Deepak Fertilizers and Petrochemicals Corporation Limited — Q2 FY26 earnings call

Call held 6 Nov 2025

Management summary

Deepak Fertilisers reported resilient Q2 FY26 results with a 9% Y-o-Y revenue growth despite global geopolitical headwinds impacting IPA and Ammonia segments. The company's strategic shift towards specialty products and value-added solutions continued to yield positive results, with TAN and Crop Nutrition businesses showing strong volume and revenue growth. Significant capex projects are progressing well, and the company is focused on cost optimization and market realignments to improve margins in challenging segments.

Highlights

  • Operating revenue for Q2 FY26 stood at INR 3,006 crores, reflecting a healthy 9% Y-o-Y growth.

  • H1 FY26 operating revenue grew 13% Y-o-Y to INR 5,665 crores.

  • Q2 EBITDA was INR 464 crores, with margins dropping from 18% to 15% due to IPA and Ammonia challenges.

  • H1 EBITDA grew 2% Y-o-Y to INR 977 crores.

  • Net profit for Q2 remained stable at INR 214 crores (7.1% margin), while H1 net profit rose 11% Y-o-Y to INR 458 crores.

  • TAN business achieved almost 29% volume growth, and Crop Nutrition business grew 54% Y-o-Y.

  • Specialty products now contribute almost 22% to H1 revenues, with Crop Nutrition's specialty portfolio accounting for 28% of segment revenue.

  • Acquisition of Platinum Blasting Services (PBS) completed at an attractive 6.7x EBITDA valuation (enterprise value INR 537 crores).

Concerns

  • IPA market challenges

  • Ammonia segment volatility

Key financials

3 periods

Headline

  • Net Debt to EBITDA
    1.74×
  • Net Debt to Equity
    0.48×

Q2

  • Operating Revenue
    ₹3,006 Cr
    YoY +9%
  • EBITDA
    ₹464 Cr
  • EBITDA Margin
    15%
  • Net Profit
    ₹214 Cr

H1

  • Operating Revenue
    ₹5,665 Cr
    YoY +13%
  • EBITDA
    ₹977 Cr
    YoY +2%
  • Net Profit
    ₹458 Cr
    YoY +11%

What they filed

Q1 FY27: revenue up 22.5%, net profit up 100.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,747 2,579 2,667 2,659 3,006 +9%2,830 +10%3,011 +13%3,256 +22%
EBITDA494 486 480 513 464 −6%353 −27%354 −26%845 +65%
Net profit214 253 278 244 214 +0%141 −44%139 −50%490 +101%
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

  • Crop Nutrition Business
    54% Revenue Growth28% Specialty Product Portfolio Share (Q2)22% Specialty Product Portfolio Share (Previous Year)1.85 LMT Manufactured Bulk Fertilisers Sales-31% Manufactured Bulk Fertilisers Sales Growth36% Fertiliser Segment Growth
  • Mining Chemical TAN Business
    29% Sales Volume Growth137 KT Sales Volume14% B2C Segment Contribution to Total Revenue18 KT LDAN Volume-3% LDAN Volume Growth33% B2C Business Growth
  • Industrial Chemicals Segment
    -21% Segment Decline17 KT IPA Volumes0% IPA Volumes Growth70 KT Nitric Acid Volume

Capital allocation

high confidence
  • Capex Capex disclosed
    • TAN project at Gopalpur
    • Nitric Acid project at Dahej
    • Ammonia plant capacity expansion
    On a growth project, as Mr. Mehta highlighted, the TAN project in Gopalpur has reached 87% completion, while Nitric Acid project in Dahej hit 70%. Both projects are on track for commissioning towards end of Q4 FY '26 with focused executions to ensure timely delivery. On cash flow and leverage front, in H1, we generated INR782 crores cash from operations. Despite a capex outlay of INR870 crores, net borrowing increased only marginal to INR3,402 crores.
  • Debt Net ₹3,402 Cr · 1.7× EBITDA
    Despite a capex outlay of INR870 crores, net borrowing increased only marginal to INR3,402 crores. Our net debt-to-EBITDA stands at healthy 1.74x, supported by improved operational performance and capital infusion through CCD. Net debt to equity was at 0.48x as of September 2025.
  • M&A Platinum Blasting Services (PBS) Acquisition · Closed · Consideration ₹[object Object] (undisclosed)

    Strengthens footprint in high potential Australian market, reinforces forward integration strategy, brings best practices to India.

    Acquired at an attractive valuation of 6.7x EBITDA.

    I'm pleased to inform that we have completed the full acquisition of Platinum Blasting Services at an attractive valuation of 6.7x EBITDA and with an enterprise value of INR537 crores. This strategic move strengthened our mining solutions footprint across Australia and India, enhancing forward integrations and long-term value creation.
  • Liquidity Liquidity disclosed H1 cash from operations was INR 782 crores.
    On cash flow and leverage front, in H1, we generated INR782 crores cash from operations.

