Mangalore Chemicals and Fertilisers (MCF) has shrugged off its innings with the UB Group completely and is all set to enter the big league of fertiliser majors.

MCF Managing Director Suresh Krishnan told BusinessLine the company plans to invest ₹1,000 crore over three years to set up a phosphatic fertiliser plant as well as improve its energy efficiency levels. MCF, now a subsidiary of Zuari Fertilisers and Chemicals, an Adventz Group company, plans to set up a new manufacturing facility to produce 700,000 tonnes of phosphatics a year in Mangaluru, Krishnan said.

Zuari Agro, which owns stakes in Paradeep Phosphates and MCF, produces about 4 million tonnes of fertiliser and plans to add another 1 million. Half of that will come from the new Mangaluru plant. Zuari had acquired a 53 per cent stake in MCF for about ₹700 crore in May 2015. UB Holdings and associated companies have an about 22 per cent stake. iHowever, UB does not have any representation in the freshly constituted board of MCF, which has helped the latter get short-term loans from banks and other institutions.

Krishnan said a policy bottlenecks has been cleared with the Centre allowing MCF to use naptha as feedstock till it receives gas from the Kochi terminal, which is expected by early 2019.

Proximity to port

Why did Zuari pick up a majority stake in MCF? Krishnan pointed out that it is one of the few plants that are very close to a port, making raw material impors easier. “We realised that the plant, spread across 180 acres, is located at a strategic place and will help us expand our market share in South India,” he said.

Zuari Agro, a ₹12,000-crore company, has a 10 per cent share of the fertiliser market. MCF has enough surplus land to augment capacity by 2 million tonnes, added Krishnan.

He further said that after a forensic audit by EY, the Zuari Group filed for remedial measures from the National Company Law Tribunal and its outcome is awaited. Zuari has no plans to delist MCF or increase its stake in it, he added. There has been no layoff after the acquisition.

Krishnan said there are plans to further invest in the ammonia and urea complex to ensure significant improvement in operational efficiencies. There will be investments made to reduce the consumption of energy. At present, the energy required per tonne of urea produced is 6.5-7 giga calorie. The plan is to bring it down to 5.5 giga calorie — this will require less feedstock as well.

The company reported a net loss of ₹3.19 crore for the quarter ended June 2017, compared to a loss of ₹8.36 crore during the same period the previous year. The losses were mainly due to the closure of Mangaluru plants for maintenance. India imports about 12 million tonnes of fertilisers from nations such as China, Saudi Arabia, Russia, Canada and north African countries.

On GST, Krishnan said naphta, a key raw material, attracts 18 per cent tax while the rate for the end-product is 5 per cent. This has resulted in an inverted duty structure which is expected to be corrected soon.

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