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Deepak Fertilisers in consolidation mode

Sep 2, 1999

According to newspaper reports, Deepak Fertilisers & Petrochemicals Corporation Limited (Deepak) has bought a second-hand nitric acid plant from Ireland for Rs 70 m. It has simultaneously planned to increase its acrilo nitrile phosphate (ANP) - a bulk fertiliser, capacity from 765 tonnes to 1,100 tonnes by December 1999. Growing demand for the product has necessitated the capacity expansion. The company plans to further increase ANP capacity to 2,000 tonnes once the new fertiliser policy is introduced. The moves appear to be an attempt by the company to consolidate its presence in the bulk fertiliser business,

Deepak's (FY99 turnover: Rs 5.1 bn) principal activity is the manufacture of anhydrous liquid ammonia, which find use as a heavy chemical as well as a fertilizer. Besides, it also manufactures CNA, DNA, Methanol, LDAN and ANP range of fertilisers. The company has been reporting improved performances over the last 3 years. In fact, it posted an impressive 29% growth in turnover to Rs 2.3 bn in the first five months of the current financial year.

The nitric acid plant, though second-hand, will not come cheap for the company. In addition to the purchase price of Rs 70 m, Deepak will have to incur Rs 300 m towards the cost of installation, erection and customs duties of the plant. Over the next few months, Its profitability may come under pressure as Oil & Natural Gas Corporation (ONGC) has curtailed the supply of natural gas to the company, forcing it to use naphtha a more expensive alternative. Weak methanol prices are also a cause for concern.

The industry is waiting for the new fertiliser policy with bated breath. Analysts believe that the blue print of the policy is ready and it will be implemented when the new government is sworn at the Centre. They expect a few positives for the industry in the new policy.

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