U.S. Markets close in 3 hrs 13 mins

Edited Transcript of COROMANDEL.NSE earnings conference call or presentation 3-Feb-20 9:00am GMT

Q3 2020 Coromandel International Ltd Earnings Call

Feb 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Coromandel International Ltd earnings conference call or presentation Monday, February 3, 2020 at 9:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jayashree Satagopan

Coromandel International Limited - CFO & Executive VP

* Sameer Goel

Coromandel International Limited - MD & Executive Director

================================================================================

Conference Call Participants

================================================================================

* Abhijit R. Akella

IIFL Research - VP

* Ankur Periwal

Axis Capital Limited, Research Division - VP of Media and Logistics

* Manish Mahawar

Antique Stockbroking Ltd., Research Division - Research Analyst

* Nihal Mahesh Jham

Edelweiss Securities Ltd., Research Division - Research Analyst

* Resham Jain

DSP Investment Managers Pvt. Ltd. - Assistant VP

* Rohan Gupta

Edelweiss Securities Ltd., Research Division - Research Analyst

* Shreyansh Talesara

Vallum Capital Pvt. Ltd. - Analyst

* Varshit Shah

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Vishnu Kumar A.S.

Spark Capital Advisors (India) Private Limited, Research Division - VP

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day, and welcome to the Coromandel International Q3 FY '20 Earnings Conference Call hosted by Antique Stockbroking. (Operator Instructions)

I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking. Thank you, and over to you, sir.

--------------------------------------------------------------------------------

Manish Mahawar, Antique Stockbroking Ltd., Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

Yes. Thanks, Faizan. On behalf of Antique Stockbroking, I would like to welcome all the participants in the earnings call of Coromandel International. From the management, we have Mr. Sameer Goel, Managing Director; and Ms. Jayashree Satagopan, CFO, on the call.

Now I would like to hand over the call to Mr. Goel for opening remarks. Over to you, sir.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [3]

--------------------------------------------------------------------------------

Yes. Thanks, Manish. Good afternoon, everyone, and thanks, Manish, for organizing the conference call. I'll give an overview of the business environment experienced during the quarter, followed by the company's performance. And then the Q&A session will be there.

So overall, like we had mentioned, Northeast monsoon has been above normal during the quarter and ended up 29% above average. In the countries -- company's addressable market in the South, the rainfall was 16x -- 16% higher than the 5-year average. However, in the crucial Rayalaseema area, the Northeast monsoon was just 1% above the average.

Good monsoons resulted in higher reservoir levels compared to last year and long-term averages. Major reservoir across the country have filled up to 72% of capacity, which is 22% higher than long-term period averages. In our main markets of AP and Telangana, reservoir are filled up to [57%] capacity, which is 17% above long period averages.

Conducive weather in North and Central India led to a very good crop sowing for the country, especially on wheat. Sowing is up by 9% over last year, driven by wheat crop sowing, which is higher by 12% over last year. In the addressable markets of the company, it is up by 13%, led by Paddy, which is up by 28%.

Coming now to the fertilizer industry performance for the quarter. Good monsoons and more acreage under cultivation resulted in growth of fertilizer market. Phosphatic fertilizer industry primary sales volume is up by 23% at 61.7 lakh metric tons versus 50.3 lakh metric tons of previous year.

Point of sales, which is through the DBT machine, which is an indicator of real consumption at the farm level, has grown by 20% over last year, 82 lakh metric tons versus 68 lakh metric tons previous year same quarter.

Complex primary sale volumes for the quarter are 26 lakh metric tons versus 21 lakh metric tons of the previous year. POS sales for Q3 is at 34 lakh metric tons versus 29 lakh metric tons prior year. Complex primary sales are basically without -- NPK sales without DAP, right?

The major raw material continues to show a softening trends. First, asset prices for quarter 4 have been finalized at $590 per metric ton compared to quarter 3 prices of USD 625 per metric ton.

For the year-to-date, there's been a good catch up, especially after the quarter 1 was soft. Phosphatic fertilizer volumes is at 157.3 lakh metric tons versus 146.2 lakh metric tons of previous year, registering a growth of 7% year-on-year.

The DAP volumes for the year-to-date have been 74 lakh metric tons versus 69 lakh metric tons of the previous year -- sorry, that's complex volumes, which is NPK. DAP volumes is at 84 lakh metric tons versus 77 lakh metric tons over the previous years.

In the last 3 quarters, industry has passed on the benefit of soft raw material prices to the consumer, and overall MRP has been brought down by around 15%. DAP MRP has come down from INR 29,500 per metric ton in March to INR 25,000 currently. This is at our level. And prices of some competition is even lower. Further, there has been discounts -- been -- which have been given to the trade.

Coming now to Coromandel's performance. Coromandel registered a strong performance in quarter 3 with its continuous emphasis on superior sales mix, farmer connect initiatives, increased operational efficiencies and better working capital management. The Northeast monsoons have helped in improving the crop acreage in most of our addressable markets, except West Bengal, which has led to increase of agriculture input consumption.

Coming now to segment-wise performance, on Nutritional. For the quarter, the Nutritional and Allied business segments registered a very good performance during the quarter. On the sales front, in quarter 3, manufacturing phosphate volumes are up by 43% to 7.5 lakh tons and overall volumes for the phosphatic fertilizer is up by 28%. Total volume for the company is at the same level as last year, primarily due to reduction in urea sales volume by 42%.

As you are aware that last year, we used to handle Kandla Port for imported urea in the West, which we have given up this year. Company market share in quarter 3 is 13%, up by 1 percentage point over last year. Company maintains its POS market share at 10% for the quarter. Normally, quarter 3 is not a very good quarter for us in terms of consumption because the main season actually has got extended this time because of the delayed kharif to -- which will last up to middle of February.

For the quarter, the share of unique grade stands at 39%, same as the previous years. During the quarter, our phosphoric fertilizer plants operated at 93% capacity, recording a production of 8.2 lakh tons, last year was 7.4 lakh metric tons at 83% capacity utilization.

The company has strengthened its marketing and farm outreach programs with the Agronomist team and has relaunched its fertilizer under a brand name called GroSmart, which has been very well expected -- accepted by the farmers.

Production for the newly commissioned phosphoric acid plant at Vizag has stabilized. With this, Vizag plant has become fully self-sufficient for its phosphoric acid requirements. Other major infrastructure projects for improving capacity, storage and efficiencies are progressing well.

Year-to-date, YTD, manufacturing phosphatic fertilizer volumes is up by 9%, and overall volume for phosphatic fertilizer is at the same period as previous year. We did less of DAP import this year, but concentrated more on our manufactured fertilizer.

Total volume for the company is down by 15% over last year, primarily due to urea sales, which I had already alluded to. Market share of the company during the first half is at 16% versus 17% last year. Company maintains its market share for POS sales at 15%. This is expected to increase as the quarter 3, mainly the sale is on DAP because of the wheat which is grown in North and West, which is outside our marketing range. The share of unique grade stands at 36% versus 39% of last year.

During the 9-month period, our phosphatic fertilizer plants operated at 83% capacity utilization, recording a production of 22 lakh tons, which is the same level as previous years.

