A near normal monsoon forecast across the country this year seems to be auguring well for the fertiliser manufacturing companies. This could be gauged from the fact that the share prices of the fertiliser making companies listed on the Indian bourses have seen a noticeable surge this month.
India Meteorological Department (IMD) has predicted a normal monsoon with about 98 per cent of the Long Period Average (LPA) this year.
The investor circles were abuzz about the news of a normal monsoon since the beginning of the month. This kept the fertiliser stocks in high demand. The companies listed on the Bombay Stock Exchange (BSE) have witnessed sharp gains in the stock prices since April 1, 2011.
Also, the central government's announcement of hiking the fertiliser subsidy for DAP (Di-ammonium Phosphate) and MOP (Muriate of Potash) has further fuelled the investors sentiments.
The stock price of Gujarat Narmada Valley Fertilizers Company (GNFC) has risen by over 11 per cent since April 1 to close at Rs 107.80 on Friday, April 29, 2011. Another Gujarat-government promoted fertilisers maker, Gujarat State Fertilizers & Chemicals (GSFC) surged over seven per cent since April 1 and ended at Rs 372.10 today.
Meanwhile, India's largest chemicals and crop nutrition products maker, Tata Chemicals jumped close to 10 per cent during the period closing at Rs 375.70 on BSE Friday.
Commenting on the outlook for the fertiliser stocks, Atul Choksi, director, Kunverji Group, informed, "Forecast of near normal monsoon by met department has improved the outlook for farm output in the country, thereby creating a hope for increased consumption of crop nutrients and fertilisers. In the short-term there should be a good growth for the fertiliser companies."
However, besides the monsoon impact, the recent uptrend in the fertiliser stocks was also supported by the latest policy decision on fertiliser subsidy by the central government.
The Cabinet Committee on Economic Affairs (CCEA) on Thursday decided to increase the fertilizer subsidy for DAP to $ 612 per tonne from $ 580 per tonne and for MOP from $390 per tonne to $420 per tonne for the upcoming kharif sowing season.
An analyst from Pravin Ratilal Share and Stock Brokers informed that the decision on fertiliser subsidy would reduce the burden on margins of the companies. But higher input costs for the fertiliser makers may spoil the show for the companies.
"The prices of key ingredients like phosphoric acid have surged in the international markets making its imports costly. The prices have surged from $820 per tonne to $980 per tonne in past couple of months. This may prompt companies to pass on the cost burden on the farmers by selling the fertilisers at higher prices," said the analyst maintaining a cautious view for the fertiliser stocks.
India's total fertiliser consumption is pegged at around 54 million tonnes (MT) per annum, of which around 27 MT is urea consumption, 9-10 MT is DAP and about 5 MT is MOP, while remaining is complex fertilisers.
According to industry experts, India imports around 5-7 MT of urea and 3-4 MT of DAP every year, while MOP and complex fertilisers are completely imported.
