Rallis eyes buys to build agri-solutions portfolio

Rallis India, the Tata group company which recently crossed the Rs 1,000 crore revenue mark, is on the prowl for acquisitions in areas such as bio fertilisers, bio pesticides and even irrigation equipment as it attempts to build a portfolio of agro inputs and services it can sell through 50,000 strong dealer network pan India.

"A lot of farmers with whom we have relationships used to ask us for seeds, which is why we acquired majority ownership in Metahelix Life Sciences in December last year. We are now looking for acquisitions in related areas such as bio pesticides to complete the portfolio of agri inputs we can offer farmers. At a subsequent stage, we can also look at acquiring a micro/drip irrigation provider,” a top Rallis official told Financial Chronicle.

The move to look at bio- pesticides and bio fertilisers is in keeping with the increased demand for organic produce, which requires such inputs.

BSE-listed Rallis is a subsidiary of Tata Chemicals. Through its ‘Rallis Kisan Kutumba’ initiative, the company regularly meets 5.5 lakh farmers who have an ongoing transaction with the firm at least once every quarter. These active customers who are in direct contact with its sales and marketing network are the priority target market for sale of the agri inputs.

The company that spent almost Rs 124.5 crore buying a 59.02 per cent stake in Metahelix in a two-step deal is bullish on that company’s prospects for launching patented seeds for cotton. “The department of biotechnology, government of India has already granted an event 9124 to the CRY1C patented gene,” said the top official. Metahelix has received bio safety approval for two varieties of BT cotton it has developed and is now in the process of seeking regulatory approval for transgenic rice that is resistant to the yellow stem borer pest. Metahelix also has a wholly owned subsidiary, Dhaanya Seeds that markets hybrid seeds for large acreage field crops such as cotton, rice, maize and pearl millet and vegetables such as tomato, okra and chili.

"Our next target may not be a seeds company but other missing components of the portfolio. Our potential targets are technocrat firms with good products who suffer from the lack of a trusted route to market. We can leverage our existing sales network and relationship with farmers to effect a quantum increase in their sales,” said the top official. The company, which had a gross debt of Rs 100 crore as of end March 2011 and a debt to equity ratio of 0.7:1, plans to fund the acquisitions with a mix of fresh borrowings and operating cash flows.

In financial year 2010-2011, Rallis saw its sales rise 20 per cent to Rs 1,047 crore which resulted in the company achieving its highest ever net profit at Rs 126 crore.

As part of its agri focus, the company is also helping its parent Tata Chemicals expand the sourcing for the i-Shakti range of pulses, from Tamil Nadu to Maharashtra. “By sourcing pulses from Maharashtra and Tamil Nadu, we hope to be able to supply Tata Chemicals quality pulses for retail in a more cost effective manner. The dual sourcing for the southern and western markets will help us economise the freight costs involved in transporting a bulk commodity across large distances pan India,” said another senior Rallis official.