Fertilizers are crucial to agricultural production as they provide the vital nutrients required by agricultural crops. There has been a constantly rising demand for fertilizers as agriculture continues to flourish in India. Although India is an agrarian economy, it is home to a large number of small and marginal farmers who have to deal with the low quality and productivity of crops. This is because they produce crops on smaller pieces of land and with time, the soil fertility diminishes. To deal with this, large quantities of nitrogen fertilizers are being demanded across the country.
As fertilizer demand continues to rise, the Indian government has also introduced various economic reforms to ensure that farmers can avail fertilizers at affordable prices. Here’s a detailed look at the fertilizer sector in India for investors looking to invest in this sector.
What does the Indian fertilizer industry comprise of?
Today, India boasts of many top-class private and public fertilizer companies that have driven the sector’s growth over the last few decades. These companies offer a range of fertilizer products, including seeds and fungicides.
The main products offered by the fertilizer sector in India include nitrogenous fertilizers, complex fertilizers and phosphate-based fertilizers. Urea, a nitrogen source, remains at the top of the list in fertilizer consumption. In 2020 alone, the consumption of this fertilizer in India reached more than 33 million tons.
Fertilizer industry – what do the statistics say?
By 2020, the Indian fertilizer sector had already achieved a valuation of Rs. 887 billion. This growth has been mainly attributed to increased fertilizer consumption to achieve sustainable grain production in the country. As per projections, the industry is expected to achieve a CAGR of 11.9% from 2022 to 2026. With this fast-paced growth, the fertilizer sector in India is likely to establish a strong global impression.
Source: Mapsofindia
The table below shows key statistics of the Indian fertilizer industry:
| Industry size | 56 large-scale plants that produce phosphatic, nitrogenous, and complex fertilisers72 small and medium fertilizer companies that offer single super Phosphate (SSP) |
| Product offerings | The main products offered by the fertilizer sector in India include nitrogenous fertilizers, complex fertilizers and phosphate-based fertilizers. |
| Global ranking | Indian fertilizer industry ranks 3rd in world production. |
Growth drivers for fertilizer industry
As against other sectors, the fertilizer sector has not seen a major impact of the COVID-19 pandemic since it was exempted from most lockdown restrictions. However, there were other challenges during the lockdown phase, including a shortage of labour, raw material shortage, and the subsequent impact on shipments.
Interesting fact
India is the world’s second-largest fertilizer consumer as it consumes more than 55 million tons of fertilizers annually.
Some of the key factors that are driving growth in the sector are:
- India is known as an agricultural nation. Since it is one of the world’s largest agricultural producers offering crops like rice, pulses, wheat, potatoes, groundnut, etc, the higher demand for fertilizer products is going to continue.
- In the long run, rising agricultural production to cater to the world’s growing food demands are expected to drive fertilizer demand in the country.
- The Indian government has also been focusing on extending maximum support to farmers by allowing easier access to subsidized fertilizers and newer technologies. This boosts agriculture and, thereby, fertilizer production.
- There has also been a significant surge in fertilizers’ production capacities across India. This is said to be driven by government initiatives to cut down on fertilizer imports and boost domestic fertilizer production.
Key challenges faced by the fertilizer industry
Fertilizer manufacturers in the country are continuing to face some challenges. These include
- Non-availability of raw materials
- Rising input costs
- Insufficient long-term and favourable policies
- Large-scale imports due to limited domestic production that cannot cater to rising demand
Top stocks in the Indian fertilizer sector by market capitalization
Coromandel International Ltd.
