Systematix

Wealth Management
Initiating Coverage Paradeep Phosphates Ltd th
30 September 2024
Sector Ratings
Fertilizer BUY Paradeep Phosphates Limited (PPL) is India's second largest private sector company in
Current Price Target phosphatic fertilizers. Its primary products include a variety of phosphatic fertilizers,
Rs. 83 Rs. 105 such as Di-Ammonium Phosphate (DAP) and several grades of NPK (Nitrogen,
Potential upside Holding Phosphorus, Potassium), as well as Urea. PPL operates two major manufacturing
26% 12 months facilities: one in Paradeep, Odisha, with a capacity of 1.8 Mn MT, and another in
Zuarinagar, Goa, with a capacity of 1.2 Mn MT.
Stock Information
Sensex/Nifty 84,300/25,811 We initiate coverage on PARADEEP with a BUY rating and a Target price of Rs 105
Bloomberg PARADEEP:IN based on 10x P/E multiple on FY26E EPS implying an upside of 26%. We estimate the
Equity shares (Cr) 81.48
company to grow its revenue / EBITDA / PAT at grow at a CAGR of 30% / 60% / 192%
52-wk High/Low (Rs) 98.4/58.7
Face value (Rs) 10
from FY24-FY26E. Our positive outlook on the company is supported by the
M-Cap (Rs Cr) 6,746 following rationale: a) Capacity expansion to ~3.7 Mn MT from 3 Mn MT post-
2-wk Avg Volume (Qty) 22,40,440 merger with Mangalore Chemicals and Fertilizers Ltd to enhance operations, b)
Substantial land assets of 2,280 acre in Paradeep complemented by a captive berth,
Shareholding pattern %
c) Strong relationship with promoters ensuring stable and consistent raw material
Particulars Dec-23 Mar-24 Jun-24
sourcing, d) Backward integration enabling better resilience on supply chain and
Promoters 56.1 56.1 56.1
improve profitability, e) Diverse product portfolio across multiple grades of NPK,
DII 22.0 24.6 26.8
DAP, Urea, and Zypmite tailored to meet different soil requirements across the
FII 5.1 1.6 1.9
Public 16.8 17.7 15.2
country

Financial Summary (Rs. crs.) Capacity expansion to ~3.7 Mn MT from 3 Mn MT post-merger with Mangalore
Summary P&L FY24 FY25E FY26E Chemicals and Fertilizers Ltd to enhance operations: PPL's manufacturing facilities
Revenue 11,575 13,755 19,442
are situated in Paradeep, Odisha (1.8 Mn MT) and Zuarinagar, Goa (1.2 Mn MT) giving
EBITDA 648 1,279 1,711
EBITDA % 5.6 9.3 8.8
a total production capacity of 3 Mn MT of which 2.6 Mn MT is for phosphates and 0.4
EBIT 437 978 1,360 Mn MT for urea. The management is optimistic about completing the merger with
EBIT % 3.8 7.1 7.0 Mangalore Chemicals and Fertilizers Ltd (MCFL) by April 2025, which is expected to
PAT 100 570 852 boost installed capacity to approximately ~3.7 Mn MT. The enhanced capacities
PAT % 0.9 4.1 4.4 following the merger will create synergies and boost the company’s operational scale
P/E 68 12 8 and is expected to start contributing from FY26. Currently, PPL holds a market share of
P/B 2 2 1 ~11-12% in the phosphate business, and the post-merger growth will further
EV/EBITDA 16 8 6 strengthen its market position.
NIFTY Vs PARADEEP
40%

30%
PARADEEP NIFTY
Substantial land assets of 2,280 acre in Paradeep complemented by a captive berth:
20% PPL owns land of 2,280 acre at Paradeep site of which it is currently utilizing 1/3rd and
10% 2/3rd is still available for further expansion. The company enjoys a competitive
0%
advantage with a captive berth at the nearby Paradeep port and a 3.4 km conveyor
-10%

-20%
pipeline, resulting in zero inbound logistics costs. Additionally, the Goa plant is located
-30% near Mormugao Port and benefits from its strategic position and includes a captive
power plant which enhances operational efficiency. Both facilities are equipped with
Hitendra Gupta – Head of Research railway sidings close to the bagging and production areas streamlining outbound
[email protected]
logistics. The Goa plant's proximity to key states like Maharashtra, Karnataka, Madhya
+91 22 6704 8170
Yash Dalvi – Research Analyst
Pradesh, Andhra Pradesh, Uttar Pradesh, Telangana, and Chhattisgarh which cover
[email protected] about 46% of the nation’s phosphate consumption allows efficient supply to major
+91 22 6704 8176 markets and reinforcing industry presence. PPL's strategic location near ports boosts
Naresh Naiker – Research Analyst logistical efficiency, enabling the company to serve markets across India effectively.
[email protected]
+91 22 6704 8172

Investors are advised to refer disclosures made at the end of the research report.
Paradeep Phosphates Ltd Systematix Shares and Stocks (India)
 Systematix PCG Research Paradeep Phosphates Ltd

