Ladies and gentlemen, good day, and welcome to the Deepak Fertilisers and Petrochemicals Limited Q1 FY24 earnings conference call, hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the conference call, please speak with 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. Harmish Desai from PhillipCapital India Private Limited. Thank you, over to you, sir. Thank you, Seema. Good afternoon, welcome to the Q1 FY24 earnings call of Deepak Fertilisers And Petrochemicals Limited, hosted by PhillipCapital. From the management, we have Mr. S.C. Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President and CFO, recently designated as President and Chief Strategy Officer with effect from August 1, 2023; Mr. Tarun Sinha, President, Technical Ammonium Nitrate; Mr. Suparas Jain, Vice President, Corporate Finance; and Mr. Deepan Palwani, Head, Investor Relations. Also, I'd like to welcome Mr. Deepak Rastogi, who has recently been designated as President and Chief Financial Officer of the company with effect from August 1, 2023. I would like to thank the management for giving us the opportunity to host this call. We will begin the call with opening remarks from Mr. S.C. Mehta, followed by Mr. Amitabh Bhargava, for details on financial performance. Post which, we'll have a Q&A session. Thank you, and over to you, sir. Thank you. good afternoon to everyone. I extend a very warm welcome to each of you for the Q1 FY24 earnings call of Deepak Fertilisers. I trust that you have had the opportunity to review the financial statements, press release, and earnings presentation already made available on the stock exchange and our website. This quarter, as you would have seen, we have had a severe drop in our bottom line, and the obvious questions that could have arisen in your mind would have been: What has led to this drop? Are there some fundamentals that have shifted, or is it a temporary aberration? Let me share some of these undercurrents as we saw them, and there are some four or five undercurrents that I would like to share. Firstly, post-COVID, a swing back on the raw material and finished good prices in comparison to the huge jump that we had seen last year, the swing back was expected. We had also indicated that for a quarter or maybe two, there was likely to be a mismatch in the sense, in the terms of the sequence, that sometimes the raw material prices, remain the same, finished good prices drop first, and sometimes the other way around. These were expected, and we had thought through in our budget when we had set it up also, and we expect these to set back into a fair and balanced equilibrium, matching to the typical long-term average. Second impact, especially for our chain sector, came from the dumping of, cheap fertilizer-grade ammonium nitrate, FGAN, from Russia. Here, what we saw was initially the embargo from various countries and global players for the Russian products post the Ukraine war made India a very convenient dumping ground for whether it is Russian oil or Russian GAN and others. Combined with this, the government, because of an earlier fear of not having sufficient ammonium nitrate for the mining activities, coal mining in particular, they had also put a ban on exports of GAN. On one hand, the import floodgates opened up with cheap Russian GAN and exports were banned. As we see the scenario, the embargo is somewhere getting readjusted in terms of the global needs, and we also learned that the government is actively considering lifting the export ban on GAN. The third dimension that emerged is where we saw that a major global phosphate supplier to India decided to virtually withdraw from the phosphate market and move to finished fertilizer supply. Here, what we in the industry and we at Deep also, what we have done is, we have encouraged and nurtured a lot of new phosphate suppliers from other sources and have fine-tuned our plants to accept the acid from multiple sources. That front also should be something that should now be on a comfortable wicket. The fourth interesting negative impact that came in was due to the reduction in the fertilizer subsidies. Normally, as the raw material prices come down, there is a resultant subsidy reduction. In this case, you know, the government, was delayed in announcing, and, you know, they had to retrospectively, you know, announce the reduction for the first quarter. Actually, two quarter reduction came in simultaneously in this current quarter, adding up to almost INR 160 crores of impact. You know, for us and everyone in the industry, the material that was there in the pipeline, the pipeline inventory, that is, what is, something that got hit because that pipeline had, finished products manufactured with the earlier raw material prices. Now, of course, we approach the government to somewhere consider this factual asset and see whether, you know, some relief can be, you know, given particularly for the pipeline inventory. We had internally, we had also somewhere had extended shutdown in one of our nitrogen plants, the long delivery repairs and all are now behind us. Lastly, the rains were also somewhat delayed, and now, you know, good rains and adequate rainfall has happened all over, particularly in Maharashtra. While we see the typical lull that is expected in the mining activity during this monsoon, now I'm talking about this quarter, on the TAN business, the fertilizer season should certainly be brisk. Having said that, on the positive side, we are very happy to share that, you know, for our new ammonia project, we have seen a successful trial production emerge, and very soon we should be declaring the complete commercial production. That will be something that is giving us a long-term, very good risk mitigation on our key raw material for all our three businesses. Lastly, I might share that at the fundamental level, our, you know, critical strategy