Deepak Fertilizers and Petrochemicals Corporation Limited (DEEPAKFERT) Q1 FY23 Earnings Concall Transcript

Deepak Fertilizers and Petrochemicals Corporation Limited (NSE:DEEPAKFERT) Q1 FY23 Earnings Concall dated Aug. 01, 2022

Corporate participants:

S. C. Mehta — Chairman and Managing Director

Amitabh Bhargava — President and Chief Financial Officer

Mahesh Girdhar — President – Crop Nutrition Business

Analysts:

Ranjit Cirumalla — IIFL Securities Limited — Analyst

Jinesh Gada — Individual Investor — Analyst

Abhijit Akella — Kotak Securities — Analyst

Unidentified Participant — — Analyst

Darshan Jhaveri — Crown Capital — Analyst

Sharanu Nandikur — Individual Investor — Analyst

Tarun Dhingra — Individual Investor — Analyst

Kartik Nagavi — Individual Investor — Analyst

Madhav Marda — Fidelity — Analyst

Meet Vora — Axis Capital — Analyst

Nishith Shah — Aequitas Investment — Analyst

Priyan Purohit — KamayaKya Wealth Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Deepak Fertilisers and Petrochemicals Corporation [Phonetic] Limited Q1 FY ’23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir.

Ranjit Cirumalla — IIFL Securities Limited — Analyst

Thank you, Ranju. Good evening, everyone. Thanks for joining us for Deepak Fertilisers Q1 FY ’23 earnings conference call. Today, we have with us from the management, Mr. S. C. Mehta, Chairman and Managing Director; Mr. Mahesh Girdhar, President, Crop Nutrition Business; Mr. Tarun Sinha, President, Technical Ammonium Nitrate; Mr. Amitabh Bhargava, President and Chief Financial Officer; and Mr. Deepak Balwani, Head, Investor Relations.

I would like to invite Mr. S. C. Mehta to begin the call with his opening remarks. Thank you, and over to you, sir.

S. C. Mehta — Chairman and Managing Director

Thank you. Very good afternoon to all of you. I take indeed pleasure in welcoming you all for the Q1 FY ’23 earnings conference call of Deepak Fertilisers. I hope you all have had a chance to look at the financial statements and earnings presentation uploaded on the exchanges and our website.

So at the outset, let me share my joy in bringing to your attention that we’ve seen in Q1, the revenues crossing INR3,000 crores and an almost 59% jump over last year same quarter. But beyond that, the profits have crossed INR436 crores, a jump of 233% over last year. And we saw almost over 87% of our segment profits were contributed by the Chemical segment. And all of this, despite a huge jump in all the raw material costs that we saw. So obviously, two aspects that could emerge in anyone’s mind, and I thought I’ll share some of those insights, and then, of course, draw you — draw Amitabh, our CFO, to take you through the details.

So if I were to look at three undercurrents, besides the price increases and the broad turmoil that all of us are seeing because of the Ukraine war and other things, but if one were to look at a fundamental level, we have three undercurrents that I saw. So one is at the macroeconomic level, we continue to see an excellent alignment with the India growth story that all our businesses are having and particularly the Chemical segment. So be it mining, infrastructure or China Plus One shift, all of it bringing in a good positive undercurrent, which is going to be ongoing. And despite such price hikes even in our finished products, one aspect that was evident was that there was no demand destruction and actually, it was to the contrary.

The other aspect that we noticed was there is a resilience in the downstream industry to absorb some of those prices. So those were, I would say, deeper insights. The second insight that we saw was that whatever investments that we have made in strengthening our operational efficiencies, our systems and processes, our supply chain management, all of it got tested, and all of it despite the COVID, despite the geopolitical situations, it stood the test of time. So that was the other undercurrent that we saw very clearly.

And the third, of course, has been our continued drive to move from commodity to speciality and giving now more customized solutions, that also we are seeing that it is beginning to bear fruits. So if one were to look at what next, what is likely to be the situation as we look at Q2, Q3, Q4 and the rest of the year and maybe years ahead. So one aspect that we see is that we do expect this kind of a heated situation on pricing to mellow down. We expect lowering of both finished goods pricing, as well as the raw material pricing.

Now as is normal that there could be a gap of a month or two between the two. And if the finished goods pricing drops faster than the raw material, it may impact the delta temporarily, and if it’s the other way around, it will continue to ensure a robust delta, but it is a matter of a temporary adjustment of a couple of months. We do also expect the normal standard a bit dampening in the chemical mining sector during monsoons, that is also a typical phenomenon every year. Having said that, there are, again, three aspects that I see, which will provide a positive thrust for the balance year. So number one that I see is the additional capacities emerging out of our operational efficiencies and debottlenecking will come in handy which will kick in the balance part of the year. So that is going to be a positive thrust.

The second is at an operational level, our continued drive on strong digitization applied R&D thrust to achieve not only operational efficiency but also customizing customer orientation, that is going to keep unfolding over the next many quarters to bring in better positioning. And lastly, on a continual basis, our management strategy change, where for each of our businesses, this move that we are bringing in from commodity to customized specialization, that is going to continue to give us better brand creation and premiums. And that if you would have seen in the quarter that went by and, of course, the quarters that are going to follow, in the Crop Nutrition business, we are bringing in crop-specific grades more and more.

