Coromandel International Limited (COROMANDEL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Quorum Under International Limited Q1FY27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the concerns over to Mr. Manish Mhavar from Antic Stocks Roping. Please, thank you and over to you, sir.

Thank you, Shruti. On behalf of Antic Stocks Roping, I am pleased to host today's running call of 411 International. Today, we have Mr. Shaggar Subramanian as Managing Director and CEO, Mr. Deepak Natarajan, Sriyanko, on the call. Without further ado, I would like to hand over the call to Mr. Shankar for opening remarks. We will open the floor for you. Thank you. Over to you, Mr. Shankar.

A low view of business environment experience during the quarter and provide an update on Coramander's operational performance. Thereafter, I will request Deepak to take you through the financial performance. On the agriculture side, India witnessed 23% of deficit rainfall on the long period average, with most of the regions reporting lower rainfall. It has moderated fertilizer uptake as well in the current month. June was one of the driest months and we have seen some recovery in the last few days, especially in Gujarat and central region. And this deficit has moderated to 17%. All India reservoir levels stood at 34% of capacity versus 57% last year, and southern reservoirs have come down to 28% versus 65% last year. On crop acreages, picture is slightly mixed, where there is a drop in pulses by 15% oil seed by 6% and cotton by 6%. Paddy acreages have come back to normal, aided by yearly monsoon in Paddyville. With monsoon activity improving during July, sowing momentum has picked up and we expect the acreage gap to narrow further over the coming weeks. Overall, farmer sentiment remains relatively cautious, influenced by uncertainty around monsoon and variability in agri-commodity and input prices. On the regulatory side, government has quite active with a lot of policy announcements during this quarter. The government has approved natural investment policy for UGA, which could potentially facilitate 9 to 10 million tons of additional domestic UGA capacity over the next 8 years across 7 proposed projects. In fact, the announcement of 37,500 coal and Dignac gasification scheme is expected to support the development of domestic. Sync gas-based feedstock can progressively reduce India's dependence on imported ammonia and other energy inputs over the medium term. The government has also initiated the pilot implementation of national fertilizer sales framework, introducing QR code-enabled traceability across fertilizer transactions by integrating farmer, land, and sales data. If gained effectively, this initiative can be very transformative for the sector, enabling a shift from... Conventional distribution system to more transparent data-driven and nutrient stewardship-based farming systems. The quota was characterized by challenging operating environment for the phosphatic sector. Global prices of key raw materials, including phosphoric acid, ammonia, and sulfur, remained elevated, driven by continued geopolitical uncertainties and supply disruption. On the subsidy front, the government announced the increase of about 10% in subsidy rates across nitrogen, phosphatic, and sulfur nutrients under the NPS regime. And this rate has been announced without factoring the Middle East crisis situation. These rates do not fully compensate for the increase in global raw material costs, which happened subsequent to Middle East crisis. The industry continues to engage closely with the Department of Fertilizers and the need for a review, and we remain hopeful of a positive outcome on this trend. And actually, this sort of subdued subsidy rate, especially for NPK fertilizers, have infracted production in force during the quarter, which were down by 20% and 30% respectively. On the demand side, consumption remains stable, especially farmers picking up lower MRC starts in the first quarter, and the industry maintained the same volume of phosphatic fertilizer in the first quarter. As compared to last year. Globally, there has been some impact on shortage of raw materials and production cuts announced by major manufacturers due to Middle East conflict. And this has led to lower availability of key raw materials like sulfur, acid, and ammonia, resulting in surging prices. However, the fortunate point is that Industry inventories remain comfortable despite lower production and imports. In fact, UDF and GAP stocks are reasonably comfortable and NPK stocks are also comfortable at this point of time to see through this current season. But it is very critical the industry continues to sustain production and imports in the next two months to ensure that the carryover inventory into the fee is augmented. For the smooth completion of rabbi season as well. On the crop protection sector, domestic market was very muted. It's the early part of the curry season. Event was impacted due to delay in crop sowings. But how was the export markets shown improvement? Although the market remained cautious and is waiting for price stabilization. There has been a shift in biological products globally as well as in India, and we continue to witness healthy growth driven by increased adoption of sustainable agriculture practices. In this backdrop, very happy to note the permittal has reported every resilient performance. Especially fortunately, the business delivered very strong numbers, in spite of a lot of headwinds that prevailed during this. We have taken a conscious call to moderate production to 6.9 lakh tens compared to 8.4 lakh tens, roughly representing 72% of capacity utilization, as the business prioritized inventory optimization amid volatile raw material markets. Thank you. Thank you. So, 1.2 lakh tens, more or less in line with last year. Ideally, we should have grown with the commissioning of a new plant, but higher sulfur prices, we have optimized the usage of sulfur and operated sulfuric acid plants at a moderate capacity to extend the availability of sulfur for a longer period. Elevated sulfur prices, during this quarter, the company took a conscious call to moderate process of production. And ensure that the prices of sulphur reach a reasonable level, be competitive on sourcing, and also looked at the various other options to secure sulphur both from domestic and global markets. What is the business margins are under pressure due to sudden spurt in key input raw materials like ammonia and sulphur, as these rates have not been factored in the subsidy rates announced by the government. These rates are prior to the Middle East crisis. The government does limit ease of this issue, and we hope we get the updated index rates for the current season, and this should help to improve the viability for NPNPK fertilizers. As we are aware, the phosphoric acid crisis for Q10 have been settled at $1,700, compared to $1,360 prevailed in Q1. Reflecting a sharp increase in line with increase in international price of DAP and other raw material inputs. On the project front, Kermit has commissioned sulfuric acid plant and process it plant, and operations have come and got stabilized, and sulfuric acid has achieved the rated capacity and also generated power as designed. And the process of operations are getting stabilized and we are embarking on the new technology implemented here to ensure optimum utilization of rock. Commissioning of these plants has been at a very opportune time and this has ensured that we continue to produce and make potlaces available to farmers when industry