RCF edged up 2.05% to Rs 34.80 today after reports suggested that the government would be granting the fertiliser maker a subsidy worth Rs 200 crore.

Volumes were immense, at 8 lakh shares by 11:10 IST. The scrip has now risen 172% from Rs 12.80 on 31 March 2003.

Reports suggest that RCF will be a recipient of Rs 200 crore in subsidies from the government for the current year as backlog for dues that the company had claimed as a result of producing excess ammonia in the past.

Reports say that the company had sold excess ammonia on commercial basis but the government had deducted the sale amount from its subsidy payments on the grounds that the ammonia should have been used internally by the company. But RCF had represented against this interpretation and claimed that the money received from these sales should not be adjusted against its subsidy claims, subsequently.

The government is now believed to have agreed to RCF's interpretation, implying that the latter could receive Rs 200 crore from the government.

This money should improve the financials of the company . For the year ended 31 March 2003, RCF recorded losses of Rs 48.07 crore compared to a net profit of Rs 24.21 crore in the previous year. Total income increased marginally by 0.41% to Rs 2,072.43 crore from Rs 2,063.85 crore. For Q4 ended 31 March 2003, the company's performance was redeeming, with a 146% rise in net profit to Rs 59.19 crore (24.04 crore) on a 13% increase in total income to Rs 650.66 crore (Rs 576.66 crore).

The stock is also rising on hopes that the monsoon this year will be an improvement over the past year and set off increase in demand for fertilisers, the company's product.

For months now, disinvestment has been a major issue for the company, lending strength to the scrip. The government had last year invited bids for global advisors for the disinvestment process of the state-run fertiliser company. The government plans to disinvest 51% stake in the state-run fertiliser major. Currently, the government holds 92.5% stake in RCF.

RCF is the largest gas-based fertiliser and chemicals manufacturer in the country, with an installed capacity of 1.16 million tonnes. It has manufacturing units at Thal (Raigad district in Maharashtra) and Trombay near Mumbai. The company produces nitrogenous, phosphatic and potash fertilisers along with a wide range of industrial chemicals. Fertilisers contribute 80% of its turnover. Since it has a depreciated plant, the cost of producing urea is low compared to international companies.

Other properties of RCF include housing complexes in Mumbai and Thal. It has an 800-acre property in Mumbai alone.

RCF has embarked upon an ambitious investment plan involving Rs 2,700 crore over the next three to five years for modernisation of its Trombay and Thal plants. The plan is to make the units safer and more environment-friendly. The company, which proposes to achieve a turnover of Rs 5,000 crore to take on global competition in the wake of WTO regime, will fund these schemes through internal accruals without Government of India support.