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Shares of Deepak Nitrite have fallen about 13% in the last five trading sessions amid reports of Gujarat govt issuing closure notice to chemical intermediate maker Deepak Nitrite over Nandesari explosions, on which the stock exchanges have also sought clarification.

An explosion, followed by fire, occurred at Deepak Nitrite in Nandesari GIDC in Gujarat's Vadodara last week on Thursday, June 2, 2022. After which, the company said it is assessing the impact of the fire incident at the plant.

"Our emergency response team, with the support of local authorities and companies around Deepak Nitrite Limited brought the fire under control within a couple of hours. There has been no casualty, and few people are being given first aid treatment," the chemical manufacturer had informed in an exchange filing last week.

A portion of Deepak Nitrite's chemical manufacturing facility in the Nandesari industrial area on the outskirts of Vadodara city in Gujarat was engulfed by a major fire. 

Despite a sharp increase in input cost, Deepak Nitrite reported Q4FY22 results in line with analysts' estimates. However, margins fell off 920 bps year-on-year (YoY) to 21.9% due to increase in realisations, though EBITDA/mt remains stable.

Deepak Nitrite reported revenue growth of 28% YoY, mainly due to rising prices. Management had said it remains confident of protecting absolute margins on per mt basis given acceptability from customers and efficient cost management.

On the segmental front, basic intermediates registered a substantial beat both on account of revenue and margins as the company was able to pass on the input cost hikes, highlighted brokerage JMFinancial in a note last month.

“We remain positive on the future outlook of the company. Despite inflationary environment, management guided for 15 bn of capex coming online over next 12-18 months. However, rising input prices and cautious margin outlook lead to cut in PAT estimates by 2%/3% for FY23/24E," said another brokerage Ambit in Deepak Nitrite's Q4 results' review note in early May.

Deepak Nitrite shares are up over a per cent in a year's period whereas the specialty chemical stock has declined more than 29% in 2022 (YTD) so far.

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