Gujarat Narmada Valley Fert.Co.Ltd — Call Transcript 2021

Mar 22, 2021

& G ¥ Ww 5 a GNFC

Gujarat[Narmada] Valley Fertilizers & Chemicals Limited

CIN : L24110GJ1976PLC002903

\,__ Investor Service Centre | Secretarial & Legal Department SEBI Regn. No. INR 000002086 (An ISO 14001[&] ISO 45001 Company)

‘Narmada House’, Corporate Office PO. Narmadanagar - 392[015,] Dist. Bharuch, Gujarat, India Ph (02642) 202208, 202227, 202282 E-mail investor @gnte.in Ph (02642) 247002, Extn. 2208,2227,2282 Fax (02642) 247084

NO.SEC/SE/INV_MEET

DATE:22.03.2021

Dy. General Manager Dy. General Manager, Corporate Relationship Dept., Listing Department BSE Ltd., National Stock Exchange ofIndia Ltd., 1st Floor, New Trading Ring, Exchange Plaza, C-1,[Block][-][“G”] Rotunda Bldg., Bandra - Kurla Complex, P J Towers, Dalal Street, Fort Bandra (E) MUMBAI - 400 001 MUMBAI —- 400 051

Stock Code : 500670

Stock Code: “GNFC EQ”

Sub: Transcript of Investors / Analysts meet through Conference Call on General Business Update

Dear Sir / Madam,

We had vide our letter dated 18'" March, 2021 intimated the Stock Exchanges about the schedule of Investors / Analysts meet through Conference Call on Friday, the 19!” March, 2021 at the Registered Office of the Company on “General Business Update”.

We send herewith a copy of Transcript of Investors / Analysts meet through Conference Call which took place on 19 March, 2021. The said transcript is also uploaded on the Company's websitei.e. www.gnfc.in

We request youto kindly take note of the same on your record.

Thanking you,

Yours faithfully,

For Gujarat Narmada Valley Fertilizers & Chemicals Ltd.

CH | CS AC Sha Company Secretary & GM (Legal)

Encl.: As above.

Regd. Office P 0 Narmadanagar - 392 015, Dist. Bharuch, Gujarat, India Ph (02642) 247001-002 Website www.gntc.in

“Gujarat Narmada Valley Fertilisers & Chemicals Group Business Update Conference Call

March 19, 2021

MANAGEMENT: Mr. D.V. PARIKH— GENERAL MANAGER, CHIEF

FINANCIAL OFFICER, GNFC LIMITED Mr. Y.N. PATEL[—] GENERAL MANAGER & M), GNFC LIMITED (O

MR. AC SHAH - GENERAL MANAGER & COMPANY

SECRETARY, GNFC LIMITED

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

Moderator:

Parth Adhiya:

Ladies and gentlemen, good day. And welcome to GNFC Group Conference Call hosted by Batlivala & Karani Securities India Private Limited. As a reminder, all participant lines will be in the listenonly mode. And there will be an opportunity for you to ask questions after the presentation concludes, toShouldtouchtoneMr. Parthyouphone,needAdhiya assistance Pleasefrom Batlivalanoteduringthat thisthe&call,KaraniconferencepleaseSecurities. issignalbeingThankanrecorded.operatoryou andI bynowpressingoverhandto you,the‘*’ conferencethenMr. Adhiya.‘0’ on overyour

Thank you. Neerav. Good afternoon, ev eryone. And thank you for joining us on the Gujarat Narmada Valley Fertilizers & Chemicals’ general business update call. We think the management for giving us the opportunity to host the call and look forward to more such interaction in the future. Today we have with us Mr. DV Parikh ~General Manager and CFO of the company, Mr. YN Patel, he is the General Managerof Operations; and Mr. AC Shah, General Manager and Company Secretary along with other senior members from the management.

I would now like to hand over the call to Mr. DV Parikh for his opening remarks. Thank you and over to you, sir.

DV Parikh: Good afternoon, everybody, Myself DV Parikh, I am the General Manager and CFOof the company.[On][behalf] of the GNFC, a warm welcome toall the participants on this call of business update. Since quarter three has already passed, we are providing a general business update. While we will cover some of the glimpses of year-to-date as well as quarter three as well on this call.

Like as you know, we started off the year with a situation of a lockdown practically across the country.[And] this lockdownhas a foree shutdown impact when we started the financial FY year 2021. So, practically for the whole month of April, was under the shutdown mode, and we lost around 11% ofthe total annual production in the process, which had an impact on the sales volume a such. Sales volume have been impacteda little lower because with the opening up of different downstream sector, we could unload the opening stock which was a carryover stock and, hence, there is a net impact of around 6%in volume terms as far as sales are concerned.

So, with the opening upofthe sector, however, the realizations have been quite better, especially when imports of certain chemicals have been impacted severely. Although, in caseof fertilizer imports[have] been more, in case of chemical they were impacted which gave us an opportunity for better regeneration, especially over quarter two and quarter three. If we look at the production, down from quarter one to quarter two, to quarter three, gradually the production levels have been ramped up. And certain products which were hitherto under a kind of like forced shutdownsort ofa thing due to demand scenario, mainly methanol and aniline have come up quite well[in] quarter three

So, with this, on a YTD basis, our PBT are at Rs. 498 crores which is practically higher than Rs. 424 crores of last year. And that too last year there was a one-time write-back of the estimated subsidy. which adjustedfor the yearit was around Rs. 160 crores, totaling to Rs. 191 crores. But

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Gujarat Narmada Valley Fertilizers[&] Chemicals Limited March 19, 2021

if we factor the subsidy of Rs. 31 crores for the financial year, which were anyway accruable there, there was a net ac ual of Rs. 160 crores during last year. So, profitability has improved substantially on a YTD basis.

