Fertiliser-makers fall, energy companies rally on gas price hike
Shares of key mid-sized fertiliser companies lost nearly 3 per cent on concerns of a spike in input cost, while state-run natural gas makers rallied on Thursday as a policy to sharply raise gas prices boosted outlook.mumbai Updated: May 20, 2010 16:18 IST
Shares of key mid-sized fertiliser companies lost nearly 3 per cent on concerns of a spike in input cost, while state-run natural gas makers rallied on Thursday as a policy to sharply raise gas prices boosted outlook.
The government on Wednesday raised prices of natural gas, a key aspect for fertiliser makers, to Rs 6,818 per thousand cubic metres from Rs 3,200 rupees on Wednesday.
The impact of gas price hike would be "short-term" considering the government would repay the increased input costs in terms of subsidies, mostly at the end of the financial year, analysts said.
"Companies like National Fertilisers and RCF are switching to gas-based technology...If gas prices are increased, it will definitely have an impact on their costs," Mehul Desai, an analyst with KR Choksey Shares and Securities, told Reuters over the telephone.
"Companies like Deepak Fertilizers, which make complex fertilisers, would be impacted for sure," another fertiliser analyst said.
Companies like RCF and other urea makers won't face problems since they operate in the subsidised segments, the analyst added.
However, fertiliser prices will remain unaffected since are controlled by the government, Apurva Chandra, a senior official in the oil ministry said on Wednesday.
"The working capital of fertiliser makers would have an impact as the realisation of subsidies happens mostly at the end of the year," another analyst said.
Shares of GSFC, Coromandel, Deepak Fertilizers dropped and Tata Chemicals dipped in the range of 1.66 per cent to 2.62 per cent during the early trade on Thursday.
At 2:44 pm, the broader Mumbai market was up 0.65 per cent, mainly driven by telecoms, ONGC and Oil India, which were up more than 8 per cent.