CRISIL COMPANY REPORT | 1

Rashtriya Chemicals & Fertilizers

Ltd
GICS Industry : Chemicals l Sub Industry : Fertiliser & Agriculture l Website : www.rcfltd.com
NSE Ticker : RCF
Bloomberg Ticker : RCF:IN
Face value / Share: 10.0
Div. Yield (%): 1.2
CMP (as on 07 Apr 2011Rs/share): 88.7
52-week range up to 07 Apr 2011 (Rs)(H/L): 132.4/71.3
Market Cap as 07 Apr 2011 (Rs mn): 48,935
Enterprise Value as on 07 Apr 2011 (Rs mn): 54,638
Div. Yield (%): 0.0
Shares outstanding (mn) : 551.7
Free Float (%) : 7.5
Average daily volumes (12 months) : 1,886,729
Beta (2 year) : 1.4
Key Stock Indicators


















Rashtriya Chemicals & Fertilizers Limited (RCF) was incorporated in 1978. The company produces
fertilisers and industrial chemical products. It also trades in imported di-ammonium phosphate and
muriate of potash.

KEY HIGHLIGHTS

Products produced and marketed by the company
RCFL is a leading fertiliser producer in India. The company has manufacturing units at Trombay and
Thal, both in Maharashtra. Its major fertilisers include Sujala, Suphala 15:15:15, Suphala
20:20, Ujjwala, Microla and Biola. The company also manufactures industrial chemical
products such as methanol, sodium nitrate, sodium nitrite, ammonium bicarbonate, methylamines,
dimethyl formamide (DMF), dimethylacetamide, etc. RCF is the only manufacturer of DMF in India.
Fertilisers manufactured by the company can be used with different soil types and in various
climatic conditions. As of FY10, fertilisers contributed ~74% to total revenue and industrial chemical
products ~26%.

Joint venture to enhance growth
In FY11, RCF entered into a joint venture with Coal India Ltd (CIL) and GAIL to establish a project for
producing urea and ammonium nitrate at Talcher in Orissa. This JV will produce a sizeable amount
of urea and 20-30% of the ammonium nitrate required by CIL. The JV will revive the Talcher unit of
the Fertilizer Corp of India. The unit has easy access to coal and other infrastructural advantages,
including coal gasification plant, a heavy water plant and urea plant.

Under expansion and diversification mode
In FY11, RCF revamped its methanol plant to achieve a production of 240 tonnes per day (TPD)
from the existing 172 TPD. The company has also set-up rapid wall plant at an estimated cost of Rs
750 mn for utilising phospho-gypsum, produced as byproduct at Trombay, for manufacturing
environmentally-friendly, load-bearing, low-cost pre-fabricated and glass-fibre reinforced building
walls and other products with wide construction applications. Production commenced in FY11. The
plant produces 1.40 mn square metres of wall panels, 40,000 tonnes of wall plaster and 6,000
tonnes of wall putty. In FY10, the company commenced manufacturing of a complex fertiliser,
Suphala 20:20, by setting up ammonium nitrophosphate granulation plant of 900 TPD capacity by
using the slurry prepared in wet section. In FY10, the company decided to de-bottleneck its Thal
plant.

KEY RISKS

Volatile prices of raw materials like rock phosphate, sulphur, etc
Government policies regarding fertiliser subsidy payout
Natural gas availability based on governments allocation policy


YTD 1-m 3-m 12-m
RCF 11 13 -3 10
NI FTY 11 8 -3 10
Returns (%)


Note:
1) YTD returns are since Apr 01, 2010 to Apr 07, 2011.
2) 1-m, 3-m and 12-m returns are up to Apr 07, 2011.


















