Zuari Agro Chemicals to sell off Goa's fertilizer plant

Zuari Agro Chemicals, the agriculture vertical of the Adventz Group, has decided to sell off the company's fertilizer plant in Goa to unlisted joint venture company Paradeep Phosphates Ltd (PPL) for a total consideration of $280 million (about Rs 2135.06 crore). The company's board has already given 'in-principle' approval for the sale on strategic and financial grounds. It will, however, be subject to a due diligence by PPL - a joint venture between Zuari Agro and Morocco-based OCP Group.

If the sale fructifies, PPL will become a large fertilizer company with access to both phosphates and nitrogenous fertilizers, the company said in a regulatory filing. Proceeds from the transaction will be used to “take care of the long term liabilities” of Zuari Agro Chemicals, the filing stated. Zuari Agro Chemicals and OCP hold 50% each of the total equity capital of Zuari Maroc Phosphates Pvt Ltd (ZMPPL), while ZMPPL holds 80.45 % of the share capital of PPL.

Additionally, the board of Zuari Agro Chemicals also approved investment of $46.5 million (approximately Rs 354.57 crore) in the share capital of its subsidiary Zuari Farmhub Ltd by the OCP Group and execution of an agreement in this regard. In the fourth quarter of 2019-20, Zuari Agro Chemicals posted a consolidated net loss of Rs 304.60 crore due to closure of its phosphatic manufacturing capacity in Goa, compared with a loss of Rs 255.17 crore in the corresponding period of 2018-19. Total income declined to Rs 1,031.93 crore during quarter under review from Rs 2,001.30 crore in the corresponding period of the preceding fiscal. The consolidated results include those of its joint ventures and subsidiaries such as Mangalore Chemicals & Fertilisers, Adventz Trading DMCC (ATD), Zuari Farmhub, Zuari Maroc Phosphates, Paradeep Phosphates and Zuari Yoma Agri Solutions.

In its regulatory filing, Zuari Agro Chemicals said the company's liquidity position had deteriorated during the previous fiscal due to delay in receipt of subsidy from the government and drought-like situation in key marketing areas. This had led to elongation of the working capital cycle. That apart, the company was unable to pass on the increase in raw materials prices to farmers, which contributed to the cash flow mismatch and reduced financial flexibility of the company. These factors adversely impacted the company's cash flows and debt positions, and led to delay in repayment of loans on contractual maturity date, recall of loans from two lenders due to covenant breach and prolonged shutdown of plants for different periods during the year, it added. As a result, the company had a net current liability of Rs 1,506.22 crore as on March 31, 2020.