When we talk of quarter three in particular, on a Q-o-Q basis the sales are up by 27%, mainly led by volume as well as price realizations. And there is a substantial improvement in the operating EBITDA margin by 50%. If we look at operating EBITDA margin, it has gone up by 50%. So, that is reflected in the PAT as well. However, since now the company is not under

MAT but under regular taxation, the PAT margins have improved by 33%at Rs. 240 crores as against the PBT ofRs. 337 crores.

If you look at line-item level within the P&L, there are two significant items where we would like to draw the attention. One is the other expenses which went up ofbecause of the certain provisioning of bad debts as well as CSR provisioning which became mandatory. And[there] is another item called catalysts and chemicals where sharp recovery in prices, the increase in prices rather has impacted the company.

Second item is that of the income tax where, as I said, the rate has almost doubled from around (+17%) to (+34%), mainly because of the company coming[under] the regular taxation regime effective this year.

So. this is by and large some substance of what do we have to cover in terms oflike operations, production side and finance side. So. now.I leave the session Open to question and answer to the participants.

Moderator:

Rahul Veera:

DVParikh:

Rahul Veera:

Thank you very much. We will now begin the question-and-answer session. The first question is fromthe line of Rahul Veera from Abacus Asset Management. Please go ahead.

Sir, I just wanted to understand in terms ofour chemical division, our usual revenues are close to Rs. 3,000 crores in FY 2022. Rs. 2,800 crores to be specific, can you give the split of that chemical division between TDI, formic acid and aniline and other chemicals? Gladly top three for chemicals.

Okay.[On] a[YTD] basis, if you look at the total turnover. it is mainlyled by the TDI, I will give you the[rounder] figures ofaroundRs. 550 crores. As far as acetic acid, ethyl acetate is concerned, they are ranging between Rs. 200 crores to Rs. 250 crores in termsof the turnover. So, formic acidis. like we operate on a very lowscale of around 65 metric tonnes a day, so that is not so significant, The othersignificant item is the technical grade area which is about Rs. 300 crore

Okay. So, for a nine-month basis. for YTD as you mentioned, is close to Rs. 2,100 crores of chemical division revenues?

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	Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021
DVParikh:	Okay. Yes, YTD,yes,it is that way.
Rahul Veera:	Okay. So, we have just got the summation comesto around Rs. 2,100 crores only,sir.
DV Parikh:	These are the product basked of around 12 chemicals and I will request our marketing person
	also, he will cover up the rest of the product if you are interested. So, I have given you the
	rounded number.
	basis is not a matter ofpublic disclosure.
Rahul Veera:	Sure, fair point. Andsir,just wanted to understandin terms ofthe visibility, like in terms of TDI
	pricing visibility over the next one quarter,it's understandable because ofthe disruption going
	onglobally, But what is your view largely, do you think any import restrictions, or anything
	could help the TDiprices to continue above Rs. 200 crores, Rs. 220 crores?
DVParikh:	Okay. onprices, anyprognosisisa little difficult. However, GNFC has been successfulin getting
	the anti-dumping duty imposedeffective December 2020. And these chemicals are like pricing
	is globally based, andit is very difficult to say. For a short term, I will request our marketing
	managerto respond on whatis he expecting about.
Moderator:	Thank you. The next question is fromline of Tanmay from Marae Asset. Please go ahead.
Tanmay M:	Sir, my first question would be, what would be the capacity utilization in the chemical segment?
	If you couldgive a blended number, that would befine,
DVParikh:	Okay. See. fromthe time we started around 3rd ofMay, TDIbusinessstarted a little later around
	middle ofJune, the rest ofthe plant started, and we are at more than 100% capacity utilization
	in all, except methanol. Because methanol weare notin a position to fully utilize the capacities
	becauseofthe oil and gaspricesat times. Therest ofthe products we are operating at more than
	100%in all products.
Tanmay M:	Andsir, in termsoflooking at, we have a good import substitution story considering the product
	portfolio, what would be sort of the CAPEX plan if were to look downtheline? Anything on
	that front?
DVParikh:	Wedidnotto get your question, can you please come again?
Tanmay M:	So, considering our product portfolio, it's mainly based on import substitution, the chemicals
	that we manufacture. So, do we see any CAPEXplansin particular products, twoor three years downthe line or howis it?
DVParikh:	Yes, actually many companies because ofthis kind of lockdowneffect as well as novisibility of when the downstream will Openup, put a hold on the CAPEX. We, sometime, like MDsaid, a

