December 2023

Fertilisers

© 2017 CRISIL Ltd. All rights reserved.

Key Messages
DEMAND Overall Fertilizers Urea Non-Urea
FY23 1.5% 5-6% ; Low base effect and increased 3-4% ; Significant decline in sales of MOP and
availability of urea Complexes due to supply issues
FY24P 4-5% 5-6% ; Uniform availability of urea and 4-5% ; Improved availability DAP and MOP,
increased crop acreages and low-price hike (prices of all key non-urea
fertilizers took growth in the range of ~0.5-3%
on year).
FY25P 3-4% 0-1% ; High base effect and expected higher 6-7% ; Expected hike in consumption of SSP
usage of non urea like DAP & complexes and MOP will lead the growth

SUPPLY Urea Imports DAP Imports MOP Imports

FY23 ~25% ; High domestic production ~12% ; led by long term and new contracts, 52% ; Supply crunch due to geopolitical
increased supplies from Morocco and Russia issues
due to China’s export restriction
FY24P ~1-2% ; Estimated high demand to drive imports 4-5% ; Increased domestic production (14-15% ~25% ; Low base effect and expected good
growth on year is expected) availability following ease of supply

PROFITABILITY* Urea EBITDA Margin Non-Urea EBITDA Margin

FY23 ~270 bps ; Tightened energy norms, spike in gas prices, capex for Nano-Urea, ~190 bps ; majorly led by revised NBS rates for Q4 FY23
no revision in fixed cost reimbursements
FY24P ~300-320 bps ; Expected ease in Gas Pooling prices by ~30% due to ~60-80 bps ; Expected declined in raw material prices; Prices of
retreating price of natural gas in European Market. Phosphoric acid expected to decline by ~35% and that of rock
phosphate by ~25%.

SUBSIDY Overall Fertilizers

FY23 CRISIL estimates fertilizer subsidy bill for FY23 to be INR ~2587 bn (considering carry forward amount from the previous fiscal) which is ~115% of the
revised budget amount.
FY24P CRISIL estimates fertilizer subsidy bill for FY24 to be INR ~1915 bn (inclusive of carry forward amount from previous fiscal) which is ~110% of the
budgeted amount. Urea subsidy is expected to decline by ~28-30% on year, while subsidy bill for non-urea is expected to decline by ~45-47% on year.

Note: Green represents growth on year, while Red represents decline on year 2
* Profitability has been derived basis sample set for urea and non-urea companies, which is mentioned in their respective slides
Industry overview
Fertilizer demand expected to grow by 4-5% in fiscal 2024P
Product-wise demand (FY24P) Nutrient-wise share of demand (FY24P)

Amongst the non-urea fertilizers, 6.7%

17%
DAP, Complexes and MOP
demand are expected to grow by 6.9%
18%
~3%,~13% & ~5% respectively in
FY 24P, while SSP is expected to 26.9%
8%
7% decline in FY24 due to high 26.7%
FY23 FY24P inventory owing to heavy FY24P FY23
3% 3% 32.2 Mn MT 30.5 Mn Tn
64 Mn Tn 67.1 Mn MT 56% 56% dumping at retail level during
H2FY23 and low confidence of 66.4%
16% farmers on quality of SSP. 66.4%
16% On the other hand, urea demand
is expected to increase by 5-6%
on year in FY24P mainly driven
by increase in crop acreage and
Urea DAP MOP SSP NPK higher availability. N P K
Source: iFMS: Department of Fertilizers, CRISIL Research

Urea DAP SSP MOP

Private (46%), public (30%), co-op

Production share(FY23) Private (63%), Public (6%), Co-op (31%) No domestic production
(24%)

Declining share of domestic gas Raw material unavailable at

Feedstock availability Feedstock largely imported
poses major challenge domestic level

Retail price (Rs/tonne) (FY24 YTD 27,000 (0.3% growth on

5,360 (no hike on year) 10,814 (3.1% growth on year) 34,468 (1.9% growth on year)
till Nov) year)

