Coromandel International Q2 FY27 Earnings Call: EBITDA Falls 18% on Input Costs, Cautiously Optimistic on Rabi Season

Subsidy-Led Revenue Growth Masks Sharp Margin Compression

• Revenue up 6% YoY to Rs.10,348 Cr — vs Rs.9,771 Cr in Q2 FY 2025-2026, driven by higher subsidy rates and growth across businesses; note the prior-year base includes NACL only from 8 Aug 2025 onwards.
• EBITDA fell 18% YoY to Rs.944 Cr — from Rs.1,147 Cr, mainly on higher input prices amid the ongoing Middle East crisis not commensurately offset by NBS rate revisions and retail MRP changes.
• PAT at Rs.523 Cr vs Rs.793 Cr — subsidy business share of quarterly profitability fell to 58% from 72% in Q2 FY 2025-2026.
• H1 FY 2026-2027 income at Rs.18,563 Cr (+10%) — H1 EBITDA down 12% to Rs.1,705 Cr and H1 PAT at Rs.905 Cr vs Rs.1,295 Cr.
• Subsidy receipts of Rs.3,086 Cr in Q2 — Rs.4,478 Cr in H1 FY 2026-2027 plus ~Rs.1,200 Cr in October 2026; government clearing claims promptly (up to the September 4th week); subsidy outstanding at Rs.3,535 Cr vs Rs.3,199 Cr a year ago.
• Rupee traded 94.5–96.6 in Q2 — company continues to hedge exposure on a conservative basis.
• Industry-wide NPK production and consumption fell ~40% — amid a 20-30% rainfall deficit in key markets (AP, Telangana, Karnataka, Maharashtra) and weak kharif consumption.

NPK-DAP Mix Distortion, Rabi NBS Correction and Sulfur Support

• Industry NPK:DAP mix shifted from 60:40 to 30:70 in Kharif FY 2026-2027 — management attributed the switch to DAP MRP being artificially pegged at Rs.1,350 vs 20:20:0:13 at Rs.2,100, with farmer demand contracting beyond Rs.1,500-1,800 per bag; the Rs.1,350 DAP capping was called an aberration with the system "now back to normalcy."
• Government announced Rabi 2026-27 NBS rates on 5 Nov 2026 — plus special support for the exceptional increase in sulfur/sulfuric acid prices; cabinet approval received the day before the call, with no further approvals required; detailed notification still awaited.
• Management expects minimum 10-15% moderation in NP-grade MRPs — e.g. 20:20:20, which rose sharply from Rs.1,350 to Rs.2,100 per bag, during FY 2026-2027 (Rabi season); conditional on scope, as ammonia prices have started spiking again.
• Sulfur subsidy applies only at a floor price of $800 — Coromandel curtailed purchases above the threshold; benefit described as not very significant but helpful in Aug-Sep 2026 in getting the Kakinada plant back on track.
• Retrospective NBS impact seen as positive in Q3 FY 2026-2027 — subsidies are paid on POS consumption basis, so high-cost carryover channel inventory will be reasonably compensated as sold; industry should not face a negative impact going forward.
• Government's fertilizer sales framework is on a pilot scale — industry has engaged with and written to the government to update package of practices; management called cash-crop farmer restrictions a "serious concern"; practical challenges (longer purchase process, digital access, brand choice) shared with the Department of Fertilizers.
• Channel inventory only 5-7% above year-ago levels — industry cut production/imports anticipating weak demand; management expects inventory moderation over the next 2-3 months (Q3 FY 2026-2027).

Export-Led CP Growth; NACL Reset Underway

• Crop protection revenue up 22% YoY in Q2 FY 2026-2027 — on strong export performance; CP standalone EBITDA margin at 16% in Q2 and 17% in H1 FY 2026-2027; CP declined ~20% per the non-subsidy discussion, on NECL sulfur-derivative carryover inventory and soft global agri prices.
• CP exports grew 44% — with >40% of segment revenue from exports in FY 2026-2027 (period reported); 6 new products introduced in Q2, with new products contributing 36% of domestic FY 2026-2027 sales.
• NACL Q2 revenue at Rs.374 Cr (−18%), EBITDA Rs.12 Cr — a one-off aberration from carryover high-cost inventory; remediation includes renegotiating raw materials, in-house intermediate evaluation, and cost-cutting/field-team rationalization targeted from H2 FY 2026-2027 onward.
• NACL strategic case rests on spare AI capacity, combined R&D and CDMO potential — management cautions NACL should not be judged on quarterly EBITDA near term, as new registrations take 2-3 years.
• Fluorination launch plant planned at Ankleshwar — pilot in place; commercial plant (capex ~Rs.250-300 Cr) only after signing key customers and product clearance, "1, 2 years down the line" (≈FY 2028-2029); differentiation rests on captive hydrofluoric silicic acid vs China's fluorspar route.
• Agrochemical regulatory tightening — restrictions on molecules such as carbosulfan and paraquat; impact on Coromandel expected to be limited.