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021 CAPEX of around Rs. 1,200 crores andit is in the public domain as well. And we have firmed up our plan[to] go ahead with substantially all the CAPEX which will come through around Rs. 1,100 crores. And we will be investing in these three product lines mainly assets in the area of focus and maybe some debottlenecking of ammonia which will contribute to the extent of around 50,000 metric tonnes per annum. Tanmay[M:] Got it. And in terms ofraw material, are we seeing any pricing pressure right now? DV Parikh: See. the kind ofrelations which we are witnessing on the chemical front, these are getting absorbed. Butif you look at the nine-monthly basis, the tapered down raw material prices and feedstock prices have contributed significantly to the bottom-line. In fact, there are three key components which contributed to the bottom-line. As you know, the volumes have beenhit to the extent of 11%, yet because of the price recovery and realization recovery,[lower] input cost; andthird[is] a gain which we booked of around Rs. 44 crores on the PF investment against the loss of Rs. 50 crores we booked last year. These are the three element, reasons which has improved the profitability. Moderator: 'hank you very much, The next question is fromthe line of Naresh Kataria from Moneycurve investments. Please go ahead, Naresh Kataria: Youhad mentioned about the Rs. 1,100 crores CAPEX, mostly on acid, are we looking to expand TDI as well, because we are the sole manufacturer and TDI demand is of course much higher than what we produce, are we looking to expand in TDI fromthe current 60,000 tonnes, 70,000 tonnes capacity? DV Parikh: Okay. Sce, there is a debottlenecking plan which will improve the capacity of TDI 2 by around 30 metric tonnes per day. And there is further debottlenecking, which is underway at TDI | plant as well, for which, once | complete, | will request Mr. YN Patel to expound more on that. So, if you[look][at] our[market] positioning, the domestic market share which we have is to the tune of around 70%, 73%, So, anyway we have to export certain part of the total production. Therefore, this debottlenecking should help in achieving more turnover. And as you know, we have witnessed over last four, five years the kind of volatility in the TDI prices. So, we have noline brownfield kind of an expansion plan on TDI. However, we do have some debottlenecking plan which will improve substantially the production levels as we currently have. Like the production levels are likely to improve by around 30% or so overall, including TDI 1. So, TDI 1 plan, Tam requesting[Mr.][YN] Patel totalk about. YN Patel: DI is[having] daily production capacity of around 55 metric tonnes to 56 metric tonnes, where We are trying to addactivity of 20 metric tonnes per day. But it will take long time to materialize, it will take at least two years: time. right from now. So, that is about TDI 1. And as Mr. Parikh has said. the 30 metric tonnes additional capacity, 30 MTD in TDI 2. that will probably materialize after... Page[5] of 18

Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

	Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021
DVParikh:	[It should happen anytime in the next FY, because the major debottlenecking, which was
	concerning the equipmenthas alreadyarrived, and we think that next financial year we should be in a position to reap the benefit of around 20% increase in the production as far as TDI 2 is
	concerned, with a capacity of 150 metric tonnes per day, on cumulative basis it is 165 metric
	tonnesper day.
Naresh Kataria:	Sure. This is very helpful and also very encouraging that we are growing TDI, evenifit is by the cost making. Mylast question is on, I think we had a joint venture with some Belgian companyto absorb somewastefinished product ofTDI and that I think that meant saving some moneywhich we were paying to dispose of, I think, with some HCLor something. So, any progress onthat? Eco force
DYParikh:	The joint venture was to valorize the HCLwhich is generated at TDI 2 plant, which is to the tune of 200,000 metric tonnes per annum. However, the companyhas gone bankrupt. Eco Force SA at Belgium has gone bankrupt, sothere are no further plans about those. And we wrote off whatever wasthe investmentto the tune of around Rs, 25 crores last year.
Naresh Kataria:	And wecontinueto spend for disposal ofthe HCL, right?
DVParikh:	Yes, we will continue to spend on the disposal, but so far this year, moreorless, we have not Spent on anet basis anything. There is some marginal positive side in terms of recoveries, So, otherwise onan average. depending uponthe priceylifting, discounts andall, we lose about Rs. 25 crores to Rs. 30 croresas far as HCLlifting businessis concerned, But we are working about finding ways and means to valorize the HCL,but as ofnowit is difficult in nearfuture.
Moderator:	Thank you. The next question is from the line ofDikshit Doshi from Whitestone Financial Advisors. Please go ahead,
Dikshit Doshi:	Sir,
DYParikh:	See, under DBT, any companyis eligible fora subsidyonly uponsales throughthe point-of-sale machine called POSsales, Hithertotill the time DBT went operational, somewhere aroundlater part of 2017-2018 financial year, Now mostofthe companies are subjected to the same regime. So, there is nothing like one can sell one cansell out of POS, everybody hasto sell through POS only. And therefore, thereis our working capital tied up. Now, so far workingcapital tied up tll last year wasin the region ofaroundsix to seven monthsofourtotal sales, Whereasthis time becauseofthis patient announcement by Government of India, additional Rs. 65,000 crores of subsidy were budgeted over and above the original budget of around Rs, 72,000 crores. So,

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

totaling up[to] around Rs. 139,000 crores. And fortunately, we have seen, practically, the disbursement coming also. So, our subsidy outstanding have substantially reduced, and we expect[to][end] the year with a substantially lower subsidy outstanding than ever witnessed in the history ofthe company.

