DEEPAKFERT - Deepak Fertilizers &Petrochemicals Share Price

In the Q3 FY 2026 earnings call, management provided an overview of the company's financial performance and outlook. For the year-to-date FY 2026, revenues grew by 12%, reaching INR 8,495 crores, supported mainly by strong growth in the Crop Nutrition and Bulk businesses, despite a challenging quarter influenced by unseasonal rains and geopolitical uncertainties.

Management highlighted a net debt-to-EBITDA ratio of 2.27x, aligning with their ongoing capital expenditure cycle, expected to lay the groundwork for future growth and competitiveness. They noted challenges arising from heavy rains, which slowed mining activities and reduced the demand for technical ammonium nitrate (TAN) and nitric acid"”key products for the company.

Looking ahead, management anticipates improved conditions with normal weather patterns expected to resonate positively across their segments. The completion of significant projects, including the Gopalpur TAN project (91% complete) and the Dahej acid project (79% complete), is expected to begin contributing to earnings. The company aims for these projects to bolster their bottom line for at least the first half of the upcoming fiscal year.

Management also mentioned a positive outlook for the Rabi season, with expectations of strong demand for the Crop Nutrition segment due to favorable water table levels and farmer sentiment. They noted a partial advantage from a long-term LNG contract with a Norwegian supplier, which will potentially enhance gas pricing stability.

In terms of future direction, management emphasized their commitment to enhancing product resilience through a diversified portfolio and a focus on specialty products, aiming for a more solutions-driven approach. They anticipate that the transformation could yield significant margin stability and improved earnings visibility in the medium term.

Major Questions and Answers from Q&A Section

1. Question: "Can you give us some color on the new upcoming TAN and ammonia projects? Any impact on India's demand-supply equation?" Answer: We anticipate demand growth for TAN at around 6% CAGR over the next 5-6 years, resulting in additional demand of 2.5 lakh tons every few years. Currently, India imports approximately 4 lakh tons of ammonium nitrate, which should decline as domestic capacity increases, creating a healthy market landscape without significant oversupply.

2. Question: "How much can be the savings from the LNG long-term contract once they start?" Answer: The new Equinor LNG contract will significantly reduce our breakeven EBITDA, currently at about USD 430. I expect a substantial double-digit percentage decrease in breakeven costs once we implement this contract.

3. Question: "What is behind the acetone price volatility and your outlook for the IPA business?" Answer: IPA has experienced a price correction of around 22%. This is driven mainly by softer acetone prices and increased imports. We're optimistic about our volume but expect pricing pressures to linger before a potential recovery starts.

4. Question: "What revenue share comes from the top TAN business players and how concentrated is this risk?" Answer: We hold a market share of around 40% in the TAN segment and supply almost every major customer. However, we do not disclose customer-specific revenue figures due to confidentiality.

5. Question: "How do you see the changes in ammonium nitrate exports from China impacting the market?" Answer: While China has increased its ammonium nitrate exports, demand for TAN in India remains strong due to ongoing mining and infrastructure growth, with domestic production ramping up as well. Despite additional capacity, we believe that the demand will absorb this growth without causing significant oversupply.

6. Question: "Could you clarify industry demand dynamics with the new ammonia capacities coming online?" Answer: The additional ammonia capacities will not fully offset the underlying demand growth. There is a projected growth in domestic demand, and the ramp-up phase for new entrants will mitigate the impact of increased supply temporarily. Thus, we remain confident in placing our product.

7. Question: "What is the strategy for the explosive manufacturer acquisition?" Answer: We have signed an agreement to acquire a manufacturer, pending due diligence. This aligns with our strategy to enhance our mining solutions and potentially bundle products for export markets, maximizing value for customers.

8. Question: "Can you discuss your approach to the nitric acid market amidst potential oversupply?" Answer: Although we've seen price softness due to temporary excess imports, the demand remains stable. We don't foresee long-term challenges, particularly as TAN demand picks up, which should bolster nitric acid utilization.

9. Question: "Why have the margins in the fertilizer segment declined despite stable growth?" Answer: The decline is driven primarily by increased raw material costs, like phosphoric acid, that have not been fully passed on due to the erratic monsoon affecting product distribution. Therefore, both cost pressures and product mix have negatively impacted margins.

10. Question: "Can you provide insights on the PICKBRITE steel picking solution's performance?" Answer: PICKBRITE is still in the ramp-up stage. We are working with select manufacturers to commercialize it further, aiming for meaningful contributions in the future as we expand its market presence.