GICS Industry: Chemicals l Sub Industry: Fertilisers & Agricultural Chemicals l Website: www.chambalfertilisers.

in

Chambal Fertilisers & Chemicals Ltd

Key Stock Indicators
NSE Ticker: Bloomberg Ticker: Face value / Share: Div. Yield (%): CHAMBLFERT CHMB: IN 10.0 2.6 CMP (as on 07 Feb 2011Rs/share): 52-week range up to 07 Feb 2011 (Rs) (H/L): Market Cap as on 07 Feb 2011 (Rs mn): Enterprise Value as on 07 Feb 2011 (Rs mn): Div. Yield (%): 0.0 74.6 103.6/53.2 31,049 56,443 Shares outstanding (mn): Free Float (%): Average daily volumes (12 months): Beta (2 year): 416.2 45.1 4,538,484 1.3

Chambal Fertilisers and Chemicals Limited (CFCL) was incorporated by the K K Birla group as Aravali Fertilisers Ltd in 1985. It manufacturers nitrogenous fertilisers, and trades in other fertilisers such as di-ammonium phosphate (DAP) and muriate of potash (MOP). It also manufactures phosphoric acid through IMACID, Morocco, its joint venture with Tata Chemicals and Office Cherifien des Phosphates, Morocco. CFCL is also present in the shipping, textiles, and software sectors, and also provides BPO/ KPO services.

Key Financial Indicators

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m. : Not meaningful

KEY HIGHLIGHTS
Third largest producer of urea in India CFCL is the third largest producer of urea in India. It accounts for around 10% of the total domestic production of 19.6 million tonnes per annum (MTPA), after Iffco, with around 20% production share, and National Fertilizers Ltd, with around 17% share. CFCL, with capacity of 2 MTPA, is the largest private sector producer of urea in the country. Strong dealer network and village outlets CFCL has a network of 11 regional offices, over 1,300 dealers and over 20,000 village level outlets, which helps the company distribute urea to over 10 states spread over the northern, western and central parts of India. Its primary market consists of Punjab, Haryana, Uttar Pradesh and Rajasthan. The company also leverages its outlets for selling other products such as DAP, MOP, pesticides, insecticides, seeds and speciality fertilisers. CFCL markets its urea under the brand Uttam Veer. Diversified revenue stream CFCL has a diversified revenue stream coming from its manufacturing, trading, shipping, textiles, software, and BPO/ KPO operations. Manufacturing and trading are its core businesses. The manufacturing division contributed around 63% of turnover for FY10, while trading division contributed around 21%. CFCL sells fertilisers under the Uttam Veer brand. The company also exports products, this contributed to around 20% of FY10 revenues. This diverse stream of revenues helps CFCL mitigate the risk of downturn in any particular segment.

Mar-08 32,241.4 16.9 2,371.3 7.4 2.0 5.7 8.8 2.2 11.7 27.8 7.1

Mar-09 56,108.5 14.3 1,789.4 3.2 2.4 4.3 9.7 1.6 14.4 17.6 4.8

Mar-10 41,460.5 17.6 2,073.3 5.0 2.4 5.0 15.0 2.7 11.2 18.6 7.7

Shareholding (As on September 30, 2010)

FII 8% DII 11% Others 26%

KEY RISKS
Government policies regarding fertiliser subsidy payout Natural gas availability based on governments allocation policy Volatile prices of raw material like sulphur, phosphoric acid, ammonia

Promoter 55%

Indexed price chart

(index) 160 140 120 100 80 60 40 20 0 Nov-10 Apr-10 Mar-10 May-10 Dec-10 Aug-10 Feb-10 Sep-10 Jun-10 Oct-10 Jul-10 Jan-11 NIFTY ('000) 60000 50000 40000 30000 20000 10000 0

Stock Performances vis--vis market

Returns (%) YTD CHAMBLFERT NIFTY
Note: 1) YTD returns are since April 1, 2010 to Feb 07, 2011. 2) 1-m, 3-m and 12-m returns are up to Feb 07, 2011.

1-m -6 -9

3-m -25 -14

12-m 4 13

20 2

Volumes (RHS)

CHAMBLFERT

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Chambal Fertilizers & Chemicals Ltd

BACKGROUND
CFCL was promoted by Zuari Industries Ltd (ZIL) in 1985. It is part of the K K Birla group of companies. Along with ZIL, it represents the groups foray into the agricultural sector. It has two nitrogenous fertiliser plants, which are located at Gadepan in Kota district of Rajasthan, with a total capacity of 2 MTPA. The companys shipping business, India Steamship Company, operates 6 tankers with a combined tonnage capacity of 0.6 million dead weight tonnes (DWT) while its textile business, Birla Textile Mills, has capacity of over 83,000 spindles per annum. CFCL also provides personalised services to farmers through its programme Uttam Bandhan, which provides free soil testing facilities and guidance regarding balanced fertiliser application. Exports and foreign operations accounted for ~20% of FY10 revenues.

