Paradeep Phosphates Limited (PARADEEP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Paradeep Phosphates Limited Q4 FY '26 Earnings Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.

Thank you, Nirav. Hello, everyone. I'm pleased to host today's earning call of Paradeep Phosphates. We have leadership team represented by Mr. Rajeev Nambiar, Joint MD and COO; Mr. Harshdeep Singh, President and Chief Commercial Officer; Mr. Bijoy Biswal, CFO; and Mr. Alok Saxena, Head Corporate Finance and IR on the call. Without further ado, I would like to hand over the call to Mr. Nambiar for opening comments, post which we will open the floor for Q&A. Thank you and over to you, Rajeev sir.

Thank you. Thank you, Manish. Am I audible properly?

Yes, sir.

Okay. Good morning, everyone and welcome to Paradeep Phosphates Limited's earnings call for the quarter ended March and the financial year 2026. I appreciate your time and interest in our company. I trust you have seen our earnings and presentations and press release, which have been circulated and are available on our website and stock exchange. Let me give you an overview of our business. I'm happy to report that PPL has once again delivered a robust financial and operational performance and best-in-class EBITDA per tonne. Many congratulations to all of you. In the financial year 2026, revenue from operations increased by 29% Y-o-Y to INR 21,826 crores. EBITDA rose up by 33% to INR 2,259 crores. Profit before tax increased by 46% year-over-year to INR 1,328 crores and the profit after tax stood at INR 1,000 crores, up by 52%. For the quarter ended March, the company reported total revenue of INR 4,702 crores with an EBITDA of INR 484 crores with the PBT stood at INR 202 crores and the profit after tax at INR 161 crores. Production volumes grew by 8% year-over-year and it stood at 36.66 lakh metric ton, achieving almost 100% capacity utilization of our existing capacities, reflecting our continued endeavor for manufacturing excellence. Sales volume rose up to 42.1 lakh metric ton with a 10% Y-o-Y. Growth was led by strong performance in value-added NPK grades. NPK as a category, including TSP, grew by 22% to 24.64 lakh tonnes. Despite global uncertainty and volatility in key raw material availability and -- as well as pricing, along with the INR depreciation, PPL has been able to deliver a consistent, robust performance through high operational agility, integrated operations and supply chain/sourcing efficiencies. Let me also give you an overview related to the key projects we have completed in the financial year 2026. During the year, we commissioned our sulfuric acid plant at Paradeep, 0.5 million tonne capacity and at Mangalore, 0.1 million tonne capacity, thereby increasing our sulfuric acid capacity at company level by 0.6 million tonne annually, an increase of 45% of the total capacity. The benefit of incremental sulfuric acid capacity commissioned this year will be available to us in financial year 2027 and will aid in improving our quality of earnings further. One more important project at Goa, we have completed our energy efficiency project and the improved energy benefits have started coming as we speak now. Our plan to double the phosphate capacity from 0.5 million tonne to 1 million tonne is on track. And directionally, we endeavor to make all our sites 100% backward integrated in phosphoric acid. The Phase 1 this expansion, that is from 0.5 million to 0.7 million at Paradeep is underway and is expected to be commissioned by financial 2027. Sustainability remains core to our operations. And during the year, we achieved S&P Global ESG score of 76 and ranked the top 2% in the global chemical sector. Through our expanded distribution and digital outreach, we are now engaging with over 15 million farmers across 18 states, supported by more than 1 lakh retailers and 6,800 dealers and a strong on-the-ground adversary network. In summary, PPL remains committed for strategic growth and expansion, build economies of scale and deepen our market presence. Let me also give you an outlook for the future. Looking ahead, we remain optimistic about the fertilizer demand, continued government thrust on soil health and rising shift towards balanced and specialized nutrient applications. However, we remain in the challenging time amidst the Middle East situation and we have seen spurt in key raw materials, particularly ammonia and sulfur. As you are aware, Middle East contributes significantly to raw materials, particularly ammonia and sulfur, which is almost like 70%, 75% and most of the shipments across the Strait of Hormuz. While industry stock remains balanced at this point, industry is making concentrated efforts and empowered committee comprising of government and industry officials have been working in close coordination to ensure fertilizer production and raw material sourcing planning. Thanking all of you once again and I now open the floor for questions. Thank you.

The first question is from the line of Deep Sanghavi from Dalal & Broacha.

Am I audible, first of all?

Yes. Can you be a little louder?

So my first question is regarding the operating cash flow, which was negative this year, it's around negative INR 1,000 crores. So that was largely driven by the increase in the inventories and receivables, right? So could you help me understand, like, the key reasons behind this and whether this should normalize going forward?

Yes. You take it.