We are branding it as Croptek. And it is not just NPKs, but NPK plus micronutrients and plus a package of practices, which are going to be focused on specific crops. Even on the asset business, we are now looking at repositioning some of our products, customizing it to the solar grade nitric acid or steel grade nitric acid. Even in case of IPA, instead of a commodity IPA, we are looking at focusing on specifically on the pharmaceutical sector and also introducing the medical wipes and the sanitizing system for hospitals. Even for the mining sector in case of technical ammonium nitrate, instead of just focusing on the product, we are now moving towards TCO, that is total cost of operations for specific mines and bringing in composite holistic solutions as we go forward.

So these are aspects which are going to continue to give, I would say, a positive tailwind as we see the balance here. Now as far as project scores, the ammonia project continues to be on a fast-track execution mode in the world [Phonetic]. And we are looking at — with that coming in, it will bring a solid foundation for all our three businesses to contain the raw material volatility and also, of course, bring in attractive IRRs by itself. And we continue to expect it to be commissioned by first [Phonetic] quarter FY ’24. I must share that the ammonia project will be giving us somewhere close to INR25,000 crores of Aatmanirbhar or import substitution over the next 10 years, plus a large reduction in the carbon footprint. So we are very happy to contribute to the larger interest of India in that fashion.

Similarly, our TAN Project work has begun at site. And there, again, we target to complete by second half of 2024. And that you are aware that it is based on solid demand from the coal, limestone, cement infrastructure sectors. So with the above two projects, we will, in that sense, complete our strategic capex drive based on — if you recall, we had two drivers, strategic drivers there. One was to get our size right. So with this now fertilisers, we have invested, triple our capacity, assets we have invested, and we are probably Asia’s largest — with the TAN coming in, we will be among the world’s top three and then ammonia coming in to feed all the three businesses.

So both these aspects, getting our size right and capturing the value in our complete chain, that will get completed with this capex getting implemented. So what will follow will be our strong forward integration drive moving from commodity to solution speciality. And that will, of course, unfold quarter-on-quarter, quarter-on-quarter as we work harder to customize each of our products to the specific needs of each of the end segments.

So with this overview, let me hand you over to Amitabh — Amitabh Bhargava, our CFO, President, Finance, to now take you through the nitty-gritty details of how the quarter went by. Amitabh?

Amitabh Bhargava — President and Chief Financial Officer

Yes. Thank you, Mr. Mehta. Good afternoon, ladies and gentlemen, and thank you for joining the Deepak Fertilisers And Petrochemicals conference call to discuss Q1 FY ’23 results. We maintained our growth momentum while concentrating on transformation initiatives. And in fact, Q1 was our best ever quarterly performance. We reported a total operating revenue of INR3,031 crores, an increase of 59% Y-o-Y compared to same period last year.

Our operating EBITDA augmented to INR740 crores compared to INR290 crores in Q1 FY ’22. Operating EBITDA margins expanded significantly to 24.3% from 15.2% during Q1 FY ’22. Our net profit for the quarter recorded a growth of over 233% Y-o-Y to INR436 crores with margins of 14%. Chemical segment, as Mr. Mehta was also mentioning earlier, contributed to about 87% of total segment profit.

Going into a little bit of details in Chemical segment. During the quarter, our manufactured Speciality Chemicals business recorded a revenue of INR1,771 crores, an increase of 95% compared to Q1 FY ’22. Segment margins expanded from 19% Q1 FY ’22 to 41% in Q1 FY ’23. Manufactured assets for the quarter recorded a revenue of INR424 crores, an increase of 156% versus last year, and manufactured IPA recorded revenues of INR98 crores. Manufactured Mining business — Mining Chemical business recorded a revenue of INR1,078 crores, an increase of 177% Y-o-Y during the quarter. Mining Chemical business volumes were supported by continued demand from coal as reflected in Coal India and SCCL’s overburden performance.

AN Melt, Ammonium Nitrate Melt volumes grew by 39% Y-o-Y, High Density Ammonium Nitrate by 15% Y-o-Y and Low Density volumes declined by 16% Y-o-Y. During the quarter, our IPA plant operated at capacity utilizations of 58% and both assets and TAN operated at 91% and 111%, respectively. As far as the Fertilisers segment is concerned, the revenues grew by 26% Y-o-Y, although segment margins were largely impacted on account of sharp increase in raw material prices. With steep increase in raw material prices, such as Ammonia, Phos Acid, and MOP, the production cost of fertiliser has been significantly higher compared to the same period last year.

NP/NPK inclusive of our Croptek recorded a sales growth of 36% Y-o-Y to INR1,121 crores in quarter one FY ’23. And Bensulf sales increased by 109% Y-o-Y to INR52 [Phonetic] crores in the quarter one compared to quarter one — or in fact, INR52 [Phonetic] crores — increased by INR52 [Phonetic] crores — or increased INR252 [Phonetic] crores, I’m sorry, in Q1 FY ’23. NP/NPK plants operated with utilization levels of 75% and Bensulf plants operated at 76% utilization level. The available capacity across our plants provides headroom for future growth potential.

I think with this, I would, as such, stop the commentary, and we’ll be happy to take your question. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jinesh Gada, an individual investor. Please go ahead.

