Sailesh C Mehta, the 62-year-old Chairman and Managing Director of the Deepak Fertilisers and Petrochemicals Ltd (DFPCL) is leading the four-decade old company through an ambitious transformation. The aggressive growth formula involves ammonia – the nitrogen and hydrogen compound that has wide applications in fertiliser, pharma and industrial chemicals.
The Pune-headquartered firm has kickstarted a ₹2,300 crore Technical Ammonium Nitrate(TAN) project in Gopalpur, Odisha and a ₹4,300 crore greenfield ammonia plant at Taloja, Maharashtra. “When commissioned in December 2024, we will be among the top three global players in TAN for mining along with the likes of the Australian Orica and American firm Dyno, from the current fifth position,” says Mehta, the second-generation promoter of DFPCL, a company founded by his father Chimanlal K Mehta in 1979.
The Chemical mix
TAN is a specialty chemical and the principal ingredient in most commercial explosives used in blasting operations in mining. Ammonia is the key raw material for fertiliser, industrial or mining chemicals and the company is currently import dependent. The new plant will change that equation.
“The greenfield ammonia project will bring in ₹20,000 crore worth of import substitution over the next 10 years and cut down our carbon foot print significantly besides saving on logistics costs,” explains Mehta. At present, the company imports ammonia in ocean vessels from the Middle East and South East Asia to JNPT, Mumbai from where it is transferred by road to Taloja through some 30,000 tankers.
While ammonia is planned to be a key vertical for DFPCL, the ₹7,500 crore company is already South East Asia’s largest manufacturer of nitric acid and India’s largest producer of Iso-Propyl Alcohol used in the making of hand sanitisers. It is also the largest manufacturer of bentonite sulphur (bensulf) fertiliser. Among crop nutrition products, DFPCL’s portfolio also includes niche NP, NPK products and water-soluble fertilisers.
The industrial chemicals manufactured by the company such as nitric acid, IPA, methanol and carbon dioxide are used in sectors such as pharmaceuticals, nitro aromatics, paints and coatings, steel and solar, inks and adhesives, explosives, dyes, agrochemicals and cosmetics among others.
Aligned to the India story
DFPCL’s transformation journey, which started about three years ago, was guided by consulting firm McKinsey. “All our three businesses – fertilisers, speciality and mining chemicals – are beautifully aligned to the India growth story,” says Mehta. The new business model envisages moving up the value chain. From being a supplier of commodities, the company aims to be a provider of specialty solutions across all its businesses.
Take the fertiliser business. Here Deepak has moved away from selling commodity fertiliser and has created crop nutrient baskets for cotton, onion, sugar cane, fruits and vegetables, which it is selling under the Mahadhan Croptek brand mainly in states like Maharashtra, Gujarat and Karnataka.
In water soluble fertilisers, the company is offering crop specific fertigation solutions under the Solutek brand for grapes and tomatoes, which Mehta says is helping farmers enhance yields and produce quality. “We have set up over 50,000 demonstration plots to showcase the crop specific nutrients and have a team of over 300 agronomists working with farmers to understand their requirements and create crop specific nutrients,” Mehta adds.
Similarly, in its industrial chemicals business, the company is now offering solutions like blast design and services along with TAN and is helping mining firms improve productivity, bringing down the total cost of ownership for miners.
Currently DFPCL derives about 80 per cent of its revenues from chemicals business and the rest from fertilisers.
Big bang Capex
Analyst Ranjit Cirumalla of IIFL Securities says, “One thing that was missing in the company was the intent to grow. That is what we see in place now. Over the last couple of years, we are seeing them coming up with big bang Capex.”
For the capacity expansion, the company has raised debt, but they say it is healthy debt. According to Amitabh Bhargava, President and CFO at DPFCL, the company’s gross debt as of June stood at ₹2800 crore, while the equity was ₹4,000 crore. “We are progressively adding to this equity as profits are adding up on a quarter-on-quarter basis. We would take additional debt for both these projects, but that will be phased out as the ammonia project will start commercial operations from next May,” he said.
According to Bhargava, the debt-equity ratio is below 1x, while the debt to EBITDA is 1:1.5, which by itself is quite healthy and has reflected in the recent rating upgrade the company has received from ICRA. “Recently, ICRA upgraded us to AA- (stable) long term rating, despite the fact we are in heavy capex programme. Our profitability and the current balance sheet is really strong.”
DFPCL’s promoters hold 47.58 per cent stake in the company with the rest being held by public and institutional investors.
Its share price has gained 129 per cent since January and is currently trading at ₹916. The strategy of moving into specialty solutions seems to be paying off as the company is now able to charge a premium for its offerings. “We have been able to get a premium of around 8-9 per cent to 14-15 per cent for different categories of products,” Mehta says.
So far the growth route has been organic. The next step is to look at acquisitions or joint venture options to accelerate growth and it is eyeing raw material assets overseas in fertilisers. Looks like the company has cracked the formula perfectly.