Dikshit Doshi: How much we would have receivedtill now and what will be the pending currently? DVParikh: Currently pending is around Rs. 300 crores, which normally remains to the tune of Rs. 900crores to Rs. 950crores. As on December, we had a subsidy outstanding of a little above Rs. 900 crores. Dikshit Doshi: Okay. Now second question regarding this, so I understand that this accumulation of almost Rs. 900 crores to Rs. 1,000 crores of subsidy were also ductothe arrears of manyyears which get accumulated, But let us say now everybody is talking that this year, by end ofthe year, almost the arrears ofthe subsidy will be over maybe from next yearit will start from zero, let's say. So, howdoyou see it going forward from next year? Will we get the subsidy payment within one month or two months ofthe due date or next year also we may get the full subsidy, butit will come mostly at the end of the year? DV Parikh: See, normally subsidy outstaying has a direct relationship with the budget of Government of India. So, far, like last year when the budget was done,it was 10% lowerat Rs. 72,000 crores as against Rs. 79,000 crores to Rs. 80,000 crores, So,it all depends upon whatis budgeted. Normal subsidy generation shouldinerease nowwith the passage oftime, because there are five more plans over next three years which are coming up, as we know. Sindri, Ramagundam, Talcher (wo others, which will add up a capacity to the extent of 6.35 million tonnes per annum. So.it all depends upon what is the budget government keeps. But with this kind ofarrears almost cleanedup, wesee that a subsidy should be regularly. Even otherwise in the DBT the provision theseis to releasekindoftheoverusessubsidywhichevery hasweek.happened. Please So,note letthatusthehopegovernmentthe best. hasthe resolve to clear up Moderator: Vhank you very much. The next questionis from the line of Sunil Singhania from Abacus. Please go[ahead.] Sunil Singhani: Congratulations on a great result. Sir, we had these advances for this employee provident fund trust,receivedbecauseeverything;we had weshiftedhavethebeenPF ableto theto outsidemove everyagency,assctwhatoutsideis the ofstatusthe there,company'ssir? Havebalancewe sheet? DY Parikh: No, we took over the investment to the tune of roughly Rs. 820 crores when financial Rs.started.600 Andcrores.forAsthat,of today,we tookthea outstandingspecial short-terminvestment areloan fromto thea coupleextent ofof banksaroundto Rs.the90extentyearof PFrest investment.are all sold Andoff.inThe termsloan ofliketaken hasthebeenlossescompletelywhich he repaidbooked,also,weSo,bookedthis is lastthe yearstatuscrores,aroundof the

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

total Rs. 62 crores loss, out of which Rs. 50 crores were on capital account and Rs. 12 crores were towards the interest part. Out of the capital loss of Rs. 50 crores, we have already record Rs. 44 crores by now, So, this is the status of investment taken over from provident funds.

Sunil Singhani:

DV Parikh:

Sunil Singhani:

DV Parikh:

Sunil Singhani: DVParikh:

Moderator:

Manvardhan Ved:

DV Parikh:

Manvardhan Ved: DYParikh:

So, we will have other income this time of Rs. 44 crores, because we hadalready taken the loss? It is already there in the nine monthly financials. Up to quarter two it was already reflecting and thereafier very marginal disposal only.

Right. Sir, one last question, now with the subsidies also being received and this also getting settled, whatis the net cash balance we have now?

See,[it] will be over Rs. 1.000crores. In fact, as of December we wereat a net Rs. 860 crores.

And there is no plan of utilizing that as of now?

Like we said, there isa CAPEX plan which will materialize because any CAPEX will not happen over one year, it will take some time, and we have enough wherewithal in such times, so we may hot have to fund our CAPEX through any loan or something like that.

Thank you very much. The next question is from the line of Manvardhan Ved from MS Investment Advisors. Please go ahead.

Congratulations ona great set of numbers,sir. My lirst question was again with regards to the fertilizer division. Now, I mean, in terms of profitability, we lag our peers significantly in that particular division. So, any plans as to how thatdivision will become more remunerative?

You are talking about fertilizer, I believe, not chemical?

Yes, fertilizer

Okay. Fertilizer, if you look at the segment results, the segment results are severely impacted threethebecausepricingreasons.of pressure.threecostmainescalationSecondly,reasons,in wetermsOne islostofinthethetheproductioninputmixcost.fertilizerandpricesaleswepressurehaveof onecost fullespeciallyheadwinds,month,in caseSo,asoftherewellmixedareas thefertilizer,line beyondand the6.20thirdupis towe Decemberlost production,2020. fourthSo, thisis ismarginalall contributedon energyto oncefertilizer,we areButcrossinggoing forward, if we do regularly on an annualized basis, then we hope we should turn profitable. And in December quarter results. we also took a provision of around Rs, 14 crores on account of atsomeleastretailermaintainingincentives,Rs. 20so thatcrores,is whyRs, 25the croresprofitabilityof profitis down.on an annualOtherwise,basiswe areon thehopefulfertilizerof front. And we don't have any plan of expansion on the fertilizer being a regulated market, and

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country has enough capacity which is coming up, which will bring down the import toits original level of 2015-2016. So, this is all about the fertilizer plan of the company.

Manvardhan Ved: Any plans of hiving off this division, since this is not a focus area for you anymore? And you are sitting on Rs. 2,500 crores of assetsin this particular division where the kind ofsort of profit that youare generating is miniscule given the asset base. So, wouldn’t it make sense to hive off this division? DV Parikh: So, we thought about this a couple of timesin past, but we think the kind of contribution it gives, andours is not a company which will ask like certain infrastructure to be laid off, which wewill think in those terms. So, we don't have any such plan ofhiving off the division and selling to somebody else. Number one. Number two, operationally also because ofthe kind of integration we have,[it] is not possible to hive off and de-link the fertilizer totally from the operations side.

