Deepak Fertilisers & Petrochemicals Corp Ltd Management Discussions

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product, DFPCL plays a pivotal role in reducing greenhouse gas emissions, aligning with environmental sustainability efforts.

Based on unfavourable market dynamics and future outlook, the management has approved the permanent closure and dismantling of its 300 TPD Methanol Plant at the K1 Taloja Unit, which has remained non-operational since FY 2021-22. Commissioned in 1991, the plant had delivered its expected economic returns and has since outlived its utility, in the context of current scale and efficiency requirements. The dismantling is expected to optimise land utilisation for future brownfield opportunities.

Our transformation strategy is centred around customised specialty solutions, co-created through constant engagement with customers and supported by R&D and new product development.

Current specialty offerings include Cororid, PuroGuard+ (hospital range of disinfectants), Purosolv (Pharmacopeia grade solvents), Pickbrite (an eco-friendly stainless steel pickling solution), Solar Grade Nitric Acid (SGNA) and Pure DIPE, etc.

Additionally, we are also exploring growth opportunities in specialty chemicals supplied to solar photovoltaics and semiconductor fab manufacturing industries, where demand for ‘Made-in-India’ ultra-pure specialty chemicals is set to rise with increased public and private investments.

DMSL, which houses the Group’s mining chemicals business, offers a uniquely integrated and differentiated value chain in India. It combines a comprehensive range of mining chemicals with an expanding portfolio of different types of explosives suited for varying rock conditions, blasting technology, technical services, and downstream operations, all aimed at enhancing productivity for the mining and infrastructure sectors.

DMSL continues to create value through its "Total Cost of Ownership" (TCO) projects across mining and infrastructure clients. This integrated approach reduces the extraction costs of rock and mineral across the mining chain – comprising drilling, blasting, load & haul, and crushing.

DMSL recorded its highest-ever TAN sales volume of 577 KT in FY 2025-26, achieving an 11% YoY growth. DMSL’s prices in the domestic market remained competitive despite the rise in Ammonia cost in the second half of FY 2025-26, while delivering value to customers and end-users.

DMSL holds a leading position in the Indian Technical Ammonium Nitrate (TAN) market, with an estimated ~40% market share. Responding to growing domestic demand, it expanded its TAN capacity from 487 KTPA to 587 KTPA over the past two years through brownfield expansion. A major milestone will be the commissioning of the greenfield TAN plant of 376 KTPA at Gopalpur, Odisha in FY 2026-27.

To support its value-delivery through Total Cost of Ownership (TCO) model, DMSL continues to make strategic investments in: Forward integration into commercial explosives and initiating systems BMD (Bulk-Mix-Delivery) trucks for down-the-hole ANFO delivery

Advanced technologies like drones, AI-based blast modelling, and mining equipment productivity measuring sensors, etc.

Engineering talent development for customer engagement and value delivery

The launch of DMSL’s new logo and brand identity reinforces its positioning as a partner in progress. The three arms of the logo symbolise DMSL’s core principles: Innovation that Drives Progress Customisation Tailored to User Needs Customer-Centricity at the Heart of Everything We Do

DMSL maintains strict compliance with Ammonium Nitrate Rules, supported by an advanced Global Positioning System (GPS). This system ensures real-time tracking, with instant alerts and corrective actions for any deviations across the manufacturing and distribution network.

PCL’s 1,500 TPD greenfield Ammonia plant produced 452 KT of ammonia during FY 2025-26, meeting around 93% of the Group’s requirements. PCL’s merchant ammonia market share in western India stands around 33%. A long-term gas supply agreement with Equinor (Norway) will ensure cost-effective natural gas supply from May 2026, thereby aiding further margin expansion.

DMSL’s overseas subsidiary Platinum Blasting Services Pty Ltd. in Australia has been serving the Australian mining industry for over a decade. Its suite of services covers cost-efficient and innovative blasting services including blast design, explosives supply, logistics, down-the-hole loading, short firing and regulatory support.

