Please note that this conference is being recorded. I now hand the conference over to Mr. Anirudh Joshi from ICICI Securities. Thank you, and over to you, Anirudh. Yeah, thanks, Ali. On behalf of ICICI Securities, we welcome you all to Q1 FY23 Results Conference Call of Paradeep Phosphates Limited. We have with us senior management represented by Mr. Suresh Krishnan, Managing Director; Mr. Sabaleel Nandi, President and Chief Operating Officer; and Mr. Alok Saxena, General Manager and Head of Corporate Finance. Now I hand over the call to the management for the initial comments, then we will open the floor for question and answer session. Thanks, and over to you, sir. Thank you, Anirudh. Good afternoon, everyone, and a warm welcome once again. Well, as you're all aware, the agriculture sector and the global agri-input sector over the last three to four months has been quite volatile, largely due to the global geopolitical situation which emerged in the last week of February. What we have noticed during the last three months has clearly been that no major corrections in terms of prices in the fertilizer in agri-input space have really taken place. In terms of supply side, we've seen some surprises in terms of availability. However, the way the sector has panned out, I think the entire fertilizer consumption is dictated by availability, and which is what we have seen globally. I think it's also important for us to understand that the leakage of fertilizer and other agri-inputs to food security has further got underscored very seriously, and we all believe that the current situation, the way it's continuing right now, will certainly have an impact in terms of overall agriculture produce right across global markets. The short-term outlook, the way we look at it today, is that some of the major crops which includes wheat, rice, and maize globally will see a decline in production over a period of time, largely because of not being in a position to get enough macronutrients which are required. But getting back to India, I think there are a few positives that we need to very clearly notice. The first positive is the agriculture sector in India and the farmers in general have been reasonably isolated from any major volatility or price hikes as far as the fertilizer input is concerned, which has been quite a positive thing, number one. Number two, even the availability as far as the fertilizer input is concerned has been well managed by the Government of India, ensuring that the serious demand pockets are well met. The third important thing that we need to realize here is that the monsoon, even though they were initially delayed, have really picked up well in the month of June, and the kind of coverage that we are seeing and the amount of water levels that we are seeing across various dam levels, both with respect to last year and the last 10 years' average, are all very encouraging as far as our sector is concerned. And last but not the least, I think the acreage that we are seeing for Kharif has been very similar to what we saw last year, and the agriculture produce that we are getting to see as per the latest government estimates is also quite encouraging. There has been a marginal improvement that we get to see here. And the other important point is the realization which has come into the farmer has been, in general, better than the MSP which has been provided by the government. So on the whole, we get to see that our consumer base continues to be well protected, is showing strong earnings, and in terms of their ability to continue their activities well and in a profitable way seems to be very evident from various parameters that we have seen. Coming to, in specific to the company, I think the last quarter for us has been quite exciting. Not only that, during the month of May we completed our IPO and got listed, it's also very heartening for us to report that we have completed the acquisition of the Goa asset, which happened effective 1st of June 2022. As we have been mentioning right across, that the Goa asset, we will take about a few months to really to get to restart and to achieve the capacity utilization that we have set out to. In terms of pure numbers, if you look at our performance, I think our production levels, the way we see it is, has as compared to the previous year, same quarter, I think our total production was 283,624 metric tons as against 227,785 metric tons. This has been quarterly a good positive change, a positive uptake of about 25%. One of the reasons, main reasons for this is the production that we achieved from Goa unit. As far as the previous year, FY22, we did not have the Goa production available. Here we had both phosphatic and urea production available, phosphatic under the cooling arrangement and the urea against the regular production that we started in the month of June. When it comes to sales, the growth has been robust, 343,000 as compared to 231,000 in the previous year, same quarter. So this has been a healthy growth that we get to see, which has got reflected in the revenues, and our revenue being INR 2,434 crores as against INR 1,020 crores in the previous year. It'll also be important to note that the revenue change is also a reflection not only of the volumes but also the price changes which have taken place between the two quarters. In terms of EBITDA, as you all know, we had a 56% improvement in the reported EBITDA, which is INR 167 crore as against INR 107 crore that we had previously. This has been a healthy quarter in that sense. This EBITDA is post some of the one-off acquisition-related expenses that we had and also the startup expenses that we had to incur. I think we believe that we have continued to maintain a robust trend in terms of our performance at the operating level. But in terms of our future outlook that we get to see, as you all know, we have been clearly stating that this is a year where our expansion takes place in terms of capacities. And the very fact that the inorganic growth that we are having through the Goa acquisition is completed, we are quite confident that the production levels from that will finally add to the overall revenue and the returns for the company in the coming quarters. And the second important thing is now we have three clear, fully revamped manufacturing lines which are operational right now. The fourth manufacturing line at Paradeep is we have taken a shutdown for the revamp, and we believe that we should be able to complete that, and the facility will be available to us in Q3 of this financial year. So these are important trends that we need to keep in mind. And one of the other important points that we would like to highlight here is that as we speak, our combined capacity is 2.85 million tons per annum. But I think the more important thing is that our fungibility in terms of products is significantly improved. And even in the first quarter, we managed to produce a lot more of NPKs as against DAP based on market requirements. So we're feeling quite confident that we will be in a position to readjust our product mix based on the demand in the market. So these are our opening remarks, and we will be happy to take any specific questions from the participants. