Coromandel International, a subsidiary of EID Parry and part of the Murugappa Group, holds 62.82% of the company’s equity.
Coromandel International Ltd manufactures fertilizers, plant protection chemicals, and specialty nutrients. The company has entered the retail market in the agro and lifestyle sectors. The company’s operations are separated into two major segments: nutrition and other linked products and crop protection.
In the last one month, the stock has declined by 15% from ₹1,263.20 per share, as well as in a week the stock has fallen by 5%.
Here are the reasons that led to the decline in the stock.
Guidelines from the Department of Fertiliser
On January 18, 2024. The Department of Fertiliser (DoF) released updated guidelines for the pricing of non-urea-based fertilizers within the Nutrient Based Subsidy (NBS) program.
However on April 1, 2023. DoF released the guidelines to allow maximum profit margins for fertilizer companies, with importers capped at 8%, manufacturers at 10%, as well as integrated manufacturers of finished fertilizers at 12%.
But, the January 18, 2024 guidelines released by DoF, stated that Fertilizer companies generating excessive profits beyond the prescribed percentages in a fiscal year must refund the surplus amount by October 10 of the following fiscal year.
Failure to comply by companies may result in an interest penalty of 12% per annum on a pro-rata basis for the refund. Based on this news, Coromandel shares responded negatively
Weak Q3FY24 results
Coromandel International reported a 57% decrease in its consolidated net profit for the December quarter, amounting to ₹228 crore compared to ₹527 crore in the same period of the prior fiscal year.
During the third quarter, the total income amounted to ₹5,464 crore, reflecting a 34% decline from ₹8,310 crore in the corresponding period of the previous year. The company’s operating profit experienced a 54% year-on-year reduction, reaching ₹358 crore in the October-December quarter of the current fiscal, down from ₹781 crore a year ago.
Recently, the company board of directors approved a proposal to set up new phosphoric acid and sulphuric acid plants at Kakinada in Andhra Pradesh with an investment of ₹1,029 crore.
However, In June 2023, Coromandel International, through its wholly-owned subsidiary Coromandel Technology Limited (CTL), acquired an additional 32.68 percent equity stake in Daksha Unmanned Systems (Dhaksha) in June 2023, bringing Coromandel’s stake to 51 percent.
In a recent fiscal year, Coromandel International Ltd achieved a return on equity ratio of 28.22 % and a return on capital employed at 34.22 percent.
As per the current shareholding pattern, company promoters possess a majority stake of 57.33 percent, foreign institutional investors own 7.71 percent, and domestic institutional investors hold a 20.22 percent stake in the company.
Coromandel International Ltd shares have gained 4% in the last six months and 21 % in a year. The stock touched an all-time high price of ₹1,287.95 on 18th December 2023.
Majorly, the company receives 85% revenue from nutrients and other allied products and 15% revenue from the crop protection pesticide segment. Further, the company is the leading manufacturer of azadirachtin in the world with a 65% export share. It exports products to the USA, Canada, and Europe.
Written by Omkar Chitnis
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