COMPETITIVE POSITION
Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m: Not meaningful

Chambal Fertilizers & Chemicals Ltd Mar-10 41,460.5 17.6 2,073.3 5.0 2.4 5.0 15.0 2.7 11.2 18.6 7.7

Coromandel Gujarat State Fertilizers Fertilisers and Chemicals International Ltd & Chemicals Ltd Travancore Ltd Mar-10 Mar-10 Mar-10 64,821.1 40,393.7 21,279.8 11.8 12.6 0.8 4,676.8 2,544.7 -1,038.7 7.2 6.3 -4.9 1.3 0.3 5.7 33.3 31.9 -1.6 6.9 10.6 n.m 2.1 1.3 20.0 24.2 15.0 1.3 34.5 12.5 n.m 5.5 6.5 251.7

FINANCIAL PROFILE
Top-line declines, but margins, net profit improve

Key Financial Indicators Units Revenue Rs mi ll ion Rs mi ll ion Per cent Per cent Per cent Times Per cent Per cent EBITDA ma rgins Per cent PAT PAT ma rgins EBITDA growth PAT growth Gea ring RoCE RoE

Mar-08
32,241.4 16.9 2,371.3 7.4 8.7 12.7 112.1 2.0 11.7 27.8

Mar-09
56,108.5 14.3 1,789.4 3.2 74.0 47.2 -24.5 2.4 14.4 17.6

Mar-10
41,460.5 17.6 2,073.3 5.0 -26.1 -9.0 15.9 2.4 11.2 18.6

CFCL registered a 26.1% decline in revenue for FY10, year-on-year. This was on account of lower subsidy payout for urea, an over 50% decline in revenue from IMACID, Morocco, due to fall in global prices of phosphoric acid, and a 33% decline in revenue from the shipping business owing to decline in spot market rates as well as time charter rates in FY10. However, switching over to natural gas from naphtha improved the companys EBITDA margin by 330 basis points to 17.6% in FY10, against 14.3% in FY09. Improved operating profitability, coupled with around 45% decrease in interest cost, helped PAT to grow to Rs 2 billion (bn) in FY10 vis--vis Rs 1.7 bn in FY09.

Revenue growth Per cent

INDUSTRY PROFILE
Nitrogenous fertilisers (Urea) The consumption of urea grew at a compounded annual growth rate (CAGR) of 5.1 per cent from 20.7 million tonnes in 2004-05 to 26.5 million tonnes in 2009-10. On the other hand, production of urea has remained relatively flat, rising marginally from 20.2 million tonnes in 2004-05 to 21.2 million tonnes in 2009-10. As a result, Indias dependency on imports has shown an increasing trend. On the capacity front, a number of greenfield and brownfield expansion plans are contingent on the government assuring gas supply at reasonable rates. While the government has increased retail price by around 10 per cent to Rs.5,310 per tonne,it will have marginal impact on players as it is a pass through. The government will benefit by way of lower subsidies. Phosphatic fertilisers (Complex) The consumption of DAP and other complex fertilisers (hereafter jointly referred to as phosphatic fertilisers) grew at a CAGR of 6.9 per cent from 2004-05 to reach 16.5 million tonnes in 2009-10. However, production growth has not kept pace with the growth in consumption, leading to a rise in imports. The government has fixed the subsidy rates at the nutrient level for the year 2010-11 while deregulating retail prices. The industry is primarily dependent on international suppliers for its feedstock requirement as India has minimal reserves of rock phosphate. Hence, fixing of subsidy rates for the year puts added importance on the ability of players to source feedstock economically.

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Chambal Fertilizers & Chemicals Ltd

ANNUAL RESULTS
Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital Cash flow from operating activities Capital Expenditure Investments and others Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets Ratio Mar-08 2,590.4 -1,075.1 2,457.7 4,948.8 8,921.8 -3,893.6 -3,714.8 Mar-09 3,453.5 -1,211.4 2,816.7 5,980.4 11,039.2 -10,322.3 -2,711.7 Mar-10 3,241.2 -1,346.7 3,233.4 -8,609.6 -3,481.7 -3,105.6 2,618.0 Revenue growth (%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax rate (%) PAT margins (%) Dividend payout (%) Dividend per share (Rs) BV (Rs) Return on Equity (%) Return on capital employed (%) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Asset turnover (x) Current ratio (x) Gross current assets (days) Mar-08 8.7 12.7 112.1 16.9 34.4 7.4 31.6 1.8 23.1 27.8 11.7 2.0 8.7 3.6 0.9 0.9 87 Mar-09 74.0 47.2 -24.5 14.3 43.0 3.2 41.9 1.8 25.7 17.6 14.4 2.4 3.5 3.2 1.3 0.9 113 Mar-10 -26.1 -9.0 15.9 17.6 41.9 5.0 38.1 1.9 27.7 18.6 11.2 2.4 5.8 3.7 0.8 0.7 116

Mar-08 32,055.5 32,241.4 5,464.8 16.9 2,457.7 629.1 212.4 3,127.5 2,371.3 7.4 416.2 5.7

Mar-09 55,973.8 56,108.5 8,043.1 14.3 2,816.7 2,296.3 523.4 2,816.4 1,789.4 3.2 416.2 4.3