Single Super Phosphate sale was at 1.5 lakh metric tons. Year-to-date, the sales have gone up by 8% to 4.7 lakh metric tons. We continued to be the -- we continue to be the market leader in SSP sales and market share is now at 14.1%, up from 13.8% last year. SSP production went up by 20% year-to-date to 5.2 lakh metric tons. Company has increased capacity of Gro Plus, a superior SSP product.

On the Crop Protection side. Crop Protection segment had recovered from its soft performance in the last 2 quarters. Plant operation at Sarigam has been fully stabilized. This segment recorded a turnover of INR 460 crores for the quarter. It was INR 441 crores for the same quarter last year.

The domestic business registered a healthy growth in both our formulation business, which is B2C, and in the B2B segment during the quarter with a focus on newly launched and co-marketing products.

The Pyrazosulfuron plant was successfully commissioned at Sarigam and production commenced at the WDG facility for Mancozeb at Dahej. During the quarter, the company launched Astra, pymetrozine, a new generation insecticide, which will strengthen its portfolio in the Crop Protection segment. Coromandel is the only company in the country to have production of both technical and formulation for pymetrozine.

Company is working with co-marketing and in-license partners to launch new products in the coming quarters. We continue to invest in new product development, building strategic alliance, technology transfer, increasing the market reach and customer connect.

Bio business continued to strengthen its manufacturing capability and product development. Company's got EPA registration for NeemAzal granule product, company is working on pre-injection, a new delivery mechanism for bioproducts.

Our Retail business. The company, through its large retail network, continues to promote balanced nutrition through its soil testing and organic solutions to improve farm productivity. It is working on several agtech and farm mechanization initiatives.

On the sales front, sales of nonfertilizer business improved from -- to 53% versus 48% for Q3. For year-to-date, this has improved from 47% -- from 41% last year. This is part of a deliberate strategy of the company to promote more of nonfertilizer, as there is a huge opportunity with our direct connect with the farmers on nonfertilizer business.

Specialty Nutrients business has been doing exceedingly well. The business continues to adopt focused product approach in promoting superior products, which are -- which is what our farmers need for their agri -- to improve their agri productivity.

The company launched its manufacturing micronutrient enriched products, BOSMAX and NOVOZIN, during the quarter. Company is working on crop-specific water-soluble products to strengthen the portfolio in this -- those segments. As a part of the medium and long-term growth initiative, Coromandel is focusing on strengthening its core business and investing in research and development, data analytics and agritech interventions.

Overall, it has been a great quarter for Coromandel. The enhanced sowing during the ongoing rabi season is expected to continue in the South to generate good demand for agri input consumption. Our focus area will remain on farmer connect, branding and marketing initiatives, operating and supply chain efficiencies and improving customer offering. Coromandel, being a leader, agriculture solution provider, will continue to drive from productivity and support farmer prosperity.

Now I'll -- Now, we'll have Jayashree talking about the company financials, which will be followed by question and answers.

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [4]

--------------------------------------------------------------------------------

Thank you, Sameer. And I will now provide updates on the company financials.

For quarter 3, in terms of turnover, the company recorded a consolidated total income of INR 3,288 crores during the quarter, which is 7.4% higher versus the same quarter prior year.

Nutrients & Allied business contributed to 86% share and the remaining 14% coming from the Crop Protection business. Q3 last year, Nutrients was 85% and CPC 15%. In terms of subsidy/nonsubsidy, share stands at 77% and 23% during the quarter. Previous year, it was at 78% and 22%.

Profitability. EBITDA for the quarter is INR 432 crores against INR 304 crores of last year, which represents 42% growth on a year-on-year basis. EBITDA margin improved to 13.1% from 10% during the previous year. The margins were supported by good sales mix, soft raw material prices and operational efficiencies. Subsidy business share of EBITDA was at 73%, which was at 60% prior year same quarter.

Net profit after tax for the quarter is INR 265 crores in comparison to INR 154 crores for the corresponding quarter last year, registering a year-on-year growth of 37%.

For the 9 months ended December 31, the company's consolidated total income is INR 10,296 crores vis-à-vis INR 10,615 crores for the same period last year. Subsidy revenue is at 81% of the total revenue versus 80% during the previous year.

EBITDA is at INR 1,340 crores versus INR 1,184 crores of last year, which represents 13% year-on-year growth. Subsidy share of EBITDA is at 77% for the -- versus 74% of prior year. Profit before tax is INR 1,064 crores against INR 929 crores of last year. Net profit after tax is at INR 831 crores, which was INR 610 crores during the same period last year.

In terms of subsidy outstanding as on December 31, 2019, the amount is INR 1,670 crores. This compared to INR 2,020 crores outstanding during the prior year. Subsidy outstanding includes INR 630 crores relating to channel stock pending stock acknowledgment and INR 639 crores, which has been claimed and pending with the government. During the quarter, subsidies released from the government was INR 972 crores. Last year, this number was INR 1,269 crores.

During Q3, rupee remained volatile and has traded in a broad range between 70.50 to 72.30. While rupee recovered slightly during December '19, driven primarily by improvement in the U.S.-China trade stocks -- talks and improving flows into the country.

Coromandel continued to follow the Board-approved hedging strategy and is dynamically covering its exposure, managing the portfolio. During the quarter, working capital position improved, and this resulted in reduction in the interest rates, which was further helped with the lowered interest rates prevailing for the quarter. The net interest cost for the quarter was at INR 37 crores. And INR 9 crores on account of regrouping due to accounting treatment of Ind AS 116. For the quarter, effective tax rate is 25.5%. This is in line with the company's adoption of the new tax rate of 25.16%.

In terms of financial performance, it has been a great quarter overall. Thank you very much for your interest in Coromandel and joining us on the call today. We shall open the session for question and answers.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from the line of H R Gala from Finvest Advisors.

As there is no response from the current participant, I have muted the line. The next question is from the line of Varshit Shah from Emkay Global.

--------------------------------------------------------------------------------

Varshit Shah, Emkay Global Financial Services Ltd., Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

First of all, congratulations for a great set of numbers and execution. My question is more on the broader side for FY '21. So FY '20, we saw that you -- in the fertilizer segment, you've changed the mix away from urea. Any such macro-level strategy going into FY '21? Or we will continue on the current mix which we are following? That's question number one.

Question number two. On the Crop Protection side, so this quarter, I think, from a margin perspective, there has been -- there's an improvement in the margins for the Crop Protection segment. So what is driving this improvement? And what is the outlook for FY '21? Is it -- the margin improvement driven by backward integration, new product mix or are there some other elements also? And if you could -- it would help if you could cover the new launches which you have planned next year, not in full disclosures, but what is the theme there next year?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [3]

--------------------------------------------------------------------------------

The thing -- and thanks for complimenting. Firstly, I don't think there is any change of mix as far as fertilizer is concerned. Urea is normally -- we only market urea and timely for our retail store business and also to help some of our dealers who are interested in urea. It's never our strategy to build the urea volumes as such. Last year -- for 3 years, we had a contract at Kandla, which is West -- in the West, wherein we basically were losing money. And therefore, we are not interested in continuing that port for urea. It was not also helping our other businesses as such. And that's the reason why we will -- we have the allocation of extra personnel for, and we'll continue to do marketing of urea. So there's no change of strategy. Our strategy is always to promote balanced nutrition. And if you see the latest outlines whether by the ministry or the agriculture ministry and even at the Prime Minister's level, there is a question of the strong push towards promoting balanced nutrition away because urea is being overutilized in the country. So there's no change in our strategy. In fact, we have been on this for a long time.

