Alpha | Deepak Fertilisers & Petrochemicals Corp Ltd. – Equity Research Desk

Deepak Fertilisers & Petrochemicals Corp Ltd – From Volume to Value

Established in 1979 and headquartered in Pune, Deepak Fertilisers & Petrochemicals Corporation Ltd. is a leading manufacturer of industrial chemicals, crop nutrition solutions, and mining chemicals. It stands as South Asia’s largest nitric acid manufacturer and India’s leading producer of Iso Propyl Alcohol (IPA). The company is also the sole Indian producer of multiple ammonium nitrate variants. Operating six manufacturing facilities, Deepak Fertilisers supports a diverse range of sectors, including pharmaceuticals, agrochemicals, dyes and intermediates, defence, resins, textiles, fertilisers, mining, and agriculture.

Products and Services

The company’s offerings are categorised across 4 business verticals:

• Industrial Chemicals – Isopropyl Alcohol (IPA), nitric acid, liquid carbon dioxide, methanol, etc.
• Technical Ammonium Nitrate (TAN) – Low, high and medical grade ammonium nitrate, ammonium nitrate solution. Additionally, the company also provides platinum blasting services in the Australian mining sector.
• Crop Nutrition Products – Bulk fertilizers, specialty fertilizers, water soluble fertilizers, micronutrient and secondary nutrients.
• Creaticity – Furniture mall and home decor store in Pune.

Subsidiaries: As of FY24, the company has 11 subsidiaries and no other joint venture/associate company.

Investment Rationale

• Expansion plans – The company is actively expanding its production capabilities to strengthen its market position and drive long-term growth. At Gopalpur, the company is setting up a TAN manufacturing facility. This project, with a capacity of 376 KTPA, is expected to be commissioned in Q4FY26 and will increase the company’s total TAN production capacity to 1 million tonnes per annum, reinforcing its leadership in the segment. At the same time, the company is undertaking a strategic backward integration project at Dahej, aimed at enhancing in-house nitric acid production. The project – comprising 300 KTPA of weak nitric acid and 150 KTPA of concentrated nitric acid is also scheduled for commissioning in Q4FY26, with a total investment of Rs.1,950 crore. This is expected to position the company as the largest nitric acid producer in Asia. In FY23, the company also commissioned a 1,500 MTPD ammonia plant, significantly reducing reliance on imported raw materials. Furthermore, to secure its energy requirements, it has entered into India’s largest private sector LNG supply agreement with Norwegian energy major Equinor, which will commence from FY26.

• Value-driven growth approach – The company is strategically shifting from a commodity – focused model to a value-added, solution-oriented approach across its core segments. In the mining chemicals segment, approximately 16% of revenue now comes from the B2C channel, driven by integrated blasting services that enhance pricing power and margin stability. Its Australian subsidiary, Platinum Blasting Services, offers comprehensive solutions beyond TAN supply – including blast design and technical support – strengthening customer relationships and shielding the business from commodity price volatility. Similarly, in the Crop Nutrition Business (CNB), the specialty portfolio, which contributes 45% of CNB revenue, commands a pricing premium of 40% compared to 15% for bulk fertilizers. The segment delivered a strong quarter, with manufactured bulk fertilizer volumes reaching 1.8 lakh MT (up 3% YoY), while specialty products like Croptek and pencil water-soluble grades grew 73% and 21% YoY, respectively, reflecting deeper market penetration and rising farmer adoption.

• Q1FY26 – During the quarter, the company generated the revenue of Rs.2,659 crore, achieving an increase of 17% as compared to the Rs.2,281 crore of Q1FY25. EBITDA improved by 11% YoY, from Rs.464 crore to Rs.513 crore. Net profit stood at Rs.244 crore, an upsurge of 22% from Rs.200 crore of Q1FY25. During the quarter, the company also achieved a significant improvement in its net debt-to-EBITDA ratio from 1.72x to 1.50x.

• FY25 – During the financial year, company’s revenue increased by 18% to Rs.10,274 crore, operating profit increased by 50% to Rs.1,925 crore and net profit increased by 107% to Rs.945 crore.

• Financial Performance – The revenue and net profit CAGR of the company for the past 3 years is around 10% and 12% between FY23-FY25. TTM sales and net profit growth is at 23% and 82% respectively. The 3-year average ROE and ROCE for the company is around 16% and 17% during FY23-25. The company has a healthy capital structure with a debt-to-equity ratio of 0.67.

Industry

The Indian chemical industry is highly diversified, comprising over 80,000 products and employing more than 2 million people. It contributes around 7% to the country’s GDP and ranks as the 6th largest globally and 3rd in Asia. Strong demand from end-user industries such as food processing, personal care, and home care is driving rapid growth in the specialty chemicals segment. Valued at approximately US$ 220 billion, the industry is projected to grow to US$ 300 billion by 2030 and reach US$ 1 trillion by 2040. Despite global uncertainties, the sector remains a hub of opportunity, with Indian companies expanding capacity to meet rising domestic and international demand. The industry spans key segments including bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilizers.

Growth Drivers

• Union Budget 2025-26 allocation of Rs.1,61,965 crore (US$ 18.7 billion) to the Ministry of Chemicals and Fertilizers.
• A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector.
• Ministry of Chemicals and Fertilisers is working towards implementing the Production Linked Incentive (PLI) for the specialty chemicals sector.

Peer Analysis

Competitors: SRF Ltd, Rashtriya Chemicals & Fertilizers Ltd, etc.

Compared to the above competitors, the company is generating substantial returns from the capital invested backed by a stable growth in sales.

Outlook

The company’s forward and backward integration initiatives are expected to significantly lower dependence on imported raw materials, enhance cost control, and provide a cushion against commodity price volatility – factors that collectively support margin stability and strengthen long-term profitability. Additionally, the Government of India has increased the export quota for TAN from 20,000 to 50,000 metric tonnes, opening up greater international market opportunities. With upcoming facilities on both the western and eastern coasts, the company will operate through a dual-location manufacturing model, which is likely to improve logistical efficiency and reduce freight costs for domestic and export customers alike.

Valuation

With its focus on value-added growth, margin expansion, and demand backed capacity additions, we believe Deepak Fertilisers is well-positioned to deliver sustainable long-term returns. We recommend a BUY rating in the stock with the target price (TP) of Rs.1,751, 17x FY27E EPS.

Note: We also encourage maintaining a stop-loss at 20% from the entry price to manage potential downside risk effectively.

SWOT Analysis

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