Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC) Q2 FY23 Earnings Concall Transcript

Gujarat Narmada Valley Fertilizers and Chemicals Limited (NSE:GNFC) Q2 FY23 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

Nitesh Vaghela — Investor Relations

D. V. Parikh — Chief Financial Officer

Manish Upadhyay — Head Industrial Products Chemicals

Jiten Desai — General Manager, Industrial Products, Marketing Department

Y. N. Patel — Head of Operation and Maintenance

Analysts:

Prayatn Mahajan — Balyasny Asset Management — Analyst

Nishith Shah — Aequitas Investments — Analyst

Unidentified Participant — — Analyst

Nirav Jimudia — Anvil Research — Analyst

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the GSFC Conference Call to discuss the Q2 FY ’22-’23 Financial Performance Earnings. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nitesh Vaghela from Anurag Services LLP. Thank you, and over to you, sir.

Nitesh Vaghela — Investor Relations

Thank you, and good afternoon. Welcome to the second quarter earnings conference call of Gujarat Narmada Valley Fertilizers and Chemicals Limited, hosted by Anurag Services LLP. From the management, we have Mr. D. V. Parikh, Executive Director and, CFO; Mr. Y. N. Patel, Head of Operation and Maintenance and other senior dignitaries from the management. I would like to thank the management for giving us the opportunity to host this call.

We will begin the call with opening remarks from the management, post which we will have a question-and-answer session. Thank you, and over to you sir.

D. V. Parikh — Chief Financial Officer

Thank you, moderator and organization, and good afternoon to all the participants. Basically, I’ll start with the general factors [Technical Issues] running within India. With our operations are predominantly confined to India, basically two factors have been more pronounced during the quarter. One is the inflation and second is the impact of foreign-exchange rates.

Inflationary situation has been around since last six to eight months by now. RBI is trying to contain the inflation to be put in rates especially by increasing the interest rates to contain the money flow within the economy. Exchange rate has been depreciated by almost around 10% over the last six months. Coming to the specific part of the industry, both chemical and fertilizer. Fertilizer subsidiary has been our main area of concern for the government. Even after increasing more than 105% of the total subsidiary, which has totaled up to INR215 crore by now, the expected subsidy is going to cross, are likely to cross around INR250,000 crores.

On fertilizer, there are three important developments. One is the recent announcement of the NBS rates which are going to be valid for H2 of FY ’22-’23. GNFC also has one fertilizer, where it is applicable. The second is, the policy relating to one nation one fertilizer, where a sort of co-branding is going to prevail for all the urea manufacturing units as well as other fertilizer manufacturing units. The third is the announcement of PM-KSK, which is Pradhan Mantri Kisan Samruddhi Kendras, KSK rather. So these are the three developments which are going to impact across the board all the companies which are into manufacturing, as well as retaining of fertilizers.

On the bulk chemical part, which is industrial product part, there are some contradictory observations in terms of elements operating. On the realizations part across the board what we have witnessed for our chemical is, there is moderation in the realization, whereas as far as input cost is concerned, more or less there is not much except in coal and gas. Gas prices are increased by around 18% Q-o-Q, and coal price has gone up by around 64% Q-o-Q, which is basically denting the margin.

Apart from that the talking about anti-dumping duty on our chemicals. The anti-dumping duty has been withdrawn, whereas that of TDI has been extended to September ’27. [Phonetic] Our colleagues from IT market we will talk more about this later on. Talking about financials, we first touch upon the operating performance in terms of production and sales volume and thereafter will go through the different elements of profit and loss, segment reporting balance sheet and cash flow.

On the volume front like production is affected mainly because of the outage at the complexities, Bharuch as well as Dahej. At Dahej, there were various maintenance issues, whereas at Bharuch, the mother plant was disrupted, that is ammonia plant was disrupted. In addition to that, there was a disruption in weak nitric acid plant also. Ammonia plant disruption happened around late July for — to nine days. These are the impact — resulting impact on the sales volume also. This outage has also caused certain unproductive cost at the locations.

In terms of sales like, they are talking about the production volume, therefore the production volume is down by around 12% on a Q-o-Q basis, when we talk about the sales volume, sales volume of chemical is down by 8%. The sales volume is down because of predominantly two reasons, one is the market reason and second is the availability reason, the channel continues to be not produce because of the cost economies reason, whereas chemical like [Indecipherable] aniline have not been selling because of the market reason. There is a sale, but the sale is damper in terms of the volume. So these are the volume effects on production and sales.

Talking about realizations, the realizations in case of fertilizer have been reasonably well because of the subsidy component, especially for the complex fertilizer. The revenue part in urea has gone up mainly because of the gas prices operative at an elevated level. I chemicals, the realizations have been down across the board. There is not a single chemical where realizations are positive as compared to Q-o-Q. Other income mainly represents some increase in the interest income and the leading part of it, when we talk about the raw material, the main increase in terms of food and fuel has come from the gas and coal prices, the rest are more or less the — not so significantly impacting. Whereas, because of the outage there is also some impact on the specific conventions, which are weighed on the profitability of the company.

