Positive on fertiliser space, Chambal Fertiliser top pick: Diwan

Prakash Diwan of prakashdiwan.in told CNBC-TV18, "Very clearly we have had this whole round of pre-monsoon exuberance where a lot of the consumption stories and all came up right from tractors to Bata India of the world. Everything started looking so bright. However, my sense is that there is one sector and that is part of this commodity cycle that is extending itself beyond sugar and that is fertiliser.""I am extremely positive on fertiliser for two reasons, one is the way the government has been bale to stop this smuggling of urea for non-agri applications and they have done this very steadfastly, very quietly. They have managed to save a lot in terms of the leakages that were there especially on the Nepal Border, a lot of urea used to go into making melamine, plastics and all that. It is going to be a huge saving for the government which makes it in a better position to pay off the subsidy burden to the companies," he added."Secondly, they are also talking about the pilot project which is already on where this direct benefit transfer for fertilisers is also happening. That is a big change; we have seen the way it has happened to LPG, it has dramatically altered the entire subsidy profile. So, if Chambal Fertilisers and Chemicals for example whichever the larger urea producers doesn’t have to wait and watch on the government bodies to look on to the subsidy to come back and straight away prices on market price to the farmer and the farmer gets the subsidy directly from the government, that is big change. If you see the working capital lock in Chambal, it is a drain. You take that out and it is a profitable business," he said. "The second reason not just urea but even complex fertilisers which have seen very low off take, the moment the monsoon comes in, there will be a lot of funding that will come into this business especially the priority sector lending that banks always focus on and that is going to make it possible for framers to be able to afford complex fertilisers.""So, the likes of Rallis India, Coromandel International, all of them will dramatically see a very different profile in terms of the sales trajectory. So, I am very positive on fertiliser. Chambal is the top pick, it rides the urea; of course the nationalised players also tend to benefit but I am not such a big fan of those companies as yet. If somebody were to rely on the government expertise, Rashtriya Chemicals & Fertilizers (RCF) is also a good buy. From the complex fertilisers space, Rallis India and Coromandel are distinctly way ahead."