Nagarjuna Fert plans Rs4,500 cr expansion

Nagarjuna Fertilizers and Chemicals Ltd (NFCL), the country’s second-largest urea producer, is doubling its production capacity at its Kakinada, Andhra Pradesh, unit to 2.9 million tonne (mt) from the existing 1.3 mt.

The brownfield project is being taken up with an outlay of about Rs4,500 crore.

“The overall plan is to bring the expanded capacity into production during 2015-16,” a company spokesman told DNA Money.

The investment would be met through a mix of equity and debt.

ICICI Bank is leading the debt finance, while the equity portion is likely to be raised by internal accruals.

The company is confident of closing the debt deals at the earliest, primarily due to the RBI’s notification on treating the investments in projects such as these at part with infrastructure.
“We are hopeful of achieving the financial closure in about six months. All the formalities for the financial closure are done except for a gas supply agreement. Once that is done with GAIL, the other issues would be closed at the earliest,” he said.

NFCL has two operating plants at Kakinada on the east coast. NFCL, which commissioned its first plant in 1991, doubled capacity through a second plant in 1997. Both plants were revamped in 2007, resulting in an increase in capacity. For the third plant, the company has awarded the engineering, procurement and construction contract to Technimont of Italy.

However, availability of gas for the project is seen as key hurdle, though the company has prepared itself for alternative modes of gas supplies.

“It is a fact that the supply of gas is remaining to be a major issue. As long as the domestic gas is not adequately available, we plan to import it. The Andhra Pradesh government and GAIL are setting up a terminal on the east coast in addition to one such facility coming up at Gangavaram port. However, using imported gas would be an expensive affair. But considering the nature of the industry and its importance, there is a gas price pass-through. Therefore, the impact of higher gas price would not be felt,” he said.

Also, the company is confident of marketing the entire production. “In addition to our own production, we are also importing about 2 mt of urea at various ports on behalf of the government and selling it,” he said.