GICS Industry : Chemicals l Sub Industry : Fertilizers & Agricultural Chemicals l Website : www.nagarjunafertilizers.

com

Nagarjuna Fertilizers & Chemicals

Ltd

Key Stock Indicators

NSE Ticker : NAGARFERT CMP (as on 08 Feb 2011 —Rs/share): 27.7 Shares outstanding (mn) : 428.2
Bloomberg Ticker : NFCL:IN 52-week range up to 08 Feb 2011 (Rs)(H/L): 41.25/27.10 Free Float (%) : 61.7
Face value / Share: 10.0 Market Cap as on 08 Feb 2011 (Rs mn): 11,861 Average daily volumes (12 months) : 4,760,003
Div. Yield (%): 1.8 Enterprise Value as on 08 Feb 2011 (Rs mn): 35,566 Beta (2 year) : 1.6
Div. Yield (%): 0.0

Nagarjuna Fertilizers and Chemicals Limited (NFCL) is the flagship company of the Nagarjuna group.
The company is mainly into manufacturing of urea and its key markets are Andhra Pradesh, Orissa Key Financial Indicators
and West Bengal. The company derives ~95% of revenues from sale of manufactured and imported Mar-08 Mar-09 Mar-10
urea. NFCL has 4 subsidiaries, viz Nagarjuna Oil Corp Ltd (NOCL), Jaiprakash Engineering and Steel
Co Ltd (Jesco), Kakinada Fertilizers Ltd (KFL) and an overseas subsidiary — Nagarjuna Mauritius Pvt Revenue (Rs mn) 22,085.6 23,775.6 19,980.7
Ltd. EBITDA ma rgins (%) 13.9 14.0 18.9
PAT (Rs mn) -217.4 344.1 663.3
KEY HIGHLIGHTS
PAT ma rgins (%) n.m 1.4 3.3
Capacity revamp and de-bottlenecking Gea ring (x) 4.2 2.6 4.0
EPS (Rs /s ha re) -0.5 0.8 1.5
During FY10, the company commissioned a carbon dioxide recovery plant with a capacity of PE (x) n.m 22.1 17.9
450 tonnes per day (TPD) for commercial use in existing production facilities. NFCL also undertook
de-bottlenecking of its urea plant, which led to increase in production by 0.2 million tonnes (MT) to
P/BV (x) 4.0 1.0 1.5
1.5 million tonnes per annum (MTPA). Along with this, the company has phased out usage of RoCE (%) 7.0 8.6 7.4
naphtha, switching to natural gas in both plants. This has led to improvement in operating margin. RoE (%) n.m 6.0 8.7
EV/EBITDA (x) 10.4 7.5 9.4
Attempts at diversification
n.m. : Not meaningful
The company, along with fertilisers also offers pesticides and micro-irrigation facilities. It has
forayed into petroleum through NOCL, a subsidiary company. The company is setting up a 6 MTPA Shareholding (As December 31, 2010)
capacity refinery at Cuddalore, in Tamil Nadu. The project started in 2006, and was not
Others
commissioned till March 2010, and is currently in the construction stage. Delay in commencement
51%
of the refinery has increased project cost to Rs 69.6 bn from Rs 47.9 bn. NFCL had also planned
diversification into the steel sector via a hot rolled coil plant, but the project was put on hold. NFCL
is also venturing into the field of manufacturing chemicals for solar and semi-conductor
applications.
DII
KEY RISKS 3%

• Government policies regarding subsidy payout

FII Promoter
• Natural gas availability and pricing policy 8% 38%
• Agro-climatic conditions
• Project execution risk Indexed price chart

Stock Performances vis-à-vis market (index) ('000)

140 60000
Returns (%) 120 50000
YTD 1-m 3-m 12-m 100
40000
80
NAGARFERT -11 -7 -30 -22 30000
60
NIFTY 0 -8 -15 12 20000
40
20 10000
Note:
1) YTD returns are since Apr 01, 2010 to Feb 08, 2011. 0 0
Feb-10