Retail, Biologicals, Nano and Daksha Drones

• 80 stores added in Q2, network at 1,300 stores — across AP, Telangana, Karnataka, Tamil Nadu and Maharashtra; targeting 2,000 stores over the next 2 years (~by FY 2028-2029); white-label brands expected to cross Rs.100 Cr annual sales in FY 2026-2027.
• Biologicals growth called sustainable — MD & CEO Shankara Subramanian: "not a one-off game"; integrated nutrient management philosophy built on a 20% organic / 80% chemical mix; bio verticals shifted to direct sales over Q1–Q2 FY 2026-2027 with good traction.
• Bio products carry strong entry barriers — in-house, Coromandel-specific registered products; agrochemical presence across 80-90 countries positions the company to cross-sell nano and bio products globally; management declined to quantify segment size or a scaling path over the next 2-3 years (FY 2027-2028 onward).
• Nano volumes dampened by state-level bans — including key markets Uttar Pradesh and Maharashtra; company did not position nano materials in Q2 FY 2026-2027 and is working to get the ban removed; strong repeat adoption, nano DAP market leadership and initial export consignments shipped.
• Daksha: defense order update expected in Q3 FY 2026-2027 — 2-3 new surveillance/fixed-wing drone variants in registration; high-altitude demonstrations in the Karigel sector well received by the Army; defense drone sector growing at a 25% annual CAGR (period unspecified) with few established players.
• Agri drone operations scaled in Q2 — two new agri variants introduced; drones with pilots being attached to each retail center; management confident "the future agri revolution in India will come through drone spraying."

Kakinada Ramp, Granulation and Gated Capex Discipline

• New granulation facility (~0.5 million tons) on track for February 2027 — commissioning in Q4 FY 2026-2027, with capacity available for the FY 2027-2028 season; retail network expansion is the main volume channel.
• Backward integration at ~70% in FY 2026-2027 — priority is ramping the Rs.2,000 Cr Kakinada PSA plant (set up in FY 2025-2026) to full volumes before adding capacity; management will retain some bought-out exposure and will not go to 100% captive integration.
• Backward integration spreads of $300–350 endorsed as a safe H2 FY 2026-2027 assumption — volumes scaling up from October 2026 (Q3 FY 2026-2027) with the improved value-gap benefit kicking in H2.
• Phosphoric acid prices rolled over at $1,700/t — sulfur softening and likely to fall below $900/t (period unspecified), with potential below $500/t through smart purchases; DAP broadly flat over the last two months.
• Battery-grade phosphoric acid on the backseat for 2-3 quarters — through Q2 FY 2026-2027, as team bandwidth was absorbed by the nutrient business; management hopes to re-evaluate in Q4 FY 2026-2027; no capex or economics shared.
• Specialty nutrients: captive MAP plant being put up — to feed WSF manufacturing and reduce dependence on Chinese raw materials (timeline not disclosed); business has sustained 20-25% volume growth even during stressful periods (period unspecified).

Cautious Optimism for Rabi; Margin Guidance Withheld

• Management declined to quantify FY27 EBITDA/ton — despite Rabi subsidy rates now known for H2 FY 2026-2027, citing margin volatility; precise guidance expected only after Q3 FY 2026-2027 closes, with performance "structurally, directionally" back on track.
• Q3 FY 2026-2027 expected closer to previously indicated margin levels — management flagged consumption/volume revival, not margin, as the key challenge.
• MD & CEO cautiously optimistic on the Rabi season for FY 2026-2027 — citing revised NBS rates, improved farm economics, moderating input costs and seasonal pickup; agri commodity prices holding above MSP levels support farm cash flows.
• Sowing has begun picking up but acreage remains behind year-ago levels — vs FY 2025-2026, despite helpful rainfall replenishing soil moisture across the country; two cyclones revived chili crop prospects in south Andhra.
• El Niño expected to move to neutral by year-end 2026 — if current forecasts hold, seen as positive for the forthcoming season.
• Andhra Pradesh's Rayalaseema horticulture hub program — the AP government announced a major program to develop Rayalaseema as a global horticulture and food processing hub; management sees a positive long-term opportunity across nutrients, crop protection, specialty nutrients and retail.