Acre ARC sells Nagarjuna Fertilizers and Chemicals debt to AM Green for ₹1,685 cr

MUMBAI: Bad loan aggregator Acre ARC has completed the sale of assets of Nagarjuna Fertilizers and Chemicals to AM Green Ammonia for a cash consideration of Rs 1,685 crore, making an absolute return of more than 88% of the Rs 896 crore the ARC had paid to a seven-bank consortium when it had taken over the company's debt in March last year.

The sale was done through an auction process under SARFAESI which was completed last month.

With this deal, AM Green, an arm of Hyderabad based renewable energy company Greenko will take control of the assets of the company. Acre declined to comment when reached.

The company will sign a commercial agreement with Nagarjuna to use its brand, network and resources in exchange for a royalty, people familiar with the deal said.

"The deal is such that the assets will now be controlled by Greenko but there is currently no change in Nagarjuna's shareholding. There is likely to be an agreement between the two parties through which AM Green will use Nagarjuna's brand, network, resources and people in exchange for a royalty," said a person familiar with the transaction.

For Acre, the deal is significant since the ARC had consolidated the debt from a seven bank consortium as recently as March 2023. IDBI Bank, with Rs 568 crore of exposure, had managed the sale on behalf of a seven-bank consortium. Other large lenders include State Bank of India (Rs 576.91 crore) and ICICI Bank (Rs 196.70 crore). Bank of India, UCO Bank, Indian Overseas Bank and PNB were the other lenders in the consortium.

To be sure, in August last year after Acre had taken over the company’s debt Nagarjuna had sought shareholders' approval to sell its urea manufacturing plant and micro irrigation business to AM Green Ammonia (India) however, that deal did not go through.

"That deal had some preset conditions which included resolving energy issues with the government and the promoters bringing in money which could not be met. Going forward it may be beneficial for AM Green to be merged with Nagarjuna in the future to ensure that the formidable brand, marketing and distribution can be used because otherwise the transfer of government subsidies will not happen," said the person cited above.

Emails sent to Nagarjuna and Greenko did not elicit any response till press time.

The most important thing from Nagarjuna's point of view is the fact that the company is now debt free with the close to Rs 4000 crore of loans being wiped out.

In a sale notice in February this year Acre had said that it plans to sell Nagarjuna as a composite asset including the Kakinada urea plant and three other units including movable fixed assets, plant and machinery and other accessories of the company.

"For now there is an agreement between the two companies. It also remains to be seen how the shareholders of Nagarjuna benefit from this arrangement and whether AM Green still takes 20% stake in Nagarjuna like in the deal structured previously," the person said.

In a stock exchange filing last month, Nagarjuna said its board had taken note of the sale by and handover of physical possession of the assets of the company to AM Green.

Nagarjuna's 1.59 million tonne plant in Kakinada had faced issues due to a gas pipeline burst in 2014-15 following which it had started to default on bank loans. Fertilizer is a heavily regulated sector with significant dependence on government subsidies. Delays in government payments also impacted the business.