Company Note Chemicals - Others │ India │ December 20, 2024

India
Deepak Fertilisers &
ADD (Initiating coverage)
Consensus ratings*: Buy 3 Hold 0 Sell 0 Petrochemicals Corp. Ltd.
Current price: Rs1,188
Target price: Rs2,051 DFPCL locks TAN upcycle with expansion
Previous target: NA
Up/downside: 72.6% ■ ~6% CAGR is expected in TAN production over FY24-30F on the back of
EIP Research / Consensus: 72.6% 1.5bnt (bn tonne) coal production target of the govt.; CIL targets 1bntpa prod.
Reuters: ■ DFPCL leverages US$8/mmBtu gas cost from the Equinor deal, starting from
Bloomberg: DFPC IN FY27, saving ~Rs14/kg with backward integrated ammonia production.
Market cap: US$1,763m ■ We value the stock at 14.8x FY27F EPS to arrive at our TP of Rs2,051 backed
Rs149,983m by strong EPS growth and sectoral upcycle. Initiate coverage with ADD rating.
Average daily turnover: US$18.5m
Rs1570.4m Targets 1mtpa TAN & ~1.5mtpa nitric acid capacity by FY26F
Current shares o/s: 126.2m Deepak Fertilizers & Petrochemicals Corporation (DFPCL) stands tall as a diversified
Free float: 54.4% leader in technical ammonium nitrate (TAN), nitric acid, isopropyl alcohol (IPA), and crop
*Source: Bloomberg
nutrition. With its current capacity of 586ktpa, the company commands a 44% market share
in TAN, supplying to critical sectors like mining and infrastructure. The company is also
India’s largest producer of nitric acid (1,116ktpa) and sole manufacturer of LDAN. DFPCL
dominates the IPA market with a 38% share, backed by a robust 70ktpa capacity, and
leads the crop nutrition business with 1,157ktpa fertilizer capacity and innovative products
like Smartek and Croptek. The company’s ambitious expansion plans include a 376ktpa
TAN greenfield project at Gopalpur, and 450ktpa nitric acid addition, propelling its TAN
capacity to 1mtpa and strengthening its chemicals business leadership by FY26F.

Gains via sectoral upcycle, low gas cost for 510ktpa ammonia plant
Source: Bloomberg The ammonium nitrate market is roaring back to life after a 2023-24 slump, where Russian
dumping wreaked havoc. Now, imports have stabilized, and prices are surging to their
Price performance 1M 3M 12M
highest levels in nine months, powered by India’s booming coal production & robust
Absolute (%) (6.6) 22.3 81.1
Relative (%) (8.6) 30.5 61.2 infrastructure growth. DFPCL’s backward integration plan ensures in-house ammonia
production, insulating it from rising global prices and import volatility. With the Equinor LNG
Major shareholders % held contract slashing gas costs from US$13.5 to US$8/mmBtu, DFPCL’s TAN business gains
Promoters 45.6
FII 9.7 a distinct cost advantage of ~39%. While peers scramble amid spiking ammonia imports
Motilal Oswal Business Cycle Fund 3.6 from the Middle East, DFPCL’s new 510ktpa ammonia plant will provide uninterrupted
feedstock for ammonium nitrate, maximizing margins and securing supply stability.

EPS to post ~68% CAGR over FY24-28F; initiate coverage with ADD
We expect DFPCL’s earnings to grow at a robust CAGR of 68% over FY24-28F, driven by
capacity expansion in TAN (to 1mtpa) and nitric acid (450ktpa), alongside favourable
demand outlook in mining, specialty chemicals, and crop nutrition. Valuing the stock at a
10-year historical forward P/E of 14.8x FY27F EPS, we arrive at a target price of Rs2,051,
reflecting significant upside potential. Key downside risks to our thesis include
environmental regulatory concerns impacting the crop nutrition business and potential
resumption of ammonium nitrate dumping from Russia, which could weigh on margins.

Financial Summary Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F

Revenue (Rsm) 113,007 86,761 94,323 98,510 124,566
Operating EBITDA (Rsm) 21,654 12,867 19,437 22,719 31,900
Net Profit (Rsm) 12,209 4,572 10,122 11,694 17,499
Core EPS (Rs) 96.7 36.2 80.2 92.6 138.6
Core EPS Growth 69.6% (62.5%) 121.4% 15.5% 49.6%
FD Core P/E (x) 12.29 32.80 14.82 12.83 8.57
DPS (Rs) 0.0 0.0 0.0 0.0 0.0
Research Analyst(s) Dividend Yield 0.00% 0.00% 0.00% 0.00% 0.00%
EV/EBITDA (x) 8.42 14.55 9.73 8.57 6.29
Pratyush KAMAL P/FCFE (x) (30.19) 42.06 40.31 141.05 49.42
T (91) 2241611549 Net Gearing 60.0% 67.7% 62.2% 62.3% 59.6%
E [email protected] P/BV (x) 2.96 2.77 2.43 2.12 1.79
Abbas PUNJANI ROE 27.3% 8.7% 17.5% 17.7% 22.6%
T (91) 22 4161 1598 % Change In Core EPS Estimates
E [email protected] InCred Research/Consensus EPS (x)
SOURCE: INCRED RESEARCH, COMPANY REPORTS

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Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

DFPCL locks TAN upcycle with expansion

Deepak Fertilisers and Petrochemicals Corporation (DFPCL) is a diversified
Indian conglomerate with a robust presence across multiple industries. In the
industrial chemicals segment, DFPCL is the largest producer of nitric acid in India,
with an impressive 1,116ktpa capacity. The company commands ~60% market
share in concentrated nitric acid (CNA) and ~30% in diluted nitric acid (DNA).
DFPCL also produces isopropyl alcohol (IPA) with a 70ktpa capacity, securing a
dominant 38% market share. In fertilizers, DFPCL manufactures high-efficiency
products, including NPK complex and bentonite sulphur, with a combined capacity
of 1,157ktpa, reinforcing its leadership in the market. The company is also a
frontrunner in mining chemicals, holding a 44% market share in technical
ammonium nitrate (TAN) and offering comprehensive mining solutions with a
capacity of 587ktpa. The company is also the only manufacturer of LDAN in India
and ranks among the top five global producers of TAN. Beyond these core sectors,
DFPCL has a presence in the realty market under its brand, Creativity, a lifestyle
centre that specializes in home interiors and design.

Business Overview
Company’s journey
Established in 1979, DFPCL started its commercial journey with ammonia
production in 1983 at its Taloja unit in Maharashtra. Over the years, the company
has significantly diversified its product portfolio, adding a wide range of chemicals
and fertilizers, including dilute and concentrated nitric acid, ammonium nitrate, and
ammonium nitro phosphate (ANP) fertilizer, with production beginning in 1992.
DFPCL has further expanded into methanol, liquid carbon dioxide, isopropyl
alcohol (IPA), and sulphur bentonite fertilizer. The company is recognized as a
leading manufacturer in India, producing top-quality chemicals that adhere to both
domestic and international standards, serving industries such as pharmaceuticals,
agrochemicals, precious metals refining, defence, and textiles. Notably, DFPCL is
the largest producer of nitric acid in Southeast Asia and holds a dominant position
in the IPA market in India. In FY24, the company commissioned a 500ktpa
ammonia plant and has ambitious plans to launch an additional 376ktpa of
technical ammonium nitrate (TAN) and 450ktpa of nitric acid by FY26F, continuing
its legacy of innovation and growth.