Jinesh Gada — Individual Investor — Analyst

Good afternoon, management. Congratulation for good sets of numbers. My first question is regarding EBITDA margin of 24%. Will it be maintained in near-term and future term? When — and well — will the margin will be maintained where the two new plants get started in FY ’24? And second question is regarding in investor presentation in one of the headings, renowned investor, one investor name is Dolly Khanna is mentioned, but in investor, I’m not able to show his holdings in the name of Dolly Khanna?

Amitabh Bhargava — President and Chief Financial Officer

Okay. To your first question, I think Mr. Mehta just — I think he did touch upon this aspect that while this quarter, we saw a significant increase in both raw material prices and finished good prices. The encouraging part was that there was no demand destruction and each of our products, by and large, the demand remained strong. So I think that is one aspect that we believe and we are confident that we — that is what is going to be the case in coming quarters.

What happens to raw material prices and finished good prices as Mr. Mehta was also mentioning, there is always tend to be a lag or lead in terms of passing on of some of these raw material prices or — so to that extent, it’s very difficult to say what could be the EBITDA margins going forward. Q2, as he mentioned is generally a lean quarter for us, particularly in the Chemical segment. And to that extent, there is obviously the demand side because of monsoon in both our Chemical segment, nitric acid, and TAN is likely to be weakened. So I think that is pretty much what we would — we are in a position to comment at this stage.

Jinesh Gada — Individual Investor — Analyst

Just can you give the margin, if we are not able to maintain 24% margin, can you give the lower base margin as per management expectation?

Amitabh Bhargava — President and Chief Financial Officer

We are not in a position to guide any — see if there — if you would appreciate that the whole geopolitical environment is so uncertain that at this stage for us to predict sitting here what would happen in the balance three quarters is very, very difficult. So we would…

Jinesh Gada — Individual Investor — Analyst

Company has a longest period, so it can — it must have any prediction or it will, in the worst case, in our margin will be this much percent and all?

Amitabh Bhargava — President and Chief Financial Officer

Like I said, we would refrain from giving any guidance on margin, given the kind of volatility we are seeing in both finished good and raw material price.

Jinesh Gada — Individual Investor — Analyst

Okay. And regarding that investor presentation, investor, Dolly Khanna name is mentioned, but in holdings, I’m not able to see Dolly Khanna name?

Amitabh Bhargava — President and Chief Financial Officer

So basically, if you are looking at BSE, BSE provides the investor details only above 1% [Phonetic], for the other details, you can write to us separately, and we can provide you with the top 200 shareholder register for your reference.

Jinesh Gada — Individual Investor — Analyst

Okay, okay, sir. So — and where I have to write?

Amitabh Bhargava — President and Chief Financial Officer

You can write to me and copy it to Company secretary, we’ll provide you the necessary details. Our details are there at the end of the presentation.

Jinesh Gada — Individual Investor — Analyst

Okay, okay, yeah. Thank you.

Operator

Thank you. Next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.

Abhijit Akella — Kotak Securities — Analyst

[Technical Issues] on very good results. Just one main point to seek your clarifications on. It’s regarding the debt position at this point in time as of June 30th, if you could please just help us with the gross and debt number? And also how much capex has already been executed on the ammonia project and how much is pending to be spent?

Amitabh Bhargava — President and Chief Financial Officer

Yeah. So as far as ammonia is concerned, let me first answer your first question, that is our gross debt is about INR2,900-odd crores and net debt is about INR1,930-odd crores. So those are the numbers at the end of June. As far as ammonia capex is concerned, out of INR4,350 crores that we had estimated, we have already spent the capex of about INR2,850-odd crores. And therefore, the [Technical Issues] INR4,350 crores minus INR2,850 crores is what is yet to be incurred, which largely will get incurred in completing the project. As we mentioned that it’s likely to be commissioned in quarter one of FY ’24.

Abhijit Akella — Kotak Securities — Analyst

Understood. So not sure if you are in a position to sort of look ahead until the end of the year, but would it be reasonable to conclude that net debt by the time of the project is commissioned, the ammonia project, will probably be less than INR3,000 crores at the end of it?

Amitabh Bhargava — President and Chief Financial Officer

Well, difficult to say, but ammonia, like I said, we need to incur roughly about INR1,500 crores additional. And out of this, roughly, I think half of it will come by way of debt and half of it will come by way of equity. So as such on ammonia, yes, gross debt perspective, it will add about INR750-odd crores by the time project is complete. But when it comes to net debt, I think it will all depend on our internal cash generation and cash position. So that I wouldn’t be able to give you any guidance on that.

Abhijit Akella — Kotak Securities — Analyst

Great. That’s very helpful. And one last thing was just in terms of the situation on the ground in terms of gas prices and ammonia prices. So what is your thought process in terms of finalizing any gas contracts? And how are you seeing the economics for the ammonia project at current market levels? Thank you so much.

Amitabh Bhargava — President and Chief Financial Officer

So at current market level, as much as the gas prices are elevated, even ammonia prices are high. And I mentioned that in earlier calls also that at the current prices, including the state incentives that we have, where we get a 9% SGST reimbursement till we recover 75% of our capex, and some of the energy-related benefits that we have at the new project. The margins are currently at, I would say, significantly better than what we had when we had started the project almost in the range of $400 per ton, $500 [Phonetic] per ton.

