Gujarat Narmada Valley Fertilizers and Chemicals Limited (NSE: GNFC) Q3 2025 Earnings Call dated Feb. 20, 2025
Corporate Participants:
Dilipkumar Parikh — Chief Financial Officer and Executive Director
Unidentified Speaker
Chetna Prabhat Kumar Dharajiya — Compliance Officer, Company Secretary and Chief Manager of Legal
Analysts:
Nirav Jimudia — Analyst
S. Ramesh — Analyst
Govind Lal — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Gujarat Narmada Valleys Fertilizer and Chemicals Limited Quarter Three Financial Year 2024 2025 Earnings Conference Call. This call is hosted by Anurag Services LLP on behalf of JNFC. From the management, we have Mr D.V. Pare, Executive Director and Chief Financial Officer; Mr YN Pateil, Head of Department O&M; Mr Ms Chetna, Company Secretary and Chief Manager, Legal and other senior members from management. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr D.V. Parik. Thank you, and over to you, sir.
Dilipkumar Parikh — Chief Financial Officer and Executive Director
Thank you. Thank you, ma’am. And thank you, Anurag Services for holding the call. And good afternoon and welcome to all the participants for the quarter three conference call of GNFC. First, I’ll cover the business aspects and thereafter I’ll touch the financial part of it. As you know, the company is mainly into the two segments, fertilizers and chemical. On the fertilizer side, by and large, it’s controlled business in terms of mainly the subsidy part of it. There are three positive developments which are there from the fertilizer business point-of-view. One is the regular receipt of the subsidy, which is not holding up the funds. Pipeline inventories are also at its lowest as at the quarter-end. When we talk about pipeline inventory, we mean inventory pending the DBT sales. The two other positive aspects is government is working on revising the energy norms, which are scheduled to expire by 31st of March 2025. And the exercise is also on at central government level for revising the fixed-cost of different urea units. On the complex fertilizer front, the — basically the scenario has been — witness is quite good because of the reduction in input cost. Now if you go to the operations part of the business side, the operations have been stable during the quarter, both at Dahej as well as. In terms of the project, projects worth around INR2,300 crore are already-approved are at various days of implementation. Our my colleague, Mr Patel will cover questions on the project. On the strategy side, as you know, we have appointed Karni for both growth as well as transformation and we are in the final stages of wrapping up on the report. And in a quarter or two, that thing would be finalized from a strategy perspective. So this is the broad update on the fertilizer part — strategy part. I’ll also cover the chemical part of it. In chemicals, the realizations have been little subdued, which are made-up by the higher volumes of chemicals, mainly during Y-o-Y as well as on a sequential-quarter basis in chemicals. Coming now to the financials, as you know, the PBT and both PAT have gone up on a sequential-quarter as well as Y-o-Y basis. We ended-up with around INR211 crore of PBT and INR158 crores of PAT. There are two important reasons because of this positive change in the PBT and PAT. One is the certain operational improvement because of the higher chemical volume. And second is, there are a few write-backs which have happened during the quarter. So this all total is up to in that figure — incremental figure of around INR76 crores on a sequential-quarter basis. Coming to the segment part of it, as you know, the — in chemicals, particularly few chemicals like TDI and the technical grade area have done relatively well on better on a sequential-quarter basis and technical grade area as well as few other chemical like acetic and a and melt have done far better in terms of volume on a Y-o-Y basis. So when we go to the segment results part of it, the fertilizer losses have reduced mainly because the input costs have come down into the complex fertilizer part. And chemical business has improved both because of the operational improvement as well as we spoke about during the quarter three. We’ll talk more about these items when there are questions about this. In terms of balance sheet, there is no major change except that the receivable of subsidy have come down, mainly because of receipt as well as the receipt based on the reference point of earlier concession rate, which is higher. So these are the broad things on the balance sheet part in terms — therefore, in terms of cash-flow, there is a positive fact in terms of cash-flow, operating cash-flow. So these are the aspects with which I am closing my opening remarks and leave the floor open for the questions-and-answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles you. The first question is from the line of Neerabh Jimodia from Wealth. Please go-ahead.
