Tata Chem expands agrochemicals business

Tata Chemicals acquisition of shares in Rallis India, a crop protection firm, is aimed at enhancing the Tata group’s focus in agrochemicals business.

Addressing the media nearly a week after Tata Chemicals announced to scale up its stake in Rallis from 9% to 45%, its managing director R Mukundan said both the firms would strengthen their agri business by exploiting a common marketing and distribution network.

"Tata Chemicals has a strong marketing presence in the north and east, while Rallis is strong in the west and south. This will create more value for the companies,” said Mr Mukundan. The consolidation of the marketing team will also help Tata Chemicals to double its speciality chemicals business to Rs 250 crore at the end of this financial year and expected to reach Rs 400 crore in three years, he said.

Tata Chemicals, the world’s second-largest and India’s largest soda ash maker, earns nearly 56% of its standalone revenue from agrochemical business in which Rallis India is a major player. Tata Chemicals bought over 35% stake in Rallis from other promoter firms for Rs 364 crore. “The scaling up of stake in Rallis was a part of the group’s effort to consolidate holdings in similar lines of business,” Mr Mukundan said. The companies have two common directors: R Gopalkrishnan and EA Kshirsagar.

When asked whether the acquisition of shares would lead to merger of Rallis India with Tata Chemicals, he said: “We have a separate team for introspecting the available options for revamping the agri business. We are examining all the options. Merger is not on cards, at least for next six months. However, we do not rule out any possibility,” said Mr Mukundan.

Prior to the transaction, Tata Tea held 24.5% stake, Tata Sons held 7.52%, Tata Investment Corporation 2.42% and Ewart Investments 1.35 % in Rallis. Tata Chemicals with annual sales of over Rs 12,000 crore has Rs 1,200 crore in cash and around Rs 5,200 crore in debt, while Rallis is a zero-debt company with sales of around Rs 850 crore. The Tata Chemicals stock gained 1.58% to close at Rs 247.60, while shares of Rallis were marginally up at Rs 747.