Gujarat Narmada Valley Fertilizers and Chemicals Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC) Q2 FY23 Earnings Concall

Q&A Highlights:

• [00:10:51] Nirav Jimudia from Anvil Research enquired how much of WNA (Weak Nitric Acid), GNFC had sold in the open market in FY22. Jiten Desai GM replied that in FY22, the company sold about 1,15,000 metric tons and the rest was consumed internally.

• [00:11:41] Nirav Jimudia of Anvil Research asked about an update on the new concentrated nitric acid plant of 50,000 tons. Y. N. Patel Head of Operation replied that the project is likely to commission by February, March.

• [00:13:23] Nirav Jimudia with Anvil Research asked about the breakdown of ammonia produced in FY22 between chemicals and fertilizers. D. V. Parikh CFO answered that normally, of the ammonia produced, one-third is for chemicals and two-third is for fertilizer.

• [00:14:16] Nirav Jimudia with Anvil Research asked about the cost of production of ammonia when it’s produced through oil and gas respectively.  D. V. Parikh CFO said that the cost of production of ammonia from gas during 2Q23 and FY23 has been higher due to the gas prices.

• [00:18:02] Prayatn Mahajan of Balyasny Asset asked about the revenue contribution from TDI segment and others, and EBIT for TDI. Jiten Desai GM answered that TDI contribution in the total revenue is around 17-18%. GNFC added that it has been steadying both in FY22 and 1H23.  EBITDA for TDI is negative.

• [00:20:05] Prayatn Mahajan of Balyasny Asset enquired about the most valuable chemical for GNFC from an earnings standpoint. D. V. Parikh CFO answered that at different points in time different chemicals perform. TDI also said it generated good revenue but it was not profitable at the net level.

• [00:24:00] Nishith Shah from Aequitas Investments asked about the current RM prices trend post 2Q23. D. V. Parikh CFO answered that gas spot prices have softened after 2Q23. Other petrochemical prices have also softened. However there are monthly trends in these.

• [00:25:05] Nishith Shah with Aequitas Investments asked about imports currently in terms of volume and pricing. D. V. Parikh CFO answered that on volume operations are stable both at Baruch to Dahej. On prices, the current levels are okay and future cannot be predicted as it’s very volatile.

• [00:36:17] Manvardhan Vaid from Laurel Investment asked that with interest rate rising and GNFC having a significant cash balance, if it’s benefiting from the interest rate. D. V. Parikh CFO answered that it’s already reflected in the other income part of the P&L. The other income has gone up mainly due to interest and dividend.

• [00:37:17] Nirav Jimudia from Anvil Research enquired about the breakeven cost for the TDI plant at Baruch to Dahej considering the current tolling prices and CNA prices. D. V. Parikh CFO replied that CNA, GNFC factors only at cost. Breakeven depends upon the contribution margin gained for covering the fixed cost.

• [00:46:23] Sandeep Abhange with Anand Rathi asked that going ahead, where GNFC can expect the margins to be stabilizing.  Manish Upadhyay answered that in 2H the company gets a good price. And so for one month or two month time the urea price may be stable or on the slightly lower side. However, GNFC will be expecting a better price realization after that period.

• [00:50:51] Maan Vardhan Baid from Laurel Investment asked about the gas prices going up and if there will be any advantage in the long run, like capacities globally getting mothballed etc. Jiten Desai GM said that it will have some advantage but not fully.