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone 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. The first question is from the line of Amanjeet Singh from Octus Capital Growth Fund. Please go ahead. Sir, I'm audible? Yes. Yeah. So congratulations, sir, on a good set of numbers, and congratulations on the acquisition of the Goa plant. Sir, I just had one question. So I believe the enterprise value of the Goa plant was about INR 2,000 crores. So could you please help us split it? What was the debt that was assumed, and what was the equity value? As far as Goa acquisition is concerned, the entire thing was 100% cash payout. No debt from Goa unit was taken over by us. Okay. So whatever debt would have been paid off by the parent company, that they would have paid themselves, right? So this is you taking the as the EV. Yes. You're right. Second question, sir, as a follow-up. What was the basis of the valuation of the plant, sir, in that case, given the plant was loss-making earlier on? Well, I think this is a subject that we have addressed quite adequately. The particular unit that we have acquired in Goa has an overall capacity of 1.2 million tonnes consisting of 0.4 million tonnes of urea and 0.8 million tonnes of phosphatic. In addition to that, we also have an incremental surplus ammonia production which is there. This plant has, in the past, generally generated close to about between INR 350 to 400 crores of operating EBITDA from this company, and it has a very, very good robust product mix. So the entire valuation was done on that basis. Got it. Sir, and the payment was. Sorry. Can Sorry. Can I just add here? The valuation of the Goa plant was, to answer your question theoretically, all kinds of or all the three methodologies of valuation were adopted, namely the EBITDA multiple, the discounted cash flow, and the replacement cost basis. The lowest of the three was adopted to arrive at the enterprise value of $280 million. Finally, the company would be closing this acquisition at a cost between INR 1,600 crores and INR 1,700 crores. Okay. Thank you so much. That's it from my side. Thank you. Thank you. The next question is from the line of Prashant Biyani from Elara Capital. Please go ahead. Yeah. Thanks for the opportunity. Sir, on the CapEx program, apart from this granulation facility for the backward integration, also, we are on track to start it by October onward? Hi, Prashant. Yes. We are on track to complete the granulation of all the four trains. Just for your information, we have completed the granulation exercise of the third train. So we did C Train and D Train last year when we were in the build-up to the IPO, as many of you would have known, and we had clarified. At that time, the granulation the debottlenecking of Train A was going on, which we completed around the 20th of June. From 1st of July, we have taken down Train B for revamp, which is expected to be completed sometime between end of September and 10th of October. That's the program, which will then complete all the four trains' granulation activity or revamp activity, and the Paradeep site would then have had a capacity of 1.8 million metric tonnes up from 1.2 million metric tonnes per annum that we had as of March 2021. Right. And sir, how much was the gross and net debt at the end of Q1? Yeah. Gross debt at the end of Q1 is INR 3,627 crores, which includes a long-term loan of INR 758 crores and short-term borrowings of INR 2,869 crores. The increase in short-term borrowing is primarily on account of subsidy receivables. So that's the short term. I would believe net debt would be somewhere around this only? Yes. Yeah. So there's INR 200 crore cash. So if you top up net debt, it will be INR 200 crore less this. So it will be INR 3,427 crores. Sir, how much would be subsidy for this year and last year, Q1? Subsidy amount has gone up by almost INR 1,700 crore, which was all outstanding as of end of June. But as we speak now, close to 50% of that has been released by the government. Sir, how much was the subsidy last year? Last year, this time, it was very low, much lower. Let me give you the exact number. So last year, Q1, the subsidy was around INR 800 crores. This year, it's INR 2,300 crores. Okay. And, sir. What would be the breakup of manufactured and sales volume from the PPL plant? It is essentially manufactured volumes for us with one shipment which came up in trading, which is close to about 50,000 tons here. Okay. Just to clarify, the complex volume was around 325,000 in total. So just to clarify it for you, the total production was 283,000 tonnes for us, which included DAP of 103,000, 16,000 of urea, and balanced with complex fertilizers. Right. Sir, lastly, EBITDA pattern for the Paradeep plant would be how many this quarter? As you see, in this quarter, essentially, the production was out of Paradeep and not very much out of Goa. So we have been maintaining the same levels of INR 4,000 closer to INR 5,000 a metric ton in terms of EBITDA per metric ton. This was also last year as well? Yes. Last year was about INR 4,600. In fact, it's INR 4,853 as against INR 4,611 last year. Oh, okay. Okay, sir. I'll come back in the queue. Thank you. Thank you. The next question is from the line of Manish Ostwal from Nirmal Bang Securities. Please go ahead. Yes, sir. Thank you for the opportunity. First question, during the quarter, sir, because of cost pressure, how much impact on the margin? And secondly, what is your overall outlook on the operating margin for the rest of the financial year? So the way we have, again, explained this a few times in the past as well. We do not view the business in terms of margins. We view the business in terms of EBITDA per ton because ours is a business which is heavily dependent on imports, and that imported raw materials constitute a large proportion of the total turnover. For this, the way we usually evaluate the business is on EBITDA per ton basis, and it would be our request that you also evaluate us now and going forward on EBITDA per ton. On EBITDA per ton basis, what is your outlook, sir? INR 4,850-odd per ton of EBITDA as against