is facing shortage of key raw materials. Happy to note that the renovation project is progressing well, and As planned, we are on track for commissioning this in Q4 of this year. In terms of sales, these are all yearly part of the season. Volumes have been moderated by 9% to 10,10 as compared to corresponding period last year. And despite this, the company has strengthened its market position, increasing the primary market share to 22% compared to 18% in the last year. Consumption has been increasing due to lower MRP stocks in the channel. The point of sales increased by 13% to 1.9 lakh tons, resulting in market sales, improving to 16%. SSP business continued its strong growth trajectory with volumes increasing by 19%, and we have been focusing on differentiated products like growth percent urea SSP, which constituted more than 50% of the total SSP sales. Highlighting the success of company's strategy to drive premiumization and improve product mix. After a Senegal operation, the rock phosphate mining project produced over 1.1 lakh times for this quarter, largely in line with our plan. Building on the strength of this backboard integration, the company is evaluating establishment of SSP facility at Senegal to canter to international markets and unlock additional value from its phosphate resources. Specialty nutrients and organic business delivered a very strong performance in Q1, aided by higher uptake in organic and micronutrient segments. We are seeing increasing adoption of these products by farmers, particularly given their ability to improve soil health and health crops' distance stress conditions in an increasingly volatile climate. The business strengthened its innovation pipeline with the launch of three new products across water-soluble and sulfur-nutrition segments. As highlighted earlier, we are building manufacturing capability to support long-term growth and reduce dependence on external sourcing. Our strategic project of setting up key MAP plant at Cachinada and seaweed granulation plant are progressing well and will enhance our ability to offer differentiated crop solutions. The crop protection business delivered a record performance in Q1. Given by strong growth in exports and B2B sales, despite softer demand environment in the domestic formulation segment. Revenue grew by 20% year-on-year to 870 growth, while EBITDA increased 44% to 159 growth, reflecting improved product mix, traction for its key molecule, and the ability to pass on higher raw material costs in the export market. Share of sales in the new products in the domestic B2C stands at 32% as compared to 22% last year. And we also introduced three new products during this current quarter. Operationally, the business continues to make steady progress on its strategic priorities. The past expansion of key molecules is on track and is expected to be commissioned by September, strengthening our ability to support future growth. We are in the process of advancing our pluricumency capabilities and are establishing advanced capability to support product development and scale-up opportunities. Further progress was made on our CDMO strategy through engagements with the leading global innovators, while long-term raw material security was enhanced through strategic sourcing and supply arrangements. Our innovation pipeline continues to strengthen with new product registrations, novel combinations, and patent filing. We remain focused on bringing differentiated solutions to the market and plan to introduce several new products over the coming months. We'll also be focusing on strengthening our market presence in Latin American markets to ensure that the market for our key molecules remain robust for the coming quarters. And subsidiary NACL industries improved its performance and EBITDA has moved up by 9% to 41 crores with margin improving to 11% from 8%. These are in line with what we envisaged at the time of acquisition. Lower export volumes and price pressure has impacted export revenues and overall revenues were moderate at 383 crores. However, the business is strengthening its product portfolio and launched three new products during the quarter and is planning to accelerate new product introductions in the coming months. The company is closely engaging with MNC customers on development of EA Intermediates in its current facility. The bio products business delivered a steady performance in Q1, supported by decent growth in domestic and export markets. The business is strengthening its innovation pipeline and developed two new products in the bio-sterminant and microbial category, specifically designed to address the requirements from the retail business. The weight-level products in the retail business, which hitherto sourced from outside, will be now manufactured by BioBusiness, providing huge opportunity and complete capturing of value chain right from manufacturing to marketing these products through our own captive retail outlets. In addition, a number of products are progressing through various stages of development and regulatory approvals. BioBusiness will be one of the key focus areas for us to grow both in domestic and global markets. And the company has invested in direct retailing of bio products by having their own trade team besides the retail outlets. The team is also actively exploring collaboration opportunities in adjacent segments, such as feed attitudes, while continuing to build capabilities in plant extracts and microbial space. The retail business delivered an outstanding performance in the current quarter, benefiting from strong former engagement, expanded store network, and higher sale of fertilizers, specialty nutrients, and organic products. Revenue on a standalone retail increased by 85% year-on-year, reflecting improved scale, operating leverage, and profitability across the network. 76% of the stores were profitable during the quarter, compared to 61% in the corresponding period last year. The business deepened its reach through additional 22 new stores, taking the network to over 1,200 outlets, while also expanding its digital and dominant channel capabilities through e-commerce and former engagement initiatives. The nano business delivered stable performance with sales volume growing 2% year on year, supported by sustained demand for nano DAP, and a market leadership position with nearly 60%. The business also initiated exports during the quarter and achieved encouraging opportunities to expand its presence in international markets, supported by registration secured in pre-markets, in few markets. There has been a ban on some of these products by fertilizer companies in the state of UP and Maharashtra, which... Industry has been representing, which has moderated the growth of these volumes, and in this current global crisis, it's very pertinent to note that this alternate fortress can make a huge difference to the farming community and also can save precious subsidy bills for the country, and industry has been approaching state governments towards the same. And Coromandel has been pursuing with drone spraying services, continue to gain traction during the quarter, reflecting increasing farm reduction of precision agriculture solutions. We are also evaluating introduction of higher-capacity drones capable of fertilized replications, which can significantly expand the accessible market and enhance the value proposition of our farm mechanization services. Our drone subsidiary Daksha, while pursuing the defense orders, has focused on Agri Drone And I've come up with the variance and agree tone spaces. Thank you.