Business segments
• Mining chemicals (TAN, ANFO, etc.): DFPCL produces a range of
ammonium nitrate grades, including low-density ammonium nitrate (LDAN),
the sole manufacturer of this product in India. LDAN is crucial in the production
of ANFO (ammonium nitrate fuel oil), a key blasting agent used in mining
operations.
• Industrial chemicals (nitric acid, IPA, ammonia): In addition to isopropyl
alcohol (IPA), DFPCL consumes approximately 75-80% of its nitric acid and
100% of its ammonia for use in the production of technical ammonium nitrate
(TAN) and fertilizers.
• Crop nutrition and fertilizers (NP, NPK, Bensulf): Beyond bulk fertilizers,
DFPCL manufactures specialized products like Croptek (crop-specific
fertilizers) and Smartek (fertilizers that release nutrients as per the plant’s
requirements), providing tailored solutions for crop nutrition.

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 1: Fertilizers constitute ~35% of DFPCL’s revenue

Mining Chemicals (TAN) NA & IPA NP, NPK & Bensulf Others

120%

100%
11% 11% 10%
17% 18%
80%
33% 33% 34%
37% 36%
60%

21% 21% 18%

40%
20% 20%

20% 35% 35% 38%

26% 25%
0%
FY20 FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 2: Historically, ~80% of EBIT contribution has come from the chemical business

Chemicals business (TAN and IC) Crop Nutrition (Fertiliser) EBIT (Cr.)

1.2 3000

1 2500
EBIT contribution

0.8 2000

0.6 1500

0.4 1000

0.2 500

0 0
FY20 FY21 FY22 FY23 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 3: Total capacity for chemicals and fertilizer segments Figure 4: TAN has almost 100% capacity utilization (CU)
combined stands at 2.6mtpa whereas the crop nutrition business has a CU of ~50-55%

Mining Chemicals (TAN) NA IPA NP & NPK Bensulf Mining Chemicals (TAN) NA IPA NP & NPK Bensulf

12,00,000 1
0.9
10,00,000
0.8
Capacity Utilization

0.7
8,00,000
0.6
6,00,000 0.5
0.4
4,00,000
0.3
0.2
2,00,000
0.1
- 0
FY24 FY24

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

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Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

DFPCL expands ammonia capacity to ~630ktpa with Rs43.5bn

investment
Over the years, DFPCL has significantly diversified its product portfolio. Ammonia
is a key raw material for DFPCL, currently accounting for 85% of its needs, with
the annual consumption at 400ktpa. This demand is expected to increase
significantly following the completion of debottlenecking at its Taloja plant and the
greenfield TAN project at Gopalpur, potentially raising ammonia consumption to
around 750ktpa. The company operates a 40-year-old ammonia plant at Taloja in
Maharashtra, with a capacity of 129ktpa, running at 90% utilization. DFPCL has
completed its 510ktpa brownfield ammonia expansion, with a capex of Rs43.5bn.
This backward integration strategy will significantly reduce the reliance on third-
party suppliers and imports, ensuring a stable supply of raw materials for its
operations.
Figure 5: Total ammonia requirement is going to be ~750ktpa by FY26F
Ammonia requirement in FY26F
Product Capacity (ktpa) Utilization Input/Output Ammonia requirement (ktpa)
DNA 1,185 90% 0.27 287.97
TAN 963 98% 0.33 311.40
Fertilizers 1100 90% 0.15 148.50
Total 747.87
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 6: ~100% of in-house ammonia capacity can be utilized internally

Ammonia production capability
Capacity (ktpa) Utilisation potential Max ammonia production (ktpa)
Old plant 129 90% 116.1
New plant 500 100% 500
Total ammonia production 616.1
Total demand 747.87
SOURCE: INCRED RESEARCH, COMPANY REPORTS

DFPCL mitigates ammonia import risks with its new plant and long-term
growth strategy
Ammonia, being a hazardous gas, presents inherent risks when imported.
Currently, logistics costs for ammonia imports are high, ranging between US$ 90-
100/mt. However, DFPCL’s new ammonia plant is expected to mitigate these
challenges. The project will provide additional rebate on Goods and Services Tax
or GST (9%) from the Maharashtra government and generate captive steam worth
US$15/mt. Despite a recent correction in ammonia prices, management remains
confident in its long-term strategy, viewing the asset as a 20–25-year investment.
Furthermore, the global demand for ammonia is poised to rise due to its diverse
applications, supporting a stable outlook for the commodity.

DFPCL’s current gas cost stands at US$13.5-14.5/mmBtu for its new

ammonia plant with 68% supply coverage
DFPCL has successfully secured a favourable gas price range of US$13.5-
14.5/mmBtu for its current operations. The new ammonia plant requires a daily
supply of 1.3bcm of gas, with 68% of its needs already covered through tie-ups.
The 68% of secured gas contracts are primarily linked to Brent crude oil prices,
ensuring a stable supply at competitive rates for the company.
Figure 7: The current spread for an ammonia plant is Rs.12.5/kg excluding GST benefits
Gas cost 13.5 US$/mmBtu
Exchange 83
Gas consumption per tonne NH3 30 mmBtu/t
Other costs 25 US$/t
Steam credit 15 US$/t
Overall costs 415 US$/
Costs (in INR) 34 Rs/kg
Selling price 47 Rs/kg
Spread 12.5 Rs/kg
SOURCE: INCRED RESEARCH, COMPANY REPORTS

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

DFPCL signs 15-year gas supply agreement with Equinor,

slashing the cost to US$8/mmBtu
Starting FY27, DFPCL has secured a 15-year long-term gas supply agreement
with Equinor from Norway, guaranteeing a continuous and reliable supply of
natural gas. This agreement is expected to enhance margins through effective
natural gas and LNG hedging, alongside in-house ammonia production, ensuring
greater operational stability. The pricing formula in the deal is linked to Henry Hub,
set at US$5 + 115%*HH, which is anticipated to reduce gas costs significantly
from the current US$13.5/mmBtu to approximately US$8/mmBtu, providing a
substantial cost advantage for the company.
Figure 8: Post-Equinor deal, overall savings are expected to stay around Rs16/kg
FY25F FY26F FY27F FY28F FY29F FY30F
Gas cost (US$/mmBtu) 13.5 11 8 8 8 8
Exchange (US$/INR) 85 87 88 90 92 94
Gas consumption per tonne NH3 30 30 30 30 30 30
Other costs (US$/t) 25 25 25 25 25 25
Steam credit (US$/t) 15 15 15 15 15 15
Overall costs (US$/t 415 340 250 250 250 250
Ammonia price (US$/t landed cost in India) 420 387 294 294 294 294
Freight cost savings (US$/t) 100 100 100 100 100 100
Overall savings (US$/t) 105 147 144 144 144 144
Overall savings (Rs/kg) 8.93 12.74 12.73 12.99 13.25 13.51
Savings because of GST 3.21 3.02 2.34 2.39 2.43 2.48
Overall savings (Rs/kg) 12.14 15.76 15.07 15.38 15.68 16.00
Ammonia production (t) 5,00,000 5,00,000 5,00,000 5,00,000 5,00,000 5,00,000
Overall savings from ammonia (Rs m) 6,069.00 7,882.33 7,537.23 7,687.97 7,841.73 7,998.57
SOURCE: INCRED RESEARCH, COMPANY REPORTS