INR 4,600. That was last year, same quarter. Secondly, sir, after this Goa acquisition, our peak debt would be INR 5,600 crore, right, sir? No. As was explained earlier, the Goa acquisition has been done on a slump-sale basis, which is a cash-free, debt-free basis. So we have not inherited any of the debt from Goa's earlier owner, which is Zuari Agro Chemicals. Okay. Thank you, sir. Thank you. The next question is from the line of Pratik Tholiya from Systematix Group. Please go ahead. Yeah. Hi. Thank you so much for the opportunity, and congratulations on a good set of numbers. So firstly, can you just help with the sales volume during the quarter, and especially if split between DAP and non-DAP? Yeah. The total sales that we did was 343,000 metric tons of which the DAP was around 100,000. Rest of it were the other products. Right. And sir, you did mention that the production that you did of 283, that was largely on account of higher volumes coming from the new Goa plant. So ex of Goa, sir, what was the production basically at Paradeep? Goa plant is minuscule. Around 47,000 tonnes is all that we took from Goa. Rest of it is all Paradeep because, as you know, the Goa plant acquisition was completed on 1st of June 2022. We just had a month during which also the urea plant, 15 days, was under annual turnaround. But in April, we had some bit of tolling manufacturing that had happened, which is, to be precise, 43,000 tonnes was the NPK volumes manufactured in Goa, and around 10,000 was the urea that was 16,000 was the urea that was manufactured in Goa. Okay. Got it. And sir, secondly, on subsidy, you mentioned the subsidy right now is around INR 2,300-odd crores. Did I hear correctly that 50% of this number has been already paid off in the month of July? In the month of July, we have received around slightly less than INR 1,000 crore. Okay. INR 1,000 crore have already been received. And so then, what is the view on subsidy going forward because now the government is talking about I mean, the industry is talking about around INR 250,000 crore of subsidy is likely possible. So you think that there could be some delay or the payments are going to be smooth even in the coming months and quarters of this financial year? Well, I'd like to answer this question in two parts. The first part is government has provided for INR 250,000 crore as subsidy for the fertilizer industry today, which includes urea and phosphates. We believe, based on the current price trends that we have, this subsidy amount is adequate to meet the entire subsidy requirement for the industry during this financial year. Given that, we believe that the subsidy payout will be smooth from the government end. We do not expect them requiring any substantial amount of additional money towards subsidy. Okay. Okay. That's helpful. Yeah. That's it from my side, sir. Thank you and wish you all the very best. Thank you. Thank you. The next question is from the line of Bhavin Chheda. Please go ahead. From Enam Holdings. Sorry. Yeah. Good afternoon, sir. This is Bhavin here. Congrats on successful IPO listing and good set of results to start with. I see your gross debt number now, INR 3,627 now. This includes since the Goa unit acquisition is done. So any pending payment for the Goa unit? Any liabilities pending or something? So now this is a big loan. Not really. Not Not really. No. The total loan that we are getting to see includes the completion of the Goa acquisition and the loans. There's nothing more which is pending that we need to take care of here. Right. And regarding what was the phosphate volume in the quarter, captive volumes for the company? phosphate plant was on shutdown in the period. We have, therefore, not been producing. It's around 50. Let me just tell you the exact number. We made 47,000 tonnes of 52,000 tonnes of phosphate in this quarter as against 46,000 tonnes same quarter last year. This is the time when we usually take the shutdown. So there's nothing. Balance would have been imported. If you can help with the contract prices that was there in the quarter? No. So, the contract prices, let me put it this way. We have not had to import phosphate during the April-June quarter. We had certain benefits of opening stock and arrival. So strictly speaking, we as a company did not have to import. And I'm saying this especially in light of there have been some as far as the other players are concerned, there has been a little bit of confusion related to the phosphate prices. I would like to clarify that. As far as we are concerned, all our prices up to June have been at the earlier price of $1,530. Okay. So now the plant has restarted now? Yeah. Yeah. Full blast. Okay. That would meet how much percentage captive for the company? Bhavin, as we have been talking and as you are aware, when we have our phosphate plant running fully and this is the pre-retrofit stage, which is the annual capacity of 300,000, we can meet close to 90% to 95% of three-train requirement. Today, the fourth train is under revamp. The Paradeep site virtually is fully self-sufficient as far as P2O5 is concerned. Goa will import and manufacture, but Paradeep site is close to being self-sufficient. Sure, sir. And sir, the margin you gave, INR 4,853, that was blended or that was for the NPK? That is blended. You will get it if you divide the EBITDA by the total volume sold. Okay. Okay. So how. Blended. You can give urea separately. Urea was around that number only, so? Nothing. Urea was 10,000 tons that we sold. 16,000 tons we made. We didn't get a difference. Oh, so it was a very small number? Yeah. Yeah. Yeah. Okay. Okay. What would be the CapEx number for FY23 that you are planning? No change from what we have said. Nothing has been added. Nothing has been deducted. Okay. So during the IPO time, whatever you mentioned was. Yes. Everything. Remains the same. Okay. Thanks a lot and best of luck. Yeah. Thanks, Bhavin. Thank you. Thank you. The next question is from the line of Rohan Gupta from Edelweiss. Please go ahead. Yeah. Hi, sir. Good evening, Suresh. Sir, first question is on our Goa facility. So you mentioned that apart from urea of 3.5 lakh tonnes of DAP, we also have some surplus ammonia. Can you quantify how much surplus ammonia we have there at that plant and for what it is going to be utilized for? 70 to 80 metric tons per day is sufficient to run one of the two NPK trains without having to import any ammonia for that one of the two NPK trains. 24,000. 30,000 maybe. Yeah. Yeah. Okay. And for phosphate, this plant is completely dependent on imported phosphate, right? Yes. Yes. Yes. And that's an area where we are looking for huge advantages to come to PPL having the kind of commercial relationship that we have with OCP. Okay. And sir, for the June contract, you have mentioned that it has been on an earlier price of phosphate of $1,525. 