Chambal Fertilizers

Incorporated in 1985 in Kota (Rajasthan), Chambal has the largest installed urea capacity of 3.07 mn
ton (1.34 mn ton of urea unit at Gadepan-III recently commissioned in January 2019) in the private
sector in India. Company is also into trading of complex fertilisers and pesticides. The company had
significant investments in the shipping and software businesses. In fiscal 2016, Chambal had
transferred its textile division to Sutlej Textiles and Industries Ltd on slump sale basis. During
September 2017, Chambal sold off its all four remaining ships, thus exiting the shipping business also.

Principal Business

1. Manufacture of Urea, 20121

2. Manufacture of Single Super Phosphate (SSP), 20122
3. Marketing of Fertilizers & Agrochemical Products, 46692

The Company has three Urea manufacturing plants at Gadepan, District Kota, Rajasthan.

The Company also supplies other agri-inputs like Di-ammonium Phosphate (DAP), Muriate of Potash
(MOP), Single Super Phosphate (SSP), NPK Fertilisers, Agrochemicals, seeds, sulphur, micro-
nutrients, complex fertilisers and city compost. The Company sources the products from reputed
domestic and international suppliers.

SSP supplies comprised of own production and procurement from domestic suppliers.
Trading Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
DAP Imported 556 600 565 635 897 985 869
NPK Imported/ Other 68 22 7 - 59 81 71
MOP Imported 52 60 28 199 184 209 256
Total Traded 676 682 600 834 1140 1275 1196
Manufacturing
SSP 78 188 192 143 44
Urea 2126 2001 1911 1883 2071 2002 2094

Existing Capacity & Expansion Plans

Company commissioned the third Urea manufacturing unit at Gadepan, Distt. Kota, Rajasthan, PIN-
325208 at an approximate cost of USD 900 million on January 2019. The new Urea plant will increase
the present Urea production capacity of the Company by about 1.34 million MT per annum.

Gadepan III plant has had steady operations since commissioning, operating at average healthy
utilisation of above 90%. Government has already allowed supply of urea from this unit.

Post expansion, total Urea manufacturing capacity stands at 3.07 million tons per annum.

No new urea production capacity came on stream in the country during last 18 years except revamp of
few existing plants. This is the first major capex in Urea in 18 years.

Products
Fertilizers
 Uttam Veer Urea (Urea)
 Uttam Neem (Neem Coated Urea)
 Uttam DAP (Di Ammonium Phosphate)
 Uttam MOP (Murate of Potesh)
 Uttam SSP (Single Super Phosphate)

Seeds
 Hy Paddy - Khushi & Barkha
 Paddy - Uttam Kranti
 Bt Cotton Dhruv
 Barley - Uttam
 Mustard - Uttam Kranti
 Soybean - Uttam Kranti & Chamtkar
 Hy Bajra - Albela & Uttam Kranti-2095
 Hy Maize - Nandini & Muskan
 SSG - Manik & Moti
 Kranti
 Wheat - Uttam Kranti

Insecticides
 Aceveer
 Endoveer
 Alphaveer
 Acto
 Lambda veer
 Chlorveer
 Monoveer
 Imidaveer
 Lambda Double

https://business.mapsofindia.com/national-fertilizers/
Industry Overview
https://www.indexmundi.com/commodities/?commodity=urea&months=240&currency=inr

https://krishijagran.com/farm-data/indian-fertilizer-sector-at-a-glance/

All India Demand Forecast of fertilizer products

India is the second biggest consumer of fertilizer in the world next only to China. According working
group report on fertilizer industry for twelfth five-year plan all India demand forecast of fertilizer
2012-13 to 2016-17 are given table.

Fertilizer Production, Consumption and Import Status

Urea production in the country during the Financial Year 2017-18 was 24.02 million MT against 24.20
million MT during the previous year. India imported 5.97 million MT of Urea during the Financial
Year 2017-18 as against 5.48 million MT of Urea imported during the previous year.

