Paradeep Phosphates Limited

Summary

Paradeep Phosphates Limited: A Business Analysis

About Paradeep Phosphates

• Incorporated in 1981, Paradeep Phosphates Limited is a manufacturer of non-urea fertilizers in India. The company is engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-Potassium (namely NPK-10, NPK-12 and NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid.
• Paradeep Phosphates Limited is the second largest private sector manufacturer of non-urea fertilizers and Di-Ammonium Phosphate(DAP) in terms of volume sales for the nine months ended December 31, 2021. The company's fertilisers are marketed under the brand names Jai Kisaan-Navratna and Navratna.
• The manufacturing facility of Paradeep Phosphates Limited is located in Paradeep, Odisha, and includes a DAP and NPK production facility, a Sulphuric acid production plant and a Phosphoric acid production plant. The facility can store up to 120,000 MT, 65,000 MT, 55,000 MT and 35,000 MT of Phosphate Rock, Phosphoric acid, Sulphur and MOP, respectively.
• The company established an extensive sales and distribution network, with a strong presence in the eastern part of India. As of March 31, 2022, Paradeep Phosphates distributed products across 14 states in India through the network of 11 regional marketing offices and 468 stock points.
• As of March 31, 2022, the company's network includes 4,761 dealers and over 67,150 retailers serving over five million farmers in India.

Business Overview - Paradeep Pho

Paradeep is the second largest private sector manufacturer of non-urea fertilizers in India and the second largest private sector manufacturer in terms of Di-Ammonium Phosphate (“DAP”) volume sales for the nine months ended December 31, 2021 (Source: CRISIL Report). The company is primarily engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-Potassium (“NPK”) (namely NPK-10, NPK-12 and NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid (“HFSA”). Company is also engaged in the trading, distribution and sales of Muriate of Potash (“MOP”), Ammonia, Speciality Plant Nutrients (“SPN”) and City compost. Company's fertilizers are marketed under some of the key brand names in the market ‘Jai Kisaan – Navratna’ and ‘Navratna’.

The company was incorporated in 1981. Zuari Maroc Phosphates Private Limited (“ZMPPL”), a joint venture of Zuari Agro Chemicals Limited (“ZACL”) and OCP Group S.A. (“OCP”), currently holds 80.45% of the equity share capital of the Company, with the balance being held by the Government of India.

Company are part of the Adventz Group, as well as OCP. The founding chairman of the Adventz Group was the late Dr. K.K. Birla and the current chairman is Mr. Saroj Kumar Poddar. The Adventz Group operates in several businesses and has a strong presence in the agribusiness, engineering and infrastructure businesses and emerging lifestyle business. OCP, founded in 1920, with revenues of over US$6.3 billion in 2020, is one of the leading producers of Phosphate rock globally and operates largely in the Morocco and Western Sahara region which has approximately 70% of the global Phosphate rock reserves, according to CRISIL Research, and is owned 95% by the Moroccan government. Phosphate rock is processed to produce phosphorous, which is one of the three main nutrients most commonly used in fertilizers (the other two are nitrogen and potassium). India has negligible Phosphate reserves and is dependent on imports of Phosphate rock (a source raw material) or Phosphoric Acid (an intermediate raw material) or DAP (finished phosphatic fertilizer). 

