Ladies and gentlemen, good day. Welcome to the Coromandel International Limited Q3 FY 2023 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. S. Ramesh from Nirmal Bang Institutional Equities. Thank you. Over to you, sir. Good evening, and thank you, Rico. Good evening, ladies and gentlemen. On behalf of Nirmal Bang Institutional Equities, I have great pleasure in inviting all for this TQ FY 2023 Earnings Conference Call with the Coromandel International management. Let me hand it over to the CFO, Jayashree Satagopan, who will introduce the management team and give the opening remarks followed by the Q&A. Jayashree, it's over to you. Good afternoon, all, and thanks, S. Ramesh, for organizing this conference call. Today I have with me Mr. S. Sankarasubramanian and Dr. Raghuram Devarakonda, Executive Directors of Coromandel, who will join in responding to your queries during the call. Let me begin with giving an overview of the business environment experienced during the quarter, followed by the company's performance, and then we will have the Q&A session. Global economy. As the World Bank Global Economic Prospects January 2023 release, the real GDP growth is estimated to slow down from 2.9% in 2022 to 1.7% in 2023. It is expected to increase to 2.7% in 2024. The decline in the GDP forecast for this year is reflective of synchronized policy tightening aimed at containing very high inflation in the U.S., worsening financial conditions, and continued disruptions from Russia's invasion of Ukraine. The combination of slow growth, tightening financial conditions, and heavy indebted mess is likely to weaken investments. Furthermore, these negative shocks and deeper weakness in major economies and rising geopolitical tensions could push the global economy towards recession. On the agriculture side, the food price index declined to 132.4 in December 2022 and continued to be in the falling trend from the record high of 159.7 in March 2022. The commodity prices continued to soften from their peak levels, except for sugar and dairy products. Indian economy. The World Bank has reduced the real GDP growth estimate as of January 2023 to 6.6% for FY 2023 from the earlier estimates of 7.1%, which was published in June 2022. It is articulated that India is in a better position to navigate the global headwinds. Indian economy is progressing well and is likely to remain the fastest-growing large economy in the world. The tax collections have been buoyant, reflecting the all-round performance of the economy. The monthly gross GST collections for the past 10 months were more than INR 1.4 lakh crores. With tight monetary measures, inflation has cooled down recently. The headwinds around rupee depreciation, inflation control measures, and energy prices need to be closely watched. Indian agriculture. The country witnessed above normal rainfall during the season. All India simulated rainfall during October 2022 to December 2022 was higher than normal by 20%. Few states, like West Bengal, Odisha, and Telangana, witnessed deficit in the rainfall during the period. The crop acreages for rabi was at 645 lakh hectares, which is 4% higher compared to the prior year. Overall, it has been a good rabi season. Fertilizer industry performance. Global supply of key commodities improved during this quarter, and the industry continued to witness the softening of prices of major raw materials. Domestically, the fertilizer demand has remained strong, supported by good monsoon and favorable policy measures from the government. For this quarter, DAP plus complex fertilizer industry's primary sales volume was up by 18%, current year 70.9 lakh metric tons vis-a-vis six point... 60.2 lakh metric tons in the prior year, with higher imported DAP sales. DAP plus complex fertilizer industry's port sales volume was marginally down by 2%, current year 74 lakh metric tons vis-à-vis 75.8 lakh metric tons in the last year. Major raw material prices continued to witness a downward trend from all-time high prices. The government is proposing a downward revision in NBS rates in line with the trend of falling raw material prices, and this is under discussion. On a year-to-date basis, DAP plus complex fertilizer industry's primary sales volume was up by 16%. Current year is 190 lakh metric tons vis-à-vis 163.6 lakh metric tons in the prior year. DAP plus complex fertilizers industry's spot sales volume was marginally down by 1%. Currently, it is 177.6 lakh metric tons vis-à-vis 180.1 lakh metric tons in the prior year. Coromandel's performance. Coromandel delivered a robust performance during the quarter, registering a strong growth in turnover and profitability, with the agricultural and environment remaining favorable in most of its key operating markets. Normal crop sowing coupled with favorable policies from the government. Record volume sales in NPK and high subsidy realization in the nutrients business primarily led to increase in the revenue during the quarter. In crop protection business, domestic formulation and B2B business grew during the quarter, which was offset with headwinds faced in the export markets. Coromandel ensured that early inputs are made available to the farmers in its key operating markets and promoted the use of balanced nutrition, including organic fertilizer to help rejuvenate the soil and crop productivity. Company's nutrient segment performance. The Nutrient and Allied Businesses segment revenue increased by 72% during the quarter and 71% on a year-to-date basis. Company's FNB and organic products registered a good growth during the year, both in terms of turnover and profitability. One new product, Gardina, targeted at the urban garden segment, was launched during the quarter. On the sales front, the business registered a record volume with sales of 10.5 lakh metric tons during the quarter, which was 27% higher than last year, where the volumes were 8.3 lakh metric tons. On a year-to-date basis, DAP plus complex volumes was at 13.2 lakh metric tons vis-à-vis 27.3 lakh metric tons in the prior year, which is 11% higher. Manufactured DAP plus complex volume was higher by 21% for the quarter and 11% on a year-to-date basis compared to prior year. Imported product volume, mainly DAP, was higher at 88% for the quarter and 12% on a year-to-date basis. Company's market share in Q3 was about 14.8%, and on a year-to-date basis, 15.9%. In the previous year, it was 13.7% in Q3 and 16.7% on a year-to-date basis. The market share for complex fertilizers grew during the quarter and the full year. SSP Q3 sales was at 2.2 lakh metric tons with a growth of 17% over last year, and on a year-to-date basis, sale was at 6.2 lakh metric tons versus 6 lakh metric tons compared to the prior year. Market share on a year-to-date basis for SSP was at 14.9% vis-à-vis 14.7% in the prior year. The urban garden is a growing segment. During the quarter, the specialty nutrient business launched a new product named Gardina to cater to the needs of this segment. Our commercial teams have continued to ensure timely availability of raw materials to enable continuous production at the manufacturing plant by staying abreast with the latest developments in the global