Deepak Fertilisers and Petrochemicals Corp Ltd
NSE:DEEPAKFERT
Earnings Call Analysis
Q3-2024 Analysis
Deepak Fertilisers and Petrochemicals Corp Ltd
In the third quarter, the company recorded an operating revenue of INR 1,853 crores and an operating EBITDA of INR 282 crores, resulting in operating margins improving to 15.2%, a growth of approximately 343 basis points from the previous quarter. Net profit stood at INR 61 crores with a margin of 3.3%. Year-to-date December figures show continued growth over the past five years, with total operating revenue reaching INR 6,590 crores and operating EBITDA at INR 849 crores, retaining a margin of 12.9%.
Despite challenges such as the one-time subsidy hit on the Fertilizer side and the stabilization costs for the new ammonia plant, the company's contribution margins remain resilient, signifying a generally better margin profile absent these one-time events. The ammonia project, a major investment, has now stabilized with guaranteed test runs completed, promising more stability in ammonia prices in the future.
While the Technical Ammonium Nitrate (TAN) business faced difficulties due to an influx of Russian fertilizer-grade ammonium nitrate, the company is responding by sensitizing the government to nonlevel playing and safety concerns. The removal of export restrictions and Coal India's plans to eliminate the import of coal are expected to drive strong demand for TAN, which bodes well for the Gopalpur project.
With global changes such as rising interest rates seemingly slowing down, there is anticipation of a gradual return to normal prices. The fertilizer business, impacted by government restrictions on pricing, has seen a new development with guidelines for margin reasonability, which provides a decent headroom for the company and paves the way for innovative products like the crop-specific Croptek.
The chemical segment margins improved notably in quarter 3 compared to quarter 2, with capacity utilization between 90% to 92%. Specialty Chemical segment revenue was reported at INR 382 crores for quarter 3. Although international competition from imports of Nitroaromatics from China has affected the Nitric Acid business, the IPA business posted strong sales volumes, improving by 49% year-over-year for the quarter.
The company plans to restart AN export operations in the upcoming quarter with an expectation of stable demand. Bulk fertilizers volumes improved by 23% year-over-year for quarter 3, with positive predictions for monsoon in the current year, hinting at a potentially favorable impact on agriculture-related products.
Following the successful commissioning of new facilities in August '23, the company operates at full design capacity and has a roadmap to increase capacity by an additional 100,000 metric tons next year, potentially reaching nearly 1 million metric tons of capacity within a few years.
Despite increased imports in the financial year ending January compared to the previous year, the company acknowledges the growing domestic demand for ammonium nitrate, which it seeks to fulfill. While the near-term market faces uncertainty, signs of stability are emerging, and the company is prepared for a likely stabilization in ammonia prices, aiming to capitalize on India's improving domestic market.
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Ladies and gentlemen, good day, and welcome to Deepak Fertilisers And Petrochemicals Corporation Limited Q3 FY '24 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Harmish Desai from PhillipCapital India Private Limited. Thank you, and over to you, sir. Mr. Harmish?
Yes. Can we start?
Yes.
Yes. So thank you, Manav. Good afternoon, and welcome to the Q3 and 9 months FY '24 Earnings Call of Deepak Fertilisers And Petrochemicals Limited hosted by PhillipCapital. From the management, we have Mr. S. C. Mehta, Chairman and Managing Director; Mr. Deepak Rastogi, President and Chief Financial Officer; Mr. Tarun Sinha, President, Technical Ammonium Nitrate; Mr. Suparas Jain, Vice President, Corporate Finance; and Mr. Deepak Balwani, Head of Investor Relations.
I'd like to thank the management for giving us the opportunity to host this call. We will begin the call with opening remarks from Mr. Mehta, followed by Mr. Deepak Rastogi for details on financial performance, [indiscernible] we'll have a Q&A session. Thank you, and over to you, sir.
Thank you. Is my voice clear?
Yes, sir.
Okay. Good. So good afternoon to all of you. I extend a warm welcome to each of you for joining us in our Q3 9-month FY '24 Earnings Call of Deepak Fertilisers. Our earnings presentation and press release have been uploaded in the company's website as well as on the stock exchange, and I hope you have had a chance to review it.
Now as you would have noticed from the figures that we have faced yet again, a very challenging quarter. However, let me take this opportunity to share what are macro and micro under currents that will help you to better understand the context as well as the figures and also get a bit of a medium-term, long-term perspective as we see it.
