Paradeep Phosphates Ltd (PARADEEP) Q1 FY23 Earnings Concall Transcript

Paradeep Phosphates Ltd (NSE: PARADEEP) Q1 FY23 Earnings Concall dated Aug. 04, 2022

Corporate Participants:

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Alok Saxena — General Manager and Head of Corporate Finance

Analysts:

Anirudh Joshi — ICICI Securities — Analyst

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Prashant Biyani — Elara Capital — Analyst

Manish Ostwal — Nirmal Bang Securities — Analyst

Pratik Tholiya — Systematix — Analyst

Bhavin Chheda — Enam Holdings — Analyst

Rohan Gupta — Edelweiss — Analyst

Ankur Periwal — Axis Capital — Analyst

Amar Mourya — AlfAccurate Advisors — Analyst

Resham Jain — DSP Investment Managers — Analyst

Ajit Darda — Nirzar Securities — Analyst

Rakesh Vyas — HDFC Asset Management — Analyst

Falguni Datta — Jet Age Securities — Analyst

Chintan Shah — JM Financial — Analyst

Utkarsh Somaiyaa — individual investor — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and a very warm welcome to the Paradeep Phosphates Limited Q1 FY23 Earnings Conference Call hosted by ICICI Securities. 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. Anirudh Joshi from ICICI Securities. Thank you, and over to you, Anirudh.

Anirudh Joshi — ICICI Securities — Analyst

Thanks, Ali. On behalf of ICICI Securities, we welcome you all to Q1 FY23 Results Conference Call of Paradeep Phosphates Limited. We have with us Senior Management represented by Mr. Suresh Krishnan, Managing Director; Mr. Sabaleel Nandy, President, COO; and Mr. Alok Saxena, General Manager and Head of Corporate Finance.

Now, I hand over the call to the management for the initial comments. Then, we will open the floor for question-and-answer session. Thanks, and over to you, sir.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Thank you, Anirudh. Good afternoon, everyone, and a warm welcome once again. Well, as you’re all aware, the agriculture sector and the global agri input sector over the last three to four months has been quite volatile. Volatile largely due to the global geopolitical situation, which emerged in the last week of February. What we have noticed during the last three month has clearly been that no major corrections in terms of prices in the fertilizer in agri input space has really taken place. And in terms of supply side, we’ve seen some surprises in terms of availability. However, the way the sector has panned out, I think the entire fertilizer consumption is dictated by availability and which is what we have seen globally.

I think it’s also important for us to understand that, the linkage of fertilizer and other agri inputs to food security has further got underscored very seriously and we all believe that the current situation, the way it’s continuing right now, will certainly have an impact in terms of overall agriculture produced in right across global markets.

The short-term outlook, the way we look at it today. is that some of the major crop, which includes wheat, rice and maize globally, will see a decline in production over a period of time, largely because of not being in a position to get enough macro nutrients, which are required. But getting back to India, I think there are a few positives that we need to very clearly notice. The first positive is, the agriculture sector in India the farmers in general have been reasonably isolated from any major volatility of price hikes as far as the fertilizer input is concerned, which has been a quite a positive thing, number one.

Number two, even the availability as far as the fertilizer input is concerned, have been well managed by the Government of India, ensuring that the serious demand pockets are well met. And the third important thing that we need to realize here is, that the monsoon even though they were initially delayed have really picked up well in the month of June and the kind of coverage that we are seeing and the amount of water levels that we’re seeing across various dam levels, both with respect to last year and the last 10 years average are all very encouraging as far as our sector is concerned.

And the last but not the least, I think the acreage that we are seeing for kharif has been very similar to what we saw last year and the agricultural produce that we getting to see as per the latest government estimates is also quite encouraging. There has been a marginal improvement that we get to see here. And the other important point is, the realization, which is come into the farmers have been in general better than the MSP, which has been provided by the government. So, on the whole, we get to see that our consumer base continues to be well protected, is showing strong earnings, and in terms of their ability to continue their activities well and in a profitable way seems to be very evident from various parameters that we have seen.

Coming to specific to the company, I think the last quarter for us has been quite exciting, not only that during the month of May, we completed our IPO and got listed. It’s also very heartening for us to report that we have completed the acquisition of Goa asset, which have been effective 1st June 2022. As we have been mentioning right across, that the Goa asset we will take about a few months to really get to restart and to achieve the capacity utilization that we have set out to.

In terms of pure numbers, if you look at our performance, I think our production levels the way we see it as compared to the previous year same quarter. I think our total production was 283,624 metric ton as against 227,785 metric tons. This has been a quarterly a good positive change, a positive uptick of about 25%. One of the reasons — main reasons for this is, the production that we achieved from Goa unit. As far as the previous year FY ’22, we did not have the Goa production available. Here we had both phosphatic and urea production available. Phosphatic under the cooling arrangement and the urea against the regular production that we started in the month of June.

When it comes to sales, the growth has been robust, 343,000 as compared to 231,000 in the previous year same quarter. This has been healthy growth that we get to see, which has got reflected in the revenues, our average revenue being INR2,434 crores as against INR1,320 crores in the previous year. And it will also be important to note that, the revenue change is also a reflection, not only of the volumes, of also the price changes which have taken place between the two quarters.

In terms of EBITDA, as you all know, we had a 56% improvement in the reported EBITDA, which is INR167 crores as against INR107 crores that we had previously. This would be a healthy quarter in that sense. And this EBITDA is post some of the one-off acquisition-related expenses that we had and also the startup expenses that we had to incur. So, I think, we believe that we have continued to maintain a robust trend in terms of our performance at the operating level.

And — but in terms of our future outlook that we get to see, as you all know, we have been clearly stating that, this is a year where our expansion takes place in terms of capacities and the very fact that the inorganic growth that we’re having through the Goa acquisition is completed, we are quite confident that the production levels from that will finally adds to the overall revenue and the returns for the company in the coming quarters.

And the second important thing is, now we have clear fully revamped manufacturing lines, which are operational right now. The fourth manufacturing line at Paradeep is — we’ve taken a shutdown for the revamp and we believe that we should be able to complete that and the facility will be available to us in Q3 of this financial year.

