Fertiliser sales may see 3-7% Y-o-Y growth in FY15: ICRA

Fertiliser sector's performance is expected to improve in FY15, primarily on account of normal monsoon, stable operating environment and hopes of reforms by the Centre, says a research report by ICRA.
Fertiliser sale volumes are likely to witness a Y-o-Y growth of 3-7 per cent in FY15. Urea sales are expected to drop by 3-5 per cent, while those of Phosphatic and Potassic (P&K) fertilisers likely to grow by 15-20 per cent, it said.
Overall sales volume of fertilisers improved by 3 per cent Y-o-Y to 29.54 MMT during the first seven months of the current fiscal, driven by a healthy 17 per cent expansion in sale of P&K to 13.3 MMT.

The P&K sales growth was driven by relatively low opening inventory levels vis-a-vis previous years and low base effect. Imports picked up in Q2 FY15 resulting in 21 per cent jump in imported volumes of P&K, the research outfit said.
The fertiliser industry is likely to see a robust performance this fiscal on account of normalisation of system inventories, reasonable monsoon in most parts of the country and a stable operating environment, it said.
Expectations of reforms from the new government, stable currency rates, modest global prices of fertilisers and key inputs too will boost the sector, it said.

Besides, the cash flow issues for the industry are expected to ease to some extent as subsidy flow has eased during YTD FY15 and the government has approved a Special Banking Arrangement for the sector.

The lower-than-anticipated gas price increase has also come as a breather to the fertiliser industry as it will lead to limited increase in the blockage of working capital in the form of subsidy.
However, the issue of gas availability for P&K manufacturers remains and it needs to be seen how the Centre resolves the issue going forward, ICRA Research said.
On the other hand, urea sales declined by 7 per cent during the April-October period. However, ICRA Research noted that urea sales volume was almost equivalent to figures seen in the same period during FY12 and FY13. This implies FY14 was an aberration and sales remain at normal levels, it stated.

The shrinkage in urea sales volumes has also been on account of lower imports and limited utilisation of Nagarjuna Fertilisers & Chemicals Ltd plants during Q2 FY15.