Chambal Fertilisers & Chemicals Ltd Management Discussions

1https://www.mospi.gov.in/uploads/latestReleases/latest_release_1780655857536_5ac01869-ca4a-422d-b7a7-57b81da60932_Press_Note_on_GDP_Estimates_for_ Q4_2025-26_and_PE_FY_2025-26_F.pdf ²https://www.mospi.gov.in/uploads/latestreleasesfiles/1776078391571-Press_Release_of_CPI_March_2026.pdf ³https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=62863 ⁴https://www.pib.gov.in/PressReleasePage.aspx?PRID=2251594&reg=3&lang=1

Indias fertiliser industry plays a critical role in supporting agricultural productivity and ensuring food security. The country is one of the largest fertiliser markets globally, driven by extensive cultivation, expansion of irrigated area, diverse cropping patterns and lower nutrients use efficiency.

Fertiliser consumption in India remains robust, with nitrogen (N), phosphorus (P) and potassium (K) (NPK) forming the primary nutrients. Urea continues to dominate the consumption mix, accounting for a significant share of total fertiliser usage, owing to its affordability and wide applicability across crops.

The industry operates within a policy-driven framework, with government support playing a central role in ensuring affordability and availability of fertilisers. Urea prices are regulated under a price subvention mechanism, while phosphatic and potassic fertilisers are covered under the Nutrient-Based Subsidy (NBS) regime. Recent policy measures, including subsidy allocations for the Kharif 2026 season, continue to provide visibility and stability to the sector.

India has made progress in enhancing domestic production capacity, particularly in urea, supported by policy initiatives aimed at improving self-sufficiency. Despite this, the country remains dependent on imports for phosphatic and potassic fertilisers, as well as key raw materials such as natural gas, rock phosphate, phosphoric acid, ammonia and potash. This structural dependence exposes the industry to global price volatility and supply-side disruptions.

During Financial Year 2025-26, fertiliser demand remained strong, supported by favourable agricultural conditions and higher sowing levels. Consumption of urea stood at 396.39 lakhs MT. Global fertiliser markets experienced volatility due to geopolitical developments, particularly in West Asia, which impacted input costs and import prices. Indias reliance on fertiliser imports and key raw materials, highlighted the need for supply chain resilience and continued capacity expansion.

The pricing of urea is regulated by the Government of India under a price subvention mechanism, ensuring affordability and widespread accessibility for farmers. This framework provides stability to the sector while linking industry economics to input costs, particularly natural gas. Over the past five years (2021-2026), urea sales have grown at a CAGR of approximately 3.78%, supported by expansion in gross irrigated area, higher cropping intensity and increased nutrient application intensity.

During Financial Year 2025-26, domestic urea production stood at 29.32 million MT, compared to 30.64 million MT in the previous year. Total sales increased to 39.64 million MT in Financial Year 2025-26 from 38.77 million MT in the previous year⁵.

The industry has worked closely with the Government to ensure adequate stock availability. The Government on its part has played a proactive role in ensuring feedstock availability to maintain production levels despite supply shocks.

To bridge the demand-supply gap, urea imports increased to 10.380 million MT in financial year 2025- 26 compared to 5.65 million MT in the previous year. Despite capacity additions under the New Investment Policy, 2012 which were aimed at improving domestic self-sufficiency of Urea, sustained demand growth of Urea has kept India dependent on imports.

Phosphatic fertilisers play a critical role in Indian agriculture, with nearly 51% of phosphorus (P_O_) consumption met through Di-Ammonium Phosphate (DAP). The country meets its DAP requirement through a combination of domestic production and imports, with imports accounting for a significant share. During Financial Year 2025-26, approximately 66% of the total DAP supplied in the domestic market was imported.

Import volumes of DAP increased to 6.22 million MT in Financial Year 2025-26 from 4.57 million MT in the previous year, reflecting favourable policy support and supply dynamics. DAP sales stood at 9.40 million MT in Financial Year 2025-26, up from 9.28 million MT in the previous year, supported by domestic production of 3.90 million MT (previous year: 3.77 million MT), with the balance met through imports⁶.

Demand for NPK fertilisers in India is largely met through domestic manufacturing, although certain grades continue to be imported. Notwithstanding this, the sector remains dependent on imports of key raw materials such as ammonia, rock phosphate, phosphoric acid and potash, as well as certain finished fertilisers, underscoring structural import dependence in the phosphate and potassic segments.