1,530. Yeah. 1,530. Okay. Current quarter, when we need not to import anything in terms of phosphate, then our margins are at close to INR 4,800 EBITDA per ton, right? Yes. Sir, wouldn't that be with the captive phosphate completely and Goa plant still not running, our margins per ton should have been much higher than the current level given the current phosphate? Our reported EBITDA per ton is what you're getting to see at INR 4,800. We had some one-off acquisition-related expenditure which we had to write off, which had not been capitalized because of which this is at this level. That amount is INR 49 crore is what we had to do, a one-time payment of stamp duty and some ATR and related expenditures. Okay. So that is also loaded on this INR 4,800 EBITDA per ton? Absolutely. Yes. Yes. Okay. Sir, with the current phosphate spread and with the captive phosphate right now, though the rock phosphate availability, I mean, we have, but how the ammonia and how the pricing of that and ammonia and sulfur, I mean, how it is right now? No. So the worst is behind us, and there is no problem as far as ammonia availability or sulfur availability. If you are following the international markets, you would have also noted that sulfur prices have virtually crashed from something like $460 per metric ton to something like in Qatar, FOB has become $77. So to India, it will be like $125 to $130. But ammonia prices are holding on, but as far as availability, there is no challenge on either front. Okay. Our second question is on subsidy front. So you mentioned that with the current pricing scenario in an international market, the subsidy from the government should be close to INR 250,000 crore. Well, I think you mentioned that they have adequately provided, but I understand that in the budget, they provided close to INR 160,000 crore only for the current year. So have there been any reason, and have there been any off-balance sheet provision made by the government? You can give some sense. The government initially made a budgetary provision of INR 160,000 crore, that is correct, and post the price hikes that happened in the global market and with a view to keep the prices at the farm gate level at a more affordable level, the government increased the subsidy allocation by over INR 100,000 crore, which they have themselves confirmed. So in effect, we have about INR 250,000 crore of subsidy available for the industry. So you mean that when there's adequate provisioning, any particular reason for the delays in subsidy disbursement from the government in this quarter when earlier they were just almost clearing every subsidy within a month? I think let us go with the track record of the Government of India. I think over the last two years, they not only cleared the backlog, and they have been very robust in terms of clearing the dues before the end of the financial year, and we've hardly been carrying more than 15 years of subsidy. When it comes to this quarter, I think it's important to realize that government's notification on the NBS happened in the month of April, late in the month of April, which was announced, and the formal notification happened in the month of May. By the time the DBT bills and others got generated, it became well into the month of June. That is one of the reasons why we did not get any major payouts. But now the process was regularized, and people have been able to generate the bills, and they have started releasing the subsidy. I personally believe that this will now be a normal process. That's our expectation. Yeah. Even on the subsidy, I think the worst is behind us. Going forward, it will be smooth. Okay. So right now, when our INR 3,800 crore around debt position, so if we adjust for that working capital and the payment will come on time, then it is going to reduce significantly going forward, right? Absolutely. If you look at it, we should be having INR 758 crore of long-term loan, which is related to the CapEx program that we've had. That will be the main loan that you will have. And outside of that, the short-term loans will be highly mitigated, and we don't believe that it's going to be any major number. Right, sir. Actually, just last bit, and I will come back in queue. You also mentioned that for your running your Goa plant complex fertilizer, which doesn't have a backward integration of phosphates state, you will be able to utilize your existing relationship with the OCP. While I understand that the phosphate pricing still will be on arm's length basis probably, right? So will we have any additional advantage? I'm not sure at this Goa facility unless we have any further future plan for increasing our phosphate capacity. So can you just clarify a little bit more on that? I think we'll have to wait for the next quarter results to come to see in terms of how we are performing in Goa. But I must tell you that phosphate price is one. And given the fact that we are an exclusive OCP buyer and the fact that we are a large volume buyer, I'm sure we will have those commercial advantages. But more importantly, it is not so much about phosphoric acid price. The entire industry gets down to a particular price. What is more important is the kind of product mix that you can deliver. And I think that is where we believe that we should be in a position to really get a product mix. We should start adding far more to the EBITDA levels than a normal product mix of a DAP plus the usual generic NPKs that you will get to see. You want to say that we will be seeing continuous improvement towards NPK? Absolutely. Okay. Thanks, sir. That's it from my side. Thank you. Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. First question on the Goa bit. Now, you did mention there was a slower or lower production in the last quarter because of the maintenance shutdown. Has it started fully now with effect from July, or even Q2 will have some bit of that impact? Well, as far as Q2 is concerned, from July, we've been having our urea plant running pretty much at peak load 90% to 93%. And as far as the phosphate plant is concerned, we had concluded the phosphate commercial transactions, and now we have started receiving phosphate on site. So from the month of August, we expect that our NPK production will also come online. Sure. Sorry. And from a product mix perspective, this will be largely NPK and some bit of DAP within phosphate? At Goa, we do not have any plans to make DAP at this stage. Great. This will be largely NPK. From a distribution network perspective, any thoughts there? Any reject required there, or probably the system is already well? I think we are one of the few companies which has a very robust I mean, I can say that pretty much a Pan-India presence as far as fertilizer distribution is concerned. We are also very heavily present in markets which consume NPKs in a big way, which includes markets of Maharashtra, Karnataka, Madhya Pradesh, and Telangana, and Andhra Pradesh. So I don't think from a distribution point of view or a brand point of view, we have any concerns here. Yeah. Ankur, and just to add, as you know, during all our discussions in the past, we've highlighted that one of the key reasons behind acquiring the Goa plant was to get the distribution strength that Zuari had. So today, I think PPL, having completed the acquisition, has actually inherited it. To answer your question, we are now looking forward to reaping the benefits of this strengthened distribution network. There's no question of rethinking or realigning any of that. Sure. Sure. And on the CapEx side, you did mention now Goa acquisition is behind us, and plus the debottlenecking part is already done. So any thoughts on CapEx and the peak debt? How should one think about it? As far as the long-term debt is concerned, we believe that our number is going to be under INR 1,000 crores, which is the number that we'll end up, which will be the peak long-term debt that we could hit. We are pretty certain that that's where we are headed today. As you know, the revamp costs are well established, and the phosphoric acid backward integration should also get done by Q3. We have pretty much procured the equipment required for that. We don't see any surprises on these. Good. Sorry, just one last clarification. You mentioned on the backward integration, especially for the Paradeep plant. On the enhanced capacity, we are fully backward integrated? Did I hear that right? Yeah. Yeah. No, no. Again, this is a repeat. Just to clarify once again, once we have completed the retrofit program for the phosphate plant, our capacity is going to move from 300,000 metric tons per annum to 500,000 metric tons per annum. While the actual requirement of phosphate depends on the product mix, at a generic level and on an average forecasted volumes of phosphatic fertilizer that we will make, Paradeep site will be around 90% to 93% backward integrated. Only a small quantity of phosphate we will have to import depending on the actual mix of product that we'll make there. That's very clear. Thank you, Sabaleel. Thanks for that. That's it from my side. Thank you. Thank you. The next question is from the line of Amar Maurya from Alpha Accurate Advisors. Please go ahead. Thanks a lot for the opportunity. Majority of my questions have been answered. Only one clarification. As you said about the Goa plant, urea capacity has already started, and NPK capacity, you are planning to start in August. So let's say at a broad utilization level, will we be making the similar kind of EBITDA per ton what we are making here in existing Paradeep facility, or what is the target there? Because there, the phosphate is basically not backward integrated. No. As far as Goa is concerned, I mean, our EBITDA margin will be dictated by the kind of NPKs that we finally end up making. I think that's the key out here. Obviously, you certainly have an advantage when you have your own phosphoric acid plant. Between having your own phosphoric acid plant and not having a phosphoric acid plant, on a general level, you have close to about INR 1,000 rupee margin difference which comes at EBITDA level. Correct. Correct. Those kind of margin difference could be there, and it could also be bridged by having certain specialized products which come from your end. So I think we are restarting the plant now, and we will be working on various products to really make. And I think in about a few months from now, we will be in a position to very clearly state in terms of what is it that we're going to finally offer because the fungibility and ability of Goa to make specialty grades is huge. And so that is where we are looking at deciding in terms of what are the best options. And we also plan to, as we have already said, we have introduced a new product, N-14, which is something Goa will also start manufacturing. Okay. So basically, at the current mix, whatever the phosphate mix—I mean, whatever the NPK mix we are having currently, so are you saying that at the current mix, you will make something around 3,800 metric tons per ton? And as you change the mix, it will broadly be moving toward 4,800 level kind of? Well, if you look at a long-term average, that has been the difference that you get between a phosphoric acid backward integrated plant versus a non-backward integrated plant. That's the long-term average. So as we stand right now here, the blended number that we're looking at, which is going to be closer to about INR 5,000 a metric ton for phosphatic fertilizer, is what we're targeting. And we will decide the mix between the two sites as we go forward. And we will ensure that we will work towards delivering that number. Okay. And secondly, I mean, did I hear right that you were going to start your commercial production in August, right? Oh, okay. Yeah. It is from August. Just to clarify, the vessel has berthed today, and so this week, we should start NPK run in Goa. Okay. Okay. Fair enough, sir. Thank you. Thank you. The next question is from the line of Resham Jain from DSP Investment Managers. Please go ahead. Yeah. Hi. Good evening, sir. A few questions. First is we have seen this INR 40 crore of one-off in Q1 with the Goa plant now going to get ramped up gradually during this quarter. Are there any more one-offs which are expected in Q2? Not likely. Not likely. Yeah. Okay. Got it. And so my second question, given that by the end of the year, most of your CapEx will be over, how are you looking at expanding your market or further expanding your capacities? If you can just help with your thought process, that would be helpful. When we look at it, we have clearly maintained that FY2022-23, the current financial year is all about ensuring that our capacity is in place both in terms of granulation and backward integration. So FY2023-24, which is the next financial year, is where we are targeting to hit our key capacities here. And that is when you will get to see that we not only get the volume that we are looking at, we also get the returns in terms of both EBITDA and free cash flows. And anything that we will end up doing is post that. I think if you're asking us in terms of what our thought process is, from what we