Thank you, Shankar. Good afternoon, everyone. During the quarter, the company recorded a consolidated total income of 8215 crores, as against 7126 crores in Q1 of last year, registering a growth of 15%. The increase in revenues has been mainly on account of higher realization in fertilizers, combined with growth in the non-subsidy business. It is pertinent to note that last year's Q1 results does not include the NACL numbers. As it became a subsidiary effective 8th August 2025 onwards. The revenue share from subsidy business stands at 77% during the quarter. As far as profitability is concerned, consolidated EBITDA for the quarter was 7.61 crores against 7.82 crores last year, registering a degrowth of 3%. The decrease in EBITDA is mainly due to higher input costs on account of the ongoing West Asia crisis. And this input cost inflation has not been fully commensurate with the revision in the MBS rates. The EBITDA share of subsidy business stands at 48% during the quarter. Met profit for the quarter was 382 crores in comparison to 500 crores last year. With regard to subsidy, During the quarter, the company received 1,392 crores towards the subsidy claims, compared to 1,300 crores last year in Q1. Government has been prompt in clearing the subsidy dues. As of today, we have received our subsidy claims till the third week of June. Subsidy outstanding as on 30th June was about 3,254 crores. We have received additional subsidy of 5,68 crores in the month of July. As far as Corex is concerned, during Q1, the rupee traded in a wide range of 92.59 to 96.83. Core model continues to hedge its exposures on a conservative basis. Thank you for your continued interest. We look forward to these interactions. I will now hand it over to Manish.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankur Perival from Access Capital. Please proceed.

Yeah, hi, sir. Thanks for the opportunity. First question, you know, on the overall on-ground scenario, you mentioned a relatively lower utilization for us in this quarter, and presumably the imported fertilizer will also be lower. More importantly, you know, urea and dab there. So is there any structural shift that you are seeing, higher demand for NPKs there, or there is some shortage of fertilizers on the ground, and, you know, how are you looking at the on-ground scenarios?

Angur, there is no shortage per se. Sufficient stocks of India and DAP is available in the market.

In the early part of the season, farmers have picked up low MRP vats, and hence there was an advanced purchase ahead of this incident. But with the slowdown in the monsoon, they have improved availability. There has been a slowdown in purchase as well. I think currently the optic is more to do with the monsoon than availability or challenge.

Sure, sir. But, you know, given the subsidy and there is no further revision in subsidy rates, is the situation on the ground still comfortable from a, you know, current demand supply perspective?

The industry has taken some price change. At this point of time, this is the maximum industry can do. Beyond this, this has to come through subsidy. That is what we have presented to government and hopefully it should come through. As long as we don't correct it further, of course, the demand portion is in time.

Sure, sir. Second bit on the crop protection and the export side. Congratulations for a strong show there. You know, your thoughts on the buyer products or, you know, the product registration for the formulation ones, both in the domestic and the export market. What could be the timelines that one can think of, you know, in terms of a revenue ramp-up here? And a second part of that question on the bankers of capacity expansion, how's the demand pricing situation there as well?

So, the domestic formation, our new product introduction, the action has been initiated two, three years before. So, we have been getting new nine to three products coming through every year.

That trend will continue.

We have lined up the product pipeline with a clear visibility for next three to four years. On the export trend, HPD and Microsoft, we have a broad-based... Sail of magnitude across various continents. We don't depend on one particular geography. Our presence in Latin America is fairly less at this point of time. Post-completion of this project, we have planned to increase the volume in Latin American markets. There, we are trying to see how best we can come up with combination products and how do we have physical presence on the ground. Through some collaborative support to ensure that there is a long-term demand for MancoCell. At this point of time, we are quite comfortable in the off-take, but it will be very important for us to build this portfolio for long-term through combination production. That is what we are working on.

Sure, sir. That's helpful. And just one last bit, if I may. You did alluded towards, you know, the CDMO opportunity for us. And earlier also, we had mentioned on the industrial chemical side. How do you look at from a capital allocation perspective, given that will you prefer to, you know, expand into industrial chemical, CDMO, etc. here, which we have been sort of talking for the last couple of years? Or there is scope for more getting backward integrated on the fertilizer site, whether it is BMCC or maybe possible further backward integration into PA and SA in India.

These two are separate track. We will continue to pursue this opportunity with the commissioning of new PA SA plants. 60% of the acid requirements are taken care of. And we are reasonably comfortable at this point. We will continue to keep some options open for imported acid as well. On the CDMO side, we are trying to do it in an organic way, and we call for huge investments for various chlorination-based derivatives to be manufactured. Before we make that investment, we wanted to ensure that we have the proper products and customer specs are met, and hence we are looking for a launch plant, which we will be doing at an enclosure. And once we succeed here, then we will look at the sectors in which we will develop these products. Currently, we are focusing on fluorination based chemicals for our agrochemical use. Once we succeed there, then we will look for other sectors as well. That's our game plan on CDMO right now.

But we are also trying to look at various other intermediaries.