As far as the Crop Protection, our concern -- the margins have been -- we have -- like has been alluded to the past. We are looking at products which we're launching, which are basically -- which are more in terms of effectiveness to the consumer and like the farmers and, therefore, they are, what is called, low volume but higher margin products, and that's the strategy which we have been driving. And this includes some of our co-marketing products. We are obviously improving some of our operational efficiencies. And we do not -- and that will also, over the period, help us to improve our margins, including certain items which you're looking at backward integrating. We will continue to focus on new products, but at this point of time, R&D are developing new products. We'll see a couple of new products in light next year also along with what we have already launched. So I don't think -- but we won't be able to give you the exact molecules on that.

--------------------------------------------------------------------------------

Varshit Shah, Emkay Global Financial Services Ltd., Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

No, sure, understand that. So are these new products planned to be launched before the kharif or that is not yet decided?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [5]

--------------------------------------------------------------------------------

So there are a couple of products that are planned for kharif. And 1 or 2 products during the later part of next year as well.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [6]

--------------------------------------------------------------------------------

What we have to do is to -- we've just launched, if you take, pymetrozine in the rabi basically for the South because it is Paddy now. And when kharif happens, this is across India. So therefore, we will be able to launch it across all India.

--------------------------------------------------------------------------------

Varshit Shah, Emkay Global Financial Services Ltd., Research Division - Research Analyst [7]

--------------------------------------------------------------------------------

Sure. And if I could just end with one last. So just on comment on the subsidy amount which the government has allocated, the budget signals a reduction in subsidy. So is this a precursor of -- it could be -- I mean, of course, this is speculation -- of reducing the per ton subsidy for NPK as well as urea? Or it's too early to comment?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [8]

--------------------------------------------------------------------------------

I think it would be early to comment. I think the important thing as far as we are concerned as a company is, we have done very well with the past dues on the subsidy, which were long pending. And we have submitted all these claims. What we want to get is -- and we are hoping to get for the -- like it happened last time on Special Banking Arrangement for the claims already submitted to the government, but not paid. But -- and after that, it will be more about the pull in the market through the POS machines. So there, we just -- all the companies have to be just efficient so that they can move the pull -- impact the pull in the market so that -- through -- there's not much of channel inventory left. And the government has been paying the DDT almost at least on a monthly basis.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

The next question is from the line of Ankur Periwal from Axis Capital.

--------------------------------------------------------------------------------

Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [10]

--------------------------------------------------------------------------------

Congratulations for a super performance. So my first question on the fertilizer front. Now if I go back in history in last quarter -- sorry, in Q4, we have taken a strategy of building up inventory so that we are well prepared for the next kharif season coming up. Now given that our utilization is fairly at decent levels, how much more upside do you believe in terms of -- one, whether we will continue with the same strategy going ahead as well? And second, how much upside in terms of absolute volume can one consider there at our existing capacity given that the competition is weakening and probably there is further scope for us to scale up our presence in the respective geographies?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [11]

--------------------------------------------------------------------------------

Right, Ankur. Just on this, I think nothing changes as far as strategy is concerned. The only thing which I mentioned was that this time, because of the delayed kharif, the rabi sowing and also has got delayed. Therefore, the rabi application also has got delayed. And we will -- we have seen good traction in the month of January in terms of how the sales have been performed. As you are aware, last year, it was not a very good season because rabi was not good in the South. And this time, with -- all indications are that it's going to be good. So -- and we are driving our business towards consumption and, therefore, we measure what is called the offtake from the farmers than to look at what the channel inventory is going to be.

As far as what we do in terms of the stock buildup, a lot depends on average turnaround plans for the plant, which we normally take at the end of the year so that we gear up for the next year on that front. So that is already in place, and that's how we will be looking at the same. We obviously will not -- currently, all indications are that -- and that's only the first indication, that next year also, the monsoon, at least the Southwest monsoon is expected to be normal. So we are gearing up towards that.

--------------------------------------------------------------------------------

Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [12]

--------------------------------------------------------------------------------

Sure. So -- and your comment in terms of competition since the industry is pretty much getting in a consolidation mode, wherein we, as a market leader, may have an upper edge here. But will we have adequate production available wherein we can continually grow for the next 1 to 3 years?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [13]

--------------------------------------------------------------------------------

I think there are 2 separate questions here. Firstly, we would not -- we would encourage competition because it helps us to grow -- jointly to grow the market. It also helps us to service the needs of the farmers. So any short-term is not anything beneficial. So we, as a company, and there may be some players who are down, but there are also other players who have picked up on that count.

As far as we are concerned, we have plans in terms of to not only maintain our market share, but to grow our market share. But like I said, it's more consumption driven. It's got to do with our focus as a company to become a very strong marketer. And that's why now we have launched what is called -- we are not distinguishing market by launching plans and branding them. And that is what is liked by the farmers as opposed to selling upgrades.

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [14]

--------------------------------------------------------------------------------

Ankur, further to your question. We had indicated in the past that we will also be carrying out some of the debottlenecking activities at our plants. That is to help us in improving our capacity in the short to the medium term. So those activities are also going on as per our plans.

--------------------------------------------------------------------------------

Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [15]

--------------------------------------------------------------------------------

Yes. Sure. And ma'am, just second question on the nonsubsidy business here on the crop protection side. We had launched a couple of products just before the rabi season. So -- and you did mention a few of them further lined up before kharif and maybe going ahead into the next financial year. So what sort of growth one should expect over there, both from existing as well as the new product launches put together?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [16]

--------------------------------------------------------------------------------

This year, so far, we have launched 4 new products; Mythri, Arithri, Fornax and Astra. Astra is what Sameer was referring to as the pymetrozine. Apart from this, we have one more product, which is getting launched this quarter, which is (inaudible) pyrazosulfuron. So this year alone, we are talking about 5 products. Last year, we had introduced 3. And next year, we have plans to do 3 to 4 new products. Our focus on Crop Protection is to move from the old generic molecules, which used to have a substantial portion of our portfolio, and get the new generation molecules come in.

With these new launches that we've had, we have seen a healthy pickup in the market which we think will continue to grow in our portfolio. That should help us both in terms of revenue growth in the domestic B2C business as well as in strengthening our margins. Some of these where we are doing technical production could also serve our B2B customers in India and also for selective market globally. So that's been the overall strategy for CPC in terms of looking at newer generation molecules and having new launches.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

The next question is from the line of [S Ramesh] from Nirmal Bang Equities.

--------------------------------------------------------------------------------

Unidentified Analyst [18]

--------------------------------------------------------------------------------

Sir, if you look at your margins in the fertilizer business, I think the significant part of that is driven by the decline in the input prices. So to what extent do you think you'll be able to continue to retain this and maintain this kind of margins here over the next 1, 2 years?

