National Fertilizers Limited

Background
National Fertilizers Limited (NFL) is an Indian state-owned corporation that manufactures chemical
fertilizers, organic fertilizers and industrial chemicals. As of 2018, it was the second largest producer
of fertilizers in India. NFL, incorporated in 1979 is India's largest Central Public Sector Enterprise
(Government of India Undertaking) in the Fertilizer Sector with a turnover of over Rs. 75 billion. It
has an authorized capital of Rs. 1000 crore and a paid-up capital of Rs. 490.58 crore out of which
Government of India’s share is 74.71 % and 25.29 % is held by financial institutions & others. Coming
under the administrative control of Ministry of Chemicals and Fertilizers, it is the second largest
producer of the key fertiliser urea in India. It operates with the vision - "To be a leading Indian
company in fertilizers and beyond, with commitment to all stakeholders."

NFL was granted the Mini-Navratna status with additional autonomy due to its profitable
operations. In 2001, the company went public, with listings on the Bombay Stock Exchange and
the National Stock Exchange. The company's marketing network comprises central marketing office
at NOIDA, four zonal offices at Bhopal, Lucknow and Chandigarh and Hyderabad, 14 state offices and
39 area offices spread across the country.

The company is also playing a pivotal role in extending various agricultural extension services such as
educating the farmers on judicious use of fertilizers along with total know-how on improved and
scientific methods of cultivation to improve soil productivity. The company is providing support to
the farmers by undertaking soil analysis for Macro & Micro Nutrients through its static & mobile soil
testing vans for balanced use of fertilizers. The company participates in various Krishi Melas
organized by leading agriculture universities for direct & effective communication with farmers.
The company is presently having 6 static and 2 mobile soil testing laboratories. Using these soil
testing labs, the company is undertaking soil tests for macro & micro nutrients and also providing
soil health cards to the farmers to enhance balanced use of fertilizers. Apart from this, the company
is also having 100 Kisan Suvidha Kendra’s (KSKs) to provide all agro products and services to the
farmers under single window concept.

Company is constantly working towards inclusive growth in society through CSR. Through its CSR
programmes, Company is supporting sectors like health, education, skill development, environment
and empowerment of underprivileged sections of the society. One of the major CSR projects of FY
2020-21 that the company undertook was for Training of Apprentices at a budget of Rs. 152.78 Lakh
over and above the minimum mandate of 2.5% of total manpower. The project was envisaged to
help youth in various placements linked skill training and capacity building through practical
industrial experience.
Financials
Performance Highlights
1. Production of Urea was 37.99 Lakh MT (capacity utilization 117.59%) as against 37.27 Lakh
MT (capacity utilization 115.35%) during CPLY.
2. Company achieved total sale of 59.37 Lakh MT fertilizers as against 57.03 Lakh MT during
CPLY
3. Revenue from operations Rs. 11905.66 crore
4. The Revenue from other than own Manufactured Urea was at Rs 4042.61 crore, which is
33.96% of total revenue of Rs 11905.66 crore.
5. The Revenue from Bentonite Sulphur was Rs 49.51 crore as against Rs 21.17 crore during
CPLY i.e. increase of Rs 28.34 crore (133.87%).
6. The profit from Trading activities was Rs 262.52 crore (sale of Rs 3358.25 crore) as against Rs
176.62 crore (sale of Rs 3777.68 crore) during CPLY i.e., increase of Rs 85.90 crore (48.64%).
7. Company’s Profit Before Tax (PBT) of Rs 343.46 crore during the year as compared to Loss
Before Tax of Rs 252.71 crore (after adjusting exceptional item of Rs 388.85 crore for
reversal of fixed cost subsidy) during CPLY i.e., increase of Rs 596.17 crore.
8. Company’s Profit After Tax (PAT) of Rs 249.63 crore during the year as compared to Loss
After Tax of Rs 171.01 crore during CPLY i.e., increase of Rs 420.64 crore.

Earnings Trend: Earnings have declined by 24.6% per year over the past 5 years.
Accelerating Growth: Became profitable in the last year, making the earnings growth rate difficult to
compare to its 5-year average.
Earnings vs Industry: became profitable in the last year, making it difficult to compare its past year
earnings growth to the Chemicals industry (46.6%).
Debt Level: Debt to equity ratio (83.7%) is considered high.
Reducing Debt: Debt to equity ratio has reduced from 380.3% to 83.7% over the past 5 years.
Interest Coverage: Interest payments on its debt are not well covered by EBIT (1.9x coverage)
Dividend Payout: The company has not reported any recent payouts.

