ADAPTIVE & RESILENT BUSINESS MODEL

Our Company has exemplified agility in driving growth while upholding stringent quality and safety standards, leveraging our deep expertise in chemicals across the value chain. Our progress is rooted in a holistic revenue accretion strategy, encompassing product diversification, client outreach and geographical expansion. Despite grappling with macroeconomic hurdles, our business model has displayed resilience, bolstering our confidence and market position. With incremental investments enhancing our capacity and sustained demand from diverse end-user industries, we have witnessed favourable trends in both revenue and profitability.

Amidst short-term fluctuations, our unwavering focus is on medium and long-term objectives of fortifying our business model. Consequently, significant strides have been taken to strengthen our balance sheet, ensure a seamless supply chain of critical inputs, byproduct valorisation and propel growth-centric capital expenditures. Despite volatile raw material costs and logistical challenges, our Company showcased resilient performance in FY 2023-24, driving overall volume growth. The operational efficiencies achieved translated into an impressive 19% return on capital employed, sustaining the performance levels across business segments.

Looking forward, we anticipate sustained growth across all strategic business units, driven by expanded capacity and enduring demand. Our sustainable business model, catering to over 30 end-user markets, acts as a buffer against market fluctuations. Throughout these endeavours, the safety of our personnel, materials and operations remains paramount across all our facilities.

As you all are aware, Deepak, as an organisation, has been having sound ESG practices and it has intensified its various initiatives towards sustainability and working towards carbon neutrality. We are publishing a separate Sustainability Report in which we have tried to capture all our aegis in the drive towards sustainability while we augur ourselves to be in the top league of global chemical manufacturing companies.

STEADFAST GROWTH MOMENTUM

Successfully navigating through the complexities, Deepak Nitrite Limited (DNL) ensured a consistent product supply for the clients while enhancing market share and demonstrating adaptability in a challenging business landscape. The team at Deepak understands the demanding business environment and is prepared to adapt and innovate to overcome the variables of this macro backdrop. Leveraging global competitiveness and strong customer relationships, DNL met customer demands while maintaining high levels of operational efficiency.

In FY 2023-24, DNL ended the year on a positive note with notable consolidated revenue and EBITDA figures. Margins remained stable at 16%, while PBT and PAT were close to ₹ 1,100 Crores and ₹ 800 Crores respectively. DNL’s profitability reflected its operational performance influenced by subdued realisation and utilities, with anticipated improvements in the coming quarters.

In Advanced Intermediates segment, volumes surged by 16%, accompanied by enhanced market share, particularly notable in Sodium Nitrite, Fuel additives and specific Agro Intermediates. Venturing into new markets and acquiring new customers further propelled growth. Segment-wise, revenue in the Advanced Intermediates segment stood at ₹ 2,724 Crores, with a healthy EBIT of ₹ 446 Crores. While, Phenolics segment also performed well, with revenues over ₹ 5,000 Crores and showing healthy EBIT of ₹ 644 Crores. Under the current global situation that world economies and industries are passing through, this performance is seen particularly an impressive one.

The team at Deepak understands the demanding business environment and is prepared to adapt and innovate to overcome the variables of this macro backdrop.

On the balance sheet front, DNL significantly enhanced its financial position, maintaining a net zero-debt position with a solid consolidated net worth, thereby strengthening the balance sheet for future expansion.”

Domestic business generated substantial revenue, with a consistent domestic to export ratio of 80:20. Net operating cash flow was robust, driven by better working capital and operational gains. Investments were made in various new projects, while financing activities included dividend disbursement and interest payments.

On the balance sheet front, DNL significantly enhanced its financial position, maintaining a net zero-debt position with a solid consolidated net worth, thereby strengthening the balance sheet for future expansion. Strategic cash flow deployment into growth projects has been happening and also in few brownfield expansion. These will further enhance DNL’s capacities, even as it continues to reduce debt and maintain dividends.