Diverse product portfolio across multiple grades of NPK, DAP, Urea, and Zypmite
tailored to meet different soil requirements across the country: PPL's core offerings
include a variety of phosphatic fertilizers such as Di-Ammonium Phosphate (DAP),
multiple grades of NPK (Nitrogen, Phosphorus, Potassium), Zypmite, and Urea, all
designed to meet the diverse nutritional needs of crops and improve soil fertility. PPL
also serves as a key industrial supplier of phospho gypsum, sulfuric acid, and
hydrofluorosilicic acid, which support various industrial applications and complement
its fertilizer business. Committed to its growth ambitions and to supporting agriculture
in India, PPL focuses on producing fertilizers tailored to the specific needs of farmers.
PPL is also focusing on expanding its product line with offerings such as nano DAP and
nano urea. In Q1 FY25, the company sold 50,000 bottles of nano urea and aims to sell
a total of 500,000 bottles by the end of FY25. Additionally, PPL introduced a new
product, Triple Super Phosphate (TSP), selling approximately 27,000 MT in Q1 FY25,
with plans to reach around 100,000 MT for the remainder of the year. The company
continually innovates new products, optimally utilizes its production capacity, and
enhances efficiency through strategic backward integration.

Strong relationship with promoters ensuring stable and consistent raw material
sourcing: PPL is promoted by Zuari Maroc Phosphates Pvt. Ltd. (ZMPPL), a joint
venture between Zuari Agro Chemicals Limited (ZACL) and the OCP Group S.A. ZACL is
a leading fertilizer player in India, while the OCP Group, based in Morocco, is one of
the largest phosphatic companies globally controlling over 70% of known phosphate
reserves. Given India's scarcity of raw materials like Rock Phosphates, Phosphoric Acid,
and Ammonia, the country relies heavily on imports. This limited availability has
prompted many companies to establish agreements with foreign entities for raw
material supply. PPL has secured a long-term supply agreement with one of its
promoters OCP Group for Phosphate Rock ensuring a stable and consistent supply.
The company also fosters strong relationships with its raw material suppliers, which
enhances its supply chain reliability and efficiency. By strategically partnering with
these suppliers, PPL not only secures essential resources but also promotes
sustainable practices within its supply chain.

Backward integration enabling better resilience on supply chain and improve

profitability: One of the key factor in PPL's success is its focus on backward
integration, which enhances supply chain resilience and improves profitability. The
Paradeep unit is integrated with phosphoric acid production, while the Goa unit
focuses on ammonia. In 2023-24, PPL increased its captive phosphoric acid capacity by
67%, from 0.3 to 0.5 Mn MT, to support rising finished goods production at Paradeep.
Concurrently, the company is enhancing its sulfuric acid production capacity from 1.39
to approximately 2 Mn MT. This backward integration mitigates operational volatility
and enables significant cost efficiencies, allowing PPL to stabilize its supply chain and
maintain healthier margins. By producing essential raw materials like phosphoric and
sulfuric acid in-house, PPL can effectively manage fluctuating prices, which
significantly impact its cost of sales. This strategic approach not only helps the
company navigate price changes but also sustains competitive margins in the fertilizer
market.

Key Risks: a) Frequent changes in government fertilizer policy affect sales and subsidy
realization, b) Volatility in raw material prices impact pricing and profitability, c) Low
rainfall can hinder crop production, subsequently reducing fertilizer demand.

Initiating Coverage Systematix Shares and Stocks (India) Limited 2

 Systematix PCG Research Paradeep Phosphates Ltd

PPL's capacity expansion and market share growth in the fertilizer sector

PPL has successfully expanded its capacity from 1.2 Mn MT in FY21 to 3 Mn MT in

FY24, achieved through a combination of organic and inorganic growth, including the
acquisition of ZACL’s Goa plant. The company’s manufacturing facilities are located in
Paradeep, Odisha (1.8 Mn MT) and Zuarinagar, Goa (1.2 Mn MT), resulting in a total
production capacity of 3 Mn MT, with 2.6 Mn MT dedicated to phosphates and 0.4 Mn
MT to urea.

PPL’s management is optimistic about completing the merger with MCFL by April
2025, which is expected to increase installed capacity to approximately 3.7 Mn MT.
The enhanced capacities following the merger will create synergies and boost the
company’s operational scale and is expected to start contributing from FY26.
Currently, PPL holds a market share of ~11-12% in the phosphate sector, and the post-
merger growth will further strengthen its market position.

The Paradeep plant features four fungible DAP/NPK production lines and is renowned
for producing high-quality DAP and its flagship product, NPK-20 (20:20:0:13).
Meanwhile, the Goa plant not only produces urea but also unique NPK grades for key
markets in western and southern India, notably being the only facility in the country to
produce NPK 19:19:19. During 2023-24, PPL produced six unique grades of NPK in
addition to its core products, including DAP, N20, N10, N12, N19, and N28.

