Coromandel International trades flat: What dragged the stock down 15% this month

Coramandel International

The Coromandel International stock traded flat on January 31 after losing as much as 8 percent in the previous session following weak fiscal third quarter results. The share price was at Rs 1,051 in the afternoon, little changed from the previous close.

On a year-to-date basis, the stock has fallen more than 15 percent, against NSE Nifty 50, which has been flat during the period. The company announced its results on January 30 indicating de-growth in total income by 34 percent and de-growth of 55 percent in net profits on-year.

Aggressive short build-up was seen in the counter on the day of its results with open interest shooting up 59.58 percent and shares price falling more than 8 percent.

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Possible trigger for the downfall:

The Department of Fertiliser (DoF) issued fresh guidelines on January 18 on the pricing of all non-urea-based fertilisers under the Nutrient Based Subsidy (NBS) programme. As per the fresh guidelines, which will be effective retrospectively from April 1, 2023, the prescribed maximum profit margins that will be allowed for fertiliser companies will be 8 percent for importers, 10 percent for manufacturers and 12 percent for integrated manufacturers. Integrated manufacturers produce finished fertilisers as well as intermediates such as phosphoric acid and ammonia.

The guidelines issued by the DoF further states that the companies earning unreasonable profits or profits over the stipulated percentages in a particular financial year will have to refund it by October 10 of the following fiscal. A failure to do so may invite an interest penalty of 12 percent per annum on a pro-rata basis on the refund amount. Further, the unreasonable profits will be adjusted against the subsequent fertiliser subsidy payment by the government.

These guidelines, prima facie are seen as negative for Coromandel International by the markets.

The shares of National Fertilisers, RCF and Chambal Fertilisers, however, are seen trading with optimism ahead of the budget (interim) day up by 2.45 percent, 1.68 percent and 1.94 percent, respectively.

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