Goenka: Wait and watch

Calcutta, May 24: Duncan Industries has put the sale of its fertiliser unit on the fast track.

The flagship company of the GP Goenka Group has appointed an adviser to carry out a valuation of the closed unit at Panki, Uttar Pradesh.

“We are expecting the valuation report in the next 10 days,” G.P. Goenka told The Telegraph.

Before closing down, Duncan had a strong presence in south India with its popular Chand Chhap brand urea.

If run at optimum capacity, the fertiliser unit has a potential to generate business worth Rs 1,500 crore a year, Goenka said.

“I think the plant can be revived with an investment of about Rs 300 crore. The plant has contemporary technology,” Goenka added.

Once the management gets the valuation report, talks with prospective buyers will begin.

Panki is close to Kanpur and buyers may be attracted to the 250 acres the plant is situated on. Moreover, it is within 15km of the HBJ pipeline, the biggest natural gas pipeline in India.

The plant was closed down in October 2002 when the Centre introduced a retrospective change in subsidies that cost the company Rs 450 crore.

The unit was set up in 1970 by ICI. Its closure was a major setback for Kanpur, the industrial hub of the state.

In 1993, ICI sold the unit to the Duncan group headed by Goenka and quit the fertiliser sector.

When the fertiliser unit was closed, Duncan had a turnover of Rs 1,100 crore, of which the fertiliser division accounted for Rs 870 crore. The balance came from its tea business.

The management had started discussions to reopen the unit in 2005 through the corporate debt restructuring mechanism.

According to the recast plan, the banks were to lend around Rs 55 crore and promoters Rs 30 crore.

But the calculation went haywire with spiralling prices of naphtha, the main feedstock to produce urea.

The CDR package was worked out when naphtha prices were at Rs 15,000 per tonne. By the time it was time to start production, naphtha had shot up to Rs 32,000 per tonne.

The company would have to invest much more than initially envisaged, which was not possible.

“If I had the capital required to commence operations, I would have started afresh,” said Goenka.

Revival of the fertiliser unit will mean re-employment for an estimated 1,000 permanent and 2000 ancillary workers.

Moreover, the increased supply of urea to the farmers of the state would reduce the amount of fertiliser imported.