Krishana Phoschem ltd - Agro - Based Multibagger?

I have kept the report short and precise about the key points


Krishana Phoschem Ltd is a subsidiary of Ostwal phoschem (India) Ltd. And a unit of the Ostwal group.
The company is in the production of Beneficiated Rock Phosphate (BRP), Single Super Phosphate (SSP), Granulated Single Super Phosphate (GSSP) that are greatly required in the agricultural industry and Sulphuric acid, H-acid, dyes and other chemicals. KPL has distinction of having fully integrated SSP, GSSP manufacturing process which is one of its kind in the country.
The Ostwal group is marketing its fertilizer products under the own brand name of “ANNADATA” in the states of Madhya Pradesh, Gujarat, Maharashtra, Rajasthan, Punjab, Haryana, Udisha, Himachal Pradesh, Utter Pradesh and Uttarakhand. The group has appointed a network of 1000 distributors who in turn supply to more than 9000 dealers


• Consistently good Monsoon Augurs well for fertilizer demand
• Government subsidy release and other reforms are very positive

• Company is consistently increasing its distribution network and adding to market shared. Plus, there remains a big addressable market (which is growing too…)

• Company manufactures mainly SSP (single super phosphate) and other phosphate related fertilizers. In short it helps in replenishing Phosphate in the soil which was taken by previous crops. Nitrogen fertilizer type (Urea etc.) is the major type of fertilizer used (65%) compared to (25%) of phosphate. But excessive use of nitrogen causes adverse impact on soil, crop and overall eco system. Growing use of nitrogen is a cause of concern in many countries. China is reported to have decided to freeze the consumption of nitrogen at the existing level. So, there’s a good chance of substitution demand. 41% of phosphate fertilizer demand is satisfied through imports. So, there’s a good chance of substitution of import as well.

BRAND NAME: A very marketable and frankly great brand name “ANNADATA”

KPL is planning to setup new project Di-Ammonia phosphate (DAP) 1000 TPD, Phosphoric Acid 100% 300TPD & Sulphuric Acid 500 TPD at AKVN Ind. Area, Meghnagar Dist. Jhabua (M.P.). It has envisaged to commence project work from FY22. This mega capex project is expected to done in phases. The land is already been allotted to the company and the plant machinery is starting to arrive at the site.
This should allow the Company to Increase its scale very fast and offer clear growth drivers for the future.


HIGH OPERATING MARGINS -: Average last 5-year ebidta margin – 21% (probably the highest amongst fertilizer companies). Above is a result of integrated business operations (the high margin chemical division helps a lot in the overall margin profile)

HIGH AND CONSISTENT REVENUE GROWTH -: 16% CAGR over the last 5 years (this along with consistent increase in profitability is a very good sign)

Low Debt (16cr) (15x Interest coverage ratio)
Working capital Position is satisfactory (especially for a fertilizer company)

Satisfactory Cash flow generation
FCF/EBIDTA -: 17% (acceptable considering the growth they have had and that the company is in growth stage

Satisfactory Returns on capital -: Average 8-year ROCE (14.1%)
Average 5-year ROCE (15.8%)
Average 3-year ROCE (19.0%)
Return on capital is consistently increasing on average

10 YEAR ROIIC – 24%
5 YEAR ROIIC – 39%
ROIIC numbers show that company is reinvesting its capital at great and increasing returns.

Company is currently trading at a very fair value
Meaning we get all the future growth of the company for free along with multiple re-rating possibility.


EXECUTION RISK: The Company’s capacity expansion plan is very big and ambitious. To the tune of 321 Cr. Of which the company estimates 60% will be debt and 40% will be internal accruals. It will be implemented in phases, taking annual internal accruals and debt as required.
So, the execution risk is definitely there. (But it’s the one kind of risk , that we as investors bet on/ can’t do away with.

