Six things to know before you invest in the fertiliser industry

Deciphering the fertiliser industry sure can be a daunting task. The segment is highly regulated and always under the government's watchful eye. And the subsidies varying depending upon fertiliser composition don't help either. While it might be near-impossible to detail every nitty-gritty of the industry, in this story, we look at the distinguishing features of the fertiliser sector. No pricing power Fertilisers are crucial to the food security of a country. Unsurprisingly, this means fertiliser companies are subject to heavy regulations. From prices to input materials, the government has a say in everything. Hence, most fertiliser companies, such as Coromandel International, have agrochemical divisions as they are not under stringent regulations like fertilisers and thereby can offer better margins. Subsidies To ensure affordability, the government fixes the selling price of fertiliser and provides subsidies to companies. This may have you believe that fertiliser companies have a steady revenue stream. However, that is not the case. The subsidies are rarely provided on time. For example, the trade receivables (including subsidies receivable) of Ch

This article was originally published on December 26, 2022.