Nirav Jimudia
Yes, sir. Thanks for the opportunity and good afternoon to the team. Sir, I have a few questions. So first on the TDI side, sir, some of our earlier conversations during the, you have mentioned that our fixed-cost for TDI is close to INR50 a KG or INR50,000 a metric ton. And at the contribution level, the TDI plant on an annual basis was making a loss of close to around INR150 crores to INR200 crores, correct me if I’m wrong here. So two things here, sir. If you can share that with the shift to the coal-based plant and its current differential to the natural gas prices, how much per kg variable-cost can we save with this shift to coal-based plant? And B, how much of the HCL is currently contributing to the negative contribution margin in per kg when we produce TDI out of our Bharuch and Dahej plant.
Dilipkumar Parikh
Okay. I am Div Parik answering your first question on what will be the differential saving when we switch-over to the coal-based power plant. The coal-based power plant is likely to schedule the commencement around 1st of August as per the current plan. There is some delay of around four months in that, after which we don’t foresee any further time overrun. Upon being operational, the current budgeted figure is around INR14,500 per metric ton of saving because of the differential between coal and gas price. On the FCL negative contribution, I’m requesting my colleague, Manish Super to respond on that.
Unidentified Speaker
Manish from marketing side. FCL is normally variable-cost depend on the market chlorine availability and caustic production. It varies from the to almost INR1,500. Fortunately, GNFC is giving around INR500 minus. So we are charging INR10 as a cost invoice value and then we give discount in INR500 or something based on the quantum lifting. On an average, it is INR500 outflow.
Nirav Jimudia
Correct, correct. So it is not materially contributing negatively to our contribution margin. And on that figure of INR150 crores to INR200 crores of loss on the contribution level, it is a correct figure, sir or am I slightly higher on this number?
Dilipkumar Parikh
No, you are close to the number. Why? Because this time, as you know, there was an elongated shutdown at Dahej plant. And as the volumes reduce, the fixed-cost goes up on a per metric ton basis. So roughly we have a fixed-cost of around INR250 crore rupees per annum at the Dahej plant, okay. Okay and since we are going to have less volume because of almost four months of shutdown which was originally planned for around 55-57 days so it this time it will have little higher per metric ton figure. Okay. In terms of the loss — because of the unproductive loss, which normally happens during shutdown time as well as under fixed-cost the loss figure would be different than what you are talking. Okay. We’ll see at the year-end because as of now, it is picking-up. So we’ll come to know finally what will be the number at the end-of-the year.
Nirav Jimudia
So if you could share the figure for 3rd-quarter because 3rd-quarter, I think we have run the plant optimally after the shutdown. So if you can share for Q3, both the production and the sales figure for TDA as well as the losses. And sir, these losses are at the contribution level or at the PBT level, which you have mentioned?
Dilipkumar Parikh
No. No losses are not at contribution level except for controduction cost we are talking about PBT level. Production and sales figure, yes, our colleague Mr Patel will cover the production part and sales part marketing colleague will take care.
Nirav Jimudia
Sir, also if you can share the of plant or TDA.
Operator
Sorry to interrupt, sir. You’re sounding a little bit distant.
Nirav Jimudia
Yeah, if you can share the TDI losses at the PBT level for Q3 along with the production and sales figure, that would be helpful.
Dilipkumar Parikh
Okay. First, we talk about the volumes.
Nirav Jimudia
Yeah, yeah, sir.
Dilipkumar Parikh
Yeah okay. So you want quarter or
Nirav Jimudia
Quarter and nine months would help, sir.
Unidentified Speaker
Okay, nine months figure, I’m answering your question for TDI 2, April to December figure is 20,507, okay. That is what TDI. TDI 1 you want or
Nirav Jimudia
One. TDI one is 14,699, okay.
Unidentified Speaker
That is April to December
Nirav Jimudia
And for Q3, sir.
Unidentified Speaker
Q3, I will just give you a moment. Yeah, yeah.
Nirav Jimudia
And sir, second question is on the opening remarks, you mentioned about the fixed-cost on the urea is set for some revision for different units. I think if I’m not wrong, earlier, you have mentioned that our actual cost is close to around INR3,600 a ton and what is actually being paid is like INR2,500, INR2,600 a ton. So with this revision in the energy norms and the fixed-cost also getting revised, is it fair to assume that once — if it gets passed-through the government, our TDI losses would be wiped out and it will more than cover our deficit of INR1,100 a ton, which we are currently losing on.
Dilipkumar Parikh
So on one-side, you are talking about urea. On the other side, you are talking about TDI. TDI losses has nothing to do with the government taxes.