So the results are good or challenging based on what they are compared with. So last year was our historic unusual best. Hence, comparing with last year, the current quarter nine months do appear rather [ pale ]. However, when we took the average of last 5 years, same quarters or last 5 years, nine months, we have noted that the contribution margins continue to be good. And this shows the resilience of our business. If I were to put aside the onetime subsidy hit on the Fertilizer side, and also the onetime ammonia plant stabilization cost during the stabilization period, then in fact, our margins profile are actually better.
As far as the ammonia project goes, which, as you all recall, was a large investment, it is now fully stabilized. We recently completed our guaranteed test runs and the capacities and efficiencies have been now well proven. So in a nutshell, from a higher volatile zone of ammonia to all downstream, we have now moved to a lower volatile zone of gas to downstream with the ammonia plant coming in. And that is going to help all the three businesses as we go forward.
We are also broadly seeing that the global newer ammonia capacities like at Mahadhan, they are getting tied up with downstream fertilizer needs. And with all that put together, we expect the ammonia prices to stabilize.
Now in case of our TAN business, Technical Ammonium Nitrate business, which serves the mining sector, we did face a big hit emerging out of the huge quantum of Russian fertilizer-grade ammonium nitrate dumped into India because of the sanctions on the Russian products in some other countries. Now as we see -- we are seeing that some demand revival of the fertilizer-grade ammonium nitrate for Russia's domestic demand itself as well as in Brazil, where earlier this year, the pickup was almost half of their typical needs.
Also, the -- as what we had envisaged in the last call that the government has now opened up the ban on exports of TAN by some 30,000 tons and we expect the complete removal of the ban in the near future as a good policy, and that will allow us to export our top grade TAN, which will help going forward.
The government is also being sensitized to nonlevel playing and safety security concerns, which are there for the imported fertilizer grade AN, and which may result into some nontariff barriers and controls for the imported [ F-TAN ].
Lastly, as you would have read more recently, Coal India is aggressive plans to supply domestic coal is targeted to completely replace all the imported coal coming to India. This Atmanirbhar drive is likely to boost TAN demand, Technical Ammonium Nitrate demand to probably double-digit CAGR positive for our Gopalpur project.
As regards to industrial chemicals, we have seen some global slowdown overall, emerging out of the increasing interest rates and aggressive supplies last year at higher prices. As we speak now, we see the upward interest rate regime slowing down, which you're all reading about in the U.S. and elsewhere. And a fair degree of destocking that has happened, which we are now seeing that gradually, we should shift back to normal prices.
Finally, as far as the fertilizer business goes, just to explain the context, Government of India had come up with the nutrient-based subsidy scheme, some 10 years back. What it simply meant was there would be fixed subsidies and free MRPs. So they would allow us to price our products, fertilizer products freely. However, in the last few years with the global prices of fertilizer shooting up, the government clamped down upon free pricing. And as regards fixed subsidies, as per the formula there based on previous 6 months average.
Now in case of rising global prices, the industry would suffer losses on its inventory because the fixed subsidies would be covering based on the previous 6 months. In light of this, the industry had been pleading to the government to restore the old nutrient-based subsidy scheme with free MRPs. But worries of farmer [indiscernible] the government was worried about any exploitative pricing.
Now I might share that a very good middle part was announced by Department of Fertilizer just 7, 10 days back, which came up in terms of guidelines for reasonability of margins. So up to what margin the industry can make and beyond which it would be something that would be exploitative and we would need to give it back. So these margins are allowing us a decent headroom and are definitely better margins than what we are looking at today. And these margins -- the margin guidelines are also -- some are giving us headroom for innovations. So this policy and this clarity is something that the industry was looking forward to, and it will be a very positive dimension to look at the fertilizer sector going forward.
Our innovative crop-specific Croptek product has been gaining very good traction. And if I summarize at the fundamentals, our committed strategy of moving from commodity to holistic solutions for the Crop Nutrition business, for the Technical Ammonium Nitrate Mining business as well as Industrial Chemicals where we are looking at specialty grids. That strategy, we feel, is validated again and again even during tough times. And that is something that we are looking forward to further building upon and our recently approved restructuring will get a more focused, I would say, drive on each of our businesses.
So with these broad perspectives, I will hand you over to Mr. Deepak Rastogi, our CFO, to take you through more details and then, of course, be available for any clarifications for any of your questions. Thank you. Yes, Deepak?
