The K K Birla-promoted Zuari-Chambal group has put on hold its proposal to invest $450 million for setting up a fertilizer plant in Egypt. This follows the September 11 terrorist attacks on the US.
"We will now review the whole proposal in December," Chambal Chemicals & Fertilisers Ltd vice-chairman H S Bawa said. The project was being touted as the largest overseas investment in a greenfield plant proposed by an Indian group.
Interestingly, the group has already received the all-important draft gas supply contract for the project. Still, it has decided to wait for a while before arriving at a decision. "The new developments that have happened might not be important for us, but these are very important for the lenders," Bawa said. According to him, the group will look at a host of new factors, including Egypt's fresh credit rating, before taking a decision on the investment.
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As per the original proposal, the project is to be funded through a debt-equity ratio of 2:1 with the Zuari-Chambal group contributing the entire equity funding. "Since the project is going to be 100 per cent owned by us, we need to review the situation very carefully," Bawa said. The gas-based plant will have a capacity to produce 1 million tonne of urea per annum.
The Egyptian plant was projected to catapult the Zuari-Chambal group among the world's top fertiliser producers. At present, with a total capacity of 2.5 million tonne, it is the sixth largest fertiliser producer in the world.
This will be the group's second overseas project. It has set up a $228 million phosphoric acid plant in Morocco in a 50:50 joint venture with Maroc Phosphate of Morocco. This project was bankrolled by Chambal.
Meanwhile, Zuari Cements, a 50:50 joint venture between the KK Birla promoted Zuari-Chambal Group and Italcementi Spa of Italy, is considering two acquisitions in south India within a year. "The plan is to raise the production capacity of the company from 2.2 million tonne per annum to 4 million tonne in the next year through buyouts," sources said.
According to sources, talks are on with a handful of companies with operations in the south including India Cements-promoted Shri Vishnu Cements Ltd. It was reported last month that the two are close to striking a deal, whereby India Cements will sell its 94 per cent stake in Shri Vishnu Cements to Zuari Cements for Rs 496 crore. Shri Vishnu Cements has a capacity of 1.3 million tonne per annum.
Zuari Cements was earlier a division of Zuari Industries. Last year, it was spun off as a 50:50 joint venture with the Italian company. As per the memorandum of understanding between the two parties, Italcementi's expansion in the south will be through Zuari Cements, though it is free to expand on its own in other parts of the country.
A couple of months back, Zuari Cements had ramped up the capacity of its Yeraguntla plant from 1.7 million tonne to 2.2 million tonne. Zuari Cements has also entered into a marketing alliance with Cement Corporation of India (CCI). Under the arrangement, Zuari will sell CCI cement produced at its Tandur plant in Andhra Pradesh in the same state as well as in Tamil Nadu and Kerala. This will account for 25-30 per cent of the Tandur unit's 1 million tonne per annum capacity.
Thus, the alliance will enable Zuari Cements to sell an additional 250,000-300,000 tonne of cement in the next year. According to sources, this will add Rs 75-80 crore to the company's turnover over the next year.
Apart from the acquisitions, Zuari Cements is also eyeing a greenfield cement plant in Karnataka.
It has applied for a mining lease for limestone deposits in the Gulbarga district. "The deposits are good enough to support a plant with a capacity of over 2 million tonne per annum," the sources said. Earlier, the company had been granted a prospecting licence for the limestone deposits. It has now sought to convert the prospecting licence into a mining lease.