In terms of increase decrease in the inventory, although the production of TDI was less, the sale has been reasonably well as compared to the quarter — quarter-on-quarter basis, so because of this there is a substantial reduction in inventory of around INR100 crore or so in TDI. In terms of like fuel and food cost, again the same element of NB and coal comes into picture. When we talk about the overheads, this time effective July, the long-term rate settlement of the company is good, for which provisions have been made both in the profit and loss agenda as other comprehensive income.

So overall, taking into consideration all these factors the PBT stood at INR316 crore, still a figure. When we talk about segment performance. The segment revenue of fertilizer has gone up substantially, whereas in terms of profit it is not making — little much, because of the regulatory framework on fertilizer. Although in case of mixed fertilizer there has been quite a good profitability, urea has been negative, mainly because of the energy norm effect on a YTD basis there is an impact of around INR22 crore because of the higher energy norms.

We might — as it’s apparent from the segment performance, the segment premium is more driven as always by the chemical segment of it. However, in terms of the revenue pie, there is more impact in terms of fertilizer revenue which has improved from 29% to 37% mainly because of the revenue increase on account of subsidy part. Now talking about balance sheet, more or less the balance sheet has been stable, except for the increase in the working capital. The working capital increase has been because of the subsidy levels increase, which has increased from around INR700 crore to INR1,100 crore level.

Cash flow, also there has been a like healthy cash flow in terms of operating cash flow which is constrained by the working capital blockage, mainly because of the subsidiaries. Talking about the capex part, Board has approved around INR850 crores of project which are already now into the implementation stage. The two projects which comprise this figure of INR850 crore is, around INR25 crore is that of the ammonia makeup loop, which will have a capacity of 50,000 metric ton per annum. And the second is the coal fire steam and power plant Bharuch, which will not increase the revenue, which is expected to reduce the cost in the vicinity of INR12,000 to INR15,000 per metric ton of TDI.

In terms of outlook like our colleagues from operations and marketing will cover how the outlook will be for the production and distribution side, but on an overall company perspective, we see the smoother sailing in couple of quarters down the line to come.

With this, I close my remark and make the session open for Q&A. Thank you very much.

Questions and Answers:

 

Operator

Thank you. [Operator Instructions] We have the first question from the line of Nirav Jimudia from Anvil Research. Please go ahead.

Nirav Jimudia — Anvil Research — Analyst

Yes. Good afternoon, team. So sir, I have two, three questions so. Sir, when we look at your annual report like we produced almost around 426,000 tons of weak nitric acid in FY ’22, so after utilizing that for AN melt and concentrated nitric acid, how much of WNA we would have sold in the open market in FY ’22?

D. V. Parikh — Chief Financial Officer

Yes. Our colleague from IP Marketing Mr. Jiten Desai will attend this question.

Jiten Desai — General Manager, Industrial Products, Marketing Department

Good afternoon, Mr. Nirav. I’m Jiten Desai.

Nirav Jimudia — Anvil Research — Analyst

Yes, good afternoon, sir.

Jiten Desai — General Manager, Industrial Products, Marketing Department

The question is specifically for weak nitric acid, we have sold in last financial year about 1,15,000 metric ton.

Nirav Jimudia — Anvil Research — Analyst

Okay. So rest was consumed internally, right?

Jiten Desai — General Manager, Industrial Products, Marketing Department

Yes. After consumption. Absolutely.

Nirav Jimudia — Anvil Research — Analyst

And sir the new concentrated nitric acid plant of 50,000 tons would have also started operations or it is yet to get commissioned?

Y. N. Patel — Head of Operation and Maintenance

I’m Y. N. Patel.

Nirav Jimudia — Anvil Research — Analyst

Good afternoon, sir.

Y. N. Patel — Head of Operation and Maintenance

Good afternoon. This project is likely to commission by February, March.

Nirav Jimudia — Anvil Research — Analyst

Okay. So once this project gets commissioned less of the WNA would be sold in the market, because then this would be consumed internally, right?

Y. N. Patel — Head of Operation and Maintenance

Yes.

Nirav Jimudia — Anvil Research — Analyst

And sir, in the next phase when again a big WNA capacity has been set up along with AN melt, so currently whatever WNA gets consumed being concentrated nitric acid would again got free after the commissioning of new WNA plant. So probably once those plants get commissioned, again, whatever we are currently selling in the outside market would again be brought back to the levels of FY ‘2021. Sir, is it safe to assume? Whenever those plants would get commissioned.

Y. N. Patel — Head of Operation and Maintenance

See we are — we’ll be adding up at least 2 lakh metric ton capacity of WNA. So that will be available in market after consumption this 50,000 in concentrated nitric acid.

Nirav Jimudia — Anvil Research — Analyst

Okay. But then we are also commissioning some AN melt capacity which is there in the presentation. So I guess there also WNA would be consumed.

Y. N. Patel — Head of Operation and Maintenance

Yes. There also — there will be some consumption. You’re right.

Nirav Jimudia — Anvil Research — Analyst

Got it. And sir, second question is on the ammonia part. So in FY ’22, I think we produced almost around 6,67,000 tons of ammonia. So if you can break it down between how much was for — how much was produced for chemicals and how much was for fertilizers? That would be helpful, sir.

D. V. Parikh — Chief Financial Officer

Normally, whatever ammonia we produce one-third is — by and large one-third is for the chemicals and two-third is for the fertilizer. Let’s say we produced 2,000 tons of ammonia a day, then you can safely assume around one-third of it — we are producing 2,100 ton, so one-third of it in the chemical and two-third in the fertilizer.

