How The Fertiliser Sector Defied The Slowdown Amid Covid-19 Lockdown

Shares of Coromandel International Ltd., Deepak Fertilisers & Petrochemicals Corporation Ltd. and Rashtriya Chemicals & Fertilisers Ltd., among others, rose between 11 and 45 percent in April, according to Bloomberg data.

That compares with a 19 percent gain in the Nifty 500 Index during the period.

Total fertiliser sales rose 47 percent year-on-year to 3.7 million tonnes in April, according to data from Ministry of Chemicals and Fertilisers. That was led by a 98 percent increase in the sales of complex fertilisers—which contains two or three primary plant nutrients in its chemical composition—such as DAP (Diammonium phosphate) and NPK (nitrogen, phosphorus and potassium).

“Despite a lot of movement restrictions due to national level Covid-19 lockdown, with the concerted efforts of the Department of Fertilisers, railways, states and ports, production and supply of fertilisers in the country is going on without hindrance,” the ministry said in a statement.

Abhay Baijal, chief financial officer of Chambal Chemicals and Fertilisers Ltd., too, said sales were better than normal. “I believe the reason we’ve seen an increase in sales is that there is a fear somewhere that there could be a supply disruption because of materials not reaching the farmers in time,” he told Bloomberg Quint. “Lower inventory could also possibly be one of the reasons.”

Expectations of a normal monsoon this year also aided sentiment, he said.“The last season was pretty good with a healthy rabi crop as well (because of the extended monsoon),” Baijal said. “Apart from some problems with respect to transportation, the operations have remained by and large normal with robust underlying demand.”

Raw material prices have been favourable as well. International prices of sulphur, ammonia, phosphoric acid, among others, have fallen between 3 and 40 percent over the previous year, according to brokerage Prabhudhas Lilladher Pvt. Ltd.

Analysts, too, are upbeat. “Though Covid-19 has impacted the cash position of farmers, we believe a normal monsoon and decent water levels across fields, coupled with government intervention in procuring rabi crops at MSP, will come as a relief in the current crisis,” Edelweiss said.

Harmish Desai, analyst at Ashika Stock Broking, agreed. “Government support for farmers, high demand for paddy crops and pulses and a normal average monsoon should play out in favour of the sector,” he told BloombergQuint. “We expect players focused on domestic markets to be relatively better positioned due to higher rabi acreage and limited lockdown impact.”