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updated on 9 Mar 2017
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Fertilizer stocks has provided 100 percent returns in last 3 yrs
Shares of the domestic fertiliser industry, which is the world’s third largest in terms of production and second largest in terms of consumption, put up a handsome performance on Dalal Street in last three years.
Check this out. Nearly 10 companies from the sector doubled investor wealth in last three years. Shares of Gujarat Narmada Valley Fertilisers & Chemicals (GNFC) advanced the most at 282.77 per cent to Rs 266.60 as of March 3, 2017 from Rs 69.65 as of March 3, 2014.
Market experts believe fertiliser consumption will increase in 2017-18 on account of improved purchasing power of farmers. India Ratings expects fertiliser demand to increase 5 per cent year on year in FY18 due to a rise in farm income and higher minimum support prices (MSP) for key rabi crops in FY17.
The rating agency has maintained a stable outlook for the fertiliser industry in FY18. “Sustained debt and Ebitda levels would result in stable credit profiles of fertiliser companies in FY18,” India Ratings said.
Other stocks such as Shiva Global, National Fertiliser, GSFC, Aries Agro and Khaitan Chemical climbed 227 per cent, 217.51 per cent, 170 per cent, 154.22 per cent and 146 per cent, respectively, during this period.
Shares of Rama Phosphates, Chambal Fertiliser, Deepak Fertiliser and Basant Agro Tech have advanced 141 per cent, 115 per cent, 112 per cent and 98 per cent, respectively, in last three years.
Coromandel International, FACT and Zuari Global also advanced 58 per cent, 63 per cent and 79 per cent, respectively, in last three years.
Will the sector continue to produce gems in the coming years?
According to a report by SBI Economic Research, in the light of increasing government focus on the agriculture sector, as well as continued growth in demand for agriculture products, fertiliser demand is expected to grow at a reasonable rate. Over the next couple of years, domestic demand for fertiliser is expected to increase.
Despite being the world’s third largest producer of fertiliser, India is still dependent on imports to fulfil its requirements. India’s fertiliser demand was pegged at around 66 million tonnes in 2016, with urea demand alone accounting for half of it.
Fertiliser production is estimated to have reached 37 million tonnes in FY2016, with urea production accounting for 67 per cent of it. In last one decade, fertiliser production has grown at a lower rate of 1.6 per cent. Fertiliser import has picked up substantially and grown at 8.6 per cent (CAGR) during the last decade.