Ladies and gentlemen, good day, and welcome to Coromandel International Limited Q3 FY24 Results Conference Call, hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and 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. Ankur Periwal. Thank you, and over to you, sir. Yeah, thank you, Riya, and good afternoon, friends. Pleased to welcome you all to Coromandel International Limited's Q3 and nine-month ending FY24 post result earnings call. From the management side, we have with us Dr. Raghuram Devarakonda, Executive Director, and Ms. Jayashree Satagopan, President Corporate and Chief Financial Officer. As usual, we'll start the call with a brief introduction from the management side, post which we'll open the call for Q&A session. Over to you, Jayashree, ma'am, for your initial comments. Thanks. Good afternoon, everyone, and thank you, Ankur, for organizing the conference call today. Let me first give an overview of the business environment experienced during the quarter, and we can follow it up with the company's performance and the Q&A session. As far as the global economy activity is concerned, we saw that it was affected by a tight monetary policies and weak global trade growth. As the World Bank's latest projections, global growth is set to edge down to 2.4% in 2024, vis-à-vis 2.6% in 2023. Recent conflict in the Middle East and disruptions in the Red Sea links has further heightened geopolitical risks and raised uncertainty in the commodity markets. Despite this, India has remained resilient, supported by robust domestic demand, strong public infrastructure investment, and strengthening financial sector. World Bank has revised India's GDP growth to 6.4% for 2024, vis-à-vis 6.3% in 2023. During the quarter, tax collections remained buoyant, though the retail inflation rose to a four-month high of 5.69% in November 2023. On the agriculture side, the country witnessed below normal northeast rainfall during the season. All India cumulative rainfall during October to December 2023 was lower than normal by 8%. The overall crop sowing area remained around last year's level, with acreage increase in wheat, coarse cereals and oilseeds, while there has been a decrease in pulses and paddy. Among our key operating markets, crop sowing in Andhra Pradesh, Karnataka, and Maharashtra were impacted. All India reservoir levels stand at 95% of the long period average, with southern region at 70%. Fertilizer industry performance. Agri-input industry experienced a challenging quarter with external headwinds, like below normal monsoons and lower crop sowing. The NBS rates for Rabi season underwent a steep downward revision, which, coupled with the rising raw material prices, further impacted the industry performance. For the quarter, DAP and complex fertilizer industry's primary sales volume was down by 17%. Current year, 58.6 lakh metric tons, vis-à-vis 70.9 lakh metric tons in the last year. DAP and complex fertilizer industry's consumption, which is indicated by POS sales volume, is also down by 9%. Current year, 67.1 lakh metric ton, vis-à-vis 74 lakh metric ton in the previous year. On a year-to-date basis, DAP and complex fertilizer industry's primary sales volume was 190.8 lakh metric tons versus 190 lakh metric tons last year. DAP plus complex fertilizer industry's consumption, indicated by POS sales volume, was at 195.3 lakh metric tons, vis-à-vis 177.6 lakh metric tons last year. Company's nutrient segment performance. The nutrient and allied businesses improved their market share during the quarter amidst drop in volumes. Lower volumes, along with the low NBS rates and higher cost of raw materials, has impacted the business margin during the quarter. On the sales front, the business registered sales volume of 9.38 lakh metric tons during the quarter, which is 11% lower than last year. On a year-to-date basis, sales volume was at 29.5 lakh metric tons, vis-à-vis 30.2 lakh metric tons last year, which is lower by 2%. The company's market share in Q3 is 16%, and on a year-to-date basis, 15.5%. Last year, it was 14.8 in Q3 and 15.9 on a year-to-date basis. SSP's Q3 volumes were at 1.43 lakh metric tons versus 2.16 lakh metric tons last year, and on a year-to-date basis, 5.35 lakh metric ton versus 6.19 lakh metric ton last year. Market share for Q3 is at 15% versus 16% last year. On a year-to-date basis, the market share is at, 15.2 versus 14.8% last year. During the quarter, our DAP and complex fertilizer plants operated at 96% capacity and produced 8.67 lakh metric tons. Last year, it was 9.2 lakh metric tons of fertilizer. Phosphoric acid production during the quarter was similar to last year's level, which is 1.12 lakh metric tons. During the quarter, the company's state-of-the-art 1,650 ton per day phosphoric acid plant got fully stabilized and is operating at optimum capacity. With this, Coromandel phosphoric acid plant has increased to 11 lakh tons from 6 lakh tons per annum earlier. This supports the requirements towards downstream processes involving phosphoric acid and phosphate fertilizer production. During the quarter, company inaugurated a nanotechnology center at Coimbatore, which will further support in research and development of nano and novel products in the agri-input space. The company has now developed and patented nanotechnology-based fertilizer, Nano DAP, has received encouraging market response, and the company is actively working with the farming community to create awareness and promote the Nano DAP. Company had an unfortunate incident in December at Ennore Fertilizer Facility due to ammonia gas leakage. The company has taken necessary measures to ensure safety of the public in and around the complex. Currently, the plant is closed, and the company is in the process of addressing the matter. On the crop protection side, the crop protection business of the company reported a healthy volume growth of 21%, improving its performance in exports and domestic markets. While the global market conditions remain very challenging with elevated inventory, demand slowdown, and declining commodity prices, the crop protection business has improved its customer base, activated government registrations, which has helped in growing the export sales. On the domestic formulation, the business has witnessed an upswing both in volumes and margins. Overall, the EBIT margins for the crop protection segment grew from 12.4% in Q3 FY 2023 to 13.8% in Q3 this year. The business continued its engagement on the CDMO opportunities and has initiated marketing of specialty chemicals products from its current