Along with NACL, we are trying to see how best we can. Provide intermediate support to global MNCs. Instead of finished agrochemicals which requires registration, it's a long registration project. Intermediate does not require registration, so we are trying to see how best we can leverage our capacities to produce those intermediates. But discussions are underway. We are having a multi-prong approach to introduce some new products under this category as well.

Sure, sir. That's helpful. Thank you and all the best. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two for participants. The next question is from the line of Himani from ICICI Prudential. Please proceed.

Sir, hi, I wanted to ask on this HC business, so on the crop protection, you can kind of expose him. Just wanted to understand how much person you have seen is coming from foreign currency, like foreign currency here.

I am not able to hear you clearly. Can you please repeat the question?

You have me now, sir?

Hello.

Yes, sir, am I audible?

Yeah, now it's better.

Yeah, sorry. I just wanted to understand when our export business on the free side has done well, so how much percentage of gains is because of foreign currency gains?

We follow the netting principle. We have a net exposure. So to that extent the overall margins... The EBITDA, what we have reported, not more than 5 to 6 percent, can be attributable to current fees.

Okay.

Thank you. And just another question. So, this is our initial acquisition in the last year. Do we have any plans to increase our shareholding in the company?

I wish we can move that.

Okay.

Thank you. The next question is from the line of Stomaya from Aventus Park. Please proceed.

Thanks for the opportunity, sir. So my first question is on the medium-term CAPEX or capital allocation. Now that the PA plant and SA plant is commissioned and the granulation is also about to get commissioned, So what are the options that we have? So whether we can add further NPKs capacity from import substitution angle and land availability. So in terms of priorities, which will be the ones that we'll be evaluating closely and when can we expect any plans for the next couple of years? That's my first question.

Yeah, we are just completing the investments and we want to ensure that we generate cash out of these investments. And meanwhile, we have this crisis which is impacting in terms of margins. So, we may not add any capacity humidity in fertilizer. Our game plan, as of now, post-commissioning of this new plant will be going up to 4 million tons of fertilizer and 1 million tons of trading, predominantly DAP. So, we have a fast visibility of 5 million tons at this point of time. We have had the ability of 8 to 9 million tons of nutrients. That I think will see us through for the next two years because we want to ensure that whatever money we have invested, we generate the cash, whether it is processed or finished fertilizers. And in terms of the land, we always be looking for additional land for the future growth and opportunities that investment can happen. And we have been working with government for securing additional land for the future expansion. So this is as far as the nutrient business is concerned. But of course, we are looking at other opportunities like MAP plant, which we are putting up in for our specialty nutrient business. He says that we are also evaluating purified phosphate for battery chemicals. These projects are under evaluation. And if we see, uh, In the crop protection business, we are just completing the capacity expansion, and here again, we wanted to focus on generating the cash. We are also trying to see how best we can realize value of initial investment. We may not be adding capacities for active ingredients because we have spare capacities available in NACF. So, hence we will try and leverage the capacity between both the plants on the A is right. In crop protection business, the investment will be more towards marketing, brand building, standard network creation rather than focusing on any asset creation.

Got it, sir. Also on NACL, so this time we are seeing margin improvement in NACL, so we are more or less, this is the... Intended level of margin, or this is kind of, we will be stipulating at this level, or we see further scope for improvement in NACL margins. And second, related to NACL, this time in our own crop production, we had a very strong revenue growth. So you had alluded to exports. So what in terms of product portfolio or the difference, you know, that's leading to a decline in NACL versus a strong growth for us in our standalone business?

See, I think with the current product portfolio, what we have got, I think we have reached a reasonable level of EBITDA. I think we remember in the time of acquisition also we talked about EBITDA which has fallen to 3-4 percent. The first stage will move to 38 percent and then we'll move it to 10-11 percent. I think the product portfolio, some molecules always keep going up, some comes down. Unless we introduce new products, which again will take two, three years' time, sustaining this margin at this level is the best we can do for any year. That's the reason they are looking at investing in intermediate capacity creation, freedom opportunities. Those are other value chain creation we can do to improve a bit of margin. And also, we continue to pursue efficiency, improvement, cost of differentiation. Those things are ready to play also. Those things can take... It's 7% or 2% margin, but any significant improvement to our line-up experiment will call for additional investment investment and new products to come in. This will be easy to time-consider.

The other part was on the revenue front. Stand alone, we had quite strong exports, but initially had an impact there. So just want to understand the difference. So, in the standalone crop protection, we had a very strong revenue growth, which you alluded to, the exports part. NACL had a decline. Just wanted to understand, I think in the comments you also mentioned about NACL exports was a bit impacted. So, just want to understand the region or molecules or what was causing the difference.

There has been some price moderation in other molecules which they are selling at the global MNCs, and that has moderated the revenue per se, whereas in the case of permantability to pass on the input cost in case of price has helped us to realize better pricing, and that is why you see a dropping growth in permantability, whereas there has been a marginal reduction in NAC. It goes to the product mix between the two companies.

Just one last, your thoughts on sulfur. I mean, we were expecting at a point in time sulfur can come, at least come off slightly, but it's still continuing to hold high. Your thoughts on this?

Yes, sulfur is actually against our initial expectation. Sulfur is holding high. It's quite unfortunate in fact, again, the revival of at least Thank you. from Indonesia and other countries. Still, we feel that these are all exorbitant levels. It should come down, but it may take a while. So that is where, as Indian fertilizer sector decided to pay out at these price points. It doesn't make economic sense. We strongly believe the prices will soften.

