Highlights of the call:

Financial Year 2017 was a challenging year but the company reported a fairly resilient performance indicating the robustness of business model.

Notwithstanding the changing dynamics in export markets as well as disruptive events in the domestic market, the company has made continued progress in enhancing its product portfolio, market presence, customer engagements and developing new products.

Overall performance during the year could have been far superior, but for the impact due to one-time developments which led to temporary shutdown of facilities at Roha as well as Hyderabad.

Deepak Nitrite (DNL) has product portfolio of Basic Chemicals (BC), Fine & Speciality Chemicals (FSC) & Performance Products (PP).

The company enjoys a leading market position in most of its products in the domestic as well as global markets.

During FY2017, the company was required to shutdown its DASDA manufacturing facility at Hyderabad, due to heavy rain and flooding.

In a separate incident, a fire broke out at a distillation column of the facility in Roha, Maharashtra which manufactures Fine & Speciality Chemical intermediates.

Sales stood at Rs.44 crore against Rs 340.75 crore. The impact unit closures affected the Q4 FY17 performance.

The Hyderabad facility has been restarted and three of the four units in Roha were restarted in a phased manner.

On a normalised basis, revenues during the quarter would have grown in double digits.

EBITDA was impacted by lower topline out of speciality chemicals portfolio as well as incurring of certain one-time expenses in restarting facilities as well as enhancing processes.

The benefits of these will accrue in the forthcoming quarters.

On a normalised basis, EBITDA would have been higher due to improved product mix.

The company undertook aggressive marketing efforts and initiatives to diversify revenue mix which has helped to partially mitigate impact of units closure.

For FY 2017, on a normalised basis, EBITDA would have been higher with better margins due to improved composition of higher value products in the revenue-mix.

Depreciation was higher due to increase in asset base.

The company made significant advancement in its Greenfield project of Phenol & Acetone with investments of over Rs 475 crore till date. The committed amount towards the project is higher than Rs 900 crore.

The company has achieved complete financial closure of debt funding for this project and have also very recently concluded the second round of QIP to raise Rs 150 crore.

Along with internal accruals, the funds raised will be deployed as the management expects to commission this project in the last quarter of FY 2018. This project will elevate the operational profile and growth prospects of the Company, once commissioned.

Going forward, the management is excited about the prospects of its enhanced product portfolio in Fine & Speciality Chemicals and Basic Chemicals segments which will provide renewed momentum.

In the Performance Products segment, the company is widening focus on newer regions and end-user industries with newer patented products.

The company has put in place some exciting initiatives in processing of by-products and waste management which will elevate its operating performance further.

The combination of these initiatives and the impending commissioning of our Phenol project will enable the company to scale new heights and accelerate value creation for our stakeholders.

During FY17, one-time developments have impacted production and sales volume. However, product mix enhancements and aggressive marketing helped the company to increase volumes in March 2017 quarter in the Basic Chemicals segments which has partly compensated for the shortfall and narrowed the overall volume decline in FY17 to 4%.

Demand for fuel additives went down. Since the company's plants are multipurpose, it has switched to other products giving better contribution.

FSC segment volume declined 3% in FY 2017.

FSC segment was on course to record a strong year but for the incident at Roha.

Better momentum driven by favourable monsoons as well as higher traction in personal care and pharma intermediates would support growth in the FSC segment in FY18 

PP volumes fell 5% due to shutdown of Hyderabad facility. The company changed product mix towards application in textiles and detergents and widening its focus to include additional markets and end-user industries in order to achieve accelerated volume growth.

The company had engaged a leading business consultant to review its business processes and suggest measures to drive enhanced value. Based on the report, several initiatives have been identified and implemented. These include debottlenecking of processing facilities to improve throughput, processing of by-products and better waste management to enhance production efficiencies and synergies. The benefit of these initiatives will result in improved operating efficiencies as well as cost savings in the ensuing financial years.

The company raised Rs 150 crore through QIP in March 2017 at Rs 104 per share (including premium of Rs. 102 per share). The QIP saw strong response from high quality domestic institutional investors.

The proceeds from the QIP will be deployed towards funding the Greenfield Project for manufacture of Phenol and Acetone.

In FY 2018 the company is well placed to capture the growth opportunities arising in the end user industries.

The company has restarted all but one of the facilities and full operation is getting restored in ensuing days.

Going forward, Fine & Specialty chemicals segment would lead the growth momentum as a result of encouraging demand scenario in the global as well as domestic markets and higher contribution from personal care & pharma intermediates.

The company has set up small facilities for backward integration of some agro-chemical products and pharma intermediates which will commence operation in FY18. These will meaningfully enhance the profitability of these products.

Going forward, the Basic Chemicals segment will witness continued momentum due to enhancing of product mix as well as addition of new category defining products. The company has spent Rs 20 crore in FY 2017 to set up processing of new products which will contribute to both topline and bottomline from FY 2018.

Performance Products segment is also expected to demonstrate improved performance going forward as a result of multiple strategic initiatives undertaken by the company which is expected to result in better customer acceptance for OBA in the global markets. In addition, the company is focusing more on the detergents and textiles industry in order to enjoy better profitability.

The company is implementing a mega project, with a capex of Rs 1400 crore, to manufacture 200,000 MTPA of Phenol and 120,000 MTPA of the co-product Acetone. This will be supported by manufacturing 260,000 MT of Cumene, which is a Feedstock for manufacturing Phenol and Acetone. A wholly owned subsidiary, viz. Deepak Phenolics Limited has been set up for this project.

The mega project will address the opportunity offered by the supply deficit in the domestic market which is currently met by imports.

BC segment margin will continue to do grow in current year also. Volume growth is expected at 5-7% in FY 2018.

The company is confident of improving EBITDA margin by 1% in FY 2018.