DFPCL aims at global leadership, expanding TAN capacity to 1

mtpa to meet growing demand
The demand for technical ammonium nitrate (TAN) remains robust, with the
annual demand currently around 1.5mt, driven by growth in infrastructure and
mining sectors. DFPCL’s strategic plan to expand its TAN capacity will support
India’s journey towards self-reliance in TAN production, aligning with the
government’s Atma Nirbhar Bharat vision. The company currently holds a
dominant ~44% share of the domestic TAN market and aims to become the third-
largest global TAN manufacturer within the next five years. This ambition is
supported by a planned increase in its TAN capacity from 586ktpa to nearly 1
mtpa.

DFPCL expands TAN capacity by 376ktpa with Rs22bn Gopalpur project,

targeting 60% of India’s demand
DFPCL is advancing a major greenfield project at Gopalpur in Odisha, which will
boost its TAN production capacity by 376ktpa, with an estimated project cost of
Rs22bn. This expansion will increase the company's total installed capacity to
approximately 1,000ktpa, enabling it to meet around 60% of India’s ammonium
nitrate demand, up from 44% currently. Scheduled for commissioning by the end
of FY26F, the project’s strategic location near key mining hubs and proximity to
Gopalpur port in Odisha will enhance both domestic distribution and export
capabilities, positioning DFPCL for greater market penetration.

India's coal sector growth to boost TAN demand with 6% CAGR in mining
production
The Ministry of Coal is advancing major infrastructure projects to achieve India's
ambitious coal production target of 1.5bnt (billion tonne) by FY30F, in line with the
Vision 2047 for a developed nation. Coal India or CIL accounts for ~75% of
domestic coal production, with coal mining representing ~63% of the mining
sector. Notably, ~65% of the technical ammonium nitrate (TAN) produced in India
is used in coal mining, followed by ~25% in the infrastructure sector and ~10% in
non-coal mining. The ‘Mission Coking Coal’ initiative aims to boost domestic
coking coal production to 140mt by 2030F to meet rising steel sector demand.
With coordinated efforts under the PM Gati Shakti scheme, India is set to
modernize its coal sector, driving both economic growth and sustainability. Mining

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

production is projected to post a CAGR of ~6% over the next five years, further
stimulating TAN demand and creating market opportunities.
Figure 9: Demand for technical ammonium nitrate is directly linked with the production growth of Coal India
Coal mining in India
Opencast Underground All India
YEAR TAN consumption (ktpa)
Production Growth % Production Growth % Production Growth %
FY15 560.7 9% 48.5 -2% 609.2 8% 457
FY16 592.8 6% 46.4 -4% 639.2 5% 479
FY17 613.5 3% 44.4 -4% 657.9 3% 493
FY18 633.6 3% 41.8 -6% 675.4 3% 507
FY19 686.2 8% 42.5 2% 728.7 8% 547
FY20 690.4 1% 40.5 -5% 730.9 0% 548
FY21 683.9 -1% 32.2 -20% 716.1 -2% 537
FY22 745.0 9% 33.2 3% 778.2 9% 584
FY23 858.3 15% 34.8 5% 893.2 15% 670
FY24 962.5 12% 34.7 0% 997.2 12% 748
FY25F 1,057.1 6% 793
FY26F 1,120.5 6% 840
FY27F 1,187.7 6% 891
FY28F 1,259.0 6% 944
FY29F 1,334.5 6% 1001
FY30F 1,414.6 6% 1061
Total TAN consumption in the mining sector 2245
SOURCE: INCRED RESEARCH, COMPANY REPORTS

DFPCL leverages Gujarat and other strategic locations to

enhance operations and export opportunities
Around 75% of DFPCL’s manufacturing capacity is in Gujarat, a key advantage
due to its proximity to industries like pharmaceuticals, dyes, and defence, which
are major consumers of nitric acid. This location supports the company's
investment of ~Rs20bn to enhance its operations. Additionally, DFPCL benefits
from its TAN plants situated near major mining hubs in East and Central India,
allowing efficient supply chains for its products. Despite challenges in FY24, the
strategic location has enabled DFPCL to sustain growth, meet market demand,
and capitalize on export opportunities, including the recent resumption of TAN
exports after the lifting of the export ban in Mar 2024.
Figure 10: Strategic manufacturing locations provide the company with a readymade market to sell its’ products

SOURCE: INCRED RESEARCH, COMPANY REPORTS

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Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Mining chemicals business

Global Leader in TAN production and mining solutions with
medical-grade ammonium nitrate
Deepak Mining Solutions Private Limited (DMSPL), a wholly-owned subsidiary of
DFPCL, stands as one of the world’s largest manufacturers of technical
ammonium nitrate (TAN). The company produces a range of TAN products,
including high-density ammonium nitrate (HDAN), low-density ammonium nitrate
(LDAN), and ammonium nitrate melt (AN melt). DMSPL is the sole producer of
explosives-grade TAN solids in India, and also manufactures medical-grade
ammonium nitrate, which plays a crucial role in the production of medical-grade
nitrous oxide, widely used as an anaesthetic and analgesic.
In addition to its product offerings, DMSPL provides consulting services to mining
companies in both Australia and India. These services focus on reducing the total
cost of ownership (TCO), helping mining companies enhance operational
efficiency and minimize costs.

DFPCL shifts towards providing blasting solutions, expanding

TAN offerings with ANFO for market growth
DFPCL's evolution in the TAN segment shifts from being a traditional supplier to
a comprehensive blasting solutions provider. Initially focused on producing
various TAN grades—ammonium nitrate solution (ANSOL), LDAN, and HDAN—
DFPCL served the mining, infrastructure, and construction industries for
explosives production. Over time, the company expanded to include cartridge-
based explosives and ammonium nitrate fuel oil (ANFO) bulk explosives, better
meeting customer needs. This shift has enabled DFPCL to offer more tailored
solutions, boosting its market value. By leveraging its leadership in the LDAN
segment, DFPCL is transforming the market from conventional explosives to
ANFO. The introduction of high-performance ANFO, as a cost-effective alternative
to emulsion explosives, is set to drive further growth in its TAN business.

DFPCL enhances blasting efficiency with advanced tech and

TCO services, strengthening its global market position
DFPCL’s transition includes advanced technical services and downstream
operations to optimize blasting efficiency and cost-effectiveness. Key initiatives
like total cost of ownership (TCO) projects and down-the-hole services are
enhancing mine and quarry productivity through optimized drilling and blasting
techniques. The company is deploying bulk mixing and delivery (BMD) trucks and
plans to integrate cutting-edge technologies like drones and artificial intelligence
or AI-based blast modelling to further improve operations and ensure regulatory
compliance. This customer-centric approach has strengthened DFPCL’s role as a
strategic partner, not just a supplier, positioning it for sustained growth in Indian
as well as overseas markets.

