Mangalore Chem. — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

Mangalore Chemicals & Fertilizers Limited reported an excellent Q3 FY25 performance, driven by strong operational efficiencies and robust sales. Revenue, EBITDA, PBT, and PAT all saw significant year-on-year growth, with sales volumes increasing by 61%. The company achieved its lowest-ever Urea energy consumption and crossed a Net Worth of ₹1,000 crores. While 9-month cumulative figures show a decline primarily due to reduced DAP imports, management remains optimistic about maintaining positive momentum into Q4 FY25, supported by favorable agricultural conditions and ongoing strategic initiatives.

Highlights

  • Revenue for Q3 FY25 increased by 51% YoY to ₹968 crores.

  • EBITDA for Q3 FY25 grew by 20% YoY to ₹110 crores.

  • Profit Before Tax (PBT) for Q3 FY25 surged by 47% YoY to ₹75 crores.

  • Profit After Tax (PAT) for Q3 FY25 rose by 73% YoY to ₹57 crores.

  • Sales volume in Q3 FY25 was 2.19 lakh metric tons, a 61% increase YoY.

  • Urea energy efficiency reached a lowest-ever 5.45 giga calorie per ton in Q3 FY25.

  • The company's Net Worth crossed ₹1,000 crores during Q3 FY25.

  • EBITDA per tonne for Urea in Q3 FY25 was ₹7500, and for Non-Urea was ₹1000.

Concerns

  • Elevated Raw Material Prices for Phosphatic Fertilizers

  • Insufficient Subsidy for DAP Imports

Key financials

3 periods

Headline

  • Net Worth (Dec 2024)
    ₹1,000 Cr
  • Subsidy Receivables (Dec 2024)
    ₹319 Cr

Q3 FY25

  • Revenue
    ₹968 Cr
    YoY +51%
  • EBITDA
    ₹110 Cr
    YoY +20%
  • PBT
    ₹75 Cr
    YoY +47%
  • PAT
    ₹57 Cr
    YoY +73%
  • EPS
    ₹4.84
    YoY +74%
  • Sales Volume
    2.19 lakh metric tons
    YoY +61%

9M FY25

  • Revenue
    ₹2,558 Cr
    YoY -15%
  • EBITDA
    ₹303 Cr
    YoY -18%
  • PBT
    ₹184 Cr
    YoY -21%
  • PAT
    ₹128 Cr
    YoY -15%
  • EPS
    ₹10.77
    YoY -15%
  • Sales Volume
    5.9 lakh metric tons
    YoY -13%

What they filed

Q1 FY26: revenue up 5.9%, net profit up 40.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q3 FY24Q4 FY24Q1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26
Revenue1,410 641 786 814 776 −45%968 +51%774 −2%862 +6%
EBITDA141 82 36 106 76 −46%103 +26%38 +6%111 +5%
Net profit68 33 5 44 26 −62%57 +73%16 +220%62 +41%
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 Revenue (Q3 FY25)
₹968 Cr Total
  • Urea ₹573 Cr 59.2%
  • Non-Urea (Complex Fertilizers) ₹395 Cr 40.8%

Guidance & targets

Merger

  • Merger Completion Timeline Merger · from Feb 2025 · Medium confidence 6-9 months
    Post the SEBI approval, we are going to approach the NCLT for final approval of the scheme which may take around 6 months to 9 months. So we are hoping that within the next 6-9 months, this process has to get completed.

    — Mr. Nitin Kantak, Whole-Time Director

Capex

  • Sulphuric Acid Project Completion Capex · August 2025 · High confidence August
    Currently of course, our sulphuric acid project is right now in progress and it is going to be completed in August.

    — Mr. Nitin Kantak, Whole-Time Director

  • Sulphuric Acid Project Investment Capex · ongoing · High confidence ₹240 crores
    This is being done with an investment of 240 crores and this is going to give us a benefit in terms of reduction in our urea energy by about 0.25 giga calorie per tonne

    — Mr. Nitin Kantak, Whole-Time Director

  • Sulphuric Acid Plant Term Loan Draw Capex · next financial year FY26 · Medium confidence ₹120 to 140 crores
    So we expect to draw maybe ₹120 to 140 crores. We will not draw fully. As we come closer to the project execution or completion, we will draw remaining part of the term loans.

    — Mr. T. M. Muralidharan, CFO

Operational Efficiency

  • Urea Energy Reduction Operational Efficiency · post Sulphuric Acid Project completion · High confidence 0.25 giga calorie per tonne
    This is being done with an investment of 240 crores and this is going to give us a benefit in terms of reduction in our urea energy by about 0.25 giga calorie per tonne

    — Mr. Nitin Kantak, Whole-Time Director

  • Urea Energy Level Operational Efficiency · FY25 · High confidence almost 5.55 giga calorie per ton
    this year it has consistently remained lower and we are expecting to finish this year with almost 5.55 giga calorie per ton energy level.

    — Mr. Nitin Kantak, Whole-Time Director

Debt

  • Term Loan Repayment Debt · by FY28 (within 3 years) · High confidence majority cleared
    This will be repaid over significantly over the next 3-4 years. So we expect, to be cleared majority in another 3 years' time by FY28, we will be carrying a small book of say ₹90 crores.

    — Mr. T. M. Muralidharan, CFO

  • Cost of Long-Term Funds Debt · current rate · High confidence sub 9 percent
    We are getting about sub 9 percent, at this current rate, market rate, sub 9 percent is a good rating, good cost for long term for an average tenure of 5 years.