INSIGHTS TO OUR CAPITAL INVESTMENTS

While, DNL has been implementing various projects, which are in nature of both backward and forward integration which comprise of fluorination based products, nitric acid (both diluted and concentrated nitric acid), MIBK – MIBC, speciality agrochem project, further projects were announced by the signing of two Memorandums of Understanding (MoUs) with the Government of Gujarat, committing a substantial investment of ₹14,000 Crores over the next 4 to 5 years. Amongst the projects under implementation / commissioning, Fluorination project has already commissioned in March 2024, while implementation of other projects are progressing well and expected to be commissioned in time.

Our operational efficiency received a significant boost with the successful implementation of SAP across our subsidiary, resulting in streamlined processes and enhanced collaboration.

Our commitment to innovation and growth is highlighted by the establishment of an advanced Research & Development Centre in Savli, Vadodara, scheduled for completion by the end of FY 2024-25.

With a dedicated project execution team on ground, we are well-positioned to explore new opportunities, particularly in material science, including special polymers and their compounds. These strategic initiatives, along with our clear focus on operational efficiency and prudent investments, position us for sustained growth and profitability, bolstering our resilience in the ever evolving landscape of the Indian economy.

EXEMPLARY CREDIT STANDING

DNL has built a solid reputation and maintains a dominant presence in numerous product categories. The Company’s financial health continues to strengthen, showcasing the disciplined growth strategy it adheres to. This robust performance has led rating reaffirmation of long-term rating at ICRA AA and the short-term rating at ICRA A1+, with a positive outlook for the long-term rating, rated by ICRA.

Deepak Phenolics Limited has had its long-term rating reaffirmed at ICRA AA and its short-term rating at ICRA A1+ for bank facilities, with a positive outlook on the long-term rating.

Moreover, ICRA has awarded a long-term rating of ICRA A and a short-term rating of ICRA A2+ for bank facilities of Deepak Chem Tech Limited, a wholly-owned subsidiary of the Company, maintaining a stable outlook on the long-term rating in the very first year.

These ratings affirm our solid creditworthiness amidst challenging conditions such as rising inflation, tightening liquidity and a difficult environment for raising capital.

DNL has built a solid reputation and maintains a dominant presence in numerous product categories. The Company’s financial health continues to strengthen, showcasing the disciplined growth strategy it adheres to.

DRIVING SHAREHOLDER VALUE

DNL remains committed in its promise to provide value to shareholders. Acknowledging our promising performance, the Board recommended a dividend of ₹ 7.50 per equity share, which is 375% on a face value of ₹ 2 each for the FY 2023-24. The Company has maintained a healthy payout while balancing its requirements for business growth and capital expenditure. Looking forward, the Company believes, its strategic investments will drive growth, enable accretive earnings in the years ahead.

PAVING THE PATH: A ROADMAP TO GROWTH

DNL has implemented strategic measures to enhance operational efficiency, spanning process optimisation, yield improvements and reduction in power and waste consumption costs. Our adoption of dynamic product pricing has bolstered margin performance, reflecting our proactive stance in safeguarding profitability amidst market challenges.

Moving forward, DNL is confident in receiving unwavering support from shareholders and Government entities. Our dedication remains intact in delivering outstanding customer satisfaction and ensuring consistent, profitable growth. Investment remains pivotal for future readiness, underpinned by our governance principles of integrity and transparency, focussing on long-term value creation through robust financial reporting and governance practices.

Driven by a combination of internal initiatives and external influences, the Company’s future outlook is promising. We are committed to leveraging this momentum to create value for all stakeholders. On behalf of the Board of Directors and the management team, I express sincere appreciation to our shareholders for their trust in the Company. We remain cautiously optimistic about the Company’s ability to deliver lasting value to both internal and external stakeholders.

Best Regards,

SANJAY UPADHYAY

Director (Finance) & Group
Chief Financial Officer