Apr-10

Jun-10

Jul-10

Aug-10
Sep-10
Oct-10

Nov-10
Dec-10
Mar-10

May-10

Jan-11

2) 1-m, 3-m and 12-m returns are up to Feb 08, 2011

Volumes (RHS) NAGARFERT NIFTY

CRISIL COMPANY REPORT | 1

 Nagarjuna Fertilizers & Chemicals Ltd
BACKGROUND

NFCL is the flagship company of the Nagarjuna group. The company was incorporated in 1985; its main business is manufacture and sale of urea. It has 2 manufacturing
plants, located in Kakinada in Andhra Pradesh, with an aggregate capacity of 1.2 MTPA. The company also trades in urea and complex fertilisers. NFCL also provides micro-
irrigation solutions, farm management services and chemical plant management services. The company’s subsidiary — NOCL — is setting up an oil refinery in Tamil Nadu,
while Jesco, another subsidiary, has shelved plans for a steel plant in Karnataka.

COMPETITIVE POSITION

Peer Comparison
Nagarjuna Chambal Deepak Fertilisers & Fertilisers and
Fertilizers & Fertilizers & Petrochemicals Chemicals
Chemicals Ltd Chemicals Ltd Corp. Ltd Travancore Ltd
Mar-10 Mar-10 Mar-10 Mar-10
Revenue (Rs mn) 19,980.7 41,460.5 13,239.9 21,279.8
EBITDA ma rgins (%) 18.9 17.6 21.9 0.8
PAT (Rs mn) 663.3 2,073.3 1,652.5 -1,038.7
PAT ma rgins (%) 3.3 5.0 12.5 -4.9
Gea ring (x) 4.0 2.4 0.8 5.7
EPS (Rs /s ha re) 1.5 5.0 18.7 -1.6
PE (x) 17.9 15.0 8.8 n.m
P/BV (x) 1.5 2.7 1.6 20.0
RoCE (%) 7.4 11.2 17.2 1.3
RoE (%) 8.7 18.6 20.1 -43.4
EV/EBITDA (x) 9.4 7.7 6.8 251.7
n.m: Not meaningful

FINANCIAL PROFILE Key Financial Indicators

Top-line drops, but operating margin improves in FY10 Units Mar-08 Mar-09 Mar-10
Revenue Rs mi ll i on 22,085.6 23,775.6 19,980.7
In FY10, NFCL’s top-line declined 16% year-on-year to Rs 19.9 bn, due to drop in
subsidiary reimbursements. Sale of urea decreased from 2.3 MT in FY09 to 2.1 MT in EBITDA ma rgins Per cent 13.9 14.0 18.9
FY10, on account of deficit rainfall during the kharif season. However, operating PAT Rs mi ll i on -217.4 344.1 663.3
margin improved to 18.9%, from 14% in FY09, mainly on account of increased urea
production following de-bottlenecking at the plant. Urea production stood at 1.5 MT PAT ma rgins Per cent n.m 1.4 3.3
in FY10, compared with 1.3 MT in FY09. The use of natural gas — cheaper than Revenue growth Per cent 21.3 7.7 -16.0
naphtha — as a feedstock, also contributed to rise in operating margin.
EBITDA growth Per cent 7.3 8.8 13.3
The PAT also showed an increase of 92.7% for FY10 and stood at Rs. 663 mn vis-à-vis PAT growth Per cent -311.3 258.3 92.7
Rs. 344 mn in FY09. This increase is on account of lower interest cost as well as rise
in other income as compared to FY09. Gea ring Times 4.2 2.6 4.0
RoCE Per cent 7.0 8.6 7.4
RoE Per cent n.m 6.0 8.7
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, India’s
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.

