Tata Chemicals has sold its urea and customised fertiliser business to Yara Fertilisers India, a wholly-owned arm of Norway-based Yara International ASA, for ₹2,670 crore.

The deal, which is expected to be closed in 9-12 months, includes transfer of all assets and liabilities (working capital) relating to the Babrala plant in Uttar Pradesh.

The plant, which has a capacity of 1.2 million tonne (mt) of urea and 0.7 mt of ammonia, generated revenues of $350 million (about ₹2,345 crore) and earning before interest, tax, depreciation and amortisation of $35 million (about ₹234 crore) in FY 2016.

Tata Chemicals, which as of March end had a consolidated debt of ₹8,694 crore, has retained Paras, TKS and Daksha brands made at the Babrala plant.

Yara, which currently employs 51 people in India, will absorb all the 425 employees of the Babrala plant.

Terming the move a part of its strategy to push its new businesses, R Mukundan, Managing Director, Tata Chemicals, told a news conference on Wednesday that “the future investments would be in recently launched consumer-facing business such as branded dal, spices and R&D-driven nutraceuticals and nanotechnology. We would focus on farm business through the subsidiary Rallis India and Metahelix.”

Tata Chemicals, he said, has also stopped further investments in the 1.2 million tonne phosphatic fertiliser plant at Haldia in West Bengal and is in the process of finding a partner or buyer for it.

Urea is a controlled fertiliser and sold at a fixed price of ₹5,360 a tonne. The difference between the cost of production and the selling price is paid as subsidy to manufacturers. The government assigns subsidy only to a portion of the production capacity of each company depending on its sales for the previous year.

But reimbursement of subsidy often gets delayed, locking up precious working capital. As of June quarter, Tata Chemicals had subsidy dues of ₹1,479 crore.

Sanjiv Kanwar, Managing Director, Yara Fertilisers, said the company is aware that the urea business in India is highly regulated. It would work closely with farmers to introduce a series of crop-specific balanced multi-nutrient products to establish itself.

Asked on the subsidy receivable from the government, Kanwar said Yara would get all pending subsidy related to the Babrala plant. A chunk of the subsidy dues will flow to Yara as the government subsidises only urea.

“We believe the new fertiliser policy announced recently addresses most of the industry’s concern. The government is also working to transfer subsidy directly to farmers rather than giving it to companies,” he said

Last fiscal, Yara sold 40,000 tonnes of speciality fertilisers and recorded a turnover of ₹180 crore in India.

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