4
4
Domestic Demand: Review and Outlook
Urea demand estimated to increase on a high base in FY24P
Urea: Expected increase in crop acreages coupled with uniform availability Non-urea: Sales to grow by ~4.5% on year in FY24, owing to expected ease in
during key season months support urea growth on year prices of MOP and complexes and increased availability

35.0 25.0%

Non-Urea Consumption (in mn MT)

40.0 8.0%
19.1%
6.0% 30.0 20.0%
Urea Consumption (in mn MT)

35.0 5.4% 5.1%

5.0% 5.4% 6.0%
12.4% 15.0%
30.0 25.0

Growth (Y-O-Y)
Growth (Y-O-Y)
4.0% 7.6% 7.2% 10.0%
25.0 6-7%
20.0 4.6%
2.0% 5.0%
1.9%
20.0 0.9% 2.0% 0.4%
15.0
0.0% 0.1% -2.5% -2.9% 0.0%
15.0
-3.4% 0-1% 0.0% 10.0
-5.0%
10.0 -3.3% -10.2%
5.0 -11.3%
-2.0% -10.0%
5.0 21.3 23.0 24.6 24.0 24.5 24.6 27.6 32.9 29.2 28.3 29.6 31.5
30.6 30.6 30.6 29.6 29.9 31.4 33.3 35.1 33.9 35.7 37.5 37.8 - -15.0%
- -4.0% FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY FY
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY FY 24P 25P
24P 25P
Non Urea Consumption Growth (Y-O-Y)
Urea Consumption Growth (Y-O-Y)
➢ In FY 23: Non- urea sales declined by ~3% on year on a low base, majorly due to dip in MOP
➢ FY23: Urea demand witnessed a promising growth of ~5.5% on a low base supported by sales (following significant spike in prices and inadequate availability during key seasons) and
increased availability of urea during key cropping seasons. Improved realization from agri complexes sales (due to good availability of DAP). Minimal price hike in DAP following
commodities led to higher acreage under crops in FY23 which drove consumption during the Government’s support coupled with increased availability resulted in significant increase in DAP
fiscal. consumption by ~14% on year, on a low base of previous year

➢ FY24P: Urea is estimated to grow by 5-6% on year in FY2024, majorly driven by increase in ➢ FY24P: Non-Urea consumption is expected to recover with a growth of 4-5% on year, owing to
acreage under crops like paddy, wheat, maize and uniform availability of urea during key
cropping season across the country. ▪ Expected ease in prices of MOP along with improved availability, however, prices may
hike in rabi FY24 due to decline in NBS rates for rabi by ~850% compared to Kharif.
➢ FY25P: Urea is expected to take a marginal growth of ~0-1% on year due to high base effect
and expected higher consumption of non urea fertilizers owing to relatively uniform prices and ▪ DAP consumption is expected to grow following adequate availability in FY24.
high availability of DAP and Complexes.
▪ SSP is expected to decline by ~10% due to high channel inventory and low confidence of
farmers on the product.

➢FY25P: Non-Urea consumption is expected to grow by ~6-7% on year due to expected growth of
SSP by ~15% due to Government focus and in MOP by ~35% on a low base due to expected
increase in availability.
Among non- urea fertilizers, complexes to witness maximum growth in FY24P
Natural gas crisis in Europe due to lower exports by Russia, cap on fertilizer export by China, spiked raw material and fertilizer prices in international market in
fiscal 23 adversely impacted fertilizer supplies in FY23. In FY24P, on a low base, fertilizer demand is expected to improve following anticipated dip in fertilizers’
and raw materials’ prices.
Consumption of Non-Urea

3.0 4.9% 10.0% 5.6 9.4% 15.0%

12.0 14.1% 20.0% 12.5 12.9% 20.0%
0.0% 5.4 10.0%
3.6% 10.0% 12.0
11.0 2.0 10.0% 0.6% 5.0%
-10.0% 5.2
(mn MT)

