Coromandel International Limited (COROMANDEL) Q4 FY23 Earnings Concall Transcript

Coromandel International Limited (NSE:COROMANDEL) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Jayashree Satagopan — Chief Financial Officer

Sankarasubramanian S — Executive Director

Raghuram Devarakonda — Executive Director, CPC, Bio and retail Business

Analysts:

Harmish Desai — PhillipCapital India Private Limited — Analyst

Prashant Biyani — Elara Capital — Analyst

Naushad Chaudhary — Aditya Birla — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Vishnu Kumar — Spark Capital — Analyst

Tarang Agarwal — Old Bridge Capital — Analyst

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Unidentified Participant — — Analyst

S Ramesh — Nirmal Bang Equities Private Limited — Analyst

Resham Jain — DSP Asset Managers — Analyst

Presentation:

Operator

0Ladies and gentlemen, good day and welcome to the Coromandel International Limited Q4 FY23 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Harmish Desai from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Harmish Desai — PhillipCapital India Private Limited — Analyst

Thank you, Devin. Good afternoon, and welcome to the Fourth Quarter and Full-Year FY20 Earnings Call of Coromandel International Limited hosted by PhillipCapital.

From the management, we have Mrs. Jayashree Satagopan, Chief Financial Officer; Mr, Sankarasubramanian, Executive Director Nutrient Business; Dr. Raghuram Devarakonda, Executive Director, CPC, Bio and retail business; and Mr. Shanky Bhola, DGM, Finance. I would like to thank the management for giving us the opportunity host this call. We will begin the call with opening remarks from the management, post which we’ll have a Q&A session. Thank you, and over to you ma’am.

Jayashree Satagopan — Chief Financial Officer

Good afternoon, everyone, and thanks Harmish for organizing the conference call. I have with me Shankar and Raghu who will join me in responding to your quetions. Let me begin with giving an overview on the agricultural environment followed by the Company’s performance and then we will have the Q&A session.

As far as the Indian agriculture is concerned, the country witnessed above-normal rainfall during the last season. Monsoon for this year has also been — is also expected to be normal as per IMD with 96% forecast of rainfall. However, there are recent indications of El Nino for this year. Central and Northwestern regions may witness below normal rainfall. Overall, the reservoir levels at around 98% of last year and good sowing conditions, agricultural growth is expected to be stable.

Fertilizer industry performance — global supply of key commodities improved during the year and the industry continued to witness softening of prices of major raw materials. Domestically, the fertilizer demand has remained strong, supported by good monsoon and favorable policy measures from the government. Government of India during the year approved nano urea and nano DAP for the benefit of farmers of making the country self reliant through the critical time.

For the quarter, the industry volumes DAO and complex fertilizers primary sales was up by 62%. Current year it is 46.4 lakh metric tons vis a vis 28.7 lakh metric ton last year with higher imported DAP sale. DAP and complex fertilizer industry consumption indicated was marginally up by 2%. Raw material prices continue to witness a downward trend. On a year-to-date basis, DAP and complex fertilizer industry primary sales volume was up by 23%. And [Indecipherable] sales volume was marginally down by 1%. As far as Coromandel’s performance is concerned, during the financial year ’22- ’23 Coromandel delivered a robust performance, registering a strong growth in turnover and profitability with its diversified portfolio of nutrients, crop protection, bio products and retail business. Record volume sales in NPKs and high subsidy rates in the nutrient business primarily led to the increase in revenue during the year.

N Crop Protection business, domestic formulation and B2B business grew during the year, which was partly offset with the headwinds faced in the export markets. Coromandel ensured that Agri inputs are made available to the farmers in its key operating markets and promoted the use of balanced nutrition and integrated pest management to help rejuvenate the soil and farm productivity. Companies nutrient segment performance, nutrients and allied business segment revenue increased by 33% during the quarter and 63% during the year. The company’s fertilizer products registered a good growth during the year both in terms of turnover and profitability.

On the sales front, the business registered sales volume of 62.5 lakh metric tons during the quarter, which is 5% higher than the last year. For full-year, DAP and complex volume were 36.45 lakh metric tons vis a vis 33.22 lakh metric tons, which is. 10% above last year. Manifested and DAP complex volume was lower by 1% for the quarter and higher by 10% for full-year. Company’s market-share in Q4 including NPK and DAP was at 13.5% and for the full-year at 15.4%. Market-share for complex fertilizers grew during the full-year to 26.7% vis a vis 26.3% last year. As far as the SSP is concerned, Q4 sales was at 1.9 lakh metric tons with the growth of 19% over last year. And on a full-year basis, SSP business clocked 8.1 lakh metric tons with a 7.5 lakh metric ton compared to last year. Market-share went up to 13.9%, last year it was 13%.