of moving from commodity to specialty continues to be a very strong and positive strategy, and we are continuing to work, you know, on that front for all the three businesses. We are finding in each place a very positive traction. On the fertilizer side, while, you know, the one time this subsidy hit came in, but at the product level, we are continuing to see a good margin. Similarly, and that is emerging, of course, because we have now shifted more and more to crop-specific nutrients rather than the commodity fertilizers. Similarly, in case of Technical Ammonium Nitrate, more and more we are looking at holistic offering, what we call a TCO, Total Cost of Operation, you know, offering that you know is required for the end user, where product plus unique services together as a holistic solution is what we are offering, and that is having a very positive traction. So also in case of our industrial chemicals, where we are seeing that the unique comfort products, pharma grade, small packs, and the oxygen grade products, including in case of acids, the solar grade and the food grade acids, you know, where we are addressing the requirements of specific segments. Those are all giving very positive traction. For more details, I would now invite Amitabh to share with you in terms of figures and the rest of the details. Of course, then we're available to answer all your questions. Thank you. Amitabh? Thank you, Mr. Mehta. Good afternoon, ladies and gentlemen, and thank you for joining the Deepak Fertilisers And Petrochemicals Corporation Limited conference call for the Q1 FY24 result. During Q1 FY24, we achieved a total operating revenue of INR 2,313 crore, representing a decrease of 24% compared to the same period last year. This was, of course, largely due to the raw material prices going down and commensurate with that, there was also a reduction in finished good prices. Our operating EBITDA for Q1 FY24 amounted to INR 281 crore, with a margin of 12%. It was a challenging quarter. We recorded a net profit of INR 114 crores, with a margin of 5%. During the quarter, our chemical segment had a revenue of INR 1,238 crores, a decrease of 31% on YOY basis. IPA sales volumes increased by 87% YOY in Q1 FY24, with manufactured IPA generating revenue of INR 154 crores. Manufactured acids for the quarter recorded a revenue of INR 119 crores, a decrease of 25% compared to the previous year. As such, the volumes were up 7.5%. The manufactured sand business had a revenue of INR 541 crores, which represented a decrease of 50% YOY during the quarter. Volumes are actually down 15%. As far as the title segment is concerned, Q1 FY24 revenue decreased by 15% YoY to INR 1,069 crores. Manufactured nitrophosphate and NPK, inclusive of our crop mix, recorded a sales degrowth of 34% YoY to INR 737 crores. As such, volumes were down by 8%, which was largely because of delayed rains, as R&D was alluding earlier. Bensulf sales decreased by 59% YoY to INR 21 crore. During the quarter, our IPA plant operated at a capacity utilization of 111%, and both acid and TAN operated at 83% and 87% respectively. The crop nutrition segment, NP and NPK plants operated with utilization of 76%, and Bensulf plant operated at 51% utilization level. The available capacity, across our plants, gives us that additional headroom for, for future growth potential. We recognize the challenges that lie ahead, but remain committed to our long-term vision and growth objective. With a dedicated and resilient team, we are confidently we'll navigate through these uncertain times and achieve sustainable growth. With this, we, we are happy to take, take your questions. Thank you. Shall we begin with the question and answer session? Yes, please. Sure. Thank you very much. We now begin with the Question and Answer Session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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. We take the first question from the line of Mr. Madhav Marda from Fidelity International. Please go ahead, sir. Yeah. Hi. Hi, good afternoon, am I audible? Yes, you are. My, my question basically was, the ammonia facility, now that it's about to ramp up, could you give us an update in terms of how the spreads are looking currently, given where our RM cost is for the gas and then the end market pricing? Then, just yeah, if you could just share that, please, that would be helpful. Yes, we are currently looking at FOB Middle East prices of about $230-$250 odd dollars, in that range. Given the current gas prices, I think overall, we would somewhere be between $125-$150 odd dollars negative in terms of our, you know, import parity prices versus the prices at which we would be producing ammonia. That said, I will have two other points I want to make is, one is that, while the import parity prices of ammonia are obviously come, derived from $230-$250 odd dollars, approximately. The domestic prices of ammonia are the ammonia that is traded domestically. We are still seeing significant premium over import parity, that reflects the cost of production, because for all the producers of ammonia who trade into surplus, surplus ammonia, the gas prices still remain elevated. That gives us an opportunity to place more of our ammonia in the domestic market. Also, this quarter, the quarter gone by, we saw almost 18, 20 days of disruption in ammonia. That again, one uncertainty that we would, we would, once our plant starts operating commercially. That uncertainty and the uncertainty around therefore, production of our downstream products like, you know, TAN and acid, that uncertainty in some sense would also be taken, taken out. Those are, those are the factors that, we need to sort of look at from, from the point of view of, once our, our, our own, production of ammonia begins. Got it. Then, you know, given that, this was like essentially a backward integration