Mar-10 41,273.4 41,460.5 7,315.7 17.6 3,233.4 1,269.7 428.7 3,215.0 2,073.3 5.0 416.2 5.0

Mar-08 4,191.6 5,410.9 9,602.5 2,844.3 11,222.0 8,290.1 19,512.0 2,860.5 1,389.8 36,209.1 35,698.5 24,438.9 3,987.4 7,782.9 2,213.3 3,177.0 1,448.6 36,209.2

Mar-09 4,162.1 6,549.0 10,711.1 2,659.9 16,494.1 9,160.6 25,654.6 15,855.5 1,287.6 56,168.7 51,019.3 31,902.2 6,699.1 17,567.4 6,879.6 3,790.7 4,320.8 56,168.7

Mar-10 4,162.1 7,385.0 11,547.1 2,455.0 15,403.3 12,009.4 27,412.7 4,788.8 1,768.2 47,971.8 54,693.8 30,601.8 4,081.1 13,288.9 6,514.6 2,786.4 2,018.8 47,971.8

Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries)

-7,608.4 1,062.8 -1,951.7 -876.5 507.9

-13,034.0 35.2 6,142.6 -876.5 -434.4

-487.6 -384.8 1,758.0 -922.1 1,216.0

Cash flow from financing activities Change in cash position Opening cash Closing cash
n.m : Not meaningful;

-1,257.5 55.9 1,393.0 1,448.6

4,866.9 2,872.1 1,448.6 4,320.8

1,667.1 -2,302.2 4,320.8 2,018.8

QUARTERLY RESULTS
Profit and loss account (Rs million) No of Months Revenue EBITDA Interes t Depreci a tion PBT PAT Dec-10 3 13,703.7 2,414.1 230.6 666.9 1,516.6 1,074.2 100.0 17.6 1.7 4.9 11.1 7.8 % of Rev Dec-09 % of Rev 3 11,542.4 1,976.0 223.5 639.2 1,113.4 797.5 100.0 17.1 1.9 5.5 9.6 6.9 Sep-10 3 15,570.4 2,248.4 269.4 676.9 1,302.0 860.6 100.0 14.4 1.7 4.3 8.4 5.5 % of Rev Dec-10 % of Rev 9 39,031.5 6,509.5 800.2 2,027.1 3,725.9 2,574.5 100.0 16.7 2.1 5.2 9.5 6.6 Dec-09 9 29,227.1 5,410.2 622.2 1,955.6 2,876.1 1,996.7 100.0 18.5 2.1 6.7 9.8 6.8 % of Rev

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Chambal Fertilizers & Chemicals Ltd

FOCUS CHARTS & TABLES
Rs mn 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Mar-08

Quarterly sales & y-o-y growth

Dec-08

Dec-09

Mar-08

Mar-09

Dec-08

Dec-09

Mar-09

Sales

Sales growth y-o-y (RHS)

Mar-10

Dec-10

Sep-08

Sep-09

Sep-10

Jun-08

Jun-09

Jun-10

Net Profit

Net profit growth y-o-y (RHS)

Rs/share 3 2.5 2 1.5 1 0.5

EPS

Per cent 25 20 15 10 5 0

Movement in operating and net margins

Dec-08

Dec-09

Mar-10

Dec-10 Dec-10 Sep-10

Sep-08

Sep-09

Sep-08

Sep-09

Jun-08

Jun-09

Mar-08

Mar-09

Dec-08

Dec-09

Mar-08

Mar-09

Mar-10

Dec-10

Sep-08

Sep-09

Sep-10

Jun-08

Jun-09

Jun-10

OPM

Mar-10

Shareholding Pattern (Per cent) Mar 2010 Jun 2010 Promoter 53.2 53.7 FII 7.8 7.0 DII 11.2 11.1 Others 27.8 28.2

Sep 2010 54.1 8.2 10.8 26.9

Dec 2010 54.9 7.8 11.1 26.2

Board of Directors Director Name Sa roj Kuma r Podda r (Mr.) Shya m Sunder Bha rti a (Mr.) Ha rba cha n Singh Ba wa (Mr.) Ani l Ka poor (Mr.) Ra m Na th Ba ns a l (Mr.) Dipa nka r Ba s u (Mr.) Ka s hi Na th Mema ni (Mr.)

Designation Cha i rma n, Promoter-Director Co-Cha i rma n, Promoter-Director Vice Cha i rma n, Non-Executive Director Ma na gi ng Di rector Non-Executive Di rector Non-Executive Di rector Non-Executive Di rector

Cha ndra Shekha r Nopa ny (Mr.) Director Ra dha Singh (Ms .) Non-Executive Di rector Ma rco Phil i ppus Ardes hir Wa di a Non-Executive Di rector (Mr.)

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Jun-10

NPM

Sep-10

Jun-08

Jun-09

Jun-10

Per cent 160 140 120 100 80 60 40 20 0 -20 -40 -60

Rs mn 1,200 1,000 800 600 400 200 0

Quarterly PAT & y-o-y growth

Per cent 400 350 300 250 200 150 100 50 0 -50 -100