These are not sustainable levels to be in.

Thank you. The next question is from the line of the way. So, DSP Mutual Fund, please proceed.

Sir, sorry, I joined the call a little late. I have this one question. You said that you're going to exploit the capacities you've added for the next one to two years. So, have you given a capex target, sir, in terms of what you'll see for the next one, two years in terms of rupees growth?

See, these things change. If there are opportunities, definitely we do invest in capex. But at this point of time, we wanted to realize value of the investments that we have made. In fact, last three, four years, we have invested close to 7,000 crores, both for organic and inorganic opportunities. It's very important for us to get the returns on those investments before we embark on further capex. So I would put a normal sustainable capex of 300 crores would be the... Number we will look at. But having said that, if there are good opportunities and there are any reasonable return project coming, we will not be opposed to look at that. Well put, sir. Thank you very much and wish you all the best. Thank you.

Thank you. The next question is on the line of Viridju from Antics Strong Token. Please proceed.

Hi, sir. Congressman for a different set of numbers and internal environment. So my question regarding the industry level shift, if I look at in terms of NPK at a farmer level prices that are much, much higher compared to last year, while if I look at the DAP prices at the farmer level, that is, you know, roughly at 27,000 rupees per ton. So how do you see this shift in terms of NPK to NPK to DAP again in this year, or like how is the consumption level market share of DAP and NPK overall, the non-UDIA, overall consumption, overall consumption?

No, the shift is not happening, but if it continues to remain like this with a long period of time and its subsidy is not corrected for NPNPK, we can't correct MRPs beyond a certain level. Then this will have a challenge of commerce looking for cheaper alternative. BAP, which is an IP product, is available at Rs.1350 per bag. And whereas low P product like 2020 is going at 2,100, it doesn't reflect the balanced nutrition need of the crop. I hope as and when the substitution happens, it will bring some normalcy. Current artificial pegging of DAP price is also impacting at this point of time. Farmers understand this balanced nutrition, and I don't think the reverse shift will happen. And also, it's also a function of availability, DAB is not available beyond certain volumes, and government also is encouraging farmers to look for alternates like SSP, organic fruit lasers. I don't think the need for NPK will remain, but too much of price can lead to demand destruction. That is what we have been presenting to the government as well.

Understood. And in terms of the DMCC, I think the ramp up during the quarter was robust. So if you could, you know, highlight that thing as well. And also, if I look at in terms of the definition overall, definition overall this quarter was much, much higher on a sequential and on a YY basis. So if you could help some why that is. And also, adding to that, if you could, you know, give us a saying that due to the commissioning of sulfuric acid and fossilized capacities in 4Q, so how much additional depreciation that you have booked during this quarter?

See, this additional depreciation also improves for the consolidated company. The amortization of mining costs, that actually as the accounting center, some of the mining costs of overbordant needs to be grouped under depreciation. So the spike in depreciation, what you're seeing, is not because of additional capital, only an account of The increase is around 16 to 18 crores, not more than that. The rest of them is only amortization expenses in mining operations. Plus, when we do the consolidated financial, we may have to amortize the, after the merger accounting, we have to amortize the, what do you call, amortization of intangibles, that is close to 20 to 21 crores. So, this is a combination of PA is the gap of 16 crores, and amortization of NFL integral is 20 crores, and rest is coming mainly from mining charge towards overborder.

Sorry sir, how much was for the mining?

Mining would be 30 years gross.

Okay. Okay. And in terms of, you know, overall mining capacity, mining activities, and also how that has, how BNC in terms of the overall improvement in this, in the fertilizer business habitat. So, if you could quantify that, that thing.

See, mining operations are to be seen in two contexts. One is what is the margin we capture in the overseas entity. That is only one aspect of it. Suppose if we have half a million ton of rock phosphate produced there, at a net EBITDA of even $30, half a million ton, that's the minimum number we are talking about, accruing year after year. That is the value what we capture in that company. But what it makes a difference is the rock gets converted into acid and you get the value gap in acid. So, we are seeing as a prominent security for our new project, the Cardinata, plus the value gap on the prosperity market, which we accrue, as compared to the imported process. So, it can't be seen in isolation. More of a strategic investment to ensure supply security, capturing value on the rock side as well as on the active side.

Understood. And then one last question in terms of the city business. So if you could, you know, provide us a mix of exposed and the domestic city business, including the NSDL numbers.

Can I ask my team to get back to you on the specifics? I will get back to you on this.

Yeah, it feels good.

Thank you. The next question is on the line of Janjeet from IIFL. Please proceed.

Yeah, thank you, sir, and congratulations for a good set of numbers in a challenging environment. My first question is on your commentary that you said that the fertilizers are now being sold through QR code. If you can shed more light on the dynamics that are playing out on ground or the government's policy, are these to be taken as in parts and pieces that may eventually lead to an ideal DBT implementation? That's my first question.

Thank you. If that happens, actually, it's quite effective. I have witness marks of the pilot operations in one of our retail stores. The QR code scans the person when he gives the other number, it links to his form-holding type of block, and accordingly, what dosage of UDR, DAP, and NPKs are required, and it is linked to the retailer. The retailer has to take this QR code into his POS mission and accordingly, deliver the back what has been mentioned there. The farmer has to restrict the purchase to that many number of bags. So that's two things. Overuse of state footplaces like urea and DAP is restricted. That can bring about huge savings for the government in terms of subsidy. It helps the farmer to ensure that the overuse of urea is taken care of. It also takes away the arbitrage available to the channel because of urea demand. I think it's a win-win situation for all the stakeholders, and I wish if this function, if it gets replicated all across, it can bring about some sanity, balance, if it is an estimate, it can lead to direct benefit transfer to the farmers, and they can decide what is good for them, for their cows.

