The Hindu Business Line : Fertiliser stocks active on monsoon hopes

THE fertiliser stocks have of late been active and outperforming benchmark indices. Expectation of a timely and widespread monsoon has led investors' interest to the fertiliser sector.

The top gainers in the sector (week-on-basis) were GNFC (9.9 per cent), GSFC (5.6 per cent), Tata Chem 44 per cent and Deepak Fertilier (2.1 per cent).

According to Mr Ketan Thacker of Anagram Stockbroking, hopes of good monsoon in the backdrop of encouraging policy changes for the sector have induced certain accumulation amid low price levels.

"In the urea segment, under the current policy initiative, plant that opts for increase in capacity through de-bottlenecking will be able to bring down cost per unit. This will boost overall profitability, as the cost of debottlenecking will be lower than setting up a greenfield plant," he commented. For example, Tata Chemicals could theoretically increase its capacity to 1.2 million tonnes from the current 0.86 million tonnes at an incremental cost of Rs 200 crore to Rs 250 crore, as against Rs 700 crore to Rs 750 crore for similar greenfield capacity addition.

On the other hand, the sector leaders have also been looking for consolidation to increase cost efficiency. Tata Chemicals, for instance, has acquired Hind Lever Chemicals and is open for further acquisition including bidding for divestments in fertilizer PSUs.

Among today's busy counters in the sector, Tata Chem attracted a block deal of 1.11 lakh shares on the NSE. Both GNFC and GSFC stocks recorded higher traded quantity on the BSE than that on yesterday.

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