Paradeep Phosphates Limited — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

Paradeep Phosphates delivered a quarter of robust volume growth and strong top-line expansion, driven by high production and aggressive POS sales. While margins faced some contraction due to DAP raw material costs and currency headwinds, the company is aggressively pursuing backward integration to secure long-term profitability. Management remains focused on a product mix shift toward NPK and specialized fertilizers like Nano DAP and Triple Super Phosphate.

Highlights

  • Revenue from operations stood at ₹4,105 crores, marking a significant 58% YoY growth.

  • EBITDA for the quarter was ₹372 crores with a margin of 9%.

  • PAT reached ₹159 crores, up 47% YoY, with a 4% PAT margin.

  • Production volume rose 25% YoY to 675,808 metric tons; sales surged 47% to 870,586 metric tons.

  • POS sales grew 65% YoY to 10.54 lakh metric tons, surpassing the 1 million ton milestone.

  • Backward integration of sulfuric acid (to 2 million TPA) is on track for completion by Q3 FY26.

  • Management committed ₹4,000 crores of capex in Odisha for fertilizer and green energy projects.

  • Nano-fertilizer sales surpassed 1.4 million bottles in the 9-month period.

Concerns

  • DAP Margin Pressure

Key financials

  1. Revenue ₹4,105 Cr +58%YoY
  2. EBITDA ₹372 Cr
  3. EBITDA Margin 9%
  4. PAT ₹159 Cr +47%YoY
  5. Net Debt ₹2,600 Cr
  6. Sales Volume 8,70,586 MT +47%YoY

What they filed

Q1 FY27: revenue up 36.0%, net profit up 24.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,619 4,990 4,194 4,504 6,872 +49%5,749 +15%4,702 +12%6,124 +36%
EBITDA507 438 383 580 657 +30%472 +8%442 +15%720 +24%
Net profit255 209 172 317 342 +34%182 −13%156 −9%393 +24%
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.

Guidance & targets

Capex

  • Odisha Investment Commitment Capex · Next few years · Medium confidence ₹4,000 crores
    So out of the Rs. 4,000 crores investment, what we are envisaging is a Rs. 3,000 crores investments will be on the fertilizer operations... And the balance Rs. 1,000 crores is estimated to be around green space.

    — Alok Saxena, Head Corporate Finance & IR

Capacity

  • Sulfuric Acid Capacity Expansion Capacity · Q3 FY26 · High confidence 2 million TPA

    From 1.3 million TPA today

    Our sulfuric acid capacity expansion from 1.3 million tons per annum to 2 million tons per annum remains on track for completion by Q3 FY '26.

    — Suresh Krishnan, MD & CEO

Margin

  • Integrated EBITDA per metric ton Margin · FY26 · Medium confidence ₹5,500+

    From ₹4,500-5,000 today

    But I believe that once the backward integration for us across the site... then we should obviously be pushing ourselves into a range of Rs.5,500 per metric ton above.

    — Suresh Krishnan, MD & CEO

Volume

  • Annual Sales Volume Milestone Volume · FY25/FY26 · High confidence 2.9 - 3.0 million tons
    Like we are nearly going to be hitting closer to the 2.9 million ton to 3 million ton mark that we had in mind in terms of overall sales.

    — Suresh Krishnan, MD & CEO

  • Nano-fertilizer growth Volume · Next 2-3 years · Medium confidence 40%
    what we should see going forward would be maybe a substantial 40% growth from where we are today.

    — Suresh Krishnan, MD & CEO

Risks & concerns

  • DAP Margin Pressure

    high

    Raw material price increases and currency weakening are squeezing DAP margins; correction expected from April 2025.

    Management acknowledged

  • Subsidy Receivables

    medium

    ₹1,700 crores in subsidy is currently pending from the government.

    Analyst acknowledged

  • Currency Volatility

    medium

    Weakening INR impacts the cost of imported raw materials like sulfur and rock phosphate.

    Management acknowledged

Areas of evasion (1)

  • Specific details on Morocco investment plans were deferred to a later stage.

Q&A highlights

3 direct
DAP Margin Contraction Direct
DAP is one product wherein we are seeing a contraction right through... raw material prices have gone up, the currency is weakening. However, the affordability of the farmer has been good.

Explains why margins declined in percentage terms despite strong revenue growth.

Asked by S. Ramesh

Subsidy Accounting Discrepancy Direct
Government said they will pay Rs.3,000 crores and Rs.500 crores will be paid at the end of the year after the audited details are given to them. So we've gone by that.

Clarifies that the company is being conservative by only accounting for ₹3,000 of the ₹3,500 subsidy, leaving a potential upside for Q4.

Asked by Dhruv Muchhal

Backward Integration Savings Direct
The domestic value capture for making phosphoric acid... could be going up to Rs.12,000 and at times even could go to Rs.14,000. So that value capture goes on.

Quantifies the massive margin benefit of captive phosphoric acid production versus imports.

Asked by Vignesh Iyer

2 min read 5 chapters

Detailed narrative

Volume Growth Outpaces Margin Expansion

Paradeep Phosphates reported a stellar 58% YoY increase in revenue, reaching ₹4,105 crores for Q3 FY25. This was underpinned by a 47% surge in sales volumes to 870,586 metric tons. However, EBITDA margins remained flat at 9% as the company faced headwinds in the DAP segment, where rising raw material costs and a weakening currency offset volume gains. Management expects a margin correction in DAP starting April 2025 as government subsidy rates (NBS) are reset.

Backward Integration as a Margin Driver

The company is aggressively expanding its captive acid capacities to insulate margins from global price volatility. The sulfuric acid capacity expansion to 2 million TPA is slated for completion by Q3 FY26, which is expected to yield the 'full benefit' of integrated operations. Management highlighted that captive phosphoric acid production currently provides a value capture of ₹10,000 to ₹14,000 per ton compared to imports, a key pillar of their long-term profitability strategy.

Strategic Pivot to NPK and Specialized Products

PPL is successfully shifting its product mix toward NPK fertilizers, which saw a 48% growth in farmer sales compared to the industry's 30%. The company produced 7 unique NPK grades this quarter. Additionally, the newly launched Triple Super Phosphate and Biogenic nano-fertilizers are gaining traction, with nano-fertilizer sales hitting 1.4 million bottles in 9MFY25. Management targets a 40% growth rate for the nano segment over the next few years.

Odisha Capex and Green Energy Initiatives

Management committed to a ₹4,000 crore investment plan in Odisha, with ₹3,000 crores dedicated to fertilizer operations (phosphoric acid, sulfuric acid, and downstream granulation) and ₹1,000 crores for 'green space' projects like green ammonia. Furthermore, a ₹180 crore energy efficiency project at the Goa plant is expected to deliver a 25% ROCE by modernizing compressors and reducing the carbon footprint.

Conservative Accounting and Subsidy Outlook

In a display of accounting prudence, PPL has only recognized ₹3,000 of the ₹3,500 incremental DAP subsidy per ton, with the remaining ₹500 to be booked in Q4 FY25 following a year-end audit. The company received ₹1,750 crores in subsidies during the quarter, with ₹1,700 crores still pending. Management expressed confidence that the current government subsidy allocation is adequate and expects more stable fertilizer prices if geopolitical tensions remain contained.

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