manufacturing facilities. Further, the business is strengthening its research and technology efforts to develop focused chemistry across both crop protection chemicals and specialty chemicals. The bioproducts business of the company is acting on multiple stages improvement initiatives, focusing on improving cost efficiencies and yield. Neem-based herbicide Azamax and fungicide Azadiraj, launched in Q1, have generated excellent market acceptance and volumes. The business is conducting field trials for new biosolutions and plans to launch the products in subsequent quarters. Our retail stores adopted crop-specific product focused approach and operated well during the quarter, despite the reduced crop acreage, enabling it to sustain and improve the earnings. Overall, 97% of the stores were profitable. In continuation to serve the farming community, the business is expanding its footprint in new markets by adding 50 stores by end of this year. Company's subsidiary, Dhaksha, a differentiated drone startup, has been receiving encouraging response from its customers in defense, agriculture, and enterprise. It has a strong order book, and it's ramping up its production capacity. It has recently set up a new state-of-the-art manufacturing facility at Chennai. Coromandel is also actively promoting the usage of drones in agriculture through its Gromor Drive program and also through its vast retail network. With that, let me take you through the company's financial performance. Turnover. The company recorded a consolidated total income of INR 5,523 crores during the quarter and INR 18,294 crores for the nine months ended thirty-first December. Corresponding period, the revenues was INR 8,349 crores for the quarter and INR 24,276 crores for nine months. The decrease in revenue is mainly on account of reduction in subsidy rates and lower volumes in the fertilizer business compared to the last year. Nutrients and allied businesses contributed to 89%, and the remaining 11% comes from the crop protection business for the quarter. For the nine-month period, it was 90% and 10% respectively. Subsidy business share in revenues stands at 82% for the quarter and 84% for nine months. In the last year, it was 88% for the quarter as well as for nine months period. Profitability. Consolidated EBITDA for the quarter was INR 358 crore against INR 781 crore last year. For the nine-month period, it was INR 2,126 crore against INR 2,523 crore in the previous year. The subsidy business share in EBITDA stands at 37% during the quarter and 74% from nine months. The previous year, it was 74% for the quarter and 77% for nine months. Net profit after tax for the quarter was INR 288 crore, in comparison to INR 937 crore for the corresponding quarter last year, and 1,477 crore for nine months against 1,766 crore last year. Subsidy: During Q3, the company has received subsidy collection from the government to the tune of INR 721 crore. Last year, this amount was INR 3,992 crore. During the nine-month period, subsidy received was INR 7,333 crore. Previous year, it was INR 7,994 crore. Subsidy outstanding as of 31 December was at INR 2,405 crore. Interest during the quarter, company earned a net interest income, excluding the Ind-AS interest, of INR 20 crore, vis-à-vis net interest expense of INR 8 crore in the previous year. For the nine-month period, interest income of INR 37 crore versus INR 1 crore in the previous year. The company has maintained the surplus fund in both approved securities and, like in the past, these are earmarked for specific growth-related investments. The balance sheet of the company continues to be strong, and the company is currently focusing on tightly managing the working capital situation. Forex during Q3, the currency was in a tight range of 82.90-83.43. Continuing its conservative approach of hedging the Forex exposure, the company has benefited in terms of limiting the impact of currency fluctuations. Making new investments. While the short term business environment remains challenging, Coromandel will continue to invest in value creation opportunities. Towards this, the board in its meeting held yesterday approved the company's plan to expand its backward integration capabilities by setting up a sulfuric acid plant at its Karnataka fertilizer unit, subject to regulatory approvals. Towards this, the board... This will further improve the company's cost efficiency, raw material securities, and can contribute towards the nation's Atmanirbhar Bharat vision. As a leading agri solutions provider, Coromandel is committed to improve availability of agri inputs, drive technology-focused solutions, and sustainable agricultural practices. We thank you for your interest in Coromandel and joining the call today, and we look forward to the interactions. 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 the touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yeah, hi. So, can you talk about the price fertilizer, non-urea fertilizer and the price control, and government is trying to fix profit margin also, whatever the unreasonable profits made by the companies to have to return. So can you discuss about that? And the second question is, we can, we will, we'll talk later. Okay. Hi, Sumant. The government has issued an office memorandum in January, which gives the broad guidelines in terms of the reasonableness margin for all the fertilizer companies. As you know, even in the past, the government has been working with the fertilizer companies, all the NPK players, whether they manufacture or they import, in terms of submission of cost data for them to look into it. Because it is a subsidized business, they have their own ways and means of looking into the costs and ensuring that the companies are able to supply fertilizer at a reasonable price to the farmers. In the recent past, we have also seen that there have been some guidelines by the government in terms of maintaining MRP at certain levels. So they have come up with a guideline recently, which is, not so different from the past in terms of the intent: to supply fertilizer at a reasonable price to the farmers. What does this circular effectively brings in? It says that the companies will be categorized into three segments. The segments are namely integrated manufacturers, manufacturers, and importers. Each of them have been given a certain percentage of PBT that they can broadly look at as they work through their MRPs, their cost structures, and their pricing. So integrated manufacturers will be able to get a 12% margin. Manufacturers who do not have backward