Thank you, Mr. Mehta. Am I audible and clear?
Yes, sir.
Good afternoon, ladies and gentlemen, and I thank you for joining Deepak Fertilisers And Petrochemicals Corporation Limited Conference Call to discuss the Q3 financial year '24 results.
During quarter 3, we reported total operating revenue of INR 1,853 crores, with an operating EBITDA of INR 282 crores. Our operating margins grew by approximately 343 basis points quarter-on-quarter to 15.2%. The net profit for the quarter is INR 61 crores with a margin of 3.3%.
Similarly, for the nine months, which is YTD December for this financial year, we reported total operating revenue of INR 6,590 crores with an operating EBITDA of INR 849 crores. Nine months revenue and operating EBITDA have shown consistent increase over the previous 5 years, except for last financial year, which we -- note that it was a positive aberration. The operating EBITDA margin is 12.9%. And without the onetime impact, which actually we took in H1, the same will be 18.3%. The onetime impact includes subsidy impact of INR 267 crores and INR 87 crores on account of Ammonia business stabilization during the first half of financial year.
Coming to the performance of our business segments. For Chemical business -- Chemical segment margins that improved to [indiscernible] in the quarter 3 versus 21% in quarter 2. The capacity utilization of our assets and Ammonium Nitrate business was closer to almost 89%, 90%. Similarly, the capacity utilization for nine months was around 90% to 92%.
Our manufacturing -- Manufactured Specialty Chemical segment recorded revenue of INR 382 crores compared to INR 454 crores in Q3 of last year last quarter, which is YoY. Nitric acid sales volumes improved by 9% Y-o-Y. And for nine months, it was similar, which is around 10%. For IPA, the sales volumes improved by almost 49% for the quarter, which is Y-o-Y quarter and 66% Y-o-Y for the nine months period.
Now due to poor demand and downstream from the downstream industry, there was a huge amount of imports of Nitroaromatics from China at a very, very cheap price, which actually impacted the margins for our Nitric Acid business and it also impacted the volumes. However, the margin pressures, which Nitric Acid business actually faced were more than offset by our IPA business profitability during the quarter as well as obviously for the nine months period.
The manufactured TAN business had a revenue of INR 440 crores in quarter 3. And despite the positive industry trends because the cement as well as power sector actually grew almost by 14%, 15%. Overall, TAN sales volumes during the quarter declined by 15% Y-o-Y in Q3 and by 7% for the 9-month period because of a huge import from Russia during the speed and it was at a very, very cheaper rates. Following the lifting of export ban in phased manner, we will restart our AN export operations in the coming quarter onwards. Demand is going to be -- we understand, would continue to be stable. The expected increase in domestic demands in Russia and demand for Russian products in Brazil are projected to reduce and hence, we expect that the Russian imports would [indiscernible] gradually be obviously coming down over a period of time.
During the quarter, bulk fertilizers, volumes improved by 23% Y-o-Y for quarter 3. And the plant utilization was closer to 75% in Q3 versus 67% of -- for the nine months [indiscernible] -- for you -- as you are aware that because of the [ erratic range ] during a period of the rainy season has actually impacted. And similarly period of lower than average rainfall and [ indicated ] irrigated rainwater. And especially for Q3, unseasonal rains and hailstorm actually has created a reduction in sowing of rabi crop. But Skynet's recent predictions indicate normal monsoon for the current year, which would support a good fertilizer season for our [indiscernible].
[indiscernible] ammonia plant, we actually -- after successful commissioning in August of this year, which means last year '23, we -- the plant has conducted performance guarantee test run, which has conclusively established the design norms are achieved. The plant is currently running at full design capacity. With available capacity across our plants, we are well positioned to navigate through challenges and capitalize on the growth opportunities.
With this, I would like to open the floor for question and answers. Over to you, [ Maadav ]. Thank you.
Thank you very much. We will now begin the question and answer session. [Operator Instructions] We have our first question from the line of Jainam Ghelani from Svan Investments.
Right. So we had a few questions. So what is the current spread for ammonia? And when do we expect to run at like optimum utilization?
Mr. Jainam, sorry to interrupt, but you are sounding very distant. Can you please...
Hello. Can you hear me?
Yes.
Yes. Sir, I wanted to know what is the current spread for ammonia for the [indiscernible] ammonia versus our production? And when do we expect it to run at full utilization?