During FY 2025-26, DMSL has further enhanced its shareholding in PBS from 85% to 100%. This strategic move reinforces DMSL’s commitment to strengthening its global footprint in the explosives and blasting services sector and gaining greater control over the subsidiary’s operations and growth plans.

The Crop Nutrition Business (CNB) operates as a focussed standalone entity under Mahadhan AgriTech Limited (MAL), a wholly-owned subsidiary of DFPCL. Under its flagship brand "Mahadhan", MAL offers a diversified portfolio of differentiated and value-added products, including enhanced efficiency NPK fertilisers (Smartek), crop-specific balanced nutrition solutions (Croptek), crop-stage specific water-soluble fertilisers (Solutek), bentonite sulphur (Bensulf Super-Fast), and other specialty fertilisers. The portfolio addresses evolving agronomic needs across crops, geographies, and soil conditions. The business has steadily evolved from a commodity-led model to a science-driven, solutions-oriented platform. It is uniquely positioned in the Indian market with its proprietary Nutrient Unlock Technology (NUT), which enhances nutrient use efficiency through fertilisers fortified with secondary and micronutrients. This differentiated approach is supported by strong in-house agronomy and R&D capabilities, backed by highly qualified scientists and extensive field trials across diverse agro-climatic zones.

The fertiliser industry faced a challenging year, with profitability impacted by ongoing geopolitical uncertainties, rising raw material costs, and supply constraints. Margin pressures remained high, while the availability of key inputs continued to be uncertain. Farmers also experienced the impact through higher fertiliser prices, affecting affordability. In addition, the sector remains dependent on subsidies, which, while supporting farmers, also exposes businesses to policy-related risks. These factors together created a challenging operating environment, requiring companies to remain agile and resilient.

Further strengthening its innovation capabilities, the Company has established a DSIR-accredited Research and Innovation Centre (RIC) at Pune. Recognised by the Government of India, the RIC houses advanced analytical, formulation, and testing infrastructure for product development, validation, and technology advancement. During the year, the Company filed four patents, reinforcing its focus on innovation and intellectual property creation.

MAL continues to hold a leadership position in water-soluble fertilisers in India, supported by a strong presence in Maharashtra, Gujarat, and Karnataka, along with a growing footprint in other regions. Its products cater to a wide range of field and horticulture crops, improving productivity and crop quality. The Company’s go-to-market model combines strong on-ground engagement with digital outreach. A field force of over 670 representatives,

supported by an extensive dealer and retailer network, ensures last-mile connectivity. Farmer engagement initiatives, including demonstrations and advisory programmes, have expanded farmer reach and accelerated adoption of differentiated solutions.

Digital platforms and farmer-centric initiatives such as the Mahadhan Saarthie Project and Saarthie Laabh loyalty programme have further strengthened farmer engagement and promoted scientific crop nutrition practices.

The Company continues to invest in soil and crop diagnostics through its NABL-accredited laboratory and dedicated research farms, enabling data-driven advisory and customised solutions. Through this integrated approach, MAL remains committed to advancing sustainable agriculture by improving nutrient efficiency, enhancing farm productivity, and supporting better farmer incomes.

DFPCL’s VARE business is anchored by ‘Creaticity’ in Pune, offering furniture and home d?cor solutions. The facility maintains an occupancy level of around 80% across furniture and interiors, co-working spaces, commercial establishments, F&B outlets, and sports and entertainment facilities. Over time, Creaticity has evolved from a retail hub into a space solutions platform, while continuing to be positioned as ‘The Land of Furniture’. New brands such as Trezure Casa, Houslife, Edo Homes, Sleepy Cat, Morning Owl, and Boingg Kids Furniture were added during the year apart from fulfilment centres and a sports arena such as the launch of Serve Society’s Pickle and Padel courts. Creaticity continues to provide curated offerings and a differentiated customer experience for Pune’s discerning customers.