project, for, for the company, in this scenario where, seems like it could be better to buy the imported ammonia rather than produce it, in-house. Would we look to run the plant at a lower utilization initially, or would we still look to ramp it up? Just, just to get a thought, I'm not very clear how that plays out, in here. One is we have tied up long-term gas, which has certain minimum off-take commitments. To that extent, within that flexibility that we have, we would we would keep the production at that level. The balance, we always have the choice of continuing to import. That's that's really the way we would we would approach it. It's also a factor that the capacity utilization at higher capacity utilization, our cost of production is also lower. We need to balance between, you know, reducing the our capacity utilization and sort of looking at balance, balance importing through the import channels. I think in such case, the cost of production, we may have to compromise because the plants, as they run on 100% or thereabout capacity, their energy efficiencies are significantly better than at lower capacity utilization. Got it. Basically, you know, if we do end up like running the plant at a high utilization, essentially, is it fair to assume that our the spreads that we make on the downstream products like TAN or nitric acid, that will get impacted? If we don't, like, basically, we'll be producing more expensive ammonia in-house than we can buy from outside. Would that mean that it has a negative impact on our business, as this plant comes up or...? I know that this is a very, it's a very cyclical margin, and we're probably at the other end of the extreme on the margins, so we have to normalize at some point. Given where we are today, just wanted to get your thoughts on how we put in that sentiment. At first, we are going to transfer the ammonia from our ammonia plant, which is into a separate legal entity for common chemical, at the arm's length prices to our, our downstream products. To that extent, whatever, let's say, downside we would see at PCL level, which is at the ammonia plant level, from a consolidation point of view, yes, it would have an impact on our margin. If you look at each of our products, because they would get ammonia at the arm's length price, there's not going to be any impact. Got it. Just for the time, because, the other question was, again, you know, like, like you indicated, that there's been a lot of dumping by Russia as they're, like, trying to, like, kind of resupply to India because of geopolitics. How do you see this playing out in the next one, two years? Will the government come in and step, step in to protect domestic manufacturers? Dumping clearly should have, some response from the government, right? It is difficult to predict what government would do, but what we can definitely say is that in the past, anti-dumping duty has been imposed by government in turn. At least it suggests that there could be a case for anti-dumping, but we would not like to hazard a guess as to what government would do in such a scenario. Overall, I'll, you know, one aspect is, of course, Let's say, in this season, there was cheaper import that came from Russia because of the factor that Russian product was not finding outlet elsewhere. There was also a larger overhang of nitrates globally in terms of the price reduction, because European season and demand was on the lower side and there were, you know, channel inventory. Now that we are already seeing that because of certain incentives that European governments are giving to farmers as well as the, we are seeing uptake, better uptake in this new season of crop season in Europe. We expect that the nitrates, in general, nitrate prices will recover, and that should have a bearing also on, even if the import continues to come from Russia, it would obviously come at a price parity with the nitrates in rest of the global market. Understood. Thank you so much. Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. We take the next question from the line of Mr. Vignesh Iyer from Sequit Investments. Please go ahead, sir. Hello. This is regarding the subsidy, fertilizer subsidy reduction that the government had undertaken in our books. Just to get an understanding of this, whether this lower subsidy is extended for the second and the third quarter, and what is the possible impact that we could see because of this? Just to get an idea of how it, how does this pan out for the rest of the year. As per the revised subsidy announced by government is valid or rather applicable from April 1st to September-end. The impact that we saw, it was about INR 161 odd crores, is it because of channel inventory? Going forward, as much as the NBS has come down or will be lower NBS would be applicable, even the raw material prices have commensurately come down. As our MD was earlier mentioning, that overall, if you look at product by product, per ton margins compared to what we saw last year, if you remove the impact of this, you know, fertilizer subsidy reduction and the impact that we've taken on our inventory, the margins are better. Per ton margins on, in our products are better. So, you know, we, we in fact see, a better, better sort of, a positive sort of traction, both in terms of volume and margins going forward in, in, in, in the coming quarters. Okay. In case of ammonia, I mean, if, let's assume what the price that is running at could be $2 to $2 to $3, at what, what utilization level would we match, probably match this cost? I mean, if we have to match the cost for our production, what would be the utilization level that we would need to operate the plant at? The point I was making is that as opposed to running the plant at 70-80%, it would always be better to run the plant at 100% capacity utilization, because the energy consumption down are, quite sort