Mumbai, February 11 India's complex fertilizer production capacity is expected to increase by 25 per cent in the next three financial years, which is likely to help the country reduce its reliance on imports, a report said on Wednesday.
The complex fertilizer manufacturing sector is expected to add around 4 million tonnes per annum (MTPA) of capacity by fiscal year 2029, from the current base of 16 MTPA, due to increasing demand and limited capacity additions in the past seven years, Crisil Ratings said in the report.
This additional capacity is expected to help reduce the country's reliance on imports, the report stated.
Despite the capital expenditure (capex), Crisil Ratings said that the credit profiles of manufacturers will remain comfortable, supported by healthy profitability and limited reliance on debt due to improving backward integration.
The government's track record of timely subsidy disbursements also supports the working capital cycle of players, it added.
Complex fertilizers, which account for a third of the overall domestic fertilizer consumption, provide balanced soil nutrition.
Approximately one-third of India's complex fertilizer requirements are met through imports, mainly di-ammonium phosphate (DAP), while nitrogen, phosphorus, and potassium (NPK) fertilizers are largely produced domestically.
The share of NPK grades in overall complex fertilizers increased to 60 per cent in fiscal year 2025, compared with an average of 53 per cent in the previous five fiscals, due to domestic manufacturers prioritizing NPK production due to better cost economics.
"Healthy demand and limited capacity growth led to capacity utilization reaching 95 per cent this fiscal. In fact, only 0.5 MTPA of capacity has been added to complex fertilizers over the last seven years. The planned capacity additions will not only provide growth opportunities but also help maintain import dependence at 30-32 per cent, which would otherwise have increased by 10-11 per cent by fiscal year 2029," said Crisil Ratings Director Anand Kulkarni.
The new capacities will have minimal off-take risk given the high import dependence. In addition, the execution risks are mitigated by the nature of the projects.
Furthermore, Crisil Ratings said that the industry will add sulfuric and phosphoric acid capacities, which are key intermediates for complex fertilizers.
This is expected to improve backward integration to 60 per cent in fiscal year 2029 from 50 per cent in fiscal year 2025.
Such integrated capacities will lead to stable profitability given the inherent higher volatility in prices of intermediates compared with raw materials, while also reducing import dependence for these intermediates, it added.
"Manufacturers of complex fertilizers are expected to invest Rs 12,000-13,000 crore over the next three fiscals, which is significantly higher than the capital expenditure incurred in fiscal years 2025 and 2026. A large part of the planned capex is likely to be funded from healthy accruals from existing capacities, leading to low reliance on external debt," said Crisil Ratings Associate Director Nitin Bansal.
These factors will keep the leverage – defined in terms of gross debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio – largely stable at 2.0-2.2 times over the next two fiscal years, he added.
The adequacy of nutrient-based subsidy rates and timely release of subsidies will, however, remain a key monitorable, the Crisil Ratings report said.
"We expect timely and adequate subsidy allocation to continue, as seen with an additional subsidy allocation of 22 per cent compared with the initial budgetary estimates of Rs 49,000 crore in fiscal year 2026," the report added.