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 the execution of a securities subscription agreement to invest up to Rs 180 crore in its joint venture, Zuari Maroc Phosphates Private Limited (ZMPPL).

Investment Details

The investment will be made through the subscription of non-voting compulsorily convertible preference shares (CCPS) issued by ZMPPL. This strategic move is 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. As per the agreement, both Zuari Agro and OCP will subscribe to an equal number of preference shares, maintaining their existing 50% shareholding each in ZMPPL.

Financial Snapshot of ZMPPL

According to the latest audited financial statements for FY 2023-24, ZMPPL's financial position is as follows:

Transaction Timeline and Conditions

The subscription to the CCPS is subject to certain conditions and must be completed within 100 days of the agreement execution. The exact number of CCPS to be subscribed and the price per CCPS will be determined based on a valuation report from a registered valuer and a chartered accountant or SEBI registered merchant banker.

Strategic Implications

This investment is aligned with the objectives set out in the scheme of arrangement between MCFL and PPL. It aims to ensure that ZMPPL continues to hold more than 50% of PPL's share capital post the scheme's effectiveness, maintaining control over PPL.

Related Party Transaction

The proposed subscription is considered a related party transaction but will be conducted on an arm's length basis. An inter-se agreement will also be signed among the parties to govern future acquisitions of securities in Paradeep Phosphates Limited.

Regulatory Approvals

While Zuari Agro's subscription to the CCPS does not require specific regulatory approvals, OCP's subscription may be subject to approval from the Morocco Foreign Exchange Office.

This strategic investment underscores Zuari Agro Chemicals' commitment to strengthening its position in the fertilizer industry and optimizing its joint venture operations. The move is expected to contribute to the company's long-term growth strategy in the agricultural input sector.

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.