And secondly, in terms of the growth and the headroom for increasing your production next year, can you give us some sense in terms of how you are and what your targets are for next year?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [19]

--------------------------------------------------------------------------------

So firstly, I don't think -- and Jayashree will add to it, the -- our margins are because of input pricing only. As you know, we have done the PAP 2 expansion, which is basically making up Vizag plant self-sufficient and not dependent on phosphoric acid and there is a value addition to it. So that plan has come up well. We are -- we have stabilized our operation. And that will continue to see the full impact of it next year. So that's one part of it.

And secondly, we have been also selective in terms of what products, which we are marketing and the pricing vision on that. So we want to be away from commodities like DAP. Yes, we will market some of them. But our whole focus is on balanced nutrition, which is on the NPK side, and to promote that. So that's the second part of the thing in terms of how we are looking at the margins.

As far as the -- as far as next year plans are concerned, we are confident of meeting all our requirements with the -- getting the plants more efficient. Also then focusing, it's the quality of the material which we supply and not the volume of material which we do. And that's the emphasis which we'll be continuing to do. And developing our capabilities and outreach program with the market. As Jayashree alluded to, we have already started debottlenecking at several of our plants, and those will pay dividends as we come along.

--------------------------------------------------------------------------------

Unidentified Analyst [20]

--------------------------------------------------------------------------------

Yes. So just one follow-up question. In terms of the numbers you shared, the EBITDA from the subsidized business has gone up from 60% to 77%. Am I correct?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [21]

--------------------------------------------------------------------------------

Just one second. It is 77% during the quarter, that is right.

--------------------------------------------------------------------------------

Unidentified Analyst [22]

--------------------------------------------------------------------------------

Versus 60% last year?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [23]

--------------------------------------------------------------------------------

No. Last year, 73%. You're asking about EBITDA or the revenue breakup, Ramesh?

--------------------------------------------------------------------------------

Unidentified Analyst [24]

--------------------------------------------------------------------------------

EBITDA, EBITDA share?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [25]

--------------------------------------------------------------------------------

Yes, EBITDA share last year was 69%. This year, it is 73%.

--------------------------------------------------------------------------------

Unidentified Analyst [26]

--------------------------------------------------------------------------------

So 69% to 73%?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [27]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Analyst [28]

--------------------------------------------------------------------------------

Next in terms of your non-fertilizer/fertilizer share, I think it's improved from 48% to 53%. So I was just wondering if there's any divergence in this? And...

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [29]

--------------------------------------------------------------------------------

No. What we said for non-fertilizer was more in our retail business, right? Because in the trade business, again, we are focusing on...

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [30]

--------------------------------------------------------------------------------

For the retail business also, there is a focus on fert and not fert. Because the fertilizer business actually helps the farmers to bring in the footfall to the stores. And since there is a certain level of margin that you make on fertilizer business, in the non-fertilizer business, the margin composition is different. So the focus for the retail centers is to see how we can get more of non-fert business.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

The next question is from the line of H R Gala from Finvest Advisors.

--------------------------------------------------------------------------------

Unidentified Analyst [32]

--------------------------------------------------------------------------------

Yes. Congratulations for a great set of numbers. Can you just help me with these numbers again? Because I think earlier you said some different numbers of EBITDA share, which I took down. Q3, you said was 63% versus 50%?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [33]

--------------------------------------------------------------------------------

The Q3 EBITDA breakup subsidy and nonsubsidy, Q3 last year was 69% subsidy, now it has gone to 73%.

--------------------------------------------------------------------------------

Unidentified Analyst [34]

--------------------------------------------------------------------------------

That is subsidy, okay. And non -- that is subsidy EBITDA, right? Q3?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [35]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Unidentified Analyst [36]

--------------------------------------------------------------------------------

73% versus last year, 69%. And how much was 9 months?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [37]

--------------------------------------------------------------------------------

YTD?

--------------------------------------------------------------------------------

Unidentified Analyst [38]

--------------------------------------------------------------------------------

Yes, YTD.

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [39]

--------------------------------------------------------------------------------

70 -- YTD this year is 75%. I'd like to just get you the YTD number of last year.

--------------------------------------------------------------------------------

Unidentified Analyst [40]

--------------------------------------------------------------------------------

Yes. Your update, I think, 77%, 74%, that's what I heard.

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [41]

--------------------------------------------------------------------------------

Why don't I just come back to you on this number, please?

--------------------------------------------------------------------------------

Unidentified Analyst [42]

--------------------------------------------------------------------------------

No problem, no problem, Jayashree. Okay, now on capital expenditure side, can you help me that in current year, how much would have been spent?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [43]

--------------------------------------------------------------------------------

Capital expenditure for the year, we had estimated somewhere close to INR 400 crores, INR 450 crores. We have completed the phosphoric acid plant at Vizag. We have also completed the pymetrozine facility at Ankleshwar, pyrazosulfuron at Sarigam and WDG facility at Dahej. These put together is somewhere about INR 250 crores. It has been added to the fixed assets until date.

--------------------------------------------------------------------------------

Unidentified Analyst [44]

--------------------------------------------------------------------------------

Okay. Out of INR 400 crores and INR 450 crores?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [45]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Unidentified Analyst [46]

--------------------------------------------------------------------------------

Okay. And how much you will be spending next year approximately?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [47]

--------------------------------------------------------------------------------

For next year also, we are looking in the range of INR 450 crores to INR 500 crores. We are currently in the process of finalizing our business plan.

--------------------------------------------------------------------------------

Unidentified Analyst [48]

--------------------------------------------------------------------------------

Okay. But will that include capacity increase also for fertilizers and Crop Protection?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [49]

--------------------------------------------------------------------------------

Yes, there is some amount of debottlenecking of one of our plants, which is included already. And as far as Crop Protection is concerned, we are also looking at increasing capacity for one of the newer molecules which has got a very good market response.

--------------------------------------------------------------------------------

Unidentified Analyst [50]

--------------------------------------------------------------------------------

Okay. That's great. Now another question is, what are the pluses and minuses from this budget, which was announced on Saturday?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [51]

--------------------------------------------------------------------------------

Okay. I think there is a lot that you see that the government is focusing on the agriculture sector per se. There are 16 steps that the finance minister has laid out in terms of what all needs to be the focus from the government. So I'm not going to speak on each and every one of them.

--------------------------------------------------------------------------------

Unidentified Analyst [52]

--------------------------------------------------------------------------------

That's fine. I mean overall? Overall?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [53]

--------------------------------------------------------------------------------

Overall, I think that focus on farmers and agriculture sector is going to be good for all agri inputs company as well as agri output company. That is a broader theme that we are seeing. They are still continuing to talk about doubling the farmer's income. So that's a good part of it. (multiple speakers) of saying that we need to have balanced nutrition. At some point in time, we do believe that there will be NBS coming on urea. There was a lot of explanations in this budget that urea NBS might be announced, but for whatever reason, that has not been taken up. Government wants to promote productivities, doubling farmer's income. One of the key requirements is to see that there is balanced nutrition to the soil. That will be possible with promoting more of NPK and restricting the higher urea usage that we are having. So that's something that's coming over a period in time. That's the second thing that we're inferring overall.

