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INDIAN FERTILISER INDUSTRY - Coromandel International

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Sambit Mishra
Sambit Mishra

The document provides an overview of the Indian fertilizer industry. It states that India is the third largest producer and consumer of fertilizers globally. It began in 1906 and expanded significantly in the 1940s. The industry includes both public and large private sector players. Urea, DAP, and SSP are the main fertilizers produced. Porter's five forces analysis finds threat of new entrants and rivalry to be low due to scale economies and lack of substitution. Supplier power is also low due to subsidies and agreements. The bargaining power of buyers is very low given lack of alternatives. A SWOT analysis of a major player finds their dealer network and R&D to be strengths, while dependence on imports and subsidies are weaknesses.

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INDIAN FERTILISER INDUSTRY S T R A T E G I C A N A L Y S I S & D E M A N D F O R E C A S T I N G A PRESENTATION
FERTILIZERS • India Is The Third Largest Producer And Consumer Of Fertilizer In The World. • Indian Fertilizer Industry Started In 1906 With SSP Production Facility At Ranipet Near Chennai. • Started Operating In A Big Scale Since 1940s, When The Fertilizer & Chemicals Travancore Of India Ltd. And The Fertilizers Corporation Of India Were Set Up In Kerala And Bihar • The Private Sector Produced 44.73 % Of Nitrogenous Fertilizers And 62.08 % Of Phosphatic Fertilizers In 2006-07. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
CONTD. • Total Production of Fertilizers In India-206.5mt . • The Production of Urea In India Has Reached Near Self-sufficiency. The Requirement of The Nitrogenous Fertilizers Is Met Through The Indigenous Industry • In The Case of Phosphatic Fertilizers, The Raw Materials And Intermediates Are Imported In Large Scale. • The Requirement of Potash (K) Is Met Entirely Through Imports. No Fertilizer Unit of India Has Any Reserve of Potash. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
MAIN FERTLIZERS PRODUCED IN INDIA • Urea •Di-ammonium Phosphate •Complexes •Single Super Phosphate Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
Porter's Model on Fertilizers Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
PORTER ANALYSIS THREAT of NEW ENTRANTS - LOW Entry Barriers Are High 1. Supply Side Economies Of Scale Present Fertilizer Industries Both Public And Private Sector Enjoy The Benefit Of Scale Economies Of Scale. The Cost Per Unit Is Low. 2. Demand Side Benefits Of Scale The Buyers I.E. Farmers Are Having Faith On The Fertilizers They Are Using. They Communicate To Each Other The Results Of Fertilizers. Hence Always Has Tendency To Buy What Others Are Buying. Hence For New Entrant It Is Difficult To Break This Attachment. 3. Customer Switching Costs It Is High. When Farmers Are Using Any Fertilizer, They Are Well Known About The Results, Also For That Fertilizers They Have Tie Up With The O-operative Societies, They Can Get It On Credit Basis Also. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
PORTER ANALYSIS RIVALRY - LOW • High Fixed Costs • Negligible Perceived Differences Between The Brands • Prices Fixed – Price Competition Impossible • FFBL Has Sole DAP Production Facility • Engro Imports And Sells DAP • A Little Competition Between These Two Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
PORTER ANALYSIS POWER of SUPPLIERS - LOW • Gas Subsidies Given By Government • Long Term Agreements • Firms Can’t Influence Market Prices • Hence Supplier Power Is Very Low Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
Porter Analysis THREAT of SUBSTITUTES - LOW • No Proper Substitutes • Natural Fertilizers Can Be Used But Not As Effective • Animal Manure Not Suitable For Commercial Production Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