Maybe I'm not clear on your first question. Are you asking that what is the ammonia pricing FOB Middle East, U.S. dollars, which is closer to around [ 400 ] and it ranges which one. But last quarter, it was closer to almost $475, $480 on an average.
As far as your second question is concerned, we are actually running the plant at full capacity.
Sir, how much sequential improvement can we expect in this quarter or the upcoming quarters?
I'm not clear about the question. Are you asking that is that on the margin side?
In terms of the spreads for us for the ammonia spread, how do we expect it to -- like what would be the spread for us in the upcoming quarters? Do we expect it to improve or should it be stable?
So effectively, what we are expecting is that it should be more or less stable or maybe slightly coming down because it depends upon how the ammonia prices globally actually are going to behave. So we expect the ammonia prices would at least to be either stable or coming down a little bit. But just what -- our understanding is that we will have to really see how it will actually happen. So for the time being, you can think it will be stable to a slightly marginally...
And sir, in the fertilizer, the Department of Fertilizer policy that has been given by the government, so where will we be standing? Will we be considered a manufacturer or an integrated player?
We would be actually considered as [ manufacturing ].
So I guess the cap for us would be 10% PBT margins?
That is correct.
And how would that impact our profitability?
I don't think that is going to impact our profitability because the reasonable, we basically -- it is within our overall limits that we can actually improve our profitability until that 10%. So the profitability can go up. So we have room to be able to actually improve our profitability going forward.
And sir, as you mentioned that the ban of AN exports have been lifted. So when do we expect the first shipment from us for exports?
Yes. So I will ask my colleague, Mr. Tarun Sinha, to respond to this, please.
Yes. Thanks, Deepak. Moderator, am I audible?
Yes, sir, you are audible.
Okay. So thanks for the question. Right now, we are just waiting for our export license from the statutory bodies. And it has taken a little bit of time because of the corporate restructuring that Mr. Mehta talked about when we -- where we had actually first changed the name of the company from Smartchem to Mahadhan, under which the TAN business came.
And then through a recent demerger process, we are demerging the TAN business from Mahadhan to Deepak Mining Solutions Limited. So as a result of these name changes, we are just awaiting some licenses from statutory bodies. And with that, we expect, if not by March, then certainly by start of April, our exportion commence.
Okay. Okay. And sir, last question. So as you had mentioned that the Chemical business was impacted by imports, can you please help us, what was the total imports for our products? And how is the situation in the month of January?
So are you basically looking at for the TAN products are you looking at?
Yes, TAN.
Yes, over to you, Tarun.
Sorry, I probably thought this question was about Chemicals or was it about the import of ammonium nitrate. Can you please come back with your question?
Yes, import of the ammonium nitrate.
Okay. So what's your specific question around that?
So we were mentioning that we were impacted by imports. So is there any [indiscernible] that what was the total imports for the products during the last quarter? And how is the month -- like how is the situation in January? Have the imports reduced also?
Yes. So I'll just give you some pointers to get some picture around it. So last financial year, which was financial year ending 31st March 2023, the total quantum of imports were INR 3,55,000, INR 3,56,000, of that order. And in the first 10 months of this financial year, which is ended January, it has been around INR 3,73,000, INR 3,74,000-odd tons. So that's the kind of -- so the imports are higher this year.
But having said that, the demand of ammonium nitrate in India is also growing. So a part of that growth is being taken by imports naturally. And while the domestic capacity we're trying to service the rest of the demand of the country.
[Operator Instructions] We have our next question from the line of Deepak Poddar from Sapphire Capital.
Am I audible, sir?
Yes, sir. You are audible.
Thank you very much for the opportunity. So first, I just wanted to understand, I mean, a couple of impacts that you mentioned about the Russian imports as well as the Chinese import, right, impacting the TAN and nitric acid, respectively, the sales. So I mean, how much time do you think that it will take from now for a situation to normalize as we speak now? I mean, are we 1 quarter, 2 quarter away from things getting normalized? And plus the export impact also -- and benefit will also come. So yes, some light on that would be helpful, sir.
So obviously, it's difficult to basically pinpoint any specific time lines for it. But I'll give you an answer in very specific part for our industrial chemicals, which is nitric acid and obviously for TAN, ammonium nitrate.