Following isn’t a key risk but more of a negative point-: Loans given to Group companies. (Note: all loans have been duly paid along with interest) Company has a big capex coming up. Don’t follow the idea of giving loans to companies when it can be deployed in the capex. Maybe it would be rectified in the coming quarters when the capex program actually begins.

Disclosure: Not Invested. This may change in the next few days.

Thoughts and comments are welcomed. If anybody has any Scuttlebutt Info, that would be more than welcome. This is my first post on the forum, so take kindly to any mistakes


When will the capex completed ?

Most Likely by Oct’22


Are you invested in this stock ? I have never ever invested in fertilizer company before but this company doing of capex 361cr of capex which is 3.5X of his fixed assest and DAP fertilizer india is importing form other country so there is the (Variant Perception) of import substitution and for the farming without DAP fertilizer not possible so there is alway in demand but as this is the cyclical sector , please tell me that what i need to do to track this business?

India imports 90% of rock phosphate and even Krishna phoschem imports as per credit report

I am tracking this company from last one year but was not much convinced about their capabilities and there is very little information available about company.

Although last quarter got to know that Ostwal group’s one more company (Madhya Bharat Agro Pvt. Ltd.) has completed expansion of DAP and NPK in Oct’21 and in Q3 FY22 there was substantial jump in sales and NP so took position their and holding now.

If we just see their journey that’s really commendable. Lets see how this pan out. I am holding from 1-2 year perspective.

Krishana phoschem re-rating was happened only after Madhya bharat Q3 Fy22 result.

Disc : Invested in MBAPL


Update: Sold all my holdings
Buy price - 142.3 (28-08-2021)
Avg sell price - 326.7 (23-06-2022)
Gross profit - 130%
Net profit - 110%
Net Annualized return - 160%

Well, the heading of the forum has been proven correctly… It has turned into a multibagger!

Reasons to sell:

  1. (Biggest reason) - Lack of information. Company does not do concalls nor is there much information available publicly. So, I do not have adequate information about the volatility of the profits, future plans, capex plans and progress, demand supply dynamics
  2. High Valuation: Valuation has already gone past fair static intrinsic value. All future gains will be dependent on future growth (growth about which i have no certain knowledge)
  3. Inter corporate loans and seeming management discretion on company profits: The issue of loans is still not resolved even though company is undertaking a big capex. Also, management seems to have control over which company gets profits (Krishana or Madhya Bharat Agro)

Recent analysis

Fundamental analysis

Last year revenue break up

Revenue Growth factors
The NPK/DPT utilisation levels far from full (33% ) if increased to 80% the profit will increase 100 CR annually which is a minimum rough estimate

Cost production : 18000 / ton
Selling price : 25000 / ton
(Rs. 25,000/ton - Rs. 18,000/ton) * 300,000 MT * (80% utilization) = Rs. 168 crore
Last quarter profit at ( 19 crores )

Macro economic factors
1.Russia resumes fertilizer trade with United States, ends discounts prices ( discount wast 80$ per MT ) to India ( Which will reduce imports to india, Currently Krishana does’t have any export business )
2.Union Cabinet approves NPK fertiliser subsidy for 2023-24 rabi season ( There won’t be any drop in demand and price reduction at least until the 2024 election, Currently NPK is sold at 1350 MRP per 50KG which is fixed price)
3. Fertilizer consumption in their major operating regions is very low ( as of 2022 ) there is room for growth there


Non-determinable Positive factors

Lot of insider trade activities

Possible Negative factors
1.Adverse impact of any regulatory/policy change ( reduction in subsidy will lead to lower demand ). ( Reduction in MRP price of fertilisers, fixed at 1350 for NPK )
2.Raw materials are imported from JORDON for Rock Phosphate with long term agreement ( Any geo political factors will affect import )

Basic Technicals
Trading at higher than 5Y Median of 25 PE, Currently trading at 33 PE ( Based on recent quarter EPS trading at 18 PE )