Mar-08 Mar-09 Mar-10
Revenue (Rs mn) 51,970.3 84,495.0 57,710.0
EBITDA margi ns (%) 7.1 5.8 7.6
PAT (Rs mn) 1,531.6 2,106.0 2,344.4
PAT margi ns(%) 2.9 2.5 4.1
Geari ng (x) 0.8 0.9 0.7
EPS (Rs /share) 2.8 3.8 4.2
PE (x) 18.8 9.8 20.9
P/BV (x) 1.9 1.2 2.7
RoCE (%) 11.2 14.1 12.6
RoE (%) 10.3 13.1 13.4
EV/EBI TDA (x) 11.1 6.3 12.4

n.m. : Not meaningful

Promoter
93%
DII
2%
Others
5%






Indexed price chart
Shareholding (As on December 31, 2010)
Key Financial Indicators
Stock Performances vis--vis market

CRISIL COMPANY REPORT | 2
Rashtriya Chemicals & Fertilizers Ltd

BACKGROUND

RCF was incorporated in 1978, following the re-organisation of the erstwhile Fertilizer Corp of India. The Government of India holds 92.5% stake in the company. RCF has
manufacturing units at Trombay and Thal, both in Maharashtra. The Thal unit primarily manufactures urea and has a manufacturing capacity of 1.7 mn TPA. It also produces
some industrial products. The Trombay unit manufactures industrial chemicals. As on FY10, the Trombay unit has installed capacity of 0.33 mn TPA of urea and 0.66 mn
TPA. RCFs industrial chemicals product portfolio includes more than 15 products, including methanol, methylamines, ammonium nitrate melt, nitric acid, ammonia, etc.
RCF has expanded its revenue stream and product portfolio through sales of imported di-ammonium phosphate and muriate of potash. RCFL produced 2.59 mn tonnes of
fertilisers in FY10, against 2.37 mn tonnes in FY09. It achieved overall capacity utilisation of 96.23%, against 88.03% during the previous year. In nutrients, the company
produced 1 mn tonnes of nitrogen, ~77,000 tonnes of phosphate and ~74,000 tonnes of potassium.

As on FY10, the company has one subsidiary namely, Rajasthan Rashtriya Chemicals & Fertilizers Ltd. The company has 4,334 employees 1,589 officers and 2,745
workmen.

COMPETITIVE POSITION

Peer Comparison
Rashtriya Chemicals
& Fertilizers Ltd
Coromandel
International Ltd
Chambal Fertilizers
& Chemicals Ltd
Gujarat Narmada
Valley Fertilisers
Co. Ltd.
Mar-10 Mar-10 Mar-10 Mar-10
Revenue (Rs mn) 57,710.0 64,821.1 41,460.5 26,661.9
EBI TDA margi ns (%) 7.6 11.8 17.6 15.2
PAT (Rs mn) 2,344.4 4,676.8 2,073.3 1,238.4
PAT margi ns(%) 4.1 7.2 5.0 4.6
Geari ng (x) 0.7 1.3 2.4 0.3
EPS (Rs/share) 4.2 33.3 5.0 8.0
PE (x) 20.9 6.9 15.0 14.1
P/BV (x) 2.7 2.1 2.7 0.8
RoCE (%) 12.6 24.2 11.2 9.0
RoE (%) 13.4 34.5 18.6 6.1
EV/EBITDA (x) 12.4 5.5 7.7 4.9

n.m: Not meaningful

FINANCIAL PROFILE

Decrease in urea imports affects top line, but margin improves

In FY10, top line declined ~32% year-on-year to Rs 57.7 bn, from Rs 84.4 bn in FY09.
This was mainly due to lower imports of urea and discontinuance of Naptha, a costly
feed stock, leading to less subsidy realisation.

EBITDA margin increased to 7.6% in FY10, from 5.8% in FY09, due to decline in power
costs and other expenses.

The companys PAT grew ~11% in FY10, led by higher operating profit, decline in
interest expenses and gain in foreign exchange transactions.

