Gujarat State Fertilizers & Chemicals Limited (NSE: GSFC) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Sanjay Kumar Bajpai — Chief Financial Officer
Sanjeev Varma — Executive Director
Unidentified Speaker
Analysts:
Nirav Jimudia — Analyst
Shanmugam — Analyst
Saket Kapoor — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Gujarat State Fertilizers & Chemicals Limited Q2 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. S.K. Bajpai and Mr. S.V. Varma. Thank you, and over to you, sir.
Sanjay Kumar Bajpai — Chief Financial Officer
Good afternoon, sir. So we are pleased to welcome you all to the earning conference call of GSFC. We appreciate your participation in the GSFC quarter two post-results conference call. I trust that you must have reviewed our findings and the other presentations that have been posted on our website as well as the stock exchanges.
We are happy to inform that your company has achieved a standalone highest ever quarter two PAT of INR303 crores, also second highest ever quarter two PBT of INR391 crores and second highest ever first half profit after tax of INR395 crores. However, the company’s turnover fell by 13% in quarter two and 6% in H1 on a Y-o-Y basis. The main reasons for reduction in turnover is reduced subsidy rates and lower DAP and urea trading volumes. Our operating margins rose from 7% to 11% in Q2 and 7% to 9% in H1.
The company achieved this performance despite ongoing external challenges in fertilizers as well as industrial product segments. First of all, subsidy rates for P&K fertilizers fell significantly year-on-year in Q2 and H1 with ammonium sulphate falling by 38%, ammonium phosphate sulphate falling by 35% and DAP falling by 24%, resulting in reduced P&K fertilizer sales realization. However, the government declared one-time special package of DAP of INR3,500 per metric ton on October ’24, which provided much needed support to industry.
The government is also prompt in releasing this subsidy and we have received this subsidy that too in the second week of October. Contrary to this, cost of essential inputs, such as natural gas, ammonia and phosphoric acid are on increasing trend. Presently, phosphoric acid price has increased to $1,060 per metric ton for Q3 current financial year versus $948 per metric ton in the quarter two current financial year. International prices of DAP have now stabilized in the range of $640 per metric ton. Closing exchange rate of USD/INR is also a cause of concern for the industry.
Geopolitical tension in Middle East and Red Sea crisis are causing delay in arrival of vessels of DAP and other input materials. Considering the other factors, cost effectiveness of local phosphatic fertilizer manufacturers are likely to be jeopardized. The company responded by boosting capacity utilization, increasing sales of manufactured products and optimizing product mix in both segments. Fertilizer output went up by 16% to 1.21 lakh metric ton during first half on Y-o-Y basis.
Good rainfall during current monsoon and enhancement of minimum support prices by Government of India for six major rabi crops will enhance demand for agri inputs in the upcoming quarter. Government is also pushing the industry to supply more DAP, hence the company has finalized the import contracts of about 1.25 lakh metric tons in the upcoming quarter. We are targeting sales in the range of 5 lakh metric ton in quarter three current financial year.
In case of industrial product segment, capro-benzene spread reduced to $620 per metric ton as against $673 per metric ton on Y-o-Y basis. However, the demand of our major industrial product is likely to remain stable to firm during next quarter. The turnover of industrial products in quarter three ’24-’25 is expected to be higher than quarter two ’24-’25. Commercial production in HX Crystal Plant has been commenced with capacity of 20 metric ton per day on 11th October 2024.
For Melamine, domestic and export markets are expected to improve during quarter three current financial year. Even though competitive imports of Melamine are likely to pose a challenge, the organization is adhering to its strategic objectives with regard to capital expenditures. It is anticipated that sulphuric acid V project and Urea II revamping projects will be operational at end of the current financial year. Further, we are trying for part availability of cheaper solar power from GIPCL after part commissioning of their 75 megawatt solar power facility at Vastan, Gujarat. These facilities are expected to be fully operational by May next year.
I would like to express my gratitude for your patience, listening to my overview. Yes, we will now commence the question-and-answer session.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nirav from Anvil Wealth. Please go ahead.
