Summary
Gujarat State Fertilizers & Chemicals Limited - Q3 FY26 Earnings Call Summary Tuesday, February 10, 2026 3:30 PM IST
Event Participants
Executives 2 S K Bajpai (Senior VP Finance & CFO), S V Varma (Executive Director - Agribusiness, HRS & IR)
Analysts 3 Madhur Rathi (Counter Cyclical Investments), Nirav Jimudia (Anvil Wealth), Saket Kapoor (Kapoor & Co.)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹2,894 crores | +5% YoY (+₹139 crores). Driven by higher APS production and Melamine exports despite DAP sales decline. |
| Profit Before Tax (PBT) | ₹177 crores | +18% YoY (+₹27 crores). Improved operational efficiency helped offset raw material price spikes. |
| Profit After Tax (PAT) | ₹157 crores | +32% YoY (+₹38 crores). Significant improvement supported by better tax positioning and operational balance. |
| Operating Margin | 6.11% | +71 bps YoY. Increased from 5.40% due to strategic focus on higher realization export markets. |
| Fertilizer Production | 5.07 lakh MT | Highest Q3 production in 5 years; 9M FY26 reached 13.30 lakh MT. |
| Fertilizer Sales | 6.27 lakh MT | Stable YoY volume. Revenue increased to ₹2,298 crores due to higher realizations in phosphatic fertilizers. |
| IP Segment Sales | ₹596 crores | +2.2% YoY. EBIT turned profitable at ₹9 crores vs losses earlier, driven by Melamine and Ammonia trading. |
| Capro-Benzene Spread | US$495/MT | -15.8% YoY from US$588/MT. However, January 2026 spreads improved significantly to US$590/MT. |
Geographic & Segment Commentary
- Fertilizer Segment: Achieved record Q3 production (5.07 lakh MT) with APS compensating for DAP deficits. Segment average moderated to ₹119 crores due to sharp raw material inflation: Phosphoric Acid (+34%), Sulphur (+130%), and Sulphuric Acid (+91%). Strategic focus remains on calibrated inventory for the upcoming Kharif season.
- Industrial Products (IP): Performance turned profitable (EBIT of ₹9 crores) through a strategic shift towards Melamine exports and traded Ammonia. Strategic focus is on utilizing newly executed FTAs and CEPAs with the US and EU to capture better realizations compared to domestic markets. HX Crystal and Nylon-6 value chains are seeing firmer realizations due to product rationalization in ASEAN markets.
Company-Specific & Strategic Commentary
- Sulphuric Acid-V Project: Commissioned on January 7, 2026, with a capacity of 2 lakh MTPA. The project provides backward integration for Ammonium Sulphate and generates steam, saving approximately ₹100 crores annually in energy/input costs.
- BCG Strategic Roadmap: Engaged Boston Consulting Group for a 10-year growth strategy. Management identified “low-hanging fruit” for operational efficiency worth ₹40 crores in annual savings, with a future focus on expanding IP facilities at Dahej.
- Urea Plant Revamp: Completed revamp of Urea-II plant, achieving energy consumption of 5.9–6.0 Gcal/MT. Government has agreed to maintain subsidy at old energy norms for 5 years, allowing for a total capital recovery of ₹350–400 crores.
- Product Diversification: Converting a DAP line at Sikka to a fungible line for APS/DAP production, expected completion by September 2026 to address market demand shifts.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| IP Segment Profitability | Positive/Improving for Q4 FY26 | Driven by Caprolactam-Benzene spreads rising to $590/MT and increased Melamine exports. |
| Fertilizer Demand | Moderate/Lean for Q4 FY26 | Q4 is seasonally lean; focus is on placing Urea and DAP for the upcoming 2026 Kharif season. |
| Operational Efficiency | ₹40 crores annual benefit | Identified by BCG; to be realized through mid-to-long term process optimizations. |
| Capital Expenditure | Payback in 2-3 years (SA-V) | Sulphuric Acid-V plant expected to recover costs quickly due to high market prices (~₹17,000/MT). |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Volatility | Extreme spikes in Sulphur (+130%) and Phosphoric Acid (+34%) prices threaten margins if government subsidy revisions do not keep pace. |
| Import Dumping | Management has petitioned the Government for protection (Minimum Support Price/Duty) as low-cost Melamine/Caprolactam imports from ASEAN/China threaten domestic realizations. |
| Seasonal Cyclicality | Q4 is historically a lean period for fertilizers, which may lead to inventory carrying costs or lower quarterly margins. |
Q&A Highlights
IP Strategy and Spreads
- Question: At what spread does the Caprolactam business cover costs? (Nirav Jimudia)
- Answer: Current spreads have improved to $590/MT in January, covering variable costs. Even at lower spreads, the plant runs to produce the by-product Ammonium Sulphate, which remains highly profitable (S K Bajpai).
Sulphuric Acid Capacity
- Question: How much of our requirement is now met internally? (Nirav Jimudia)
- Answer: Baroda unit is now near 100% self-sufficient. Total requirement is 5.5–6 lakh MTPA; we produce ~4.5 lakh MTPA and buy the remainder for the Sikka unit (S K Bajpai/S V Varma).
Export Markets
- Question: How do FTAs impact the IP segment? (Saket Kapoor)
- Answer: New FTAs with the EU and tariff concessions in the US provide better realizations than domestic markets. We are prioritizing 100% capacity utilization for HX Crystal for these markets (S K Bajpai).
Urea Fixed Costs
- Question: Is there a revision in Urea fixed cost reimbursement? (Nirav Jimudia)
- Answer: Data has been submitted to the Government; current fixed costs are old and not sustainable. We are awaiting final fixation (S K Bajpai).
Key Takeaway
GSFC delivered a resilient Q3 FY26, characterized by record fertilizer production (5.07 lakh MT) and a 32% YoY growth in PAT despite massive raw material headwinds in Sulphur and Phosphoric Acid. The company successfully pivoted its Industrial Products segment to profitability by targeting high-margin export markets for Melamine and HX Crystal, leveraging new FTAs. Strategically, the commissioning of the Sulphuric Acid-V plant and the Urea-II revamp are expected to provide significant cost buffers, with the latter projected to recover ₹350-400 crores in capital costs over five years via energy savings. While Q4 is expected to be seasonally lean for fertilizers, the improvement in Capro-Benzene spreads to $590/MT and a ₹40 crore operational efficiency roadmap guided by BCG position the company for margin expansion. Investors should monitor the finalization of government Urea fixed-cost policies and the potential for anti-dumping protections in the chemical segment.
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