G S F C — Q1 FY26 earnings call

Call held 8 Aug 2025

Management summary

Gujarat State Fertilizers & Chemicals Limited reported a resilient Q1 FY26 with marginal revenue growth of 1% YoY to Rs. 2,184 crores, driven by strong PBT and PAT growth of 63% and 59% respectively. The fertilizer segment saw robust EBIT growth, while the industrial segment turned profitable. However, production volumes declined, and rising raw material costs for P&K fertilizers remain a key challenge, though management expects subsidy revisions. The company commissioned three key projects to enhance cost efficiency and sustainability.

Highlights

  • Consolidated revenue grew marginally by 1% YoY to Rs. 2,184 crores.

  • Consolidated PBT rose by 63% YoY to Rs. 184 crores.

  • Consolidated PAT rose by 59% YoY to Rs. 139 crores.

  • Fertilizer segment EBIT grew to Rs. 137 crores from Rs. 86 crores YoY.

  • Industrial product segment turned profitable with Rs. 25 crores EBIT.

  • Commissioned 15 MW solar project, Urea-II energy revamp, and 37.5 MW share in GIPCL's 75 MW solar project.

Concerns

  • Fertilizer production reduced by 10% YoY (40,787 metric tons).

  • Rising Phosphoric Acid and Sulphuric Acid prices impacting P&K cost economics.

  • Caprolactam Benzene spreads likely to remain under pressure due to oversupply and Chinese dumping.

  • DAP production is not cost-economical, leading to reliance on imports/trading.

Key financials

  1. Revenue from Operations ₹2,184 Cr +1%YoY
  2. PBT ₹184 Cr +63%YoY
  3. PAT ₹139 Cr +59%YoY
  4. Fertilizer Segment EBIT ₹137 Cr +59.3%YoY
  5. Industrial Product Segment EBIT ₹25 Cr

What they filed

Q1 FY27: revenue up 64.1%, net profit up 14.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,635 2,814 1,922 2,184 3,187 +21%2,941 +5%2,633 +37%3,583 +64%
EBITDA284 158 80 193 337 +19%178 +13%83 +4%233 +21%
Net profit298 134 72 139 324 +9%158 +18%52 −28%159 +14%
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 EBIT
₹162 Cr Total
  • Fertilizer ₹137 Cr 84.6%
  • Industrial Product ₹25 Cr 15.4%

Capital allocation

high confidence
  • Capex Capex disclosed A mix of internal accruals and external funding for larger projects, as money is not sufficient for PSU project (>Rs. 1,600 crores).
    • Phosphoric Acid and Sulphuric Acid plant at Sikka ₹1,600 Cr
    • Converting DAP train at Sikka for fungible production ₹30 Cr
    • Sulphuric Acid V plant in Vadodara ₹340 Cr
    Under execution, today only this Phosphoric Acid and Sulphuric Acid plant at Sikka, which is proposed. So, that CAPEX is around Rs. 1,600-Rs. 1,700 crores what we have projected at the time of proposal. Now, the firm bids have been received, and we are under negotiation, we cannot disclose the price. So, this is the CAPEX available presently. But more stream of DAP at Sikka is proposed to be converted into fungible production facilities like APS and other NPK. So, approximately, Rs. 30-Rs. 40 crores expenditure will be there to convert this DAP train. Yes, that is commissioned in next month or so, September, October. So, that is around Rs. 340 crores of the plant. So, we will be capitalizing that in the next quarter or in the 3rd quarter. No. 3-4 projects, we have already commissioned and now our money we are having, it is not sufficient to cater the needs of PSU project, which is more than Rs. 1,600 crores. So, let us see whenever we need, we will approach the market for that portion.
  • Debt Debt disclosed
    We continue to maintain a strong balance sheet with no long-term debt, healthy net worth, and adequate liquidity.
  • Liquidity Liquidity disclosed Cash has reduced from March 2025 due to raw material inventory piling up for next quarter production, but management believes it will suffice for the PASA plant.
    Yes, so that has been reduced quite a bit, Rs. 800 crores. So, now because of the raw material prices going on, other inventory we are piling up for the next quarter production. So, we are not having that much cash, which I can assume that it will suffice for the PASA plant.

