Deepak Fertilizers signs JV with Norway major

Pune-based Deepak Fertilizers and Petrochemicals Corporation (DFPCL) has entered into a heads of agreement with the Norway-based Yara International ASA, a $14 billion fertilizer and specialty chemicals major, to establish a joint venture (JV) for the production and marketing of ammonium nitrate and specialty fertilizers in India.

DFPCL will own 51% of the JV while Yara will own the balance 49%. The JV will also invest in Deepak Fertiliser's 300,000 million tonne (MT) per annum ammoium nitrate plant under construction at Paradip in Orissa.

A spokesperson of DFPCL declined to comment on the size of the investments in the joint venture, citing the Board of Directors of both the companies were yet to finalize the details.

Fertilizer industry sources said typically a midsize to large fertilizer plant would incur an investment of close to $1 billion.

India consumed around 400,000 tonne a year of technical ammonium nitrate (TAN) and the market was growing at around 5-6% per year, driven by strong coal demand for power generation, said a Yara press release.

Ammonium Nitrate is mainly used to produce explosives for the mining industry and in coal production.

Currently Deepak Fertilizers is the only major domestic producer of ammonium nitrate, with an installed capacity of 140,000 tonne. The rest of Indian demand is covered mainly by imports.

"The JV will be value-accretive to DFPCL and will benefit its long term strategy in nutrient management through specialty fertilizers and value-added mining products and services," said Sailesh Mehta, vice-chairman and managing director, DFPCL.

"India has the world's third biggest coal reserves and Yara has proven strengths in safety, production, logistics and expertise in the use of technical ammonium nitrate for explosives (TAN)," said Thorlief Enger, president and CEO, Yara International ASA.

The heads of agreement would  be converted into a final agreement after a due diligence and the necessary company and regulatory approvals.

The JV will review opportunities for production, marketing and import of specialty fertilizers in focused states like Maharashtra and Gujarat, where DFPCL has considerable strengths. It will also target the ammonium nitrate market in India, especially the mining and infrastructure sectors.

Yara International ASA, is a global leader in ammonia, speciality and bulk fertilizers and Ammonium Nitrate (AN), industrial gases and other diversified chemical and pollution control products.