FACT, Paradeep Phosphates, Chambal Fertilisers, GSFC & others rally up to 17%; here's why

Bucking the sharp sell-off in the broader markets, shares of fertilizers makers were seen rallying higher on Wednesday, extending their gains for the second straight session amid the positive news flow. Select counters from the fertilizers' space were seen surging as much as 17 per cent today, before pairing up some gains.

The surge came after the government issued the Natural Gas Regulation Order, 2026. As per the order, natural gas supplies to fertiliser plants will be maintained at 70 per cent of their six-month average consumption. The order also specified that the gas supplied to these units must be used only for the production of fertilisers and not for any other purpose.

Fertilizers and Chemicals Travancore Ltd (FACT) led the gainers as the stock surged 16.83 per cent to Rs 928.95 on Wednesday, commanding a total market capitalization of Rs 60,000 crore. The stock has gained nearly 41 per cent in just two sessions.

It was followed by Khaitan Chemicals & Fertilizers, rising over 12.4 per cent to Rs 59.92, while Paradeep Phosphates Ltd added over 6 per cent to Rs 115.45 for the day. Chambal Fertilisers & Chemicals Ltd rose 2.3 per cent to Rs 441.40 during Wednesday's trade. Gujarat State Fertilizers & Chemicals Ltd (GSFC) and Rashtriya Chemicals and Fertilizers Ltd (RCF) rose nearly 2 per cent each.

One should note that the natural gas is a crucial input for fertiliser companies as a large portion of it is used as feedstock in the production of ammonia, a key raw material required for manufacturing urea. Besides that, fertilizers also saw some relief led by the correction in the crude oil prices.

India’s import prices of urea have jumped 20 per cent in the past month amid supply constraints imposed by China, and the outbreak of war in West Asia threatens to further increase India’s fertilizer import costs and perhaps affect availability ahead of the upcoming Kharif season, said Kotak Institutional Equities.

"Forecasts for a strong El Nino this summer in India are an added worry for the upcoming cropping season. Prolonged unrest in West Asia could not only push up input costs for Indian chemical companies but also impact export revenues for certain companies," it added.

India’s fertiliser industry has some exposure to imported ammonia. Companies such as Paradeep Phosphates and Coromandel International import around 0.3–0.5mmtpa of ammonia, said JM Financial.

"Around 65 per cent of India’s ammonia imports originate from Middle Eastern countries such as Saudi Arabia and Oman, which are located near the Strait of Hormuz. This geographic concentration increases the sector’s vulnerability to disruptions in shipping routes across the region," it said.

Among the smaller peers, Madras Fertilizers, Bharat Agri Fert & Realty, Zuari Agro Chemicals Ltd, Rama Phosphates, MP Agro Industries, Southern Petrochemicals Industries Corporation Ltd (SPIC), Teesta Agro Industries and Nova Agritech advanced 3-6 per cent each during the session.

Benign global prices of crude oil and fertilizers have been positive for India from inflation, fiscal deficit and corporate margins perspective in FY24-25. However, a sustained sharp increase in these commodities would be a headwind for India, said HSBC Mutual Fund in a recent note.