Murugappa to buy overseas gas resource

The Chennai-based Murugappa Group is planning to acquire an overseas gas resource for around $900 million (about Rs 4,500 crore). The company is looking at acquiring the resource for captive purposes. The deal is likely to be finalised by December 2009.

Speaking to Business Standard, Murugappa Group Vice-Chairman A Vellayan said the company had set a target to increase its fertiliser business to 4 million tonnes over the next five years. To achieve the target, the company needed more ammonia and urea.

The group is the second-largest phosphatic fertiliser player in India, with a capacity of over 1 million tonnes per year. It manufactures a wide range of fertilisers and pesticides.

“Going forward, our requirement would be 600,000 tonnes of ammonia and 500,000 tonnes of urea. Currently, we are meeting demand through sourcing from the open market. In future, we will have to resort to a captive resource to cater to the demand.” The company is looking at countries in West Asia and South East Asia for the gas resource.

“We are hoping that we will get some clarity by December this year. Given the current international prices and quantum required, the acquisition cost would be about $900 million,” said Vellayan.

Currently, the company is in talks with countries with gas resources which can support an endeavour of this size. The talks are expected to be complete and the deal finalised within two months. The investment would be through the group’s partners via debt-equity structures.

Headquartered in Chennai, the Rs 15,646-crore ($3-billion) Murugappa Group is one of India’s leading business conglomerates with interests in engineering, abrasives, finance, general insurance, cycles, sugar, farm inputs, fertilisers, plantations, bio-products and nutraceuticals.