Fertiliser sales to see moderate growth in H1 FY18: ICRA | business-news | Hindustan Times
Today in New Delhi, India
May 23, 2017-Tuesday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Fertiliser sales to see moderate growth in H1 FY18: ICRA

Fertilisers demand is likely to be moderate in the first half of 2017-18, mainly due to improved spending power and healthy reservoir levels, ICRA today said in a report here.

business Updated: Mar 24, 2017 18:45 IST
PTI
Fertilisers demand

An Indian farmer sprays fertilizer in his paddy field in Roja Mayong village, east of Gauhati.(AP)

Fertilisers demand is likely to be moderate in the first half of 2017-18, mainly due to improved spending power and healthy reservoir levels, ICRA today said in a report here.

“The demand for fertilisers in H1 FY18, will witness moderate growth, given the lower base for H1 FY17, improved spending power of the farmer community with higher minimum support price (MSPs) for Rabi crops, strong sowing witnessed during the season and healthy reservoir levels,” ICRA said.

ICRA expects further thrust in fertiliser demand if the proposed farm loan waivers by various state governments gets implemented.

“The recent uptick in global gas prices is expected to result in increased cost of production for the urea industry in H1 FY18, which will translate to higher subsidies and higher working capital borrowings for the industry.

“While the subsidy backlog at the end of FY17 is expected to decline to Rs 30,000-32,000 crore, allocation remaining unchanged at Rs 70,000 crore for FY18, coupled with rising gas costs and firming global prices, will result in higher subsidy backlog at the end of FY18,” ICRA Senior Vice President and Group Head, Corporate Ratings, K Ravichandran said.

He said, despite rising gas costs, the Indian urea units are expected to remain competitive against imports as international prices have witnessed an upward movement recently due to the pullback in Chinese exports during calender year 2016.

“On the other hand the domestic Phosphatic and Potassic (P&K) industry should continue to benefit in the near term from subdued global prices for key raw materials, that is phosphoric acid and ammonia,” he added.

Meanwhile, ICRA said, revenues of fertiliser industry declined by 15% in nine months FY17 against FY16, due to lower gas prices leading to retention prices for urea.

Further, sales of associated chemicals witnessed de-growth due to the down-cycle in commodity prices.

However, ICRA said, the profitability of the industry remained moderate with operating margins at 10.8% in nine FY17 from 8.4% in 9M FY16 due to the lower price of key raw materials.

The net earnings of the companies improved during nine FY17 to 4.4% on account of higher operating margins. The return indicators continued to remain weak, while credit metrics continued to remain under pressure due to high reliance on working capital borrowings to fund subsidy receivables.

P&K fertiliser sales grew by 7% to 19.89 million tonne during 11 months FY17 due to normal monsoon and healthy sowing during the Rabi season, ICRA added.