Tatas may acquire 26% stake in Nagarjuna refinery for Rs 400cr

Tuesday, December 05,2006

The Economic Times India

by Nevin John


MUMBAI: The Tata group is believed to be close to buying a stake in Nagarjuna group’ oil refinery project for about Rs 400 crore, a senior official of the South-based group told ET.


In a move to increase its presence in the oil sector, the salt-to-software Tata group is believed to be in advanced stages of investing in the 6-million tonne, over Rs 4,000 crore plus refinery project coming up in Cuddalore, Tamil Nadu.


“The group is also in talks with some Russian and Middle East companies for funding the remaining equity portion of the project,” the senior group official added.


The Tata group is believed to be buying about 26% for about Rs 400 crore. The project’s equity base is about Rs 1,500 crore.


A Tata group spokesperson declined to comment to an email query on the issue. An email sent to Nagarjuna Oil Corporation managing director S Rammohan remained unanswered.


But a senior official, speaking on condition of anonymity, said the announcement of the deal is likely to happen very soon. He also added that the project’s debt of about Rs 3,000 crore is also likely to be tied up soon. The Nagarjuna group will hold a majority stake of 51% in the venture.


It’s for the first time that the Tata group has shown interest in oil refining, though it has presence in upstream business as Tata Petrodyne is actively acquiring oil and gas assets in the country.The rationale behind the move is not known.


“For Nagarjuna, the deal will unlock more value. Nagarjuna’s plan is to sell 49% of its equity in the refinery project,” the official added. “The refinery project is financially very attractive and would get premium from investors. The total project is Rs 4,000 crore and NFCL has invested more than Rs 600 crore in the project,” said sources.


Nagarjuna Oil Corporation, a subsidiary of Nagarjuna Fertilisers and Chemicals (NFCL), is setting up the project.The refinery was initially scheduled to go on stream in 2002, but has not yet taken off due to problems in raising funds. Sources said all statutory clearances required for setting up the refinery and the marine facilities are in place.


The project is now expected to go on stream 33 months from the date of financial closure. “Moreover, the promoters are planning to integrate the first and second phases of the project, which would increase the project cost to nearly Rs 5,000 crore. Hence, for raising this large sum, partnering with a foreign entity has become necessary,” sources said.NFCL’s scrip has lost 3.68% on the Bombay Stock Exchange in the past month. On Monday, it gained 1.29% to close at Rs 12.55.


The Cuddalore refinery plans to produce 6 million tonnes of crude petroleum per annum by relocating a refinery from Germany and adding new process units and utilities.


Crude receipt and product evacuation facilities are also planned. The refinery will produce Euro IV auto fuels such as petrol, diesel apart from products such as liquefied petroleum gas and bitumen. The project site is spread over 1,600 acres, which includes 300 acres of greenbelt. About 40% internal roads are already laid.

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Tatas may acquire 26% stake in Nagarjuna refinery for Rs 400cr
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