The fertiliser industry in India operates in the public, private and co-operative sectors, with the private sector occupying a prominent share of the manufacturing capacity. Fertiliser is a high energy and capital intensive sector, as the cost of fertiliser is quite high. At present urea prices are subsidised and administered under the “new urea policy”, with the price fixed by Government of India. Currently, it is fixed at Rs 5,360 per MT, which is around one third of the current cost of production/imported price. Apart from domestic production, the government is also importing urea through three canalising agencies—MMTC, STC and IPL. Under the “Make in India” initiative of the government, a record urea production of 245 LMT was achieved. All out efforts are being
National Fertilisers Limited (NFL) is a Mini Ratna of Government of India, which owns 89.71% shares of the company. It is engaged in producing and marketing urea, neem coated urea, bio-fertiliser and other allied industrial products. It is involved in the trading and selling of fertiliser and other agro-inputs, including certified seeds and agro-chemicals, such as compost, insecticides and herbicides. The company is the second largest producer of urea in the country, with a total market share of 15.5%. It saw a strong rebound in its latest operating performance on the back of record urea production, increased turnover of other industrial products, lower power consumption on lower gas prices, favourable government policies on neem coated urea and improved domestic production. With new product lines, expansion of production capacities, and favourable urea prices, we feel that the NFL stock can appreciate by 30% in the next one year, from the present levels. Also any major appreciation in international urea prices can trigger further upside, turning NFL to be a multi bagger stock in the making.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.