Paradeep Phosphates to raise fresh capital of around Rs 1,255 crore to finance capacity expansion

Zuari's Goa facility would be an important addition for PPL as this would greatly help PPL target the strong fertiliser demand in states like Maharashtra and Karnataka

In a major move to broaden its geographical footprint and meet India’s challenges in the agriculture sector, fertiliser major Paradeep Phosphates Ltd (PPL) is undertaking a capacity expansion at the existing facility besides acquiring the facility of Goa-based Zuari Agro Chemicals Ltd.

Post expansion, PPL’s capacity will increase to a combined 2.22 MMTPA (million metric tons per annum) for fertilisers like DAP (Di-ammonium Phosphate) and NPK (Nitrogen, Phosphorous, Potassium) and Phosphoric acid; while Sulphuric acid has an existing capacity of 1.39 MMTPA.

PPL also intends to retrofit a new Phosphoric acid production plant to increase its Phosphoric acid annual production by 120,000 MT and also intends to install a new evaporator to increase the annual production of strong Phosphoric acid by 116,000 MT.

PPL will raise up to Rs 1,255 crore of fresh capital to part-finance the acquisition of the Goa facility.

PPL intends to utilise Rs 642 crore towards part financing the acquisition of the Goa facility. It will also utilise the funds towards repayment/prepayment of certain borrowings; and general corporate purposes.

Zuari's Goa facility would be an important addition for PPL as this would greatly help PPL target the strong fertiliser demand in western states like Maharashtra and Karnataka.

PPL is a leader in manufacturing, trading, distribution and sales of a variety of complex fertilisers such as DAP/ NPK and the fertilisers are sold under brands like 'Jai Kisaan – Navratna' and 'Navratna'.

“We are investing in topline growth. We are aiming to increase our geographical footprint with a very strong presence in the East, South and West…our cash flow is positive,” PPL president and chief operating officer Sabaleel Nandy told visiting journalists at the PPL facility off the Paradeep Port in Jagatsinghpur district of Odisha.

The Goa facility is engaged in manufacturing, distribution and sales of various fertilisers such as DAP, Urea (JK Urea) and several grades of NPK, namely Samarth (NPK-10), Sampatti (NPK-12), Soubhagya (NPK-14), Sampurna (NPK-19) and Uramphos (NPK-28). The Goa facility is also engaged in the trading of DAP and MOP.

This facility is strategically located close to the Mormugao Port and includes two NPK production plants (NPK A and NPK B), an Ammonia production plant, and a Urea production plant.

In February, Zuari Agro Chemicals Ltd, the agriculture arm of the Adventz Group, had decided to sell off its fertiliser plant at Zuarinagar in South Goa to PPL for a total consideration of about Rs 2,027.46 crore.

As part of the plans, the PPL had filed DRHP with SEBI in August this year for its IPO.

The IPO offer sized at around Rs 2,000 crore comprises a fresh issue and an offer-for-sale (OFS) of up to 12,00,35,800 equity shares by its existing shareholders and promoters.

The Government of India - which holds a 19.55 per cent stake in the company - will exit in its entirety.

The Zuari acquisition would be on a slump sale basis and it is debt-free and cash-free.

According to Nandy, the PPL facility in Paradeep has a land parcel of 2,282 acres of which only 33 per cent is utilised. “Future expansion is possible in a big way and we can easily have a mirror image of the current facility…even then we would have 33 per cent left,” Nandy said optimistically.

As of March 31, 2021, the total annual fertiliser capacity of the Goa plant is 1.2 million MT per annum, with a breakup of 0.4 million MT per annum of urea and 0.8 million MT per annum of phosphates. In addition, the plant also manufactures about 0.23 million MT per annum of
ammonia, which is largely utilised in the production of urea.

Within the Paradeep Port, the PPL has a captive berth that can handle solid and liquid cargo - and the length of the berth is being increased by 19 mt. The company has a closed conveyor belt of 3.4 km and 3.1 km cross-country pipeline and railway sidings and storage facilities.

Explaining the financial matrix, Nandy said that in FY21, the bulk fertiliser sold was 1.4 MMTPA.

“One year post the Zuari acquisition, it would be in the order of 3 MMTPA while five years down the line, it would reach to the level of 3.5 MMTPA,” he said.

The revenue in FY21 was of the order of Rs 5,183 crore while in the next five years, it would be scaled to Rs 15,000 crore.

Nandy said that the PPL is the second-largest private-sector manufacturer of phosphatic fertilisers in India.

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