Manufacturing Facilities

Company's manufacturing facility is located in Paradeep, Odisha and includes a DAP and NPK production facility, a Sulphuric acid production plant and a Phosphoric acid production plant. Company is utilize Sulphuric and Phosphoric acids for manufacturing DAP and NPK. They believe that their integrated business model has been critical to their success and a differentiating factor from the competitors. Company's integrated business model provides them with the ability to drive profitability, optimize capital efficiency and maintain their competitive advantage. As of March 31, 2022, (i) total annual granulation capacity of DAP and NPK production plant was approximately 1.50 million MT; (ii) total annual installed capacity of Sulphuric acid production plant was approximately 1.30 million MT; and (iii) total annual installed capacity of Phosphoric acid production plant was 0.30 million MT, in addition, the plant has three operational concentrators to concentrate weak Phosphoric acid into strong Phosphoric acid. The company is also have facilities to store their raw material in Paradeep, Odisha and at any point of time, they can store 120,000 MT of Phosphate rock, 65,000 MT of Phosphoric acid solution, 55,000 MT of sulphur, 45,000 MT of Sulphuric acid, 40,000 MT of liquid ammonia and 35,000 MT of MOP. Paradeep also have two captive power plants of 16 MW each, designed to run on the excess steam generated by the Sulphuric acid production plant. The manufacturing facility is strategically located close to the Paradeep port and the company have a closed conveyor belt which is 3.4 km long connecting the Paradeep port to their manufacturing facility. At the Paradeep port, company have a captive berth with 14 meters draft with facilities to unload solid and liquid cargo. In addition, company own a railway siding and a cross country pipeline. This enables them to transport raw material directly to their facility.

The following table sets forth the volume of fertilizers manufactured and sold by us for the periods indicated;

The following table sets forth the products traded by us for the periods indicated:

Business Strategy

• Improve the leadership position by enhancing their production capabilities and having a more diversified product portfolio.
• Continue to improve cost efficiency and productivity.
• Increase geographical reach in Eastern and Western India and expand distribution channels.
• Improve market leadership through investment in brand building and other campaigns.
• Continue to attract, retain and develop human capital.
• Selectively pursue inorganic growth opportunities.

Company's Product Portfolio

DAP

DAP is a granulated, high quality, water-soluble, complex mineral fertilizer containing primarily of 18% Ammoniacal Nitrogen by weight and 46% Phosphate by weight. (Source: CRISIL Report) DAP is suitable for all types of soils and can be used as a base fertilizer for all crops. DAP is a dry material used extensively for bulk blending and for direct application. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 721,565 MT, 638,737 MT and 564,132 MT of DAP, respectively.

NPK

Multi-nutrient, complex fertilizers, commonly referred to NPK include all three main nutrient elements: Nitrogen, Phosphate and Potassium. Complex fertilizers are produced by either blending or chemical reaction between Phosphoric Acid, Ammonia, Potassium Chloride (Potassium Sulphate), Nitric acid and other substances. We manufacture the following NPK fertilizers: 

NPK – 10:
This NPK fertilizer contains Nitrogen, Phosphorus and Potassium in the ratio of 10:26:26. This NPK fertilizer is suitable for all types of soil. Due to the presence of 1:1 ratio of Phosphorus and Potassium, NPK-10 fertilizer is suitable for crops such as sugarcane and potatoes. As the Potassium nutrients are in water-soluble form, it is easier for the crops to absorb the nutrient. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 85,555 MT, 81,490 MT and 106,283 MT of NPK-10, respectively.

NPK – 12:
NPK-12 fertilizer contains Nitrogen, Phosphorus and Potassium in the ratio of 12:32:16. The three nutrients are present in granule form. This NPK fertilizer is suitable for all types of soil. This NPK fertilizer enhances the yield and quality of crops such as onions, tobacco, ginger, garlic, tomato, cabbage and oil seeds. Given that Phosphorous and Potassium nutrients are in water-soluble form, it is easier and quicker for the plants to absorb the nutrients. Nitrogen is present in the form of Ammonium Sulphate. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 30,663 MT, 26,465 MT and 12,380 MT of NPK-12, respectively.

NP – 20:
NP -20 fertilizer contains Ammonia, Phosphate and Sulphate in the ratio of 20:20:0:13. NP-20 is suitable for all types of soil. This fertilizer enhances the yield and quality of crops such as oil seeds, pulses, onions, soybean, garlic, sugarcane, paddy and cotton. NP-20 fertilizer is utilized for fertilizing the vegetables that require frequent application of fertilizers. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 380,062 MT, 275,200 MT and 378,625 MT of NP-20, respectively.

Zypmite
Zypmite is a micronutrient mixture containing Sulphur, Zinc, Boron, Calcium and Magnesium. Zypmite helps in improving the soil fertility, increasing the intake of NPK fertilizers and improving the quality of yield of crops. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 40,540 MT, 16,574 MT and 23,036 MT of Zypmite, respectively. 

