How ‘shopoholic’ UPL adds muscle with takeovers

By Vishwanath Kulkarni

In recent weeks, the market was abuzz that UPL Ltd, the Indian agrochemicals multinational, could become a likely takeover target for US companies like FMC Corp and CF Industries. However, UPL was quick to dismiss the reports, stating “promoters — the Shroff family — are completely aligned and committed to the company’s future growth.”

“We are a beautiful company and people have many aspirations when they see beautiful things,” says Jai Shroff, Global CEO, UPL, the second-generation promoter. Established in 1969, UPL has done over 40 acquisitions in the past 25 years, expanding its presence to over 138 countries.

“UPL is a shopoholic company and we like to shop,” says Shroff , adding that it is currently in talks with 70 different start-ups for testing technologies and in discussions with another 50 firms for collaboration.

After acquiring Arysta LifeScience from Platform Specialty Products Corporation for $4.2 billion in 2019, UPL has kept up with its shopoholic image, with the latest being the buyout of OptiCHOS, a bio-solutions product platform, from the Norwegian University of Life Sciences.

The Arysta deal catapulted UPL to the fifth slot among the top ten global agrochem firms with annual revenue exceeding $5.2 billion. A large player in the post-patent crop-protection market, UPL has a robust portfolio consisting of biologicals, seeds, traditional crop protection solutions, bio solutions, pre- and post-harvest solutions, soil and water technologies, with more than 14,000 registrations. In fact, the company doubled its share in the global crop protection market over the past five years to around 8 per cent in FY 2022 from 4 per cent in FY 17. The company expects to increase it further to 9-11 per cent by FY27.

Robust growth

For FY22, UPL registered a 19 per cent revenue growth at ₹46,240 crore and 26 per cent profit growth at ₹3,626 crore. The robust growth was driven by strong demand for herbicides and insecticides in Latin America, North America and India, among other markets. In the current year, UPL is eyeing over 10 per cent revenue growth, which it believes will be driven by factors such as strong commodity prices and the higher cost and reduced availability of fertilisers favouring the use of bio-solutions, a key focus area for the company.

“The integration of Arysta is complete and the company has reorganised itself to focus on growth,” says Shroff, adding that UPL has got better ability to price the products. With significant investments in manufacturing, marketing and distribution, UPL is probably the most backward integrated player in the industry worldwide.

The company has diversified its raw material sourcing strategy by reducing dependence on China, while increasing from other geographies, including India, where it has an expanding supplier base of over 15 major companies like Deepak Fertilisers, Aarti Industries and Laxmi Organics, which are being encouraged to expand their capacities. Sourcing of raw materials from China has reduced from 37 per cent in FY17 to 31 per cent in FY22. At the same time sourcing from India has improved from 34 per cent to 38 per cent and rest of the world from 29 per cent to 31 per cent during this period.

UPL has been gaining market share in the past 10 years and expects to grow at thrice the industry average. It expects to sustain the trend of doubling revenue every five years.

"UPL has consistently gained market share through a combination of low-cost manufacturing and portfolio expansion, and gaining scale through inorganic play. With food inflation rising on account of geopolitical tensions and supply disruption, we expect demand for crop protection products to remain robust," says Anil R, Sr. Research analyst at Geojit Financial Services.

Collaborate to grow

UPL, which strongly believes in collaboration to drive growth, has entered into a string of partnerships through its OpenAg platform to expand its product portfolio and geographical footprint, besides setting up a new global business unit, Natural Plant Protection, that comprises both natural and biologically derived inputs to tap the fast-growing bio-solutions business. In fact, the company is the largest player in the bio solutions space. UPL saw encouraging volume-led growth in its differentiated and sustainable (D&S) solutions portfolio, which grew 19 per cent during FY 22.

Read more at https://www.thehindubusinessline.com/specials/corporate-file/how-shopoholic-upl-adds-muscle-with-takeovers/article65490940.ece