As far as gas and ammonia prices are concerned, you would appreciate that gas is also getting driven by what’s happening in Europe, particularly because of Russia-Ukraine war and the stand taken by Russia on supply of gas to Europe. And therefore, Europe also trying to bridge the gap through various LNG import from the U.S. and other geographies. So I think that aspect of it is, honestly, we are seeing pretty much every two, three weeks, there is new development, very difficult to predict.

The second factor that may affect the gas prices also is how severe the winter is, as we move into winter for Europe and U.S., I think all of those aspects will play kind of a significant effect on gas prices. And to an extent, ammonia prices because ammonia prices are given the incremental cost of — marginal cost of production of ammonia is dependent on what’s happening in European gas prices. There is a level that there seems like a strong linkage at this moment between these two commodities. But it’s very like I said, every month is a new development, it’s very difficult to predict what might happen.

Abhijit Akella — Kotak Securities — Analyst

Understood. Thank you so much, Amitabh. Wish you all the best.

Operator

Thank you. Next question is from the line of Vidhi Dadia [Phonetic] from Vedant [Phonetic] Securities. Please go ahead.

Unidentified Participant — — Analyst

Hello? Hello? Hello?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, go ahead, please.

Unidentified Participant — — Analyst

Hello, are you able to hear me, sir?

Amitabh Bhargava — President and Chief Financial Officer

Yes, we can hear you. Please go ahead with your question.

Unidentified Participant — — Analyst

Okay. Sir, my first question is, can you help us with the volume and realization trends in TAN and nitric acid for the next two quarters, a broader picture?

Amitabh Bhargava — President and Chief Financial Officer

Sorry, what — can you repeat your question?

Unidentified Participant — — Analyst

Hello?

Amitabh Bhargava — President and Chief Financial Officer

Can you repeat your question, please?

Unidentified Participant — — Analyst

Sure, sir. Sir, can you help us with the volume trends in TAN and nitric acid segment and also the expected realization, the broader picture, sir, for the next two quarters?

Amitabh Bhargava — President and Chief Financial Officer

See, the only point that I can confirm or guide at this stage that Q2 as is the case every year is a quarter where demand for both TAN and nitric acid typically is on the lower side, because in nitric acid, again, the inorganic nitration segment is also linked with what happens on the explosive side. And to that extent, the Q2 is likely to be a weaker quarter compared to what we saw in Q1. But beyond Q3, Q4, I would go back to the point that Mr. Mehta also mentioned and we’ve been saying that we are seeing good demand both on the explosive side, as well as on nitric acid side.

Explosives driven by coal, as well as infra and cement segment and nitric acid largely by nitration segment, which is again is somewhere we think that China Plus One shift and a lot of our customer, downstream customers are seeing very strong demand of their products and their order book. So I think that — with that directionally, I think Q3, Q4, we expect the demand to continue to remain robust. I think that’s pretty much what I would be in a position to say at this stage.

Unidentified Participant — — Analyst

Sure, sir. Thank you so much, and congratulations on a good quarter and right direction. Thank you, sir.

Operator

Thank you. [Operator Instructions] Next question is from the line of Chinmaya Bhargava [Phonetic] from Chetan [Phonetic] Capital.

Unidentified Participant — — Analyst

Hi all, nice to meet you. I hope you can hear me.

Amitabh Bhargava — President and Chief Financial Officer

We can hear you. Please go ahead.

Unidentified Participant — — Analyst

Okay, yeah. So I have a couple of questions. I’m not going to ask about TAN realizations. But — so a majority of our nitric acid is consumed in-house, right? So if I’m continuing to look at, let’s say, solar grade nitric acid, does this fall in the concentrated nitric acid segment? And how much higher realizations do you expect for solar grade nitric acid compared to our current end use?

Amitabh Bhargava — President and Chief Financial Officer

So we are right now in the process of developing some of these products based on the requirement we are seeing in these segments. And therefore, it is till we establish the volume as well as what value-add that we need to do, meaning that what is the additional cost to be incurred and what realizations can we make, it’s, right now, we are not in a position to guide you on the margin. But needless to say, the whole idea of getting into specific segments and catering to specific requirements of the end user is to basically look at value-based pricing. And that’s what we expect that, therefore, the margins are likely to be better than the plain vanilla grade nitric acid.

Unidentified Participant — — Analyst

Okay. And do we — are we thinking about expanding our capacities in concentrated nitric acid after the TAN capacities or is it too early to think about that right now?

Amitabh Bhargava — President and Chief Financial Officer

It’s too early. Board hasn’t taken any decision, so I won’t be able to guide you anything on that.

Unidentified Participant — — Analyst

No, that’s fine. Next question is, I’ve been hearing of the coal industry looking at a PLI set — like a PLI scheme for TAN. Could you share if there’s talks of that happening?

Amitabh Bhargava — President and Chief Financial Officer

We don’t have — we’ve been obviously because of the way PLI scheme was proposed by the government, we were also exploring whether that will be available for TAN. But as of now, we don’t have any firm news on that. We’ve also — like yourself, we have also heard it in the press. So I don’t have anything firm to mention here.

