…
Ashok Jain
Yes. I mean, if I see the annual report of last year, March, here it says that MTPA of technical ammonium nitrate plant, 10, we are thinking of 240,000 metric tons per year — per annum expansion. And the second is 210,000 MTPA WNA plan. So my question is how much do you feel that approximately cost of it? And how much we have already spent? And when do you think it can be completed?
Mr. Abhay Baijal
Okay. So you want to know what is the project cost. I think the Board approved project cost is about INR1,600 crores.
Ashok Jain
Okay. Both the plants?
Mr. Abhay Baijal
Sorry?
Ashok Jain
Is the INR1,600 crore for both the plants, am I right?
Mr. Abhay Baijal
Yes, yes.
Ashok Jain
Yes.
Mr. Abhay Baijal
And we have spent about INR400 crores.
Ashok Jain
When do you feel that this will be completed?
Mr. Abhay Baijal
We will be completing it by October ’25.
Ashok Jain
October, okay. But this INR400 crore is not showing in capital work in progress. Anyway, you are saying, because capital work in progress is around INR200 crores or so. So you feel that by October ’25, it can be completed.
Mr. Abhay Baijal
Yes, yes. Not a problem.
Ashok Jain
And…
Mr. Abhay Baijal
See what is happening is that these are milestone payments. There is an LSTK contract to Larsen & Toubro. They draw down on the basis of whatever work they have done, and it is as per the milestone payment, and it is according to schedule. The major payment will start happening once the equipment start rising. At the moment, it’s only advances and some given for the major equipment and construction activities.
Ashok Jain
So that when sales from the new that can come, I mean, after one year, we can expect that.
Mr. Abhay Baijal
No, no. Mr. Jain, the payment is no indicator of progress because the equipment orders are already placed. So as for milestone payments, the payment to the vendor will be made, they will draw the payment from us. So when the equipment arise, the majority of the payment will happen. So suddenly, you will see an increase in capital work in progress.
Ashok Jain
Okay. Good, good. So I mean, I am happy. Overall, I can say that the company has done extremely well, and we are very happy. And I will like to remain in touch that, obviously, I will, follow the due process. Thank you very much.
Mr. Abhay Baijal
Thank you very much, Mr. Jain.
Operator
Thank you. We’ll take the next question from the line of Harmish Desai from PhillipCapital. Please go ahead.
Harmish Desai
Good afternoon and thank you for taking my question. Is my voice audible?
Mr. Abhay Baijal
Yes, Mr. Desai, yes.
Harmish Desai
Sir, first question, on the TAN plant. You have given the update in the presentation that the amount spent up till September. Can you give an update of what is expected amount to be spent in FY ’25 on the TAN project by the end of FY ’25?
Mr. Abhay Baijal
Cumulatively, about INR600 crores.
Harmish Desai
Understood. Sir, coming to the crop production segment that you guys have been reporting, the performance has been consistently good in the first half. Can you, in brief, give an update of what could this be attributed to?
Mr. Abhay Baijal
I think we just answered this question when I was answering…
Harmish Desai
I’m sorry, I joined the call late for that. I’m very sorry for that.
Mr. Abhay Baijal
There’s reputation that we are actually a company who are creating value in the product through matching the expectations of the farmers, timely placement, good communication and the download and giving quality to the farmers, that is one part. Secondly, we have a range of products. Instead of — I think I had mentioned in my opening remarks, we have 62 products across all the three categories. So there is a range of crop, there’s a range of the insecticide — or insects or the weed or the fungus, which needs to be addressed.
So all of that goes through a process of our first testing it in our fields, understanding the value proposition, placing the value proposition properly to the farmer and then convincing him to buy our products in comparison to others. Plus our price points are very reasonable. We have always want to be value for money. And that approach has helped us. That’s why the growth is there.
Harmish Desai
Got it. Sir, some of your peers have reported some amount of product returns because of inconsistent monsoon season in the second quarter. Did we face anything like that?
Mr. Abhay Baijal
No.
Harmish Desai
Okay. And sir, we have been consistent in terms of our product placement. That is the reason why we did not face such problems?
Mr. Abhay Baijal
No, I think, first of all, we assess the market more accurately. We understand what the farmer is needing. We don’t pump up the channel just because we want to achieve those numbers. And as I said, the range of products that we have creates that flexibility with us. We have continuous discussions with our supply chain backward and forward. We take only that quantity, which we want to do. So these are things I think the management of the whole process of serving and providing product to the farmer, that is the most important issue.
Harmish Desai
Understood. And sir, any update on your market performance? The performance in the first half has been really good. So do you expect this to continue in the second half?
Mr. Abhay Baijal
Again, I would say that this question was answered by me earlier also. The company is on an even keel. We are producing about 40,000 tons per month. And given the situation and contribution which it is in, I don’t see any negatives coming up in terms of repeating the performance.
Harmish Desai
Got it. Sir, can you give us the volume of Gadepan-I and II and Gadepan-III for the quarter?
Mr. Abhay Baijal
I would ask Mr. Anand Agarwal to give you the numbers.
Mr. Anand Agarwal
Harmish, for G1 and G2, our numbers have been 5.71 compared to 5.51 last year and at G3, 3.62 compared to 3.57 in the last year.
Harmish Desai
Understood, sir. Sir, are there any plant shutdowns to be taken this year?
Mr. Abhay Baijal
Yes. Gadepan-III plant takes turn around — taken for turn around in the month of March 2025.
Harmish Desai
Understood, sir. Yeah, that is all. Thank you so much. Thanks so much.
Operator
Thank you. We’ll take our next question from the line of Falguni Dutta from Mansarovar Financials. Please go ahead.
Falguni Dutta
Sir, I had one more question on nano DAP. So what was the value of the sales for that in H1?
Mr. Abhay Baijal
We have sold about two lakh bottles. That is not nano P. That is biophosphorous. Please understand that it is not derived from a chemical process. It is derived from a biological process. That makes it a unique product.
Falguni Dutta
Okay. And this is a part of which of our segments?
Mr. Abhay Baijal
This is part of our specialty new plant segment in the CPC & SN segment overall.
Falguni Dutta
Okay. And obviously, this is outside subsidy, right?
Mr. Abhay Baijal
Yes, it is.
Falguni Dutta
Thank you, sir. That’s all from my side.
Operator
Thank you. [Operator Instructions] As there are no further questions, I now hand the conference to the management team for closing comments. Over to you, sir.
Mr. Abhay Baijal
So thank you very much for the brief and sharp exchange of views. I would say, thank you very much for listening to us, and we hope to continue to pay at value for you going forward. Thank you so much.
Operator
[Operator Closing Remarks]