Deepak Fertilizers & Petrochemicals Corp Ltd Management Discussions

ECONOMIC OVERVIEW

Global

The global economy showed surprising resilience in 2023, maintaining a stable growth rate of 3.2% despite significant challenges. These included escalating geopolitical conflicts, higher inflation, prolonged high interest rates, a slow recovery in China, and volatility in energy and food prices. However, economic performance in the United States and several key emerging and developing economies, along with inflation meeting target levels in advanced economies, have mitigated the risk of a severe global economic downturn.

While uncertainties persist, particularly from geopolitical tensions and related price volatilities, various positive factors are expected to enhance the overall economic outlook. The global inflation is projected to decrease from 6.8% in 2023 to 4.5% by 2025, which bodes well for financial stability. This anticipated decline in inflation along with the easing of fiscal policies, the fading of energy price shocks, a rebound in the euro area, and a notable resurgence in labour supply in many advanced economies suggest a cautiously optimistic outlook with steady growth rates as we move into 2024 and 2025. Advanced economies may see slight growth at 1.7%, while growth in emerging and developing economies is expected to remain stable at 4.2%.

(Source: IMF - World Economic Outlook, April 2024)

India

Amidst a volatile global economic environment, the Indian economy retains its position as the worlds fifth-largest and fastest-growing economy. According to estimates, India witnessed a healthy GDP growth of 7.6% in FY24 compared to 7% growth in FY23. Construction sector (10.7% growth) and Manufacturing sector (8.5% growth) were the key GDP growth drivers supported by robust domestic demand, moderate inflation, stable interest rates, and large capex/ infra spends.

According to the IMF, the Indian economy is expected to grow steadily, with a projected increase of 6.8% in FY25 and 6.5% in FY26. The RBI is even more optimistic, forecasting 7% growth for FY25. This growth is supported by robust domestic demand, a revival in manufacturing and services, increased capital expenditure, and positive business and consumer sentiments. Initiatives like Make in India 2.0, Ease of Doing Business, and the PLI scheme are not only strengthening the infrastructure and manufacturing sectors, but also integrating India into the global value chain. Additionally, the AtmaNirbhar Bharat initiative positions India as a lucrative global manufacturing hub and a strategic alternative destination for companies willing to diversify geographically.

The Union Budget 2024-25 lays the foundation for the vision of a developed India by 2047 and outlines a multi-pronged economic management strategy. It focusses on the welfare of farmers (Annadata) with direct financial assistance to 12 crore farmers under PM-KISAN, crop insurance to four crore farmers under PM Fasal Bima Yojana, and integration of 1,361 mandis under e-NAM, supporting trading volume of Rs. 3 lakh crore.

(Source: Ministry of Statistics & Programme Implementation, Ministry of Commerce & Industry, Reserve Bank of India, Ministry of Finance, IMF - World Economic Outlook, April 2024)

INDUSTRY OVERVIEW Chemicals

The Indian chemicals sector has emerged as a dynamic and rapidly growing industry on the global stage. With a market size of US$ 220 billion in 2022, it ranks as the sixth-largest chemical producer globally, and the third in Asia. The sector is expected to reach US$ 1 trillion by 2040, on the back of rising demand in the end-user segments for specialty chemicals and petrochemicals leading to robust domestic demand.

Government initiatives, including emphasis on R&D, reductions in basic customs duties, mandating BIS-like certification for imported chemicals, Make in India and the PLI scheme, aim to foster sectoral growth and increase the competitiveness of domestic manufacturers. The government has set up a 2034 vision for the chemicals and petrochemicals sector to improve domestic production, reduce imports and attract investments. Despite challenges like limited feedstock availability, low access to building blocks and key minerals, and inadequate R&D facilities, India is poised to ascend as a global hub for chemicals. Favourable demographics, increasing preference for eco-friendly products, and the global shift in supply chains following the China plus one strategy are significant drivers propelling the sector forward.

[Source: Chemical Industry, Chemicals

Manufacturers and Exporters in India - IBEFl

Pharmaceutical

According to market research firm IMARC, the Indian pharmaceutical market is expected to reach US$ 163 billion by 2032. Indias medical spending is expected to increase by 9-12% over the next five years, placing it among the top 10 nations. In the export market, Indian companies are poised to benefit from losses of exclusivity of branded generics which are replaced by biosimilars. Strong government push with increased allocation to the pharma sector and prioritisation of healthcare, will boost sectoral growth. The industry is poised for expansion in the future, buoyed by factors including, prevalence of chronic diseases, improved medicine accessibility in emerging markets, strong development of the generics market, peak in US drugs patents expiring in 2024, growing trend of pharmaceutical outsourcing and the rise of Contract Development and Manufacturing Organisation (CDMO) in the global pharmaceutical landscape. [Source: 1688971213_Pharma Growth and Margin July 2023.pdf [careratings.coml

Mining & Infrastructure

India continued its growth trajectory in the mining & infrastructure sector. In FY24, India produced 997 (MMT) of Coal compared to 892 MMT in FY23, up by 12%. Coal production in FY24 saw significant growth, 26% increase from captive/commercial coal mining companies, along with 10% growth from Coal India Limited and 4% growth from Singareni Collieries Company Limited.

Healthy growth was achieved in the production of iron ore and limestone reflecting robust demand in user industries, like steel and cement, which together reflect strong demand in the infrastructure sector. Cement production in FY24 grew by 9% and steel production grew by 12%.

