Mangalore: MCF is fighting to sustain its operations and profitability on two fronts. It is going through a takeover bid on the one hand, and is about to shut operations over a central government policy which has directed all fertilizer units to switch from naphtha or furnace oil to liquefied natural gas (LNG) to produce urea. The policy, announced in 2007, by the UPA-I, set October 1 this year as the deadline to complete the switch.
It has also said that subsidy will be withheld for those who continue to use naphtha which would make it unviable for MCF to continue its operations.
The battle for control:
Vijay Mallya, Karnataka’s flamboyant business tycoon, is trying hard to retain MCF, the only profitable venture in his stable after his aviation business nose dived and his liquor business became less intoxicating.
UB Group holds around 22 per cent of MCFL shares. Since last year, Zuari and Deepak Fertilizers have been picking up shares of MCFL. Zuari’s stake has gone up to 16.43 per cent while that of Deepak Fertilizers has risen to 24.46 per cent. Earlier this year in April, Deepak Fertilizers acquired 10 lakh more shares from the market, taking its share beyond 25 per cent after which it announced an open offer to buy 26 per cent more shares.
It is learnt that Zuari promised Mallya that he would continue as chairman if they took control of the company. Since there were competing bids, SEBI, advised both Deepak Fertilizers and Zuari to take permission from Competition Commission of India.
Zuari’s tie up with Mallya has run into a road block. He was declared a ‘wiflul defaulter’ by the United bank of India, and this debars him from sitting on the board of any company even if a majority of the shareholders support him. Mallya, in the meanwhile is legally contesting the declaration by the United Bank of India.
The gas mess:
Workers unrest over the naphtha issue too, looms large as the deadline approaches. The company has prepared the ground to switch, but the deadline is too near. Mallya is on record saying that MCF has invested Rs: 300 crore in the switch over and it is the responsibility of the government to supply the gas, however the delay in the completion of GAIL’s southern gas grid from Kochi to Mangalore, for which MCF had signed an agreement with GAIL in 2011, means that MCF has no gas source for production.
It is learnt that there are nearly 500o workers, both directly and indirectly employed in MCF who will be affected if the government stops the subsidy after Oct. 1st.
However the employees in this case do not blame Mallya for the mess and are trying hard to use their influence to save the company. It is learnt that the MCF workers union has approached all the concerned powers that be, including Karnataka’s Ananth Kumar, who is the Union minister for Chemicals and fertilizers, to work out a solution.
It is said that the centre is planning to connect the Dhabol-Bangalore pipeline through Chitradurga to Mangalore. This will take at least two years, but in the meanwhile, the fate of MCF, post October 1 hangs in the balance.