DV Parikh:

Moderator:

Thank you. Our next question is from the line of Sameeksha Jain from ANS Wealth. Please go ahead. Sameeksha Jain: Sir, | have twoquestions. Oneis, I believe our major chemicals thataniline, acetic acid and TBI, right, am I correct? DV Parikh: Major chemicals arelike, if we talk in terms of commercial sales, probably yes. If you talk in terms of capacities andincluding captive, then the scenario is different, Sameeksha Jain: In terms of revenue. DV Parikh: In terms of commercial sales. ‘DI comes first, and followed by other chemicals it is made by acetic acid, ethyl as well, TGU aswell. So, exact sequence our marketing personwill tell, if you are interested to know, Sameeksha Jain: Sir, actually I was interested in knowing the prices, the realization for the major top three chemicals this quarter and if you could give a comparison to what they were last year same quarter, DV Parikh: Okay. See, realizationis something which isa little confidential, So, from finance side, we have inclination not to share such kind of numbers on realization.

Sameeksha Jain: Sir, my second question was actually a follow-up question that an earlier participant asked, this is regarding your fertilizer business, What we understand is, with the DBT, most of the backlog ofall the previous year would be mostly cleared. So, now on a steady state basis, | believe our thenreceivables| believeshouldthat willsubstantiallyImpact ourg0 workingdown goingcapitalforward,to an extent.is my Andunderstandingif you putcorrect?through Ifsomeyes, sense as to how much of impact this would have on our working capital requirement?

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021 DVParikh: See, the overall receivables have already come down by Rs. 600 crores right and weare like net non-utilizing company, so working capital has come[down] because of that by Rs. 600 crore, but we are not drawing any money from external sources. So, that is adding up to the cash which was erstwhile locked up into receivables. Sameeksha Jain: So, what I want to understand is, going forward,since the previous duesare going to be cleared mostly, all the backlog is going to be removed so going forward, on an annual basis our working capital requirement will substantially go down, right? DV Parikh: Yes. Sameeksha Jain: Okay. So, what kind of an impact would it have, like would it come down to our current requirements? DV Parikh: Okay. Normally along with the subsidy our drawing power hovers around Rs. 1,200 crores. So, if you factor Rs. 500 crores to Rs. 600 crores ofsubsidylike this,it will bring down the drawing power by around[Rs.] 500 crores to Rs. 600 crores. Moderator: Thank you. The next question is fromthe line of Nitin Gosar from Invesco. Please go ahead. Nitin Gosar: One question, sir, you talked about CAPEX requirement or the CAPEX that you will incur, around Rs. 1,100 crore spreading over three products. I could guess the two names, that is ammonia debottleneck and the second one is TDI related CAPEX which is sort of 50 metric tonnes per day expansion over two facilities over next two years, which was the third one,sir? DV Parikh: No, there is no CAPEX within this Rs. 1.100 crores to Rs. 1.200 crores of TDI 1, This Rs. 1.100 crores CAPEX is on acids and ammonia debottlenecking. Apart from that, we hadlike last couple[of] years we had Rs. 150 crores which is almost extended on TDI 2 debottlenecking. So, what we covered, like 30 metric tonne per day minimum we should get from TDI is[after] expanding on certain CAPEX of debottlenecking in the downstream, Nitin Gosar: Okay. Could you put a numberto it, like how would this Rs, 1,100 crores CAPEX would be spread, broadly the product volume? DV Parikh: Ammonia debottlenecking will have close to Rs. 200 crores, in acid and nitrate business, ammonium nitrate business will pick up the rest of it. As long as acids are concerned,it will be close to Rs. 750 crores out of the balance and rest is ammonium nitrate. Moderator: ‘Thank you. Next question is from the line of Abhishek Maheshwari from Skybridge Wealth Management. Please go ahead. Page 10 of 18

Gujarat Narmada Valley Fertilizers[&] Chemicals Limited March 19, 2021

Abhishek Maheshwari:

Maheshwari: Sir, what I wanted to know was, our chemical realizations have spiked up considerably over last quarter, and they arestill rising. So, do we expect some kind of normalization to occurin coming quarters or[it][is] expected to remain high for a particular time being? DV Parikh: | request our senior marketing people to respond on this. YN Patel: Our prices have gone up andit has gone up substantially, and some products have attained the ever-highest prices nowadays. And we expect that to come to ever highest level it will come down to the normal fee actually. But in our expectation, all the prices, all the products will discover the new normal. Like in COVID situation we have discovered so many new normal, the prices ofthe products will also discover new normal, So, it will attain normalcy but at a higherlevel. Abhishek Maheshwari: Okay. got it, And we are absorbing all the input price increases, right, still? YN Patel: Pardon. Abhishek Maheshwari: No, | am saying that whatever the gas price increases and all that we have seen, YN Patel: Yes, Moderator: Thank you. The next question is from the line of Tanmay from Mirae Asset. Please go ahead. Tanmay M: Sir, on the CAPEX part that you referred to, the assets part of Rs. 700 crores, out of that what would be usedfor the captive consumption, if you can give a rough number? And what will be for the final sale, group CAPEX and (Inaudible) 35:53.7 that will be required? DYParikh: Okay, we start with the ammonia which is on the upstream. So, ammonia should get substantially consumed, out of 50,000 tonnes, we expect the kind of production levels which we have.it should absorb practically 80% of the ammonia when we start on the other new products, two hew products, nitric acid as well as ammonium nitrate As far as nitric acid is concerned, like we have considered nitric acid whichis coming up somewhere next year by March 2022, which will consume from the existing pic of around 50,000 tonnes of weak nitric acid. So, out of 100,000 tonnes which we are planning, 50,000 tonnes will be like there, and another 50,000 tonnes will be meant for further down usesinto the ammonium nitrate. Ammonium nitrate, while we have a capacity planned for around 100,000 tonnes, it should consume weak nitric acid to the extent of around 0.8, so around 80,000 tonnes. So, on a net basis it looks like we will have to gofora little more than what we have planned as of now, butthese are at an advanced level of discretion as to what level ofnitric acid plant we needto bring, whether 100,000 tonnes or 200,000 tonnes