FY 2025-26 represents a clear inflection point for DFPCL, marking the transition from a phase of capacity creation to one of delivery and growth. For the two major ongoing projects, the focus during the year has been on completing construction, energisation and commissioning during H2 FY 2026-27.

The Dahej Nitric Acid expansion project, involving 300 KTPA of Weak Nitric Acid and 150 KTPA of CNA capacity, achieved 86% completion during the year. Major equipment and packages have been installed, critical electrical systems energised, and the boiler ready for startup. With over five million safe manhours recorded, the project has entered the pre-commissioning and commissioning phase, with commissioning activities expected to be completed during H2 FY 2026-27. Upon commissioning, this expansion will position DFPCL as Asia’s largest nitric acid producer, translating scale into sustained leadership.

The 376 KTPA greenfield TAN facility at Gopalpur reached 95% overall progress in FY 2025-26. With 10 million safe manhours achieved, the project has transitioned into pre-commissioning and commissioning, with utilities being brought online in a phased manner. Commissioning is scheduled for H2 FY 2026-27. Upon completion, Group TAN capacity will increase to ~1 MMTPA, enabling DMSL to address nearly 60% of India’s TAN demand and deliver meaningful contribution to the "Aatmanirbhar Bharat Abhiyan", by reducing the need for AN imports. With near-completion construction and well-defined commissioning pathways, the focus in FY 2026-27 will be on stabilisation, ramp-up and performance optimisation. Both these projects are expected to not only contribute materially to volumes and earnings, reinforcing DFPCL’s market leadership but also solidify its strategic transformative objectives.

The Company delivered a resilient performance in FY 2025-26 despite a challenging global environment marked by geopolitical uncertainties, volatile raw material and energy prices, supply chain disruptions and pressure on global chemical spreads.

Operating revenue increased by 12% from Rs 10,274 crore in FY 2024-25 to

Rs 11,506 crore in FY 2025-26, supported by sustained demand and market leadership across the businesses. Operating EBITDA stood at Rs 1,684 crore, while Net Profit stood at Rs 739 crore during the year. Profitability was impacted by elevated input costs, pricing pressures in Industrial

Chemicals, limited subsidy realignment in fertilisers and planned ammonia plant turnaround activities. However, lower finance costs and continued operational discipline supported overall performance. The Mining Chemicals business registered strong recovery momentum with 11% growth in FY 2025-26 sales volumes, driven by robust B2C demand and improved customer engagement. Specialty and Croptek products contributed 33% of Crop Nutrition revenues, reflecting continued focus on differentiated and value-added offerings. The Crop Nutrition business maintained resilient market performance through strong execution, value premium and product mix enrichment initiatives.

The Company entered into a long-term LNG supply agreement with M/s. Equinor (Norway), a strategic initiative aimed at strengthening feedstock and enhancing long-term margin resilience across the value chain. With improving market conditions and key growth projects nearing completion, the Company remains well-positioned for sustainable growth and long-term value creation.

In FY 2025-26, DFPCL’s manufacturing operations remained focussed on operational excellence, superior product quality, safety, agility and supply chain resilience. Targeted debottlenecking initiatives, technology upgrades, energy conservation measures and reliability improvement programmes enhanced productivity, asset utilisation and operational responsiveness across manufacturing facilities.

The Company continued its journey towards world-class manufacturing through adoption of best-in-class practices and future-ready operations. As part of its Make in India initiatives and backward integration strategy, the 1,500 TPD ammonia plant at Taloja operated near design capacity, reducing dependence on imported ammonia and strengthening cost competitiveness. The commissioning of the 20 TPD powdered Water-Soluble Fertiliser (WSF) plant at Taloja further enhanced the specialty fertiliser portfolio and supported value creation.

Aligned with its strategic shift towards higher-value products, the Company continued operations of its solar and steel grade nitric acid plants at Taloja and Dahej while advancing the development of specialty chemicals and advanced materials, including Electronic Grade Iso-Propyl Alcohol, Technical Grade Mono-Ammonium Phosphate, aniline, toluene derivatives and other value-added products.

