Thank you very much. We will now begin the question-and-answer session. We will take the first question from the line of Noel Vaz from Union Asset Management. Please go ahead.

Thank you for the opportunity. I just had one question regarding the sulfuric acid plant. So, the Capex is about Rs 400 Crores odd. What is the extent of cost savings that we are looking at the payback period? If you could have some details on that front. Thank you.

The Capex as you rightly mentioned is about Rs 400 Crores for the plant. The purpose of setting up the sulfuric acid plant was mainly for securing our supplies and we have deliberated this in the past as well. However, given the way the commodity prices move, the value gap between procuring sulfuric acid in the m arket and converting sulfur into sulfuric acid could give us a benefit . At the current prices that are prevailing , we think in about two to three years we should get a payback on this project, but again, the main purpose of setting up the sulfur burner is for securing our own sulfuric acid.

Second thing would be, actually some clarity regarding subsidy changes. Are we expected to see any kind of provisions related to it in the second-half? Thank you.

Your question was not very clear.

Sorry about that. There have been some revisions to the NBS rates, right? NBS subsidy. So, I just want to know if there is any kind of provision that we are expecting in the second half of the financial year.

We will see that the subsidy realization in the second half is going to be lower because of the lower NBS rates. Having said that, we have also made some reasonable estimates and have factored it in our Q2 financials. So we may not see a one-time hit coming in the third quarter. But the overall realization is likely to be lower, and this is a normal trend. When the NBS rate goes up, the realization will be higher, when the rates come down, the realization will be lower. The company has been following a consistent policy in terms of looking at what could be the rate and appropriately making the necessary adjustments in the books.

Thank you.

Thank you. We will take the next question from the line of Tarang Agrawal from Old Bridge Asset Management. Please go ahead.

Hi, ma’am. Good afternoon. A couple of questions from my side. Specifically on the subsidy. I could gather that there has been a sharp reduction in the NBS rate and while in the first half the reduction was not as significant as the reduction in the global commodity prices that I think seems to have been made up in the current sub sidy. While you have been prudent in terms of providing for it, but purely on a per ton margin basis, how do yo u see H2 period versus what we have seen in H1 and the previous year as well?

You are right, the government has been adjusting the subsidy rates, the NBS rates in line with the raw material prices. We have seen in the first half a very sharp correction in raw material prices compared to what was prevailing in the previous year, and government normally looks into the last six months prices, and they took an adjustment and that i s what has happened currently to the new NBS rates for Rabi. When we look into the EBITDA per ton, we normally look at it on a full year basis, we do not look at it on a quarter-to-quarter or just talk first half to second half. The raw material prices currently are in a slightly upward trend. So, if at all the government is going to look at it like last year when they made a correction in the N BS in Jan 1, we believe that could also be in consideration, but we do not know for certain at this point in time. With that background and the backward integration that Coromandel has done both in sulfuric and phosphoric acid plants, we believe on a full year basis , it should not majorly impact the margin per ton. Having said that, with the current visibility that we have, I think it should be in the range of Rs.5000 per ton for the full year.

That is helpful. The second question, when we came into FY2024, we were anticipating about anywhere between 6 % to 10% volume growth in the Phosphatics business. So far in H1, things have been largely flat on the manufacturing side. So how are you lo oking at H2, and the third one, if you could give us a split of the 580 Crores Capex in H1 FY2024? Thank you.

