Krishana Phoschem Ltd Management Discussions

Global Economy¹

In CY 2024, the global economy demonstrated resilience, despite navigating macro headwinds such as geopolitical conflicts, steep inflation for a large part of the year, re-alignment of supply chains and shifting trade patterns. Global output grew by 3.3% during the year, exhibiting sustained recovery and stability after a few uncertain years. This growth was primarily driven by Emerging Market and Developing Economies (EMDEs), expanding by 4.3% due to robust domestic demand, improved exports and a steady growth in services and manufacturing. Simultaneously, advanced economies grew at a gradual pace at 1.8%. Global economy was therefore, supported by robust job markets, steady household expenditure and prudent policy measures, thereby, propelling long-term growth.

Moreover, global inflation registered improvement in CY 2024, with headline inflation at 5.7%, a decline from the past two years. Improved supply chains, decreased commodity prices and tighter monetary policies eased inflationary pressures in many countries. However, the momentum of disinflation slackened in the second half of the year, with a few countries witnessing a marginal hike in prices. Towards the end of CY 2024, global trade patterns shifted due to the introduction of US tariffs. Consequently, a few countries front-loaded their exports to the US to avoid higher duties thereafter. This early response to the upcoming trade measures may have impacted growth and inflation trends in the terminal point of the year, with temporary shifts in global demand and prices.

The global fertiliser industry remained steady and proactive during CY 2024. Robust demand was driven by moderate weather and effective farm policies in major regions. Despite varying costs of energy and raw materials throughout the year, supply chains performed at a measured pace. This allowed for timely delivery of fertilisers, thereby, enhancing food production and supporting farmers and rural communities worldwide.

Outlook

The global economy is predicted to sustain progress, with a moderate pace in CY 2025 and a gradual recovery in CY 2026. Global output is projected to grow by 2.8% in CY 2025 and improve marginally by 3% in CY 2026. Over the next five years, growth will potentially reach an estimated 3.2%. Advanced economies are forecast to grow by 1.4% in CY 2025 and 1.5% in CY 2026, while EMDEs are expected to expand by 3.7% and 3.9%, respectively. While uncertain trade tensions are escalating, the global economy maintains resilience, supported by robust domestic activity in most regions.

Global inflation is projected to ease further, reaching 4.3% in CY 2025 and declining to 3.6% in CY 2026, propelled by stable commodity prices and easing supply chain operations. Advanced economies will potentially register inflation reaching the target levels, while in emerging markets, it is expected to moderate. The global fertiliser industry is projected to remain steady, driven by heightened demand from the agriculture sector and logistics. Moreover, these positive developments ensure timely delivery of fertilisers, thereby, contributing to stable food production worldwide.

Indian Economy²

Indias economy recorded a growth of 6.5% in FY 25, supported by strong domestic demand, improved agricultural output, a significant amount of monsoon with a sustained expansion in the services and manufacturing sectors. Augmented government expenditure on infrastructure and the stable financial stance of banks and corporates further strengthened overall growth. Key contributors included a 7.6% hike in private consumption, 6.1% growth in capital investments and a 7.5% growth in the services sector. High-frequency indicators suggest steady momentum in E-way bill generation that escalated by 19.4%, GST collections that grew by 9.9% and toll collections that hiked by 11.9%. Additionally, the construction and core industries, such as steel and cement, registered double-digit growth, further demonstrating the economys robust performance.

On the inflation front, India witnessed its third consecutive year of improvement, with retail inflation at 4.6% in FY 25. This was primarily due to effective monetary policies by the Reserve Bank of India (RBI) and targeted government measures such as food stock releases, import duty reductions, stock limits and food subsidies. Food inflation declined, with the food index at 2.69% during the year. Moreover, the Government of India exhibited robust support for agriculture, allocating Rs1.22 lakh crore to the Department of Agriculture and Farmers Welfare (DA&FW). Flagship schemes such as PM-KISAN and higher MSPs bolstered farmers economic growth and propelled input purchases of fertilisers. The sharper focus on enhancing farm productivity and rural incomes, provide an opportunity for sustained growth in the fertiliser sector and overall rural economy.

Outlook

India has emerged as the worlds fourth-largest economy, with per capita income doubling since 2014, a testament to its sustained economic progress. Despite global headwinds, the way forward remains optimistic, due to enhanced domestic and foreign investments, robust manufacturing growth and improvement in trade and financial services.