Exhibit 01: Key products and targeted markets

Source: Company, Systematix PCG Research

Exhibit 02: Key growth drivers going ahead

Source: Company, Systematix PCG Research

Initiating Coverage Systematix Shares and Stocks (India) Limited 3

 Systematix PCG Research Paradeep Phosphates Ltd

In 2023-24, PPL achieved a production volume of 2.3 Mn MT, marking a 13% year-on-
year increase. Sales volumes also rose significantly, reaching 2.5 Mn MT an impressive
25% increase compared to the previous year. The company's product mix has
increasingly favored value-added NPK fertilizers over DAP. The year-on-year increases
in production and sales volumes of 13% and 25%, respectively, contributed to a larger
market share for PPL. NPK fertilizers accounted for approximately 50% of total sales
volumes, highlighting the company's capability to produce and market a diverse range
of NPK grades tailored to specific soil and crop conditions across India.

Exhibit 03: Sales and production volumes of fertilizer

Sale Volume (MT) Fertilizer Production Volume (MT)

25,27,119

23,04,969
20,32,516
20,29,284
14,86,200
14,06,807

12,47,178
10,21,892

FY21 FY22 FY23 FY24

Source: Company, Systematix PCG Research

Initiating Coverage Systematix Shares and Stocks (India) Limited 4

 Systematix PCG Research Paradeep Phosphates Ltd

Driving agricultural growth through backward integration and operational

excellence

PPL owns 2,280 acres of land at its Paradeep site, utilizing one-third of this area while
leaving two-thirds available for future expansion. The company benefits from a
competitive advantage due to its captive berth at the nearby Paradeep port and a 3.4
km conveyor pipeline, which result in zero inbound logistics costs. Additionally, the
Goa plant is strategically located near Mormugao Port and includes a captive power
plant that enhances operational efficiency. Both facilities feature railway sidings close
to production and bagging areas, streamlining outbound logistics.

The Goa plant’s proximity to key states such as Maharashtra, Karnataka, Madhya
Pradesh, Andhra Pradesh, Uttar Pradesh, Telangana, and Chhattisgarh—covering
about 46% of India’s phosphate consumption—enables efficient supply to major
markets and reinforces PPL’s industry presence. This strategic positioning near ports
improves logistical efficiency, allowing PPL to serve markets across India effectively.

Exhibit 04: Plant locations

Source: Company, Systematix PCG Research

A key factor in PPL's success is its focus on backward integration, which strengthens
supply chain resilience and enhances profitability. The Paradeep unit integrates
phosphoric acid production, while the Goa unit specializes in ammonia. In the 2023-24
fiscal year, PPL increased its captive phosphoric acid capacity by 67%, from 0.3 to 0.5
Mn MT, to support rising finished goods production at Paradeep. Concurrently, the
company is expanding its sulfuric acid production capacity from 1.39 Mn MT to
approximately 2 Mn MT. This backward integration mitigates operational volatility,
improves cost efficiencies, and stabilizes the supply chain, allowing PPL to maintain
healthier margins despite fluctuating raw material prices.

PPL also secures a stable source of critical raw materials through long-term contracts,
reducing the risks associated with supply chain disruptions and price volatility. By
producing essential raw materials like phosphoric and sulfuric acid in-house, the
company effectively manages costs and sustains competitive margins in the fertilizer
market.

Initiating Coverage Systematix Shares and Stocks (India) Limited 5

 Systematix PCG Research Paradeep Phosphates Ltd

To enhance operational efficiency, PPL implements just-in-time procurement

strategies and optimizes production, distribution, and inventory management
processes. These initiatives streamline operations, reduce costs, and improve
responsiveness to market demands, ensuring the company’s sustained
competitiveness and profitability in the industry.

Diverse product offerings, R&D, and distribution network driving agricultural

innovation and sustainability

PPL's core offerings include a diverse range of phosphatic fertilizers, such as Di-
Ammonium Phosphate (DAP), various grades of NPK (Nitrogen, Phosphorus,
Potassium), Zypmite, and Urea, all designed to meet the nutritional needs of crops
and enhance soil fertility. The company also serves as a key supplier of phospho-
gypsum, sulfuric acid, and hydrofluorosilicic acid, supporting industrial applications
that complement its fertilizer business. The company ensures operational flexibility
through extensive storage facilities for both raw materials and finished goods. This
capability helps meet customer demands promptly and maintains supply chain
resilience.

There has been a notable shift in preference from traditional fertilizers like urea and
DAP toward NPK fertilizers, reflecting a growing focus on balanced nutrient
management to improve crop yields and soil health. The rapid growth of NPK products
highlights a broader trend towards more efficient and sustainable agricultural
practices.