The Company also strengthened manufacturing resilience through initiatives aimed at securing critical raw materials and reducing input-cost volatility. Digital transformation initiatives, including Advanced Process Control (APC), AI/ML-based applications, predictive maintenance, real-time monitoring and digitised workflows, supported improved decision-making, process optimisation and enhanced operational performance.

In FY 2025-26, Project Galaxy 2.0 progressed further, building on the initiatives undertaken in the previous year for the sustained and impactful delivery of the S&OP process. The focus remained on developing and implementing daily refresh logic for sales and despatch planning, aimed at improving planning agility, forecasting accuracy and despatch optimisation.

Cross-functional collaboration across sales, supply chain, S&OP, and logistics enabled integration of daily KPI monitoring and control mechanisms into the system, enhancing planning effectiveness, operational visibility and decision-making. The project is currently in the adoption phase.

Progress was made in enabling system capabilities to onboard the WSF business into the S&OP cycle, alongside Bulk and Bensulf, with expected completion during Q2 of FY 2026-27. Integrated planning processes for TAN and IC businesses continued to operate steadily during the year, supporting better coordination, inventory optimisation and supply chain efficiency.

The Company continued to embed Environment, Health, Safety and Sustainability (EHS/ESG) principles across its operations. All manufacturing sites remained compliant with applicable statutory and regulatory requirements, supported by initiatives in energy conservation, water stewardship, emissions management, effluent treatment and renewable energy adoption.

During the year, two manufacturing units received the Frost & Sullivan "Sustainability 4.0" Award, while the AN/ANP Solid Recovery Project commissioned in FY 2025-26 was recognised for "EHS Leadership". These recognitions reaffirm DFPCL’s commitment towards responsible and sustainable manufacturing practices.

Manufacturing continues to be a solid foundation of DFPCL’s long-term growth aspirations. The Company will continue to focus on: Building world-class manufacturing capabilities through innovation, engineering excellence and continuous improvement Enhancing customer value through superior product quality, consistency and reliability Driving sustainable growth through responsible resource utilisation and environmental stewardship Strengthening manufacturing agility through technology adoption, digitalisation and process innovation Developing future-ready capabilities through standardisation, knowledge sharing and the Centre of Excellence (CoE)

These initiatives support DFPCL’s vision of contributing to India’s growth story by serving the agriculture, mining/infrastructure and pharma/ agrochemical sectors, while progressing towards becoming a world-class manufacturing organisation.

Despite ongoing global supply chain disruptions during FY 2025-26, the Company ensured stable raw material availability through proactive sourcing and supply chain management. Procurement of key raw materials and traded products was managed by a focussed team, enabling seamless production, optimised procurement costs and supporting business growth. Strategic sourcing initiatives, including long-term partnerships and diversification of suppliers, helped us mitigate supply risks, reduce geographic dependencies, besides bringing commercial competitiveness.

Supply chain continuity of critical inputs, such as refinery-grade propylene, natural gas, phosphoric acid, MOP, sulphuric acid and other raw materials, ensured sustained production across key manufacturing locations. The Company strengthened logistics and storage capabilities, which improved supply chain resilience, inventory optimisation and turnaround time, while supporting current operations and upcoming capacity expansions.

Digital initiatives were undertaken in planning, procurement, and logistics which enabled enhanced efficiency, productivity and transparency across the supply chain. In the case of Repair & Maintenance and Operational spares & consumables tail spend, procurement was streamlined through Annual Rate Contracts and aggregators thereby improving spend visibility, standardisation, service levels and operational efficiencies.