Guidance & targets

Volume

  • Fertilizer Volume Volume · FY26 · High confidence 23-24 lakhs tons
    FY '26, the whole year, we are expecting fertilizers in the range of 23-24 lakhs.

    — S. V. Varma

  • APS and AS Volume Volume · FY26 · High confidence around 10 lakhs tons
    And APS and this both combined around 10 lakhs.

    — S. V. Varma

  • Fertilizer Volume Volume · Q2 · High confidence 5.8-6 lakhs tons
    Around 5.8-6 lakhs.

    — S. K. Bajpai

Efficiency

  • Urea Energy Consumption Efficiency · Post-revamp · High confidence less than 6 gcal/metric ton
    So, actually, after this revamp, we could get less than 6 gcal energy consumption per metric ton of Urea.

    — S. K. Bajpai

Profitability

  • Urea Revamp Payback Period Profitability · Medium confidence 6-7 years
    So, if they fix the subsidy based on the old energy norms, then we will generate something like Rs. 50-Rs. 60 crores per annum. So, that payback period will be 6-7 years.

    — S. K. Bajpai

Cost Savings

  • Solar Power Cost Savings Cost Savings · Annual · Medium confidence Rs. 20 crores
    But roughly, we can say that Rs. 20 crores odd figures we will be receiving by way of reduction in the power cost.

    — S. K. Bajpai

What to watch in Q2 FY26

Government subsidy revision for P&S based fertilizers

After September / Q3 FY26
Current Subsidy to be fixed based on input cost by GoI from Oct 1st.
Target Higher subsidy for P&S based fertilizers.

Why it matters

Directly impacts the profitability of the fertilizer segment, especially given high raw material costs.

As I told you in the opening remarks, the subsidy is due to be fixed based on the input cost by the Government of India with effect from 1st of October. So, we are quite hopeful that there must be some revision because Sulphuric Acid price and Phosphoric Acid price, both have been risen a lot and that is the reason the DAP is not economically viable for us to produce.

Risks & concerns

  • Rising raw material costs (Phosphoric Acid, Sulphuric Acid)

    high

    Prices of Phosphoric acid and Sulphuric Acid saw a sharp increase impacting P&K cost economics, leading to DAP being uneconomical to produce. Management is relying on GoI subsidy revision.

    Management acknowledged

  • Regulatory dependence for fertilizer profitability

    high

    Profitability of AS/APS depends on GoI fixing subsidy based on input costs, which is expected from October 1st. Policy actions from the Department of Fertilizers will be critical.

    Management acknowledged

  • Caprolactam Benzene spread pressure

    medium

    Spreads are likely to remain under pressure due to oversupply and Chinese dumping. Company has applied for anti-dumping duty.

    Management acknowledged

  • TIFERT plant closure due to fire

    medium

    The TIFERT plant in Tunisia has been closed since February due to a fire, resulting in no supply of P2O5. Management expects supply to be restored once the plant restarts.

    Management acknowledged

Q&A highlights

5 direct
Profitability mechanism for AS and APS fertilizers Partial
So, I think the profitability in case of Ammonium Sulphate and Ammonium Phosphate Sulphate is dependent on the cost of the nutrient what we are using in the production of AS and APS. Actually, for us this P2O5 rates are very high, and it is presently around $1,258 per metric ton. So, there is no fixed norm that what is the percentage of profit we are earning.

Highlights the dependence on raw material costs and lack of a fixed profit margin mechanism, indicating vulnerability to input price volatility.

Asked by Nirav

Outlook on fertilizer margins given high raw material costs Direct
As I told you in the opening remarks, the subsidy is due to be fixed based on the input cost by the Government of India with effect from 1st of October. So, we are quite hopeful that there must be some revision because Sulphuric Acid price and Phosphoric Acid price, both have been risen a lot and that is the reason the DAP is not economically viable for us to produce.