The guidance of how much this has been implemented on a pilot basis, in which states or districts it's been started.

Right, they are trying to do it in 1-12 states, 2-3 districts in each state. I will get back to you in specifics. That is what my understanding is. Of course, it has been picked up for Merrick district in Kalangana and one more district in Kalangana. That is where we have witnessed. But I am very impressed with the way the system is functioning.

The second question is just trying to understand the difference. So you do console manage standalone. The data that we see, the remaining part has seen quite a bit of a jump. I understand that a part of it is due to initial consolidation and some growth in the base business, but it's still not able to reconcile that figure. There is a gap of 30, 40 odd crores. Is this attributable to BMCC profitability?

Yeah, that's what I was telling. See, in the mining cost, it comes below EBITDA and the depreciation. The previous caller also has been asking for the reason for supporting depreciation number. That includes amortization of mining expenditure, which comes below the line. But to that extent, the BMCC increase in the conservative financials is showing up in EBITDA. But after providing for the amortization, the net impact comes down. That is 30-year-old, which has got input under the marketplace.

So one request from our side is that now the non-subsidy business is kind of a gaining scale. And in yesterday's press release, we also started highlighting or at least mentioning the crop protection EBITDA. If you can also try and give a bit more KPIs on the non-subsidy front, the subsidy EBITDA and non-subsidy, at least to monitor them going forward would be helpful from our side and that would help us to understand the company a little bit more indeed. That's a request from my side. Thank you.

So, we should do that, definitely. Thank you.

Thank you. The next question is from the line of Aram from Old Bitch. Please repeat.

Hi, am I audible? Yes. Hi, so a couple of questions, one on crop protection and the other one on fertilizers. So first on fertilizer, stepping into Q1 from an industry vantage, the industry already had excess inventory, a sizable inventory, and You did call out that there was some element of pre-buying because there were lower MRP package that were sort of available. So in that context, the real impact of high cost inventory would have probably impacted only the latter part of this quarter. So, just wanted to understand over and above the subsidy, what is the broad pricing trends, pricing actions that the industry has taken? And number two, given that now the inventory that would be in the system would be fairly expensive, and at least sewing seems to have caught up now, how should we look at Q2 on this business and for the fertilizer business? So that's on the fertilizer, and on crop protection, I'll probably ask after the first question's response.

We are right, actually. We need to wait for whatever we could do in terms of the price increase. It has already happened in this year, taking the price increase. Beyond this, it has to be supplemented with subsidy correction. That's the exact reason why we are focusing upon the need to update the NBs rates for Kareef. We hope for the Rabi, the revision will happen, but what we are seeking correction is for the ongoing Kareef season, because we don't want to increase MRT beyond the current level. Having said that, there has been correction in some of the global government prices, you know, the urea having gone up to $900 has come down, ammonia has started softening, and sulfur is only eluding a matter of time before it comes off. The industry has been very cautious in building up inventories, and there has been lack of supplies as well, so most of us have calibrated our purchases and production to avoid any carryover of high-cost inventories. So, further increase is not doable. It has to come from subsidy. Let's hope it happens.

And how much has been the price increase, I mean, on a broad basis for this quarter?

25-30% of the crop gains have happened.

20-30% is it?

25-30%.

Okay, got it. Okay, on the crop protection business, you know, your opening commentary, whether... You know, your commentary on domestic crop protection consumption or even on international markets for the broader market was slightly, you know, soft. But despite that, you know, the standalone business has grown 20 percent. Just trying to understand what part of that business has really grown. Is it B2B technicals, B2C branded? Is it really your export technicals or your export B2C franchise? So, if you could give slightly granular sense on what part of this business really did well, because what we understand is technical prices broadly have come off again, which is also sort of visible on NACL prices. And secondly, given how fertilizer prices have inched up globally, I just wanted to understand what is the pattern, what is the demand pattern that's emerging from farmers, both in India as well, as abroad for crop protection. Thanks.

You are absolutely right. Global commodity prices are softening. However, it has not gone up, but it is gone up. To the extent the farmers' availability has come down. Commerce are looking for cheaper alternatives and the specialities are getting pushed back, and that is why some of the molecules, active ingredients, what we are dealing with, are gaining some traction. Fortunately, these molecules are not the ones which China is in. So China has kept artificially active ingredients at low prices, including intermediates at a higher level. So there are certain markets which can take this out of a price increase, so we could pass on the input cost increase to the markets. For these AAs, what we are dealing with. This may sustain because of the nature of the molecules, and currently we are focusing on B2B exports, but our aim is to see how best we can get into B2C. Right now, we are not having B2C presence. We are exploring opportunities to create specific brands and also combination products based on our AAs. So that effort is underway for the long-term sustenance and demand for these molecules.

Thank you, sir.

It was much better than what it was earlier in terms of AI pricing. There's been a slight improvement, so I won't say it's that bad what we witnessed a year before.

Thank you. The next question is on the line of Dhru from EGF, the AMC. Please proceed.

Thank you so much. Looking at the NPK production data for the industry, it seems it has come off significantly in 1Q, probably 2Q. 4Q was also a bit lower, and imports have also come down. Now, is it fair to understand that the subsidy policy by the government will be key for this number to probably go up? Is that a fair way to think of this?