Nirav Jimudia
. No, no. No, no, sir. I’m into my second question. So I think that you said, Nake, you will just give us in a moment, so I then switch on to the second question. My apologies.
Dilipkumar Parikh
Okay. See, okay, you have asked for the losses of TDI on a product level basis, these are sensitive information. These are supposed to be within the company, no product level information. And I don’t think not only GNFC, any company shares on a product level basis their profit or loss. No, if very fair. Okay. And if anybody is sharing, please do let us know, okay. Because normally this is supposed to be a very confidential kind of a data.
Nirav Jimudia
Correct.
Dilipkumar Parikh
Okay. Now production and sales figure you got sales that you are yet to receive sales?
Nirav Jimudia
No, I have received, sir.
Dilipkumar Parikh
Received. Okay. I think Mr Patil has covered production. Sales on a nine monthly basis is again close to that INR22,000, okay. Is the sales of TDI 2. TDI 15,000 in terms of the volume we are talking, if you want to know quarter three, it is basically 9,000 and 5,000 metric ton respectively.
Nirav Jimudia
Got it. Got TDA 2, to TDI one. Got it, sir. Got it. Sir, on that question of, if you can share your views.
Dilipkumar Parikh
Yes. Now, see, again, it is very clear that depending upon the level which is set for the fixed-cost as well as the energy, we will come to know whether we stand to gain or lose. It is very clear when it comes to the revisioning fixed-cost, it is going to happen upward side only. But whether it will recoup the kind of under-recoveries it has is very relative. So very difficult to make a guess not only for any unit, how much government will revise what kind of position, although we exercise it at very advanced level. We are receiving queries almost every week, okay, for discussion. We visited there, there is a cost sale assigned to it and all that. So we are hopeful that something should happen in the shortest possible time. What is not moving in our view is a change in the energy norm. Now we had meetings few months back and thereafter, we don’t see any movement in terms of interactions with the industry or the units as such. So that is where we feel that whether there’ll be change or not is not clear and finally if it gets rolled over, then it might remain at the same level also. So let us see in a one month’s time — one and a half month’s time what actually happens to the norms part of.
Nirav Jimudia
Correct. And next question is on the TGU part. I think you mentioned that the prices were remunerative in Q3 and that has also helped to improve our profitability. So I think if I’m not wrong, I think we produce close to around 190 to 2 lakh tons of TGU on an annual basis. So if you can share how much is the demand domestically or how much we are currently India as a country importing TGU? And is it safe to believe that the prices of TGU in the international market drives the domestic prices of TGO in India or is it a right assumption to make or am I different in here?
Unidentified Speaker
I’m Manish. Indian demand is around 5 lakh ton, okay, right moment and around 2 lakh ton is being produced by GNFC and 3 lakh to be imported, okay. And our price is more or less in-line with the international prices.
Nirav Jimudia
Correct, correct. And sir, for this TGU, are we producing it through natural gas route or through the oil route like the ammonia which is required for this, it is either produced from the oil or the gas which is available in the market?
Unidentified Speaker
That is produced from oil. TGU is produced from oil, yeah.
Nirav Jimudia
Okay, okay, okay. Sir, next question is on the ain melt. I think a and melt, we have seen the imports getting reduced which were predominantly coming into India year back. So if you can share your views here because I think now Q4 looks to be a good season for AN melt given the pickup in the capex activities which we normally see during this quarter. So if you can share your views in terms of A, the outlook for AN melt and B, how much we have produced in these nine months?
Unidentified Speaker
Production part, Mr will tell. I’ll tell about the sales point-of-view. Our demand is definitely is on higher side in-quarter three and quarter-four also. It will be reduced in-quarter two normally when monson is there, yeah. And actually production of deeper fertilizer and RCF is increasing. So overall — we are also producing more. So there is a less — less import compared to the previous year.
Nirav Jimudia
Correct
Dilipkumar Parikh
I’m DV Parik. This is on the volume. Actually, the nine months volume is 127,000 and the sales and production are more or less in sync except for a difference of 1,000 metric ton here and there.
Nirav Jimudia
Got it. Got it, sir. Got it. Sir, next question is on the WNA part. I think we produce more than our actual capacities like we produce close to around 40,000 tonnes of WNA. So let’s say, after consuming for CNN and melt, some rough calculation of mine suggests that we are left with close to around 85,000 tonne to 90,000 tonnes of WNA, which we can sell-in the open-market. So is this figure correct or it is slightly lesser than this?