integration facilities, but they do the granulation, could get about a 10%, and importers about 8%. So these are broad guideline that they've given. So I think, if you look into most of the fertilizer companies, their performance, these are respectable margins, and there is clarity that's coming in from the government. They are also encouraging companies to look into backward integration, so that there is more of self-sufficiency that could come in. That's the way one needs to look into this guideline. We are not having any impact, considering this 12% kind of PBT, currently? Because historically, I have seen our EBITDA margin in the range of 14%-15% also in the past. This is not at the EBITDA level, Sumant, it's at the PBT. Okay, it's at PBT level. Yes, yes. So we'll not have an impact, considering 5,000 EBITDA per ton you have guided in the past, so we'll not have any impact, considering 12% kind of margin? Yeah, we will not have. Okay. And the second question is phosphoric acid. Can you guide us how much capacity we are going to increase and any inventory loss in this...? How much inventory loss in this quarter? Sorry, what is the second question? Second question is inventory loss in this quarter. Inventory loss in the quarter. Okay. So on the PA capacity, we are looking at, adding about 650 tons per day capacity, as and when we get all the approvals in place. As far as the inventory, hit is concerned for the quarter, if I remember right, it is in the range of about INR 30 crore or so. Okay, and we are planning to have a backward integration for the 600 TPD, around 7 lakh tons. So almost we are going to have a backward integrated company for NPK and manufacturing plant? Yeah, this will add close to 200,000 tons of PA at Kakinada. Okay. Okay. Thank you so much. Yeah. Thank you. Next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead. Thank you for taking my question. Just to clarify, with the latest guidelines, Coromandel will be treated as an integrated manufacturer? Would that be the right understanding? Yeah, because we have both granulation as well as phosphoric, sulfuric plants here, we would be an integrated manufacturer. Sure. Secondly, there is this evaluation methodology, which has stated that integrated manufacturers, manufacturers and importers of fertilizers will be considered as a separate segment. So essentially, we do import DAP. So would each SKU of import versus manufacturing be treated separately? Would we have to maintain two sets of accounts there? No, even in the past, Arjun, when we used to submit cost reports to the government, we used to give it separately. All imports had to be shown separately, and we'll continue to show that. So- So the imports, for us, if we import DAP or any NPKs, in any case, the data used to be compiled and shared with the DoF on a standalone basis. That will continue to happen. For imported items, the margin guideline that has been suggested is 8%. Right. Sure. So, that clarifies that. Secondly, if one looks at, they have talked about the boards coming back with some sort of unreasonable profit for the previous year. Can you confirm on the call that we would have no impact from that aspect? This guideline is effective first of April 2023. Right. Yeah. Sure. So, you're saying the impact, if at all, we would know, by the end of the year? Yeah. We will be concluding it by end of the year, but my initial assessment is it's not likely to have an impact for the company. Sure. The last question I have is, in terms of our retail outlets, there is a net MRP minus dealer margin. Now, Gromor, given it's a subsidiary, would it be subsumed in that 12%, that's considered separately as a dealer, so that impact would be plus? So the retail sales. You're asking about the sales of fertilizer that happens through the retail outlet, right? Right, right. Which is owned by us, yes. Yeah, it will be taken as the same, and the margin that we make on the sales will be considered as the overall margin for the company. Sure. So if we didn't have a retail, we could price it differently. Is that the right understanding? No, the retail also gets a similar treatment like a channel partner. Okay. Except that, it is all done internally within the company, and the dealer margin, so-called, stays within Coromandel. Sure. Just trying to understand scenarios, ma'am, because this is on a percentage basis and not on an absolute basis. So if raw material prices fall substantially, essentially, it would impact profitability for the entire industry. Is that the right understanding? The way one should look at it is, if the raw material prices are coming down dramatically, the expectation also is to pass on the benefit to the farmers, right? And the government also has a lever in terms of subsidy. So there are three aspects one needs to look into. Sure. There are raw material prices, there is an MRP, which the companies can work with, and then there is subsidy element. Sure. So all these three have to be looked into, as a whole sum, and on that, you work out your revenue, your margins, your margin percentage, and therefore the profitability. Sure. Very well understood, ma'am. Just a final question is, if one looks at pricing in the market, one player is significantly more efficient, essentially, that player's product would be priced lower than other players in the market. Would that be the right understanding? That is true for any company, any product, right? Right. Whoever is having a better process, whoever is most cost efficient, whoever is able to source much better, will have an advantage of pricing it far more competitively or trying to hold on to the price and then make more margins, so there is no difference for the fertilizer industry. But the latter part may not pan out because you are limited by peak margins. Yeah, but the way government has given it, 12% on the PBT, right? Right. You're saying that's more than enough to account for everything. I think so. So, there are going to be efficiencies, but then the market dynamics sort of plays in. When the raw material prices actually shot up- Right ... the government had increased the subsidy to a very great extent, while they had asked the companies to sort of maintain the MRP, right? Sure. In a free regime, MRP has to be determined and maintained by the industry players. So there have been interventions oversight. Since the guideline has just now come in, we also need to go through a couple of cycles to understand how this will pan out. But I will not get too concerned about it, because there is also a differentiation that