DFPCL optimizes mining efficiency with its TCO model,

enhancing value across key value streams
Total cost of ownership (TCO) in mining includes all costs from drilling to crushing.
DFPCL’s mining solutions business model optimizes TCO by enhancing five key
value streams: drilling, blasting, excavation, transport, and crushing. Unlike
traditional explosives manufacturers who charge only for inputs, DFPCL
guarantees specific outcomes and shares the resulting benefits with clients. This
innovative approach boosts efficiency and cost-effectiveness in mining and
infrastructure projects, distinguishing DFPCL as a leader in the industry.

DFPCL targets 1mtpa TAN capacity with Rs22bn Gopalpur plant

expansion to meet 60% of India’s demand
DFPCL commands a dominant ~44% share of the domestic TAN market and aims
to become the third-largest global TAN manufacturer within the next five years by
increasing its capacity from 586ktpa to nearly 1mtpa.

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

The company is advancing a major greenfield project at Gopalpur in Odisha, which

will boost its TAN capacity by 376ktpa at a project cost of Rs22bn. This expansion
will raise DFPCL's total installed capacity to ~1,000ktpa fulfilling about 60% of
India’s ammonium nitrate demand, up from 44% currently. Scheduled for
commissioning by FY26F, the project’s strategic location near key mining hubs
and Gopalpur port will enhance both domestic distribution and export potential.
DFPCL secures reliable ammonia supply for Gopalpur project
with strategic port agreement
A key element of DFPCL's Gopalpur project is its agreement with Gopalpur port
for the import of ammonia, a crucial raw material for TAN production. This
partnership guarantees a reliable and efficient ammonia supply chain, essential
for the smooth operation of the Gopalpur TAN plant. The plant's proximity to
Gopalpur port not only streamlines ammonia imports but also provides DFPCL
with a strategic advantage for exporting TAN products to international markets,
including the Middle East, Africa, and Southeast Asia. Meanwhile, the new
ammonia plant at Taloja in Maharashtra will primarily support DFPCL’s western
facilities.

Industrial chemicals business

DFPCL is a leading manufacturer of industrial chemicals (ICs) in India, producing
nitric acid, isopropyl alcohol (both pharmaceutical and industrial grades), and
food-grade liquid carbon dioxide. The company also imports and supplies IPA and
other chemicals in India. As a part of its strategy to transition from a commodity to
a specialty chemicals company, DFPCL focuses on delivering value through
tailored product solutions. By adopting value-based pricing and improving input
cost management, the company has enhanced customer satisfaction and
achieved stable earnings, solidifying its position in the market.

DFPCL expands DNA and CNA capacity by 450ktpa with a

Rs20bn investment to meet rising demand
Figure 11: The current capacity of its three facilities stands at 1,116ktpa; ~450ktpa of new capacity to come online by FY26F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

DFPCL plans to add approximately 300ktpa of DNA and 150ktpa of CNA by

FY26F, with an estimated project cost of ~Rs20bn, already sanctioned by banks
for lending. This expansion aligns with DFPCL’s strategic growth plan to meet the
rising demand from downstream sectors like nitroaromatics, pharmaceuticals, and
specialty chemicals, with ~78% of SNA (strong nitric acid) consumed by the
nitroaromatics industry alone. The demand-supply gap in WNA (weak nitric acid)
is expected to increase by ~380ktpa over the next five years, while the CNA gap
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Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

is projected to triple in the same period. In response to this, DFPCL has secured
~65% of its CNA capacity through a 20-year contract with Aarti Industries.
Figure 12: Around 60% of its nitric acid production is consumed internally to manufacture TAN and fertilizers
FY20 FY21 FY22 FY23 FY24
Industrial Chemicals Sales (in kt) Sales (in kt) Capacity (ktpa) Sales (in kt) Capacity (ktpa) Sales (in KT) Capacity (ktpa) Sales (in kt)
CNA 138 143 231 164 231 167 231 159
SNA 28 23 24 26 30
DNA 70 59 885 66 885 86 885 88
Total Nitric Acid 236 225 1,116 254 1,116 279 1,116 278
IPA 62 55 70 65 70 44 70 64
Liquid CO2 55 45 66 52 66 58 66 47
Mining Chemicals
LDAN 92 92 98 77 74
HDAN 285 270 293 308 298
AN Melt 59 66 97 117 133
Total 436 428 487 488 487 502 537 505
Crop Nutrition Business
NP 220 245 300 164 300 193 300 209
NPK 286 441 600 364 600 376 800 363
Total 506 686 900 527 900 569 1,100 572
Bensulf 24 31 57 32 57 33 57 26
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 13: The 300ktpa WNA plant’s capacity expansion would be subsequently used for captive consumption once the 500ktpa
TAN plant ramps up
FY25F FY26F FY27F FY28F FY29F FY30F
Industrial Chemicals Capacity (ktpa) Sales (in kt) Capacity (ktpa) Sales (in kt) Capacity (ktpa) Sales (in kt) Sales (in kt) Sales (in kt) Sales (in kt)
Total Nitric Acid 1116 236 1566 673 1566 497 453 394 380
IPA 70 67 70 70 70 70 70 70 70
Liquid CO2 66 48 66 50 66 51 53 54 56
Mining Chemicals
Total TAN 562 559 587 575 963 801 857 932 951
Crop Nutrition Business
NP 300 300 300
NPK 800 800 800
Total 1,100 590 1,100 607 1,100 626 644 664 684
Bensulf 57 27 57 28 57 29 30 31 32
SOURCE: INCRED RESEARCH, COMPANY REPORTS

DFPCL secures 20-year nitric acid supply agreement with Aarti Industries,
ensuring long-term growth
DFPCL and Aarti Industries (ARTO) have signed a binding 20-year term sheet for
the offtake and supply of nitric acid, effective from 1 Apr 2023. This agreement
provides ARTO with long-term supply security for a key raw material. The contract
will consume 40-45% of DFPCL’s current nitric acid capacity (both weak and
concentrated), with potential for a further increase based on demand. Under the
deal, prices are fixed on a cost-plus model up to a specified volume, and market-
linked for volume exceeding the threshold. This long-term agreement, compared
to the previous 4–5-year contracts, underscores the growing and sustained
demand for nitric acid.

DFPCL commercializes solar-grade nitric acid and targets growing demand

in steel and specialty chemicals
DFPCL has successfully commercialized solar-grade nitric acid (SGNA), receiving
positive feedback from solar-cell manufacturers and securing repeat orders. The
company has also completed multi-stage commercial trials for steel-grade nitric
acid, targeting steel pickling applications, with a planned launch soon. The
demand for nitric acid is expected to grow in the medium- to long-term, driven by
its increasing use in industries such as steel, pharmaceuticals, aromatics, and
explosives, along with the emerging 'China Plus One' trend benefiting India's
specialty chemical sector.

