Krishana Phoschem Limited

Krishana Phoschem Limited reported a resilient Q1 FY27, with revenue growing 35% year-on-year to ₹532 crore and EBITDA increasing 36% year-on-year to ₹89 crore. Despite these gains, the quarter was marked by a challenging operating environment, including global supply-side disruptions, elevated raw material prices, and geopolitical uncertainties. PAT rose 54% YoY to ₹47 crore, but the PAT margin declined QoQ from 11% to 8.9% primarily due to increased finance costs (₹13 crore to ₹20 crore) and depreciation (₹8.7 crore to ₹13 crore) from newly commissioned plants.

The company faced significant raw material issues in Q1 FY27, exacerbated by geopolitical tensions in West Asia affecting critical shipping lanes. This led to higher freight costs and increased prices for key inputs like ammonia, sulfur, phosphatic acid, and rock phosphate. Industry-wide production declined by 28% year-on-year, with SSP production down 7% year-on-year, largely due to supply-side constraints rather than demand weakness. Sulphur prices, a critical raw material, surged from ₹65,000-70,000 per tonne in April to nearly ₹1 lakh per tonne by June and July.

To navigate the challenging environment and meet evolving nutrient requirements, Krishana Phoschem expanded its product portfolio by introducing additional complex fertilizer variants, including 12:32:16, 16:20:0:13, 15:15:15, 8:21:21, and 9:24:24. The production and sales of these new NPK products contributed to an improvement in EBITDA margins. Management confirmed that the increase in EBITDA is attributable to both cost efficiencies and improved selling prices, with manufacturing EBITDA margins averaging around 16% compared to 7-8% for trading.

In Q1 FY27, the company achieved fertilizer production of 89,747 metric tonnes, with NPK-DAP unit utilization at 43% and SSP unit utilization at 121%. Management expects a steady ramp-up in utilization of the NPK capacity commissioned last quarter. They are confident that raw material issues have been resolved, and supplies are moving smoothly, anticipating optimal capacity utilization in the remaining quarters and a quarterly turnover exceeding ₹500 crore for the rest of FY27.

Several favorable developments supported the industry, including the government's hike in Minimum Support Prices (MSPs) for 14 Kharif crops, which is expected to strengthen farmgate economics and fertilizer demand. The Nutrient Based Subsidy (NBS) support continued despite raw material inflation, ensuring affordability for farmers. Additionally, the monsoon revived strongly in early July, cutting the all-India rainfall deficit from nearly 40% to 24%, accelerating Kharif sowing and improving farmer sentiment.

Krishana Phoschem has signed a 10-year agreement for 70,000 MTPA of Green Ammonia with SECI, expected to commence in FY29. This strategic agreement aims to ensure the company's cost price for ammonia will match international grey ammonia prices, positioning them as the lowest-cost raw material buyer in the country for green ammonia once the facility becomes operational. This initiative also aligns with the government's National Energy Security Initiative.