Chambal Fertilisers and Chemicals Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives (6)

Abhay Baijal, Anuj Jain, Ashish Srivastava, Narinder Goyal, Tridib Barat, Vivek Misra

Analysts (9)

Darshita (DSP Asset Managers), Dhruv Muchhal (HDFC AMC), Himani Negi (District B), Karan Gupta (CAVI Capital), Mayuresh (invest4Edu), Prashant (Elara Capital), Sanjay K. (Individual Investor), Shivam Gupta (Trinetra Asset Managers), Viraj Kacharia (SiMPL)

Financials & KPIs

Geographic & Segment Commentary

• Urea: Revenue declined 8% YoY to ₹2,860 crore due to bunched shutdowns, but profitability remained healthy. Margins benefited from Gadepan III ramp-up, currency uptick and better-margin ammonia sales. Production volumes: G1 0.96 lakh tonnes, G2 1.85 lakh tonnes, G3 3.29 lakh tonnes.
• Complex Fertilizers: Revenue fell 18% YoY to ₹1,737 crore on delayed sowing and cautious placement, but EBIT jumped 67% to ₹239 crore due to prudent advance procurement. The company launched Ammonium Sulphate and has tied up 8.5–9 lakh tonnes of material.
• Crop Protection, Specialty Nutrients & Seeds: Revenue declined 6% to ₹430 crore on deferred farmer purchases, while EBIT rose 13% to ₹108 crore on better product mix. Seven new products launched across herbicides, fungicides and insecticides; two new maize/bajra varieties added; biologicals business reported volume and revenue growth.
• Technical Ammonium Nitrate (TAN): Weak Nitric Acid and Ammonium Nitrate Solution production commenced; High Density Ammonium Nitrate (HDAN) is nearing commissioning. Sales are not yet booked in the P&L and are being adjusted against project de-capitalization; 8.5 lakh tonnes tied up with vendors.
• IMACID JV (Morocco): Temporarily shut down due to sulfur shortage and elevated prices to avoid negative margins; production resumed in July with improving market conditions.
• Domestic demand/monsoon: Kharif sowing stood at ~183 lakh hectares at end-June, down ~23% YoY, but July monsoon recovery brought acreage broadly back to last year's levels. July farmer sales reached ~3.80 lakh tonnes of urea and ~0.92–0.93 lakh tonnes of NPK.

Company-Specific & Strategic Commentary

• Urea capacity expansion (NUP 2026): Government approved the National Investment Policy for Urea 2026. Preparatory activities are ongoing for a potential fourth urea plant (~₹10,000 crore capex), subject to board approval. Financial bids expected by mid-October after technical equalization; commissioning targeted by 2030. Scale advantage would make the site India's largest and Asia's second-largest urea complex.
• TAN value chain: Ramp-up progressing with three products (WNA, ANS, HDAN), warehouses being completed, and marketing mix expected to be fully in place by end-December. Management sees further downstream chemical/nitric acid opportunities.
• Phosphatic JV: An overseas JV for finished phosphatic material supply to India is under evaluation; progress has been made. Domestic granulation from rock was assessed but found costlier due to high outside-battery-limit costs.
• Innovation & sustainability: CFCL-TERI Centre of Excellence lab is operational, with next-generation agri-tech products expected from FY2028/29. Seed to Harvest programme completed 1,400+ farmer meetings, 500+ demos and 38,000+ soil samples; social media reach crossed 1.63 crore viewers.
• Capital allocation: Dividend policy of ~25% payout to be maintained; buyback is not on the horizon given project visibility. Balance sheet remains strong with net borrowings of only ~₹200 crore.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Urea Expansion & NUP 2026

• Question: Does the company need fresh approval for the new urea plant, and what is the timeline? (Prashant, Elara Capital)
• Answer: Formal approach with bank guarantees happens only after government approval; company considers itself a strong contender. Application window is already open; financial bids expected by mid-October post technical equalization, followed by board approval. (Abhay Baijal)
• Question: New policy returns are dilutive vs old policy—why invest? (Viraj Kacharia, SiMPL)
• Answer: Scale benefits of four urea plants at one site—India's largest and Asia's second-largest complex—cut fixed costs and capital expenditure. India's urea consumption gap (404–405 lakh MT vs domestic production of 305–306 lakh MT) and cross-sell through the dealer network also add strategic value. (Abhay Baijal)
• Question: What is the expected EBITDA per tonne and timeline for the new plant? (Viraj Kacharia, SiMPL)
• Answer: At current dollar conversion (~₹13,500 per tonne revenue), EBITDA likely around ₹12,000 per tonne. Commissioning targeted by 2030; capital cost optimisation is the key variable. (Abhay Baijal)
• Question: Is efficiency gain beyond 16% ROE capped? (Dhruv Muchhal, HDFC AMC; Viraj Kacharia)
• Answer: 12–16% ROE is an indicative floor/ceiling; efficiency gains and lower project costs are not capped. Benefits under gas price between $14 and $6.5–7 are similar to the old policy. (Abhay Baijal)
• Question: How are plants allocated if multiple players apply? (Dhruv Muchhal, HDFC AMC)
• Answer: Five-year execution timeline and ₹300–400 crore bank guarantee act as entry barriers; limited vendors give first-mover advantage. Company is confident of its position. (Abhay Baijal)

