SM Written

Assignment
GROUP-3
Apurva Agrawal (H013-18)
Arghadeep Biswas (H014-18)
Aashika Budding (H015-18)
Boni Kumar (H016-18)
Dara Kavya (H017-18)
Deepika Rangasai (H018-18)

DECLARATION

We hereby declare that the work

submitted in the file “SM_Group 3” is
purely our own work, without any copied
content from any sources. Some
information was taken from the internet
but the same has been provided here in
our own words, based on our
interpretation of the same as a group.

Students:-

1. Apurva Agrawal (h013-18)

2. Arghadeep Biswas (H014-18)
3. Aashika Budding (H015-18)
4. Boni Kumar (H016-18)
5. Dara Kavya (H017-18)
6. Deepika Rangasai (H018-18)

CHEMICALS AND
FERTILIZERS
INDUSTRY
This document provides a comprehensive insight on the Chemicals and Fertilizers Industry in India
and uses some established strategic tools to gauge the prevalent industrial scenario and the
strategies and competitive advantages of one of the leading companies in the market.
 TABLE OF CONTENTS

1. Macro Environment Analysis ………………………………………….. 2

2. Industry Analysis …………………………………………………………… 4
3. Competitive Analysis of the Company ……………………………… 6
4. Firm Analysis and Competitive Strategy ………………………….. 8
5. Competitive Advantage …………………………………………………... 9

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India is a pre-dominantly agricultural country and, in order to keep pace with the latest
farming tools and techniques, it is imperative that the country does its best to produce high
quality chemical fertilizers – which is an essential make-up of farming equipment and a
critical factor in determining profitability of farmers and their crops. As of now, India is the
fourth largest producer of nitrogenous fertilizer and ranked eighth in the production of
phosphoric fertilizers in the world.
Let us take a deeper look into this fascinating industry and study one of the stalwart
companies of the country in the Chemical Fertilizers space.

A. MACRO ENVIRONMENT ANALYSIS

To study the macro environment that the Chemicals and Fertilizers Industry in India
operates in, we deploy the tried and tested PESTEL Framework to obtain a holistic
view of the environment.

PESTEL Analysis

Political

1 - Pricing mechanism for urea by the government forms an essential parameter for
boosting farm income, as it is fully controlled by the government and sold at
statutory notified uniform sale price.

2 -The budget is expected to have an amended New Investment Policy (NIP)

involving investment benefits for Urea manufacturers, as the domestic urea capacity
is falling short, and due to which the government has to rely on imported urea for
meeting the demand.

Economical

1 - System of Subsidy Payment under DBT Framework

 Under DBT system in fertilizer subsidies, the farmers/beneficiaries are
expected to continue receiving urea at statutory subsidized prices and P&K
fertilizers at subsidized prices in the market.
 The fertilizer companies which were receiving subsidy on receipt of fertilizers
at the district, will now get subsidy only after the fertilizers are sold to
farmers/beneficiaries by the retailers through Point of Sale (PoS) machines
through biometric authentication

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 2 - The recent reduction of the Goods and Services Tax (GST) on fertiliser-grade
phosphoric acid to 12% from 18% earlier is likely to be marginally positive for
fertilizer manufacturers as it will benefit them in terms of lower input tax credits that
will result in lower working-capital blockage, says ratings agency ICRA.

Social

The harmful effects of the industry are very high because of the improper handling
of waste which causes many diseases like asthma, kidney diseases, hepatitis etc.
Adding to it, the unequal use of fertilizers and pesticides in different regions have
led to decreased soil fertility which is mainly because of the lack of awareness
among farmers. Even though it has harmful effects the usage of the fertilizers cannot
be stopped because it gives farmers so much ease in terms of saving time and
actually using it.

Technical

There is a lot of development going on to meet the demand of fertilizers in the

country through indigenous production, self-reliance in design engineering and
execution of fertilizer projects is very crucial. Consultancies these days organize
themselves to undertake execution of fertilizer projects starting from
concept/designing to commissioning of fertilizer plants in India and abroad. Adding
to it, the entire requirement of potassic fertilisers is met through imports as India
does not have commercially viable sources of potash. With a view to make the
nation self-sufficient in urea fertiliser, the Fertiliser Ministry has moved a proposal to
boost investment in the sector.