DFPCL boosts SGNA production, capitalizing on 2x higher margin in

specialty nitric acid
DFPCL is strategically enhancing SGNA production at its Taloja facility to meet
rising demand. The company's shift from commodity to specialty nitric acid
products is yielding promising results, with specialty grades offering 2x higher
margin compared to general-grade acids. The brownfield site at Dahej presents
further opportunities for cost-effective capacity expansions. With the Government
9
Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

of India’s production-linked incentive or PLI schemes supporting the solar and

electronics sectors, demand for premium specialty nitric acid is expected to grow,
reinforcing DFPCL’s position in high-growth markets.

Market leader in isopropyl alcohol (IPA)

• Market leadership: DFPCL is the largest producer of isopropyl alcohol (IPA)
in India, offering reliable supply through both manufactured and imported
products. It is the only pharmacopeia-compliant IPA manufacturer in the
country, adhering to specific guidelines set by recognized pharmacopeia
authorities.
• Market growth: The IPA market in India is poised to post a CAGR of 6-7%,
driven by rising consumption in pharmaceuticals and chemical industries. In
FY23, the IPA market stood at 220ktpa, and it is expected to touch 392ktpa by
FY30F.
• Comprehensive product range: DFPCL stands out as the only player offering
a complete portfolio of IPA variants, including industrial grade (IG), pharma
grade (PG), and pharmacopoeia-compliant grades (IP, EP, BP, CP, USP) in
various pack sizes.
• Value-added applications: DFPCL is strategically positioning its IPA-based
solutions for premium applications across pharmaceuticals, electronics, and
disinfection. The company launched its Cororid brand in FY21, focusing on
IPA-based products like hand sanitizers, disinfectants, and wipes. The brand
has received strong domestic market feedback, reinforcing DFPCL’s
commitment to value-added product innovation.
DFPCL manufactures IPA using refinery-grade propylene (RGP) as a feedstock,
backed by a long-term sourcing contract with Bharat Petroleum Corporation or
BPCL. Unlike Deepak Nitrite and Deepak Phenolics and many international
producers who use acetone (a more readily available and cost-effective
feedstock), DFPCL’s capacity is tailored for RGP, making a switch to acetone
impractical. However, the continuous supply of RGP ensures uninterrupted
production and the potential for margin expansion as feedstock prices decline.
Propylene-based IPA commands a 15-20% premium over benzene-based IPA, as
it is primarily used in high-end applications such as pharmaceuticals and
cosmetics, while acetone-based IPA is typically used in disinfectants.

Crop nutrition business

• Business structure: DFPCL’s crop nutrition business is operated under its
wholly-owned subsidiary, Mahadhan Agritech (MAL). This includes 48
products such as value-added fertilizers, specialty fertilizers, water-soluble
fertilizers, micronutrients, and secondary nutrients.
• Geographical presence & market share: DFPCL has a strong foothold in
Maharashtra, Karnataka, and Gujarat, particularly in the horticultural belt. The
company commands a 20% market share in NPK fertilizers in Maharashtra and
is the only manufacturer of 24:24:0 nitro phosphate (NP) fertilizer. DFPCL is
actively expanding its reach into southern and northern states of India.
• Manufacturing capacity: DFPCL is among the top five NPK manufacturers in
India and the largest producer of bentonite sulphur. Its manufacturing facilities
are located at Taloja (Maharashtra) and Panipat (Haryana), with a total
capacity of 300ktpa for nitro phosphates and 800ktpa for NPK fertilizers. The
company also operates a 57,000mt greenfield bentonite sulphur plant at
Panipat, catering to sulphur-deficient regions in North India. Additionally,
DFPCL imports NPK and DAP fertilizers to meet the needs of farmers.
• High-efficiency brands: DFPCL has introduced high-value products like
Mahadhan Croptek, India’s first crop-specific balanced nutrition product,
launched in FY22. Powered by Nutrient Unlock Technology (NUT), Croptek
enhances nutrient bioavailability, delivering a balanced formulation with
essential nutrients for crops like onions, cotton, sugarcane, and maize. This
product commands premium prices in key markets due to its advanced
technology and superior efficiency.

10
Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Ammonium nitrate
Ammonium nitrate (AN) is a widely used chemical compound with significant
applications in agriculture, mining, and defence industries.
Manufacturing process
Ammonia and nitric acid reaction:- The primary raw materials for the production
of ammonium nitrate (AN) are ammonia (NH₃) and nitric acid (HNO₃). The
chemical reaction involved is as follows:
NH3+HNO3→NH4NO3
330gm ammonia reacts with 790gm nitric acid to produce 1kg ammonium nitrate
and water. This is an exothermic reaction, releasing heat, and it occurs in a
neutralization reactor.

Grades of the chemical

• AN (96-99.8%) + additives (0.2-4%) → low-density ammonium nitrate (LDAN).
• AN (96-99.8%) + additives (0.2-4%) → high-density ammonium nitrate
(HDAN).
• AN (85-92%) + water (8-15%) → ammonium nitrate solution (ANSOL).

Applications of the chemical

• Fertiliser-grade ammonium nitrite (FGAN): It is used in agriculture to provide
nitrogenous content. Of all the grades, FGAN is the most used grade of
ammonium nitrate. This grade is essential for enhancing plant growth and crop
yields, making it a critical component in the agricultural sector.
• Technical-grade ammonium nitrate (TAN): It is used in making explosives
for mining, and construction. TAN is predominantly used in the manufacture of
civil explosives and for chemical purposes. It is a key raw material in mining
and construction industries, where it is utilized for its oxidizing properties to
produce explosives. In India, coal mining accounts for ~63% of TAN
consumption, non-coal mining ~9% and infrastructure ~28%.
• Electronic-grade ammonium nitrate (EGAN): It is a highly purified grade
used in manufacturing circuits and microchips.
• Medical-grade ammonium nitrate (MGAN): It is used in healthcare to
produce nitrous oxide, which serves as an analgesic and anaesthetic in
surgery and dentistry.

Russia is the primary producer and exporter of ammonium

nitrate
Russia is the primary producer and exporter of ammonium nitrate. The country
produces close to 11mt of ammonium nitrate. Ammonia is the primary source of
two important ingredients that go into making ammonium nitrate. As Russia has a
huge production of natural gas, it can produce ammonium nitrate in a cost-
effective manner.

11
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 14: Brazil, Peru and India are the biggest importers of Figure 15: Russia is the biggest exporter of ammonium nitrate
ammonium nitrate
Others Peru Brazil India Canada Turkey Others
37% 8% 6% 5% 1% 1% 17%

Russia
Romania Singapore
Mozambique 24%
5% 2%
1% Bulgaria
Canada 7%
Poland
3%
Mexico 2%
Mongolia 3%
2% Uzbekistan
Lithuania 2%
3% Korea Georgia
Bulgaria UK Ghana 2% 7%
2% 2% 3%
United
USA Kazakhstan Kingdom Lithuania
Ukraine 2%
2% 2% 2% 6%

Congo France Indonesia Serbia Morocco Colombia Zambia Oman Chile South Africa Egypt Sweden United States
2% 2% 2% 2% 2% 2% 2% 3% 3% 4% 5% 5% 6%
SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

The TAN supply chain was distorted in 2022 and 2023 because
of the Russia-Ukraine war
The Russia-Ukraine war distorted the TAN supply chain in 2022 and 2023.
Figure 16: Russia was the biggest exporter of TAN in 2021 Figure 17: Brazil and Peru were the biggest importers of TAN
3500 1600
2021 Exports Qty in KT
3000 1400

