A keen competition appears to be on the cards for the Andhra Pradesh government's 25.88 per cent stake in Godavari Fertilisers and Chemicals Ltd even as the Chennai-based Murugappa group's Coromandel Fertilisers, one of the contenders, is aggressively mopping up GFCL shares from the market.

In response to a notification by the Implementation Secretariat (IS) -- a body instituted by the government to supervise the public enterprise reform process -- on May 10 inviting bids for the government's stake in GFCL, four contenders have thus far registered themselves to participate in the bid.

These are Coromandel Fertilisers, Kribhco, city-based Krebs Biochemicals and Fosker Ltd, a South African company with larger interests in the fertiliser business.

Coromandel Fertilisers has informed the exchanges that it had further acquired 150,000 shares of GFCL from the market on May 19. With this, Coromandel's stake in GFCL went up to 14.26 per cent from the earlier 13.79 per cent.

If Coromandel further purchases GFCL shares and increases its holding to 15 per cent, it has to come out with an open offer to purchase another 20 per cent shares from the public as per the Sebi's substantial acquisition of shares and takeover guidelines.

Whether Coromandel moves that fast, in a way hindering the process of divestment by the government, is to be seen, though the IS officials believe that it won't happen. In fact, the Rs 4,500-crore (Rs 45-billion) Murugappa group has plans to make Coromandel Fertilisers a major player in the fertiliser business.

Towards this end, the group had recently decided to hive off the EID Parry's fertiliser and pesticides division and merge with Coromandel Fertilisers for a 1:3 swap ( one equity share of Coromandel for every three shares of EID Parry held).

However, Kribhco's interest on GFCL is likely to pose a serious competition to Coromandel Fertilisers since IFFCO, the main promoter of Kribhco, already holds a 24.9 per cent stake in GFCL as a joint venture partner.

IS officials have been watching the developments keenly. "The response (to the bid) has been encouraging as expected. Some more serious players, including a few foreign companies, are expected to register with us before the month-end," an IS official said.

As per the notification, parties interested in acquiring the government's stake in GFCL have to register by paying Rs 25,000 fee and signing a confidentiality and non-interference agreement, besides declaring the eligibility to bid.

IS has set an eligibility criteria of minimum Rs 50 crore (Rs 500 million) networth and annual sales of at least Rs 150 crore (Rs 1.5 billion). The bidder has to provide a bank guarantee for Rs 2.5 crore (Rs 25 million) towards earnest money deposit.

While June 21 is the last date for receipt of bids, the transaction is expected to be completed by August.

GFCL has a paid up capital of Rs 32 crore (Rs 320 million) and its networth stood at Rs 74.86 crore (Rs 748.6 million) as on March 31, 2002. For the nine-month period ended December, 2002, it posted a net loss of Rs 5.10 crore on a sales of Rs 535 crore (Rs 5.35 billion). It is yet to declare its full-year results for fiscal 2002-03.

With its manufacturing unit located at coastal town Kakinada, GFCL has a capacity to produce 832,000 tonnes of di-ammonium phosphate and other chemical fertilisers per annum. It enjoys a market share of about 68 per cent in the state's DAP market and has a good presence in Madhya Pradesh, Maharashtra and Karnataka.