markets. During the quarter, our DAP and complex fertilizer plants operated at 108% capacity and produced 9.29 lakh metric tons of fertilizers. On a year-to-date basis, the plants have operated at 102% of the capacity and produced 26.45 lakh metric tons of fertilizers. Phosphate production during the quarter was at 1.1 lakh ton. On a year-to-date basis, it's 3.4 lakh metric ton. Progress on our key capital projects is going as per plan. Work on Sulphuric Acid plant as well as the desalination plant at Vizag is progressing well. Commissioning is expected as per schedule in July 2023. With these initiatives, we would continue to promote balanced nutrition approach and support the farming community. The Crop Protection Business registered a growth of 4% in revenue for the quarter and 3% on a year-to-date basis. Domestic formulation witnessed good growth with positive traction from the new products that were launched during the year and the prior year. Cost lag effect and price-related challenges in exports impacted our export performance. Domestic formulation witnessed good growth with positive traction from the new product launches made during the year. A new bio-insecticide under the brand name of Azamax was launched by the business during the quarter. With this, seven new products have been introduced during the current year. The crop protection business continues to focus on refreshing and strengthening its portfolio and has lined up two new technical and three new formulation to be introduced in the fourth quarter. The R&D and product registration teams are working on a rich pipeline of new and combination products to be launched in the coming year. The business is further activating some of its registration of global markets through collaboration with its key B2B customers. Multi-Purpose plant at Ankleshwar for manufacture of three new technical has been completed, and the business is investigating purchase of additional land for further expansion of its business. On the bio-products, the business is working on other plant extracts to expand its product offerings. Our retail stores operated well during the quarter, focusing on providing all-round agri solutions, including products, farm advisory, and mechanization services. The business has launched a new e-commerce platform, and there was a good response from the prime customers. Retail business has improved its operational efficiencies and has leveraged technology to reach out to its farmers. During Q3, 96% of the stores have been profitable and operated with negative working capital levels. The company continues to promote active solutions with farmers and started piloting cold storage solutions through its retail network. It further plans to scale up drone applications after successful completion of pilot tests in its key operating markets. With that, let me take you through the company's financial performance. Turnover. Coromandel recorded a consolidated total income of INR 8,350 crores during the quarter and INR 24,276 crores for the nine months ended 31st December vis-à-vis corresponding period of INR 5,100 crores for the quarter and INR 14,962 crores for nine months. This represents a growth of 64% for the quarter and 62% for nine months. The increase in revenues has been mainly on account of volumes in the fertilizer business and higher subsidy realization. Nutrient and Allied Business contributed to 92% of the share and remaining 8% coming from crop protection business for the quarter, and the same for the nine months as well. Subsidy non-subsidy share of business stands at 88% and 12% for the quarter and 87% and 13% for the nine months. During the previous year, this ratio was 82.18% during the quarter and 81.19% for the nine-month period. Profitability. Consolidated EBITDA for the quarter was INR 781 crores vis-à-vis INR 544 crores last year, and for the nine months it was INR 2,523 crores as against INR 1,770 crores during the previous year. In terms of subsidy non-subsidy share, it stood at 74.26% during the quarter and 77.23% for nine months. In the previous year, it was 70.30% for the quarter and 72.28% for the nine months period. Net profit after tax for the quarter was INR 527 crores in comparison to INR 382 crores for the corresponding quarter last year, and INR 1,766 crores for the nine months as against INR 1,239 crores in the previous year. Subsidy. During the quarter, company received INR 3,992 crores towards subsidy claims compared to figures last year was INR 2,296 crores. For the nine months ended 31st December 2022, subsidy received is INR 7,994 crores. In the previous year, it was INR 4,459 crores. Subsidy outstanding as on 31st December 2022 was at INR 4,359 crores versus INR 1,336 crores during the previous year. Interest. During the quarter, company incurred a net interest expense excluding indirect interest of INR 8 crores vis-à-vis an interest income of INR 15 crores in the same quarter last year. For the nine months period, company earned a net interest income of INR 0.5 crores versus INR 20 crores interest income during the previous year. Company continued to maintain the surplus funds in board approved securities, and these are earmarked for specific growth-related activities. The company also took some short-term borrowings to fund the near-term working capital needs, mainly to balance return on its margin investments. Credit rating. Company's financial continues to be strong. The company's long-term credit rating by India Ratings and Research, a Fitch Group company, continued to be at IND AAA /Stable and short-term rating at IND A1+. The company's long-term credit rating by CRISIL continued to be at CRISIL AA+ Positive and the short-term debt rating at CRISIL A1+. Forex. During Q3, INR was volatile and it traded in a broad range of INR 80.72-INR 82.94 to a dollar Coromandel follows its prudent conservative approach of hedging the forex exposure, which has been a key help while limiting the impact due to currency depreciation. Dividends. The board in its meeting held on second February 2023 has approved an interim dividend of INR 6 per share. With good northeast monsoon and higher reservoir levels, Indian agriculture continues to be in a bright spot. With strength in our key operating markets, Coromandel will continue to ensure timely availability of agri inputs to the farming community through our dealers and retail outlets. Coromandel, with its diversified presence across the agri value chain, will continue to provide balanced nutrition and integrated pest management solutions to maximize farm productivity. As we open the session for Q&A, please allow me a moment to introduce my colleagues who have joined the call today. S. Sankarasubramanian, heads our nutrient nutrition business. Sankar has been with Coromandel and the Murugappa Group for more than 30 years, and prior to his business role, he has held the position of CFO of the company. Dr. Raghuram Devarakonda heads the Crop Protection Chemicals, bioproducts, and regional business of Coromandel. Raghu brings in experience from industry and consulting business, joined Coromandel in August 2021. Prior to this, he has worked with the Murugappa Group between 2004 and 2013. Thank you all for your interest in Coromandel and joining us in the conf call today. We look forward to interactions. We can now open the session for question and answers. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Tarang Agarwal with Old Bridge Capital. Please go ahead. Hello, good afternoon, thank you for the opportunity. I have three questions. The first is if there is any update on BMCC mines and when can we see some round of commercializations coming from them? The second on the S3 plant, you said that the commercialization will start from July 2023. Just wanted to get a sense on what is the post-tax cash payback that you are anticipating for this plant once it commercializes, and how much time will it take to run at optimal utilizations. The third is phosphate prices for the quarter. Thank you. Thank you, Tarang. On the BMCC mines, I would request Sankar to provide an update. Sankar, if you want, you can also take on SAP-3 and the PA price. Good afternoon. In respect of BMCC operation, we have seen good traction in the last three months. In fact, we have deputed our team, and we are engaged, mainly focusing on the mining part and there has been a good result, and we are stabilizing the operations. We started receiving shipments, and hopefully, we should be able to achieve the target volumes what we planned for the year, 2023-2024. At this point of time, whatever we envisaged to do, we are on the right track. Just, sir, just a follow-up. My sense is about a third of your requirement were to be met, that is mined. Can we anticipate that coming in for FY 2024? It should be 20% of our requirement to begin with, but the potential is high. In fact, it'll be beyond what we envisaged earlier or potentially high. Next year we can say 20% of our requirements can be met from this mine. Wonderful. With respect to sulfuric acid plant is your second query, right? Yes. Our sulfuric acid plant will be commissioned by July, whatever we stated to achieve as per the plan should be able to get the production as planned earlier. From August onwards, we should be able to come back to full stream. We may require a month of stabilization. From August onwards, we should achieve the rated capacity. How much would the payback be, sir, on this? I mean, in how many years? The sulfuric acid is more investment from the point of view of securing the raw material, right? Currently our requirements are quite significant, almost 1 million tons of sulfuric acid. The part of it, 50% is being covered through our captive facility what we have indicated. We look at more of augmenting our captive source of raw material. It's a function of import price of sulfuric acid versus the cost of our own manufacture. Also it generates other savings in terms of power and other utilities. It's more of, you know, I would say it's a supply security. Got it. The last is on phosphate prices. We have signed a third quarter price at $1,050 as against $1,175 which was there for the previous quarter. We have signed up with our joint venture partner, Foskor. Okay. Thank you. Thank you. Thank you. Our next question is from the line of Bharat Sheth with Quest Investment Advisors Private Limited. Please go ahead, sir. Hi, Coromandel management team. Thanks for the opportunity. Welcome Sankar and Dr. Raghu on the board. I have a question on, first on this fertilizer. See, Jayashree, in view of declining fertilizer raw material price as well as final product price and the farm output price is also declining. With that background, how do we see fertilizer demand for FY 2024? That is first question. Since we are operating almost at full capacity, what will be our strategy for to grow that volume? Second thing, our EBITDA per ton has increased substantially over last seven years, six to seven years from almost 2,000 level to around 6,000 in FY 2023 because of several business initiative as well as backward integration program. Can you give, I mean, the margin trajectory, how do we see now from here onward? How much decline if it, at all if it happens, can we anticipate or any further room to improve? Thanks to Bharat for your question. The first one is in terms of raw material prices coming down. We have seen this trend over the last few months, and we expect seeing most of the materials, this trend to continue. With that, we would also expect some sort of a correction in the subsidy realization from the government, which is what I was mentioning when it is high load. Given those, I think, and the good monsoon conditions, that is there and the increase in the overall area under cultivation, we expect the demand for fertilizers to continue to be good, both in terms of NPK, DAP, as well as SSP. Given that there is a good demand for fertilizers, our production, our imports will be helpful in terms of meeting the farmer requirements. As far as the capacity is concerned, you would have seen, I was mentioning that on a year-to-date basis, our capacity utilization is more than 100%. Right. As I mentioned in the past too, we have taken few actions at the plant for debottlenecking the capacity and also some increase in mix of using certain raw materials has also increased the throughput. Apart from this, as we have been sharing in the past, the type of product that we produce, meaning the grade, also determine the throughput at our plant. Okay. A combination of all of these three will help in terms of getting our capacity utilization at decent levels. Apart from that, we would also be looking into strategically importing complex fertilizers. This year, we have imported DAP to a great extent because importing DAP vis-a-vis manufacturing made more economic sense. In the past, we have also imported NPK, so we will continue to resort to these practices, which happens on a month-to-month, quarter-to-quarter basis. Apart from this, the business is also contemplating to see how we can increase the capacity, like we have alluded in the past. This will also mean that we will have to look at securing some of the key raw materials, which the business is actually tying up very well. Probably as the business plan for next year gets firm up, we will have a little more clarity in terms of how we go forward. The demand for NPK is quite good, and we expect it to go up. Based on that, the business will come with your proposal for further capacity expansion. The last one from your end was in terms of EBITDA per ton margin. Yes, over a period in time, the EBITDA per ton has been showing an upward trend. Despite an increase in the raw material prices and the fact short of on the MRP, given the fact that the commercial teams have worked in terms of securing multiple sources for our raw materials and the flexibility that our manufacturing plants have exhibited in processing these raw materials have ensured that this has been on a good upward trend. What you said about INR 6,000 per metric ton is something that we should look at, stabilizing and maintaining in the coming years. Although there could be some sort of adjustments in raw material prices or, you know, the MRP correction and so on and so forth. Okay. Two more questions, Jayashree, if with your permission. One is on what is the potential of this nano DAP, how do we see the convergence of economic interest of government, our company and farmers and farmers' mindset for the acceptance of this nano DAP? What is our strategy, whether we'll be manufacturing, how is our raw material scenario for that? Is it again imported? 