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00:00Mr. V.D. Nanavati, the Executive Director of Finance and CFO of the company joins us
00:04right now on the phone line to talk about these numbers.
00:08Mr. Nanavati, thanks so much for taking the time out.
00:11Now, good morning to you.
00:13But I understand that it's not very happy hunting grounds for fertilizer companies because
00:19the raw material prices are moving up, subsidies not there, and it's showing in the hit that
00:25all companies are taking on margins, including yours.
00:29Correct, correct, correct.
00:31So what's happening, the outlook, and why did this happen and how bad can it get?
00:37No, it will improve, I mean, this is the bottom, along with the lower, I mean, subsidy level
00:46versus higher input cost.
00:49We also had the Red Sea crisis that delayed the shipment of inputs in the Q4, so the production
00:57and sales, everything were affected.
01:00But we are hopeful to get back the ground in this current financial year, and 20% growth,
01:09volume growth we expect in the fertilizer volume on the, I mean, with the backup of
01:16the good monsoon that is predicted in the country.
01:20And the higher production at Sika Unit we are planning, plus one more fertilizer plant
01:25set up at Baroda Unit of ammonium sulfate.
01:29So with the support of these new facilities, we will be able to achieve higher volume of
01:34around 23 to 24 lakh metric ton in current FY.
01:39So that is what the positive thing is.
01:42As far as IP industrial product is concerned, still the headwinds of lower realizations
01:49continue, and immediately we don't see any turnaround in this chemical sector.
01:58So still there will be, I mean, we will be meeting the demand, there will be turnover,
02:05but margin will be under pressure.
02:09So I hear that you are saying that there will be volume growth, Mr. Naravati, but will that
02:14volume growth of 20% or even 23, 24% lift, have operating leverage benefits, would margins
02:21move up from either the 1% in March quarter or even the 5% in December quarter, which
02:27is not great either.
02:28What do you expect FY25 average margins to be like?
02:32Yeah, we also see some margin growth in FY25 over the yearly performance of FY24.
02:42How much?
02:44Over FY24, whatever PBT we achieved, we see some growth in the PBT in the current financial
02:52year, so some improvement in margin is seen.
02:55No, sir, sorry, sorry, sorry, I just want clarity.
02:59You are anyway showing a volume growth, so the PBT is going to go up, I have no doubts
03:03on that.
03:04My question is from the 6% EBITDA margin that you've got or operating profit margin that
03:09you had in FY24, can it go up to 7, 8, 9% or would it be double digits or difficult
03:15to say?
03:16No, difficult to achieve, but let us hope post-election results, some improvement in
03:22the subsidy regime also is taken to correct this anomaly at present, because still the
03:29raw material prices are high, it's not gone down the way subsidy structure for the FY25
03:36also.
03:37So already government is feeling the shortage of DAP in the country and people are, fertilizer
03:44companies are reluctant to either produce or import DAP, so this current season there
03:51is likely to be quite a good shortage in DAP and that cannot be, I mean, tolerated, demand
04:00has to be met on the back of the good monsoon.
04:05Some correction in subsidy may be considered post-June or July.
04:13Right, so I think Mr. Nanavati, fair for us to assume that the first quarter of FY25 will
04:19still be a little soft and we hopefully will see the sector and your company seeing an
04:23improvement in earnings going into second quarter of FY25.
04:29One of the good things about GSFC also is that you are debt-free.
04:34So any sort of planned CAPEX which you were fairly aggressive on last year would have
04:37been self-funded.
04:38Can you share with us what is the cash positions at GSFC currently?
04:44Yeah, so the published result, that is the balance sheet shows the cash position.
04:52We have cash around 2200 crores as on March end, so and as you said it is debt-free and
05:00our CAPEX plans are also uploaded during the next five years.
05:05We have CAPEX plan of more than 6000 crores.
05:09So we plough back all our earnings in form of, I mean, growth as well as to reward the
05:18shareholders.
05:19Mr. Nanavati, it's interesting because exactly a year ago there was cash in the books was
05:25about 1400 crores and now that's down to 200 crores.
05:28I do understand that you are ploughing back all your earnings back into the business for
05:32expansion purposes.
05:34But given that things have been fairly muted in this quarter, those numbers are not just
05:38for you but industry-wide are slightly weak.
05:41Is there any expectation of raising some debt to cross over or for now that's not even on
05:47the radar as we see it, or potentially a delay in expansion plans could possibly be an outcome
05:53of this?
05:55No, I mean, CAPEX plan will continue as planned and as shown in the investor presentation.
06:02As far as the borrowing is concerned, it is not immediately required.
06:07So the borrowing may happen after three years from now.
06:11So maybe FY28, if we need money, we will borrow.
06:16Otherwise, right now, we are okay with the fund position and internal acrobatics.
06:23Mr. Ramati, one thing, on the dividend, I mean, because there's this whole talk about
06:27the dividend policy for some of the Gujarat PSUs, what's the update there?
06:31What's the dividend that you will be giving or via subsidiaries if you are getting some?
06:37Yeah, so we have declared 200% dividend in the yesterday's board meeting.
06:43It is a little lower than that government guidelines because it is not also prudent
06:50to have a very large payout ratio when your PET is low.
06:55So if we strictly follow guidelines, it would have amounted to more than 75% payout ratio
07:04for the dividend.
07:06But that is not sound financial practice as well as in view of the impending CAPEX also.
07:15And plus government policy of reasonable national profit guidelines where you have
07:24control on your business aspect of the profitability also.
07:30So considering all these things, we need to be cautious in declaring the dividend.
07:36So the board declared 200% dividend instead of, say, 500% last year.
07:42Thank you very much, Mr. Nanavati.
07:44Good luck.
07:45I know things are tough, but we really hope that it comes out of the woods because things
07:48have deteriorated substantially for the sector in the last couple of quarters.
07:52But we hope it works out for you.