What led to the 15% decline in Coromandel International's shares this month? The company's operations remain flat

What led to the 15% decline in Coromandel International's shares this month? The company's operations remain flat

What led to the 15% decline in Coromandel International's shares this month? The company's operations remain flat

On the other hand, ahead of the Budget (Interim) day, shares of National Fertilizers, RCF, and Chambal Fertilizers were seen trading optimistically, climbing 2.45%, 1.68%, and 1.94%, respectively.

On January 31, Coromandel International's stock was trading flat after plunging 8% the day before due to subpar fiscal third-quarter earnings. At midday, the share price stood at Rs 1,051, hardly moving from the previous closing.

Compared to the NSE Nifty 50, which has been unchanged throughout the course of the year, the stock has decreased by more than 15% so far this year. The firm reported data that showed a year-over-year fall in net profit of 55% and a decline in total sales of 34%.

On the day of the results, there was a strong build-up of short positions in the counter, as the share price dropped by more than 8% and the open interest increased by 59.58 percent.

Potential reason for the collapse:

New recommendations regarding the price of all non-urea-based fertilizers under the Nutrient Based Subsidy (NBS) program were released by the Department of Fertilizers (DoF) on January 18. The new regulations, which go into force retroactively on April 1, 2023, state that fertilizer businesses may only make a maximum profit margin of 8% for importers, 10% for manufacturers, and 12% for integrated manufacturers. Integrated producers provide intermediate goods like ammonia and phosphoric acid in addition to final fertilizers.

According to the instructions released by the Department of Finance (DoF), enterprises that generate earnings that are excessive or beyond the authorized proportion in a given fiscal year are required to reimburse such gains by October 10 of the next fiscal year. Failing to do so may result in a 12-percent annual interest penalty that is based proportionately on the amount of the refund. Furthermore, the government will deduct the illicit proceeds from future payments for fertilizer subsidies.

The markets first see these rules negatively for Coromandel International.

On the other hand, ahead of the Budget (Interim) day, shares of National Fertilizers, RCF, and Chambal Fertilizers were seen trading optimistically, climbing 2.45%, 1.68%, and 1.94%, respectively.