Real GDP growth is projected at 6.5% in FY26, with a marginal hike to 6.7% in FY27, predicting a moderate monsoon and minimal major global disruptions. Growth is expected to be broad-based, with agriculture, manufacturing and services sectors exhibiting positive trends. On the inflation front, the Consumer Price Index (CPI) is expected to sustain stability at approximately 4.0% in FY26, aided by easing crude oil prices, balanced supply-demand dynamics and supportive policy measures. Despite ongoing global uncertainties such as geopolitical tensions and supply chain challenges, Indias strong macro-economic fundamentals and proactive policy interventions provide a solid base for sustained economic progress.

Industrial Overview²

Global Fertiliser and Chemicals Industry

In CY 2024, the global fertiliser market was valued at USD 182.3 billion, demonstrating steady growth. This is primarily due to the rising demand of food for keeping pace with the population and the augmenting incomes. Farmers are utilising more fertilisers to enhance crop yields, thereby, making better use of limited land. Governments further, bolster growth by offering subsidies, formulating affordable fertilisers for farmers. In CY 2024, countries globally, invested over USD 50 billion on fertiliser subsidies, with India with an expenditure of approximately USD 13 billion.

A predominant part of the market in CY 2024 was led by chemical fertilisers, constituting a 66.6% of the total. These are extensively used for yielding swift results of well-grown crops. Dry fertilisers being the most used form, comprising an 81.8% share, for their convenience of storage, transportation and application on large farms. Grains and cereals, were the top crops, to use fertilisers, constituting 45.8% of the market, due to being food staples in most countries. Asia Pacific emerged as the largest regional market, with more than 52.5% share, led by big farming nations such as China and India. This region benefits from large farming areas, supportive government policies and innovative farming methods.

Indian Fertiliser and Chemical Industry⁴

In FY 25, the Indian government increased the final budget for fertilisers to INR 1,91,836.29 crore, from the earlier estimate of INR 1,68,130.81 crore. This surge was supported by additional approvals in the Parliament. The budget is allocated based on the quantity of fertiliser the country expects to use, along with fluctuating natural gas prices and international fertiliser prices. The government continues to substantially invest in subsidies, for improving farm prosperity, especially under the Nutrient Based Subsidy (NBS) scheme, wherein the final allocation for FY25 augmented to INR 54,310 crore from the initial INR 45,000 crore.

Moreover, the government approved a special package for DAP fertiliser, for companies to navigate challenges in global supply. This package provides an additional INR 3,500 per metric ton of DAP sold, with the regular NBS subsidy. This keeps DAP prices stable and affordable for farmers. For urea, the price has remained unchanged since 2018 at INR 242 per 45 kg bag with the government providing subsidies, ensuring affordable rates for farmers.

To timely delivery of fertilisers, the government works closely with states before each cropping season to plan supply. Fertiliser movement is tracked via the integrated Fertiliser Monitoring System (iFMS) and weekly video calls with state officials that offer swift solutions. India further imports fertilisers to meet demand, while the Department of Fertilisers (DoF) is responsible for international deals and companies, thereby, ensuring a steady supply of raw materials and manufactured fertilisers. This coordinated effort strengthens the affordability and accessibility of fertilisers, nationwide.

Outlook⁵

With a budget allocation of 1.91 lakh crore⁶, the Indian fertiliser industry is predicted for robust growth. A key target being selfsufficiency by 2032, particularly in urea production by FY 26, that is driven by heightened local manufacturing and widespread usage of nano urea. Consequently, the number of nano liquid urea plants will surge from 9 to 13 by FY 25, with an expected output of 44 crore bottles. The government, further prioritises expanding the market for organic and bio-fertilisers, reviving old fertiliser plants in Gorakhpur, Talcher and Barauni, thereby, reinforcing local production to decrease import dependence. Ongoing investment in research and innovation improved fertilisers, promoting efficient farming. Simultaneously, the risks of fluctuating climate and demand for sustainable farming are driving efforts to build long-term resilience. Supportive schemes such as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and the extension of irrigation programmes are predicted to bolster farmer incomes and utility of fertilisers in the forthcoming years.

