Deepak Fertilisers exits rating watch as gas supply stabilises

Deepak Fertilisers and Petrochemicals Corporation has exited ICRA’s rating watch after the start of contracted Equinor gas supplies improved ammonia availability and strengthened visibility over group operations.

ICRA reaffirmed AA- on Rs. 2,186 crore of term-loan facilities and assigned a Positive outlook on October 15. The assessment takes a consolidated view of Deepak Fertilisers and its linked subsidiaries, rather than measuring the parent’s financial position alone.

Henry Hub-linked gas supplies have supported stable production at Performance Chemiserve. ICRA says the resulting gas cost is below oil-indexed term LNG and prevailing spot LNG prices, while elevated ammonia prices have supported earnings.

The benefits are uneven within the group. Mining chemicals have gained from stronger technical ammonium nitrate realisations and ammonia availability, but the fertiliser business still faces high phosphoric-acid and ammonia costs. Ammonia supplied internally is priced with reference to West Asia, and subsidy and retail-price adjustments have not fully covered the cost increase.

The next major test is commissioning a Rs. 4,658-crore expansion programme. By June, the Rs. 2,675-crore Gopalpur TAN project was approximately 95% complete and the Rs. 1,983-crore Dahej nitric-acid project around 90% complete. Production is targeted for Q3 FY2027, followed by ramp-up in Q4. Nitric-acid commissioning has already slipped by approximately six months.

Consolidated FY2026 profit fell to Rs. 738.8 crore from Rs. 944.7 crore despite higher revenue, before Q1 FY2027 profit reached Rs. 490 crore. The Positive outlook anticipates further improvement from gas economics and new capacity, with timely stabilisation, commodity spreads and fertiliser subsidy terms remaining material dependencies.