National Fertilizer Ltd FY26: ₹211 Crore Profit, 17.1x P/E, 9% ROCE
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1. At a Glance
National Fertilizer clocked ₹211 crore profit in FY26 on ₹21,514 crore revenue.
The company paid 17.1x earnings—above its own 5-year average of 20.2x but sitting flat against the sector median of 14.56x. Urea stayed at 114% capacity utilization despite natural gas supply hiccups in March.
The elephant in the room: profit grew 24% YoY while revenue grew 8.7%, but ROE has stayed stuck at 7.61% for three straight years. ROCE is 9.09%—below the cost of capital for most disciplined operators.
The company holds ₹59 crore cash against ₹3,964 crore debt. Order book size remains opaque.
Teaser: Sector-wide energy norm changes loom, and the Namrup JV capex just got greenlit at ₹572 crore. Margins are narrowing. Where’s the growth?
2. Introduction
National Fertilizer is the second-largest urea manufacturer in India after IFFCO, commanding 12% of the country’s urea production.
The Government of India holds 74.71% as on Mar 2026—a stable promoter, though with agenda beyond profit. The company’s five urea plants run at overcapacity (114% utilization in FY24), supplying subsidized fertilizer to 21 states and 3 Union territories through 4,000 distributors.
FY26 marked a reset. Revenue grew 8.7% YoY to ₹21,514 crore after three consecutive years of decline (3-year CAGR: -10%). Manufacturing urea volume fell 8% in FY24 but traded volume (buying and reselling imported fertilizers) climbed 24%. This pivot—away from making, toward trading—carries thinner margins.
Debt fell from ₹3,172 crore in FY22 to ₹1,411 crore in Q2 FY25, then ticked up to ₹3,964 crore by March 2026, a rebound of 180%. The company blamed subsidy timing delays and working capital pressure.
ICRA reaffirmed AA (Stable) on fund-based limits in May 2026, citing GoI backing and urea’s import dependence (20–25% of demand still met by imports). However, the rating flagged rising vulnerability to energy norms and NBS (Nutrient Based Subsidy) rate caps that compress margins sector-wide.
3. Business Model: WTF Do They Even Do?
Fertilizers (91% of H1 FY25 revenue): The company manufactures neem-coated urea under the Kisan brand, plus solid and liquid bio-fertilizers and bentonite sulphur. It also trades in non-urea fertilizers, seeds, and agrochemicals—a lower-margin hustle but a hedge against urea price swings.
In FY24, the core business took a hit: manufactured urea volume dropped 8%, and price realization fell 23%. The company offset this by trading 24% more imported fertilizers, but at razor-thin margins, making the segment’s FY24 revenue fall overall by 21%.
Industrial Chemicals (9% of H1 FY25 revenue): Three plants churn out nitric acid, ammonium nitrate, sodium nitrate, and sodium nitrite at Nangal, Punjab. FY24 output: 87,249 MT nitric acid (+8% YoY), 40,510 MT ammonium nitrate (+56% YoY). These products serve explosives, dyes, and fertilizer makers. Margins here widened in recent quarters thanks to West Asia supply shocks, but ammonia availability is expected to tighten in FY27.
Seeds (Kisan Beej): The company runs three seed processing units and sold 2.24 lakh quintals certified seed in FY24 through soil testing labs (10 labs, capacity 65,000 samples/year for macronutrients). This is a vanity line for a ₹21,000-crore revenue company—strategic, not material.
The roast: The model is commodity-first. Urea is subsidized by the Government, meaning the company sells at a ceiling price set by Delhi, not demand. Trading non-urea fertilizers is lower-margin. Industrial chemicals are lumpy and tied to global ammonia prices. Bio-fertilizers and seeds are noise. Survival depends on capacity utilization (running the plants hot) and subsidy inflow (getting paid on time). Growth? Not in the cards.
The quarter showed profit growth despite revenue decline—a sign of margin recovery, not volume. Operating profit margin in Q4: 7% (vs 5% in Q3). Other income fell sharply YoY, indicating lower treasury gains or subsidy write-backs.
Profit & Loss Narrative:
FY26 profit jumped 24% YoY (TTM basis from Screener: +23.9%) even as revenue grew 8.7%. This math only works if operating leverage swung sharply. EBITDA margin expanded from 5% in FY25 to 5.7% in FY26 (estimated). Interest expense held at ₹249 crore (down from ₹277 in FY24 as debt declined mid-year), and depreciation climbed to ₹405 crore, gobbling some of the gain.
The company recognized ₹146,395 lakh (₹1,464 crore) in subsidy during Q3/9M FY26—a massive bump that props up reported profit. Subsidy is a receivable until the Government pays; timely inflow keeps working capital clean.
Concall color: Management flagged natural gas supply disruptions in March 2026 but said the company navigated by preponing shutdowns and diverting gas. Operating rates recovered to ~100% post-crisis. Industrial segment profitability improved on West Asia supply tightness (higher realizations for nitric acid and ammonium nitrate).
5. Valuation Discussion: Fair Value Range (Educational Only)
What follows is a walkthrough of how three valuation methods work, using this company’s numbers as the example — not a target, not a forecast, not advice.
Method 1 — P/E Multiple:
Annualised EPS (FY26 full year) = ₹4.31. The peer band for fertilizer companies spans P/E multiples of 9.59x (Chambal Fert.) to 26.41x (Coromandel Inter.), with a median of 14.56x. At the peer median of 14.56x, the arithmetic produces ₹4.31 × 14.56 = ₹62.7 to ₹63 per share (range tightened around median).
Method 2 — EV/EBITDA Multiple:
EBITDA FY26 (estimated from reported OPM and revenue) = ₹1,239 crore. Enterprise Value = Market Cap + Net Debt = ₹3,622 crore + (₹3,964 crore debt – ₹59 crore cash) = ₹7,527 crore. Current EV/EBITDA = 6.07x. Peer band (from Screener data) spans roughly 4.93x (FACT) to 26.41x (Coromandel), with median ~9.8x. At the peer median of 9.8x, the arithmetic produces ₹1,239 × 9.8 / (shares in crore) = ₹78 to ₹82 per share (approximated across lower-to-median peer band).
Method 3 — Simplified DCF (indicative):
Operating cash flow FY26 = –₹1,342 crore (negative, owing to working capital build during subsidy timing gaps). Free cash flow = –₹1,564 crore. A company burning cash is not a DCF candidate under normal assumptions. Under normalized EBITDA of ₹1,200 crore, assuming 5% FCF conversion and a 9% WACC, indicative intrinsic value lands in a wide range, but with negative FCF, the method is unreliable here.
These figures show how the methods work and are not a valuation, a target, or advice.
6. What’s Cooking
1. Namrup JV Greenlit (November 2025): The board approved ₹572.45 crore equity investment in a 1.27-MMTPA ammonia-urea plant in Assam (AVFCCL). Timeline: 48 months. This is the old Brahmaputra Valley JV, dormant since 2018. Capex is significant for a company with negative FCF. The payoff (capacity addition, entry into
