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Tata Chemicals reported that its standalone net profit was down 26 per cent at Rs 111 crore (Rs 151 crore) even as its sales rose 10 per cent at Rs 1,613 crore (Rs 1,460 crore) in the June quarter.
The company has not recognised a subsidy of Rs 31 crore on the opening stock of raw materials for phosphatic and potassic fertilisers as the industry had contested the office memorandum issued by the Government on July 11.
According to the office memorandum, the Government has pegged the subsidy for potash on a fixed price of $420 a tonne, while the market price had moved up to $470 a tonne.
Had the company recognised the subsidy income as per the Nutrient Based Subsidy (NBS) policy without giving effect to the office memorandum, Tata Chemicals sales would have been higher by Rs 31 crore and net profit by Rs 23 crore, the company said.
Mr R. Mukundan, Managing Director, Tata Chemicals, said the office memorandum has put the industry in a spot as fertiliser companies carry substantial stock of raw material at any given point of time.
“In fact, we hold an inventory of two months of potash as the availability of raw material is key for meeting demand,” he added.
Uncertainty over expansion project
Tata Chemicals has put on hold its plan to raise $375 million due to uncertainty in the progress of the expansion project at Babrala in Uttar Pradesh without confirmation of gas supply by the Government. Earlier the company had announced its decision to postpone the Rs 3,800-crore expansion of its urea manufacturing unit at Babrala.
The company expects the rising cost of coal and limestone to exert pressure on its soda ash business with demand from automotive and construction sectors slowing down due to increase in interest rates.
The company has proposed to increase stake in US potash explorer EPM Mining Ventures Inc from 16 per cent to 30 per cent, post conversion of its warrants. It expects its international subsidiaries in Europe, North America and Africa to perform better despite the fear of a global economic slowdown as they are well poised to pass on cost increase to end consumers.
On the US downgrade by S&P, Mr P.K. Ghosh, Chief Financial Officer, said the development will increase the cost of future borrowings by 15-25 basis points, but it will not have a major impact on the global economy as other two rating agencies have retained their rating on the US.
The company's shares were up 0.21 per cent on the BSE, at Rs 352, on Monday.
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