PE funds, Godrej & UPL in race for 57.7% in Gharda Chemicals

Global private equity funds KKR & Co and Blackstone Group and two local companies, Godrej Agrovet and American private equity fund TPG Capital backed United Phosphorus Ltd, have put in independent bids to acquire a controlling 57.7% stake in agrochemicals maker Gharda Chemicals, according to two people with direct knowledge of the development.

The stake held by scientist RA Mashelkar-led Gharda Medical & Advanced Technologies Foundation (GMATF) in Gharda could be worth anything between Rs 5,600 crore and Rs 6,000 crore. The demand includes the non- compete fee and the control premium, with the debt-free company being valued at Rs 9,500 crore.

The debt-free Gharda Chemicals could rake in a valuation of more than 14 times its operating profit.

Gharda Chemicals posted an operating profit of Rs 683 crore on revenue of Rs 2,608 crore in fiscal 2018.

Based on that, the valuation could be around Rs 9,500 crore. Around 10% of Gharda Chemicals is owned by its employees and the rest by minority shareholders.

“The talks are on for sometime and we are not sure whether the deal will be concluded soon as Gharda faces several litigations due to alleged pesticide poisoning,” said one of the fund managers who is in discussions for the stake.

In 2017, Maharashtra Chief Minister Devendra Fadnavis had constituted a special investigation team (SIT) to probe the deaths of farmers due to pesticide poisoning and an FIR had been lodged against Gharda Chemcials as its pesticide named 'Police’ was among those used by farmers. The report is yet to be submitted to the government.

Spokespersons for Blackstone, TPG and KKR declined to comment.

Mails sent to UPL, Godrej Agrovet and Gharda Chemicals did not elicit any response until the publication of this report.

For the strategic buyers such as Godrej Agrovet, acquisition of Gharda will give a beachhead in the agrochemcials and crop-protection market as well as entry into the veterinary drug segment.

Godrej Agrovet Limited is a leader in areas of animal feed, crop protection, oil palm, dairy and poultry and processed foods. In crop protection, UPL has a strong presence with a range of fungicides, herbicides, insecticides, biopesticides and crop nutrition.

ET reported on September 19 about the plans of Gharda Medical & Advanced Technologies Foundation to sell its 57.5% in agrochemicals maker Gharda Chemicals.

The not-for-profit GMATF plans to use the proceeds to build a pipeline of innovative products and technologies for the chemical and metal industry.

After the US, Japan and China, India is the fourth-largest producer of agrochemicals. It is valued at $4.1 billion and is expected to grow at 8.3% to reach $8.1billion by FY25, according to a FICCI 2018 report.