GNFC margin falls 10.46 points sequentially as costs outrun revenue
Revenue grew 23.91% sequentially on higher volumes, but lower realization and higher fixed costs cut operating profit by 49.87%.
Filed 02 Nov 2026, 17:20 IST · after market close · Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC)
Key takeaways
- GNFC’s consolidated operating margin fell 10.46 percentage points sequentially to 7.1% as expenses grew 39.62%, faster than revenue at 23.91%.
- Consolidated net profit rose 8.38% year on year to Rs 194 cr, despite operating margin narrowing 2.3 percentage points because expenses grew faster than revenue.
- Other income contributed 54.8% of consolidated profit before tax, making reported earnings less dependent on operations this quarter.
Price around the results
Higher volumes could not offset lower realization
GNFC’s consolidated revenue increased 23.91% sequentially, while operating profit fell 49.87%. Management said higher volumes across most products drove revenue, partly offset by lower realization, and that substantial inventory built up at the start of the quarter was liquidated. Year on year, revenue grew 40.9%, but operating profit increased only 6.49% as costs rose faster.
Fixed costs drove the 10.46-point margin drop
Sequential expenses grew 39.62%, outpacing revenue growth of 23.91%, which reduced operating margin by 10.46 percentage points. Management attributed the quarter-on-quarter decline mainly to lower realization and higher fixed costs, partly offset by higher volume. It also said high feed, fuel and energy prices had increased operating costs and working-capital intensity.
Margin is in its second straight quarterly decline
Operating margin has fallen from 21.83% in Q4FY26 to 17.56% in Q1FY27 and 7.1% in Q2FY27, marking a second consecutive quarterly decline. GNFC’s margin was 8.13 percentage points below the 15.23% median for the 65 Commodities peers that had reported the quarter. Other income was 54.8% of profit before tax, while the sequential tax-rate reduction of 2.96 percentage points also supported net profit.
Expansion projects are the company’s stated offset
Management said the 50 KTPA ammonia expansion at Bharuch is expected to improve ammonia-loop reliability and generate some energy savings. It also said the 200 KTPA Weak Nitric Acid III and 163 KTPA ammonium nitrate II projects are expected to support market share, revenue and results, while the 180–200 MT/HR CFBC boiler is expected to improve reliability and reduce energy costs. The company told analysts that its Dahej captive coal-based power plant has started operations and reduced operating costs.
No post-results market move yet
The consolidated results were filed after market close, so there is no reported stock reaction yet. After its previous eight results, GNFC’s stock rose five times and fell three times, with a median absolute move of 1.69%.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹2,773 cr | ₹2,238 cr | +23.91% | +40.90% |
| Other income | ₹137 cr | ₹103 cr | +33.01% | +6.20% |
| Expenses | ₹2,576 cr | ₹1,845 cr | +39.62% | +44.48% |
| Operating profit | ₹197 cr | ₹393 cr | -49.87% | +6.49% |
| Operating margin (%) | 7.10% | 17.56% | — | — |
| Interest | ₹1 cr | ₹2 cr | -50.00% | +0.00% |
| Depreciation | ₹83 cr | ₹76 cr | +9.21% | +2.47% |
| Profit before tax | ₹250 cr | ₹418 cr | -40.19% | +7.76% |
| Tax | ₹56 cr | ₹106 cr | -47.17% | +5.66% |
| Net profit | ₹194 cr | ₹312 cr | -37.82% | +8.38% |
| EPS (₹) | ₹13.20 | ₹21.22 | -37.79% | +8.37% |
Operating margin of 7.10% compares with a Commodities sector median of 15.23% across 65 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Quarter-on-quarter revenue increased mainly because of higher volumes across most products, partly offset by lower realization.
- The quarter saw liquidation of substantial inventory built up at its beginning.
Guidance & outlook
- The ammonia expansion is expected to improve existing loop reliability and generate some energy cost savings.
- The WNA-AN projects are expected to strengthen market share and increase revenue and results.
- The CFBC boiler is expected to improve operational reliability and save energy costs.
Expansion
- GNFC is executing a 50 KTPA ammonia expansion at Bharuch.
- GNFC is executing a 200 KTPA Weak Nitric Acid III project at Bharuch.
- GNFC is executing a 163 KTPA ammonium nitrate II project at Bharuch.
- GNFC is executing a new CFBC steam boiler at Bharuch with capacity of 180–200 MT/HR.
- GNFC is considering a 150 KTPA BisPhenol-A project at Dahej.
New initiatives
- The Dahej captive coal-based power plant has started operations, reducing operating costs.
- GNFC is pursuing a fixed-cost revision for NCU with the Government at industry level through a task assigned to NITI Aayog.
Problems & risks
- Quarter-on-quarter results decreased mainly because of lower realization and higher fixed costs.
- Year-on-year results were partly offset by higher input and fixed costs.
- High feed and fuel prices caused by the geopolitical situation increased working-capital intensity.
- High energy prices and their downstream effects increased operating costs.
- The nutrient-based subsidy rates for complex fertilizer had not yet been announced and were awaited for the RABI season.
What to watch
- Whether consolidated operating margin recovers from 7.1% after the second consecutive quarterly decline.
- Whether higher volumes continue to offset lower realization and expenses growing 39.62% sequentially.
- Progress on the 50 KTPA ammonia expansion, 200 KTPA Weak Nitric Acid III project and 163 KTPA ammonium nitrate II project.