Deepak Fertilizers & Petrochemicals Corp Share price and Fundamental Analysis

Company History

Deepak Fertilisers and Petrochemicals Corporation Ltd (DFPCL) is the leading manufacturer of industrial chemicals such as Nitric Acid, Iso Propyl Alcohol (both pharma as well as industrial grade IPA) and food grade Liquid Carbon Dioxide in the country. The Company also imports and supplies IPA and other chemicals within India. Presently, it is engaged in manufacture, trading and sale of bulk chemicals and value added real estate. It has manufacturing facilities at Taloja in Maharashtra, Srikakulam in Andhra Pradesh, Panipat, in Haryana and Dahej in Gujarat. The total current manufacturing capacity is nearly to about 3 million MT per annum. Apart from this, it leverages its robust distribution network to provide products in the Middle East, Far East, Australia, New Zealand, Europe and America.

The company owns India's most significant Technical Ammonium Nitrate (TAN) complex which produces Ammonium Nitrate (AN) Melt, High-density AN and Low-density AN. DFPCL is India's largest TAN (Solids) manufacturer and is also one of the world's top 5 largest merchant TAN manufacturers.

DFPCL is one of the largest producers and importers of industrial chemicals in India, with Nitric Acid and Solvents being its key flagship products. Currently, the Company remains the only manufacturer of Iso Propyl Alcohol (IPA) in India, enjoying a significant leadership position with 85% market share. DFPCL is the largest manufacturer of Nitric Acid in Asia, having the largest integrated nitric acid plant with a manufacturing capacity of around 7,00,000 MT of Diluted Nitric Acid (DNA) and 1,38,600 MT of Concentrated Nitric Acid (CNA).

In its trading business, the company imports solvents such as Acetone, Toluene, IPA, Methanol, Hexane, Mixed Xylene and Phenol to cater the needs of pharmaceuticals, inks and coatings, paints, pesticides and the agrochemical industries. The company is the key partner of solvent producers in South East Asia, Middle East, Europe and China for the import of these solvents in India.

The Value-Added Real Estate business of the company comprises of a lifestyle retail centre - Creaticity' (previously Ishanya) in Pune, with around 4,00,000 sq. ft. of retail space. Creaticity has been focused on a three-pronged category strategy comprising of Home and Living, F&B and Entertainment.

Deepak Fertilisers and Petrochemicals Ltd was incorporated in the year May 31, 1979 as a private limited company and in the year 1982, they became a public company. In the year 1983, the company in technical collaboration with Fish International Engineers of USA started commercial production of ammonia using natural gas as feedstock. The International Finance Corporation initially supported this venture in the form of equity participation.

The company undertook major expansion and diversification in 1989 to achieve forward integration of ammonia and diversification in Methanol. In July 1992, the company commenced commercial production of Low Density Ammonium Nitrate, Nitro Phosphate, Dilute Nitric Acid, and Concentrated Nitric Acid. Later, they diversified into specialty retailing with Ishanya, India's largest Design Centre and Specialty Mall for interiors and exteriors.

During the year 2001-02, the company in technical collaboration with Grande Praoisse of France expanded the capacity of Nitro Phosphate fertilizer plant to 3,00,000 tpa and Low Density Ammonium Nitrate plant to 1,00,000 tpa. During the year 2003-04, the company acquired equity shares of Smartchem Technologies Ltd and thus STL became the subsidiary of the company.

During the year 2004-05, the company has incorporated a wholly owned subsidiary, namely Deepak Nitrochem Pty Ltd in Australia to explore investment opportunities triggered by the growth in mining operations. The company commissioned the Automatic Bagging Plant in NP and Ammonium Nitrate. Also they installed and commissioned the 9MW captive co-generative plant during the year. During the year 2004-05, the company increased the installed capacity of Concentrated Nitric Acid by 23100 MT and with this expansion the total installed capacity increased to 79200 MT.

In August 2006, the company commissioned their IPS plant and in March 2007, the company received the ISO 9001-2000 certification for the manufacture and supply of Methanol and Iso Propyl.