The company reported a decent full year result with improved earnings and profit margins, although
revenues were weaker. Over the last 3 years on average, earnings per share has fallen by 50% per
year but the company’s share price has increased by 7% per year, which means it is well ahead of
earnings.
Locations

NFL initially operated two plants in Bathinda and Panipat. In 1978, the ownership and operations of
the Nangal plant of FCI was transferred to NFL. The Govt. of India, in 1984, entrusted the company
to execute the country's first inland gas-based fertiliser project of 726,000 tonnes urea capacity in
District Guna of Madhya Pradesh, and commercial production started from 1 July 1988. The
company built and commissioned its Vijaipur plant in Guna district of Madhya capacity was doubled
to 1.45 million tonnes in 1997.
Shareholding

Management

Chairman & Managing Director

Shri Virendra Nath Datt took over the additional charge of Chairman & Managing Director of the
Company on 3rd June 2020. Shri Datt has been associated with the Company as Director (Marketing)
since October 2018.

Other Board Members

Name Designation
A K Jain Executive Director
Anil Motsara Chief General Manager
Ashutosh Arora Chief General Manager
Dinesh Sood Chief General Manager
J P Sachdev Executive Director
N S Verma Executive Director
Nirlep Singh Rai Director - Technical
R K Gogia Executive Director
Ratnakar Mishra General Manager
Sohan Lal Executive Director
Yash Paul Bhola Director - Finance & CFO
Industry Structure and Developments
Manufacturing Plants
NFL has five gas-based Ammonia-Urea plants viz. Nangal & Bathinda plants in Punjab, Panipat plant
in Haryana and two plants at Vijaipur at District Guna, in Madhya Pradesh. The Panipat, Bathinda &
Nangal plants were revamped for feed stock conversion from Fuel Oil to Natural Gas, an eco-friendly
fuel during 2012-13 / 2013-14. Vijaipur plants of the company were also revamped for energy
savings & capacity enhancement during 2012-13, thus increasing its total annual capacity from 20.66
LMT from 17.29 LMT, an increase of 20%. The company currently has a total annual installed
capacity of 35.68 LMT (Re-assessed capacity of 32.31 LMT) & is the 2nd largest producer of Urea in
the country with a share of about 16% of total Urea production in the country.
Company has a Bio-Fertilizers Plant at Vijaipur with a capacity of 600 tons of solid & liquid Bio-
Fertilizers to produce four strains of Bio-Fertilizers viz. PSB, ZSB, Rhizobium and Azotobacter are
produced.

Products
NFL is engaged in manufacturing and marketing of Neem Coated Urea, four strains of Bio-Fertilizers
(solid & liquid), Bentonite Sulphur and other allied Industrial products like Ammonia, Nitric Acid,
Ammonium Nitrate, Sodium Nitrite and Sodium Nitrate.

NFL manufactures and markets four types of Bio-Fertilizers, Rhizobium, Phosphate Solubilising
Bacteria (PSB) and Azotobacter and Zinc Solubilising Bacteria (ZsB). Starting with a mere 23 MT
production in 1995-96, the production has risen to 630 MT (Approx) in 2019-20. The Company
presently markets its bio-fertilizers in Madhya Pradesh, Maharashtra, Uttar Pradesh, Uttrakhand,
Chattisgarh, Bihar, Jharkhand, Punjab, Haryana, Rajasthan, Andhra Pradesh, Telangana.

National Fertilizers Limited, in the year 2002, standardized the techniques for production of Neem
Coated Urea in situ, at its Panipat Unit. Today the company has facilities at all its 3 Units namely
Nangal, Bathinda, Panipat and Vijaipur, for production of Neem Coated Urea. Neem coated urea
produced at these production facilities is marketed in all the 14 States where the company is
marketing its Urea.

In Dec 2017, 25000 MTPA Bentonite Sulphur Plant was commissioned at NFL Panipat Unit. Bentonite
Sulphur is straight Sulphatic fertilizer containing Sulphur and Bentonite clay. The Sulphur present is
90% in these fertilizers and is the highest among other category of Sulphated fertilizers. This makes
Bentonite Sulphur more effective in terms of supplying Sulphur to Crops.

The brand name of the company is popularly known in the market as ‘KISAN’. The company has also
started production of certified seeds under its Seeds Multiplication Program for sale under its own
brand name as Kisan Beej.

Imports & Trading

Apart from manufacturing business, the company is also expanding its business, in a consistent &
phased manner, by way of imports and trading of various agro-inputs like Non-Urea Fertilizers,
Certified Seeds, Agrochemicals, Bentonite Sulphur, City Compost through its existing PAN India
dealer’s network under single window concept.

Consultancy
NFL is well known for taking up assignments in India and abroad in the fields of:
• commissioning activities of plant/ equipment
• heavy equipment erection supervision
 • complete operation of chemical plants on a continuous basis
• overall maintenance of plants; specialised maintenance and repair services/shutdown/turn
around jobs
• special maintenance and repair services for rotatory equipment, like pumps, compressors,
turbines etc.
• energy audits leading to energy savings safety audit services
• design and monitoring of environment protection systems
• NDT, corrosion and RLA services

Marketing setup
NFL Marketing Network comprises of Central Marketing Office at NOIDA, four Zonal Offices at
Bhopal, Lucknow, Chandigarh & Hyderabad, 15 State & 3 UT Offices and 35 Area offices spread
across the marketing territory of NFL.
The company has 10 Soil testing laboratories (6 Static & 4 Mobile) with annual capacity of testing
around 65000 samples for Macro Nutrients and 10000 samples for Micro Nutrients and are fully
dedicated to the testing of soil health helping farmers to facilitate balanced fertilization.