0.0% 11.5 -4.0% 0.0%

10.0 0.0% 5.0
-10.0% -28.8% -20.0% 11.0 -11.3% -9.9% -5.0%
-22.6% 1.0 -33.3%
9.0 -20.0% -30.0% 10.5 -10.0% 4.8 5.4 5.4 4.9 -10.0%
9.2 10.5 10.9 2.4 1.6 1.7 12.1 10.7 12.1
8.0 -30.0% - -40.0% 10.0 -20.0% 4.6 -15.0%
FY 22 FY 23 FY 24P FY 22 FY 23 FY 24P FY 22 FY 23 FY 24P

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FY 22 FY 23 FY 24P

DAP Consumption Growth (Y-O-Y) MOP Consumption Growth (Y-O-Y) NPK Consumption Growth (Y-O-Y) SSP Consumption Growth (Y-O-Y)

Moderate growth expected in FY 24P High growth expected in FY 24P High growth expected in FY 24P High decline expected in FY 24P

MRP of DAP remained range bound on year with a minimal hike of ~0.5% Y-O-Y in FY24 YTD (Till Nov), while price of MOP and SSP increased by ~2% and ~3%
respectively on year in FY24 YTD (till Nov). Prices of complex fertilizers declined by ~2.5% on year in FY24 YTD (Till Nov).
Domestic Prices (Rs/MT)

34378 34738 34806 34811 34824 34777 34718 34645 34620 34644 34676 34036 33624

29202 29207 29209 29208 29196 29355 29400 29400 29400 29400 29384 29400 29400
27000 27000 26999 27000 27000 27000 27000 27000 27000 27000 27000 26998 27000

10954 10749 10759 10655 10579 10498 10535 10572 10638 10652 10674 10954 11987

5360 5360 5360 5360 5360 5360 5360 5360 5360 5360 5360 5360 5360

Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23
Source: Department of Fertilizers, CRISIL Research Urea DAP MOP NPK 10-26-26 SSP - Granular
7
With Nano- urea in place, import dependency can reduce to <5% by FY28
Nano urea has been included in the supply plan of Department of Fertilizer to support better reach to the farmers
Nano Urea Penetration With the expected penetration of nano urea in Indian market and capacity
50 addition in conventional urea production, we can expect <5% dependency
on imports of urea for domestic requirements by FY28P.

40
Consumption (mn MT)

35.7 36.3 36.0 35.5 34.8 33.5

30 33.9

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20

10

1 1.5 1.5 1.8 2.5 3.5 5

0
FY22 FY23 FY24P FY25P FY26P FY27P FY28P
Nano Urea Consumption Conventional Urea Consumption

FY22 FY23 FY24P FY25P FY26P FY27P FY28P

Expected Nano Urea penetration 3% 4% 4% 5% 7% 9% 13%

▪ IFFCO introduced world’s first nano-urea liquid. It was commercially launched in August 2021.
▪ One bag of urea is likely to convert into 1 bottle of nano urea with efficacy as high as 75-80% as against 30-35% of traditional prilled urea.
▪ During 2021-22, IFFCO sold, 2.15 crore bottles of Nano Urea, which is equivalent to 9.67 lakh MT of conventional urea. Nano urea is also being exported in Sri
Lanka.
▪ By FY28, CRISIL expects ~13-14% penetration of nano urea that will help in reduction of import requirements to less than 5%. This estimation assumes ~25%
extra imports being done every year that is reportedly used as buffer to avoid risk of supply.