Our commercial teams have continued to ensure timely deliveries of raw materials to enable continuous production at the manufacturing plant by staying abreast of the latest developments in the global market. During the quarter, our DAP and complex fertilizer plants operated at good capacity levels and produced 6.46 lakhs metric tons of fertilizer. On a full-year basis, plants operated over 90% of capacity and had a record production of 32.91 lakh metric tons of fertilizer and production during the quarter was at 0.67 lakh metric tons and for the full-year it was at 4.1 lakh metric tons.

During the year, Coromandel strengthened its backward integration capabilities in the Nutrient business by acquiring 45% shareholding in [Indecipherable] mining company in Senegal. Major capital expenditure projects like the sulfuric acid plant and the desalination plant are progressing wall as per the schedule. Company continued its focus on developing new products and during the year developed and tech product nano DAP, which aims to improve nutrient uptake, lower water consumption and minimize environmental loses. Company is setting up a plant in Andhra Pradesh and plans to launch the product in the second-half of 2023. With these initiatives, we will continue to promote balanced nutrition approach and support the farming community.

On the crop protection side, the business registered a growth of 11% in revenue for the quarter and 5% on a year-to-date basis. Domestic formulation witnessed good growth with positive traction from the new product launches made during the year and the previous year. The cost lag effect and price-related challenges in [Technical Issues] impacted our export business. A new pre-emergent herbicide Claro was launched during the quarter. With this, a total of eight new products have been introduced during the year.

The R&D has product registration teams are working closely on a rich pipeline of new and combination products to be launched in the coming year. The business is further activating, some of it registrations in the global market through collaboration with key B2B customers. Multipurpose plant at Ankleshwar for manufacture of three new technicals have been commissioned and two products have been commercialized in the last quarter. The business is purchased 50 acres of additional land at Dahej for the green field expansion.

On the CapEx front, company recently-announced investment of INR1,000 crores, where it intends to invest in crop production business primarily in-building of new multipurose plants and also plans to leverage its technical expertise and manufacturing infrastructure to foray into adjacencies like CDMO and specialty chemicals.

On the Bio-Products, the business is working on other plant extracts to expand its offerings. Azamax, an insecticide was launched in the market. On the manufacturing, bio business is under implementation phase for DCA system filtration and concentration project. The retail stores operated well during the quarter, focusing on providing all round agri solutions, including products, farm advisory and mechanization services. The business launched a new e-commerce platform and has received good response of the end-customer. Retail business has improved its operational efficiencies and has leveraged technology to reach out to farmers.

In Q4, 97% of the stores were profitable as they focused on high-margin products and operated with negative working capital level. Company continued to promote ag tech solutions to farmers and started piloting cold storage solutions through the retail network, it further plans to scale-up the drone applications after successful completion of pilot test in its key operating market.

With that, let me take you through the company’s financial performance. Turnover, company recorded a consolidated total income of INR5,523 crores during the quarter and INR29,799 crores during the full-year. Via a vis corresponding period where the total income was INR4,304 crores for the quarter and INR19,255 crores for the full-year. This represents a growth of 28% for the quarter and 55% on the full-year. The increase in revenues is attributable to higher raw-material prices, which hash driven a higher MRP and high subsidy realization as far as the nutrient business is concerned.

Nutrients and allied business contributed to 89% share and the remaining 11% is from the Crop Protection business for the quarter and for the full-year the ratio is at 91% and 9% respectively. Subsidy and non-subsidy share of the business stands at 84% and and 18% for the quarter and 87% and 13% for full-year. Profitability, consolidated EBITDA for the quarter was INR403 crores against INR380 crores last year and full-year it was INR2926 crores against INR2150 crores in last year.

In terms of subsidy, non-subsidy share, it stands at 66% and 34% during the quarter and 75% and 25% for full-year. Previous year it was 59% and 41% during the quarter and 70% and 30% for the full-year. Net profit-after-tax for the quarter was INR246 crores in comparison to INR290 crores for the corresponding quarter last year, and the INR2013 crores for the full-year against INR1528 crores last year. Subsidy during the quarter, company received subsidy of INR4,483 crores. For full-year subsidy received amounts to INR12,477 crores. Previous year figures INR70,77 crores for the full-year. Subsidy outstanding as on 31st March 2023 was at INR2,378 crores against INR294 crores which was outstanding in the previous year.

During the quarter, company earned interest income, this is excluding the India adjustments of INR3.8 crores vis a vis the net income of INR32.7 crores in the same quarter last year. For the full-year, net interest income earned was INR4.3 crores. During the year, the company had elevated working capital requirements, primarily due to higher raw-material prices as well as the higher subsidy outstanding from the government, which the company-managed through taking suppliers and buyers line of credit.