Exhibit 05: Core and newly launched products

Source: Company, Systematix PCG Research

Research and development is viewed as a key driver of future growth, with a focus on
enhancing agricultural productivity and ensuring environmental sustainability. PPL
actively engages in the development of value-added fertilizers, contributing to its
intellectual capital and product diversification. The company has undertaken lab-scale
trials for a new low-nutrient content NPK (12:11:18) formulation, yielding promising
results. Additionally, PPL is developing SSP-Urea Fertilizer and Zincated DAP Fertilizer
to enhance micronutrient content, addressing crop-specific needs and supporting
sustainable agriculture.

Initiating Coverage Systematix Shares and Stocks (India) Limited 6

 Systematix PCG Research Paradeep Phosphates Ltd

At the forefront of innovation, PPL invests in domestic R&D, developing Biogenic Nano
Urea and Nano DAP while introducing new NPK variants to enhance its product
offerings for the agricultural sector. The Goa plant is particularly noted for producing
unique NPK grades, such as NPK 19:19:19, which is exclusively manufactured in India.

In an effort to expand its product line, PPL is introducing innovative offerings like nano
DAP and nano urea. In Q1 FY25, the company sold 50,000 bottles of nano urea and
aims to reach a total of 500,000 bottles by the end of FY25. Additionally, PPL launched
Triple Super Phosphate (TSP), selling approximately 27,000 MT in Q1 FY25 with plans
to achieve around 100,000 MT for the remainder of the year. The company continually
innovates, optimally utilizes its production capacity, and enhances efficiency through
strategic backward integration.

Exhibit 06: Expanding scope of nano urea

Source: Company, Systematix PCG Research

PPL manufactures and distributes a range of complex fertilizers, complemented by

micronutrients like Zypmite. With over five decades of trust, its brands like Jai Kisaan
and Navratna resonate deeply with Indian farmers, symbolizing the company’s
commitment to agricultural excellence.

To boost sales density and enter new markets, PPL cultivates its dealer and retailer
network. By nurturing relationships with channel partners, the company effectively
addresses the growing demand for its products.

PPL's strategically located manufacturing facilities near the Paradeep and Goa ports
enhance logistical efficiency, allowing the company to effectively serve markets across
India. With an extensive distribution network of over 5,000 dealers, PPL sells finished
fertilizers under well-established brand names, reaching more than 9 Mn farmers
across 15 states and significantly contributing to the country’s agricultural prosperity.
This network includes over 75,000 retail points, ensuring strong regional coverage and
localized engagement, while its infrastructure of more than 345 stock points secures
product availability and facilitates timely delivery.

Initiating Coverage Systematix Shares and Stocks (India) Limited 7

 Systematix PCG Research Paradeep Phosphates Ltd

Exhibit 07: Widely spread distribution network

Source: Company, Systematix PCG Research

In line with its growth ambitions, PPL is committed to producing fertilizers that cater
to the specific needs of farmers. The company consistently innovates while optimizing
production capacity and enhancing efficiencies through backward integration.
Dedicated to supporting agriculture in India, PPL focuses on creating tailored fertilizer
solutions for farmers.

Initiating Coverage Systematix Shares and Stocks (India) Limited 8

 Systematix PCG Research Paradeep Phosphates Ltd

PPL and MCFL Merger: Strategic consolidation and growth prospects

On February 7th, 2024, the Board of Directors of PPL approved the composite scheme
of arrangement for the merger with Mangalore Chemicals and Fertilizers Ltd (MCFL),
marking a strategic move that will create one of the largest integrated private sector
fertilizer firms in India, with a total manufacturing capacity of approximately 3.7 Mn
MT. This merger is expected to enhance market reach and production capacity,
positioning the combined entity as the largest private fertilizer company in the
country by installed capacity. It will facilitate entry into new markets, particularly in
southern India, while delivering cost synergies. The combined entity is set to benefit
from economies of scale, optimize product mix, enhance distribution reach, and
improve supply chain capabilities, leveraging each other’s strengths. This strategic
move aims to unlock significant value and drive sustainable growth for shareholders,
employees, and partners.

Regulatory approvals for the merger are currently underway. Company is working with
SEBI and soon shall be able to submit all the required documents post observations
issued. CCI and lenders approvals have been received and as soon as company gets
SEBI approval it will apply to NCLT. In this case company will need 2 NCLT approvals
one in Odisha and one in Bangalore. By April 2025 the management expects to
complete the merger.

The merger ratio for the consolidation of MCFL and PPL is set at 187 equity shares of
PPL for every 100 equity shares of MCFL. Investors can acquire PPL shares through this
merger by purchasing shares of the target company MCFL. Based on current prices
and the merger ratio investors could potentially realize a gain of approximately 19%
on PPL shares solely from the merger by buying MCFL shares. This upside is in addition
to any gains projected from our target price.

The key risk associated with this situation is the possibility of the merger failing, which
could leave investors holding MCFL shares. However, management remains confident
that the merger will be successfully completed by April 2025.

Valuation

Paradeep Phosphates is India’s second largest phosphate based fertilizer player. The
company stands to benefit from the notable shift in preference from traditional
fertilizers like urea and DAP toward NPK fertilizers.