In February 2008, the company and Yara International ASA signed a Heads of Agreement with the intention of establishing a joint venture company to produce and market ammonium nitrate and speciality fertilisers in India. ISHANYA, India's largest Design Centre and Specialty Mall, for interiors and exteriors open its first 25 outlets with over 5000 brands.

The company has decided to set up another 450 TPD Dilute Nitric Acid plant at Taloha. It is expected that the plant will be commissioned during the first quarter of FY10. Also, the company has undertaken a project to build an Ammonia storage facility at the JNPT port to facilitate imports.

The company is expanding their diluted nitric acid capacity to 1350 MT/day from 900 MT/day by June 2009 with a total investment of Rs. 110 crore. Also, the company plans to foray into contract mining operations as part of a strategic growth initiative. They are looking to enter into third party open cash mining of coal, limestone and other minerals, which has massive growth potential.

During 2009-10, DFPCL's agri-business continued its focus on integrated nutrient management and providing crop specific, soil specific advisory services to the farmers, through its Saarrthie Centres, to build brand loyalty, enhance produce quality and farm productivity. The company also expanded its geographical footprint by moving into states like Punjab & Haryana in addition to the traditional markets of Maharashtra, Gujarat, Karnataka and Goa.

During the year, DFPCL recorded the highest production and sale of Iso Propyl Alcohol (IPA) with the increased availability of propylene. The company recorded the highest production of all Nitric Acid put together, including the highest production of 87,596 MT of Concentrated Nitric Acid (CAN) in 2009-10, surpassing the earlier high of 84,971 MT in the previous financial year.

Post-Diwali 2009, a positive rebound has begun and consumer spending at DFPCL's mall Ishanya is on the increase.

During the year, the company borrowed long-term funds of Rs. 241 crores for part financing project costs. In addition, there were short-term borrowings of Rs. 122.16 crores.

During the financial year ended 31 March 2014, for the first time in the history of the company, DFPCL's fertilisers sales crossed Rs. 1,000 Crore, growing to Rs. 1,410 Crore from Rs. 995 Crore in the preceding year.

While home and interiors will remain the prime focus DFPCL's mall Ishanya, during the year, the company recalibrated its business strategy to attract more retailers and shoppers by inviting brands from an equally exciting and growing category of Food and Beverages (F&B) linked with Entertainment. An area of around 40,000 sq. ft. has been allocated to F&B and the company is in active stage of progress to launch this category.

During the financial year ended 31 March 2014, DFPCL acquired 49,993 Equity Shares (i.e. 99.99%) and has also acquired beneficial interest of remaining 7 Equity Shares (i.e. 0.01%) of SCM Soilfert Limited. Therefore, SCM Soilfert Limited became wholly owned subsidiary of the company.

During the year under review, DFPCL's wholly owned subsidiary SCM Soilfert Limited (SSL), acquired 2,89,91,150 Equity Shares (i.e. 24.46%) of Mangalore Chemicals & Fertilizers Limited (MCFL). Further on 23 April 2014 SSL, acquired 10,01,309 Equity Shares (i.e. 0.8%) of MCFL and made an Open Offer for acquiring 3,08,13,939 Equity Shares (i.e. 26%) to the public share-holders of MCFL at a price of Rs. 63 per Equity Share pursuant to the provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and subsequent amendments thereto. DFPCL is 'person acting in concert' (PAC) in the Open Offer.

DFPCL's operations were adversely affected during the financial year ended 31 March 2015, in view of the stoppage of supply of domestic gas pursuant to an order by Ministry of Petroleum & Natural Gas (MoPNG) w.e.f. 15 May 2014. The company has since challenged the order of MoPNG in the High Court of Delhi. All proceedings in the High Court of Delhi have been completed and the final order is awaited. As a result of stoppage of supply of domestic natural gas the company's Nitrophosphate plant at Taloja has been closed since 15 May 2014.