of, effectively better. At 100%, this will be 80%. But at 100% also, current prices of gas and ammonia, we are in that, negative sort of, domain. To that extent, the prices of ammonia need to recover for us to, to, to break even. We are, we are seeing, you know, I was, as I was mentioning, the nitrate and nitrogen prices in general, have seen weakness in this quarter. As those recover, ammonia is expected to, to recover, and, and if even cost of production of ammonia, marginal cost of production of ammonia in places like Europe is still high because the gas prices are, GPS prices are high. We expect that the ammonia prices will recover, in a matter of time, and as with that, we, we should be in a position to break even and, make positive margins. Okay. Okay, sir. That, that's all from my side. Thank you. Thank you, sir. We take the next question from the line of [inaudible]. Hi, thanks for the opportunity. Some clarifications. Firstly, on the, as you mentioned, that we are moving from commodity to specialty, especially on the client side of the business, you said, total cost offering kind of services we are now providing. I just wanted to understand the thought process behind it and what exactly we do here, and what is the size of opportunity we see in this kind of services? My colleague, Tarun is there. He heads our plan business. Tarun, would you like to take that question, please? Yeah, absolutely. Thanks, Amitabh. Am I audible, Amitabh? Yes, you are. Okay, good. Thank you for your question. Talking of Technical Ammonium Nitrate business and the journey of, you know, from commodity to specialty, what we mean by that and the concept called Total Cost of Ownership. There are two components of the term specialty, you know, the way we look at it in our plan business. One is specialty products, which are not commodity products. Secondly, is the customized solutions, which make it special, so in terms of our offering to our consumers, the consumers being the mining industry, the mine owners, the mine operators, you know, infrastructure targets, so on and so forth. Those are the two components of specialty. Now, the concept of total cost of ownership, in simple terms means, it's the cost of extraction of mineral or cost of extraction of rock, depending on what was the case. That's what we are attempting to improve through this customized solutions. The way we are approaching that is, there are essentially five value streams, the way we look at it in any mining operations. They being drilling, blasting, excavation, hauling, which is same as transport, and then crushing, if applicable. These are the five value streams. The sum total of all the costs becomes the cost of mineral extraction for the mine operator. We have started to build in capabilities in the form of tools, softwares, people capability, all of that over the last one and a half years, to try and attempt to bring about improvements in each of these five value streams of a mining operation, and thereby reducing the total cost of ownership or the cost of mineral extraction for the mine operators, which is going to be beneficial for them. That's in summary, this whole solution-based and specialty, you know, transformation journey of Technical Ammonium Nitrate business, riding on the concept of total cost of ownership. What is the size of opportunity we see here, and how big can this be for us, at least in the next 2-3 years? In terms of the opportunity, the universe is quite large. Effectively, every single mine in India and every single infrastructure project in India has opportunities, if not in all those five value streams, then at least in some of those value streams. You know, you can just imagine how big is the opportunity. We've just started this journey as of 1.5 years ago. We are very excited about it as we go along in terms of the growth potential for this business, and equally importantly, for us to be able to add value, you know, to the consumers, which are the mining companies and the infrastructure project owners. Any global benchmark kind of companies you have which offer this kind of services, or is this something new we have thought about and we don't have any benchmark of these kind of services? Internationally, the leading, you know, explosives manufacturing companies, some of them, not all, they do have this business model in place. Certainly in the Indian industry, I think we are going to be more or less a pioneer. If I may add one more point to make, you know, Mr. Mehta, in his initial address, also talked about a holistic solution. One part of holistic solution for our technical ammonium nitrate business, and TCO is just a part of it. If you look at it in the overall part, you see how integrated we are in terms of being able to provide the solutions to the mining companies. We have our own ammonia. We have our own ammonium nitrate. We are having forward integration initiatives in the explosives area, and then we are investing in blasting technology, which I was talking about. All this, this unique chain, starting from ammonia, going up to blasting technology, we are the only company in India to have this holistic and complete value chain as an out offering. It's really unique from an Indian point of view. Any particular number or chart, numbers that are reaching, in next 2-3 years in terms of revenue from this? As I said, the, the potential is huge, and we are starting from a small base. You know, we started this journey just about a year and a half ago. We, we definitely see, you know, some good momentum picking up in the coming months and years, and hence, quite a bit of growth, both in top line and bottom line, through this business model. Okay. When are we planning to commercial production of ammonia plants, or has it started yet? Amitabh, you want to say? Currently, currently, the plant productions are on. We are monitoring, the