8
Urea consumption expected to grow at moderate pace in the long run
Urea: Growth in urea consumption to decelerate during FY23-FY28P as compared
Dependency on imports to grow marginally in FY24 due to increased demand
to that during FY17-FY22
15 50%

40%
Consumption (mn MT)

Urea Imports (mn MT)

33%

Import Share (%)

10 31% 29% 30%
28%
25% 30%
22% 21% 21% 21%
20% 18%
20%

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15%
5
9%
5% 10%

29.6 29.9 31.4 33.3 35.1 33.9 35.7 37.5 38.5 7.6 8.7 9.4 5.8 6.5 6.6 11.0 10.3 10.2 7.6 7.8 6.9 5.6 3.5 1.9
0 0%

FY14

FY15

FY16

FY17

FY18

FY20

FY21

FY22

FY23
FY19

FY24P

FY25P

FY26P

FY27P

FY28P
FY 28P
FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24P Urea Imports Import Share in Urea Consumption

Source: Department of Fertilizers, CRISIL Research

▪ Urea will continue to be the preferred fertilizer among the marginalized and middle-income farmers due to high price disparity between urea and non-urea fertilizers.

▪ Urea demand is expected to grow at a moderate pace (CAGR ~1.5%) during FY23-28P. However, the growth rate is expected to be slower than non-urea fertilizers as
farmers are likely to become more aware about the use of non-urea fertilisers and balanced use of fertilizers focusing on the soil health.

▪ Over the years, production of urea had been falling short of the consumption demand for urea, thus giving rise to imports .However, in FY23, imports declined by ~25%
supported by increased domestic production due to operationalization of revived urea producing units of Matix (Oct’21), HURL Gorakhpur (Dec’21),RFCL (Mar’22), HURL
Barauni (Oct’22) and Sindri (Nov’22). Subsequently, with expected increase in urea producing capacity, dependency on imports is expected to further reduce.

▪ Along with enhancement of indigenous capacity, introduction of nano- urea is expected to replace a significant proportion of granular urea gradually over the years, thus
reducing our dependency on imports.
9
DAP and NPK complexes to drive growth for the non–urea segment
Non-Urea: Rate of growth to accelerate from 4% (during FY17-22) to ~5%
Fertilizer application efficiency to improve gradually
(during FY23-28P)

9.9 9.7
Consumption (mn MT)

8.2 8.0 8.3

7.8
7.2 7.3 7.2
6.7 6.7 6.7 6.9 6.6

NPK Ratio
6.1 6.2

4.0 3.9
3.2 3.4 3.3

© 2017 CRISIL Ltd. All rights reserved.

2.9 2.8 2.8 3.0 3.1 2.9
2.7 2.4 2.7 2.5 2.6
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
24.0 24.5 24.6 27.6 32.9 29.2 28.3 29.6 36.0

FY 27P

FY 28P
FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24P

FY25P

FY26P
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24P FY 28P
N P K

Source: Department of Fertilizers, CRISIL Research Source: Department of Fertilizers, CRISIL Research

▪ DAP consumption growth to accelerate with 3.5% CAGR during FY23-FY28P, while that of complexes to accelerate with ~4% during the same period due to
increasing preference

• In the near term, expected decrease in prices of phosphatic and potassic fertilizers to aid healthy offtake of DAP and NPK from fiscal 2024 onwards.

• Government objective of improving land productivity through Soil Health Cards and direct income support schemes like PM KISAN, PM-AASHA, e-NAM (National
Agriculture Market) to support growth in the long run.

• Soil Health Card provides every farmer soil nutrient status of his land and advice him/her accordingly on the dosage of fertilizers to be applied.

▪ Soil fertility to gradually improve during FY23-28P

• NPK ratio to gradually improve from 9.9:4:1 in FY23 to 6.6:2.9:1 in FY28(P). While ratio for N will marginally decline, non urea, including P and K is expected to
increase with increasing awareness.
10
Supply: Review & Outlook
Urea price in international market is expected to decline by ~45% in FY24 owing to ease in
prices of natural gas
International fertilizer prices are estimated to decline in FY24 due to expected decline in prices and increased availability of raw materials.