The company's Crop Nutrition business extended its reach to new markets (Tamil Nadu, Andhra Pradesh) in South India during FY2014-15. The company's Farm Produce business broke even during FY 2014-15, steered by a more robust business model and greater access to new markets.

As part of its forward integrated linkages, DFPCL is operating 12 Saarrthie Centres, located across its core command area, since 2006. With strong linkages between nutrient management and product output management, these centres continued to boost last-mile connectivity for farmers during the year under review through advisory and other services.

The Ammonium Nitrate Rules introduced by the Government of India relate to logistics management, post production and the import of Ammonium Nitrate. The Rules, implemented from 11 January 2014 are aimed at regulating storage, handling transportation and possession for sale or use of Technical Ammonium Nitrate (TAN). DFPCL has completed the process of adoption of these stringent Rules during the year and now fully complies with them.

Despite pricing being a challenge, DFPCL achieved record-breaking production and sales of Iso Propyl Alcohol in the three consecutive months of the last quarter of FY 2014-15. Breaking its all time records in terms of production for three consecutive months, from January to March 2015, DFPCL reported its highest ever production numbers Concentrated Nitric Acid.

With regard to Value-Added Real Estate business, DFPCL Ishanya mall in Pune helped enhance retailer sales by creating special schemes leading to greater visibility for Ishanya in the core category of home decor and interiors. The mall embarked on a smart strategy of building experiential spaces and allocated 30% of space to food & beverage (F&B) and entertainment. This strategy was kickstarted during FY 2013-14 with Blue Frog - Live Music Performance club with F&B, which became operational during FY 2014-15 will further augment the topline growth. The division also expanded the F&B business by signing on Pub Town - Pune's pioneering concept for one-stop fine dining spread over 30,000 sq. ft.; phase 1 of 7,000 sq. ft. has become operational since early February 2015.

During the financial year ended 31 March 2015, DFPCL acquired 49,993 Equity Shares (i.e. 99.99%) and has also acquired beneficial interest of remaining 7 equity shares (i.e. 0.01%) of SCM Fertichem Limited. Thereby, SCM Fertichem Limited became wholly owned subsidiary of DFPCL. Further, DFPCL's wholly owned subsidiary Smartchem Technologies Ltd. (STL), as part of its forward integration initiative, announced the launch of its overseas JV during the year for blasting services in Australia. STL has set up Platinum Blasting Services Pty Ltd, a JV with local Australian partners having vast experience in providing value-added blasting services and operational expertise to mining and explosives industries in Australia.

During the year under review, DFPCL's wholly owned subsidiary SCM Soilfert Limited (SSL) acquired 70,44,397 (5.94%) equity shares of Mangalore Chemicals & Fertilisers Limited (MCFL) at a price of Rs. 93.60 per share plus interest through an open offer made by SSL in October 2014, in which DFPCL was 'person acting in concert'(PAC). Subsequent to the open offer, the shareholding of SSL reached 31.25% represented by 3,70,36,856 equity shares of MCFL. Thereafter, SSL sold 2,94,11,831 (24.82%) equity shares of MCFL in the open market through Stock Exchanges. In April/May 2015, Zuari Fertilisers and Chemicals Limited made an open offer to the shareholders of MCFL to acquire upto 36% shares of MCFL equity share capital @ Rs. 91.92 per share plus interest. In response, SSL sold 61,84,928 (5.22%) equity shares of MFCL in the aforesaid open offer. SSL continues to hold balance 1.21% equity shares of MCFL. DFPCL received an interim dividend of Rs. 705.54 Lacs from SSL during the year under review in view of the financial gain SSL received on account of the aforesaid transaction in MCFL shares.

During the financial year ended 31 March 2016 (FY 2016), DFPCL attained a new benchmark in terms of Net Sales which was highest ever. The total Net Sales for the year FY16 stood at Rs 4,258.72 crore, up by 14.74% from Rs. 3,711.76 crore in FY 2015.

