Deepak Nitrite Limited , a leading chemical manufacturing company, has reported a significant decline in its financial performance for the second quarter. The company's consolidated net profit fell by 38% to ₹118.75 crore, compared to ₹194.20 crore in the same period last year.

Revenue and Profitability

The company's revenue from operations decreased to ₹1,901.89 crore, down from ₹2,032.00 crore in the corresponding quarter of the previous year, representing a 6.4% year-on-year decline. This reduction in revenue was accompanied by a compression in profit margins:

Operational Performance

The company's operational performance was impacted by several factors:

1. Raw Material Costs: The cost of materials consumed decreased to ₹1,243.82 crore, down from ₹1,456.39 crore in the previous year.

2. Employee Expenses: Employee benefits expense saw a slight decrease to ₹99.22 crore from ₹106.45 crore year-on-year.

3. Other Expenses: Other expenses reduced to ₹114.80 crore from ₹133.09 crore, suggesting some cost control measures implemented by the company.

Segment Performance

Deepak Nitrite operates in two main segments:

1. Advanced Intermediates: This segment reported a profit before tax and interest of ₹22.97 crore, down from ₹47.45 crore in the same quarter last year.

2. Phenolics: The phenolics segment showed resilience with a profit before tax and interest of ₹144.78 crore, compared to ₹214.87 crore in the previous year's quarter.

Balance Sheet

The company's balance sheet remains robust:

• Total assets stood at ₹7,883.50 crore at the end of the quarter.
• The company maintained a cash and cash equivalent position of ₹22.50 crore.

Conclusion

Deepak Nitrite faced challenging market conditions in the quarter, experiencing pressure on sales volumes and pricing, leading to the observed decline in revenue and profitability. Despite these headwinds, the company's strong balance sheet and diverse product portfolio may position it to navigate the challenging environment. The reduction in other expenses suggests a focus on cost management, which may help in mitigating some of the impacts of reduced revenue.

Deepak Nitrite 's wholly owned subsidiary, Deepak Chem Tech Limited (DCTL), has successfully raised ₹32 crore through the issuance of preference shares. This strategic move aims to bolster DCTL's capital base and support its ongoing project expenses.

Key Details of the Transaction

Impact on Shareholding Structure

Despite this transaction, Deepak Nitrite maintains its 100% equity shareholding in DCTL. The preference share capital is now indirectly held 100% by Deepak Nitrite along with DPL, another wholly owned subsidiary.

About Deepak Chem Tech Limited

DCTL, incorporated on October 9, 2020, operates in the chemical industry. The company currently runs a state-of-the-art fluorination plant and is actively pursuing projects across various sites in Gujarat. For the fiscal year 2024-25, DCTL reported a turnover of ₹9.43 crore.

Financial Snapshot of DCTL

Regulatory Compliance

The transaction has been executed in compliance with Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As both DCTL and DPL are wholly owned subsidiaries of Deepak Nitrite, this transaction is considered a related party transaction but has been conducted on an arm's length basis.

This capital infusion is expected to strengthen DCTL's financial position, potentially enabling it to expand its operations and pursue new projects in the chemical industry sector.