Within this framework, the Company sources a range of fertilisers from international markets and markets them domestically, ensuring consistent availability to meet agricultural demand. During Financial Year 2025-26, the Company imported 6.03 LMT and sold 5.83 LMT of NPKs, compared with imports of 2.85 LMT and sales of 2.13 LMT in the previous year. The Company imported 5.01 LMT and sold 4.58 LMT of DAP during Financial Year 2025-26, as against 1.75 LMT imported and sold in the previous year.

At the end of the year, the Middle East crisis disrupted supply chains for ammonia (NH ) and sulphur which impacted availability of P&K grades fertilisers. However, timely action by the Company at the beginning of the year has ensured that adequate stock of such fertiliser is available with the Company.

The Indian Crop Protection Chemicals (CPC) industry plays a critical role in improving agricultural productivity by protecting crops from pests, diseases and weeds. The market comprises insecticides, fungicides and herbicides, with both domestic consumption and exports contributing to overall growth. The domestic market for crop protection chemicals, speciality nutrients and biologicals is estimated at around INR 40,000 crore and is expanding at a CAGR of 8–9%, with projections reaching approximately INR 54,000 crore by Financial Year 2029–30. Currently, generic products account for nearly 70% of the market, while patented products account for the remaining 30%.

India is among the leading producers of agrochemicals globally, supported by strong manufacturing capabilities and a well-established formulation ecosystem. Agrochemical production up to February 2026 for Financial Year 2025–26 stood at 2,61,099 MT, ensuring sufficient supply to meet domestic agricultural requirements during the Kharif season. Continued coordination between industry participants and government authorities also supported timely availability across markets⁷.

CFCL is a strong marketer of crop protection solutions across all three segments and has forged strategic relationship with suppliers and distribution channels. The Company has positioned itself as a solutions provider bridging the gap between farmers problems and available solutions. The segment grew in turnover from Rs. 599.63 Crore in Financial Year 2024-25 to Rs. 732.63 Crore in Financial Year 2025-26.

The Speciality Nutrients (SN) and Biologicals segment is emerging as a key growth area within the agri-input industry, driven by a growing focus on soil health, nutrients efficiency and sustainable agricultural practices. SN, including micronutrients and water-soluble fertilisers, play a critical role in addressing soil deficiencies and improving crop quality and yield.

The segment is witnessing steady growth, supported by rising farmer awareness, greater adoption of precision farming practices and a gradual shift towards balanced and efficient nutrients application. The growing emphasis on high-value crops and horticulture is further driving demand for specialised inputs.

Biologicals, including bio-fertilisers, bio-stimulants and bio-pesticides, are gaining traction as environmentally feasible alternatives to conventional CPC & fertilisers. This shift is supported by favourable regulatory policies, evolving farming practices and increasing focus on reducing chemical usage, while maintaining crop productivity. CFCLs partnership with The Energy and Resources Institute (TERI) is showing promise with the launched products.

This segment grew in turnover from Rs. 326.48 Crore in Financial Year 2024-25 to Rs. 444.91 Crore in Financial Year 2025-26. A healthy pipeline of products is due to hit the markets by Financial Year 2027-28. In addition, CFCL is collaborating with global companies to introduce advanced agricultural technologies to Indian farmers.

The Governments initiatives towards promoting alternative fertilisers and sustainable agricultural practices are further supporting the adoption of biological inputs. At the same time, advancements in research and development are enabling the introduction of innovative, technology-driven products with improved efficacy.

The mining and infrastructure sectors play a critical role in driving demand for industrial explosives, including Technical Ammonium Nitrate (TAN), supported by infrastructure development, growing energy requirements and sustained government focus on capital expenditure.

Indias total coal production for Financial Year 2025-26 surpassed 1 billion tonnes for the second consecutive year, reinforcing the nations energy security⁸. Captive mines recorded a significant contribution, accounting for over 210 million MT of total output. Indias iron ore production increased to around 310 million MT during Financial Year 2025-26, registering growth of approximately 7% year-on-year and exceeding initial targets. This momentum was reflected in the cement sector, where production volumes expanded to an estimated 480-485 million MT, supported by continued demand from infrastructure and construction activities.

These trends, along with the Union Budget 2026-27s emphasis on Rare Earth Corridors, high-speed rail corridor and enhanced capital expenditure on infrastructure, are expected to lead to sustained demand for explosives used in mining and infrastructure activities. As a critical input for commercial explosives, TAN remains integral to supporting the continued expansion of mining operations and infrastructure development in India.

Chambal Fertilisers and Chemicals Limited (CFCL) is the largest private sector manufacturer of urea in India, with an annual production of approximately 3.37 million MT. The Company operates three state-of-the-art plants located at Gadepan in Kota, Rajasthan.