So these are important trends that we need to keep in mind, and one of the other important point that we have that we will like to highlight here is that, if we speak our combined capacity is 2.85 million ton per annum, but I think the more important thing is that our fungibility in terms of products is significantly improved, and even in the first quarter, we managed to produce a lot more of NPKs as against DAP based on market requirements. So we’re feeling quite confident that we will be in a position to readjust our product mix based on the demand in the market.

So these are my — these are our opening remarks and we will be happy to take any specific questions from the participants. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Amanjit Singh from Oculus Capital Growth Fund. Please go ahead.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Sir, I am audible?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Yeah. Sir, congratulations on a good set of numbers, and congratulations on the acquisition of the Goa plant. Sir, I just had one question. So the agreed enterprise value of the Goa plant was about INR2,000 odd crores. So, could you please help us [Indecipherable] that, what is the debt that was assumed and what was the equity value?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

As far as Goa acquisition is concerned, the entire thing was 100% cash pay out. No debt from Goa unit was taken over by us.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Okay. So whatever debt would have been paid off by the parent company that they would have paid themselves, right? So this [Speech Overlap]

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Absolutely.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Second question as a follow up, what was the basis of the valuation in the plant given the plant was loss making earlier on?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Well, I think this is a subject that we have addressed quite adequately. The particular unit that we have acquired in Goa as an overall capacity of 1.2 million tons, consisting of 0.4 million tons of urea and 0.8 billion tons of phosphate. In addition to that we also have an incremental surplus ammonia production, which is there. This plant is in the past generally generated close to about between INR350 crores to INR400 crores of operating EBITDA from this company and it has a very, very good robust product mix. So the entire valuation was done on that basis.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

Got it. Sir.. [Speech Overlap]

Alok Saxena — General Manager and Head of Corporate Finance

Can I just add here? The valuation of the Goa plant was — to answer your question theoretically, all kinds of — all the three methodologies of valuation were adopted, namely the EBITDA multiple, the discounted cash flow and the replacement cost basis and the lowest of the three was adopted to arrive at the value enterprise value of INR280 million. And finally, the company would be closing this acquisition at a cost between INR1600 and INR1700 crores.

Amanjit Singh — Oculus Capital Growth Fund — Analyst

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

Operator

Thank you. The next question is from the line of Prashant Biyani from Elara Capital. Please go ahead.

Prashant Biyani — Elara Capital — Analyst

Yeah. Thanks for the opportunity. Sir, on the capex program apart from this granulation facility for the backward integration also we are on track to started by October onwards.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Hi, Prashant. Yes, we are on track to complete the granulation of all the four train. Just for your information, we have completed the granulation exercise of the third train. So we did C train and D train last year when we were in the buildup to the IPO as many of you would have known and we have clarified. At that time, the granulation — the debottlenecking of train A was going on, which we completed around June 20th June. From 1st July, we have taken down train B for revamp which is expected to be completed sometime between end of September and 10th October. That’s the program, which will then complete all the four trains granulation activity — a revamp activity and the Paradeep sites would then have had a capacity of 1.8 million metric tons, up from 1.2 million metric tons per annum that we had as of March 2021.

Prashant Biyani — Elara Capital — Analyst

Right. And sir, how much was the gross and net debt at the end of Q1?

Alok Saxena — General Manager and Head of Corporate Finance

Gross debt at the end of Q1 is INR3,627 crores, which includes a long-term loan of INR758 crores and short-term borrowings of INR2,869 crores. The increase in short-term borrowings is primarily on account of subsidiary receivables. So that’s for sure.

Prashant Biyani — Elara Capital — Analyst

So, I would believe, net debt would be somewhere around this only?

Alok Saxena — General Manager and Head of Corporate Finance

Yes. So there INR200 crore cash. So if you drop off net debt INR200 crores less, so it will be INR427 crores.

Prashant Biyani — Elara Capital — Analyst

And sir, how much would be subsidy for this year and last year Q1?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Subsidy amount has gone up by almost INR1,700 crores of which — which was all outstanding as of end of June. But as we speak now close to 50% of that has been released by the government.

Prashant Biyani — Elara Capital — Analyst

Sir, how much was the subsidy last year?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Last year this time, it was very low, much lower. Let me give you the exact number.

Alok Saxena — General Manager and Head of Corporate Finance

So last year Q1 the subsidy was around INR800 crores, this year it’s INR2,300 crores.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir, what would be the breakup of manufactured and sales volumes from the PPL?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

It is essentially manufactured volume for us with one shipment, which came up in trading, which is close to about 50,000 tons.

Prashant Biyani — Elara Capital — Analyst

Okay. So just to clarify the contracts volume was around 325,000 in total.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

So, just to clarify for you, the total production was 283,000 tons for us, which included DAP of 103,000, 16,000 of urea and balance were complex fertilizers.

Prashant Biyani — Elara Capital — Analyst

Right. And sir, lastly EBITDA per ton for the Paradeep plant would be how much this quarter?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

As you see in this quarter, essentially, the production was out Paradeep and not very much of Goa. And so we have been maintaining the same levels of 4,000 — closer to INR5,000 metric ton in terms of EBITDA per ton.

Prashant Biyani — Elara Capital — Analyst

And this was also last year as well.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes. Last year was about INR4,600.

Alok Saxena — General Manager and Head of Corporate Finance

In fact, it’s INR4,853 as against INR4,611 last year.

Prashant Biyani — Elara Capital — Analyst

Okay, sir. I’ll come back in the queue. Thanks.

Operator

Thank you. The next question is from the line of Manish Ostwal from Nirmal Bang Securities. Please go ahead.

Manish Ostwal — Nirmal Bang Securities — Analyst

Yes, sir. Thank you for the opportunity. First question on during the quarter sir, because of cost pressure, how much impact on the margins? And secondly, what is your overall outlook on operating margin for rest of the financial year?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

The way and we have again explained, this a few times in the past as well. We do not view the business in terms of margins, we view the business in terms of EBITDA per to, because ours is a business which is heavily dependent on imports and that import — imported raw materials constitute a large proportion of the total turnover. For this, the way we usually evaluate the business is o EBITDA per ton basis and it would be our request that you also evaluate us now and going forward on EBITDA per ton.