clearly understand today, the opportunity around agri-input space is quite large in India. And it's not only about bulk fertilizer. It's also about specialty fertilizer. It's also about other agri-inputs like agrochemicals and other related products. Our retail reach is truly very strong today, and it's quite robust today. We will certainly look at opportunities around that as far as the coming years are concerned. That's the first one. Second important thing for us will also be getting some more specialized products from our own site, which will also be equally important for us to take this. The third important thing for us is industrial sales that we plan to do, whether it is surplus ammonia, whether it's going to be the gypsum, which we have substantial quantities available with us, and also the capacity that we have in terms of sulfur, sulfuric acid, and related products. We have a mix of things that we can very efficiently do. There are a lot there. Quite a good number of markets that we service today where we have identified demands for various products. We will start certainly ensuring that the stakeholders in this company get the benefit of the same. Any possibility of further expanding capacity in Paradeep? Is there a possibility there, or the site is still? In Paradeep, as far as the infrastructure is concerned, we have a very good option to double our capacity. I mean, we have always maintained that we are a 2,200-acre site with our own private berth. We are in a position to do that quite well here. And we will earn the right to do that post-FY2023-24 when we have the full capacity being utilized. Okay. Understood, sir. Thank you. All the best. Thank you. Thank you. The next question is from the line of Ajit Daga from Nirzar Securities. Please go ahead. Hello, sir. First of all, congratulations for your completion of Goa plant acquisition. So, sir, I have just two questions which are more of clarification. The first one is, sir, as SSP is a bit more affordable to customers, and also the government is supporting its production by giving a high amount of subsidy. So is SSP substituting the use of complex fertilizers, and is the increased demand of SSP sustainable? What's your thought on that? Our view is very simple that SSP cannot replace complex fertilizer because complex fertilizers have got N, P, and K in them. And SSP is a pure, simple phosphate nutrient. And at the same time, SSP is a very important, I would say, an agri-input or a fertilizer input. And it has a capability to blend itself with so many other mainstream fertilizers here. So from that perspective, I think SSP has a role to play. And we are clearly seeing that SSP is playing a role in India far more in the last couple of years. Okay. Do you see the increased demand of SSP sustainable? Well, SSP is a product which is localized because you can't really transport it to very long distances because of the freight costs. So the current structure which is there in SSP, I don't believe that one will be able to move it for a very long distance. But obviously, if there is a policy which comes in from the government which ensures SSP kind of moves around, and I'm sure you will find more pockets where consumption of SSP will come. Okay. Understood. And the second one is, sir, recently, Mangalore Chemicals and Fertilizers has announced the shutdown of phosphatic fertilizer plant due to lack of availability of some raw materials. So is there any kind of issues that we are facing with respect to raw material supplies or any sort of? I can just confirm to you, as far as Paradeep Phosphates is concerned, we need phosphoric acid and phosphate raw material primarily for the Goa facility. And we have already are well enough we have tied up the same, and we don't see that as a challenge for us in the coming quarters or coming years. Okay, sir. Thank you so much, and all the best. Just to add, not only this, we believe the ability to have raw materials without any interruption in our production is an area of competence that we would like to demonstrate going forward as well. Understood. Thank you. Thank you. The next question is from the line of Rakesh Vyas from HDFC Asset Management. Please go ahead. Yeah. Hi. Good afternoon. A few questions from my side. First of all, on the production trend itself, if I analyze the current numbers that we did, we are closer to 1 million tons in Paradeep despite us having a higher revamped capacity available in the quarter. So any color that you can throw on this as to whether we have suboptimally utilized the capacity or whether larger shutdowns than what were expected? Not really. I think what we have done in the first quarter has been to ensure that we had shutdowns taken for our phosphoric acid plant and to some extent also for some of the units of sulfuric acid plant. So the plant production is pretty much in line with what we had planned. So there was nothing like an underutilization. If you get to see, we have actually done better production than what we did last year in the same quarter. So that is the first point that I'd like to state here. The second thing I'd like to state here is that we've also ensured that the product mix is such that we are able to get a good EBITDA margin for ourselves. I think what is important for us is not only the volumes that we do, also to ensure that we have the return that is required. That is something that we've ensured with the product mix that we did. We did less of DAP, which could have ramped up the capacity a little bit more. We also experimented with some new product manufacturing, which has come out quite successful. Got it. That clarifies. Secondly, just a clarification, this INR 49 crore one-off, is it part of the other expenses? Yes. Yes. Okay. So we should normalize that going forward. And last question is around subsidy. So, of course, subsidy payments are due, but are there large dues from the markets as well because we would have just placed the? Markets, we are on a cash-and-carry mode. Typically, it's about seven to 10 days is what the market outstandings are going today. If I understood it right, if at all, as in when we are expanding the production both from Goa and Paradeep going forward into second half, the incremental working capital requirement, if at all, will be to fund the subsidy receivables if there are delays? Absolutely. Yes. Got it, sir. Got it. Great. Thank you so much, and best of luck, sir. Congrats once again. Yeah. Thank you. Thank you. The next question is from the line of Falguni Dutta from Jet Age Securities. Please go ahead. Yeah. Good afternoon, sir. I just have one question on the Goa acquisition. So out of this INR 1,600 crore to INR 1,700 crore, which will be the final acquisition cost, how much would have been funded through internal accruals, and how much debt funded? Well, the total debt funding for this acquisition has been INR 450 crore. 