2nd, on drone side, are we entering into manufacturing or we'll be just providing the services? Okay, nice question. I'll take the drones question first. Okay. As you know, in the last couple of quarters back, we mentioned that we have invested in a agtech company who is manufacturing drones. This is part of our investment in agri startup companies. We will be leveraging the drones manufactured by this company, and two of our businesses have already done their pilot trial, CPC and specialty nutrients, and we want to sort of scale it up because we believe agtech is going to be the future. That's our strategy around drones. As regards nano DAP, this is a very interesting area, and I'm going to once again refer Sankar, as he's much more closer to the business to articulate on this question. On nano DAP, as a company, we have taken a lead in terms of developing this technology in-house, and we have applied for a patent, and we have also applied to government for the approval, which is expected anytime. We are also carrying out the field trials to understand the efficacy of the products and the results are mixed. We have to wait and see. We may have to carry out more such trials in the next season to establish nano DAP. We could see some improvements, partial replacements in certain crops with higher foliage. That is what our initial studies have revealed. It's too early stage to comment on how this will play out, but we are very much focused on it, and we'll be able to share more as we progress on our field trials. It's looking very promising, and we have taken a lead on this. Sankar, can you, I mean, cannibalize our NPK sales going ahead? how or where it will replace? The bulk fertilizer soil application, that will continue to remain because predominantly the NPK grades, including DAP, what we consume is predominantly soil application. The nano DAP is more focused on foliar, so it may be an add-on supplementary nutrient. It can't replace in entirety. And also it requires, you know, that sort of adaptation by the farmers. It will take time, and also it involves additional cost in terms of spraying et cetera. It requires a lot of education, and the effect has to be seen on the ground. The question of replacement is too early to talk about and Our view is our bulk fertilizer application will continue to remain, and this will help to replace some portion of wheat after seeing stage as and when the farmer applies it. Okay. Thank you. Jayashree, have we received any subsidy post Q3? What is the government, I mean, undertaking if we have not received, whether this will keep on increasing or not? No, the total subsidy outstanding is the combination of what we have already sold and raised as a claim, and it also includes the standing inventory, right? The government has been sort of giving the subsidy. It has been little slower compared to previous year, we don't see a concern in this area. As you know, this year the subsidy rates have also gone up compared to last year. Therefore, you would see that the quantum is slightly higher. That doesn't mean that we're not going to receive the subsidy. We have not received post December, correct? Is that fair understanding? No, we have received. We received even in January. We continue to receive subsidy. How much we have received so far, post December? Maureen, do you have the numbers? INR 1,200 million. Around INR 1,200 crores. Okay. Thank you. If I have any question, I'll come back in queue. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. A reminder to all the participants, you may press star and one to ask a question. Our next question is from the line of Ankur Periwal with Axis Capital. Please go ahead. Yeah. Hi, Ma'am. Thanks for the opportunity and congrats for a good set of numbers. First question on the crop protection side. You know, while you did mention in your initial commentary on the overall growth in the domestic market while Mancozeb was slightly weak. If you can put some more light on, you know, what is the pricing or volumetric trend in Mancozeb as well as on non-Mancozeb crop protection portfolio. How has our performance been and, you know, some guidance there. Yeah, Ankur. Thanks for your question. As I mentioned, during this year, the business has seen some amount of pressure, especially on Mancozeb due to the fact that the ban of this molecule in Europe has happened, and the excess capacities from our competitors, mainly UPL and Indofil, is now available for other markets as well as for India. That has actually led to a bit of a pricing war, if I were to use that terminology. From our standpoint, the business has taken a very conscious call that beyond a point, we would not be subsidizing and selling the product for the sake of volume. That's been the prime reason for sort of, I would say a lower increase in the revenue as such. In terms of absolute volume increase or decrease, let me come back to you. But from a team standpoint, the intent is to ensure that the production is happening and we are able to sell at reasonable margin levels. Having said that, the business has also been focusing on seeing how do we de-risk our portfolio from the old generics that we have had, especially Mancozeb is about 40%-48% of our overall turnover. With that in mind, they have identified quite a good number of so-called recent re of patented molecules. As I was mentioning, the multi-purpose plant for production of three of such molecules got commissioned recently, and the first order has also been executed. This is for products like Azoxystrobin, Picoxystrobin, and Cyproconazole. These three are relatively new products and couple of them have very large potential. In the new land that is also planned to be acquired, the business is looking into adding few more technicals. From a overall portfolio standpoint, there is conscious effort to move from the old generics while there is still a large demand for it. Given the fact there is lot of competition action there, practically we have to manage volume versus new products. That's the way one should look into the CPC technical business. Sure. Just, you know, next question related to crop protection again. We have seen, you know, some bit of margin pressure over the last couple of quarters, primarily because of RM inflation there. Is large part of RM inflation already, you know, passed through, given there is a decline there as well in RM prices? Yeah, I would think so. The raw material prices are coming down, which is a good trend. In some of the molecules we are seeing that pricing pressures are there. That way we have to manage between volume, price, and margins. This is a very tactical operational call that we take on a monthly basis. I expect this to continue for a little while. The business also is working on number of initiatives at the plant level in terms of cost optimization, both on the conversion side, on the fixed cost. They've come up with