Nirav Jimudia — Anvil Research — Analyst

Got it. And sir, if you could break it down between currently, so like in Q2 FY ’23, what would have been the cost of production of ammonia when it is produced through oil, because that goes to chemicals? And what would be the cost of production of ammonia to gas, which goes into our urea? So if you can help on that part, sir.

D. V. Parikh — Chief Financial Officer

Yes, I’m D. V. Parikh, the cost of production of ammonia normally produced from the gas, especially during quarter two and this effort has been higher because of the gas prices. So overall gas prices have been higher. And every unit is to get at only one grade at the end of the month which is the price, whereas that of oil base is lower, exact numbers we can’t tell you in terms of cost of production, because this is an important raw material, but broadly this is the situation for ammonia produced from gas and produced from oil.

Nirav Jimudia — Anvil Research — Analyst

Correct. And sir last related question to this before I again join back in the queue. So what would have been the sales contribution of AN melt in FY ’22? And if you can specify it for first half of FY ’23 that would be helpful, sir.

Jiten Desai — General Manager, Industrial Products, Marketing Department

Okay. I can answer that, it is in revenue. I am Jiten Desai answering questions to Nirav. Ammonium nitrate melts contribution in revenue is around 24% in last financial year. No, sorry, it is in current year, first half. And then last year, it is around 16%.

Nirav Jimudia — Anvil Research — Analyst

16%, one-six, 16%.

Jiten Desai — General Manager, Industrial Products, Marketing Department

Yes.

Nirav Jimudia — Anvil Research — Analyst

Mr. Parikh, on the opening remarks you mentioned something around INR850 crores of capex, but I think the voice got muffled in between. So if you can again touch upon that, that would be very helpful. I think you’ve mentioned some breakup in terms of the ammonia capacity of 50,000 tons and one coal based power plant, which could help us in some TDI production of INR12,000 crores to INR15,000 crores. So if you can just touch upon that again that would be very helpful.

D. V. Parikh — Chief Financial Officer

The capex relating to 50,000 tons of ammonia is around INR225 crores out of INR850 crores. The rest is for the captive power plant for steam and power. The objective is lower cost production of steam and reliability of the power in this.

Nirav Jimudia — Anvil Research — Analyst

So the capex for — so how much in megawatt, if you can specify, sir.

D. V. Parikh — Chief Financial Officer

Equivalent megawatt would be 35 megawatt around, whereas power would be around 18 megawatt, the rest is tubes.

Y. N. Patel — Head of Operation and Maintenance

150 metric ton will be steam.

Nirav Jimudia — Anvil Research — Analyst

Okay.

D. V. Parikh — Chief Financial Officer

150 metric ton, when we say, it is 150 metric ton per hour, we are talking.

Nirav Jimudia — Anvil Research — Analyst

Got it, sir. I’ll again join back in the queue and thank you for answering the questions in detail. All the best, sir.

D. V. Parikh — Chief Financial Officer

Welcome.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Prayatn Mahajan from Balyasny. Please go ahead.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Yes, hello.

D. V. Parikh — Chief Financial Officer

Yes, please.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Yes, hi. Thank you, sir. Thank you for giving me the opportunity. Sir, I was just trying to understand there are so many products that we cater to. Can you broadly provide us the split of, let’s say, I just wanted in two categories. What is the revenue contribution from the TDI segment, and let’s say, others on the revenue side? And as you mentioned that the fertilizer business does not contribute much to the EBIT, if you can give me the split and others in revenue in TDI and others in EBIT that will be very useful.

D. V. Parikh — Chief Financial Officer

Revenue part our marketing colleague Shri. Jitendra Desai will cover. Let me cover the contribution part of TDI. TDI like we have two plants, one is at Bharuch, and second is at Dahej. Bharuch plant has been positive in terms of the contribution at a net level it is positive. Whereas Dahej plant has been incurring losses predominantly because of the fixed cost, whereas last quarter in addition to the fixed cost, we made also because of the contribution losses, because it was necessary to be in the market. Now on the revenue part, our colleague will touch upon the numbers.

Jiten Desai — General Manager, Industrial Products, Marketing Department

In TDI — I’m Jiten Desai. TDI contribution in our total revenues around 17% to 18%. It is steadying both past financial year as well as first half.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Okay. And sir the same — can you provide us the same split for EBIT also. How much EBIT is coming from TDI usually on a run rate basis?

D. V. Parikh — Chief Financial Officer

The EBITDA is negative for TDI, like we are incurring losses there.

Prayatn Mahajan — Balyasny Asset Management — Analyst

So you’re saying that all the EBITDA that the company is generating, majority of it is coming from other production nor TDI?

D. V. Parikh — Chief Financial Officer

Yes for H1, it is true.

Prayatn Mahajan — Balyasny Asset Management — Analyst

And sir, what was the split for ’22 — FY ’22?

D. V. Parikh — Chief Financial Officer

FY ’22 also we were in grade-in TDI.

Prayatn Mahajan — Balyasny Asset Management — Analyst

And sir, any idea sir, I just wanted to understand, which is the most valuable chemicals for us from an earnings standpoint? Which — what would as per — is the most valuable chemical which we guys are selling?