Porter Analysis BARGAINING POWER of BUYERS - VERY LOW • No Alternate For Urea – Have To Buy It Irrespective Of Prices • Urea Used As An Alternate For DAP • When DAP Prices Increase, Urea Sales Increase And DAP Sales Fall Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
Industry Analysis • 65 Large-Sized Fertilizer Plants In India • 32 Units- Urea • 20 Units-DAP & Complex Fertilizers • 13 Units- Ammonium Phosphate & CAN • Nitrogenous Fertilizers-88% Urea ,10% DAP & 2% Ammonium Fertilizers. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
MAJOR PLAYERS OF PUBLIC SECTOR The Public Sector Companies In Indian Fertilizer Market Are Listed Below: • Fertilizer Corporation Of India Limited (FCIL) • Hindustan Fertilizer Corporation Limited (HFC) • Pyrites, Phosphates & Chemicals Limited • Rashtriya Chemicals And Fertilizers Limited (RCF) • National Fertilizers Limited (NFL) • Projects &Development India Limited (PDIL) • The Fertilizers And Chemicals Travancore Limited (FACT) • Madras Fertilizers Limited (MFL) • FCI Aravali Gypsum & Minerals India Limited, Jodhpur Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
PRIVATE COMPANIES • The Scientific Fertilizer Co Pvt Ltd • Coromandel Fertilizers • Deepak Fertilizers and Petrochemicals Corporation Limited • Devidayal Agro Chemicals • DSCL • Gujarat State Fertilizers &Chemicals Limited • Tata Chemicals Limited • Chambal Fertilizers • Nagarjuna Fertilizers and chemicals limited • Godavari Fertilizers and Chemicals limited • Zuari Industries Limited Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
INTERNAL FACTORS Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis Weight Rating Wtd. Score Comments STRENGTHS Dealer network 0.20 4 0.80 Strong dealer network allows fast sale Joint Ventures 0.10 4 0.40 JVs with resource rich countries for P & K fertilizers Tie-ups with key raw material suppliers 0.10 4 0.40 Already established tie-ups for urgent need of raw materials R&D Facility 0.05 5 0.25 High investment in R&D at Vishakapatnam for rock phosphate, increasing throughput Dedicated technical and managerial workforce 0.05 3 0.15 Strong brand image and retail network with dedicated workforce WEAKNESSES Old plants/ infrastructure 0.20 5 1.00 Unlike PSUs, Coromandel has new facilities Dependence on imports 0.05 2 0.10 Raw materials for phosphate fertilizers and potash fertilizers are in scarce in the country High requirement of Natural Gas 0.15 4 0.60 Low volumes in Urea, low requirement of natural gas Dependence on subsidies 0.10 4 0.40 profitability in non-urea output companies is less dependent on subsidy by GOI Total 1.00 4.10
EXTERNAL FACTORS Weight Rating Wtd. Score Comments OPPORTUNITIES Gaps between demand and supply 0.12 4 0.48 Is better equipped for capital expansion New JVs and consolidations 0.07 5 0.35 Company is more active De-regulation 0.10 4 0.40 Will have an upper-hand Fast growing population 0.08 4 0.32 Dependency on agriculture is high Investment in R&D 0.07 4 0.28 Has invested a lot in R&D End to End Solutions 0.05 4 0.20 Educating the farmers Brand Consciousness 0.05 5 0.25 Has built brand image THREATS Uncertainty of government policies 0.10 4 0.40 Have not much of a say Shortage of feedstock/ government approval 0.12 3 0.36 Uncertainties due to priority allocation of natural gas Large scale imports 0.05 3 0.15 Bulk Order Delays in subsidy payments 0.05 4 0.20 Always on time Proximity to feedstock 0.07 4 0.28 Decision as per ROI Change in Technology-plant as well as chemicals 0.07 5 0.35 Well ahead in technology implementation Total 1.00 4.02 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
STRATEGIC FACTORS Strategies Weights Rating Wtd. Score Comments S1 Dealers network 0.15 4 0.60 Strong dealer network allows fast sale S2 Joint Ventures 0.15 4 0.60 JVs with resource rich countries for P & K fertilizers W1 Old Plants/ Infrastructure 0.20 4 0.80 Unlike PSUs, Coromandel has new facilities W2 Dependence on Natural Gas 0.10 3 0.30 Urea production requires high amount of Natural Gas as input O1 De-regulation 0.05 3 0.15 Will have an upper-hand O2 Fast growing population 0.05 4 0.20 Dependency on agriculture is high T1 Shortage of feedstock 0.15 2 0.30 Priority Allocation T2 Proximity to raw materials 0.10 4 0.40 Decision as per ROI T3 Delay in subsidy payments 0.05 4 0.20 Always on time Total 1.00 3.50 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