Dilipkumar Parikh
You are close. Okay. Okay. And that is on an annual basis.
Nirav Jimudia
Yeah, this is on annual basis. So roughly a run-rate of 20,000 22,000 tons on a quarterly basis is a right number to work with
Dilipkumar Parikh
Now. Yes,
Nirav Jimudia
Correct, correct. And sir, for CNA, I think we — after our new plant got started, we have a capacity of 1,66,000 tonnes. So assuming that, let’s say TDA plant runs at optimum utilization, how much of the CNA is available-for-sale in the market, which we can sell-in the open-market?
Unidentified Speaker
Approximately 150 metric ton is available-for-sale as such.
Dilipkumar Parikh
Per day,
Unidentified Speaker
Per day.
Nirav Jimudia
Okay, 150 metric ton per day. Okay. Sir, last question from my side is on the capex part. I think we are working on two capexes. So one ammonia 50,000 tonnes and WN at 2 lakh tonnes. You mentioned some figure of INR2,300 crores also. So if you can share the commissioning schedule of both this plant and out of INR2,300 crores, how much we have spent till now?
Dilipkumar Parikh
Okay. See, INR2,300 crore comprised of three projects. One is the coal-based conversion, which we are talking, which is scheduled to commission by 1st of August. The capex figure is INR613 crores. Okay. The WNA has a capex figure of INR1,420 crore. Okay. And the ammonia makeup loop has a capex figure of INR225 crore. This totals up to around INR2,300 crore rupees. When it comes to the actual commitment, we have already given advance of around INR187 crore rupees for WNA. Okay. And in respect of CCPP project, the last completion scheduled, we were behind by around 40%, so around 60% capex is committed. Okay. This is an LSTK. So commitment is almost full. It is just a matter of giving out the cash-flow, okay. Out of INR613 crore, INR525 crore worth of project is already given on an basis. Okay. Now coming to INR225 crore of ammonia loop, we are yet to commit the capex because there are various work which are going on for the ammonia makeup loop of 50,000 metric ton per annum.
Nirav Jimudia
Okay. And the commissioning would be next year or
Dilipkumar Parikh
Before. We have given in the investor presentation the schedules of commissioning also, okay. I will check that sir. Okay. If you may check as we can give you offline also, but it is already part of the information available in the public domain. But still for your information, I’ll quickly tell, 1st of August, like for CCP INR613 crore worth of project, ammonia makeup loop is somewhere coming by 2027 and around 2028 WNA is coming
Nirav Jimudia
27. Okay. And sir, one more thing like you have mentioned in the presentation that because of the chemical volumes looking good and the TDA plant also running optimally. The numbers looks optimally better for Q4 of FY ’25. So you refer on a Q-on-Q basis or you refer on a Y-o-Y basis.
Dilipkumar Parikh
No, see, the outlook you are referring to you? Yeah. See, whatever is the show in-quarter three is based on the steady numbers, okay, of production and sales. So — and since we don’t foresee any outage, a major outage, yeah. We hope that the steady-state should continue.
Nirav Jimudia
Got it. Got it.
Dilipkumar Parikh
And so-far up to up to this day 28th of February, there are no major outages also which are witnessed.
Nirav Jimudia
Got it. Got it, sir. Thank you so much, sir, for answering the questions in detail and wish you all the best.
Dilipkumar Parikh
Thank you.
Operator
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go-ahead.
S. Ramesh
Hello. Can you hear me?
Operator
Yes.
S. Ramesh
Thank you very much for the insight. So the first thought is now, if you look at your chemical segment, the margins have improved substantially Y-o-Y and even on a quarter-on-quarter basis. So apart from the savings and input cost, which are the products on the chemicals where you’ve seen this improvement in margins because we are not able to make that out in the spreads you’ve shown in the presentation. So which are the products where you’ve seen this sort of margin improvement and how do you see the outlook, say, say, over FY ’27 in these products where you’re seeing the?
Dilipkumar Parikh
Okay. If you look at Dave Parik, if you look at the chemicals segment, basically the profits are coming from there. And their technical grade area are contributing positively, okay, on a — both Y-o-Y basis and sequential-quarter basis. And mainly it is driven through the higher-volume.
