Zuari to invest Rs 8,000 cr in urea space in FY13

Fertiliser maker Zuari Industries reported a dismal performance in Q4FY12 with a net loss of Rs 4.37 crore. The company had recently demerged its fertiliser business into a separate entity called Zuari Holdings. In an interview with CNBC-TV18, Suresh Krishnan, MD, Zuari Industries clarified that the fertiliser business along with the manufacturing facilities in Goa falls under Zuari Industries.

Krishnan believes that the fertiliser industry will soon hear positive announcements on the urea policy. The company is hopeful and despite the disappointing results, Krishan said that the company is keen to invest Rs 8,000 crore in the urea space, as part of their expansion plan.

Zuari Industries reported a standalone net loss of Rs 4.37 crore for the fourth quarter of FY12. In the year-ago period, the company had registered a net profit of Rs 21.42 crore. The company's net sales stood at Rs 23.54 crore during the quarter as compared to Rs 966.38 crore in the year-ago period. The standalone net profit of the company in FY12 declined to Rs 47.56 crore from Rs 166.88 crore in the 2010-11 fiscal.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: If you can tell us what comes under Zuari Industries, because you demerged a bit to Zuari Holdings. Please specify the areas and segments under Zuari Industries and Zuari Holdings.

A: Zuari Industries primarily is the fertilizer company for the group. What we have done here is the entire fertilizer business, which includes our manufacturing facilities at Goa plus the trading business that we have, has moved completely to Zuari Holdings Ltd. The effective date for this transaction is January 1, 2011.

What remains in Zuari Industries today is our entire investment portfolio plus our operating portfolio which comes from the fertilizer and agri-input trading business that we have. Primarily, what you get to see is substantially the fertilizer business has moved out. So, the agri-input business has remained here.

But, on a consolidated basis, you also get the benefits of Zuari Industries, the other verticals including Simon India which is an EPC business with business over Rs 200 crore, India Furniture Products Ltd. which is the Style Spa brand of furniture that we sell and has a turnover of close to Rs 180 crore. Apart from these, there is Adventz Infraworld, wherein we have launched the real estate project in Karnataka and we plan to expand in this segment also.

Q: For the non-fertilizer business, which is basically Zuari Industries, give us a break up of this Rs 23.4 crore that you did this quarter. How does it break up in terms of the furniture business, the real estate company as well as Simon India which you spoke about?

A: Primarily, Rs 33.2 crore that you get to see in our results today has only come from Zuari Industries on a standalone basis. The other verticals in the group are in various independent companies, which are 100% controlled by Zuari Industries. The Rs 23.4 crore represents our agri-input sales turnover.

Q: What exactly is happening with regards to the fertilizer sector? Is there a possibility that we could hear something on urea, the new pricing scheme for urea or possibly even decontrol? Is that something which is just completely put on the backburner with regards to the government or are you all in active talks?

A: If you look at the urea segment, the industry has been waiting for two key announcements from the government. The first one being the new NPS3 to be extended with certain modifications. The second one is the Urea Investment Policy.

We are quite keen to make these announcements as quickly as possible. Current information that we have is that there is still some work going on and we should get to hear something rather quickly.

Q: Therefore, you are planning expansions for your fertilizer unit under Zuari Holdings?

A: As far as our expansion plans are concerned, we have already announced the capex program of Rs 8,000 crore which is split half between the phophatic segment and the nitrogenous segment. In the phophatic segment, we are already very well into implementing these projects.

Last year, we made an investment in a mine at Peru which is going to provide the feedstock required for the downstream investment that we intend to make in India. We are quite committed to the investment that we have. As far as urea investment is concerned, we will certainly wait to see the government policy before we take a final decision.

Q: Would you be looking to relist your fertilizer business on the exchanges?

A: Zuari Holdings is certainly going to be listed. It’s just a demerger process which took place and Zuari Industries shareholders have already got one on one shares of Zuari Holdings Ltd.

For the listing process, we have already filed all documents and we understand that in the next three months this company should be listed.