Deepak Fertilizers & Petrochemicals Corp Ltd Management Discussions

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and sales from February 2025. PCLs ammonia market share in western India stands at 30%. A long-term gas supply agreement with Equinor (Norway) will ensure cost-effective natural gas supply from May 2026 thereby helping improve the margins further.

DMSLs overseas subsidiary Platinum Blasting Services Pty Ltd. (PBS) has been serving Australian mining industry for over a decade. Its suite of services cover cost efficient and innovative blasting services including blast design, explosives supply, logistics, down the hole loading, short firing and regulatory support.

DMSL has enhanced its shareholding in PBS from 65% to 85% during FY 2024-25 by buying shares from other existing shareholders. This strategic move reinforces DMSLs commitment to strengthening its global footprint in the explosives and blasting services sector and gaining greater control over the subsidiarys operations and growth plans.

As part of an ongoing scheme of arrangement, the Crop Nutrition Business (CNB) now operates as a standalone entity under Mahadhan AgriTech Limited (MAL), functioning as a 100% subsidiary of Deepak Fertilisers And Petrochemicals Corporation Limited (DFPCL). MAL offers a diverse product portfolio under the flagship brand ‘Mahadhan, featuring enhanced efficiency NPK fertilisers (Smartek), crop-specific balanced nutrient fertilisers (Croptek), crop-stage specific water-soluble fertilisers (Solutek), bentonite sulphur (Bensulf Super-Fast), and other advanced specialty fertilisers.

MAL has evolved from a commodity-centric operation to a comprehensive crop nutrition solution provider, offering tailored, crop-specific solutions. It stands out in the Indian market as the exclusive manufacturer of NPK fertilisers fortified with secondary and micronutrients, leveraging its proprietary Nutrient Unlock Technology (NUT) to enhance nutrient use efficiency. This transformation is driven by an in-house R&D team of 14 PhDs and agricultural doctorates, which has validated its solutions through over 1,100 field experiments across diverse geographies.

MAL is the market leader in bentonite sulphur and water-soluble fertilisers in India, with a strong presence in Maharashtra, Gujarat, and Karnataka, while steadily expanding across other southern and northern states. Its flagship products serve both field and horticultural crops effectively, with Mahadhan Croptek catering to crops like onion, maize, cotton, sugarcane, potato, and soybean, and Mahadhan Solutek providing 100% water-soluble nutrients for horticultural crops such as grapes, pomegranate, tomato, banana, and sugarcane.

MAL maintains a 360? farmer engagement model, combining field-level interactions with digital outreach. A team of over 600 field representatives operates across 12 states, supported by 4,000 direct dealers and over 20,000 retailers. In FY 2024-25 alone, the company conducted over 13,000 product demonstrations, reaching approximately 6,50,000 farmers. Its digital channels include Facebook, WhatsApp, YouTube, Instagram, and the Mahadhan website.

The Mahadhan Saarthie Project empowers over 28,000 progressive "influencer farmers" to advocate advanced crop nutrition practices. The ‘Saarthie Laabh loyalty programme, integrated within the Mahadhan App, rewards these Saarthie farmers for their continued engagement.

MAL operates an NABL-accredited soil testing laboratory capable of processing 15,000 soil, petiole, and water samples annually. Additionally, it operates an applied research, training, and innovation centre in Baramati, Maharashtra, as well as an in-house field research farm near its Pune headquarters.

MAL is committed to promoting sustainable agriculture by providing customised, high-efficiency solutions that optimise nutrient use, minimise environmental impact, and support farmers in achieving higher yields.

DFPCLs VARE business, anchored by ‘Creaticity in Pune, offers a comprehensive furniture and home d?cor experience. With 85% occupancy and nearly 100 brands, Creaticity has transitioned from a retail hub to a holistic furniture solutions provider strengthening its brand promise as ‘The Land of Furniture, adding global brands like Index Living Mall (Thailand), Konfor (Turkey), and Gautier (France). Its value proposition is anchored on curated choices, lifestyle solutions, and phygital integration.

The Company demonstrated resilience amid several challenges like sharp movements in currency exchange rates, an increasingly complex geopolitical environment, potential dumping from China and unstable input pricing which created additional pressures.