While Urea and DAP prices softened, MOP had its

International Prices of fertilizers (USD/MT) peak in FY 23. However, MOP prices started
924 936 945 declining in FY24, as can be seen in the graph
920 891 below.
722 758 722 743 723
691 679 655
631 590 593 609 589 595 595
661 665 614 576 557 540
590 514

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590 468 440
590 590 590 590 590 590 590 590 590 400 403 402
549 422 422 422
500 475 422 422
361 332 332 374 371
302 282 319 319
May-22

May-23
Apr-22

Apr-23

Nov-23
Jun-22

Jul-22

Nov-22
Aug-22

Feb-23

Mar-23

Jun-23

Jul-23

Aug-23
Oct-22

Jan-23

Oct-23
Dec-22
Sep-22

Sep-23
Urea DAP MOP
▪ FY 22 and FY23 witnessed the historical spike in international prices of fertilizers such as urea, DAP and MOP.

▪ Prices of DAP had started spiking since the beginning of FY22 due to shortage at global level, which was further aggravated from export ban of DAP by China to meet their
domestic requirements.

▪ Russia-Ukraine war led to the worsening of situation and as a result, prices of Urea, DAP and MOP were very steep high during Q4 FY22.

▪ Due to aforesaid reasons, in FY23, Urea prices increased by ~110%, while that of DAP increased by ~115% and MOP increased by ~150% as compared to normal pricing
scenario in FY21.

▪ However, in FY24, fertilizers prices are expected to decline with dip in prices of raw materials. In FY24, price of ammonia is expected to decline by ~60%, while that of rock
phosphate is expected to decline by ~25% and phosphoric acid by ~35%. Among the fertilizers, urea prices are expected to decline by ~45%, DAP by ~35% and MOP by
~35%. 12
MOP imports to increase significantly in FY24P following improved availability and expected dip in
prices, while that of urea is expected to grow marginally owing to increased demand in FY24
In FY24, expected increase in urea demand, despite increased domestic production capacity, urea imports is expected to marginally improve by 1-2% on year.
DAP import is expected to decline by ~4-5% on year due to increased domestic production by ~14-15%.
DAP Import (million MT) MOP Import (million MT) Urea Import (million MT)
11.0
6.8 5.1 10.3 10.2
6.6 4.9
6.3-6.4
5.8 5.9 4.4
5.5 3.9 7.6 7.7
4.3
58% 87% 6.5 6.6 16%
2.9

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1.8
1.4

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24P FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24P FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24P

In FY24, with relaxation of trade restrictions by China, it regained the “top exporter to India “ position with ~50% share in total DAP imports in India. After trade ban from
Belarus, Russia became the largest exporter of MOP in India in FY24. In Urea also, Russia share increased to ~25% in FY24.
DAP Exporters to India MOP Exporters to India Urea Exporters to India

7% FY 24 YTD (Till Nov) FY 24 YTD (Till Nov) FY 24 YTD (Till Nov)

5% China 6% 5%
Russia 7%
9%
9% 10% 18% 30%
Oman
2%
3%5% Canada
Saudi 11% 24%
15%
Arabia 39% Russia
12% 24% 34%
50% Morocco Jordan China
FY 23 FY 23 48% FY 23
9%
32% Israel 13% UAE
25% Russia 8%
29% 14% 18% 6% 19% Qatar
Turkmenistan
Others Others
29% 25%
Others
Source: Ministry of Commerce & Industry
13
Capacity Addition: Urea
Two revival plants came on stream in fiscal 2023
Urea capacity additions of ~6.35 million tonnes expected by fiscal 2025 over fiscal 2021

Barauni and Sindri

RFCL started its Gorakhpur plant of HURL has started production in Oct Talcher unit to
commercial already been commissioned and Nov 22 respectively. start operation
Matix fertiliser Chambal’s in FY 22 .
Gadepan III plant operation in March
plant 2021 1.27
2.54
1.27
1.27
1.27
Production Capacity (mn MT)

1.27
0.8

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31.12 31.12 32.39
27.31 28.58
24.77 24.77 26.04 26.04
22.7 23.5 23.5 23.5 23.5

FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23P FY 24P FY 25P FY 26P FY 27P

Capacity Capacity Additon

Source: Industry, CRISIL Research
Note: Capacity of plants added in the year next to the year of commencement of commercial production, assuming full capacity will be added in succeeding year, as plants were operationalized in mid or later
quarters of the fiscal

▪ The government is aiming to reduce the dependency on imports for urea and is therefore aiming to revive 5 sick fertiliser plants. Overall urea capacity is projected
to increase by ~6.35 million tonnes by fiscal 2025.
▪ Work on Talcher plant has started. The unit is expected to commence urea production by September 2024.
▪ Gas based Matix plant was commissioned in October’2017 but could not produce urea due to gas supply unavailability. It was re-commissioned in September 2021
and produced ~50% urea of its total capacity of 1.27MTPA in FY22..
15
Raw Materials
 All key raw material prices are expected to decline significantly in FY24
Rock phosphate prices rose to ~85% in FY23 owing to increased demand Cabinet approval of the Kirit Parikh Committee’s recommendation will lead
but is expected to decline by ~25% in FY24 due to anticipated increase in moderation in APM prices
supplies.
Rock Phosphate Natural Gas prices’ trend
285 289
Price (USD/MT)

276 30.0 27.3

238 213 209
144 144 170
130 130 126

Price (USD/MMBtu)
120 111 101 100 99 99 102 97 25.0 21.3
20.0
Dec-18

Mar-19

Jun-19

Dec-19

Mar-20

Jun-20

Dec-20

Mar-21

Jun-21

Dec-21

Mar-22

Jun-22

Dec-22

Mar-23

Jun-23
Sept-19

Sept-20

Sept-21

Sept-22

Sep-23
13.5 12.5
15.0
9.8 10.1
9.0
Russia gas export reduction to Europe and China’s restriction on export led

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10.0 7.9 7.3 11.0
6.2 6.5
8.9 4.6
to hike in ammonia price by ~35% in FY 23, but expected to decline by ~55- 5.0 8.0 2.3
5.3
60% in FY24 owing to retreating natural gas prices in European market 2.7
3.2 3.5 2.1
0.0
Ammonia FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY24P
Contracted LNG Spot LNG APM
1164 1298 1072 1148
Price (USD/MT)

545 612
827 759 ▪ Natural gas prices had soared high during FY22-23, and there had been a
367 306 236 254 250 232 248 362 373 345
219 208
tremendous spike in the gas pooled price during the period, owing to increase
Dec-18

Mar-19

Jun-19

Dec-19

Mar-20

Jun-20

Dec-20

Mar-21

Jun-21

Dec-21

Mar-22

Jun-22

Dec-22

Mar-23

Jun-23
Sept-19

Sept-20

Sept-21

Sept-22

Sep-23
in prices under the three kinds of allocation – contracted, spot and APM. On an
average, prices of contracted LNG spiked by ~90%, spot LNG by ~360% and
Phosphoric acid prices increased moderately by ~20% in FY 23 H1 owing to
China’s limiting export. However, it declined drastically in FY23 H2 due to APM prices by ~130% during FY22-23 as compared to that during FY21.
decreased demand from food, beverage, and pharmaceutical industries. In ▪ Hike in prices of natural gas in FY 23 was mainly attributed to Russia-Ukraine
FY24, it is expected to decline by ~35%.
Crisis, as the Russia is one of the largest global exporter of natural gas. Trade
Phosphoric Acid 1715
1397 1530
Price (USD/MT)

1149 1273 1235 1092 restriction of natural gas by Russia resulted in natural gas crisis in Europe and
957 1003 932
766 755 722 655 625 590 602 630 689 760
consequently price hiked significantly.
▪
Mar-19