Coromandel maintains a surplus funds of approximately INR3,000 crores in Board approved securities and these are earmarked for specific growth-related investments apart from funding the capital expenditure to drive at the company. On a net basis, the company ended the year with a surplus of about INR3,111 crores, including cash-on-hand. Credit rating, the company’s balance sheet continues to be strong. During the quarter, company’s long-term credit rating by CRISIL has been upgraded from CRISIL AA+/Positive to CRISIL AAA+/Stable. And the short-term debt rating continues to be at CRISIL A1+. The company’s long-term credit rating by India Ratings and Research, a Fitch group company continued to be be IND AAA stable and short-term rating at IND A1+.

Forex during Q4 rupee traded in a broad range between 80.89 and 82.96. The company continued to follow a prudent conservative approach of hedging the ForEx exposure, which has immensely helped in limiting the impact of currency fluctuations. Dividend, the Board in its meeting held on 14th of May 2023 has recommended a final dividend of INR6 per share along the interim dividend which was declared and paid earlier, the total dividend for the year is INR12 per share, in line with the prior year.

As the Indian economy continues to progress well, healthy reservoir levels, good soil moisture conditions and a forecast of a normal monsoon, all these augers well for the Indian agriculture sector. As the leading agri solutions provider, Coromandel will continue to promote integrated farm practices and brings prosperity to the farming community. In terms of financial performance, this has been a great year and we expect the momentum to continue in the coming years.

Thank you for your interest in Coromandel and joining us in the concall today. With this, we can open the session for question-and-answers and we look-forward to the interactions. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Prashant Biyani from Elara Capital. Please go-ahead.

Prashant Biyani — Elara Capital — Analyst

Yeah, thanks for the opportunity. Ma’am, we had announced investments in crop protection and specialty chemicals a few weeks back. Any investment that we have freezed on the fertilizer side?

Jayashree Satagopan — Chief Financial Officer

What we shared with you, Prashant, is only part of the overall investment that we had 2024 and 2025, specifically on crop protection and specialty chemicals which is INR1,000 crores. We also have investments planned for fertilizer, specialty nutrient and the Bio Products for the company. Overall for 2024, we have settled projects of about INR2000 crores that has been identified, which includes major capital expenditure, which includes some of the normal annual CapEx as well.

For fertilizers, we have plans to set-up the nano DAP facility. There is the capacity expansion and debottlenecking that is happening in these plants at Vizag and Kakinada. Apart from that, we are looking at increasing the valuation capacity in our F&B plants. So overall for the company its about close to INR2000 crore of CapEx.

Prashant Biyani — Elara Capital — Analyst

So out of INR2000 crores around INR1,000 crores could be for fertilizers?

Jayashree Satagopan — Chief Financial Officer

I would say about INR700 crores to INR800 cores would be for fertilizers.

Prashant Biyani — Elara Capital — Analyst

And by when can we setup the granulation facility?

Jayashree Satagopan — Chief Financial Officer

The granulation is for F&B. We have powder and we have granulated it. So we are looking at increasing the capacity of granulated F&B. On the fertilizer front, we are working on several actions, including use of data analytics to see how we can improve the capacity for granulation within our existing facilities.

Prashant Biyani — Elara Capital — Analyst

And if we are trying to do it in-house, then would that expansion be of more than 10% of the existing sites?

Jayashree Satagopan — Chief Financial Officer

It depends. Currently, we are looking at — there is some work that has already happened in Kakinada due to the biggest debottlenecking and also using multiple raw material sources which can actually help in throughput increase. We seen some benefits flowing in FY23 and we expect it to accelerate during the year. We continue to work on debottlenecking and increasing the capacity in-house depending on the market conditions as we have maintained earlier, we will also look for opportunities to import. You may appreciate during the last year, most of the DAP that we sold in the market we had come through our increase because we were able to then purposefully use the facility for manufacturing the other NPK grade. So we’ll be looking into all these options to maximize on our capacity utilization.

Prashant Biyani — Elara Capital — Analyst

And how are we placed on the channel inventory because the industry I believe is sitting on a higher side of the inventory. So if you can just give an idea on our channel inventory position.

Jayashree Satagopan — Chief Financial Officer

Shankar, do you want to…

Sankarasubramanian S — Executive Director

Channel inventory industry has got a huge amount of stocks DAP, as well as NPK. Majority of these stocks are lying with the importers who have contracted these volumes in the 4th-quarter. As Coromandel, we focus more on manufacturing. Our inputs are mainly to meet the demands as and when required. So our channel inventory is one if the lowest and we continue to maintain that. So we do not have any issue on the channel inventory.

Operator

And ma’am, lastly… We request you to please rejoin the queue for further questions. Ladies and gentlemen, we request you to please restrict your questions to two questions per participant. For follow-up questions, you may be rejoin the queue. The next question comes from the line of Naushad Chaudhary from Aditya Birla. Please go-ahead.

Naushad Chaudhary — Aditya Birla — Analyst

Hi, thanks. Just extension on the previous question in terms of the cash deployment I understood you explained your plan for FY24, but looking at the cash-flow we have and existing surplus, beyond FY24 what is the outlook, what are we planning and how are we planning to use this cash and which part of the business would attract more investment?