Disclosure : Not invested,

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Recently there is a aggressive Insider Trading activity happening in the company.( Purchasing from open market ) . Could’t figure why.
Just happened to see “Madhya Bharat Agro Products Limited” Announced on December 15 they made an agreement with “National Fertilizers Limited” for DAP/APS/NPK fertilizers

Here is the full details

“This is to inform you that Madhya Bharat Agro Product Limited (MBAPL) (A Unit of Ostwal Group of Industries)
has entered into a marketing agreement with National Fertilizers Limited (NFL), New Delhi (A
government of India undertaking) with effect from 15th December 2023 (subject to approval from DoF)
for 2,90,000 Metric ton of DAP/APS/NPKs valid up to 31st March, 2025, total expected inflow from this
agreement is ₹ 1170 Crores (including ₹ 447 Crores subsidy) excluding GST.”

Both companies are owned by Same promoter group. And both companies have similar products.
But why this will have an impact is currently MBAPL is currently their NPK/DAP capacity is 2.4 Lack metric ton and they are already running at 53% capacity as of november end.

Also MBAPL mentioned in their presentation

Work on setting up of 1000 TPD DAP/NPK ( 365000 MTPA ) plant with matching Phosphoric acid plant purchased from Birla Copper (A
unit of Hindalco Industries Ltd) commenced.
o Location for setting up DAP/NPK plant has been finalized in Maharashtra.
Did’t mention when the plant will be operational

If the new plant does’t become operational as early as possible
Maximum of 1.2 Lack Metric ton will be produced from MBAPL and remaining will be produced from KPL which is 1.9 Lack Metric ton ( Maximum ). But honestly don’t know how this intercompany model will pan out.
Currently KPL has 3 Lack Metric ton of Capacity on NPK/DAP fertiliser and currently running at 33% utilisation. If the NFL agreement which lead MBAPL to buy 1.9 Lack Metric ton from KPL then
There is also a possibility rather than KPL getting orders from MBAPL, KPL might get on agreement from NPL or some other fertiliser company. Let’s see
Happened to figure out Both the sons of MK ostwal are CA. Watched Praveen ostwal interview in youtube. My Initial judgement is he is simple and humble.

Disclosure : Invested

Krishana Phoschem ltd (KPL ) is little bit less valued than it’s sibling Madhya Bharat Agro Products Ltd ( MBAPL ) even though Both now has the same product profile, Capacity and sales numbers. Any alternate views are welcomed.

Madhya Bharat Agro Products Ltd Krishana Phoschem Ltd
Sep 2023 Sep 2023
MCAP 2643 Cr 1526 Cr
Share Price 302 Rs 252 Rs
Total Shares 87524752 61040000
Madhya Bharat Agro Products Ltd Krishana Phoschem Ltd
Revenue 278 ( In crores ) 265 ( In crores )
Profit Margin 15% 18%
Profit 40 47
Debt 287 439
Interest 8 10
Depreciation 7 8
Profit before tax 26 28
Tax 42% ( Not sure why tax higher here) 32%
EPS 1.70 Rs 3.25 Rs

This is production capacity difference of product profile between KPL and MBAPL. In this SSP, NPK/DPA is significantly different and MBAPL has one more product profile Organic fertiliser. Also NPK/DPA production utilisation is Just 33% for KPL. There is a room for growth there.


Disclosure : Invested

Recent development which was missed
Government caps profit margin for fertiliser stocks

Also for the latest quarter the EPS is 0.60 ( last quarter 3.25 ). Higher expenses lead to lower margin. Need to dig deeper.

Promoter continues to buy from Open market which is what piqued my interest in this company. Are there any ongoing developments happening in the company? The investor presentation looks interesting, seems like one of the few SSP manufacturers to have complete backward integration.

Numbers look good.
Anyone aware about the topline guidance of FY25.?
Margins have contracted in Q4-24.

Trade receivables have gone up.
Intrest cost and borrowing has gone up almost 3X.

Doesnt make sense of such borrowing unless they are projected to grow in excess of 40%?

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