2500 1200
in 000 tonnes

Imports in KT

2000 1000

800
1500
600
1000
400
500
200
0
0
Chile

Bulgaria

China

Turkey
South Africa

Sweden

Vietnam
Russia

Indonesia

Others
Namibia

Zambia
India

Argentina

Chile
Ghana

Coast

Ecuador
Peru

Others
Brazil

Namibia

Ivory

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 18: The Russia-Ukraine war in 2022 changed Russia’s Figure 19: Brazil and Peru remain the biggest importers of TAN,
exports quantum dramatically but the quantity halved in the case of Brazil and became 33% of
CY22 imports in the case of Peru
2500 900
Exports in 2022 in KT Imports in 2022 in KT
800
2000
700

1500 600
in KT

500
in KT

1000
400

300
500
200
0 100
Georgia

Chile

Bulgaria

United States

Lithuania

Sweden

South Africa

Hong Kong
Russia

Others
Tanzania

0
Chile
India

Ghana
Tanzania

Panama

Ecuador
Peru

Colombia

Uganda

Others
Brazil

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

12
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 20: Russia’s export revival came with a vengeance in Figure 21: However, India became the destination of dumping
2023 as Peru’s TAN imports didn’t recover to the 2021 level
2500 1200
Exports in KT in 2023 Imports in KT in 2023

2000 1000

800
1500
KT

KT
600
1000
400
500
200
0
China

Bulgaria
Georgia

Chile

Hong Kong

South Africa
Sweden
Russia

Tanzania

Others
Egypt
0

Chile
India

Ghana

Botswana
Ecuador

Panama
Peru

Colombia

Others
Tanzania
Brazil
SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 22: Russia’s exports per month are declining in 2024 Figure 23: Half of Russia’s exports are to India, but exports to
Brazil and Peru are set to recover in the rest of 2024F
160 80
Exports in KT in 2024 Imports in KT in 2024
140 70

120 60

100 50
KT

40
KT

80
30
60
20
40
10
20
0

Botswana
0
India

Ghana

Ivory Coast
Tanzania

Congo

Nigeria

Uganda

Others
Brazil

Burkina Faso
Georgia

Zambia
Ghana

India
South Africa
Hong Kong

Sweden
Russia

Tanzania

Others
Brazil

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

The examples of Chile and Peru showed how the Covid-19

pandemic distorted the supply chain
Figure 24: 2019 was the normal scenario for the supply chain, Figure 25: Brazil and Peru imported nearly 1.2mt and 0.9mt of
with Russia exporting 2mt ammonium nitrate, respectively
2500 1400
2019 Exports in KT 2019 imports in KT
1200
2000
1000
1500
800
KT

KT

1000 600

500 400

200
0
Bulgaria

Estonia
Chile

India
Turkey

Netherlands

Georgia

United States
Sweden
Russia

Others

0
India

Chile

Guatemala

Ecuador

Mexico
Australia
Peru

Colombia

Bolivia

Others
Brazil

SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

13
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 26: However, 2020 showed an interesting pattern with Figure 27: …led by overzealous imports by a Peruvian mining
Chile turning into the largest exporter and Russia facing supply company called Orica Mining Peru, which imported 3.5mt of TAN
chain problem…
3500 4000
2020 Exports in KT 2020 Imports in KT
3000 3500

2500 3000

2500
2000
KT

KT
2000
1500
1500
1000
1000
500
500
0
0
Georgia

Turkey

Bulgaria

China
Chile

India
Netherlands

South Korea
Sweden
Russia

Others

Chile
India

Argentina

Vietnam

Philippines
Ecuador
Peru

Colombia

Others
Australia
Brazil
SOURCE: INCRED RESEARCH, COMPANY REPORTS SOURCE: INCRED RESEARCH, COMPANY REPORTS

However, after three-to-four years of lower imports, the

inventory in Peruvian mining industry will come to the normal
level
Given the huge mining infrastructure, TAN imports of Peru normally are in the
range of 1-1.2mt per annum. Higher imports in CY20 and CY21 are being followed
by lower imports in CY22/23 and may be in CY24F as well. This will normalize the
overall inventory level in Peru.
Figure 28: It is likely that TAN imports by Peru will be around 0.5mt in CY24F and
CY25F as well, which should normalize the overall TAN inventory in the system
4
TAN Imports in peru
3.5

2.5
m tonne

1.5

0.5

0
CY19 CY20 CY21 CY22 CY23 CY24F CY25F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

However, Brazil’s TAN imports may rise in CY24F and CY25F

Brazil’s mining industry is totally dependent on Chinese production and as China
ramps up the production of steel and other metals, Brazil’s mining production is
set to rise. This makes us believe that TAN imports by Brazil will pick up in the
coming months.

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Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 29: TAN imports by Brazil are set to rise this year, and also next year
1.6
TAN Imports in Brazil

1.4

KT
1.2

0.8

0.6

0.4

0.2

0
CY19 CY20 CY21 CY22 CY23 CY24F CY25F
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Consequently, India’s TAN imports to come down in the coming

months and prices will recover
India’s TAN imports in the first couple of months of this year have been at 0.72mt,
which is ~50% of Russia’s exports. However, till Mar 2024, we haven’t seen even
1kg of TAN imports by India. Assuming that everything else remains the same,
rising Brazilian imports will lead to lower shipments in India, ergo Indian prices
should rise. We are witnessing the first signs of the same as Indian TAN prices
are recovering.

Global TAN prices are also recovering

Figure 30: TAN prices in India have recovered and are at the highest level since the
last nine months
48
Price of TAN
46

44

42

40
Rs/Kg

38

36

34

32

30
16-Jan-24

03-Feb-24

19-Feb-24

23-Feb-24

08-Mar-24

16-Mar-24
23-Dec-23
25-Jul-23

29-Aug-23

04-Nov-23

14-Dec-23
21-Oct-23

SOURCE: INCRED RESEARCH, COMPANY REPORTS

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

TAN’s spreads over ammonia and nitric acid appear to have

bottomed out
Figure 31: TAN’s spreads over nitric acid and ammonia appear to have bottomed out; please note that these spreads have been
calculated as landed CIF +duty prices; domestic Indian prices of TAN are normally 10-15% higher

60 Ammonium Nitrate Spreads Average +1SD +2SD +3SD -1SD -2SD

50
40
30
20
Rs/Kg

10
0
-10
-20
-30
-40
Nov-18
May-17

Nov-17

May-18

May-19

Nov-19

May-20

Nov-20

May-21

Nov-21

May-22

Nov-22

May-23

Nov-23

May-24

Nov-24
Sep-22
Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Sep-23

Sep-24
Mar-17

Mar-18

Jul-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24
Jan-17

Jul-17

Jan-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

Jul-21

Jan-22

Jul-22

Jan-23

Jul-23

Jan-24

Jul-24
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Nitric acid
Nitric acid (HNO3) is a strong chemical used in industries to make explosives,
fertilizers, and clean metals.