Manish Ostwal — Nirmal Bang Securities — Analyst

So on EBITDA per ton basis, what is your outlook sir?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

INR4,850 odd per ton of EBITDA as against INR4,600 that was last year same quarter.

Manish Ostwal — Nirmal Bang Securities — Analyst

Secondly, sir. After this Goa acquisition, our peak debt would be INR5,600 crores right sir?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No, as was explained earlier, the Goa acquisition has been done on a slump sale basis which is a cash free, debt free basis. So there — we have not inherited any of the debt from Goa’s earlier owner which is Zuari Agro Chemicals.

Manish Ostwal — Nirmal Bang Securities — Analyst

Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Pratik Tholiya from Systematix. Please go ahead.

Pratik Tholiya — Systematix — Analyst

Yeah. Thank you so much for the opportunity and congratulations on good set of numbers. Firstly, can you just help me the sales volume during the quarter? And especially split between DAP and non-DAP?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah. The total sales that we did was 343,000 metric tons of which the DAP was around 100,000, rest of it where the other products.

Pratik Tholiya — Systematix — Analyst

Right. And sir, you did mention that the production that you of 283 that was largely on account of higher volumes coming from the new Goa plant. So except Goa sir, what was the production basically at Paradeep?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Goa Plant is miniscule around 47,000 tons is all that we took from Goa, rest of it is all Paradeep, because as you know the Goa Plant acquisition was completed on 1st June 2022, just had a month of which — during which also the urea plant 15 days was under annual turnaround, but in in April, we had some bit of tolling manufacturing that had happened, which is 43,000 tons of to be precised 43,000 tons was the NPK volumes manufactured in Goa and around 10,000 was the urea, that was — 16,000 was the urea that was manufactured in Goa.

Pratik Tholiya — Systematix — Analyst

Okay, got it. And secondly on subsidy. You mentioned the subsidy right now is around INR2,300 odd crores. And did I hear correctly that 50% of this number has been already paid off in month of July?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

In the month of July, we have received around slightly less than INR1,000 crores.

Pratik Tholiya — Systematix — Analyst

Okay. INR1,000 we already received. And sir then what is the view on subsidy going forward, because now government is talking about, I mean the industry around INR2.5 lakh crores of subsidy is likely possible. So do you think there could some delay or the payments are going to be smooth even in the coming months and quarters of this financial year?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Well, I’d like to answer this question in two parts. The first part is government is provided for INR2.5 lakh crores as subsidy for the fertilizer industry today, which includes urea and phosphatic. We believe based on the current price trends that we have, this subsidy amount is adequate to meet the entire subsidy requirement for the industry during this financial year. Given that, we believe that the subsidy payout will be smooth from the government end. We do not expect them requiring any substantial amount of additional money towards subsidy.

Pratik Tholiya — Systematix — Analyst

Okay. That’s helpful. Yeah, that’s it from my side sir. Thank you and wish you all very best.

Operator

Thank you. The next question is from the line of Bhavesh Chheda. Please go ahead. From Enam Holdings.

Bhavin Chheda — Enam Holdings — Analyst

Sir, good afternoon, sir. This is Bhavin here. Congrats on successful IPO listing and good set of results to start with. I see your gross debt number now 3627 now, this includes since the Goa unit acquisition is done. So any pending payment for the Goa unit, any liabilities pending or something? So now

This is..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Not really. The total loan that we getting to see includes the completion of the Goa acquisition and the loans, there is nothing more which is pending that we need to take care of.

Bhavin Chheda — Enam Holdings — Analyst

Right. And regarding — what was the phos acid volume in the quarter, captive volumes for the company?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Phos acid plant was shut down in the period. We have therefore not been — we have not been producing. It’s around [Indecipherable]. We’ve made 47,000 tons of — 52,000 tons of phos acid in this quarter as against 46,000 ton same quarter last year.

Bhavin Chheda — Enam Holdings — Analyst

Okay.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

This is the time when we usually take the shutdown. So there is nothing..

Bhavin Chheda — Enam Holdings — Analyst

Balance would have been imported, and if we can help with the contract prices that was there in the quarter?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No. So we — the contract prices that — let me put it this way we have not had to import phos acid during the April, June quarter we had certain benefits of opening stocks and arrivals so strictly speaking we as a company did not have to import and I was saying this especially in light of as far as the other players

Are concerned there has been a little bit of confusion related to the phos acid prices I would like to clarify that as far as we are concerned all our prices up to June has been at the earlier price of INR1530.

Bhavin Chheda — Enam Holdings — Analyst

Okay. So now the plant is restarted now?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah, full plant.

Bhavin Chheda — Enam Holdings — Analyst

Okay. And that would meet how much percentage captive for the company?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

So as Bhavin as we have been talking and as you are aware, when we have our phos acid plant running fully and this is the pre-retrofit stage, which is the annual capacity of 300,000. We can meet close to 90% to 95% of 3 train requirement. Today the fourth trend is under revamp. So the Paradeep side virtually is fully self sufficient as far as P2O5 is concerned. Goa will import and manufacture, but Paradeep site is close to be in full self sufficient.

Bhavin Chheda — Enam Holdings — Analyst

Sure sir. And sir, the margin you gave 4853 that was blended or that was for the NPK?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

That is blended. It is — you will get it if you divide the EBITDA by the total volume sold.

Bhavin Chheda — Enam Holdings — Analyst

Okay. So give urea, separately urea was around that number only?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Urea was 10,000 tons that we sold, 60,000 tons we made.

Bhavin Chheda — Enam Holdings — Analyst

Although, it was very small number.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah.

Bhavin Chheda — Enam Holdings — Analyst

Okay. And what would be the capex number for FY ’23 that you’re planning?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No change from what we have said, nothing has been added, nothing has been deducted.

Bhavin Chheda — Enam Holdings — Analyst

Okay. So the IPO — during the IPO time whatever you mentioned.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes, everything.

Bhavin Chheda — Enam Holdings — Analyst

Okay. Thanks a lot, and best of luck.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah. Thanks Bhavin. Thank you.

Operator

Thank you. The next question is from the line of Rohan Gupta from Edelweiss. Please go ahead.

