CHENNAI: Tata Chemicals (TCL) said on Friday it has completed the sale of its urea fertilisers business to Yara Fertilisers India for Rs 2,682 crore. The deal heralds the first foreign direct investment (FDI) in the highly regulated urea sector.
“The sale and transfer of urea and customised fertilisers business to Yara as contemplated in the scheme of arrangement has been completed today after the receipt of requisite regulatory approvals, fulfilment of conditions precedent and sanction of the National Company Law Tribunal, Mumbai,” the company said in a regulatory filing on Friday.
The transaction involves transfer of its all assets, working capital, contracts, liabilities and deeds of its Babrala plant in Uttar Pradesh, it added. The acquired plant has an annual production of 0.7 million tonnes ammonia and 1.2 million tonnes urea, and generated revenues and profit before tax of $296 million and $29 million, respectively, in the fiscal year ended March 2017. With this acquisition, Yara gains a significant position in north India with access to a network of 650-700 dealers.
“It will enable the company to provide enhanced crop nutrition solutions to farmers,” Yara CEO and president Svein Tore Holsether said. Yara’s current turnover of $40 million in India will increase to $350 million, he added.
Initiated in August 2016, the sale is part of the company’s strategy to strengthen its fertiliser business through partnership or transfer of ownership to world-class companies. “Strengthening the balance sheet, pursue growth opportunities in line with the strategic directions was the rationale behind the deal,” the company said.
Since TCL exited its less remunerative fertiliser business, it has significantly pared debt from Rs 8,077 crore in FY17 to Rs 6,448 crore in FY18. The divestment strategy from fertilisers business would help TCL reduce its debt further and de-leverage its financials. “The company would become debt-free at net level due to Rs 4,500 crore from the sale of investment in Tata Global Beverages and Rs 3,000 crore from fertiliser divestment over the next 2-3 years,” said an analyst with a broking firm.