Mining and infrastructure sectors significantly impact Indias GDP growth. In the Interim Union Budget 2024-25, a 17% increase in capital outlay, along with allocations of Rs. 2.78 lakh crore for roads and bridges, and Rs. 2.55 lakh crore for the railways, is expected to boost infrastructure development and have a substantial multiplier effect on economic growth. Additionally, the government has announced the expansion of existing airports, development of new airports under the UDAN scheme, infrastructure projects for port connectivity, tourism amenities, and construction of additional 20 million houses under the PMAY (Grameen) scheme in the next five years, and promotion of urban transformation via metro rail and NaMo Bharat. This will in turn drive the demand for power, cement, steel, other minerals and rock/stone aggregates.

Technical Ammonium Nitrate (TAN), essential for commercial explosives in blasting applications, is essential to the growth in Indias infrastructure and mining sectors. With increasing demand for power. key minerals and infrastructure development, the demand for TAN is expected to rise.

Agriculture

Agriculture, with its allied sectors, is the largest source of employment in India. With ~60% of the Indian population engaged in the sector, it contributes 18% to Indias GDP. India boasts the worlds second- largest arable land, encompassing 46 of the 60 soil types in the world. It has the largest area planted for wheat, rice, and cotton. It is the largest producer of pulses, and spices and the second-largest producer of fruit, vegetables, tea, sugarcane, wheat, rice, and sugar.

As per the Second Advance Estimates of major agricultural crops for FY24, Kharif foodgrain production is estimated at 154 Million Tonnes, while Rabi foodgrain production is estimated at 155 Million Tonnes. Agricultural output growth is anticipated to reach a five-year high of over 6% in FY25, supported by a normal monsoon and a low base effect. The government is developing strategies to boost exports of 20 items, including bananas, mangoes, potatoes, and baby corn, which hold significant growth potential in the global markets.

However, the agricultural land in India is rapidly decreasing while the demand for agricultural products is increasing. To boost productivity on 174 million hectares of arable land and meet high domestic demand for agricultural products, an increased investment in agricultural infrastructure like irrigation facilities, warehousing, and cold storage coupled with innovative crop-specific solutions boosting Nutrient use efficiency will be the key to be self-sufficient.

[Source: Agriculture Presentation: Industry Overview, Market Size, Role in Development I IBEF pib.gov.in/PressReleaseIframePage. aspx?PRID=2010380l

BUSINESS OVERVIEW

With a rich legacy of four decades, Deepak Fertilisers And Petrochemicals Corporation Limited (DFPCL or the Company) is a multi-product, multi segment player catering to a wide range of core segments of the Indian economy including mining, pharma & chemicals, infrastructure and agriculture. The Company has its business operations spread across four business verticals:

The Company has six world-class manufacturing facilities situated at Taloja (Maharashtra), Dahej (Gujarat), Srikakulam (Andhra Pradesh), Panipat (Haryana) and a seventh facility is upcoming at Gopalpur in Odisha state.

Industrial Chemicals (IC)

DFPCL holds a leadership position in the manufacturing of Industrial Chemicals, including Nitric Acid (DNA, CNA, SNA), Iso Propyl Alcohol (IPA - pharma grade, food grade, cosmetic grade, standard grade, etc.), Ammonia, and Liquid Carbon Dioxide.

Strategically, DFPCL is committed to enhancing value for all stakeholders by shifting its IC business from a commodity focus to a specialty focus, thereby ensuring a stronger value proposition. This approach not only secures stable earning opportunities and repeat orders but also fosters long-term customer relationships and strengthens brand value, ultimately leading to sustained value creation for the Company and its shareholders.

Iso Propyl Alcohol (IPA)

DFPCL, one of the largest manufacturers of Iso Propyl Alcohol (IPA) in India - a solvent predominantly used in the pharmaceutical industry - is equipped to supply any pharmacopeial grade of IPA (IP, BP, EP, USP, JP, CP, and multi-compendial). This capability supports the demand for high-grade solvents in both the formulation and API manufacturing stages of the pharmaceutical industry.

In FY24, DFPCL introduced PUROSOLV a brand for Pharmacopeia grade IPA and other solvents (methanol, acetone and MDC) which are being used in pharma industry. DFPCLs increased focus on pharma grade IPA in line with its long-term commitment to end users wellbeing and health safety.

The Companys solvent products meet international quality standards for use in coatings and inks, specialty chemicals and cosmetics. Apart from all the pharmacopeia standards, solvents are also compliant to other standards like OHSAS, FDA, CFDA, HALAL & KOSHER with acceptance across markets of USA, EU, Africa, Middle East and Far East. PUROSOLV - one-stop for certified pharmacopeia solvents including IPA, methanol, acetone, and methylene di chloride. The brand was showcased extensively in India and abroad during the Companys participation in CPHI exhibitions in Europe and India. PUROSOLV relies on its focus on Technology, Quality and Service. The use of technology like QR codes for authenticity, on-demand online authentication checks, and hologram seals sets PUROSOLV apart from other players in India and overseas.

Manufacturing of IPA using the propylene route ensures high-purity, benzene-free IPA is produced in the GMP-approved plants. hrough an extremely efficient and environment-friendly direct hydration process, the Company ensures highest quality standard, world-class service, quick TAT and customer satisfaction. The product is delivered using dedicated pharma tankers to ensure no contamination during logistics. Newly introduced solvents are supplied from 21 CFR Part 11 compliant FDA and GMP-approved plants.

