National Fertilisers soars 9% to hit 52-week high on hopes of strong Q4FY23

Shares of National Fertilizer (NFL) soared 9 per cent to hit a 52-week high of Rs 82.79 in Wednesday’s intra-day trade, amid heavy volumes, on hopes of earnings improvement.

The stock of state-owned fertiliser company, primarily engaged in manufacturing urea, surpassed its previous high of Rs 82.40, which it had touched on December 19, 2022. It has bounced back 51 per cent from its February low level of Rs 55.

At 12:15 pm; it quoted 7 per cent higher at Rs 81.34, as compared to 0.16 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped nearly 10-fold, as around 14.35 million equity shares, which represented 3 per cent of total equity of NFL changed hands on the NSE and BSE so far.

The Government of India (GoI) currently holds 74.71 per cent stake in the company. The GoI is looking to divest 20 per cent stake in NFL through an offer for sale. The Department of Investment and Public asset management (DIPAM) has invited proposals from legal advisers, merchant bankers, and brokers.

On Monday, April 10, ratings agency ICRA upgraded long-term rating of fund-based limits and term loans of NFL and reaffirmed short-term rating of the company’s non-fund based facilities and commercial paper.

The rating upgrade for the credit lines of NFL factors in expected sustained improvement in profitability, owing to completion of the energy savings schemes for all the units, which would thereby drive lower energy consumption for plants.

"The rating action also factors in the increased diversification into industrial chemicals segment, which provides some degree of insulation from subsidised products, along with stabilisation of fertiliser plant under NFL’s joint venture Ramagundam Fertilisers and Chemicals Limited (RFCL), which was facing operational issues earlier. The company has also benefitted from extension of energy norms by the Department of Fertilisers, for which it has booked additional subsidy recoverable in Q3FY2023, which is likely to be realised shortly," the ratings agency added.

The 'stable' outlook on the long-term rating reflects ICRA’s opinion that the  company will continue to benefit from its leadership position in the fertiliser sector and its strategic importance to the GoI and will generate healthy cash flows from operations, driven by improvement in energy consumption and higher share of the industrial chemicals segment.

India Ratings and Research (Ind-Ra), too, upgraded NFL's long-term issuer rating to ‘IND AA’ from IND AA- with a 'stable' outlook.

"The upgrade factors in successful implementation of energy savings scheme (ESS) across all plants, leading to improved EBITDA, break-even of Ramagundam plant in FY23, increased utilisation from FY24, and expected improvement in credit metrics," the ratings agency added.