Tata Chemicals Vs Coromandel International: India is largely an agrarian country. Most of the yield depends on the monsoon and fertilizers play an important role. Farmers usually cultivate crops on a single piece of land, leading to a decline in soil fertility over time. Therefore, the Indian government has brought about economic reforms. It has ensured that fertilizers are available at affordable prices to increase productivity.
The Indian fertilizer industry has been able to provide enhanced food security to the country due to subsidy eligibility on notified fertilizers. In this article, we shall compare two fertilizer stocks, Tata Chemicals vs Coromandel International on the basis of their business, profits, prospects and more!
Fertilizer prices have ballooned, thanks to the Russia-Ukraine war. The demand for fertilizers is increasing. However, there isn’t enough supply due to supply chain disruptions caused by the war. This could pose a potential risk to food security.
Many countries are facing a shortage of fertilizers. For instance, the government of Nepal is trying to import fertilizers from India, through a government-to-government deal. Their state-run companies failed to make timely imports mainly due to high costs.
Analysts said that companies posted steady revenue in the June quarter of 2022 due to government subsidies. However, a breach of the government’s fiscal deficit target could play a spoilsport for the sector. It could prompt the government to cut back on subsidies.
The impact of the Russia-Ukraine War
Russia’s invasion of Ukraine has sent the prices of commodities on an upward spiral. Both countries are producers and exporters of edible oils, crude and other major commodities.
In addition, the war has pushed up the prices of natural gas which is a key raw material that accounts for nearly 70 per cent of the cost of production of Urea, a fertilizer. Experts anticipate that the prices of non-urea fertilizers will rise sharply too. This can increase the costs for companies and drive their profits southward.
It is a science-led company that manufactures basic and speciality chemical products. Its history can be traced to Okhamandal Salt Works, set up in 1927. In 1939, it became a part of the Tata Group, when the then chairman JRD Tata took it over.
The company has successfully evolved over the years. Initially, it started with soda ash and salt and continued to manufacture a wide range of science-based products. They are now an innovation-led, sustainability company with a global footprint. They derive 65% of their revenue from America, 25% from India and the remaining from African and European nations.
A part of the Murugappa group is one of India’s leading Agri solutions providers. The group is present across various industries such as auto components, abrasives, financial services, transmission systems, cycles, sugars, farm inputs, fertilisers, plantations, and so on.
Further, a few brands under which it offers products and services are BSA, Hercules, Montra, Parry’s, Chola, and Shanthi Gears.
Coromandel International offers a diverse range of products and services across the farming value chain. Further, it specializes in crop protein, bio-pesticides, fertilizers, organic fertilizers and speciality nutrients.
The company demerged its consumer products Business into Tata Consumer Products Limited via a share swap transaction, in FY20. Tata Salt and Tata Sampann are well-known brands in the consumer products business. This business consisted of:
- vacuum-evaporated edible common salt for human consumption,
- protein foods
- and certain other food and other products.
The demerger has helped Tata Chemicals to focus on its key segments – Basic Chemicals and Speciality Chemicals.
These low-value and high-volume products cater to a wide range of downstream industries. These products contribute about three-quarters of the company’s revenue. It manufactures inorganic chemistry products. The major products in this segment are soda ash, sodium bicarbonate, and salt. They contribute 56%, 4% and 11.5% to the company’s revenue respectively.
- Tata Chemicals is the world’s third-largest producer of Soda Ash with a production capacity of 3670 KT.
- Further, it is the sixth-largest producer of sodium bicarbonate in the world. Food additives, animal feed, pharmaceuticals, dyes, textiles, and air pollution control are a few industries that make use of sodium bicarbonate.
- Moreover, the company is India’s largest Salt manufacturer. It recorded the highest production of salt at 10.78 lakh tonnes. However, Tata Consumer Products Limited markets the iconic brand ‘Tata Salt’. Tata Chemicals has a Long-Term Supply Agreement (LTSA) with Tata Consumer Products Limited. Further, the agreement provides for the supply of vacuum-evaporated edible salt as a take-or-pay arrangement for an initial period of 25 years, with the option of extending this on mutual agreement.
- Tata chemicals started manufacturing cement to utilize the solid waste generated through the manufacturing of Soda ash. The company expanded its product offering by launching Tata Shudh PPC.
These are high-value products that require high technical know-how. They are used in agro science, nutritional sciences, material sciences and energy sciences.
- Tata Chemicals has a strong presence in the crop chemical business through its subsidiary Rallis India. It owns a 50% stake in it. Rallis India serves over five million farmers in India and covers 80% of the total districts in India.
- Tata Chemicals is India’s first and only nutritional sciences business for FOS and GOS manufacturing. The company offers ingredient and formulation solutions, marketed under the brand Tata NQ, catering to human and animal health.