The demand for IPA is witnessing healthy growth led by multiple industries like pharmaceuticals, chemicals, electronics, automotive, flavour and fragrances, and cosmetics. Consumption of IPA is projected to grow by ~6% Y-o-Y to reach around 410 KTPA by FY33. In view of the PLI scheme launched by the government for semiconductor industries, significant growth is expected in the high-purity IPA segment.

Nitric Acid

Nitric Acid, an important chemical, finds applications in various industries. It is used in producing nitrate-based fertilisers, ammonium nitrate and nitroaromatics (nitro benzene, nitro toluene) and in industries like steel, dairy, chemical intermediates and rocket propellants.

Production of Technical Ammonium Nitrate (TAN) and Ammonium Nitro Phosphate (ANP) utilises a significant portion of the Nitric Acid manufactured, while the remaining is supplied to the market in different grades. The Company supplies various grades of Nitric Acid including dilute nitric acid (DNA), concentrated nitric acid (CNA), strong nitric acid (SNA), and solar grade nitric acid, complying with various national and international standards. The Company also imports Nitric Acid based on customer commitments and market scenarios, converting to required grades and in order to support the downstream.

Going ahead, the domestic market is expected to witness robust double-digit demand growth, led by strong growth in major downstream industries like nitroaromatics and chemical intermediates. New capex commitments from the downstream industry augurs well to a bright future for Nitric Acid in India. To meet this rising demand-supply gap, Company has undertaken expansion project of WNA and CNA capacity at Dahej.

Specialty Chemicals

As a part of its strategic transformation journey, the Company has increased its focus on offering customised specialty solutions to strengthen the bonds and foster long-term relationship with customers. DFPCL is continually developing solutions across various industry sectors.

DFPCL commercially launched PICKBRITE, an innovative and eco-friendly Stainless Steel (SS) pickling solution which effectively answers the ESG challenges currently faced by the stainless-steel industry. It reduces Hydrofluoric acid consumption by 50-60%, offering a cleaner option, promoting health and safety in the workplace. Additionally, it decreases the toxic waste generation, water usage, energy consumption, and the need for sludge handling and disposal, while scoring highly on EHS fronts to meet customers goals.

Electronic Grade IPA witnessed good traction with approvals from various institutions, including government and private entities.

Cororid has established itself as a premier brand in the hospital disinfection segment in the South and Western parts of the country. The brand will be adopting a two-pronged strategy for business growth, expanding its footprint beyond Tier I cities of the currently existing markets and capturing new untapped markets.

The Company participated in the Global Stainless Steel Expo (GSSE 2023) in September 2023 to present its innovative customer-oriented solution to the whole Stainless Steel pickling community, which led to further initiation of technical trials at customers places.

Nitric Acid Brownfield Expansion

We have announced the expansion of Nitric Acid plant at Dahej, Gujarat, driven on the growing needs of both the merchant market and the downstream industries. The strategic expansion of WNA (300 KTPA) and CNA (150 KTPA) will be at a project cost of Rs. 1,950 crore Leveraging its 40 years of credible experience in Nitric Acid, DFPCL will become Asias Largest Manufacturer of Nitric Acid post expansion. The plant will have state-of-the-art technology from leading global technology provider, combined with low emission green technologies for the first time in India. About 65% of additional CNA capacity is already tied-up under a 20-year contract. The EPCM contract has been awarded to M/s Tata Projects Limited and the basic engineering is completed. All licensor equipments and critical long lead items have been ordered. The construction work is expected to commence at site from the first half of FY25. The Commercial

Operations Date (COD) is targeted in second half of FY26.

Liquid Carbon Dioxide and Methanol

DFPCL is a leading provider of Liquid Carbon Dioxide (LCO2), with a capacity of 72,000 MTPA at its Taloja facility. Certified for food-grade quality, LCO2 serves diverse applications, including the production of dry ice, beverage carbonation, and as a shielding gas in the welding processes within the engineering sector. By converting CO2 into useful products, DFPCL plays a pivotal role in reducing greenhouse gas emissions, aligning with environmental sustainability efforts.

The Company has an installed capability of 100 KMT of methanol annually. However, due to adverse market conditions and economic factors, there was no methanol production in FY24. Looking ahead, the potential applications of methanol in products like dimethyl ether and M15 fuel blends are expected to spur demand. DFPCL remains prepared to resume methanol production once market conditions improve.

Mining Chemicals

With the demerger of its mining chemicals business into Deepak Mining Solutions Ltd., the Company is poised to transition from being a supplier of TAN products to the provider of holistic mining solutions.

The Company enjoys ~40% market share in the domestic TAN market. To meet the growing demand for TAN in India, the Company has enhanced its licensed production capacity to 0.63 MMTPA through brownfield expansion. It produces High Density Ammonium Nitrate (HDAN), Low Density Ammonium Nitrate (LDAN), Ammonium Nitrate Melt (AN Melt) and Medical Grade AN. It is the sole producer of explosives grade LDAN in India. It also manufactures Medical Grade Ammonium Nitrate, which finds application in the production of medical grade nitrous oxide used as an aesthetic/analgesic.

During FY24, the country became an easy market for lower-price FGAN due to sanctions imposed on Russia by Western economies, which led to adverse price fluctuations in TAN prices and put margins under pressure. The Company remains committed to maintaining competitive pricing while delivering value to its customers and end-consumers. With the lifting of export ban by the GoI, the business has resumed export of TAN with effect from March 2024.