several ideas which will help us to remain cost competitive, including purchasing of raw materials at better rates. I think all of this should start playing out very soon and, we should be able to handle the pressures on the margin front. I would, request Raghu to sort of chip in and add his comment here. Thanks, and good afternoon, everyone. The only other point that I would like to add to what our CFO has already shared is that, you know, other than the product portfolio, even the business portfolio we're trying to, you know, change in terms of the proportion of revenue that comes from our various fees. Primarily the B2C side of things, we are investing heavily in that area to improve the product portfolio and also in terms of putting more feet on the street so that our market penetration also improves. With that, you know, the margin pressures that we are seeing in the commodities like technical, we should be able to tide over somewhat. Sure, Raghu. That's it. That's it from my side. I'll get back into the queue. Thank you. Thank you. Our next question is from the line of Sumant Kumar with Motilal Oswal. Please go ahead. In Q2 FY 2023, we raised our EBITDA pattern estimate for manufacturing fertilizer from INR 4,500 to INR 5,500. Can you talk about the margin profile for fertilizer business for FY 2024, and what is the revised guidance for FY 2023? Sumant, as you know, we don't give a guidance for quarter or a year. The indication obviously is, we've been in the range of INR 5,500-INR 6,000 per metric ton. That's our endeavor to sustain the INR 5,000-INR 6,000 type of range per metric ton. Every effort will be done by the business to see how we can maximize it. I have already spoken about multiple initiatives that are being taken, starting from procurement, manufacturing, brand building, logistics. All of those will continue. I think I leave it there and let's take it every quarter and then look at it on an annualized basis. What are the key reasons? Can you talk about the pricing? Raw material prices corrected, but we have not cut the price of our key products or backward integration. There are many factors. Can you talk about the from here, the if we are going to reduce price, this margin is sustainable or not for FY 2024? Yeah. As you know that, during the beginning of the year, as the raw material prices were very high, government had increased the subsidy, right? When the raw material prices come down, it is very natural for government to also re-look at the subsidy rates that are being offered. Today, the government's outflow in terms of subsidy is actually very, very high. As I was mentioning, they are contemplating a downward revision in the subsidy rates. The MRP also will get moderated. If the raw material prices are coming down, obviously, like in the past, there will be correction to factory, there could be corrections to MRP. At the end of the day, we have to make fertilizer affordable for the farmers. Can we conclude, saying that the EBITDA pattern, whatever we have generated in FY 2023 is not going to be in FY 2024? No, I won't say that. As I said, we've been in the range of 5,500 - 6,000. We shall continue to maintain those levels. Okay. Thank you so much. Thank you. Thank you. Our next question is from the line of Gagan Thareja with ASK Investment Managers. Please go ahead. Good afternoon. Am I audible? Good afternoon. Could you speak a little loudly? Yeah. Is this better? Can you hear me now? Yeah. Yeah. Yeah. Ma'am, just one question. I think around the second quarter, there was an initiative by the government to promote unbranded fertilizers, Bharat brand fertilizer. Basically, the government logo on the fertilizer packaging would be 2/3 and the company logo probably 1/3. What could be the implications of this move as far as, you know, brand building and brand patronage are concerned for you? Yeah. Sankar, please go on. This is the initiative overall by the government. We welcome the move of the government. Especially considering the fact in the products like urea, government is extending significant amount of subsidy. They have come up with this universal brand of Bharat brand, also being extended to other grades of fertilizers. Packaging brand on the package is only one aspect of communication. Companies like Coromandel, our engagement with the farming community is more by way of through our degree graduates going and communicating with the farmers, talking to them about these products and our extensive farmer exchange activities which are being carried out. Besides other activities like soil testing, organic carbon testing, communicating to the products and the value proposition of new products what we introduce. Those brand value proposition continues to remain. And also in the 1/3 portion we communicate our brand and our logo, so we don't see any major change. We welcome this suggestion which has come from the government to have universal branding of Bharat Urea or Bharat NPKs. Sir, as I understand it from the government side, the initiative probably is being done to rationalize, you know, the subsidy cost on the transit of fertilizers. You know, the idea being that subsidizers being bulky, you know, it's appropriate for certain radiuses or radii to be maintained within which the sales is done. Probably that was their incentive. Would that therefore not have some sort of fallout repercussions for or limit, you know, in some way, what companies can do in terms of brand building and, you know, selling a little far away from where their plants are based? Maybe true in the case of products like urea where you can't make any differentiation at the product level. Whereas with the NPK, with the multiple nutrients and also the value creation what we give in terms of, for example, we have grades which are unique to us. For 24-24 which are fortified with sulfur. Similarly, we have grades like 28-28 which is unique to Coromandel. These unique grades, the value proposition is different and that needs to be communicated, and the farmers prefer those grades. We don't see much of a challenge. We have been building these volumes on these grades over a period of time. I agree maybe for generic product like urea or generic grades for that matter, DAP, farmers may be agnostic about the brand. In the unique grades what we have, there'll be traction for and the demand will be there for this market. That purely depends on the extension activities what companies carry out. Thanks for that. Just one final question on, if you could, you know, enumerate what is the degree of backward integration you have now and, you know, with the mine that you've taken a stake in, over a three-year time frame, to what degree further can you increase your backward integration, for the fertilizer business? Backward integration varies from product to product. In the case of acid, we are almost close to 50%, you can say, on the backward integration of hydrochloric, phosphoric acid. In terms of rock, we diversify our scope. Definitely we'll not be able to go into mining to meet up the entire rock requirement. As I mentioned in my earlier response, we have visibility up to 20%-30% of the requirements being met through our mines