- The company produces a wide range of precipitated silica and nano zinc oxide. Tyre manufacturers and non-tyre rubber industries use silica. Further, various Industries like paints, coatings & adhesives, plastics & polymers and personal care & cosmetics use nano zinc oxide. The company recently increased its silica production capacity by 900TPM by acquiring a plant in Tamil Nadu.
- Lithium-ion cells are produced in the energy sciences space. It is one of the critical components for the batteries of electric vehicles. Tata Chemicals has partnered with leading battery makers around the world for contemporary commercial cells and a global R&D Lab. Further, it has invested in a plant site of over 127 acres in Dholera, Gujarat. This site can house the manufacturing of actives, cells and batteries up to 10 GWh per annum.
Coromandel International Ltd
The company’s products are broadly classified under:
- Nutrients and other allied products
- and crop protection.
However, here are a few businesses that the company is involved in:
Coromandel International Ltd sells a variety of phosphatic fertilizers in the domestic markets. In fact, it has a 40% market share in unique-grade fertilizer sales in India. Further, it is the second-largest phosphatic seller in India and the largest single super phosphate (SSP) seller with a market share of approximately 15%. In addition, it has a leading position in the states of Andhra Pradesh, and Telangana, which are India’s largest complex-fertiliser markets.
Crop Protection Business
The company has more than 60 brands under this business segment. Further, it is the third-largest manufacturer of mancozeb globally. Moreover, its exports account for approximately 37% of the revenues of the business.
Coromandel International has a rich product pipeline. It is a leading manufacturer of azadirachtin in the world with ~65% export share. It exports its products to the USA, Canada and Europe.
Speciality Nutrients Business
The company focuses on crop-specific nutrient & liquid fertilizer solutions under this segment. It targets cereals, pulses, cotton and horticulture crops. Further, it sells bentonite sulphur and water-soluble fertilizers (WSFs).
Coromandel International operates approximately 750 retail centres, where it sells products that it has manufactured and labelled. For example, agricultural nutrients, crop pesticides, seeds, vet feed, farm implements and so on. The company has a significant presence in Andhra Pradesh, Telangana and Karnataka.
The company is a leading organic fertilizer marketer in India with products for soil health, nutrition and amendment. It sells approximately 1.7 lakh tons of organic fertilizers per annum.
It has made significant expansion plans over the years. It has focused on capacity expansions for soda ash, bicarb, salt, cement, caustic, and chlorine derivatives. Further, it focuses on providing more value-added products under portfolio Exploring adjacencies.
The company currently owns and operates 16 manufacturing facilities across India in Andhra Pradesh, Jammu, Karnataka, Rajasthan, Gujarat, Tamil Nadu and other states. Further, it has a manufacturing capacity of 4.5 million tonnes per annum of NPK (nitrogen, phosphorus & potassium), and SSP (single super phosphate).
Moreover, it has a capacity of approximately 80,000 TPA of crop protection compounds from 6 plant locations. Further, it distributes its products through a network of about 20,000 dealers and a strong market development team with over 2,000 people.
The revenue of Tata Chemicals is increasing, however, at a very slow pace. On the other hand, Coromandel International’s revenue has been increasing at a faster rate. When we look at the data from 2018 and 2022, Tata Chemical’s revenue has grown by 22.91%, whereas that of Coromandel International has grown by 72.44%.
As the trendline indicates in the graph above, Tata Chemical’s net profits have been declining. On the other hand, Coromandel International’s profits have been showing an upward trend. However, it is important to note that in 2018, though Tata Chemical’s revenue was lower than that of Coromandel International, its profits were significantly higher.
|Particulars||Tata Chemicals||Coromandel International|
|Face Value (₹)||10||1|
|Debt to Equity||0.33||0.22|
|Market Cap (Cr)||24,500||25,750|
|Promoter’s Holdings (%)||37.98||57.4|
|Dividend Yield (%)||1.27||1.33|
|Stock P/E (TTM)||12||12.5|
|Net Profit Margin||10.9||8.02|
- Coromandel International has provided a higher return on equity.
- Both companies have an ideal debt-to-equity ratio. Ideally, it should be between 0 and 1.
- The current ratio for Coromandel international is higher, however, it is not ideal.
- Promoters hold more than half of the stake in Coromandel International. However, the promoter’s stake in Tata Chemicals is low.
- Tata Chemicals has a higher net profit margin in the current year, as compared to Coromandel International.
In this article, we took a look at Tata Chemicals vs Coromandel International. We understood a little bit about the industry that they operate in. Then we understood that the Russia-Ukraine war impacted the companies. Later, we went through their business segments, capacity, revenue growth and profitability. Finally, we compared the companies based on key metrics.
That’s all for this article, folks. We hope to see you around. Happy investing, until next time!
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Hey, there! Thank you for stopping by 🙂 Simran is a master graduate in commerce from Bangalore University, an NSE-certified Fundamental Analyst and a NISM-certified Research Analyst. She finds interest in investing and personal finance. Outside of work, you can find her painting, reading and going on long walks.
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It’s a very good, well analysed informative article for individual investors.