Fertiliser scrips shoot up on urea sales

Mid-cap fertiliser stocks are buzzing at the stock markets on the back of improved sales of urea and di-ammonium phosphate (DAP) in the first fortnight of the rabi season, indicating a promising demand for the rest of the season.

Interestingly, urea sales have also picked up in the south, where the demand during kharif was not as good as was witnessed elsewhere in the country.

Likewise, DAP sales in the south have also been higher than in the corresponding period last year. The overall country sales for DAP so far has been 1.5 times higher than last year's levels.

The market capitalisation of fertiliser companies has surged 13.88 per cent to Rs 15,643 crore in the last 15 days from Rs 13,854 crore.

Some key stocks have seen their prices surge by as much as 40 per cent in the last fortnight.

FACT's stock price has edged up 38.04 per cent since December 1. Recently, the Cabinet Committee on Economic Affairs (CCEA) approved a Rs 650 crore financial restructuring package for the company, which includes a waiver of penal interest, moratorium on principal repayments, reduction in interest rates and deferment of interest payments.

The company has been continuously making losses since 1997-98 due to a combination of factors such as high cost of ammonia production, high interest rates and high loans repayment.

EID Parry, another major player in the industry, has seen its share jump 30.22 per cent since December 1 to Rs 234.40 on Tuesday.

Godavari Fertiliser & Chemicals has added 26.11 per cent in the last two weeks to close at Rs 76.45. Zuari Industries has risen 13.15 per cent to Rs 52.05. Gujarat Narmada Fertiliser's (GNFC's) share price has risen 9.11 per cent to Rs 66.50 during the same period.

Moreover, most fertiliser companies have announced impressive earnings for the half year ended September 2003, indicating the impact of the Central government's new policies on urea and complex fertiliser manufacturers.

Analysts watching the sector add that the government is likely to remain favourable to the farmers due to the ensuing elections. Most agree that several concessions are likely to be offered to the farmers.

Besides, there are expectations that key industries such as fertilisers, steel and infrastructure will be given priority with the budget just round the corner.

Internationally, urea prices have continued to remain firm with high gas prices, which in turn pushed up ammonia prices.

Sulphur prices also rose due to robust demand from China. Freight rates jumped by almost 20 per cent. However, DAP prices declined due to high inventory levels held by traders.

The SSP producers are also finding it increasingly difficult to maintain their margins after the Centre announced that it would continue with the existing concession rate of Rs 650 per metric tonnes for 2003-04, despite higher phosphoric acid and ammonia prices.