Jayashree Satagopan — Chief Financial Officer

So good question, Naushad. Thanks. As we had indicated in the past, we are looking into opportunities to grow the business both organically and inorganically, right? For the current year as I was mentioning there is about INR2,000 crore of capital expenditure that is being looked into. The cash-flow might be during the year and spillover into next year. Having said that, we are also looking into further opportunities depending on the attractiveness, the synergies and what it could do to Coromandel in medium to long-term. That exercises is on. The intent is obviously to see how we deploy the funds into business for us to get a longer-term sustainable profitable growth in Coromandel. So the management is focused and working on that aspect.

Naushad Chaudhary — Aditya Birla — Analyst

Can we get into little bit of granularity exactly which area we are looking into? You had talked about CDMO and specialty a possibility, but if you can help us understand broadly in which kind of chemistry we must be targeting, in which kind of end-user industry we are looking at and how would it seem to our existing competencies?

Jayashree Satagopan — Chief Financial Officer

Some of these are very strategic in nature as you will appreciate. Last year we looked into a BNCC investment. And we were able to come and talk to you once we were more or less there. Similarly, there are multiple proposals that the company is looking into. There are growth — high-growth opportunities like specialty chemicals and CDMO which we’ve already spoken. So some investment is committed from the company. If there interesting opportunities coming in these areas, definitely we will be looking into it. And I’d request to hold this on until we come up with something where we can specifically come and talk to you about.

Naushad Chaudhary — Aditya Birla — Analyst

Alright. I’ll come back-in queue.

Jayashree Satagopan — Chief Financial Officer

Thank you.

Operator

Thank you. The next question comes from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go-ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Good afternoon. Ma’am, and congrats on the AAA rating. My question is on the debt levels in the company. This year like your rightly pointed out because of increased government subsidies you’ve managed with stretching creditors. The first question that I had is, are these creditors interest-bearing. In any case — in any way or there’s not interest costs in it? And the second thing is given you large INR2000 crore CapEx plan, do you expect that the borrowing levels will go up in the current year or how do you see the ebb and flow of creditors versus debt levels? Thank you.

Jayashree Satagopan — Chief Financial Officer

Yeah, thanks, Vivek. The elevated working capital requirement was met through extended credit terms, in some cases while the supplier has sort of accommodated, in other cases where we have taken a loan through the bank. There is an interest component into it. As far as capital expenditure program of INR2000 crores is concerned, we intend to fund it internally through our existing resources. Over the last five years plus, we have not resorted to any long-term borrowings for capital expenditure. I think there is enough cash accruals that happens on a yearly basis. That would be best deployed in these investments.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Okay ma’am. Thanks. That’s my only question. Thank you. Good luck.

Jayashree Satagopan — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Vishnu Kumar from Spark Capital, please go-ahead.

Vishnu Kumar — Spark Capital — Analyst

Thanks for the time ma’am. Just on the NBS rates that you have taken, could you just help us understand what is the NB and NPK rates that you’ve taken and what is the impact in the first-quarter, sorry, this quarter, in the 4th-quarter how much impact we have taken.

Jayashree Satagopan — Chief Financial Officer

So Vishnu we have made an estimate on the rate based on the falling raw material prices. As you know, the RM prices have been coming down over the last few months and we expect the trend to continue. I do not currently have the rate right in front of me. These are our best estimate that we have taken. And based on that, the adjustments for the quarter has been done. I would also like to indicate that based on our interactions with the DOS, we expect the subsidy rates to be moderated 1st as of January or 1st of April. So there are two corrections that are likely to happen. On the first 1st January it will have double impact. One, in terms of the subsidy income itself, the other one in terms of the channel inventory. And obviously for 1st April the channel inventory will commence. So appropriately this has been considered factored in. I do not have the exact rate incentive [Technical Issues]

Vishnu Kumar — Spark Capital — Analyst

So for both Jan and April both numbers have been already considered. So no more — we should not expect anything in first quarter.

Jayashree Satagopan — Chief Financial Officer

As I said, we have made a judgment based on what would be the best possible rate and I do not see reason for any major variation to comment first-quarter.

Vishnu Kumar — Spark Capital — Analyst

Understood. And on the INR1,000 crore investment in the Chemicals business, if you could just help us understand timelines of plant commissioning, what level of contracting are we there, and very recently China has again started — we understand from multiple companies that they’ve started dumping a lot of products. Does it impact at least some part? Do we see some impact in our investment thesis on this side.

