Greenko Group firm agrees to buy assets of Nagarjuna Fertilizers for Rs 1,700 crore

At a board meeting held on August 14, NFCL approved the proposal of AM Green Ammonia. (Representative Image)

Hyderabad-headquartered Nagarjuna Fertilizers and Chemicals Ltd (NFCL) on August 14 decided to sell its urea and micro-irrigation businesses to AM Green Ammonia (India) Pvt Ltd, a firm owned by one of India’s largest renewable energy players, Greenko Group, for Rs 1,700 crore on a slump sale basis.

This comes three months after Asset Care and Reconstruction Enterprise Ltd (ACRE), an asset reconstruction company, purchased the debt of the fertiliser company from the lenders and issued a demand notice to NFCL under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

At a board meeting held on August 14, NFCL approved the proposal of AM Green Ammonia, which includes Rs 1,365 crore in cash and a 19.7 percent equity stake in the purchaser’s company.

With a call option available to the purchaser on the 19.7 percent stake, the purchaser can exercise it within one year for Rs 335 crore with a premium of 12 percent a year, taking the total to Rs 1,700 crore. Of this, NFCL proposes to pay Rs 1,500 crore towards debt resolution under a one-time settlement.

In a communiqué to the stock exchanges, NFCL said it had objected to the claim of ACRE and requested an opportunity to submit a resolution plan, and that ACRE has advised the company to submit a resolution plan without prejudice to its rights under the SARFAESI Act.

According to NFCL, the proposal to sell its assets and business by way of a slump sale on a going concern basis to AM Green Ammonia will allow the company to realise fair value for its business in the interest of all stakeholders. It will also allow the lenders to realise better value compared to the process under the provisions of the SARFAESI Act or Insolvency and Bankruptcy Code (IBC).

NFCL, which earns less than half of its revenues from urea and the balance from non-urea business, has been facing financial stress since the 2014 accident at the GAIL pipeline that supplies gas to the company.

The fertiliser company did not receive compensation from the insurance company and GAIL for the losses caused, making it approach the lenders for working capital limits and a working capital term loan. Though the lenders assessed and approved a corrective action plan (CAP) with funding to revive the company in 2015, they did not release the funding, which the company termed a violation of the RBI’s statutory guidelines.

The fertiliser company confined itself to the low-margin and controlled urea business owing to the non-availability of CAP funding by the lenders. The low margins did not help it service the debt. The company once again approached the lenders in 2017 and 2018 for a long-term debt resolution to overcome the financial stress and submitted several debt resolution plans based on the input of the lenders, but in vain.

NFCL accuses the lenders of unilaterally freezing the working capital limits and adjusting market receivables of over Rs 700 crore towards loans outstanding in 2018-19, resulting in the stoppage of plants, an increase in losses and unsustainable loans.

In 2020, the secured lenders, including IDBI Bank, State Bank of India, ICICI Bank, Punjab National Bank, UCO Bank, Bank of India, and Indian Overseas Bank, issued notice to NFCL under the provisions of the IBC, which was objected to by the company proposing an amicable settlement.

In 2021, one of the operational creditors, Keytrade AG, approached the National Company Law Tribunal (NCLT) which admitted the application for an insolvency resolution process in August 2021. Challenging this, the promoters of NFCL moved the National Company Law Appellate Tribunal (NCLAT), which ordered a stay on the NCLT's decision, and the stay is currently in force.

In 2022, the secured lenders of NFCL initiated the sale of debt, and ACRE purchased the debt on March 28 this year, replacing the erstwhile lenders of the company.