Nirav Jimudia
Yes. Sir, Good afternoon and thanks for the opportunity. Sir, I have a few questions. Sir, when we discussed last quarter, you mentioned that since it was the start of the season for the fertilizer, we had to offer some sort of discounts in AS and APS. So, just wanted to understand from you that were those discounts withdrawn by us. And because our sales volume for both the fertilizers also looks pretty good. So, just wanted to understand from you that what was the situation on the discount part A and B? What was the average EBITDA what we have clocked for both the fertilizer grades because earlier you used to guide that for both the fertilizers, on an average, it used to be around INR2,500 to INR3,000 a ton. So, if you can just share your views here?
Sanjeev Varma
Sanjeev Varma here. In case of discounts, yes, we have slowly reduced the discount over the period as the market started taking the fertilizers. As you know, the season was delayed. So real sales happened lately, but now it’s been nearly zero for both the products.
Nirav Jimudia
Got it. Got it. So sir, what was the EBITDA per metric ton for both these grades put together in Q2 of FY ’25?
Sanjay Kumar Bajpai
It is near about INR2,500 per metric ton.
Nirav Jimudia
Got it. And because now those discounts have been withdrawn, we can see further improvement in quarter three because you also guided 5 lakh tons of fertilizer production in Q3. So this would help the margins to improve in Q3?
Sanjay Kumar Bajpai
No. We are not certain because the sulfuric acid prices and ammonia prices are going to increase in the next quarter. So it is very difficult to predict that the same margin will continue for the Q3 also.
Sanjeev Varma
And PA prices has also increased. You know that PA prices gone up by $110 per metric ton that will impact the cost of production. Yes, the prices — the market will start responding to this increase, and let’s hope for the best.
Nirav Jimudia
Got it. So, sir, just to continue here, like based on the production numbers, what we have reported, I think our quarterly requirement for sulphuric acid this quarter was close to 175,000 tons. And I think what we are having current capacity is close to around — on an annual basis, close to around 7 lakh tons. So you rightly mentioned that there was an increase in the sulphuric acid prices globally and also domestically. So does this buildup in the prices for — or increase in the prices of sulphuric acid doesn’t help us to increase the prices of both these fertilizer grades? And how much we are currently buying from the outside market so far as sulphuric acid is concerned?
Sanjay Kumar Bajpai
So as you know, the Sulphuric Acid V Project, what we are under construction, that will be operational at the end of the financial year as per my opening remarks. So whatever the deficiency in the sulphuric acid for the period from October to March, we have made — tied up with the other companies as a long-term solution. So we are receiving this sulphuric acid at a competitive price rather than going on the spot. And as you know, the spot market is very volatile and is very costly also. So we have made arrangement of sulphuric acid for the six-month period till the time our Sulphuric Acid V Project becomes fully operational.
Nirav Jimudia
Got it. But the number of 175,000 tons of sulphuric acid requirement is pretty near to what we have actually consumed in Q2 or the figure is slightly different?
Sanjay Kumar Bajpai
No. It depends upon the production of ammonium sulphate and ammonium phosphate sulphate in — at our this Fertilizer Nagar Complex and ammonium phosphate sulphate in — at Sikka, Jamnagar. So depending upon the production over there and here in Fertilizer Nagar, we prefer the sulphuric acid.
Nirav Jimudia
Correct. But then government doesn’t allow us to build up those cost increases in our MRPs or let’s say, the subsidy doesn’t go up. Because what we can understand from you that there are only two players who are producing this. And being a critical water-soluble fertilizer for the farmers, doesn’t this allow us to pass on those cost increases to the customers or to the farmers?
Sanjeev Varma
See, we are in a competitive market. There are different grades of water soluble available in the market. Yes, we get a subsidy based on the NBS rate for NPKS and we have to move subsidies — there only MRP where we function based on competitors in the market. So that is going to remain for all the products, which are water soluble mostly.
Nirav Jimudia
Got it. Sir, second question is on — you mentioned that our contracted price for phos acid this — for Q3 was close to $1,060 per metric ton. And with the shortage of DAP currently in the market, does it provides a chance for us here to increase the MRP or there’s a fair chance that government would increase the subsidy here so that our per ton margins are not impacted? You mentioned last time that even DAP were making losses at the EBITDA level. So if you can help us understand what was the situation in Q2? And how do you see the things forward?
Sanjay Kumar Bajpai
As I told that DAP in the last interview also, the DAP was not a very cost economical thing for us to produce here by purchasing of phosphoric acid. So we have shifted our production to ammonium phosphate sulphate and other NPK grades of fertilizer at Sikka unit. And as far as the requirement of DAP is concerned, we have tied up with foreign suppliers for importing the DAP of 125,000 metric tons, and we will be receiving in quarter three. However, in Q2, if you have heard this — my opening remarks, the lesser revenue — one of the reasons of lesser revenue is that we did not incur any trading of DAP. So that was one of the reasons. So that’s why our revenue turnover was 13% below in Y-o-Y basis.