See, after almost 3 -4 years we ha ve seen that we have got a sub normal monsoon this year and Kharif is a big season. We have seen that August rainfall has been very, very low for the past several decades. September was very high . With so much uncertainty, I think it is only prudent not to go and dump the material in the market and to say that we are showing a volume growth. Therefore, we ha ve been taking a very conservative as well as strategic approach in terms of both manufacturing and placing of fertilizers in the market. It is not about placing it with the dealers. We also need to ensure that farmers are able to take and consume it in their field. So, from that standpoint, we feel comfortable in terms of what has been done in the first half given the extreme uncertainties in the monsoon and the reservoir level. Having said that, with the expectation of a near normal monsoon in the second half of the Rabi season, we expect that the consumption should go up. On your question relating to the Capex, I have earlier also indicated that it is about the sulfuric acid plant. We h ave a desalination plant that has got commissioned in Vizag. There is a Nano DAP plant that is coming up in Kakinada and there is work that is getting initiated in the crop protection chemicals for the multi -purpose plants and also their regular Capex. Apart from it, we are looking into increasing the granulation facilities in SSP. All of this put together should add up to say, about Rs 500 Crores of Capex during the year.

Thank you.

Thank you. The next question is from the line of Prashant Biyani from Elara Securities. Please go ahead.

Thanks for the opportunity. Just continuing on the NBS policy for H2, while I am not looking for any quarterly guidance, but for Q3 whether there will be a significant dip for the industry in profitability or there will be no profit at all on major grades of fertilizer that we are selling as an industry, if you can give some color on that? Not specifically from Coro’s perspective, but for any backward integrated player.

I think I wi ll give you a very general outline . For companies who are backward integrated , the impact could be much lower compared to companies who are buying intermediates and manufacturing. The second thing is there could also be some MRP increases that could happen given the way that subsidy corrections have happened for the Rabi season. So one needs to keep in mind both these factors and accordingly when you look at it, definitely there is going to be an impact on margins, no doubt at all. More so for SSP than NPK and in NPK when companies are working on the unique grade, the possibility of pricing is better in such grades vis -à-vis the generic grades . Integrated players will do better than non integrated players. Traders may get even more impacted.

How are we placed on the raw material inventory, especially for ammonia and phosphate for Q3? Have we had enough opportunity to buy it at lower cost?

So, I think we have this very agile procurement team here and based on the inputs, on the price movements and the capacity that we have for storage of these raw materials , the team has been taking very prudent calls and you could see that one of the main reasons for Coromandel profitability in the last few years., The procurement team has a sense in terms of how the raw material prices could move, and accordingly the purchase decisions are taken. It is also a factor in terms of how much storage capacity we have for each. So long and short, to the extent that we can store, material has been procured, secured and wherever we have to use our backward integrated facilities, the intent is to maximize production from our PA as well as SA plants.

And lastly, how much are we backward integrated in phos acid manufacturing and how much in sulfuric acid?

I would say for phos acid slightly above 50% and sulfuric acid could be 60% or so. Yes, it could be around 60%.

Thank you, ma’am. That is it from my side.

Thank you. We will take the next question from the line of Akshat Mehta from Sameeksha Capital. Please go ahead.

Thank you for the opportunity. One of the questions that I had is in this quarter, have we included any kind of provision for the changes in subsidy that it has come in October.

Sorry I could not follow your question.

My question was that in quarter two, have we taken some kind of provision for the reductions in subsidy that has come in recently.

Yes, we have.

If you could quantify that?

No, I would not be in a position to quantify it now, but we have considered some impact on account of the NBS rates that has been announced.

Yes, the reservoir levels are very low in Southern markets. That would have an impact on the soil moisture conditions. We do see that as a constraint, but at the same time, if the rainfall is going to be good, to a great extent it could compensate.

My next question is on the line of Nano DAP. So when are we kind of commercializing the Nano DAP plant?

Actually the Nano DAP plant is said to be commissioned in Q3 of this year at Kakinada. We are waiting for some regulatory approval s to start the operations there. Pending the commissioning of the new Nano DAP plant at Kakinada, we have started producing Nano DAP at our pilot plant in Vizag and in September we have also started commercial production and sales, although at a limited quantities and we are seeing that the response from the farmer has been pretty good.

My last question is that if you could throw some light on what has been the progress of specialty chemical during the quarter and going forward when you will be able to kind of give some numbers or Capex requirements on specialty chemicals?