The Urea sales in the country during the Financial Year 2017-18 were 30.31 million MT against the
Urea sales of 29.61 million MT during the previous year – an annual growth of 2.4%. The imported
Urea was 19.70% of the total Urea sales in the country and its prices ranged between USD 203 to USD
292 per MT during the financial year 2017-18.

The total sales of DAP in the country during the Financial Year 2017-18 were 8.98 million MT as
against 8.82 million MT during the previous year registering a growth of around 1.81%. The total
production of DAP during the year was around 4.65 million whereas 4.22 million MT of DAP was
imported in the country.

The demand of DAP in the country is met through imports and domestic production whereas the
country is fully dependent upon imports for MOP

MOP imports in the country during the Financial Year 2017-18 were 4.74 million MT as against 3.74
million MT during the previous year.

India is meeting 80 per cent of its urea requirement through indigenous production but is largely
import dependent for its requirements of phosphatic and potassic (P & K) fertilizers either as finished
fertilizers or raw materials. Its entire potash requirement, about 90 per cent of phosphatic
requirement, and 20 per cent urea requirement is met through imports.
Top leading fertilizer Companies
Some of the public sector companies in India fertilizer industry:

1. National Fertilizers Limited

2. Fertilizers & Chemicals Travancore Limited (FACT)
3. Rashtriya Chemicals & Fertilizers Limited (RCF)
4. Madras Fertilizers Limited
5. Steel Authority Of India Limited
6. Neyveli Lignite Corporation Limited
7. Paradeep Phosphates Limited
8. Pyrites, Phosphates & Chemicals Limited
9. Hindustan Fertilizer Corporation Limited

Some of the private sector companies in Indian fertilizer industry:

1. Chambal Fertilizers & Chemicals Limited
2. Ajay Farm-Chem Private Limited
3. Balaji Fertilizers Private Limited
4. Deepak Fertilizer and Petrochemicals Corporation Limited
5. Bharat Fertilizer Industries Limited
6. Coromandal Fertilizers Limited
 7. Gujarat Narmada Valley Fertilizer Co. Limited (GNFC)
8. Meerut Agro Chemicals Private Limited
9. Duncans Industries Limited
10. Karnataka Agro Chemicals
11. Godavari Fertilizers & Chemical Limited
12. Shri Amba Fertilizers (I) Private Limited
13. Tuticorin Alkali Chemi & Fertilizer Limited
14. Gujarat State Fertilizers & Chemicals Limited (GSFC)
15. Indo-Gulf Fertilizers & Chemicals Corporation Limited
16. Southern PetroChemical Industries Corporation Limited (SPIC)
17. Maharashtra Agro Industrial Development Corporation
18. Zuari Industries Limited- Fertilizer Limited
19. Mangalore Chemicals & Fertilizers Limited

