Date:04/02/2005 URL: http://www.thehindubusinessline.com/2005/02/04/stories/2005020402731300.htm

Back Fertiliser stocks see greener pasture on decontrol hopes

Our Bureau

Kolkata , Feb. 3

FERTILISER stocks today saw a very brisk activity on the market on strong buying interest.

Chambal Fertiliser was the biggest gainer among the pack and moved up 11 per cent while Nagarjuna Fertiliser improved 8.48 per cent, Deepak Fertilizer 5.46 per cent, Madras Fertilizer 4.49 per cent and Gujarat Narmada by 3.51 per cent.

Tata Chemicals, Indo Gulf and GSFC were also among the gainers.

Stocks with lower P/E multiples appear to be target of re-rating.

According to analysts and dealers, in view of Government's favourable disposition towards fertiliser subsidy reduction issue, a section of investors has reportedly opted for paying premiums to the counters.

Mr Shashin Upadhya of Anagram Stockbroking said partial decontrol of fertiliser industry over a period has provided a new business dynamics for the efficient manufacturers. "Although the industry does not seem poised for a total decontrol, it is very clear that Government is not interested in increasing subsidies.

This is also triggering consolidation and further mergers and acquisition is expected going forward," he added.

According to Mr R. Agarwal, Chief Analyst of CD Equisearch, the market is expecting further announcement in the forthcoming Budget in terms of liberalising the sector from controls.

The sectoral stocks, which so far attracted discounting in valuation from the market, are now looking up in view of change in the prospects.

"Moreover, manufacturers in anticipation of the change have been pursuing business and financial restructuring," he added.

According to Mr Gul Teckchandani, CIO Sun F&C, shortage of urea in the domestic market and hardening of fertiliser prices are also serving as positives for the domestic players. "It is expected that tight supply position would continue for some time. As the domestic fertiliser sector gradually goes into free market regime and Government intervention comes down, pricing power for the manufacturer would improve and cash flow would go up," he added.