Yes. So thanks for the question. No, this is -- yes, we are quite mindful of that. We have a -- there is a negative operating cash flow. But this is mainly on account of the increase in the inventory and increase in the trade receivables and subsidy. This increase in inventory is mainly to accommodate this increase in the raw material prices, which is going to unfold in this Q1 of '26, '27. So that's a strategic call that we should -- we hold this additional inventory of around 30-odd days. And this subsidy receivable is mainly on account of the increase of the DAP prices, DAP subsidy and other things which came towards the end of the period. And all these things, whatever is there, that will get unwinded in this Q1 and we'll definitely reap the benefit of this stock holding and this subsidy receivable in Q1.

Right. Okay, sir. And my other question is regarding the sulfur prices, which are of course still higher. So sir, what could you give like guidance about that for the future? And so last -- I think last con call, you also said that you are sourcing domestically from the IOC and MRPL, which is in Mangalore. So can you also give something else in regard that, please?

Yes. Sulfur prices remain under stress actually for last few months and we expect that actually unless the Hormuz situation deescalates, there won't be a major impact, which is coming and supporting us. But as you said, actually, we are taking out 100% of this sulfur requirement from MRPL from Mangalore, even with the increased capacity. The recent 300 tonnes plant we have commissioned is currently running at almost, like, 400 tonnes. And the Paradeep, almost like 20%, 30% of the sulfur requirement comes from the IOC Paradeep. So put together, domestically, we are poised towards a comfort position. But yes, internationally, we remain under stress condition, sulfur.

And my last question is regarding the future guidance, if you can give. So the company is -- I think you are looking for -- you're increasing the share and getting higher-margin NPK fertilizers, right? And of course, the backward integration as well. So in the medium-term trajectory, so what could be the EBITDA per tonne? I think for this FY '26, it was around INR 5,100 per tonne, right? So what could be the [ guidance on that ]?

Yes. So currently, the spread was INR 5,300, I think. And as we deepen the backward integration across phos acid and sulfuric acid, the spread is going to increase, but we also have to take care of the global situation that is in place. So it will be hard for us to give you a specific number for FY '27. But given the supply chain linkages and the backward integration that we have, the backward integration benefit should flow in FY '27.

Next question is from the line of Prashant Biyani.

Sir, how are you placed with regard to raw material availability for Q1? How much of your requirement you have already bought prewar? And how much are you having to buy at higher prices, which are prevailing right now?

Prashant, we remain optimistic for the Q1 because we have covered most of the Q1. And Q2, the situation is unfolding. It will be a little difficult for us to give a direct answer for the rest of -- beyond Q1, I think.

And Prashant, I think, industry is actively engaging with government on this aspect, particularly for Q2 and almost daily discussions being discussed with Secretary of Fertilizers and MDs of the major companies. So I think all the stakeholders are involved and we should get some clarity very soon. But as far as Mr. Nambiar said, Q1 is adequately covered. For Q2, the company as well as the industry is working with the government to have more visibility.

Sure. Mr. Nambiar, can you share some update on our CapEx, which is underway across granulation, phos acid and sulfuric acid?

Sulfuric acid, if you look at it, actually 2 projects were completed last year, 0.5 and 0.1, 0.6 altogether. The next sulfuric acid project is actually we are in the stage where the commercial offers are coming now. We should be able to take a call in terms of our proposed to 3,000 tonnes per day sulfuric acid by beginning this quarter actually. And phos acid also, it will be coupled with both together. So our -- in spite of all these challenges coming on the global scenario, our commitment for our CapEx remains same.

Currently, it would be in design stage or, we have finalized vendors for, construction.

We are in the finalizing stage for the vendors. We have almost received the quotes and there is a separate team working on it.

And how much would be the CapEx for FY '27 that we are planning?

FY normal CapEx will be around INR 600 crores, which is completely we have -- the financial closure has been done. So this is normal CapEx and something of this -- all these major projects also some outflow will be included there.

And Prashant just for FY '27, the major projects that we expect to close this year will be expansion of phos acid from 0.5 million tonne to 0.7 million. So there's an incremental 200,000 tonnes of phos acid that is expected in FY '27. And the key other project is some debottlenecking at Paradeep unit. So these are the incremental, I would say, the cash flows that we expected to receive from the project that is getting completed. And all other major CapEx, as we have said earlier, is likely to be done by FY '28 and FY '29.

Next question is from Riju from Antique Stock Broking.

A few questions. First one is regarding the Goa plant energy efficiency. So the Goa plant energy efficiency project that we have completed in Q4 or in the Q3?

So can you repeat the question?

Yes. So the Goa plant energy efficiency project, so that we have completed in Q4 or earlier Q4?

No, no, this Q4. Q4. We have taken the shutdown actually from the month of February and completed in the last week of April.