Rohan Gupta — Edelweiss — Analyst

Yeah, hi, sir. Good evening. Sir, first question is on our Goa facility. So you mentioned that apart from urea and of the 3.5 lakh ton and of a DAP. We also have some surplus ammonia. Can you quantify that how much surplus ammonia we have there at that plant? And it is going to be utilized..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

70 to 80 metric tons per day, it sufficient to run one of the two NPK trains without having to important an ammonia for that one of the two NPKs.

Rohan Gupta — Edelweiss — Analyst

Okay. And for phos acid, this plant completely dependent on imported phos acid, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes, and that’s an area where we are looking for huge advantages to come to PPL, being having the kind of commercial relationship that we have with OCP.

Rohan Gupta — Edelweiss — Analyst

Okay. And sir, for the June contract, you had mentioned that it has been on a earlier price of phos acid of $1,525.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

$1,530. Yeah.

Rohan Gupta — Edelweiss — Analyst

$1,530. Okay. And the current quarter when we need not to import anything in terms of phos acid then our margins are at close to INR4,800 EBITDA per ton, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes.

Rohan Gupta — Edelweiss — Analyst

Sir. Wouldn’t be that with the captive phos acid completely and Goa plant is still not running our margin per ton. Should have been much higher than the current level, given the current phos acid?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Our reported EBITDA per ton is what you’re getting to see at INR4,800. We had some one-off acquisition related expenditure, which we had to write-off, which has not been capitalized, because which at this level. That amount is INR49 crores is what we have to do a one-time payment of stamp duty and some ATRM and related expenses.

Rohan Gupta — Edelweiss — Analyst

Okay. So that is also loaded on this INR4,800 per ton.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Absolutely, yes.

Rohan Gupta — Edelweiss — Analyst

Okay, sir. With the current phos acid spread and with the captive phos acid right now, though the rock phosphate availability. I mean we have, but how the ammonia and how the pricing of that ammonia and sulfur we are — I mean how it is right now?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No. So the worst is behind us and there is no problem as far as ammonia availability or sulfur availability. If you are following the international markets, you would have also noted that sulfur prices have virtually crashed from something like $460 per metric ton to something like in Qatar FOB has become $77. So, to India. It will be like 125 to 130. So there is — ammonia prices are holding on. But as far as availability, There is no challenge on the either front.

Rohan Gupta — Edelweiss — Analyst

Okay. The second question is on subsidy front, you mentioned that with the current pricing scenario in an international market, the subsidy from the government should be close to INR2.5 lakh crore. I think they — you mentioned that they are adequately — they have adequately provided, but I understand that in the budget, they provided close to INR1.6 lakh crores only for the current year. So, has there been any reason? And has been any off balance sheet provision has been made by the government? Can give some..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Government that initially made a budget — budgetary provision of INR1.6 lakh crores that we have, correct. And post the price hikes that that’s happened in the global market and with a view to keep the prices of the farm gate level at more affordable levels. Government had increased the subsidy allocation by over INR1 lakh crores, this they have themselves confirm. So in effect, we have about INR2.5 lakh crores of subsidy available for the industry.

Rohan Gupta — Edelweiss — Analyst

So you mean that the when there is adequate provisioning. Any particular reason for the delays in subsidies disbursement from the government in this quarter when earlier there was just almost clearing every subsidies within a month?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

I think, let us go with the track record of government of India I think over the last two years they have not only cleared the backlog and they have been very robust in terms of clearing the dues before the end of the financial year and we have hardly been carrying more than 15 days of subsidy. When it comes to this quarter I think it is important to realize that government’s notification on the MDA has happened late in the month of April and which was announced and the formal notification happened in the month of May and by the time the DBT bills and others were generated it became well into the month of June and that is

One of the reasons why we did not get any major payouts but now the process was regularized and people have been able to generate the bills and we have started releasing the subsidy I personally believe that this will now be a normal process that is our expectation.

Alok Saxena — General Manager and Head of Corporate Finance

Yeah. Even on the subsidy, I think the worst is behind us. Going forward, it will be smooth.

Rohan Gupta — Edelweiss — Analyst

Okay. So, right now at [Indecipherable] INR3,800 crore around debt position. So if we adjust for that working capital and the payment will come on time, then it is going to reduce significantly going forward, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Absolutely. If you look at it, we should be having a INR758 crores of long-term loan, which is related to the capex program that we had. That will be the main loan that you will have and also the short-term loans will be highly mitigated and we don’t believe that it’s going to be any major number.

Rohan Gupta — Edelweiss — Analyst

Right sir. And sir, just last bit and I’ll come back in queue. You also mentioned that for you’re running your Goa plant complex fertilizer which doesn’t have a backward integration of phos acid. You will [Indecipherable] to utilize your existing relationship with the OTC. While I understand that the phos acid pricing is still will be on an arms length basis probably, right? So will we have any additional advantage? I’m not sure at this go up — until and unless we have any further future plan for increasing our phos acid capacities. So can you just clarify a little bit more on that?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

I think we’ll have to wait for the next quarter results to come to see in terms of how you are performing in Goa. But I must tell you that phos acid price is one and given the fact that we are in exclusive OCP buyer and the fact that we had a large volume buyers. I’m sure we will have those commercial advantages. But more importantly, it is not so much about phosphoric acid price, the entire industry gets down to a particular price. What is more important is the kind of product mix that you can deliver. And I think that is where we believe that we should be in a position to really get a product mix. We should start I think far more to the EBITDA levels than a normal product mix of DAP plus the usual generic NPKs that you’ll get to see.

Rohan Gupta — Edelweiss — Analyst

So you want to say that, we will be seeing continuous improvement towards NPK?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Absolutely.

Rohan Gupta — Edelweiss — Analyst

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

Operator

Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.

Ankur Periwal — Axis Capital — Analyst

Yeah. Hi, sir. Thanks for the opportunity. First question on the Goa bit. Now, you did mention there was a slower or lower production in the last quarter, because of the maintenance shutdown. Has it started fully now with effect from July or even Q2 will have some bit of that impact?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Well, as far as the Q2 is concerned, from July, we’ve been having our urea plant running at pretty much peak loads between 90% to 93%. And as far as the phosphatic is concerned, we are concluded the phos acid commercial transactions and now we have started receiving phos acid in the site. So from the month of August, we expect that our NPK production will also commence here.