Mar-20

Mar-21

Mar-22

Mar-23
Dec-18

Jun-19

Sept-19

Dec-19

Jun-20

Sept-20

Dec-20

Jun-21

Sept-21

Dec-21

Jun-22

Sept-22

Dec-22

Jun-23

Sep-23

However, in FY 24, global scenario of natural gas price is expected to cool with
Source: CRISIL Research retreating price of natural gas in European market. Also, domestic prices are
expected to decline owing to revised APM prices. 17
Profitability & Receivables
Downward revision of NBS rates (Q4 FY23) adversely impacted margins of non- urea players in FY23
Margin of Urea companies expected to grow by ~300-320 bps, while that of non-urea expected to grow by ~60-80 bps in FY24

Profitability of fertilizer industry

15.0%
EBITDA Margin (%)

12.6% 12.4% 12-12.2%

11.4%
8.1% 9.6% 10.0% 9.4%
10.0% 8.4% 12.0%
9.9% 10.3% 9.8-10%
9.0% 8.5%
5.0% 7.8%
5.8% 6.8%

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0.0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24P
Urea Non-Urea
Note: Players considered for urea- Chambal Fertilizers and Chemicals Ltd, National Fertilizers Limited, Rashtriya Chemicals and Fertilizers Ltd, Brahmaputra Valley Fertilizers Corporation, Gujarat Narmada Valley
Fertilizers and Chemicals Limited, Nagarjuna Fertilizers and Chemicals Limited
Players considered for non-urea- Coromandel International Limited, Gujarat State Fertilizers & Chemicals Ltd, Mangalore Chemicals and Fertilizers Ltd, Deepak Fertilizers and Petrochemicals Corporation Ltd,
Fertilizers and Chemicals Travancore Ltd, Khaitan Chemicals and Fertilizers Ltd, Paradeep Phosphates Ltd

▪ Margins of fertilizer companies are expected to improve in fiscal 24P. Urea companies’ margins are expected to increase by ~300 bps, while that of non urea
companies to increase by ~60-80 bps.

▪ In FY23, margins of urea companies had majorly declined due to spiked natural gas prices, tightened energy norms, investment towards nano urea plant set up (for
instance in NFL) and non consideration of government towards increasing minimum fixed cost reimbursement to the tune of Rs 2300 per MT. For non urea companies,
revision of NBS rates for Q4 reportedly hit the margins as the procurement was done at higher costs.

▪ Revision in APM prices (indexing with price of imported crude oil) and smoothening of natural gas prices in international market are expected to increase margins of
urea companies in FY24P.

▪ While in the case of non urea, declining raw material prices will aid in the increased margin of the companies. However, due to significant decline in NBS rates for non-
urea in Rabi FY24, the margins are expected to be affected adversely. Both these drivers together are expected to lead non-urea margin growth by ~60-80 bps on year
in FY24.
19
Timely subsidy disbursal to improve the receivables of the fertilizer manufacturers in FY24
WCC for urea companies expected to be ~28-30, while that of non-urea is expected to be ~8-10 in FY24 due to improved receivables
Working Capital Cycle Receivables
250 250

200 200 182 178 185

160 156 161

Debtor Days
WCC (in days)

149
150 137 134
150
153 158
91
100 120 116 100
111 56 59
46 98 100
50 84 83 33 29 36 35-40
28-30 50

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66
22 8 7 8-10 40 15-20
0 0 22 17
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24P FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24P
Urea Non-Urea Urea Non-Urea

Note: Players considered for urea- Chambal Fertilizers and Chemicals Ltd, National Fertilizers Limited, Rashtriya Chemicals and Fertilizers Ltd, Brahmaputra Valley Fertilizers Corporation, Gujarat Narmada Valley
Fertilizers and Chemicals Limited, Nagarjuna Fertilizers and Chemicals Limited
Players considered for non-urea- Coromandel International Limited, Gujarat State Fertilizers & Chemicals Ltd, Mangalore Chemicals and Fertilizers Ltd, Deepak Fertilizers and Petrochemicals Corporation
Ltd, Fertilizers and Chemicals Travancore Ltd, Khaitan Chemicals and Fertilizers Ltd, Paradeep Phosphates Ltd

▪ Working Capital Cycle of fertilizer manufacturers has improved post DBT (though not immediate) due to enhanced process of subsidy disbursal and subsidy claims on
weekly basis sale transactions at retail counters.

