New Delhi [India], April 2 : The gross margins of fertiliser makers are unlikely to improve in tandem with the previous financial year 2024-25, despite the latest raise in subsidy rates by the central government, asserted brokerage firm Anand Rathi.
The brokerage firm has argued that a considerable increase in global retail market prices, coupled with rupee depreciation, are the key reasons behind the projections.
Anand Rathi said back-of-the-envelope calculations suggest that gross margins, on average, for H1 2025-26 are likely to be 32 percent versus 35 percent in the same period last year (assuming the status quo in farmgate and retail market prices).
At the same time, it believes the industry is likely to benefit from carry-over inventories in H1 2025-26.
"Overall, we believe this to be neutral to positive for the complex fertilizer industry," Anand Rathi said.
"The government increasing subsidy/tonne for H1 FY26 would result in similar/marginal contraction in gross margin for most of the complex fertiliser grades. Ahead, we believe that the sector will focus on manufacturing more NPK than DAP, as the former would be more margin accretive," it added.
For the farmers, the brokerage firm said they believe that the farming community is not likely to be materially impacted by higher retail market costs as the government continues to bear inflated costs through higher subsidies.
On March 28, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal of the Department of Fertilizers for fixing the Nutrient Based Subsidy (NBS) rates for kharif season 2025 (April-September) on Phosphatic and Potassic fertilizers.
The budgetary requirement for the Kharif season would be approximately Rs 37,216.15 crore, which is approximately Rs 13,000 crore more than the budgetary requirement for Rabi seasons 2024-25.
India has three cropping seasons: Summer, Kharif, and Rabi. Kharif crops, sown during June- July and dependent on monsoon rains, are harvested in October- November. Rabi crops, sown in October-November, are harvested from January, depending on their maturity. Summer crops are produced between the Rabi and Kharif seasons.
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