The Jaypee Group will invest Rs 1,100 crore to acquire a closed fertilizer factory near Kanpur, owned by tea producer Duncans Industries Ltd. The factory will be hived off into a 50:50 joint venture with Jaypee Fertilizers and Industries Ltd, a subsidiary of Jaiprakash Associates Ltd.
The deal has to be cleared by the Board for Industrial and Financial Reconstruction (BIFR), which provides protection from creditors to companies in financial trouble.
Kanpur Fertilizer Unit has an annual production capacity of 722,000 tonnes and was shut in 2002. Though Jaypee Fertilizers will initially own 50%, it will exercise managerial control over the company, Jaypee Group chairman Manoj Gaur said. Jaypee will not pay separately for the equity, but will bear the factory’s liabilities and the cost of restarting production. “Duncans had reached a settlement with banks, but that has to be firmed up,” said Gaur. “Only a detailed audit would establish the exact liability; we would not be surprised if it approaches Rs700 crore.”
The factory owes around Rs 700 crore to banks, which have agreed to settle for around Rs 280 crore, a Duncans official had earlier said, requesting anonymity.
Refurbishment could cost another Rs 400 crore. “God willing, the plant should be ready by March next year,” said Gaur.
Duncans’ chairman G.P. Goenka said that the biggest beneficiaries of this deal are going to be the workers, fixed deposit holders and the banks .
Obtaining BIFR clearance could take several months. But within three months of receiving it, all 64,000 fixed deposit holders will be paid in full, Goenka said. The firm owes them Rs 75 crore.
Duncans would pull out of the joint venture in a phased manner after the BIFR has cleared the deal. It is currently staying invested in it to comply with BIFR and other regulations.