100%. We need to, otherwise it doesn't make economic sense for the people to produce, and the capacity cannot afford to produce at high input prices of sulfur and ammonia. It's very critical for the substrate to get raised if the production has to come through, otherwise it can have an impact in Cuba as well.

Got it. Sure. And, sir, secondly, given the market dynamics currently, are we seeing any change in the adoption of nano, DAP nano urea, probably more entrenched, at least in the FOILA application where it probably works well?

Ideally, it should happen, but unfortunately, some of the state governments like UK and Maharashtra have banned these products, that has put their lead on the ban for these products. Had it not been for this, definitely the volume will pick up. We have seen a very good response. We strongly believe in these products. In fact, globally also, we have a good response. We started exporting nano products last quarter. Coming quarters, we will be focusing on how do we improve our international business on nano products once the registration comes through. Our nano DEP is working very well, and we are very confident, and we have been very diligently promoting this across various geographies, and the response has been pretty good.

Yes, sir. Thank you. The next question is from the line of Prashant from Alara Capital. Please proceed.

Yeah, thank you for the opportunity. Sir, while, you know, we are in Q2, we will have benefit of higher production, and I just want to get a sense of, you know, to maintain the same level of EBITDA per ton, supposedly, how much increase in subsidy would one seek?

Prasad, I don't count six hundred dollars, but Pratirikum will derive the income that they will know.

Right.

And, sir, regarding you are... I wanted to, just to be serious on the side, a very valid question. What we have been asking government is to give us what is due to us. Policy envisages six-month average rates to be applied for India. That's all we are asking for. If that is restored, See, you know, the subsidy rate for the last 2-3 years has been a marginal 10% increase. In this global environment, no plant can sustain this sort of cost increase and try to achieve So what we are seeking help from the government is to provide a fixed-month average. The rest we will take care because fortunately, NP and NP supply things are not controlled.

Yes, sir, that is what I was asking for. I mean, how much is due to the industry, and how much has the government not given yet?

It varies for the nutrients. N is a very significant, cheap correction is required, and P will also require cheap correction. Because the six-month average price, even in April, if you have to go back and put these numbers, what prevailed the six months prior to April, what we got. It has no relevance to the numbers prevailed, even without the crisis.

Right. Secondly, on this QR code based selling of fertilizer, Sir, if this is applicable pan-India, then there could also be some rationalization in fertilizer sales, whosoever are using it on an excess. Would that understanding be right?

Of URI and DAP, definitely. And this is not happening on NP-NPK. Ideally, it should increase the demand for NP-NPK.

Okay, so for NPK, consumption is not in excess, but for DAP, it is there, is what you are going to say.

Yes, for use of N and P, both URI and DAP may get curtailed.

Right. And, sir, as per your annual report and also from the data that you shared...

Sorry to interrupt, Mr. Prashant. May we request you to join the question queue again for your follow-up questions, as there are other several participants waiting for their time.

Okay.

Thank you.

Sir, on the part, we are already running above capacity. If you can share some expansion plans, which you might have there. And on BMCC side, if you can repeat what you told in the opening remarks regarding the CAPEX.

On the BMCC, currently, we are operating the plant closer to the target volumes of high lactanferbrog phosphate production. That is going as a plan. Besides that, we wanted to invest in a single superphosphate facility. It doesn't cost much. It may be 5 to 6 million dollars of investment to

create

150,000 tons of SSP, but it provides a huge opportunity because we'll be using the reject rocks to process and produce SSP for the domestic market as well as for the export market. So, it provides a value addition of rock phosphate in Senegal, and also we can export to other countries from there. So, once we succeed in the smaller capacity, then we may look to expand the capacity so that we can capture the value in Senegal itself. So, that's what we are looking at. Besides supplying rock to India, we can also look at capturing value there.

Sure. Thank you so much. I will join the team. Thank you.

Thank you. The next question is from the line of Darshita Shah from DSP Asset Manager. Please proceed.

Thank you, sir. My first question was regarding the delay in the incremental subsidy announcement. We've been waiting to hear back on this since the last quarter. If you could just throw some light on what's causing the delay from the government's end.

Sir, obviously there is a pressure on overall subsidy bill across various product categories. The government has, with the gas price, the UDA subsidy is going up. With the DAP being compensated fully, there is a reasonable amount of allocation happening for DAP as well. And hence there is a pushback on NPNPK, which we have represented to the government. So more of a subsidy bill which is causing this delay.

Okay. Okay, got it. So secondly, with the incremental capacity coming in in the fourth quarter, fourth quarter of this year, how are we seeing, what are we doing with respect to entering the new markets? We've spoken about it a little in the past, but if you could say, if you could just share with us, what are the key new markets that you're looking at, and any key markets where you feel that we may be able to gain incremental market share, maybe somewhere like Maharashtra or something on those fronts?

The capacity is 750,000. 50% of the volume we wanted to sell through our own retail outlets. We are increasing our footprint in Marassa, Tamil Nadu, and also we are increasing number of retail outlets in Andhra, Kalinga.

So in the current markets where we have significant

buttons, we will be maximizing our sales through our own retail outlets. So where are 50% selling is 750,000 at times, we don't see a challenge. We have already developed the market in UP, Rajasthan, MP. That is good. So these markets can absorb the balance only. So I don't see any challenge in taking the additional volume.

Alright. Okay, sir. That's all. Thank you.

Thank you.

Thank you. The next question is from the line of Nushar. Chaudhbi from Aditya Birla Mutual Fund. Can we proceed?