Okay. Understood. So sir, I think as per your earlier guidance, I think 6.4 to 6.1 Gcal kind of energy efficiency that like will be in Goa plant. So with that, how much EBITDA per tonne improvement that we can expect from going forward?

Look the guidance what we have given that from 6.4 to 6.1 that energy efficiency will accrue to us. So in the current gas price scenario, it will be around INR 1,000 to INR 1,200 per tonne of urea at EBITDA level.

Understood. And sir, in terms of the MCFL urea plant, I think there were some issues -- like there were some policy issues due to which we are -- we were expecting that EBITDA per tonne to be lower. So if you could indicate the EBITDA per tonne for the MCFL plant as of now, maybe in the H2 of '26.

No, look, earlier to this policy changed, there is a reduction in this norm, a benchmark energy norm from 7.3 to 6.5. So that impacted the EBITDA by around INR 3,000 per tonne. And current level, it will be around INR 6,000 -- INR 6,000 to INR 6,500. And, yes, this is the scenario as of now.

And just to add there was no policy change. That was an incentive given, because we switched over from naphtha to gas and that has expired. So there's no -- as far as policy change, it was an investment benefit that was accrued to us for a period of a year, which has done. So there is no major policy shift as far as that is concerned.

So the margin that we used to get roughly around INR 6,000 a tonne for the MCFL urea, so that we are continuing to -- we are getting till now, right?

Yes. And it is also a function of the global gas prices. The margins in urea is a function of the global gas prices.

And also sir, we have expanded sulfuric acid capacity at the MCFL plant. I think that might help in terms of getting the higher margin for the urea plant because of the power generation from the sulfuric acid plant. So how we can look at that scenario in '27?

We are expected -- actually we have been using the steam from the sulfuric acid plant to the other one. So at least almost INR 1,000 per tonne could be the impact, which is on a favorable side.

Understood. And sir, one last question, in terms of the overall capacity utilization for the Goa plant for this year and for the MCFL plant for this year for the NPK and for the like urea and the non-urea, both, if you could bifurcate those 2 numbers for the FY '26.

No, we have produced around 4 lakh tonnes of urea at Goa and around 7 lakh tonnes of NPK. And in Mangalore, same -- similar 4 lakh tonnes of urea and 3.5 lakh tonnes of NPK. Both the plants have actually completed the RAC quantity. And afterwards only, we went for the Goa energy saving project. And in terms of NPK, actually, Goa is almost like 0.7 to 0.8 in between and Mangalore is almost a full capacity of 1.4. So put together, both the plants are run wonderfully well in terms of capacity utilization.

Understood, sir. And sir, one last thing. I think earlier you have mentioned the debottlenecking of granulation capacity at the Odisha plant, roughly around 2 lakh tonnes. So that is -- that might come in FY '27. Is that correct understanding?

It'll be in 2027. This current year, it will come.

Okay. So the incremental volume that -- can we expect from this year or maybe from the next year?

The volume...

So you should expect this in second half, the incremental volumes coming into the company.

Next question is from the line of Viraj from SiMPL.

Just a couple of questions. First is, if I look at Q4 and for the year gone by, what will be the EBITDA per ton on the manufactured volumes, DAP, NPK?

Yes. We give as a product blended margin EBITDA margin, that is around INR 5,700. For the Q4, it is INR 5,700. And the whole year, it is INR 5,300.

Yes. But for the manufactured business, any indication you can give? How much would that be?

Yes. We give it at a blended company level. And obviously traded products will be at a lower number.

Okay. So this will be purely the DAP, NPK business, right, not the urea piece?

No, this is at a company level. So it includes everything.

All put together.

Okay. Second question is now what is the current level of backward integration post the sulfuric acid and the phos acid we have? And once the expansion of phos acid and other initiatives, what will be the backward integration a year or 2 down the line?

Paradeep, it is around 80% to 90%.

Paradeep is almost like fully integrated actually. So Paradeep expansion, which is coming from 0.5 to 0.7 should cover most of the other 2 units' requirement of phos acid also.

And for sulfuric acid, sir, are we...

The sulfuric acid -- for phos acid is 100% backward integrated. If you take up N-20 product, then there will be some requirement. We have to import around 10%. But in Mangalore, it is 100% backward integrated, sulfuric acid.

Okay. Just one last question. I mean, now the subsidy rates are out by the government. With the way the key raw material prices are behaving right now, how should one understand spreads for us in the first half? I mean, do you think there is more flexibility in terms of adjusting the market prices to cover for the raw material under recovery? Or where does the larger focus lie? Any color you can give?

