Fertilizer Industry in India - mytclworld

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					Fertilizer Industry in India
          Alpa Mishra, 26th Sept 2006

    Industry Scenario

•    Agriculture and allied Services are at 2.3% against the
     overall growth in GDP at 8.1% in 2005-06
•    The target annual growth rate in agriculture as per the Tenth
     Plan is 4%. This can be met by:-
     -   Govt’s positive stance
     -   Higher food grain requirement
     -   Change in cropping pattern
     -   Growth in irrigation and
     -   Favorable Change in policies
•    Fertilizer consumption in India to grow at a CAGR o 4.6%
     during FY04-08

    Key Success Factors in this industry
•    Favorable Policy :-
      -   switching over to gas from non-gas based urea producers
      -   Theme of balanced nutrient usage would put complex & DAP
          manufacturers a stair over Urea producers
      -   Favorable Demand-Supply scenario ( both domestic & global)
      -   Assured feedstock arrangement ( in phosphates)
•    Assured backend and Diversification to enhance revenues
      -   Increase global tie ups to secure raw materials
      -   Chemicals portfolio offers great synergy

Sustainable Competitive Advantage
Sl No.   The reasons for being              The reasons for being
         successful                         unsuccessful
   1     Focus on core command areas        Non availability of gas (proximity
                                            to gas pipeline/single feedstock)
   2     Product packaging and Brand        Securitization of Phosphoric acid
         Image leading to higher
   3     Infrastructural support- port &    Non favorable Govt. policies
         Production site
   4     Offering a portfolio of products
         (own capacity & trading)
   5     Energy Efficient Technology

   6     Adherence to Environment norms

Competitor Activities Are in the
following areas

•   RM Securitization
•   Stage 3 implementation
•   Capacity Expansion
•   Growth in consumption
•   Changing revenue Streams
•   Consolidation

    RM Securitization
•    GNFC in urea- No plans of capacity expansion. A switch
     over to RLNG from LSHS at capex of Rs. 7500 Mn in two
     years on the cards.
•    GFCL imports its entire phosphoric acid requirement from
     GCT, Foskor and Mitsui & Co
     -   GFCL has commenced setting up a 10,000 Mt and 15,000 MT Storage
         tanks for Ammonia and Phosphoric Acid at a cost of Rs. 200 Mn and Rs.
•    DFPCL-
     -   the DUPL pipeline is progressing as per schedule,
         additional supply of gas would flow in by Q4-FY07
     -   Is putting up Ammonia Storage tank

Stage 3 implementation

•   Naptha based units along the HBJ pipeline to be
    given 2 years would have to convert to gas/
•   Units not along HBJ pipeline and based on
    FO/LLSHS to be given 3 years.

 Capacity Expansion- Urea

(‘000 tonnes)                Location State          Additional Status           Type of       Completion
                                                     capacity                    project       by

BVFL                         Namrup II    Assam      240             UI          D             2006-07
Indo Gulf Fertilizers        Jagdishpur UP           244             UI          D             Mid 2007
Indo Gulf Fertilisers        Jagdishpur UP           1140            UI          B             2008-09
Kribhco                      Hazira,Phase IGujrat    1056            Proposed    G             2009-10
IFFCO                        Phulpur I & II UP       560             UI          D             Apr-07

 UI: Under implementation,         G: Greenfield,   B: Brownfield,        D: Debottlenecking

 GFCL proposed to enhance its production capacity by 4
 lakh tonnes at an outlay of Rs. 800 Mn.
DFPCL- the new Ammonium Nitrate (AN) facility at Paradip
is expected to add revenues and bottomline from Q4-FY08
Growth in Consumption

•   There is a Strong demand pull for Fertilizers:-
    - Urea Demand to grow at CAGR of 3.3%
    - DAP demand to grow at a CAGR of 5.6%
•   Increase Availability of Value added products
    along with increase in Farmer Awareness
•   Partner with the farmers to increase yield leading
    to use of nutrient balanced fertiliser

    Other Revenue Streams
•    GFCL has about 250 acres of spare land
     -   150 acres to be utilised for future expansion
     -   Balance to be sold to Group companies
     -   Possibility of setting up an SEZ (KG basin )
•    CFL plans to increase non-subsidy related product share in
     topline to 25% by 2008 from the current 10%
     -   Introduction of G Sulphur
     -   Management fees by rendering technical services to
     -   Hinted at entering drip irrigation
•    DFPCL has proposed Rs 6.7 bn capex in Chemical & Mall
     business by FY06-08