As far as the industrial chemical, which is nitric acid is concerned, given that the destocking has already happened. And obviously, we are expecting that the interest rates are -- obviously, Fed has already said that the interest rates are going to eventually increase. Hence, there should be an uptick of volumes and obviously, the reduction in imports overall is what we are expecting over a couple of quarters. Now whether it will happen in 1 quarter or 2 or 3 quarters. It is difficult for us to obviously comment, but it is in near term, obviously, the things are getting stabilized now.
And -- but obviously, so the stability will continue and it will eventually improve, but we'll have to really wait and watch how and when the situation improves.
As far as ammonium nitrate is concerned, as Mr. Tarun Sinha was mentioning that we have actually seen the imports actually coming in from Russia because of that they are actually exporting close to 1.5 million metric tons of [indiscernible] to Brazil in the past. But in this year, specifically, they have only exported around 1.1 million, 1.2 million tons to Brazil. And it was because of, obviously, the lack of demand in that market. And all that product, which was to be going to Brazil has actually made into India.
So obviously, the things, again, on ammonium nitrate are stabilizing now. And obviously, this could be a onetime event, it could repeat, but we'll have to [indiscernible]. The other thing which I would also place on record is that generally, there is always some imports, closer to 350,000 metric tons, which would continue, which doesn't impacts our growth and things like that because the domestic market is also improving.
So for ammonium nitrate also, we are seeing stabilizing signs. Obviously, Q3 has been one of the tough quarters across both these businesses. But we have seen a lot of signs of stabilization. And hence, we think that the improvement would obviously start coming in, it's only a matter of time, whether it will take one quarter or a couple of quarters. We'll have to really wait and watch the situation.
I got it. That's quite helpful, sir. And my second question revolves around your ammonia. Currently, it is at $470, $480 per ton, the ammonia, Middle East, FOB price because that was what you mentioned about for the last quarter.
So currently, obviously, it keeps changing. Currently, it is covering around [ 425 to 430 ] range. So that is the range especially in January.
[ 425 to 440 ] .
[ 440, 450 ], yes. That is right. So -- but what happens is that on an average, you have to see how the whole month actually drives it. So the ammonia prices, FOB has actually been variating quite a bit. And we think it would actually stabilize over a period of time. But I would say, generally, the range of ammonia is closer to [ 450 to 475 ]. So it should have stabilized in that range.
Understood. And what would be our spread at this $425 to $450 per tonne, including the benefit we get from the government, yes?
We had been basically talking about the spread between $75 to $145 depending upon how the actual variation is. But at $450, generally, we talk about a spread of close to maybe around $75 to $100.
Okay. And that includes the government benefit, right, of $75 that we get?
That will be slightly over and above.
Over and above that.
Yes.
Yes. Okay. That's it from my side, all the very best.
Thank you, sir. We have a next question from the line of Aditya [indiscernible] from Robo Capital.
Sir, with the capacity addition in TAN and given that we will start exporting in the coming quarter. How much volume addition do we aspire in the coming year, that is FY '25?
So we basically are currently at 486,000 metric tons. We basically are looking for 100,000 tons worth of capacity expansion going forward in next year, which will take us to around [ 187,000 ] metric tons. With Gopalpur coming in, sometimes in '26, '27. That would actually add up additionally [ 376 ]. So give or take, by -- in a couple of years, we will be close to 1 million metric tons of capacity.
Right. And this 100,000 tons in next year is expected to come by which quarter, quarter 2?
So 50,000 tons is already in place, 50,000 tons is obviously -- planning both. So it will come in early next year.
Okay. And with the ammonia CapEx, how much -- roughly how much percentage increase in EBITDA do we aspire.
What is your question again?
So my question basically is because ammonia CapEx is sort of a backward integration CapEx. Ultimately, we believe that the objective is to cut down the volatility on the ammonia prices. So do we expect any increase in gross margins or an EBITDA with the addition of such CapEx?
Yes. The answer is yes. Otherwise, there will be no ROI. So effectively, there will be an increase, but it also depends upon how the ammonia prices in the global markets are doing effectively. But just to give you an answer, overall, we have been looking at a payback period of around 6 to 7 years for the project and hence, accordingly, the numbers, and we think we would be able to basically be delivering those numbers in the [indiscernible].
We have our next question from the line of Mr. Ranjit from IIFL Securities.
The first question is on the...
Sorry to interrupt, Mr. Ranjit. Can you please come closer to the device?
Is it better?
Yes, sir. Please go ahead.