S. Ramesh
Okay. So that means you’re getting a lot of operating leverage below gross contribution. So in terms of headroom for volume in these two products, what is the kind of additional sales to your growth you can expect say FY ’23, ’27
Dilipkumar Parikh
In a and melt and technical you mean
S. Ramesh
Yeah.
Dilipkumar Parikh
The capacities, the debottleneck capacity for urea is around eight lac metric ton, okay, per annum, and out of that, like we see, we have a RSE which is normally sort of compulsory production we have to make. It will 8 lakh to 8.3 lakh, you can say. So the balance is the kind of quantity available for technical grade urea. As far as a and melt is concerned, see, there is an integration interplay. On a standalone basis, we get roughly 500 or 550 metric ton per annum basis. But in case complex fertilizer is not remunerative, we can add-up to some more volume into the air and melt, which goes at times up to 650 to 70 metric ton per day.
S. Ramesh
Okay. So when you mentioned the numbers for technically at, your annual capacity is 800,000. You said the RSV is 8,000 to 8.3. So what is the tonnage you have that you can on in terms of the technical there?
Dilipkumar Parikh
Again, I am correct, cannot be revised to eight — why because the gas-based plant has a limiting capacity. We have a capacity of ammonia of roughly 1,120 metric ton per day of ammonia from gas. If you total up on an annual basis on an operating days of around 340, that comes to around 636,900, which is the. So let’s say, tomorrow if it is increased, we should have a feed available from the gas side of it, which is not possible. And therefore, the balance is going to be technical grade area and for which we have the approval also.
S. Ramesh
Okay, because it is basically the headroom you have in terms of the ammonia that you can divert for the year got it. So the other question is, so in terms of the segment, when you see that turning around because there’s a lot of capital employed which is not earning any returns. There have been negative returns last year, this year, year-to-date. So what is required to make it viable and generate at least 10%, 12%.
Dilipkumar Parikh
No, you are talking about the returns on fertilizer or overall returns?
S. Ramesh
No, I’m talking about the fertilizer segments. If you see the segment number, there is a loss, right, at EBIT level. So if you look at the EBITDA on the capital employed before taxes, so when do you see that at least ROCE before-tax becoming positive, when do you see the segment PBIT on fertilizer gone positive, what is required to achieve that?
Dilipkumar Parikh
See, in case of control businesses, it is difficult because we are not expanding into the fertilizer and the only leverage in our control business is by and large-volume and fixed-cost. So we don’t see a segment dramatically improving from loss to profit. Our bread winner is going to be chemicals, which continues to be this in case as of date also.
S. Ramesh
Listening, can we conclude that will be driven by whatever growth you can get-in with rain, milk and technical grade urea and any growth in the margins we may get-in acetic acid in other countries. We are not performing TDI and acetic acid. So yes, some of the kind of growth levers you have for FY ’23, ’25?
Dilipkumar Parikh
So you are not pretty clear while you are talking, can you come again and be little slow so that we persue.
S. Ramesh
So what I’m asking is in terms of the growth you in revenue and profits for financial year ’26 and ’27, would it be driven largely by the volume growth in ammonium nitrate and the typical ubia and any reversal in the fortunes in, let’s say TDI business and any growth you may expect acid. So is that broadly the kind of avenues for growth over FY ’23, ’27?
Dilipkumar Parikh
See, okay. I would request marketing because it has something to do more with the kind of pricing, okay. Volume-wise, we have a steady-state till the time the expansions fructify. And before that further volumes are not going to be increasing overnight. Now as far as price projections are concerned, I don’t know what will be the price in ’26, ’27, but still we may listen from our marketing colleagues about any forecast if it is available.
Unidentified Speaker
Manish both products are being imported largely and we need to compete them. So based on the imported price, we will have to play the price, our pricing. But more or less it can say it will be steady price or looking to the last one, one and a half year scenario, it will be either steady or slightly moving upward.
Dilipkumar Parikh
So now I’m Paris again. See, to answer your question, what are the levers? One is, of course the interplay of the margin which emanates out-of-the realization and the direct input cost. The other is there are certain transformation initiatives which we are talking internally. And if that fructifies, there is some chance of improving the profitability there also, okay, both in variable-cost and the fixed-cost. So for ’26, ’27, we will be in a position to tell you more closely about this transformation matter in a quarter or two
S. Ramesh
Okay. Okay. So in terms of the expectation from the capex of INR2,300 crores, you mentioned the improvement in savings from the switch to coal for power. So when do you see that actually the coalition.