--------------------------------------------------------------------------------

Unidentified Analyst [54]

--------------------------------------------------------------------------------

Yes. And third thing, they also spoke about that one -- I mean they should reduce the use of chemical fertilizers -- in the budget, they also said that government wants to focus on reducing the chemical fertilizer consumption and promote more of the nonchemical. So how does -- how will that pan out for our company and for NPA -- NPK manufacturers?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [55]

--------------------------------------------------------------------------------

As far as we are concerned, firstly -- 2 things. I think they are talking more about, like I mentioned, about the N, which is very high, which is basically derived from urea, right? And in some markets, it is not a full fertilizer. DAP is what is -- which is also being utilized much more even to meet the peer economy, especially in North and West. And some of the states have been very high -- some of the states have been very high in terms of -- in the NPK ratio. And obviously, the government is definitely concerned because it leads to negative returns. As far as we are concerned, we have always been a balanced nutritional player, and that is what we are telling the farmers because we believe in his productivity improvement.

We're also one of the largest players in the organic sector. And investing in both organic fertilizer and what is called balanced nutrition, NPK chemical fertilizers, they complement each other. And the organic fertilizer is used -- carbon content in the soil has gone down and, therefore, farmers are not getting productivity. So one way of replenishing the carbon content of the soil is by using organic fertilizer. At the same time, we have some of the organic fertilizers which also give some nutrition to the plants in the form of NPK, and also some other micronutrients like calcium and other things. And we have products, which we have also developed by our R&D team, which I think foresees this. So we would need this to be complementary to the chemical fertilizer coming in and very important to improve the farmer's productivity and ease.

--------------------------------------------------------------------------------

Unidentified Analyst [56]

--------------------------------------------------------------------------------

Okay. But do you expect government facilitates the subsidy rates?

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

This is the operator. Sorry to interrupt you, Mr. Gala. May we request that you return to the question queue for follow-up questions?

The next question is from the line of Abhijit Akella from IIFL.

--------------------------------------------------------------------------------

Abhijit R. Akella, IIFL Research - VP [58]

--------------------------------------------------------------------------------

Congratulations on a great quarter. First of all, I just wanted to confirm, as per my calculations, it seems like the EBITDA per ton on the manufactured part of the fertilizer business was about INR 4,000. So is that the right number?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [59]

--------------------------------------------------------------------------------

It's around INR 3,800, Abhijit.

--------------------------------------------------------------------------------

Abhijit R. Akella, IIFL Research - VP [60]

--------------------------------------------------------------------------------

Okay. And on the Crop Protection side, we've seen a little bit of a soft performance even though the rest of the nonsubsidy business has done very well this quarter. So what -- which parts were slow over here? Was it the export business? And how do you see this export -- Crop Protection business trending now?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [61]

--------------------------------------------------------------------------------

See, Crop Protection, we had a pretty good quarter in the country, both domestic B2C as well as B2B. Exports, we saw some pricing pressures in Mancozeb. We have indicated in the past as well that Mancozeb, given the high channel inventory, has been seeing some price pressures and that continued during the quarter, primarily in the Southern American market as well as in some parts of Asia Pacific.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [62]

--------------------------------------------------------------------------------

Now the way we see it is, one is on Mancozeb, first the Indofil has shutdown certain capacity of the plant in Thane. And actually, the soya crop, because of the trade war between U.S. and China, has been exceptional as far as Brazil is concerned, which is the main market. So we have to wait and see how this trickles up, but we are hoping that the channel inventories actually come down and there's less of pricing pressure given these 2 phenomenons.

--------------------------------------------------------------------------------

Abhijit R. Akella, IIFL Research - VP [63]

--------------------------------------------------------------------------------

Okay, great. One last question, and I'll come back in the queue. The -- just on the budget side, based on the subsidy numbers that have been announced, which are about 11% down year-on-year for the upcoming year, would you foresee any price cuts that are required, MRP cuts that are required heading into the kharif season? And also, in that same context, how would you see the subsidy outstanding for releases coming forward in next year? And whether this EBITDA per ton that you've been targeting of about INR 3,500 per ton, is that still a realistic number for next year?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [64]

--------------------------------------------------------------------------------

Okay. In terms of the announcement by the government for 10%, 11% cut in the subsidy. You'd see over the last year, the raw material prices have been continuously coming down. This has also been reflected in terms of the industry proactively going ahead and reducing the MRP. From a DAP INR 29,500, which was there a year before, currently it's around INR 24,000, INR 25,000 per ton. So that's the action taken by the industry.

From the government side, if they are going to come up with a reduction in the subsidy rate per metric ton, obviously the industry will also be looking into what could be the opportunities on the MRP front, that we'll have to wait and watch. Having said that, from Coromandel's standpoint, there are multiple areas that the company has been working on. One is in terms of sourcing from various strategic partners that we have -- we are working with and identified.

The second thing is our fertilizer plants for next year will be fully operational. The third one, we are working on several debottlenecking to improve the capacity utilization and, therefore, leverage on the fixed cost. Fourth, we are also looking into several operational efficiencies that will come on the supply chain front as well. With all of these, we do believe that INR 3,500 per metric ton is an achievable and a good target for us next year as well.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [65]

--------------------------------------------------------------------------------

And just on the pricing front, Abhijit, what happens is that the industry is already discounting the product further. So what will happen is while the -- and, therefore, the farmer is getting the benefit. If the government reduces the subsidy, that discount will go out and then the MRP will get reduced.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

The next question is from the line of Bharat Gupta from Edelweiss Securities.

--------------------------------------------------------------------------------

Nihal Mahesh Jham, Edelweiss Securities Ltd., Research Division - Research Analyst [67]

--------------------------------------------------------------------------------

This is Nihal here from Edelweiss. My first question was on the CapEx side. If I recollect, at the end of Q2, I think the CapEx number that we are looking for next year was more close to INR 200 crores number. So just wanted to understand, incrementally, what is the fresh CapEx that we have planned for the next year that led to the number of INR 400 crores?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [68]

--------------------------------------------------------------------------------

So what we indicated last time, the INR 200 crores, is every year, we have a normal replacement CapEx of about INR 150 crores to INR 200 crores because we do maintain our operations. So some of our earlier pumps, filters, all of those go through the replacement. So that's the normal replacement CapEx on a year-on-year basis that we have. Apart from that, we are looking at a new evaporator that will come in for our phosphoric acid plant. We are looking at additional storage capacity for some of our raw materials like sulphuric acid, phos acid. And in CPC, we are looking into the multipurpose plant, which will come fully next year. We had contemplated that coming in this year, we've just started it. So that will be taken up in the coming year.

And there are several R&D projects that are also coming up. So all of these put together plus the debottlenecking at the fertilizer plant will add up to this INR 400 crores, INR 450 crores. As I was also mentioning earlier, we are currently in the process of getting our annual plan for next year finalized. That exercise is not through. These are the first set of numbers that have come in from the different SBUs. So as we go through the finalization, we'll have more clarity, and we can talk about it further in our next call.