https://krishijagran.com/farm-data/indian-fertilizer-sector-at-a-glance/

http://www.indianmirror.com/indian-industries/fertilizer.html
 Chambal Coromande Deepak Mangalor Natl.Fertilize Madras
GNFC GSFC FACT SPIC RCF
Fert l Inter Fert e Chem r Fert
3357.0
Mcap 7200.40 5063.58 3831.36 13357.12 1039.88 498.97 1712.12 2510.63 548.46 381.00
3
PER 14.32 4.87 6.96 19.09 7.25 8.24 8.05 13.99 13.70 38.04 0.00
PSR 0.84 0.77 0.45 1.03 0.14 0.19 0.19 1.31 0.23 0.41 0.24
PBR 2.47 1.14 0.53 4.27 0.51 1.05 0.86 -1.53 1.79 1.15 -0.77
Dividend Yield 1.10% 2.30% 2.29% 1.42% 5.09% 2.38% 0.00% 0.00% 0.00% 0.99% 0.00%
1Y Sales Gr Rate 14.47% 27.21% 35.42% 18.74% 44.45% 10.36% 26.57% 3.22% 33.00% 12.61% 16.13%
3Y Sales Gr Rate -5.63% 7.94% 5.69% -1.07% 16.33% 1.43% 1.55% -0.88% -1.35% -1.76% -1.63%
5Y Sales Gr Rate 0.34% 6.54% 0.11% 3.92% 17.57% -0.66% 5.83% -3.61% -0.52% 1.55% -7.17%
10Y Sales Gr Rate 5.54% 8.00% 0.72% 1.74% 16.80% 0.95% 6.36% -1.10% 20.44% -1.52% 4.13%
1Y OPM 10.18% 23.98% 9.55% 10.53% 7.17% 7.27% 5.66% 1.12% 4.12% 3.97% 1.56%
3Y OPM 9.15% 17.40% 9.69% 9.18% 9.48% 5.92% 6.69% 3.83% 3.84% 4.66% 2.58%
5Y OPM 8.57% 13.17% 10.11% 8.63% 9.80% 6.17% 5.26% 2.18% 3.12% 6.63% 4.02%
10Y OPM 10.27% 13.35% 13.38% 9.37% 12.07% 5.94% 4.64% 2.24% 2.51% 6.53% 5.46%
1Y NPM 6.44% 13.53% 7.59% 6.06% 2.71% 2.25% 2.39% -6.77% 1.87% 1.08% -2.77%
RoE 16.49% 17.71% 6.55% 21.23% 7.95% 12.69% 10.71% 12.18% 2.69%
RoA 5.31% 14.39% 5.17% 7.13% 1.92% 2.27% 2.17% 9.68% 2.76% 1.34% -2.31%
RoCE 11.60% 18.59% 8.92% 14.10% 6.90% 7.96% 6.49% 26.72% 14.21% -0.70% 0.22%
D/E 1.93 0.07 0.15 0.87 1.73 2.86 1.54 -1.39 0.86 0.45 -3.06
Interest Cover 5.34 38.03 13.43 5.80 2.60 2.16 2.62 0.08 4.29 3.06 0.27
Receivable Days 107.51 61.93 41.57 42.78 95.08 149.13 126.92 85.76 7.31 131.37 4.64
Inventory Days 33.98 37.63 34.66 62.54 37.18 53.88 21.60 98.47 29.06 34.06 50.84
WC Cycle 125.32 -7.73 118.13 120.23 113.58 162.90 28.07 50.47 38.68 94.95 156.82

Most of the fertilizer companies in general are characterised by slow growth due to stagnant demand.

Working capital cycle is often high, potentially due to delays in subsidy payments

Majority of the companies have low margins, with OPM < 10%

Capital intensive business, with low RoA

Low margins, with OPM < 10% in many cases

Apart from Chambal Fertilizers, GNFC, Coromandel & Deepak Fertilizers look interesting.
Risk Analysis
https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Chambal_Fertilisers_and_C
hemicals_Limited_January_23_2019_RR.html

Regulated nature of the industry

The Fertiliser Industry is highly regulated and dependent on the Government policies. The changes in
such policies may sometimes adversely affect the Company. The low prices of Urea in the
International market coupled with increase in gas prices due to increase in prices of crude oil in
international market may affect the Urea production beyond re-assessed capacity of Urea
manufacturers in the country.

WC stress due to delays in payment of subsidies

Subsidy is a major component of revenue of the Company. The delay in payment of subsidy by the
Government of India creates stress on the working capital and increases the finance cost of the
Company. The implementation of DBT for fertiliser subsidy envisages linking of subsidy payment to
the actual sales through POS. This has made the subsidy payment process cumbersome and it requires
more resources and efforts on the part of fertiliser manufacturers / suppliers. However, it is expected
that the DBT process will stabilise after teething troubles and it is not likely to have a material
financial impact on the Company.