Environment

According to the new pollution norms notified by Union Ministry of Environment,

Forest and Climate Change in December 2017 now includes limits for nitrogen oxides
in ammonia and nitric acid plants, which were missing earlier. Norms have also been
introduced for particulate matter, gaseous ammonia and total fluoride for
Ammonium Nitrate, Calcium Ammonium Nitrate (AN/CAN) and complex fertilizer
(NPK) plants. Even effluent norms have been improved in the notification. The
effluent norms since 1988 had different limits for plants commissioned before and
after 1982 due to differences in design. However, the new norms are uniform
irrespective of its age. Secondly, permissible limits for key pollutants such as Total
Kjeldahl Nitrogen and Free Ammonical Nitrogen have been made stringent in
straight nitrogenous plants, comprising of Urea/CAN & AN.

Legal

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 Legislations also play a very important role in the fertilizers and chemicals industry as
most of the raw materials need to be imported which brings into picture the import
export laws, etc. Also, the environmental regulations need to be kept in mind during
the production of fertilizers and chemicals.

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B. INDUSTRY ANALYSIS

India is the third largest consumer and producer of fertilizers in the world. As fertilizers
industry contributes 40 – 50 % of agricultural productivity and agriculture contributes to
16% of the GDP and employees about 58% of Indian population, India being primarily an
agrarian economy, this industry holds a prime importance in the economy.
Fertilizers industry is highly energy and capital intensive and there is a supply demand gap of
10 MPTA (million tons per annum) and is clearly evident that our country is sin short of
capacities and dependent on imports to meet its growing demands.
Also Fertilizers industry is highly regulated in terms of pricing, availability, distribution and
movement. Government of India provides subsidies to the industries so that the end user
(farmer) gets them for an affordable price.

Porter’s 5 forces analysis:

1. Treat of new entrants: LOW

2. Bargaining power of suppliers: HIGH
3. Bargaining power of Buyers: LOW
4. Threat of substitutes: MEDIUM
5. Rivalry: LOW

1. Treat of new entrants: LOW

The threat of new entrants is low because of t the below stated reasons:

a) Capital investment is high

b) Production cost is high
c) Government regulations
d) Low returns
e) Import of raw materials

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2. Bargaining power of suppliers: HIGH

The Bargaining power of suppliers is high because of the below stated reasons:

a) Limited number of suppliers

b) Greater dependence on imports
c) High prices and less diversity of imports
d) Scarce raw materials being natural resources
e) Captive market in India

3. Bargaining power of Buyers: LOW

The Bargaining power of buyers is low because of the below stated reasons:

a) Productivity of substitutes is low

b) No product differentiation
c) Demand is less for less productive and high for more productive fertilizer
d) High demand for agricultural products in turn creates a necessity for fertilizers
e) Crop yield is directly affected by fertilizers

4. Threat of substitutes: MEDIUM

The Threat of substitutes is medium because of the following reasons:

a) Organic fertilizers, vermicomposts, bio fertilizers may be substitutes
b) Animal manure is not much effective for commercial purpose
c) Natural fertilizers might not be much productive than chemical fertilizers

5. Rivalry: LOW

Rivalry is low because of the below stated reasons

a) Government regulated industry

b) Subsidies are provided by government
c) Pricing is done by government which are uniform across leads to
cooperation in the industry
d) Supply chain is improving and the capacity utilization is high , hence no
rivalry.

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COMPANY CHOSEN: Coromandel International Limited

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C) COMPETITIVE ANALYSIS OF THE COMPANY

Using strategic group mapping as a tool for competitive analysis, 9 companies were chosen
from the chemical and fertilizer industry. This grouping will help understand the different
strategies used by multiple companies within the same industry and help define the scope
of our company’s competitors.
To determine the competitive positions, two competitive attributes (No. of factories/plants
and Revenue) of each company were identified and mapped.

Firm No. of Revenue

factories
Mangalore Chemicals & Fertilizers Limited (MCF) 1 2692.00

Zuari Agro Chemicals Ltd (Zuari) 4 4649.00

Gujarat Narmada Valley Fertilizers and Chemicals Ltd 1 5917.00

(GNVFC)
Deepak Fertilizers & Petrochemicals Corporation Ltd 4 3187.00
(DFPC)
Fertilizers & Chemicals Travancore Ltd (FACT) 2 1928.00

Rashtriya Chemicals & Fertilizers Ltd. (RCF) 2 7252.00

Chambal Fertilizers & Chemical Ltd. (CFC) 2 7466.00

Gujarat State Fertilizers & Chemicals Ltd. (GSFC) 3 6309.00

Coromandel International Ltd 8 11044.00

The Strategic Group Mapping for companies above is shown below -

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Above mapping can help determine the correlation between no. of manufacturing facilities
a company has and its revenue. While it seems to be directly proportion, there are some
companies who have been able to perform better even after restricting it to fewer locations.
This could be due to better efficiency of the plant or better dealer network/market reach
etc.