--------------------------------------------------------------------------------

Nihal Mahesh Jham, Edelweiss Securities Ltd., Research Division - Research Analyst [69]

--------------------------------------------------------------------------------

Sure, that's very helpful. The second thing is that the phos acid facility did get commissioned at the start of the quarter. I just wanted to understand as to what -- approximately what utilization was it at for the quarter?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [70]

--------------------------------------------------------------------------------

The utilization has been fairly good. We did about 29,000 metric tons of phos acid from this plant. And this is more than 100% of our internal estimates in terms of production for the quarter. So if I were to look at it, it's been a pretty good story. The plant has stabilized very quickly and the output has come in well.

--------------------------------------------------------------------------------

Nihal Mahesh Jham, Edelweiss Securities Ltd., Research Division - Research Analyst [71]

--------------------------------------------------------------------------------

Absolutely. So in this background, given the plant ramp-up is also as per expectations, is there a possibility of the EBITDA per ton, which is, I think, for this year also we're looking at INR 3,500, being a little more than FY '21 if all the situation remains the same?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [72]

--------------------------------------------------------------------------------

See, we look at INR 3,200 to INR 3,500 as a ballpark number. So our endeavor, obviously, is going to be looking at improving it further. So INR 3,500, I think, would be a fairly good number because there are going to be several puts and takes. So our guidance remains around INR 3,500. We will definitely endeavor to see how we can improve on this further.

--------------------------------------------------------------------------------

Nihal Mahesh Jham, Edelweiss Securities Ltd., Research Division - Research Analyst [73]

--------------------------------------------------------------------------------

Absolutely. Just one last question from my side. Ma'am, I think you mentioned about how there has been a significant acreage increase for soya bean, especially last year. Now the current situation, obviously, points to that there is a possibility of a sharp reduction happening in the soya acreage, especially in Brazil. In that background, is there a disruption or a bit of overhang that would come into our export business, I mean related to Mancozeb in the next year?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [74]

--------------------------------------------------------------------------------

See, in terms of our overall spread of Mancozeb in the global market, we are fairly widespread. Our dependency on Brazil is not that high. It's actually relatively small. We are spread across various markets including South and Central America. We have a very good presence in Africa. And then we have in the other APAC countries including China. So from that standpoint, an acreage decrease in Brazil, we do not see a big impact for Coromandel per se.

--------------------------------------------------------------------------------

Nihal Mahesh Jham, Edelweiss Securities Ltd., Research Division - Research Analyst [75]

--------------------------------------------------------------------------------

Just for my head, what would be the share of Brazil exports in our export business for the Crop Protection side?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [76]

--------------------------------------------------------------------------------

I'll have to come back to you on specifics on this.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [77]

--------------------------------------------------------------------------------

We don't give specifics. We have...

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [78]

--------------------------------------------------------------------------------

We don't give specifics, but I can share with you later.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [79]

--------------------------------------------------------------------------------

It's one of the other molecules and not on Mancozeb for the Brazil market what we are getting ready and we are getting into registration is, what the market requires is Mancozeb WTG, and that's the plant which we have set up. Earlier, there was outsourcing, but now we have set it up within Dahej, the formulation is in our Dahej plant itself.

--------------------------------------------------------------------------------

Operator [80]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of [Shreyansh Talesara] from Vallum Capital.

--------------------------------------------------------------------------------

Shreyansh Talesara, Vallum Capital Pvt. Ltd. - Analyst [81]

--------------------------------------------------------------------------------

Congratulations for the good set of numbers. Majority of my questions have been answered. Just one question on the Mancozeb side. So what is the present capacity utilization for Mancozeb right now? And what is your future outlook for next 2 years? Like, can you give me any sort of volume guidance for this?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [82]

--------------------------------------------------------------------------------

I can give you the capacity utilization, just one second. So our total capacity is about 50,000. Currently, we are around 65% to 70% of our capacity utilization.

--------------------------------------------------------------------------------

Shreyansh Talesara, Vallum Capital Pvt. Ltd. - Analyst [83]

--------------------------------------------------------------------------------

What is your outlook for markets like Latin America and Africa markets for Mancozeb? Can you give me any idea what you see?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [84]

--------------------------------------------------------------------------------

So we look into overall markets. We do see there is a lot of white space opportunities, while we have been spread across APAC, Africa, LATAM and other parts. Part of our planning process, which is currently going on, is to deeply look into some of these markets, the existing channel stocks that are there, and the capacities of our vis-à-vis competition and our overall strategy for next year. This year, obviously, we had some challenges in terms of additional channel stock being there, resulting in pressures on the prices. We foresee that to sort of ease next year. However, including the cropping pattern, that exercise is currently being done.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [85]

--------------------------------------------------------------------------------

Also, what we have in our pipeline is combination molecules of Mancozeb, which will be something which we'll be registering and continue to grow that because that will make it special for us.

--------------------------------------------------------------------------------

Operator [86]

--------------------------------------------------------------------------------

The next question is from the line of Vishnu Kumar from Spark Capital.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [87]

--------------------------------------------------------------------------------

Firstly, in terms of the medium-term CapEx plan, would it be possible to share, over the next couple of years, what would be an indicative range of CapEx would be doing and which segment primarily would be investing more?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [88]

--------------------------------------------------------------------------------

So Vishnu, next year, we were just talking about, we are -- as we are working through our plan, we are getting close to about INR 400 crores, INR 450 crores of CapEx for the coming year, which is 2021. And as we had indicated in our earlier calls, the focus for Coromandel will be to see how we can increase our capacity, especially with the new molecules and multipurpose plants on the Crop Protection segment. So that we call for additional CapEx, which is part of our long-term strategic plan.

Apart from that, for fertilizer business, given the opportunities in NPK and also the thrust on balanced nutrition, there is some additional CapEx that is required on debottlenecking the plants, both at Kakinada as well as Vizag. So that is also going to be taken up. We are also further looking into opportunities, now that PAP 2 plant is fully commissioned, if there are opportunities to further take up the capacity with few modifications. So all of these in the next 2 to 3 years would mean on an average, in my mind, about INR 400-odd crores per year. Our normal maintenance CapEx is about INR 150 crores to INR 200 crores. I think another INR 200 crores or so would be required for adding up capacity, putting up new product lines, multipurpose plants.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [89]

--------------------------------------------------------------------------------

Also -- and same will apply also on the fertilizer side where we're looking at new delivery mechanisms and also new product -- new next gen projects. So the R&D team is already working on it. As and when they come up with the molecules, we'll be putting CapEx for that.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [90]

--------------------------------------------------------------------------------

This is the fertilizer side, is it, sir?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [91]

--------------------------------------------------------------------------------

Including fertilizer. So we are looking at next-generation molecules, both from our Crop Protection and also from our fertilizer and specialty nutrition point of view.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [92]

--------------------------------------------------------------------------------

Okay. On an average, is it fair to say that INR 200 crores, INR 250 crores should be still for fertilizer, about INR 100 crores to INR 150 crores would go towards the CPC and others?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [93]

