Subsidy of around Rs 1700 cr pending from govt: RCF

Despite Rashtriya Chemicals and Fertilisers reporting a topline growth in the second quarter, its net profit is down about 50 percent on the back of rupee depreciation, lower margins in P&K fertilisers and also higher interest charges on subsidy, which the company is yet to receive from the government, says RG Rajan, CMD.

Also Read: RCF Q2 net profit halves to Rs 40.04 cr
The state-run company, as on date is supposed to receive Rs 1700 crore subsidy from the government. Though it expects to get around Rs 300 crore soon.
Rajan expects higher sales in the second half of the fiscal year. He says around 8 percent EBITDA margins or more can be expected in the remaining quarters. Below is the verbatim transcript of RG Rajan's interview on CNBC-TV18 Q: First a word on quality of your earnings because sales are up 10 percent and despite that the net profit is down about close to 50 percent, if you could take us through the internals of the numbers?
A: Profits are down by 50 percent because of the rupee depreciation, lower margins in P&K fertilisers and also the higher interest charges on the subsidy which is not yet received from the government. Q: Could you tell us how much subsidy is pending from the government and when you are expecting it?
A: As on date, Rs 1700 crore subsidy is pending from the government. Recently, the government has got some special banking arrangement of Rs 5500 crore. From that we will get around Rs 300 crore and some more arrangement from the banking is also expected. So, we hope to get some more money in the next month. Q: Can you say that the second half is going to be better for you compared to first half and what is the overall outlook for second half?
A: Second half, especially in P&K fertilisers will be better because the stocks in the trade have come down. We will have higher sales so overall we will be better. Urea will be about the same level like the first half. So, around 8 percent EBITDA margins or more can be expected in the remaining quarters. Q: We have seen international prices of urea coming down. Could you tell us what impact that will have and in the second half of the year what are you expecting by way of urea prices?
A: Lower urea price means that our revamp capacity, that is not so profitable because it is linked to import parity pricing. The current levels of USD 310 per tonne of urea is what we get for the revamp capacity, is not so attractive. So, from hereon maybe if the prices may go up marginally in the coming months – the urea price may go up marginally – the import price. Q: Any plans with your large land bank in Chembur because that is something that everyone keeps talking about but we haven’t heard much on that?
A: As of now there is no plan for any monetisation of the land bank. Q: With respect to your complex fertiliser we understand that the sales were under pressure in the quarter gone by. They fell on year-on-year (YoY) basis on account of excess channel inventory. What is the outlook on that going forward?
A: Whatever was the inventory, the trade that has now come down considerably. We expect that in the rabi season we will have higher sales of the P&K fertilisers. So, we will have a higher margin there in the rabi season.