Tata Chemicals: Grabbing global capacities
Business Standard — December 27, 2005


Tata Chemicals is grabbing global capacities in soda ash to compete with China, where companies are undergoing expansion programmes. It announced that its 63.5 per cent stake in Brunner Mond Group will cost the company Rs 508 crore. The UK-based company has a debt of £50 million. Brunner Mond has a capacity to manufacture 2 million tonnes of soda ash at four plants, three in Europe and one in Kenya. The per tonne cost of acquisition works out to about Rs 6,000, which is much cheaper than setting up a new capacity, which will cost between Rs 20,000-25,000 per tonne.

With Brunner Mond's presence in the UK, Netherlands and Kenya, Tata Chem will get more flexibility in marketing across more countries. The company will also get access to 6.8-lakh tonne of natural soda ash capacity in Kenya through the acquisition. The manufacturing cost of natural soda ash is half of that through the synthetic process.

Tata Chem will finance this acquisition from internal accruals (including its Rs 675 crore FCCB). With this acquisition, Tata Chem has trebled its soda ash capacity and become the third largest soda ash manufacturer in the world. The stock is reasonably priced at about 10 times FY07 earnings.