Units Mar-08 Mar-09 Mar-10
Revenue Rs mi l l i on 51,970.3 84,495.0 57,710.0
EBITDA margi ns Per cent 7.1 5.8 7.6
PAT Rs mi l l i on 1,531.6 2,106.0 2,344.4
PAT margi ns Per cent 2.9 2.5 4.1
Revenue growth Per cent 47.2 62.6 -31.7
EBITDA growth Per cent 7.1 32.0 -9.6
PAT growth Per cent 3.0 37.5 11.3
Geari ng Ti mes 0.8 0.9 0.7
RoCE Per cent 11.2 14.1 12.6
RoE Per cent 10.3 13.1 13.4
Key Financial Indicators


INDUSTRY PROFILE

Nitrogenous fertilisers (Urea)
The consumption of urea grew at a compounded annual growth rate (CAGR) of 5.1 per cent from 20.7 million tonnes in 2004-05 to 26.5 million tonnes in 2009-10. On the
other hand, production of urea has remained relatively flat, rising marginally from 20.2 million tonnes in 2004-05 to 21.2 million tonnes in 2009-10. As a result, Indias
dependency on imports has shown an increasing trend. On the capacity front, a number of greenfield and brownfield expansion plans are contingent on the government
assuring gas supply at reasonable rates.

While the government has increased retail price by around 10 per cent to Rs.5,310 per tonne,it will have marginal impact on players as it is a pass through. The government
will benefit by way of lower subsidies.

Phosphatic fertilisers (Complex)
The consumption of DAP and other complex fertilisers (hereafter jointly referred to as phosphatic fertilisers) grew at a CAGR of 6.9 per cent from 2004-05 to reach 16.5
million tonnes in 2009-10. However, production growth has not kept pace with the growth in consumption, leading to a rise in imports.
The government has fixed the subsidy rates at the nutrient level for the year 2010-11 while deregulating retail prices. The industry is primarily dependent on international
suppliers for its feedstock requirement as India has minimal reserves of rock phosphate. Hence, fixing of subsidy rates for the year puts added importance on the ability of
players to source feedstock economically.

