Deepak Nitrite Limited
Q1 FY26
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- Volume growth across a diverse product portfolio, with recovery in non-agrochemical applications.
- Notable improvement in consolidated EBITDA (INR 197 crore, up 11% QoQ) and margin expansion to 10%.
- Operational efficiencies and cost optimization initiatives yielding results.
- Progress on backward and forward integration projects, including trial production at new hydrogenation and nitric acid facilities.
- Expansion into new products and geographies, with new product launches for dyes, cosmetics, and through co-manufacturing agreements.
- Resilience in the Phenolics segment, with improved profitability and operational efficiencies.
- Strategic transition to renewable energy, with a PPA signed and projected eCO₂ emissions reduction of 60–65% by FY27.
Key Negatives
- Slower-than-expected recovery in agrochemical intermediates due to global demand softness and oversupply from China.
- Standalone revenue (INR 620 crore) and EBIT (INR 41 crore) declined due to delayed offtake in agchem intermediates.
- Phenolics segment revenue declined 6% sequentially.
- Persistent pricing pressure in Advanced Intermediates segment.
- Geopolitical uncertainties and potential US tariffs, though direct exposure is limited.
Forward Guidance
- Capex plans: INR 10,000 crore investment over next 3 years; FY26 capex outlay of INR 800–1,000 crore, with INR 3,000 crore in FY27 and balance by FY28.
- New products/segments: Commercialization of new integrated products for dyes/cosmetics and specialty fluorochemicals; new hydrogenation and advanced solvent plants to be commissioned in next quarter.
- Expected client wins/losses: New customer additions in non-agchem and new geographies; pilot batches for new products with commercial volumes expected from January 2026.
- Revenue/margin outlook: Anticipates demand revival in agro intermediates and margin improvement as new projects come online and cost initiatives gain momentum; Advanced Intermediates segment margins expected to improve with backward integration.
- Other strategic initiatives: India's first integrated polycarbonate project (165,000 MTPA) to start by December 2027; focus on import substitution, digital transformation, and sustainability.
2 · Q&A Highlights
Q 1 (Composite): What is driving the weakness in agrochemical intermediates, and when is recovery expected?
A (Management):
• Weakness due to global demand softness and China oversupply, mainly in final products; Deepak is focused on cost optimization, asset multipurposing, and expects recovery as deferred orders are fulfilled and new products are qualified for supply from January 2026.
Q 2 (Composite): Update on new specialty fluorochemical project and its market potential/timeline?
A (Management):
• INR 220 crore investment; commissioning expected between Jan–Mar 2026; primary customer is an agro major for a patented product, but plant is fungible for cosmetics and polymers; pilot batches in Q3 FY26, with long-term contracts to follow.
Q 3 (Composite): Capex pipeline, integration benefits, and payback/IRR for polycarbonate project?
A (Management):
• Capex of INR 11,000 crore including BPA; payback for integrated value chain is 5–5.5 years with 16–18% IRR; most new phenol/acetone/BPA capacity will be captive for polycarbonate, with some merchant sales.
Q 4 (Composite): Timeline and margin impact of nitric acid and advanced solvent (MIBK/MIBC) projects?
A (Management):
• Nitric acid and weak nitric acid plants to be commissioned by end-Q2 FY26, with 2–3% EBITDA margin uplift in Advanced Intermediates from Q3; MIBK/MIBC ramp-up to be accelerated, with merchant revenue potential of INR 550 crore, but margins highly dynamic.
Q 5 (Composite): Impact of global trade/tariff risks and mitigation strategies?
A (Management):
• Direct US exposure is 2.5–3%; company is expanding into new markets and focusing on domestic demand; capex plans remain unchanged as projects are targeted at Indian customers and import substitution.
Q 6 (Composite): Phenolics segment performance and sequential revenue decline despite improved realizations?
A (Management):
• Sequential revenue decline of 6% (excluding government incentives) due to volume constraints from heatwave, but EBITDA improved due to better spreads; Q1 saw highest-ever production despite challenges.
Q 7 (Composite): Debt levels at peak capex and future expansion plans?
A (Management):
• Peak debt expected at INR 7,000–7,500 crore (max 1.5x D/E); further expansion beyond 2027 will be considered after current projects are operational.
Q 8 (Composite): Polycarbonate market size, competition, and strategic positioning?
A (Management):
• Indian polycarbonate market size is 400,000 MT; Deepak will be the first integrated domestic producer; expects to be lowest-cost producer due to integration; no plans to manufacture ABS, but will supply to ABS producers.
3 · Other Key Numbers
- Q1 FY26 consolidated revenue: INR 1,897 crore (down 7% QoQ)
- Q1 FY26 consolidated EBITDA: INR 197 crore (up 11% QoQ)
- Q1 FY26 EBITDA margin: 10%
- Q1 FY26 PBT: INR 138 crore (up 17% QoQ)
- Government incentives: INR 17 crore (Q1 FY26), INR 161 crore (Q4 FY25)
- Standalone Deepak Nitrite revenue: INR 620 crore (down 6% QoQ)
- Standalone EBIT: INR 41 crore
- Advanced Intermediates segment revenue: INR 605 crore (down 7% QoQ)
- Advanced Intermediates EBIT: INR 35 crore (margin 6%)
- Phenolics segment revenue: INR 1,287 crore (down 6% QoQ)
- Phenolics EBIT: INR 101 crore (margin 8%; EBIT up 29% QoQ)
- Domestic/export revenue split: INR 1,623 crore (domestic), INR 267 crore (export); ratio 86:14
- Planned capex: INR 10,000 crore over 3 years; FY26: INR 800–1,000 crore; FY27: INR 3,000 crore; FY28: balance
- Polycarbonate project capacity: 165,000 MTPA; Indian market size: 400,000 MT
- Renewable energy target: 60–70% by FY27; projected eCO₂ reduction: 60–65%
- Payback for integrated polycarbonate project: 5–5.5 years; IRR: 16–18%
- Peak debt expected: INR 7,000–7,500 crore (max 1.5x D/E)
- US exposure: 2.5–3% of consolidated revenue
- MIBK merchant revenue potential: INR 550 crore
- Capex for specialty fluorochemical project: INR 220 crore
- Polycarbonate project commercial operations: by December 2027
- Number of manufacturing plants: 7; countries served: 50+