Deepak Nitrite held a conference call on 15 February 2024 to discuss the results for the quarter ended December 23 and way forward. Mr. Maulik Mehta, Executive Director and Chief Executive Officer, Mr. Sanjay Upadhyay – Director, Finance & Group CFO and Mr. Somsekhar Nanda –CFO of the company addressed the call.

Highlights of the Concall

• Revenue growth of 13% on a QoQ basis in Q3FY24 was anchored by solid growth in phenolics segment, which witnessed robust volume gains coupled with improved realizations. This was achieved by focussed initiatives to drive operating efficiency and undertake de-bottlenecking of phenolics plant leading to record production levels.

• EBITDA was lower by 3% YoY to Rs 318 crore during Q3FY24, impacted by high input prices which is yet to be fully passed on to the customers. While prices of some key inputs declined, prices of petrochemical linked inputs remained firm due to low operating rates in refineries.

• During the quarter, the domestic and export mix stood at 78:22. The domestic business generated a revenue of Rs 1,572 crore, while the export business revenue stood at Rs 451 crore, during the quarter.

• Volume growth for 9MFY24 was around 17-20%.

• Advanced intermediates segment has reported volume increase on a year-on-year basis with increased wallet share. However, realization trends reflected the subdued demand recovery in end use segments such as agrochemicals, textiles and dyes & pigments. End-use applications like construction, infrastructure and homecare are maintaining healthy growth visibility.

• The company expects healthy growth in advanced intermediates segment as the global supply chain mechanics change and further anticipates Q4FY24 to be better from a volume perspective as compared to the current quarter.

• The phenol plant sustained its average capacity utilization during the quarter and this is further expected to go up post debottlenecking. The segment is on course to substantially improve its downstream product offerings, leading to a higher captive utilization of acetone and resultant value addition.

• The global chemical industry continued to witness adverse conditions in the third quarter. Uneven economic growth, sustained inflation and interest rates have impacted consumption trends globally leading to persistent softness in demand from certain regions as well as certain segments. Consequently, realizations of several key products have remained subdued. This has been exacerbated by destocking by Chinese Industry as well as geopolitical challenges such as continuation of Russia-Ukraine War and emergence of the Red Sea Crisis, which have led to extended voyage times and cash conversion cycles.

• Products serving end-user industries like agrochemical and textiles remain under pressure while other applications are witnessing a volume led sequential improvement.

• While prices of some inputs have declined, prices of petrochemical linked inputs have remained firm due to low operating rates in refineries. The company believes that its upstream integration and brownfield capacity expansion will be available in line with a secular demand improvement.

• Deepak Chem Tech Limited (DCTL) inks MoU worth Rs. 9,000 crore with the Government of Gujarat on January 31, 2024 to establish projects in the State of Gujarat, to manufacture 3 new products - Polycarbonate, Methyl methacrylate (MMA)/Poly Methyl methacrylate (PMMA) Resins & Compounds and Aniline. This is in addition to the previous MoU worth Rs. 5,000 crore as of May 23, 2023 for an aggregate of approximately Rs. 14,000 crore.

• The company inks term sheet with Petronet LNG to offtake 250 KTPA of Propylene and 11 KTPA of Hydrogen for its expanded capacities via pipeline from Petronet LNG (Dahej). The arrangement spans 15 years from the initial delivery of Propylene and Hydrogen. This long-term supply agreement provides the company with assured access to crucial feedstock for its production processes, paving the way for consistent output and operational stability.

• Polycarbonate compounding project is taking concrete shape and is under implementation as per plan. Seeding programs for Poly Carbonate compounds already initiated since November 2023.

• Construction work of PhotoHalogenation and fluorination has made significant progress and plant commissioning is expected by end of current financial year.

• For Acid Unit, most of the on-site construction is complete and the project is making rapid progress towards mechanical completion.

• Other expansion projects including MIBK, MIBC, Hydrogenation among others are taking shape and will be commissioned as per plan.

• Long term contracts for raw material Propylene have been signed for supply from 2027 onwards.

• Between Jan-Dec 2024, around Rs. 2,000 crore of new investments are expected to be commissioned.

• DPL pre-paid the remaining balance of its term loan during Q3 to become debt-free. The group remains debt-free on a net basis, with total liquid investment of Rs 386 crore.

• The company expects improvement of 2-3% in its Ebitda margin post completion of its expansion projects.