GNFC Concall Notes: Key Updates from Gujarat Narmada Valley Fertilizers & Chemicals Ltd

Table of Contents

GNFC Concall Notes – Gujarat Narmada Valley Fertilizers & Chemicals Ltd

GNFC Concall Notes – Gujarat Narmada Valley Fertilizers & Chemicals Ltd

Business Overview

Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) operates in two main sectors: Fertilizers and Chemicals. The fertilizer business is regulated by government subsidies, while the chemical segment operates under market-driven conditions.

Fertilizer Segment Insights

Key Developments:

Government subsidies are being received regularly, and inventory levels are at their lowest.
The government is revising energy norms and fixed costs for urea units, with new policies expected by March 31, 2025.
Input costs for complex fertilizers have decreased, improving margins.
Production facilities in Dahej and Bharuch are operating smoothly.
Current projects worth about ₹2,300 crores are progressing in different stages.

Chemical Segment Insights

Revenue from the chemical segment has been lower, but higher sales volumes have helped compensate.
Key chemicals like TDI (Toluene Diisocyanate) and Technical Grade Urea have seen increased production and sales compared to previous quarters.
Operational efficiencies have boosted both Profit Before Tax (PBT) and Profit After Tax (PAT).

Financial Performance

PBT: ₹211 crores | PAT: ₹158 crores.
Growth seen both quarter-over-quarter and year-over-year.
Operational improvements and write-backs contributed ₹76 crores.
Fertilizer losses have decreased due to lower input costs.

TDI Plant Transition

Transition to a coal-based power plant is expected to save ₹14,500 per metric tonne of TDI.
New operations expected to start by August 1, 2025.
Current fixed costs for TDI stand at ₹50,000 per metric tonne.
Losses from TDI production estimated at ₹150-200 crores due to reduced volumes.

Market Trends

India’s demand for Technical Grade Urea: 500,000 tonnes.
GNFC’s contribution: 200,000 tonnes, with the remaining quantity imported.
TDI production faced challenges due to fixed costs and prolonged shutdowns.

Capital Expenditure (CAPEX) Plans

GNFC has a total CAPEX of ₹2,300 crores, which includes:

Coal-based power plant: ₹613 crores.
Weak Nitric Acid (WNA) project: ₹1,420 crores.
Ammonia makeup loop: ₹225 crores.
Financial commitments: ₹187 crores advance for WNA; 60% of coal power plant costs already allocated.

Profit Margins & Future Outlook

Operating margins have ranged between 5%-8% in recent quarters, compared to 25%-30% historically.
Margin recovery depends on global chemical cycles and import pricing.
Management remains uncertain if margins have hit their lowest point.

Strategic Growth Initiatives

GNFC has engaged Kearney to improve cost efficiencies and business growth.
Focus on reducing variable costs and optimizing operations.
Management is actively reviewing fixed cost structures.

Dividend Policy & Shareholder Returns

Management has confirmed a 30% PAT payout as dividends, excluding any buybacks.
Decisions on buybacks and dividends will be taken separately.

Conclusion

GNFC is managing challenges in the fertilizer sector while strengthening its chemical business to enhance profits. The company is focusing on cost reductions, operational efficiency, and strategic investments to improve future performance. Management remains cautiously optimistic about growth and margin improvements in the coming months.