Deepak Fertilizers and Petrochemicals Corporation Limited (DEEPAKFERT) Q2 FY23 Earnings Concall Transcript

Deepak Fertilizers and Petrochemicals Corporation Limited (NSE:DEEPAKFERT) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Sailesh Chimanlal Mehta — Chairman & Managing Director

Amitabh Bhargava — President and Chief Financial Officer

Tarun Sinha — President – Technical Ammonium Nitrate

Mahesh Girdhar — President – Crop Nutrition Business

Deepak Balwani — Head, Investor Relations

Analysts:

Ranjit Cirumalla — IIFL Securities Limited — Analyst

Nishith Shah — Aequitas Investments — Analyst

Sanjay Shah — KSA Shares & Securities — Analyst

Chetan Thacker — ASK Investment Managers — Analyst

Smitesh Sheth — Raedan Securities — Analyst

Amarjit Gupta — — Analyst

Adit Shah — — Analyst

Prashant Pani — DCS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Deepak Fertilisers and Petrochemicals Limited Q2 FY ’23 Earnings Conference Call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. 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, Nero [Phonetic]. Good afternoon everyone and thank you for joining us on Deepak Fertilisers and Petrochemicals Q2 FY ’23 earnings conference call. Today we have with us Mr. S.C Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President and Chief Financial Officer; and Mr. Tarun Sinha, President – Technical Ammonium Nitrate; Mr. Mahesh Girdhar, President – Crop Nutrition Business; and Deepak Balwani – Head, Investor Relations. We will begin the call with opening remarks from Mr. Mehta, followed by comments on financial performance by Mr. Amitabh post which we will open the floor for an interactive Q&A session. I now invite Mr. Mehta to share his opening comments. Thank you and over to you, sir.

Sailesh Chimanlal Mehta — Chairman & Managing Director

Yes, thank you. I hope my voice is clear, right?

Operator

Yes sir, loud and clear.

Sailesh Chimanlal Mehta — Chairman & Managing Director

Okay, thank you. So a very good afternoon to all of you and I take once again a lot of pleasure in welcoming all of you for this Q2 FY ’23 earnings call of Deepak Fertilisers. I hope all of you had a chance to look at the financial statements and earnings presentation uploaded on the exchanges and our website. So at the outset, I’m quite happy to underscore the good news that our Q2 top line grew by 52% and the bottom line by 195% and similarly the H1. Additionally, our H1 bottom line surpassed the whole of last year’s profit. So as we were thinking and as I was looking at it [Indecipherable], what would be the root cause that delivered this positive play and somewhere — to look at it at a distance that what other fundamental that had been indicated to these results.

So I was wanting to share two from the outside-in perspective and two from the inside-out perspective. So from the outside-in perspective, what we see is that despite the huge raw material price hikes that we have seen over the last now year, year and a half, we have been able to establish a good pass through in our finished products and somewhere the larger picture is that the finished product prices have now set a new norm for price affordability among all our segments and this I see as a good sign over the long-term that the resilience that the downstream of our downstream is also somewhere where the price affordability is of a new order, a much higher order.

The second perspective from the outside-in approach is I want to take I also see that the strong alignment with the India growth story that all our three businesses, the fertilizers, the industrial chemicals, and the mining chemicals, all the three businesses the kind of strong alignment that is being seen with the India growth story is clearly validated and despite the price hikes, we have seen no demand destruction. In fact, it would be the other way. So, these are the two at the fundamental levels that we see from an outside-in perspective that seems to have been established as we see the performance.

From the inside-out, if I look at it that number one that I see is that all the hard work that you have put in setting a good IT systems and processes. The strength of those have been validated as we were in a position to withstand all the volatility that we saw, the geopolitical uncertainties, the waves of uncertainties in logistics, availability, price upheavals that the internal systems and processes have been able to withstand is I would say onslaughts and yet take advantage of these aspects, which are reflected in our results and the second aspect that I see is the strategy that we had — a transformative strategy that we had been pursuing over the last couple of years on and on, on and on which is the shift from commodity to specialty in each of our businesses. It does seem to be bearing fruit and does seem to be giving us the very strong I would say foundation to further build on.