Nirav Jimudia
Correct. And because INR3,500 per metric ton increase in the subsidy was effective October, was Q2 being still at a loss at the EBITDA level for the DAP?
Sanjay Kumar Bajpai
No, it is effective from 1st April, if I’m not mistaken. This INR3,500 is effective from 1st April to 31st December ’24. And this one more circular came from the DOF for the compensating the loss, if anything, due to the import of DAP, that is effective. I think that came from 1st of October. And if whatever import we are doing, and if there is any loss incurred by the company, then this will be compensated by the government.
Nirav Jimudia
That is on the trading only. But on the manufacturing side, the subsidy increase of INR3,500 will take care of our profits or still the profits are not at the reasonable level to adjust?
Sanjay Kumar Bajpai
The profits are not that delaying. That’s why I told that we have shifted already to the APS production in case of DAP. So that is as simple as this.
Nirav Jimudia
Got it. And sir, last question from my side is on the urea part, how much we are currently losing at the EBITDA per metric ton level? And once that energy conservation measure is implemented, which would reduce our Gcal per metric ton, how much of this EBITDA per metric ton could be recouped?
Unidentified Speaker
Hi. This is [Indecipherable]. Hello?
Nirav Jimudia
Yes, sir.
Unidentified Speaker
Yes. With regards to the urea, as everybody knows that the government has not implemented or revised the fixed cost, which — and the fixed cost is based on company-wise for each industry. So that’s the question because variable cost is being passed through. So that’s the question which affects every company. So ours is also the case where we get hit about INR1,000 to INR1,200 per metric ton on the EBITDA side.
Nirav Jimudia
Got it. And this energy conservation measures, what we have been implementing or is in the process of getting completed, would this INR1,000 or INR1,200 per metric ton would help us to save some of the fixed cost, because then our urea capacity is also going up. So is there any chance of us recouping some of this EBITDA per metric ton loss?
Unidentified Speaker
That will also do some sort of help in respect to covering up this differential. Over and above, government is also in the process of revising that and they have asked for data of the fixed cost from all industries. So they are in the process. And once they get completed over with that process, they will come up — they might come up with increase in the fixed cost per metric ton part also. So that process is all and they have — we have already submitted the data for the same. And let’s see, once they come up with their calculation and finalization of the increase in fixed cost.
Nirav Jimudia
Got it, sir. Thank you so much, sir. And wish the entire team all the best.
Sanjay Kumar Bajpai
Thank you. Thank you, Nirav.
Operator
Thank you. The next question is from the line of Shanmugam, an Individual Investor. Please go ahead, sir.
Shanmugam
Yes. Sir, thank you for the opportunity. My question is slightly on the cost. I see employee cost have sharp reduction, sir, approximately by INR50 crores. Is it — is there any one-time cost that has an impact? Or do you expect the same reduction in the coming month as well?
Sanjay Kumar Bajpai
No, no. This is the one-time cost. Actually, what we have provided something — because of the pay revision and bonus payment there were some certain adjustment, but it is not a regular feature, so it is a one type of one-time cost.
Shanmugam
So there is an entry for INR50 crores, am I right?
Sanjay Kumar Bajpai
What?
Shanmugam
There is an entry for INR50 crores, entire is due to that one-time adjustment? [Speech Overlap] Let me put it in this way. Can I expect the employee cost in line with the previous quarters?
Sanjay Kumar Bajpai
Just a minute. Let me see. So this is INR250 crores over in ’23. And now 30th September, ’24, there is — the personnel cost is only INR185 crores. Is that right?
Shanmugam
Yes
Sanjay Kumar Bajpai
INR250 crores was earlier in 30 September, ’23, when we have made the provision. So that’s why this cost was higher in ’23. And now it has been reduced to normal levels, and which is INR185 crores.
Shanmugam
Okay. Great. So it’s going to be — it is current norm, it’s going to be the same in the coming months. Am I right?
Sanjay Kumar Bajpai
Yes, yes, yes. That’s correct.
