G S F C

Gujarat State Fertilizers & Chemicals Limited reported a resilient Q1 FY26 with consolidated revenue from operations growing marginally by 1% YoY to Rs. 2,184 crores. Quarter-on-quarter, revenue grew by 14% from Rs. 1,922 crores. Profitability saw significant improvement, with PBT rising 63% YoY to Rs. 184 crores and PAT increasing 59% YoY to Rs. 139 crores, indicating a strong start to the financial year.

Fertilizer production volumes decreased by approximately 10% YoY (40,787 metric tons), primarily due to a one-time^📎 transfer of 14,435 metric tons of urea for a revamping project. Excluding this, the reduction was only 1% YoY. Despite volume challenges, the fertilizer segment delivered a strong EBIT of Rs. 137 crores, up from Rs. 86 crores last year, supported by robust NPK trading and improved realizations in P&K fertilizers. Fertilizer sales are estimated to have grown by 11% in value terms and 10% in volume terms in Q1, considering the urea transfer.

The industrial product segment turned profitable, reporting an EBIT of Rs. 25 crores, driven by improved realization in ammonia and new product development like HX crystals. Management noted that while Caprolactam-Benzene spreads remain under pressure due to oversupply and Chinese dumping, the company has applied for anti-dumping duties. They anticipate much better performance in Q2, with continued ammonia trading and new product contributions.

GSFC commissioned three key projects in Q1 FY26: a 15 MW solar power project at Charanka, Urea – II energy revamp facilities, and a 37.5 MW share in GIPCL's 75 MW solar project. These initiatives are expected to enhance cost efficiency and sustainability, with the Urea revamp achieving less than 6 gcal/metric ton energy consumption. Additionally, the company is progressing with a Phosphoric Acid and Sulphuric Acid plant at Sikka, estimated at Rs. 1,500-1,600 crores, with final costs under negotiation, and a Rs. 340 crore Sulphuric Acid V plant in Vadodara expected to be capitalized in Q2/Q3.

The company faced significant increases in Phosphoric Acid (priced at $1,258/metric ton) and Sulphuric Acid prices, impacting P&K cost economics and making DAP production uneconomical. Management is hopeful for a revision in government subsidies, expected from October 1st, to mitigate the impact of rising input costs and ensure profitability. They believe the government will note the high raw material prices and provide higher subsidies for P&S based fertilizers.

GSFC maintains a strong balance sheet with no long-term debt and adequate liquidity, supported by timely government subsidy disbursements received up to the second week of July. While cash reserves have reduced from March 2025 due to raw material inventory piling up for next quarter production, management believes current liquidity will suffice for the planned PASA plant. The company plans to approach the market for funding portions of its larger capex projects exceeding Rs. 1,600 crores.