Ankur Periwal — Axis Capital — Analyst

Sure. And from a product mix perspective, this will be largely NPK and some bit of DAP within phos acid.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

At Goa, we do not have any plans to make that at this stage.

Ankur Periwal — Axis Capital — Analyst

Great. So this will be largely NPK. And from a distribution network perspective, any thoughts there? Any rejig required there? Or probably system is already..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

I think we are one of the few companies, which has a very robust, I mean, I can say that pretty much a Pan India presence as well as fertilizer distribution is concerned. And we’re also very heavily present in markets which are — which consume NPKs in a big way, which includes markets of Maharashtra, Karnataka, Madhya Pradesh, and Telangana and Andhra Pradesh. So we — I don’t think from a distribution point of view, all the brand point of view we have any concerns.

Alok Saxena — General Manager and Head of Corporate Finance

Yeah Ankur, just to add, as you know during the — during all our discussions in the past we’ve highlighted that one of the key reasons behind acquiring the Goa plant was to get the distribution strength that Zuari had. So today, I think people having completed the acquisition has actually inherited it. So to answer your question, we are now looking forward to reaping the benefits of this strengthen distribution network. There is no question of rethinking or realizing any of that.

Ankur Periwal — Axis Capital — Analyst

Sure. And on the capex side, you did mention now Goa acquisition is behind us and the debottlenecking part is already done. So, any thoughts on capex and the peak debt, how should one think about it?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

As far as the long-term debt is concerned, we believe that our number is going to be under INR1,000 crores is a number that will end up, which will be the peak long-term debt that we could hit. And we are pretty certain that, that’s where we’re headed today. And as you know the the revamp cost are well established and the phosphoric acid backward integration should also get done by Q3. And we have pretty much procured the equipment required for that. So we don’t have any — we don’t see any surprises on these.

Ankur Periwal — Axis Capital — Analyst

Great. Just one last clarification. You mentioned on the backward integration, especially for the Paradeep plant. On the enhanced capacity we are fully backward integrated, did I hear that right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah. No, this is a repeat. Just to clarify once again, once we have completed the revamped retrofit program for the phos acid plant, our capacity is going to move from 300,000 metric tons per annum to 500,000 metric tons per annum. While the actual requirement of phos acid depends on the product mix on — at a generical level on an average forecasted volumes of phosphatic fertilizer that we will make. Paradeep side will be around 90% to 93% backward integrated. Only a small quantity of phos acid we will have to import, depending on the actual mix of products that we make there.

Ankur Periwal — Axis Capital — Analyst

That’s very clear. Thank you. Thanks for that. That’s it from my side.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Amar Mourya from AlfAccurate Advisors. Please go ahead.

Amar Mourya — AlfAccurate Advisors — Analyst

Thanks a lot for the opportunity. Majority of my questions have been answered. Only one clarification like, as you said that about the Goa plant, urea capacity has already started and NPK capacity you are planning to start in August. So let’s say at broad utilization level will be making the similar kind of EBITDA per ton. What we are making here in existing Paradeep facility? Or what is the target there, because they’re the phos acid is basically backward integrated?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No. As far as Goa is concerned. I mean, our EBITDA margin will be dictated by the NPKs that we finally end up making. I think that’s the key out here. And obviously, you certainly have an advantage when you have your own phosphoric acid plant. So between [Indecipherable] and own phosphoric acid plant and not having a phosphoric acid plant. On a general level, I know you have close to about INR1,000 margin difference which comes at EBITDA level.

Amar Mourya — AlfAccurate Advisors — Analyst

Correct.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Those kind of marginal difference could be there and it could also be bridged by having certain specialized products, which come from your end. So I think we are restarting the plant now, I think — and we will be working on various products to really make. And I think in about a few months from now, we will be in a position to very clearly state in terms of what is it that we’re going to finally offer, because the fungibility and ability of Goa to big fatality gate is huge. And so that is where we are looking at deciding in terms of what are the best options and we also plan to as we’ve already said, we have introduced a new product N14 and which is something Goa will also start manufacturing.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. So basically and the current mix whatever the causes and mix. I mean whatever the NPK mix we are having currently. So are you saying that at the current mix you will make something around 3,800 metric ton per ton and as you change the mix, it will broadly moving to 4,800 level?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

If you look at our long-term average that has been the difference that you get between a phosphoric acid backward integrated plant versus a non-backward integrated plant. That’s the long-term average. So as being stand right now, the blended number that we’re looking at, which is going to be closer to about INR5,000 per metric ton for phosphatic fertilizer is what we’re targeting and we will decide the mix between the two sites as we go forward and we will ensure that we will work towards delivering that number.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. And secondly, did I hear right that you are going to start commercial production in August, right?

Alok Saxena — General Manager and Head of Corporate Finance

Yeah, it is from August. Just to clarify the vessel has boarded today and so this week, we should start NPK run in Goa.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. Fair enough sir. Thank you.

Operator

Thank you. The next question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yeah. Hi, good evening, sir. So, few questions. So first is, we have seen this INR40 crores of one-off in Q1 with the Goa plant now going to get ramped up gradually during this quarter. Are there any more one-offs, which are expected?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Not likely.

Resham Jain — DSP Investment Managers — Analyst

Okay. Got it. And sir my second [Indecipherable] given that by the end of the year, most of your capex will be over. How are you looking at expanding your market or further expanding your capacities? If you can just help with your thought process that would be helpful?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

When we look at it, we are clearly maintain that FY ’22, ’23. The current financial year is all about ensuring that our capacities are in place, both in terms of granulation backward integration. So ’23, ’24 which is the next financial year is where we are targeting to hit off the capacity here. And that is when you will get to see that we not only get the volume that we’re looking at. We also get the returns in terms of both EBITDA’s and free cash flows. And anything that we will end up doing is post that.

I think if you’re asking us in terms of what our thought processes from what we clearly understand today, the opportunity around agri input space is quite large in India. And it’s not only about bulk fertilizer, it’s also about specialty fertilizer, it’s also about other agri inputs like agrochemicals and other related products. Our retail reach is truly very strong today and is quite robust today. So we will certainly look at opportunities around that as far as the coming years are concerned. That’s the first one.