has happened, and it is at the overall portfolio level. There could be certain products where you'll be far more efficient. There are certain products where the throughput may be lower, and therefore your margins profile could be different. So at a manufactured segment, it's a pretty reasonable call at this point in time. Ma'am, just because if we look at the formula, cost of sales, there's also this net interest and financing charges expenses, which you are able to claim. Given that we are a net cash balance sheet, essentially this component would be absent for us. So essentially, having large cash on balance sheet, would be a detriment to a nutrient or a fertilizer player. Would that be a right understanding? One can interpret it that way, but the fact is, on a year-on-year basis, there has also been good amount of investment that's happening in-house. So the new CapEx that has been announced, the CapEx that has already happened, is all through our own internal accrual. I don't think it's going to impact to a very great extent, considering the current situation. But if one were to theoretically look into it, the answer is yes. Sure. Thank you very much, and wishing you all the best. Thank you. Thank you. Next question is from the line of Vishnu Kumar from Avendus Spark. Please go ahead. Good afternoon, and thanks for your time. Ma'am, following up on Arjun's question only, this guideline seems to actually make lead to a efficient company or a lower debt company, or cash rich company, little bit, a bit more on the lower end, whereas a inefficient probably company having higher debt would probably end up making at least up, directionally there is a possibility there. So, will this guideline go with multiple iterations with the government before you finalize any conversations will further happen on this side? That is one. Secondly, what is the... I mean, you did mention that there is not much of a change in the this is the previous policy, and that was already in force, and this one. Why would the government come up at this point in time on this side? Why do they have come specifically with further guideline process? Okay. Vishnu, your first question in terms of companies having cash versus debt, when you're having cash, it also comes because of the fact that you've been running your operations very efficiently and you can deploy it for multiple other purposes. As I said, theoretically, yes, but if you're going to be highly leveraged, you're also going to incur that cost, and with that, your margins are going to be lower. So what you really want to see is the margin earnings capacity with or without an interest cost. The way the guidelines are at this point in time, and looking at how we have been running the operations, we don't see a risk. If you can do a comparative of several companies in the industry, and how well the EBITDA per ton has turned out, and therefore the margin percentage, to see whether a higher debt will be helpful or not. My personal read and assessment, to us, it doesn't impact. The cash will be deployed on more purposeful areas. That's the way I look at it. On your second question, as I was mentioning even earlier, there's been a guideline in terms of how the fertilizer companies operate, what is the cost structures, what is the reasonableness in terms of the government looking into a fair price that has to be maintained for farmers. These have been there. And they have come up now clarifying a couple of things. One is clearly on the GST front, because GST is only a pass-through as far as the companies are concerned; it cannot be included. So they have very clearly articulated the GST will not be a cost. The second thing that they have included is also doing a differentiation between companies who are investing in the country, therefore they, they are entitled to earn a better margin compared to companies who are just importing or having a certain level of manufacturing. So they have, they've gone ahead clarifying their intent. They want to promote more of manufacturing in the country. Good. Got it. Ma'am, earlier, you were highlighting that, if at all, let's say, at some point in time, we would be probably thinking about capacity expansion, the natural way would be to get all the backward integration done, get clarity on policy and, I mean, at least that's what we thought. But so at least now from that side, your next phosphoric acid announcement and some policy clarity, we probably have at least is the base margins that we can earn. Does this mean that over the next, we should expect some kind of a capacity enhancement announcement or anything that you could help us understand on this side? At this point in time, we want to first focus on the backward integration and getting our own supply security. At an appropriate time, definitely we can look into further options. We also need to be cognizant of the fact that new technology like nano has come in. While Nano Urea has not evoked a much encouraging response, the Nano DAP that has been developed by Coromandel, through our own in-house R&D center, has been received well. Our nano plant in Kakinada has to come full stream, and we also want to wait and see how these new technology adoptions are happening. While it is not going to totally substitute, there could be a certain percentage of granulation that can be consumed through the nano fertilizers. Plus, it will take a couple of years for us to get this backward integration done and feel far more secure with our raw material. So all these factors will be considered appropriately, and we will look for capacity expansion. But in the immediate future, as I had alluded in the past, we are looking at several debottlenecking options, and there is going to be investment that is going to be spent in the coming year for increasing some capacity within our existing plants. Further to what we have done, so those studies have been completed. So as we complete our business planning exercise, we'll be in a position to let you know what could be the additional, or the upsides in the existing plants through debottlenecking activity one can further look at. All right, ma'am. If I may, additionally, on the CPC and other businesses, one, we, if we exclude fertilizer and CPC, the balance EBITDA on all other segments, the SND and multiple other, we're generally seeing a material uptick versus last year. And any color on that? In fact, our mathematical numbers suggest that we have grown very well on the ex-fertilizer, ex-CPC business, and it is almost yielding us 25-30% margins now. Any color on