So however, we are of the view that this sort of like GST rate realignment basically and number one bringing the natural gas under the GST regime.
Basically, when you actually look at natural gas and never at all we consider that natural gas coming in under the GST regime, but one has to understand that natural gas is largely used by urea players.
On natural gas we are currently under the VAT (value added tax) regime which is considered as a cost for the urea players.
So if at all natural gas also comes under the GST regime, I do not foresee any sort of impact on the P&L.
So P&L should be largely neutral for urea companies.If you look at the non-urea side, they do not extensively use natural gas.
This, in turn, would provide some help to the farming community.
Fertiliser stocks have been in focus over the last few days with the Street anticipating some relief in Goods and Services Tax (GST) on the sector at the upcoming GST Council meeting on June 22.Sources told CNBC-TV18 that the Fitment Committee, nominated by the Council, has recommended that the Group of Ministers on rate rationalisation consider exempting the fertiliser sector from the currently applied 5% GST The Fitment Committee also urged that the argument to exempt GST on fertiliser has been supported by the Standing Committee on Chemicals & fertilisers, which proposed the GST Council to consider the request.However, according to Himanshu Binani, Research Analyst at Anand Rathi Institutional, a GST rate realignment is unlikely to have any meaningful impact on the earnings of fertiliser companies.He pointed out that the industry has been seeking this GST exemption for a while now.He believes a revision in the direct benefit transfer (DBT) regime may be more beneficial in reducing working capital and reducing interest costs.According to him, if all the natural gas is also coming under the GST regime, there will be no impact on the profit and loss (P&L) for the urea companies.A. When you actually look into the fertilizer segment, so we have like seen a very stellar sort of like run up into the stock prices for the last few days. So however, we are of the view that this sort of like GST rate realignment basically and number one bringing the natural gas under the GST regime. So this has been like going on for quite some time and whatever what I understand is that this in turn is like not likely to have a meaningful impact basically on the overall earnings profile of the company.However, there has been some talks in terms of the DBT regime which is likely to get revised and if at all the government comes up with a DBT 2.0, which is currently into the pilot stages. So, if that comes in, that in turn would result into a reduction basically into the overall space.A. Basically, when you actually look at natural gas and never at all we consider that natural gas coming in under the GST regime, but one has to understand that natural gas is largely used by urea players. From natural gas we get ammonia and from ammonia we get urea. On natural gas we are currently under the VAT (value added tax) regime which is considered as a cost for the urea players. The entire cost is fully passed through. So if at all natural gas also comes under the GST regime, I do not foresee any sort of impact on the P&L. So P&L should be largely neutral for urea companies.If you look at the non-urea side, they do not extensively use natural gas. However, the discussion of bringing the GST from 5% to zero so that in turn would result that the MRPs (maximum retail prices) are likely to get decreased in the final market.A. The subsidy disbursement from the government has been very timely. Also, the outstanding continues to remain at a very comfortable zone. The talks of subsidy and the DBT 2.0, which necessarily means that the subsidy gets directly credited to the consumer's account, reduces the working capital requirement, and leads to interest cost savings. Lower working capital will improve both the P&L and balance sheet. So that would be taken as a positive and something the industry will like as it would be a structural change in the sector.A. The recent rally has been like more of a pre-budget rally and this was fuelled by the incremental expectation of the normal monsoon. In terms of the valuations, the industry has been growing at a low to mid-single digit sort of CAGR in terms of volumes over the last two decades and this sort of run rate is likely to continue going forward as well. Secondly, in terms of the recent MSP increase, most crops are trading well above the MSP rates. Going by the better farm economics, outlook for normal monsoons, and thirdly, the subdued RM prices, each and everything is factored in. Nothing incremental is likely.A. We continue to like Sumitomo Chemicals and UPL in the agrochemical space. We continue to prefer Coromandel International in the fertiliser space. These are the structural plays and one can expect stable earnings growth.