Shanmugam
Yes. That’s fair, sir. And second, cost element, raw material costs. I see there is a drop by 1.5% on a sequential basis. So in the initial remarks that I understand that we may not sustain in the coming months here and there. If I look at in a different perspective, sir, can we at least stick to 63% of material costs in the coming months? Or it will be — like last year, it will be 65%? Sorry, if I’m wrong in numbers.
Sanjay Kumar Bajpai
No, no problem, but this raw material cost is an increasing trend, I guess, as I spoke in the opening remarks. Main raw materials are — in Sikka is P2O5, phosphoric acid and ammonia. So both the costs, if you see internationally, ammonia pricing and the phosphoric acid pricing is in rising trend. So anyway this raw material cost will go up. And as we are — our production is higher in this quarter, so that is also the impact on the higher raw material cost.
Shanmugam
Is there any value in hearing that we can expect and to see — to sustain this, to offset the hike in raw material costs in the coming months?
Sanjay Kumar Bajpai
It is very difficult to say because the hike — in the fertilizers, the prices are determined by the government subsidy and the MRP both. So if there is any increase in the cost, we have to the adjust somewhere either to shift the production of other products or we have to absorb the cost. But we manage this through the product mix changes so that we are keeping it in control.
Shanmugam
Yes, yes. That’s what I understand from your opening remarks as well. Because of the product mix, we could offset the higher cost. So in that sense, can we maintain this 11% or at least 10% of EBITDA in the rest of the quarters?
Sanjay Kumar Bajpai
Yes, we — see, it’s the 7% to 8%, it will remain in the same line.
Shanmugam
Sorry, sir?
Sanjay Kumar Bajpai
You were talking about that EBITDA percentage, no?
Shanmugam
No, what I was trying to say, we do expect the raw material cost increase in the coming months that we agree. And also I understand from you that there is product mix changes that given good improvement in EBITDA. So the hike in raw material cost can be offset by your product mix changes in the coming months. So ideally…
Sanjay Kumar Bajpai
Correct.
Shanmugam
So ideally, so what you achieved 11% EBITDA can be expected in the coming months. Am I right, sir?
Sanjay Kumar Bajpai
See we’re not getting clearly what you’re asking. See what we have said that we are trying to change the product mix as to recover the hike in the product cost for the mix thing and that is the best and lower basis we are doing. So we are assuming that we will be able to maintain our EBITDA margins in that case.
Shanmugam
Okay. Can we — so 10%, can we — we can expect in the coming months as far as EBITDA is concerned? Currently, the 11.6% is achievement. So even if you look at hikes in coming headwinds or something, this product mix could help from that. And could be around 10%, I can expect, sir?
Sanjay Kumar Bajpai
See, again, we are not able to clearly hear you what you are saying. The only thing which we want to say that we will — our endeavor is to see that our EBITDA margin is protected with the change in the product mix in spite of increasing the cost of the raw materials. And this will be on the best endeavor basis based on the market demand and supply, both. So yes, our full efforts we will see that we at least get some EBITDA which we have got in this Q2.
Shanmugam
Yes. Thank you. And I understand that power cost — there is a reduction in power cost that would — I do appreciate cost management for better management. But you said that still there is room and there are some project which are coming. From next year onwards, there will be good impact, next year, maybe in May onwards, that’s fine. With respect to other expenses, sir, I see it’s very neutral. It’s fixed in nature compared to last year and/or sequential basis. Do you see any room for cost control on this area, sir, other expenses? Or you can drill down a couple of elements that’s contributing more than 50% of other expenses?
Sanjay Kumar Bajpai
So what I see, the other expenses are more or less at the same level in the quarter and as well as in half yearly basis. The quarterly basis, it is around INR234 crores, and half yearly it is INR443 crores. So there is no difference as such, and we are maintaining the same level of the other expenditure.
Shanmugam
Sir, my last question, on other income, how much portion that comes from your investments, sir? I see the balance sheet, you have a big investment. If I ask you how much portion that could be related to your investment income out of INR150 crores, I believe, I remember. So correct me if I am wrong?
Sanjay Kumar Bajpai
Yes. It is INR150 crore. And most of the things the other income contains is the dividend received from the other companies and the interest on our excess funds, whatever we have parked in the fixed budget or with the banker.
Shanmugam
So the entire income from that accrual — sorry, that investment. Am I right?