    — Mr. T. M. Muralidharan, CFO

  • Cost of Working Capital Borrowings Debt · current rate · High confidence around 7 percent+/-
    So around 7 percent+/-is the cost of my working capital borrowings

    — Mr. T. M. Muralidharan, CFO

Risks & concerns

  • Elevated Raw Material Prices for Phosphatic Fertilizers

    high

    Phosphoric acid and Ammonia prices continue to remain at elevated levels, leading to very low margins on Phosphatic fertilizers.

    Management acknowledged

  • Insufficient Subsidy for DAP Imports

    high

    High import prices for DAP (around $632.5 per ton) are not sufficiently covered by government subsidy, leading to a conscious decision not to import DAP due to negative margins.

    Management acknowledged

  • Uncertainty in Subsidy Revision

    medium

    Management is hoping for increased government support in the next subsidy revision, due in April, to improve margins for the Phosphatic fertilizer industry.

    Management acknowledged

  • Red Sea Shipping Disruption

    medium

    While a temporary ceasefire between Israel and Hamas is a positive development, shipping disruptions in the Red Sea could still impact freight costs for fertilizers and inputs.

    Management acknowledged

Areas of evasion (2)

  • Specific observations/queries from SEBI regarding the merger scheme.
  • Percentage breakdown of raw material costs (power/fuel vs. phosphoric acid).

Q&A highlights

1 direct, 1 evasive
Phosphoric Acid Import Duty Direct
You mentioned there is a 20 percent duty on phosphoric acid. I think that is not factual. I don't know what quality of phosphoric acid you are talking about. The phosphoric acid which is used for the fertilizer industry, the duty on that is only 5percent and there is absolutely no change in that in the last budget.

Clarifies a potential misunderstanding about raw material import duties, which directly impacts the cost structure for Phosphatic fertilizers.

Asked by Mr. Hinel Boradia

Merger Timeline and SEBI Observations Evasive
I don't think Naresh it would be appropriate from my side to disclose what were the queries from SEBI. Whatever queries have been there, they have been satisfactorily answered and we are awaiting their final approval.

While a timeline for the merger was provided, management's refusal to disclose SEBI's specific queries leaves investors in the dark about potential hurdles or concerns raised by the regulator.

Asked by Mr. Ramesh Kevraj

Raw Material Mix Breakup (Power & Fuel vs. Phosphoric Acid) Partial
The phosphoric acid is a part of raw material consumption. Not only phosphoric acid, this ammonia and few other chemicals go into manufacturing phosphorus, that all comes under the raw material consumption. Coming to urea, there are 2 components, the material is the same, that is natural gas consumption. What is used in ammonia and urea section is shown under raw materials.

Analyst sought a percentage breakdown of key raw material costs, but management provided a qualitative explanation of what's included rather than the requested quantitative split, limiting insight into cost drivers.

Asked by Mr. Saket Kapoor

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance and Agricultural Outlook

Mangalore Chemicals & Fertilizers Limited delivered an excellent Q3 FY25, with revenue growing 51% YoY to ₹968 crores and PAT surging 73% YoY to ₹57 crores. Sales volume increased by 61% to 2.19 lakh metric tons. The northeast monsoon brought 9% excess rainfall in operating states, contributing to consistent crop acreage and favorable reservoir levels (120% nationally, 133% in key markets), setting a strong foundation for the upcoming Kharif season and supporting record food production.

Operational Efficiencies and Production Highlights

The company achieved high production volumes in Q3 FY25, with 1.23 lakh tons of Urea and 0.88 lakh metric tons of NP. A significant achievement was the lowest-ever Urea energy consumption at 5.45 giga calorie per ton, a result of the Ammonia Energy Improvement Project. Management expects to finish FY25 with an energy level of almost 5.55 giga calorie per ton, demonstrating consistent focus on optimizing plant operations.

Financial Position and Debt Management

MCFL's Net Worth crossed ₹1,000 crores in Q3 FY25, growing by ₹114 crores YoY. Long-term debt saw a net decrease of ₹73 crores, and short-term debt stood at ₹220 crores. The reduction in finance cost is attributed to term loan repayments and improved working capital management due to timely subsidy disbursements. The company is carrying a term loan book of ₹312 crores, with the majority expected to be cleared by FY28, leaving a small book of ₹90 crores.

Merger and Backward Integration Plans

The merger process with PPL is expected to be completed within the next 6-9 months, pending NCLT approval after SEBI's clearance. Post-merger, the company plans new investments, including a sulphuric acid project (₹240 crores investment) to be completed by August 2025, which is expected to reduce urea energy by 0.25 giga calorie per tonne. Further backward integration plans include studying investments in the NPK Plant at MCFL and potentially a phosphoric acid plant at a group level (Paradeep or Morocco).

Raw Material and Subsidy Dynamics

Raw material prices for Phosphatic fertilizers, particularly phosphoric acid ($1055 per ton) and ammonia ($440-$465), remain elevated. This has resulted in very low margins on Phosphatic fertilizers. DAP import prices are also high ($632.5 per ton), making imports unprofitable due to insufficient government subsidy, leading to a decision not to import DAP. The company anticipates support from the government in the next subsidy revision due in April to aid the Phosphatic fertilizer industry.

Segmental Performance and Market Position

Urea business revenue for Q3 FY25 was ₹573 crores, while non-Urea business posted ₹395 crores. Despite a cumulative decline in overall sales volume for 9M FY25 (5.9 lakh metric tons vs 6.77 lakh metric tons in 9M FY24) due to the absence of DAP imports, MCFL continues to hold the top position in N20 sales in Karnataka. The company's sales performance in Q3 FY25 was exceptional, with 2.19 lakh metric tons sold, a significant improvement from 1.36 lakh metric tons in Q3 FY24.

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