The business has established and demonstrated holistic mining solutions capability in the form of Total Cost of Ownership (TCO) projects across mining & infrastructure end-users in India. The capability will deliver value to end-users through improvement in mine & quarry productivity has been established across the mining value chain of drilling -> blasting -> load & haul -> crushing. The value delivery to mines and quarries is enabled through the use of superior TAN products converted into differentiated explosives, coupled with advanced technical services capabilities and last-mile execution excellence.

To deliver increased value to end-users, the TAN business continues to make significant investments in hardware, like BMDs (Bulk-Mix-Delivery) trucks for delivering ANFO explosives down-the- hole on mine bench at mine sites, forward integration into commercial explosives, advanced software technology like drones and AI-based blast modelling, sensors to accurately measure key productivity parameters and capability development of the value delivery team. As a next step, the Company has secured outcome-based contracts with end-users, leveraging these capabilities to guarantee specific and measurable value to its end-users.

Deepak Mining Solutions Limited, is poised to establish a fully integrated, unique value chain for mining and infra sectors in India. This will enable the Company to deliver value to mines, quarries and infrastructure projects in the form of improvement in their TCO.

Being the leading player in the Indian market, the Company maintains strict compliance with the prescribed AN Rules. The TAN segment has deployed an advanced version of Global Positioning Tracking System (GPS) across its manufacturing and distribution network to track and trace product movement on an ongoing basis. Any deviations are promptly alerted by the system and corrective actions are taken in a timely manner.

Performance Chemiserve Limited (PCL)

The greenfield Ammonia plant, set up through the step-down subsidiary Performance Chemiserve Limited (PCL), began trial production on July 10, 2023, with all pre-commissioning activities completed.

The Ammonia plant began commercial production on August 4, 2024 and the production has now been stabilised. The successful backward integration into Ammonia will provide a long-term risk mitigation for all the three businesses of the Group. Besides, it will significantly reduce dependency on imported ammonia, which will enhance our operational efficiencies and eliminate global price volatility impacts.

The Company has entered into a 15-year long-term gas supply agreement with Equinor from Norway, commencing in May 2026. This move will ensure continuous supply of Natural Gas and is expected to improve margins through effective natural gas/ LNG hedging and in-house ammonia production, ensuring greater stability.

Gopalpur TAN Project

The Company is working on a Greenfield TAN project in Gopalpur, Odisha with a production capacity of 376 KTPA. Upon completion, it will increase its overall installed capacity to ~1.0 MMTPA, capable to meet ~60% of Indias demand for AN, contributing to Atmanirbhar

Bharat Abhiyan. The project is strategically located close to major mining hubs to be able to cater to their demand, while its proximity to Gopalpur Port provides excellent export opportunities.

The project falls under the prestigious thrust sector category, as per IPR-22 of the Government of Odisha and will be entitled to the State incentives, further solidifying its potential for success. It is expected to be commissioned by second half of FY26, with its engineering work having been completed and construction work progressing well.

Crop Nutrition Business (CNB)

As a result of ongoing scheme of arrangement, the Crop Nutrition Business (CNB) will be a standalone company under Mahadhan AgriTech Limited (MAL), as a 100% subsidiary of DFPCL. CNB product portfolio comprises 48 products, including enhanced efficiency NPK fertilisers (Smartek), crop-specific balance nutrient fertilisers (Croptek), crop and stage-specific water-soluble fertiliser (Solutek), bentonite sulphur (Bensulf Super-Fast), and other specialty fertilisers under the flagship brand Mahadhan.

Its evolution from a commodity-centric to a specialised player underscores its focus on tailored crop-specific nutrient solutions, positioning itself uniquely in the market. It boasts Indias exclusive production of crop-specific NPK fertilisers accompanied by secondary and micronutrients, supplemented with Nutrient Unlock Technology (NUT). Strong R&D team with 14 PhDs and agriculture doctorates works diligently to innovate unique solutions.

The R & D team executed over 1,000 field experiments across different geographies on new crop nutrition products.

The Company enjoys market leadership in bentonite sulphur and water-soluble fertilisers in India. The business has strong presence in Maharashtra, Gujarat, Karnataka and is expanding in southern and select northern states.

Mahadhan Croptek meets the balanced nutrition requirements of focus field crops like onion, maize, cotton, sugarcane, and potato, significantly increasing yields and produce quality. New grade for soybean was launched in March 2024.

Mahadhan Solutek offers 100% water-soluble and highly-efficient nutrient availability for horticultural crops like grapes, pomegranates, tomatoes, and bananas, tailored for different growth stages.

The Company fosters farmer connections through a combination of field engagement, digital outreach, and mass media channels, including TV and print. Its extensive distribution network includes over 600 field team members spread across 12 operating states in India. Direct farmer engagement initiatives include crop seminars, on-field demonstrations, and training to reach millions of farmers.

Leveraging social platforms like Facebook, WhatsApp, YouTube, Website, and Instagram, the company connects with farmers through its 6 zonal offices, 27 area offices, 4,000 direct dealers, and over 20,000 retailers. A core team of over 300 members, including sales, marketing, research, new product development, and supply chain professionals, is supported by over 350 market development officers and 100+ junior agronomists for daily interaction with farmers and gathers their feedback on the efficacy of crop-specific nutrition solutions.

Mahadhan operates an NABL- accredited soil testing laboratory capable of testing 15,000 soil/ petiole/water samples annually. The Company boasts an applied research, training, and innovation centre in Baramati, Maharashtra, and an in-house field research farm near its Pune corporate office.

