The company operating margins increased 400 bps to 27.1% driven by the increased volumes and higher efficiency in plant operations of the Phenolics business supported by better sourcing, logistics and marketing for the wider product basket including IPA, which commenced in Q1 of the current fiscal leading to 30% increase in operating profits to Rs 335.04 crore. Other income was Rs 4.88 crore compared to Rs 14.74 crore. Interest cost was down 42% to Rs 15.7 crore. Depreciation fell 3% to Rs 33.92 crore. PBT was up 38% to Rs 290.3 crore. Effective rate of taxes was down 30 bps to 25.4%. PAT reported was up 38% to Rs 216.56 crore. 

Operational improvement in the Phenolics business and contribution from IPA supported by better logistics and sourcing have been accompanied by lower finance costs and depreciation, which has led to the sharp rise in quarterly PAT. 

Segment wise, Basic Chemicals Segment revenue stood at Rs 96.24 crore, down by 22% YoY and accounted for 16% of sales. PBIT from the same was down 21% to Rs 46.88 crore and accounted for 15% of total PBIT with PBIT margin at 23.9% compared to 23.3% in Dec19 quarter.  

Fine and speciality chemicals segment revenue stood at Rs 210.93 crore up by 22% YoY and accounted for 17% of sales. PBIT from the same was down 91% to Rs 8.16 crore and accounted for 3% of total. PBIT margins stood at 43.1% as compared to 33.9% for Dec19 quarter.  

Performance products segment revenue stood at Rs 90.17 crore down by 49% YoY and accounted for 7% of sales. PBIT from the same was Rs 8.16 crore compared to Rs 95.31 crore in Dec19 quarter and accounted for 3% of total PBIT. PBIT margins stood at 9% as compared to 54.1% for Dec'19 quarter.  

Phenolics segment revenue stood at Rs 746.92 crore compared to Rs 535.06 core in Dec19 quarter and accounted for 60% of sales. PBIT from the same was Rs 173.83 crore compared to Rs 40.5 crore and accounted for 54% of total PBIT. PBIT margins stood at 23.3% for Dec20 quarter compared to 7.6% in Dec19 quarter.

Commenting on the performance, Mr. Deepak C. Mehta, Chairman & Managing Director, said, "Our financial performance in Q3 is indicative of the underlying resilience of our business. Excellent team work, improved operations including more active marketing and logistics have enabled us to grab the opportunities arising from the sharp rebound in India's overall economic activity following several months of lockdown.  

In the backdrop of volatile input prices and persistent sluggishness in some end-use industries like oil, paper, textile we have achieved a strong sequential recovery in both revenues and profitability. This is attributable to our diversified product portfolio supported by deep expertise and decades of manufacturing experience enabling us to relentlessly enhance our offerings to meet the stringent requirements of our global clientele. Running the Phenolics plant beyond 100% stated capacity on a sustainable basis is a result of excellent teamwork and meticulous co-ordination of functions like sourcing, logistics, material management and human resources. 

As a result, we have grown PBT, both standalone and consolidated, in each successive quarter this fiscal and expect the trend to continue in Q4. 

In recent years, we have judiciously deployed funds to elevate our growth prospects, steadily strengthened our financial position while remaining committed to core objectives of people, planet, and profit. We have in place a robust manufacturing platform and are excited by the myriad opportunities emerging from increased global attention on India's potential. The Union Budget seeks to strengthen domestic industry and with our demonstrated track record in import substitution, we are well placed to contribute to Atmanirbhar Bharat."

Standalone performance 

Standalone Revenues are lower by 16% YoY to Rs. 491 crore in Q3FY21. This is largely attributable to the unusually high prices of performance products and intermediates in the corresponding period which resulted in a high base in Q3FY20. Adjusting for this impact, DNL has recovered from the lockdown-led disruption and is witnessing revenue momentum on the back of healthy growth in the FSC segment predicated on demand recovery in key end user industries of Agro and Pharma. 

Standalone EBITDA was Rs. 149 crore, lower by 31% Yo-Y with an EBITDA margin of 30.4% in Q3. The unusually elevated prices of Performance products and intermediates in the corresponding period last year led to a high base in PP segment, which was sizably offset by the strong performance in the other segments. Standalone PAT for Q3 was lower by 31% to Rs. 98 crore compared to the corresponding period last year.

Performance for the nine months ended Dec20 

For nine months ended Dec20, net sales fell 9% to Rs 2896.52 crore. The company operating margins increased 340 bps to 27.4%. As a result operating profits rose 4% to Rs 792.37 crore.  

Other income was Rs 15.58 crore compared to Rs 34.18 crore. Interest cost was down 32% to Rs 60 crore. Depreciation fell 7% to Rs 96.17 crore. PBT was up 8% to Rs 651.78 crore. 

Effective tax rate was down 210 bps to 25.5%. PAT reported was up 11% to Rs 485.7 crore. 

For the 9 months, sales from the Basic chemical segment fell 28% to Rs 514.96 crore and accounted for 18% of sales. PBIT from the same was down by 19% to Rs 124.16 crore and accounted for 16% of total with PBIT margin at 24.1%.

 Sales from the fine and speciality chemicals segment rose 31% to Rs 560.6 crore and accounted for 19% of sales. PBIT from the same was up 104% Rs 254.02 crore and accounted for 33% of total with PBIT margin at 45.3%. 

Sales from the performance products segment fell 65% to Rs 217.52 crore and accounted for 7% of sales. PBIT from the same was Rs 19.58 crore and accounted for 3% of total PBIT with PBIT margin at 9%. 

Sales from the phenolics segment was Rs 1622.97 crore compared to Rs 1469.9 core in Dec19 and accounted for 56% of sales. PBIT from the same was Rs 365.79 crore and accounted for 48% of total with PBIT margin at 22.5%.

Outlook by the company 

Successful Vaccine Diplomacy by the Indian Government has helped to elevate the status and competence of Indian manufacturing sector in the eyes of the world. This is expected to have a multi-layered impact. Immediate impact will be the continued shift from China to India for manufacture of chemicals which is already evident and which holds potential for further acceleration in upcoming quarters. 

The second order impact will be from growth of the domestic market. India is already a lucrative market for the Chemical industry and DNL is an ideal aspirant to ride on the India chemical manufacturing theme alongside its diversified product mix with decades of manufacturing experience. Impetus given by the Budget to enable the growth environment, principle of Aatmanirbhar Bharat and focus of the PLI scheme to incentivise manufacturing in India is expected to lead to increased volume of manufacturing of other industries such as electronics, automotives, engineered components, paper, textiles, pharmaceuticals, etc. which will widen and deepen the ecosystem contributing to more robust local demand. 

DNL is also setting the platform for continued growth through planned introductions of newer products and projects. The company is witnessing encouraging demand scenario across several end user industries, and that is expected to continue as it moves ahead. Second phase of the IPA plant is progressing well and remains on track to be commissioned in the fourth quarter. Brownfield expansion at Nadesari plant along with other downstream products in the Phenolics business also contribute to the strong outlook. 

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