D. V. Parikh — Chief Financial Officer

See it is not like it — at different points in time different chemicals perform out of the basket. Last year we had a very good run on acetic acid, AN melt, technical grade urea, so it is like that. On revenue part, TDI also delivered a good revenue. But it is not profitable at the net level.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Okay. Is there any…

D. V. Parikh — Chief Financial Officer

The reason that we applied for some protection, and anti-dumping duties extended till September 2027. The second important part within TDI is, as of now the major operations are running on gas and we know what is the situation in last like nine to 12 months as far as gas prices are concerned.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Right. And so you wouldn’t say that TDI prices globally where they are still — we are still not able to make profit at these elevated prices also?

D. V. Parikh — Chief Financial Officer

Up to September, yes. After September the scenario has improved in terms of realization, and the most important part is the input cost has gone down, especially that of theirs. And other petrochemical also, but predominantly it is the gas prices which outturn turn the contributions positive.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Right. Sir, just one last question for 1H FY ’23, if you — because we’re not doing segmental disclosure, what would be the contribution, let’s say, I understand TDI is negative, but which one — which segment has contributed us the most, let’s say, if we have to say acetic acid or nitric acid, which chemical is contributing the most to our EBIT in 1H ’23.

D. V. Parikh — Chief Financial Officer

By and large all chemicals contributed more or less equally, except TDI.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Okay. So TDI has been a…

D. V. Parikh — Chief Financial Officer

Yes, the proportion of the margin has been going down, mainly because of the reasons we explained in the press note. In investor presentation also some parts of the press notes are appearing. So these are basically the reasons, the contradiction which we observed is, there is a stagnancy in case of most inputs, so they are at an elevated level. Some of the inputs like coal and gas have further gone up, but the same is not reflected in the output products.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Got it, sir. And, sir, any guidance for the — for us for the second half, how are we looking at it. Are we seeing a very sharp contraction in our earnings for the second half or are we fairly confident of maintaining the run rate at which we are in the first half?

D. V. Parikh — Chief Financial Officer

We have mentioned that in the press release that we are pretty okay with whatever is the current level. And we don’t see any issues, because operations are stable, pricing realization are also stable. The rest I would request our colleague from operations and marketing to comment.

Y. N. Patel — Head of Operation and Maintenance

From operation, we don’t see any eventuality, unless that we are surprised or breakdown of any scenario. Otherwise — operation-wise performance will be smooth.

Prayatn Mahajan — Balyasny Asset Management — Analyst

Right. I’ll join back the queue. Thank you so much, sir. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Nishith Shah from Aequitas Investments. Please go ahead.

Nishith Shah — Aequitas Investments — Analyst

Good afternoon, sir, and thank you.

Operator

Yes, please go ahead.

Nishith Shah — Aequitas Investments — Analyst

Good afternoon, sir, and thank you for this opportunity. Sir, I would like to understand how are the current raw material prices trending post Q2?

D. V. Parikh — Chief Financial Officer

See this information is already in public domain, but we will still answer that. Gas prices have softened, gas spot prices have softened after Q2. Other petrochemical prices like oil, polybenzene which we are using are also softened. But there are monthly trends to this. Okay, so we can’t share with an exact forecast that it will go down or up, but as of now we see a moderation, because there was a sharp rally in all the input prices. The only thing which — where we see some constancy is [Indecipherable].

Nishith Shah — Aequitas Investments — Analyst

Okay. And sir how do we see inputs now, in terms of volumes and pricing?

D. V. Parikh — Chief Financial Officer

Pricing our marketing colleagues would explain, like on volume, Mr. Y. N. Patel has already explained, that operations are stable, both at Bharuch and Dahej. On the sales part, our colleague Mr. Jiten Desai [Indecipherable]

Jiten Desai — General Manager, Industrial Products, Marketing Department

Hello, good afternoon Mr. Shah.

Nishith Shah — Aequitas Investments — Analyst

Thank you.

Jiten Desai — General Manager, Industrial Products, Marketing Department

As far as prices of chemicals are concerned, you know recession-like situation is taking stole, but we are better insulated, because our products finding applications in various end-use surplus. So suppose one sector like textile is not doing well, and other sectors there are enough demand for our chemicals. As far as prices are concerned, current price levels are okay, as CFO has explained. And going forward we cannot predict, because it is month-to month and situation is bit volatile now on these.

Nishith Shah — Aequitas Investments — Analyst

So there are no dumping-like situations on the import side, right?

D. V. Parikh — Chief Financial Officer

Yes. Normal volumes are coming actually, as far as imports of acetic acid and TDI, because our all the products — major products are India’s net importer. So our imports are coming in the normal quantity.

Nishith Shah — Aequitas Investments — Analyst

Okay. And, sir, earlier you are selling more of nitric acid compared to TDI, because the spreads were better. So are the spreads still better in nitric acid?

D. V. Parikh — Chief Financial Officer

TDI might improve, gradually has improved in terms of realization. So if we look at the value addition it is storing more value when we produce TDI now. And also like a couple of months back there was a heavy demand for concentrated nitric acid, which has moderated as you mentioned, it is better to put the news when the plant is running for TDI. Secondly, for market reason also we continue manufacturing TDL. So all this — looking from all this factors, as of now TDI has a preference over concentrated nitric acid, because beyond a particular volume of nitric acid, company has to enter into certain contracts, which may not be so lucrative as that of the spot prices.