Operating revenue grew by 18% from Rs 8,676 crore in FY 2023-24 to Rs10,274 crore in FY 2024-25. The Chemical Business (including Industrial Chemicals and Mining Chemicals) contributed 49.53% to total revenue and the Fertilisers Business contributed 49.83%.

Operating EBITDA increased from 14.83% to 18.73%, indicating a margin expansion of 390 bps. Net Profit rose to Rs 945 crore in FY 2024-25, reflecting a robust year-on-year growth of 102%. As a result, the Net Profit Margin improved by 381 basis points to 9.19%.

In FY 2024-25, CNB business achieved a historic milestone by crossing 1 million metric tonnes in bulk fertiliser sales and liquidation. It posted a 55% YoY growth in manufactured bulk fertiliser volumes, buoyed by favourable monsoon conditions and wider adoption of crop-specific nutrient solutions. Chemicals segment posted sustainable margin of 28%.

Despite Capex spent of Rs 655 crore in FY 2024-25, net debt reduced from Rs 3,426 crore in FY 2023-24 to

Rs 3,305 crore in FY 2024-25 based on healthy cash generation. Net debt to EBIDTA reduced from 2.66x to 1.72x on YoY basis.

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.

^ Net profit margin increased, primarily due to a significant rise in Profit After Tax (PAT), driven by improved business performance compared to the previous year ^^Return on Net Worth increased, primarily due to a 102% rise in Profit After Tax compared to the previous year.

The outlook for Nitric Acid remains stable, driven by sustained captive demand from Technical Ammonium Nitrate, although offtake from the Nitroaromatics segment continues to be subdued. For IPA, while demand volumes are holding steady, margins may experience some pressure due to prevailing market softness, primarily stemming from a sharp decline in Acetone prices and elevated stock levels of both Acetone and IPA. Our specialty chemicals portfolio is steadily gaining market traction and has been well-received by key customers, reinforcing its growing relevance.

In FY 2024-25, coal mining grew by approximately 5% year-on-year, driven by increased power sector demand. Additionally, steel and cement production witnessed a 5%–7% rise, supported by infrastructure-led growth. These trends are expected to continue into FY 2025-26. The resulting uptick in explosives demand across mining and infrastructure sectors bodes well for our TAN products. The Mining Chemicals business remains committed to playing a pivotal role in Indias growth journey by delivering consistent supply and innovative solutions to critical sectors of the economy.

India is projected to receive above-normal rainfall in the upcoming monsoon season. With a continued focus on key crops including Cotton, Onion, Sugarcane, Soybean, Paddy, Corn and through our strategy of offering crop-specific solutions, the Company is well-positioned to enhance market share. Improved crop yields and quality outcomes are expected to further reinforce the unique value proposition of our flagship brand, MAHADHAN, strengthening its position in the agri-inputs market.

In FY 2024-25, DFPCL maintained a strong focus on operational excellence, enhancing plant utilisation and supply chain resilience. Key facilities saw improved performance through debottlenecking, technical upgrades, efficiency improvements, energy saving schemes, and reliability improvement initiatives.

The 1,500 MTPD Ammonia plant at Taloja, which became operational in FY 2023-24, operated at design capacity in FY 2024-25, bolstering backward integration by reducing import dependency. The new powdered Water-Soluble Fertiliser (WSF) plant at Taloja, which is in an advanced stage of commissioning, further strengthens DFPCLs product portfolio.

Support for upcoming projects — greenfield WNA/TAN at Gopalpur and brownfield WNA/CNA at Dahej — is being ensured through strategic manpower deployment and expertise transfer from existing teams.

DFPCL continues to explore backward integration opportunities to secure raw material supply, optimise costs, and strengthen competitiveness. Post-demerger, manufacturing was aligned to entity structure to enhance market responsiveness and efficiency.

The Companys digital transformation progressed with smart factory tools, including predictive maintenance, online monitoring, and digitised workflows, improving plant productivity and decision-making.

Environment, Health, Safety, and Sustainability (EHS&S) remained a high priority across the organisation. All sites maintained compliance with statutory norms, with ongoing investments in energy conservation, emissions control, and renewable energy.

In FY 2024-25, Project Galaxy 2.0 advanced this journey by embedding

Integrated Business Planning into daily operations, enabling dynamic system connectivity and agile decision-making. The tool is also being enhanced to support the demerged business structure, guided by the principle of Asset Maximisation.

