Deepak Fertilizers and Petrochemicals Corporation Limited

Deepak Fertilisers reported a full-year revenue of INR11,506 crores, marking a 12% growth, with Q4 revenue at INR3,011 crores. Full-year EBITDA stood at INR1,684 crores, while Q4 EBITDA was INR354 crores. The second half of FY26 was notably subdued due to a sharp increase in input costs, pricing pressures in the Chemicals segment, and a lag in subsidy realignment, further impacted by a one-off^📎 INR75 crore effect from a planned ammonia plant shutdown in Q4.

The company is actively pursuing a strategy to enhance its business mix by increasing the contribution from specialty products and B2C segments. In Mining Chemicals, the B2C segment now accounts for 16% of revenue, up from 13% in the previous year. Similarly, in Crop Nutrition, Specialty and Croptek products now contribute 33% of segment revenue, an increase from 30% in the prior year, indicating a positive structural shift for margin improvement.

Two major growth projects, Gopalpur TAN and Dahej nitric acid, are nearing completion, with 95% and 86% progress respectively. The cumulative CWIP for these projects is INR3,050 crores, and total cumulative spend stands at INR3,800 crores. Commissioning for both projects is now anticipated in Q2 FY27, a slight delay from previous estimates primarily due to a shortage of skilled manpower, but the projects remain within their approved capex envelopes.

A significant development was the receipt of the maiden cargo from the 15-year LNG contract with Equinor in May. This long-term contract is expected to provide enhanced supply security, improved cost visibility, and integration advantages for the ammonia value chain, which will support margin stability across downstream businesses. Management anticipates a clear cost benefit from this arrangement, especially given current gas price dynamics.

The company completed the acquisition of an explosive unit (Chardham Chemicals) for INR120 crores, acquiring a 100% stake. This acquisition is strategic, aimed at transforming the company's offering from products to holistic mining solutions. It leverages the acquired licenses, land, and market proximity to provide a full range of products and services that improve productivity and reduce costs for customers in the mining and infrastructure sectors.

The company's net debt stood at INR4,824 crores, resulting in a net debt to EBITDA ratio of 2.86x, reflecting the advanced stage of its investment cycle. Receivables and inventory days increased significantly during the year, primarily in the Crop Nutrition business. This was attributed to a soft fertilizer market, uneven rains, and elevated channel inventory, but management expects this working capital buildup to normalize within the next month or two as the Kharif season progresses.

The company faced a challenging operating environment in Q4, including sudden LPG and LNG supply disruptions, volatile fertiliser prices, and an inadequate subsidy mechanism. IPA performance was particularly affected by weak prices and limited RGP availability. Despite these headwinds, management believes they have navigated the situation effectively and are observing positive trends in Q1 FY27, with some respite from the Petroleum Ministry regarding LPG propylene sourcing.