that? And also, just on the CPC business, if you could talk about the external macro, and you did speak about some improvements and some new products coming up there. This will be helpful. Yeah. So our other businesses have also been doing well. SND, Organic, Retail. Retail has done pretty well despite the adverse monsoon conditions that we have seen in the Southern Peninsula. We have Dr. Raghuram on the call. He's leading Retail, Bio, and CPC, and I would request him to sort of take this question and respond to you, Vishnu. Raghuram, you there? Yeah, Jayashree. So, I mean, just to briefly describe, I mean, performance of CPC, Bio and Retail, in that sequence. So as Jayashree mentioned, the volumes have increased handsomely. However, the price erosions have been fairly steep. I mean, for those of you who have been tracking this industry, I think you'll be very familiar. The extent of erosion in prices has been upwards of 30%. So as a result, you know, the top line hasn't grown much for CPC. But through efficiency improvements, product mix optimization, catering to profitable customer segments, we have been able to shore up the gross margins. So, even the outstandings have come down from an overdue point of view. So many of the business fundamentals are slowly but surely coming into place. Looking ahead in the future, our new product pipeline is also looking good. But again, those of you who have been tracking this segment, will understand that globally, the regulatory environment takes time to approve many of these new products. So we have also forged partnerships with some of the Japanese innovators, so those products are also in the pipeline. So not only our generic, formulations, but also some, patented molecule formulations are also in the pipeline. So as I said, all of those are for the future, and it will take some time. There are CDMO discussions that are maturing well, another long lead item, for the business. So the future is looking good, and a lot of investments are going in on that front, including R&D and building some infrastructure. Even on the previous calls, I've mentioned that as and when many of these 55 will come to the, you know, you know, we'll have appropriate, you know, press releases at, at those points in time. For the moment, it will suffice to say that a lot of work is underway. A lot of heavy lifting is going on in the background, so that, you know, the business is in a good shape and more robust, going forward in the next couple of years. In the meantime, we are also, as we, as we announced a little while back, we are diversifying into specialty chemicals. Happy to state that some commercial transactions have happened during the quarter. So that beginning has happened. So this is another step forward in the right direction for CPC business. So that's as far as that is concerned. And in retail, primarily, we have been using our databases. We have got more than 3 million farmers in our databases, and we have done some, you know, data crunching, data mining to identify those who are repeat purchasers, who have been loyal to us. And we are helping them improve their yields significantly and driving word of mouth. And the whole trick that has, you know, given us the results is to focus on the villages, focus on the key farmers from the databases, help them improve through our advisory services, integrate products and services like drones, you know, so that we provide that sort of an impact the farmer is looking for. These people being quite influential in their respective villages, the word of mouth has helped us drive more footfalls into our retail stores. The bio business, again, we have been pretty much a one-product company, Azadirachtin is the active, and we are the largest manufacturers of this molecule worldwide. So the dependence on Azadirachtin, we are trying to reduce, and bringing up a slew of new products, about which you should be hearing in the news over the quarter and Q4. So, these are the three, you know, main things that we have done in these three respective businesses. Namely, diversification theme, data mining theme, and staying focused on products and customers that are profitable. I hope that answered the question. Actually, my question was more to the this segment profitability for nine months. Actually, it have it looks like it has exceeded the CPC business itself. While we understand why CPC is down, but the segment is the this ex ex-fertilizer and ex it has done phenomenally well. As a suggestion, if we can in the presentation we can show separately the EBITDA for these three as a breakup, it will actually be very helpful to track this going forward. So that is, maybe Jayashree may want to take that. Yeah. So, Vishnu, I, I'm not sure how you're coming with these numbers. We can take it offline. Sure. I take your point in terms of getting some more visibility to the other businesses, either through segmental or otherwise. We also want to get this story around, and we'll definitely address that. Thank you. Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all participants in the conference, please limit your question to only two questions per participant. Next question is from the line of Dheeresh Pathak from White Oak Capital. Please go ahead. Sure. Thank you. Thank you for the opportunity. So just coming back to the notification again. So is it fair to say that this reasonableness of MRP, this was always there at 12% for all manufacturers, in the past? Now it has been more fine-tuned, 8, 10, 12, and made it at a portfolio level versus product level, but it was always there. Yeah, there has been fine-tuning, you're right. Putting into a product, putting it at a portfolio level and also segmenting the companies as integrated manufacturers, manufacturers, and importers. Okay. This 12% PBT margin, when the build up happens to get to the reasonable MRP, is it going to be on actual basis, or is it going to be on a normalized basis? So, for example, interest cost, raw material cost, all the other costs when we build up, you know, is it going to be on each company's individual actual cost report or on a normalized basis? It will be on actual. Okay. Then what does this 12% mean for the company? Let's say, like yourself, if you are investing new capital into backward integration, what does this- Mm-hmm. 12% mean on, from an ROIC point of view? Your capital investment has to be looked at it on a standalone basis, right? For instance, if you want to do a backward integration, you will look at what's going to be the ROI for the project, what is the IRR, what's