Dilipkumar Parikh
No, we are not getting what is the exact question.
S. Ramesh
Now, yeah, yeah. Sorry, there is some determ in the line. So in terms of the coal conversion, from the time you commission that coal-based power, when do you get to see the full benefits of that cost-savings from gas support?
Dilipkumar Parikh
Yes, our current projection is INR14,500 rupees per metric ton of TDI and we are going to get that as per the schedule effective 1st of August.
S. Ramesh
So from the second-half, we’ll be able to get the entire benefit on whatever you continue, right?
Dilipkumar Parikh
Yes, it has to come. And as the gas prices are firming up, probably this may increase also.
S. Ramesh
Okay. So in terms of the nitric acid, that’s why the largest part of the capex is going, INR1420 crores. So what is the kind of returns and expect on that? How do you see that over the next two, three years in terms of the returns you can earn on that?
Dilipkumar Parikh
See, there is a projected IRR on that, okay. And we have a threshold beyond which we normally invest. And internally we have a threshold of 14% post-tax and we have worked out the numbers considering this kind of threshold.
S. Ramesh
So if you’re expecting that to be commissioned by ’28, maybe by FY ’29, 30, you’ll be able to achieve that full impact on the 14% ROC, right,
Dilipkumar Parikh
In the gap. So it should come, it will have a two impact. One is substantial part of this production is going to be part of downstream production, which is of a and melt and there is going to be some quantity around 70,000 metric ton per annum available for merchant sales.
S. Ramesh
Okay, got it. So finally, the last, in terms of your cash flows, you’re generating a lot of cash-flow, right, and you have a INR2,700 crores of capex has been done in two, three years and you have INR1,000 crore cash-flow. So any thoughts in terms of, any thoughts in terms of what the additional cash-flow will be used for whether it will be return on shareholders through dividends or buyback or you have any further investments you’re planning beyond this capex? What are your thoughts there?
Dilipkumar Parikh
Okay. So buyback is already affected some time back around October, November ’23 of INR851 crore rupees. So immediately there — normally as per the regulation, there is a cooling of period of one year. As far as other CapEx is concerned, we are working on some alternatives of what is the possible project. The immediate on-hand on which our team is working is that of AN melt okay, and we will have the. The tender is in the revaluation phase, so we’ll come to know about the size of the capex as you progress further
S. Ramesh
So thank you very much for — wish you all the best and looking-forward to meeting you sometime. For the good luck, sir.
Dilipkumar Parikh
Thank you very much.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Govind Lal, who is an Individual investor. Please go-ahead.
Govind Lal
Thanks for the opportunity and congratulations to GNFC entire team for a good set of numbers in this tough environment and guiding for better 4th-quarter going-forward. I’ve got two questions, sir. So current our margins are in last eight quarters between operating margins are around 5% to 8% ranges. And earlier we have done on higher side, I think, 25%, 30% margin also it is two, three years back. So shall we assume that it is the tough environment and it is the bottom margin reflected? And what should be — okay, that 28%, 30% as the best-case? And shall we presume this worst margin, I think almost in the last 10, 12 years, we see the worst margin, 5%, 7%, 8%. So in regular course, what margin we should take into account and that is the first question.
Dilipkumar Parikh
Okay. Probably you have taken this percentage from the public domain we are publishing or where we are also publishing the EBITDA data, right? So that is showing the figures which you spoke about.
Govind Lal
Yeah, I have taken from Skinner.
Dilipkumar Parikh
Okay. Screener, okay, fine. Now Skinner will also reflect more or less the same thing which we have given except our data is more accurate than because you know the individual line items at P&L level. As far as your question on what is the maintainability of margin, whether it has bottomed-out or not, see, these are difficult cases to make, but our internal perception, including what is available in the public domain by expert is that the downturn in chemical cycle has lasted longer-than-expected. So these are just the hopes people can make about whether it’s a bottom of the cycle or there is yet further next level of bottom yet to come. So there are no informed cases which are normally available. But like we said and our marketing colleague has also said, it all depends upon — predominantly India is an import-dependent country when it comes to the major chemicals like out of our 10 chemicals, nine are import parity driven. So it all depends upon what transpires globally, which will have impact in India
Govind Lal
So thanks, sir, I got it. So just I was wondering, sir, we can presume, sir in the 12% to 15% of margin should be a reasonable margin. IFR was 28% 30% lower is on 5%. So just rub this, you are the best-in industry, you all got the idea we are either lame and I’m asking. So can you guide me, sir? Generally a good — a reasonable scenario, 12%, 15% margin we should expect?
