National Fertilizers snaps 6-day winning streak, share price falls over 6%

National Fertilizers (NFL) share price fell over 6 percent in the morning on BSE on April 13, trading in the red after six consecutive sessions of gains.

In a regulatory filing on BSE on April 13, the company said, "The subsidy income on urea production from Vijaipur-I from 02.04.2014, up to its re-assessed capacity, would come down by Rs 665 per MT (Rs 2,300—Rs 1,635). For the period 02.04.2014 to 31.12.2019, this would result in lower subsidy income by Rs 330.41 crore."

The company is manufacturing urea at its units in Panipat, Bathinda, Nangal and Vijaipur (Vijaipur- I and Vijaipur II). Urea is covered under the subsidy scheme of the Government of India.

On April 9, the company told BSE that ICRA had downgraded its long term-CC limits rating to 'ICRA AA-' from 'ICRA AA'. The outlook was revised to 'stable' from 'negative'.

ICRA revised ratings on term loans to 'ICRA AA-' from 'ICRA AA'. The outlook was revised to 'stable' from 'negative'.

The rating downgrade factors in the weakening cost competitiveness of NFL in urea operations, arising from a sharp rise in energy consumption in the current fiscal, which was brought about by unscheduled plant outages, ICRA said in a note.

Besides, production of urea beyond RAC was also less remunerative in a scenario of subdued international prices, which impacted its cash accruals.

With tightening of energy norms by the government from FY2021, NFL’s cash accruals would further take a hit, even though the company was embarking on an energy-saving project that would partially mitigate the risk, ICRA said.

The downgrade in rating also factors the weakening credit metrics of the company due to elevated debt, brought about by higher subsidy receivables and increase in the scale of trading operations leading to higher working capital borrowings and large debt-funded capital expenditure, and investments in the Joint venture company, Ramagundam Fertilisers & Chemicals Limited (RFCL), ICRA added.