Second important thing for us will also be getting some more specialized products from our own side, which will be — which will also be equally important for us to take this. And the third important thing for us is, industrial sales that we plan to do whether it is surplus ammonia, whether it’s going to be the gypsum which we have a substantial quantities available with us, and also the capacity that we have in terms of sulfur, sulfuric acid in related products. So we have a mix of things that we can very efficiently do and there are lot — there are quite a good number of markets that we service today where we have identified these products and we will start certainly ensuring that the the stakeholders in this company get the benefit of the thing.

Resham Jain — DSP Investment Managers — Analyst

Any possibility of further expanding capacity in Paradeep, is there a possibility there or the site..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Paradeep, as far as the infrastructure is concerned, we have a very good option to double our capacity. I mean, we have always maintained that we are at 2,200 acres site with our own private birth. We are in a position to do that quite well. So — and we will earn the right to do that post FY ’23, ’24 when we have the full capacity being utilized.

Resham Jain — DSP Investment Managers — Analyst

Okay. Understood sir. Thank you. All the best. Thank you.

Alok Saxena — General Manager and Head of Corporate Finance

Thank you.

Operator

Thank you. The next question is from the line of Ajit Darda from Nirzar Securities. Please go ahead.

Ajit Darda — Nirzar Securities — Analyst

Hello, sir. First of all congratulations for your completion of Goa plant acquisition. So, sir I have just two questions, which are more of clarifications. The first one is, sir as SSP before affordable to customers. And also the government is supporting its production by giving high amount of subsidy. So is SSP substituting the use of complex fertilizers? And is the increased demand of SSP sustainable? What’s your thought on that?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

My view is very simple that, SSP cannot [Indecipherable] complex fertilizer, because complex fertilizers have got NPK in them. SSP is the pure simple phosphate nutrient. And at the same time SSP is a very importantm, I would say an agri input or fertilizer input and it has a capability to blended with so many other mainstream fertilizers. So from that perspective, I think SSP has a role to play and we are clearly seeing that SSP is playing a role in India far more in the last couple of years.

Ajit Darda — Nirzar Securities — Analyst

Okay. And do you see the increased demand of SSP sustainable?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Well SSP is the product, which is localized because you can’t really transported to very long distances, because of the freight cost. So the current structure, which is there in SSP. I don’t believe that one will be able to move for a very long distance. But obviously, if there is a policy, which comes in from the government, which ensures the SSP kind of moves around, and I’m sure you will find more pockets where consumption where SSP will come.

Ajit Darda — Nirzar Securities — Analyst

Okay, understood. And the second one is sir. The recently in Mangalore Chemicals and Fertilizers has announced the shutdown of phosphatic fertilizer plant, due to non-availability of some raw materials. So is there any kind of issues that we are facing with respect to raw material supplies?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Just confirmed to you as far as Paradeep phosphate is concerned. We [Indecipherable] phosphoric acid and phosphate raw material, primarily for the Goa facility and we have already — we have tied up the same and we don’t see that as a challenge for us in the coming quarters or coming years.

Ajit Darda — Nirzar Securities — Analyst

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

Alok Saxena — General Manager and Head of Corporate Finance

Just to add, not only this we believe the ability to have raw materials without any interruption in our production is an area of competence that we would like to demonstrate going forward as well.

Ajit Darda — Nirzar Securities — Analyst

Understood. Thank you.

Operator

Thank you. The next question is from the line of Rakesh Vyas from HDFC Asset Management. Please go ahead.

Rakesh Vyas — HDFC Asset Management — Analyst

Yeah. Hi. Good afternoon, few questions from my side. First of all, on the production trend itself. If I annualize the current numbers that we did, we are closer to a 1 million ton in Paradeep, despite us having a higher ramped — revamped capacity available in the quarter. So, any color that you can throw on this as to whether we have sub optimally utilize the capacity? Or where there larger shutdowns than what was expected?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Not really. I think what we have done in the first quarter is being to ensure that, we had shut down taken for our phosphoric acid plant and to some extent also some of the units of sulfuric acid plant. So the plant production is pretty much in line with what we had planned. So there is nothing like an under-utilization. If you get to see, we have actually done better protection than what we did last year in the same quarter. So that’s the — that is the first point that I’d like to state here.

And the second thing I’d like to state here that we also ensured that the product mix is such that we are able to get good EBITDA margin for ourselves. I think what is important for us is not only the volume that we do, also to ensure that we have the return that is required and that is something that we’ve endured with the product mix that we did. We did less of DAP which could have ramped up the capacity a little bit more and we did more of other phosphate and we’ve also experimented with some new product manufacturing, which has come out quite successful.

Rakesh Vyas — HDFC Asset Management — Analyst

Got it. That clarified. Secondly, just a clarification this INR49 crore one-off. Is it part of other expenses?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes.

Rakesh Vyas — HDFC Asset Management — Analyst

Okay. So we should normalize that going forward. And last question is around subsidy. So, of course, subsidy payments are due, but are there large due from the markets as well, because we have just placed?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Market, we are on a cash and carry mode, contributed and typically about 7 to 10 days is what the market outstandings are going today.

Rakesh Vyas — HDFC Asset Management — Analyst

So, if I understood it right, if at all as and when we are expanding the production both from Goa and Paradeep going forward into second half? The incremental working capital requirement if at all will be to fund the subsidy receivables if there are delays?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Absolutely. Yes.

Rakesh Vyas — HDFC Asset Management — Analyst

Got it, sir. Great. Thank you so much and best of luck, sir. Congrats once again.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah. Thank you.

Operator

Thank you. The next question is from the line of Falguni Datta from Jet Age Securities. Please go ahead.

Falguni Datta — Jet Age Securities — Analyst

Yeah. Good afternoon, sir. I just have one question on the Goa acquisition. So out of the INR1,600 crores, INR1,700 crores, which will be the final acquisition cost. How much would have been internal funded through internal accruals? And how much debt funded?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

There is total debt funding for this acquisition has been INR450 crores.

Falguni Datta — Jet Age Securities — Analyst

INR250 crores?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

INR450 crores.