Sanjay Kumar Bajpai
I cannot say it is investment. It is a temporary parking of funds whatever we are having. Whenever we receive subsidy or something like that, so for temporary period we park the funds and we receive the interest on that.
Shanmugam
Okay, sir. Sorry, one question last, I missed. Sorry for that. With regard to cash equivalents, I see a huge element in the balance sheet of about INR2,000 crores, I believe, roughly I remember, INR2,200 crores, I believe. So this cash company, you have any idea, sir, to diversify this to maybe to improve efficiency from strategic perspective? Do you have any idea to share?
Sanjay Kumar Bajpai
We cannot get what you asked. Will you please repeat?
Shanmugam
In the balance sheet, I remember, there is a cash equivalent more than INR2,000 crores in the balance sheet. Am I right, sir?
Sanjay Kumar Bajpai
Yes, yes, maybe.
Shanmugam
So we have huge cash that’s idle. Do you have any plans to invest in to improve efficiency — to improve verticals?
Sanjay Kumar Bajpai
Yes, yes. Whatever the cash we are having in the balance sheet, it will be used for our expansion project, which is lined up as per the investor presentation. Two projects we are — we will be commissioning in the year-end, so where INR400 crores to INR500 crores is required to be paid. And then after phosphoric acid or sulphuric acid plant, we are projecting at Sikka unit, that cost INR1,560 crores or so. And over and above, the Dahej project, we have already got land and that study is going on and we have immediately starting the finalization of which product and which project we will be going to install there. And so whatever the money we are having, it will be utilized for the expansion of the project.
Shanmugam
Great, sir. So what is capacity utilization as of now for the current year?
Sanjay Kumar Bajpai
Capacity utilization is [Speech Overlap] more than 100%.
Shanmugam
More than 100%. Yes, I understand. I understand. So all these expenses that you are looking for capex will be effective from the next year onwards?
Sanjay Kumar Bajpai
Whatever capex we are having INR565 crores, I told that it will be required to be paid at the year-end. And afterwards as per the progress in the project, we would be utilizing the fund.
Shanmugam
No. I mean when it will be converted to numbers, the capex, could be next year onwards? Next January?
Sanjay Kumar Bajpai
Yes, yes, because all these projects are for the captive consumption. So there will not be a direct one-to-one link Sulphuric Acid V. So whatever the sulphuric acid we will produce over there, it will be consumed internally. So it will be having impact on our bottom line rather than the top line.
Shanmugam
Okay, sir. Sir, last and final, you said that annual guidance in the last con calls, I do remember that volume perspective, there will be growth of 20%. Hope that we stick to the same number. Am I right, sir?
Sanjay Kumar Bajpai
You said the growth in that turnover, right?
Shanmugam
Volume base, yes.
Sanjay Kumar Bajpai
Volume. See growth in the volume, if you see this quarter, there was some decrease in sales because of the market condition where — next quarter will be improving the sales. Yes, we are projecting still the growth of 20% to 30%. Yes.
Shanmugam
Thank you, sir. Appreciate your time, sir. Thank you, sir, for the opportunity. Thank you.
Sanjay Kumar Bajpai
Thanks.
Shanmugam
Thank you, sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Nirav from Anvil Wealth. Please go ahead.
Nirav Jimudia
Yes, sir, thanks for the opportunity again. Sir, in earlier discussions, you mentioned that put together everything like HX Plant and renewables as well as the sulphuric acid and phosphoric acid plant. Our capex was close to INR2,200 crores to INR2,300 crores put together. And I guess we have spent close to around INR250 crores till March of ’24. Just walk us through how much we have spent until first half? And what could be the numbers we should look for FY ’25?
Sanjay Kumar Bajpai
First half, we have spent I think INR100 crores to INR150 crores. And up to 31st March, second half, we will be spending around INR400 crores to INR500 crores because, SA-V and Urea-II Revamping, both the plants are slated to be commissioned in March or up to the end of this financial year. So mostly all the payments or final payment will be released up to the current financial year. And as far as this phosphoric acid and sulfuric acid project is concerned, it is at initial stage. So there will not be any direct impact on the expenditure. But slowly, slowly after the detailed engineering and the orders are placed to the detailed engineering workers, then after the current payment will start because the time period is also mentioned that up to March ’27, I think.