The Company has implemented "Mahadhan Saarthie Project" which encompasses of solid strength of progressive farmers in focussed geographies. The Mahadhan Saarthie network, comprising 25.000 influencer farmers, helps fellow farmers gain access to crop nutrition solutions. The Company also launched the Saarthie Laabh Loyalty module in the Mahadhan App for Saarthie farmers.

The Company conducted over

10.000 product demonstrations in FY24, engaging with about 6,00,000 farmers through various market development activities to showcase product performance and enhance crop productivity. These initiatives emphasised on seeing is believing approach to demonstrate the efficacy of enhanced efficiency fertilisers.

VALUE ADDED REAL ESTATE

DFPCLs Value Added Real Estate (VARE) business primarily focusses on the Companys lifestyle retail centre, Creaticity, situated in Pune, Maharashtra. Creaticity hosts around 100 brands in the furniture and home decor categories. It also features restaurants, banquets, and entertainment options including a trampoline park and go-karting track, along with commercial and co-working spaces on the higher floors.

The Company initiated a transformation in the VARE segment, aiming to evolve from a pure space enabler to a comprehensive solutions provider. The launch of "Creaticity Branded interiors" in FY24 signifies a new initiative to establish itself as a single source of interior solutions. Leveraging its competitive advantages, including diverse selection, physical destination, digital experience, and specialised services, the Company aims to strengthen its core offerings in furniture and interiors. During the year, over ten reputed national and international brands were onboarded, reinforcing the segments journey to establish itself among the finest multi-branded home interior destinations in the region.

FINANCIAL REVIEW

The Company demonstrated resilience amidst several challenges like below normal monsoon, short-term aberration in the import of fertiliser-grade ammonium nitrate from Russia and import of nitroaromatics from China in FY24, operating revenue decreased by 23.2% to Rs. 8,676 crore from Rs. 11,301 crore in FY23. The Chemical Business (including industrial Chemicals and Mining Chemicals) contributed 55% to total revenue and the Fertilisers Business contributed 44%.

Operating EBITDA declined from 19.2% to 14.8% with 433 bps margin contraction led by one-time subsidy impact of Rs. 267 crore and of Rs. 87 crore on account of ramping up impact of ammonia plant Without the exceptional items, the operating EBITDA margin would be 18.3%. Chemicals segment posted sustainable margin of 26%. Margin of the Fertiliser Business were impacted on account of one-time subsidy and weak monsoon.

Net Profit declined by 62.5% YoY. Net profit margin contracted 553 bps to 5.27%.

The Companys net debt increased to Rs. 3,426 crore as on March 31, 2024 due to long-term project debt and working capital needs. Total Debt / Equity ratio was sustained at 0.75x in FY24 as compared to 0.71x in FY23.

ICRA Credit Rating of Long-Term loans was AA- (stable) and that of Short-Term loans was A1+.

Consolidated Performance	FY24	FY23
Operating total revenue ( crore)	8,676	11,301
Operating EBITDA ( crore)	1,287	2,165
PBT ( crore)	672	1,816
PAT ( crore)	457	1,221
Earnings per share (?)	35.05	97.7

 

Parameters (Consolidated)	FY24	FY23
Debtor turnover (x)	5.48	9.78
Inventory turnover (x)	7.08	9.81
Interest coverage ratio (x)	2.66	10.32
Current ratio (x)	1.36	1.56
D/E ratio (total debt equity ratio) (x)	0.75	0.71
Operating margin (%)	14.83	19.16
Net margin (%)	5.27	10.80
Return on networth (%)	8.73	27.28
Segment Performance	FY24	FY23
Chemical revenue ( crore)	4,792	6,411
Fertiliser revenue ( crore)	3,861	4,868

Revenue mix for key products

Products	FY24 (% share)	FY23 (% share)
TAN (incl. PBS)	31.24	37.79
ANP, NPK, Bensulf, WSF	31.93	34.39
Nitric acid	10.98	13.29
IPA and Propane	9.13	4.64
Outsourced bulk fertilisers	3.64	4.41
Outsourced agro specialty	9.42	4.37
Bulk chemical trading	0.65	0.73
Others	3.01	0.38
Total	100	100

We have entered into a 15-year long-term gas supply agreement with Equinor, commencing in May 2026. This move will ensure continuous supplies of Natural Gas and is expected to improve margins through effective natural gas/LNG hedging and in-house ammonia production, ensuring greater stability.

Sales Volume in MT

Key Products	FY24	FY23
Technical Ammonium Nitrate	5,04,642	5,01,575
NPK Fertiliser (CNS included)	3,62,842	3,76,056
Nitro Phosphate Fertiliser	2,09,434	1,92,559
Concentrated Nitric Acid	1,59,352	1,67,181
Dilute Nitric Acid	86,362	83,478
Liquid Carbon Dioxide	46,706	57,512
Iso Propyl Alcohol	63,475	49,391
Bentonite Sulphur	26,490	33,354
Strong Nitric Acid (SNA)	30,517	26,451
Propane	9,657	8,826

BUSINESS OUTLOOK

Industrial Chemicals: The demand outlook is stable to strong across major consumer segments including pharmaceuticals, agrochemicals, food, specialty chemicals, and chemicals intermediates, among others. This is well reflected in investments done by the customers in expanding capacities, entering newer markets and launching newer products. A strong outlook was one of the key drivers for the Company to announce its world-scale Nitric Acid plant with the latest technology at Dahej during FY24. Once commissioned, this will make DFPCL Asias largest nitric acid producer.