Grades of the chemical

• Nitric acid (98-99%) + water (1-2%) → concentrated nitric acid (CNA).
• Nitric acid (64-72%) + water (28-36%) → strong nitric acid (SNA).
• Nitric acid (60%) + water (40%) → diluted nitric acid (DNA).
270-280gm ammonia is needed to produce 1kg of nitric acid. This is an exothermic
reaction, releasing heat, and it occurs in a neutralization reactor.

Nitric acid manufacturing process (Ostwald Process)

• Ammonia oxidation: Ammonia is oxidized using air in a platinum-rhodium
catalyst at high temperatures (~800-900°C) to produce nitrogen monoxide
(NO) and water vapour.
• Oxidation of NO2: The nitrogen monoxide reacts with oxygen in the air to form
nitrogen dioxide (NO₂).
• Absorption of NO₂ in water: Nitrogen dioxide is absorbed in water, where it
reacts to form nitric acid (HNO₃). The concentration is typically around 50-70%.
• Concentrated nitric acid: To produce concentrated nitric acid (98-99%), the
weak acid undergoes a concentration process using sulfuric acid (dehydrating
agent) or by direct distillation.

The global nitric acid industry

The global nitric acid market is estimated to touch 67,330kt in 2024F and is
projected to grow to 78,510kt by 2029F, with a CAGR of 3.2% during the forecast
period (2024-2029F). The Asia-Pacific region is expected to remain the dominant
market for nitric acid, driven by the largest production and consumption of
fertilizers in countries like China, India, and South Korea. Leading global
producers of nitric acid include Yara International ASA (Norway), BASF SE
(Germany), TKG Huchems (South Korea), Nutrien Ag Solutions (Canada), CF
Industries Holdings (United States), and DFPCL (India).

The Indian nitric acid market

The Indian nitric acid industry is approximately 1,800kt, primarily fuelled by the
fertilizer sector. Nitric acid is essential for producing ammonium nitrate, a key

16
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

component in nitrate-based fertilizers that support domestic agricultural activities.

This close connection between the nitric acid market and the agricultural sector
underscores the strong demand for fertilizers, which drives the growth of the nitric
acid industry in India.

Nitric acid prices to rise in coming months

The global ammonia and nitric acid market is undergoing significant changes due
to key factors such as stricter environmental regulations and rising compliance
costs, which have led to the closure of ammonia production facilities across
Europe, reducing regional supply. Additionally, higher domestic demand and LNG
exports are driving up natural gas prices, increasing production costs for ammonia
producers, particularly in Europe. As a result, global prices for ammonia and nitric
acid are expected to rise, benefiting producers in regions like India, where raw
material costs are lower. However, industries that rely on these chemicals, such
as fertilizer and explosives manufacturers, may face challenges due to these
higher costs.
Figure 32: Nitric acid prices are expected to stay range-bound in the near term until LNG, the key raw material’s prices fall

80 Nitric acid Spread over NH3 Average +1SD +2SD +3SD -1SD

70
Rs/kg

60

50

40

30

20

10

-10
Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24
Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Sep-17

Sep-18

Sep-20

Sep-21

Sep-23

Sep-24
Mar-17
May-17

Nov-17

Mar-18

Nov-18

Sep-19
Mar-19
May-19

Nov-19

Mar-20

Nov-20

Mar-21
May-21

Nov-21

Sep-22
Mar-22

Nov-22

Mar-23
May-23

Nov-23

Mar-24
May-18

May-20

May-22

May-24
SOURCE: INCRED RESEARCH, COMPANY REPORTS

Management team details

Figure 33: Key management personnel
Name of the Director Designation Profile
He currently serves as the chairman & managing director of Deepak Fertilisers and Petrochemicals
Chairman & Managing Corporation (DFPCL). He has been associated with the company for more than 30 years and has played a
Mr. Sailesh Chimanlal Mehta
Director pivotal role in its growth and expansion. Mr. Mehta has a management degree from the University of Texas,
USA.
Mr. Rastogi has over 17 years of working experience in the field of corporate relations, strategy, corporate
Mr. Deepak Rastogi Chief Financial Officer communications and financial planning & analysis. He is a chartered accountant (ICAI) and holds a post
graduate degree in management (PGDM).
Mr. Giridhar has over two decades of professional experience and is associated with DFPCL for three years.
President – Crop
Mr. Mahesh Giridhar Prior to DFPCL, he worked as Global Crop Lead at Bayer Crop Science in Singapore since 2010 and
Nutritionals
previously was the Country Head, Bayer BioScience India, based in Hyderabad.
Mr. Sinha has over 30 years of combined experience in the mining and steel industries and has spent 24
President – Technical
Mr. Tarun Sinha years working with Orica, the world’s largest explosive manufacturer. He has a Bachelor of Technology
Ammonia Nitrate
(Mining Engineering) degree from Indian School of Mines, Dhanbad.
President – Industrial Mr. Shanmugamath has around 28 years. Prior to joining DFPCL, he was associated with Dow Chemical as
Mr. Shanmugamath M
Chemical a commercial director.
Mr. Agrawal has rich experience of approx. 30 years and during this span, he has worked across various
Mr. Mukul Agrawal President – Manufacturing domains such as chemicals, ammonia, fertilizers, engineering polymers, fine chemicals, carbon black,
viscoelastic fibres, etc..
President – Commercials & Mr. Landge has 39 years of diverse experience of operations, projects conceptualization, projects and
Mr. Pandurang Landge
Strategic Growth product development, execution, commercialization, and running businesses.
Mr. Vijayakumar has 26 years of extensive experience in managing integrated and large multi-phased
Mr. Arun Vijayakumar President – Projects complex engineering, procurement and construction (EPC) projects in petrochemical and refining field. He
has done his MBA from S.P. Jain Institute of Management Research, Mumbai.
Mr. Sahay has over 28 years of experience in leading HR for multi-units and large geographically distributed
President – Human
Mr. Romy Sahay workforces. He has worked in the field of HR management (managing manufacturing operations) at Dr.
Resources
Reddy’s Laboratories.
SOURCE: INCRED RESEARCH, COMPANY REPORTS

17
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Earnings and valuation

We forecast a robust earnings growth of ~68% over FY24-28F, driven by the
expansion in DFPCL’s TAN and nitric acid segments, coupled with a strong
demand outlook in key downstream industries like mining and nitroaromatics.
Additionally, the company’s backward integration of ammonia production is
expected to create significant value, positioning DFPCL to outperform its peers.
Figure 34: EPS to post a CAGR of ~68% over FY24-28F

EPS (Rs./share)
180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0
FY21 FY22 FY23 FY24 FY25F FY26F FY27F FY28F

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 35: Historically, DFPCL has traded at a forward P/E of 14.8x but it currently trades at 14.6x P/E

P/E Mean +1 SD -1 SD +2 SD
70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0
Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Apr-22 Oct-22 Apr-23 Oct-23 Apr-24 Oct-24

SOURCE: INCRED RESEARCH, COMPANY REPORTS

18
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

Figure 36: Historically, DFPCL has traded at a P/BV of 1.2x but it currently trades around +2SD, i.e., 2.4x P/BV