With upcoming expansion in capacity and synergies from the merger, strong
backward integration, a focus on innovative products, and robust support from its
promoters, PPL is well-positioned for growth in the future. Management expects the
merger with MCFL to get completed by April 2025. Post which the capacity will go
upto 3.7 Mn MT which will enable PPL become more competitive within the
industry. FY23 was an aberration year for the company which affected its profits and
we expect that going ahead government support for the sector will be stable. These
factors are expected to drive revenue growth at a CAGR of 30%, EBITDA at a CAGR of
62%, and PAT at a CAGR of 192% from FY24 to FY26E. Therefore, we initiate
coverage on Paradeep with a target price of Rs 105, based on 10x P/E multiple on
FY26E EPS, resulting in a 26% upside.

Initiating Coverage Systematix Shares and Stocks (India) Limited 9

 Systematix PCG Research Paradeep Phosphates Ltd

Financial Analysis

Revenue growth driven by strong capacity expansion and post-merger synergies

We project Paradeep to achieve a revenue growth rate of 30% CAGR from FY24 to
FY26E, reaching Rs 19,442 cr, which will include the consolidation of MCFL. This
growth is expected to be fueled by the additional capacities resulting from the merger,
along with synergies and enhanced backward integration. Additionally, we expect the
government to provide strong support to the fertilizer industry which will bolster the
company's long-term growth prospects.

Exhibit 08 (In Rs Cr): Strong revenue growth at a CAGR of 30% from FY24-FY26E

19,442

13,341 13,755
11,575

7,859

FY22 FY23 FY24 FY25E FY26E

Source: Company, Systematix PCG Research

EBITDA and EBITDA margins to expand led by backward integration

Paradeep's EBITDA faced a setback in FY24 due to an increase in costs of

approximately Rs 350 cr resulting from a government circular that mandated price
revision retrospectively from January instead of April. We anticipate this impact to be
a one-time occurrence and we project the company’s EBITDA to grow at a CAGR of
62% from FY24 to FY26E to Rs 1,711 cr. The company’s backward integration in
phosphoric and sulfuric acids, coupled with robust support from its promoter OCP
group for rock phosphate supplies will enhance its competitive edge and improve
EBITDA per ton. Management has indicated a target of maintaining a sustainable
EBITDA per ton in the range of Rs 4,500 to Rs 5,000.

Exhibit 09 (In Rs Cr): EBITDA margin to expand coupled with healthy growth in EBITDA
EBITDA EBITDA %
1,800 9.3% 8.8% 10.0%
8.5%
1,600 1,711 9.0%
1,400 8.0%
6.0% 7.0%
1,200 5.6% 1,279
6.0%
1,000
5.0%
800
801 4.0%
600
671 648 3.0%
400 2.0%
200 1.0%
0 0.0%
FY22 FY23 FY24 FY25E FY26E
Source: Company, Systematix PCG Research

Initiating Coverage Systematix Shares and Stocks (India) Limited 10

 Systematix PCG Research Paradeep Phosphates Ltd

PAT is expected to grow at a CAGR of 192% from FY24-FY26E

We expect PAT to grow at a CAGR of 192% from FY24 to FY26E to Rs 852 cr partly due
to the low base effect from FY24. As capacities expand the company will benefit from
economies of scale, facilitating improved growth. Additionally the synergies realized
after the merger will positively impact the bottom line.

Exhibit 10 (In Rs Cr): PAT CAGR of 192% from FY24-FY26E

PAT PAT %

900 6.0%
5.1%
800 852
4.4% 5.0%
700 4.1%
600 4.0%
500 570
3.0%
400 2.3%
398
300 2.0%
304
200 0.9%
1.0%
100
100
0 0.0%
FY22 FY23 FY24 FY25E FY26E
Source: Company, Systematix PCG Research

Initiating Coverage Systematix Shares and Stocks (India) Limited 11

 Systematix PCG Research Paradeep Phosphates Ltd

About the company

Incorporated in 1981 as a joint venture between the Government of India (GoI) and
the Republic of Nauru (RN) for a phosphatic fertilizer manufacturing unit in Paradeep,
PPL became a public sector enterprise (PSU) following the divestment of RN's stake in
1993. In 2002, the GoI decided to sell nearly 80% of its stake to Zuari Maroc
Phosphates Pvt. Ltd. (ZMPPL), a joint venture between Zuari Agro Chemicals Limited
(ZACL) and Morocco's OCP Group S.A., one of the world's largest phosphatic
companies with over 70% of known phosphate reserves and revenues exceeding USD
10 billion in FY 22.

Paradeep Phosphates Limited (PPL) is a prominent player in India’s private sector

phosphatic fertilizers market. With a total production capacity of 3 Mn MT of which
2.6 Mn MT is dedicated to phosphates and 0.4 Mn MT to urea. PPL offers a diverse
range of phosphatic fertilizers. The company operates six flexible production trains,
enabling it to manufacture various products, including DAP, N-10, N-12, N-14, N-19, N-
20, and N-28. Additionally, PPL is a key supplier of industrial products such as gypsum,
zypmite, hydrofluorosilicic acid (HFSA), sulfuric acid, and ammonia.