Unidentified Participant — — Analyst

Okay, fine. That’s fair. Last question from my side is, could you just tell us about the consequence of the income tax issue that we had for INR500 crores? I know we said we’re confident of descending it, but if you could give me some details on why we’re confident and, yeah, where this stems from? Thank you.

Amitabh Bhargava — President and Chief Financial Officer

So essentially, the — most of the demand is a consequence of disallowance of goodwill and intangible, depreciation on goodwill and intangible. And that both on the judicial precedent and also the fact that in Finance Act 2021, government had prospectively disallowed depreciation on goodwill, that is the reason we believe that retrospectively, when we had claimed depreciation on goodwill and intangible is something that would be defendable. And that is where our belief that this would not have any — I mean fundamentally, it’s a legally defendable claim.

Unidentified Participant — — Analyst

Okay. And there won’t be any outlay until it’s challenged in courts and at certain court, right?

Amitabh Bhargava — President and Chief Financial Officer

At this moment, we’ll have to discuss with the department that whether before giving — appealing at the next stage, would there be a requirement for any deposit of tax. But in the worst case, that will not be more than the 20% of the demand made by the department.

Unidentified Participant — — Analyst

Okay. So at worst case, our balance sheet will look like it did last quarter, because from the debt levels that you’ve mentioned, it looks like our net debt is still roughly the same as what it was last quarter and we’ve got about INR400 crores of cash?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, no, so I don’t know what is the link between the two. But what I can confirm is that given that our — the demand made by the department is for INR569 crores, the maximum that we may be required to deposit is 20% of this, roughly, say, INR100-odd crores. But even that depends on if we would make an appeal for — given that the amount is large, we’ll see how — what dispensation department is willing to give us. And to that extent, that’s the maximum outflow at this stage till we go into next stage of appealing.

Unidentified Participant — — Analyst

Now I understand. Thank you so much for taking my question.

Operator

Thank you. Next question is from the line of Tejas Shah [Phonetic] from Leo [Phonetic] Securities. Please go ahead, sir.

Unidentified Participant — — Analyst

So how do we see the spend prices compared to last quarter?

Amitabh Bhargava — President and Chief Financial Officer

Compared to?

S. C. Mehta — Chairman and Managing Director

Last quarter.

Unidentified Participant — — Analyst

I mean, that is Jan to March and from April to June. So if the prices have gone up or is it just that the volume ramp-up has helped you clock more sales or profits?

Amitabh Bhargava — President and Chief Financial Officer

See, quarter-on-quarter, you — we have, in fact, reported in our presentation, the revenues from TAN. Quarter-on-quarter, the increase in volume as far as TAN is concerned, it is about 12%. So you can then maybe make this back calculation to see how much of the increase in revenue is because of volume and how much is because of price.

Unidentified Participant — — Analyst

And price will be what, how much increase will be done as far as price, if you can share?

Amitabh Bhargava — President and Chief Financial Officer

That’s what I said that the volume have gone up by 12%. And we have reported the revenues from TAN segment last year — last quarter as well as this quarter. And to that extent, you could just do a back calculation to see what the per ton or rather NST would have gone up by both quarter-on-quarter and Y-o-Y.

Unidentified Participant — — Analyst

Okay. Thank you.

Operator

Thank you. Next question is from the line of Darshan Jhaveri from Crown Capital. Please go ahead.

Darshan Jhaveri — Crown Capital — Analyst

Hello, sir, am I audible?

Amitabh Bhargava — President and Chief Financial Officer

Yes, please.

Darshan Jhaveri — Crown Capital — Analyst

Yeah. Sir, congratulations on a good set of numbers, sir. I just wanted to ask after our project completion, what kind of revenue can we foresee for the next year or something could be available to be guided, or how — what would be the benefit or it — not the revenues, and the benefit of the new ammonia plant?

Amitabh Bhargava — President and Chief Financial Officer

See, as I said that ammonia was largely for our own consumption. So on a consolidated level, it would not lead to increase in revenue, but it would — depending on the margins that we make in ammonia project, which is typically the ammonia gas delta on which assets — earlier, I was — I had answered that question, that is the likely improvement as far as the margins were bottom line concerns. But from a revenue perspective, it is — at consol level, it will not, as such, result in — because it’s all for — entirely for our own capital consumption.

Darshan Jhaveri — Crown Capital — Analyst

Right, sir, okay. Thank you for that answer, sir. And, sir, we’ve seen very good growth in this quarter one, sir. So how much of it would be sustainable going forward? I imagine, our demand is — we don’t see any problem in demand. So the revenue in quarter one could be assumed as sustainable?

Amitabh Bhargava — President and Chief Financial Officer

Look, revenue, I think two aspects that we mentioned and you — I would again draw your attention to those. One is that if you look at the capacity utilization in some of our segments, there is still a good headroom available in terms of better capacity utilization. So if the demand with the exception of Q2, which has its own sort of demand reduction aspects in Chemicals segment. But with that exception, if the demand continues and which we are confident it would, then the capacity utilization in these segments, there is a headroom.