Nishith Shah — Aequitas Investments — Analyst

Okay. And sir, what is the capex for H2?

D. V. Parikh — Chief Financial Officer

Yes. Our colleagues, Mr. Patel will respond on that.

Y. N. Patel — Head of Operation and Maintenance

See it is difficult to exactly give capex. But broadly it will be around INR235 crore by end — that is cash outflow.

Nishith Shah — Aequitas Investments — Analyst

Okay.

D. V. Parikh — Chief Financial Officer

See, if we talk about the capex, Mr. What’s your name?

Nishith Shah — Aequitas Investments — Analyst

Nishith Shah.

D. V. Parikh — Chief Financial Officer

Nishith, if we — Mr. Shah, if we look at the press release, we have covered the capex in three parts, one INR140 crore of capex, which is expected to be complete by FY ’23. The second is the capex of around INR5,000 crores we have mentioned, okay. Where different capital expenditure are there for week nitric acid, AN melt, like the CCPP and others. And after that, we have also mentioned a figure of INR15,000 crore, which is at a very, very last stage, not even up to drawing board stage, which has something to do with the cracker related investment. So these are the three things which are given in the press note.

The exact breakup if you want, Mr. Patel will tell you the breakup of around INR5,000 crore of capex lined-up. INR140 crore is basically two things concentrated nitric acid and 4 megawatt solar plant.

Nishith Shah — Aequitas Investments — Analyst

Yes. That I’m aware. Okay, thank you, sir. This is all from my side. Sir, lastly I’ve just one request, so I wanted to give a plan, I think it will be — it will help investor community as a whole to better understand the company and operation. So if you can consider this request, it will be great.

D. V. Parikh — Chief Financial Officer

Always you may get in touch with our Investor Services sir, they will do the needful coordination for that. And you are welcome.

Nishith Shah — Aequitas Investments — Analyst

Okay, sir. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Alkesh Mungra [Phonetic] an investor. Please go ahead.

Unidentified Participant — — Analyst

Hi, good afternoon, sir. Sir, I think most of my question related to TDI are already answered, I only have one question, like every month of October credit sizes went up quite high. So were we able to get in taking advantage of it, like any price hike or anything?

D. V. Parikh — Chief Financial Officer

Could you please repeat the question?

Unidentified Participant — — Analyst

Yes. Like last month in the month of October, TDI prices globally went up quite high. So my question is, were you able to take advantage of it, like any TDI price hikes, from margin as defined?

D. V. Parikh — Chief Financial Officer

Yes.

Jiten Desai — General Manager, Industrial Products, Marketing Department

Hello, I am Jiten Desai, Mr. Alkesh. Yes, there was a spike observed in last October. And we have also increased the price in tandem with that. But the current situation, it is slightly moderating now.

Unidentified Participant — — Analyst

Okay. Thank you, sir. And what is the utilization level of plants for TDI right now?

Y. N. Patel — Head of Operation and Maintenance

We are — I am Y. N. Patel. See, right now we are running at 110% capacity. But if you want yearly utilization, then it will be — so 130 — give some time, I will give…

D. V. Parikh — Chief Financial Officer

Last year the figures of like TDI too was around 70%. And normally Bharuch plant operates at more than 100%, it ranges between 110% to 120%. For the H1, Mr. Patel will get back.

Y. N. Patel — Head of Operation and Maintenance

I think 69% up to October, capacity utilized — TDI-2. For TDI-1, it is 128%.

Unidentified Participant — — Analyst

Okay. Thank you, sir. Yes, that’s all from my side.

Operator

Thank you. We have the next question from the line of Ankur Shanwal [Phonetic] an investor. Please go ahead.

Unidentified Participant — — Analyst

Thank you for the opportunity. Sir, GNFC has some excellent set of chemicals, for last few quarters we have been performing really well. The same cannot be said about our fertilizer do be done. Sir, I’m not efficient in fertilizer, because government has been really helpful with the subsidies they are providing. I know GSFC might be using some other technology, so you cannot compare it. But why our fertilizer division is not generating profits in like huge quantity? Thank you.

D. V. Parikh — Chief Financial Officer

There is a fundamental difference between the product portfolio of GSFC and GNFC. GNFC’s product portfolio of fertilizer is just two fertilizer. And out of like close to 1 million tons of fertilizer, roughly 70% fertilizer — or around 75% volume is that of urea. And urea, the profits are highly regulated, the fixed cost are not revised since quite some time. So when our product mix were, there is a highly regulated business, you cannot make much profit.

The second part within urea businesses that government is cruising the norms of energy which are very difficult to achieve for a very old kind of a plant. Our plant has been running since ’80s. So this is another reason fertilizer is not into profit. But if you look at the H1, as compared to INR11 crores, the profit of fertilizer has gone up to INR57 crores in the segment itself, mainly this is because of the complex fertilizer where government has been helpful.

If you look at the GSFC portfolio, their portfolio is more on the complex fertilizer side than the urea side. Their urea is substantially lower more than what we manufactured. Whereas, if you look at their chemical side, their chemical side is not so significant, our chemical side is very significant. This will be apparent to you from the segment also like we are broadly speaking 65%, 70% chemical and rest, fertilizer almost. And that is exactly opposite of us. This is the reason there is a difference in the profitability, in the complex fertilizer, if you take the case of Coromandel, they reported the results for H1 as well as Q2.