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D) FIRM ANALYSIS AND COMPETETIVE STRATEGY
In order to determine the competitive strategy of the company, we have used the TOWS
Strategic Matrix to see the various combinations of strengths, weaknesses, opportunities
and threats of Coromandel International.

STRENGTHS WEAKNESSES

 Strategic tie-ups with key raw  Heavy dependence on

material suppliers Tunisia, for phosphoric
 Offers complete range of acid
agricultural needs of the  Lacks strong operational
farmers efficiency
 Strong financials of the
company and a healthy credit
score

OPPORTUNITIES O-S STRATEGIES O-W STRATEGIES

 Scope for increase in  Investments to augment  Strong turnaround of

farm productivity
 Crop protection
business
 Export Market
 Growing demand for
Speciality Nutrients
capacity and R&D facility of Sabero Organics
the Vishakhapatnam plant  Reduction of inventory
 Acquisition of Sabero Organics, levels
enabling expansion of product
range and size of the market
 Raising working capital finance
at competitive interest rates
 New plant, setting up in-joint
venture for raw
material/product
requirements

THREATS T-S STRATEGIES T-W STRATEGIES

 Insufficient rainfall  Currently, no tie-ups with  Raise the MRPs of the

 Reduction in nutrient
based subsidy
 Rising international
prices for raw
materials
 Rupee depreciation
suppliers of Phosphorous and
Potassium nutrients
 Liaison with government to
increase MSPs
 Focus on farm mechanisation
commodities offered
 Increase operational
efficiency
 Ponder on backward
integration for lower
costs and higher
efficiencies

Based on the above analysis, we arrive at the conclusion that Coromandel International is
pursuing a HYBRID strategy, a balanced mix of Cost Leadership (through its higher

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production capabilities and smart tie-ups) and Product Differentiation (through its superior
and diverse supply chain and access to raw materials).

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E) COMPETETIVE ADVANTAGE

Low cost of production:

 Coromandel has its integrated manufacturing facilities at Visakhapatnam and Ennore
and features among the lowest cost producers in India.
 The research and development lab at Hyderabad provide support through process
improvements to bring down the production costs and creating a roadmap for
development and introduction of off patent and combination of products.
 Captive phosphoric Acid and sulphuric Acid manufacturing capacity - improvement
to the cost structure of phosphatic products

Digitization and New technology:

 Digitization of the Fertilizer Supply chain under Direct Benefit Transfer enhance the
stock visibility , improves the operational efficiency and provides transparency to the
functions
 Agri infrastructure development – Strengthening of Irrigation, cold chain, rural
electrification and digital connectivity
 R&D facilities for new product development in Nutrient and Crop Protection space

Diversified portfolio, unique products:

 They have a diversified product portfolio with non-subsidy businesses contributing
significant share in Company’s profitability. Besides this, they have differentiated crop
solutions provider with unique and inimitable products

Sourcing capabilities:
 Coromandel has advanced sourcing capability, manufacturing and technical knowledge
in Water Soluble Fertiliser ,that comes through their joint venture with SQM Chile, a
global player in specialty plant nutrition.
 Upstream integrated sourcing for Phosphoric Acid

Customer centrism
 Integrated nutrient marketing team and agronomist structure improving customer
connect and driving knowledge dissemination.
 Its position as a ‘Complete Farm Solution Provider’ by enhancing its engagement with
the farming community in the addressable markets.

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Well defined risk management
 Spans across different levels and continuous identification, classification and
formulation of mitigation measures (Environmental Risk, Economic Risk, Regulatory Risk,
Operational Risk, Financial Risk, HR & Legal Risk).The practices include risk assessment,
monitoring, measurement reporting, mitigation actions, strategy alignment and business
planning and evaluation on quantitative, semi-quantitative and qualitative aspects of
impact for timely decision on its treatment.

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