--------------------------------------------------------------------------------

Yes, I think so. There could be some shifts depending on how we want to accelerate the Crop Protection business. But I think this is a fair assessment.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [94]

--------------------------------------------------------------------------------

In terms of debottlenecking in fertilizers, how much would our capacity or any additional data points if you could give us on that? I mean we are probably at 3, 3.3 metric tons of capacity, would it go up by, let's say, about 0.2, 0.3?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [95]

--------------------------------------------------------------------------------

No, each plant has a different plan that has been worked out. Again, this depends upon the product mix. For instance, in Kakinada, we do multiple product mix. So we want to continue some of those products or is there other ways of optimizing, how some of those that are being worked out at the BU level? Overall idea is to see how we can focus more on our unique grades. And as Sameer was mentioning, also looking into branding of certain products where we can decommoditize. And therefore, currently, looking at our 13-odd products that we are manufacturing, do we need all the 13 or is there a smarter mix that we need to have is also being contemplated. Depending on that, the capacity release could be higher than what we had originally thought through. So that exercise is currently going on, Vishnu.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [96]

--------------------------------------------------------------------------------

And we always have listing of actually importing DAP and releasing those capacity for NPKs.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [97]

--------------------------------------------------------------------------------

Got it. On an average, could, at least, we say that the 10% capacity increase is possible? I mean just to indicate a ballpark number?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [98]

--------------------------------------------------------------------------------

Yes, 5% to 10% should be possible.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [99]

--------------------------------------------------------------------------------

Got it. And you mentioned the phosphoric acid plant also there. Currently, including the recent expansion, my view -- I mean I think it's about 3.5 lakh tons. Is the number going to go up from here?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [100]

--------------------------------------------------------------------------------

No, at this point, these are the approvals that we have. This also needs to go through some regulatory approvals and all. So currently, I think 3.5 to 4 lakh tons is what one could look at from the -- both the phosphoric acid plants.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [101]

--------------------------------------------------------------------------------

Any idea do you put it as well in the new and other fertilizer locations also? This is the last quarter that you might look into it?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [102]

--------------------------------------------------------------------------------

No, no, there are a lot of regulatory requirements when you have to put up a new phosphoric acid plant. We also need to have a sulphuric acid capacity in-house, which has been the case in Vizag. We had looked at Kakinada earlier. The other factor that we also need to look into is disposal of gypsum. So there are a lot of environmental clearances that needs to be taken before we first put up a phosphoric acid plant. It was always -- rapid integration is helpful in terms of value creation for the company. So phosphoric acid plant and sulphuric acid plant, government approvals is quite cumbersome. Then the next one is also, what do we do with the additional gypsum? Is there enough takers for it? It is something that we have to weigh on. We have to properly dispose the gypsum.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [103]

--------------------------------------------------------------------------------

Got it, ma'am. And just one more comment that you mentioned that we probably -- before the budget, we are expecting some announcement of NBS in urea. Obviously, that did not play out. Going ahead, at least, do you see that there could be a potential price hike, marginally, let's say, INR 50 per bag or INR 100 per bag of urea? And any sort of things that you heard from ministry? And if at all, before the kharif season, when is the time line by which, if at all that could be possible, you will consider that?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [104]

--------------------------------------------------------------------------------

See, the dialogue is very much there between the government and the industry and the farmer association and all. So all that dialogue is there, which is basically being taken for part of the year. Definitely, the intent of the government is to look at how -- and the main intent is about balanced nutrition, which they've stated. And balanced nutrition cannot come at the current level of urea consumption.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [105]

--------------------------------------------------------------------------------

So what is the realistic way forward, in your view, sir? Is it possible that government may...

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [106]

--------------------------------------------------------------------------------

What the government is doing. Firstly, when you look at DBT 2, they've already now -- with the (inaudible) and there is a recommendation to the farmers in terms of making them aware of the balanced nutrition and what they need. So that's one, and it's also the onus on the companies to make them educated on the balanced nutrition linked to the soil and plant. So that is what we have been doing with the agronomics team and all on the importance of increasing their productivity and, therefore, to use balanced nutrition. And this is not just NPK, but also other micronutrients.

The second thing is, which is more of a game is, the farmer still feels because the urea is cheap that he should be utilizing it. But once he realizes the negativity of it, which is coming from various sources, he himself will have some attention, and like I said, this is more prevalent in certain states much more acutely than other states as such. And this is also crop specific. So the government definitely wants to look at it. And that's the reason probably they have brought down the subsidy level also, basically to encourage balanced nutrition. And also, at the same time, increase the use of organic fertilizer.

--------------------------------------------------------------------------------

Vishnu Kumar A.S., Spark Capital Advisors (India) Private Limited, Research Division - VP [107]

--------------------------------------------------------------------------------

Got it, sir. And just one final question in terms of current -- I'll just close out with this. Because of the current Chinese situation, is there any supply issues in terms of chemical prices? Or is it favorable to us or not favorable to us?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [108]

--------------------------------------------------------------------------------

See currently, in the last week or so, there have been some disturbances in terms of secondary transportation in China. So if somebody is looking at importing for a shorter term requirement, they are definitely going to be constrained. As far as Coromandel is concerned, we've sort of covered for the next 2 to 3 months, so we don't foresee any issue in terms of availability. And in the longer term, we do think that the concerns relating to Coronavirus should come down and should not have an overall impact. Having said that, overall, the issues that are there in China from a broader perspective, given some of the environmental crackdown that's going on, all those well for India and we have seen that happening across various Crop Protection companies here. I expect that trend to continue.

--------------------------------------------------------------------------------

Operator [109]

--------------------------------------------------------------------------------

The next question is from the line of Resham Jain from DSP Investment.

--------------------------------------------------------------------------------

Resham Jain, DSP Investment Managers Pvt. Ltd. - Assistant VP [110]

--------------------------------------------------------------------------------

Sir, just 2 questions. Sir, one is on debottlenecking of capacity, which you mentioned. Will this capacity be available for us in the kharif period? Or will this come only after the kharif will be over next year?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [111]

--------------------------------------------------------------------------------

It may not come immediately for the kharif period. As Sameer was mentioning to you, if there is a need for more NPK, our strategy has been to see how we can import DAP and use that capacity for NPK production. The debottlenecking will take over a period of a year or so. So that initiative is going to be taken up in the coming year.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [112]

--------------------------------------------------------------------------------

But we are sufficiently covered in terms of all our requirements for next year. So that's not -- won't be an issue.

--------------------------------------------------------------------------------

Resham Jain, DSP Investment Managers Pvt. Ltd. - Assistant VP [113]

--------------------------------------------------------------------------------

Okay, okay. And next year, given that good reservoir levels are here, do you expect that the kharif sowing also should be slightly better and timely as compared to what we have seen this year?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [114]

--------------------------------------------------------------------------------

Early to say, but definitely the first prediction, and it's a very early prediction, was normal monsoon. So if the monsoons are normal, obviously, we do expect the kharif sowing to start earlier, as per normal than later like it happened last year.