Urea Business & Gas Pricing

• Question: What drove urea profitability despite lower volumes? (Dhruv Muchhal, HDFC AMC)
• Answer: Gadepan III was the largest contributor; currency uptick directly helped Gadepan III margins; ammonia sales also added better margins. (Abhay Baijal)
• Question: What was Q1 gas price and net cash position? (Prashant, Elara Capital)
• Answer: Q1 provisional gas price was $17.25/mmBtu on NCD basis; net borrowings were ~₹200 crore. (Anuj Jain)
• Question: Have WNA and ANS revenues been booked? (Prashant, Elara Capital)
• Answer: Sales have been made but are not yet in the P&L; they are being adjusted against project de-capitalization and will enter the P&L shortly. (Abhay Baijal)
• Question: Can G3 utilise full 1.27 million tonnes by November? (Prashant, Elara Capital)
• Answer: Not possible; maximum run rate is 9.5–10 lakh tonnes per month, so the full quantity cannot be completed before the policy period ends. (Abhay Baijal)

Complex Fertilizers & Subsidy

• Question: Why were complex fertilizer margins so strong? (Shivam Gupta, Trinetra Asset Managers)
• Answer: Advance purchases at lower prices helped placement, revenues and margins; margins will normalise as price averaging happens. (Abhay Baijal)
• Question: Why is the NPK subsidy delayed? (Dhruv Muchhal, HDFC AMC; Darshita, DSP Asset Managers)
• Answer: Government is balancing stocks, monsoon progress and fiscal position; DAP/urea are effectively cost-plus, but NPK has less sensitivity. Industry expects action by October; interim relief has not been received. Chambal's calculated advance procurement (8.5–9 lakh tonnes) gives it an advantage. (Abhay Baijal)
• Question: How does e-token restriction on urea/DAP purchases impact the company? (Darshita, DSP Asset Managers)
• Answer: The system was suspended in Madhya Pradesh after farmer agitation; no further commentary on pan-India implications. (Abhay Baijal)

TAN & Nitric Acid Value Chain

• Question: How much TAN volume is tied up? (Shivam Gupta, Trinetra Asset Managers)
• Answer: 8.5 lakh tonnes tied up with vendors. (Ashish Srivastava)
• Question: Is there oversupply risk and does Reliance entry threaten TAN margins? (Mayuresh, invest4Edu)
• Answer: Demand growth from infrastructure, coal mining and thermal expansion is strong; any oversupply likely to last not more than a year. Reliance's entry is speculative; currently no roadblocks. (Abhay Baijal)
• Question: Does the FY27 utilisation target of 70–80% still hold? (Viraj Kacharia, SiMPL)
• Answer: ANS Melt started mid-June; market response on quality, delivery and pricing is positive. HDAN is near commissioning; marketing mix should be complete by end-December, with stronger volumes from Q3. (Abhay Baijal)

Phosphatic Sourcing & Overseas JV

• Question: How are global phosphatic supplies from North Africa shaping up? (Prashant, Elara Capital)
• Answer: Morocco is rich in phosphate but short on sulfur and ammonia; it sourced sulfur from North America and has resumed production. China remains largely out, while Saudi Arabia faces logistics issues; North Africa remains a major global supplier. (Abhay Baijal)
• Question: Why an overseas phosphatic JV instead of domestic granulation? (Viraj Kacharia, SiMPL; Darshita, DSP Asset Managers)
• Answer: Domestic granulation from rock is costlier due to high outside-battery-limit costs—storage, gypsum disposal and ammonia tanks. The overseas JV is focused on supplying finished phosphatics to India; OCP is expanding phosphoric acid capacity from 500,000 to 700,000 tonnes, operational by Apr–Jun 2027. (Abhay Baijal)

Capital Allocation & Balance Sheet

• Question: Will large capex affect dividends or buybacks? (Karan Gupta, CAVI Capital)
• Answer: Dividend policy of ~25% payout will be maintained; buyback is not on the horizon given clear project visibility. (Abhay Baijal)

Demand Outlook & Monsoon

• Question: Will Q2 demand be better than expected after the delayed monsoon? (Sanjay K., Individual Investor)
• Answer: Yes. July saw ~3.80 lakh tonnes of urea farmer sales and ~0.92–0.93 lakh tonnes of NPK, with daily pickup of ~19,000–20,000 tonnes; channel liquidation will drive second-round demand. (Abhay Baijal)

Key Takeaway

Chambal Fertilisers delivered resilient Q1 FY27 results despite geopolitical disruption and a delayed monsoon: revenue fell 12% YoY to ₹5,000 crore, while EBITDA rose 12% to ₹851 crore (17% margin, +350 bps) and PAT grew 10% to ₹703 crore. Urea volumes were hit by bunched plant shutdowns, but profitability was aided by Gadepan III's contribution, currency gains and ammonia sales. Complex fertilizers posted a 67% EBIT jump to ₹239 crore on accumulated low-cost inventory, while crop protection/specialty EBIT grew 13%. Strategically, management is progressing a potential fourth urea plant under NUP 2026 (₹10,000 crore; board decision after mid-October bids; commissioning by 2030), ramping TAN with 8.5 lakh tonnes tied up, and exploring an overseas phosphatic JV. July monsoon recovery supports stronger Q2 demand; key watch points are NPK subsidy revisions, raw-material prices and project execution.

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