First question is on the PCL, Performance Chemicals. Can you share a rough financials, whether you would be able to break even at the EBITDA level for this quarter?
And second, you have also mentioned that we are looking forward to getting the government incentives -- the state government incentives. How do we account that? Would it be [indiscernible] the 4Q or as and when we would receive that? That's the first question I had.
Sorry, Ranjit. So that I understand, are you saying that will we be breakeven at EBITDA level this year or this coming quarter, is what your question is?
Yes, for PCL.
Yes. Okay. So the answer, obviously, we'll have to do some math, but the answer could be yes. But we'll have to really see how the overall things stands out in terms of external FOB ammonia, obviously rising because it's on the revenues of PCL are determined on the -- obviously, how it is marked with the market pricing. So that is number one.
As far as the other question which you had was how do we account for the incentives, is what your question is?
That [indiscernible] -- yes.
So these numbers, if I were to basically obviously start adding incentives because these numbers are without incentives, then definitely, we will be EBITDA positive. But we have -- we are actually currently in the process of filing the details for the eligibility certificate and once we have got those things, we should be able to account for it.
Now we'll have to -- we are working on the time line as to when we will be able to get those from the -- [indiscernible] -- I might actually, it is the district [ the IC ], which is district industry's commission. So we will have to [indiscernible] when we get it, but the idea would be that if we can get the eligibility certificate during this year, then we should be able to account for.
Just one extension whether the 2Q or 3Q, whatever production that we have done, we would be eligible for that? Or it would be only be implemented from the date of eligibility certificate that we get?
No, it is from the start of the production.
Yes. Good. That's helpful. The second, what is the average gas costing now since we have already almost entirely tied up, so if you can help with the [indiscernible] gas question, that would be helpful.
So it is around, it is somewhere around closer to around $13.5 weekly.
Yes. And final bit of the FOB price that you have shared, what will be the landed cost of ammonia?
So you can actually -- when you talk about FOB [ MA ], you are talking about.
Sir, your voice was not clear.
Am I audible now?
Yes.
Your question is that FOB [ MONE ] any pricing, how much dollars we have to add to be able to basically get to the landed cost, right?
Right.
So closer to around $100, $110 because just at the landing it is $100 then you have to add customs and all, which will add maybe around $15 more. So that is the reason I said it's around $100 and $115.
Right. And finally, any update on the nitric acid project that we have done, what are the time lines we are looking at for the commissioning?
So we are looking for the second half of '26.
FY '26.
Yes.
And what is the CapEx that we've incurred till now out of INR 1,900-odd crores?
So we have just started it. It is actually currently -- because we are into more procurement right now, so it's more of placing the orders and providing the LCs wherever it is required because a lot of assets are [indiscernible] written. But if just from a cash perspective, we have hardly recurred INR 20 crores, INR 30 crores so far.
[Operator Instructions] We have our next question from the line of Mr. Ankit from [indiscernible]
Can you please let us know the net debt number for the -- for December '23? Am I audible?
Yes, yes. Just hold on, please. So it will be closer to around 4,000, closer to that number.
This is net debt, right?
Sorry, this will be around -- yes, yes. That is correct. It's an annualized number. That's the way we are looking at.
Annualized as in annualized for FY '24? Hello?
Yes, that is correct, yes.
Okay. And what is the status on Gopalpur project?
So currently, it is -- just to answer you, currently, we are at around INR 3,400 crores as a net debt effectively, just to give you a [indiscernible], yes. Okay. Yes, tell me.
On my second question, what is the status on Gopalpur project?
So that progress -- the project is progressing well now and the time lines are for the second half of '26.
We will have our next question from the line of Sharon [indiscernible] from Investor.
I would like to know the demerger status and by when both the entities will be listing separately in the stock exchange.
So we have got the other on -- actually, they have pronounced the order on 17th of January. The demerger has been approved. We have to -- yet to receive the order. So it will take a while, maybe a month or so to basically put that process in place.
The second question on the IPO side is what you are saying. We have to basically run these companies and whenever the Board actually approves the listing process, then we will come back and then accordingly plan and then inform [ FX ].
What's the time line? Do you have any time line like in next two quarters, this will happen like share allocation of share ratio for the existing shareholders and the both entities will be listed separately?
So the currently Board has not taken any view on that. So there is no time line as such which I can provide.