performance parameters. As the performance parameters and, the plant operation, stabilize, by and large, we would be in a position to declare commercial operation. All right. Thank you so much, and all the best. Thank you, sir. The next question is from the line of Mr. Deepak Poddar from Sapphire Capital. Please go ahead, sir. Hello? Am I audible? Yes, you are. Yeah, yeah. Thank you very much, sir, for the opportunity. First up, I wanted to understand on the ammonia, our new plant. Now, you mentioned we are having a $125-$150 per ton of negative carry as compared to import prices, right? As we stand, I mean, on our overall capacity of 0.5 million tons, if I have to just calculate, an INR 500 crore kind of annual impact could be there because of this negative negativity with the import and export utilization. Well, I don't think we have done a annual calculation. we'll see as the ammonia prices and. We are confident that the overall nitrogenous fertilizer demand is picking up and overall nitrogen prices are going up. There has to be a recovery for ammonia in the second half of this year. Correct. I think it's, it's, it's too early for us to hazard a guess in terms of what will be the annual impact on. As for current pricing prices, my calculation is correct, right? 0.5 into $125 into INR 180. I mean, that way. What do I comment on that? I mean, you get... Okay, understood. Fair enough. And, and, sir, our incremental impact, depreciation, and interest, will be about INR 300 crores and INR 200 crores respectively from this plant and on an annual basis? In terms of interest, we are restricting our overall debt on this project to about INR 2,000 crore. If you recall, earlier we were looking to raise almost INR 2,600 crore, but we have funded it from our own internal resources. On INR 2,000 crore debt, we are looking at about nine, nine quarter kind of interest rate. Mm-hmm. You can do that calculation. Correct. As far as depreciation is concerned, it's roughly about INR 200 crore annually. How much? INR 200 crore. Depreciation is INR 200 crore? Yes. Okay, I got it. And, sir, in one of the comments earlier, you mentioned that, TAN profitability should improve. I mean, did I hear correct, I mean, going forward? Yeah. The point I was making is that in general, the nitrate prices have been weakness because of European season, and in general, there were, there were channel inventories of nitrates. Mm-hmm. are already seeing in Europe the off-take of nitrates has been quite good in the new season. Also, overall, I think there's been farmer incentives assessed in Europe, and that is reflecting in terms of not just the uptake of nitrates, but even recovery of nitrogen, in general, nitrogen as fertilizer. And that should reflect, because if you look at overall fertilizer-grade ammonium nitrate is part of the overall basket of nitrates Mm-hmm. -including urea, urea, ammonium nitrate. As, as those prices recover from a parity perspective, the prices of fertilizer-grade ammonium nitrate should also recover. I must also mention that we believe that we have, we have seen bottom. There is already some recovery that we have seen in the Indian plastic prices in recent times. Okay. The pressure that you mentioned because of the dumping from Russia as well as the export ban. Those pressures, I mean, are, are easing out in that sense? As far as the export is concerned, the merit of having imposed the export ban at a stage where India was really under pressure that, you know, they would not need enough ammonium nitrate from a cold production point of view, that has certainly eased out. The import that has happened from Russia suggests that there is enough ammonium nitrate available. With that view, we are quite hopeful that government would keep the ban on gas. Uh-huh. So that, that is certainly the, the case. Understood. My final question is on your duty. I mean, you mentioned that this quarter we have, we added 2 quarters impact of subsidy reduction, right? What would be, I mean, normal run rate, of this, I mean, the subsidy impact, probably going forward? Well, like I mentioned that this impact is on the channel inventory. Mm-hmm. As the NBS prices have come down, commensurate with the raw material prices. Going forward, it's business as usual, meaning that you, you are now on a new NBS regime, and you are also going to be producing at the lower or new prices of raw material. This one time, I would say the impact that comes in channel inventory as and when NBS changes. Mm-hmm. -that aspect is, is not going to be there, and we would be back into a normal, you know, kind of margins that we would make. There I was mentioning and we also made that point, that for some kind of margins in each of our products, we are seeing better margins compared to a similar period last year. Correct. This INR 160 crore would be considered a one-time impact, right? Just, it will not reoccur. In a sense, yes. I mean, as, as when MBS changes, there, there can always be an impact. Right now, we are into the new MBS, which is effective from April 2021. Fair enough. That impact we have taken on our channel inventory. Quite useful, sir. I think, that's it from my side. All the very best. Thank you so much. Thank you, sir. The next question is from the line of Mr. Renam Gilanu from Swan Investments. Please go ahead, sir. Hi, sir. Thanks a lot for giving me this opportunity. Most of my questions have been answered, but I just have one more question. Have you signed any contracts for gas pricing? If so, what is the aspect that we finalize on? We've signed contracts for next three years of gas. These are three different buckets of contracts. Some contracts are related to Brent pricing, and therefore, the prices of gas would depend on the Brent movement. There are balance are linked with Henry Hub prices and also JKM, Japan, Korea market. This is the domestic