Tata Chemicals sells urea business to Yara India
Tata Chemicals urea business has been sold to Yara India for Rs.2670 crores on a 'slump sale' basis. This divestment is intended to strengthen Tata's balance sheet as their debt as on March 31, 2016 was little over Rs.8600 crores. Tata Chemicals managing director said this decisive move was intended to build a consumer business while maintaining leadership in the inorganic chemicals business.
Tata Chemicals has manufacturing facilities across North America, Africa, Asia and Europe and is considered the world's second largest producer of soda ash. Tata Chemicals has businesses spread across sectors such as industry chemicals, agri-solutions, consumer products and has recently ventured into nutraceuticals. Its urea business contributed to 21% of the total turnover of the company in the financial year 2015-2016.
Urea is naturally produced in humans and mammals. However the synthetic version of urea is an inexpensive form of nitrogen fertiliser which is used to acidify soil to grow plants or crops like rice, wheat, corn, strawberries, cotton and several others.
Yara International ASA (YIA), a Norwegian chemicals giant founded in 1905, is spread across 150 countries. Yara Fertilisers India is a unit of YIA, one of the most energy efficient of Yara plants producing fertilisers and fertiliser raw materials. Yara has been present in India since the 1990s and focused on premium product category sales in the western & southern region.
India is the world's second largest fertiliser market and this deal allows YIA to expand its presence. Additionally, given the increasing population and standards of living, Yara aims to significantly improve productivity in India's agricultural sector. This deal allows Tata Chemicals to achieve its goal of strengthening the fertiliser business either in form of a partnerships or transfer of ownership to world renowned companies.
A slump sale refers to the sale of an undertaking as a 'going concern' for a lump sum consideration; in this scenario individual values are neither assigned to the assets nor the liabilities. It's a commonly used mode of corporate restructuring in India.