DEMAND FORECAST YEAR SALES (000 TONNES) MOVING AVERAGE N P K TOTAL 2000 109.2 42.2 15.67 167.07 #N/A 2001 113.1 43.8 16.67 173.57 #N/A 2002 104.7 40.2 16.01 160.91 #N/A 2003 110.8 41.2 15.98 167.98 #N/A 2004 117.1 46.2 20.61 183.91 170.688 2005 127.2 52 24.13 203.33 177.94 2006 137.7 55.4 23.35 216.45 186.516 2007 144.2 55.2 26.36 225.76 199.486 2008 150.9 65.1 33.13 249.13 215.716 2009 155.8 72.7 36.32 264.82 231.898 2010 165.6 80.5 35.14 281.24 247.48 2011 173 79.1 26.76 278.86 259.962 2012 168.2 66.5 20.62 255.32 265.874 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
DEMAND FORECAST 0 50 100 150 200 250 300 1 2 3 4 5 6 7 8 9 10 11 12 13 Value Data Point Moving Average Actual Forecast Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
SWOT Analysis - Strengths Strength • Strategic tie-ups with key raw material suppliers • Offers complete range of agricultural needs of the farmers • Strong financials of the Company and healthy credit rating Weakness • Heavy dependence on Tunisia for phosphoric acid. • Lacks very strong operational efficiency Opportunity • Huge scope for increase in farm productivity • Crop protection business • Export Market • Growing demand for Specialty Nutrient O-S strategies • Investments to augment capacity and R&D facility of Vishakhapatnam plant • Acquisition of Sabero Organics enabling expansion of product range and size of market. • Raising working capital finance at competitive interest rates. • New plant, setting up in joint venture for raw material / products requirements O-W Strategies • Strong turnaround of Sabero Organics • Reduction of inventory levels. Threat • Insufficient Rainfall • Reduction in Nutrient based subsidy rates applicable for 2012-13 • Rising international raw material prices. • Rupee Depreciation • Delay in payment of fertilizer subsidy T-S strategies • Currently no tie-ups with suppliers for P and K nutrients. It should seek even more tie-ups with the suppliers. • Liaison with Government to increase MSPs • Focus on farm mechanization T-W Strategies • Raise MRPs along while increasing operational efficiency. • Backward integration for better efficiencies Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
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INDIAN FERTILISER INDUSTRY - Coromandel International

  • 1. INDIAN FERTILISER INDUSTRY S T R A T E G I C A N A L Y S I S & D E M A N D F O R E C A S T I N G A PRESENTATION
  • 2. FERTILIZERS • India Is The Third Largest Producer And Consumer Of Fertilizer In The World. • Indian Fertilizer Industry Started In 1906 With SSP Production Facility At Ranipet Near Chennai. • Started Operating In A Big Scale Since 1940s, When The Fertilizer & Chemicals Travancore Of India Ltd. And The Fertilizers Corporation Of India Were Set Up In Kerala And Bihar • The Private Sector Produced 44.73 % Of Nitrogenous Fertilizers And 62.08 % Of Phosphatic Fertilizers In 2006-07. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 3. CONTD. • Total Production of Fertilizers In India-206.5mt . • The Production of Urea In India Has Reached Near Self-sufficiency. The Requirement of The Nitrogenous Fertilizers Is Met Through The Indigenous Industry • In The Case of Phosphatic Fertilizers, The Raw Materials And Intermediates Are Imported In Large Scale. • The Requirement of Potash (K) Is Met Entirely Through Imports. No Fertilizer Unit of India Has Any Reserve of Potash. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 4. MAIN FERTLIZERS PRODUCED IN INDIA • Urea •Di-ammonium Phosphate •Complexes •Single Super Phosphate Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 5. Porter's Model on Fertilizers Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 6. PORTER ANALYSIS THREAT of NEW ENTRANTS - LOW Entry Barriers Are High 1. Supply Side Economies Of Scale Present Fertilizer Industries Both Public And Private Sector Enjoy The Benefit Of Scale Economies Of Scale. The Cost Per Unit Is Low. 2. Demand Side Benefits Of Scale The Buyers I.E. Farmers Are Having Faith On The Fertilizers They Are Using. They Communicate To Each Other The Results Of Fertilizers. Hence Always Has Tendency To Buy What Others Are Buying. Hence For New Entrant It Is Difficult To Break This Attachment. 