at Senegal. Any further opportunities we need to evaluate. In terms of sulfuric acid, we have currently 50%-60%, and we are augmenting capacities for that. As and when need arises and if economics pay for it, we will expand our capacities on intermediate products. And on rock, are you currently at 20%-30% or are you lower than that? Sir, this is the first overseas investment on mining. So far we have been only buying, so just started with the Senegal investment. This will be 20%-30% investment. Okay. Thanks, sir. I'll get back to you. Thank you. Thank you. Thank you very much. Our next question is from the line of Chintan Chheda with Quest Investment Advisors Private Limited. Please go ahead. Good afternoon, thanks for the opportunity. My first question is related to the growth in the crop protection segment. Given the headwinds that we are facing in Mancozeb and the new MPP plant which is coming up, right? What is the growth that we are envisaging in this segment over the next couple of years? Chintan, once we see some sort of stability in the market and the new products kicking in, we should see a growth of about 10%-12% or so. That's what we are looking at. Having said that, the businesses are working through their annual budgeting process, and we will get more clarity in the next couple of months. As Raghu was mentioning, the intent is to see how we grow our B2C business furthermore, because there is an opportunity to not only grow the revenue but also the margin, since our base is also very relatively smaller compared to our B2B and our export business. I think, definitely in the double digits we should be in a position to see the growth. Okay. Secondly, in this new growth areas of nano DAP and drone technologies, is there any capital commitment that we have made? Over the next two, three years, what is the kind of investment that will be required over here? On the drones, we made an investment in [Agtech], right? Mm-hmm. That's as much at this point in time. Over a period in time, we will see how we can help the startup in terms of scaling up their own operations, given the expertise that Coromandel has in terms of best manufacturing practices, in terms of approach to the market, also trying and piloting through our own businesses, mainly crop protection, SND and retail. That will take care of the drone part of the business. On the nano DAP, as Sankar was mentioning, we have applied for a patent. We will be working closely with the government to see that we are getting the approval. Putting up a nano DAP plant compared to any other granulation plant is going to be much shorter in terms of time frame. As I understand, even IFFCO for their capacities that they have created, which is roughly about 56 crore bottles, is about INR 150 odd crores. It's not a huge investment if you look at it from a benchmark standpoint. From Coromandel, as we go along, we will be taking a call. We already have our pilot plant for liquid fertilizers in Vizag, which currently the business is using for production of nano DAP to sort of test and try in universities and in the field. The proposal for putting up a dedicated nano DAP facility and the investment will come through during the business planning cycle. Okay, got it. Thanks a lot. Yeah. Thank you. Our next question is from the line of Prashant Biyani with Elara Capital. Please go ahead. Thanks for the opportunity. Jayashree ma'am, what could be the capacity utilization of the granulation plant, and how much utilization are we targeting next year? Okay. The capacity utilization of our plants currently for all the three quarters put together is about 102%, which is what I was mentioning earlier during the call. Prashant, you would also recall that there are several measures that are being taken by the company to hit this type of capacity utilization. One is debottlenecking and debottlenecking operations. Second, we looked into multiple sources of raw material. Third is the grades that we are producing. Fourth is obviously looking at what grades we can import so that we can produce more of certain other grades. Combination of these has actually helped to hit about 100%+ till now. In Q4 we will be going through the annual turnaround in both Vizag and Kakinada, which sort of would moderate for the full year. This is also in line with our past performance, right? Q4 typically we take a APA. For the coming year, we expect a similar trend to continue. In fact, our Kakinada debottlenecking and, using different source of raw material has, helped in scaling up capacity there. We should be able to hit even slightly higher volumes with all our three plants fully in operation next year. Yeah. How much incremental capacity would be available through debottlenecking next year? Yeah. There are multiple opportunities in which we can increase the volume. Depends on the mix. We can't go by the current volume. With the current trains, we can produce multiple products. We have taken two, three steps. One is in terms of producing different grades in the same plant. If X grade can produce, say, 100 tons, Y grade can produce 120 tons. It depends on the mix optimization. There is a scope of increasing volume through the mix optimization. Second can be through the debottlenecking of the capacities, which we are seriously contemplating, which will soon come through in the second quarter of next year. Third, we use different sources of raw materials which can increase the throughput. Fourth, we are also looking at additional trains possibilities being explored. Always the business will look for opportunities of volume growth as well as the mix which can bring in top line growth for us. As Jayashree mentioned in the earlier response, there is also option for us to produce certain unique grades in our plant, and the generic grades can always be imported. Our focus will be to increase production of NPK and import DAP. That strategy also will play out more in the next year. Right. Sir, with regard to future growth for the industry and as well as for Coro, I mean, we are right now at a very critical stage where, you know, on one hand, Nano fertilizers are being promoted, and on the other hand, we are also short of granulation capacity. Going forward, I mean, how do you see this? How much has been the acceptability of nano fertilizers while you are doing trials, and whether it would be prudent to set up capacity? How much granulation new capacity is prudent to be set up in the country? Is there any risk of, you know, some of the spare, some of the granulation capacity, you know, being available because of some market shift to nano fertilizers over the next three to five years? Because of all these things, how do you see, you know, which path would be correct for Coro to take? If you know, the phosphate industry segment is close to INR 20 million-INR 22 million. It ranges between INR 20 million-INR 22 million. India produces roughly 13 million tons. Basically six to 10 million tons is imported. Even if you were to assume that nano DAP is going to come in, first it will only replace the imported DAP. Our aim is also to see that how this can replace imported DAP. That's what government is also looking at it. We