Just to share with you, we retain our price leadership as far as the market is concerned. So we have taken a price increase in NPK. However, we're also working very closely with the government. because the entire price increase cannot be passed on to the customer also because the sulfur and ammonia prices are extremely high in the current situation. And we expect the government also to be equally supportive on that. And at the same time, we're also having the strategy where there's clarity in margin, like focusing on products like DAP, so which also ensures that we maintain our overall profitability. So that's how we're doing it. But in terms of NPKs, we are a leader in the market in terms of our market realization also.

Okay. Understood. But generally, there's no issue in terms of availability of raw material. It's just the prices are at abnormal levels. So in terms of kharif, we are well covered in terms of supplies?

Yes. Kharif, I think we are confident and optimistic about it. But we are making our endeavor to see actually for future tie-ups happen faster.

Next question is from the line of Kiran Naik from Mody Fincap.

Sir, if I'm correct, as per the presentation shown on the BSE India on their website -- can you hear, sir?

Yes, yes, we can hear. Go ahead.

Sir, the EBITDA margin for the full year was 8.4%. Am I right?

8.4 what?

Percentage. EBITDA margin shown for the 2026 financial year. Or was it 10.03% -- 10.3%.

EBITDA margin is 11% for the year.

11%. 11% for the year. So can we expect, sir, because the conditions are not good geopolitically, so can we expect for '27 EBITDA margin 10%?

See, I think the percentage is not the right metric for us as an industry. We evaluate the industry as EBITDA per tonne. So I think the right metric for us is to look at EBITDA per tonne. Given the situation we are in today of the Middle East, we will not be able to give you a right EBITDA per tonne at this moment of time. But I think with the kind of supply-side linkages that we have and the marketplace penetration we have, we should be able to give -- end the year with the good margins.

Revenue expectation for '27?

What is that?

Revenue expectation for '27.

We will still hold ourselves because let things settle, and we will come back actually. That will be...

Okay.

The situation is quite volatile. And see, our endeavor is to get the raw materials to produce. So if we are able to do that, then definitely, we'll see a growth.

See, just to kind of give you a perspective from the market side, see, we had opening stock. We have had a good visibility on kharif. So we will continue to maintain our leadership. And hopefully, by another 2 to 3 months, we should get a clarity on the rabi supply chain. But we are very confident as far as market leadership is concerned. So I don't see any concerns, except for very unexceptional situations where the value chain is impacted.

Kiran, may I request you to come back for a follow-up question, please?

Yes, yes.

Next question is from the line of Sandeep Mukherjee from SKP Securities.

Sir, my first question is like what was the N-20 volume in the total NPK mix for Q4 and FY '26?

So N-20 volume, which we did was 14.5 lakh metric ton. Okay? And we grew almost 9% over last year. And we are among the top 2, 3 companies today in the NPK volumes.

Sir, for N-20 -- this is for N-20, sir?

This is for N-20, what I'm talking of 14.5 lakh metric ton.

Okay. Okay, sir. And for traded products, what were the volumes for TSP, DAP and MOP, sir?

TSP was around 2.8 lakh metric tons and DAP was around another 2.2 lakh metric tons. Overall, import for full year was around 0.6 million tonnes.

0.6 million tonnes. Okay, sir. And what was the gas cost, sir, for the quarter?

What is it?

Gas cost.

Yes. Around $14 per MMBtu.

And what is the current gas cost, sir?

It has slightly moved up. It is now around $18 to $19 because of this disturbance in the supply. But I can tell you that this entire urea energy cost is a pass-through. So whatever the increase in the raw gas cost that will be passed through. That will not impact this bottom line of the urea.

Absolutely.

In fact, it is helpful because what urea plays is the energy efficiency.

And out of the new project cost, sir, that INR 3,600 crores, so what was your spend in FY '26? And what is your planning for FY '27 spend?

FY '26 actually most of the things were in the engineering stage. The actual cash flow will start happening in '27. And we expect like INR 600 crores will be spent in '27.

Sandeep, may I request you to come back for a follow-up question, please?

Yes.

Next question is from the line of Ahmed from Unifi Capital.

Yes. You made a few remarks around government support and your communication with government. Can you elaborate a bit? I mean, what sort of measures you are expecting? Is it certain kind of an ad hoc subsidy increases or support in some other form? If you can just expand on it, how you are looking at things as of today? I'm asking this question considering the subsidy hike for the season has been just 10% while the raw material prices are up significantly. Yes.

See, just to kind of give you an overview, government's policy as far as DAP and TSP is concerned, government has a clear advantage, disadvantage as a policy, which factors in the increase in the import prices and the price of the product. So to that extent, DAP gets adjusted and your bottom line gets kind of adjusted positively with any price change. And we are also working closely with the government as far as the sulfur and ammonia raw material prices are concerned. So that's how we look at it.