▪ For urea, Working capital cycle for sample set of urea companies was ~30 in FY23, a decline of ~17 days, led by all key factors such as debtor days, inventory days
and creditor days. Debtor days for the urea companies has declined due to regular subsidy disbursal by the Government. In FY23, debtor days declined by ~24 days.
Inventory days also declined by ~30 days in FY23. In FY24, Working Capital Cycle for urea companies is expected to remain ~28-30.

▪ For non-urea, Working capital cycle for sample set of non-urea companies was ~8 in FY23, nearly at par with that in FY22. Debtor days for the non-urea companies
has declined due to regular subsidy disbursal by the Government. In FY23, debtor days declined by ~5 days. Inventory days also declined by ~14 days in FY23. In
FY24, Working Capital Cycle for non-urea companies is expected to remain ~8-10.

20
Government Interventions: Subsidy & Schemes
Decline in prices of natural gas and other raw materials to take subsidy bill
downside on year in FY24P
Total Subsidy bill expected to decline by ~25% Y-O-Y in FY 24P

Fertilizer Subsidy Budget & Actual Bill Trend (Rs bn) Share of fertilizer and urea subsidy in agri and fertilizer budget
Total subsidy bill
expected for FY 24
is ~Rs 1915 Billion 77% 77%
74% 74% 74% 75%
including arrears
2453
65%
2252 62% 60% 58%
57% 56%
53% 54% 52%
1751

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1568 44% 44% 45% 44%
1551 1538 42%
40% 40%
37% 37% 37% 37%
1279
30%
25%
718 724 706 748 811 687
663 665 679
529 498 535
363 334
233 206 143 100 123 163

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23RE

FY24BE
FY 24P
FY 16

FY 17

FY 18

FY 19

FY 20

FY 21

FY 22

FY 23
Fertilizer subsidy as a % of agri and fertilizer budget
Carry Forward next year Subsidy Bill Subsidy Budget (Actual/RE/BE)
Urea subsidy as a % of agri and fertilizer budget

▪ CRISIL estimates fertilizer subsidy bill for FY24 to be INR ~1570 bn which is ~90% of the budget amount. However, adding carry forward from last fiscal (FY 23)*, total
subsidy bill for FY 24P is estimated to be ~Rs 1915 bn.

▪ Urea subsidy for FY24 is expected to decline by ~28-30% on year, while for non- urea, subsidy bill is expected to witness a decline of ~45-47% in FY24P.

▪ Due to expected smoothening in prices of raw materials such as natural gas, rock phosphate, phosphoric acid and ammonia and international prices of fertilizers, subsidy
bill for FY24P is expected to decline by ~35-36% from FY23.
*As per calculation of subsidy bill by CRISIL research

22
Annexure
NBS Rates
FY23 FY23(Rabi) Fy23 (Rabi) FY 24 FY 24
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
(Kharif) Oct-Dec Jan-Mar (Kharif) (Rabi)
N 20.9 20.9 20.9 15.9 19.0 18.9 18.9 18.8 18.8 91.9 98.0 99.3 76.5 47.0

P 18.7 18.7 18.7 13.2 12 15.2 15.2 14.9 45.3 72.7 66.9 49.9 41.0 20.8

K 18.3 15.5 15.5 15.5 12.4 11.1 11.1 10.1 10.1 25.3 23.7 25.7 15.9 2.4

S 1.7 1.7 1.7 2.0 2.2 2.7 3.6 2.4 2.4 6.9 6.1 2.8 2.8 1.9

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24
 Thank you

25

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Last updated: April 2016

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