Jayashree Satagopan — Chief Financial Officer

Kay, and again a very good question, Vishnu.. Out of the INR1,000 crores, the first and foremost what we wanted to do was to also purchase additional land for our crop protection business. We had identified as a plot in in Dahej. In a very-very short-term, the business has worked on, procured the land it is now ready, it’s got registered as well. That has happened in the last one week, the registrations are completed. Apart from that, the three proposals of the business is working on. One is for a multipurpose plant, especially for the fungi side which will be coming up at Ankleshwar. They have submitted the business proposal and it is in the final stages of approval internally. The second large multipurpose plant is planned to be set-up in Dahej, aain in our existing facility. That will also be on the funding fungi side front. The 3rd one, this is relating to herbicides is going to be set-up in the newly-acquired plots at the Dahej For all of this, the business has identified about 18 molecules which were off patent in the recent past. Three of them will come out of Ankleshwar. And two of them has already been even commercialized in the last quarter.

Now as the business case gets developed, we also look into the global trends in terms of pricing, capacities, the existing new capacities that are coming up in China and India, and accordingly it gets factored in, in the decision to invest. So it go through a very thorough scrutiny before we put in our money in setting of these plants. Unlike in the past, the reason that we are doing a multipurpose plant is also to give the flexibility so that we are not stuck with one-product. For instance the Mancozeb plant is only doing Mancozeb, right? Whereas when we are looking into a plant for doing a and few other molecules, five molecules can be done out of a large multipurpose plant. It is to give the flexibility so that if there is a demand fluctuation or a price fluctuation, the business can accordingly tweak and produce. So we feel quite comfortable with this approach.

And in terms of the project — each of the projects as they start is expected to take between 18 to to 24 months to get completed. The first set of proposal has come and it is almost in the final stages. Others will come in during the year, will get reviewed and updated.

Vishnu Kumar — Spark Capital — Analyst

Any percentage is contracted. I mean, or its currently completely open or any contracted — any contracting is done as of now for the capacity.

Jayashree Satagopan — Chief Financial Officer

This is not for CDMO. These are primarily technical plants. They have registrations globally and in India. On the CDMO front, there has been interest from some of our innovators. They come and visited our plants. And we are making a very humble start in terms of getting an NDA signed and possibly looking at one or two smaller lot which can be given to them. Raghu, do you want to add something. Yeah, I think that’s fine.

Operator

Thank you. The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go-ahead.

Tarang Agarwal — Old Bridge Capital — Analyst

Hi, good afternoon and thanks for the opportunity. Two-three questions from my side. One, your manufactured volumes grew by about 10% this year. I think it’s got do with the debottlenecking that happened in Kakinada and Vizag. How should we see the manufactured volumes from here on? Does the business have capacity to grow these volumes in the current year or two years from now? That’s one.

Second, for the crop protection business for FY23, if you could give us a sense on the split between export of technicals, B2B domestic and B2C formulation. How are these in the in FY22. And third, the INR2000 crore of CapEx that’s been deployed, my sense is about INR1,000 crores of spec chem, INR700 croresto INR800 crores of fert and the balance INR200 crores to INR300 crores. So will all it be be deployed in FY 23, one. And second, in the other part, which is the INR200 crores to INR300 crores of remaining figures, what would that be in relation to.

Jayashree Satagopan — Chief Financial Officer

As far as the manufacturing volumes of fertilizer is concerned, there are two-three component that goes into it. One is the mix. There are certain products if you manufacture the throughput could be lower compared to others. So we optimize the mix. The second thing is the debottlenecking that happens in the plants and the 3rd is the raw materials that we use, which can also have an influence in the throughput. So a combination of all of this, we achieved a closer to a 10% improvement in the manufactured volume last year. Going forward, there still lots that is happening at the plants. We expect a 6% to 10% improvement in the manufacturing volumes even in the coming year. And that should be possible.

As I said, the company consciously looked at importing VAP versus manufacturing which has helped us in the last year. We are continuing to explore such options to see how we can manufacture products which can give us higher-volume. As far as CTC is concerned, you were looking into the revenues numbers for domestic formulation, B2B and exports. During the current year, our domestic formulation overall for this segment is about, you can say roughly about INR700 odd crores and remaining coming from domestic B2B and exports, both of them are in similarly ways about INR780 odd crores with domestic B2B and the balance coming from exports.

As we have mentioned in the commentaries earlier, we have seen a good growth in domestic formulation. B2B has seen some growth. Exports is where we faced headwinds mainly because of the prices of Mancozeb and similar molecule having issues in terms or more supply than demand and impact on raw material prices. Your third point was regarding the CapEx of about INR2,000 odd crores, INR1000 crores goes into CPC mainly for the multipurpose plants and using the existing infrastructure which requires modifications for specialty chemicals and CDMO. We have a large chunk going into fertilizers and SSP and some amount that goes in biproducts. That’s how the entire INR2000 crore is split into. And we expect this cash outflow to happen over a period of couple of years. As we place the orders, some of these are going to be 18 to 24 months in terms of time taken to complete the construction. At the same time, from last year projects where we are talking about SAP3 as well the desalination plant, which will get commissioned in July-August this year, you may see some cash outflow. So aAll of these will be funded from our own internal accruals and we are not expecting any borrowing. I hope this clarifies your questions.