Okay. And the second question is about the noncore asset, the real estate. I think from last more than one year, we have been discussing in all the calls. And currently, the company is going through tough times with respect to imports and other pricings. Is there any plan on that selling the noncore asset to liquidate and make the balance sheet stronger?
So there is always a plan, obviously, for liquidation. Only thing is the Board has not taken a final view. And whenever, obviously, we get the best pricing. So the Board will take a call and then accordingly, we'll do it. But we are aware of this, and we want to do it no sooner than that.
And a quick question on what's our production cost of ammonia? Currently, market price is $450, what you said. What's our production cost?
So you can basically -- it's closer to...
Sorry. I'm not able to hear.
It's around [ 38,000, 39,000 ] or maybe around [indiscernible].
Sorry, a $450 per ton is the market price, right? And what's our per-ton production cost?
So we are -- the production, obviously, we don't [ devise ]. We don't provide those numbers. But net and net, we always say the margins which we basically on the spread we have, depending upon how the ammonia prices, the spread ranges from $50 -- $75 to $125.
I have one request actually. Can we get an update on whenever there is an increase in the export -- like export ban was there and it's lifted now from [ 20,000 to 30,000 ] and any further because all these updates, we will not get to know until the -- call, in between the quarter, whenever such things happens, if we get an update on these things, it will be helpful.
So we will look at that.
And so the export licensing, that's also pending from last one quarter? Mr. Tarun mentioned in the last con call as well that it is pending and even today it's pending, whenever that happens, if we get update on such things, these are major events in terms of export ban, export lifting and getting approval on all these things. That's a request. Thanks for your time.
Sure.
We have our next question from the line of Mr. Neeraj, a shareholder.
Just wanted to know what is the status on putting antidumping duty again? And last con call, I gather that the matter is [ subjudiced ]. So any update on that front? It's specific to TAN business.
Yes. Tarun, can you take this, please?
Yes, absolutely. So the answer is still the same. As you know, in India, when the matter is subjudiced, we would be lucky to have a decision in a quarter, which is the time gap between two consecutive con calls this. So the matter is still subjudiced.
That said, it appears that now the Ministry of Finance, which earlier had been rejecting unilaterally without assigning any reasons to a number of [ ADD ] recommendations from the DGTR, which is the Director at General of Trade Remedies, under the Ministry of Commerce and Industry. And this is not just for ammonium nitrate, for many products in different industries.
Now I think the message we are getting is that stand of Ministry of Finance is changing slowly. So we'll just see what happens. And as I said, it's hard to put a date or a time line to a matter which is in the court.
So if that stand is changing, are we expecting that something positive can happen in terms of, again, putting this antidumping duty? Any such feedback or feelers you have from the government side?
At this stage, no. It is just a very recent information we received that now probably things are looking for better. I'm not sure whether it is for ammonium nitrate or it is for which product. But certainly, there is a bit of a change is what we feel.
Now if we are talking of the pending matter, which is matter pending in the court. Now that probably will continue to be in court, and we will have to wait until the decision comes out. If it comes to a stage that there's a case for putting in a new ADD request, then it will follow the entire process as it does, which is starting from General of Trade Remedies. And then the feel, there's enough justification for a fresh antidumping duty, develop a case, put up the case in Ministry of Finance again, and then you will have to see what happens there.
So we are expecting any such development?
If there is a case, it is. So I think our Chairman mentioned in the initial part of this call that we have sensitized the different government bodies in terms of the need to create level playing field for the Indian producers, and there are ways to do that through tariff barriers, through nontariff barriers. So all those measures are being looked at. And we will grow the line depending on how the government and the various ministries guide us on this process.
We have our next question from the line of Tarun [ Nimra ], a shareholder in the company. Mr. Tarun, are you there? As we are unable to hear from Mr. Tarun, we will move on to the next question from the line of Kushal Shah, individual investor.
Am I audible?
Yes, sir.
So my questions are on the lines of the Mining Solutions business that we have. And my first question is about the nature of contracts that we have with our customers, what are the inputs do we provide to our customers as in do we provide some kind of promise that we will produce [ extents ] of the material and what kind of return do we get like do we get a percentage of amount we save for them.
Second question is since we have no experience in downstream, like do we do have experience for using TAN but we do not have experience in mining. So what kind of prototyping have been done in this area? And what kind of customer reviews we have got till now?
Yes. Tarun, if you can take it, please?