Especially I’m happy to share that in our fertilizer business as we moved from commodity NPK to Smartek which is a product which enhances the nutrient use efficiency and then from Smartek as we are moving towards Croptek, which is a more crop-specific kind of a grain. These efforts and the work that we’re doing at the farmer level was also noted by ADB and ADB has come up with a unique blue loan kind of a thing for the first time in the country where not just debt funding, but also certain grants for the efforts at the farmer level is something that they have signed up with us and that gives you a very warm acknowledgment of the fact that we are in the right direction and that somewhere it is making an impact at the bottom line at the farmer level. So that was something I thought I should share.

Now, of course, Q2 otherwise is typically a dull kind of quarter because of rain sometimes impacting the chemical business or the mining activities and this time of course the rains at some places were excessive so which also impacted the fertilizer sector, but as you move out of this Q2 and look at the H2 going forward, we now see somewhere you know the settling down of some aspects of the price volatility between raw material and finished product despite the fact that there is still uncertainty on what will happen between Russia-Ukraine, but at least it is something that is getting factored and as it settles down, we see that there will be some plus, minuses, a month here and a month there, but it should then finally settle down at a decent level.

And we will continue to make further and further deeper inroads through our strategy of moving from commodity to specialty and that is something which we are now seeing further and further reflected in terms of somewhere we are looking at a solar grade nitric acid for instance or in the mining sector, more and more TCO projects, total cost of operations where one looks at not just products, but services and then looks at the total impact in terms of the whole project, which means a much better traction and a brand creation for the mining sector products, technical ammonium nitrate and similarly on the fertilizer side, I see more grades of Croptech that had been approved by the government and now gradually it will be showing up in the marketplace and creating its own inroads specific to those crops.

Last, but not the least, I’m also very happy to share that the ammonia project execution is going on full steam on a very good fast track and it’s now on to the final notice what — final last five or six months of pre-commissioning activity. And ready soon that should be available to give a very strong foundation to all the downstream by way of a [Technical Issues] pipeline availability of ammonia for all the downstream that are there. So with these broad thoughts, I’ll hand you over to Amitabh, our President – Finance and CFO to take you through the details and then, of course. share clarifications to all your questions. Amitabh?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, thank you Mr. Mehta. Good afternoon ladies and gentlemen and thank you for joining the Deepak Fertilizer and Petrochemicals conference call to discuss Q2 FY ’23 results. During the quarter two FY ’23, we reported a total operating revenue of INR2,719 crores, an increase of 51.7% YoY compared to same period last year. Our operating EBITDA increased to INR495 crores compared to INR212 crores in quarter two of FY ’22. Operating EBITDA margins increased to 18.2% from 11.8% during quarter two FY ’22. Our net profit for the quarter recorded a growth of over 195% YoY to INR276 crores with margin of 10%.

During the quarter, our manufactured chemicals business recorded a revenue of INR1,533 crores, an increase of 55% compared to quarter two FY ’22. Manufactured pharma chemicals recorded a revenue of INR454 crores, an increase of 22% YoY. Manufactured mining chemicals, that is our TAN, that TAN business recorded a revenue of INR920 crores, an increase of almost 146% YoY during the quarter on YoY basis compared to quarter two FY ’22, all the three indicators of TAN business such coal and overburden production. Cement and steel production recorded a healthy growth.

That said as I’m sure you would notice that this reduction in margins quarter-on-quarter, which was due to quarter two being a lean season as is the case pretty much every year for chemical segment in general. That is both TAN and acid reduction in demand due to monsoon effect. This year, availability of more acid in the market also came due to the extended shutdown of the downstream of our co producers in the market. This further reduced our volumes and margins in acid. TAN lean season is in India, which is because of monsoon. It also coincides with the lean season in other geographies like Russia and Brazil which are the other major consumers of TAN, which also resulted in reduction of imported fertilizer which is fertilzer grade ammonium nitrate, which also has an effect in terms of the margins in quarter two.

