Fertilizer Margins Under Pressure Despite Increased Subsidies

Anand Rathi brokerage predicts stagnant margins for fertilizer manufacturers in 2024-25, despite increased government subsidies. The firm cites rising global retail prices and rupee depreciation as key factors. Farming communities are shielded from effects due to government support, with expectations of industry focus shifting to more profitable NPK production.

The latest analysis by brokerage firm Anand Rathi indicates that fertilizer manufacturers are unlikely to see improved gross margins for the financial year 2024-25, despite the recent government increase in subsidy rates. The firm attributes this outlook to rising global retail market prices and the depreciation of the Indian rupee.

Calculations by Anand Rathi suggest that gross margins for the first half of 2025-26 will average around 32 percent, down from 35 percent in the same period of the previous year. The industry is expected to benefit from carry-over inventories despite this predicted contraction.

Anand Rathi considers the government’s decision to increase per-tonne subsidies for the first half of FY26 as neutral to positive for the complex fertilizer industry, predicting a shift towards more production of NPK fertilizers due to better margins. Farmers seem insulated from market fluctuations, supported by ongoing subsidies.