Use Fertilizer (Stocks) To Grow Portfolio Returns
Lohit Bharambe and Nikita Singh delve into reasons why fertiliser sector is being re-rated by the investors
Indian fertiliser industry is seeing a healthy re-rating by investors, as is seen in the rising stock prices of several of the fertiliser companies. While realty stocks, banks and finance companies have outperformed markets on YTD and one-year basis, fertiliser stocks have been a pleasant surprise, moving up without much ado.
Fertiliser stocks on an average have delivered returns in excess of 65 per cent on a YTD basis, whereas the returns delivered over one- year period is in excess of 80 per cent. So what is brewing in the fertiliser space and will the fertiliser stocks gain further ground?
As of now, India is the second biggest consumer of fertilisers in the world after with China. Under the current Modi government, the focus on the rural economy with an emphasis on improving agriculture economics is a positive trigger for the fertiliser industry.
The consumption of fertilisers in India is on the rise owing to improving farm economies and increasing thrust on irrigation. As of now, India is highly dependent on imports to fulfil its fertiliser requirement. However, almost 80 per cent urea requirement of the country is met from domestic production.
India majorly imports phosphatic and potassic (P&K) fertilisers. Urea production in India has grown by 8 per cent in recent years, mainly owing to favourable policy changes by the Central government.
The urea requirement in India is also on the rise. Almost 80 per cent urea requirement of the country is met from domestic production.
The revised GST rate at 5 per cent, down from 12 per cent, can be seen as a big boost to the vast agriculture sector in the country. One can expect drop in prices to increase demand for fertilisers
Under the Modi regime over the last three years, there has been an attempt to boost the rural economy. Efforts have been taken to promote energy efficiency in urea production and maximising domestic urea output. One of the focus areas also has been timely imports of urea and other fertilisers meeting the demand at the ground level.
The fertilizers that are covered under the subsidy scheme are urea, di-ammonium phosphate (DAP), muriate of potash (MOP), mono ammonium phosphate (MAP), triple super phosphate (TSP), ammonium sulphate (AS), single super phosphate (SSP) and other complex fertilizers