Complex fertiliser capacity set to jump 25pc in three fiscals; imports seen stabilising: Report

Mumbai, Feb 11 (PTI) India's complex fertiliser capacity is expected to jump by 25 per cent in the next three financial years, which is likely to keep the country's import dependency in check, a report said on Wednesday.

Complex fertiliser manufacturing sector will add around 4 million tonne per annum (MTPA) of capacity through fiscal 2029, over the current base of 16 MTPA, as capacity utilisation has shot up due to negligible capacity addition in the past seven years amid steadily rising demand, Crisil Ratings said in a report.

This additional capacity is expected to keep the country's import dependency in check, it stated.

Despite the capital expenditure (capex), Crisil Ratings said, the credit profiles of manufacturers will remain comfortable, supported by healthy profitability amidst improving backward integration resulting in limited reliance on debt.

The government's track record of timely subsidy disbursements also supports the working capital cycle of players, it added.

Complex fertilisers, accounting for a third of the overall domestic fertiliser consumption, provide balanced soil nutrition.

Around one-third of India's complex fertiliser requirement is met via imports - mainly di-ammonium phosphate (DAP), while nitrogen phosphorous potassium (NPK) remains largely indigenously produced.

The share of NPK grades in overall complex fertilisers increased to 60 per cent in fiscal 2025, compared with 53 per cent on average in the previous five fiscals, on account of prioritisation of NPK production by domestic manufacturers due to better cost economics.

"Healthy demand and limited capacity growth led to capacity utilisation reaching 95 per cent this fiscal. Indeed, complex fertilisers have seen only 0.5 MTPA capacity added over the last seven years. The planned capacity addition will not only provide a growth avenue but also help in keeping import dependency at 30-32 per cent, which otherwise would have increased by 10-11 per cent by fiscal 2029," Crisil Ratings Director Anand Kulkarni said.

The new capacities will have minimal offtake risk given the high import dependency. Besides, the execution risks are mitigated by the brownfield nature of the projects.

Additionally, Crisil Ratings said that the industry will add sulphuric and phosphoric acid capacities, which are key intermediaries for complex fertilisers.

This is expected to improve backward integration to 60 per cent in fiscal 2029 from 50 per cent in FY25.

Such integrated capacities will lead to stable profitability given the inherent higher volatility in prices of intermediaries compared with raw materials, while also reducing import dependency for these intermediaries, it added.

"Manufacturers of complex fertilisers are expected to invest Rs 12,000-13,000 crore over the next three fiscals, significantly higher over capex incurred in fiscals 2025 and 2026. A large part of the planned capex is likely to be funded out of healthy accrual from existing capacities, leading to low reliance on external debt," Crisil Ratings Associate Director Nitin Bansal said.

The above factors will keep the leverage - defined in terms of gross debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio, largely stable at 2.0-2.2 times over the next two fiscals, he added.

Adequacy of nutrient-based subsidy rates and timely release of subsidy will, however, remain monitorable, Crisil Ratings report said.

"We expect timely and adequate subsidy allocation to continue, as seen with additional subsidy allocation of 22 per cent compared with initial budgetary estimates of Rs 49,000 crore in fiscal 2026," added the report. PTI SM MR