Falguni Datta — Jet Age Securities — Analyst

INR450 crores. And sir, any entire interest and depreciation on this plant has come in Q1? Or we will see in..

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah, there is an incremental amount has come in Q1. Yes.

Falguni Datta — Jet Age Securities — Analyst

The entire amount has come in Q1 the incremental. I mean, both the interest and depreciation?

Alok Saxena — General Manager and Head of Corporate Finance

Yeah. That amount was paid before the IPO proceeds, because IPOO amount was the last amount that we have to pay to close the acquisition. So that was in place before that.

Falguni Datta — Jet Age Securities — Analyst

So in short, we don’t see any incremental interest or depreciation on this [Indecipherable] from Q2?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes.

Falguni Datta — Jet Age Securities — Analyst

Thank you, sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Chintan Shah from JM Financial. Please go ahead.

Chintan Shah — JM Financial — Analyst

Yeah. Hi. Thanks for the opportunity. So couple of questions. So first is I’m not very clear on the input costs. So, one is on the phosphoric acid. So you mentioned that will be approx 90% backward integrated. So just wanted to clear, we still have to import phosphatic rock and how is the pricing for that? So that is one.

And secondly, considering the current gas scenario, just wanted to see how — what the impact that we could see from the increase in prices? So those are the two one from input costs.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

So on the backward integration, obviously we import rock phosphate as well. But as it is the case globally, so also for a plant like Paradeep, the inherent sustainable margins for a backward integrated player who starts producing from rock similar to a steel plant if someone who starts from an iron ore has greater margins than someone who buys ingot. So that’s the competitive advantage that we’re talking for the Paradeep side, nothing unusual or nothing out of the ordinary. What was the second question?

Chintan Shah — JM Financial — Analyst

Gas prices. Impact of that gas prices.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

DAP prices.

Chintan Shah — JM Financial — Analyst

No. Basically — ammonia prices basically.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Ammonia prices. So ammonia prices we buy from — we have long-term contracts from the major global ammonia players of the world and we are on a formula pricing, which obviously by the global prevailing prices, generally in the East of Suez. And we are — the ammonia prices are still holding on. And as far as the Q1 is concerned, they have been high and — very high, because it was just on the aftermath of the Russia and Ukraine war breaking off. But we — as we have been maintaining, we believe that the worst is behind us and the first trend of softening is already visible in the form of much easier and much smoother availability situation, not only for us, we always had enough ammonia, we never had a shortage, but other players, smaller players are also today getting ammonia very easily. So when there is a softening that happens, it usually starts with an availability situation easing out followed by a certain degree of fall of prices.

Chintan Shah — JM Financial — Analyst

Okay. So just to be very clear on two fronts. So if we compare on Y-o-Y basis. So the input cost increase that we would have witnessed, that has been largely offset by the subsidy — increase in subsidy and that is why we will see a higher EBITDA per ton. Is that the correct understanding?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

That’s correct, yes.

Chintan Shah — JM Financial — Analyst

And secondly going ahead also in over the next at least couple of quarters, what we are saying is the, we’re sufficiently covered in terms of our operating profitability fee again on back of subsidy, is that right understanding?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yeah. What we’re trying to say about the future is that, despite that we witnessed in the during March, April was obviously a fallout of the Russia, Ukraine war, because these two countries control a lot of these global raw materials including things like urea, ammonia, phosphate et cetera. The worst is behind us. So we expect the prices to gradually soften, it just started. The trend of softening has started with sulfur, it will follow with other products as well. So in a softening scenario, again this is a phenomenon of the industry globally and India is no exception.

Generally margins for all players remain protected. The question of margin becomes more relevant in a scenario when raw material prices are going up. For the last two years we’ve seen scenario where the prices have gradually gone up. We think that we are now over the hill, the prices from hereon are only going to go down.

Chintan Shah — JM Financial — Analyst

Got it. Understood. But just to be sure to keep inventories of around three to five months. So what I believe is..

Alok Saxena — General Manager and Head of Corporate Finance

No. We don’t keep inventories for backlog. We keep –today India is going through a shortage scenario and whatever we are making is we’re on hand to mouth as Mr. Krishnan mentioned earlier today. We are not able to feed the market properly. Indian inventory and we have said it in other forums as well. the country’s total fertilizer stock is down by close to 10 million metric tons compared to the like-to-like scenario last year same time. So we are actually having a problem of not able to feed the market adequately. So inventory is virtually hand to mouth.

Chintan Shah — JM Financial — Analyst

No. I’m not talking about fertilizer inventory. What I’m talking about is, the inventory for phosphoric acid and ammonia basically.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No, that was the one month.

Chintan Shah — JM Financial — Analyst

Okay.

Alok Saxena — General Manager and Head of Corporate Finance

We don’t — our long-term supply in a manner they arranged in such a way and that’s the reason for having long-term contracts that we are — we run it virtually in a way that we are just enough to ensure continued operations. We have storage to keep more, but at this time we will not do that.

Chintan Shah — JM Financial — Analyst

Okay. Got it. Understood. And then last question would be on capacity utilization. So just wanted to get a sense once it is [Indecipherable] what would be the max utilization levels that you can reach considering the shutdowns and [Indecipherable] product that we do?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

No. PPL, as far — apart from this shutdown days, which are all planned, because every year at this time we have shut down. It has been more than what our internal target has been, as you can witness. Last year we had done 227,000, this year we have done 283,000. Give or take a little bit here and there to go up. If I ignore that, these are the headline numbers.

Chintan Shah — JM Financial — Analyst

Okay. Great. Thanks for answering my questions.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Akshat Mehta from Sameeksha Capital. Please go ahead. Akshat, your line is unmuted. Please go ahead with your questions. As there is no response we move to the next question from Utkarsh Somaiyaa, an individual investor. Please go ahead.

Utkarsh Somaiyaa — individual investor — Analyst

Thank you for the opportunity. [Indecipherable]

Operator

Utkarsh, we are unable to hear you.

Utkarsh Somaiyaa — individual investor — Analyst

Am I audible now?

Operator

Yes.

Utkarsh Somaiyaa — individual investor — Analyst

Of your total debt, I just want to confirm INR750 crores is long-term debt, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes. INR750 crores.