With daily refreshes across Asset, Demand, and Despatch functions on Galaxy 2.0, the Company aims to drive greater transparency, accountability, and progress toward delivering a differentiated customer experience and transitioning from Commodity to Specialty.

The Manufacturing function continues to play a central role in delivering on DFPCLs long-term strategic vision. The key pillars remain: y Maximising renewable energy adoption y Optimising logistics and reducing dependency on imports y Driving backward integration y Enhancing plant reliability, asset utilisation, and maintenance excellence y Focussing on energy saving initiatives y Accelerating digitalisation and innovation y Maintaining strong focus on EHS and sustainability y Thrust on Total Quality Management (TQM), Quality Circles and Focussed Initiative (FI) projects

The Centre of Excellence (CoE) has been instrumental in driving engineering standardisation, knowledge-sharing, and process optimisation across sites. Manufacturing team remains committed to agility, efficiency, and resilience contributing to the Companys sustainable and customer-focussed growth journey.

DFPCL proactively mitigated supply chain risks through supplier diversification and strategic partnerships. The highest-ever Phosphoric Acid imports were recorded in FY 2024-25, ensuring supply continuity. Other raw material included natural gas, murate of potash, ammonium sulphate, propylene, sulphuric acid, sulphur etc.

A Sustainable Supply Chain & Procurement Policy was introduced, bolstering sustainable sourcing and supplier compliance.

Strengths: y Seasoned Management: Led by an experienced team with deep industry expertise y Solid Fundamentals: Strong manufacturing capabilities and financial discipline y Trusted Brand: Well-established reputation across diverse customer segments y Market Leadership: Dominant share in key products, poised to grow with new capacity expansions y Robust Network: Extensive dealer network and loyal customer base across segments y Diverse Product Portfolio: Serving multiple sectors, enhancing market resilience y Integrated Manufacturing: Integrated plants with world-class technologies and energy optimisation y Strategic Alignment: Business verticals aligned with key sectors of the Indian economy y Location Advantage: Proximity to key customers and optimised supply chain y Value Chain Integration: Forward into explosives, backward into ammonia, enhancing sustainability y Uninterrupted Supply: Reliable availability and supply of products to our customers y Regulatory Expertise: Proficient in dealing with state and central authorities y Quality Excellence: Strong systems and processes to ensure world-class quality y Global Trade Proficiency: Extensive experience in import/ export of chemicals and port operations y Operational Excellence: Global benchmarking and partnering with leading global technology / engineering firms

Opportunities: y Economic Growth: Benefiting from Indias expanding economy, especially in infrastructure, agriculture, and pharma y Value-Added Transition: Shifting focus to premium products and solutions y Digital Expansion: Leveraging digital platforms for enhanced consumer connectivity y Micro Irrigation Growth: Rising demand for nutrient-based fertilisers in the CNB segment y Enhancing Farmer Income: Significant potential in enhancing farmer income through crop specific bulk and specialty fertilisers y Export Potential: Competitive supplies of AN, Nitric Acid and IPA strong position in nitration chemistry for overseas markets

Threats: y Trade & Geopolitical Risks: Impact from evolving trade policies and global tensions y Regulatory Changes: Risk of sudden policy changes affecting operations y Raw Material Volatility: Price fluctuations of key inputs (natural gas, ammonia, etc.) y Project Delays: Potential delays in regulatory clearances affecting capital projects

Risks and Concerns: y 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 y Working Capital Intensity: The working capital-intensive nature of this business, coupled with dependence on government subsidies, poses liquidity and financial risks y Price Pass-through Lag: Any delay in passing increased raw material prices to end customers can impact the Companys margins and profitability y Price Gap Challenges: Disparities between natural gas and imported ammonia prices pose challenges to the Companys cost competitiveness and margins

DFPCL is committed to harnessing human capital and organisational resources to enable business excellence. Our focus remains on fostering a high-performing, resilient, and engaged workforce within a positive, empowering environment.

