Indian government retains Deloitte Touche Tohmatsu to assist in global auction for fertilizer assets

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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The Indian government has retained Deloitte Touche Tohmatsu (India) to assist in its global auction for five to six Indian fertilizer assets, a government source told mergermarket. The expected date of completion was previously 31 December but could take a little longer by a month or so, he added.

Interested parties with whom informal talks have been held include overseas and domestic companies in the chemical, fertilizer, petrochemical and mining space, said the source. US-based Mosaic and privately-held German-based Helm were previously mentioned as potential bidders, as reported. Each asset will require an estimate USD 1bn in investment.

Deloitte is currently preparing pre-qualification criteria, bid parameters and teasers for the five to six assets on sale, said the source. This will be sent to the central government – the Union Cabinet of the Government of India – for approval in about three weeks, said the source.

Once the central government has approved the bidding parameters and bidder pre-qualifications, teasers will be sent to potential bidders and first round bids are expected in late November to early December. The auction process will be open to all – as the government allows 100% foreign direct investment in fertilizer assets, said the source. Based on the auction parameters being outlined by Deloitte, bidders who meet the pre-qualification bidder criteria will be invited to bid in the second and final round, the source said.

As per the criteria sent to the Cabinet for approval, the investments will be structured on a private public partnership revenue sharing model, said the source. The winners of the auction will sign a 30-year concession agreement, extendable for another 30-year period, during which time they have the right to use the asset and the surrounding land, said the source.

The Indian government is in the process of obtaining environmental, electrical, water and other clearances for the assets being auctioned which will make them more attractive and hence ensure a brief auction process, said the source. It has also been working to finalize gas supply agreements to the assets, as well as providing them with a good logistical and transportation framework.

Separately, the Indian government is in the process of changing its fertilizer policy to attract more overseas interest, said the source. The current fixed price, fluctuating subsidy could be changed to a fixed subsidy, fluctuating price model which could be more appealing as it would be dependant on market rates, he added. The proposal to shift the policy has recently been put before the Cabinet.

The assets are based in Barauni in Bihar, Durgapur in West Bengal, Talchar in Orissa, Sindri in Jharkhand, Gorakhpur in Uttar Pradesh and Ramagundam in Andhra Pradesh, according to a previous report by this news service.

Meanwhile, there has been no update regarding the privatization of Rashtriya Chemical Fertilizers and Natural Fertilizers, said the source. Both companies had been touted by the press as logical government divestiture candidates.

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