Murugappa to consolidate mkt share in agrochem biz

A month after acquiring agrochemicals company Sabero Organics, the $3.8 billion Murugappa Group is finalising a two-pronged strategy to consolidate its market share in India and expand global footprint.

In the long run, to maximise efficiencies of scale in sourcing, manufacturing, marketing, and R&D, the diversified group may also explore ways to get into integrated pest management operation by bringing its crop protection operations under one roof. Currently they are scattered in three different listed entities – Coromandel, EID Parry and Sabero.

Coromandel, historically had an agrochemicals presence. The latest acquisition shows their intent to emerge as a leading player. From a small player in the unregulated pesticides sector, Sabero will give Murugappa flagship Coromandel International both scale and size to break into the big five.

"We are derisking our linkages with the government consciously by increasing our non-subsidy portfolio. The Sabero acquisition is part of that strategy. Fertiliser is the base, but we are looking at several add-ons like water solubles, organic manure, micro nutrients, soil testing and education," said A Vellayan, executive chairman, Murugappa Group.

Being a regulated sector, fertiliser companies such as Coromandel see limited growth potential, and technology-driven agrochemicals is becoming a natural and logical diversification. Currently, 12 per cent of sales come from non-subsidised products and contribute to 27 per cent of profits. After including Sabero, Vellayan sees that changing to 30 per cent of total sales and half of profits in a few years.

"The fertiliser and agrochemicals business has the potential to be a Rs 15,000 crore piece for us in the next three-four years. Pesticides and crop management alone can be a Rs 2,000 crore business and retail will be another Rs 2,000 crore," Vellayan said.

Sabero, a producer of fungicides, herbicides, insecticides and speciality chemicals has global operations across three continents of Europe, Latin America and Australia besides a manufacturing facility in Gujarat. And boasts of about 240 product registrations internationally for key products. Half of its turnover comes from exports. Hence, exports will remain a key thrust and Coromandel and EID Parry will now be able to ride piggyback on Sabero.

So, though the new management in Sabero will only come in by September, the priorities are in place. As the pollution clearances come in, the first focus will be to improve capacity by almost threefold. Even Coromandel is undergoing a 900,000-tonnes organic expansion in its Kakinada plant, to be ready by next July. Sales or throughput of Sabero’s portfolio of formulations will also get a boost as they now will be able to use the existing rural retail stores of the Murugappa Group.

The geographical footprint, too, will expand in Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. Even pockets of Orissa will be covered. Vellayan is clear when he says Sabero has the capacity; it’s a question of “creating market linkages”.