Our HR Strategy is built on four key pillars: y Agile Systems & Policies – Keeping frameworks relevant and aligned with evolving needs y Enhanced Employee Engagement & Experience – Creating meaningful connections and impactful experiences y Performance & Productivity Enablement – Driving measurable outcomes y Partnership for Transformation – Supporting business shifts through people-focussed change

1. Culture Building

We strengthened our leadership culture through structured 360? feedback and team roundtables, promoting coaching, solution-oriented thinking, and stronger managerial capability. These practices are now embedded at mid-management levels, with leaders actively mentoring next-line managers.

2. Capability Building

In alignment with our business expansion plan, actions have been initiated towards ramping up the skilled resource base to cater to our upcoming manufacturing plants at Gopalpur and Dahej. Capability-building programmes - spanning both functional and behavioural competencies - were aligned to our framework. We also launched self-paced learning via LMS to promote continuous development.

3. Process Automation

We advanced automation across core people processes to enhance employee experience and operational efficiency. Key digital initiatives are underway, focussed on empowerment and simplification, with full rollout targeted in FY 2025-26.

4. Employee Engagement

Driven by our Employee Value Proposition (EVP) — "WE LISTEN! WE CARE! WE DELIVER!"– we achieved the lowest voluntary attrition in three years. Regular employee connect sessions and responsive policy updates deepened trust. Wellness initiatives also saw high engagement and positive feedback.

In FY 2025-26, we would be continuing our journey to further enable distributed empowerment, process simplification, leveraging technology for efficiency & effectiveness improvement and capability build-up to help deliver superior performance. The details pertaining to Industrial Relations and number of employees employed are provided in the Boards report

DFPCL advanced its digital strategy, implementing Salesforce CRM for customer management, Snowflake for data and AI, and Industry 4.0 solutions to enhance plant efficiency. Cybersecurity measures were also strengthened.

The Companys well established ERM (Enterprise Risk Management) framework comprising a comprehensive Risk Management Policy, approved by the Board, is adept to tackle changes in regulatory environment, development in technology and disruptions in financial markets. Business risks are categorised into the following broad categories - financial, operational, reputation, legal/regulatory, IT/cybersecurity, sustainability - ESG, and HR.

Risks are assessed & evaluated at following levels: y Inherent Risks: Are the untreated risks that an organisation faces, defined as the magnitude of risk in the absence of any risk controls or mitigants y Residual Risks: These are the risks that remain subsequent to implementation of controls after efforts to identify and eliminate some or all types of risks have been made Business-level committee comprising key business and functional heads periodically review and monitor documented residual risks to comprehend the nature of the risk and its characteristics including contributing factors, impact, likelihood and velocity, existing controls, and their effectiveness. Risk rating or risk score is calculated based on impact & likelihood on the scale on 1 to 5. Risk treatment plans are evaluated and implemented to reduce the impact and likelihood of the risks. Based on the strategy, risk treatment plans are classified into the following five types- eliminate, reduce, transfer, share and pursuit.

Risk Management Committee biannually reviews the Risk Management Policy and framework to ensure its robustness and effectiveness to deal with unforeseen risks. 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 us to take timely action for risk mitigation. The Risk Management Committee apprises the Board on the effectiveness of the Risk Management Framework.

DFPCLs internal control framework, audited by Ernst & Young LLP, ensures compliance, financial reliability, and risk management. Regular reviews by the Audit Committee helps to maintain effectiveness. y The company has appointed Ernst & Young LLP, India to execute internal audit reviews as per the approved internal audit plan. EY reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks y The Audit Committee of the Board of Directors, comprising independent directors carries out regular reviews of the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any y A process is in place for documentation of major business processes and testing thereof including financial closing, computer controls and entity level controls, as part of compliance programme, as required under the Companies Act, 2013 y A comprehensive information security policy is in place which is reviewed periodically based on which continuous upgrades to the companys IT systems are carried out y Detailed business plans exist for each segment. Investment strategies, year-on-year reviews, annual financial and operating plans and monthly monitoring are part of the established practices for all operating and service functions y Anti-fraud programmes including whistle blower mechanisms are operative across the Company y An ongoing programme, for the reinforcement of the Companys Code of Conduct is prevalent across the organisation. The Code covers integrity of financial reporting, ethical conduct, regulatory compliance, conflicts of interests review and reporting of concerns There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During FY 2024-25, we assessed the effectiveness of the Internal Control over Financial Reporting and have determined that our Internal Control over Financial Reporting as at March 31, 2025, is effective.

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, FY 2024-25.