They’ve made excellent profit, whereas you take the case of — which has declared the results, they have eroded their margins as compared to Q1. So it all depends upon what product portfolio we have Within the fertilizer also, like there are two major companies which I turn to, one is Chambal, second is Coromandel. Coromandel is doing exceedingly well, Chambal has not been shown. In terms of its duty performance. So this is the reason — yes, we are not making so much of money in fertilizer.

Unidentified Participant — — Analyst

Thanks for the detailed clarity regarding fertilizer. And sir, on chemical division, the overall been doing daily very nice since last two years. I hope the performance will continue over the years. Thank you.

D. V. Parikh — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of [Indecipherable] from Laurel Investment Advisors. Please go ahead.

Unidentified Participant — — Analyst

Hello, good evening, sir. Sir, just wanted to understand sort of with interest rates rising and since we have a significant cash balance. Are we getting the benefits of that rate rising?

D. V. Parikh — Chief Financial Officer

That is all reflected, if you look at the other income part of the P&L that is reflected. The other income has gone up, mainly because of two reasons, interest and dividend.

Unidentified Participant — — Analyst

Okay. So now what is the interest that we get on our…

D. V. Parikh — Chief Financial Officer

It depends upon the tenure for which you made — but it ranges between 6% to 7.4% as of today.

Unidentified Participant — — Analyst

6% to 7.4%.

D. V. Parikh — Chief Financial Officer

Depending upon tenure, yes.

Unidentified Participant — — Analyst

Depending upon, okay. Fair enough, sir. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Nirav Jimudia from Anvil Research. Please go ahead.

Nirav Jimudia — Anvil Research — Analyst

Yes. Thanks for the opportunity, sir, again. So sir you were mentioning that we made a operating profit losses on TDI at both the plants in H1 as well as last year. So if you can let us know like what could be the breakeven cost for us for the TDI plant at Bharuch, as well as at Dahej considering the current tolling prices as the CNA prices?

D. V. Parikh — Chief Financial Officer

Okay. I’m D. V. Parikh, see, CNA we factor only at cost, so that is not an issue as far as TDI cost is concerned. The main component of TDI cost installing and gas prices. So which are wildly fluctuating month-to-month. So — apart from that when we talk about breakeven, breakeven depends upon what is the contribution margin you are getting for covering the fixed cost. Now, there is also an equal kind of the like changes in the net realization. So there is no specific one figure which we can attribute to a contribution level, which will give the breakeven point.

What we can at the most say is that, there is a particular fixed cost and we require certain contribution, which has again two worrying elements, one is realization and secondary is the variable cost of it. It’s a fact that as of now we are not covering and we are incurring losses, especially at TDI-2. And it’s the six quarter consecutively we are incurring losses at TDI-2.

Nirav Jimudia — Anvil Research — Analyst

Correct. So sir, if you can specify the fixed cost also that would be helpful, like we don’t want the breakup of the variable cost. But let’s say, even if you can give us an idea about the fixed cost on an annual basis at both the plants that would be helpful, sir.

D. V. Parikh — Chief Financial Officer

Okay. So if you look at our financials, the fixed cost is going to be around INR1,200 crore to INR1,300 crore. There is some impact which will come because of the wage revision also, okay. So on an average roughly INR100 crore is the fixed cost which is there for the company. Out of which, we may say safely between 25% to 30% is attributable to TDI.

Nirav Jimudia — Anvil Research — Analyst

Okay. So 25% to 30% of the INR1,200 crores could be attributable to both the TDI plants in combine, right?

D. V. Parikh — Chief Financial Officer

Yes.

Nirav Jimudia — Anvil Research — Analyst

Got it, sir. And sir, there is — just a clarification on the concentrated nitric acid, because last year we produced around 1,16,000 tons, 1,20,000 tons, and we almost sold the equivalent amount. So wasn’t CNA not utilized for our aniline, as well as TDI? So how that mismatch happened? So if you can just help us understand on that part.

D. V. Parikh — Chief Financial Officer

Okay. I’m D. V. Parikh, actually there is always been mismatches depending upon the market opportunities. Supposing aniline misquoting, like, we do production planning meeting almost weekly, and depending upon the market situation whichever products course over in terms of the contribution, we take a decision based on that for certain time. There are like input forecast, there are relation forecast based on that, the decisions are taken. So sometime back in the quarter, we also said that instead of TDI, we — concentrated nitric acid for some time and reserve is the case currently.

If we talk about aniline. Aniline for quite some time it was down, if you look at the production numbers, it was down in Q2, now we have started not at the full level which is consuming concentrated nitric acid, but supposing tomorrow we got a good chance to realize concentrated nitric acid more, then aniline will be sacrificed.

Nirav Jimudia — Anvil Research — Analyst

Correct. And sir…

D. V. Parikh — Chief Financial Officer

It is all about product optimization.

