Tata Chemicals is in initial talks to acquire the troubled industrial salt unit of Archean Group in a deal that could value the business at ₹450 crore.
The potential deal could offer a reprieve to Chennai-based Archean, which has been struggling to service its debt obligations for the past two years, sources said. Founded in 1982, it has businesses spanning from industrial salt and fertilizers to mining.
Archean has an integrated manufacturing plant at Hajipir near the Rann of Kutch, Gujarat, with 3 million tonne of salt production capacity. The industrial salt is used as an intermediary in the manufacturing of detergents, textile dyes, plastic products and glass.
The company uses the abundant and unique Rann brine as raw material, which provides it with a cost advantage over other producers. This advantage also creates entry barriers for new market entrants.
After completion of initial negotiations, the Tata Chemicals board may discuss the potential offer this month, sources said.
Starting 2018, Archean has raised ₹840 crore through the issue of NCDs in three tranches to India Resurgence Fund, a joint venture between Bain Capital and Piramal Enterprises. It used the proceeds to refinance the erstwhile bank loans, raise working capital and fund ongoing capex for bromine expansion.
ICRA upgraded Archean’s rating in October 2019 citing operational improvements since the investment, but said its capital structure remains highly leveraged.
Shares of Tata Chemicals hit a new 52-week high of ₹535 on Tuesday but closed with a gain of 5 per cent at ₹523 on profit-booking.