Nirav Jimudia
Correct. Correct. And sir, currently, I think based on the production volumes, I think our phos acid requirement, depending upon the grades we produce, is close to around 200,000 to 250,000 tons in between that. So how are we currently placed? Because one, that capacity would be commissioned, so before that, currently, how much we are producing phos acid? And how much we are currently buying from the market?
Sanjay Kumar Bajpai
See phos acid is produced only at Fertilizer Nagar Complex. There is no phosphoric acid plant at Sikka. What we are having the capital expansion project, the phosphoric acid or sulphuric acid plant is to be put up at Sikka for meeting the requirement for DAP and other NPK grades of fertilizers. So presently, there is no phosphoric acid plant at Sikka unit. All the material is purchased from the foreign suppliers. As far as the Fertilizer Nagar Complex is concerned, we are getting some rock phosphate from this RSMML. And we are also procuring rock phosphate from the foreign suppliers and then the PA plant here.
Nirav Jimudia
So how much is our current PA production, sir, if you can share?
Sanjay Kumar Bajpai
In Baroda, it is around 60,000 metric ton per annum.
Nirav Jimudia
Okay. Okay. And for that rock phosphate, what you mentioned, we either import or source something from the domestic market, correct?
Sanjay Kumar Bajpai
Yes.
Nirav Jimudia
And sir, last question is on — you mentioned last time that Baroda complex consumes close to around 75 megawatts to 80 megawatts of power. And like 40% is from renewables. Rest, we are currently buying it from the grid. So has there any reduction in the grid cost? Or are we increasing our renewables? Because I think you mentioned that GIPCL is get — going to commission in June 2025, something close to around 75 megawatts of solar power plant. So how the power mix would look like once that supplies from GIPCL commences? And any cost reduction in per unit basis, what we have seen from our power buying from the grid?
Sanjay Kumar Bajpai
So there are two plants we are proposing. One is it Charanka solar power plant of 15 megawatts. That plant is proposed — commissioned by — and I think by the end of this year, financial year. So that the whole 15 megawatts, we will be receiving for our own consumption. However GIPCL of 75 megawatts plant, 50% of the electricity will come to us and 50% will go to the GACL, the other partner. So in the GIPCL, our share is 37.5 megawatts. So there must be some power saving because after this — we start receiving the power, then we will come to know what is the rate and what is the sort of charges they are coming. But certainly, it is cheaper than the current purchase — power purchase from the grid.
Nirav Jimudia
Correct. And the grid cost is what, close to INR10 a unit or it is lesser than that?
Sanjay Kumar Bajpai
It is, I think, INR8 to INR9 per unit.
Nirav Jimudia
Got it. Sir similarly, if you can also help the power consumption in megawatt for our Sikka plant and how we are placed there?
Sanjay Kumar Bajpai
Sikka consumption is around — is quite less compared to Baroda unit. And presently, we are drawing the power from windmill and second from the grid because Sikka operation depends on the availability of phosphoric acid and ammonia. So there it is very important to how to do this thing. And total project power cost you get is a weighted average from Sikka and Baroda, both in the balance sheet.
Nirav Jimudia
Got it. Got it. So — but any idea on the total power consumption at the Sikka…
Sanjay Kumar Bajpai
812 megawatt if it is over 100% capacity, so it is based on the change in capacity as our consumption reduces.
Nirav Jimudia
Got it. Got it, sir. Thank you so much, sir.
Sanjay Kumar Bajpai
Okay.
Operator
Thank you. The next question is from the line of Saket Kapoor [Phonetic] from Kapoor & Co. Please go ahead.
Saket Kapoor
Yes. Namaskar, sir. Thank you for this opportunity. Sir, for our Industrial Chemicals segment, if you could give us some more color what’s the market scenario currently? And I think — so we were looking to move more downstream products for caprolactam. So where are we in terms of penetrating or improving our product basket?
Sanjay Kumar Bajpai
As you know, the IC segment or chemical market is very — it’s still not out of woods. And there is no — cheaper material is available from the China or other foreign countries. So we have to compete the cheaper material and cheaper pricing of the caprolactam as well as melamine in the Indian market. However, we are doing some efforts — we are taking. For the caprolactam, we have commissioned this HX Sulphate Crystal plant. So HX is one of the intermediates for producing the caprolactam or it will go to the — for the production of HX Sulphate, HX Crystal plant And that is 20 metric ton per day capacity. And that has been commenced from 12th October. The per annum capacity of both the plants 1 and 2, comes to around 10,000 metrics ton per annum. So near about — top line will increase by INR125 crores. And being a good margin product, we expect around 30% to 40% margin in this HX Sulphate.