Margins are expected to be stable and improve gradually with robust demand prospects and stability in key raw material pricing. Additionally, several actions undertaken to grow the specialty chemical portfolio will enable the Company to launch new products in the coming year and grow the market share of the products launched already.

Mining Chemicals: Segment recorded healthy growth in FY24 and the trend is expected to continue in FY25. The increasing demand for power is expected to drive coal mining demand.

Additionally, demand for cement, steel and rock aggregates is expected to improve, driven by the Governments spending on infrastructure projects. This will result in increased commercial explosives demand in the mining and infrastructure segments, which will have a positive effect on the demand for all TAN products and create a positive thrust for the specialty (mining solutions) business.

CNB: With the recently announced Retail Price Reasonability Guidelines for margins on fertiliser sales, it is expected that the basic tenets of the NBS scheme of free/reasonable MRPs will be restored. This will also provide the needed impetus to promote innovative and value-added products such as Croptek, Solutek, and other specialty fertilisers. The value proposition of the Companys specialty Croptek products is finding increasing acceptance by farmers. As per IMDs prediction, above-average rainfall in FY25 in India, influenced by La Nina, is expected to result in a favourable season in the coming years. Furthermore, reduction in the prices of key raw materials like ammonia, phosphoric acid and MOP will aid in margin protection. Focus areas for FY25 include implementing focussed crop campaigns to drive sales and farmer engagement, optimising manufacturing facilities at Taloja for seamless production, and ensuring adequate inventories of specialty fertilisers through various means to achieve targeted sales.

VARE: The overall occupancy stood was 80% in FY24, which the Company aims to increase to 90% by FY25. It is also targeting a 25% growth in centre sales through projected footfalls of 0.5 million. The Company is working on providing dedicated attention across its three customer segments, business to architects (B2A), business to builders (B2B) and business to consumers (B2C), with a house of brands approach.

MANUFACTURING

In FY24, DFPCL continued its unwavering commitment to operational excellence and sustainable growth. Building upon its previous successes, DFPCL achieved significant milestones in manufacturing, including plant utilisation and efficiencies. Its most notable achievement was the successful commissioning of the new Ammonia plant through its step-down subsidiary Performance Chemiserve Ltd. at Taloja, with a capacity of 1,500 MTPD. The new capacity not only helps to optimise the value chain but it also reduces its dependence on imports and contributes to Indias self-reliance, especially in a volatile geopolitical scenario. As part of its manufacturing strategy, the Company is actively exploring opportunities for backward and forward integration, spanning from raw materials to value-added products.

EHS & SUSTAINABILITY

EHS and Sustainability are of prime importance to the Company, and it is continuously striving for excellence in this area. In line with its sustainability objectives, DFPCL has embedded environmental responsibility at the core of its manufacturing operations. It is making strategic investments and adopting innovative practices to enable it to reduce its environmental footprint and surpass regulatory thresholds. Since making its first Business Responsibility and Sustainability Reporting (BRSR) in the previous fiscal year, the Company has set new targets to further improve its sustainability performance. It is working on maximising its efficiencies, optimising energy consumption, minimising waste generation through its "reduce, reuse and recycle" philosophy, with a strong focus on emission control and effluent treatment, as per prescribed norms.

Its proactive and capital-intensive steps such as the installation of N2O abatement systems in the Nitric Acid plants, and nutrient recovery through RO-MEE, underscore its dedication to environmental stewardship. The new Ammonia plant has significantly reduced the logistic requirement from port to plant, thereby improving logistical safety and tailpipe emissions. Furthermore, it is significantly increasing its share of renewables beyond the existing 15 MW of wind and solar installations. Looking ahead, it is exploring green technologies, including green hydrogen, to decarbonise industrial processes to further mitigate its environmental impact.

The Company is striving to instil a culture of safety and sustainability by conducting regular training and awareness programmes, and periodic audits to review process safety, energy usage and losses, and compliance. It is committed to further enhancing EHS & Sustainability initiatives, including the use of technologies, like IoT, to improve environmental monitoring. Aligning with the UN Sustainable Development Goals, the Company is working to implement energy-efficient technologies, renewable energy, water conservation and waste reduction initiatives. As a part of Extended Producer Responsibility (EPR), it has committed to responsible plastic waste management.

SALES & OPERATION PLANNING (S&OP)

As a transformation drive, the Company implemented state-of- the-art Sales & Operation Planning Solution under Project Galaxy 1.0 in FY22 to improve the Planning process by integrating the key elements of Demand, Manufacturing, Procurement and Despatches.

The transformation continued in FY24, under Project Galaxy 2.0 to further enhance the cloud-based platform for unified planning. This project integrates the value chain from demand aggregation to delivery to customers, emphasising service quality. With embedded constraints management principles, it optimises resource availability for best demand fulfilment and maximum asset utilisation. It improved planning efficiencies and leveraged cross-functional synergies to achieve planned targets. The journey has brought the Company closer to its vision of providing differentiated experiences across all aspects of customer interactions, which will enable it to serve best-inclass capabilities like "Available to Promise". It has helped the Company become more agile in planning, enhance anticipation of customer needs, and provide better visibility to its internal and external stakeholders.