Utkarsh Somaiyaa — individual investor — Analyst

And once you received the subsidy from the government. Do we expect all the short-term debt to come down to zer?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Normally, what we have seen is government outstanding is about — roughly about 15 days to a month is what the outstanding will be there. And we expect that the short-term debt [Indecipherable] around INR1,000 odd crores, INR1,000 crores to INR1,200 crores at the end of the year. So that’s the kind of a number that we get to see.

Utkarsh Somaiyaa — individual investor — Analyst

And that will remain constant over time, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

That is what we’re seeing and only if government decides the subsidy per ton is going to be much lower, obviously we could see a lower number. But given what it is today and we would expect this number to be there. Yeah.

Alok Saxena — General Manager and Head of Corporate Finance

Yes. To handle short-term debt is what we wave[Phonetic], why we have the working capital limits. So they are funded very differently as you maybe aware.

Utkarsh Somaiyaa — individual investor — Analyst

Okay. As a company the long-term plus short-term we should at all times have approximately INR2000 crores of debt. Can I — Is that a fair understanding? Just to get an understanding.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

For the medium term in a couple of years from now given that our capex program is already completed. The overall debt position should keep coming down and I think that is — and so you will see that in ’24. ’25 financial year. We will have a debt level, which is significantly different and lower than what it is today. That is our expectation based on the capacity utilization that we’re targeting.

Utkarsh Somaiyaa — individual investor — Analyst

Okay. And after the next capacity expansion that will have in the second half. Our capacity will increase from 2.85 million tons to how much?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Now, it’s going to be 3 million tons as far as fertilizer is concerned. But the key increase that will happen in the next six months. The increase in our backward integration capability. The phosphoric acid plant, which is currently 300,000 tons will be moving up to 500,000 by end of December.

Utkarsh Somaiyaa — individual investor — Analyst

Okay. And the 5,000 per ton, EBITDA per ton guidance is considering the backward integration.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

That is where the EBITDA per ton figure kicker comes quite seriously.

Utkarsh Somaiyaa — individual investor — Analyst

So that will exceed 5,000.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes, I mean it depends on prices at that point of time. So we believe that the trend that we’ve seen in the industry on a long-term basis has been in this range.

Utkarsh Somaiyaa — individual investor — Analyst

Okay. And — by FY ’24, we expect to hit peak utilization, right?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes, absolutely.

Utkarsh Somaiyaa — individual investor — Analyst

And what peak revenues do we expect at peak utilization?

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Sir, as far as revenue is concerned, it is the way the global prices are. I know it’s quite a 3 million tons you could be at INR15,000 crores, or it could be even at all INR18,000 crores, that’s the kind of numbers we get to see.

Alok Saxena — General Manager and Head of Corporate Finance

The answer to your revenue question is similar to why we don’t look at EBITDA margin, because it’s a function of the raw material prices. So revenue is of little consequence to us. For us, it’s all about the tons that we make and the EBITDA per ton that we earn, neither do we look at revenue nor do we look at margins of EBITDA, both are equally relevant and our request would be to also view us in the same light as we view ourselves.

Utkarsh Somaiyaa — individual investor — Analyst

Fair. Just one more question, I am trying to understand the business. I know it maybe a simple question, but can you be explained to me what raw materials did you require for your manufacturing the composition of the raw materials?

Alok Saxena — General Manager and Head of Corporate Finance

Yeah. We manufacture — we need four key raw materials, basic raw materials. It is the phosphate, it is NPK and S. N is nitrogen, P is phosphorus, K is phos acid sulfur. Now these are the four raw materials that we need. The source of N is generally, there are two kinds of sources of N, one is ammonia, which is called ammoniacal nitrogen and the other urea which is ureacal nitrogen. The Paradeep plant runs fully on ammoniacal nitrogen, whereas the Goa plants has dual feed mechanism, it can take urea nitrogen, it can also take ammoniacal nitrogen. That’s about N.

When it comes to P, there are two sources of P. One is the rock phosphate, which is like one step backwards or phosphoric acid P2O5 that’s the — this thing phosphoric acid in H3PO4 from a commercial — chemical formula point of view. MOP is K which is the mined the product actually. So that’s what we readily take. And sulfur is S. We either use directly sulfur as the raw material or we buy sulfuric acid, typically 93% concentration — 98% concentration of sulfuric acid.

Utkarsh Somaiyaa — individual investor — Analyst

Understand. We are 90% backward integrated and all these for raw material.

Alok Saxena — General Manager and Head of Corporate Finance

No. So when we say — so this is phosphatic business. So why we call it prospecting is because the lever around P, the P in raw material is the first amongst equals, because in a way it’s scarcity, the prices, et cetera, et cetera. So when we say that the Paradeep site is 93% backward integrated around the P raw material.

The Goa plant and ammonia is actually 50% backward integrated. Paradeep site is not backward integrated as far as ammonia is concerned and none of our sites are backward integrated as far as the other two raw material, which is K which is potash and S which is sulfuric sulfur. That is true for the entire industry. When we say phosphatic industry backward integration, this is it. So when you talk about iron steel, the talk of iron is the backward integration element, not about the other materials or even fuel like coal, et cetera. So it’s about the main raw material that we’re talking about.

Utkarsh Somaiyaa — individual investor — Analyst

Understood. Okay. Thank you so much, sir. That was very helpful.

Alok Saxena — General Manager and Head of Corporate Finance

Thank you.

Operator

Thank you. That was the last question in queue. I now hand the conference over to the management for their closing comments.

Narayanan Suresh Krishnan — Managing Director and Chief Executive Officer

Yes. So I think just to closing. Thank you all very much for showing interest and asking us the questions, which we find very relevant. We are in the company quite excited with the fact that we’ve been able to complete two very important projects in our corporate history, which is about the acquisition of the Goa Plant on completion of the IPO.

As you know, the INR1,500 crore IPO have marked also the exit of Government of India from the company. So we are now a fully private sector listed company with a strong parentage of Zuari and OCP Group, which is the world leader in phosphates. We are — we find a lot of prospect for the phosphatic industry going forward, the way it is shaping up globally and in India. And we believe we have exciting times going forward coming to us. Thank you.

Anirudh Joshi — ICICI Securities — Analyst

[Operator Closing Remarks]

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