Coromandel board okays equity buy in S Africa firm

Coromandel Fertilisers today announced that its governing board has approved of an investment in a South African company, Foskor, to the tune of 2.5 per cent of its equity.

The board has also approved Coromandel's plan to give technical consultancy advice to Foskor.

Coromandel has not disclosed the value of the planned investment, and its chairman, A Vellayan, could not be contacted.

The current development comes on the heels of an existing relationship between Coromandel and Foskor. Foskor is a key supplier of phosphoric acid to the fertiliser industry in India.

In October 2003, Foskor signed an agreement with Coromandel to acquire a 5 per cent stake in Godavari Fertilisers and Chemicals, a company controlled by Coromandel.

A Foskor press release at that time said that the logic underpinning the investment was an attempt to secure an annual supply contract of about 200,000 tonne of phosphoric acid.

Foskor's deal with Coromadel to buy Godavari's equity followed an unsuccessful bid for the company when the Andhra Pradesh government divested its stake. Coromandel topped the bidding to buy out the government's stake

Coromandel and other fertiliser companies are sensitive to the price of phosphoric acid. Indian fertiliser companies import potash and phosphoric acid for their operations.

On the recommendation of the government, a consumer group that was made up of 12 major Indian DAP plants was formed some time ago. The group uses its size to secure a favourable deal from phosphoric acid suppliers.

Last year, Vellayan told the media that the consumer group managed to secure supplies at a price of $398.72 and $402.75 a tonne as against the quoted price of $452 a tonne.