Tarang Agarwal — Old Bridge Capital — Analyst

Yes, just one follow-up. What would be the current maintenance CapEx for your current manufacturing footprint?

Jayashree Satagopan — Chief Financial Officer

You can take about INR300 odd crores.

Operator

Okay, thank you. Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited. Please go-ahead.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Hi. Thanks for the opportunity and congratulation Jayashree and team. Can you give little more color on these non DAP opportunity from two to three years perspective, how much CapEx we are doing and availability of import? Whether again it’s the same imported or is domestically available? If you can give a little more color.

Jayashree Satagopan — Chief Financial Officer

Yeah. I think this is an interesting question. As Shankar is in the call, I’m going to request Shankar to give a color on nano DAP.

Sankarasubramanian S — Executive Director

Yeah, this project we have just. In the market. We are distributing to the farmers to get their first-hand experience of this product. Our field trials indicate there is a possibility of 50% replacement on the current dosages in the various crops. And the behavior of this product also varies from crop to to crop. Crop with high foliage we have seen with good response. In some crops like paddy and wheat the response has been relatively muted. So at this point of time it is very difficult to see to what extent the demand will pickup because this needs to be accepted by the the farmers.

Our focus will be for the next six months to try this product with the farmers and take their inputs and midcourse correction of the product, and accordingly our capacity will be moderated depending on the market response. So as we see in the current year the in our facility for [Technical Issues] depending on the market response we will scale up the volumes. This investments are relatively small and it’s faster to make it so we don’t have any challenge if the demand really picks up.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

I mean input availability.

Sankarasubramanian S — Executive Director

There are no challenges in terms of raw material [Technical Issues]we have no challenges in securing those raw materials.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Okay. Jayashree, one more question on this chemical side that we said that we will be going for industrial chemical. So can you give a little more sense on that?

Jayashree Satagopan — Chief Financial Officer

Yeah, definitely. I have Raghu with me and he can share some of these inputs and I can add subsequent to his comments.

Raghuram Devarakonda — Executive Director, CPC, Bio and retail Business

Yeah, so some of our current products itself find use in specialty chemicals industry. So that is our first phase so that we diversify our customer base. and subsequently we plan to leverage our existing facilities infrastructure to similar chemistry based products for different target industries in the specialty chemicals space. And finally as Jayshree mentioned as far the INR1000 crore investment, we are also identifying molecules for which we will be making specific investments to cater to specialty Chemicals segment [Technical Issues] in which we are looking at opportunity, starting with our existing products [Technical Issues]

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

And is it possible to give us little more color, which industry arre we targeting as the user base.

Raghuram Devarakonda — Executive Director, CPC, Bio and retail Business

Yeah, for example, paints and coatings. They use some fungi side.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Okay. And Jayashree color on that CapEx for this industrial chemical.

Jayashree Satagopan — Chief Financial Officer

The overall CapEx is about INR1,000 crores, which includes multipurpose plants and some amount of CapEx, which may be required to do some infrastructural changes to cater the specialty chemicals Industry. Because as Raghu was mentioning, there are opportunities to the current intermediates which we are doing which could get up to multiple segments. So that’s the low-hanging fruit that we want to first address. As we do it, the business is also working on further opportunities in several segments in the specialty chemicals area. There will be presenting in the next couple of months a very detailed business plan. What does it require further in terms of investment, returns, that once it is approved may call for further investments also. I think it will be better that we can come back to you in terms of the specifics on specialty chemicals probably in the next investor conference call or a little later once we are internally cleared and reviewed the proposal for the business much more in detail.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

And last question on CPC side, all supply-chain headwinds are almost over. So how do we now see the improvement in the profitability in the CPC business?

Raghuram Devarakonda — Executive Director, CPC, Bio and retail Business

[Technical Issues] supply chain side. But also it depends on the agro-climatic conditions and the pest incidence. There are several other external factors [Technical Issues] to track these trends in the in the market and we make sure that in our topline for the cline are adequately addressed and significant progress being made in the area of improving efficiency in our operations [Technical Issues] I would say we are very well placed is because of the efficiency improvements and also our internal processes to respond to the market trends. So it’s just not supply chain.

Bharat Sheth — Quest Investment Advisors Private Limited — Analyst

Okay, thank you and all the best.

Raghuram Devarakonda — Executive Director, CPC, Bio and retail Business

Thank you.

Operator

Thank you. The next question is from the line of from [Technical Issues] IIFL Securities. Please go-ahead.