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Moderator:

Thank you very much. The next question is from the line of Raghavendra Kedia from MH Capital Partners. Please go ahead.

Raghavendra Kedia:	My questionis regarding TDI. Sir, if you can enlighten us on how muchis GNFC's market share
	for the entire Indian market? And we have seen that this market share is gradually increasing
	where the unorganized and smaller players are slowly getting a lesser market share. So, if you
	would knowor can youalso share how muchis the unorganized smaller participants' market
	share for the TDI market?
DVParikh:	Yes, it is 70% domestic demand,
Raghavendra Kedia:	And would you knowfrom the 30% how muchis unorganized and smaller players?
DVParikh:	So, we are the only manufacturer in India of TDI, balanceis import.
Raghavendra Kedia:	Okay. Just a follow-up question, do you see any more import duty hike in the next quarterorin
	the next two, three quarters on TDI coming from the government?
DV Parikh:	Notreally.
Moderator:	Thank you very much. The next questionis from the line of Pawan Nahar, an individualinvestor.
	Please go ahead.
Pawan Nahar:	Mr.Parikh, I had afewquestions. We are doing new CAPEX,sogenerally when we do CAPEX,
	what is the kind of payback we expect?
DYParikh:	Okay. We haveinternal guidelines about payback and IRR. We look forward to about 12%to
	14% post tax IRR and payback ofaround seven to eight years. There are internal guidelines,
	however, we do take deviation depending upon the positioning of the project. There could be
	strategic aspects to the projects where we maycompromise on these kind of benchmarks,
Pawan Nahar:	Okay. And when you say CAPEX, you are only talking about project costs, you are only talking about gross block and not working capital, right, when you when yousaythat seven to eight years or 12% to 14% post tax IRR, howdo you define the project costs? Theseinclude working capital.
DYParikh:	Yes. it includes.
Pawan Nahar:	So, if
	numberchange?

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	Gujarat NarmadaValley Fertilizers & Chemicals Limited
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DYParikh:	Okay. As far as CAPEX numberis concerned, the numberwill not change. However, for the
	purpose ofcalculation of IRR, the numberswill change becauseit will have working capital
	margins as well factored.
Pawan Nahar:	Sure. So,it will improve?
DVParikh:	Yes, it will improve meaning the IRR wecalculateis after considering,let's say, Rs. 1,100 crores
	of project. And in terms of cash out go, the marginal working capital is also considered. So, whenit comesto the general public, when you look at the balance sheet they will see a net
	addition of Rs. 1,000-plus crores on the fixed assetside. Whereas,ifwe lookat the cash side of
	it, it will generate an IRRin the range which weindicated.
Pawan Nahar:	So, second,just to continue onthis, today ourfixed assets gross block is about Rs. 8,000 crores
	is my understandingright that ballpark Rs, 6,000croreis relating to chemicals? And out ofthat
	Rs. 6,000crores, ballpark Rs. 3,000crore is relating to TDI?
DYParikh:	TDI2 is the carved-out CAPEX as such,ifyou lookatinternally in the books of accounts. And TDI 2is close to aroundRs. 2,300 croresin termsofthe grossblock. Thatincludes everything, land, plant and machinery, everything, equipments.
Pawan Nahar:	Sure. And if
DVParikh:	DI 1 is not carved out so no immediate idea, okay. Ifyou still want to know we can get back on it. TDI 1 isa twobecause older plant, so no exact immediate idea aboutthe net CAPEX which
	youare asking for
Moderator:	hank you very much. The next question is from line of Rishabh, an individual investor. Please
	goahead.
Rishabh Baldaya:	I got only one question. Your MD has gone recently on record on CNBCinterview that next 2022 and 2023 our volumeswill g0up by 20%and 30%, 40% and margins will be maintained 20%, 25%. Thesetwothings
DYParikh:	Okay. Margin improvementis something which is futuristic, so we normally restrict ourselves in termsof Stretching ourselves too muchinto that direction. So, we might give this question a Pass
Rishabh Baldava:	!amasking, what is your MD has gone on record, the samething