your payback period, so on and so forth. Overall, by doing that, if you're still able to make a 12% margin as an integrated player, it still augurs well. My decision to invest in a backward integration is not only going to be guided by this, it has to be a separate ROI project for me. Oh, I'm not able to understand that, because the 12% we're talking about PBT margin, it does not give us a good understanding of what return is generated on the capital. So if you can triangulate the 12% PBT from a, what does it mean from a return on capital point of view, right? Because if you have to spend too much on fixed assets, then PBT margin alone itself does not give you enough information, right? So what I'm trying to get to is, what 12% PBT margin, does it compensate enough for the capital that will go into backward integration? Yeah, at this point in time, given the size of investments that have been happening in the industry, I don't think it will be a deterrent. But we can work out the return on capital employed as well. I personally do not see it, this 12% being a deterrent for further investments. One last question. The current margins on manufacturing are way, way below the normalized margin guidance of 5,000. So if the current subsidy regime continues and the current spot prices continue, it seems that margins are way below the normalized margins. So given that we have flexibility to get up to 12% PBT, the only reason we are not able to increase MRP is because it is an election year period. Is that the only difference? Because right now, an efficient player like yourself is earning way below the 12%, way below your normalized guidance, and you're still not increasing MRP. So what is the... Apart from what I mentioned, is there any other reason that you're not able to get to a normalized margin? See, one must look into it as a cycle. Not every year is going to be the same, not every quarter is going to be the same. We normally look into a full year basis, and if you still look at this year on a full year basis, we should be relatively okay. Last quarter has been tough. The NBS rates have been sharply corrected. Last year in January, there was a downward revision. This year, with the raw material prices going up from August onwards, the industry is hoping and still representing with the government to see if there could be an upward revision on the NBS rate effective from January. At this point in time, seems unlikely, but there has been representation. We are also working through the FAI and along with our other industry counterparts, to share with the government the way the raw material prices have moved. There needs to be an interim correction in the NBS rates. Having said that, these current MRPs that we have, given the monsoon conditions, the consumption has also not increased, so there is no point in increasing the MRP and not being able to sell. There is a propensity of the farmer to pay, and, that is getting affected. So MRP increase may not help at this point in time. A revision of the subsidy will be very helpful. Representations are being made to the government. Hopefully, if it works, it's fine. Otherwise, we should hope for the changes coming from first of April. I would also encourage us to look into one or two periods in time when you will see these type of aberrations happening. Okay. Understood, ma'am. Thank you for taking the question. Yeah. Thank you. Next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited. Please go ahead. Hi, ma'am. Thanks for the opportunity. Ma'am, I have 2, 3 questions. First is, I mean, you clarified on this GST amount is a pass-through and will not be considered as part. What about the subsidy part? I mean, whether it will be a pass-through or 12% it will be calculated on the subsidy amount also? No, it's only for GST, because GST is not your income, right? Correct. You're collecting and then you're remitting. Yeah. Whereas, subsidy, when you look at it, you're not able to fully price the product, and therefore, the subsidy comes in from the government. Okay, great. Ma'am, how much capacity have we planned for this phosphoric plant, which is almost at 250,000 tons per annum? Post that, how much still we need to have a backward integration scope is there, either on phosphoric or sulfuric acid? What is now, how much are we getting rock phosphate from our one of the subsidiary or joint venture partner that we have formed in Africa? Okay. The phosphoric plant that we are looking at is a 200,000-ton capacity per annum, and we are looking at an integrated, both phosphoric and sulfuric acid plant. When we did the Vizag expansion, we did the PA, P2O5 first, and then after a gap of 2 years, we did our SAP 3. So we are looking at putting both of them together, and we are waiting for a couple of approvals, which we are expecting in the next 2-3 months timeframe. So it's a pretty large project, having both the plants together. And after we complete implementation of these plants, there will still be requirement for import of phosphate. Because currently we import somewhere close to 400,000-450,000 tons, again, depending on the grade mix. After this plant comes in place, we will still have about 200,000 tons or so, which we might have to import. I was also mentioning a little while ago, we are looking at expanding these capacities through debottlenecking activities at Vizag and Kakinada, and that might also require some more acid for granulation. So considering all of these, even after the plant is in place, there will be requirements for imports. Yeah, it will not totally do away with it. As far as the rock import is concerned, we have started getting the rock from Senegal. About close to about 100,000 tons has come from our mines there. Very recently, we have been working with one another company to help set up a fixed processing plant, which will get operational in the next quarter, and that should help to further stabilize and increase the throughput. On a normal year basis, we could expect somewhere close to 2.5-3 lakh tons, and the intent is to see how we can increase it up to 5 lakh tons of rock. Okay. And last question on the CPC side, that we were working on CDMO. And so what stage we are, I mean, in this CDMO business? Yeah. Just a little while ago, Dr. Raghu was mentioning about some of the progress there. So on CDMO, there are a couple of companies with whom the business is very closely working on, and some tech packs have been shared. The response has been good, so it's progressing well. As you would also appreciate, CDMO is a long lead item, taking