Nirav Jimudia — Anvil Research — Analyst

Yes. So sir, if I can ask on the cost of production of producing ammonia through oil as well as natural gas, you mentioned that it’s a sensitive figure which we can’t disclose on. But, is it safe to assume that because of the recent increase in the oil prices what we have seen and in your chart, gas prices have been constant at around INR88 rupees per SCM for last three, four quarters. Is it safe to assume that the cost of production of ammonia through oil is almost 25%, 30% higher than what it was before two, three quarters?

D. V. Parikh — Chief Financial Officer

See the cost of oil has been continuously rising, okay. In our case, it is not just the crude which is quoted, it is a special type of oil which we buy, which has two variables. One is the normal crude price which is the high sulfur crude price. And second is the very low-sulfur crude price. Ours is a product which falls in between that. But in general, we would say that, oil prices have a continuous rise, since three, four quarters by now.

Nirav Jimudia — Anvil Research — Analyst

Correct. So, has those cost increased by almost 25% to 30% for the cost of production of ammonia through oil over last six months to eight months?

D. V. Parikh — Chief Financial Officer

Yes.

Nirav Jimudia — Anvil Research — Analyst

Correct. And sir, small clarification to the capex as what you mentioned. So when could we expect our ammonia plan to get operationalized one, along with power plant and the TDR of 10,000 tons what you mentioned? So if you can just highlight the timelines of each of them that would be helpful.

D. V. Parikh — Chief Financial Officer

TDI, I will cover. The rest will be covered by, Mr. Patel. I am D. V. Parikh, TDI 10,000 tons is already in operation, okay. The debottlenecking has already taken place. There are factors like operating disturbances as well as market which is consuming as of now the capacity utilization. Regarding ammonia makeup loop of 50,000 and that 18 megawatt power plant, Mr. Y. N. Patel will tell you the expected dates of completion.

Y. N. Patel — Head of Operation and Maintenance

See, we have issued alloy for both these projects. Ammonia makeup loop will take at least 36 months. So we expect by end of ’26, ammonia capacity that is 150 metric ton will be added. 150 metric ton per day. And for this power plant tenure is around 30 months, we are trying to compete as fast as possible, but that will take — commissioned by end of ’25 year — year ’24, ’25.

Nirav Jimudia — Anvil Research — Analyst

Right. And the capex for, is it around INR600 crores?

Y. N. Patel — Head of Operation and Maintenance

INR613 crores precisely for these power projects. And for ammonia makeup loop bar, it is INR225 crores.

Nirav Jimudia — Anvil Research — Analyst

Yes, that he mentioned. So our effective TDI capacity now stands to around 74,000 tons with this 10,000 tons of debottlenecking which has happened, right?

D. V. Parikh — Chief Financial Officer

75 years.

Y. N. Patel — Head of Operation and Maintenance

Yes.

Nirav Jimudia — Anvil Research — Analyst

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

Y. N. Patel — Head of Operation and Maintenance

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of [Indecipherable] from Anand Rathi. Please go ahead.

Unidentified Participant — — Analyst

[Technical Issues]

Operator

Mr. [Indecipherable]. Sorry to interrupt, but we cannot hear you clearly.

Unidentified Participant — — Analyst

[Technical Issues]

Operator

No sir, could you switch to your handset?

Unidentified Participant — — Analyst

Hello. Yea, I’m on the handset. Hello?

Operator

Sir, you may have to speak a little louder, sir.

Unidentified Participant — — Analyst

Yes. Can you hear me?

Operator

Yes, it’s better. Thank you. Please go ahead.

Unidentified Participant — — Analyst

[Technical Issues] So firstly, we saw a margin contraction by almost 0.5%. And what was the major reason [Technical Issues] contributed to this margin contraction. Are there any particular reason, particular products, which contributed to the margin contraction? Or…

D. V. Parikh — Chief Financial Officer

There are two major products which has led to the margin contraction, one is the [Indecipherable] India, there is the AN melt during the last quarter.

Unidentified Participant — — Analyst

Okay. So what was the update on the price hikes that you have taken? Is there any price hikes, which you have taken, or you haven’t taken any?

D. V. Parikh — Chief Financial Officer

Prices have been continuously going down for these two products, and therefore it is eroding the margins directly. So it’s a same price where [Indecipherable].

Unidentified Participant — — Analyst

Okay, sir. And so what [Technical Issues] where can we expect the [Technical Issues] is to be quite stabilized and like by H2, next year. Is there any update on that?

D. V. Parikh — Chief Financial Officer

Yes. Our IP marketing executive Shri Manish Upadhyay will respond on that.

Manish Upadhyay — Head Industrial Products Chemicals

I’m Manish Upadhyay, actually second half normally we’ll get a good price. So, of course, particularly period of — maybe for one month or two months’ time, [Indecipherable] price maybe stable or slightly lower side, but we will expecting the better price realization after that period.

Unidentified Participant — — Analyst

Okay.

Manish Upadhyay — Head Industrial Products Chemicals

Mr. Desai will tell you.

Unidentified Participant — — Analyst

Hello.

Jiten Desai — General Manager, Industrial Products, Marketing Department

Right now it’s steady. And we hope that, that will remain for the balance period.

Unidentified Participant — — Analyst

Okay. Thank you. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Akhilesh Kumar, an Investor. Please go ahead.

Unidentified Participant — — Analyst

Thank you. Sir, I joined little late, if you have answered already, please skip that. I wanted to know if you have touched upon the earlier demand from the DoT. What I believe is, couple of years back the demand was withdrawn. Do we know why all of a sudden it has been again come up?