Seasoned Management: Led by an experienced team with deep industry expertise Solid Fundamentals: Strong manufacturing capabilities and financial discipline Trusted Brand: Well-established reputation across diverse business and customer segments Market Leadership: Dominant share in key products, poised to further consolidate with new capacity expansions Robust Network: Extensive dealer network and loyal customer base across segments Diverse Product Portfolio: Serving multiple sectors, enhancing market resilience through strong value proposition

Integrated Manufacturing: Integrated plants with operational flexibility and energy optimisation Strategic Alignment: Business verticals aligned with key sectors of the Indian economy and growth sectors Location Advantage: Proximity to key customers and optimised supply chain Value Chain Integration: Forward into explosives, backward into ammonia, enhancing sustainability Supply Chain Management: Seamless sourcing of raw material and supply of products Quality Excellence: Strong systems and processes to ensure world-class product quality and services Global Trade Proficiency: Extensive experience in import/ export of chemicals and port operations

Economic Growth: Riding India’s economic growth journey, especially in mining, infrastructure, agriculture, and pharma sectors Value-Added Transition: Shifting focus to premium value-added products and solutions Digital Expansion: Leveraging digital platforms for enhanced consumer centricity Micro Irrigation Growth: Rising demand for water-soluble fertilisers in the CNB segment Enhancing Farmer Income: Significant potential in enhancing farmer income through crop-specific bulk and specialty fertilisers

Export Potential: Competitive supplies of AN, Nitric Acid and IPA for overseas markets

Geopolitical Risks: Impact from evolving trade policies on overall supply chain economics and trade balance Regulatory Changes: Risk of sudden policy changes affecting operations like subsidy, state incentives, export quotas, import duties etc.

Price Pass-through Lag: Any delay in passing increased raw material prices to end customers may impact the Company’s margins and profitability Project Delays: Potential delays in regulatory clearances affecting timelines of capital projects Forex Fluctuations: Absence of natural hedges exposing the business to forex fluctuations

Dependence on Imported Raw Materials: The reliance on imported raw materials like phosphoric acid, potash, and ammonium sulphate exposes the Company to supply chain vulnerabilities and currency risks Working Capital Intensity: The working capital-intensive nature of this business, coupled with dependence on government subsidies, poses liquidity and financial risks Weather: Risk of below normal rains due to forecast of El Ni?o impact

During the year under review, Human Resources continued to play a pivotal role in supporting DFPCL’s business transformation and long-term growth agenda. Our people strategy remained firmly aligned and calibrated with the organisation’s key objectives, and strongly focussed on enabling business excellence, strengthening capabilities, and fostering a culture of inclusion, performance, and accountability.

DFPCL progressed steadily on its journey of aligning the organisation’s design and talent practices with the evolving business needs. With a focussed approach on workforce planning, leadership capability building, and culture reinforcement, Human Resources actively contributed to enhancing organisational effectiveness and supporting transformation initiatives across the Company.

Employee engagement remained our key priority during the year. Reinforced engagement interventions, structured recognition platforms, and comprehensive wellness initiatives were rolled out across locations. These efforts resulted in a measurable improvement in the employee engagement scores, reiterating our commitment to create a supportive, motivating, and high-performance workplace environment.

The year witnessed the advancement of digitalisation of the HR transformation roadmap through automation of key people processes to drive consistency, transparency, and efficiency. The implementation of an HR Shared Services model, facilitated the consolidation of transactional and repetitive activities, enabling the HR function to focus even better on strategic value creation priorities. These initiatives collectively enhanced the overall employee experience, and also enabled improved execution and governance.

To remain poised for future growth, Human Resources initiated a substantial scale-up of talent acquisition and capability development initiatives to support DFPCL’s upcoming greenfield projects at Gopalpur and Dahej. This included phased hiring, targeted skilling programmes, and structured onboarding to ensure fully role-ready resources, in tandem with the project timelines. Overall, Human Resources remains committed to building a future-ready workforce, strengthening organisational capabilities, and being closely aligned with the business to deliver sustainable growth.

