Deepak Fertilizers and Petrochemicals Corp Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Deepak Fertilizers and Petrochemicals Corp Ltd (DEEPAKFERT) Q1 FY23 Earnings Concall

Q&A Highlights:

• Abhijit Akella from Kotak Securities asked about the gross and net debt of the company as of 1Q23 end. Amitabh Bhargava CFO answered that the gross debt is about INR2,900 crores and net is about INR1,930 crores.

• Abhijit Akella from Kotak Securities also asked how much capex has already been executed on the ammonia project and how much is pending. Amitabh Bhargava CFO replied that out of the INR4,350 crores estimate, the company has already spend a capex of about INR2,850 crores and the remaining will largely get incurred in completing the project that is likely to be commissioned in 1Q24.

• Abhijit Akella from Kotak Securities enquired about the company’s thought process in terms of finalizing any gas contracts. Amitabh Bhargava CFO answered that at the current market level, as the gas/ammonia prices are elevated, the margins are currently better than the start of the project.

• [Vidi Dadia of Vedant Securities] asked about the volume and realization trends in TAN and nitric acid. Amitabh Bhargava CFO answered that only thing to confirm at this stage is that 2Q is a quarter where the demand for TAN and nitric acid is on the lower side. Beyond 3Q, 4Q, the company is seeing good demand on the explosive and the nitric acid side.

• Chinmaya Bhargava asked if the company is continuing to look at solar grade nitric acid and if it falls in the concentrated nitric acid segment. Amitabh Bhargava CFO said the company is right now in the process of developing some of these products based on the requirement seen. Therefore, until the establishment of volume and value add, it’s difficult to guide on margins.

• Chinmaya Bhargava also enquired if the company is thinking about expanding its capacities in concentrated nitric acid after the TAN capacities. S. C. Mehta MD replied that it’s too early to tell and the company cannot give any guidance on that.

• Tejas Shah from Liz Securities asked about TAN prices and volume compared to 4Q22. Amitabh Bhargava CFO replied that QonQ, the increase in volume is about 12%, so the price calculation can be done.

• Darshan Jhaveri of Crown Capital asked that after the project completion, what kind of revenue can be foreseen for FY24. Amitabh Bhargava CFO answered that ammonia is for DEEPAKFERT’s own captive consumption. Therefore, on a consolidated level it won’t lead to increase in revenue.

• Darshan Jhaveri of Crown Capital enquired about 1Q23 growth and how much of it is sustainable going forward. Amitabh Bhargava CFO replied that there is headroom for capacity utilization if demand increases. So it depends on the volume numbers regarding growth sustainability.

• Sharan Nandikur enquired that for the remaining capex of 50% will it be through the QIP more or any other mode of funding. Amitabh Bhargava CFO replied that it will be largely through internal generation and the existing cash balance.