gas, which is also capped by government, PPAC guidelines or the PPAC sort of price cap on gas. The combination of these three is going to determine our prices. Effectively, we are one is taking a view on Brent, Henry Hub and JKM put together. Difficult to say which, which way it could move, but we've also taken certain hedging positions to ensure that if some of these commodities go up, we do have a protection on the upper side. Okay, sir. Thank you. Sir, can we expect this to be the bottoming out of ammonia prices, or can it further? I think in, in our view, the point I was mentioning about nitrogen as fertilizer and nitrates in general, having seen the bottom, we are seeing demand recovery. Producers, you know, the inventory which was there with producers has, is now getting exhausted. Nitrate prices, in general, nitrogen prices will go up from here and should go up from here. As the demand recovery happens, the incremental cost of production of ammonia in Europe is still very high. The prices of ammonia obviously have to somehow reflect these fundamentals. Okay, sir. Thanks a lot, sir. All the best. Thank you. The next question from the line of Mr. Viraj Parekh from JMP Capital. Please go ahead, sir. Yeah, thanks for the opportunity. A couple of questions on the debt side. What would be our gross and net debt as on date? We have debt about INR 2,600 crore end of June, and we were holding roughly about INR 1,300 crore of cash balance, so about INR 3,960 odd crore of gross debt. All right. All right. Since we've seen a significant spike in the finance cost, for the quarter gone by for Q1 versus, the previous periods, should we work on this front then in terms of the finance cost for the rest of the financial year? There is an increase in MCLR, and to the extent loans do get adjusted to or get reset because of the new MCLR on weekday. There is an increase, there would be an increase in interest cost. Incidentally for us, compared to March 2023, in June 2023, our average cost of borrowing being reduced by about 40 basis points. These are earlier, you know, holding slightly expensive loans on ammonia projects, which we repaid completely in this quarter, and we are refinancing those loans with cheaper loans. ... All right, sir. All right. You know, just another one on this. By the end of March 2024, what should be our gross debt number? Should we be at similar levels or there will be... We have the ultimately, ammonia project is now complete and particularly complete from the debt standpoint. Whatever debt we need to draw, we have, we have drawn on ammonia project. The debt which we get added from there on would be debt on and Gopalpur. Roughly, I would say INR 400 crore-INR 500 crore should get added on Gopalpur till March. Equally, through the year, we definitely pay about INR 250 crore-INR 300 crore. We amortize the debt. For the balance period, whatever is the pro rata number, that should, that should come down. I think that, that's how we should look at the debt number gross, right? Net debt would also sometimes would depend on how the business performs in next three quarters. Right. Right, sir. Right. Sure. Sure. Okay. Okay. Thanks a lot, sir. Thanks. All the best. Thank you, sir. We take the next question from the line of Mr. Paritosh Bajoria from Vision Capital. Please go ahead, sir. Yeah. Hi, sir. Thanks for the opportunity. Just want to get a brief overview on how the ammonia cycle works. From what I understand, there's a demand or shortfall, and because of that, the markets are down. Essentially, are all the in the world right now selling ammonia at a loss, because how does the ammonia end up being at the rate in spite of the gases being at the rate that they are? If you can shed light on that, it'll be helpful. You see, one is ammonia cycle in the past, and we've spoken about it. When we look at our own imported cost in last 10-15 years, we have seen an average of $400 to actually $4,450 FOB Middle East cycle, which the landed cost basis would be in the range of $500-$510. That's how average of ammonia import cost has, has, has moved for us. Now, in that average, we've, we've seen lower cycles the way we are seeing right now, which is $230, $230, $240-$250 odd dollars, but we've seen the higher end of $1,200 as well. In fact, in the recent past, the whole of last year, the average cost of or average FOB Middle East prices would have been somewhere in the range of $650 odd dollars, with the I would say, the upper side of $1,200 odd dollars. That's the kind of cycle that you would see. Globally, ammonia that gets traded and procured by the players who are not integrated with ammonia, they depend on the global trade or the surplus capacity, which either comes from integrated plants or certain merchant, merchant plants that ammonia merchant plants which trade into the market. What we've seen in the past, the numbers are no different currently, is that roughly, while the increase on the demand side has been about 1.5% or so, 1.5%-2%, supply side is somewhere between 0.5%-1% in terms of the addition, as you look at CAGR or compound addition. That, that kind of gives us that assurance that, you know, supply side is remaining, I would say, somewhere behind in terms of the demand side, and that should sooner or later reflect on the ammonia traded prices. What happens is in all of this, the... There are players, global players who, who have access to cheaper cost of, of, of gas, because these are, you know, gas producing or gas surplus, surplus countries or locations. However, the prices of ammonia would always, like in any other commodity, would get determined by the incremental cost of production. As if the demand goes up, if the last plant that produces ammonia, to cater to that, that demand is, is what would determine the prices of ammonia. That is where I was mentioning earlier that in Europe, given