Mumbai: Tata Chemicals Ltd plans to raise up to Rs4oo crore in FY11 to partly fund its capacity expansion programme as it sees robust growth in fertiliser business, a top official said on Monday.
The company plans to make preferential allottment of 11.5 million shares to its holding company Tata Sons in the current fiscal to raise the funds, P.K. Ghose, chief financial officer, told a news conference.
“The funds would be used to support our growth plans; mainly the expansion at the Babrala (in Uttar Pradesh) fertiliser plant,” he added.
The proposed expansion at Babrala plant, which makes urea and ammonia, would raise its capacity to 1.15 million tonnes annually from 864,000 tonnes, he added.
“We would invest upto Rs3800 crore at Babrala over a period of three years,” he said.
The company would further raise funds after the Babrala project starts taking shape, he added.
The fertiliser and diversified chemicals maker earlier reported a marginal drop in net profit to Rs435 crore in FY10 on net sales of Rs5412 crore.
“The rising demand as well as input costs are pushing up global prices. Therefore, there is increasing opportunity for natural soda ash player like General Chemical Industrial Products and Tata Chemicals,” he stated.
“Although the volumes of our products went up in FY10, the lower prices led to a sharp fall in revenue,” Kapil Mehan, executive director, said.
“With a better monsoon forecast, we expect a strong growth in the current fiscal.”
Tata Chemicals has planned a major foray in customised fertilisers segment and plans to set up 10 new units at an approximate investment of Rs6 crore each, Mehan added.
“The first of the (customised fertiliser) units would be operational in the second quarter of this year,” he added saying “We have got approval for four new customised fertiliser products from the government.”
The first unit would have an annual capacity of 130,000 tonnes.
Mehan denied any impact on company’s margins in FY11 following the increased prices of natural gas by the federal government.
“Our working capital would have some impact but margins won’t be hit as fertilisers are subsidised,” he added.
About 40% of the gas used by the company falls under the APM category, he said.
Tata Chemicals’ gas requirement is expected to shoot to 4.5 million standard cubic feet per day (mmscfd) from present 2.2 mmscfd over next two years.
“We have sufficient tie-ups with gas makers to meet the rising gas requirements,” he added.
Shares of Tata Chemicals ended down 3.73% on Monday in a Mumbai market that closed up 0.15%.