Deepak Nitrite Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Deepak Nitrite Limited (DEEPAKNTR) Q4 FY22 Earnings Concall

Q&A Highlights:

• Naresh Vaswani of Sameeksha Capital asked about the capex of INR1,500 crores, the revenue expected to be generated out of this and the timeline. Maulik Mehta ED replied that capex is spanning across products that are into the lifesciences space from DEEPAKNTR downstream as well as Deepak Phenolics. The schedule is on track.

• Naresh Vaswani of Sameeksha Capital also asked about the steps the company has taken internally to mitigate the current environment. Maulik Mehta ED said that to manage the short and medium term supply chain, the company is working with key suppliers not only in India but worldwide to ensure that supplies are coming in indexed linked pricing with volume commitments coming from DEEPKNTR to leverage cash flows.

• Andrey Purushottam from Cogito Advisors asked about the profit growth lagging the revenue growth and when it’s likely to reverse. Sanjay Upadhyay CFO replied that today the company is operating in such a volatile situation that to give an indication is very difficult.

• Rohit Nagraj with Emkay Global asked about the demand environment. Maulik Mehta ED replied that in general the demand is good. But couple of products customers are unwilling to give long term visibility. However, Europe is becoming more resilient than it was. But customers are not in a position to give the level of confidence and commitment.

• Rohit Nagraj with Emkay Global enquired about any inorganic initiatives as expansion plans. Sanjay Upadhyay CFO replied that the company is not averse of any inorganic growth. In fact it works faster if a good opportunity comes. Greenfiled projects always takes time.

• Deepak Saha asked about performance products and the levers contributing higher to the overall revenue. Maulik Mehta ED replied that right now the company doesn’t expect the same kind of margins. As a percentage, however, DEEPAKNTR is increasingly looking at a higher base.

• Naushad Chaudhary from Aditya Birla asked about the normalizing margins of Phenolics and if there is any scope for improvement going forward. Maulik Mehta ED answered that there are opportunities to improve and in this case most of it comes from further tweaking the company’s operational excellence. Also, phenol as a business, demand for the product is good and strong, but RM price is challenging.

• Naushad Chaudhary from Aditya Birla also asked that with the existing capital deployed to the Phenolics business if the company can do INR200-250 crore of quarterly EBIT business. Sanjay Upadhyay CFO replied there is not control over raw material pricing, so the company cannot answer some questions which are beyond anybody’s control.

• Balkrishna asked if any of the company’s products have application in making batteries used in e-mobility. Maulik Mehta ED replied that it’s not there. But this industry, which is nascent in India, has a lot of utilization or processes which DEEPAKNTR is very competent in like hydrogen reduction, nitration and fluorination.

• Balkrishna also asked about epoxy,  how much impact the government infrastructure spend could have on the demand of DEEPAKNTR products. Maulik Mehta ED said that the company’s downstreams will have a direct interface with these products. So once the company is close enough to commissioning or post commissioning, it would be reasonable to answer.

• Samir Palod of AUM Fund Advisors enquired that given a net debt free balance sheet, why would the company consider a QIP. Maulik Mehta ED replied that the company has plans with QIPs. Of course the balance sheet is strong but no harm in making it stronger.