Speciality Nutrients⁷

The Indian speciality nutrient market, with its steady growth, is expected to reach USD 1.77 billion by 2030, from USD 1.27 billion in FY 25, at a rate of 6.8% annually from 2025 to 2030. These fertilisers yield improved crops with nutrients provided more effectively via soil application, spray on leaves (foliar) and combined irrigation water (fertigation). The most popular categories being liquid fertilisers, water-soluble fertilisers, controlled-release and slow-release fertilisers. Fertigation remains as a widely suited method, with field crops such as rice, wheat and sugarcane as primary users of these fertilisers.

New-age technology, enhanced farming practices and government support, further propels market growth. More farmers utilise precise methods to apply fertilisers, for decreased wastage and heightened crop yield. Moreover, many areas are now equipped with improved irrigation systems, enabling convenient usage of fertigation. A rising demand for eco-friendly fertilisers is witnessed, due to concerns regarding soil health and water pollution by regular fertilisers. Moreover, with the horticulture sector expanding, farmers use speciality fertilisers for high-quality yields.

The companies form partnerships with agri-tech firms and research groups, thereby, prioritising innovation, making nanofertilisers and providing digital advice to farmers. In the future, the market will potentially sustain growth with sharper focus on sustainable farming, improved products and strengthened farmer connections.

Company Overview

Krishana Phoschem, established in 2004, is a leading Fertilizer Manufacturing Company in India. The Company commenced operations with its Beneficiated Rock Phosphate (BRP) Plant and began commercial production from 2005-06. In the 201213, the company started production of SSP fertilisers.

The Company primarily manufactures fertilisers, and other chemical products. Its production facilities are located in the AKVN Industrial Area in Meghnagar, Jhabua District in Madhya Pradesh. The Company is mainly engaged in the manufacturing of Beneficiated Rock Phosphate (BRP), Single Super Phosphate (SSP) along with other chemical products including Sulphuric Acid (SA)& Phosphoric Acid (PA). From February 2023, the Company began producing Di-ammonium Phosphate (DAP) and NPK complex fertilisers, which help supply nitrogen and phosphorus to the soil.

The Company holds capacities of 198,000 MT for Rock Crushing, 120,000 MT for SSP/GSSP and 330,000 MT for DAP/ NPK, along with 2,64,000 MT for Sulphuric Acid. Additionally, Phosphoric Acid has a capacity of 99,000 MT.

The Company is ISO 9001:2015 certified for the manufacturing and supply of Beneficiated Rock Phosphate (BRP), Single Super Phosphate (SSP), Granulated Single Super Phosphate (GSSP) and Di-ammonium Phosphate (DAP)/ Nitrogen, Phosphorus and Potassium (NPK) complex fertilisers. Its facilities are equipped with modern machinery and tools, along with a quality control lab that checks product samples to maintain standards.

Krishana Phoschems Diverse Offerings

Fertilisers

Bulk Fertilisers

Krishana Phoschem Limited (KPL) manufactures and sells a range of fertilisers, including basic (bulk) and advanced (specialty) types. One of the primary bulk fertilisers is Single Super Phosphate (SSP), which comes in both powder and granular form. The Company has experience in making Single Super Phosphate (SSP) using Beneficiated Rock Phosphate (BRP). The Company also makes NPK and Di-Ammonium Phosphate (DAP) complex fertilisers, including a product called Annadata NPK. NPK contains 20% nitrogen and 20% phosphorus and is used to support root and flower growth, along with other grades of NPK fertilisers to meet the needs of various crops.

Specialty and Value-Added Products Water Soluble Fertilisers

Krishana Phoschem produces fertilisers that dissolve in water easily, one of it being Annadata NPK (20:20:13), which is high in phosphorus (20%) and nitrogen (20%). This type is best for crops that require these nutrients extensively. This range has a low salt index, is very pure and can be used on crops including tomatoes, chillies, watermelon, wheat and rice.

Chemicals and Intermediates Rock Phosphate and Acids

Krishana Phoschem processes low-grade rock phosphate into high-grade Beneficiated Rock Phosphate (BRP), which is used in its own fertiliser production. The Company also has its own plant for making Sulphuric Acid and is among the top producers of Phosphoric Acid in North India.

Brands

The Company sells its products mainly under the ‘Annadata and ‘Bharat brand names. Products developed by KPL, such are SSP sold under the ‘Annadata brand and NPK sold under the Bharat brand.