anywhere between two to three years, depending on the innovator with whom you're working and the complexity in the product. We can say that the response has been positive. The progress is going in the right direction at this point in time. Madam, overall, in ballpark, number CapEx on this PA-SA and phosphates, what would be in your fair assessment? I think it will be in the closer to INR 2,000 crore. Okay, great. Thank you very much, and all the best, ma'am. Thank you. Thank you. Next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Mr. Gagan Thareja, you're not audible. Am I audible now? Can you- Yeah. Yes. Good afternoon. First question is, pertains to the policy margins that have been enumerated, I think, 10 and 12. In your assessment, what historically for yourself and at an industry level, what have been the margins, you know, that you've seen as being cyclically average in these three categories of trading and manufacturing with backward integration and within? I can hardly hear you on this. Am I audible now? Can you, can you hear me now? Yeah. Yeah. So my question was that, you know, while certain margin ceilings have been set, or proposed in the document, what in your experience have been the cyclical average margins that Coromandel would have seen, or for that matter, what at an industry level would have been historically prevalent? Just to get an assessment of, you know, where they lie or where we can peg them versus what's normal. I may not be able to answer you at the industry level, but if you look at the performance of the company over a period in time, I don't think that companies have hit this line of cap at all. Yeah. So my assessment was, you know, even at an EBITDA level, for this business specifically and not overall Coromandel in aggregation, margins will be closer to 9.5%-10%. Is that a reasonable assumption? Yeah. Okay. Okay. Right. And so from your perspective, you know, this does not impact you in any way in your make versus trade or make versus buy sort of, you know, decision at all or in your capital allocation at all, whatsoever? No, our policy has always been to see what we can do in terms of improving the cost efficiencies in our manufacturing, and wherever there are opportunities for us to look at import, we do import. For instance, manufacturing DAP versus importing DAP, whichever is more profitable, that's a call we take. And in times when manufacturing of DAP is going to be loss-making, importing of DAP is going to be further loss-making, at that time we may decide, okay, we cut loss and do our DAP manufacturing, right? So there is always going to be the economics of looking at ensuring that we have the potential to cut our loss if there is going to be a loss-cutting situation, or earn decent margins if there is going to be a situation in maximizing it between manufacturing and importing. At the same time, given the fact that we do manufacture multiple grades, there is also an option to import certain grades versus manufacturing. Because manufacturing of certain types or certain grades in certain plants can help us get a better margin. This guideline is also talking at a portfolio level, portfolio level for all the grades that are getting manufactured, so there is good amount of flexibility that's been built in. Okay. Got it. And you, you've invested heavily in backward integra- Sorry to interrupt you. May we request you that you return to question? Madam, I have asked only one question. People have been asking five questions. Just kindly allow me one more. Yeah. So, on backward integration, you invested sizably. You know, while you talked of individual projects, can you enumerate for us, you know, to what degree these projects increase your level of backward integration in terms of cost savings or cost advantage or ROIC, you know, what does this yield for you? How do I articulate this? Anytime when you are going to just import and granulate, when the phosphoric prices go up, the granulators don't make money, right? When you backward integrate, you buy the rock, and you do the processing here, there is a value capture. Similarly, when there is a sulfuric acid plant, there is a local feed of sulfuric acid, and also there is power generation that comes from the burner. So that is another value capture. I was just looking to whether you can enumerate it for us. I mean, to what... You know, while we understand at a qualitative level, some degree of enumeration would be helpful. So we look at it on an IRR basis. There is a threshold IRR for the company, and there is a certain years of payback when you take up these backward integration projects. As it is within these parameters, the investments are reviewed and taken up for approval. What is the payback that you generally, you look for? It varies on, project to project. Some projects have a payback... One commodity super cycle can make the payback come in 2 years, right? Like how we had this phosphoric shooting up, couple of years back. You, you make the investment, you get the return in, period of 2-3 years itself. Sometimes it can be all the way up to 5, 6, 7 years. Okay. And the debottlenecking that you're proposing to do would give you, you know, what kind of additional capacity? The business is actually working on the exact numbers. We are going through the business plan cycle now, and probably the next call I'll be able to give you the clarity on it. The OP per ton, which has seen, you know, a massive squeeze- I'm sorry to interrupt. Could you now please return to the question queue? There are several participants waiting. Okay. Thank you, madam. Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah, just one question, I thought, on the crop protection side. Your thoughts on both B2B as well as B2C growth, and as well as how is the progress going on Dhaksha side? Yeah, that's it from my side. Thanks, Ankur. I'll request Raghu to speak on B2C, and probably once he completes, I'll give you a flavor on Dhaksha. So the second part I didn't catch. If you can repeat the question, please. Yeah, Raghu. So, you know, thoughts on the overall crop protection business, both B2B as well as B2C, and how is Dhaksha progressing now? Oh, okay. Dhaksha, okay. So, as I shared a little while back, you know, the strong as the price realizations are concerned. And, we are all aware of the, you know, the monsoon that played out in India, you know, in patches and, the reservoir levels, what we have. So having said all of that, the new products and leveraging the data that we have and making those, focused, you know, what should I say? plans for specific districts and markets, targeting specific crops, is helping us. So in Q3, we grew handsomely, in volume terms, therefore, and I believe, that will help us improve the market share as well, because we have got-... more quantities of our products in the market, both in domestic as well as exports. So I think, if we continue on the same path, we become more and more, what should I say? resilient as a company, to weather the vagaries of the external environment. And at the same time, internally, we have immensely improved our efficiencies for the technicals that we manufacture. So we have done a lot of work within the four walls of our factories to drive up efficiencies, achieve significant levels of cost reduction, and therefore, are able to withstand the competitive pressures in the marketplace. So I think overall, the story has been good for Q3, so as CPC is concerned on these fronts. That is, you know, volume increase, margin expansion at the gross margin level, and also collections. That also has been pretty good, given the market conditions, collections improving, that has been quite a bit of a challenge. So exports and domestic trade are doing well for us at the moment. Thanks, Raghu. As far as Dhaksha is concerned, we've been doing pretty well. We've been working closely with multiple segments like agriculture, defense, enterprise. Happy to state that we have close to INR 300 crore of an order book for Dhaksha at this point in time. This is spanning across all the three segments I have mentioned. Apart from also setting up new training centers where pilots will get trained, there is a lot of emphasis from the government for promotion of drones in agriculture, especially through women self-help groups. They are looking at close to 15,000 drones over a period of next couple of years, and Dhaksha is supplying to IFFCO and the Coromandel. Early next month, we understand that there is going to be a program from the government promoting these drones for agriculture. Apart from this, the company has been participating in looking at promoting drones for logistics and defense purposes, and that's where a large chunk of the order book is there currently. Enterprise is also a very interesting solution, where they have received couple of orders. So R&D work is going on, new manufacturing facility has been set up. From next month onwards, the line from the existing facility will be moved there. That should help them in terms of continuously working on newer products and scaling up the manufacturing on the existing models they have. Thank you, ma'am. That's helpful. We over to you. Thank you. Thank you. Ladies and gentlemen, please limit your questions strictly to only one question per participant. Next question is from the line of Tarun from Old Bridge Asset Management. Please go ahead. Ma'am, I had actually quite a few questions, but given the constraint, I'll probably request for two. The first, I believe this might have been answered, but specifically coming to Q3, you know, per ton manufacturing margins for the nutrition business, given that our Q2 results were declared after the Rabi subsidy announcement, and my sense is there was a provision that was taken in Q2. Considering all of that, what drove such a stark reduction in the per ton margins? So, the impact of channel inventory has been taken in Q2 numbers, but the sales in Q3, the subsidy realization is also very low, as you'd appreciate the steep correction that has happened in the subsidy rates. Plus, as I was mentioning, the raw material prices, which came down quite well compared to last year, started inching up from August onwards. So it's an effect of lower subsidy rates, MRP being held where it is, and the raw material prices slightly going up in the context of a not-so-good season. Got it. So, yeah. Got it. So just following up on that: so, have we, out of prudence, taken some hit for what we are anticipating in Q4 as well, or we could see a similar sort of a rundown in Q4 as well? What is the... I'm not able to understand your question. This is, Ma'am, my question is that given where the MRPs are today, the raw material prices and the subsidy that has already been announced, you would have some sense on the per unit profitability, should the volumes flow through in Q4. So given how Q3 has transpired for us. As a part of prudence, have Q4, has Q4 hit also been taken, or that's something that we'll see in the Q4 numbers? You can't take a hit for future in the current quarter, right? I haven't picked up any hit of the next quarter. Okay. We-- Yeah. Okay, I was just double checking that. Great. Okay. Just last, I mean, given what's happening in the crop chemical space, is there some amount of recalibration to the INR 1,200 crore outlay that you had announced? There's a lot of activities going on in the crop protection front. The current focus has been to see how we can maximize, improve the volumes, run the platform more efficiently. A lot of work has been happening on those fronts, which has actually helped the company improve the, get a very good volume growth. In the context of what's happening globally, both in exports as well as the formulation. Last two quarters, consistently, we have seen a volume growth that's happening. At the same time, when you look at, the raw material, the, the intermediate prices, while they have been holding, the prices of certain molecules have come down sharply because of the China factor. In several cases, we have seen the intermediate prices are higher than the final technicals. Therefore, we are talking a bit before getting on to the molecules which have been shortlisted on the multipurpose plants, and also looking at what could be other processes that can be followed to get a far more compelling cost position. At the same time, there's been a lot of research that's going on on repurposing some of the assets for specialty chemicals, and work is also progressing well on the CDMO front. At the Dahej facility, where we wanted to get the herbicide plant up and running, there has been some traction in terms of the basic infrastructures that are required to set this up, so that is also happening. Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to management for closing comments. Thank you, all for your interest in Coromandel. Good set of questions during the day. If there are any further clarifications or questions that you may have, feel free to reach out to Anoop or me. We'll be happy to connect and interact with you. Thank you again. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.