don't see any challenge to the domestic capacities, and there will be coexistence. There are multiple products, whether it is water-soluble fertilizers or specialty nutrients or nano DAP, they'll coexist along with the main soil applicant. We don't see any challenge to the existing capacities when we are almost importing 40% of the total annual requirement of phosphate. Coromandel will definitely look at expanding volumes and there are opportunities available in this space, and we will look at growing the granulation capacity as well. In tune with government focus on Aatmanirbhar, it makes immense sense for the companies to augment domestic capacity, not only for granulation, but also to create a backward integration opportunity. We'll continue to focus on that. All right. Sir, lastly, while, you know, we have applied for patent for nano DAP, what would be our plans for other nano fertilizers? Specifically, do we plan to venture into Nano Urea, and have we been able to find another route to manufacture Nano Urea? We have the nano urea technology as well, which we have applied for patent, we are going through the various studies which are required for making our application to the government. We are going through that phase. We are also carrying out the field trial. Once we get the studies completed, we will apply to the government and take the approval, then we will launch Nano Urea as well. We have got an alternate route of manufacturing Nano Urea as well. Again, I repeat my response in the earlier case. These are all meant for foliar applications which are much later part of the crop stage at the time of flowering, it cannot replace the traditional soil applications which are happening. To that extent, there are no immediate challenge in terms of, you know, the volumes, prospects for the phosphate offering. Sure. Our effort on nanotechnology applications will continue to be there, and we will look at opportunities including nano, micronutrients also going into the future. Sir, how have you-? I just want to add one more comment here. You know, these are still very early phase of nanotechnology, right? ICAR launched this year, I mean, in this current financial year, Nano Urea, and we're talking about nano DAP. We just need to see even on the foliar application to what extent there is going to be a substitution. It's an interesting area to watch out. We'll have to wait and see rather than getting into some sort of a conclusion whether there is going to be a substitution or whether it's going to be an add-on application. That is an interesting space to look out for. All right. In your trials, how have you seen the farmers acceptability for nano fertilizer? As I said, it's very early stage Pra shant. We're doing some university trials. Once we get to some level of certainty, we'll definitely be happy to share our views. Sure. Thank you. That's it from my side. Thank you. Next question is from the line of Rohan Gupta with Nuvama. Please go ahead. Yeah. Hi, sir. Hi, ma'am. Good afternoon. Thank you, Sankar sir, joining call after such a long time. A couple of questions from my side. First is on fertilizer margin itself. As you mentioned, you guided roughly INR 6,000 that is the margin per ton you are looking in a fertilizer. We have seen that we have been continuously improving our stable margin guidance from almost INR 4,000 -I NR 4,500 - NR 5,000 and now roughly INR 6,000. We have been living in an environment where the phosphate prices were constantly going up and now they have started correcting. I think that during this time, we definitely enjoyed some margin because of the backward integration, high backward integration. When we are talking about INR 6,000 stable margin per ton, assuming that DAP prices come back to the normal of say INR 40,000 per ton, what they used to pay earlier, that's a pretty handsome margin on an average realization basis of INR 6,000. Given that our profitability will be primarily coming from the government subsidies, do you think that the government will be okay with this kind of margin enjoyed by the industry? Though I understand Coromandel will have an efficiency level also driving this margin. Still, do you see that this margin for the industry can sustain at this level once the phosphate prices and DAP normalizes? A good question, Rohan. As you know, margins have been improving on a year-on-year basis, primarily based on the cost efficiency, backward integration, building on the brands, creating demand for unique grades based on agronomist activities in the field, so on and so forth. I would look at a steady state, as I was mentioning, between INR 5,000-INR 6,000 as a EBITDA per ton margin for us. These levels based on the efficiencies that are coming, should sort of be doable. We see that the PA prices are coming down, in the immediate future, I don't see a drastic reduction per se, right? Because the demand next year also is expected to be higher. We still do not know how China is going to play the card. There is going to be still more imports that happens into the country. For DAP, primarily we are seeing more imports, and we've also continued to import that and start manufacturing more of NPK than any grade in our facilities, right? With that, we should sort of be able to maneuver around these margin levels. The government probably will be looking into reduction in the subsidies, which I was also mentioning little earlier. There is also for unique grades a bit of flexibility to work out on the MRP. It's going to be a combination of multiple factors. As the capacity of the plants go up, primarily due to debottlenecking and using multiple grades or sources of materials or types of materials, there is also going to be efficiency in the fixed cost front. One should look into it overall. I think we should be comfortable in this range. I wouldn't get worried in terms of whether these numbers are reasonable or not. Okay. Second, ma'am, second is a clarification. In Q2 we mentioned that definitely we do have some high cost inventory of phosphate and the prices of phosphate last quarter came down to $1,175, while they have further come down to $1,050 now. We have seen that, despite that cautious outlook which you shared in Q2, which could have led to some inventory-led losses, we are seeing the Q3 numbers are pretty robust and the margin has been very well maintained. When the prices of raw material has further fallen to $1,050, government is still holding on the subsidy rates which they have revised in month of October. I'm sure that we are almost half of the fed now. It means that for the current quarter, the subsidy rates will be the same at what we have seen in Q3. It means that we are looking at very, very attractive Q4 with the fall in raw material prices, and also the even the prices coming down in phosphate in previous quarter also. Market prices of DAP and NPK, whatever channel checks suggest are still holding on. It indicates with all these things probably indicating a good Q4 unless the government further reduces the prices on the subsidies. Is that understanding correct, ma'am? Well, as I was mentioning, Rohan, Government is already contemplating reduction in the subsidy