State-owned National Fertilisers Ltd (NFL) on Tuesday said it has tied up with banks for financing its Rs 3,850 crore urea expansions plan. NFL, the second largest producer of nitrogenous fertilisers in the country with 15 per cent share, is in the process of converting its three urea manufacturing plants located in Panipat, Nangal and Bhatinda to natural-gas based units from oil-based ones.
"We have tied up 13 banks, including Bank of India and Oriental Bank of Commerce, and SBI Caps for financing the Rs 3,850 crore expansion plan," National Fertilisers Ltd chairman and managing director V.K. Sharma told PTI.
Banks have agreed to give loans of up to eight-year duration on favourable conditions and as all the expansion projects are to be materialised by 2012 end, the company plans to retire the entire debt by 2017, Mr Sharma said.
He said that by switching to natural gas from oil would help company in utilising its full capacity as the cost of producing urea from oil is costlier and the government has put a cap on production because of the subsidy cost.
"Producing urea from natural gas will give us a cost advantage of up to Rs 12,000 per tonne thus subsidy bill would go down and we will be able to produce more," Mr Sharma said.
He, however, declined to give the revenue projections post conversion saying that it would depend on many factors. The shares of the public sector firm on Tuesday soared over 12 per cent amid the reports of finalising the finances for expansion.
Shares of the company jumped 12.05 per cent to touch one-month high of Rs 132.90 on the Bombay Stock Exchange.
The stock climbed 13.03 per cent to Rs 134 on the National Stock Exchange. NFL has an installed capacity of 3.2 million tonnes of urea. The company had recorded annual sales of Rs 5,091 crore during 2009-10 fiscal.
India had produced 21.1 million tonnes urea, 4.2 million tonnes DAP and 8 lakh tonnes complex fertilisers in 2009-10. As per the information available, domestic urea production caters only 70 per cent of the total requirement and nearly one-third of country's demand of total fertilisers is met through imports.
The country will have to import more than 11.6 million tonnes of fertiliser to meet domestic demand for the current kharif season, ending September, which includes three million tonnes of urea, recently the government had announced.