Tata Chemicals sells urea business to Yara Fertilisers

Tata group firm Tata Chemicals today announced sale of its urea business to Norway's Yara Fertilisers for Rs 2,670 crore.
Under the deal, the company will sell its only urea plant in Barbala, Uttar Pradesh, which has an annual capacity of about 1.2 million tonnes.
Following the sale, which was done to unlock value of a heavily regulated urea sector, Tata Chemicals will focus on its consumer businesses like salt (Tata Salt), pulses and spices (sold under Sampann brand) and water purifier (Tata Swach).
The deal is expected to be finalised in the next 9-12 months, subject to regulatory approval and Yara would fund this acquisition through internal accrual.

The Board today approved "transfer of the business of sale and distribution of urea and customised fertilisers, manufactured by the company at its plants located in Babrala, Uttar Pradesh, by way of a slump sale to Yara Fertilisers India", Tata Chemicals said in a statement.
The urea business along with the assets, liabilities, contracts, deeds etc, would be transferred to Yara India in exchange of a lump sum consideration of Rs 2,670 crore.

Later at a press conference, Tata Chemicals MD R Mukundan said: "Broadly, this is in line with the company's strategy of building our consumer business, while we maintain our leadership in the inorganic chemical business and try to focus on farm business through Rallis and Metahelix".

The divestment of the urea business will unlock value for the company, strengthen its balance sheet and will help to pursue growth potentials and opportunities in line with its strategic directions, he said.
Tata Chemicals will continue to own the brands -- Paras, TKS and Daksha -- and the transaction does not include speciality products and complex fertilisers, he added.
Munkudan said the company has stopped all investments in its complex fertiliser plant in Haldia, West Bengal, and is looking at opportunities and suitable partners, as and when it comes.
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As of June quarter, Tata Chemicals was to receive Rs 1,479 crore towards government subsidy on urea. The government fixes the maximum retail price of urea and reimburses the difference between MRP and cost of production to manufacturers.

When asked about this, Yara Managing Director Sanjiv Kanwar, without quoting figures, said, "We will only receive what is entitled to the Barbala plant."
"The deal is in table for 9-12 months. We are going to finance the deal internally," Yara Senior VP and Head of Crop Nutrition Terje Knutsen said.
This is the first investment in India by Yara, which has been present in the country for the past two decades. The move will help the company gain 5 per cent market share in the urea segment.
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"Our growth in India can be further accelerated with this acquisition, creating a larger market footprint for Yara and enabling increased premium product sales in particular.

"We will place great emphasis on successful integration of the operations, and will put in place an integration team consisting of highly experienced TCL and Yara employees, the latter from both our existing India operations and our regional management," Knutsen said.
This acquisition represents another significant step in Yara's growth strategy, creating an integrated position in the world's second-largest fertiliser market, he said.
"India has strong population growth and increasing living standards, and significant potential to improve agricultural productivity," Svein Tore Holsether, President and Chief Executive Officer of Yara, said in a release here.
Yara is operating in India since the 1990s, focusing in recent years on premium product sales in the West and South of the country.

Kotak Securities and JM Financials were the financial advisors of the deal.