Fert policy will boost profitability going ahead: Chambal

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Fert policy will boost profitability going ahead: Chambal

In an interview with CNBC-TV18, HS Bava, Managing Director of Zuari Industries and Vice Chairman of Chambal Fertilisers, spoke about his outlook for the company.

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In a major reform signal for the fertiliser sector, the Cabinet has approved the nutrient-based fertliser subsidy plan. It has allowed a 10% hike in urea prices and a price decontrol of all other fertlisers. Under the new policy, subsidy will be given to nutrients like nitrogen, phosphorus, potash and sulphur. The government however, will continue to fix the prices of urea.

In an interview with CNBC-TV18, HS Bava, Managing Director of Zuari Industries and Vice Chairman of Chambal Fertilisers , spoke about his outlook for the company post this announcement.

Here is a verbatim transcript of an exclusive interview with HS Bava on CNBC-TV18. Also watch the accompanying video.

Q: Give us a quick reaction on the announcement made by the government yesterday. How would it impact Zuari and Chambal?

A: It is a very positive step. The reforms in the agriculture sector were long overdue. This is the first step in that direction. It is good for the industry, sector, the farmers and all the stakeholders. Industry has been expecting some beginning of the decontrol for a long time.

Q: For the industry we understand that it is a very good move. What about your company per se? We understand that Zuari Industries is one of the complex fertiliser manufacturers to be benefited by the entire programme specially the change in Nutrient Based Subsidy (NBS) policy. How would this impact the profitability?

A: It is a positive step and it will improve the company's profitability on a long-term basis.

Q: By how much?

A: It is difficult to give the numbers. It depends on many other factors. The commodity markets have been very volatile. The raw material prices of fertilisers have been very volatile. India imports all the raw material, the potash, phosphoric acid, etc. It will all depend on the international scenario. NBS in India will lead to some kind of stability in the prices and most of the large manufacturers of phosphatic fertilisers in the country which includes Zuari, our other joint venture company Coromandel and others, already have a long-term relationship.

Q: Give us one clarification Zuari SEZ which is a 100% subsidiary of yours has acquired Anil Kumar MN Developers, a company holding about almost 73 crore of land. What is the development in that and how do you plan to develop this land, how are you valuing it right now?

A: Right now this is a very initial stage. I don't think I can give you much input on that. There is a good piece of land there in Mysore and we are trying to develop it. The project has just started and there is not much that I can tell you at this stage.

Q: Would it be commercial development?

A: Yes it would be a commercial development.

Q: How much time will this move towards a market price take? What do you think the MRP could hike up to?

A: In order to improve the agricultural production, the government needs to completely decontrol. This is a welcome step and once there is a total decontrol and we are benchmarked against the international prices on import parity basis, the fertiliser industry is bound to do well.

In a free market scenario, it has to be more competitive, it has to compete with the global players which I think knowing the Indian fertiliser industry where I have spent more than thirty years, it is one of the most sufficient fertiliser industries in the world. It should be able to cope up and it should be mutually benefited to the government in terms of reduction in subsidy to the fertiliser industry in terms of further profitability.