Operational Performance

In terms of sales volumes, Krishana Phoschem recorded a solid performance in FY25. The Company sold 117,536 tons of Single Super Phosphate (SSP) during the year, reflecting a 21.4% increase from 96,833 tons in FY24. For NPK and DAP combined, sales reached 232,715 tons in FY25, which was a 70.4% rise compared to 136,567 tons in FY24. Out of this, approximately 11,741 tons of DAP were produced and 13,906 tons sold entirely in-house, marking a significant milestone for the Company.

Production volumes for FY25 highlight the scale of operations, where the Company produced 62,620 tons of Beneficiated Rock Phosphate (BRP), 2,0,1785 tons of Sulphuric Acid and 56,466 tons of Phosphoric Acid. In terms of fertilisers, the Company manufactured 1,14,559 tons of Single Super Phosphate (SSP) and 2,30,694 tons of NPK/Di-ammonium Phosphate (DAP) fertilisers during the same period. These figures reflect the Companys strong backward integration and operational capabilities.

Capacity Utilisation

In FY25, the Company optimally used its available resources. The Single Super Phosphate (SSP) plant operated at 95% capacity, while the NPK/ Di-ammonium Phosphate (DAP) plant achieved 70% utilisation, an improvement from 45% in FY24. The Sulphuric Acid and Phosphoric Acid plants ran at 76% and 58% capacity utilisation, respectively. The Beneficiated Rock Phosphate (BRP) Crushing unit operated at 70% of its capacity, supporting internal raw material requirements.

The Companys backward integration sets it apart in the industry. It is one of the few companies in India with the capability to beneficiate low-grade rock phosphate into high-grade material. Additionally, the Company produces Sulphuric and Phosphoric Acid in-house, ensuring a stable supply of key inputs. Long-term sourcing agreements for rock phosphate from India, Egypt and Jordan further strengthen the Companys supply chain.

The Company which is part of Ostwal group of Industries has also built a robust marketing and distribution network, spanning nine Indian states. This network includes around 170 marketing personnel, 2,000 wholesalers and 30000 dealers and retailers. The Company has embraced technology-enabled marketing, allowing it to expand its reach and maintain strong customer relationships.

Opportunities Expansion Plans

Krishana Phoschem is proactively exploring ways to increase its production capacity through brownfield expansion and greenfield expansion. It is also acquiring sick or underperforming fertiliser units. The Company anticipates long-term potential in the phosphatic fertiliser sector and is planning significant capacity additions in both fertiliser and raw material production facilities. The company plans to set up 500 TPD DAP/NPK plant and 300 TPD Sulphuric Acid Plant which is expected to be operational by March 2026.

Supportive Government Policy

Several policies by the Government of India are now encouraging the use of nutrient-based fertilisers, matching the specific needs of soil and crops. This shift supports NPK fertilisers, which can be customised in many different nutrient combinations. With global DAP supply falling and prices rising, the Company is in a good position to grow its NPK business and support farmers with better alternatives.

Improved Operational Efficiency

Continuous improvements in production processes, adoption of advanced technology and major new investments in Resource and Development (R&D) are helping the Company to enhance yields, reduce bottlenecks and increase its fertiliser range, leading to higher efficiency and profitability.

Strong Backward Integration

The Company is one of the few Indian players with in-house production of key inputs such as sulphuric acid and phosphoric acid. Its ability to process low-grade rock phosphate and its longterm sourcing contracts for raw materials in India and abroad (including Egypt and Jordan), enhance supply chain consistency and lower the risk of disruptions.

Strong Financial Growth

FY 25 was a standout year for Krishana Phoschem, where it achieved record-high production, sales and profits. Especially in the first and third quarters, the Company recorded its highest- ever revenues and earnings. This validates the Companys growth strategies and operational efficiencies.

Geographical Expansion

The Company is expanding its geographical presence by expanding its reach by entering into new states. It has applied for land in industrial zones where it can build new plants. This strategy reduces the risk of market concentration and increases national reach.

Funding Support

Positive relationships with financial institutions and banks provide the Company with access to capital for future projects and expansion, supporting long-term growth.

Threats

Seasonal Nature of the Industry

The seasonal nature of Indias fertiliser industry results in irregular yearly demand. Sales predominantly occur before the sowing seasons (Kharif and Rabi), while the fourth quarter (January to March) experiences a decline. This uneven demand results in elongated working capital cycle during off-seasons, consequently affecting revenue in some quarters, creating inventory management and forecasting challenges.