CRISIL COMPANY REPORT | 3
Rashtriya Chemicals & Fertilizers Ltd

ANNUAL RESULTS

Income Statement Balance sheet
(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10
Net Sal es 51,406.1 83,663.9 56,419.3 Equi ty share capi tal 5,516.9 5,516.9 5,516.9
Operating Income 51,970.3 84,495.0 57,710.0 Reserves and surpl us 9,837.7 11,192.1 12,834.2
Tangible net worth 15,354.6 16,709.0 18,351.1
EBITDA 3,684.3 4,862.4 4,395.2 Deferred tax l i abl i ty:|asset| 1,660.9 1,487.1 1,637.4
EBITDA Margin 7.1 5.8 7.6 Long-term debt 917.7 984.9 2,824.3
Short-term-debt 11,501.7 13,253.7 10,727.4
Depreci ati on 832.0 866.3 1,058.1 Total debt 12,419.4 14,238.6 13,551.7
Interest 700.0 1,107.2 705.5 Current l i abi l i ti es 5,944.5 16,437.9 13,291.6
Other Income 175.0 357.9 506.8 Total provi si ons 1,926.6 2,743.9 2,228.4
Total liabilities 37,306.0 51,616.5 49,060.2
PBT 2,401.1 3,247.2 3,461.7 Gross bl ock 27,720.1 28,685.5 31,151.4
PAT 1,531.6 2,106.0 2,344.4 Net fi xed assets 11,669.0 13,295.1 14,239.7
Investments 3,596.9 6,547.4 1.7
PAT Margin 2.9 2.5 4.1 Current assets 22,040.1 31,774.0 34,818.8
Recei vabl es 11,410.9 17,881.7 8,589.8
No. of shares (Mn No.) 551.7 551.7 551.7 Inventori es 8,655.2 6,926.9 4,095.9
Cash 493.1 4,051.2 7,848.3
Earni ngs per share (EPS) 2.8 3.8 4.2 Total assets 37,306.0 51,616.5 49,060.2
Cash flow Ratio
(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10
Pre-tax profi t 2,327.3 3,246.8 3,138.4 Revenue growth (%) 47.2 62.6 -31.7
Total tax pai d -878.5 -1,315.0 -967.0 EBITDA growth(%) 7.1 32.0 -9.6
Depreci ati on 832.0 866.3 1,058.1 PAT growth(%) 3.0 37.5 11.3
Change i n worki ng capi tal -1,640.7 5,134.9 -2,909.5
EBITDA margi ns(%) 7.1 5.8 7.6
Cash flow from operating activities 640.1 7,933.0 320.0 Tax rate (%) 36.6 40.5 27.9
Capi tal Expendi ture -1,167.3 -2,478.8 -2,002.7 PAT margi ns (%) 2.9 2.5 4.1
Investments and others -3,595.2 -2,950.5 6,545.7
Di vi dend payout (%) 36.0 31.4 25.9
Di vi dend per share (Rs) 1.0 1.2 1.1
Cash flow from investing activities -4,762.5 -5,429.3 4,543.0 BV (Rs) 27.4 30.3 33.3
Equi ty rai sed/(repai d) 0.0 0.0 0.0 Return on Equi ty (%) 10.3 13.1 13.4
Debt rai sed/(repai d) 2,867.1 1,819.2 -686.9 Return on capi tal empl oyed (%) 11.2 14.1 12.6
Di vi dend (i ncl . tax) -645.5 -774.5 -707.7
Others (i ncl extraordi nari es) 88.5 9.7 328.7 Geari ng (x) 0.8 0.9 0.7
Interest coverage (x) 5.3 4.4 6.2
Debt/EBITDA (x) 3.4 2.9 3.1
Cash flow from financing activities 2,310.1 1,054.4 -1,065.9
Change i n cash posi ti on -1,812.3 3,558.1 3,797.1 Asset turnover (x) 1.9 3.0 1.9
Openi ng cash 2,305.4 493.1 4,051.2 Current rati o (x) 1.3 1.2 1.3
Cl osi ng cash 493.1 4,051.2 7,848.3 Gross current assets (days) 155 134 220
n.m:Notmeaningful;


QUARTERLY RESULTS

(Rs million) Dec-10 % of Rev Dec-09 % of Rev Sep-10 % of Rev Dec-10 % of Rev Dec-09 % of Rev
No of Months 3 3 3 9 9
Revenue 15,469.8 100.0 16,199.7 100.0 15,719.9 100.0 39,213.7 100.0 42,775.7 100.0
EBITDA 1,236.9 8.0 1,434.7 8.9 1,245.7 7.9 3,020.3 7.7 3,248.1 7.6
Interest (1.1) (0.0) 32.9 0.2 67.5 0.4 54.0 0.1 176.4 0.4
Depreci ati on 284.6 1.8 226.3 1.4 265.5 1.7 805.7 2.1 667.1 1.6
PBT 953.4 6.2 1,175.5 7.3 912.7 5.8 2,161.2 5.5 2,404.6 5.6
PAT 683.6 4.4 777.8 4.8 608.8 3.9 1,490.2 3.8 1,654.5 3.9
Profit and loss account


CRISIL COMPANY REPORT | 4
Rashtriya Chemicals & Fertilizers Ltd

FOCUS CHARTS & TABLES


Mar 2010 Jun 2010 Sep 2010 Dec 2010
Promoter 92.5 92.5 92.5 92.5
FI I 0.0 0.0 0.1 0.1
DI I 1.5 1.5 1.5 2.1
Others 6.0 6.0 5.9 5.3
Shareholding Pattern (Per cent)
Director Name Designation
V. Rajagopal an (Dr.) Nomi nee Di rector-GOI
Sham Lal Goyal (Mr.) Di rector
Manoj Pri ya (Mr.) Di rector
R.G. Rajan (Mr.) Chai rman & Managi ng Di rector
Gautam Sen (Mr.) Di rector
Board of Directors


Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

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