Also, we are — and we’ve already done debottlenecking of TAN as well as NPK capacity, and that also in terms of — would play a role in terms of improvement in our top-line. But I think other than that, price-wise, we just mentioned that price, of course, it’s very difficult to predict. It will also depend on what happens to raw material prices and its consequent impact on the finished good prices. So I think you should maybe take guidance more from the demand side or volume numbers that are likely to pan out in next couple of quarters.

Darshan Jhaveri — Crown Capital — Analyst

Okay, thank you, thank you so much, sir. That answers all my questions, sir. And all the best for the next quarter. Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Sharanu Nandikur, an individual investor. Please go ahead.

Sharanu Nandikur — Individual Investor — Analyst

Hello, yeah, thank you for the opportunity, and congratulations for a good set of numbers. So my first question is, for the remaining capex, you mentioned that around 50% will be the equity, whether it will be QIP once again or any other mode of the funding?

Amitabh Bhargava — President and Chief Financial Officer

No, this is through — largely through internal generation.

Sharanu Nandikur — Individual Investor — Analyst

Sorry?

Amitabh Bhargava — President and Chief Financial Officer

It will be largely through internal generation and the existing cash balance that we have.

Sharanu Nandikur — Individual Investor — Analyst

Okay. Thank you. And another question is in the previous two quarters, there was a point raised on the non-core sector, commercial property sale, whether that’s like going to happen in the next one or two quarter or still not on the discussion?

Amitabh Bhargava — President and Chief Financial Officer

No, I think our reply to that remains the same that one is, we are trying to remove all the regulatory, I would say, blocks that are there to make sure that any potential — monetization of that is done at the full potential. And the second is given that currently, as such, from a balance sheet perspective, we are very fairly comfortable. We are — we will see the right timing of that as we go in the process of completing our capex and the funding requirement.

Sharanu Nandikur — Individual Investor — Analyst

Okay, sure. And, sir, my last question is customized offerings to the solar and steel sector, the Chemical. So I think someone asked the question and you responded saying that it’s still in the development process. So my question is like, once, let’s say, considering the huge growth potential in solar and steel in the next few years in India, do you have existing plans to scale up the Chemical like once you are — invention is done or like you need to even plan the capex for that sector as well for the Speciality Chemical for those two sector?

Amitabh Bhargava — President and Chief Financial Officer

So those two sector, we are looking at product development, both largely in nitric acid segment. So, as such, volume perspective, it would go out of the existing volume or some of the better capacity utilization that we are targeting. But beyond this, as I was mentioning that there is no decision as of now to increase the capacity or any capex in nitric acid. As and when that happens, we will — we would be informing stock exchange…

Sharanu Nandikur — Individual Investor — Analyst

Okay, yeah, thank you, sir. Thanks for the time. All the best for the future.

Operator

Thank you. Next question is from the line of Tarun Dhingra, an individual investor. Please go ahead.

Tarun Dhingra — Individual Investor — Analyst

Good evening to all participants. Sir, my question is that you have a non-core asset of around INR700 crores, that has been giving you losses since the last four quarters. Why don’t you exit from that non-core asset and reduce the debt?

Amitabh Bhargava — President and Chief Financial Officer

I just answered that question, and we will take your sentiment back to the management.

Tarun Dhingra — Individual Investor — Analyst

And second question is that, sir, when my Company is going to get debt-free?

Amitabh Bhargava — President and Chief Financial Officer

Sorry, can you repeat that question?

Tarun Dhingra — Individual Investor — Analyst

When my Company is going to be debt-free? I mean what time span you are thinking that Deepak Fertilisers would be debt-free?

Amitabh Bhargava — President and Chief Financial Officer

See, if you see today, even from a gross debt, net debt perspective, we have the numbers. We are — we have sort of cash balance practically. But given that we are in a capex mode, both on ammonia and TAN, we are, obviously, till we complete the capex, we would be purchasing in repaying our debt ahead of the schedule. But as these capexes are over, depending on the cash generation, we would certainly look at because that cash would either have to go for next round of growth or it is for repaying the debt, there is no reason for us to hold that cash in our books. So I think largely, one would have to see how the capex of these two projects is turns out in the next, let’s say, about 24 months to 36 months and also internal cash generation, based on that, we certainly go [Technical Issues]. We are…

Tarun Dhingra — Individual Investor — Analyst

Okay, thank you so much, sir.

Operator

Thank you. The next question is from the line of Madhav Marda from Fidelity. Please go ahead. Mr. Madhav, please go ahead with your question. Since there is no reply from the line of Mr. Madhav, we’ll go ahead with the next question. The next question is from the line of Mr. Kartik Nagavi, an individual investor. Please go ahead.

Kartik Nagavi — Individual Investor — Analyst

Yes. Good afternoon. Am I audible? Hello?

Amitabh Bhargava — President and Chief Financial Officer

Yes, please.

Kartik Nagavi — Individual Investor — Analyst

Yeah, good afternoon. Firstly, I’d like to congratulate you for a very good set of numbers. I have two questions. In the opening comments, the Chairman mentioned regarding the pricing of the Chemicals, wherein there would be sometimes a lag, wherein the raw material prices may rise, but the finished product prices might not rise and the other way around. What I would like to know is that in this quarter, have we had the benefit of the raw material prices going down and the finished product prices not coming down or vice versa? And my second question is, you made us understand regarding the price of gas and ammonia. What I just want to know is the Company assured of gas supply when the ammonia project starts?