D. V. Parikh — Chief Financial Officer

With DoT, the Department of Telecommunication you are talking.

Unidentified Participant — — Analyst

Yes. The [Indecipherable] demand.

D. V. Parikh — Chief Financial Officer

It is not all of a sudden. Actually what is with every time passing by there is an increase in the interest and penalty we apply, given the time the issue is settled. So every time we expect that, they will keep on revising, but in substance it was showing demand. The only thing which is changing, because both the license is expired, the only thing which is adding up with the passing of time is interest and penalty. So like in the financing, it is mentioned around, INR21,370 crore or so. So that is the last demand that we’ve started with the demand of INR15,019 crore and it went up to INR16,359 [Phonetic] and it went up to INR20,000 crores, and now, INR21,370 crores.

So there is nothing in terms of principal which is adding up. But we do hope — the revaluation on them, or it will keep hanging all the time. It is — see, we have taken up the matter at the highest level, okay, at the government level [Indecipherable] also. And we are awaiting certain outcome to come, certain positive decisions came already, but then again department has contested that in the Supreme Court. So let’s see what kind of decisions come on those [Indecipherable] already given favor of us. So it will define the course of action.

Unidentified Participant — — Analyst

Okay. Thank you for the clarification. That’s it from my side.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Maan Vardhan Baid from Laurel Investment Advisors. Please go ahead.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Thank you for the opportunity, again. Sir, just wanted to understand. I mean, sort of since gas prices have gone up and that has impacted us, but that has impacted some other geographies more than us. So sort of going ahead or in the longer run, do you see some advantage out of this whole thing? Are you seeing capacities globally getting mothballed or something on those lines?

Jiten Desai — General Manager, Industrial Products, Marketing Department

Yes, you are right. I’m Jiten Desai, you are right. That particularly, the capacity erosion, plants under not in operations for TDI, it is happening worldwide and particularly in Europe. But the demand is also weak. So whatever the supply and demand, it’s — supply constraint has created imbalance that has eroded by weak demand. So it is just — I don’t think to some extent, but not fully.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Okay. And because of this are you being able to identify some gap, because again one of the advantages with GNFC is that it is sitting on a very large cash pile. So in terms of maybe procuring some machinery or some of these clients, maybe relocating them so that — because sort of at our end we feel that given the kind of cash that the company is sitting on and the sort of the spread of the capex etc. it seems a very sort of — and it is a continuously cash generating kind of a business that you are. So sort of any opportunities that are there on that front or that you are considering which could lead to some quick addition of capacity if one might say?

Y. N. Patel — Head of Operation and Maintenance

See, I’m Y. N. Patel answering your question. Normally any good project of substantial size, it takes at least two to three years for execution and by the time you complete engineering, it’s almost one year gone. And GNFC has a tradition that we don’t buy old machinery or old plant re-operating from any other players. And we don’t go for any inferior technology, where guarantees are not involved. So we don’t do any such gamble GNFC. We go with the fresh installation of plant and we execute ourselves with — and we go with the good technology supplier. So I don’t see short-term opportunity, we can guess on at least on capex side.

D. V. Parikh — Chief Financial Officer

Today which is not mainly into like R&D, it is moving towards the execution after purchasing technology, absorbing and plan, reasonably mastering it. So the second part is, growth can come in two ways, like one is organic which we are into. Second is inorganic which can happen through the process which you said include some companies acquisition. But most of our kind of companies do not go even in inorganic way. So what should be an organic way, what are position we are at from 1976 to this date is probably organic journey. Do you have any further question on this?

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

No, sir. This clarifies things. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of [Indecipherable] from Allied Equity. Please go ahead.

Unidentified Participant — — Analyst

Good evening, everyone. So my simple question over here is, from last many quarters we have seen that PAT, the PAT of around INR500 crores was being posted by GNFC, in this particular quarter because of some inevitable reasons, the PAT has dipped to INR235 crores, INR240 crores-odd. In future can you just give a hint of about the profitability where we can see in the future quarters? Thank you.

D. V. Parikh — Chief Financial Officer

So we don’t do any like — give any future guidance like this. If we were to be known, probably we would have been in business on our own. So these are chartering into certain rough measure over a period of time. And it will all depend upon responses, it will all depend upon the market conditions. So — okay, we may have INR500 crore or whatever PAT you are talking about, but then if you look at the consistency of profitability, I don’t think on a per annum basis it will be around INR325 [Phonetic] crore more than that. If you take our history of 47 years.

Unidentified Participant — — Analyst

Okay. Right. Obviously.

D. V. Parikh — Chief Financial Officer

Okay. So we would definitely like to grow both in revenue and profit, but after adjusting our price gain market conditions, okay. It can always not be stratospheric. But if opportunity comes, then we definitely [Indecipherable] stride and go forward.

Unidentified Participant — — Analyst

Thank you so much. Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions from participants, I would like to hand the floor to the management for closing comments. Please go ahead.

D. V. Parikh — Chief Financial Officer

Yes. Hi, thank you for all our investors for participating in our investors conference call. And I also thank my Senior Executives for joining this call and adequately replying to the queries of the investors. Thank you. So we close this conference call right now.

Operator

[Operator Closing Remarks]