Our crop nutrition business resulted in quarter two FY ’23 revenues of INR1,181 crores, an increase of 47.3% YoY with segment margins of 7%. As cost of production had obviously gone up due to the sharp rise in the prices of raw materials. During the quarter, our IPA plants operated at a capacity utilization of 54% and both assets and TAN operated at 81% of 92%, respectively. In the crop nutrition segment, nitro phosphate and NPK plants operated with utilization levels of 66% and bensulf plants operated at 74% utilization levels. Net debt as of 30th September was INR1,921 crores with net debt to equity of going 0.43 times. ADB as Mr. Mehta was mentioning has recently granted a $30 million debt assistance and $0.5 million of technical grant for our farm efficiency initiative, which I think as Mr. Mehta elaborated earlier.

We have already spent capex of about INR3,163 crores as on September-end on greenfield ammonia plant and INR422 crores on the TAN project as on September end. Out of this, the company has already infused equity of about INR1,587 crores for ammonia and the entire TAN project capex so far has been done through equity infusion our internal accrual. Promoters pledged shares are now restricted to only 2.67% and the non-disposal undertaking obligation which you must note that this is not the pledge but non-disposal undertaking is 3.66% of paid-up share capital. With this, we would be happy to take your questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Nishith Shah from Aequitas Investments. Please go ahead.

Nishith Shah — Aequitas Investments — Analyst

Good afternoon sir.

Amitabh Bhargava — President and Chief Financial Officer

Hi, good afternoon. Please carry on.

Nishith Shah — Aequitas Investments — Analyst

Yes, Sir, I wanted to understand how are the imports in technical ammonium nitrates now in terms of volume and pricing?

Amitabh Bhargava — President and Chief Financial Officer

Okay, is that your question? Is there any other question you have?

Nishith Shah — Aequitas Investments — Analyst

Yeah, I have other two questions also. So the second question is I want an update on the debottlenecking of the TAN facility. And the third question is how are the key input prices trending now like natural gas, ammonia polypropylene. That’s it.

Amitabh Bhargava — President and Chief Financial Officer

Okay, so on the first question, my colleague Tarun is also on the call. Tarun, if you can just take the first two questions and then I’ll come in for the third one.

Tarun Sinha — President – Technical Ammonium Nitrate

Yeah, absolutely. Thanks, Amitabh. Just to check with the moderators, am I audible?

Operator

Yes, sir, you are.

Tarun Sinha — President – Technical Ammonium Nitrate

Okay, thanks. Okay, so very quickly on the — thanks for the questions first of all. On the imports of ammonium nitrate. So far this year has not been any unusual year compared to the prior years in terms of the quantum of imports that we had been seeing in the country. That said, the demand of ammonium nitrate in India we’ve also seeing growth year-on year. So it is not unlikely that as we try to reach towards the end of this financial year maybe the quantum of imports of ammonium nitrate in this year could be slightly higher than in the prior year and that is in line with the growth of demand in the domestic while the domestic manufacturers are continuing to produce to their capacities and that links to your second question, which is about the capacity augmentation of ammonium nitrate.

So as far as Smartchem Technologies Limited is concerned and hence Deepak Fertiliser is concerned, we have actually implemented some of the measures to increase the capacity at our Taloja [Indecipherable] at this stage for us and there are some more initiatives being undertaken to increase the capacities further again in order to meet the ongoing growth of demand of ammonium nitrate in the country and we have kept the various regulatory bodies and ministries informed of our intention and activities that are ongoing in relation to the capacity expansion at Taloja. Amitabh over to you.

Amitabh Bhargava — President and Chief Financial Officer

So, as far as the raw material price trend is concerned, while we’ve seen some early trends in H2 that is phospheric acid for example, prices have come down significantly but the prices of other commodities, particularly ammonia, gas price depends on what we are going to see in terms of Russia-Ukraine situation and how Russia also reacts to it because one of the other news that we have been gathering is also certain restrictions that Russia may put in terms of or certain additional exports packs that Russia may put on our various fertilizer and commodities.

