Deepak Nitrite Ltd (DEEPAKNTR) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Deepak Nitrite Q2 FY '27 Earnings Conference Call, hosted by IIFL Capital Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in nature, and a disclaimer to this effect has been included in the investor communication shared with you earlier. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Capital Services Limited. Thank you, and over to you, sir.
Ranjit Cirumalla (IIFL Capital Services Limited): Thank you, Elsa. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q2 and H1 FY '27 Earnings Conference Call. Today, we have with us Mr. Maulik Mehta, Deputy Managing Director; Mr. Sanjay Upadhyay, Director, Finance, and Group CFO; and Mr. Somsekhar Nanda, CFO of Deepak Nitrite Limited. We will begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin, Mr. Maulik Mehta will share views on the operating performance and the growth plans of the company, followed by Mr. Sanjay Upadhyay, who shall take us through the financial and segmental performance. The result documents have been shared with you earlier and have been posted on the company's website. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.
Maulik Mehta (Deepak Nitrite Ltd): Thank you. Good afternoon, everybody, and a warm welcome to Deepak Nitrite's Q2 and H1 FY '27 earnings conference call. Thank you for your continued interest in the company. Our investor presentation and financial results have already been shared, and I trust you've had an opportunity to review them. I will begin by sharing our perspective on the operating environment, business performance, and strategic developments, following which Mr. Upadhyay will take you through the financial results in greater detail. At the outset, I'm delighted to announce that we have achieved the best-ever performance in Deepak Nitrite's operating history of over five decades, delivering record revenue and EBITDA on both a quarterly as well as a half-yearly basis. Consolidated revenue from operations for Q2 stood at 3,091 crores, registering a sequential growth of 19% and year-on-year growth of 61%.
Maulik Mehta (Deepak Nitrite Ltd): worthwhile year, the challenging environment in which it has been accomplished. I'd like to congratulate our entire team for its commitment, agility, and outstanding execution. The global chemical industry continues to navigate significant volatility arising from geopolitical developments, disruptions to international trade, elevated freight, and energy costs, as well as uneven demand across end use applications. These developments are also influencing sourcing preferences, with customers increasingly valuing assured delivery, consistent quality as well as reliability of supply. For Deepak, this environment has presented opportunities as well as challenges. Our extensive domestic manufacturing footprint, integrated operations, and ability to respond swiftly to evolving market conditions have enabled us to capitalize on such opportunities while mitigating disruptions across our businesses. On Phenolics, this was our principal driver for the quarter's performance, achieving its highest ever top line and profitability. Disruptions to international supply chains, higher landed costs of imports, and firm domestic demand created a favorable market environment. Importantly, our teams were able to capitalize on these conditions through proactive procurement of critical feedstocks, maintaining consistently high operating rates, and ensuring dependable supplies to customers. Despite challenges in securing our basket of inputs, we sustained high throughputs across the Phenolics chain, with several assets operating at or above their rated capacities. This reflects the quality of our manufacturing infrastructure, operational expertise, and the advantages of being a large-scale domestic producer. In advanced intermediates, Q2 was a result of buoyant domestic demand of Q1, which, despite proactive procurement strategies, we were unable to fully cater to. Consumers saw elevated ammonia prices and other raw material prices, and imported proactively, which landed up in July. This led to lower utilization of some plants despite the moderation in raw material prices. While this impacted Q2, the current demand scenario, as well as ongoing in the forthcoming quarters, shows the value of our emphasis on an integrated ammonia to amines and propylene to polycarbonate strategy. Our short and medium-term growth prospects remain encouraging. Growth will be supported by an improvement in the demand across various product categories, capacity-led expansion in select product lines, and a gradual ramp-up of recently commissioned facilities. We're also continuing to diversify our product portfolio, customer base, as well as geographic presence. This approach is intended to reduce dependence on individual products or markets, improve our ability to serve customers, and create a more resilient earning base. A key priority for us continues to be the development of integrated manufacturing platforms that improve raw material security, enhance cost competitiveness, and enable greater value addition. This is over and above best in class carbon footprint as well as an overall integrated cost platform. The stabilization of our ammonia to amines chain, together with the expansion of our nitration as well as hydrogenation capabilities, represents an important milestone in this journey. These investments strengthen supply securities and provide the infrastructure required to develop a far broader range of downstream products. During the quarter, we continued with a ramp-up of recently commissioned assets, including the nitric acid facility, while progressing with the commercialization as well as scale up for manufacturing downstream products such as MIBK, MIBC, as well as the derivatives. Moreover, through the, towards the end of the quarter, Deepak Chemtech also commissioned its chlorination, which is in addition to the photo halogenation assets, as well as specialty chemicals plant in Dahej with a capital investment of approximately 300 crores, including associated utilities and infra. The commissioning strengthens the group's manufacturing footprint and expands its specialty chemicals portfolio, enabling Deepak Nitrite to cater to a wider range of customer requirements and capture emerging growth opportunities. As the plant ramp-up in operations,
Maulik Mehta (Deepak Nitrite Ltd): they are expected to drive incremental revenues, improve capability, utilization, as well as generate operational efficiencies, and this will also lead to margin improvement as well as strengthening of the overall company's performance. These facilities, as they stabilize and customer requirements as they translate into commercial volumes, are expected to provide a greater manufacturing flexibility and support optimize cost efficiencies. On our integrated polycarbonate project, we continue to advance in line with its execution road map. Progress at Dahej alongside the dismantling and relocation activities in Germany are expected to steadily build up the foundation for our entry into advanced materials. We're also progressing well with customer qualifications for the polycarbonate compounds across multiple applications. Looking ahead, we remain encouraged by the opportunities across businesses. In phenolics, our priority is to sustain high throughput, strengthen downstream value addition, and grow wallet share. Within advanced intermediates, improving capacity utilization, new product introductions, and the ongoing recovery in deferred demand provide additional avenues for growth. As our new assets progressively ramp up and customer qualifications translate into commercial volumes, we expect an increasingly diversified contribution from our portfolio. While geopolitical uncertainties and price volatility may persist, we believe Deepak is better equipped than ever to respond to changing market conditions. Our focus continues to remain on maximizing asset turns for our existing lines while building new platforms for long-term growth. With this, I'd like to hand over the call to Mr. Sanjay Upadhyay to take you through the financial performance of the quarter as well as the first half. Thank you.
