Financial Daily from THE HINDU group of publications
Tuesday, May 31, 2005
Corporate - Announcements
Iffco announces $1 b investment plan
Mr Surinder Kumar Jhakhar , Chairman, IFFCO (left), and Mr U. S. Awasthi, MD, at a press conference in the Capital Monday. Kamal Narang
New Delhi , May 30
THE world's largest fertiliser cooperative, Indian Farmers Fertiliser Cooperative Ltd (Iffco), on Monday announced a $1-billion (approximately Rs 4,400 crore) investment plan to ramp up domestic fertiliser production capacity and reduce energy consumption at its ammonia-urea plants.
Out of this, around Rs 2,700 crore would be invested in the country and Rs 1,700 crore in Egypt, the Managing Director, Mr U.S. Awasthi, told reporters here.
The investments would be over a period of four years.
Out of the $1 billion investment, around $800 million would be invested in backward integration of DAP/NKP production, while the remaining $200 million would be invested in energy saving and urea production and expansion schemes.
"The objective is to align Iffco's prices with international prices, so that in future, when prices are freed, there is an alternative support mechanism," Mr Awasthi said.
The cooperative has lined up investment plans from sourcing of rock phosphate to producing phosphoric acid, that would eventually be used to make di-ammonium phosphate.
Simultaneously it will increase its urea production capacity from the present 61 lakh tonnes to 86 lakh tonnes.
Iffco would be setting up a modern phosphoric acid plant in Egypt with a capacity of 5 lakh tonnes of phosphate (P2O5) per annum in joint venture with El Nasr Mining Company (ENMC).
Iffco will hold 75 per cent while the Egyptian company would hold the balance equity.
As per the agreement, ENMC would supply 2 million tonnes of rock phosphate to the joint venture company and Iffco would buy out the entire production for use in its Indian plants.
According to Mr Awasthi, this would lend stability to the international prices of phosphoric acid.
Iffco is also in an advanced stage of negotiation with an Egyptian Government entity to undertake rock phosphate mining.
The venture envisages production of two million tonnes of rock phosphate per annum, which would be the feedstock for Iffco's second phosphoric acid plant with an installed capacity of five lakh tonnes at Kutch in Gujarat.
The 10 lakh tonnes of phosphoric acid produced at its two plants would be utilised in its new DAP plant proposed to be set at Kandla in Gujarat with a capacity of 18 lakh tonnes.
The cooperative would also be setting up a new urea facility with a capacity of five lakh tonnes and increase capacity through de-bottlenecking.
According to Mr Awasthi, the new unit's production cost of urea would be around Rs 5,000 per tonne against of the current national average of more than Rs 9,000.
"In total, the cut in production cost would result in savings in subsidy of around Rs 1,000 crore per year as the production cost of urea would be pruned substantially as well as of DAP," he said.
The cooperative is planning to maintain a 2:1 debt equity ratio for the total plan and is in talks with major domestic and international financial institutions. Around $670 million would be raised in debts and $330 million in equity.
"Financial closure of all the projects would be completed in the current fiscal and would be completed in four years. Commercial production would commence from the first quarter of 2009," Mr Awasthi said.
The cooperative's board today approved the financial results for 2004-05. It has posted a net profit of Rs 320 crore on a turnover of Rs 7,224 crore. Last fiscal the net profit was Rs 330 crore on a turnover of Rs 5,920 crore. The fall in profit was on account of the losses incurred in importing of urea and selling it at a loss.
"We have supplied 20 per cent more than our commitments. We have supplied urea by importing at a loss. Otherwise in terms of production and turnover the year was a record year for the cooperative," Mr Awasthi said.
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