Leveraged capital structure and moderate debt protection metrics

Chambal has a leveraged capital structure and moderate debt protection metrics. The company's
capital structure, is constrained by large working capital borrowings following delay in subsidy
disbursement by the government. Gearing is expected to remain high in the near term, with
Debt/EBITDA estimated at 7-8 times for fiscal 2019, due to commissioning of Gadepan III plant in the
last quarter. Nonetheless, higher cash accruals from Gadepan-III unit from fiscal 2020 (being first full
year of commissioning), capital structure is expected to improve gradually over the medium term.

Variation in Monsoon, Forex, International prices of fertilizers

The variations in demand of DAP and MOP due to change in monsoon patterns, volatility in foreign
exchange rates and prices of the products in international markets and interest burden due to delay in
payment of subsidy may impact the profitability of the Company.
Related parties

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

Consolidated Sales 8,906.00 9,733.00 9,008.00 7,553.00 7,541.00

Consolidated NP 244 295 221 362 499
(Consolidated - Standalone) Sale 929.04 855.90 237.74 142.34 79.88
(Consolidated - Standalone) NP -59.07 58.22 232.14 -63.10 18.83

Contribution of subsidiaries are negligible after sales of shipping & IT business. Only JV contribute to
around 8% of turnover & PNL.

Subsidiaries
 CFCL Ventures Limited, Cayman Islands
 Chambal Infrastructure Ventures Limited, India
 India Steamship Pte. Limited, Singapore
 India Steamship International FZE, UAE
 India Steamship Limited, India
 Subsidiaries of CFCL Ventures Limited, Cayman Islands
 ISGN Corporation, USA
 ISG Novasoft Technologies Limited, India
 Inuva Info Management Private Limited, India

Joint venture
 Indo Maroc Phosphore S.A. Morocco

IMACID is a joint venture of your Company with Tata Chemicals Limited and OCP, Morocco and each
partner is having equal stake in the joint venture. IMACID is engaged in the manufacture of
phosphoric acid in Morocco.

During the calendar year 2017, IMACID produced 409,160 MT of phosphoric acid against 336,984
MT produced during the calendar year 2016. Sales of phosphoric acid during the calendar year 2017
were 408,013 MT against the previous year sales of 336,341 MT.

During the calendar year 2017, IMACID achieved revenue of Moroccan Dirham (MAD) 2279.87
million (Rs. 150851.90 Lakhs) against revenue of MAD 2068.30 million (Rs.140419.38 Lakhs)
achieved during the calendar year 2016. The profit after tax of IMACID was MAD 177.98 million (Rs.
11776.21 Lakhs) during the year 2017 as against MAD 12 million (Rs. 814.78 Lakhs) in the calendar
year 2016.
Financials

Leverage has generally been high, with 10Y D/E average at 1.87. Currently DE is even higher at 1.93
due to project borrowings, which is gradually expected to come down with cash stream from the new
urea unit hitting the books from Q4FY19

Receivables are high at 123+ days due to delays with subsidy payments

Capital intensive business, with RoA of 5%, RoE is 16.5%

FY18 OPM is 10.49%, less than 10Y average of 11.07%, but higher than 5Y average of 8.66% (long term
OPM higher due to change in govt policies, which has hit profitability of fertilizer manufacturers?)

Strong cash generation. 10Y cumulative OCF is 3799, higher than 10Y cumulative PAT at 2792

No equity dilution in past 10Y

1 Y historical price chart

Acquisition/ Disposal

Feb: 1.95cr/35.6 L Net 1.6cr

Jan: 34.3L/ 12.6L Net 21.7L

Net, in Q4FY19 insiders have purchased around 1.82 crores worth of shares (or ~0.03%)

Domestic promoters have been upping the stake continuously, from 57.72% in Dec CY17 to 58.08% in
Dec CY18. Foreign promoters hold additional 0.64%.