Tata Chemicals Shelves Expansion Project in Gujarat

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Researched by Industrial Info Resources (Sugar Land, Texas)--Because of the economic downturn, Tata Chemicals Limited (BSE:500770) (TCL) (Mumbai) has decided to shelve a proposed capacity expansion for the production of soda ash through the development of an additional facility near an existing chemical complex in Mithapur in the state Gujarat. The firm had planned to make investments of $140 million to $200 million in setting up a new chemical complex to manufacture soda ash. TCL had earlier invested $60 million to modernize and upgrade the Mithapur facility.

TCL's existing facility in Mithapur has a production capacity of 825,000 tons per year of soda ash and 500,000 tons per year of salt. The firm was planning to raise the production of soda ash to 1.2 million tons per year with the new facility. The company was planning to acquire 600 acres of land near the existing chemical complex, of which 24 acres of area was wasteland granted by the state and the rest was to be provided by private landowners at current market prices. TCL had already secured infrastructure for the project including a 65-megawatt captive power plant and availability of water and raw materials.

Industry analysts were of the opinion that the proposed expansion project was a strategic move by TCL to support plans of setting up a glass-manufacturing unit near Sanand near Ahmedabad in Gujarat, toward which the firm has already invested $200 million. Dense soda ash constitutes one of the basic raw materials in the manufacture of glass. Glass from the proposed unit near Sanand would be used for the production of the Tata Motors Limited's (NYSE:TTM) (Mumbai) Nano car, in which glass constitutes about 30% of the surface area.

Meanwhile, TCL has secured a non-recourse loan of $300 million from a consortium of banks to repay a bridge loan of $350 million procured for the acquisition of General Chemical Industrial Products Incorporated (GCIP) (East Hanover, New Jersey). The firm has already repaid $50 million of the bridge loan through funds from internal accruals. ABN AMRO, ANZ Banking Group, Calyon Bank, HSBC (NYSE:HBC) (London), State Bank of India and Standard Chartered Bank have underwritten the $300 million non-recourse loan. With the acquisition of GCIP, TCL now has an aggregate soda ash production capacity of 5.5 million tons per year, making the company the world's second largest manufacturer of soda ash after Solvay S.A. (OTC:SVYSY) (Brussels, Belgium).

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