So it’s difficult right now to gauge what will happen to the fertilizers in general and also to gas price because gas price — spot prices of gas obviously would also have a bearing depending on how the winter in Europe because we are still in the early stages how that would pan out in the next couple of months. So the commodities other than acids we are very clearly seeing the trend downward trend the other commodities may have to wait and see what comes out in coming weeks and months depending on how the Russia-Ukraine situation turns out.

Nishith Shah — Aequitas Investments — Analyst

This is the usual, sir. I have one follow-up on our debottlenecking plant. So, how much of the capacity have we already added and going forward, how much can we add from debottlenecking overall?

Amitabh Bhargava — President and Chief Financial Officer

So we have added nearly 33,000 tonnes and the second phase is on and we would be able to come back in terms of the exact increase once we’ve completed that project.

Nishith Shah — Aequitas Investments — Analyst

Okay thank you, sir.

Operator

[Operator Instructions] The next question is from the line of Sanjay Shah from KSA Shares & Securities. Please go ahead.

Sanjay Shah — KSA Shares & Securities — Analyst

Good afternoon gentlemen. Thanks for opportunity. Sir, congrats on good set of numbers. Sir my question was on the fertilizer side, new government rolled out a new fertilizer policy, One Nation, One Fertilizer. So can you highlight upon how that can impact us as a company on our margin side and can you even help us to know the modalities of this policy.

Amitabh Bhargava — President and Chief Financial Officer

So my colleague Mahesh is also online. So I’ll request him to take this question.

Mahesh Girdhar — President – Crop Nutrition Business

Am I audible?

Sanjay Shah — KSA Shares & Securities — Analyst

Yes, sir.

Mahesh Girdhar — President – Crop Nutrition Business

Yeah, Sanjay, good afternoon. See the One Nation, One Fertilizer has been received. We are also trying to understand it. So how finally it will be implemented. In terms of policy provisions, it says that some part of the fertilzers that would help to contain certain government communication which is related to subsidy and certain part of that can be by the company to bring about with their brand. So this policy was announced recently and certain products have been started with that and we are trying to understand the implication on other products at the moment.

Sanjay Shah — KSA Shares & Securities — Analyst

So prima facie is that we are coming under control of government for the pricing of this?

Mahesh Girdhar — President – Crop Nutrition Business

See the prices of phosphatic fertilizers are governed by NB stream. So as you may know that there is a nutrient based scheme by the government whereby the government announced these nutrients for nutrients subsidy price for NPK and various micro nutrients and sulfur on an annual basis and in the last year this was done twice for [Indecipherable] separately and depending on the movement of the prices, companies can fix the price. Basically, the nutrient based policy whereby nutrient subsidy is fixed. That’s the policy. Policy for urea is different whereby it is on process based and the government decides one price for the farmers.

Sanjay Shah — KSA Shares & Securities — Analyst

Really helpful sir. Sir, my second question was regarding ammonia plant. Deepak, sir, can you highlight upon the project as you said it is on schedule. So how about the cost? Is there any overrun in the cost and [Technical Issues] next year, we’ll be able to start the production of the same?

Deepak Balwani — Head, Investor Relations

Yeah, so we’ve been I think now consistently for last couple of quarters we did giving the details even in our investor presentation on the total project cost and how much has been spent during the quarter. At the end of September, so while total project cost has remained the same in terms of what we’ve been sort of announcing for last couple of quarters that is INR4,350 crores, by end of September, we’ve already incurred INR3,153 crores and balance INR1,576 crore is to be incurred. We are expecting the commercial operation somewhere in quarter one of FY ’24.

Sanjay Shah — KSA Shares & Securities — Analyst

That’s great. So what about TAN. How is the capacity ramping up and how is the demand right now?