Dilipkumar Parikh
Okay, I’m dealing for it. Actually, your question pertains to something which has to do with the macro picture. Okay. And we operate at a micro-level, okay. Difficult to make such guesses and tell you that whether it will be 12%, 20% or 5% because the way we operate, we normally have a visibility of few months down the line apart from the overall visibility of how the direction is taking shape. But it has more than one parts moving around in terms of the inputs and outputs. So regarding the maintainability of margin, if you take the leaf out-of-the, probably that would be telling how much we should be in a position to make. But Informed gas is not with us as to what will really happen in future.
Govind Lal
Got it, sir. Thanks. My second question is regarding TBI prices. How they are ruling, sir, quarter-on-quarter any improvement has happened, sir, last quarter, what was the average and what is current price is going on?
Unidentified Speaker
I’m Manish price is improving. Last quarter price was little lower this at moment price is around INR2,10,000 rupees.
Govind Lal
So what was the aggressive last quarter
Unidentified Speaker
Almost, but it was slightly lower than the — at the moment. So it is improving.
Govind Lal
Got it, sir. Then last one question is, what is our dividend payout policy sir? Some state government have given some directives on this. So what was that, sir? I can confirm
Unidentified Speaker
Yeah, that we request our company circuit respond on the dividend policy.
Chetna Prabhat Kumar Dharajiya
Yeah, good evening. Am I audible?
Govind Lal
Yeah,
Chetna Prabhat Kumar Dharajiya
Yes, yes you can refer from the website of the company and dividend we pay as per the policy and the government directives. So it is a mission of both.
Govind Lal
So that’s what only I’m asking what is the directive or state government last year they are given what that just can you summarize? That’s what I’m asking. It will be helpful for me.
Chetna Prabhat Kumar Dharajiya
So dividend would be 30% –, please correct me if I’m wrong. 30% of the OpEx
Govind Lal
Is 30% of the that is including of buyback you if you do.
Chetna Prabhat Kumar Dharajiya
Sorry,
Govind Lal
No, you do buyback, that is including buyback amount or it is excluding a buyback amount, dividends. 30% is total of buyback plus dividend, that’s what I’m asking.
Chetna Prabhat Kumar Dharajiya
No, no, it is.
Govind Lal
No, just hypothetical question. Suppose if we do buyback also last-time you have done buyback. So suppose we do buyback also and dividend is some portion we do pay-out there. So I’m asking this both put together 30% or dividend exclusive will be 30%, buyback will be over and
Chetna Prabhat Kumar Dharajiya
That will be a management’s decision whether to go for buyback and dividend both. But a dividend is a separate decision from management and buyback is a separate decision.
Govind Lal
So my understanding gentlemen,
Unidentified Participant
So I am asking, sir, 30% payout policy government has directed state government. I am asking this is purely dividend or including buyback, these both dividend and buyback put together?
Dilipkumar Parikh
Chetnam may answer his question.
Chetna Prabhat Kumar Dharajiya
So that is yes..
Dilipkumar Parikh
See, the directive is 30% of the PAT or 5% of net-worth, whichever is higher, number-one. Your question is whether this 30% is after considering the buyback or not, 30% has nothing to do with the buyback as such because it has a reference point of PAT. When it comes to the other reference point, which is the net-worth — with buyback, the net-worth will definitely reduce. So it will have some impact, but it depends upon which one is higher. So a dividend is decided predominantly first based on the guideline and secondly based on what the Board decides considering the overall situation and the dividend policy of the company. Is there anything else which is left out in terms of your question?
Govind Lal
I thought it. I got it. So 30% PAT dividend is assured and the buyback is over and above as if it happens. I got it. Thank you very much, sir. Thank you.
Operator
Okay. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Ankur from ICP Group. Please go-ahead.
Unidentified Participant
Yeah, hi. Thank you for taking my question, sir. Am I audible?
Operator
Yes, sir.