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	Gujarat Narmada Valley Fertilizers & Chemicals Limited
	March 19, 2021
DVParikh:	Youare right, but the current quarteris still on and therefore we cannot comment exactly on
	that.
Rishabh Baldava:	Okay. Regarding volume growth, all that, next two years?
DVParikh:	Volume growth, growth there are certain debottlenecking, which in fact has happened in both
	aniline and ethyl acetate. Weare not putting exactly the numbersas ofnow. Let the quarter pass
	byand then wewill comebackwith the exact numbers of debottlenecking, whichis contributing
	additionallyto the turnover and profit.
Rishabh Baldava:
	are conducted, in due course the post results call will be conducted?
DVParikh:	Weare trying to like be in touch with investors, Last call happened,if I recall correctly, in fact
	the conference happenedsimilar on 9th or 10th ofJuly 2018. And afterthat, we are connecting
	for the first time and we hope to remain connected on quarterly basis regularly in the coming
	years.
Rishabh Baldava:	Yes, that is my request. This practice keep as a regularafter results or post results so we will get
	the opportunityto clarify our doubts andall that. And one more request, along with results if
	youcan give some presentation about the company with someflags, figures, production,sales,
	all that, that will be more helpful.
DVParikh:	We note this suggestion, and wewill try to cover that.
Rishabh Baldava:	Andsir, what will be ourtax rate this year, it will be around the 27%?
DV Parikh:	It will be normal corporate tax, close to 35% now. Last year we were under the MATwhich is
	no morethere with the kinds ofprofitability we have; we have used practically most ofthe MAT
	credit available, Since we have one more yearto go forthe infrastructure benefit which weare
	getting under Section 80 ofincometax, we will continue with the present regime of regular
	taxation of close to 35% for another year. And thereafter, we will think between the options
	which are given by GovernmentofIndia last year, between around 25% versus 35%.
Moderator:	Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment
	Managers. Please go ahead.
Pritesh Chheda:	Sir, with respect to TDI, we are hearing all these capacity shutdowns which have happened globally. Ifyou could help us understand the Status ofthese capacities and in your opinion when should the supply normalize for TDI? And whatis the extent ofthese global disruption in capacities. if you could help us with that?

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

DV Parikh:

DVParikh:	There are a series of shutdowns lined up now onwards. BASF Germanyis planning shutdown
	ofthe 3 lakh metric tonnes plant, and this will be followed by Covestro's 3 lakh metric tonne
	plant. There are certain shutdowns planned in Korea also, Hanwha Corporation. So, these
	shutdownsare plannedover aperiod of next three to four months. And at the same time. the
	Chinese plants have come up againto their normal operation rate. So, we haveto really absorb
	the effect of these shutdowns in due course oftime. But we expect that the price which is
	prevailing nowadayswill sustain for another three, four monthsatleast.
Pritesh Chheda:	Just a continuation, whatis the net capacity which is now out of supply?
DVParikh:	Out of 33 lakh tonnescapacity. around4 lakh tonnes capacityare out at present.
Moderator:	Thank you very much. The next question is from the line of Rohit Nagaraj from Sunidhi
	Securities and Finance. Please go ahead.
Rohit Nagaraj:	Thanksfor the opportunity, sir. Sir, we being a state controlled enterprise, whatis our incentive
	policy and howdowenurture andretain our talent? Thank you.
DVParikh:	See, most ofthe Government of Gujarat promoted companieshave similarstructures. And itis
	driven by our standard pay package, and those pay packagesare revised at the time of every
	long-term settlement. Andthis is the kind of practice with mostly the Government of Gujarat
	companies follow. Andso far, we are not seeing issues in nurturing, our people have been with
	us for more than three decades. Things might change with the change of time, but then we
	structure ourselves accordingly in that case.
Rohit Nagaraj:	Right. And second question is on the capacity available for us for FY 2022 and FY 2023. So,
	you mentionedthat in PY 2021 there was 11%loss ofyearly production, and we are operating at 100%, So, will there be any volume growth expected in FY 2022 and FY 2023, given that our
	CAPEXplans will culminate only sometimes towardsthe end of FY 2022? Thank you.
DYParikh:	Okay. There are a couple of things as far as capacity addition is concerned. Like we said,
	debottlenecking plan of TDI 2 will materialize somewherein next financial year. Our formic acid. the brownfield expansion is going to materialize somewhere in next financial year. Our concentratednitric acid is going to be operational by March 2022, around a year downtheline. Apartfrom that, we have certainly debottlenecking which has already happened,sothatwill see
	certain margin volume growthin aniline as well as ethyl acetate in time to come. So, this is what
	we have as of nowon table. And there are further CAPEX plans, but each will have its own
	gestation time.
Moderator:	Thank you very much. And the next questionis from the line ofSaket Kapoor from Kapoor & Company.Please go ahead.

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

Saket Kapoor:

Sir, my first observation is about this DIPAM policies, althoughI think the state PSUs doesn't fall in the ambit, but the waythe things are articulated by the Government of India in rewarding the investors in dividend payout, buybacks and other measures, that should be contemplated by other state PSUs also. So, it's a request on the part ofinvestor that the key constituents of the DIPAM policy must be studied by the board and its applicability also on the Gujarat based companies that fall underthese state PSUs, That is a humble suggestion from my side. Hope the Board looks intoit.

And again, you spoke about the factors that will create a new normal for the prices of products, So, are the shutdown being the only factor thatthat will create the new normal? By that whatare you trying to explain us? And how long this new normalis going to be as being said by you?

YN Patel: As Parikh sir told you earlier, I told you earlier that the prices are anybody's guess actually in chemical industry. But the wayall thingsare developing, thatis why the new normal level will be attained by some ofthe products. And new normal meansit will remain plus or minus either side by 20% or so.

Saket Kapoor: And on the raw material basket, howis that shaping up? And you have told that there are inflationary pressures, so how much are we vertically integrated in terms of our raw material requirement and what steps are we taking in that purpose?