One of India’s leading agri solutions providers, this fertilizer company offers fertilizers, various specialty nutrients, and also pesticide products. It also manufactures and sells phosphatic fertilizers like Di-ammonium phosphate and Single Super Phosphate. Through its wide range of products and services, the company covers a large part of the farming value chain. Lately, the company has expanded its presence in retail agri space as well as lifestyle segments to become an end-to-end plant nutrition solutions provider. Apart from domestic supply, the company is also considering establishing business in Latin America. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 27,378 crores |
| PE Ratio | 17.93 |
| Return on Equity | 26.56% (June’22) |
| Debt Equity Ratio | 0.06 (June’22) |
| Promotor’s Holdings | 57.53% |
| Share price | Rs. 946.80 (27 June 2022) |
| Dividend Yield | 1.29% |
Chambal Fertilisers & Chemicals
The company is the largest manufacturer of urea in India. Apart from fertilisers, the company also offers phosphoric acid, textile, shipping, and other agri inputs. It is known for its wide distribution network that includes 3,700 dealers and 50,000 retailers. The company has strong presence in Haryana, Uttarakhand, J&K, Punjab, Bihar, West Bengal, Uttar Pradesh, Madhya Pradesh, Rajasthan, among other states. Thus, it enjoys access to nearly 90% of the entire Indian fertilizer market. The company closed down its software business in 2021 by selling off assets and transferring liabilities of its software segment. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 11,838 crores |
| PE Ratio | 7.57 |
| Return on Equity | 26.89 (June’22) |
| Debt Equity Ratio | 0.68 (June’22) |
| Promotor’s Holdings | 60.46% |
| Share price | Rs. 287.80 (27 June 2022) |
| Dividend Yield | 3.16% |
Gujarat Narmada Valley Fertilizers & Chemicals Ltd.
Gujarat Narmada Valley Fertilizers & Chemicals Ltd. (GNFC) manufactures and sells fertilizers, chemicals, and information technology. It is one of India’s fertilizer sector leaders with fertiliser offerings that include calcium ammonium nitrate, urea and ammonium nitro phosphate offered under the brand name NARMADA. It also imports muriate of potash (MOP), urea, and di-ammonium phosphate (DAP). Since its inception, the company has achieved extensive growth while respecting the environment and adopting a progressive vision strategy. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 9,045 crores |
| PE Ratio | 5.29 |
| Return on Equity | 24.33% (June’22) |
| Debt Equity Ratio | 0.00 |
| Promotor’s Holdings | 41.18% |
| Share price | Rs. 612.05 (27 June 2022) |
| Dividend Yield | 1.37% |
Deepak Fertilisers & Petrochemicals Corporation Ltd
Deepak Fertilisers and Petrochemicals Corporation Ltd. (DFPCL) is one of India’s leading fertilizer and industrial chemicals producer. Established in 1979, DFPCL is today a multi-product company with an annual turnover of more than USD 1 billion. It has a diverse product portfolio including technical ammonium nitrate, bulk and specialty fertilisers, farming diagnostics and solutions, industrial chemicals, and value added real estate. It has manufacturing facilities spread across states of Maharashtra, Andhra Pradesh, Haryana and Gujarat. The company now offers high-quality products using its state-of-the-art technologies in manufacturing. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 7,326 crores |
| PE Ratio | 10.68 |
| Return on Equity | 20.59% (June’22) |
| Debt Equity Ratio | 0.68 |
| Promotor’s Holdings | 47.58% |
| Share price | Rs. 597.90 (27 June 2022) |
| Dividend Yield | 1.23% |
Fertilisers and Chemicals Travancore Ltd.
Fertilisers & Chemicals Travancore Ltd is a manufacturer of fertilizers, chemicals and petrochemicals. The company offers a diverse range of products, including some of the finished products like complex fertilizers, bio fertilizers, ammonium sulphate, and caprolactam. It mainly exports products like caprolactam and ammonium sulphate. Some of the byproducts of the company include carbon dioxide gas, nitric acid & soda ash. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 6,244 crores |
| PE Ratio | 17.66 |
| Return on Equity | 186.55% (June’22) |
| Debt Equity Ratio | 9.53 |
| Promotor’s Holdings | 90% |
| Share price | Rs. 99.65 (27 June 2022) |
| Dividend Yield | – |
Conclusion
The faster growth of the Indian agricultural sector in the last few years is highly attributed to the country’s strong fertilizer industry. Because of its technically sound and technologically advanced fertilizer manufacturers, the country’s food industry has been flourishing over the years. Needless to say, the fertilizer sector is one of the most booming industries in the country and worth exploring for investment opportunities.