As I was mentioning in the past, the intent of getting into specialty chemicals is primarily utilizing our existing assets, for some of the molecules where the applications are beyond agrochemicals. So we have started in a very small way during the last quarter, token invoicing and shipments are happening to some of the specialty chemicals customers already. It is not substantial we are not talking about the absolute numbers at this point in time. But the good news is the traction has begun. Now the business has also worked out certain specific areas where they would like to invest further in terms of building up our own capabilities, infrastructure as we go into a medium-term, and that i s where the current focus is on the specialty chemicals business. We will continue to use our existing assets in the near-term and get the customer connects. Start shipping the products to broad base our customers and applications and in the medium-term invest further and deeper into specialty chemicals.

Thank you.

Thank you. We will take the next question from the line of Vishal Biraia from Bandhan AMC. Please go ahead.

The capacity that we are looking at is 1 Crore bottles per year, which is a 1 litre bottle, and the pricing for these bottles, MRP is about Rs.600. So that is the capacity that we are building up. Depending upon how the response of the market is because this calls for lots of customer awareness and education . If the farmers do not know how it has to be used then it could actually boomerang. We are seeing mixed response from the farmers in the case of Nano urea and therefore from Coromandel’s standpoint, there is lot of ground level activity going on in terms of the agronomist reaching out to the farmers, helping them to understand the product better, how to apply so on and so forth. We have also initiated what is called as a Gromor drive, which is using the drones for some of these foliar applications. So combining both of these, we are in for a slow and a steady start with farmers understanding there is an opportunity for us to sell more and t hese are all modular facilities. So in a quick period of about 8 to 10 months, we should be in a position to add further plan t capacities. That is the game plan as far as Nano is concerned.

And just to understand something on the technical side as to your utilization of phos acid here will be how different than the utilization of phos acid for the solid-state complex grades or DAP?

Here we do not directly use phos acid.

Could you help me understand as to what would be the substitute for the phos acid here.

This is a patented technology and I may not be able to reveal what are the contents and what percentage of what is being used for manufacturing Nano DAP at this point in time. But I should tell you the phos acid, sulfuric acid, the quantum that we use is all goi ng to be for granulation. There is no comparison at all.

And on a steady state basis, once this business stabilizes, what would be the kind of operating margins that you would target?

On Nano DAP.

Yes.

Nano product must have a very decent margin here. I think it should be pretty healthy.

If it is 20%-22%.

Final question. I think it i s a continuation of what the earlier participant was asking . When you say Rs.5000 per ton for the full year for the fertilizer business, this includes SSP.

No, normally we do not include SSP. This is mainly for NPK's.

And then could you give as to what would be this number for NPK for the second quarter like for the September quarter, what this number have been?

No, I normally encourage to look at a full year number because there are seasonalities, you see subsidy price is up and down, MRP considerations. raw material consideration. So for a seasonal business, given so much of external variations, it is always good to look at an annualized basis.

And just lastly to get to this 5000 number, hypothetically what would be the extent of increase in MRP would you require to get to this number for the balance half of the year looking at the way the, and assuming that the RM prices remain where they are and the subsidy is what it is. There is no upper revision.

There could be MRP increases in unique grades . On the generic grade s, we need to look at how the industry is taking it up and what is the view of the government.

If you look at the generic grades or let us look at the specialty grade, what would be the extent that you would target to get to this number for the full year?

That depends upon the market conditions honestly.

Okay. Fair enough. Thank you.

Thank you. The next question is from the line of Vishnu from Avendus Spark. Please go ahead.

Hi, thanks for your time, I am Vishnu from Spark. Firstly, continuing the previous participant’s question, compared to first half most of the raw materials have currently spiked a lot and there is at least Rs.10000 to Rs.12000 correction on an average on sub sidy. So second-half, I mean, given it i s an election year and if the price hikes do not come even the fertilizer EBITDA still be positive or can it tend to be a bit negative?

