BackFertilizer cos see potential in customised biz
Fertilizer cos see potential in customised biz
Premium
Mumbai: Indian chemical firms are rushing to set up ‘customised fertilizer’ plants in a bid to capitalise on rising demand, while famers can now buy fertiliser tailormade for the soil and crop in their regions.
Tata Chemicals, Deepak Fertilisers and Petrochemicals Corp and Nagarjuna Fertilizers have lined up investments in excess of Rs7 billion over next three years to make these ‘need-based’ soil nutrients.
“Customised fertiliser units can be set up with low investments in the range of 700-800 million rupees and the gestation period for every unit is only 9-12 months," Tarun Surana, analyst, Sunidhi Securities & Finance, said.
In comparison, a urea plant typically needs an initial investment of about Rs2-4 billion and has a turn-around period of three to four years, he added.
Customised fertilisers are combination of micro nutrients like sulphur, zinc, boron added to the key items such as urea and diammonium phosphate and potash, in a proportion that suits specific crops and soil patterns.
Tata Chemicals executive director Kapil Mehan had said in May that the company aims to set up 10 new customised fertilisers’ plants at an approximate investment of Rs600 million each.
Nagarjuna Fertilizers, as part of its expansion project at Kakinada plant in the state of Andhra Pradesh, would set up a customised fertiliser unit at a cost of Rs160-170 million.
“Customised fertilisers have a bright future in India and companies are looking forward to encash the opportunity in this business segment," Satish Chander, director general, The Fertilizer Association of India, said over the telephone.
Indirect subsidy
Although these plants do not enjoy direct subsidy unlike conventional fertilisers, manufacturers are allowed to avail benefits through subsidised raw material.
“We expect the government to directly subsidise the 24 customised products it has approved so that even smaller players enter this business," Chander added.
Companies with a turnover of Rs5 billion or more are in a position to enter this business vertical, officials and analysts said.
“It’s difficult to estimate the investment that would happen in this segment but the number would be around RS8-9 billion over next 2-3 years," another analyst working with a Mumbai-based brokerage firm said.
Pune-based Deepak Fertilizers plans to invest about Rs800 million in the current fiscal to launch its customised fertiliser brand ‘Yashada’, a company spokesman said.
“Customised fertiliser plants are set up across geographies to cut transportation costs and meet the domestic requirements," an analyst with a Mumbai-based brokerage said.
“The revenue generation begins quickly, which helps the producers price their products in a competitive manner," the analyst added.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