--------------------------------------------------------------------------------

Resham Jain, DSP Investment Managers Pvt. Ltd. - Assistant VP [115]

--------------------------------------------------------------------------------

Okay. And just one final question is on -- last year, if we look at your balance sheet, your inventory actually has gone up significantly, almost INR 1,000 crores increase. And you mentioned last year that there has been some strategic purchase, which has happened. Do you expect that the same level of inventory will be there this year as well? Or how the situation will be?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [116]

--------------------------------------------------------------------------------

Last year, there were a couple of things. One is in terms of our annual turnaround plan that we have. We typically look into March or April depending upon the season. And given the fact that for kharif season, we will have to be ready. We had actually produced more in March and we were holding as inventory with us. This year, as we speak now, the exact timing of ETA is not yet clear. It may happen in March or it may be -- there may be a spillover in April. Depending on that, finished goods inventory could move. And that it could be closer to prior year levels.

--------------------------------------------------------------------------------

Operator [117]

--------------------------------------------------------------------------------

The next question is from the line of Rohan Gupta from Edelweiss.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [118]

--------------------------------------------------------------------------------

Sir, just one question -- first question is on the -- our strategy to get into urea. We have seen that there are some stress assets may be available in the current scenario and Coromandel as a company has always shown a desire to get into urea business also. Do you see that, in the current scenario, there is a possibility that the company may acquire any of these stress assets which are available?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [119]

--------------------------------------------------------------------------------

So Rohan, I don't know whether you were there a couple of years back. And this question was asked to the Chairman. And one of the things which he had mentioned clearly was in terms of what Coromandel did not do. And for a particular reason, and he said, we did not get into urea. And they are glad they didn't get into that because of all the reasons which have been alluded to and what the industry has been seeing. Having said that, if tomorrow, the government policy of urea changes and things become better for urea, there's no reason for us, as a fertilizer company, not to look at -- at least look at the opportunity as such. But currently, there are no plans.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [120]

--------------------------------------------------------------------------------

Okay. Sir, second question on this agrochemicals. Jayashree mentioned that there is 1 product in technicals, you are increasing the capacity and putting a new plant for that. So can you just elaborate a little bit that this is technical plant for B2B in agrochemicals? Or -- just some more light on that front?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [121]

--------------------------------------------------------------------------------

So Rohan, this is primarily for the domestic market, which could be both B2B and B2C.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [122]

--------------------------------------------------------------------------------

And this is the existing 2 that we are manufacturing or the new technicals?

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [123]

--------------------------------------------------------------------------------

It's a new technical.

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [124]

--------------------------------------------------------------------------------

This is new technical.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [125]

--------------------------------------------------------------------------------

And we have already started manufacturing this?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [126]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [127]

--------------------------------------------------------------------------------

And marketing.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [128]

--------------------------------------------------------------------------------

And marketing. So I don't think that there is any reason not to mention this technical, if you can give the name of the technical?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [129]

--------------------------------------------------------------------------------

We will share with you next time. We're just going through the process.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [130]

--------------------------------------------------------------------------------

Okay. Is it going to replace the imports in the current market or market size? Any sense on that front then?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [131]

--------------------------------------------------------------------------------

No. As we started production of technical and formulation, we see that there is a much higher demand than we originally anticipated. So from that standpoint, we are going ahead, increasing the capacity production for this product. It is not replacing anything. It's a new product that we introduced.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [132]

--------------------------------------------------------------------------------

Okay. And just last one, and I'll come back in queue again. Ma'am, you mentioned that we still have a DAP manufacturing capability and we are still utilizing our DAP manufacturing plant, which can -- very easily can be converted to NPK. So do you see that over the next 2 to 3 years, that even with the current capacities and with even 10% debottlenecking, sort of we can very easily go to 4 to 4.5 million tons of NPK, pure NPK production, if we move to DAP company's trading?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [133]

--------------------------------------------------------------------------------

So let me clarify this to you, Rohan. Our plants and fertilizer are fungible. We can do both NPK and DAP in the same facility. As we stand, also our DAP production is normally very less. We can further minimize it and produce NPK depending on the market requirements. That will increase the capacity for NPK and we can resort to DAP imports. So that is what I was articulating. That will not give you so much of additional capacity, even if you look into our DAP production, it's not very high at all. What will help us is to see how we can optimize the mix. Currently, we are ordering about 12 to 13 products. We are also looking into a lot of value-added products, if you look at it. We have a value-added product based on the shell technology, which is gross margins relaunched this year. We are also doing 10:26:22 (inaudible) which has very specific requirement for certain markets. So when we do these value-added products, there is also a change over time. It is about optimizing our plants through planning of our mix. So reducing the change over time can also help us in increasing the production capacity. That is what I was referring to. That will help us to, say, get about 2% to 3% or address the 5% additional capacity utilization. That is what one can look into.

--------------------------------------------------------------------------------

Rohan Gupta, Edelweiss Securities Ltd., Research Division - Research Analyst [134]

--------------------------------------------------------------------------------

So at best, without DAP, we can make NPK with the optimal utilization, 3.5 million ton, even after 7%, 8% debottlenecking which we are planning to do next year. Is that the right number?

--------------------------------------------------------------------------------

Jayashree Satagopan, Coromandel International Limited - CFO & Executive VP [135]

--------------------------------------------------------------------------------

Yes. Directionally, you can look at it, Rohan. I'm not getting into what is the right number around now because mix has a very important role here. And one should also bear in mind there is a huge goodwill and the brand recall for our own manufactured DAP. Godavari DAP has a superb recall from the customers and people want to buy Godavari DAP rather than imported DAP.

So we do not want to deny some of our customers an opportunity to buy our products. Like Nagarjuna Urea, Godavari DAP is one of the top brands in AP/TG. So we will have to look into it optimally, not just say we will not manufacture DAP and resort to complete imports. So there may be some amount of manufacturing to meet with certain segments of our customers. At the same time, it will also be to see how we can better utilize our facility for other NPK grades as well. So it is a very dynamic decision-making process based on the demand. But ultimately, the company looks at seeing how you can give maximum production, which meets with the farmer requirements.

--------------------------------------------------------------------------------

Operator [136]

--------------------------------------------------------------------------------

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Goel for closing comments.

--------------------------------------------------------------------------------

Sameer Goel, Coromandel International Limited - MD & Executive Director [137]

--------------------------------------------------------------------------------

Right. Thank you very much, and appreciate everyone's time and questions. If there are any further questions people have, they can get in touch with Saurabh, Jayashree or me directly, and we can be more than happy to answer the questions. But I think overall, it has been a good, strong quarter 3. And like we predicted from early on, with the fact that the rabi season is turning out to be good, we expect this momentum to continue in quarter 4. And we are hoping that we are building up our plans for next year. And with the normal announcement of a normal monsoon, it will help us to continue to build Coromandel further as a brand. And I think, overall, all our strategic drivers, which we are doing, are panning out and we continue to be aggressive in terms of looking at what the chain market scenario is going to be, and developing products and also improving our reach to the farmers in terms of -- and also improving our operational efficiencies, that will continue to happen in the coming year. Thank you very much.

--------------------------------------------------------------------------------

Operator [138]

--------------------------------------------------------------------------------

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.