P/E Mean +1 SD -1 SD +2 SD
3.0

2.5

2.0

1.5

1.0

0.5

0.0

SOURCE: INCRED RESEARCH, COMPANY REPORTS

Figure 37: Peer comparison

P/E P/B EV/EBITDA ROE ROCE
DFPCL 22.2 2.4 10.4 7.7% 10.7%
RCF 53.4 2.2 14.7 4.2% 6.2%
GNFC 20.1 1.1 7.5 5.6% 7.7%
NFL 16.2 2.3 6.6 5.6% 6.7%
SOURCE: INCRED RESEARCH, COMPANY REPORTS

We value the stock at a historical P/E of 14.8x FY27F EPS to

arrive at our target price of Rs2,051
Figure 38: We have valued the stock at 12 years’ historical average P/E to arrive at our
target price of Rs2,051; initiate coverage on it with an ADD rating
Item Unit Valuation
Core FY27F EPS Rs/share 139
Average P/E x 14.8
One-year forward multiple x 14.8
End-FY26F price Rs/share 2,052
One-year forward target price Rs/share 2,051
SOURCE: INCRED RESEARCH, COMPANY REPORTS

19
 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

BY THE NUMBERS

P/BV vs ROE 12-mth Fwd FD Core P/E vs FD

400.00 33
1200 Core EPS Growth 400
300.00 28
900 300
200.00 23 600 200
100.00 18 300 100

0.00 13 0 0
Apr-21 Apr-22 Apr-23 Apr-24 Apr-25 Apr-26 Apr-21 Apr-22 Apr-23 Apr-24 Apr-25 Apr-26
Rolling P/BV (x) (lhs) ROE (rhs) 12-mth Fwd Rolling FD Core P/E (x) (lhs)

Profit & Loss

(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Total Net Revenues 113,007 86,761 94,323 98,510 124,566
Gross Profit 36,315 27,780 32,941 36,386 48,610
Operating EBITDA 21,654 12,867 19,437 22,719 31,900
Depreciation And Amortisation (2,392) (3,337) (3,722) (4,209) (4,959)
Operating EBIT 19,262 9,530 15,715 18,509 26,941
Financial Income/(Expense) (1,947) (4,038) (3,126) (3,861) (4,792)
Pretax Income/(Loss) from Assoc.
Non-Operating Income/(Expense) 840 1,228 943 985 1,246
Profit Before Tax (pre-EI) 18,155 6,720 13,532 15,634 23,395
Exceptional Items
Pre-tax Profit 18,155 6,720 13,532 15,634 23,395
Taxation (5,946) (2,147) (3,410) (3,940) (5,895)
Exceptional Income - post-tax
Profit After Tax 12,209 4,572 10,122 11,694 17,499
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 12,209 4,572 10,122 11,694 17,499
Recurring Net Profit 12,209 4,572 10,122 11,694 17,499
Fully Diluted Recurring Net Profit 12,209 4,572 10,122 11,694 17,499

Cash Flow
(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
EBITDA 21,654 12,867 19,437 22,719 31,900
Cash Flow from Invt. & Assoc.
Change In Working Capital (11,705) (2,618) (1,249) (701) (4,215)
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow (1,464) (3,629) (2,182) (2,876) (3,546)
Net Interest (Paid)/Received 1,806 3,832 3,126 3,861 4,792
Tax Paid (5,361) (3,134) (3,410) (3,940) (5,895)
Cashflow From Operations 4,931 7,318 15,721 19,063 23,035
Capex (12,084) (8,848) (12,000) (18,000) (20,000)
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow 2,295 5,096
Cash Flow From Investing (9,788) (3,752) (12,000) (18,000) (20,000)
Debt Raised/(repaid)
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid (1,142) (1,264) (2,429) (2,807) (4,200)
Preferred Dividends
Other Financing Cashflow 7,181 (2,835) 5,274 8,739 9,208
Cash Flow From Financing 6,039 (4,099) 2,845 5,933 5,009
Total Cash Generated 1,182 (533) 6,566 6,996 8,043
Free Cashflow To Equity (4,857) 3,566 3,721 1,063 3,035
Free Cashflow To Firm (6,847) (472) 596 (2,797) (1,757)
SOURCE: INCRED RESEARCH, COMPANY REPORTS

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

BY THE NUMBERS…cont’d

Balance Sheet
(Rs mn) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Total Cash And Equivalents 4,987 3,609 10,176 17,172 25,215
Total Debtors 16,905 14,758 16,044 16,756 21,188
Inventories 12,589 11,924 12,410 12,560 15,356
Total Other Current Assets 3,388 8,704 8,704 8,704 8,704
Total Current Assets 37,869 38,996 47,333 55,192 70,463
Fixed Assets 59,244 67,397 75,675 89,466 104,507
Total Investments 8,744 5,753 5,753 5,753 5,753
Intangible Assets 812 808 808 808 808
Total Other Non-Current Assets 7,543 5,350 5,350 5,350 5,350
Total Non-current Assets 76,343 79,307 87,585 101,376 116,417
Short-term Debt 3,824 9,826 9,826 9,826 9,826
Current Portion of Long-Term Debt
Total Creditors 17,774 12,849 13,372 13,533 16,546
Other Current Liabilities 5,987 7,268 7,268 7,268 7,268
Total Current Liabilities 27,585 29,943 30,466 30,628 33,641
Total Long-term Debt 32,310 30,626 39,026 51,626 65,626
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities 1,187 2,012 2,012 2,012 2,012
Total Non-current Liabilities 33,497 32,638 41,038 53,638 67,638
Total Provisions 1,198 1,261 1,261 1,261 1,261
Total Liabilities 62,279 63,843 72,766 85,527 102,540
Shareholders Equity 50,670 54,082 61,775 70,663 83,962
Minority Interests 1,263 378 378 378 378
Total Equity 51,933 54,460 62,153 71,041 84,340

Key Ratios
Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F
Revenue Growth 47.5% (23.2%) 8.7% 4.4% 26.5%
Operating EBITDA Growth 59.7% (40.6%) 51.1% 16.9% 40.4%
Operating EBITDA Margin 19.2% 14.8% 20.6% 23.1% 25.6%
Net Cash Per Share (Rs) (246.73) (291.85) (306.38) (350.77) (397.95)
BVPS (Rs) 401.38 428.41 489.35 559.75 665.10
Gross Interest Cover 9.89 2.36 5.03 4.79 5.62
Effective Tax Rate 32.8% 32.0% 25.2% 25.2% 25.2%
Net Dividend Payout Ratio
Accounts Receivables Days 37.31 66.60 59.60 60.76 55.59
Inventory Days 54.82 75.85 72.35 73.35 67.07
Accounts Payables Days 75.98 94.75 77.96 79.04 72.27
ROIC (%) 18.8% 8.0% 12.0% 12.3% 15.3%
ROCE (%) 25.0% 10.4% 15.3% 15.2% 18.4%
Return On Average Assets 13.6% 6.5% 9.8% 10.0% 12.3%
SOURCE: INCRED RESEARCH, COMPANY REPORTS

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

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 Chemicals - Others │ India
Deepak Fertilisers & Petrochemicals Ltd │ December 20, 2024

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Add The stock’s total return is expected to exceed 10% over the next 12 months.
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