Deepak Fertilisers & Petrochemicals Corporation Limited (DFPCL) has reported impressive financial results for the first quarter, reflecting its strategic transformation and focus on specialty products, setting a positive tone for the upcoming Kharif season.

Financial Highlights

Segment Performance

The company's Chemicals segment reported a 9% year-on-year decline in profit, primarily due to softness in IPA and Ammonia prices. However, this was offset by the Fertiliser segment, which delivered robust year-on-year growth of 125%.

Strategic Shift Yields Results

DFPCL's strategic realignment has shown significant progress, with specialty products now accounting for 45% of the Crop Nutrition Business (CNB) revenue in Q1. This shift is evident in the following areas:

1. Croptek volumes improved by 73% year-on-year
2. Specialty fertiliser volumes grew by 21% year-on-year
3. The B2C segment contributed 16% to revenue in Mining Chemicals

Operational Highlights

• Export quota for Technical Ammonium Nitrate (TAN) increased to 50,000 MT per year
• Net debt reduced from ₹3,305.00 crore to ₹3,078.00 crore, despite a capex spend of ₹377.00 crore in Q1
• Net debt to EBITDA ratio improved from 1.72x to 1.50x during Q1

Positive Outlook for Kharif Season

DFPCL expects a strong Kharif season, attributing the positive outlook to favorable weather conditions and increased farmer engagement. The company's Chairman and Managing Director, S.C. Mehta, stated, "The strong start underscores the impact of our strategic transformation and disciplined execution. Our continued focus on specialty products, customer engagement, and operational agility is driving tangible results."

Project Updates

• The Gopalpur TAN project is approximately 80% complete
• The Dahej Nitric Acid project is around 57% complete
• Both projects, with a combined capex of ₹4,661.00 crore, are progressing as planned for commissioning

Favorable Tax Ruling

Mahadhan AgriTech Limited, a subsidiary of DFPCL, has received a favorable ruling from the Income Tax Appellate Tribunal (ITAT) in Mumbai for Assessment Years 2016-17 to 2020-21. This ruling has nullified tax demands aggregating ₹581.00 crore and is expected to lead to the withdrawal of penalty orders totaling ₹479.00 crore.

Revised Project Cost for Gopalpur TAN Project

The Board of Directors of Deepak Mining Solutions Limited (DMSL), a wholly-owned subsidiary of DFPCL, has approved a revision in the estimated cost of the Technical Ammonium Nitrate (TAN) Project at Gopalpur. The project cost has been revised to ₹2,675.00 crore, up from the earlier estimate of ₹2,223.00 crore in November 2020. The increase is attributed to geopolitical issues, price increases in materials, additional safety and efficiency features, and investments in effluent treatment systems.

Despite the cost increase, DFPCL maintains that the project's financial metrics remain robust, with the Project IRR continuing to be well above internal threshold benchmarks.

As DFPCL continues to focus on its strategic transformation and expansion plans, the company appears well-positioned to capitalize on the expected strong Kharif season and drive long-term value for its stakeholders.

Deepak Fertilisers & Petrochemicals Corporation Limited (DFPCL) has reported robust financial results for the first quarter, demonstrating strong growth across key financial metrics.

Financial Highlights

DFPCL reported the following consolidated results:

Business Segments

DFPCL operates across three main verticals:

1. Crop Nutrition Business (48% of revenue)
2. Mining Chemicals (25% of revenue)
3. Industrial Chemicals (21% of revenue)

Tax Appeal Victory

In a significant development, the Income Tax Appellate Tribunal in Mumbai ruled in favor of Mahadhan AgriTech Limited, DFPCL's material subsidiary. The ruling covers tax appeals for assessment years 2016-17 to 2020-21, totaling Rs 581.00 crore.

Expansion Projects

Two major capacity expansion projects are currently underway:

1. TAN project at Gopalpur with 376 KTPA capacity
2. Nitric Acid project at Dahej with 300 KTPA WNA and 150 KTPA CNA capacity

Both projects are expected to be commissioned in Q4.

Market Capitalization

DFPCL's market capitalization stood at approximately $2.51 billion.

Conclusion

With its strong financial performance, successful tax appeal, and ongoing expansion projects, DFPCL is well-positioned for continued growth. The company's diversified business segments and strategic investments in capacity expansion are expected to drive future performance and maintain its competitive edge in the market.