NFL To Tap Markets To Fuel Growth

When supply of feedstock is crippling growth of most fertiliser companies PSU National Fertilizers Limited (NFL) is actually planning to buck the trend and go for mega expansions.To fund its growth it is planning to tap the capital markets with an public offer. The company is planning to raise Rs 2,000 crore while the government diluted three per cent stake in NFL for the employees. Now it may dilute upto a maximum of 20 per cent equity.

The extra cash will help NFL to add capacity by acquiring two sick units of Hindustan Fertilisers and FCI in Bihar and Andhra Pradesh.Three of its existing units at Bhatinda, Panipath and Nangal are already going through expansions and will switch to gas for fuel by 2010 helping the company cut costs by over two and a half times. Its fourth unit at Vijaypur will also see production going up by 25 per cent in the next two years. NFL''s current build up capacity is 32.31 lakh metric tonne per annum and it will go up to 40 lakh metric tonne per annum by 2010 giving it around 20 per cent market share.

But NFL''s growth story has not excited investors, the stock was down 9 per cent on Monday. With the government assuring gas supply to NFL at a subsidised rate the management is getting the courage to grow its operations. It has given the government two options to fund its growth, either a financial package and if that seems unlikely then the freedom to tap the Indian capital markets, either way it expects a final decision by the end of the year.