SMART FACTORY & DIGITAL TRANSFORMATION

The Company is in the process of embracing information technology to drive operational efficiency and enhance supply chain management. Smart factory solutions, including data analysis for AI/ML-based predictive maintenance and process control are being implemented to increase the reliability and efficiency of its plants. By prioritising online monitoring and analysis of process, quality, and environmental parameters, it is enabling real-time insights and proactive decision-making.

The Company is enhancing employee productivity and ergonomics by digitalising and automating routine and tedious processes and jobs. Its digitalisation efforts extend including security and surveillance, commercial processes including procurement to pay and supply chain. It is also prioritising the use of customer relationship management (CRM) systems to deliver value and personalised experiences and to strengthen its partnerships with customers.

Looking ahead to FY25, DFPCL remains steadfast in its commitment to drive operational excellence, sustainability, and digital transformation. Its ongoing initiatives and strategic investments reflect its dedication to driving innovation, enhancing planning & operational efficiency, and delivering value to all its stakeholders while advancing towards a greener and more sustainable future.

RAW MATERIAL

DFPCL is taking proactive and strategic steps to address the challenges posed by the global supply chain disruptions. By diversifying suppliers and forging sustainable, long-term agreements, the Company is mitigating risks associated with geopolitical tensions and trade restrictions.

The establishment of an operational Ammonia Plant with a long-term natural gas supply agreement demonstrates foresight in securing a crucial input for production. Additionally, strategic alliances for securing sustainable supplies of phosphoric acid from various regions further strengthen the Companys resilience against supply chain disruptions.

The Company is exploring green solutions for the Gopalpur TAN project, which not only aligns with its environmental objectives but also enhances its reputation as a responsible corporate entity.

DFPCLs proactive approach in securing key raw materials at competitive industry standards, while ensuring uninterrupted supply to its customer base, showcases its adaptability and agility in navigating the complexities of the current global market.

RISK MANAGEMENT

The Companys well-established ERM (Enterprise Risk Management) framework comprising a comprehensive Risk Management

Policy is adept at tackling changes in the regulatory environment, development in technology and disruptions in the financial markets. The Companys robust model absorbs market volatility.

The Risk Management Policy and framework is reviewed by the Risk Management Committee periodically to ensure its robustness and effectiveness to deal with unforeseen risks. Business-level committee comprising key business and functional heads periodically reviews the effectiveness of existing controls and implementation of risk mitigation plans for the key risks and/or new risks, emerging, if any, associated with its businesses.

The Companys strong governance structure has facilitated the ERM process to integrate seamlessly with the strategic business planning activities. Identification and evaluation of underlying critical assumptions for key internal and external risks, associated with different business vertical strategies is carried out periodically.

A detailed review of the risk management practices has been carried out by the Risk Management Committee. It also evaluates the implementation status as reported by the Internal Committee. Quantitative, semi-quantitative and qualitative assessment of the entity-level key risks enable timely action for risk mitigation. The Risk Management Committee apprises the Board of the effectiveness of the Risk Management Framework. Any new entity level risks identified, along with the appropriate risk response mechanism are brought to the notice of the Board.

STRENGTHS, OPPORTUNITIES, THREATS, RISKS AND CONCERNS

Strengths:

• Experienced Management Team: The Company benefits from a seasoned management team with profound industry knowledge and experience.

• Robust Fundamentals:

The Company stands on a robust foundation of extensive manufacturing expertise and financial prudence.

• Trusted Brand: The Company enjoys a well-established and trusted brand reputation among its diverse customer base, instilling confidence across business segments.

• Extensive Dealer Network and Customer Loyalty: The Company possesses a robust dealer network and a loyal customer base spanning various market segment.

• Diversified Product Portfolio:

With a diverse product portfolio, the Company caters to consumers across multiple sectors, enhancing its market resilience.

• Integrated Plant Operations and World-class Technologies:

The Company operates integrated plants equipped with world-class technologies, ensuring efficiency and quality throughout its processes.

It leverages advanced IT tools to enhance operational effectiveness.

• Alignment with Indias Growth Story: The Companys key business verticles are beautifully aligned with the key sectors of the Indian economy such as Agriculture, Mining, Infra and Chemicals & Pharmaceuticals.

• Location and Supply Chain Advantage: The Company benefits from strategic proximity to key customers and a well-established supply chain logistics junction, optimising its operational efficiency.

• Forward and Backward Integration: The Companys forward integration into explosive business and backward integration to produce Ammonia strengthens its overall business sustainability.

Opportunities:

• Growth in the Indian Economy:

The Company stands to benefit from the significant opportunities presented by the growth of the Indian economy, particularly in sectors critical to the countrys development like infrastructure, steel, cement, power, pharma and agriculture. The Governments initiatives such as Aatmanirbhar Bharat further bolster domestic industries, aligning seamlessly with the Companys objectives.

• Shift to Value-added Products:

The transition from commodities to value-added and differentiated products and services offers the Company avenues for growth and innovation.

• Digital Transformation:

Embracing digital platforms, including social media and mobile applications, facilitates enhanced connectivity with end consumers, enabling the Company to stay abreast of evolving market dynamics and consumer preferences.

• Growth in Micro Irrigation and Nutrient-based Fertilisers:

Increasing adoption of micro irrigation and demand for nutrient-based fertilisers presents growth opportunities for the CNB segment.

Threats:

• Trade Tensions and Geopolitical Issues: Trade tensions, led by the Red Sea crisis and geopolitical uncertainties pose risks to the Companys supply chain.

