Urea biz may dip mildly in Q4, awaiting NIP amendments: NFL

National Fertilizers’ third quarter net profit jumped 104 percent at Rs 47 crore against Rs 23 crore, Y-o-Y. The urea business EBIT rose 101 percent to Rs 175.5 crore versus Rs 87 crore.

Discussing the numbers, CMD Neeru Abrol, said the urea business performance till Q3 has been good, but may dip slightly in Q4. The company has been awaiting amendments in the New Investment Policy 2008 (NIP) for urea sector.

Below is the transcript of Neeru Abrol’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: This time around although the revenues were down the EBIT or the operational performance went up substantially in the Urea business. What is the forecast for the last quarter of the fiscal and for FY16?A: Till third quarter the performance has been very good and production doing exceedingly well, as well as our sales and energy consumption also is much below our preset norms. However, the fourth quarter is going to be tough in the sense because we have achieved our production at one of our unit Nangal and for other units also we will be achieving very shortly. We are waiting for the amendment in the New Investment policy (NIP-2008) policy.Where beyond the cut off quantity it becomes viable for us to go on continuing beyond the cut off quantity. We are just awaiting that policy which is already under review by the government. So by February end if it comes than we continue our production beyond a cut off quantity and it becomes viable for us then the fourth quarter numbers are going to good. Good in the sense this trend will continue. However we are also waiting because the subsidy should be coming in timely because already there is a lag so that is affecting my working capital requirement. The interest is getting substantially higher than the previous years. So we are expecting that it should come not the total subsidy but at least half of it comes so my pressure on working capital requirement especially the working capital interest should be otherwise it is under pressure that way.

Sonia: What is the amount of subsidy that you are expecting from the government? How much have you received so far?A: We have received it till August 2014. So something is going to come this month also and we are expecting that in the Budget also the balance should be provided for that we get as soon as the Budget gets announced the subsequently March may get or April we are expecting it. So the pressure on my interest is going to be there. Otherwise my operating performance has been one of the best in this quarter we have ever had. Sonia: If there is any quantum that you can share with us in terms of what you are expectation is from the government? How much working capital requirement do you have every quarter and what kind of interest payments are you making quarterly do you expect that to come down any time soon?A: Like this quarter you would have seen that for 9 months it is about Rs 190 crore odd we have done. So the interest is about, the delay in subsidy it comes to about Rs 30 crore per month. So those type of interest numbers are there. I can’t tell what the Budget will be providing because we have all given our demands that this at least should be provided let see how much is provided and how much we get out of it.Sonia: One word on the margins because you mentioned that Q4 could be better. You did very good margins of 7 percent this time around. Is this a sustainable level?A: Fourth quarter if my production continues then my energy also sustains then I will be able to sustain this type of margins otherwise they will come down. So we are just waiting for the NIP 2008 policy. As soon as possible it is announced then I will continue my production so my energy further comes down. Whatever the energy benefits I have had till 9 months they continue for the remaining 3 months also so that gives me sustainability and them I will be able to retain the margins. Though not at 7 percent it could be little less because wherever we achieve our 100 percent capacity utilisation then the viability has to be seen and then only continue it. Sonia: Apart from the subsidy expectations any other expectations that you have or the industry have from the Budget this time around?A: We are expecting that at least the MRP in case of Urea should increase because then it gives for the manufacturers some levy to have lower working capital requirement. So there are able to pick up money from the market and then sustain the operations. We are expecting that some MRP increase should be there.