Performance Chemiserve turns profitable as Equinor gas changes ammonia economics

Performance Chemiserve’s first-quarter turnaround has followed the arrival of long-term Equinor gas supplies, reversing losses at the ammonia producer and enabling ICRA to remove its facilities from rating watch.

The October 15 assessment reaffirms AA- Stable on Rs. 2,000 crore of term loans and A1+ on Rs. 1 crore of unallocated short-term facilities. The long-term outlook is Stable, even though the parent Deepak Mining Solutions carries a Positive outlook.

Standalone Q1 FY2027 operating income reached Rs. 1,063.4 crore and net profit Rs. 225.5 crore. That follows a Rs. 257.3-crore loss in FY2026, when the operating margin was negative 1.3%. The first-quarter margin improved to 35.2%.

Ammonia-plant utilisation averaged around 94% during the quarter despite April gas constraints. Equinor supplies began in May under a fifteen-year agreement for up to 0.65 million tonnes of LNG annually. Volumes are being phased in as earlier arrangements expire.

Offtake protection is substantial: group agreements cover production with a minimum commitment of 450,000 tonnes annually. The report expects growing nitric-acid, TAN and fertiliser requirements eventually to absorb the plant’s entire output internally.

The balance sheet has also benefited from conversion of group inter-corporate deposits into equity during FY2026. Nevertheless, ICRA continues to factor in timely group support if cash accruals fall short of debt-service requirements.

The improved gas arrangement does not fix every cost variable. Henry Hub prices, exchange rates, escalation, regasification and pipeline charges remain relevant. A lower GST-linked reimbursement also reduces the incentive available. Sustaining the turnaround ultimately depends on the spread between ammonia selling prices and delivered gas costs.