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Market shifting from China to India to boost domestic chemical firms, says Deepak Fertilisers CMD

Despite the COVID-19 pandemic raging across the country, Sailesh C. Mehta is confident that the company’s robust growth numbers are sustainable.

May 31, 2021 / 10:29 PM IST
A farmer spreads fertilisers on his rice plants in Patra village in the northern Indian state of Punjab.

A farmer spreads fertilisers on his rice plants in Patra village in the northern Indian state of Punjab.

A shift in supply chain and manufacturing from China to India would benefit Indian companies substantially, and a normal monsoon expected this year could be a fresh fillip for the domestic fertiliser sector, says Sailesh C. Mehta, Chairman and Managing Director, Deepak Fertilisers and Petrochemicals Corporation Ltd (DFPCL).

DFPCL, a leading producer of fertilisers and industrial chemicals in the country, has recently reported robust Q4 performance. Its revenues for FY21 grew by 24 percent to Rs 5,800 crore while net profit surged by 357 percent to touch Rs 400 crore, compared to Rs 89 crore last year.

Despite the COVID-19 pandemic raging across the country, Mehta is confident that the company’s robust growth numbers are sustainable. “The results are a culmination of the strategy that DFPCL has been working on for the past three years. A strong focus on cost optimisation, systems and processes in each sphere of the operations and the investment in Capex that we did over the last three years to triple our fertiliser manufacturing have helped us. The decision to add to the acid manufacturing capacity at Dahej is also bearing fruit,” he told Moneycontrol.

According to the CMD, at a macro level, all the sectors in which DFPCL is present, including industrial chemicals, mining chemicals and fertilisers, are aligned with the India growth story. “Power, cement (which needs limestone as an input material) and infrastructure -- the three key sectors for India’s growth story to unfold in earnest will need Technical Ammonium Nitrate – a key mining chemical that DFPCL manufactures. This provides clarity to the growth prospects of the company going forward,” he pointed out.

Mehta noted that rising demand for quality fruits and vegetables in India would help in keeping up the growth momentum in the domestic fertiliser segment. “In fact, India’s growing importance in the pharmaceutical and fine chemicals sector will support the industrial chemicals segment. Here, processes shifting from China to India are expected to play a critical role,” he opined.

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The CMD further explained the company’s growth strategy. “A shift from commodity to the speciality segment in the last three years and a shift of focus from products to end-user solutions by directly engaging with the farmers have improved the value proposition, and that has resulted in our growth. Recently, the government announced additional subsidy on fertilisers, which gives us scope to recover the high cost of raw materials from farmers thanks to increased demand,” Mehta said.

In the current financial year, the company has also brought down its net debt by Rs 840 crore. “Since we operate in the essential commodities space, our operations were not seriously disrupted during the pandemic; going forward, we expect to keep our operational efficiency at the same level or improve it further,” he stated.

The shift in manufacturing from China to India is expected to help certain segments of DFPCL’s business. “The demand for IPA, which is used in hand sanitisers, is certainly high now. And a normal monsoon this year, as predicted, will improve the prospects of the fertiliser segment,” Mehta pointed out.

DFPCL has been rapidly augmenting its critical capacities. Its ammonia plant coming up in Taloja is on track and is expected to go on stream over the next two years. “This is going to be a huge risk-mitigating Capex as all of our segments need ammonia; and instead of importing it, we will be manufacturing it here, saving $75-80 per tonne on the freight cost that we are currently incurring,” says Mehta. The company has already acquired the land and all environmental clearances are in place. As much as 95 percent of the equipment have already arrived, and the work is progressing in full swing.

The CMD also cleared the air over the share pledging issue, which had raised concerns in the market. There were reports that DFPCL was among the companies whose promoters had pledged more than 70 percent of shares and therefore carried the risk of losing control of the entity. “I have pledged only 15.3 percent or 8.7 million shares. But non-disposal undertaking data also released on the same format of pledging which created some confusion in the market,” Mehta clarified.



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Tarun Sharma
first published: May 31, 2021 09:07 pm
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