Chambal Fertilisers & Chemicals: The Urea Play?

“Our Crop Protection Chemicals and Specialty Nutrients business continue to grow strongly. The business has grown by about 25% in volume Y-o-Y and 17% in value Y-o-Y. We are seeing very encouraging progress in our new products, which were primarily for sugarcane, rice, soya bean, groundnut and cotton crops. Our Seed to Harvest program continues to make very good progress. In the first quarter, Chambal Fertilisers reached out to 2.3 lakh farmers from training programs and tested 39,000 soil samples. This has encouraged very good relationships with our farmers and is creating business opportunities.”

– Mr. Abhay Baijal, Managing Director, Chambal Fertilisers & Chemicals on Q1FY24 ConCall

Stock Data
Ticker	CHAMBLFERT
Exchange	NSE
Industry	FERTILIZER

Price Performance
Last 5 Days	+3.37%
YTD	-8.10%
Last 12 Months	-17.00%

*As of 07.09.2023

Company Description:

Chambal Fertilisers & Chemicals Ltd is an Indian agrochemicals manufacturing company based in Kota, Rajasthan. The company operates through two segments: Fertilisers & Other Agri-Inputs, and Software & Others. Chambal Fertilisers has consolidated its position in agri-business and diversified into shipping, textiles, software, and manufacturing of phosphoric acid.

Fertilizer Production: Chambal Fertilisers is involved in the production of various types of fertilizers, including urea, di-ammonium phosphate (DAP), and complex fertilizers. These fertilizers are essential for enhancing crop productivity and are a crucial component of modern agriculture.

Agricultural Inputs: In addition to fertilizers, the company also produces and distributes other agricultural inputs such as seeds, pesticides, and micronutrients. These products complement their fertilizer offerings and provide a more comprehensive solution to farmers.

Marketing and Distribution: Chambal Fertilisers markets its products to farmers through a network of dealers, distributors, and retailers across India. They may also provide technical support and advisory services to farmers to optimise the use of their products.

Retail and Branding: The company may have its own branded fertilizers and agricultural inputs, which are promoted and sold under their brand name. Building a strong brand presence in the agricultural sector is essential for business success.

Government Subsidies: In many countries, including India, the fertilizer industry receives government subsidies to make fertilizers more affordable for farmers. Chambal Fertilisers may benefit from such subsidies, and part of their revenue may come from government support.

Financial Results:

Chambal Fertilisers & Chemicals Ltd reported Revenues for Q1FY24 of ₹5,589.00 Crores down from ₹7,291.00 Crore year on year, a fall of 23.34%.

Total Expenses for Q1FY24 of ₹5,088.00 Crores down from ₹6,822.00 Crores year on year, a fall of 25.42%.

Consolidated Net Profit of ₹339.00 Crores down 0.88% from  ₹342.00 Crores in the same quarter of the previous year.

The Earnings per Share is ₹8.14, down 0.85% from ₹8.21 in the same quarter of the previous year.

Key Challenges:

“Due to the delayed monsoon disturbances, due to Cyclone Biparjoy and the Balasore train accident, the movement of material was restricted and affected our P&K sales by about 30%, which is expected to be made up in the next quarter. At the same time, the prices of DAP and NPK phosphatic fertilisers have declined during the quarter, but of late have started moving up. Our technical ammonium nitrate project is on track. The project, as you know, was awarded to Larsen & Toubro, and the technology licensor is CASALE.”

– Mr. Abhay Baijal, Managing Director, Chambal Fertilisers & Chemicals on Q1FY24 ConCall

Vulnerability to agro-climatic conditions: The performance of Chambal Fertilisers & Chemicals Ltd is vulnerable to agro-climatic conditions, which can affect the demand for its products.

Regulatory risks: The company is subject to various regulations and policies, which can change and affect its operations.

“Subsidy collections during the quarter were timely and they have lately accelerated. The budgetary allocation for the current fiscal is adequate to cover up for the subsidy payment during the year, which is a very heartening feature this year.”

– Mr. Abhay Baijal, Managing Director, Chambal Fertilisers & Chemicals on Q1FY24 ConCall

Delay in subsidy receipts from the Government of India: The company is dependent on subsidies from the Government of India, and any delay in receiving these subsidies can result in high interest charges to fund working capital borrowings, which can impact profitability.

Key Strengths:

Established market position: Chambal Fertilisers & Chemicals Ltd is the third largest urea manufacturer in the domestic market. It has a significant market share in north India, supported by its robust distribution network.

Stable demand outlook for fertilisers: The demand for fertilisers in India is stable, which provides a steady market for Chambal Fertilisers & Chemicals Ltd’s products.

High import dependence for urea in the country: India is highly dependent on imports for its urea needs. This provides an opportunity for domestic manufacturers like Chambal Fertilisers & Chemicals Ltd to capture a larger share of the market.

Energy efficient urea operations: Chambal Fertilisers & Chemicals Ltd’s urea operations are energy efficient, which helps to reduce costs and improve profitability.