Research Centers
The company has a R&D set up at each Manufacturing Unit i.e. at Nangal, Panipat, Bathinda and
Vijaipur as well as at Corporate Office (Noida) which are primarily focused and undertakes various
innovation studies to develop new, efficient & safer processes, value added products and suggest
implementation of energy saving schemes.

Assignments taken abroad

• Assistance in checking the operability and maintainability of PETROBRAS
• Fertilizer Plant in Brazil and training of Specialist Welders.
• Assistance in operation and maintenance of Ammonia and Methanol Complex of Gulf
Petrochemical Industries Co., Bahrain.
• Assistance in operation and maintenance of Ammonia Plant of NAPETCO, Libya through
UNIDO.

Projects completed / underway

Revival of closed Urea plant of FCIL at Ramagundam Plant in Joint Venture mode: The company is
currently executing the revival of closed Urea plant with annual installed capacity of 12.71 LMT
through a Joint Venture Company namely Ramagundam Fertilizers & Chemicals Limited (RFCL) along
with EIL, FCIL and other partners. The cost of project is ` 6165 crore with equity participation of 26%
each of NFL and EIL, 11% each of FCIL and State of Telangana, 14.3% of GAIL and 11.7% of a
Consortium led by M/s HTAS, Denmark.

This project is expected to commence its commercial production by November 2020.

NFL has also been mandated to market 100% of Urea to be produced by RFCL

Seeds Processing Plant at Bathinda, Panipat and Indore

The company has recently commissioned its two seeds processing plant at Bathinda and Panipat
recently and one more plant at Indore is being set up. The company would be processing the seeds
to be grown & harvested under its flagship Seed Multiplication Program which was otherwise being
processed through outsourcing to third party. The total seeds processing capacity of the company
after commissioning of all the 3 plants would be 1.20 Lakh quintals.
Integrated Energy Saving Projects
In order to meet the new energy norms stipulated under NUP-2015, the company is already in the
process of setting up Gas Turbine Generators along with Heat Recovery Steam Generation (HRSG)
Unit at Panipat, Bathinda & Nangal Units with a total project cost of ` 675 crore. These schemes are
expected to be commissioned by end of December 2020. Besides this, the company is also
implementing energy reduction schemes at its Vijaipur Units to meet these new energy norms and
would be commissioned in a phased manner by March/April’ 2021.

Setting up of manufacturing facilities for Agrochemicals at Bathinda

In order to make self-sufficient in Agro-Chemical’s business, NFL is setting up an Agro-chemical

manufacturing facilities at Bathinda with total Capex of the project approx. ` 9.30 crore.
The plant is expected to be completed during 2021-22.

Corporate Social Responsibility (CSR)

The company is implementing various developmental activities under its Corporate Social
Responsibility (CSR) with focus on Health, School Education and Nutrition. As per the guidelines from
Department of Public Enterprise (DPE) the company is spending more than 60% of its allocated
budget on the annual CSR themes i.e. Health, School Education and Nutrition.
The company continue taking up wide range of welfare activities in different areas like Sanitation,
Solar lights & Panels, Environment etc. One of the major CSR projects the company undertook
is Improvements to Channenhalli Tank at Channenhalli Village, Bangalore Urban District for budget
of Rs. 300 Lakh for the sustainable development of underdeveloped village. The project is likely to be
completed in FY 2020-21. The company also supported Government of India and State Government
in Disaster Management by contributing and taking different initiatives for relief from likes COVID-19
pandemic, Punjab Floods, Cyclone “Fani” and flood affected Assam.
SWOT Analyses
Strengths
• Company with Zero Promoter Pledge
• FII / FPI or Institutions increasing their shareholding
• Rising Delivery Percentage Compared to Previous Day and Month, Strong Volumes
• Stocks where Mutual Funds Increased Holdings in Past Month
• Second largest producer of urea in the country with 14.2% market share

Opportunities
• High Momentum Scores (Technical Scores greater than 50)
• Venturing in to non-urea fertilizers by manufacturing/trading

Weaknesses
• High PE with Negative ROE
• Declining profits every quarter for the past 4 quarters with falling Profit Margin
• Low Piotrowski Score: Companies with weak financials
• Recent Results: Declining Operating Profit Margin and Net Profits (YoY)

Threats
• Degrowth in Revenue, Profits and Operating Profit Margin in recent results (QoQ)
• Stocks with high PE (PE > 40)
• Over dependence on Urea
• Large scale of operations in international chemical market may lead to lower pricing power