CRISIL COMPANY REPORT | 2

Nagarjuna Fertilizers & Chemicals Ltd
ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10
Net Sales 21,963.6 23,735.6 19,886.5 Equity share capital 4,655.0 4,828.8 4,281.8
Operating Income 22,085.6 23,775.6 19,980.7 Reserves and surplus -677.6 2,579.5 3,549.8
Tangible net worth 3,977.4 7,408.3 7,831.6
EBITDA 3,060.0 3,329.9 3,773.0 Deferred tax liablity:|asset| 1,965.5 1,812.1 1,811.5
EBITDA Margin 13.9 14.0 18.9 Long-term debt 10,504.7 16,515.4 28,325.4
Short-term-debt 6,309.4 3,103.9 3,358.3
Depreciation 1,203.2 1,213.8 1,292.4 Total debt 16,814.1 19,619.4 31,683.6
Interest 1,629.7 1,693.2 1,490.4 Current liabilities 6,689.8 4,988.0 4,924.5
Other Income 29.6 50.0 117.6 Total provisions 141.5 98.1 367.9
Total liabilities 29,588.3 33,925.9 46,619.1
PBT -84.2 522.8 1,113.7 Gross block 25,114.6 27,260.8 29,426.8
PAT -217.4 344.1 663.3 Net fixed assets 21,084.1 25,886.9 34,198.3
Investments 1,375.5 649.5 1.8
PAT Margin n.m 1.4 3.3 Current assets 7,128.7 7,389.5 12,419.0
Receivables 2,981.4 3,460.5 2,981.6
No. of shares (Mn No.) 428.0 428.0 428.2 Inventories 1,892.4 749.4 593.8
Cash 997.7 2,204.0 7,978.4
Earnings per share (EPS) -0.5 0.8 1.5 Total assets 29,588.3 33,925.9 46,619.1

Cash flow Ratio

(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10
Pre-tax profit 256.8 472.8 1,107.8 Revenue growth (%) 21.3 7.7 -16.0
Total tax paid -416.2 -332.1 -451.1 EBITDA growth(%) 7.3 8.8 13.3
Depreciation 1,203.2 1,213.8 1,292.4 PAT growth(%) -311.3 258.3 92.7
Change in working capital 1,198.8 -799.7 951.2
EBITDA margins(%) 13.9 14.0 18.9
Cash flow from operating activities 2,242.6 554.8 2,900.3 Tax rate (%) -494.1 63.5 40.5
Capital Expenditure -1,572.8 -6,016.6 -9,603.8 PAT margins (%) n.m 1.4 3.3
Investments and others -1,040.4 725.9 647.8
Dividend payout (%) 0.0 0.0 32.3
Dividend per share (Rs) 0.0 0.0 0.5
Cash flow from investing activities -2,613.2 -5,290.7 -8,956.0 BV (Rs) 9.3 17.3 18.3
Equity raised/(repaid) 0.1 0.3 10.7 Return on Equity (%) n.m 6.0 8.7
Debt raised/(repaid) 1,179.7 2,805.2 12,064.3 Return on capital employed (%) 7.0 8.6 7.4
Dividend (incl. tax) 0.0 0.0 -250.5
Others (incl extraordinaries) 34.2 3,136.6 5.7 Gearing (x) 4.2 2.6 4.0
Interest coverage (x) 1.9 2.0 2.5
Debt/EBITDA (x) 5.5 5.9 8.4
Cash flow from financing activities 1,214.0 5,942.1 11,830.2
Change in cash position 843.4 1,206.2 5,774.5 Asset turnover (x) 0.9 0.9 0.7
Opening cash 154.5 997.7 2,204.0 Current ratio (x) 0.6 1.0 1.4
Closing cash 997.7 2,204.0 7,978.4 Gross current assets (days) 118 113 225
n.m : Not meaningful;

