Zuari Agro Chemicals Limited (ZACL) has announced plans to invest up to ₹180 crore in its joint venture company, Zuari Maroc Phosphates Private Limited (ZMPPL). This strategic move, approved by the company's board of directors, involves the subscription of Compulsorily Convertible Preference Shares (CCPS) issued by ZMPPL.

Investment Details

The investment will be made through a securities subscription agreement between ZACL and ZMPPL. The CCPS to be issued will be non-voting in nature, maintaining the current shareholding structure of ZMPPL. OCP S.A., the other joint venture partner, will also subscribe to an equal number of non-voting CCPS, ensuring that both ZACL and OCP continue to hold 50% of ZMPPL's share capital post-investment.

Purpose of the Investment

This investment is aligned with the scheme of arrangement between Mangalore Chemicals and Fertilizers Limited (MCFL) and Paradeep Phosphates Limited (PPL). The scheme contemplates that ZMPPL may raise funds from its shareholders or external sources for purposes outlined in the arrangement.

Financial Implications

The exact number of CCPS to be subscribed and their price will be determined based on a valuation report from a registered valuer and a chartered accountant or SEBI-registered merchant banker. This report will establish the fair value of ZMPPL's securities.

Timeline and Regulatory Approvals

The subscription to CCPS by ZACL is subject to certain conditions precedent, with a long stop date of 100 days from the execution of the Subscription Agreement. While ZACL's subscription doesn't require specific regulatory approvals, OCP's subscription may need approval from the Morocco Foreign Exchange Office.

About ZMPPL

ZMPPL, incorporated on January 24, 2002, is engaged in trading fertilizers and industrial sales of ammonia and sulphuric acid. As per its latest audited financial statements, ZMPPL reported the following consolidated figures:

Strategic Implications

This investment underscores ZACL's commitment to strengthening its position in the fertilizer industry. By infusing capital into ZMPPL, the company aims to support the joint venture's growth and potentially enhance its market presence in the fertilizer and related chemical products sector.

The move also aligns with the broader restructuring efforts involving MCFL and PPL, indicating a strategic realignment within the group's fertilizer business operations.

As the fertilizer industry continues to evolve, this investment could play a crucial role in ZACL's long-term strategy, potentially leading to improved operational efficiencies and market competitiveness for the joint venture.

Zuari Agro Chemicals Limited , a key player in the Indian fertilizer industry, has announced a significant investment move that aims to strengthen its position in the market. The company's board of directors has approved a securities subscription agreement to invest up to Rs 180.00 crore in its joint venture, Zuari Maroc Phosphates Private Limited (ZMPPL).

Investment Details

The investment will be made in the form of non-voting compulsorily convertible preference shares (CCPS) of ZMPPL. This strategic decision comes as part of a broader scheme of arrangement involving Mangalore Chemicals and Fertilizers Limited (MCFL) and Paradeep Phosphates Limited (PPL).

Joint Venture Dynamics

ZMPPL, established in 2002, is an equal partnership between Zuari Agro Chemicals and OCP S.A. The joint venture is primarily engaged in trading fertilizers and industrial chemicals. Both partners will subscribe to an equal number of preference shares, maintaining their existing 50% shareholding in ZMPPL.

Financial Implications

The investment is structured as a cash transaction, with Zuari Agro Chemicals committing up to Rs 180.00 crore. The exact number of CCPS to be subscribed and the price per share will be determined based on a valuation report from a registered valuer and either a chartered accountant or a SEBI-registered merchant banker.

Strategic Objectives

This move is aligned with the scheme of arrangement between MCFL and PPL, which stipulates that ZMPPL may raise funds from its shareholders or external sources as required. The investment is expected to support ZMPPL's objectives and strengthen its position in the fertilizer market.

Regulatory Compliance

The transaction is considered a related party transaction and will be conducted on an arm's length basis. The subscription is subject to certain conditions and must be completed within 100 days of the agreement execution, or as mutually agreed by the parties involved.

Future Considerations

In addition to the investment, an inter-se agreement will be signed among the parties to govern future acquisitions of securities in Paradeep Phosphates Limited. This agreement aims to ensure ZMPPL's continued control over PPL following the effectiveness of the scheme of arrangement.

Market Impact

While the immediate market reaction remains to be seen, this strategic investment underscores Zuari Agro Chemicals' commitment to strengthening its joint venture and potentially expanding its influence in the fertilizer industry. The move could position the company for growth opportunities in the evolving agricultural sector.

As the transaction progresses, investors and industry observers will be keen to see how this investment translates into operational and financial benefits for Zuari Agro Chemicals and its joint venture ZMPPL.