Chambal Fertilizers & Chemicals Limited — Q2 FY25 earnings call

Call held 7 Nov 2024

Management summary

Chambal Fertilisers delivered a strong Q2 FY25 performance characterized by significant profit growth and operational efficiency. The company benefited from higher urea sales volumes and improved energy efficiency, while its non-urea segments (Crop Protection and Specialty Nutrients) showed robust margin expansion. Management is aggressively pursuing diversification through the TAN project and a new entry into the seeds business to complete its agri-input profile.

Highlights

  • Consolidated PAT grew 41% YoY to ₹536 crore in Q2 FY25.

  • Standalone EBITDA reached ₹834 crore, a 20% YoY increase.

  • Urea sales volumes increased to 9.65 lakh metric tons from 8.38 lakh metric tons YoY.

  • CPC & SN segment revenue grew 18% YoY to ₹289 crore with a 36% growth in contribution.

  • Energy efficiency improvements contributed ₹35-40 crore to EBITDA in the quarter.

  • Technical Ammonium Nitrate (TAN) project is 37% complete with ₹388 crore spent to date.

  • Subsidy receipts remained timely with ₹4,713 crore received during Q2 FY25.

  • Company announced entry into hybrid and research variety seeds starting Kharif '25.

Key financials

  1. Standalone EBITDA ₹834 Cr +20%YoY
  2. Standalone PAT ₹500 Cr +34%YoY
  3. Consolidated PAT ₹536 Cr +41%YoY
  4. Urea Sales Volume 9.65 lakh mt +15.1%YoY

What they filed

Q1 FY27: revenue down 11.8%, net profit down 4.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,346 4,918 2,449 5,698 6,413 +48%5,898 +20%2,785 +14%5,027 −12%
EBITDA790 778 163 761 842 +7%821 +6%255 +56%826 +9%
Net profit536 534 130 549 649 +21%586 +10%169 +30%524 −5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹550 Cr Total
  • CPC & SN (Crop Protection Chemicals & Specialty Nutrients) ₹289 Cr 52.5%
  • Complex Fertilizers (P&K) ₹261 Cr 47.5%

Guidance & targets

Capex

  • TAN Project Completion Capex · October 2025 · High confidence October 2025
    We will be completing it by October '25.

    — Abhay Baijal, Managing Director

  • TAN Project FY25 Spend Capex · FY25 · Medium confidence ₹600 crore
    Cumulatively, about Rs. 600 crore.

    — Abhay Baijal, Managing Director

Other

  • Seeds Business Launch Other · Kharif 2025 · High confidence Kharif '25
    We expect to start sales and marketing of these products from Kharif '25 onwards.

    — Abhay Baijal, Managing Director

Capacity

  • IMACID Phosphoric Acid Expansion Capacity · next 2.5 to 3 years · Medium confidence 2,00,000 tons
    My understanding is that the Board has approved 2,00,000 tons expansion of Phosphoric Acid capacity... normally this kind of project takes about two and a half to three years to come to fruition.

    — Abhay Baijal, Managing Director

Margin

  • Energy Efficiency Roadmap Margin · by 2028 · Medium confidence 3-4 additional plans
    Prashant, we have a roadmap stretching out to 2028... there will be at least three to four such plans that we will implement.

    — Abhay Baijal, Managing Director

Risks & concerns

  • Climatic Conditions (Late/Unseasonal Rains)

    medium

    Late rains impacted the absorption of crop protection chemicals in certain territories during Q2.

    Management acknowledged

  • P&K Fertilizer Availability

    medium

    Volumes were low in P&K fertilizers due to availability constraints.

    Management acknowledged

  • Gas Price Volatility

    low

    Current gas prices are around $16.7 to $17 per MMBTU; management monitors this closely.

    Analyst acknowledged

Areas of evasion (1)

  • Initially hesitant to quantify the exact energy efficiency EBITDA number until pressed for a second time.

Q&A highlights

3 direct
Quantification of Energy Efficiency Gains Direct
When I say healthy double figure, it is about Rs. 35 crore to Rs. 40 crore.

Reveals the specific margin tailwind from internal efficiency projects, which is a key driver of the current profit beat.

Asked by Prashant Biyani

Anomaly in Complex Fertilizer Revenue and Liabilities Direct
Fortunately or unfortunately, we were receiving a little bit more subsidy from the government than was eligible, to that extent this is payable.

Explains a significant balance sheet item (₹2,012 crore trade payables) as a temporary over-payment of subsidy by the government that will normalize.

Asked by Ashok Jain

Product Returns and Channel Stuffing Direct
We do not pump-up the channel just because we want to achieve these numbers... did we face anything like that? No.

Management claims superior channel management compared to peers who reported high returns due to inconsistent monsoons.

Asked by Harmish Desai

2 min read 5 chapters

Detailed narrative

Efficiency Gains Drive Margin Expansion

Chambal's focus on energy efficiency has started yielding tangible financial results, contributing ₹35-40 crore to EBITDA in Q2 FY25 alone. This was achieved through a 3% energy efficiency improvement in urea manufacturing. Management has outlined a long-term roadmap stretching to 2028, with 3-4 additional efficiency projects currently being vetted by consultants to sustain this margin tailwind.

Strategic Diversification into TAN and Seeds

The Technical Ammonium Nitrate (TAN) project is progressing on schedule with 37% overall progress and ₹388 crore spent out of a total ₹1,600 crore budget. Completion is targeted for October 2025, with cumulative spending expected to reach ₹600 crore by the end of FY25. Additionally, the company is entering the hybrid and research variety seeds market in Kharif '25, aiming to provide a complete 'Seed-to-Harvest' product profile to farmers.

Non-Urea Segments Outperform Industry

Despite unseasonal rains impacting the broader agrochemical industry, Chambal's CPC & SN segment grew revenue by 18% YoY to ₹289 crore. More impressively, segment contribution grew 36% YoY, reflecting a shift toward higher-margin specialty products. Management attributed this outperformance to a robust portfolio of 62 products and a policy of not overstocking the distribution channel, which resulted in zero product returns during the quarter.

Operational Excellence in Urea Manufacturing

All urea manufacturing units operated at optimal capacity during the quarter. Total production reached 9.34 lakh metric tons, while sales volumes surged 15% YoY to 9.65 lakh metric tons. Plant-wise, Gadepan-I and II contributed 5.71 lakh MT, while Gadepan-III contributed 3.62 lakh MT. A planned turnaround for the Gadepan-III plant is scheduled for March 2025.

Subsidy Dynamics and Balance Sheet Health

The company received ₹4,713 crore in subsidies during Q2, maintaining a trend of timely government payments. A notable increase in trade payables to ₹2,012 crore was explained as a temporary liability due to the government's 'escalation and de-escalation' process, where the company received more subsidy than eligible. This excess cash has been temporarily deployed into mutual fund investments, contributing to 'Other Income' via interest.

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