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Last Updated : Oct 03, 2016 12:55 PM IST | Source: CNBC-TV18

Govt to divest stake in NFL, RCF via OFS; roadshows soon: CMD

The roadshows for the stake sale of NFL and RCF to being in the third week of October, said Manoj Mishra, CMD, NFL.

The government is looking to offload 15 percent stake is NFL and bring it down from 90 percent to 75 percent in line with SEBI regulations surrounding maximum stake ownership, CMD Manoj Mishra said.

The government will sell 5 percent stake in RCF and bring it down from 80 percent to 75 percent, Mishra, who has also been given additional CMD charge of RCF, told CNBC-TV18 in an interview.

The stake sales will be done via offer for sale route (OFS), he said, adding that roadshows for the stake sale to being in the third week of October.

The government on Friday cut gas prices by roughly 18 percent to USD 2.5 per mmbtu for the six-month period October 2016-March 2017. New gas prices applicable from Oct 1 to Mar 31.

The above move will benefit all gas users, said Mishra.

Currently, the unrealised subsidy by the government is to the tune of Rs 2000 crore for NFL and Rs 1500 crore for RCF, out of that half is likely to come through by end of FY17.

Moreover, the outlook for fertilisers looks robust post the good monsoons, said Mishra.

Below is the verbatim transcript of Manoj Mishra’s interview to Nigel D’souza.

Q: You are in charge of Rashtriya Chemicals and Fertilisers (RCF) as well as National Fertilizers Limited (NFL). Could you break it down for us as to how much of your gas requirement are you sourcing under the administered pricing mechanism (APM) route, how much is coming in from the spot route and also, this gas price, which category does it really affect?

A: Actually, after the implementation of gas pooling mechanism, it has become immaterial whether a company has more share of APM or more share of spot gas. So, this benefit will accrue to all the gas users equally though we have larger share of APM but that will be shared equally because of gas pooling.

This 18 percent reduction in gas price from USD 3.06 to USD 2.5 per million British Thermal Units will ultimately lead to 8-10 percent reduction because of weighted average because at present my average price is about USD 7.6 and this will come down to USD 6.9 according to our assessment.


Q: Before we take this further, could you tell us what are the unrealised subsidiaries from the government currently?

A: This is actually quite a large number.

Q: Help us with some approximate numbers.

A: You are speaking for the entire industry or should I talk about NFL?

Q: From NFL and RCF.

A: NFL is more than Rs 2,000 crore and RCF around Rs 1,500 crore. It has actually more to do with quality and quantity certificate which is required from state governments. It is more to do with that than with the Budget.

Q: When do you see that these subsidies can get realised in a phased manner? How much can we receive in FY17?

A: Actually for quality and quantity certificate for which I am talking about, only 5 percent subsidy which is pending for a certificate from state government. So, now government has thought of deemed provision; if within six months state governments do not give the certificates, so this will be treated as if it is deemed provision.

Q: So, what is that number? How much can you get before the end of this fiscal?

A: We should be getting at least half of it.

Q: So, Rs 750 crore we can assume you will get in this fiscal for RCF and for NFL around Rs 1,000 crore?

A: Right.

Q: So, you are saying that this reduction in gas, what really happens is that the subsidies will reduce. So, could you tell us will the cut in gas prices be set off by the fall in subsidies? How are you looking at this?

A: Urea subsidy budget is already there. There will be reduction in subsidy outgo of Government of India. With this one reason, Rs 120-140 crore subsidy saving will be there for the Government of India. But for industry, what happens is you are more worried about the production beyond reassess capacity, which is actually linked to my cost of production and linked to the international price of urea and international price of urea is hovering at a much lower price. So, we were actually a little worried whether we should be able to produce more than 100 percent or not. But with this reduction some viability has come into the question.

Q: But operationally it does not change things much is what you are trying to tell us?

A: No, obviously. My working capital requirement comes down; my interest expenditure will come down. It is a positive development.

Q: So, bigger benefit to the government and some benefit as well to the companies.

A: Yes.

Q: I want to ask you that the government’s stake in both these two companies at 80-90 percent. There is some talk that they are looking to off-load stake, I speak to a lot of bankers and they tell me there is some interest that s coming in there as well. Could you confirm the same? Is there any kind of divestment on the cards in this year?

A: For NFL, right now, government if India is having 90 percent equity which is to come down to 75 percent, so government will be offloading 15 percent. And for RCF, offloading will be by 5 percent to bring it to 75 percent. And the road shows are on. Most likely, this month in the third week, our road show will take place.

Q: And this will be the offer for sale (OFS) route?

A: OFS route.

Q: Could you tell us what is the current crop condition post the good monsoons? What is the outlook on acreage?

A: With the good monsoon, the outlook is very positive and we are also positive about the fertiliser consumption picking up and the rabi also because of good monsoons this time.

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First Published on Oct 3, 2016 11:24 am
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