Based on the request from the farming community and directive of Government of Maharashtra, DFPCL restarted the manufacturing of ANP fertiliser during first quarter of FY 2016 based on RLNG. The plant had remained shut since 15 May 2014 due to stoppage of Natural Gas (a key raw material) supply pursuant to an arbitrary and discriminatory order of the Ministry of Petroleum, Government of India. During this period, to complete the basket of products required by farmers, the company continued with trading of fertilisers from overseas as well as domestic producers & suppliers.

Platinum Blasting Services Pty. Ltd., a joint venture in Australia and subsidiary DFPCL' wholly owned subsidiary Smartchem Technologies Limited (STL), successfully completed its 1st year of operation. During the year it bagged 3 blasting services contracts to provide value added blasting to the mining industry in Australia.

During the financial year ended 31 March 2016, Platinum Blasting Services Pty Ltd. (PBS), subsidiary of Smartchem Technologies Limited, has acquired ownership interest in Australian Mining Explosives Pty. Ltd. (AME) for a consideration of AUS $ 3.7 Million. Due to the aforesaid acquisition by PBS, AME has become subsidiary of DFPCL pursuant to the provisions of the Companies Act, 2013.

During the year ended 31 March 2016, DFPCL registered its highest ever production and sales of Concentrated Nitric Acid. During the year, the company introduced a special grade Nitric Acid for dairy industry. Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL) commissioned its brownfield NPK (Nitrogen, Phosphorous and Potassium) granulation plant at Taloja (Maharashtra) in the fourth quarter of FY 2017, with a capacity of 6 lakh MTPA. This brownfield facility expansion is the first and the only facility in India with a unique fully automated bag loading facility.

As there were huge inventories available in the channel and with the expected production of new NPK facility, the company restricted volumes of the trading business. To tackle the prevailing challenges in the external environment, the company undertook series of measures including the tracking and pushing of inventories through aggressive and structured marketing, advertising and promotional activities. The company also undertook region-specific and crop-specific initiatives on identified regions which had the maximum potential.

The company is moving to a more sustainable, crop-friendly and productivity-enhancing fertiliser products. The company's ongoing product development is also focussed on developing customised crop-specific nutrient solutions. This initiative maps the global best-class practices and the company is confident that these will revolutionise the way farm inputs are consumed in India. Trial runs for the same have been carried out during FY 2017.

In spite of Fertiliser Grade Ammonium Nitrate (FGAN) imports, DFPCL continued to be the market leader with a share of 36% of TAN portfolio in FY 2017. The company's Srikakulam TAN plant which was shut down for a short period due to compressor repairs and maintenance, commenced operations from the second quarter of FY 2017. This resulted in better capacity utilisation and improved availability of the product across Eastern India.

Platinum Blasting Services Pty. Ltd. (PBS), a joint venture in Australia and a subsidiary of DFPCL's wholly- owned subsidiary STL, successfully completed its second year of operation. During the year, through its value-added blasting service offerings to the mining industry in Australia, it bagged 3 blasting services contracts and 4 top-up services contracts.During FY 2017, the company's Concentrated Nitric Acid (CNA) sales grew by 10% leading to highest ever sales of the product.

In its Value-Added Real Estate business, DFPCL's strategy of crafting a food & beverage destination continued through the year with addition of new and exciting dining formats such as Zora, Baraza, Opus Banquets with nearly 25,000 sq. ft. of space being leased out during FY 2017. Sportainment in the form of Pune's largest indoor sports arena XLR8 opening during year, complemented the F&B initiatives. Adjacencies were leased out in the form of design institutes like Srishti School of Design and Fashion and Design institute.