So that will reduce the caprolactam availability in the market. So we will get benefited by this and the new product, HX Crystal which is 100% imported presently in India. Nobody else is manufacturing. So GSFC is only the manufacturer of this new product. So being a — put forward for the Atmanirbhar Bharat. So that is a good step that the company is having.
Saket Kapoor
Sir, can you come again for the number, what will be our annual savings with this commercial production of HX Crystal plant?
Sanjay Kumar Bajpai
Sir, I told the top line will be INR125 crores on full capacity per annum basis. And 40% means, INR30 crores — INR25 crores to INR30 crores bottom line will be improved.
Saket Kapoor
Okay. And when can we see the plants…
Sanjay Kumar Bajpai
So, except that, whatever we are having the breakeven or some few crores loss that will be wiped out.
Saket Kapoor
Okay. And when we will be achieving the optimum utilization levels or ramp up [Foreign Speech]?
Sanjay Kumar Bajpai
[Foreign Speech] we are operating at more than 100% capacity already, the second one is commissioned on 11th October and it is near to 90% or 95% capacity utilization and I am sure in the next month or so, we will be achieving more than 100% capacity in that plant also.
Saket Kapoor
Sir, secondly, for the fertilizer segment, I think so with rabi season buying, I think, so in the annual, what kind of volume growth are we anticipating going ahead for Q3 and Q4 and what should be the trend going ahead since for fertilizer we have more visibility than the industrial product?
Sanjeev Varma
In case of fertilizer for next say, rabi in Q3, Mr. Bajpai has said in his opening remarks that we’ll be selling around 5 lakh tons of fertilizers. Yes, we’ll be meeting that and may be surpassing that because rabi is in full swing now. But from January to March, the fourth quarter is always the main season for this thing and mostly goes to the stocking levels in field. So it will depend on the prices of PA and ammonia at that time how much we produce and how much we put in the stocking at the field level.
Saket Kapoor
But overall sir…
Sanjay Kumar Bajpai
You have a growth, but we have indicated growth in the volume should be there.
Saket Kapoor
Okay. And our INR1,500 per ton EBITDA numbers is also — we should hold on to that?
Sanjeev Varma
Yes.
Saket Kapoor
Correct. Sir, we have seen our raw material price trends, employee cost, these things remaining stable. And also your presentation also speaks for the same. So going ahead, do you think that these line items — the vagaries of raw materials are now behind us, and we can look at these price trends to remain in a similar way?
Sanjay Kumar Bajpai
The international prices of all the raw material is very volatile. As you might have seen, that current crisis, international prices, war between the countries and Red Sea crisis. So this may impact the future scenario of the raw material availability in India and also the pricing. So it is very difficult to say what way it will go.
Saket Kapoor
But sir, when we look at the key input cost movements, even year-on-year or even barring the June quarter, vagaries most of the imported phosphorus, ammonia, natural gas, benzene, prices have remained in a band only, sir. Correct me there, sir, when we look at the key input cost movements, slide number 5. So slide number 5, it does speak in that manner. That was the reason why I came to that conclusion.
Sanjay Kumar Bajpai
This is a slide only depicting the caprolactam and benzene spread. So number 5 slide of the presentation [Speech Overlap] so only capro-benzene spread. And I have told that it has been reduced to $620 from $673 year back on September ’23. So capro-benzene spread is reduced, and let us hope for the best that some improvement will be there in the next quarter or so. But we are not very much hopeful. That’s why we are taking this step to divert this caprolactam — reduce caprolactam production and divert the material for the new project called HX Crystal. And we are also importing some direct anone. So that anone can be directly fitted into our caprolactam 1 plant. So the benzene consumption will be lesser because if you see the benzene pricing, it has been increased 23% on year-to-year basis for the quarter. So benzene price is very volatile. In comparison to caprolactam, benzene price is much higher. That’s why the spreads get squeezed.
Saket Kapoor
Okay, sir. I’ll join the line.
Operator
Thank you. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for the closing comments.
Sanjay Kumar Bajpai
Yes. Thank you for patience listening and I hope that we have given the satisfactory reply to all the investors who have posed the questions on the working of the company and we will meet again after three months after this result of third quarter in January next year. Thank you very much.
Operator
[Operator Closing Remarks]