the TTF prices of gas are still high and will perhaps go higher as the winter progresses, the cost of producing ammonia in Europe will remain high. Today, because the demand side is lower or nitrogenous fertilizer demand is, is, is weak, some of those incremental plants are shut and therefore, ammonia, demand is low, and there is, there is also maybe some channel inventory. As that equalizes, we are going to see again the demand-supply fundamentals playing out, and the, and, and, and there should be at the lower end of this, you know, the commodity prices that we have seen. We, we should see recovery from there. All right, sir. That clarifies that particular aspect. Another small aspect, although it's nothing compared to our balance sheet at this point, the real estate division, with the onset of the interest rates going up and also the equity market picking up, why aren't we trying to basically get done with the same trying to do for the past quarters now? It'll also help us ease out the increasing debt in our balance sheet. Is there any update on that? Fundamentally, any non-core assets that we have, we've been reviewing that closely. We have recently started selling some of our non-core real estate land, not necessarily in Pune, but we have some land outside of Pune. We have sold that. Therefore, directionally, we are looking at coming out of our non-core. The timing of when we make a decision on our Pune land and, you know, and then how do we really go ahead with that? Because that even that has more than one parcel of land. We would inform when board takes a view on that. All right, sir. Thank you very much. Thank you, sir. The next question is from the line of Pinaki Banerjee from AUM Capital. Go ahead. Sir, thanks for the opportunity. I would like to ask some, some questions on the isopropyl alcohol segment. In the presentation, I see because of that position of, import restrictions by the government of India has been one of the prime reasons for the significant jump in volumes, this quarter. If you go back to 2022, you had, about 64,900 MP, which has fallen drastically to 4,900 in 2023. How much, are you expecting to produce for this quarter, considering the fact that This quarter, our production has been around 19 odd thousand tons. Okay. Exactly by, our, our capacity utilizations were about 111%. Great. We produced about 19,467. We are quite hopeful that our run rate this year should be, I would say, extrapolation of what we have seen in, in, in quarter one. Basically, you are expecting to surpass your effect in 2022 levels? I don't know what the FY 22 level as such. It was around INR 64,900. I think that should be, should be, should be possible. Though, we'll have to see how the prices on propylene prices, vis-à-vis acetone prices also, also the overall demand side. We'll have to see what happens in the next three quarters. Yeah, you know, the signs in terms of what has happened in Q1 on turnaround in IPA are very positive. Actually, can you give us a breakup of end segment ratio, B2B or B2C? Is there any segregation in segments? We are largely, or significantly still in B2B- Okay. because pharma remains almost 80% plus kind of, volumes go into pharma segment as well. Even the other sectors that we service through IPA are largely B2B. Even in our corporate, which is the segment, which in a sense is also disinfectant, we are focusing on institutional customers. Okay. Obviously there are product portfolio which caters to the retail customers, but our focus is also going to be in hospital segment, as in disinfection for hospital segment. Cool. Just one last question regarding the TAN segment. Actually, since it is being used for manufacturing of explosives, are you supplying this raw materials products to any defense company? Sorry? Sir, are you supplying any of this, this TAN product to any defense customer because of its explosive properties? I was inviting Tarun, my colleague to comment on that. Okay. I'll take that question. Yeah, thanks. As far as TAN is concerned, there is a very small portion of, of, of TAN in our business, which goes to some ordnance factories. Okay. Which is then used for converting into some sort of products which eventually get used in the defense sector. We are a couple of steps away from that. Considering the fact that the defense, there's a huge expectation from the defense segment, so are you planning to further increase its exposure to exposure? I can talk from a Technical Ammonium Nitrate, and then Bhargava can add more from a group strategy point of view. This is, you know, Technical Ammonium Nitrate business is focusing more on our transformation journey that I talked about. Okay. Which consists of a complete value chain, starting from ammonia, ammonium nitrate, forward integration into explosives, and then into blasting solutions, and finally, mine productivity improvements. Right. That's what we are focusing on as a part of the core strategy for our business. Cool. Thank you. Thanks for me. That's from my end. Thank you. We take the next question from the line of Mr. Sumeet Hora from SG Global. Hi, thanks for the opportunity. My first question was, what will be our cost to producing ammonia, $ per ton, including the current gas cost and the conversion cost, versus the Middle East prices, where we break even, if we exclude the freight, freight and custom duty, that we pay while importing? I want to answer that question. The current gas prices, including it should be around $380. The car cost of producing ammonia. No, I, I mentioned that, overall from a import parity, what is our cost of production? We are in that $125-$150 odd dollar range, depending on the pricing fluctuation we are seeing in ammonia. That's the negative we are seeing. Sure, sir. Secondly, in terms of the contracts that we enter into for an asset business, how do we fit the pricing? Are these