Fertiliser stocks witnessed a mixed reaction in the market today, with shares of urea producers ending the day in the red, while those of complex fertiliser manufacturers managed to close on a positive note. The changes were not significant, but a discernable pattern emerged.
Among urea producers, Chambal Fertilisers recorded the biggest loss, closing 2.75% lower than the previous trading day. National Fertilisers and RCF also saw a decline of between 1-2%. On the other hand, most phosphatic fertiliser manufacturers, except for Coromandel and GNFC which remained flat to marginally down, ended the session in positive territory. Paradeep Phosphate’s stock surged by 4.1%, while GSFC gained 1.8%.
In terms of the budget announcements for the fertiliser sector, two key developments stood out. The news of a new 1.2 million tonne urea plant in Assam initially sparked excitement in fertiliser stocks. However, the impact on domestic urea producers is expected to be neutral as the plant will primarily benefit the government by reducing import dependence and saving forex. The new plant’s production will take time to come online, so there will be no immediate impact on domestic urea manufacturers.
Secondly, the budgetary allocation for fertilisers is crucial. While the initial budget allocation may not seem significant, the government has historically increased allocations as needed. This year’s budget allocation for urea is slightly higher at ₹1 lakh crore compared to last year, with the revised estimate for FY25 even higher at ₹1.01 lakh crore. For phosphatic and potassic fertilisers, the budget allocation is 13.2% higher than the previous year, potentially driving the positive movement in complex fertiliser stocks. However, any market reaction to these allocations is unnecessary as the government will ensure timely subsidy payments to maintain fertiliser availability.
Overall, the lack of major reforms to incentivize fresh investments in the fertiliser industry, improve plant efficiency, and address feedstock costs could be seen as a minor disappointment. However, the industry remains stable with the government’s commitment to ensure adequate fertiliser supply through subsidy support.
Published on February 1, 2025.