rates and there is discussions within DOF will go for approval to the Cabinet because they are seeing a trend which is coming down as far as raw material prices are concerned. What we do not know now is from when this reduction in subsidy rates will be applicable. Like for instance, first April onwards the rate went up. The announcement didn't happen in March. It happened subsequently. While the Government was willing to give an increase in the subsidy rate effective first April, maybe they may want to reduce the subsidy rate from first January because they've been talking about it. At this point in time, we do not know the exact date. I wouldn't jump the gun to say the government may not change the rate for the quarter therefore it will be. They are definitely seriously considering a reduction in the rate. We do not know how much. We do not know the date. If that doesn't happen, there may be some corrections in the market price also because the expectation is to see how the farmers benefit out of it. We all know that the subsidy outflow for the government has been quite high. The incentive for them also is to reduce the subsidy ratio. Also seen that formality coming in the budget speech of the finance minister. I would rather wait a week or so, then we will get little more clarity on this subject relating to the change in the subsidy rate by the government. I hope that clarifies. Yeah, right, ma'am. Thank you very much for clarifying that. I think that the further reduction in subsidy or any point of time the government announcement which may be retrospective effective from 1st of January itself will be the biggest risk which we are going to face right now. We don't know how the company handles that risk. I mean, because that is not in our hand, right? You must be having some inventory. The current quarter forecasted prices are already fixed. I think that we are just only doing the business. There is a risk which we are having right now in terms of the impact to the profitability. Correct? Yeah. This is what, this happens every time, you know, when the rates move up or down. Yeah, right. that happens. Right. Right. Right. Right. It is part of the business. Yeah. Got it, ma'am. Got it, ma'am. Thank you. Thank you so much, ma'am. Thanks a lot. Thank you. Thank you very much. I would like to hand the conference over to Mr. Ramesh for closing comments. Please go ahead, sir. Hello. Let me ask a question before I close the call. I would like to have your thoughts on how you see the Crop Protection Business, again, its true potential in terms of the improved product mix and what are the kinds of share you expect from the formulations. Can you see some kind of steady trajectory in terms of volume growth and margin expansion? Would it be by 2025 or FY 2026? If you can give your thoughts on that in terms of the internal assessment, that'd be useful. Secondly, on the structural soil Nutrient content, how do you see that imbalance being addressed? Because you have a problem in terms of the steep discount for the Urea price for the farmer. Any thoughts or government thinking on it you can share in terms of the potential for long-term growth in the complex fertilizers. I know these are, you know, slightly difficult questions, but if you can give your thoughts, it'd be great. All right, Ramesh. On CPC, as we have been maintaining, the opportunities for Coromandel to grow their business is large. Therefore from a midterm to a long term, when you look at it is extremely critical to work on few factors which we sort of have shared in the past. One is revamping and having a good product portfolio, reducing our dependency on Mancozeb, improving our B2C sales compared to our B2B, both domestically and also in select export markets. And also looking into backward integration when it comes to the new technical that are being picked up by the business. And improving the channel strength both in terms of the dealer network as well as our [seed and sheet]. Multiple of these initiatives are being taken by the business, including lot of changes within the organization, getting the right people, whether it is for R&D, product development, manufacturing, across multiple areas. I honestly believe in the next year, in the next two, three years, we will see a very different player in this business, where we'll have a much more enriched portfolio, deeper penetration into the B2C segment and also select markets globally where we will be growing on a B2C. Apart from this, multiple registrations are being taken. We are also looking into activating them either on our own or through our B2B customers globally, which would also help. As far as the soil nutrients, question that you asked, this is about promoting balanced nutrition, right? This is what Coromandel has been doing. If you look at us as a company, we've been talking about balanced nutrition, selling more of NPKs, not even DAPs, be it urea. Urea is primarily for first one which we also import, sell it relatively through our dealers or market it through our retail network. Coromandel's focus has been on NPKs. We have about 150 odd agronomists. We have nutrient clinics through which we sort of advocate right farmer practices and behaviors, which is actually has been growing the NPK market in our key operating areas. Whereas there is a higher dependency on urea as well as DAP in many of the northern markets, where Coromandel is not present as much. As part of our initiatives working with the government advocacy, we've been constantly talking about and discussing with the government on our own through FAI the need for promoting balanced nutrition. Government is also conscious about it. We do hope at some point in time with DBT 2.0 that they are talking, they may be linking subsidies to usage of fertilizers and thereby sort of moderating the type of fertilizers the farmers will use, which will help in improving the farm productivity. All of these have its own rationale. When the government will do, whether they will do now or they will do couple of years later, we do not know. There are different ways how the government can actually work through this. You see, the government is also continuously in dialogue, through this PM CARES that they have sort of introduced, working with different dealer outlets, talking to the farmers. They are looking into this seriously. It's a question of time. From Coromandel's standpoint, we will continue our focus on balanced nutrition. We will continue our focus on integrated pest management because we believe this is the right incident for sustainable agriculture. Thank you very much for your question. Thanks a lot, Jayashree. That was very helpful. With that, we bring this conference call to a close. Let me first thank Jayashree, Sankar and Raghuram from the Coromandel management team for taking time off and giving us this call and answering all the questions. Also, thank all the participants for making this an interactive session. Thank you very much and have a good day ladies and gentlemen. Thank you. Thank you. Thank you. On behalf of Nirmal Bang Equities. Thank you. That concludes this conference. Thank you for joining us and you may now disconnect your lines.