Indicates management's reliance on government subsidy revisions to restore profitability, highlighting regulatory risk.

Asked by Nirav

Sustainability of Rs. 25 crores EBIT from Industrial Products segment Direct
That is not only the Ammonia trading. Ammonia trading is the basic factor and we continue the Ammonia trading if we get the Ammonia at a good price. So, we have the contract in our hand and we will continue to do so in the next quarter or coming quarters also. But also, in the Caprolactam side now, we have developed a new product HX crystal. So, while Caprolactam is not giving any positive contribution, we have shifted some of the intermediate product like HX for manufacturing of HX Crystal. So, during the last quarter, it has also given a very good margin. So, the IP sector has come into positive side and it will continue to do so because these are the permanent plants, HX Crystal and other things like Ammonia. So, I think now, we will have some more improvement in the coming quarter.

Clarifies that the industrial segment's profitability is not solely from one-off ammonia trading but also from new product development (HX crystal) and ongoing ammonia trading contracts, suggesting some sustainability.

Asked by Nirav

Impact of Urea revamp on profitability and energy savings Partial
So, actually, after this revamp, we could get less than 6 gcal energy consumption per metric ton of Urea. So, whatever the targeted energy norm by the Government of India, it has been achieved. And that less conserving of this energy norm, that will provide temporary relief. But I don't know what is the stance of the Government of India, they will fix the energy norms and the subsidy for the GSFC.

While the technical target was achieved, the financial benefit is contingent on government policy, introducing regulatory uncertainty.

Asked by Nirav

DAP production strategy given cost-inefficiency and China import restrictions Direct
No, actually the DAP production is not cost-economical. So, we have tied up 4 segments of DAP from the international suppliers and actually one has already arrived and 3 are in the line queue. So, enough DAP will be available to the farmers during the season and in place of DAP, we are manufacturing this APS and one idle strain of this DAP production at Sikka unit now, we are proposing to convert it for the fungible production whether we require to produce DAP or APS or other NPK grade of fertilizers.

Reveals a strategic shift away from cost-inefficient DAP production towards importing and converting existing facilities for fungible production, impacting future product mix.

Asked by Yash

Status and cost of the Phosphoric Acid and Sulphuric Acid project at Sikka Partial
No, cost still we are in the negotiation stage. So, it is not firmed up. Earlier, we have estimated around Rs. 1,500-Rs. 1,600 crores for this PSA plant. But after receiving the actual code and commercial negotiation, we will be able to finalize and tell to you what is the real cost of the project.

Indicates that a major capex project's final cost is still under negotiation, introducing potential for cost revisions.

Asked by Saket Kapoor

Impact of ammonia stock mismatch on Q4 FY25 industrial product profitability Direct
No, actually one more factor which I tell to you that during this fiscal instruction as on 31st March of the physical stock of the ammonia and the book stock, there was some mismatch. So, we have inflated the stock in the system because physical stock was there. So, that was also one factor which provided a little more margin because it was that the stock material uploaded in the system and that is the reason that you are seeing the higher margins available by way of trading on ammonia.

Explains a one-time factor that boosted Q4 FY25 industrial segment margins, implying that the Q1 FY26 profitability is a more normalized run rate.

Asked by Saket Kapoor

Timeliness of government subsidy disbursements Direct
No, we are receiving the subsidy well in time, up to the July 2nd week, we have been receiving the subsidies, there is no delay from the Government side, and I hope that this will continue.

Addresses a key concern for fertilizer companies regarding working capital and cash flow, providing reassurance about timely subsidy receipts.

Asked by Munzal Shah

2 min read 6 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

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 Segment Dynamics and Production

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.

Industrial Product Segment Turnaround and Outlook

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.

Strategic Capex and Project Commissioning

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.

Raw Material Headwinds and Subsidy Reliance

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.

Liquidity and Capital Management

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.

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