3. Customer Switching Costs It Is High. When Farmers Are Using Any Fertilizer, They Are Well Known About The Results, Also For That Fertilizers They Have Tie Up With The O-operative Societies, They Can Get It On Credit Basis Also. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 7. PORTER ANALYSIS RIVALRY - LOW • High Fixed Costs • Negligible Perceived Differences Between The Brands • Prices Fixed – Price Competition Impossible • FFBL Has Sole DAP Production Facility • Engro Imports And Sells DAP • A Little Competition Between These Two Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 8. PORTER ANALYSIS POWER of SUPPLIERS - LOW • Gas Subsidies Given By Government • Long Term Agreements • Firms Can’t Influence Market Prices • Hence Supplier Power Is Very Low Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 9. Porter Analysis THREAT of SUBSTITUTES - LOW • No Proper Substitutes • Natural Fertilizers Can Be Used But Not As Effective • Animal Manure Not Suitable For Commercial Production Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 10. Porter Analysis BARGAINING POWER of BUYERS - VERY LOW • No Alternate For Urea – Have To Buy It Irrespective Of Prices • Urea Used As An Alternate For DAP • When DAP Prices Increase, Urea Sales Increase And DAP Sales Fall Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 11. Industry Analysis • 65 Large-Sized Fertilizer Plants In India • 32 Units- Urea • 20 Units-DAP & Complex Fertilizers • 13 Units- Ammonium Phosphate & CAN • Nitrogenous Fertilizers-88% Urea ,10% DAP & 2% Ammonium Fertilizers. Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 12. MAJOR PLAYERS OF PUBLIC SECTOR The Public Sector Companies In Indian Fertilizer Market Are Listed Below: • Fertilizer Corporation Of India Limited (FCIL) • Hindustan Fertilizer Corporation Limited (HFC) • Pyrites, Phosphates & Chemicals Limited • Rashtriya Chemicals And Fertilizers Limited (RCF) • National Fertilizers Limited (NFL) • Projects &Development India Limited (PDIL) • The Fertilizers And Chemicals Travancore Limited (FACT) • Madras Fertilizers Limited (MFL) • FCI Aravali Gypsum & Minerals India Limited, Jodhpur Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 13. PRIVATE COMPANIES • The Scientific Fertilizer Co Pvt Ltd • Coromandel Fertilizers • Deepak Fertilizers and Petrochemicals Corporation Limited • Devidayal Agro Chemicals • DSCL • Gujarat State Fertilizers &Chemicals Limited • Tata Chemicals Limited • Chambal Fertilizers • Nagarjuna Fertilizers and chemicals limited • Godavari Fertilizers and Chemicals limited • Zuari Industries Limited Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 14. INTERNAL FACTORS Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis Weight Rating Wtd. Score Comments STRENGTHS Dealer network 0.20 4 0.80 Strong dealer network allows fast sale Joint Ventures 0.10 4 0.40 JVs with resource rich countries for P & K fertilizers Tie-ups with key raw material suppliers 0.10 4 0.40 Already established tie-ups for urgent need of raw materials R&D Facility 0.05 5 0.25 High investment in R&D at Vishakapatnam for rock phosphate, increasing throughput Dedicated technical and managerial workforce 0.05 3 0.15 Strong brand image and retail network with dedicated workforce WEAKNESSES Old plants/ infrastructure 0.20 5 1.00 Unlike PSUs, Coromandel has new facilities Dependence on imports 0.05 2 0.10 Raw materials for phosphate fertilizers and potash fertilizers are in scarce in the country High requirement of Natural Gas 0.15 4 0.60 Low volumes in Urea, low requirement of natural gas Dependence on subsidies 0.10 4 0.40 profitability in non-urea output companies is less dependent on subsidy by GOI Total 1.00 4.10