This has been partially offset by moving into backward integration manufacturing of Ammonia.

• Regulatory Interventions: Abrupt regulatory interventions or policy changes could adversely affect DFPCLs business.

• Volatility in Raw Material Prices: Fluctuations in prices of key raw materials like natural gas, ammonia, phosphoric acid, propylene, and natural gas impact profitability.

• Delay in Regulatory Clearances:

Delay in regulatory clearances/ approvals for new ongoing projects can impact the Companys capital expenditure outlays.

Risks and Concerns:

• 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.

• Price Pass-through Lag: Any delay in passing increased raw material prices to end customers can impact the Companys margins and profitability.

• Price Gap Challenges: Disparities between natural gas and imported ammonia prices pose challenges to the Companys cost competitiveness and margins.

HUMAN RESOURCES

The Company continued to strengthen investments in people, processes and systems and the key focus areas include:

Capability Development:

The Company has a structured competency framework to enhance employee capabilities essential for its business transformation. Significant investments have been made in developing functional and behavioural skills through this role-based framework. Additionally, in-house capabilities have been established to provide structured soft skills training across the organisation.

Succession Planning: The Company leveraged this approach to create career opportunities for internal talent and protect against attrition. The Company continues to enhance its talent pipeline with in-house resource development and robust succession planning for leadership roles. Additionally, efforts were made to provide career and role rotations across different levels.

Enhancing Employee Experience: In line with the "WE LISTEN, WE CARE AND WE DO NOT GIVE UP TILL WE DELIVER" ethos, the Company launched the "WE LISTEN" campaign. Leaders periodically engaged with employees at all levels to address urgent issues and develop practical solutions. This intervention helped enhance responsiveness and foster an inclusive workplace while focussing on improving employee experience and engagement.

Managing Cost Productively: The organisation implemented various interventions such as redesign, role rotation and career move alongside innovation in administrative cost management and technology deployment. These measures were aimed at maintaining and enhancing productivity and managing people costs.

Resource Management and Retention:

DFPCL is committed to enhancing employee engagement and ramping up resources to support business expansion and manage employee retention effectively. The Company increased hiring to support the commissioning and operation of the new ammonia plant while strategically managing the resourcing across the organisation to ensure seamless operations and delivery.

Strengthening Culture: The Company introduced the ANHAAD (limitless) initiative to enhance leadership performance by promoting a coaching over mentoring approach, aiding in effective business plan execution. The successful integration of a 360-feedback programme also helped foster a culture that values listening, caring and performing.

In FY25, DFPCL aims to expand on these initiatives to enhance business performance and drive growth with a competent and engaged workforce.

INFORMATION TECHNOLOGY & AUTOMATION

The Company has developed a robust digital infrastructure, enabling the next level of digitalisation with a unified data source for business decision-making. Transformational initiatives are ongoing, including the implementation of a Salesforce CRM system aimed at enhancing customer service and internal processes, which is expected to go live soon.

A major focus has been on optimising the supply chain, improving decision-making agility, and increasing visibility throughout the system. This includes advanced planning and scenario analysis tools that improve productivity and customer satisfaction by enhancing sales team capabilities and production planning accuracy.

The Companys Industry 4.0 journey includes a three-year roadmap aiming to digitise four plants using digital solutions to boost process efficiency and resource management. Additionally, a data lake house is being established to utilise AI and machine learning for deeper business insights.

Cybersecurity is being strengthened with the adoption of forensic tools to improve process integrity in response to evolving threats.

INTERNAL CONTROL SYSTEMS

DFPCL has laid down a well-defined scope of internal controls and audit process. Significant emphasis is given to ensure that the key management personnel adhere to the best practices. The Company has adequate internal controls commensurate with the nature of the Companys business and size of its operations, to effectively provide for the safety of the assets, reliability of financial transactions with adequate checks and balances, compliance with prevalent statutes, regulations, management authorisation, policies & procedures, and to ensure optimum use of the available resources.

The Audit Committee of the Board is responsible for establishing, maintaining and reviewing the Companys system of internal controls and directing the Internal Audit function. The Audit Committee approves the overall internal audit plan, including risk assessment, scope, methodology and frequency of audits.

The Company has appointed Ernst & Young LLP, India to execute internal audit reviews as per the approved Internal Audit Plan. Further, the Audit Committee periodically reviews significant audit observations along with recommendations, i mplementati on status, adequacy of internal controls and keeps the Board informed of its observations, if any, from time to time. The internal audit department follows up to ensure corrective measures are implemented in the respective business functions as per the report generated post the audit, to strengthen the overall framework. The objective of the internal control framework is to align strategic goals with operations.

The Company has a budgetary control system to monitor revenue and expenditure against the approved budget on an ongoing basis. Further, the Company has SAP S/4 HANA system to help improve operational efficiencies and business decision-making capabilities across financial reporting, organisational structure and various business processes which are reviewed and validated by external experts. The Company has also adopted Internal Financial Control framework in line with section 134(5)(e) of the Companies Act, 2013 to authenticate implementation of the Company policies across businesses, protect intellectual property, prevent, and detect frauds and errors and ensure transparency of accounting records. Based on its evaluation (as defined in section 177 of the Companies Act, 2013 and Clause 18 of SEBI Regulations 2015), the Audit Committee has concluded that, as of March 31, 2024, DFPCLs internal financial controls were adequate and operating effectively.

CAUTIONARY STATEMENT

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 managements discussion and analysis of Companys Annual Report, FY24.