Deepak Balwani — Head, Investor Relations

So capacity, if you’re talking about the new [Indecipherable] capacity that we are now implementing, that would add additional 376,000 tonnes and it is expected to be completed by quarter two of financial year ’25. That project is nearly about INR2,200 crore capex project and we have already incurred INR420 odd crores by the end of H1 this year. Overall, I think demand my colleague Tarun just mentioned a little while back that this year we are seeing increase in demand because the overall year-on year coal production and overburden production from public sector coal particularly which is the largest consumer of TAN has seen improvement and that any specific number Tarun you would want to mention over and above that?

Tarun Sinha — President – Technical Ammonium Nitrate

Not at the moment unless there are any specific questions around the numbers, then we can certainly speak about those, but broadly speaking, as you rightly said, the entire demand is being driven by coal sector at this stage followed by the other minerals that India has got plenty of in terms of the mining activities of those minerals and then certainly this growth is also underpinned by the infrastructure growth under the various schemes and policies of the government of India which have been announced to build infrastructure in the country and in most of those cases, there is a lot of rock blasting to be done which requires explosive and hence technical ammonium nitrate. So all these sectors combined are driving the demand in the country.

Amitabh Bhargava — President and Chief Financial Officer

So for us as you would have already noticed in our presentation year-on year growth in volume in TAN in quarter two was about 14%, which is in a sense reflective of what’s happening in TAN sector year-on year.

Sanjay Shah — KSA Shares & Securities — Analyst

Thank you sir. Thank you very much.

Operator

Thank you next question is from the line of Chetan Thacker from ASK Investment Managers. Please go ahead.

Chetan Thacker — ASK Investment Managers — Analyst

Good evening, sir. The question is on the TAN business from a more medium to long-term perspective, how should we view the profitability per tonne for the TAN business?

Amitabh Bhargava — President and Chief Financial Officer

So as I was mentioning that as far as Q2 is concerned, it is a lean period not just in India because of monsoon effect but even in other large geographies which consume TAN and as you know TAN or the substitute of TAN which is fertilizer grade ammonium nitrate is essentially a fertilizer and therefore it’s relative I would say consumption vis-a-vis other nitrogenous fertilizer, it kind of defies the prices of fertilizer grade ammonium nitrate and therefore the import substitute that we see in TAN in India also in a sense gets governed by that price at least partially.

There is also obviously the other domestic producers who also depend on demand supply which is the domestic demand supply, they kind of affects their prices. So a combination of all of this will decide the prices going forward but I think one larger aspect in TAN which we were also I was just mentioning that there is also a level of impact that we are likely to see from what happens in Russia-Ukraine situation because the prices of gas, thereby the prices of overall cost of production of TAN as well as the shut down of some of these plants in Europe because of thees high raw material prices will also have bearing on prices.

The third thing that I was mentioning, which very early we have just picked up the news that Russia is given that the season is coming back, demand season or consumption season is coming back, Russia in general is looking at importing certain export taxes on export of fertilizer. Their TAN or is also one of the products. We’ll have to see the combined effect of all of that, but Q3, Q4 in general I would say should from a demand perspective at least we are very clear the the domestic demand would again pick up after a lean season and given that dimension of the overall margins, we should hopefully see better quarters in Q3 and Q4.

Chetan Thacker — ASK Investment Managers — Analyst

This question is largely coming from historically [Indecipherable] profitability that’s been witnessed for the TAN business. Current numbers appear to be significantly better. So just wanted to get a sense on that. Would it start to revert to that over a more medium-term or it’s again a flavor of what happens globally in terms of energy costs in Europe and that’s on the margin will decide the profitability for TAN.

Amitabh Bhargava — President and Chief Financial Officer

I didn’t get the first part of your statement where you seem to suggest that TAN margins have come down. Is that what you were alluding to?

Chetan Thacker — ASK Investment Managers — Analyst

No earlier TAN profit per tonne used to be significantly lower than what it appears to be today. So just wanted to get a sense on do we start to revert towards that over the more medium-term or is this profitability here for some more time before we start to see anything happen on that because prices have obviously gone up and we have seen our spreads also increase significantly compared to historically last seven, eight of per tonne profitability.