  • 15. EXTERNAL FACTORS Weight Rating Wtd. Score Comments OPPORTUNITIES Gaps between demand and supply 0.12 4 0.48 Is better equipped for capital expansion New JVs and consolidations 0.07 5 0.35 Company is more active De-regulation 0.10 4 0.40 Will have an upper-hand Fast growing population 0.08 4 0.32 Dependency on agriculture is high Investment in R&D 0.07 4 0.28 Has invested a lot in R&D End to End Solutions 0.05 4 0.20 Educating the farmers Brand Consciousness 0.05 5 0.25 Has built brand image THREATS Uncertainty of government policies 0.10 4 0.40 Have not much of a say Shortage of feedstock/ government approval 0.12 3 0.36 Uncertainties due to priority allocation of natural gas Large scale imports 0.05 3 0.15 Bulk Order Delays in subsidy payments 0.05 4 0.20 Always on time Proximity to feedstock 0.07 4 0.28 Decision as per ROI Change in Technology-plant as well as chemicals 0.07 5 0.35 Well ahead in technology implementation Total 1.00 4.02 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 16. STRATEGIC FACTORS Strategies Weights Rating Wtd. Score Comments S1 Dealers network 0.15 4 0.60 Strong dealer network allows fast sale S2 Joint Ventures 0.15 4 0.60 JVs with resource rich countries for P & K fertilizers W1 Old Plants/ Infrastructure 0.20 4 0.80 Unlike PSUs, Coromandel has new facilities W2 Dependence on Natural Gas 0.10 3 0.30 Urea production requires high amount of Natural Gas as input O1 De-regulation 0.05 3 0.15 Will have an upper-hand O2 Fast growing population 0.05 4 0.20 Dependency on agriculture is high T1 Shortage of feedstock 0.15 2 0.30 Priority Allocation T2 Proximity to raw materials 0.10 4 0.40 Decision as per ROI T3 Delay in subsidy payments 0.05 4 0.20 Always on time Total 1.00 3.50 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 17. DEMAND FORECAST YEAR SALES (000 TONNES) MOVING AVERAGE N P K TOTAL 2000 109.2 42.2 15.67 167.07 #N/A 2001 113.1 43.8 16.67 173.57 #N/A 2002 104.7 40.2 16.01 160.91 #N/A 2003 110.8 41.2 15.98 167.98 #N/A 2004 117.1 46.2 20.61 183.91 170.688 2005 127.2 52 24.13 203.33 177.94 2006 137.7 55.4 23.35 216.45 186.516 2007 144.2 55.2 26.36 225.76 199.486 2008 150.9 65.1 33.13 249.13 215.716 2009 155.8 72.7 36.32 264.82 231.898 2010 165.6 80.5 35.14 281.24 247.48 2011 173 79.1 26.76 278.86 259.962 2012 168.2 66.5 20.62 255.32 265.874 Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 18. DEMAND FORECAST 0 50 100 150 200 250 300 1 2 3 4 5 6 7 8 9 10 11 12 13 Value Data Point Moving Average Actual Forecast Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis
  • 19. SWOT Analysis - Strengths Strength • Strategic tie-ups with key raw material suppliers • Offers complete range of agricultural needs of the farmers • Strong financials of the Company and healthy credit rating Weakness • Heavy dependence on Tunisia for phosphoric acid. • Lacks very strong operational efficiency Opportunity • Huge scope for increase in farm productivity • Crop protection business • Export Market • Growing demand for Specialty Nutrient O-S strategies • Investments to augment capacity and R&D facility of Vishakhapatnam plant • Acquisition of Sabero Organics enabling expansion of product range and size of market. • Raising working capital finance at competitive interest rates. • New plant, setting up in joint venture for raw material / products requirements O-W Strategies • Strong turnaround of Sabero Organics • Reduction of inventory levels. Threat • Insufficient Rainfall • Reduction in Nutrient based subsidy rates applicable for 2012-13 • Rising international raw material prices. • Rupee Depreciation • Delay in payment of fertilizer subsidy T-S strategies • Currently no tie-ups with suppliers for P and K nutrients. It should seek even more tie-ups with the suppliers. • Liaison with Government to increase MSPs • Focus on farm mechanization T-W Strategies • Raise MRPs along while increasing operational efficiency. • Backward integration for better efficiencies Introduction Industry Analysis Factors Analysis Demand Forecast SWOT Analysis