Rising Raw Material Costs

The Company depends on the import of key raw materials like sulphur, rock phosphate and other chemicals. In recent times, the price of sulphur has escalated sharply resulting in higher production expenditure. Despite favourable government subsidies, fertiliser manufactures are subjected to risks in the failure of such adjustments to compensate for the rising costs, thereby, impacting profit margins.

Delays in Government Subsidies

Indian fertiliser manufactures such as KPL are dependent on government subsidies to ensure product affordability for farmers. However, these subsidies are often delayed. As of March 2025, the Companys pending subsidies are recorded to be ^189.11 crore. As an outcome of such delays KPL has to use its own funds or rely on debts to cover day-to-day expenses, imposing significant pressure on cash flow and working capital. Prolonged delays may decelerate investment and expansion plans.

Business Outlook

Krishana Phoschem maintains an optimistic outlook for FY26. The Company anticipates continued demand for fertilisers such as Single Super Phosphate (SSP) and Nitrogen, Phosphorus, Potassium (NPK) blends, driven by favourable agricultural trends and supportive government policies promoting nutrient- based fertilisers. This shift is also helping reduce Indias heavy dependence on Diammonium Phosphate (DAP) imports by promoting flexible and crop-specific alternatives such as NPK fertilisers. This aligns with the Companys core product offerings and presents long-term opportunities.

With a promising monsoon forecast, fertiliser consumption is likely to increase during the sowing season. Keeping this in mind, the Company is aiming to sell around 240,000 metric tons of NPK fertiliser during the year.

Favourable sectoral conditions, combined with the Companys efficient operations and product diversification, will position it well to improve sales, increase efficiency and strengthen its leadership in the fertiliser industry.

Key Financial Ratios

Human Resource

KPL acknowledges its people as one of its most valuable strengths. The Company depends on a skilled and future-ready workforce to support its operations, sales and future growth trajectory. It prioritises hard work, knowledge and dedication of its employees as key drivers of the Companys long-term success.

As of early 2025, OGI as a group has recorded to have a robust workforce of more than 170 marketing professionals promoting its products and reaching farmers across different regions. The substantial increase in the value from approximately 150 employees in the previous year, reinforces the Companys expanding market presence. Through regular employee benefit provisions, the Company demonstrates its sustained commitment to its people.

The Company has allocated a part of its CSR budget on employee benefit activities, such as welfare programs and community support. KPL understands the role of a motivated and capable workforce in driving market expansion and product diversification. Through talent retention and attraction, the Company is committed to long-term success.

In FY 25, the Companys employee benefits expenses were around 27.71 crore, reflecting the Companys continued investment in its workforce.

Quality Management

Krishana Phoschem Limited focuses on manufacturing high quality products throughout its operations. Its manufacturing units are certified under ISO 9001:2015 and it runs NABL- accredited laboratories as per ISO/IEC 17025:2017 standards. These certifications show that the Company abides by strong systems to ensure consistent quality and reliable testing.

Each plant is equipped with a NABL-accredited lab for meticulous product monitoring. KPL has been recognised through official approvals for efficient handling of raw materials and finished products such as SSP, BRP, Phosphoric Acid, Sulphuric Acid and others hazardous substances. The Company is committed to deliver quality fertilisers, thereby, enabling farmers improve crop yields and soil health. Additionally, the Company conducts awareness camps in villages to promote education among farmers on proper usage, facilitating greater product effectiveness and reliability in the field.

Risk Management

Internal Control System

Krishana Phoschem Limited has established a strong internal control system to ensure smooth and efficient operations across all levels of the Company. The controls are designed to safeguard assets, maintain accurate financial records and ensure compliance with laws and Company policies. Regular audits and reviews are conducted to identify and address any gaps or weaknesses in the system. The Companys management is focused to continuously improving these controls to support transparency, accountability and overall business integrity. This helps the Company in operational efficiency and protects stakeholder interests effectively.

Cautionary Statement

The Management Discussion and Analysis (MDA) section talks about what the Company plans to do in the future and what it expects to happen. These plans may involve some risks or changes that could affect the actual results. The Company makes these statements based on the information and ideas it has now, both from inside and outside the Company. But these ideas can change over time, which might also change the results. It is important to know that these statements are only true at the time they are made. The Company does not have to update them later, even if new things happen.