Tata Chemicals Ltd said on Wednesday it has agreed to sell its urea business to a local unit of Norwegian firm Yara International ASA for Rs 2,670 crore ($400 million).
The deal will help the company strengthen its balance sheet and pursue growth opportunities in line with its strategic directions, the Tata group company said in a stock-exchange filing.
The deal is the latest sale by the diversified Tata Group as it sheds assets and reduces its debt that had ballooned as it expanded its operations through multiple acquisitions, mostly overseas, in diverse sectors in the first decade of this century. Tata Steel Ltd, Tata Power Ltd, Tata Communications Ltd and Indian Hotels Co. Ltd are among the other group companies that have sold assets this year.
Yara Fertilisers lndia Pvt. Ltd will acquire Tata Chemicals' urea and customised fertilisers business which has plants at Babrala in Uttar Pradesh.
The transaction is subject to regulatory approvals and is likely to be completed within a year.
Tata Chemicals said that it will continue to own the brands Paras, TKS and Daksha and that this transaction does not include specialty products and complex fertilisers.
Tata Chemicals managing director R. Mukundan said the deal marks a decisive move on the part of the company to move forward on its strategy to build its consumer business and maintain its leadership in the inorganic chemicals business.
For Yara, the deal will accelerate its growth in a country where it has operated since the 1990s and where it has been focusing in recent years on premium product sales mainly in the western and southern regions.
"This acquisition represents another significant step in our growth strategy, creating an integrated position in the world's second-largest fertilizer market," said Svein Tore Holsether, president and CEO of Yara.
The Babrala plant was commissioned in 1994 and has an annual production capacity of 0.7 million tonnes ammonia and 1.2 million tonnes urea.
It generated revenue of $350 million and EBITDA of $35 million in the financial year ended 31 March 2016. The urea business comprises nearly a fifth of Tata Chemicals' revenue.
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