Over the years, CFCL has built a comprehensive product portfolio to address diverse agricultural requirements. In addition to urea, the Company markets a wide range of fertilisers and crop solutions, including DAP, TSP, MOP, various grades of NPK fertilisers, Crop Protection Chemicals (CPC) and Speciality Nutrients (SN).

CFCL forayed into the seeds business during the previous year, which has substantially completed its agri-inputs profile.

Financial Year 2025-26 marked a year of strategic progression for the Company as it continued its transition from a urea-centric business model to a diversified and value-driven agri-input platform. While the urea segment provided earnings stability, growth momentum was led by other Bulk Fertilisers, particularly NPK fertilisers, along with CPC, SN and biologicals, reflecting a deliberate shift towards higher-value segments.

The urea segment delivered strong operational performance with high-capacity utilisation. Urea sales volume stood at 34.06 lakh metric tonnes during the year, generating revenue of Rs. 12,037.36 Crore and reflecting stable segment performance. The segment continues to contribute substantially to overall volumes and cash flows.

The complex fertilisers segment registered robust expansion during the year, led by strong traction in the DAP, TSP and NPK categories. Timely market placement and prudent procurement ensured adequate availability ahead of the Kharif season. The Company further focused on enhancing its distribution footprint along with farmer connect programmes.

The Company operates in this segment through an asset-light model, supported by alliances with established domestic players and innovation-driven multinational partners. Through these partnerships, it sources high-quality generic and patented offerings across CPC, SN and Agricultural (Ag) Biologicals, which are marketed under the "Uttam" brand.

Within Ag Biologicals, the ‘CFCL–TERI Centre of Excellence for Advanced and Sustainable Agriculture Solutions (Centre of Excellence) is engaged in developing patented and technology-driven products. These include biogenic Nano fertilisers, consortia-based bio-fertilisers, bio-pesticides, bio-stimulants and metabolite-based crop protection solutions. The Centre of Excellence is aligned with the Governments PM PRANAM scheme, which promotes alternative fertilisers and biogenic agricultural inputs. Companys products such as Uttam Superrhiza, a next-generation mycorrhizal biofertiliser and Uttam Pranaam, a biogenic nano phosphorus solution, were applied across approximately 3 million acres during the year.

The seeds business delivered encouraging initial results, with newly introduced bajra, mustard and wheat varieties performing well during the year. The Company continues to strengthen its expertise and presence in this segment.

The brownfield Technical Ammonium Nitrate (TAN) project at Gadepan, Kota (Rajasthan), is progressing as planned. The facility has a production capacity of 2,40,000 MTPA of TAN and 2,10,000 MTPA of Weak Nitric Acid (WNA). Its strategic location enables efficient servicing of major hubs such as Singrauli, Nagpur and Hyderabad, targeting supply to mining and infrastructure markets. The project is expected to cater to a significant share of domestic demand.

The plant is designed as an integrated manufacturing unit, encompassing the production of WNA and multiple grades of ammonium nitrate. These include High-Density Ammonium Nitrate (HDAN), Ammonium Nitrate Melt and specialised grades such as medical-grade ammonium nitrate, supporting a wide range of industrial applications.

Segment-wise performance of the Company on a standalone basis, is summarized below:

(Rs. in Crore)

Sales of various marketed products are as under:

During Financial Year 2025-26, overall urea production was lower primarily due to two factors. The Gadepan II plant underwent planned maintenance in March 2026 and operations were affected by a breakdown in Gadepan II plant at the beginning of the year. In addition, plant operations were impacted by reduced gas availability arising from the West Asia conflict in March 2026. As a result, urea revenue declined compared to the previous year, primarily due to lower sales volumes and reduced gas cost pass-through.

Revenue from branded marketed products, including complex fertilisers, CPC, SN and Seeds, stood at Rs. 8,227.50 Crore in Financial Year 2025-26, compared to Rs. 3,487.44 Crore in the previous year, aided by higher volumes and improved realisations in P&K fertilisers. The Company continued to ensure adequate availability of key products such as DAP, NPK and MOP to meet channel requirements, with focus on addressing agricultural needs and maintaining supply continuity.

The CPC and SN segment sustained its growth momentum during the year. Continued emphasis on improving the product portfolio, expanding channel reach, improving supply chain efficiency and enhancing field capabilities contributed to improved performance. Growth was further supported by initiatives such as crop-specific product positioning, introduction of new-generation products, channel engagement programmes and demand generation efforts under the ‘Seed to Harvest initiative, along with increasing digital adoption.