PPL's manufacturing facilities are located in Paradeep, Odisha (1.8 Mn MT) and
Zuarinagar, Goa (1.2 Mn MT). The company sources its raw materials globally through
long-term contracts and markets its finished fertilizers under the established brands
“Jai Kisaan” and “Navratna” to over 8 Mn farmers across 16 states in India.

In May 2022, PPL completed its Rs 1,500 cr initial public offering (IPO) during which
the GoI divested its remaining stake. Part of the proceeds was used to acquire the 1.2
Mn MT fertilizer plant in Goa in June 2022. Post-IPO, ZMPPL holds a 56.10% stake in
PPL.

The promoters have now announced the merger between Paradeep Phosphates
Limited (PPL) and Mangalore Chemicals and Fertilizers Ltd (MCFL) which once finalized
will enhance their market presence and production capacity. This strategic
consolidation will position them as the largest private fertilizer company in India based
on installed production capacity. Additionally the merger will facilitate entry into new
markets particularly in the southern region, while unlocking cost synergies.

Exhibit 11: Competitive advantage for Paradeep

Source: Company, Systematix PCG Research

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 Systematix PCG Research Paradeep Phosphates Ltd

Key Managerial Personnel and Senior Managerial Personnel

Name Designation
Mr. Saroj Kumar Poddar Chairman
Mr. N. Suresh Krishnan Managing Director & CEO
Mr. Bijoy Kumar Biswal Chief Financial Officer
Mr. Rajeev Nambiar Chief Operating Officer
Mr. Harshdeep Singh Chief Commercial Officer
Mr. Raj Kumar Gupta Chief Procurement Officer
Mr. Palanisamy Velusamy CMO & Unit Head, Paradeep
Mr. Nilesh Dessai CMO & Unit Head, Goa
Mr. Rajneesh Bhardwaj Chief Human Resources Officer
Mr. V. Vinay Chief Sustainability Officer
Mr. Sachin Patil Company Secretary & Compliance Officer
Source: Company, Systematix PCG Research

Industry Overview
As India’s population continues to grow, the demand for food grains and agricultural
products is expected to rise, necessitating higher agricultural output. This increase in
agricultural activity drives a greater need for fertilizers, which are essential for
enhancing crop yields. To address this, the Indian government has implemented
several favorable policies and subsidies aimed at bolstering the fertilizer industry,
setting ambitious goals to enhance domestic production and reduce reliance on
imports.

In the 2023-24 crop year, India’s total food grain production was estimated at 309 Mn
tons, according to the Ministry of Agriculture and Farmers’ Welfare's second advance
estimates. The government revised its kharif food grain production estimate upward
to 154.1 Mn tons, from an earlier projection of 148.5 Mn tons, while Rabi production
is projected at 155.1 Mn tons. Additionally, farm exports have significantly contributed
to the economy, totaling USD 48.82 billion in 2023-24, as reported by the Department
of Commerce.

The global fertilizer market is poised for substantial growth, with its size estimated at
USD 384.37 billion in 2024 and projected to reach USD 543.20 billion by 2030,
reflecting a CAGR of 5.93% during this period. This growth is driven by rising
urbanization, diminishing agricultural land, and increasing food production demands.
Europe, as the second-largest fertilizer market, is experiencing growth supported by
modern agricultural practices and regulatory support for sustainable farming. The
Asia-Pacific region, with its vast agricultural base and rapid industrialization, is
emerging as the fastest-growing market for fertilizers. China, the world’s largest
producer and exporter, accounts for 25% of global production, while India, as the
second-largest consumer, underscores the robust demand in this region. In 2023-24,
India’s consumption of major fertilizers reached 64 Mn tons, highlighting their critical
role in sustaining agricultural productivity.

Balanced fertilization is essential for improving agricultural productivity in India, which

ranks first globally in fertilizer consumption per hectare of agricultural land. However,
yields for major crops like rice, wheat, and pulses remain below potential due to
fragmented landholdings, imbalanced fertilizer use, and limited adoption of advanced
technologies.

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 Systematix PCG Research Paradeep Phosphates Ltd

To tackle these challenges, the Indian government is promoting technological

advancements to enhance agricultural productivity and farmer incomes. Key initiatives
include digital agriculture platforms like the National Agriculture Market (e-NAM),
digital registries, and improved public infrastructure to ensure widespread IT access,
alongside a strong agricultural research system comprising 102 ICAR institutes and 73
agricultural universities.

The Indian fertilizer market is projected to reach approximately USD 39.54 billion by
2030, growing at a CAGR of 5.22% from 2024 to 2030. The market size was recorded
at USD 27.70 billion in 2023, indicating significant potential for expansion. Larger
fertilizer companies benefit from long-term agreements with raw material suppliers,
backward integration, extensive distribution networks, and strong brand recognition
among farmers. In contrast, smaller players often lack these advantages and rely
heavily on imported raw materials.

