CHAMBAL FERTILISERS AND CHEMICALS

Piggybacking India’s agri demand

Chambal Fertilisers and Chemicals (CFCL), a KK Birla group company, is one of India’s leading fertiliser manufacturers with a domestic marketshare of 12% in urea, 13% in DAP, 2% in MOP and 2% in NPK. The company operates one of the largest urea plants in the country, with three plants located at Gadepan in Kota district of Rajasthan. Apart from urea, it is also engaged in the marketing of other fertilisers such as diammonium phosphate (DAP), Muriate of Potash (MOP), NPK (nitrogen, phosphorus, potassium) fertilisers, speciality plant nutrients and crop protection chemicals.

Its crop protection products include insecticides, fungicides and herbicides. It caters to the needs of the farmers in approximately 10 states in the northern, eastern, central and western regions of India, and is the fertilizer supplier in the states of Rajasthan, Madhya Pradesh, Punjab and Haryana.

All the three urea manufacturing units of the company operated at optimal capacity in fiscal 2024 and production stood at 9.34 lakh tonnes against 9.08 lakh tonnes last year. Urea sale was 9.65 lakh tonnes against 8.38 lakh tonnes YoY. Subsidy receipts too continued to be timely, and it received Rs 4,713 crore in subsidy in Q2FY25.

The company has been performing very well on the financial front. During the last 12 years, its sales turnover has more than doubled from Rs 8,198 crore in fiscal 2013 to Rs 17,966 crore in fiscal 2024, with operating profit trebling from Rs 686 crore to Rs 2,047 crore and the net level spurting more than six times from Rs 212 crore to Rs 1,276 crore. Its financial position is also very strong, with reserves at the end of March 2024 standing at Rs 7,803 crore – over 19 times its equity capital of Rs 401 crore.

PRODUCT MIX

What is more, its prospects going forward are highly encouraging. Consider:

• Chambal Fertilisers is focusing on the establishment of a TAN (technical ammonium nitrate) plant, with a capacity of approximately 2,40,000 mtpa. The decision to invest in this plant and the associated manufacturing of Weak Nitric Acid (WNA) is poised to reshape the company’s growth trajectory. The expansion into TAN diversifies the product portfolio, reducing reliance on existing products. The plant’s set-up contract has been given to L&T and will see it operationalizing by October 2025. Hence, a full year of backward integrated TAN facility will come by FY27, with revenue of Rs 1,000 crore for a full year.

LARGE PORFOLIO

• The company’s strategy continues to focus on creating partnerships and alliances for introducing better chemistries and increasing the width of offerings in channels. Today, it has a CPC product portfolio of almost 62 products of distinct chemistries, covering fungicides, weedicides and insecticides. Geographic diversification has also been a part of this strategy and has been successfully executed.
• The new focus area in the coming quarters will be to enter the hybrid and research variety seeds, which will substantially complete the company’s agri-input product profile.

PIVOTAL MOVE

The company’s strong fundamentals, coupled with the positive tailwinds in the fertilizer industry, make CFCL an attractive investment option with the potential for robust returns. The strategic capex plan to establish a TAN plant and associated facilities represents a transformative move for the company. It not only augments production capacity but also positions the company as a key player in the TAN market, both domestically and globally. In FY25, we expect the company to register an EPS of Rs 43.0, which is likely to rise to Rs 53.5 in FY26. The scrip trades at Rs 464. The P/E on the FY26 EPS works out to 8.6.

PERFORMANCE INDICATORS (Rs. in crore)

MOIL

Hoping to turn the corner in profits

Formerly known as Manganese Ore (India) Ltd, MOIL Ltd is a mini-ratna public sector undertaking which operates its underground and opencast manganese mines located in the Nagpur and Bhandara districts of Maharashtra and Balaghat district of Madhya Pradesh. The Balaghat mine is the largest mine of the company, having reached a mining depth of about 435 metres from the surface. The Dongri Buzurg mine located in Bhandara district is an opencast mine that produces manganese dioxide ore used by the dry battery industry. This ore, in the form of manganous oxide, is used as a micro-nutrient for cattle feed and fertilisers.

Today, the company has 10 mines located in Maharashtra and Madhya Pradesh and produces 53 per cent of the country’s total manganese ore. MOIL produces and markets four types of manganese ore: (a) high grade ore for production of ferro manganese; (b) medium grade ore for production of silico manganese; (c) blast furnace grade ore required for production of hot metal, and (d) dioxide for dry battery cells and chemical industries. About 95 per cent of the total production of the company is directly or indirectly used in the steel industry. The company also produces ferro manganese for the steel industry.

P.A.T. DECLINE

But MOIL’s financial performance has not been very satisfactory. Though sales turnover during the last 12 years improved from Rs 966 crore in fiscal 2013 to Rs 1,447 crore in the fiscal 2024, operating profit has more or less remained at the same level at Rs 478 crore in 2024 against Rs 435 crore in 2013, and the profit at net level has declined from Rs 432 crore to Rs 298 crore. However, prospects for the company going ahead are quite promising. Consider:

• This year, MOIL has taken aggressive steps to push up production and sales. During the first seven months of the current fiscal ending March 2025, it has recorded a production of 1,097 lakh tonnes higher by 10 per cent over the corresponding period last year, and sales during these seven months (April to October 2024) have grossed 8.57 lakh tonnes. Production and sales spurted during this period mainly on account of a record, best-ever production of 1.7 lakh tonnes, suggesting a 32 per cent spurt over that in the corresponding October month last year. On the sales front also, the company has put up a bestever performance of marketing 1.06 lakh tonnes – higher by 21 per cent over that in October 2023. The management is confident that the trend witnessed during the first seven months of fiscal 2025 will be maintained, going ahead.
• The company is looking for overseas acquisitions in regions including Africa (South Africa and Gabon), Australia and Latin American nations like Brazil, for expansion of manganese ore extraction operations. South Africa is said to have the largest manganese ore reserves globally, while Gabon has around 25 per cent of the world’s resources. Australia, on the other hand, is known to be a major exporter of manganese ore.

DOMESTIC J.V.s

• At home, MOIL is working with different state governments for manganese ore mining. Critical minerals other than manganese is something that the company will also be looking at. It will also be entering into JVs with the Gujarat and Madhya Pradesh governments for manganese ore mining in these states. Exploration activities are being carried out in Chhattisgarh too.
• According to the management, in Gujarat, nearly 9.5 million tonnes of manganese ore reserves have been identified and the company is in advanced discussions for a JV with the state government and Gujarat Mineral Development Corporation Ltd (GMDC). Production could start 12- 18 months post finalisation of the JV. In FY 2025, we expect the company to register an EPS of Rs 18.2, which is likely to rise to Rs 22.1 in FY 2026. The scrip trades at Rs 295. P/E on FY 2026 EPS works out to 13.3.

PERFORMANCE INDICATORS (Rs. in crore)