The National Company Law Tribunal (NCLT), vide its Order dated 30 March 2017 has approved the Scheme of Arrangement amongst the company, SCM Fertichem Limited (SCM Fertichem) and Smartchem Technologies Limited (Smartchem) and their respective shareholders and creditors involving: The slump exchange of (a) the Technical Ammonium Nitrate (TAN) undertaking of the company together with its business and operations including its manufacturing and related facilities located at (i) Taloja & Pune, Maharashtra (ii) Jawaharlal Nehru Port, Maharashtra and (iii) Paradeep and its marketing & corporate office(s) (TAN Undertaking), and (b) the Fertiliser undertaking of the company together with its business and operations including its manufacturing and related facilities located at (i) Taloja and Pune, Maharashtra (ii) Jawaharlal Nehru Port, Maharashtra and (iii) Panipat, Haryana and its marketing & corporate office(s) (Fertiliser Undertaking) (and collectively, (a) and (b) are hereinafter referred to as the 'Transferred Undertakings') of the company to SCM Fertichem, on a going concern basis (Slump Exchange); and thereafter, the subsequent demerger of the Transferred Undertakings and vesting of the same from SCM Fertichem in Smartchem, on a going concern basis, in accordance with Section 2(19AA) of the Income Tax Act, 1961 (Demerger) with effect from the Appointed Date, 1 January 2015. A certified copy of the Order passed by the NCLT was filed with the Registrar of Companies, Pune, Maharashtra on 1 May 2017. Thus the Scheme of Arrangement has become effective with effect from 1 May 2017 in terms of the provision of the said Scheme of Arrangement.

Further, the National Company Law Tribunal, vide its Order dated 22 June 2017, has approved the 'Scheme of Amalgamation' providing for amalgamation of SCM Soilfert Limited, a Wholly Owned Subsidiary of the company, with the company. The Appointed Date for the said Scheme is 1 April 2015.

Effective 15 May 2014, domestic gas supply to the company was arbitrarily stopped by the Ministry of Petroleum and Natural Gas. The company successfully challenged the same before the Delhi High Court, which by its Orders dated 7 July 2015 and 19 October 2015 directed the Government of India (GoI) to restore the supply of gas. Review petition filed by the GoI, challenging the said Orders was rejected by the Court. Further the GoI also filed the Special Leave Petition (SLP) before the Supreme Court of India against the Order of the Delhi High Court, which was disposed of during the year under review without granting any relief to the GoI. The GoI has filed an affidavit before the Delhi High Court stating that Inter Ministerial Committee (IMC) has decided to recommend supply of pooled gas to the company, subject to approval of the Competent Authority.

FY 2018 witnessed Deepak Fertilisers and Petrochemicals' continued journey into Specialty Fertilisers, Micro Nutrients and Water-Soluble Fertilisers. In January 2018, Deepak Fertilisers and Petrochemicals introduced a fertiliser under the brand name Mahadhan 'Smartek', which is the first-of-its-kind product in India. Smartek is a specialised technology for NPK that involves a unique coating which enhances nutrient uptake and profusely helps the root system, thereby increasing yield significantly. It also helps in releasing the phosphorus fixed in the soil, reduces nitrogen volatisation leading to increased fertiliser availability to the crop. During the 4th quarter of FY 2018, STL initiated 5,000-plus field demos in the states of Maharashtra, Gujarat and Karnataka for groundnut, sugarcane, tomato, onion, banana and solanaceous vegetable crops.

The company has set up a 32,000 MT greenfield plant for Bentonite Sulphur and commissioned in Q1 FY 2018. Strategically located at Panipat (Haryana), this plant will serve the markets of Madhya Pradesh, Haryana, Uttar Pradesh and Punjab which are essentially Sulphur- deficient regions. Besides, it will enable the company to save on logistics costs, boost functional efficiencies, enhance its competitiveness and cater to newer markets especially Northern India where it had marginal presence.

The Department of Fertilisers (DoF), Ministry of Chemicals and Fertilisers, had withheld subsidy due to the company in accordance with applicable Nutrient Based Subsidy (NBS) Scheme of the Government of India (GoI), alleging undue gain arising to the company on account of supply of cheap domestic gas. The company had filed a Writ Petition in the High Court of Judicature at Bombay, challenging the withholding of subsidy. Based on the directive of the High Court, the GoI released the subsidy amounting to Rs 463 Crore and subsidy amounting to Rs 310 Crore was withheld pending final decision. On the request of the company, the DoF has released subsidy amounting to Rs 310 Crore against a Bank Guarantee pending final decision.

