Gujarat State Fertilizers Expects 25% Volume Growth In Fiscal 2025, Says CFO
The company’s profitability was hit due to higher input costs and marginal increase in fertiliser subsidy, Says CFO SK Bajpai.
Gujarat State Fertilisers and Chemicals Ltd. is expecting 25% volume growth in fiscal 2025, according to Chief Financial Officer SK Bajpai. This expectation is despite the company reporting muted first quarter earnings.
The company's consolidated net profit fell 22.3% year-on-year to Rs 87 crore in the quarter ended June 2024, according to an exchange filing. Revenue from operations rose 4.82% to Rs 2,162.53 crore during the same period.
The company’s profitability was hit due to higher input costs and a marginal increase in fertiliser subsidies, Bajpai said. The rise in subsidies was not enough to meet the rising cost of raw materials, he said.
GSFC Q1 Results: Key Highlights (Consolidated, YoY)
Revenue from operation rose 4.82% to Rs 2,162.53 crore
Ebitda fell 22.3% to Rs 110 crore.
Net profit fell 22.3% to Rs 87 crore.
Subsidy income at Rs 852 crore versus Rs 846 crore
"In the fertiliser industry, subsidies play a vital role in deciding the margin. The subsidy has been down 35% since October 2023, but the raw material prices have not come down in the same proportion. So that is the reason that we have seen this reduction in the margins," Bajpai said.
The company's fertiliser sales climbed 7% to Rs 101 crore in the June quarter, while sales volume grew 30% to 1,02,058 metric tonnes.
With sustained volume growth over the current financial year, GSFC's margins may rise 2-3% from the current 5-6%, according to Bajpai. "Overall, we expect 25% growth in volume," he said.
However, Bajpai emphasised that diammonium phosphate, or DAP, production held the key to the growth numbers, as presently there is a contribution loss in DAP production.
"The production of DAP is crucial, but it currently suffers from a contribution loss due to the fixed subsidy and maximum retail price (MRP), which prevents the raw materials from falling below that level. The industry as a whole anticipates a rise in subsidies to mitigate contribution losses," said Bajpai.
GSFC is looking to capitalise on around Rs 1,000 crore of assets in the fiscal year. Additionally, the company expects to increase the capacity utilisation of its plants in Baroda and Sikka.
Shares of GSFC closed 0.16% lower at Rs 222 apiece on the BSE, compared with a 0.21% decline in the benchmark Sensex.
