Chambal Fertilizers & Chemicals Q1 FY27 earnings call

Chambal Fertilizers & Chemicals Limited reported a 12% decline in revenue from operations to INR 5,000 crores in Q1 FY27 compared to INR 5,700 crores last year. Despite this, EBITDA increased by 12% to INR 851 crores, with margins expanding significantly to 17% from 13%. Profit after tax also grew by 10% to INR 703 crores, achieving a PAT margin of 14% compared to 11% in the previous year. The company received INR 2,480 crores in subsidy during the quarter, with total receivables standing at INR 3,300 crores as of June 30, 2026, including INR 2,460 crores in subsidy receivables.

The Urea segment delivered resilient results despite plant shutdowns at Gadepan-1 and Gadepan-2, recording revenues of INR 2,860 crores, an 8% decrease from INR 3,109 crores due to lower production and sales. The complex fertilizer segment saw revenues decline by 18% to INR 1,737 crores from INR 2,131 crores, reflecting a measured placement approach amidst delayed sowing. However, segment EBIT for complex fertilizers rose significantly by 67% to INR 239 crores, supported by advance inventory purchases.

The crop protection chemicals, speciality nutrients, and seed segment recorded revenues of INR 430 crores, a 6% decrease from INR 458 crores, primarily due to deferred farmer purchases. Despite this, segment EBIT grew 13% to INR 108 crores, with margins improving to 25% through better product mix. The biologicals business witnessed volume and revenue growth, supported by increased farmer acceptance and scale benefits. The company also expanded its portfolio with seven new crop protection products and two new maize and bajra varieties.

The Technical Ammonium Nitrate (TAN) project progressed well during the quarter. Production of Weak Nitric Acid and Ammonium Nitrate solutions has commenced, with the high-density Ammonium Nitrate (HDAN) moving closer to commissioning. Management expressed confidence in achieving over 70-80% utilization for the TAN project in FY27, supported by market acceptance and strategic warehousing to optimize placement.

A key development was the Government's approval of the National Investment Policy for Urea 2026, which the company believes provides a strong framework for future investments in domestic urea capacity. Chambal is progressing preparatory activities for a potential fourth urea plant, estimated to cost almost INR 10,000 crores, with financial bids expected by mid-October and commissioning targeted by 2030. Management highlighted the significant benefits of scale and optimized capital expenditure for this brownfield expansion.

The quarter was marked by geopolitical developments disrupting global fertilizer and energy supply chains, leading to elevated raw material prices for ammonia, Sulphur, and phosphatic intermediates. While nutrient-based subsidy rates for Kharif were increased by about 10%, they did not fully cover the subsequent cost escalations. The industry is actively engaging with the Department of Fertilizer on this matter, and timely subsidy disbursements have helped maintain liquidity and fertilizer availability.

The IMACID joint venture experienced a temporary production shutdown due to Sulphur shortages and high prices, leading to negative margins. However, production resumed in July as market conditions improved, with sourcing from North America. Management noted that while the new NUP-2026 policy's ROE profile might seem dilutive compared to older policies, the benefits of scale from having four plants at one site, including reduced fixed costs and improved raw material sourcing capabilities, make the investment attractive.