I think we can talk for Coromandel, given the backward integration that we have, we ex pect the margins to be positive . We saw a steep correction in raw material prices, and there has been some increase in the last couple of months, we really do not know to what extent these increases will sustain or will it again come down because what we saw here bef ore was unprecedented increases. So from that standpoint, we think we will have to go with the market. If the prices continue to be high , there could be some opportunities in terms of our backward integration and value capture. But if prices come down then it is even better. We like to see how the government is going to respond on subsidy. We have seen in the past they have been pretty considerate and they have responded to the industry requirement when there was a price inc rease, they ha ve increased the subsidy. When the raw material prices are corrected, they have just now reduced the subsidy. I think while there are considerations of election year so on and so forth, we just need to work along with the government as an industry and impress on them on the rising raw material prices, and see how we can help in getting a subsidy rate correction for the fourth quarter.

And secondly, on the subsidy provisioning firstly for kharif they have provided some 38000 plus another 22000 they have mentioned so that takes to 60. But whereas in the government budget for NPK we understand only 45000 Crores is provided, so additional 15000 will have to come through a supplementary grant and would this be normally the total amount gets covered, but this time around the actual NPK is 60 which has provided only 45. So will there be a supplementary grant immediately or after electio ns only do you think that this will happen? I am questioning from the possibility of a delay on subsidy release in March.

Answer honestly, we do not know. The government has been considering and getting supplementary credits for disbursing subsidy. So, we hope they will be able to get it through. This year especially, I have also mentioned that the subsidy disbursements have been pretty good. They do not have any arrears in terms of DBT claims that h ave been made by the companies. Since we are able to get through these supplementary grants, we should be able to get the subsidy realizations also fast, but in case there is a constraint and it spills over to next year, we have to wait. So, we do not know the answer, but we honestly believe the government will be able to get it through.

And one final question, what will be the stock, that stock of materials that we have sold, and it is still lying with the dealers and distributors, any rough number in million tons 0.2-0.3 or any rough number if you could help us understand.

Can we come back on this?

Thank you. We will take the next question from the line of Ankur Periwal from Axis Capital. Please go ahead.

Thanks for the opportunity. First on the crop protection side, you did mentioned, we witnessed a good volume led recovery in both domestic and export markets. If you can share some details there, how has been the growth in exports and especially given the negative commentary from most of the global and other domestic players as well, how are we seeing the market there?

A little bit in terms of how the global markets have been behaving. As you know, Brazil is our largest consumer of agrochemicals and we have seen that there is a high level of channel inventory in Brazil. Having said that, we also know that the prices of agr ochemicals from China has been very, very low. They have been trying to dump their chemicals in the market. So, this has a dual impact. Therefore, if we hear and we witness that exporters are having a tough time, it is very much resonating with the realities in the market. For us, we have done specifically well on three counts, one we have focused on bundling our products instead of just one or two of our technicals, our export has grown by 29%. We were successful in onboarding new customers, we got more than 20 new customers who helped us generate additional sales volumes. Apart from that, there were a lot of dormant registrations which have been activated, which has also helped in increasing the overall export sales. A combination of these activities plus our sales force becoming far more active in these markets have helped in the export sales growth.

Sure, that i s helpful. So going ahead as well, we should see a continuation of say a decent growth here given that the new customer addition as well as the geographic expansion that you highlighted.

Yes, you are right. We also wish that we should be in a position to gro w our export markets well. Equally important is to increase our range of products, which is what we are also trying to address both in terms of technical and in terms of formulation. So that is part of our long- term strategy to see that we add more technicals which are recently off patented and also come up with certain formulations and a B2C light model in select countries which can help grow our export business.

Sure. That is helpful. Secondly, on the crop protection margins, again this quarter we saw a dip probably because of the pricing led competition or the commodity price decline that we are seeing from China. Any thoughts there because what we had highlighted earlier was most of the new product launches, through technicals or through collaboration were margin accretive. So is this more a near -term phenomenon and maybe FY2025 should see a better growth there on margins front?