250 crores? 450 crore. 4,500. 450 crore. Sir, has the entire interest and depreciation on this plant come in Q1, or we'll see an? It has come in in Q1. Yeah. There's an incremental amount that's come in Q1. Yes. The entire amount has come in in Q1, the incremental amount? I mean, both the interest and depreciation? Yes. Yes. Yeah. That amount was paid before the IPO proceeds because IPO amount was the last amount that we had to pay to close the acquisition. So the debt was in place before that. In short, we don't see any incremental interest or depreciation on this account from Q2? Yes. Okay. Thank you, sir. That's all from me. Thank you. The next question is from the line of Chintan Shah from JM Financial. Please go ahead. Yeah. Hi. Thanks for the opportunity. So a couple of questions. So first is I'm not very clear on the input cost. So one is on the phosphoric acid. So while you mentioned that it will be approximately 90% backward integrated, so just wanted to be clear, we'd still have to import rock phosphate. And how is the pricing for that? So that is one. And secondly, considering the current gas prices scenario, just wanted to see what's the impact that it would be from the increase in mineral prices? So those are the two ones from input costs. No. So on the backward integration, obviously, we import rock phosphate as well. But as it is the case globally, so also for a plant like Paradeep, the inherent sustainable margins for a backward integrated player who starts producing from rock, it's similar to a steel plant, which someone who starts from an iron ore has greater margins than someone who buys an ingot. So that's the competitive advantage that we are talking of for a Paradeep site. Nothing unusual or nothing out of the ordinary. What was your second question? Gas prices. Impact of gas prices. DAP, DAP prices? No. So ammonia prices, basically. Oh, ammonia prices. So ammonia prices, we buy from the, we have long-term contracts from the major global ammonia players of the world. And we are on a formula pricing, which obviously gets impacted by the global prevailing prices, generally in the East of Suez. And the ammonia prices are still holding on. And as far as the Q1 is concerned, they have been high and, in fact, very high because it was just at the aftermath of the Russia-Ukraine war breaking off. But as we have been maintaining, we believe that the worst is behind us. And the first trend of softening is already visible in the form of much easier and much smoother availability situation, not only for us. We always had enough ammonia. We never had a shortage. But other players, smaller players, are also today getting ammonia very easily. When there is a softening that happens, it usually starts with an availability situation easing out, followed by a certain degree of fall of prices. Okay. So just to be very clear or to recap, so if you compare on year-by-year basis, so the input cost increase that would have a bit less, that would be largely offset by the increase in subsidy. And that is why we see a higher EBITDA%. Is that the correct understanding? That's correct. Yes. And secondly, going ahead also, over the next at least couple of quarters, what we are seeing is that we are sufficiently covered in terms of our operating profitability fee, again, on back-off with subsidy. Is that the right understanding? Yeah. What we are trying to say about the future is that the spike that we witnessed during March, April was obviously a fallout of the Russia-Ukraine war because these two countries control a lot of these global raw materials, including things like urea, ammonia, phosphate, etc. The worst is behind us. So we expect the prices to gradually soften. The trend of softening has started with sulfur. It will follow with other products as well. So in a softening scenario, again, this is a phenomenon of the industry globally, and India is no exception, generally, margins for all players remain protected. The question of margin becomes more relevant in a scenario when raw material prices are going up. For the last two years, we have seen a scenario where the prices have gradually gone up. We think that we are now over the hill. The prices from here on are only going to go down. Got it. Understood. But just to be sure, so we keep inventories of approximately three to five months. So what I believe is for. No, no, no. We don't keep inventories for that long. Today, India is going through a shortage scenario. And whatever we are making is we are on hand to mouth, as Mr. Krishnan mentioned earlier today. We are not able to feed the market properly. Indian inventory, and we have said it in other forums as well, the country's total fertilizer stock is down by close to 10 million metric tons compared to the like-to-like scenario last year, same time. So we are actually having a problem of not able to feed the markets adequately. So inventory is virtually hand to mouth. No, I'm not talking about a fertilizer inventory. What I'm talking about is the inventory for phosphoric acid and ammonia, basically. One month, yes. No, that's also one month. Okay. Yeah. We ensure our long-term supplies are in a manner they're arranged in such a way. And that's the reason for having long-term contracts that we run it virtually in a way that we are just enough to ensure continued operation. We have storage to keep more, but at this time, we will not do that. Okay. Got it. Understood. And the last question would be on capacity utilization. So just wanted to get a sense once it's ramped up to what was the max utilization level that you can reach considering the shutdowns and the fungibility of product streams that we do? No. PPL, as far as apart from the shutdown days, which are all planned because every year, this time, we have shutdown, it has been more than what our internal target has been, as you can witness. Last year, we had done 227,000. This year, we have done 283,000, give and take a little bit here and there for Goa. If I ignore that, these are the headline numbers. Okay. Okay. Great. Thanks so much. Thank you. Thank you. Thank you. The next question is from the line of Akshat Mehta from Sameeksha Capital. Please go ahead. Oh, yes. Akshat, your line is unmuted. Please go ahead with your questions. As there is no response, we move to the next question from Utkarsh Somaiya, an individual investor. Please go ahead. Thank you for the opportunity. I have a question on your debt. So from