In the biological segment, research activities under the Centre of Excellence progressed in line with planned objectives, targeting the development of next-generation sustainable solutions.

The average trade receivables were higher by 337% compared to the previous financial year. This was primarily due to adjustment of provisional higher concession price paid in earlier periods leading to higher outstanding subsidy receivables and lower Debtors Turnover Ratio. During the year, turnover increased by 136% compared to previous financial year due to higher sales volume of complex fertilisers, crop protection chemicals, speciality nutrient and seeds, which improved the Debtors Turnover Ratio. The net impact of above resulted into lower Debtors Turnover Ratio.

The interest coverage ratio improved due to lower interest expense following prepayment of long-term borrowings during the previous financial year.

Return on net worth is calculated by dividing standalone profit after tax for the financial year by the average net worth during the year. The return on net worth during Financial Year 2025-26 was 20.83%, compared to 21.16% during the Financial Year 2024-25.

Standalone profit after tax of the Company during the Financial Year 2025-26 increased to 17.68% compared to the previous financial year. This is attributable to improved performance arising from higher sales volumes of complex fertilisers, crop protection chemicals, speciality nutrients and seeds, along with lower finance costs. The average net worth increased by 19.57% during Financial Year 2025–26 compared to previous financial year due to profit accretion during the current year.

These factors resulted in a marginal decline in return on net worth.

Various Government supported schemes and subsidies continue to play an important role in promoting fertiliser usage in India. Structural factors such as expansion of rural infrastructure and irrigation facilities, increasing awareness of micronutrients and speciality fertilisers and rising adoption of digital platforms for agri-input distribution are expected to aid steady growth in fertiliser consumption over the coming years.

The mining industry is growing at the rate of 6% to 7%, which will also provide opportunities for further expansion in TAN.

Along with its own manufactured urea, the Company offers a diversified portfolio of bulk fertilisers, including DAP, TSP, NPKs and MOP. Long-term arrangements with reliable partners, strong brand equity and an established distribution network, provide a platform to expand volumes across bulk fertilisers as well as CPC, SN and biological segments.

Increasing demand for NPK fertilisers, along with availability of imported products, present opportunities for growth through expansion into new geographies and deeper penetration in existing markets.

The Companys continued emphasis on product quality and customer satisfaction is expected to support the growth trajectory. Brand-building initiatives such as the ‘Hamara Naam Hamara Nishaan campaign are aimed at strengthening recall among farmers and enhancing brand visibility through a consistent identity.

The business remains exposed to external factors such as variability in monsoon patterns, supply constraints, volatility in prices of key fertilisers including DAP, MOP and NPKs, and the regulated pricing environment. The Company manages these factors through a calibrated approach to sourcing and pricing.

In the urea segment, natural gas remains a critical input, given its role as the primary feedstock for urea manufacturing. The recent tension in West Asia has impacted gas availability. Under the Government of Indias pooling mechanism, gas procurement is managed through the Empowered Pool Management Committee (EPMC). During this period of supply disruption, EPMC undertook significant efforts to ensure gas availability, enabling urea plants to maintain production continuity.

The fertiliser industry in India operates within a policy-driven environment and business performance remains closely linked to the regulatory framework of the Government of India. The Companys third urea plant was established under the New Investment Policy, 2012, which is applicable for a defined period from the commencement of production. Any changes in policy provisions or delays in notifications may impact operations and financial performance. In addition, the regulated nature of fertiliser pricing, combined with volatility in market prices of certain products, can influence short-term performance.

Under the prevailing policy framework, subsidy for urea production beyond Re-assessed Capacity (RAC) is determined based on natural gas costs and a fixed cost component applicable across the industry, subject to the Import Parity Price (IPP) of urea and associated incidental expenses. In situations where natural gas prices remain elevated while IPP levels are relatively lower, production beyond RAC may become less viable, requiring careful production planning.

Demand for crop protection chemicals is influenced by external factors such as weather conditions, pest and disease incidence and cropping patterns, all of which may vary across seasons. Similarly, the Speciality Nutrients segment is linked to cropping trends, international price movements, supply chain conditions and farmer affordability, leading to variability in demand over time.

Natural gas remains the primary raw material for urea production and its availability and pricing are critical to operations. A significant portion of Indias gas requirement is met through imports, making it susceptible to global market movements and geopolitical developments.

Risk mitigation is supported by way of a diversified sourcing strategy and efficient inventory optimisation practices. The Company also reinforces its dealer financing ecosystem to improve channel stability, while maintaining a balanced portfolio approach to reduce exposure to market fluctuations.