Yes, We have seen this price pressure coming in near term, I do not know whether i t will extend to a medium -term because to several experts whom we have spoken and companies whom we have been in dialogue with, nobody is certain about when this China dumping is going to end. So that is one main factor. Some of the companies who are pr oducing certain technicals, as I understand have even stopped production because it becomes more economical to import from China. So that i s a short-term phenomenon. Hopefully if the Brazilian market picks up again this year and the demand goes up, we should see some quick wins in terms of the pricing as well as recovery in the margins.

And just one clarification if I may. The Rs.5000 EBITDA per ton guidance which you gave that is for the current financial year given the sub sidy rates? Any thoughts on FY 2025 and beyond given annually government has been pretty supportive in terms of RM inflation being absorbed in terms of subsidy?

I would wait a little bit on this . We have to see how the raw material prices move and the election year, what the government is going to come up with. But as you rightly said, the government has been pretty supportive; at times, when the raw material prices have gone up they have helped the industry with higher subsidies. So I do expect that trend to continue and if that continues, our margin should hold and also we will work to see how to improve it.

Sure. That is helpful. Thank you and all the best.

Thank you. We will take the next question from the line of S Ramesh from Nirmal Bang Equities. Please go ahead.

Thank you very much. Following up on the questions on the crop protection business. Can you give us some details on the volume growth in the crop protection business in domestic and export markets for the second quarter, and if you can give us some sense in terms of when you expect to complete the 1000 Crores Capex in crop protection and what is the kind of impact you expect from that, say from FY2026?

Thanks Ramesh. These are nice questions that you come up with. In terms of volume growth, I would say that the export market has volume growth close to about 30%. On the domestic front, formulations had a volume growth, but we did see a contraction in the domestic B2B mainly because of the price pressures and the margin pressures. We had consciously limited our sales into the B2B market , but we focused on growing the formulation business as well as the exports. As far as the capital expenditure is concerned of Rs 1000 Crores that has been announced, there are three multi-purpose multi product projects that the business is working on. We have submitted the proposal for one large Capex, and that is curre ntly under the approval process. Given the short -term scenario that we are currently in with the prices showing such a steep fall, especially from China, we are looking into certain other factors as well to ensure that as we set up the MPP, we have the right level of backward integration. The right type of Capex, so that the return on investment can be much faster. So we are currently in the evaluation stage as I mentioned earlier as well, the Rs 1000 Crore investment is for three large plants and it could take a period of about 24 to 36 months in all for us to consume this entire capital. The good news obviously is we have completed procurement and bhoomi pooja for the new herbicide facility in Dahej and the business is setting up the basic infrastructure and is contemplating to set up formulation units because those can be done on a fast-track basis at the Dahej herbicide facility.

Thank you very much.

Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sunlife AMC. Please go ahead.

Thanks for the opportunity. Two quick questions I have. Firstly, on the Capex space. We are entering a historic high Capex space. So in terms of the management bandwidth, are we okay with the existing, which we have or is there any addition, which we are doing to support the Capex which we are running. If you can, share something on that piece?

I quite did not follow your question. Are you asking whether we have enough management bandwidth to execute these large Capex?

Yes.

I believe so. We have added quite a few people to strengthen our project team in our businesses both nutrients as well as crop protection as you see the sulfuric acid plant and the desal plant that has been commissioned. It has happened in a record period of 18 months , such a large Capex does not happen in 18 months ’ time frame. A similar approach is also being planned for our multi -purpose plan ts in Gujarat. So I think we have the in -house strength to manage these large Capex projects.

We invested in the drone business almost a year back with a small stake and then we increased it over a period in time. We have found that the application of drones is not just limited to agriculture. It could be for various things. It could be for defense, it could be for logist ics, it could be for enterprise, a nd we are also seeing that the government is opening up opportunities for exports in the non-defense sector. There is also a huge opportunity in terms of training because you need trained pilots to operate these drones. So there are multiple areas where the drone services can be deployed. So from that standpoint, we believe it is more of a technology game w ith an adjacency in agriculture. Even in agriculture, given that labor constitutes almost 35% to 40% in terms of the cost of inputs that goes in, d rone spraying could be a very good opportunity given the shortage of manpower and the cost. So that is the way one should look into this investment in drones.