Unidentified Participant — — Analyst

Hi, thanks for taking my question. Just. Had to first question on the nano DAP. The first is that we’re doing — do we think that you know — ow much of a volumes will be replaced by nano DAP? Are we going to push a product by replacing our existing volumes? Are we going to build upon what we are already selling in the market. And secondly in terms of EBITDA per ton that we have guided towards 5.000 to 6,000 does nano DAP also bring in the similar levels of margin or is it significantly different from what we’re doing right now?

Jayashree Satagopan — Chief Financial Officer

On the margin front I think we will be very similar range between the current year and the coming year. I’m going to once again request Shanker to comment on the nano DAP, the adoption, what we see now in the light of what happened with nano urea that has been introduced and some of the trials that we have taken in nano DAP. Over to you Shanker.

Sankarasubramanian S — Executive Director

The cost of reputation I will say, we need to wait for the market response. Right now we have got a product which is the full-year application, and we are targeting those states which has high input content of DAP. Basically, this is going to have a substitute for DAP. And adoption makes the difference. So if there will be yearly adoption declined, replacement of 50% as we see in our client because in some of the university trials we seen there can a potential replacement of 50%, which means the high imported DAP consuming stats can find better traction for this nano DAP.

And in some farmers may take this as an add-on because it also helps in improving the yield. So if people are habituated to DAP application at the basal stage as a soil application, this comes at a later stage. So we are not sure at this point that we have to see definitely whether it would be an add-on or a substitution. It depends on result for the experience because it goes with the crop, agro climatic conditions, moisture in the soil and the timing of applications and the combination they do it with other on the spraying packages. So we need to wait-and-see. It’s too premature to comment whether this can replace DAP immediately. We do see a potential in the long-run, at least in this period of five to seven years 20% replacement seem to be a definite possibility, but these are all empirical data point we have, but we need to wait-and-see how the pharma adoption.

Unidentified Participant — — Analyst

Okay, got it. And just out of the FY23 sales, how much would be the imported DAP sale currently.

Sankarasubramanian S — Executive Director

Coromandel or for the India..

Unidentified Participant — — Analyst

For Coromandel.

Sankarasubramanian S — Executive Director

For Coromandel we do predominantly imported DAP only, 4 lakh tons.

Unidentified Participant — — Analyst

Okay. Got it, and we did a EBITDA per ton of roughly 6.5,000 odd tons this year. So are we maintaining that guidance going forward? Just wanted to clarify that.

Jayashree Satagopan — Chief Financial Officer

Our EBITDA per ton would be in the range of about 5,500, you have to look at the full-year. And that’s something that we would be in a position to follow.

Unidentified Participant — — Analyst

Okay, fine. Thank you so much.

Operator

Thank you. The next question is from the line of S Ramesh from Nirmal Bang Equities Private Limited. Please go-ahead.

S Ramesh — Nirmal Bang Equities Private Limited — Analyst

Hello, good evening, and thank you very much. I have the following questions. One is, in the crop protection chemicals business what is the kind of volume growth you have done in domestic and exports in FY 23 and how do you see the volume growths shaping up in domestic and export in FY24 for.

Jayashree Satagopan — Chief Financial Officer

We did not have a volume growth in CPC. It’s been more or less flat. As I was mentioning, there’s a lot of headwinds primarily in Mancozeb been dropping out and therefore it was wiser in our part not to produce and predicate the lower price.. Going into next year, while we have our own internal budget and our planning process, the call will be taken depending on how the market conditions come in as far as the largest molecule currently in our portfolio Mancozeb is concerned. As we embrace the portfolio and bring in new products, which will actually help us in derisking from the old molecules that we currently have.

S Ramesh — Nirmal Bang Equities Private Limited — Analyst

Okay, so when you’re looking at your new investments in CDMO and specialty chemical and the active ingredients to start with, what is the timeline for these investments to start adding to your revenues and what is the kind of percentage margin you will expect compared to the current margins in the CPC business?

Jayashree Satagopan — Chief Financial Officer

Yeah, the projects once it is approved, we’re expecting anywhere between 18 to 24 months for completion because these are large plants. One of the three proposals is already in the final stages of approval. The other two would come in in the next three to six months time. And as we phase out these projects as they get completed in three years time, which we expect these to come to a peak capacity with a multi-products that we are having, we are expecting a INr2000 crore to INR3,000 crore of revenue from these investments to come in. The EBITDA margins should be in the range of 16% to 18% for the new molecule. Again, as I was mentioning a little while earlier, we are building a lot of flexibility in the plants with the capability to handle multi-products so that if there is any challenge in terms of volume, pricing, margin for one of those, we can quickly shift to other molecules and therefore maintain a stable margin profile. So that’s the expectation as far as the CPC investments are concerned.

S Ramesh — Nirmal Bang Equities Private Limited — Analyst

Understood. If I might squeeze in one last thought. So if you’re looking at — talking to innovators four contracts, when do you expect to finalize. contracts for the CDMO business in terms of timeline?