Guidance & targets

Capacity

  • Ammonia Plant Capacity Increase Capacity · Q4 FY26 · High confidence 10%
    Okay. We are expecting around 10% increase in capacity in this shutdown.

    — Subhash Anand

Project Completion

  • TAN Project at Gopalpur Completion Project Completion · Q4 FY26 · High confidence End of Q4 FY26
    Both projects are on track for commissioning towards end of Q4 FY '26 with focused executions to ensure timely delivery.

    — Subhash Anand

  • Nitric Acid Project at Dahej Completion Project Completion · Q4 FY26 · High confidence End of Q4 FY26

    — Subhash Anand

Capacity Utilization

  • New Projects Capacity Utilization Capacity Utilization · FY27 · High confidence 70%
    Yes. Normally, the way we expect FY '27, we expect around 70% capacity utilization.

    — Subhash Anand

  • New Projects Capacity Utilization Capacity Utilization · FY28 · High confidence 80%+
    And FY '28 will be 80% plus. And after that, it will be a normal capacity utilization.

    — Subhash Anand

Profitability

  • ROCE for New Projects Profitability · High confidence 20%+
    ROCE is normal. We are expecting 20% plus businesses. This is what we expect in this, for the new project, and it should deliver.

    — Subhash Anand

Debt

  • Peak Debt Debt · End of FY26 · High confidence INR 4,500 crores
    Our peak debt to go up to INR4,500 crores. That's what we expect towards the end of this year.

    — Subhash Anand

Margins

  • Overall Margins Margins · FY26 · High confidence Normal range
    Okay. For FY '26, we expect our margins to go back to a normal range, definitely.

    — Subhash Anand

Business Outlook

  • IPA Market Recovery Business Outlook · Coming quarters · Medium confidence Back in business
    But now there are early sign of things going back to normalcy, and we expect IPA to be back in business in coming quarters.

    — Subhash Anand

Pricing

  • Ammonia Prices Pricing · Coming quarters · High confidence Rebounded above $400, stable
    On the outlook front, Ammonia prices have rebounded above $400 already.

    — Subhash Anand

Raw Material

  • LNG Gas Contract with Equinor Raw Material · Middle of next year · High confidence Kick in
    Also, our attractive LNG gas contract with Equinor will kick in by middle of next year to bring further positivity.

    — Sailesh Mehta

What to watch in Q3 FY26

TAN and Nitric Acid Project Commissioning

End of Q4 FY26
Current TAN 87% complete, Nitric Acid 70% complete
Target Commissioned

Why it matters

Successful commissioning is crucial for new capacity and future revenue growth.

On a growth project, as Mr. Mehta highlighted, the TAN project in Gopalpur has reached 87% completion, while Nitric Acid project in Dahej hit 70%. Both projects are on track for commissioning towards end of Q4 FY '26 with focused executions to ensure timely delivery.

Risks & concerns

  • IPA market challenges

    high

    Global oversupply, steep drop in acetone prices, and US import antidumping duty on China intensified competitive pressures in the domestic market.

    Management acknowledged

  • Ammonia segment volatility

    high

    Impacted by global price volatility, operational constraints, higher natural gas consumption, and lower incentive income due to GST rate cuts.

    Management acknowledged

  • Global geopolitical headwinds

    medium

    Impacted operating EBITDA margins, particularly in IPA and Ammonia segments.

    Management acknowledged

  • Raw material availability for Fertilisers

    medium

    One key raw material was in short supply, leading to reduced manufactured bulk fertiliser production and reliance on trading.

    Management acknowledged

  • Competition from Russian ammonium nitrate imports

    medium

    Impacts the DMSL (Mining Solutions) business, though controlled over the last 6 months.

    Management acknowledged

Q&A highlights

6 direct
International TAN price trends Direct
And if one were to look at the index rise, I'm looking at it now as we speak. So when we started Q2 in the month of July, the average Fertecon index for Baltic FOB was USD313 in July. Come September, end of the quarter, it became USD275. So it's gone down. It's not gone up.

Management clarified that international TAN prices, contrary to the analyst's information, had actually declined, indicating resilience in their domestic margins.

Asked by Bhavya Shah

IPA market situation and recovery Partial
Second thing, a lot of this IPA disturbance is actually led by tariff, which US Trump has announced and a lot of supply because of those tariffs and antidumping on China, thus US market has started supplying it back in India. That's where a lot of import of IPA has started coming to India from US. ... But now there are early sign of things going back to normalcy, and we expect IPA to be back in business in coming quarters.

Management explained the reasons for IPA market disturbance (US tariffs, China dumping) and indicated signs of stabilization and future recovery.

Asked by Shubham

Capex completion timeline and capacity utilization for new projects Direct
Normally, the way we expect FY '27, we expect around 70% capacity utilization. And FY '28 will be 80% plus. And after that, it will be a normal capacity utilization.

Management provided specific capacity utilization targets for the new TAN and Nitric Acid projects post-commissioning, giving clarity on future operational ramp-up.

