Deepak Nitrite held a conference call on 05 May 2022 to discuss the results for the quarter ended Mar'22 and way forward. Mr. Maulik Mehta, Executive Director and Chief Executive Officer, Mr. Sanjay Upadhyay – Director, Finance & CFO and Mr. Somsekhar Nanda – Deputy CFO of the company addressed the call.

Highlights of the Concall

• The company witnessed an increasing amount of disruption in the global supply chain for crude oil, fertilizers and also specialty chemicals. In many cases, it saw that supply chain is not a stretch but in some cases broken as well as major consumers working on building alternate supply networks.

• The company continues to operate at high productivity levels of its facilities despite facing the kind of challenging macroeconomic environment driven by volatile raw material environments, high approved price and supply uncertainties, which have been further accelerated by the ongoing war in Europe.

• Revenue growth in Q4FY22 was driven by robust volume for several products complemented by sharp realization gains.

• The company anticipates that the growth trajectory will be sustained across all strategic business units supported by additional capacity and demand from end user industries.

• Basic intermediates (BI) segment revenue grew 66% in FY22 driven by numerous de-bottlenecking exercises and capacity augmentation in key products in the basic intermediates (BI) segment, which has enabled it to increase volumes towards the second half of the year. This was further aided by realization gains for key products in this segment.

• There was a sharp rise in input prices in BI segment during the year and the company was able to pass on most of the same to customers with some time lag, resulting in sustained EBITDA performance.

• Fine and specialty chemicals (FSC) segment revenue grew 10% in FY22 propelled by strong demand and an appealing product lineup that tailor to a broad and diverse array of applications.

• Prices of finished products of FSC segment were abnormally higher during the prior year but the raw material prices were abnormally low which have normalized during FY22 but in many cases raw materials are at all time highs.

• The company has annualized contract for few niche agrochemicals in FSC segment wherein price negotiation is possible in case of any abnormalities. However, there is some lag in cost pass through. Effect of this is expected to be visible in the ensuing quarters.

• Cost of major raw materials in FSC segment has increased during the current reporting period resulting in normalization of EBITDA performance.

• As a strategy reset in FSC segment, going forward the company will gain from new multi-year contracts with leading customers, with cost pass-through mechanisms in place

• Performance product segment reported healthy revenue growth at 74% in FY 22, driven by positive demand trends for key products, resulting in a sharp rise in volume accompanied by improved sales realization. This has also helped to improve the EBITDA margin.

• Performance products (PP) prices are expected to be normalized in ensuing quarter resulting into normalized margin as there is a there is some sort of tepid demand with regards to the products in the European market, which are currently experiencing some of their highest energy and utility costs as well.

• Deepak Phenolics delivered an outstanding performance with revenue growth of 68% while Ebitda expanded by 35% year on year translating into a pat expansion at 48%. This was achieved despite a sharp increase in key raw materials such as propylene and benzene, combined with skyrocketing prices of coal.

• Deepak Phenolics plant efficiency measures culminated in utilizations exceeding 118% of design capability during the quarter as result of heavy demand, revenue realization for both phenol and acetone increased substantially from those previous year .

• The company has commissioned its captive power plant during the quarter. This is expected to lead to production efficiencies due to assured and consistent power supply

• Projects approved by the company spanning across products that are into the life sciences space from the Deepak nitrites downstream as well as some Deepak Phenolics aggregating to Rs. 1500 crore are being implemented as per plan and commissioning to happen in a phase-wise manner from Q1FY23 besides debottlenecking projects and capacity augmentation in existing product line

• The company has obtained all permission from board of directors, shareholders and innovators for issue of equity QIP and now evaluating the market conditions for appropriate time to launch the issue.