Chambal Fertilisers + GSFC – A Fertile Quarter

The fertiliser sector is expected to post strong Q2FY09 earnings owing to good volumes in urea & DAP backed by an encouraging policy and robust growth in the trading business. The Urea Investment Policy was announced in the quarter, providing import parity price (IPP)-linked pricing for all incremental urea capacities.

Subsidy payment:
Under provisioning of subsidy in the budget and ballooning fiscal deficit owing to rising crude prices creates risk of delay in payment of subsidy bill or payment in the form of fertiliser bonds. In an unprecedented move during the quarter, the Department of Fertilizers borrowed from PSU banks to discharge the fertilizer subsidy bill on schedule.

Chambal Fertilizers:
There have been significant accounting changes made by the company in Q1FY09, from booking profit/loss arising from foreign exchange fluctuation on borrowings towards acquisition of fixed assets to adjusting such fluctuation in the carrying value of assets, the company’s profit & loss account is insulated from rupee depreciation going forward. The company is expected to post a 30% adjusted PAT growth for H1FY09.

Revenues are likely to register 79% YoY growth due to rising prices of phosphoric acid and, hence, DAP prices. EBITDA is likely to grow at 26% YoY over Q2FY09 due to margin expansion. The company is expected to post a 18% adjusted PAT growth for H1FY09.