Deepak Nitrite Ltd. (DNL) is one of the fastest growing and trusted chemical intermediates company in India with a diversified portfolio of product, has reported Consolidated financial results for the period ended June 30, 2023.

The company has reported total income of Rs. 1800.21 crores during the period ended June 30, 2023 as compared to Rs. 1973.93 crores during the period ended March 31, 2023. DNL reported total income of Rs.2067.60 crores during the period ended June 30, 2022.

The company has posted net profit of Rs. 149.90 crores for the period ended June 30, 2023 as against net profit of Rs. 233.86 crores for the period ended March 31, 2023. It posted net profit of Rs.234.62 crores for the period ended June 30, 2022.

Commenting on the performance for Q1 FY24, Deepak C. Mehta, Chairman & Managing Director said: “We entered FY24 on a challenging note while navigating through several global macro-economic pressures and a slower-than-anticipated increase in consumption, leading to modest performance. The chemical industry faced difficulties due to China'sopening up and destocking of inventory across the globe. Nevertheless, we remaincommitted to strengthening our market position and enhancing product portfolio.

"In a key milestone, our wholly owned subsidiary, Deepak Chem Tech Limited (DCTL), inked a groundbreaking Rs. 5,000 crore MoU with the Government of Gujarat. Thiscollaboration aims to produce Specialty Chemicals, Phenol, Acetone, and Bisphenol within the state, with the aim to commence the first phase in 2024-2025 and completethe projects by 2026-2027. This is a testament of our focus on import substitutionthrough value-addition.

"We are strategically positioned to take advantage of increasing demand and benefit from the country's trend of import substitutions. Exciting projects, such as solvents likeMIBK and MIBC among others, approved by the Board, will enable us to capitalize onthis trend.

"Our noteworthy investment plans reflect our enthusiasm to seize opportunities both inIndia and worldwide. We are continually diversifying our product offerings byintroducing innovative intermediates, expanding our client base and enhancing overall value propositions. With a strong financial position, valuable client relationships, andwell-considered growth investments, we are poised to elevate our businessproposition."

The Indian chemical industry has been impacted in Q1 FY24 due to China opening up, global destocking of inventory and the Euro zone slowdown. This has led to subduedrealizations and impacted volume offtake by customers. To safeguard profitability and market share, the Company adopted several strategies like exploring new customeropportunities, optimizing procurement, driving for valorization opportunities.

In this backdrop, the company has delivered a commendable performance. For several established products, DNL reported highest-ever production in May 2023 of selectproducts thereby demonstrating solid business resilience, process efficiency and byproduct valorization. Notably, the Company was able to export its key pharma and agrointermediates to China during the last 2 quarters.

The Phenol plant operated at an impressive average capacity utilization of around 135% during the quarter, however it also went into annual maintenance. The Companyproactively de-risked its business model by securing assured input supplies, captive power and driving value creation from waste. Moreover, the contracted product supply inall the segments will ensure a clear pathway for sustained growth going ahead.

Performance Overview and Other Highlights

Ø The Company achieved the highest-ever SNI production in May 2023

Ø The Phenol plant clocked Highest-Ever daily production but also had annual shutdown

Ø Enhanced wallet shares in several products

Ø Commenced exporting product to China for pharmaceutical applications

Ø In order to secure stable and consistent supply of key raw material, the Company has decided onfurther diversifying sources which will more than cover up short term pain of de-risking

Ø In Q1 FY24, DNL witnessed significant exchange rate volatility (USD/ INR), ranging from a peak of 82.85 to a low of 81.61 § To manage the forex volatility risk, the Company employed dynamic hedging strategies, whichled to a gain of Rs. 0.24 Cr in Q1 FY 24. Consequently, the total treasury gain amounted to Rs. 8.84 Cr

Ø DPL’s Net Debt / Equity ratio stood at 0.03x as compared to last year’s 0.13x.

Ø On a consolidated basis, the company remains debt-free and boasts a substantial net worth of Rs. 4,240 crore and Rs. 2,711 crore on standalone basis

Project Status

Ø Approved projects are being executed and within contemplated timelines

Ø Key hirings across several functions including Project Management, Procurement, Operations and support has been concluded for phase 1 projects

Ø Construction work at Photohalogenation + Halex plant is ongoing as per planning and is expected to be commissioned in H2 of current FY; Acid plant project also remains on track to commence commercial production in FY24

Ø Once commissioned, both the above plants will help secure internal supply of critical raw materials and thereby elevate the profitability levels at full utilization

Ø Other projects like brown field projects of increasing existing process and product lines are under implementation too, they are expected to be commissioned by the end of current financial year

Ø Acetone-derivatives project of MIBK and MIBC has seen significant progress on-ground including engineering works andordering of equipment. The plant is expected to be commissioned on schedule in H1 FY25 and aims for downstream valueadded products using captively sourced acetone

Ø Sodium Nitrite Project in Oman is on track and progressing well, as planned

Ø  Initiatives around debottlenecking of Phenol facility has commenced and the same is expected to increase the production byclose to 10% over FY 23 levels, thereby giving DPL more headroom for incremental growth in phenol

MoU signed with Government of Gujarat

Deepak Chem Tech Limited signed Rs. 5,000 crore MoU with Government of Gujarat

Ø Early adopter of Make in India, Deepak Group takes another step in realizing the goal of self-reliant India

Ø Specialty Chemicals, Phenol, Acetone and Bisphenol to be manufactured in Gujarat by Deepak Chem Tech Limited (DCTL)

Ø DCTL to invest around Rs. 5,000 crore across these projects with aim to commence the first phase in 2024-2025 and aims to complete these projects by 2026-2027

Ø Aims to generate a revenue of approximately 1.5 times the investment

Ø About 1,500 direct and indirect employment opportunities will be created