Amitabh Bhargava — President and Chief Financial Officer

So see overall margins are a function of both the finished good prices and raw material prices. Raw material prices have as much as finished good prices have gone up in last few quarters. So have the raw material prices, but we’ve seen a better pass-through of raw material prices in the finished good prices and so long as the demand in Indian context as well as the demand for fertilizers, overall nitrogen fertilizers in particularly the fertilizer consuming geographies remains strong.

As fertilizer grade ammonium nitrate also, which is essentially a fertilizer would continue to have buoyancy as far as the prices are concerned but we’ll have to see. I mean there are too many factors right now at play meaning the prices of natural gas, prices of ammonia and then of course the nitrogen as fertilizers. So a combination of that and also some external factors like what Russia does in terms of export and the export quality may also play some role. So I think it’s within I would say from a demand perspective we remain quite bullish. We’ll have to see how all of these factors would play out in terms of the user margins in TAN.

Chetan Thacker — ASK Investment Managers — Analyst

And sir just the last question on the ammonia commissioning. So when the commissioning happens, what is the strategy in terms of locking the contracts for natural gas and how should we view that?

Amitabh Bhargava — President and Chief Financial Officer

So we are looking at both domestic gas as well as a part of it LNG. Domestic gas as you know that there are some gas options are In fact come in the last quarter as well and there are some more expected in the coming couple of months. So we look to tie up part of that gas from domestic sources and the balance we are in discussion with LNG suppliers. So it’s a combination of the two.

Chetan Thacker — ASK Investment Managers — Analyst

And sir, total requirement for natural gas should be how much?

Amitabh Bhargava — President and Chief Financial Officer

About 1.2 to 1.3 million cubic meters per day.

Chetan Thacker — ASK Investment Managers — Analyst

Sure sir. Thank you so much. That’s helpful. All the best.

Operator

The next question is from the line of Smitesh Sheth from Raedan Securities. Please go ahead.

Smitesh Sheth — Raedan Securities — Analyst

Sir, this ammonia project is [Technical Issues] self consumption only.

Amitabh Bhargava — President and Chief Financial Officer

Yes.

Smitesh Sheth — Raedan Securities — Analyst

So suppose if say if the project is on schedule. So in May, it will take how much time for —

Operator

Sorry to interrupt you, but your voice is breaking.

Smitesh Sheth — Raedan Securities — Analyst

So how much time will it take for a trial run, test run and then full production capacity, when do you think sir will start?

Operator

Smitesh, sorry to interrupt you, but once again your voice is still breaking. May I request you to rejoin the queue please?

Smitesh Sheth — Raedan Securities — Analyst

Yeah, sure, I’ll rejoin the queue.

Operator

The next participant is Amarjit Gupta, Individual Investor. Please go ahead.

Amarjit Gupta — — Analyst

Good evening. I wanted to know what is the total import of ammonia in a financial year?

Amitabh Bhargava — President and Chief Financial Officer

Yeah, we’ll just give you the numbers. Any other questions you have?

Amarjit Gupta — — Analyst

And then, how are we going to supply ammonia to the Gopalpur project?

Amitabh Bhargava — President and Chief Financial Officer

So Gopalpur project we have as part of the project we have a tie-up with Gopalpur Port where they would be an import terminal for ammonia and then we would have an ammonia tank at our project site. So it will be essentially imported. What the Taloja ammonia project would essentially do is cater to the requirement on our Western part of India, that is Taloja and [Indecipherable].

Operator

Amarjit, do you have any follow-up question?

Amarjit Gupta — — Analyst

No, actually I was waiting for the figures of the import of ammonia.

Amitabh Bhargava — President and Chief Financial Officer

Yeah so roughly about 300,000 kt and then of course we have our old capacity.

Amarjit Gupta — — Analyst

So is there any surplus ammonia for this plant?