During 2023-24, urea production reached 31.41 Mn tons reflecting a 10.2% increase
compared to the previous year, while NP/NPK complex fertilizer production rose by
2.8% to 9.55 Mn tons. Conversely, DAP production declined by 1.2% to 4.29 Mn tons,
and SSP production fell by 21.0% to 4.46 Mn tons. Imports of urea, DAP, and NP/NPKs
also decreased, while MOP imports increased by 53.8% to 2.87 Mn tons.

Total fertilizer sales reached approximately 64.70 Mn tons in 2023-24, up from 63.84
Mn tons in 2022-23. Urea sales increased by 0.2% to 35.78 Mn tons, DAP sales rose by
3.8% to 10.81 Mn tons, MOP sales grew by 0.8% to 1.64 Mn tons, and NP/NPK sales
surged by 9.9% to 11.07 Mn tons, despite a 9.4% decline in SSP sales.

Notably, the NPK segment experienced significant growth of around 10%, while DAP
sales saw a year-on-year increase of approximately 4%. These growth rates for both
NPK and DAP are vital for maintaining balanced soil nutrition and bode well for
phosphatic fertilizer companies in India.

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 Systematix PCG Research Paradeep Phosphates Ltd

Financial Summary

Income Statement (Rs Crs) FY22 FY23 FY24 FY25E FY26E Basic Ratios (Rs.) FY22 FY23 FY24 FY25E FY26E
Revenue from Operations 7,859 13,341 11,575 13,755 19,442 EPS 6.9 3.9 1.2 7.0 10.5
Expenses 7,188 12,540 10,927 12,476 17,731 Growth (%) -44% -69% 474% 49%
EBITDA 671 801 648 1,279 1,711 Book Value Per Share 38.7 43.0 43.7 50.2 60.2
Depreciation and Amortisation 90 175 211 301 350 Growth (%) 11% 2% 15% 20%
EBIT 581 626 437 978 1,360
Other income 39 91 69 83 97 Valuation Ratios
Interest Cost 86 291 366 300 322 P/E (x) 12.0 21.2 67.9 11.8 7.9
PBT before exceptional items 534 426 140 760 1,136 P/CEPS (x) -108.6 -2.8 4.7 7.6 7.1
Excep. Items 0 0 0 0 0 P/BV (x) 2.1 1.9 1.9 1.6 1.4
Share of Profit/ (Loss) from JV's 1 1 1 1 1 EV/Sales (x) 0.9 0.8 0.9 0.8 0.6
Tax expense 137 122 41 190 284 EV/EBITDA (x) 10.6 14.1 16.4 8.4 6.4
PAT including minority interest 398 304 100 570 852
Attriutable to minority interest 0 0 0 0 0 Profitablity Ratio (%)
Net Profit attributable to owners 398 304 100 570 852 ROE (%) 17.9% 8.7% 2.8% 13.9% 17.4%
ROA (%) 5.0% 2.9% 1.0% 5.7% 7.4%
Balance Sheet (Rs crs) ROCE (%) 20.2% 14.7% 9.9% 19.2% 22.4%
PP&E, CWIP incl Right of use Assets 1,596 3,509 3,743 4,142 4,491 Margin (%)
Goodwill, Other Intangibles & Equity accounted investment 4 63 63 63 63 EBITDA 8.5% 6.0% 5.6% 9.3% 8.8%
Other non current Assets incl income tax assets 1,195 70 98 98 98 PBT 6.8% 3.2% 1.2% 5.5% 5.8%
Total Non Current Assets 2,795 3,642 3,904 4,303 4,652 PAT 5.1% 2.3% 0.9% 4.1% 4.4%
Inventories 2,293 2,238 1,831 1,857 2,435
Cash & Cash equivalents incl bank balances 598 110 118 81 145 Leverage Ratios
Receivables 902 3,690 2,720 2,638 3,196 Interest Coverage Ratio (x) 6.8 2.1 1.2 3.3 4.2
Investments, Other current assets incl financial assets 1,340 978 1,088 1,088 1,088 Net D/E (x) 1.1 1.3 1.1 1.0 0.8
Total Current Assets 5,133 7,015 5,757 5,664 6,864 Net Debt / EBITDA (x) 3.5 5.6 6.0 3.2 2.4
Total Assets 7,928 10,657 9,661 9,966 11,516 Financial Leverage (x) 3.6 3.0 2.7 2.4 2.3
Share capital 575 814 815 815 815 Liquidity Ratios
Net worth 2,225 3,505 3,564 4,094 4,906 Current Ratio 1.0 1.1 1.1 1.2 1.3
Long term borrowings 528 612 677 798 973 Quick Ratio 0.6 0.7 0.8 0.8 0.8
Lease liablities & Other financial liabilities 3 18 17 17 17 Cash Ratio 0.1 0.0 0.0 0.0 0.0
Provisions & Deferred tax liabilities (net) 119 132 177 177 177
Total Non Current Liablities 650 761 871 992 1,168 Working Capital
Short term borrowings 2,426 4,019 3,318 3,318 3,318 Trade Receivable Days 48 63 101 70 60
Trade Payables 2,273 1,912 1,488 1,143 1,705 Inventory Days 93 78 83 65 60
Other Financial Liablities incl lease liablities 78 241 227 227 227 Trade Payable Days 47 36 34 40 42
Other current liablities incl Provisions & current tax liabilities 276 219 193 193 193
Total Current Liablities 5,053 6,391 5,226 4,880 5,443 Growth Ratio (%)
Total Equity and Liablities 7,928 10,657 9,661 9,966 11,516 Sales 69.8% -13.2% 18.8% 41.3%
Expenses 74.5% -12.9% 14.2% 42.1%
Cash Flow Statement (Rs crs) EBITDA 19.4% -19.1% 97.4% 33.7%
CF before working capital changes 733 827 661 1,362 1,809 Interest Cost 240.5% 25.7% -17.9% 7.1%
Changes in working capital -691 -3,066 834 -289 -574 PBT -20.3% -67.1% 442.1% 49.5%
Cash from operations 42 -2,239 1,495 1,074 1,234 PAT -23.7% -67.2% 470.9% 49.4%
Direct taxes paid -86 -137 -58 -190 -284 Cash EPS 3727.0% -160.4% -38.5% 7.6%
Net cash from operations -44 -2,377 1,437 883 950
Net cash from investing activities -1,099 -419 -367 -700 -700
Net cash from financing activities 1,589 2,301 -1,022 -220 -187
Net change 446 -495 48 -37 63
Opening cash 92 538 43 91 54
Closing Cash 538 43 91 54 118

