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Deepak Fertilisers Credit Rating Affirmed Amidst Capex-Driven Debt Rise
9M FY26 Revenue ₹8,495 crore; EBITDA ₹1,330 crore
Estimated Net Debt ₹4,800-5,200 crore by FY26 end
Reader Takeaway: A stable credit rating has been reaffirmed for Deepak Fertilisers, even as debt is set to increase due to significant capital spending. Successfully completing expansion projects and managing costs will be crucial.
What Happened
Deepak Fertilisers And Petrochemicals Corporation Ltd announced that CRISIL has reaffirmed its credit ratings. The company holds a long-term rating of CRISIL AA-/Positive and a short-term rating of CRISIL A1+. The announcement also included updates on the company's financial performance for the first nine months of fiscal year 2026 and its projected debt levels for the full fiscal year.
Why It Matters
This reaffirmation by CRISIL indicates the rating agency's confidence in Deepak Fertilisers' financial stability and operational capacity, especially as the company pursues substantial capital expenditure. Credit ratings are closely watched by investors as key indicators of a company's creditworthiness and associated risks.
Financial Performance Update
For the nine months ending FY26, Deepak Fertilisers reported revenue from operations of ₹8,495 crore, an increase from ₹7,607 crore in the same period last year. However, Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) saw a dip, falling to ₹1,330 crore from ₹1,445 crore in 9M FY25. This reduction was influenced by challenging conditions in the third quarter, including adverse weather impacting the Technical Ammonium Nitrate (TAN) and Nitric acid segments, alongside rising ammonia prices.
Debt and Leverage Outlook
Net debt is projected to rise to between ₹4,800 crore and ₹5,200 crore by the end of FY26, a significant increase from ₹3,305 crore at the close of FY25. This rise is primarily driven by ongoing capital expenditure projects and increased working capital requirements in the fertilizer business. Despite this increase, the company anticipates its leverage ratio will moderate to between 2 and 2.2 times by FY27, as capital expenditure eases and operating margins improve.
Key Risks
Profitability has been affected by rising input costs, particularly higher ammonia prices, and natural gas supply disruptions linked to geopolitical events. Furthermore, potential delays in receiving fertilizer subsidy payments from the government and changes in policy represent regulatory risks that could impact the company's cash flows and working capital management.
Sector Context
Deepak Fertilisers operates in the competitive fertilizer and industrial chemicals sectors. While specific peer data was not detailed, companies in this industry commonly face challenges related to input cost volatility and navigating regulatory environments.
Performance Metrics
9M FY26 vs 9M FY25:
- Revenue: ₹8,495 crore vs ₹7,607 crore (Increased)
- EBITDA: ₹1,330 crore vs ₹1,445 crore (Decreased)
Debt Levels:
- Net Debt (End FY25): ₹3,305 crore
- Projected Net Debt (End FY26): ₹4,800-5,200 crore
- Projected Leverage (End FY27): 2-2.2 times
Project Progress:
- TAN Capacity Expansion: 93% complete
- Nitric Acid Capacity Expansion: 86% complete
What to Watch Next
Investors will be closely monitoring the progress and commissioning of the TAN and Nitric acid expansion projects, which are expected to boost contributions from the second half of FY27. The impact of the new LNG supply contract with Equinor, set to begin in May 2026, on production costs will also be a key factor. Continued tracking of the company's debt management and its ability to enhance operating margins following the completion of these capital expenditures will be critical indicators.