formula linked to ammonia? Or if, you know, you could just give a broad sense on what would be a spot, what would be a long term, and how do we fix the pricing? The prices typically of any product, there is a combination of contract customers and spot customers. Contractual customers, are typically on the basis of certain margin protection, where we pass on increase and decrease in cost. As far as spot is concerned, we look at each, each of our customer, each location, what is the next best alternative they have, and typically, our prices are, to some PM over the other alternatives, given, given the quality of our product, given the kind of, reach we have, the turnaround time in terms of reaching the product to our customer. Largely, that's the way any, any, cost, commodity or commodity is priced on, on spot basis, and we are no different. Sure. What will be our ROC for time projects that we would have initially worked on, versus what would have changed now? You know, just to know what will be the playback of this project that we were initially expecting versus, what will be it now? You said time? Yes. Ammonia. Ammonia, sorry. Ammonia. See, look, you need to look at ammonia, you can't look at it in 1 quarter. I mean, if you asked me this question in previous quarter or quarter before that, based on that quarter price, the numbers would be very different. Therefore, you need to look at these 20-year, 30-year projects on the basis of the average of commodity cycle. That's where I just explained that, you know, in, in last 10, 15 years, we've seen prices of $420-$430 FOB Middle East. That's the basis on which we conceptualize the project. We don't see the commodity prices are going to be any different. You in 1 quarter, you see $1,000, in another quarter you are seeing $250. You can't keep changing your, your favorite based on what, what happens in that quarter. Understood. Understood. Thanks, so much. That's all from my side. Thank you, sir. The next question from the line of Mr. Billas Berg from Star Health. Please go ahead, sir. Hi, good afternoon, everyone. Thanks for giving me the opportunity. The first question I wanted to know was, the CapEx plans that you have for after 2024 and 2025. I believe the TAN project is the one, where you would be putting in most of your CapEx. is there any personal making projects or assignment? any maintenance. how should we look at? As of now, the project that we are working on, after ammonia completion- Yeah. Time is the only time Rupantu project is the only project that we have, we are, we are working on. As such, based on whatever, decision board we have taken so far, these are the projects. These two are the four main projects that we are, we are undertaking. Okay. So basically, whatever remaining CapEx for this project, and additionally some maintenance CapEx is what we should get. I hope my understanding is right. Yeah, that, that's correct. See, in the past, as you would recollect, we, we've also... Our MD has also made that point, that the next round of growth that we see is also going to be from a potential opportunity that we would see in brownfield expansion in the age asset projects. The timing of it or, when does that happen? We, as and when it takes place, we would, we would bring it to the investor. As of now, these are the, the two projects we are working on. Got it. And sir, you mentioned a very interesting point, that you have been taking some hedging positions to cover up for any spike in the raw material price. If you can have some details around what are these products, what index, what kind of percentage of your total consumption and, and pricing levels, if you can tell anything, anything on that? Right now, we have taken position on, on Brent-related contracts. We are evaluating the positions in other, other, other contracts out there. Practically, this is just for the gas storage. Okay. I believe the subsidy impact which we had this, this quarter, INR 161 crores, this is, you know, this is not resulting in any cash outflow, rather it is just an impact on the PNL accounting statement item. Practically, what the portion of the income which we registered for first quarter, sorry, first quarter of last fiscal, and the one which is for the this year, this quarter, that is the impact which we have to bear, right? Yeah, see, to the extent channel inventories are yet to be sold, the realization on that, both from trade and subsidy has to still take place. Since you have bought sales at a particular value and that, PS has come down, it's. You need to take that accounting. There's no, there's no outgo of equivalent amount as such. Yeah. Yeah. Yeah. Let's say if we kind of imagine ourselves in a world where the inventory subsidies are getting repriced every now and then based on the prevailing raw material prices, these, this impact would never have been there because, That potential would have been built in, in the price there itself when the commodities were... When we were placing our products, right? I'm not sure if I got your question, but ultimately anything that we are going to sell going forward will see at the new end, subsidy regime. Correct. To the extent you have sold and collected, you have collected. To the extent your inventory, which you earlier spoke at a particular value, and on that subsidy has come down, we need to revise that, and we need to put, take that impact on, on that general inventory. Okay. Got it. Thank you. Thank you, and all the best. Thank you, sir. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Bhargava for closing comments. Well, thank you everyone for your extensive questions. For any further queries or clarifications, please look at it with our investor relations team. Have a good day, and thank you so much. Thank you. On behalf of PhillipCapital India Private Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.