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Moneycontrol.com >> Message Board >> View Messages >> Nagarjuna Fert
   You are here :     Moneycontrol     MMB    Stocks      Nagarjuna Fert                         Most active discussions of 2006 , 2007 & 2008
TIME TO INVEST.....& ACCUMULATE..!!!!!! (1)   07-Jul-08 13:09Tracked by (0)  
Posted by:   santhosho on ( 07-Jul-08 13:09 )
Price : BSE: Rs 32.30 ( 3.53 % ), NSE: Rs. 32.30 ( 3.69 % )
The latest policy announcement points to a positive beginning, which along with a demand-supply mismatch scenario and the aim to achieve food security should benefit domestic fertiliser companies.

Off late, fertiliser stocks, which were deserted by investors mainly due to the highly regulated environment, are once again in the news.

The fertiliser companies, which have underperformed the BSE Sensex over the last three years, have turned out to be outperformer in the last one year gaining 33 per cent as against the Sensex\\`s decline of about 6 per cent. Even since mid-April 2008, most of the fertilizer company stocks have outperformed the Sensex.

Higher global inflation, rising agri-commodity prices and growing need for food security has led to an immediate need for increased supply of agriculture produce globally as well as in India.

This is also partly responsible for increase in fertiliser prices globally, which have gone up two-three times compared to a year ago.
In India, which is among the largest consumer of fertiliser, the problems have compounded as there has been hardly any capacity addition in the last one decade.

As a result of this the country has to heavily depend on imports. However, with prices of the key inputs going up in overseas markets and selling price of fertilisers regulated, even imports became a difficult choice for the companies.

Typically, the difference between the selling price and the cost of production was paid as subsidy by the government. But this further led to increase in working capital for companies and a soaring subsidy bill for the government.

Also, it was considered that even after the payment of the subsidy, the companies were not making adequate profits due to the rising international prices.

In these contexts, the visible impact of these has been seen on demand for the fertilizer, which continues to outstrip the supply in the country thus, threatening to slow down the already paltry agriculture growth due to the non availability of the fertilises.

Meanwhile, fertiliser stocks have shown some strength, thanks to the markets expectation of concrete reforms for the sector.

The policy
Though just a beginning, the government has approved the new fertiliser policy, wherein the domestic price of based on phosphorus and potash based fertilisers will be linked to import price parity.

Under the new scheme, the companies will be paid the difference based on the international prices and the domestic selling prices.

Industry experts say that if a company is importing phosphorous at 0 a tonne and the average international price worked out by the government is 0 a tone, then 65 per cent of savings of will be paid to the companies by the government over and above their actual cost of 0.

This will largely benefit companies who have tie ups or raw material linkages. Thus, benefiting efficient players and leading to an improvement in their Return on equity (RoE).

Triggers ahead
Besides these policy announcements, the industry is also expecting the urea policy to be declared soon.

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