Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL), one of India’s leading producers of industrial chemicals and fertilisers, Q3 FY24 revenue reached Rs. 1,853 crore, down 32.7% whereas net profit reached Rs. 61 crore, down 76%.   

Revenue and Operating EBITDA for 9M FY24 continue demonstrating a sustained growth trend over the last five years (except for FY23 which was a positive aberration). Operating EBITDA margin is 12.9%, which has one time subsidy impact of Rs. 267 crore and Rs. 87 crore on account of stabilization impact of Ammonia business during H1 FY2024.

Greenfield Ammonia Plant: Post the successful commissioning of the Ammonia plant, the DFPCL Group’s risk exposure from Ammonia to downstream has shifted to a lesser volatile gas to downstream. The recently completed Guarantee Test Run has conclusively established the global scale capacity and efficiency of the plant/technology. Furthermore, the state approved incentives are expected to kick-in during this year.

Mining Chemicals (TAN): The expected increase in domestic demand in Russia, and demand of Russian products in Brazil, is likely to ease up the Russian AN dumping in India. With India taking strong steps to become self-reliant in Coal by targeting to eliminate coal imports, the demand for TAN is likely to get a further boost, a positive for DFPCL’s greenfield TAN project under construction.

Pharma/Speciality Chemicals (Nitric Acid and IPA): The dampners of global interest rate hikes transmitting to the real sector and China slowdown gradually stabilizing combined with the gradual cessation of de-stocking of old inventories is expected to gradually help prices to bounce back.

Fertilisers (CNB): With the recently announced Retail Price Reasonability Guidelines for margins giving clarity on allowable fair margins on fertiliser sales will help restore the basic tenets of the Nutrient Based Subsidy (NBS) scheme of free/reasonable MRPs. This will also provide the needed impetus to bring innovative products such as Crop-specific, Croptek products. The value proposition of DFPCL’s speciality Croptek products are finding increasing acceptance by the farmers.

Commenting on the performance, Sailesh C. Mehta, Chairman & Managing Director said, "As we start 2024, DFPCL remains focused on implementation of the company’s strategic growth plans. Price volatility is an inherent part of industry dynamics that DFPCL have been successfully navigating through. TAN sales during the quarter were largely affected due to higher and cheap imports. FGAN imports from Russia in the first half resulted in high opening inventories in the quarter, which in turn impacted volume & margins. Nitric Acid sales to downstream industries were impacted due to Chinese imports of nitroaromatics along with scheduled plant maintenance at Dahej."

"Fertiliser business experienced erratic and lower-than-average rainfall in the core market which reduced availability of irrigation water. Ammonia business performance improved against last quarter due to increase in Ammonia prices which was partially offset by plant interruptions. As we navigate through short term challenges for the quarter, on a YTD basis there has been consistent improvement in the operating EBITDA margins over the past five years (except for FY23, which was a positive outlier)," commented Mehta.  

"We continue to work towards enhancing efficiency in order to drive sustainable growth, and contribute to India's growth story. DFPCL continues to transform its businesses from commodity to specialty, providing customised solutions to our end customers. In spite of the short term challenges, mid to long term fundamentals continue to remain strong. This will aid our growth based on our strong market position, the underlying competitive edge in each of the businesses, and our product and service value proposition," added Mehta.