The urea industry is the backbone of Indian agriculture and plays a vital role in food grain production in the country. Since India does not have sufficient manufacturing capacity of urea, the demand is met through indigenous manufacturing and imports. But the implementation of the new government policy will change the landscape of urea manufacturing in India in the next few years. In addition, there are a few urea plants under implementation which are expected to come on stream shortly. With the commissioning of these plants, India is likely to be self-sufficient in urea production. The Government of India has also fully implemented the Direct Benefit Transfer for payment of subsidy on fertilisers. Chambal Fertilisers and Chemicals Ltd. accounts for nearly 15% of the total urea produced in the country. Its three fertiliser plants are located in Kota district of Rajasthan with an installed annual production capacity of about 3.4 million MT of urea. The third plant commissioned recently is a state-of-the-art fertiliser unit and is among the most efficient plants in the world with latest technologies from USA and Japan. The new plant has an installed annual production capacity of about 1.4 million MT of urea. The company holds the highest market share among private sector urea manufacturers in the country. In addition to manufacture of urea, Chambal Fertilisers also markets other agri-inputs like Di-ammonium Phosphate, Muriate of Potash, NPK Fertilisers, agrochemicals, seeds, sulphur, micro-nutrients and city compost. The company facilitates availability of fertilisers, seeds and agrochemical products to farmers under a single roof. Fertilisers could be on the government’s priority list and hence Chambal Fertilisers stock looks a decent and safe bet. The stock quoting at Rs 128 can give a 20% price appreciation in the next few months.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.