QUARTERLY RESULTS

Profit and loss account

(Rs million) Sep-10 % of Rev Sep-09 % of Rev Jun-10 % of Rev Sep-10 % of Rev Sep-09 % of Rev
No of Months 3 3 3 6 6
Revenue 11,264.7 100.0 5,344.3 100.0 3,318.5 100.0 14,583.1 100.0 8,645.3 100.0
EBITDA 1,206.0 10.7 763.9 14.3 1,029.0 31.0 2,235.0 15.3 1,712.2 19.8
Interes t 509.9 4.5 333.4 6.2 311.9 9.4 821.8 5.6 640.3 7.4
Depreci a tion 204.1 1.8 319.2 6.0 320.0 9.6 524.1 3.6 631.7 7.3
PBT 492.0 4.4 111.4 2.1 397.1 12.0 889.1 6.1 440.2 5.1
PAT 283.6 2.5 81.1 1.5 271.4 8.2 555.0 3.8 312.0 3.6

CRISIL COMPANY REPORT | 3

Nagarjuna Fertilizers & Chemicals Ltd
FOCUS CHARTS & TABLES

Rs mn Quarterly sales & y-o-y growth Per cent Rs mn Quarterly PAT & y-o-y growth Per cent
12,000 120 300 1,000
100 250 800
10,000
80
200 600
8,000 60
40 150 400
6,000
20
100 200
4,000 0
-20 50 0
2,000
-40 0 -200
0 -60

Dec-07

Jun-08

Sep-08
Dec-08

Jun-09
Sep-09

Dec-09

Jun-10
Sep-10
Mar-08

Mar-09

Mar-10
Dec-07

Jun-08
Sep-08
Dec-08

Jun-09
Sep-09
Dec-09

Jun-10
Sep-10
Mar-08

Mar-09

Mar-10
Sales Sales growth y-o-y (RHS) Net Profit Net profit growth y-o-y (RHS)

Rs/share EPS Per cent Movement in operating and net margins

0.7 35
0.6 30

0.5 25
20
0.4
15
0.3
10
0.2
5
0.1
0
Dec-07

Jun-08

Sep-08

Dec-08

Jun-09

Sep-09

Dec-09

Jun-10

Sep-10
0
Mar-08

Mar-09

Mar-10
Dec-07

Jun-08

Sep-08

Dec-08

Jun-09

Sep-09

Dec-09

Jun-10

Sep-10
Mar-08

Mar-09

Mar-10

OPM NPM

Shareholding Pattern (Per cent) Board of Directors

Mar 2010 Jun 2010 Sep 2010 Dec 2010 Director Name Designation
Promoter 37.9 37.9 37.9 38.3 Sa tya na ra ya na Ra ju Ka numuru Executive Cha i rma n & Ma na gi ng
FII 3.5 3.9 6.2 7.5 (Mr.) Director, Promoter-Director
DII 6.2 4.5 4.1 3.0 Ra hul Ra ju Ka numuru (Mr.) Jt.Ma na ging Director
Others 52.4 53.8 51.9 51.2 Ba l Kri s ha n Ba tra (Mr.) Nominee Di rector
As hok Chopra (Mr.) Non-Executive Di rector
Ra dha kri s hna n Pa tta bhira ma n Nominee Di rector
Mos ur (Mr.)
Bhogindra na th Na l la n Non-Executive Di rector
Ra nvir Sa in Na nda (Mr.) Director
Ra nga s wa my Srira nga m Non-Executive Di rector
Ra ma kris hna n (Mr.)
Suni l Sha rma (Mr.) Nominee Di rector
Pa s hu Pa ti Si ngh (Mr.) Director
Cha ndra Pa l Si ngh Ya da v (Mr.) Non-Executive Di rector
S.P. Arora (Mr.) Nominee Di rector-Ifci Ltd.

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

Disclaimer
This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as
such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment,
legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial
liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or
redistributed or communicated directly or indirectly in any form to any other person – especially outside India or published or copied in whole or in part, for any purpose.

CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please
contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.
CRISIL COMPANY REPORT | 4