The company's Technical Ammonium Nitrate (TAN) manufacturing plant at Srikakulam which was shut down due to repairs and maintenance, commenced operations and delivered about 50% of the capacity. This resulted in the overall better capacity utilisation for TAN Business and improved availability of the product across India. The company utilised the services of international experts to develop the value-added products, understand market vis- -vis value proposition gaps and facilitate market penetration and actions with the right Capex and Opex. For establishing global footprint and enhancement of export revenue, the company augmented and strengthened its presence in the key markets of Africa and Asia, through better services. In the domestic market, the company's focus has been on expanding the target geographies to reach the end-users through a solid distribution network through the addition of new zones in Raipur, Tata Nagar and NCR in FY 2018 followed by North-East, Salem and Rajkot in FY 2019.

Platinum Blasting Services Pty. Ltd. (PBS), a joint venture in Australia and STL, successfully completed its 4th year of operations. During the year, through its value-added blasting service offerings to the mining industry in Australia, it bagged 3 blasting services contracts and 4 top-up services contracts.

In FY 2018, Deepak Fertilisers and Petrochemicals'Industrial Chemicals segment witnessed record volumes in Nitric Acid with full capacity utilisation in Concentrated Nitric Acid (CAN). During the year, the company dynamically migrated its product mix towards Concentrated Nitric Acid in line with the growth in major application, such as the nitroaromatics industry. In Iso Propyl Alcohol (IPA), the company maintained its market share in manufacturing and trading, becoming the key supplier to customers in various segments such as Pharma, inks and coatings and other derivatives.

In FY 2018, Deepak Fertilisers and Petrochemicals' trading business touched Rs 2,000 crore, growing by 80% over FY 2017. The company imported over 4 lakh MT of various solvents in FY 2018, growing 73% over FY 2017. In its trading business, the company imports solvents such as Acetone, Toluene, IPA, Methanol, Hexane, Mixed Xylene and Phenol to cater the needs of pharmaceuticals, inks and coatings, paints, pesticides and the agrochemical industries. The company is the key partner of solvent producers in South East Asia, Middle East, Europe and China for the import of these solvents in India.

In FY 2018, Creaticity has actively embarked on an exciting transformation into a vibrant and creative living campus that offers inspiring experiences to its customers across the three categories of Home & Living, Food & Beverage and Entertainment. Creaticity (previously Ishanya) is the Value-Added Real Estate business of the company comprising of a lifestyle retail centre in Pune, with around 4,00,000 sq. ft. of retail space. This journey of transformation includes smart reconfiguration of the mall spaces, innovative deployment of technology and service design ideas, aimed at better navigation and circulation of the customers across the campus thereby enabling more productive and satisfied customers.

During April 2019, the Company commissioned the commercial production of nitric acid plant with CNA production capacity of 92,400 MTPA and DNA production capacity of 148,500 MTPA in Dahej, Gujarat.

During the year 2020, the Company had allotted 10,79,482 equity shares to Robust Marketing Services Private Limited pursuant to conversion of warrants into equity shares.

The Company raised Rs 510 Crore through a QIP in October 2021.

During FY22, the Industrial Chemicals (IC) business unit launched eight different products for disinfection solutions in the hospital segment. It launched innovative solution Croptek', which has major, secondary and micronutrient viz. Sulphur, Magnesium, Zinc and Boron along with N, P and K. It launched crop specific fertigation solutions for grapes and tomato crops under the brand Solutek' for improving their yield produce quality and helping them get higher price in market.

Ishanya Realty Corporation Limited was made a subsidiary of Company during the year 2022-23. Solar Grade Nitric Acid (SGNA) was launched in FY23. Steel grade Nitric Acid and pharma grade Pure DIPE (Di-isopropyl Ether) was commissioned in 2023. It launched solar grade nitric acid, a premium specialty product. In FY23, the Company introduced other pharmacopeial grade solvents like methanol, acetone and MDC apart from IPA used in pharma industry.