What Led To A Selloff In Fertiliser Stocks

Fertiliser stocks have witnessed a selloff as sales fell in the seasonally strong month of July on account of a delayed monsoon.

Shares of Coromandel International Ltd., Gujarat State Fertilizers & Chemicals Ltd., Deepak Fertilisers & Petrochemicals Corporation Ltd. and Zuari Agro Chemicals Ltd., among others, have declined in the range of 9-31 percent since June, according to Bloomberg data. That compares with a 6 percent drop in Sensex during the period.

Total sales dropped 5 percent year-on-year to 4.9 million tonnes in July. That was led by a 9.6 percent decline in sales of complex fertilisers—which contain two or three primary plant nutrients in its chemical combination such as DAP (Diammonium phosphate) and NPK (nitrogen, phosphorus, and potassium).

“The ongoing kharif season witnessed several headwinds on account of late onset of monsoons (by at least a fortnight). This resulted in sales deferment from June quarter to September for agri-input players. Thus, demand remained subdued till the end of July,” Manish Mahawar, vice president (research—agri and midcaps) at brokerage Antique Broking, told BloombergQuint.

This also comes at a time fertiliser makers cut prices to pass on the benefit of lower raw material prices to customers. Indian Farmers Fertiliser Cooperative Ltd. (IFFCO)—one of the biggest producers in the country—reduced prices of DAP and NPK by 6-8 percent in July and by another 4-5 percent in August, Ranjit Cirumalla, research analyst at B&K Securities, said in a report.

International prices of rock phosphate, phosphoric acid, ammonia and sulphur, among others, too are down in the range of 10.5-31 percent year-on-year in July, data released by the Ministry of Chemicals and Fertilizers showed.

Still, Chambal Fertilisers & Chemicals Ltd. said sales are likely to increase as the rainfall progressed well and sowing picked up last month. “This boosted sales of fertilisers and urea, and the industry should see higher liquidation of inventories,” Abhay Baijal, chief financial officer at the company, told BloombergQuint.

National Fertilizers Ltd. and Zuari Agro declined to comment on BloombergQuint’s queries. Deepak Fertilisers and GSFC didn’t return phone calls seeking comment.