Fertiliser Cos Soar on Talk of Early Start to DBT Plan
Analysts say the introduction of DBT will be significant for firms, such as Coromandel International, which have wide retailer networks
Mumbai: Shares of fertiliser companies were in focus on Wednesday, rising up to 11%, as investors cheered the progress in the government’s direct benefit transfer (DBT) scheme. Analysts said the possibility of a faster-than-expected rollout of the scheme may have bolstered shares on Wednesday. Mansukh L Mandaviya, minister of state for fertilisers, had informed the Lok Sabha on Tuesday that almost two lakh point-of-sale (POS) machines have been installed across the country to roll out the DBT of fertiliser subsidies by March 31, 2018.
Shares of Rashtriya Chemicals and Fertilizers closed 10% higher at ₹ 97, Nagarjuna Fertilizers and Chemicals closed 9.95% higher at ₹ 15.25, while Coromandel International closed 0.96% higher at ₹ 450.75. “The government may be looking to roll out the scheme earlier than ex-
DBT system, subsidy on fertilisers will be released to companies on the basis of actual sales made by the retailers to the farmers
is expected to require end-to-end supply chain management and last-mile reach demand for fertilisers during the first half of 2017-18 to see recovery
pected. As with other agri schemes, there’s a sense of urgency to ensure that the DBT is in place in advance of the next agricultural cycle. It could be rolled out within the next nine-twelve months.” said Dhananjay Sinha, head-institutional research, Emkay Global Financial Services. “The scheme will help companies reduce the stress in their working capitals as receivables from the government will
come at a faster pace.”
Analysts said the introduction of the DBT will be significant for companies with wide retailer networks like Coromandel International. “Once implemented, it (DBT) will significantly ease the subsidy receivables situation for Coromandel International. DBT rollout is expected to require end-to-end supply chain management and last-mile reach, both of which will benefit CRIN on account of the strong brand pull,” a note by Motilal Oswal said.
Analysts expect demand for fertilisers during the first half of 2017-18 to witness a good recovery. The progress of monsoon could also mean higher kharif sowing, but some have warned that shares have run-up far ahead of their fundamentals.
“Shares of fertilisers have seen a big run-up in the last few months but the time is ripe for profit-booking. I am, however, bullish on Nagarjuna Fertilizers. If its acquisition by Coromandel goes through it could be a potential multi-bagger. In the fertilizer industry, we have seen many appreciations between Zuari Group and Mu r u g a p p a G r o u p through Coromandel, so in t hat s e nse Nagarjuna could turn out to be a good long-term bet,” said G Chokkalingam, founder & MD, Equinomics Research & Advisory. Zuari Agro Chemicals c u r r e n t l y h a s a 5 % s t a ke in Nagarjuna Fertilizers.
UNDER THE DBT ROLLOUT ANALYSTS EXPECT