Satish Viras-MFM Roll No.

358

Sector- Fertilisers

Rashtriya Chemicals and Fertilizers Limited

In the present scenario, there are more than 57 large and 64 medium and small fertilizer
production units under the India fertilizer industry. The main products manufactured by the
fertilizer industry in India are

• Phosphate-based fertilizers
• Nitrogenous fertilizers
• Complex fertilizers

The fertilizer industry in India with its rapid growth is all set to make a long-lasting global
impression.

RASHTRIYA CHEMICALS & FERTILIZERS LTD. (RCF)

Rashtriya Chemicals & Fertilizers Limited (RCF), a “Mini-Ratna”, is a leading fertilizers and
chemicals manufacturing company with about 75% of its equity held by the Government of
India. It has two operating units, one at Trombay in Mumbai and the other at Thal, Raigad
district, about 100 KM from Mumbai.

RCF manufactures Urea, Complex Fertilizers, Bio-fertilizers, Micro-nutrients, 100 per cent
water soluble fertilizers, soil conditioners and a wide range of Industrial Chemicals. It
produces around 25.00 Lakh MT Urea, 4.75 Lakh MT Complex fertilizers and 4.5 Lakh MT of
Industrial Chemicals every year. The company is a household name in rural India with brands
“Ujjwala” (Urea) and “Suphala” (Complex Fertilizers) which carry a high brand equity. RCF
has countrywide marketing network in all major states. Besides fertilizer products, RCF also
produces a large number of industrial chemicals that are important for the manufacture of
dyes, solvents, leather, pharmaceuticals and a host of other industrial products.

1. Degree of Actual Potential of Competition

a) Rivalry Among the Existing Firm

There are many private and government companies which provide high quality
fertilizers. RCF ranks the fourth largest company in India with market capital of (Rs.
Cr.) 1,906.08. It facing competition from many private and public ltd. 1. Coromandel
International ltd, 2. Gujrat state fertilizers and chemicals ltd, 3. Chambal fertilizers and
chemical ltd. These are some top listed companies.

b) Threat of New Entrants-LOW

entry barriers are high supply side economies of scale present fertilizers industries
both public and private sector enjoy the benefit of scale economies of scale. The cost
per unit is low.

Some major reasons given below why the Threat of new entrants is low

• chemical and fertilizer it’s a capital-intensive industry it requires of huge

amount of capital and land.
• The existing players have good distribution channels & experience over the
years
 • Farmers having faith on their fertilizers which is incumbency advantage over
the new players.
• Restrictive government policy for new entrant in fertilizer industry.
• Social issue- people living near the fertilizer production plant may oppose it
because of heath related matter.

c) Threat of Substitute Product: Moderate

Wide range of substitutes are available they are Bio fertilizer, cattle dung, green
manures (house hold vegetable waste) and vermicompost (Round worms) price of
these organic fertilizer is low as compare to chemical fertilizer and it also protracts soil
from deteriorated. But the cost of switching to the substitute is high.

2. Relative Bargaining Power

a) Bargaining Power of Buyers: HIGH

The buyers here are farmers distributers like Krishi seva kendra and co-operatives
society thus the customers in large numbers. agriculture is a backbone of Indian
economy and fertilizers use the key oration in agriculture and government also keep
Control over the prices of the fertilizer because fertilizer cost accounts for a large
portion of crop production and verity of substitutes are available like bio-fertilizers and
cattle dung and prices of these fertilizers are low as compare to the inorganic
fertilizers.

b) Bargaining power of suppliers: HIGH

The fertilizer producers depend upon the suppliers of chemicals these are many but
the quality of raw-material is the key in production the other strong point on part of
suppliers is that they can get into forward integration. Thus, the bargaining power of
the suppliers is high.

2. Competitive Strategy Analysis

a) Cost Leadership

b) Differentiation

Ecological farming solutions.

Farmers generally use fertilizers to correct soil deficiencies. Fertilisers
contaminate the soil with impurities, which come from raw materials used for their
Manufacture.
 RCF aims replacing external inputs with natural processes and locally available
technology in order to empower farmers and create financial security. There are
studies which suggests that nitrogen-fixing legumes used as green manures can
provide enough biologically fixed nitrogen to replace the entire amount of synthetic
nitrogen fertilizer.

3. Corporate Strategy Analysis

a) Corporate-level strategy

• RCF contemplating to setup an organic fertilizer plant of 10,000 MT per Annum

capacity using STP & ETP sludge and gypsum, sourced in-house, at Trombay unit.
The project shall serve dual purpose of producing & marketing organic fertilizer as
per Government mandate as well as the disposal/management of STP & ETP
sludge with the manufacturing of value-added product giving clean environment.
Estimated Project Capital Cost is about `7 Crore.

• RCF is Planning to Installing new gas turbine in Trombay - New energy norms for
Trombay Urea are scheduled to be effective from 01.04.2020. RCF is implementing
some energy reduction projects in order to reduce impact on profitability.

• Existing steam turbine driven compressor will be replaced with motor driven at
estimated cost of `20.78 Crore to utilize power generated from GT. Saving expected
is `13.69 Crore per year. Scheme will be completed by Dec. 2020.

b) Business-level strategy

• RCF has formed a Joint Venture Company with Fertilizers and Chemicals
Travancore Limited (FACT) by incorporating FACT-RCF Building Products Ltd. to set
up a Rapid wall project at Kochi. Both your Company and FACT have 50:50 equity
holding in the Company. The plant is in operation. There is a substantial reduction in
the losses and products manufactured by the Company has very good potential,
therefore your Company would continue to support it in the coming years.
• RCF has formed a Joint Venture company, with Coal India Limited (CIL), GAIL (India)
Limited (GAIL) and Fertilizer Corporation of India Limited (FCIL), with the name
Talcher Fertilizers Limited for revival of FCIL’s fertilizer unit at Talcher by establishing
and operating coal gasification-based fertilizer complex. The equity participation of
RCF, CIL and GAIL is 29.67% each and that of FCIL is 10.99%. During the year, your
Company has infused `11.33 Crore in TFL.
b) Value Chain Analysis