In so far as TAN business is concerned, production of Ammonium Nitrate is highly sensitive to the availability and pricing of liquified natural gas/ammonia gas, both of which are vulnerable to the impact of global geopolitical uncertainties. Furthermore, large-scale imports of Ammonium Nitrate, particularly from countries such as Russia, can lead to price disparities challenging the competitiveness of the domestic manufacturers. The entry of new production capacities in the future is also expected to intensify competition and reshape supply dynamics.

Strong demand across the Companys product portfolio and continued geographical expansion of the marketing reach, provides a favourable growth outlook. Timely subsidy disbursements by the Government of India have supported liquidity, enabling smoother operations.

The Company continues to strengthen its non-subsidy business through the implementation of the TAN project. Further, strategic horizontal and vertical expansions are being explored in the TAN and WNA sectors to bolster market leadership. By scaling these operations, the Company aims to play a pivotal role in achieving Indias vision of self-reliance (Atmanirbhar Bharat) in critical chemical resources.

The CPC and SN product portfolio is being expanded and supply chain efficiencies are being further strengthened. The entry into the seeds business has strengthened the Companys integrated agri-input offering, enabling it to provide more comprehensive solution for farmers. At the same time, the biological portfolio has been expanded, with new fungicides and nematicides.

The urea business continues to deliver consistent performance, providing stability to overall operations, while growth in non-urea fertilisers, CPC and SN is expected by way of deeper penetration of existing markets and expansion into new geographies.

The business remains aligned with evolving trends in Indian agriculture, including increasing adoption of value-added inputs, rising demand for integrated farm solutions and a growing focus on productivity and sustainability. While near-term performance is expected to remain stable supported by the urea segment, the medium to long-term outlook is anchored in building a diversified agri-solutions portfolio with an improved margin profile.

In CFCL, human resources are integral to achieving operational excellence, innovation and long-term sustainability. The Company upholds strong commitment to safety, efficiency and continuous improvement, with its people at the centre of operations and growth. As a performance and merit-driven organisation, CFCL promotes culture of accountability, empowerment and recognition. The Companys HR practices are strategically aligned to attract, develop and retain high-calibre talent.

Key highlights of the HR framework include the following-

The Company continues to build its talent base through structured recruitment aligned with business requirements. Well-defined onboarding practices support smooth assimilation of new employees. Workforce planning remains aligned with operational requirements, including support for existing plant operations and the new TAN plant under commissioning, ensuring continuity in operations.

Employee capability development remains a key focus area across the organisation. Employees undergo focused technical training through classroom sessions, on-the-job learning, leadership initiatives, behavioural workshops, coaching sessions and partnerships with leading institutes. Training needs are periodically assessed and learning initiatives are delivered through structured development programmes. The self-development scheme also encourages employees to pursue relevant certifications and upgrade their skills.

The Company promotes a performance-driven work environment supported by structured performance management processes. Clear goal setting, periodic reviews and feedback mechanisms help align individual performance with organisational priorities.

Employee engagement initiatives focus on improving communication,recognitionandoverallwell-being.Community development, recreational, healthcare, educational and cultural initiatives are undertaken to encourage participation, enhance quality of life and strengthen the sense of belonging among employees and their families.

The Company places strong emphasis on maintaining a safe working environment across all locations. Regular training, awareness programmes and adherence to statutory requirements support high standards of safety and compliance. Employee welfare remains an important area of focus.

As at March 31, 2026, the Company had a permanent employee strength of 1201. Employee attrition during the year remained below the industry average, reflecting the Companys stable work environment, strong employee value proposition and sound labour practices. Industrial relations across all locations remained positive and collaborative.

The Company has a strong internal control system comprising various levels of authorisation, supervision, checks & balances and procedures through documented policy guidelines and manuals. The Companys internal control systems are adequate and operating effectively. The internal audit department regularly monitors the efficacy of internal controls and compliances with Standard Operating Procedures (SOP) and manuals with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance that all material transactions are authorised, recorded and reported correctly and policies, laws and regulations are complied with.

The business function heads and managers exercise their control over business processes through operational systems, procedure manuals and financial limits of authority manuals. These processes are reviewed and updated, if required, to improve their efficacy and meet business needs.

The internal audit function draws a risk-based annual audit plan which is aligned to the previous years observations and suggestions from the management, operating managers and auditor. The internal audit programme is approved by the Audit Committee. The Internal Audit Department also assesses opportunities for improvement in business processes, systems and controls, gives recommendations and reviews the implementation of directions issued by the Management, Board of Directors or its Committees.