Amitabh Bhargava — President and Chief Financial Officer

So to your first question, as I said that if you look at the volumes in Chemicals segment, both TAN and acid, you can also look at what the margins had been or compared to the volume growth, what has been the overall sales growth, and to that extent, yes, I think that the margins have expanded. And so it’s obvious that the finished good prices have obviously compared to raw material prices, the finished goods prices have seen higher expansion.

But the second aspect on your question on the gas availability. So gas availability per se is not a challenge even today, because India has enough LNG terminals and therefore, import capacity. Also, both ONGC, Reliance, what we understand based on the progressive auctions that have happened from their fields, they also have the plans to increase their production profile.

And to that extent, a combination of both domestic and imported gas, there is enough availability. It is more about at what price is this gas available, and this is where I earlier mentioned that today, even at the current prices of gas, we also keep buying spot gas every quarter, incremental quantity based on our production profile or our internal utility consumption, and we are buying gas even at this price, current price in our overall portfolio. And to that extent, it’s the price and what effect does it have or what kind of margins can one make with the current prices of ammonia is the aspect that one has to track, but availability is not an issue.

Kartik Nagavi — Individual Investor — Analyst

Okay, thank you, thank you very much.

Operator

Thank you. Next question is from the line of Madhav Marda from Fidelity. Please go ahead. Mr. Madhav, please go ahead with your question. Mr. Madhav, if you have muted yourself from your phone, please unmute yourself and go ahead with your question.

Madhav Marda — Fidelity — Analyst

Hello?

Amitabh Bhargava — President and Chief Financial Officer

Yes, please. We can hear you.

Madhav Marda — Fidelity — Analyst

Hello?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, we can hear you. Can you…

Madhav Marda — Fidelity — Analyst

Yeah, so sorry, there’s some issue with my line. No, my question was that, basically, could you help us — help me understand the capex that we have for FY ’23 and FY ’24, given the projects that are ongoing at with ammonia and TAN?

Amitabh Bhargava — President and Chief Financial Officer

So in ammonia, which we are targeting to complete by Q1, let’s say, somewhere in May ’23. We are yet to incur or from here on, we have another INR1,500 crore of capex in ammonia project. As far as TAN is concerned, this year, this financial year, we would incur somewhere like INR550 crores to INR600-odd crores in this year for TAN.

Madhav Marda — Fidelity — Analyst

Okay. That’s INR2,100 crores. And then any other maintenance or any other small capex for the existing lines and something like that, so we could get the number for the full-year?

Amitabh Bhargava — President and Chief Financial Officer

So there is normal maintenance capex, and there is also — we have — we completed one round of debottlenecking in TAN. The second phase of debottlenecking, we are still awaiting the technical details, depending on that, though the numbers are not going to be very big as far as debottlenecking expenses, but those would be the additional expenses beyond the TAN and ammonia capex.

Madhav Marda — Fidelity — Analyst

So would it be fair to say the capex for FY ’23 should be within INR2,500 crores, including the debottlecking and the maintenance?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, yes, yes.

Madhav Marda — Fidelity — Analyst

Okay. And then FY ’24, what does that look like? So [Technical Issues] should be largely complete and then you would have TAN, the balance capex…

Amitabh Bhargava — President and Chief Financial Officer

Ammonia would be largely complete. And by that time, assuming that we would have incurred, let us say, INR600-odd crores in TAN from here on, we would have completed almost INR1,000 crores in TAN. After that, over next 18 months to 20 months, we would incur the balance of INR1,200 crores.

Madhav Marda — Fidelity — Analyst

Okay, understood. All right, sir. Great. Thank you so much for your time. Thank you.

Operator

Thank you. Next question is from the line of Meet Vora from Axis Capital. Please go ahead.

Meet Vora — Axis Capital — Analyst

Hi, sir, [Technical Issues]. Just want to [Technical Issues] margins for TAN and nitric…

Amitabh Bhargava — President and Chief Financial Officer

We can’t hear you. Can you speak a bit loud?

Meet Vora — Axis Capital — Analyst

Hello? Hello?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, go ahead, but we were not able to hear you earlier. Can you just…

Meet Vora — Axis Capital — Analyst

Yeah, am I audible?

Amitabh Bhargava — President and Chief Financial Officer

Not very clear.

Meet Vora — Axis Capital — Analyst

Sir, yeah…

Operator

Mr. Meet, you are inaudible. Can you speak a little louder?

Meet Vora — Axis Capital — Analyst

Yeah. Sir, can you share the segment-wise margins for TAN and nitric acid both?

Amitabh Bhargava — President and Chief Financial Officer

We don’t report segment-wise, I think we report Chemical segment and Fertiliser segment, and that is — we’ve already shown that in our earnings presentation.

Operator

Thank you. Next question is from the line of Nishith Shah from Aequitas Investment. Please go ahead.

Nishith Shah — Aequitas Investment — Analyst

Sir, I’d like to congratulate on this great set of numbers. Sir, I have only one question. So in Q1, you highlighted we faced some issues which impacted our capacity utilization. So in Q2, are you facing any issues?