Initiating Coverage Systematix Shares and Stocks (India) Limited 15

 Systematix PCG Research Paradeep Phosphates Ltd
DISCLOSURES/APPENDIX

Analyst Certification
I/we, Hitendra V Gupta, Yash Dalvi and Naresh Naiker, hereby certify that (1) views expressed in this research report accurately reflect
my/our personal views about any or all of the subject securities or issuers referred to in this research report, (2) no part of my/our
compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report by
Systematix Shares and Stocks (India) Limited (SSSIL) or its group/associate companies, (3) reasonable care is taken to achieve and maintain
independence and objectivity in making any recommendations.
Disclosure of Interest Statement Update
Analyst holding in the stock (%) None
Served as an officer, director or employee No

ISSUER SPECIFIC REGULATORY DISCLOSURES, unless specifically mentioned in point no. 9 below:
1. The research analyst(s), SSSIL, associates or relatives do not have any financial interest in the company(ies) covered in this report.
2. The research analyst(s), SSSIL, associates or relatives collectively do not hold more than 1% of the securities of the company(ies) covered in this report as of
the end of the month immediately preceding the distribution of the research report.
3. The research analyst(s), SSSIL, associates or relatives did not have any other material conflict of interest at the time of publication of this research report.
4. The research analyst, SSSIL and its associates have not received compensation for investment banking or merchant banking or brokerage services or any
other products or services from the company(ies) covered in this report in the past twelve months.
5. The research analyst, SSSIL or its associates have not managed or co-managed a private or public offering of securities for the company(ies) covered in this
report in the previous twelve months.
6. SSSIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party in connection
with this research report.
7. The research analyst has not served as an officer, director or employee of the company(ies) covered in this research report.
8. The research analyst and SSSIL have not been engaged in market making activity for the company(ies) covered in this research report.
9. There is no material disciplinary action taken by any regulatory authority that impacts the equity research analysis activities.
10. Details of SSSIL, research analyst and its associates pertaining to the companies covered in this research report:

Sr. No. Particulars Y/N

Whether compensation was received from the company(ies) covered in the research report in the past 12 months
1 N
for investment banking transaction by SSSIL.
Whether research analyst, SSSIL or its associates and relatives collectively hold more than 1% of the company(ies)
2 N
covered in the research report.
Whether compensation has been received by SSSIL or its associates from the company(ies) covered in the research
3 N
report.
Whether SSSIL or its affiliates have managed or co-managed a private or public offering of securities for the
4 N
company(ies) covered in the research report in the previous twelve months.
Whether research analyst, SSSIL or associates have received compensation for investment banking or merchant
5 banking or brokerage services or any other products or services from the company(ies) covered in the research N
report in the last twelve months.
EXPLANATION TO RATINGS: BUY: TP>15%; ACCUMULATE: 5%<TP<15%; HOLD: -5%<TP<5%; REDUCE: -15%<TP<-5%; SELL: TP<-15%

Initiating Coverage Systematix Shares and Stocks (India) Limited 16

 Systematix PCG Research Paradeep Phosphates Ltd
DISCLAIMER
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