Sure. Thank you so much and all the best. I will come back in the queue.

Thank you. We wi ll take the next question from the line of Gaurav Nigam from Tung a Investments. Please go ahead.

Thank you for taking my question. Just have one question on this government sub sidy receivable. In the last few years, I have seen that it has been considerably reduced. Just wanted to understand how should we think about the sustainability of reduction in this government subsidy there and what is the reason behind this reduction?

As I mentioned earlier, we have been submitting the claims the same day the portal opens. That is number one. Second, there is a lot of activity in the field to ensure there is consumption happening on the ground. The farmers are actually buying and using it. The third obviously is that the government machinery is also pretty fast in terms of processing, and they have been support ive in terms of timely dispersal. All the three have favorably contributed to receiving record subsidies and maintaining the outstanding at a low level . We will continue to do activities from our end and I think the government has been fairly supportive and if this trend continues, we should not see a huge buildup in terms of receivables.

Just a follow up on that, is this receivable days come down for everyone in the industry or we have some added advantage because of which it has come down more for Coromandel?

I honestly do not know. I have been monitoring our receivables and we have been pushing our teams, working very closely with our marketing teams and Agronomists. So I can tell you as far as Coromandel is concerned, but generally the government is also being disbursing subsidy timely.

Got it. Thank you.

Thank you. We wi ll take the next question from the line of Noel Vaz from Union Ass et Management. Please go ahead.

I just wanted to get some clarity about the 165 Crore drone order that was announced earlier. Has there been some execution on that and do we have any idea as to what kind of growth prospects that we are looking for or margins on the same? Thank you.

Yes. We are in the process of executing these orders. Raw materials have been procured. A new manufacturing site is also being commissioned. It should be ready by December of this year. The existing facility is also being leveraged so that we can do a certain quantum of manufacturing from the existing site.

Margins, any idea what could be the margins now or in the future?

We have to wait to see the overall margin profile. Currently there is a good amount of spending that is also happening on the technology front, R&D and we do not want to restrict investment in R&D, especially in an area where it is a sunrise industry. It is a startup, and we have to scale up, we have to invest in manufacturing. We have to continue investing in R&D. Those are all happening. I honestly believe this will be a good margin business as we go along, not just in terms of manufacture and sale, but also in terms of services and training.

Thank you. That is all from my side.

Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Vipulkumar Shah from Sumangal Investments. Please go ahead.

Thanks for the opportunity. What is our annual requirement of phos acids and how much we produce captively in-house and the same for sulfuric acid?

We require close to about 10 lakh tons of phos acid and depending upon the product mix, we may require about 4.5 to 5 lakh tons of imported acid. I mentioned earlier about 50% plus of our capacity is through our in -house production. On the sulfuric acid front , we would have close to about 60% of our capacity in-house and we will have to import for the balance.

The business is thinking about further investments in fertilizer, especially in backward integration. At this point in time these are all in the discussion stage, once we are certain about it, we will definitely come back and have the announcements made.

Lastly, regarding this investment in this drone company. Are we involved in the management also or we are just the financial investors?

We are involved in the management. We are helping them in setting up the operation, scaling up the operations, putting together the systems, processes, everything. So, it is an integral part of Coromandel.

We are one of their biggest customers, right?

We are not their biggest customer. They have got orders from the Army for the logistics drones. We have also got a good order from IFFCO for agriculture drones. We have picked up drones and we are doing our Gromor drive, so there are multiple customers for Daksha.

Okay, ma'am. Thank you so much and wish you all the best.

Thank you. As that was the last question for today, I would now like to hand the conference over to the management for closing comments. Over to you.

Thank you very much all of you who have joined the call today and actively participated. In case there are any further questions, please feel free to reach out to us. Thanks again.

Thank you members of the management. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.