Yeah, hi. Thank you for the opportunity. Just one clarification, sir. Based on our calculation, looking at the price hike industry has taken, it's still... There is a substantial, could be historic high requirement from the government in terms of fertilizer budget, which I think industry have not experienced at any time in the past, and looking at the different commitments the government has on the balance sheet side, could this be the year where, you know, everybody from Parma to companies and government, And everybody, oh.

I understand, but what we are speaking is what is in line with policy. We are not asking for an additional ad hoc subsidy which has been given to DAP or for Urea to absorb the additional gas price. What NPK fertilizer which is currently produced predominantly in India? Atmanirpur government is also promoting. What we are seeking is the average expense rate, which any who defined under the policy. We are not asking for anything prior. So I think this is a fair expectation and hopefully it will be right.

Thank you.

Thank you and all the best. Thank you.

Thank you. The next question is from the line of Nira from Anvil Wealth. Please proceed.

Yes, sir. Thanks for the opportunity, sir. Two questions. First on the capex, but like in the last five years, we have invested close to around 7,000 crores. So, let's say, given the steady state and this capex, which we have generally invested towards the backward integration and the strategic part. So, on a steady state basis, how much of the EBITDA this returns could, this capex could generate over the next two, three years, given the kind of ramp-up we are seeing in terms of the strategic investments as well as the backward integration projects?

Yeah, he did talk about some feedback. Our average EBITDA, which needs to be 5,000, needs to go up to 6,500 rupees, 6,500 rupees for magic 10. Correct, correct. That is the improvement we are looking for as far as the nutrient design is concerned. Rest of the capital towards acquisition or towards enable operations or towards new capacity creation in crop protection business.

In the way the margins are accruing to crop protection business, we

see the payback of less than three years, and some of these capex we have invested in the first two years, and hope we continue to cover the money.

Correct. And I think we have also expanded the capacity on the benton and sulfur side, where we have doubled our capacity, taking the total speciality nutrients capacity to close to around 88,000 tons. So, if you can give us some sense in terms of how much the speciality nutrient business would have contributed in that 3,100 crores of EBITDA, which we have generated in NF526.

We don't look at a separate number of specialties, but all we can say is we have been continuously growing the top line of specialties in business, like 25-30% with a bit of a margin of 20%. Of course, the sulfur expansion has not really helped due to the current situation what we have written, but these are temporary. One thing we should be able to say is that prices. But we are looking at MAP, which is again a strategic investment from raw material sourcing as well as for trading opportunities. It will come up after one year or so. And granulation of specialty nutrients and organic fertilizer which also helps us to diversify the product portfolio towards seaweed granulation, gypsum granulation and other micronutrient granulation. So these things are gaining good traction from the farming community and they are high margin products and it doesn't cost much. The specialty nutrient business is growing very well and there are some crops and definitely farmers will use water-soluble grades. We hope we are able to take advantage of this opportunity.

Thank you.

Thank you. Thank you. The next question is from the line of Vipul Kumar from Sumangal Investment. Please proceed.

Hi, sir. Thanks for the opportunity. Can you give some figures regarding Daksha, our drone company?

So, once I put some numbers there, I will talk about it. At this point of time, we are focusing more on agri drones, which are getting good traction. In fact, Colorado itself has purchased close to 150 drones this quarter, and we are trying to expand the fleet to find the drones during the year. So, actually, we will be mainly catering to agri drones, and until we get the different orders, we will be focusing on agri vehicles. On defense orders, we are in the final stage, as and when it mitigates us, we should be able to scale up the awareness. There are among those opportunities available in this sector. We will continue to pursue them. We are trying to also ensure that how do we strengthen the supply chain, how do we develop the complete ecosystem. We are working on it. It is still a work in progress. It is too early for me to comment on those numbers.

But are they a big drag or as far as the EBITDA level is concerned or at least?

It's not very significant. We are able to, it's not, it's very insignificant than the overall number. It doesn't impact us. See, these are all factors to deal with them and ensure that we create a future value. So that way it's been helpful for us. We will try to create this Okay, sir.

And lastly, you said due to this backward integration, our EBITDA in NPK will move to 6,500 rupees. So, that is what I heard. Is that correct, sir?

Yeah, yeah.

That is what we have always been telling.

Once we commercialize the plant in a steady state, we should generate that sort of revenue. But don't ask me this number for this quarter. It doesn't happen this day because of the spurt in input prices. I said in a normal situation, we should release that sort of EBITDA. But these are all abnormal grades, so we should regulate them all.

Yeah, yeah. It means all things being equal, it should be shared, right, sir?

Yes, absolutely.

Okay. Thank you, sir, and all the best. Thank you very much.

Thank you. The next question is on the line of Sandeep Mukherjee from SKB Securities. Please proceed.

Sir, thanks for taking my question. Sir, I wanted to know at what levels of sulphur, I mean, what levels of pricing of sulphur do you think optimal backward integration kicks in? Just for understanding, sir. At the guarantee given phosphoric acid price of $1,700, at least we want $800 of sulphur. $800, okay. Okay, thank you. Thank you.

Due to time constraints, that was the last question. I now have the consent over to the management for the closing comments. Over to you, Thor.

Thank you very much, and thanks for raising some insightful questions, and we strive to do our best and hope the situation improves and the off-take improves, and we also improve on the subsidy realization from the company. Thank you for your interest in Coromandel. Thank you, Manish.

Thank you. On behalf of Coromandel International Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.