Sanjay Upadhyay (Deepak Nitrite Ltd): Thank you Maulik and good afternoon, everyone. I'll take you through the financial and segmental performance for the quarter and half-year ended September 30, 2026, followed by an update on our balance sheet and capital allocation. Consolidated financial performance for the quarter two marked another record quarter for Deepak Group. Consolidated revenue from operations increased to 3,091 crores, registering growth of 61% year-on-year and 19% sequentially. EBITDA reached a record 643 crores, growing at 187% year-on-year and 16% quarter-on-quarter with EBITDA margin sustained at 21%. PBT increased to 543 crores, with PAT reached 398 crores, representing sequential growth of 16 and 15% respectively. For H1 FY27, consolidated revenue stood at 5,682 crores, registering 48% year-on-year growth. EBITDA increased 173% to 1,197 crore with margins expanding to 21% compared with approximately 11% in corresponding period last year. PAT increased 221% to 743 crores. The significant year-on-year improvement reflects higher operation throughput, favorable product economics, effective procurement and better utilization of our manufacturing assets. Now on segmental performance, phenolics delivered the highest ever quarterly revenue of 2,291 crores, an increase of 29% sequentially and 72% year-on-year. EBIT increased to 515 crores, up to up 23% quarter-on-quarter and with EBIT margin of approximately 22%. For H1 FY27, the segment recorded revenue of 4,066 crores and EBIT of 933 crores. I am sure many of you would have noticed that just in six first 6 months of this financial year, the EBIT of 933 crores has surpassed previous highest annual EBIT of 867 crores, which was registered in FY22. We believe the business is well-placed to sustain the momentum and we will be setting a a new benchmarking annual performance for this segment by the end of the financial year. The improvement was driven by a combination of healthy capacity utilization, favorable domestic realization and procurement efficiencies. While product spread remained subject to market conditions, the business continues to benefit from its manufacturing scale and ability to optimize product and feedback economics.
Sanjay Upadhyay (Deepak Nitrite Ltd): to support sustainable profitability while allowing us to respond effectively to changing market conditions. In advanced intermediate, quarterly revenue stood at 811 crores, representing 38% growth year-on-year, and marginally sequential increase in the EBIT stood at 49 crores, compared with 67 crores in Q1 FY27, with EBIT margin at 6%. For H1 FY27, revenue reached at 1,615 crores, while EBIT doubled year-on-year to 116 crores. The sequential moderation profit of profitability reflected the headwinds from input prices, some variation in customer volume as well as impact of duties, logistics, and freight rates. As Maulik indicated, headwinds for advanced intermediate businesses are tailwinds for phenolics. Our integrated model allows us to position ourselves favorable for this changes. Now on balance sheet and capital allocation, consolidated net worth increased to 6,521 crores at the end of September '26. Consolidated net debt stood at 1,657 crores, compared to 1,676 crores at the end of previous quarter. Consequently, our net debt to equity ratio improved to 0.25 times from 0.27 times. Working capital management also continued to improve with net cash conversion cycle reducing to 53 days from 57 days in Q1. This reflects our ongoing focus on inventory efficiency, receivable management, and financial discipline. As we progress our on our expansion program, our capital allocation priorities remain centered on disciplined project execution, prudent leverage, and improving returns from both existing and newly commissioned assets. The financing arrangements for our growth investments are in place. We continue to monitor project expenditure, funding requirements, and cash flows closely to preserve our financial flexibility. Looking ahead, our financial priorities are clear, sustaining operating efficiencies, improving cash conversion, and progressively translating our investment program into higher asset productivity and earnings contributions. While external market conditions will continue to influence our near-term profitability, our focus will remain on strengthening the underlying financial performance of the group and ensuring that growth is supported by sound capital allocation. With that, I would request the moderator to open the floor for questions. Thank you.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Nirav Jimudia from Anvil Wealth. Please go ahead.
Nirav Jimudia (Anvil Wealth): Yeah, good afternoon, sir, and congratulations on excellent set of numbers. Sir, a few questions from my side, sir. So first on the AI segment, like when we observe our numbers, we have already achieved EBITDA run rate of FY26 in first half of FY27, and you touched upon few of the aspects that in the month of July there were the imports which came by, and there were some pressure on the capacity utilization for the end user industries. But from a broader perspective, if you can share your thoughts in terms of which of the products in the AI segment have seen a volume increase or improvement in the capacity utilization and if you can just extrapolate your thoughts with respect to second half of FY27, how it looks like, and some thoughts on FY28, that would be very helpful.
Maulik Mehta (Deepak Nitrite Ltd): Okay. Hi, Nirav. That was when I referred to imports, largely these were for sodium nitrite, as well as nitroaromatics. So domestic demand is strong, and while we worked proactively to see how to purchase ammonia and other critical raw materials in Q1, one thing that happened is that consumers saw the market price, not the price at which we imported, and preemptively decided to import their products in significant volumes because the demand for them was certain. While we
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