Asked by Shubham

Ammonia plant shutdown and capacity increase Direct
Okay. We are expecting around 10% increase in capacity in this shutdown. ... It will be a few weeks shutdown. So definitely, Q4, we have planned for that. With that, it will bring capacity expansion and some efficiency or some of the efficiency things which actions which we kept pending will get completed during that shutdown.

Management confirmed a 10% capacity increase for the Ammonia plant during a planned Q4 shutdown, indicating future efficiency gains.

Asked by Adarsh Jain

Impact of GST rate cut on Ammonia plant incentives Direct
No. Ranjit, that's right. GST rate cut has impacted the incentives, which we were getting on this plant. So with the revised rate, the incentive is much lower compared to what it used to be earlier.

Management acknowledged the negative impact of GST rate cuts on incentives for the Ammonia plant, which affects the project's original payback assumptions.

Asked by Ranjit

TAN export quota utilization and strategy Partial
The export quota was removed only in the month of June... But as a responsible company, what we have to keep in mind is that as long as it makes financial sense to export compared to what we can generate in the domestic market, then so be it. So it's always that balanced decision we make, how much to export and how much not to export.

Management explained their cautious approach to utilizing the TAN export quota, prioritizing domestic market needs and financial viability over simply exhausting the quota.

Asked by Adarsh Jain

Sustainability of Ammonia price rebound Direct
Ammonia prices, in fact if somebody is looking 10-year average, it remained $450 higher up. So $300 was abnormality, I call it, that's not the normal somebody should look in. So, it's getting back to the right scenario, and that's how it should be.

Management views the current Ammonia price rebound as a return to normalcy, suggesting the higher prices are sustainable compared to the abnormally low Q2 levels.

Asked by Sheelkumar Shah

Margin differential between specialty and normal products, and B2C vs B2B TAN Direct
It's a material difference. We normally don't give a differentiated margin portfolio that way. But if we are looking at general trend, definitely, the specialty products and the B2C products, that gives us a differentiated margin, and that's one of the margin expansion initiative which we have.

Management confirmed a material margin difference for specialty and B2C products, reinforcing their strategy to shift towards these higher-margin offerings.

Asked by Ishan Daga

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview and Margin Compression

Deepak Fertilisers reported Q2 FY26 operating revenue of INR 3,006 crores, marking a 9% Y-o-Y growth. For the first half (H1) of FY26, operating revenue grew 13% Y-o-Y to INR 5,665 crores. However, operating EBITDA margins saw a decline from 18% to 15% in Q2, primarily due to challenges in the IPA and Ammonia segments. Despite this, H1 PAT grew 11%.

Strategic Shift Towards Specialty Products and Crop Nutrition Growth

The company's strategy to transition from commodity to specialty products is yielding results, with specialty offerings now contributing almost 22% to H1 revenues. The Crop Nutrition business demonstrated strong resilience, growing 54% Y-o-Y, driven by its flagship specialty product, Croptek, which saw a 54% Y-o-Y growth. The specialty product portfolio within Crop Nutrition now accounts for 28% of segment revenue, up from 22% in the previous year.

TAN Business Momentum and Project Progress

The Technical Ammonium Nitrate (TAN) business maintained strong momentum, achieving a 29% Y-o-Y volume growth to 137 KT. The B2C segment of TAN also grew 33% Y-o-Y. Key growth projects, including the TAN project at Gopalpur (87% complete) and the Nitric Acid project at Dahej (70% complete), are on track for commissioning by the end of Q4 FY26. These projects are expected to reach 70% capacity utilization in FY27 and over 80% in FY28, with an expected ROCE of over 20%.

Challenges in IPA and Ammonia Segments

The Chemicals segment experienced a 21% Y-o-Y decline, largely due to subdued performance in IPA and Ammonia. IPA volumes remained flat at 17 KT, facing margin pressures from global oversupply, a steep drop in acetone prices, and increased competition from US imports. The Ammonia segment was impacted by global price volatility, with FOB Middle East Ammonia prices averaging $300/metric ton in Q2, significantly lower than the previous year, though they have since rebounded above $400.

Capital Allocation, Debt, and Strategic Acquisition

The company generated INR 782 crores cash from operations in H1 FY26. Despite a capex outlay of INR 870 crores in H1, net borrowing increased only marginally to INR 3,402 crores, maintaining a healthy net debt-to-EBITDA ratio of 1.74x and net debt to equity of 0.48x. The full acquisition of Platinum Blasting Services (PBS) for an enterprise value of INR 537 crores at 6.7x EBITDA strengthens the company's mining solutions footprint in Australia and India.

Outlook and Future Strategy

Management anticipates a robust Rabi 2025 season for Crop Nutrition due to favorable monsoons and increasing adoption of specialty products. The Ammonia plant is expected to see a 10% capacity increase after a Q4 FY26 shutdown. The attractive LNG gas contract with Equinor, set to kick in by mid-next year, is expected to significantly reduce gas prices and improve Ammonia profitability. The company remains committed to cost optimization and market realignments to drive margin recovery in challenging segments.

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