Fertiliser shares rally up to 12%; RCF, Chambal, Coromandel hit 52-wk highs

Ind-Ra opines the credit profile of fertiliser players will remain comfortable in FY25, driven by the GoI's continued policy-level support to the industry by way of the healthy subsidy budget.

Shares of fertilizers companies were in demand and rallied up to 12 per cent on the BSE in Wednesday’s intra-day trade on expectations of improved outlook amid hopes of above normal monsoon.

Chambal Fertilisers and Chemicals, Deepak Fertilisers and Petrochemicals Corporation (DFPCL), Rashtriya Chemicals and Fertilizers (RCF), Gujarat State Fertilizers & Chemicals (GSFC), Coromandel International, National Fertilizers (NFL) and Paradeep Phosphates were up between 4 per cent and 12 per cent.

Of these, Chambal Fertilisers, Coromandel International, NFL and RCF hit their respective 52-week highs today. In comparison, the BSE Sensex was up 0.17 per cent at 77,433 at 01:16 pm.

Analysts expect better urea volume growth in FY25E, driven by expectations of onset of the La Nina phenomenon along with the monsoon, which should result in good rainfall.

The aggressive buying at these counters is also attributed to reports that the forthcoming Goods and Services Tax (GST) Council meeting may take a call on a proposal to remove GST on fertilizers.

According to a CNBC TV18 report quoting sources said, the council-nominated fitment committee is understood to have suggested that "the Group of Ministers (GoM) on rate rationalisation, should take a call on whether GST should be exempted from the current 5 per cent, on fertilizers.

Meanwhile, India Meteorological Department (IMD) has forecasted above normal monsoon in FY25. This is the first time, after a gap of eight years that the IMD has forecast “above normal” rains in the country, expecting good kharif season this year.

“For FY 24-25, the demand outlook for all business segments looks positive as ‘IMD’ has forecasted above average normal rainfall, expecting a good Kharif and Rabi season this year,” DFPCL had said while announcing Q4 results on May 29, 2024.

Meanwhile, India Ratings and Research (Ind-Ra) opines the credit profile of fertiliser players will remain comfortable in FY25, driven by the government of India’s (GoI) continued policy-level support to the industry by way of the healthy subsidy budget of Rs 1.64 trillion. This is backed by a moderation in the raw material prices across urea and nutrient-based fertilisers starting Q4FY23, coupled with the likelihood of a continued healthy demand in view of the GoI’s focus to increase farmer income.