DV Parikh: Okay. Rawmaterial in general, if we talk about oil, toluene and benzene are definitely going up. But then it's an interplay between output prices and input prices as well as like, demand supply positionat a particular point in time. So, far over the years we have been in a position to wither away such[kind] of headwinds and we hope to maintain such position in time to come as well. As far as derisking part is concerned, to insulate ourselves completely from the price rises, there is

a strategy from like risk management to broaden the supplier base which we have often done in case[of] certain products. which have given benefit both in case oflike procurement as well as other products. Moderator: ‘Thank you very much. The next question is from the line of Ramkishan from Intuit Intelligence, Please go and Ramkishan: Sir, we are doing some expansions in Romania, and because of that our TDI 2 plantalso is expected to go up. So, I think I understand that we have TDI 2 capacity of 50,000 tonnes annum. So, howmuchit will go up? And TDI 1 we used to operate 15,000 tonnes, we usedperto level?operate around 120%, 130% capacity utilization in the past. So, TDI 2 also can we go to that

DVParikh: acidammonia,First inofitsall,processsoammoniatherewhich willis a islinknotsourcedhavelike athis.fromdirectAsBharuch.impactfar asonAndproductionTDIconcentrated2. TDI2increaseconsumesnitricis acidconcerned,concentratedis made uplikenitricfromwe

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Gujarat Narmada Valley Fertilizers & Chemicals Limited March 19, 2021

indicated, it is going tobein the range of around 30 metric tonnes per day at TDI 2. So, you may expect around 12.000 tonnes, 15,000 tonnes depending upon whenit actualizes to what extent it debottlenecks. At the same time, it will now have a good amount of reliability because ofthe

new equipment and parallel equipment being put upat the plant. So, benefits will be in terms of reliability as well as production increase, both.

Moderator:

Thank you. Next questionis from the line of Vinayfrom Alliance Bernstein Holding. Please go ahead.

Vinay:

I just had one question probably on your balance sheet, So, if I remember correctly, you mentioned about Rs, 1,000 crores of net cash today. And with the kind of business coming along, the prices and the demand, | presume we would be continuously generating cash flows going forward. Just wanted to understand your cash allocation policy given that now we have a much stronger balance sheet.

DVParikh: fromWe arelikethinkingRs. 1,000aboutcrores,going Rs.further1,200downcroresintokindthe newof investmentprojects whichwe areare talkingbeing evaluated,about. Weapartare actively thinking about few other lines of business. The current constraint which we

weis areon thefindingtechnologyit verytie-updifficult,front.likebecausein pastmostwe ofhavethe narratedtime the sometechnologyoftheisissuescloselyon sourcingguardedare facingandthe technology of acetic acid. So, although the products might be promising, we are trying hardfirst

to freeze upon the technology part. Once that happens, we can meaningfully utilize our cash: and therefore, we are quite aggressive on this kind of focusing on the new products or new projects,

Moderator:

Thank you very much. Ladies and gentlemen, due to time constraints, we will take the last ahead.questionHellofrom the line of Vikram Sharma from Niveyshaay Investment Advisory. Please go

Vikram Sharma:

Sharma: Whatis your major raw material for acetic acid? DYParikh: We use methanol as well as specialty nature spirit, SDS we call it, for manufacturing acetic acid, Vikram Sharma: Andis there any pressure on raw materials? DY Parikh: I correct myself; it is methanol, SDS is into methyl acetate, | stand corrected. Management: fromIt is methanolSDS. But plusmajorcarbonconsumptionmonoxide,is methanol.carbon dioxide, as well as some hydrogen,it is basically Vikram Sharma: So. sir, most of raw material is same or there is any price Pressure for cost of raw materials?

Management:

Vikram Sharma:

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	Gujarat Narmada Valley Fertilizers & Chemicals Limited
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DV Parikh:	Yes, for the NGpart, natural gas part, normallyat timesthereis a price pressure because weare to compulsorily operate that plant, we call it methanol2 plant capacityat least for catering to the acetic acid to the tune of around 250metric tonnes per day.
Vikram Sharma:	Is there any shortfall in market in India for acetic acid? Whatis current pricing scenario for
	acetic acid?
DVParikh:	Acetic acid, the total market size in India is more than
YN Patel:	Pricing in India, because the majority of the consumption in India is met through import,it depends onthe international price. Andinternational price depends on demand supply as well as methanolprice, Methanol price in fact has very direct relation with the natural gasprice. So, this is the link as far as price is concerned. And wehavetosell our products on importparity price
Vikram Sharma:	Sir, right now thereis a shortfall in market, whatis current market scenario?
YN Patel:	Right now, since two weeks, because ofthe delayin parcels there was a short-term temporary shortage. But nowthe thingsare improving, parcelsare coming now.
Moderator:	Vhank you very much. Due to time constraint, that was the last question.
DVParikh:	"hank you everyonefor active participation and makingthis con-call meet a grand success. We extend ourspecial thanksto the coordinator andthe arrangersofthis con-call meet, Thank you, everyone. Thanks again.
Parth Adhiya:	Wethank you every body. once again,
Moderator:	Thank you very much. On behalfofBatlivala & Karani Securities India Private Limited, that concludes this conference. Thank youforjoining us. You may nowdisconnect yourlines. Thank you,

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