the entire debt you have of INR 2,400 crore, INR 750,000 is your. Utkarsh, we are unable to hear you. Am I audible now? Am I audible? Yes. Yes. Yes. Yeah. Of your total debt, I just wanted to confirm INR 750 crore is long-term debt, right? Yes. Yes. 758, to be precise. Once you receive the subsidy from the government, do we expect all the short-term debt to come down to zero? Normally, what we have seen is government outstanding is roughly about 15 days to a month is what the outstanding will be there. We expect that the short-term debt hovers around INR 1,000 odd crores, INR 1,000 to INR 1,200 crores at the end of the year. That's the kind of a number that we get to see. That will remain constant over time, right? That is what we are seeing. Only if government decides that the subsidy per ton is going to be much lower, then obviously, we could see a lower number. But given what it is today, we would expect this number to be there. Yeah. Yeah. To handle the short-term debt is why we have the working capital limits. They are funded very differently, as you may be aware. Okay. As a company, long-term plus short-term, we should at all times have approximately INR 2,000 crore of debt. Is that a fair understanding? Just to get an understanding, no pun. For the medium term, in a couple of years from now, given that our CapEx program is already completed, the overall debt position should keep coming down. And I think so that is and so you will see that in 2024, 2025 financial year, we will have a debt level which is significantly different and lower than what it is today. That is our expectation based on the kind of capacity utilization that we are targeting. Okay. After the next capacity expansion that we'll have in the second half, our capacity will increase from 2.585 million tons to how much? Now, it's going to be 3 million tons as far as fertilizer is concerned. But the key increase that will happen the next six months is the increase in our backward integration capability. The phosphoric acid plant, which is currently 300,000 tons, will be moving up to 500,000 tons by end of December. Okay. The 5,000 per ton EBITDA per ton guidance is considering the backward integration? That is where the EBITDA per ton kicker comes in quite seriously. Yeah. That will exceed 5,000? Yes. I mean, it depends on prices at that point of time. So we believe that the trend that we have seen in the industry on a long-term basis has been in this range. Okay. By FY2024, we expect to hit peak utilization, right? Yes. Absolutely. Yeah. What peak revenues do we expect at peak utilization? Well, as far as revenues are concerned, it's the way the global prices are. It's quite a at 3 million tons, you could be at INR 15,000 crore, or you could be even at INR 18,000 crore. That's the kind of numbers that you get to see. Yeah. The answer to your revenue question is similar to why we don't look at EBITDA margin because it's a function of the raw material prices. So revenue is of little consequence to us. For us, it's all about the tons that we make and the EBITDA per ton that we earn. Neither do we look at revenue, nor do we look at margins of EBITDA. Both are equally irrelevant. And our request would be to also view us in the same light as we view ourselves. Fair. That's understood. Just Just one more question. I'm trying to understand the business. I know it may be a simple question, but can you please explain to me what raw materials do you require for your manufacturing, the composition of the raw materials? Yeah. We need four key raw materials or basic raw materials. It is the phosphate. It is N, P, K, and S. N is nitrogen, P is phosphorus, K is potash, and S is sulfur. Now, these are the four raw materials that we need. The source of N is generally there are two kinds of sources of N. One is ammonia, which is called ammoniacal nitrogen, and the other is urea, which is ureal nitrogen. The Paradeep plant runs fully on ammoniacal nitrogen, whereas the Goa plant has dual feed mechanism. It can take urea nitrogen. It can also take ammoniacal nitrogen. That's about N. When it comes to P, there are two sources of P. One is the rock phosphate, which is one step backward, or phosphoric acid, P2O5. That's the thing. thing. Phosphoric acid is H3PO4 from a chemical formula point of view. MOP is K, which is a mined product, actually. So that's what we readily take. And sulfur is S. We either use directly sulfur as the raw material, or we buy sulfuric acid, typically 93% concentration, 98% concentration of sulfuric acid. Understood. We are 90% backward integrated in all these four raw materials? No, no, no, no, no, no, no, no, no. So when we say so this is phosphatic business. So why we call it phosphatic is because the lever around P, P in raw material is the first amongst equals because, in a way, it's scarcity, the prices, etc., etc. So when we say that the Paradeep site is 93% backward integrated, it's around the P raw material. The Goa plant on ammonia is actually 50% backward integrated. Paradeep site is not backward integrated as far as ammonia is concerned. And none of our sites are backward integrated as far as the other two raw materials, which is K, which is potash, and S, which is sulfur, is concerned. That is true for the entire. That is true for the entire industry. When we say phosphatic industry backward integration, this is it. So when you talk of an iron steel, they talk of iron as the backward integration element, not about the other materials or even fuel like coal, etc. So it's about the main raw material that we are talking of. Understood. Okay. Thank you so much, sir. That was very helpful. Thank you. Thank you. That was the last question in queue. I now hand the conference over to the management for their closing comments. Yeah. So I think just to closing, thank you all very much for showing interest and asking us the questions, which we find very relevant. We are in the company quite excited with the fact that we've been able to complete two very important projects in our corporate history, which is about the acquisition of the Goa plant and completion of the IPO. As you know, the INR 1,500 crore IPO marked also the exit of Government of India from the company. So we are now a fully private sector listed company with the strong parentage of Zuari and OCP Group, which is the world leader in phosphates. We find a lot of prospects for the phosphatic industry going forward the way it is shaping up globally and in India. And we believe we have exciting times going forward coming to us. Thank you. Thank you very much, ladies and gentlemen. On behalf of ICICI Securities, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.