Yes, absolutely. So that's a great question because it is aligned to, again, one of the comments our Chairman made right in the beginning of the call, which is our transformation strategy for all our businesses from just selling products to solutions. And in the technical ammonium nitrate, which is now going to become a mining solutions company anyway going forward through the corporate restructuring, this is the buzz word.
So what we do and I try to keep it simple, the details can be quite lengthy. What we do with the mining companies and the mine operators is that, see, effectively, there are 5 value streams in a typical mine, and they are starting from drilling, which is drilling holes in the rock. Then blasting, which is putting the right type of explosives in the right quantities in those holes in the rock, so that's blasting. After the rock is blasted, the third, value stream is lifting [ bedrock ], excavating that broken rock, so excavation. And then that excavated rock is moved from where it was blasted to the place of processing or for the treatment. So that's transportation, the fourth one. And the fifth one is crushing if applicable. So drilling, blasting, excavation, transport and crushing.
If you combine these 5 operations in a typical mine or an infrastructure project, then this is what we call as the total cost of ownership of the mine operator or the quarry operator of the project operator. So what we do in the form of Mining Solutions business, if we reach out to the mines and the infrastructure projects, try to do a baselining work in terms of mapping the baseline cost for each of these five value streams that I talked about because that is drilling to crushing. Figure out where are the scope of improvements in terms of the delta through introduction of the right products and the right technologies, which we are in the process of developing, and that's the part of downstream that we use in your question.
And then we deploy a team of people, which is another area where we are building capability. And then we actually offer -- put an offer on the table for the mine operator saying, look, this is what we feel it is in terms of the current cost structure. And these are the, let's say, 2 out of the 5 value streams or 4 of the 5 value streams depending on the case where we think we can bring delta improvement. And as a result of we being able to build that delta improvement and if we are able to bring that delta improvement, we would like to share some of the benefit with you.
So in other words, the model that the Mining Solutions business of Deepak is putting in the market is we provide inputs to the mines in the form of products, services and solutions, which includes technology and get paid for that. And at the same time, we guarantee certain outcomes as a result of the inputs that we provide. And those outcomes are agreed in the form of certain KPIs in our contract. And then we try to go for benefit sharing once we deliver those outcomes. So it's a 2-way income stream, input and outcome based. That's the kind of model which we are working on, and we will continue to develop as we go along.
Sorry to interrupt you, is it a one-time contract? Or is it a long-running contract for multiple years?
So initially, we were doing shorter-term contracts, let's say, 6 months kind of thing because this is a new concept, a novel concept in India. No company in India is doing it actually. So we -- and therefore, the consumers also wanted to see how does it actually work from their perspective.
Now that we have done a number of these, and now the success is there and the consumers can see it, we are now targeting slightly longer-term contracts. When I say longer term, we will be looking at anywhere between 1- to 2-year kind of contracts to begin with. And again, as we get more mature, if the industry gets more mature, the consumers start to see even more value out of this, potentially in the longer term, we can go for even longer-term contracts.
[indiscernible] part of my question is what kind of prototyping will be done? And what kind of customer reviews have been till now and [ course of ] what road map do we expect -- how long do we expect till we go to full scale?
So the short answer is the entire country is the canvas that we can attack with this model because nobody in India is doing it. When I say entire country, one level down detail is all the mines in India and all the infrastructure projects in India and there are thousands of them, as we know, so it's a huge canvas to cover.
But then the point is not every consumer is at the same level in terms of how they look at productivity improvement. So we are very conscious in terms of approaching those consumers first to actually understand this language that we are trying to develop, and then we start to engage with them and the results have been quite good.
In saying so, we basically approach the entire market in three segments. One is what we call as Coal segment, which is a very big segment in India. So coal mines, that's Coal segment for us. Then the noncoal mining segment, which is all other minerals other than coal and limestone, all put together because they have different ways of running their mines, their nuances are different -- mindset is different. And then the third segment, which we approached for the solutioning model is the infrastructure segment, which is completely different from mining anyway. So these are the sort of customers, and we have actually covered all three types of customers in the past 12 to 18 months with this novel idea [indiscernible] business model. And as I said, it's picking up traction as we go along.
If you can just mention some kind of reviews we have got.
Ladies and gentlemen, that was the last question for today. And I now hand the conference over to Mr. Deepak Rastogi for closing comments.
Thank you, everyone, for your participation. For any further queries, or clarification, please do get in touch with our Investor Relations team. Thank you.
On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.