Amitabh Bhargava — President and Chief Financial Officer

Sorry, what — can you repeat that question? Q1…

Nishith Shah — Aequitas Investment — Analyst

Yeah. So in Q1, we highlighted in our presentation that there were some issues which impacted our capacity utilization. So in Q2, are we facing any issues?

Amitabh Bhargava — President and Chief Financial Officer

No, so in Q1, one effect was of raw material rather raw water shortage, which was because of MIDC had taken some maintenance shutdown of their pipeline. Now that is over, as such, that is unlikely to affect. The other aspect of — we had MOP shortage in quarter one. And that is now better compared to Q2 — compared to Q1.

Nishith Shah — Aequitas Investment — Analyst

Okay, that’s it, sir. Thank you.

Operator

Thank you. Next question is from the line of Priyan Purohit from KamayaKya Wealth Management. Please go ahead.

Priyan Purohit — KamayaKya Wealth Management — Analyst

Hi, hi, sir. Thank you so much for taking my question. So I can clearly see that since — if I compare to FY ’21, the Chemical segment has been contributing quite significantly to your bottom line specifically. So just wanted to understand if do you have any plans for doing any capex for the Fertiliser segment or probably entering into some niche Fertiliser segments, which are maybe not NPK-based, maybe something like potassium-based fertilisers or — just wanted to know your outlook on that segment? Thank you.

Amitabh Bhargava — President and Chief Financial Officer

No such plan or decision taken by the Board.

Priyan Purohit — KamayaKya Wealth Management — Analyst

Okay, okay, all right. Thanks a lot, sir. And secondly, just wanted to ask that there has been a sharp drop in IPA capacity utilization, if I compare it with Q4, I think it has dropped from 88% to 58%. So what’s the reason for that, sir? Are you already experiencing the muted demand that you are seeing, which you are foreseeing in Q2, are you already experiencing those headwinds right now?

Amitabh Bhargava — President and Chief Financial Officer

So IPA had some production challenges because of raw water, but other than that, IPA margins were under pressure. So we had taken certain product shutdowns or plant maintenance in advance rather than waiting for the scheduled one.

Priyan Purohit — KamayaKya Wealth Management — Analyst

All right, all right, sir. So do you see the utilization levels going up in the coming quarters now, considering that these shutdowns would have been a one-off event?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, we’d like to see the margins — see, there are two things that are playing out right now. One is because of the crude prices, the refinery-grade propylene prices have also gone up, while the IPA prices seem to be — has come down or has remained and hasn’t reflected the increase in prices of crude and propylene because the IPAs made through the other route as well.

The second aspect is that we are currently also looking expansion of our product profile to — into pharma-grade IPA and a couple of other special applications. And to the extent there, our margins are better than the plain vanilla standard grade IPA. So depending on how we are able to ramp up the volumes in the speciality grade and what happens to the margins, our capacity utilization would be calibrated accordingly in quarter two.

Priyan Purohit — KamayaKya Wealth Management — Analyst

All right, sir, got it. Thank you, thank you so much, sir.

Operator

Thank you. Next question is from the line of Shubham Thorat [Phonetic] from Perpetual Investment Advisors. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, everyone, and congratulations on very good set of numbers this quarter. So sir, my question is related to our Fertiliser business vertical. So we can see a quite subdued performance from this vertical this quarter. So how do you see this Fertiliser business shaping up in the coming quarters?

Amitabh Bhargava — President and Chief Financial Officer

I think — Mahesh is here, he would…

Mahesh Girdhar — President – Crop Nutrition Business

So if you see the fertiliser consumption takes place during Kharif and Rabi. And in the first quarter, we had a bit of a delayed rainfall, start of the rainfall in the month of June was lower than the previous year, that has got shifted to July. From July onwards, there’s proper rainfall, and we are seeing that investment paths where we operate and probably even more, and we have a better reservoir fill. So from that perspective, we don’t see any challenges from agriculture perspective, as well as the commodity prices are good.

And if you see as your question related to the fertiliser performance, we are in a range of 10% year-to-year performance. From last quarter, we nearly doubled our net income as we reported. Industry-wise, there was a little bit of reduction in the volume in the first half, but we have maintained our market share, as well as you may have noticed that we already launched next level of category — innovation category, which is Croptek products, which are unique products with great nutrients, along with nutrient unlock technology, as well as we continue to launch in water-soluble fertiliser business also new products. So we are moving up on our innovation and continue to launch better products every quarter and scale them up.

Unidentified Participant — — Analyst

Okay, great, sir. And just a small clarification. So did you say that greenfield ammonia project is going to be commissioned by Q1 FY ’24? And TAN plant is going to be commissioned by second part in FY ’24. Is that right?

Amitabh Bhargava — President and Chief Financial Officer

Yeah. So the ammonia project, yes, it will be in quarter one FY ’24, but TAN project would be in the calendar year — second half of calendar year ’24.

Unidentified Participant — — Analyst

Okay, okay, thank you, sir. Thank you so much, and wish you all the best.

Operator

Thank you. Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Amitabh Bhargava — President and Chief Financial Officer

Well, ladies and gentlemen, thank you so much for your participation. And for any further queries or clarifications, please do get in touch with our investor relationship team. Thank you once again. Thank you.

Operator

[Operator Closing Remarks]

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