During the year, the Company advanced its digital transformation initiatives across customer management, data platforms, manufacturing operations and cybersecurity. The implementation of a customer relationship management (CRM) platform improved visibility of customer interactions, supporting sales effectiveness, pipeline management and service responsiveness across business segments.

To establish a strong foundation for enterprise-wide data and AI initiatives, Snowflake was implemented as the core data platform, enabling centralised, scalable, and secure data management across business functions. This facilitated data and AI-driven insights for decision-making across sales, supply chain, finance, and operations, helping us to further enhance market reach, customer service, supply chain efficiency and making it more resilient towards dynamic business demands.

The Company also progressed its Industry 4.0 initiatives across manufacturing plants through deployment of automation, advanced sensors and real-time monitoring systems. These initiatives supported improvements in operational efficiency, production throughput, asset reliability, maintenance practices, energy cost optimisation and product quality consistency, while enabling better data visibility and decision-making at the plant level.

The cybersecurity framework was further strengthened through enhanced governance, system upgrades and continuous monitoring. These measures support the protection of enterprise and operational systems and enable the secure adoption of digital technologies.

The Company has a well-established Enterprise Risk Management (ERM) framework, supported by a Board-approved Risk Management Policy, to address evolving regulatory, technological disruptions in financial markets and market dynamics. The framework enables informed decision-making, operational resilience and long-term value creation.

Business risks are categorised into strategic, financial, operational, reputational, legal/regulatory, IT/ cyber, ESG and HR risks. The risk landscape is influenced by factors such as regulatory changes, input cost volatility, supply chain dependencies, operational and environmental considerations, increasing digitalisation, cybersecurity threats and rising stakeholder expectations.

These risks are dynamic and are continually assessed.

In the current volatile environment, the Company mitigates the risks of supply disruption, input cost volatility and potential production losses through long-term contracts and alternative sourcing arrangements for key raw materials, including natural gas and phosphoric acid.

Risks are evaluated as inherent and residual, with residual risks reviewed by business-level committees comprising functional and business heads. Risks are assessed based on velocity, impact and likelihood using a defined scale, enabling consistent evaluation and prioritisation.

Risk treatment plans are implemented to manage risks through strategies such as elimination, reduction, transfer, sharing or acceptance.

Risk assessments are periodically refreshed to reflect changes in the internal and external environment, including review of existing controls and their effectiveness against these risks.

The Risk Management Committee reviews the framework biannually, monitors implementation, and apprises the Board on its effectiveness. The Board provides strategic oversight to ensure alignment with business objectives.

The Company’s internal control framework supports compliance, reliability of financial reporting and effective risk management. The Audit Committee periodically reviews its adequacy and effectiveness. Internal audits are conducted by Ernst & Young LLP, India, in line with the approved audit plan, covering internal controls, operational efficiency and process-level risks, with findings reported to management and the Audit Committee.

The Company has established processes for documentation and testing of key business and financial controls in compliance with the Companies Act, 2013. Cybersecurity and information security remain integral to the Company’s internal control and risk management focus.

Structured business planning, periodic performance reviews and monitoring mechanisms are embedded across functions. Anti-fraud programmes, including whistle-blower mechanisms, strengthen governance by enabling timely reporting of concerns and reinforcing accountability across the organisation.

An ongoing programme for reinforcement of the Company’s Code of Conduct is prevalent across the organisation. The Code covers integrity of financial reporting, ethical conduct, regulatory compliance, conflict of interest review and reporting of concerns. These mechanisms support ethical conduct and transparency.

There were no changes in internal control over financial reporting during the year that materially affected, or are reasonably likely to materially affect, such controls. The Company has assessed the effectiveness of internal control over financial reporting as on March 31, 2026, and considers it to be adequate and effective.

The internal control framework continues to be strengthened in line with evolving business requirements and emerging risks.

The document contains statements about expected future events, financial and operating results of the Company, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions and other forward-looking statements may not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the management’s discussion and analysis of the Company’s Annual Report, FY 2025-26.