Deepak Nitrite

Management described Q3 as an abnormal period where multiple headwinds hit simultaneously. The Phenolics segment faced a scheduled maintenance shutdown, resulting in a production loss of 12,000 to 15,000 metric tonnes. Simultaneously, the Advanced Intermediates segment suffered from end-of-year destocking by international agrochemical customers, leading to temporary idling of plant capacities. These factors, combined with 'stubborn' raw material costs for benzene and propylene, led to a sharp decline in EBITDA to ₹190 crore from ₹318 crore YoY.

Deepak Nitrite is aggressively pursuing a strategy of deep integration to insulate itself from global volatility^🌐. The upcoming Nitric Acid complex is a key pillar, expected to provide ₹70-80 crore in annualized margin expansion starting Q1 FY26. Furthermore, the company is moving into the polymer value chain, with major projects like Polycarbonate resin production targeted for completion by December 2027. Management emphasized that these integrated facilities will make them the lowest-cost domestic producers, effectively discouraging imports.

Despite the 18% YoY revenue drop in Advanced Intermediates, management noted that volume dispatches began picking up at the tail end of Q3 for EU and non-EU customers. They expect the domestic agrochemical industry to resume demand towards the end of Q4 FY25. The company has prioritized a 'market share strategy' in Phenolics and dye intermediates, choosing to maintain wallet share even at the cost of temporary margin compression, betting on a recovery in spreads from March onwards.

Analysts raised concerns regarding the delay in commissioning key projects like Nitric Acid and MIBK/MIBC, which have slipped into FY26. Management acknowledged the impact on Return on Capital Employed (ROCE) due to capitalized overheads and delayed revenue. However, they defended the delays as necessary to ensure plants are 'fully sorted' for immediate ramp-up to capacity. They highlighted that the Nitric Acid plant's location in Nandesari, connected via pipeline, offers 'enduring benefits' that outweigh the short-term delay.

The Phenolics segment remains the company's largest revenue contributor. While Q3 was hit by the shutdown and a surge in imports, management believes the situation will normalize by March 2025. They argued that non-integrated global players are currently operating at borderline profitability, and with India's growing demand (7-8% CAGR), Deepak's expanded capacity of ~350,000 MT is well-positioned to capture domestic growth. They noted that traders who imported during the shutdown have suffered due to price volatility, which should reduce import appetite in the coming quarters.