Jayashree Satagopan — Chief Financial Officer

So you must be aware that tis is a little longed on process, right? Establishing connect, the customers coming and visiting the facility, clearing it, timing of NDAs, giving certain molecules for us to sort of work-out the initial proto pack and send it to them for validation. At this point in time, one of our customers is in the final stage of getting the NDA and the initial order to us. We have hired a business development manager for CDMO, Who is pretty new in the system and over a period in time this team will start working with the innovators, both in Europe as well as in Japan, have then visit, interact and work through it. So I think in the next couple of years we should see some good traction in this area. At the same time, if there are any other opportunities that comes in our way working with these innovators with our existing facilities per se, that will also be explored.

S Ramesh — Nirmal Bang Equities Private Limited — Analyst

Thank you very much and wish you all the best.

Jayashree Satagopan — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Resham Jain from DSP Asset Managers. Please go-ahead.

Resham Jain — DSP Asset Managers — Analyst

Yeah, hi. Good afternoon team. So I have two questions. So first is, a few years back we used to have this target of having 50:50 split between subsidy, non-subsidy, EBITDA. So we haven’t heard on that because subsidy business has been doing quite well. But going forward, let’s say, three years, four years out, how do you see the mix given that there is incrementally higher focus in the non-subsidy business.

Jayashree Satagopan — Chief Financial Officer

Resham, good question. While we maintain that 50:50 has to come from subsidy and non-subsidy, the profession always has been to look into each of these business on its own merit. As you also observed the subsidy business has been doing pretty well and therefore we are seeing a benefit of higher EBITDA coming in from that business.

On the CPC front, in the past we haven’t made as much of an investment either in terms of backward integration or setting up a new multipurpose plants. So that’s currently the focus. The products can give us margins but to a certain extent. We need to enrich our portfolio, which started happening in the last two-three years in terms of the product development teams working on multiple molecules, coming up with new combinations and that has helped our domestic formulation business. However, if we have to look into the global business and exports that we have, we have to definitely enrich our portfolio and that is the reason for us to work on our long-term strategic plan, identify 18 odd recently patented molecules, 30 odd combination which will improve the requirements of both global and Indian conditions. For that, a certain amount of investment has been committed. The first step in terms of setting up a plant for azoxystrobin, picoxystrobin and cyproconazole has been done. Further investments will happen in the next one to two years. So we will see an uptick there and also foray into specialty chemicals, CDMO, which is in the right direction.

There is also big focus on the specialty nutrients business if you look it, because we see that the future of fertilizers could be [Indecipherable] fertilizers, special grade for crop fertilizer, slow release, so on and so forth. The Nano DAP is also a step-in that direction. This is non-subsidy. As nano DAP picks up, while it may be part of the nutrient business, it also augers well with the overall objective of the company to focus on the non-subsidy business. The biochemistry is another very interesting area. While we have been focusing on [Indecipherable] in the past, there is scope for us to do more in terms of other plant extracts and the business is actually working them. We also have a couple of very interesting microbials which are in the good stage of development. Tie-ups with agriculture universities on research who are also going to help us in some of these plants. So overall I think there will be a good balance between subsidy and non-subsidy as we go-forward.

Our business which are doing well will continue to do well and we will have our investment there too. We don’t want to be constrained by the fact that we want to be a 50:50 of subsidy and non-subsidized. I hope that clarifies.

Resham Jain — DSP Asset Managers — Analyst

Okay. My second question is on organizational structure we made certain changes and now we have divisional CEOs rather than CEO at the company level. So we have not operated in this kind of structure earlier. So if you can give or share any thoughts around this because the responsibility seems to be split and there is no one at the top from your perspective.

Jayashree Satagopan — Chief Financial Officer

We have had both Shankar and Raghuram with the company for sometime with us and they have been running the operations, while we definitely had an MD for the company. Both Shanker and Raghu comes with rich experience in their respective fields. And we have at a corporate level [Indecipherable] over seeing these operations. This structure provides lot of nimbleness in terms of looking into the businesses per se, helping increase decision-making. Both the Directors have been empowered to handle their respective areas. There is a monthly Council, where we work together with all the businesses to look at areas where there are best practices to adapt. Each of them have their own areas to focus and grow. These are large businesses, right? Each have their own priorities and I think its best to shuffle it in a way that can enable good focus, growth and opportunities to excel. So as a company we find it pretty comfortable working through this structure.

Resham Jain — DSP Asset Managers — Analyst

Okay, perfect Ma’am. Thank you.

Jayashree Satagopan — Chief Financial Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Jayashree Satagopan for closing comments. Over to you, ma’am.

Jayashree Satagopan — Chief Financial Officer

Well, thank you all for your continued interest in Coromandel. Appreciate your time and your questions if there are any further questions that we could respond to you, please feel free to reach out to Shanky or to me, we will be happy to connect with you. Thanks again.

Operator

[Operator Closing Remarks]