Phospho-gypsum
Phospho-gypsum contains Sulphur and Calcium in the ratio of 17:21. Phosho-gypsum is suitable for alkaline soils. Sulphur in the Phospho-gypsum helps in (i) increasing crop yield, crop product quality and oil content in oil seeds; (ii) improving fertilizers’ efficiency, plant health and soil condition; and (iii) adding colour and flavor to the crops. Calcium in the Phospho-gypsum helps in (i) better fruit development; (ii) increasing crop product quality; (iii) improving the plant growth and root development; (iv) metabolic activities; and (v) preventing fruit cracking. Phospho-gypsum enhances the yield and quality of crops such as rice, pulses, oil seeds and sugarcane. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 1,583,132 MT, 12,05,347 MT and 914,422 MT of Phospho-gypsum, respectively.

HFSA
HFSA is an inorganic compound, colorless liquid and manufactured as a coproduct in the production of phosphates fertilizers. It is used as a precursor to aluminum trifluoride and synthetic cryolite, which are used in aluminum processing. For the Financial Years 2022, 2021 and 2020, we manufactured approximately 4,903 MT, 3,507 MT and 3,343 MT of HFSA, respectively.

The following table sets forth the products traded by us for the periods indicated:

Production Process

Sulphuric acid
Liquid Sulphur is pumped to a combustion chamber to produce Sulphur dioxide. The Sulphur dioxide gas is cooled down in the waste heater boiler. The Sulphur dioxide is then fed to the converter. We maintain the concentration of Sulphuric acid at 98.5% by controlling the quantity of water to be mixed with the Sulphuric acid. The Sulphuric acid is thereafter circulated to the final absorber pump tank and pumped through water-cooled plate type acid coolers to the storage tank.

Phosphoric acid
We grind Phosphate rock and water to make slurry. The slurry is ultimately pumped into a product tank and then passed onto a density tank. The slurry is then pumped to a reactor and sulphuric acid is added to the reactor to produce Phosphoric acid and Phospho-gypsum. The slurry is cooled in a vacuum cooler. The slurry thereafter flows down to a vacuum cooler seal tank and most of the cold slurry returns back to the reactor whereas the remaining slurry moves to the filter feed tank. Slurry from the filter feed tank is fed to the feed box to separate the Phosphoric acid from gypsum. Weak Phosphoric acid is pumped to a clarifier for sludge separation. The clarifier overflow goes to a product acid tank and is either pumped to the DAP production plant or to the evaporators. The weak Phosphoric acid is also concentrated to 54% in evaporators. The concentrated Phosphoric acid flows to theconcentrated acid seal tank and is pumped to the concentrated acid clarifier for further sludge separation.

DAP and NPK
Production of DAP and NPK is based on the neutralization of Phosphoric acid by Ammonia. In the pre-nuetraliser tank reactor, liquid Ammonia and Phosphoric acid react to produce slurry, which is discharged from the preneutraliser directly into a granulator by pumps. The heat of the reaction raises the slurry temperature to the boiling point and evaporates the existing moisture. Further ammonization and addition of Potassium Chloride and / or Ammonium Sulphate (if NPK is produced) take place in a drum granulator.

Zypmite
The primary raw materials required for the production of Zypmite are Phospho-gypsum, Zinc Sulfate, Bentonite, Borax and Dolomite. We mix all these raw materials in a specified proportion in a paddle mixer. Once the wet Zypmite granules are formed, we dry them in a rotary dryer.

Network and Reach

Company's Strength

• Well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations.
• Second largest manufacturer of Phosphatic fertilizers in India .
• Driving raw material efficiency through backward integration of facilities and effective sourcing.
• Secure and certified manufacturing facility and infrastructure and unutilised land available for expansion.
• Strategic location of our manufacturing facility and sizeable material storage, handling and port facilities.
• Established brand name backed by an extensive sales and distribution network.
• Strong parentage, experienced management team and prominent shareholders.

Company's Management

Suresh Krishnan, Managing Director

Shareholding Structure

Financial Highlights

Profit and Loss

Balance Sheet

Cash Flow