Amitabh Bhargava — President and Chief Financial Officer

So like I said, we have our own ammonia that we produce within house which has a capacity of about 128,000 tonnes. So we produce some ammonia from our own plant. We have import which I just mentioned and we also procure partially from other domestic players and as you know that our fertilizer capacity is on a ramp-up. Our capacity utilization and fertilizer are currently at about 67%, 68% odd and that would ramp up basically the Taloja production would largely get consumed in our West Coast plants basically Taloja and Dahesh but as you know part of the capacity is at surplus at any stage. We are also in a position to sort of sell it domestically because India is a significant importer of ammonia and in the past we have sold surplus ammonia in domestic market also.

Amarjit Gupta — — Analyst

Thank you. That was very helpful.

Operator

[Operator Instructions] The next question is from the line of Adit Shah. Please go ahead.

Adit Shah — — Analyst

Hi thanks for taking my question. My first question was on the ammonia plant. When the plant had initially been planned and announced, you were expecting about $230, $240 per tonne of benefits versus import costs back then on the plant. So just in terms of numbers and given that the plant is four to five months away from commissioning and given the current industry scenario, are we still expecting similar benefits or are these going to be significantly higher than before and if so, then how much.

And my second question was on the solar grade nitric acid capacities. How much of overall volumes would these constitute or even other specialty in nitric acid constitute and what would be the margin acquisition due to these — move towards these products?

Amitabh Bhargava — President and Chief Financial Officer

So as far as ammonia margins are concerned, based on current prices of ammonia and the likely gas prices that we are looking to tie up, the margins are likely to be significantly better, but I think it will be fair to say that a much better estimate or more accurate estimate can be assessed on our end and we can inform also the stakeholders once we have clarity on our gas prices. As we speak the gas prices are at current prices of ammonia. To get lets say $230, $250 of delta, we can afford significantly higher prices of gas, but our likely tie up is going to be at much better prices as we are discussing with the suppliers. So we’ll give a better estimate maybe by next quarter. I think we’ll have a much better estimate.

As far as your other question is concerned, what was the question? [Speech Overlap]. Solar grid as of now we are looking at roughly about 6,000 tonnes to 7,000 tonnes a year kind of volume, but depending on as the demand picks up, we have the ability to expand the capacity. Pricing wise also, a little early for us to — we’ve just done a trial run and therefore pricing wise also maybe by next quarter, we should be in a position to give you a better estimate on additional margins coming out of this period.

Adit Shah — — Analyst

Okay thanks and I’ll get back in queue.

Operator

[Operator Instructions] The next question is from the line of Prashant Pani [Phonetic] from DCS. Please go ahead.

Prashant Pani — DCS — Analyst

Yeah good evening sir. So thanks for the opportunity for me to ask the questions. Sir, like I recently heard some protests in the Odisha project which is near to Ganjam district. So still that protest is going on or the work has resumed and it is continuing?

Amitabh Bhargava — President and Chief Financial Officer

So we have I think we’ve also reported and we’ve given some photographs also as part of our investor presentation. The filing work has started. There were some I would say local triggers there were certain issues which were more linked with the overall SEZ and earlier I think compensation issues which were there. I think those government has sorted out. The protests that you would have picked up are not specific to our project but are to a larger SEZ there and as far as our project is concerned, we are getting support from local administration and our work has commenced and we have already in fact shown some progress through photographs also in our presentation.

Prashant Pani — DCS — Analyst

Okay, thank you, sir. Sorry, I could not see, but I am from [Indecipherable], I saw like some protests was there. Okay, thank you sir. Thank you, that’s it from me.

Operator

Thank you very much. As there are no further questions, I now hand the conference over to Mr. Amitabh Bhargava for closing comments.

Amitabh Bhargava — President and Chief Financial Officer

Thank you everyone for your participation. For any further queries or clarifications, please do get in touch with our investor relations team. Have a good day and thank you so much.

Operator

[Operator Closing Remarks]