Unidentified Participant
Okay. My question is, is, sir, you mentioned we are a lot dependent on imports. So just wanted to understand the contracts for ammonia and natural gas. Are these long-term contracts and how are they indexed? What is the structure of these contracts? If you can just throw some light on that, that would be helpful. Is there any index or benchmarks that they are based on? Thank you.
Dilipkumar Parikh
Okay. I’m Parik answering your question. See, if we talk about our key inputs, gas, oil, coal, rock phosphate, benzene and. These are the key inputs for the company. Now whether there is a long-term contract or not, we have a long-term contract for the gases of urea. We don’t have the long-term contract for the chemical part of it. We do have short-term contract and the spot purchases of gas. We have a mid-term and long-term contract for oil and which is worked out based on the mutual understanding about what are the global benchmarks. Okay. For example, in case of oil, there are a few benchmarks like Fujera, etc. So whatever is the most prevalent, that is what is negotiated upon in terms of the different element apart from the benchmarks. If we talk about coal, we do have an Indonation benchmark, okay. So depending upon the commodity, there are benchmarks which are considered after internal evaluation and the inquiries are floated accordingly. For coal also, the buy normally happens on a spot basis couple of times in a year. So this is third commodity. Regarding the benzene and tollin, it’s a mix of spot as well as foreigner based buying. Again, when it comes to the formula, it has a benchmark like pets, et-cetera, which is taken into account. When it comes to the rock phosphate, it is a kind of no reference point negotiation. At times people fall-back on phosphoric acid, at times people fall-back on some other base, but then it is who wins in the negotiation, who has more power. So that is what happens in case of rock phosphate. So out of our various product of gas, oil, coal,, and rock, these are the ways and means with which we procure — we structure our procurement.
Unidentified Participant
Okay. Thank you, sir. And as you mentioned, some of — some are on the basis of spot and some are — are they in long-term contracts as well or these are mostly short-term contracts?
Dilipkumar Parikh
For gas, we do have contracts up to 28, but these are mainly for urea because we don’t want to bank on either EPMC or spot and do the inquiry, okay. And most of the time there is a push from government also to enter into long-term contract and not bank on EPMs your spot.
Unidentified Participant
Okay. Thank you, sir. Thank you so much for answering my question. That’s it.
Operator
Thank you. Ladies and gentlemen, you may press star and one to ask a question a reminder to all the participants that you may tress star and one to ask a question. The next follow-up question is from the line of S. Ramesh from Nirmal Bang Equities. Please go-ahead.
S. Ramesh
Hello. Thank you for the follow-up. So on this transformation exercise you’re doing with, I know you said you will share it once you are in a position to discuss it after the 4th-quarter. But in terms of your broad thought for thought process on the avenues of cost-savings and incremental growth. What are the kind of you know, key areas you would have possibly identified for this study just to get your thought process.
Dilipkumar Parikh
Okay. I’m answering your question. See, there are various items at variable-cost level, majorly and only some at fixed-cost level. Fixed-cost level addressing has a structural issue to be addressed. So that’s a matter which is yet to be debated. On the variable-cost level, there are items like power, fuel, et-cetera, sourcing of oil, etc., which is being firmed up, okay. And then we’ll come to know exactly how much benefit we can expect as against what is being advised to us.
S. Ramesh
Okay. Okay. So basically, it’s your attempt to reduce the variable-cost and improve the contribution of got it. And this is possibly yes. So this is focused more on the chemical business or you will also look at it for the fertilizer business.
Dilipkumar Parikh
So partly fertilizer also because urea, as you know, is out of question because variable-cost has an impact only to the extent of inefficiency in energy norms.
S. Ramesh
Sure, sure.
Dilipkumar Parikh
Okay. And inefficiency or our not meeting these standards of fixed costs, which are difficult to meet for most players in the industry. When it comes to the other part, which is a complex fertilizer, yes, this is going to help if there is a reduction in the input cost. Because the base is again oil-based ammonia predominantly rock phosphate and weak nitric acid
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr D.V. For closing comments.
Dilipkumar Parikh
I would request the company’s Secretary to place a vote of thanks, please.
Chetna Prabhat Kumar Dharajiya
Thank you. Yeah. Good evening, everyone. I’m here. My thanks to all the participants for active participation. I’m thankful to the moderator and Aurorak Services LLP. I’m also thankful to all the members from management team. Thank you, everyone.
Operator
Thank you. On behalf of Anurag Services LLP, that concludes this conference. Thank you for joining us and you may now disconnect your lines.